A bill to amend the Small Business Act to permit business concerns that are owned by venture capital operating companies or pension plans to participate in the Small Business Innovation Research Program.

Mr. President, I rise today to join my colleagues, Senators Norm Coleman, Susan Collins and Jack Reed, in introducing the Central Contractor Registry Act of 2004. The purpose of this bipartisan bill is to strengthen the ability of the Federal Government to stop tax cheats from obtaining Federal contracts or use a portion of their contract payments to repay their tax debts.

In February, the Permanent Subcommittee on Investigations, on which Senator Coleman and I sit, held a hearing on a report by the General Accounting Office which disclosed that over 27,000 contractors at the Department of Defense owe $3 billion in unpaid taxes, mostly from failing to transmit payroll taxes to the IRS. Think about that for a minute--27,000 DOD contractors--more than one in every ten DOD contractors--had outstanding tax debts at the same time they were holding out their hands for taxpayer dollars.

Allowing tax cheats to bid on federal contracts is a disservice to all of the honest taxpayers out there who manage to meet their tax obligations. It is a disservice to all of the military men and women who put their lives on the line for us every day. It is a disservice to all of the honest companies that compete for the same DOD contracts, since companies that do not pay their taxes have lower costs and a competitive advantage over the companies that do.

Under current law, DOD has an obligation to identify any DOD contractor with unpaid taxes, to withhold up to 15 percent of their contract payments, and to forward that money to the IRS to be applied to the contractor's tax debt. The official title of the DOD program to carry out this obligation is the Federal Payment Levy Program, also sometimes referred to as the DOD tax levy program.

The first step in the program is for DOD to identify tax delinquent DOD contractors who are scheduled to get a contract payment in the near future. To identify these contractors, DOD participates in a computer matching program administered by the Treasury Department that cross- checks DOD lists of upcoming contractor payments with IRS lists of delinquent taxpayers. If a match occurs, DOD is supposed to withhold money from the identified contractor's upcoming contract payments.

The problem is that the DOD-IRS computer matching program has so far produced relatively few matches. In 2003, for example, DOD collected only about $680,000 of back taxes through its tax levy program instead of the $100 million that GAO estimates should have been collected. That means DOD collected less than 1 percent of the back taxes it should have.

On major impediment to the computer matching program has been that it depends upon DOD's providing the correct taxpayer identification number or TIN for each of its contractors, when many DOD contractors have either failed to submit a TIN or supplied an incorrect number.

When a TIN is incorrect or missing, the computer matching program is unable to determine whether the relevant DOD contractor is on the IRS list of delinquent taxpayers. Data indicates that, in one year, DOD sent the IRS over 26,000 invalid TINs that could not be used.

To increase the efficiency of the computer matching program, DOD and the IRS have tried to improve the accuracy of the TINs in DOD's contractor data. The IRS has, for example, set up a computer-based TIN validation system that can electronically verify a TIN number in seconds. This electronic system is available for use by DOD and all other Federal agencies. Unfortunately, the IRS has also interpreted certain tax laws as prohibiting DOD from obtaining TIN validations for many types of contracts. In addition, in the case of TIN numbers with clerical errors, the IRS has interpreted current taxpayer confidentiality laws as prohibiting it from supplying DOD with a corrected number.

The bill we are introducing today would eliminate this bureaucratic red tape and significantly increase the effectiveness of the tax levy program by increasing the accuracy of the TINs used by DOD.

The bill would strengthen TIN accuracy by focusing primarily on the TINs in the Central Contractor Registry, a government-wide database of persons wishing to bid on federal contracts. This registry is currently administered by DOD, and current Federal regulations require potential bidders to self-register in the system by supplying specified information. As part of the process, registrants are currently supposed to supply a TIN, but many either do not or supply an incorrect number. The bill would, for the first time, impose a legal requirement on registrants to supply a valid TIN and would also bar contracts from being awarded to contractors who fail to supply a valid TIN.

In addition, the bill would require registrants to authorize DOD to validate their TINs with the IRS and obtain a corrected TIN from the IRS, if needed and possible. This requirement would apply to all registrants in the Central Contractor Registry, no matter what type of contract is involved and whether the contract is with DOD or another Federal agency. It would also allow the IRS to supply corrected TINs where it can promptly and reasonably do so.

If, by chance, a registrant managed to obtain a DOD contract without having supplied a valid TIN, the bill would direct DOD to withhold a portion of their contract payments to satisfy their tax debt as specified under existing law. Although this backup holding requirement has been on the books for years, DOD has not implemented it. The bill would require DOD to start doing so.

Finally, the bill would provide a number of protections. It would require DOD and other federal procurement officials not to make TIN numbers available to the public, so that this information is kept confidential within the procurement community using the Central Contractor Registry. It would explicitly exempt from the TIN requirements any contractor, such as a foreign business, not required by U.S. law to have a taxpayer identification number. The bill would also require DOD to show in the registry database whether a particular TIN has been validated, is awaiting validation, has been found invalid, or is not required, so that procurement officials using the database will know the status of a contractor's TIN. If the IRS were to determine that a particular TIN was invalid, the bill would require DOD to give the relevant contractor an opportunity to correct the number. DOD would also be required to warn all registrants in the Central Contractor Registry of the possibility of backup withholding in the event they fail to provide a valid TIN.

It is common business sense for the Federal Government to require contractors who want to be paid with Federal taxpayer dollars to allow the United States to determine whether they owe any taxes and, if so, to offset a portion of their contract payments to reduce their tax debts. To accomplish that objective, the Federal Government has to do a better job in identifying federal contractors with unpaid taxes. Our bill, by improving the accuracy of taxpayer identification numbers in the Central Contractor Registry, will strengthen DOD's ability to identify tax delinquent contractors and either deny them new contracts or reduce their tax debts.

I hope all my colleagues will join us in supporting this legislation's enactment during this Congress.

Mr. President, I rise today to introduce legislation in the hopes that it will correct a grave injustice committed against the people of Iraq as well as the honest and law-abiding citizens of the world community.

We now believe that Saddam Hussein, corrupt U.N. officials, and corrupt well-connected countries were the real benefactors of the Oil- for-Food Program. Their benefits came from illegal oil shipments, financial transactions, kickbacks, and surcharges and allowed Saddam Hussein to build up his armed forces and live in the lap of luxury.

The evidence in this far-reaching scandal tells an unbelievable story. In January of this year, the Iraqi Governing Council (IGC) released a list of 270 former government officials, businessmen, political parties, and foreign cronies of Hussein from more than 46 countries suspected of profiting from illegal oil sales that were part of the U.N.'s Oil-for-Food Program.

Our own U.S. General Accounting Office estimates that Saddam Hussein siphoned off $4.4 billion through oil sale surcharges. Saddam Hussein also demanded kickbacks on the humanitarian relief side from suppliers which amounted to 10-20 percent on many contracts.

Saddam used this revenue to rebuild Iraq's military capabilities, to maintain lavish palaces, buy loyalty, oppress his people and financially support terrorism. And as Claude Hankes-Drielsma, an IGC consultant investigating the scandal testified, the secret payments ``provided Saddam Hussein and his corrupt regime with a convenient vehicle through which he bought support internationally by bribing political parties, companies and journalists . . . This secured the cooperation and support of countries that included members of the Security Council of the United Nations.''

The United Nations should be embarrassed.

What resulted from the goodwill gesture was international scandal, corruption at the highest levels, and suffering Iraqi citizens. Not exactly a model U.N. program.

Contrary to its protestations, the United Nations Secretariat had a critical role in the implementation and management of the program. It kept the contract records. It controlled the bank accounts and was the only entity allowed to release Saddam Hussein's oil earnings. And it arranged for the audits. As Secretary General Kofi Annan noted, ``under the program, the [U.N.] Secretary General was required to supervise the sale of Iraqi oil, and to monitor the spending of the proceeds on specific goods and services for the benefit of the Iraqi people.''

Well, he did a lousy job.

Tasked by the international community to deny Saddam Hussein the ability to rebuild his military apparatus while providing humanitarian needs, the United Nations allowed the corrupt to become richer and innocent Iraqis to be oppressed.

Today we have a chance to rectify that injustice. We must demand that the United Nations cooperate completely with efforts to extrapolate the truth from this scandal and punish the guilty. We know that the Volker panel does not have subpoena power.

And we've now learned that officials acting on behalf of Benon Sevan, the Executive Director of the Oil-for-Food Program, who is personally implicated in the scandal, are asking contractors not to release documents relating to the program to congressional investigators without getting U.N. authorization. An April 2, 2004, U.N. letter to a Swiss firm Cotecna reminded the firm that according to its contract all documents: ``shall be property of the United Nations, shall be treated as confidential and shall be delivered only to United Nations authorized officials.'' Cotecna, was in charge of inspecting the humanitarian goods shipped to Iraq under Oil-for-Food. It had Kofi Annan's son Kojo on its payroll until the month it won its U.N. contract. And an April 14 letter reminded a Dutch company called Saybolt of its confidentiality agreements with the U.N., demanding ``that Saybolt address any further requests for documentation or information concerning these matters to us.'' Saybolt was in charge of making sure oil invoices matched shipments.

The United Nations should be more interested in bringing the truth to light then trying to protect its tattered reputation and its corrupt officials.

The legislation I am introducing today will hold the United Nations' feet to the fire on this scandal. It calls for transparency and accountability. Under this bill, the United Nations must allow GAO and law enforcement agencies access to its Oil-for-Food records. U.N. officials must waive their immunity for any crimes committed on United States soil and repay their ill-gotten gains.

If not, 10 percent of our assessed U.N. regular budget contributions will be withheld the first year and 20 percent the second year. Granted, the withholding of $36 million in the first year is no where near the more than $1 billion that the United Nations skimmed

off the top of Iraqi oil sales for administrative costs or the billions that were stolen from the Iraqi people through corruption and mismanagement. But the 10 percent withholding worked in the past when the 103rd Congress used it to compel the United Nations to create an inspector general. And I believe it can work again.

But we have to make an important choice first. We can do nothing and allow the word ``humanitarianism'' to be the new code word for corruption scandal from here on out. Or we can stand up and make the United Nations rightfully accountable for the corruption that harmed innocent Iraqis. The answer is clear. We must act.

The U.N. is broken. This scandal revealed that the U.N. Security Council is unable to do its job when some members are more interested in lining their pockets than preserving security. I contend that there was no way that the U.S. could get France and Russia to enforce Security Council resolutions on Iraq and go to war when so many of their politically connected individuals, companies, and institutions received Iraqi oil contracts. Victory brought their corruption to light. And I am deeply worried that the ability of the United Nations to convey ``legitimacy'' to the new Iraqi government and assist in postwar Iraq is hampered by its history of corruption and mismanagement in the Oil-for-Food program.

The U.N. needs to come clean and start over. The first step toward doing that is to accept the terms and conditions of the Oil-for-Food Accountability Act.

Mr. President, I rise today to introduce the Central Contractor Registry Act of 2004 whose purpose is to establish a centralized contractor database within the Department of Defense and to require federal contractors who register in that database to provide their taxpayer identification number and their consent to verifying that number with the Internal Revenue Service as a condition that must precede the awarding of a contract by the Department of Defense. This bill will close a $3 billion tax loophole and will help to recover over $100 million annually from federal contractors who have not filed federal tax returns or who have not paid the taxes they owe the government. I am joined by Senators Carl Levin, Susan Collins and Jack Reed.

In a hearing before the Permanent Subcommittee on Investigations, the General Accounting Office testified that over 27,000 contractors at the Department of Defense owed over $3 billion in unpaid Federal taxes. Normally, these taxes could be collected through the Federal Payment Levy Program by levying fifteen percent of the contractors' payments. In fiscal year 2002, the Financial Management Service should have collected over $100 million from tax delinquent Department of Defense contractors. However, actual collections for the year were less than

$500,000. Further, in 2001, the Department of Defense provided the Internal Revenue Service with over 26,000 information returns that could not be used to determine contractors' tax liability. One of the principal reasons for this anemic state of collections and the large volume of unusable information returns has been and remains the inability of the Department of Defense and the Internal Revenue Service to reach an accord on verifying the taxpayer identification numbers of the contractors who have registered in the Department of Defenses's Central Contractor Registration database.

Under current law, the Department of Defense's authority to verify contractors' taxpayer identification numbers is limited to those contractors who have contracts with the Department of Defense and for whom the department is required to report miscellaneous income to the Internal Revenue Service on a Form 1099 information return. However, there are contractors who have registered in the Central Contractor Registration for whom the Department of Defense lacks authority to verify their taxpayer identification numbers including individuals and companies who would like to contract with the federal government and contractors who have contracts with agencies and departments other than the Department of Defense. On the other hand, current law also allows a taxpayer to consent to the verification of their taxpayer identification number with the Internal Revenue Service and allows the Internal Revenue Service to provide a validated taxpayer identification number.

My bill will resolve the impasse between the Department of Defense and the Internal Revenue Service by requesting contractors' consent to the validation of their taxpayer identification number as part of the registration process. Contractors will not be required to provide their consent. But if they do not, they will not be awarded a contract by the Department of Defense.

Further, my bill requires the Department of Defense to warn contractors as part of the registration process that if they do not provide a valid taxpayer identification number they may be subject to backup withholding. This would apply to those contractors who list an invalid taxpayer identification number, have a contract with the Department of Defense, and will earn miscellaneous income that is required to be reported to the Internal Revenue Service.

I would like to briefly summarize the major provisions of my bill. It provides a statutory basis for the Central Contractor Registration and renames the database as the Central Contractor Registry. It requires that the registry contain contractor's taxpayer identification numbers, their consent to verifying their numbers with the Internal Revenue Service and for the Internal Revenue Service to provide a corrected number if possible. It requires that registrants furnish this information as a condition for registration, and requires the Department of Defense to warn contractors who fail to provide a valid taxpayer identification number that they may be subject to backup withholding and requires implementation of backup withholding in cases where it is required. It precludes awarding a contract to any registrant who has not provided a valid taxpayer identification number and excludes from coverage any registrant who is not required to have a taxpayer identification number.

It directs the Secretary of Defense to apply to the Internal Revenue Service for inclusion in the Taxpayer Identification Number Matching Program and directs the Commissioner of Internal Revenue to provide response to the Department of Defense. It directs the Secretary of Defense to provide any registrant who is determined to have an invalid taxpayer identification number with an opportunity to provide a valid number. It further requires that the Central Contractor Registry clearly indicate whether a registrant's taxpayer identification number is valid, under review, invalid, or not required. Finally, it requires that contractors taxpayer identification numbers be treated as confidential by federal contract officers who have access to the Central Contractor Registry.

My overall objective in introducing this bill is to ensure that tax cheats are not rewarded with federal contracts. If the Department of Defense and the Internal Revenue Service do not have accurate and reliable taxpayer identification numbers then we will not be able to stop this practice. My bill takes the necessary first step toward ensuring that the Department of Defense and the Internal Revenue Service have valid taxpayer identification numbers in the Central Contractor Registry database.

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

Mr. President, the United States biotechnology industry is the world leader in innovation. This is due, in large part, to the Federal Government's partnership with the private sector to foster growth and commercialization in the hope that one day we will uncover a cure for unmet medical needs such as cystic fibrosis, heart disease, various cancers, multiple sclerosis, and AIDS.

However, the industry was dealt a major set-back when the Small Business Administration (SBA) determined that venture-backed biotechnology companies can no longer participate in the Small Business Innovation Research (SBIR) program. Until recently, the SBIR program was an example of a highly successful Federal initiative to encourage economic growth and innovation in the biotechnology industry by funding the critical start-up and development stages of a company.

Traditionally, to qualify for an SBIR grant a small-business applicant had to meet two requirements; one, that the company have less than 500 employees; and two, that the business be 51 percent owned by one or more individuals. Recently, however, the SBA determined that the term ``individuals'' only means natural persons, whereas for the past 20 years the term ``individual'' has included venture-capital companies. As a result, biotech companies backed by venture-capital funding in Missouri and throughout our Nation, who are on the cutting edge of science, can no longer participate in the program.

The biotech industry is like no other in the world because it takes such a long span of time and intense capital expenditures to bring a successful product to market. In fact, according to a recent study completed by the Tufts Center for the Study of Drug Development, it takes roughly 10-15 years and $800 million dollars for a company to bring just one product to market. As you can imagine, the industry's entrepreneurs are seeking financial assistance wherever they can find it.

For the past 20 years, the SBIR program has been a catalyst for developing our Nation's most successful biotechnology companies. In addition to these important government grants, venture-capital funding plays a vital role in the financial support of these same companies. The strength of our biotechnology industry is a direct result of government grants and venture-capital working together.

However, some have argued that a biotech firm with a majority of venture-capital backing is a large business. This is simply a bogus conclusion. Venture-capital firms solely invest in biotech start-ups for the possibility of a future innovation and financial return and generally do not seek to take control over the management functions or day-to-day operations of the company. Venture-capital firms that seek to invest in small biotech businesses do not, simply by their investment, turn a small business into a large business. These are legitimate, small, start-up businesses. Let's not punish them.

Instead, we must work together to avoid stifling innovation. Let me be clear. Our impact today will foster cures and medicines tomorrow that were once thought to be inconceivable. However, the industry cannot do it alone. We must nurture biotechnology and help the industry grow for the future of our economy and for our well-being.

This bill that I am introducing today will do just that. It will ensure that the biotechnology industry has access to SBIR grants, as it has had for 20 years. It will level the playing field to ensure that SBIR grants are given to small businesses based on fruitful science and nothing else. This is still a young and fragile industry, and we are on the cusp of great scientific advances. However, there will be profound consequences if biotechnology companies continue to be excluded from the SBIR program.

I ask unanimous consent that the full text of the bill be printed in the Record.

Mr. President, the United States biotechnology industry is the world leader in innovation. This is due, in large part, to the Federal Government's partnership with the private sector to foster growth and commercialization in the hope that one day we will uncover a cure for unmet medical needs such as cystic fibrosis, heart disease, various cancers, multiple sclerosis, and AIDS.

However, the industry was dealt a major set-back when the Small Business Administration (SBA) determined that venture-backed biotechnology companies can no longer participate in the Small Business Innovation Research (SBIR) program. Until recently, the SBIR program was an example of a highly successful Federal initiative to encourage economic growth and innovation in the biotechnology industry by funding the critical start-up and development stages of a company.

Traditionally, to qualify for an SBIR grant a small-business applicant had to meet two requirements; one, that the company have less than 500 employees; and two, that the business be 51 percent owned by one or more individuals. Recently, however, the SBA determined that the term ``individuals'' only means natural persons, whereas for the past 20 years the term ``individual'' has included venture-capital companies. As a result, biotech companies backed by venture-capital funding in Missouri and throughout our Nation, who are on the cutting edge of science, can no longer participate in the program.

The biotech industry is like no other in the world because it takes such a long span of time and intense capital expenditures to bring a successful product to market. In fact, according to a recent study completed by the Tufts Center for the Study of Drug Development, it takes roughly 10-15 years and $800 million dollars for a company to bring just one product to market. As you can imagine, the industry's entrepreneurs are seeking financial assistance wherever they can find it.

For the past 20 years, the SBIR program has been a catalyst for developing our Nation's most successful biotechnology companies. In addition to these important government grants, venture-capital funding plays a vital role in the financial support of these same companies. The strength of our biotechnology industry is a direct result of government grants and venture-capital working together.

However, some have argued that a biotech firm with a majority of venture-capital backing is a large business. This is simply a bogus conclusion. Venture-capital firms solely invest in biotech start-ups for the possibility of a future innovation and financial return and generally do not seek to take control over the management functions or day-to-day operations of the company. Venture-capital firms that seek to invest in small biotech businesses do not, simply by their investment, turn a small business into a large business. These are legitimate, small, start-up businesses. Let's not punish them.

Instead, we must work together to avoid stifling innovation. Let me be clear. Our impact today will foster cures and medicines tomorrow that were once thought to be inconceivable. However, the industry cannot do it alone. We must nurture biotechnology and help the industry grow for the future of our economy and for our well-being.

This bill that I am introducing today will do just that. It will ensure that the biotechnology industry has access to SBIR grants, as it has had for 20 years. It will level the playing field to ensure that SBIR grants are given to small businesses based on fruitful science and nothing else. This is still a young and fragile industry, and we are on the cusp of great scientific advances. However, there will be profound consequences if biotechnology companies continue to be excluded from the SBIR program.

I ask unanimous consent that the full text of the bill be printed in the Record.