Government Settlement Transparency Act of 2003

Mr. President, as we look at the situation in America and in the world today, we face serious challenges. Obviously, the war on terrorism is one of the most serious challenges we have had in many decades, one that is different because there are no specific battles that are won or lost. There may not be a moment when we say it is over. Because we are dealing with a moving, shadowy element that uses the most dastardly types of attacks on individuals, innocent men, women, and children.

We have seen the situation in Florida, where the people there have been hit repeatedly by hurricanes and disasters. I guess you could say in many respects these are times that try men and women's souls.

We are under attack in a lot of ways. But, also, these are the times that require a certain trumpet. We cannot have uncertainty in terms of leadership. We cannot have an uncertain trumpet. We have to have direction, strong leadership, and courage to take a stand and follow it through. That is why I am very much worried about what I see in Senator Kerry and the positions he has taken, first on one side and then the other.

I was greatly distressed last week when we had the Prime Minister of Iraq here. He is a man who is showing strength, leadership, and great courage because his life is on the line every day with repeated assassination attempts directed at him. He came here. He said: Thank you, America. He said: We are going to have elections. We are going to have peace and freedom and democracy. We chose justice and the rule of law rather than chaos and anarchy. He did a magnificent job. I was inspired by what he is doing and by his speech.

Yet Senator Kerry attacked his speech before he even left town. Where are the basic courtesies that we have in the past extended to leaders of other countries?

President Bush, on the other hand, has shown strength, leadership, and courage. He is dealing with the issues of security. People see in him and hear in his voice a determination, a commitment, that will get us through this. But Senator Kerry has been flip-flopping back and forth on Iraq for not just the campaign but actually for years, going back to 2002 where he took one position and where now, in 2003 and 2004, he has taken a different position.

On September 20, 2004, he said that our most important task is to win the war on terrorism. On March 6, 2004, he balked at calling the war on terror an actual ``war.''

On September 20 he said Iraq was a ``diversion from'' the war on terror. Yet back in December of 2003 he said that Iraq is ``critical'' to the success of the war on terror.

In September of 2004 he said the evil of Saddam was enough to justify the war. Yet before that he agreed with the administration's goal of regime change. He also said that Saddam's ``breach of international values'' was a sufficient cause of war.

In 2004 he said Saddam's ``downfall . . . has left America less secure.'' Yet in December of 2003 he questioned the judgment of those claiming Saddam's capture doesn't help American security.

The list goes on and on. I ask unanimous consent this list be printed in the Record.

But it goes beyond just the war on Iraq. What worries me is there is a pattern here, across the board, not only in that area that threatens our very security and our lives, the war on terrorism, but in area after area, issue after issue.

For instance, in 1991 Senator Kerry supported most-favored trade status for China and now he criticizes the Bush administration for trading with China.

Which is it? You cannot be for it and against it when you talk about international trade. Trade is good. America can compete. We do need to enlarge the pie. We need to make sure we have fair trade. But you cannot vote one way on trade and then be critical of it on the other side.

In October 2003, Senator Kerry called the fence that is being built in Israel for security purposes a ``barrier to peace.'' He was critical of it. Yet in February of 2004, he calls the fence a ``legitimate act of self-defense.'' You can't get into a very dangerous and sensitive situation like this and say one thing and then the other. What is it? Which is it? An uncertain trumpet takes lives.

Even in the case of eliminating the marriage penalty for the middle class, Senator Kerry said he will fight to keep the tax relief for married couples. He said Democrats fought to end the marriage penalty tax. Yet in 1998, he voted against eliminating the marriage penalty relief for married taxpayers with a combined income of less than $50,000 a year. Last week when we actually extended the elimination of that marriage penalty tax, of course, he didn't vote.

He even flip-flopped on the PATRIOT Act. The PATRIOT Act is a favorite punching bag now.

I was here when the death debate occurred. I remember the broad unanimous support involved in passing that legislation. We needed to do some things to give our law enforcement people the ability to deal with these terrorists. If you look at what has transpired since then, this great fear of having your library card checked or a ``knock in the night'' is not occurring. So he voted for it, and now he attacks the PATRIOT Act. He said:

We are a nation of laws, and liberties, not of a knock in

the night. So it is time to end the era of John Ashcroft.

I think that is an unfair shot at our former colleague, the Attorney General of the United States. Again, Senator Kerry was for the Patriot Act and now he is against it.

On the gay marriage amendment, in 2002, Senator Kerry signed a letter urging the Massachusetts legislature to reject a constitutional amendment banning gay marriage. Yet now in 2004 he won't rule out supporting a similar amendment. Which is it? Is it one thing in Massachusetts and another here in Washington?

Also, I think when you get into other issues like the death penalty for terrorists, these are relevant issues we can't take the wrong position on. Yet, in 1996, he attacked Governor Weld of Massachusetts for supporting the death penalty for terrorists. But now he said he might support the death penalty for terrorists.

On the No Child Left Behind Act, he voted for it, and now he attacks it as a ``mockery.'' He trashed it as an ``unfunded mandate'' with ``laudable goals.''

Let me tell you that I am a son of a schoolteacher. I was in public education all my life. I didn't go to some elite school. I went to public education. I stay in touch with teachers and administrators. And they tell me it is making a difference. We have goals and challenges. Teachers are doing better, students are doing better, and the money has been going up every year.

On issue after issue, he has flip-flopped.

I ask unanimous consent that the remainder of this lengthy list be printed in the Record.

Mr. President, I rise today to introduce, along with Senators Durbin, Reid, and Kerry, the ``Renewable Energy Investment Act of 2003.''

This legislation will guarantee that by the year 2020, twenty percent of our electricity will be produced from renewable energy resources. These resources include wind, biomass, solar, ocean, geothermal and landfill gas.

Again and again, I have heard members come to this floor and say how important renewable energy is to our environment, to our national security, and to our domestic economic stability. I agree. But if we want to achieve these great benefits, we must, as they say, ``put our money where our mouth is.'' It is time to pass realistic, achievable standards to guarantee that renewable energy is produced.

The Renewable Energy Investment Act of 2003 is a very important step in that direction. It will create a renewable portfolio standard or ``RPS'' under which utilities and others who supply electricity to retail consumers will be required to ensure that by the year 2020, twenty percent of our domestic electricity is generated from renewable energy sources. The RPS in this legislation provides a flexible, market-driven system of tradeable credits by which utilities can readily achieve these renewable energy requirements.

Why twenty percent by 2020? Because the U.S. Department of Energy, through its Energy Information Administration, has repeatedly indicated that requiring that twenty percent of our electricity come from renewable energy by the year 2020 will actually lower overall consumer energy costs, while at the same time achieving tremendous environmental benefits.

According to the most recent estimates derived from the Department of Energy, consumer electricity prices under a twenty percent renewable portfolio standard would be largely the same as without one. According to the Department of Energy, retail electricity costs by the year 2020 without an RPS would be 6.5 cents per kilowatt hour. If a 20 percent RPS is in effect, retail electricity costs would be approximately 6.7 cents per kilowatt hour.

However, the Department of Energy studies also indicate that because an RPS creates a more diverse and competitive market for energy supply, overall domestic consumer energy costs will actually decrease by almost nine percent.

Equally important, shifting to greater renewable energy production will have dramatic impacts on human health and the environment. The Department of Energy has found that, as demand for energy grows, without changes to Federal law U.S. carbon emissions will increase forty seven percent above the 1990 level by 2020. However, with a twenty percent renewables standard, U.S. carbon dioxide emissions will decrease by more than eighteen percent by 2020.

Electricity production, primarily from burning coal, is the source of an estimated sixty six percent of sulfur oxide, SOx, emissions. These chemicals are the main cause of acid rain, which kills rivers and lakes, and damages crops and buildings. Burning fossil fuels to produce electricity also emits nitrogen oxides, NOx, which cause health-damaging smog. Ground-level ozone caused by nitrogen oxide contributes to asthma, bronchitis and other respiratory problems.

Electricity produced from nuclear power, while not responsible for the emissions associated with burning of fossil fuels, results in highly toxic, and essentially permanent wastes for which no complete disposal option currently exists.

Switching to renewable resources virtually eliminates these concerns. The Renewable Energy Investment Act of 2003 will help reduce emissions of carbon dioxide, sulfur dioxide, nitrogen dioxide, mercury and particulate matter, without creation of toxic wastes.

The twenty percent RPS established in this legislation will also create thousands of new, high quality jobs and bring significant new investment to rural communities. It will create an estimated $80 million in new capitol investment, and result in more than $5 billion in new property tax revenues.

It will bring increased diversity to our energy sector, creating greater market stability and reducing the price spikes that so often plague our domestic natural gas markets.

Greater diversity also reduces the vulnerability of our energy infrastructure to terrorist threats.

In a letter to Congress shortly after the attacks of September 11, 2001, several national security experts endorsed congressional passage of an RPS. The letter, signed by former CIA director James Woolsey; former National Security Advisor to President Reagan, Robert McFarlane; and former Chairman of the Joint Chiefs of Staff, Thomas Moorer, stated that a strong RPS is an important component of addressing the significant challenges to America's new energy security.

Rapidly increasing the production of renewable energy is vital to America's future. We must be willing to take the steps necessary to make that happen. The Renewable Energy Investment Act of 2003 is an essential part of that goal and I urge my colleagues to join with me in supporting this important legislation.

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

Mr. President, today, Senator Hagel and I, and others introduce ``The IDEA Full Funding Act of 2003.'' This bill will provide increased mandatory funding for the Individuals with Disabilities Education Act, IDEA, and meet the Federal Government's commitment to pay 40 percent of the average per pupil expenditures. These additional funds will ensure that every child with a disability gets a free, appropriate public education.

In 1975, when the IDEA was passed in the House and Senate, there was an agreement made by negotiators based on the understanding that the Federal Government's goal would be to provide 40 percent of the average per pupil expenditures in each local education area. There was no time frame placed on this goal, but since that time it has been understood that ``full funding'' for IDEA means reaching that 40 percent goal.

For the past 28 years, we have put additional resources into IDEA but we have not come close to full funding. This bill will put our money where our mouth is and say that the federal government will be full partners with states and local governments in meeting the needs of children with disabilities.

This bill fully funds the IDEA. It appropriates funds for the next 10 years, gradually increasing the percentage of funds which are mandatory and increasing the amounts so that in year 8 we are at the level projected to equal 40 percent of the average per pupil expenditure. While we have seen welcome increases in IDEA spending over the past few years, past year increases do not guarantee future increases. This bill guarantees full funding, phased in over 8 years.

This bill does not create a new entitlement program. It provides advanced appropriations for the next 10 years, but it has a set amount for each year, not an open-ended figure.

This bill also provides incentive for compliance with the requirements of IDEA. If all of the IDEA-eligible children are getting the services that they are entitled to, then local property taxpayers get relief.

Last year, the Senate passed an amendment to the reauthorization of the Elementary and Secondary Education Act which would have required full funding of IDEA. The full funding provision was not in the final conference report. Prior to that amendment, there have been 22 separate bills and resolutions in the House and Senate calling for full funding.

This year, the time has come for full funding to make it into law. It has been 28 years since the Federal Government agreed to pay a share of IDEA and it is time to meet that goal.

The IDEA has been remarkably successful. In 1975, only \1/5\ of children with disabilities received a formal education and several States had laws specifically excluding many children with disabilities, including those who were blind, deaf, or had mental health needs from receiving such an education. The most recent data on the number of children served under IDEA indicates that over 6 million children are currently benefiting from the law.

Although IDEA has been successful, there is more work to be done. Every time I speak to school districts in Iowa, they tell me that the costs of special education are very difficult for them to manage. Some parents of children with disabilities also complain that their children are not getting the education promised by IDEA.

This bill will provide significant additional resources. In 2003, we are funding $17.6 percent of the cost at 8.8 billion dollars. Under our bill, this number rises steeply to 22 percent of the cost and 10.8 billion dollars in 2004. The increases continue until 2011, when we reach 40 percent and an expenditure of 24.6 billion. Iowa sees its funding rise from 96 million in 2003 to 278.3 million in 2011. We are more than doubling the resources going to special education in Iowa and elsewhere.

I want to thank Senator Hagel for his ongoing leadership on this issue and for his work in achieving bipartisan support for this bill. I also want to thank Senators Kennedy, Jeffords and Dodd for their longstanding commitment to fully funding IDEA. In addition, I want to acknowledge all of the co-sponsors of this bill, who are joining me today in leading the way for Congress to finally pass full funding into law.

This is a win-win-win bill. With this advance appropriations, students with disabilities will get the public education they have a right to, school districts will be able to provide services without cutting into their general education budgets, and in cases where all IDEA-eligible children are getting the services they are entitled to, property taxpayers get relief.

Mr. President, today, we are introducing the ``Government Settlement Transparency Act of 2003.'' Over the past several months, we have become increasingly concerned about the approval of various settlements that allow penalty payments made to the government in settlement of a violation or potential violation of the law to be tax deductible. This payment structure shifts the tax burden from the wrongdoer onto the backs of the American people. This is unacceptable.

The issue of tax deductibility is particularly relevant in the settlement of various SEC investigations into violations or potential violations of the securities laws. The corporate meltdown of the past two years has caused investors to lose confidence in the stock market. To address investors' loss of faith, Congress passed the Sarbanes-Oxley Act last July. However, Sarbanes-Oxley begins to address only part of the corporate reform problem, as it applies solely to future corporate activity. To more fully restore confidence in the markets, America's State and Federal regulators are also working to hold accountable the corporate executives and others in corporate America responsible for damaging investor confidence. With these efforts to achieve greater accountability in the business community and ensure the integrity of our financial markets, it is important that the rules governing the appropriate tax treatment of settlements be clear and adhered to by taxpayers.

Section 162(f) of the Internal Revenue Code provides that no deduction is allowed as a trade or business expense under section 162(a) for the payment of a fine or penalty to a government for violation of any law. The enactment of section 162(f) in 1969 codified existing case law that denied the deductibility of fines and penalties as ordinary and necessary business expenses on the grounds that ``allowance of the deduction would frustrate sharply defined national or state policies proscribing the particular types of conduct evidenced by some governmental declaration thereof.'' Treasury regulations provide that fine or penalty includes an amount paid in settlement of the taxpayer's actual or potential liability for a fine or penalty.

The legislation introduced today modifies the rules regarding the determination of whether payments are nondeductible payments of fines of penalties under section 162(f). In particular, the bill generally provides that amounts paid or incurred, whether by suit, agreement, or otherwise to, or at the direction of, a government in relation to the violation of any law or the investigation or inquiry into the potential violation of any law are nondeductible. The bill applies to deny a deduction for any payment, including those where there is no admission of guilt or liability and those made for the purpose of avoiding further investigation or litigation.

An exception applies to payments that the taxpayer establishes are restitution. It is intended that a payment will be treated as restitution only if the payment is required to be paid to the specific persons, or in relation to the specific property, actually harmed by the conduct of the taxpayer that resulted in the payment. Thus, a payment to or with respect to a class broader than the specific persons or property that were actually harmed, for example, to class including similarly situated persons or property, does

not qualify as restitution. Restitution is limited to the amount that bears a substantial quantitative relationship to the harm caused by the past conduct or actions of the taxpayer that resulted in the payment in question. If the party harmed is a government, then restitution includes payment to such harmed government, provided the payment bears a substantial quantitative relationship to the harm. However, restitution does not include reimbursement of government investigative or litigation costs, or do payments to whistleblowers.

The bill would be effective for amounts paid or incurred on or after April 28th, 2003, except that it would not apply to amounts paid or incurred under any binding order or agreement entered into before such date.

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

Mr. President, today, we are introducing the ``Government Settlement Transparency Act of 2003.'' Over the past several months, we have become increasingly concerned about the approval of various settlements that allow penalty payments made to the government in settlement of a violation or potential violation of the law to be tax deductible. This payment structure shifts the tax burden from the wrongdoer onto the backs of the American people. This is unacceptable.

The issue of tax deductibility is particularly relevant in the settlement of various SEC investigations into violations or potential violations of the securities laws. The corporate meltdown of the past two years has caused investors to lose confidence in the stock market. To address investors' loss of faith, Congress passed the Sarbanes-Oxley Act last July. However, Sarbanes-Oxley begins to address only part of the corporate reform problem, as it applies solely to future corporate activity. To more fully restore confidence in the markets, America's State and Federal regulators are also working to hold accountable the corporate executives and others in corporate America responsible for damaging investor confidence. With these efforts to achieve greater accountability in the business community and ensure the integrity of our financial markets, it is important that the rules governing the appropriate tax treatment of settlements be clear and adhered to by taxpayers.

Section 162(f) of the Internal Revenue Code provides that no deduction is allowed as a trade or business expense under section 162(a) for the payment of a fine or penalty to a government for violation of any law. The enactment of section 162(f) in 1969 codified existing case law that denied the deductibility of fines and penalties as ordinary and necessary business expenses on the grounds that ``allowance of the deduction would frustrate sharply defined national or state policies proscribing the particular types of conduct evidenced by some governmental declaration thereof.'' Treasury regulations provide that fine or penalty includes an amount paid in settlement of the taxpayer's actual or potential liability for a fine or penalty.

The legislation introduced today modifies the rules regarding the determination of whether payments are nondeductible payments of fines of penalties under section 162(f). In particular, the bill generally provides that amounts paid or incurred, whether by suit, agreement, or otherwise to, or at the direction of, a government in relation to the violation of any law or the investigation or inquiry into the potential violation of any law are nondeductible. The bill applies to deny a deduction for any payment, including those where there is no admission of guilt or liability and those made for the purpose of avoiding further investigation or litigation.

An exception applies to payments that the taxpayer establishes are restitution. It is intended that a payment will be treated as restitution only if the payment is required to be paid to the specific persons, or in relation to the specific property, actually harmed by the conduct of the taxpayer that resulted in the payment. Thus, a payment to or with respect to a class broader than the specific persons or property that were actually harmed, for example, to class including similarly situated persons or property, does

not qualify as restitution. Restitution is limited to the amount that bears a substantial quantitative relationship to the harm caused by the past conduct or actions of the taxpayer that resulted in the payment in question. If the party harmed is a government, then restitution includes payment to such harmed government, provided the payment bears a substantial quantitative relationship to the harm. However, restitution does not include reimbursement of government investigative or litigation costs, or do payments to whistleblowers.

The bill would be effective for amounts paid or incurred on or after April 28th, 2003, except that it would not apply to amounts paid or incurred under any binding order or agreement entered into before such date.

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