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A district eligible to elect to receive its funding through this initiative must have 599 students or fewer and have a Beale Code rating of 6, 7, 8, or 9. The Beale Codes are used
[Page: S7131] GPO's PDF
FLEXIBLE USE OF FORMULA GRANTS
If a district qualifies and elects to participate in this initiative, it will have flexibility with regard to Titles II (Eisenhower professional development), IV (Safe and Drug-Free Schools), and VI (Innovative Education Program Strategies) of the Elementary and Secondary Education Act and the Class Size Reduction Act. Districts would be able to combine the funds from these programs and use the money to support reform efforts intended to improve the achievement of students and the quality of instruction provided.
ALTERNATIVE TO COMPETITIVE GRANT PROGRAMS
If an eligible district elects not to compete the discretionary grants programs listed below, it will receive a formula grant based on student enrollment (see following table), less the amount they received from the formula grant programs included in the flexible use of formula grants program (Titles II, IV and Vi of ESEA and the Class Size Reduction Act). This alternative formula grant may be combined with the funds from the flexible formula grant program and used for the same purposes.
State and Local Programs for School Technology Resources (Subpart 2 of part A of title III of ESEA) ;
Bilingual Education Capacity and Demonstration Grants (Subpart 1 of part A of title VII of ESEA) ;
Bilingual Education Research, Evaluation, and Dissemination Grants (Subpart 2 of part A of title VII of ESEA) ;
Bilingual Education Professional Development Grants (Subpart 3, Section 7142 of part A of title VII of ESEA) ;
Fund for the Improvement of Education (Part A of Title X of ESEA) ;
Gifted and Talented Grants (Part B of Title X of ESEA) ;
21st Century Community
Learning Centers (Part I of title X of ESEA)
Number of K-12 Students
Amount
in District:
of grant
\1\ $20,000
\1\ 30,000
\1\ 40,000
\1\ 50,000
\1\ 60,000\1\ Reduced by the amount the district receives from the listed formula grants.
ACCOUNTABILITY
School districts participating in this initiative would have to meet high accountability standards. They would have to show significant statistical improvement in assessment test scores based on state and/or local assessments. Schools failing to show demonstrable progress will not be eligible for continued participation in the initiative.
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STARKWEATHER PUBLIC SCHOOL
DISTRICT NO. 44,
Starkweather, ND, April 15, 1999.
Hon. KENT
CONRAD,
U.S. Senate, Washington, DC.
DEAR SENATOR CONRAD: The purpose of this letter is to voice several concerns that are facing rural districts in North Dakota and ask for your assistance as the reauthorization process for various educational legislation is currently being addressed by congress. I currently serve as a shared superintendent for both the Starkweather and Munich Public School Districts. At this particular time these two districts are two independent districts, with the Starkweather District serving 131 students and Munich serving 154 students. Each district covers in excess of 200 square miles.
The first issue that I have deals with the recently approved Class-Size Reduction Program. I support the primary legislative intent of this legislation, however, this office disagrees with the way in which the funds can be accessed. Please allow me to explain.
This office received information at a recent regional meeting that the allocation for the Starkweather District is $5,003, and $6,020 for Munich. It was also shared that in order to access these funds our individual district allocations must be equal to or greater than the cost of hiring a first-year teacher at our schools. This equates to approximately $23,000. If a school allocation is less than that, the school district can create or join a consortium to access these dollars, so long as the aggregate amount equals or exceeds that cost of a first-year teacher. Therefore, as you can see, the two school districts that I serve would be forced to enter into another consortium in order to obtain these allocated funds through this program.
Currently, both the Munich and Starkweather School Districts are members of various consortiums in order to access our federal allocated monies. These consortiums include Title II, Lake Area Carl-Perkins, and Goals 2000. This is in addition to having consortiums for special education and school improvement. My point is that each of my respective school districts have lost their individual ability to access funds directly, and as a direct result of forming these consortiums in order to access our entitled monies, it is of my opinion, we have lost our individual ability to utilize these monies in an effective manner that would be conducive to promoting the educational needs of our individual schools. Let me cite an example of how this loss of effectiveness has occurred for my districts.
3. Legislation for rural school districts. Something needs to be done for us. Rural districts with low student enrollments and high square miles have to form consortiums to access federal funds. If legislation were created as cited above, my two districts could better utilize allocated funds and still be in-line with federal education goals.
In closing, I understand that it is difficult to write legislation to meet everyone's needs. However, I do believe that we need to address our educational needs as our children deserve the same opportunity as those in larger districts. Our issues may be different, but we all hold the common thread of providing the best education for each child.
Thank you for your time and consideration regarding the issues shared. Your office has my permission to share this letter with any individual who may need to review the concerns voiced. Your office may feel free to contact me at the address and telephone provided, or e-mail messages to me at elburkle@sendit.nodak.edu (work) or my home e-mail stburkle@stellarnet.com.
Respectfully,
ELROY BURKLE,
Superintendent.
Mr. KERREY. Mr. President, I rise in support of the Rural Education Initiative introduced by Senator COLLINS today, and I am pleased to be a cosponsor of this important piece of legislation.
The Rural Education Initiative takes a significant step toward ensuring that all young people have a shot at the American Dream. It addresses an important problem that many rural schools face: Often they receive small amounts of funding for a variety of programs, but they don't have the budget and personnel to develop and sustain multiple programs. Yet they still have students who need our help to raise their achievement levels and become productive, successful citizens.
The Rural Education Initiative asks us to make a $125 million investment in rural schools. And it allows small rural districts to pool funds from a handful of federal programs and target funding in those areas where they see the greatest need and where the funding will have the greatest impact.
But this legislation also ensures that districts remain accountable--in exchange for increased flexibility, they must demonstrate improved performance.
Over 70 percent of Nebraska's school districts are small, rural districts, as defined by this legislation. Currently Nebraska receives approximately $92 million in federal funds for elementary and secondary education. The Rural Education Initiative would increase that contribution by more than $10 million.
Mr. President, recently I contacted Jim Havelka, superintendent of both Dodge and Howells Public Schools in Nebraska. Dodge has 175 students K-12, and Howells has 225 students K-12. I said, ``Jim, what do you need to do a better job of educating your kids?''
Jim said, ``You know, it's awfully hard to start a new initiative on $900. But if I could pool funds from a few programs, I could hire an experienced instructional technology teacher to help us make even better use of computer hardware and software that is so crucial in improving learning opportunities for our students. And I could share that instructor with 2 or 3 other schools. Keep Title I, special education, and other major programs intact, but give me a little flexibility with a few other programs, and I'll give you results.''
Mr. President, I intend to do what I can to help Jim and his students produce results. I believe that in addition to this initiative, we should increase our investment in Title I and in education technology, both of which are especially important to rural schools. I look forward to working with Senator COLLINS and the other cosponsors of this legislation to accomplish these goals as we move this legislation through Congress.
By Mr. MACK:
S. 1226. A bill to amend the Internal Revenue Code of 1986 to provide that interest on indebtedness used to finance the furnishing or sale of rate-regulated electric energy or natural gas in the United States shall be allocated solely to sources within the United States; to the Committee on Finance.
[Page: S7132] GPO's PDF
ALLOCATION TO SOURCES WITHIN THE UNITED STATES OF INTEREST EXPENSE ON INDEBTEDNESS FINANCING RATE-REGULATED ELECTRIC ENERGY OR NATURAL GAS INFRASTRUCTURE INVESTMENTS
Mr. MACK. Mr. President, today I am introducing legislation to remedy a problem in the way the U.S. taxes the foreign operations of U.S. electric and gas utilities. With the 1992 passage of the National Energy Policy Act, Congress gave a green light to U.S. utilities wishing to do business abroad, lifting a long-standing prohibition. U.S. utilities were allowed to compete for the foreign business opportunities created by the privatization of national utilities and the need for the construction of facilities to meet increased energy demands abroad.
Since 1992, U.S. utility companies have made significant investments in utility operations in the United Kingdom, Australia, Eastern Europe, the Far East and South America. These investments in foreign utilities have created domestic jobs in the fields of design, architecture, engineering, construction, and heavy equipment manufacturing. They also allow U.S. utilities an opportunity to diversify and grow.
Unfortunately, the Internal Revenue Code penalizes these investments by subjecting them to double-taxation. U.S. companies with foreign operations receive tax credits for a portion of the taxes they pay to foreign countries, to reduce the double-taxation that would otherwise result from the U.S. policy of taxing worldwide income. The size of these foreign tax credits are affected by a number of factors, as U.S. tax laws recalculate the amount of foreign income that is recognized for tax credit purposes.
Section 864 of the tax code allocates deductible interest expenses between the U.S. and foreign operations based on the relative book values of assets located in the U.S. and abroad. By ignoring business realities and the peculiar circumstances of U.S. utilities, this allocation rule overtaxes them. Because U.S. utilities were until recently prevented from operating abroad, their foreign plants and equipment have been recently-acquired and consequently have not been much depreciated, in contrast to their domestic assets which are in most cases fully-depreciated. Thus, a disproportionate amount of interest expenses are allocated to foreign income, reducing the foreign income base that is recognized for U.S. tax purposes thus the size of the corresponding foreign tax credits.
The allocation rules increase the double-taxation of foreign income by reducing foreign tax credits, thereby increasing domestic taxation. The unfairness of this result is magnified by the fact that the interest expenses--which are the reason the foreign tax credit shrinks--are usually associated with domestically-regulated debt, which is tied to domestic production and is not as fungible as the tax code assumes.
The result of this economically-irrational taxation scheme is a very high effective tax rate on certain foreign investment and a loss of U.S. foreign tax credits. Rather than face this double-tax penalty, some U.S. utilities have actually chosen not to invest overseas and others have pulled back from their initial investments.
One solution to this problem is found in the legislation that I am introducing today. This remedy is to exempt from the interest allocation rules of Section 864 the debt associated with a U.S. utility's furnishing and sale of electricity or natural gas in the United States. This proposed rule is similar to the rule governing ``non-recourse'' debt, which is not subjected to foreign allocation. In both cases, lenders look to specific cash flows for repayment and specific assets as collateral. These loans are thus distinguishable from the typical risks of general credit lending transactions.
The specific cash flow aspect of non-recourse financing is a critical element of the non-recourse debt exception, and logic requires that the same tax treatment should be given to analogous utility debt. Thus, my bill would exempt from allocation to foreign source income the interest on debt incurred in the trade or business of furnishing or selling electricity or natural gas in the United States. The current situation is a very real problem that must be remedied, and I urge my colleagues to support the solution I am proposing.
Mr. President, I ask unanimous consent that the text of the bill be printed in the RECORD.
There being no objection, the bill was ordered to be printed in the RECORD, as follows:
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. ALLOCATION TO SOURCES WITHIN THE UNITED STATES OF INTEREST EXPENSE ON INDEBTEDNESS FINANCING RATE-REGULATED ELECTRIC ENERGY OR NATURAL GAS INFRASTRUCTURE INVESTMENTS.
(a) IN GENERAL.--Subsection (e) of section 864 of the Internal Revenue Code of 1986 (relating to rules for allocating interest, etc.) is amended by redesignating paragraphs (6) and (7) as paragraphs (7) and (8), respectively, and by inserting after paragraph (5) the following new paragraph:
``(6) TREATMENT OF CERTAIN INTEREST EXPENSE RELATING TO QUALIFIED INFRASTRUCTURE INDEBTEDNESS.--
``(A) IN GENERAL.--Interest on any qualified infrastructure indebtedness shall be allocated and apportioned solely to sources within the United States, and such indebtedness shall not be taken into account in allocating and apportioning other interest expense.
``(B) QUALIFIED INFRASTRUCTURE INDEBTEDNESS.--For purposes of this paragraph, the term `qualified infrastructure indebtedness' means any indebtedness incurred--
``(i) to carry on the trade or business of the furnishing or sale of electric energy or natural gas in the United States, or
``(ii) to acquire, construct, or otherwise finance property used predominantly in such trade or business.
``(C) RATE REGULATION.--
``(i) IN GENERAL.--If only a portion of the furnishing or sale referred to in subparagraph (B)(i) in a trade or business is rate regulated, the term `qualified infrastructure indebtedness' shall not include nonqualified indebtedness.
``(ii) NONQUALIFIED INDEBTEDNESS.--For purposes of clause (i), the term `nonqualified indebtedness' means so much of the indebtedness which would (but for clause (i)) be qualified infrastructure indebtedness as exceeds the amount which bears the same ratio to the aggregate indebtedness of the taxpayer as the value of the assets used in the furnishing or sale referred to in subparagraph (B)(i) which is rate-regulated bears to the value of the total assets of the taxpayer.
``(iii) RATE-REGULATED DEFINED.--For purposes of this subparagraph, furnishing or sale is rate-regulated if the rates for the furnishing or sale, as the case may be, have been established or approved by a State or political subdivision thereof, by an agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of the District of Columbia or of any State or political subdivision thereof.
``(iv) ASSET VALUES.--For purposes of clause (ii), assets shall be treated as having a value equal to their adjusted bases (within the meaning of section 1016) unless the taxpayer elects to use fair market value for all assets. Such an election, once made, shall be irrevocable.
``(v) TIME FOR MAKING DETERMINATION.--The determination of whether indebtedness is qualified infrastructure indebtedness or nonqualified indebtedness shall be made at the time the indebtedness is incurred.
``(vi) SEPARATE APPLICATION TO ELECTRIC ENERGY AND NATURAL GAS.--This subparagraph shall be applied separately to electric energy and natural gas.''
(b) EFFECTIVE DATE.--
(1) IN GENERAL.--The amendment made by this section shall apply to indebtedness incurred in taxable years beginning after the date of enactment of this Act.
(2) OUTSTANDING DEBT.--In the case of indebtedness outstanding as of the date of enactment of this Act, the determination of whether such indebtedness constitutes qualified infrastructure indebtedness shall be made by applying the rules of subparagraphs (B) and (C) of section 864(e)(6) of the Internal Revenue Code of 1986, as added by this section, on the date such indebtedness was incurred.
By Mr. CHAFEE (for himself, Mr. MCCAIN, Mr. GRAHAM, Mr. MACK, Mr. MOYNIHAN, and Mr. JEFFORDS):
S. 1227. A bill to amend title IV of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 to provide States with the option to allow legal immigrant pregnant women and children to be eligible for medical assistance under the medical program, and for other purposes; to the Committee on Finance.
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