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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.
IMMIGRANT CHILDREN'S HEALTH IMPROVEMENT ACT OF 1999
Mr. CHAFEE. Mr. President, I am pleased to introduce the Immigrant Children's Health Improvement Act of 1999. I also want to thank Senators MCCAIN, GRAHAM, MACK, MOYNIHAN, and JEFFORDS for their support and cosponsorship of this important legislation.
[Page: S7133] GPO's PDF
In 1996, legal immigrants in this country lost critical public benefits because of changes made under welfare reform. While I supported the underlying goals of welfare reform--self sufficiency and individual responsibility--I continue to believe that the cuts made to immigrants' benefits as part of the 1996 reforms were unwarranted. While some of those cuts were reversed in 1997 and again in 1998, we still have a long way to improve the lives of the millions of immigrants who are legally in this country. The Immigrant Children's Health Improvement Act is one small but important step toward this goal.
While cash benefits such as Supplemental Security Income (SSI) and food stamps are critical to the well-being of low-income immigrants, access to health care is their largest concern. Immigrants who were legally in the country before the enactment of the welfare reform legislation are still eligible for Medicaid. However, those immigrants--including children and pregnant women--who arrived after August 22, 1996, the enactment date of the welfare bill, are barred for five years from receiving health benefits under Medicaid or the State Children's Health Insurance Program (SCHIP). While these individuals may still get emergency medical care, they are ineligible for the basic medical services that may reduce the need for such emergency care. This makes no sense.
The legislation we are introducing today would fix this problem by giving states the option to lift the five-year bar for pregnant women and children, allowing this narrow group of legal immigrants to receive health care services under either SCHIP or Medicaid. I want to emphasize that this legislation does not require states to cover these immigrant children--it merely allows the state to do so if it chooses. This approach is consistent with Congress' shift toward more state flexibility and will provide needed relief to states, such as Rhode Island, with high immigrant populations.
I hope that my colleagues will join me in support of this important measure. I ask unanimous consent that the legislation 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. SHORT TITLE.
This Act may be cited as the ``Immigrant Children's Health Improvement Act of 1999''.
SEC. 2. OPTIONAL ELIGIBILITY OF CERTAIN ALIEN PREGNANT WOMEN AND CHILDREN FOR MEDICAID.
(a) IN GENERAL.--Subtitle A of title IV of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1611-1614) is amended by adding at the end the following:
``SEC. 405. OPTIONAL ELIGIBILITY OF CERTAIN ALIENS FOR MEDICAID.
``(a) OPTIONAL MEDICAID ELIGIBILITY FOR CERTAIN ALIENS.--A State may elect to waive (through an amendment to its State plan under title XIX of the Social Security Act) the application of sections 401(a), 402(b), 403, and 421 with respect to eligibility for medical assistance under the program defined in section 402(b)(3)(C) (relating to the medicaid program) of aliens who are lawfully residing in the United States (including battered aliens described in section 431(c)), within any or all (or any combination) of the following categories of individuals:
``(1) PREGNANT WOMEN.--Women during pregnancy (and during the 60-day period beginning on the last day of the pregnancy).
``(2) CHILDREN.--Children (as defined under such plan), including optional targeted low-income children described in section 1905(u)(2)(B).''.
(b) APPLICABILITY OF AFFIDAVITS OF SUPPORT.--Section 213A(a) of the Immigration and Nationality Act (8 U.S.C. 1183a(a)) is amended by adding at the end the following:
``(4) INAPPLICABILITY TO BENEFITS PROVIDED UNDER A STATE WAIVER.--For purposes of this section, the term `means-tested public benefits' does not include benefits provided pursuant to a State election and waiver described in section 405 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.''.
(c) CONFORMING AMENDMENTS.--
(1) Section 401(a) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1611(a)) is amended by inserting ``and section 405'' after ``subsection (b)''.
(2) Section 402(b)(1) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1612(b)(1)) is amended by inserting ``, section 405,'' after ``403''.
(3) Section 403(a) of such Act (8 U.S.C. 1613(a)) is amended by inserting ``section 405 and'' after ``provided in''.
(4) Section 421(a) of such Act (8 U.S.C. 1631(a)) is amended by inserting ``except as provided in section 405,'' after ``Notwithstanding any other provision of law,''.
(5) Section 1903(v)(1) of the Social Security Act (42 U.S.C. 1396b(v)(1)) is amended by inserting ``and except as permitted under a waiver described in section 405(a) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996,'' after ``paragraph (2),''.
(d) EFFECTIVE DATE.--The amendments made by this section take effect on October 1, 1999.
SEC. 3. OPTIONAL ELIGIBILITY OF IMMIGRANT CHILDREN FOR SCHIP.
(a) IN GENERAL.--Section 405 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, as added by section 2(a), is amended--
(1) in the heading, by inserting ``
(2) by adding at the end the following new subsection:
``(b) OPTIONAL SCHIP ELIGIBILITY FOR CERTAIN ALIENS.--
``(1) IN GENERAL.--Subject to paragraph (2), a State may also elect to waive the application of sections 401(a), 402(b), 403, and 421 with respect to eligibility of children for child health assistance under the State child health plan of the State under title XXI of the Social Security Act (42 U.S.C. 1397aa et seq.), but only with respect to children who are lawfully residing in the United States (including children who are battered aliens described in section 431(c)).
``(2) REQUIREMENT FOR ELECTION.--A waiver under this subsection may only be in effect for a period in which the State has in effect an election under subsection (a) with respect to the category of individuals described in subsection (a)(2) (relating to children).''.
(b) EFFECTIVE DATE.--The amendment made by subsection (a) applies to child health assistance for coverage provided for periods beginning on or after October 1, 1999.
Mr. GRAHAM. Mr. President, I rise today, along with Senators CHAFEE, MACK, MCCAIN, and MOYNIHAN, to introduce the Immigrant Children Health Improvement Act of 1999. I believe that these efforts are necessary in order to guarantee a healthy generation of children.
This legislation is simple. It provides states the option to provide health care coverage to legal immigrant children through Medicaid and the State Children's Health Insurance Program (SCHIP)--in essence eliminating the arbitrary designation of August 22, 1996 as the cutoff date for benefits eligibility to children. The welfare reform legislation passed in 1996 prohibits states from covering these immigrant children during their first five years in the United States. This prohibition has serious consequences.
Children without health insurance do not get important care for preventable diseases. Many uninsured children are hospitalized for acute asthma attacks that could have been prevented, or suffer from permanent hearing loss from untreated ear infections. Without adequate health care, common illnesses can turn into life-long crippling disease, whereas appropriate treatment and care can help children with diseases like diabetes live relatively normal lives. A lack of adequate medical care will also hinder the social and educational development of children, as children who are sick and left untreated are less ready to learn.
In addition to allowing extended coverage of legal immigrant children, this initiative aims to provide Medicaid to legal immigrant pregnant women who are also barred from receiving services as a result of the 1996 welfare reform law.
This legislation attempts to diminish the arbitrary cutoff date used in the 1996 welfare law to determine the eligibility of legal immigrants to benefits they desperately need. Our nation was built by people who came to our shores seeking opportunity and a better life, and America has greatly benefitted from the talent, resourcefulness, determination, and work ethic of many generations of legal immigrants. Time and time again, they have restored our faith in the American Dream. We should not discriminate between these important members of our community based on nothing more than an arbitrary date.
As our nation enters what promises to be a dynamic century, the United States needs a prudent, fair immigration policy to ensure that avenues of refuge and opportunity remain open for those seeking freedom, justice, and a better life.
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