[Pages S10565-S10569]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. SIMON (for himself and Mr. Jeffords):
S. 1065. A bill to provide procedures for the contribution of
volunteer U.S. military personnel to international peace operations; to
amend title 10, United States Code, to provide for participation of the
Armed Force in peacekeeping activities, humanitarian activities, and
refugee assistance, and for other purposes; to the Committee on Foreign
Relations.

the international peace operations support act of 1995

Mr. SIMON. Mr. President, Senator Jeffords and I are introducing
today a bill entitled ``The International Peace Operations Support Act
of 1995.'' The bill would enhance the U.S. military's ability to
contribute to international peace operations, and is similar to
legislation we introduced in the last Congress.
The Simon-Jeffords bill requires the President to report to Congress
on a plan to earmark within the Armed Forces a contingency force that
could be used for peace and humanitarian operations, and could be
deployed on 24-hour notice. The force would include up to 3,000 active-
duty personnel from any of the services, who would volunteer to serve
in international peace operations. The soldiers would receive extra
compensation for their participation, and would get special training
for such operations.
Additionally, the bill augments the mission statements of the Army,
Navy, and Air Force by affirming that their responsibilities include
participation in ``international peacekeeping operations, humanitarian
activities, and refugee assistance activities, when determined by the
President to be in the national interest.''
Senator Jeffords and I designed this legislation to help the U.S.
military meet some of the emerging threats in the post-cold-war era:
ethnic conflicts and civil wars that cause regional instability,
humanitarian disasters, and aggressors that threaten our interests
overseas. Just as the military was used to confront the threat of the
cold war, it will be called upon to address the threats of today and
tomorrow. This has been evident in recent years in Bangladesh, Somalia,
Macedonia, Rwanda, and Haiti, where the United States military has been
asked to perform missions beyond the scope of traditional war-fighting,
generally called peace operations.
Some reject categorically these kinds of roles for our military. I
believe that is a mistake, and a denial of reality. That point of view
implies that our military planners should prepare only for the big ones
like World War II on the gulf war. That notion is not realistic, and
would not serve our national security interests. Regional conflicts and
instability are inevitable, and humanitarian disasters are inescapable.
Peace operations will be needed, and the U.S. military--the most
capable in the world--will be called upon to respond, so long as our
Nation rejects isolationism.
Simon-Jeffords bill would help us respond to emergencies and crises
by consolidating up to 3,000 soldiers with both the will and the
training to undertake peace operations, who could react on short,
perhaps 24-hour, notice. Let me give an example of why this is
important:
In May 1994, when the situation in Rwanda was going from worse to
horrific, Senator Jeffords and I called the Canadian general in charge
of the small U.N. force there. General Daullaire made it clear that the
quick infusion of 5,000-8,000 troops could stabilize the situation.
Unfortunately, the United Nations did not have the troops, nor were
nations willing to provide them, and we
subsequently witnessed the deaths of hundreds of thousands. Rapid
deployment of a contingency force as envisioned in this bill, in
conjunction with similar forces in other countries, may have been able
to help General Daullaire prevent some of the tragedy in Rwanda.

The concept of rapid reaction capability is neither new nor is it
revolutionary. The first U.N. Secretary General, Trygve Lie, raised the
idea in 1948, and there is a growing interest among the international
community in enhanced military responsiveness. In fact, the United
States is far behind our allies on new thinking in these areas. Canada
is studying proposals to have nations designate contingency forces for
peace operations, which would be coordinated by a central headquarters
in some location. Our bill would fit into that plan very well. Denmark
and the Netherlands are also formulating plans on quick reaction
forces.
The U.S. military realizes that we will have to deal with regional
crises, and I give credit to the services for incorporating peace and
humanitarian

[[Page S10566]]
operations into their mission statements, strategy and planning. The
National Military Strategy prepared by the Joint Chiefs finds that
peacetime engagement activities are a primary military task--activities
such as peacekeeping, humanitarian operations and democratic
assistance. Senator Jeffords and I believe our bill complements these
efforts already underway.
I noted before that the contingency force would be made of
volunteers, who would be given added compensation. This is all
volunteers, who would be given added compensation. This is an important
component. We must recall that despite the difficulties with our
operations in Somalia and Haiti, our soldiers expressed a sense of
pride and accomplishment in their missions to help the people in these
troubled lands. I imagine that it would not be difficult to find
soldiers who would like to join this force.
The burden of world leadership is on the United States--we are the
richest, the most influential, and the most militarily capable nation.
Our soldiers will inevitably be called on to respond to world crises.
The Simon-Jeffords bill can improve our response capability by
providing for a contingency force of specially trained troops for quick
deployment.
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:
S. 1065

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 ``International Peace
Operations Support Act of 1995''.

SEC. 2. FINDINGS.

The Congress makes the following findings:
(1) With the end of the Cold War, the United States is
clearly the undisputed world economic and military leader and
as such bears major international responsibilities.
(2) Threats to the long-term security and well-being of the
United States no longer derive primarily from the risk of
external military aggression against the United States or its
closest treaty allies but in large measure derive from
instability from a variety of causes: population movements,
ethnic and regional conflicts including genocide against
ethnic and religious groups, famine, terrorism, narcotics
trafficking, and proliferation of weapons of mass
destruction.
(3) To address such threats, the United States has
increasingly turned to the United Nations and other
international peace operations, which at times offer the best
and most cost-effective way to prevent, contain, and resolve
such problems.
(4) In numerous crisis situations, such as the massacres in
Rwanda, the United Nations has been unable to respond with
peace operations in a swift manner.
(5) The Secretary-General of the United Nations has asked
member states to identify in advance units which are
available for contribution to international peace operations
under the auspices of the United Nations in order to create a
rapid response capability.
(6) United States participation and leadership in the
initiative of the Secretary-General is critical to leveraging
contributions from other nations and, in that way, limiting
the United States share of the burden and helping the United
Nations to achieve success.

SEC. 3. DEFINITIONS.

For purposes of this Act--
(1) the term ``appropriate congressional consultation''
means consultation as described in section 3 of the War
Powers Resolution; and
(2) the term ``international peace operations'' means any
such operation carried out under chapter VI or chapter VII of
the United Nations Charter or under the auspices of the
Organization of American States.

SEC. 4. REPORT ON PLAN TO ORGANIZE VOLUNTEER UNITS.

Not later than 180 days after the date of enactment of this
Act, the President shall submit a report to the Congress
setting forth--
(1) a plan for--
(A) organizing into units of the Armed Forces a contingency
force of up to 3,000 personnel, comprised of current active-
duty military personnel, who volunteer additionally and
specifically to serve in international peace operations and
who receive added compensation for such service;
(B) recruiting personnel to serve in such units; and
(C) providing training to such personnel which is
appropriate to such operations; and
(2) proposed procedures to implement such plan.

SEC. 5. AUTHORIZATION.

(a) In General.--Upon approval by the United Nations
Security Council of an international peace operation, the
President, after appropriate congressional consultation, is
authorized to make immediately available for such operations
those units of the Armed Forces of the United States which
are organized under section 4(1)(A).
(b) Termination of Use of United States Armed Forces.--(1)
Subject to paragraph (2), the President may terminate United
States participation in international peace operations at any
time and take whatever actions he deems necessary to protect
United States forces.
(2) Notwithstanding section 5(b) of the War Powers
Resolution, not later than 180 days after a Presidential
report is submitted or required to be submitted under section
4(a) of the War Powers Resolution in connection with the
participation of the Armed Forces of the United States in an
international peace operation, the President shall terminate
any use of the Armed Forces with respect to which such report
was submitted or required to be submitted, unless the
Congress has extended by law such 180-day period.

SEC. 6. AVAILABILITY OF FUNDS.

Funds available to the Department of Defense are authorized
to be available to carry out section 5(a).

SEC. 7. WAR POWERS RESOLUTION REQUIREMENTS.

Except as otherwise provided, this Act does not supersede
the requirements of the War Powers Resolution.

SEC. 8. MISSION STATEMENTS FOR ARMED FORCES.

(a) Army.--Section 3062(a) of title 10, United States Code,
is amended--
(1) by striking out ``and'' at the end of paragraph (3);
(2) by striking out the period at the end of paragraph (4)
and inserting in lieu thereof ``; and''; and
(3) by adding at the end the following:
``(5) participating in international peacekeeping
activities, humanitarian activities, and refugee assistance
activities when determined by the President to be in the
national interests of the United States.''.
(b) Navy.--Section 5062(a) of such title is amended--
(1) by inserting ``(1)'' after ``(a)'';
(2) by striking out the second sentence; and
(3) by adding at the end the following new paragraph:
``(3) The Navy is responsible for the preparation of naval
forces necessary for the following activities:
``(A) Effective prosecution of war except as otherwise
assigned and, in accordance with integrated joint
mobilization plans, for the expansion of the peacetime
components of the Navy to meet the needs of war.
``(B) Participation in international peacekeeping
activities, humanitarian activities, and refugee assistance
activities when determined by the President to be in the
national interests of the United States.''.
(c) Air Force.--Section 8062(a) of such title is amended--
(1) by striking out ``and'' at the end of paragraph (3);
(2) by striking out the period at the end of paragraph (4)
and inserting in lieu thereof ``; and''; and
(3) by adding at the end the following:
``(5) participating in international peacekeeping
activities, humanitarian activities, and refugee assistance
activities when determined by the President to be in the
national interests of the United States.''.

Mr. JEFFORDS. Mr. President, today I join Senator Simon in
introducing the Simon-Jeffords International Peace Operations Support
Act of 1995.
The altogether natural and necessary focus in American politics on
our domestic problems should not blind us to the monumental
responsibilities of the United States as a leader of the world
community. The very real dangers of the post-cold war world, as well as
the equally real opportunities, are ignored only at our peril.
When civil strife or naked aggression threaten the stability of
countries or whole regions and threaten the lives of whole populations,
it is clearly in the world community's interest to try to do something.
This response could take many forms, and a U.S. contribution might
appropriately consist of political support, logistics or intelligence
assistance, or provision of equipment. But there surely will be times
when it will be in the U.S. national interest to respond to acute
peacekeeping and other humanitarian needs with a contribution of
troops.
We are severely hamstrung today in our ability to respond to these
types of problems. With the most capable military establishment in the
world, we find ourselves often unable to contribute troops to
international peacekeeping efforts because of unclear political
guidance to our military as to whether peacekeeping is part of its
mission and a reluctance to train a designated cadre of troops to
perform the tasks of peacekeeping, refugee assistance, and other
humanitarian operations.
Our legislation addresses this problem. It sharpens one of our tools
of foreign and security policy by providing

[[Page S10567]]
clearer guidelines for U.S. troop contributions to United Nations or
other international peace activities. It specifically makes this
activity a formal mission of the U.S. military in cases where U.S.
national interests are served by a peacekeeping deployment. It also
calls for the identification of a specific unit or units consisting of
service personnel who have volunteered for such service and who would
be given specialized training for the unique circumstances of such
missions.
The preeminent position of the United States in the world, and our
far-flung commercial and security interests do not always dictate that
we contribute troops to address particular problems, but they do
dictate that we be prepared to do so if necessary. As in other areas of
international endeavor, U.S. leadership means that our contributions
leverage contributions by other states that follow our lead. Thus,
greater U.S. contributions to U.N. peacekeeping might, as the result of
a multiplier effect, prove to be the most cost-effective method of
increasing worldwide peacekeeping capabilities.
We are rightly proud of the dedication, skills, and bravery of our
Armed Forces. They are the world's most effective fighting force, and
their skills and dedication have successfully been applied to
humanitarian activities in, for example, Operations Provide Comfort in
Iraq and Restore Democracy in Haiti. Not all international crises will
result in U.S. troop deployments. Indeed, our experience in Somalia has
brought home quite clearly to us the limits of international action in
the face of massive civil strife. But when the international community
decides to act, and when we decide that it is appropriate to offer as
our contribution the finest, most capable men and women in uniform in
the world, we must be ready.
______

By Mr. BRADLEY (for himself and Mr. Nickles):
S. 1066. A bill to amend the Internal Revenue Code of 1986 to phase
out the tax subsidies for alcohol fuels involving alcohol produced from
feedstocks eligible to receive Federal agricultural subsidies; to the
Committee on Finance.

the clean fuels equity act of 1995

Mr. BRADLEY. Mr. President, I rise today to introduce legislation
aimed at restoring some level of financial equity in the marketplace
for clean automotive fuels. My bill will phase out certain targeted tax
subsidies given to an industry that has too long received unique and
favorable treatment under the Tax Code: The domestic ethanol industry.
In this effort, I am very pleased to be joined in this effort by
Senator Nickles as an original cosponsor of this legislation.
The Clean Fuels Equity Act will phase out the ethanol tax subsidy for
ethanol produced from feedstocks that already receive other subsidies
through the Department of Agriculture's price and income support
programs. The phaseout would occur over 3 years to allow the existing
industry an orderly transition to a less-sheltered marketplace. My
legislation would continue to allow the tax credits for special energy
crops, waste products, and other biomass that do not benefit from the
USDA price supports. These energy crops hold some promise of
environmental and energy benefits. Furthermore, they still represent a
technically immature industry, for which additional Federal support
might be justified.
As most people know, the bulk of the ethanol produced in the United
States is derived from corn, and processed and sold in the Midwest; 20
years ago, there was no fuel ethanol industry. But, born from the
crisis concerns of the late 1970's, this business grew from nothing,
built by an array of special and substantial tax privileges. However,
unlike many of the questionable policies developed during that period
of energy crisis--from the Synfuels Corp. to the Fuel Use Act and plans
for gas rationing--the ethanol subsidies continue to survive.
When the credits were initiated over 15 years ago, they were intended
to jumpstart an industry that would not otherwise exist. This policy
has obviously succeeded. The ethanol industry is no longer a small,
fledgling industry. It now produces in excess of a billion gallons of
ethanol per year and consumes roughly one-half billion bushels of corn
yearly. It is an industry that now benefits from special tax credits
and exemptions worth roughly $700 million per year--a number that is
growing. These tax subsidies are in addition to the millions of dollars
in benefits the industry receives each year from the USDA price support
programs.
In light of recent ethanol industry efforts to obtain
regulatory expansions of their subsidies, it seems the ethanol
industry's attitude can be characterized by the phrase ``never
enough.'' Why worry what it costs to produce a product when you get a
targeted tax credit, soon to be worth nearly $1 billion per year? Why
worry about competition when you receive millions more through price
supports?

The cost to taxpayers and the cost to consumers are real. These
subsidies take money out of Americans' pockets. In the face of billions
of dollars in cuts in Medicare, Medicaid, and education programs for
children, I question a continued, substantial tax break to a single,
well-established industry. By handing out subsidies to ethanol, the
Government is passing along a bill worth hundreds of millions of
dollars to taxpayers and consumers.
Ethanol competes in the marketplace with other chemicals that have no
special tax break. These alternatives must compete based on price and
performance. This legislation is not intended to be punitive to
ethanol. Rather, it is an attempt to allow the markets a better chance
to work for the benefit of all consumers, taxpayers, and the
environment. Furthermore, it is acknowledgment that you cannot have it
both ways. If ethanol already benefits from price supports, there is no
need for a tax credit to keep an industry afloat. It is that simple.
I urge my colleagues to consider this legislation carefully. Last
year the Joint Tax Committee estimated that this bill would raise
almost $3 billion over a 5-year period; since then, the cost of
subsidizing the ethanol industry has only gone up. In these times when
we are struggling to reduce the deficit as well as the tax burden on
the American middle class it makes sense to reduce unneeded subsidies
whenever possible.
Mr. President, I ask unanimous consent that the text of the bill and
additional material be printed in the Record.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. PHASE-OUT OF TAX SUBSIDIES FOR ALCOHOL FUELS
PRODUCED FROM FEEDSTOCKS ELIGIBLE TO RECEIVE
FEDERAL AGRICULTURAL SUBSIDIES.

(a) Alcohol Fuels Credit.--Section 40 of the Internal
Revenue Code of 1986 (relating to credit for alcohol used as
a fuel) is amended by adding at the end the following new
subsection:
``(i) Phase-Out of Credit for Alcohol Produced From
Feedstocks Eligible To Receive Federal Agricultural
Subsidies.--
``(1) In general.--No credit shall be allowed under this
section with respect to any alcohol, or fuel containing
alcohol, which is produced from any feedstock which is a
subsidized agricultural commodity.
``(2) Phase-in of disallowance.--In the case of taxable
years beginning in 1996 and 1997, paragraph (1) shall not
apply and the credit determined under this section with
respect to alcohol or fuels described in paragraph (1) shall
be equal to 67 percent (33 percent in the case of taxable
years beginning in 1997) of the credit determined without
regard to this subsection.
``(3) Subsidized agricultural commodity.--For purposes of
this subsection, the term `subsidized agricultural commodity'
means any agricultural commodity which is supported, or is
eligible to be supported, by a price support or production
adjustment program carried out by the Secretary of
Agriculture.''
(b) Excise Tax Reduction.--
(1) Petroleum products.--Section 4081(c) of the Internal
Revenue Code of 1986 (relating to taxable fuels mixed with
alcohol) is amended by redesignating paragraph (8) as
paragraph (9) and by adding after paragraph (7) the following
new paragraph:
``(8) Phase-out of subsidy for alcohol produced from
feedstocks eligible to receive federal agricultural
subsidies.--
``(A) In general.--This subsection shall not apply to any
qualified alcohol mixture containing alcohol which is
produced from any feedstock which is a subsidized
agricultural commodity.
``(B) Phase-in of disallowance.--In the case of calendar
years 1996 and 1997, the rate of tax under subsection (a)
with respect to any qualified alcohol mixture described in
subparagraph (A) shall be equal to the sum of--

[[Page S10568]]

``(i) the rate of tax determined under this subsection
(without regard to this paragraph), plus
``(ii) 33 percent (67 percent in the case of 1997) of the
difference between the rate of tax under subsection (a)
determined with and without regard to this subsection.
``(C) Subsidized agricultural commodity.--For purposes of
this paragraph, the term `subsidized agricultural commodity'
means any agricultural commodity which is supported, or is
eligible to be supported, by a price support or production
adjustment program carried out by the Secretary of
Agriculture.''
(2) Special fuels.--Section 4041 (relating to tax on
special fuels) is amended by adding at the end the following
new subsection:
``(n) Phase-Out of Subsidy for Alcohol Produced From
Feedstocks Eligible To Receive Federal Agricultural
Subsidies.--
``(1) In general.--Subsections (b)(2), (k), and (m) shall
not apply to any alcohol fuel containing alcohol which is
produced from any feedstock which is a subsidized
agricultural commodity.
``(2) Phase-in of disallowance.--In the case of calendar
years 1996 and 1997, the rate of tax determined under
subsection (b)(2), (k), or (m) with respect to any alcohol
fuel described in paragraph (1) shall be equal to the sum
of--
``(A) the rate of tax determined under such subsection
(without regard to this subsection), plus
``(B) 33 percent (67 percent in the case of 1997) of the
difference between the rate of tax under this section
determined with and without regard to subsection (b)(2), (k),
or (m), whichever is applicable.
``(3) Subsidized agricultural commodity.--For purposes of
this subsection, the term `subsidized agricultural commodity'
means any agricultural commodity which is supported, or is
eligible to be supported, by a price support or production
adjustment program carried out by the Secretary of
Agriculture.''
(3) Aviation fuel.--Section 4091(c) (relating to reduced
rate of tax for aviation fuel in alcohol mixture) is amended
by redesignating paragraph (5) as paragraph (6) and by
inserting after paragraph (4) the following new paragraph:
``(5) Phase-out of subsidy for alcohol produced from
feedstocks eligible to receive federal agricultural
subsidies.--
``(A) In general.--This subsection shall not apply to any
mixture of aviation fuel containing alcohol which is produced
from any feedstock which is a subsidized agricultural
commodity.
``(B) Phase-in of disallowance.--In the case of calendar
years 1996 and 1997, the rate of tax under subsection (a)
with respect to any mixture of aviation fuel described in
subparagraph (A) shall be equal to the sum of--
``(i) the rate of tax determined under this subsection
(without regard to this paragraph), plus
``(ii) 33 percent (67 percent in the case of 1997) of the
difference between the rate of tax under subsection (a)
determined with and without regard to this subsection.
``(C) Subsidized agricultural commodity.--For purposes of
this paragraph, the term `subsidized agricultural commodity'
means any agricultural commodity which is supported, or is
eligible to be supported, by a price support or production
adjustment program carried out by the Secretary of
Agriculture.''
(c) Effective Dates.--
(1) Credit.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 1995.
(2) Excise taxes.--
(A) In general.--The amendments made by subsection (b)
shall take effect on January 1, 1996.
(B) Floor stock tax.--
(i) In general.--In the case of any alcohol fuel in which
tax was imposed under section 4041, 4081, or 4091 of the
Internal Revenue Code of 1986 before any tax-increase date,
and which is held on such date by any person, then there is
hereby imposed a floor stock tax on such fuel equal to the
difference between the tax imposed under such section on such
date and the tax so imposed.
(ii) Liability for tax and method payment.--A person
holding an alcohol fuel on any tax-increase date shall be
liable for such tax, shall pay such tax no later than 90 days
after such date, and shall pay such tax in such manner as the
Secretary may prescribe.
(iii) Exceptions.--The tax imposed by clause (i) shall not
apply--

(I) to any fuel held in the tank of a motor vehicle or
motorboat, or
(II) to any fuel held by a person if, on the tax-increase
date, the aggregate amount of fuel held by such person and
any related persons does not exceed 2,000 gallons.

(iv) Tax-increase date.--For purposes of this subparagraph,
the term ``tax-increase date'' means January 1, 1996, January
1, 1997, and January 1, 1998.
(v) Other laws applicable.--All provisions of law,
including penalties applicable with respect to the taxes
imposed by sections 4041, 4081, and 4091 of such Code shall,
insofar as applicable and not inconsistent with the
provisions of this subparagraph, apply with respect to the
floor stock taxes imposed by clause (i).
____

The Clean Fuels Equity Act of 1995

Senator Bradley's legislation would phase out the existing
tax credits for ethanol produced from certain feedstocks. The
tax will be phased out for ethanol if it is produced from
feedstocks, such as corn, that are eligible for various price
and income supports under the programs of the U.S. Department
of Agriculture. If the ethanol feedstock is a specialized
energy crop, not supported by USDA, or a waste product, the
tax credit will still be allowed.
The phase-out will occur over 3 years. Unless exempt,
ethanol would be allowed: the full tax credits for calendar
year 1995; 67 percent of the existing credits for 1996; and
33 percent of the existing credits for 1997. No special tax
subsidies would be allowed for ethanol, unless exempt, after
December 31, 1997.
The principal Federal incentive for ethanol is a 54-cent
exemption from the Federal motor fuel excise tax. Each gallon
of gasoline blended with at least 10 percent ethanol is
eligible for the exemption. Using a blend, each gallon of
ethanol can be blended with nine gallons of gasoline to make
ten gallons of a blended fuel. All ten gallons are eligible
for the exemption, which equates to a total exemption of 54
cents on each gallon of ethanol.
Also, an equivalent 5.4-cent-per-gallon federal blenders'
income tax credit or refund is available to fuel distributors
that blend ethanol into motor fuels, The tax credit or refund
can be taken in lieu of the excise tax exemption described
above.
Because of these tax subsidies, ethanol can be offered at a
dramatically lower price than would be the case otherwise.
The U.S. ethanol industry produces approximately 1.2 billion
gallons of ethanol for blending into fuel each year. This
equates to a total subsidy value in excess of $700 million
annually. Last year's effort by EPA to mandate a market set-
aside for ethanol would have added at least another $300
million annually to the tax subsidy total.
Ethanol is produced today almost exclusively from
feedstocks that are eligible for USDA support.

Mr. NICKLES. Mr. President, I am pleased to join my friend from New
Jersey, Senator Bradley, in the introduction of legislation to phase-
out tax subsidies for the ethanol industry. If enacted, our legislation
will reduce the Federal budget deficit by nearly $3 billion over the
next 5 years.
For 15 years the Federal Government has provided substantial tax
breaks to subsidize the development and use of ethanol as a clean,
renewable fuel. Those subsidies have proven very effective, as the U.S.
ethanol industry will produce over 1 billion gallons of ethanol for
blending into fuel this year, costing the government over $700 million
in lost tax revenue.
However as with most government programs, even though the need for
ethanol tax subsidies has ended, the subsidies themselves live on. In
fact, the ethanol industry and their friends in the legislative and
executive branches are continually seeking to expand those subsidies.
We believe the time has come to stop subsidizing a healthy industry.
Other clean fuels offer the same benefits as ethanol, but struggle to
compete against ethanol's massive tax advantage.
Our legislation will even the playing-field by phasing-out the excise
tax exemption and income tax credit over 3 years for ethanol produced
from crops which are also eligible for U.S. farm program subsidies.
This prevents the double-subsidization of some farm production, while
allowing continued ethanol tax breaks for alcohol produced from non-
subsidized crops or waste products.
Mr. President, as we seek to eliminate our budget deficit, it is
important that we examine all forms of Federal spending, including
specialized tax expenditures. We should not allow our tax code to
subsidize healthy businesses, especially when those subsidies create an
unfair competitive advantage over others. I am pleased to join Senator
Bradley in this initiative.
______

By Mr. COHEN (for himself and Ms. Snowe):
S. 1067. A bill to amend the Internal Revenue Code of 1986 to provide
an excise tax exemption for transportation on certain ferries; to the
Committee on Finance.

TAX ON TRANSPORTATION BY WATER

Mr. COHEN. Mr. President, I am introducing legislation today to
clarify an interpretation of a section in the Internal Revenue Code
that imposes a $3 departure tax on ship passengers aboard vessels that
travel outside the U.S. The provision was intended to apply to
passengers on cruise ships and gambling voyages. The language of the
statute reaches further, however, and the International Revenue Service
has

[[Page S10569]]
been interpreting the law to apply to a broader class of passenger ship
traffic, including ferry services that operate between the United
States and Canada.
Section 4471 of the Internal Revenue Code was added to the Internal
Revenue Code in the Omnibus Reconciliation Act of 1989. The provision
originated in the Senate Commerce Committee as a means of that
Committee fulfilling its reconciliation instructions. The tax writing
committees assumed jurisdiction once it became clear that the provision
was more in the nature of a tax than a fee. The fee, as envisioned by
the Commerce Committee, was intended to apply to overnight passenger
cruises that do not travel between two U.S. ports, and to gambling
boats providing gambling entertainment to passengers outside the
territorial waters of the U.S.
Unfortunately, the statutory language of the 1989 Act was not drafted
in accordance with the intent of Congress. As a result, the tax appears
to apply to commercial ferry operations traveling between the United
States and Canada. Two such ferries operate between Maine and Nova
Scotia. The Maine ferries carry commercial and passenger vehicles to
Nova Scotia in the warmer months as a more direct means of
transportation between Maine and eastern Canada. As such they are an
extension of the highway system, carrying commercial traffic and
vacationers. The lengths of the voyages are approximately 11 hours and
almost all passengers traveling on the outbound voyages do not return
on the inbound voyages of the two ferries. Because the trips are of
some length, the ferries provide entertainment for the passengers,
including some gaming tables that bring in minimal income.
This is not a voyage for the purpose of gambling and the great
majority of the passengers, including children, do not gamble. Clearly,
these ferries are not the kind of overnight passenger cruises or
gambling boats intended to be covered by the law. However, the IRS has
been interpreting the statute to apply this tax to ferries.
The statute establishes a dual test for determining if the tax
applies. First, the tax applies to voyages of passenger vessels which
extend over more than one night. As a factual matter, the Maine ferries
do not travel over more than one night
but the IRS interprets that they do because it takes into account both
the outward and inward voyage of the vessel. The IRS considers both
portions of the trip to be one voyage even though virtually no
passengers are the same.

Second, the tax applies to commercial vessels transporting passengers
engaged in gambling. Although the intent was to apply the tax to
gambling boats, the wording of the statute applies to all passengers on
vessels that carry any passengers who engage in gambling, no matter how
minor that gambling. That interpretation subjects the Maine ferries to
the tax because they earn a minimal amount of income from providing
gambling entertainment to some passengers.
The legislation I am introducing clarifies the statute by exempting
ferries which are defined as vessels where no more than half of the
passengers typically return to the port where the voyage began.
This legislation is not intended to give a special break to a certain
class of passenger ships. It is instead intended to clarify the statute
so that it achieves its original intent: To tax passengers on cruise
ships and gambling voyages, not passengers on ferry boats.
The imposition of the tax to ferries is particularly unfair. First,
because Congress did not intend to tax such ferries. Second, because
the burden of the tax relative to the price of the ticket, is greater
on ferries. Their ticket prices are much lower than tickets for cruise
ships so the tax is considerably more burdensome for ferry operations
and interferes to a greater extent with their operations.
Similar legislation addressing this issue has been approved by the
Finance Committee in the past but the underlying bills were not enacted
into law.
I ask unanimous consent that a copy of the introduced legislation be
included in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:

S. 1067

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. EXEMPTION FOR TRANSPORTATION ON CERTAIN FERRIES.

(a) General Rule.--Subparagraph (B) of section 4472(1) of
the Internal Revenue Code of 1986 (relating to exception for
certain voyages on passenger vessels) is amended to read as
follows:
``(B) Exception for certain voyages.--The term `covered
voyage' shall not include--
``(i) a voyage of a passenger vessel of less than 12 hours
between 2 ports in the United States, and
``(ii) a voyage of less than 12 hours on a ferry between a
port in the United States and a port outside the United
States.

For purposes of the preceding sentence, the term `ferry'
means any vessel if normally no more than 50 percent of the
passengers on any voyage of such vessel return to the port
where such voyage bean on the 1st return of such vessel to
such port.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to voyages beginning after December 31, 1989;
except that--
(1) no refund of any tax paid before the date of the
enactment of this Act shall be made by reason of such
amendment, and
(2) any tax collected from the passenger before the date of
the enactment of this Act shall be remitted to the United
States.
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By Mr. LAUTENBERG (for himself and Mr. Simon):
S. 1068. A bill to amend title 18, United States Code, to permanently
prohibit the possession of firearms by persons who have been convicted
of a violent felony, and for other purposes; to the Committee on the
Judiciary.

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