Senate Floor Speech
Senator Kay Bailey Hutchison
April 1, 2003 -- Page: S4635

MRS. HUTCHISON. Mr. President, I am pleased to introduce a bill with Senator Bingaman that takes an important step toward modernizing the Internal Revenue Code.

Decades ago, investment companies which manage mutual funds were limited in the amount of income they could receive from investments in partnerships.

At the time, this restriction was established to address legitimate concerns and protect the interests of investors. Ownership interests in partnerships can be illiquid, so it is difficult to get one's money out of the investment. Partnerships are also not required to be transparent in their financial statements, so it could be difficult for investors to accurately assess a business.

However, the world has changed. Some partnerships have been able to go public and offer shares on the stock markets, so the problem of liquidity is solved. By going public, they must meet much higher standards of financial transparency, including regularly publishing audited financial statements for investors. Currently, 50 publicly traded partnerships trade on major U.S. stock exchanges; 14 of these companies are headquartered in my home State, Texas.

Unfortunately, tax laws have not reflected this change in the business and financial worlds. Mutual funds are still restricted in how much they can invest in any partnership, including those that are publicly traded. This significantly impedes the ability of these companies to raise capital. It limits their ability to grow and create jobs.

Publicly traded partnerships play an important role in the economy. About half are in the energy sector, actively involved in building and operating infrastructure to gather, process and transport oil and natural gas. These partnerships also include timber and real estate companies. It is clear we need a healthy energy sector to ensure the availability of oil and gas at reasonable prices.

The bill Senator Bingaman and I introduce today will lead to a dramatic increase in the flow of capital to these companies. Mutual funds, which often purchase a majority of equity offerings, will be able to participate in stock offerings from publicly traded partnerships. This will expand the investor base and lower the cost of capital, ultimately helping to lower energy prices.

Our bill will also provide millions of investors an opportunity, through their mutual funds, to participate in another investment opportunity if their professional mutual fund managers believe it is an attractive investment.

It is wrong for the Federal Government to use the tax code to make decisions for investors. The bill we are introducing will modernize our tax laws so families can make their own financial planning decisions. This legislation will also provide an important source of capital for key areas of the economy. I hope my colleagues will support this long overdue improvement.