Transcripts For CSPAN3 Politics And Public Policy Today 20160520

And residents or u. S. Interests, those interests are clearly impacted by the behavior of other countries. And the u. S. Tax base can be eroded not only by the behaviors of multinationals but by behavior of other governments. Thank you and thank you for the opportunity. Good to be here, don, thank you very much for this opportunity to speak about policy and reform. It seems to me ive seen this movie before, however. We all love to sit around and talk about policy. I will get to policy in a second. Let me just say while we talk about policy, our tax system is being slowly eroded at the level of administration. Doesnt matter what the rules are if you dont have people to enforce them. If you just take a wink, a quick look at whats happening to the intern Internal Revenue service, you would realize it doesnt matter what the rules are. Weve lost so many people the enforcement capability is diminished. Unless that gets rectified. Who cares about tax reform if we dont have a tax system. Saying all that ill turn to tax policy. I see beps as the revenge of the source basis approach to tax. And part of it, i think is true. I get this a little bit from what bob stack said because the deal as i understood it coming out of world war ii was in the eternal war of residence source, the Resource Companies would limit their tax of the tax and the Residence Companies would undertake to avoid double taxation. Thats been the u. S. View of the world. Its particularly and dramatically reflected in our treaty policy where we are way beyond the oecd in favoring the country of residence. Whats happened, i think, is that the residence countries, we were and still are presumably the premier residence country. Failed to do their part of the deal. They failed to impose tax on their own taxpayers. I think you could draw a direct line, not even a dotted line, between check the box and beps. I think beps is a direct reaction to the check the box rules. And they were used aggressively by u. S. Taxpayers in ways that got under the skin of a lot of countries. I think it was probably a foreseeable thing that would happen. You had to take i think the problem im like john, i never been inside a corporation. I think the problem inside a corporation is the war between the long view and the short view. I mean, it does seem to me that taking the short view in terms of tax planning has resulted in a lot of pretty aggressive things, which have led to the beps what we see in beps. Saying that, the question for me has been how should the United States react to that . Weve been the premier country going around the world telling other countries be reasonable. If you want our investment, limit your tax. Frankly the indians, chinese, brazilians, a lot of other countries theyre not buying it anymore. They are answering us look, well set our own tax policy thank you very much. You guys in the United States arent doing such a great job either. Frankly thats where we are. I think we have to come to terms with that. Theres only a couple of things i think we can do. So far, my perception, some will say this is unfair, is that our policy is essentially been to do nothing. Pretend beps doesnt exist. Unfortunately it does exist. The the upshot will be dramatic for a lot of countries. We cant do a heck of a lot about it. I do hold hope we can dispute resolutions. The efforts of bob and others to advance ways of getting disputes resolved. I see a lot of disputes on the horizon. One thing we can do is do nothing. We can double down on our basic policy of saying residence country rules, we go to brazil, india and try to convince them to be reasonable in their treatment of our companies. Ive had a fair amount of experience recently particularly in india. I tell you it doesnt work very well. So i dont see that thats going to be fruitful. The third thing we could do i think it is something thats long overdo that we could rethink the balance between our own source basis taxation as opposed to residence based taxation. If you put wanted to put your finger on one of the major problems with tax policy, International Tax policy in the United States, its that everybody seems to think almost exclusively about the outbound rules. Ive seen entire books written in this town called International Taxation where there wasnt a word about inbound. Guess what . The Inbound Investment in the United States on a year by year basis is staggering. I saw the statistics this morning. It aint 1946 anymore, guys. And so we really ought to revisit rules that have been in place for over 50 years. We havent touched the Foreign Investors tax act from 1966 except at the margins, its time to rethink that and rethink our treaty policy as well in my view. If you wanted to address inversions, lowering the corporate rate as a means of addressing inversions is in my view mindless. You cant get the rate even close to being low enough to remove the incentive. What you can do is you can pay more attention to the Inbound Investment once people do invert. Why people invert at the end of the day is its just better to be foreign in the United States. We treat people better. Our rules are more generous. The irs audits of the inbound investors are lighter. In many cases nonexistent. All of that needs more attention. It isnt going to be cured by a little bit of policy around the edges. We really need to rethink where we stand in the world. We dont stand in the same place we stood in 1962 and 1966. And in my opinion, what is really needed is a thorough going review of our statutory law on Inbound Investment. Next comes treaty. I think we are way too favorable to the residence countries in treaties. These are radical thoughts. Nobody pays attention to what i say anyway. I think we should can the nondiscrimination clause why . Because we want to are discriminate. Lets get less hypocritical. I was disappointed today some extent in the new model treaty which doesnt go far enough in my opinion for a complete rethink. You cant really do it you cant start with the treaty you have to start with redoing the statute. Rethinking the statute. My third approach, the three approaches i see to beps are do n nothi nothing, double down. Its right the storource countr should reduce tax. Or maybe take a few leaves from the book of brazil india and china who say we have a market and were going to impose tax on the entry into our market. We have a market, too, in the United States. I dont think you can plan around that market. That market isnt going anywhere. So it seems to me that thats what i would see as coming out of the beps material. Thank you. First let me say how delighted i am to be here and thank don. Without don i wouldnt be here. I was a lawyer laboring in a wall street law firm and don called the senior partner in the firm and said do you have anyone who is foolish enough to come to washington. The partner said ive got just the guy. It changed my life. Without don i wouldnt be here. I thank you. So i rarely find myself in agreement with david but i certainly do. I really think we need to focus more on our source base taxation. We dont know residences are anymore or source is anymore. What we need to focus on is destination which is what david is talking about i think. To frame International Tax reform i like to start outside the tax world. What is it were trying to accomplish . I think the answer is maybe to raise revenue but probably not. But to increase the standard of living, jobs, competitiveness of u. S. Firms but only to the extent its a vehicle to increase the u. S. Standard of living. How do taxes come into play . How should we change our tax system to do that . I actually think looking at other countries are doing is a good place to start. I dont find race to the bottom very helpful. Its a label. Maybe its a race to the top. Because what theyre looking to do is attract investment and theyre using their tax systems to do that. And i have only two reasons i can think of as to why we wouldnt look at what other countries are doing. One of them is maybe we think were smarter than the rest of the world. For long time we did. Its pogo. We met the enemy he is us. No other country in the world could put together a group of people like in this room, maybe thats a blessing, maybe its a problem. But were not smarter than the rest of the world. Maybe were different than the rest of the world. Maybe we were once when we had the big large u. S. Market to ourselves and didnt have much foreign competition. U. S. Firms didnt have to compete abroad. No longer. Today as a result of technology, trade, low cost of transportation, the u. S. Is a small open economy. Larry summers and jim heinz did a great job making that point. Were not different than the rest of the world anymore. What is the rest of the world doing . Lowering their corporate rates, adopting territorial systems without minimum taxes. What i mean by that is current home country tax on active business income. If its passive interest income, maybe thats one thing. Active business inm ccome nobods doing it. Its a bad view. Its a hybrid system. Its too broad it will hurt the competitiveness of u. S. Firms. It will not stop base erosion we have a 15 minimum tax. A headline rate in the u. S. Of 35 . Intangibles will foreign governments will raise rates to soak up the minimum tax and u. S. Multinationals will stop reducing their rate. Its a bad idea and no other country has one. So if were going to reduce our rates and adopt a territorial system, how do we pay for it . Rate reduction. Id start with base broadening on things that cant move. Id rely on the ramsey rule. Slow railroads, pipe lines and telecommunication and cable. Things that have to be here and cant move and arent in the traded sector. This is what the uk did. What we do with real estate. Its as i said the ramsey rule. Id capitalize a lot of things, repairs, advertising, i understand that a timing item. Well be using dynamic scoring whether you like it or not. And dynamic scoring shows a lot of growth outside the window. The uk did a study and showed that 60 of the revenue lost would be made with Economic Growth in the long run. Id adopt thin cap rules like the rest of the world. Dividend deduction or Credit System. Higher taxes on dividends or Capital Gains. Accrual taxation as eric has recommended or even a pfic regime. Individuals are less mobile. How to pay for territorial. First, on a static basis territorial doesnt cost very much. An analysis in 2006 you excepted all dividends, youd raise a billion dollars. On a static basis were collecting no revenue. Having said that the joint committee has estimated moving to a territorial system would cost 25 rate, 220 billion. Were at a 35 maybe 300 billion to 400 billion. There are two pieces to that revenue lost. Incremental income shifting from a territorial system. Two, the joint committee is anticipating the dividends will come back in the ten year window that wont be sheltered by credits. I dont know why theyre assuming that. I dont think they will in the next ten. Having said that, thats the headline number. So i would address instead of using a blunt tool like the minimum tax i would address base erosion. I think its a problem. I dont think its a bigger problem under territorial than it is today. I think today its a heads i win, tails i lose. I think its a huge problem. Try to identify where the problem is. So where is the problem . Go to your cfo and say id like to move something offshore. When do you move something off shore for tax reasons . When the tax savings are greater than the nontax costs of moving. When is that . Got a big tax savings. You can count on. When do you have big tax savings you can count on . When you have high margins for the foreseeable future. When do you have those in a competitive market . Only when you have protected intellectual property. Thats the only time you can have high margins over a long period. Thats the plus side of moving. What are the costs . The costs of moving if you have your products can be put into a fedex envelope and shipped or sent over the internet, very low cost. I think pharma, intangibles is where i think the issue is. Today, its very easy to move patents to ireland. If you move patents to ireland you have to move your manufacturing outside the United States. I can explain that later. I have a couple minutes left. Thats a big problem. We have no high tech manufacturing in the u. S. Anymore. I think my thesis is the ip is outside the u. S. , and because they cant manufacture in the u. S. Because the royalties pay would be subf income or if there would be a permanent establishment here were hollowing out our base. I would address this outbound transfer outbound base erosion with very tough transfer pricing rules that would be formulaic out law cost sharing, contract research. I would put a weighted use something called the realistic alternatives test and limit the return in a cash box to the weighted average cost of capital to the parent. Phizer doesnt go out to finance its next drug to go to a venture capitalist. Id provide a patent box, a low rate, but the rnd would have to be done in the u. S. The rnd would have to be scaled here, meaning youd have to manufacture here. I only apply it to very high margin stuff, to guys who move. Then im out of time, im in my negative territory. I would think about a dp to david said id think about a diverted profits tax for the United States. What we have left is our large u. S. Market. The india and china, now the uk has set the path for it. I think its nonsense for us to explore that im out of time, otherwise id tell you why. Treaty and deal with our treaties. Barbara . I am speaking for myself today. And im not speaking officially for the committee. I also want to thank don lubric i had the opportunity to work with him. While we werent directly colleagues and sometimes we were on the opposite side of an issue. Don approached me in a collegeal way and we were both working for a better tax system. Its a privilege to be here at the first donald lub i c symposium. I thought the question that was posed to this panel was a really important one. It also has a simple answer. Foreign tax changes do have a dramatic effect on u. S. Business and they further reinforcement the need for fundamental tax reform in the u. S. Thats my simple answer. Ill elaborate for a few minutes on that. Over the last decade countries around the world have been reduced Corporate Tax rates. The uk reduced theirs by 17 . Thats left than half of the u. S. Rate. Countries around the world have been replacing the world wide tax systems with territorial approaches for taxing the global businesses that are headquarter headquartered in that country. The spots are being taken by foreign headquartered countries. These developments all matter. The u. S. Tax system must be modernized to reflect the modern world. More recently the focus on beps has led to an anticorporate sentiment around the world. Largely focused on household name countries, largely focused on household named american countries. Rather than seeing coordinated change in International Tax policy that i think the oecd was seeking to deliver. Were seeing countries using beps as an excuse to justify what are often blatant revenue grabs. There are many examples of unilateral action being taken in the name of beps that are at odds with the beps recommendations. The uk diverted profit taxes is one example. A response to concern about the permanent establishment rules. But a very different response than the response agreed to and negotiated in the oecd that involved amendments to the permanent establishment definition in the treaty. One could say that the u. S. 385 a regulations which are controversial for many reasons, are very different response to concerns about interest deductibleability than the beps action for and the agreed recommendation with respect to limiting interest deductibleability. The reason efforts toward requiring country by country information is in sharp contrast with beps action 13s mandate for reporting of this information to tax authorities only. It seems likely that this is just the beginning of a long line of unilateral actions justified by beps, but not in line with the agreed beps recommendations. The eu eight cases are another example of law being applied beyond its original intent to target corporations. Again, almost exclusively american corporations. In the u. S. , were seeing increasingly American Companies forced to consider a foreign acquisition or to succumb to a foreign takeover as the only way to remain competitive in the global marketplace. The transactions are labelled inversions but we should recognize them for what they are, a means for survival. The ways and Means Committee held a hearing earlier this year on the global tax environment in 2016. What that means for tax reform and the clear conclusion was we need fundamental tax reform that includes a modernization of the u. S. International tax rules. An important point that was driven home at that hearing, was International Tax reform is not just an issue for global american businesses, its an issue for all american businesses if a Global Company is forced to move headquarters to a foreign country through an acquisition or takeover, that often means that over time key decisions that used to be made in the u. S. Will be made overseas instead. Thats something that will be felt throughout the companys supply chain including local businesses that provided goods and services to the american company. It also will be felt in the local community, where the Company Provided support to the symphony to the museum, to the local sports teams. I think in looking at this issue, building a wall is not the answer. Tax reform is the answer. The ways and Means Committee has been charged with leading the effort to produce a blueprint for comprehensive tax reform that will lay out the House Republican vision for 21est century tax reform. That will be released this summer. International tax reform, of course, is an integral part, element o element of tax reform as it involves complex issues that include the meshing of u. S. Tax rules with a rapidly changing rules of our trading partners, weve seen that the crafting of new International Tax rules benefits from consultation and input. We need more input. We need to spend more time looking at what is happening in other countries. And by that i dont mean we should follow the lead of other countries. The International Tax rules other countries choose to put in place may well not be at all appropriate for the u. S. And the u. S. Economy. But its very important that we understand them. Because of the impact they have on u. S. Companies investing in those companies and the impact of the companies that seek to invest in american countries. Well continue the consultation and input process this year so were ready with the right International Tax reform package as soon as it can be enacted into law. Returning to the question that was put to the panel, foreign tax changes are significant. They affect u. S. Businesses. And they ratchet up the need for u. S. Tax reform. Does anyone have any response . Response to anything that was said . I agree with David Rosenbloom that we should be looking carefully i dont know if you want to taihink about it as a destination tax or antibase erosion, but i think that there all of our focus has been on out bound base erosion. Not to say thats not a problem and it should be dealt with. If dwee that other countries are likely to retaliation. That will solve the income problem. Countries acting in their own selfinterest. Just picking up on that, i think one of the things im struck by is to the extent the concern and impacts of whats happening right now, you have a lot of unilateral action and not coordinated tax policies, looking to tax source, it is a relitigation, but without having to come to the table and strike the deal. Is it clear that every country does its own thing, with respect to its inbounds, makes an adjustment, maybe its territorial well solve the problem being faced by companies now in terms of the clash of these tax rules. Just take a hypothetical. If the u. S. Were to move to a territorial system so the u. S. Company operating outside the u. S. Doesnt have to worry about double taxation veisavis the u. S. It doesnt necessarily mean it will worry about double taxation. Dont we need to do something more than simply think about domestic reform. Is there room to have coordinated action is in the. We may to do something more. Its critically important we do something domestically. All the change thats happening around the world has disproportionate impact on u. S. Companies because in the ways in which our International Tax rules are different than those of the rest of the world. If we move our International System more in line with the rest of the world, if we move more to a territorial system eliminate the lock out effect and what that does in terms of the buildup of foreign earnings, i think that puts us in a better position to have the larger discussion. But right now, an action thats taken by another country has a different effect on the u. S. Than it does on that countrys other trading partners. But i dont disagree with the territorial system under certain conditions. It seems to me that, beps the world has not gone to territorial. Its going to an increased emphasize on taxing the domestic marketplace. And unfortunately i think the debate is gone. I dont think i think its too late to try to persuade people that we ought to all get together and get serious about residence taxation. Or source, even a coordinated source approach. Im not sure you can i dont know i like bobs statement, but i thought it was he has to be, he gets paid to do this. Not much. Idealistic in terms of which ive been at the table with some of these countries. I mean, theres only so much persuading you can do. I think we have to act in our own National Interest. We havent had a coherent discussion about what our National Interest is. Our National Interest cant be confined to always reducing the tax on out bound investment. That cant be the end. We cant pay for that. Secondly, we ought to be paying attention. These other countries are not completely stupid. Theyre acting in their own selfinterest, doing it for a reason. We have something to learn from them. Were not going to be able to dictate the world, the International Tax system. There was a time in our history when we could come pretty close to doing that. Those days are long gone. And beps is the proof of that. Can i ask a question . Let me respond to david. So the world is a big place. It isnt all homogenous. If you look at the capital exporting countries, europe and they all have remarkably similar tax systems. You believe in markets and my friends the economists have taught me to do that. Its like they got into a Conference Room and agreed how they would tax out bound investment. Territorial and theyve lowered the corporate rates. And they did that because its in their own selfinterest. They want revenue but they want investment. Theyre acting in selfinterest. They have harmonized on out bound investment. We are an out lier. India started with the voda phone. Its a construct of wealthy countries who are going to use their markets and you dont have to pay any tax. China followed. The uk is following. Let us join. We have a big market. Bob stack said the uk is doing two things. They want headquarters, they want to tax source based inm can. Great. We should want the same thing. They want the multinationals to thrive outside. Great, we can have both. So it is but david said it, the goal should be National Interest. Back in 1962 when the goal of every economist was global welfare not national welfare. National welfare is a relatively new starter in the International Tax policy debate. Its easy to be a moderator for this panel. One world. One world. Which is john just pushed one of the buttons i havent had previously pushed is. You agree. I think the oecd is the wrong forum for us to be trying to make progress in. Fif im not saying drop out. But the oecd has the urge to democratize and admit to the table a bunch of countries who dont have many common interests with us. Its a rich mans club. It isnt anymore. The lowest common denominator is getting lower and lower. I think what we ought to be doing is forming coalitions of like minded countries to talk about these problems. On a one by one basis. It would be in our own interest to have groups we have some we have things in common with Market Countries as well. We have both. Thats a really important point. The dichotomy between source and residence country is a false choice for the u. S. When we are both a source and residence country and want to be both. Weve overemphasized residence for far too long. As a naive economists, im going to ask a question. When i learned International Tax i learned there were a form of coordinated system in the source country got the first bite of tax, whether there was a residual tax afterwards, countries could decide. The question then, when you have ip being a main driver of value, where is it appropriate to tax those ip profits . Thats something i dont quite understand. Id like the panel to help me with. I think john is telling me destination. But i have a feiunny feeling abt that. If a Company Develops ip in the United States and all their business exports to other countries. Does that mean all the other countries tax it because thats where their sales are . Im a little need some help. Really hard question. You say source historic concept is where is the income earned. And im thinking about source in where is the product consumed. When i think about ip, the only thing that protects it are patten laws. Maybe it should be if there werent patent laws in different countries, then the you invent somebody in the u. S. , somebody in china could copy it and earn it, the rents would disappear very quickly. Its probably the country whose laws are protecting the rents as to where the ip income is earned. At least in a conceptual sense. But net net i can move my factors of production, i can move my residence. I can move where i do my rnd, not as mobile as people think. The one thing i cannot move is my customer. I cannot move my customer. Which is why a vat or destination based tax so thats the only ultimate answer to tax it i think. I think what you need is a careful review of that question. Im not convinced its an either or answer, that theres one answer to that. My instinctive response to your question is where are the deductions being claimed. If theyre going to ask. Theyre going to want some of that income. Regardless. Im not excluding johns analysis. It begs the question in terms of where it is consumed what is the value attributable to that consumption. There will be components of value, there is the question of residual. Is there a residual that goes to the owner, the developer . Or is it all somehow transferred and divided up to the consumer and just to reinforce a point i made earlier, what if one country follows davids approach and looks to where its developed or protected the other is looking to where its consumed dont have multiple incidents of taxing the same income. The reason for referring residence taxation, if you get away from selfishness in countries, the residence country is in a better position to avoid double taxation. For years, International Taxation was dominated by the concern for double taxation. Theres been a shift, i think we all know it. The modern concern isnt double taxation. The modern concern is double nontaxation. The shift from residence to source is going to be accompanied by International Double taxation. Its inevitable when you move to a source based world. I dont think you can stop that. We have to come to terms with the reality of whats going on. Were not leading the world. Were following it. And some of this discussion puts us in a posture of being a following country. At least when i entered the business as my daughters say when the dinosaurs roamed the earth, we were the leaders. Were not the leaders anymore. I sound like donald trump. You sound like donald trump. I was going to say, can we if were not leaders do we pack up our toys and go home or should we be team players . I think we ought to learn. [ inaudible ] put in a plug for coming back to the economics answer. Income is earned where the economic value is contributed. Yes, intangible transaction is complex. And theres value in various different points. But i guess i still believe in the fundamental transfer pricing concept, that you should see what were the contributions to value and where were they made. And the income earned should be divided among that. And so i continue to be grateful for the work that bob sack did at the oecd in defending the transfer pricing rules in this area. I think theyre really important. That leads to a follow up question. Was that the right choice by the oecd to continue the transfer pricing . Should they have looked at a different paradigm for allocating income . I tipped my hand. Yes. I think transfer pricing is the right choice. I recognize that every few years there are calls for a move to formulary apportionment. Any formula is by its very nature artificial and arbitrary. So were having this discussion today about all the disagreements among countries. I cant imagine how countries could agree on a formula. Both on the formula to apply, and then more importantly, and more fundamentally, on the daytoday implementation of that formula consistently over years. And thats what would be needed. So i come back to transfer pricing. That its complicated. But it is grounded in an economic truth. Where is the contribution to economic value . And i think that any agreement needs to have an anchor like that. But, eric, to your question about the transfer pricing between a parent and its wholly own subsidiary, can that ever be arms length. I dont think it can. The treasury told us you cant have debt between your almost virtually told us between your parent and your wholly own subsidiary. This whole notion of transferring risk from the parent to your subsidary. In the captive insurance area you cant do it. We allow the fiction that the subsidiary is a separate taxpayer. I think i respect the foreign entity but i might need some tough guidelines around what arms length means when im dealing with a wholly owned or controlled subsidiary. I think thats right. I think its a false dichotomy to set formulary against arms length. Theres a whole bunch of steps along the way, including presumptive rules. Again, you know, i was certainly one of the people who thought that the brazilians were nuts with their system. I no longer think that. They are slightly nuts but not as nuts at what i thought they were. They have basic formulas, theyre rigid in the application of their formulas which i dont like. They dont bend in treaty negotiations you could go a long way with presumptive rules. Thats the way the developing world is going. They cant apply a pure transfer price rules like we have in our regulations. We cant either. Which brings me back to tax administration. Which is, i think, really the elephant in the room. It doesnt maetter what the ruls are if you dont have anybody to enforce them. Seriously. Thats where were headed. On that note i think ill throw it open to the floor. On the question assuming well solve the business tax issues later, on the question of the impact of foreign rules on the u. S. System and u. S. Reform, following up on something bob said, something john said, which is context matters and lets start with First Principles or start outside the tax system or at least the business tax system. At the end of your presentation, you talked about maybe making up revenue on the individual side. And with a debate about wealth inequality its not what were talking about business tax reform. When we think about what countries do on the individual side or what countries do on the carbon tax side or the vat side. How much of that should we be i was in europe recently i was shocked to hear that switzerland that has a progressive fine for you get into an auto accident, you pay more, the wealthier you are. Of course, wealth taxes you see around the world. Hire a chauffeur, low paid chauffeur. Exactly. Exactly. So what role for all these other changes, in particular on the individual side with wealth inequality being an important part of the debate today. Let me try, first of all, what stunned me a little bit through a lot of this conversation we keep talking about corporations like they pay tax. We dont pay tax. Al we all i learned that from you guys a long time ago. Not only we dont pay it if we did pay it we wouldnt pay it. Its borne by people. You want to tax whats not mobile. People are not mobile. [ inaudible ] move from new jersey to florida but we dont let you move to bermuda. We figured that one out. Where the real money is here, is, look, the rates our top rates are getting to be as high as they can get. Our rates are top rates are as high as rest of the worlds are not any higher. Its where they kick in. The middle class in this country is sggetting a free ride. The other rates in other countries kick in around 150,000. Thats where the money is. It isnt really Capital Gains. You can tax Capital Gains. If you raise rates at Capital Gains we have to charge them at death. Maybe a carry over basis in the law for a while. The lubic tax, gains at death. The answer is yes if we can tax whats not mobile. Im not convinced taxing conicism sco consumption. Im not convinced its progrowth. All the gains are from the double tax of accumulated wealth. Once thats gone, not so sure its any different than any other tax. The answer is yes, i thought the point you were making is we tend to compare ourselves with other countries on one spectrum or one aspect of their tax system and not the full spectrum. Even if you go to the individual tax and say as compared to other countries, the middle class and other countries pay higher income taxes. But theyre also getting significant amount of services and other benefits. So if we were to compare the full spectrum of impact, Financial Impact on individuals and other countries, its they have a v. A. T. , too. But their Public Sector is, their government has a much bigger piece of the economy than we do in this country. Were catching up. I dont think we ever really know how the tax system in another country applies in full. I mean, we read the statutory rules, we talk to experts, but in the actual application, we tend to impute to the country our own understanding and our own practices. And our own practices, for that matter our own cultural is not found in other countries. I just saw for example, just read a paper done by, i think it was some economist in asia on the effect of japan moving to territory alt. This paper came to the conclusion it didnt make a difference on corporate behavior. Thats fine. Its fine for japan. To take that conclusion, and apply it outside japan, is crazy. I mean, japan, ive dealt with japan enough to know its the most tax compliant country in the world. You cant take a study of japan and say what youve the conclusions youve reached, no matter how good they are, are applicable to us, to our country. Its not true. Japans system looks different than other to make them all i think that would be true in every country. I mean, in the uk, i dont know the deals that are made by the tax inspectors in the uk i would be very suspicious of any comparison of a part of a tax system. I lived through all of that. About how, you know, the japanese were more generous than we are when they a Credit System. Sure they were most generous but their Credit System went down one tier. Companies would pick and choose, taxpayers would pick and choose cherry pick from other systems and say lets adopt this, lets adopt that. I think the overall comparisons are fallacious, generally. I find myself agree ing with david. Great. Everybodys agreeing with david up here. Davids going to change the views. Its really important that we understand what other countries have chosen to do and why. Because as a part of the Global Economy, all of those choices effect the u. S. But it doesnt mean that any of those choices are right for the u. S. Our choices just need to be informed by whats happening in the rest of the world. Another question . Could you identify yourself . Seth green. I wanted to address the point that john made a while back. He was talking about, you know, not its not a race to the bottom looking at other countries. I guess, the question is, isnt i would argue that headquarters taxation is and the remnants of a residence based system is really a way of collecting rent from the rest of the world, right . You get your company headquartered in some place, take advantage of treaties to reduce source based taxation, and you collect a little sliver, whether its, you know, some small amount of residual based taxation or just the tax on the salaries of the people who moved because your headquartered company. If you view residence based taxation and headquarters taxation through that lens, you know, isnt it not true that the u. S. Is like every place else because were bigger and so we can benefit from rent from other places less than they can benefit from renting us . There are so many double negatives there, im not sure sorry. I followed you. But the answer is, i dont think this is a bad headquarters or inversions. I think theyre a system of the problem. I think the real issue is assets want to be owned in the hands of someone who where they produce the highest after tax rate of return. After tax rate of return. So if somehow we could just stop all acquisitions of u. S. Companies, stop them. They wouldnt top capital from flowing out of this country. It would flow out of the portfolio area. Stockholders would sell stock. U. S. Companies would say divisions. Merk put things out for bid. It was a market for this. A buyer could bid and assume it was only the chinese te. P g had to bid assuming it would pay the u. S. Rate. So the assets, its startups. Its what i call creeping acquisitions slow loss of market share by u. S. Firms. Charlie kingson, some of you may know him. Hes a great new york tax lawyer years ago said the biggest mistake we made is when the u. S. Had all the capital in the world and all the headquarters in the world and we should have dropped our Corporate Tax rate to 20 , adopted a territorial system and not let these other places nibble us to death. Slowly attracting assets. And we would have had a higher tax base today, more headquarters, more investment. You really in a Global Economy cant keep mobile capital in a place taxed at a high level when other countries arent taxing. Maybe when it was bermuda or the bahamas or barbados you could but not when its the uk. Not when its developed countries. You just cant do it. [ inaudible ] source meaning where the income is earned . I dont know where its earned. We did our r d in six different places and scientists were talking to each other on the internet. Raw materials are sourced in one place. Its a different components are made in different countries. The marketing is somewhere else. You tell me where that income is going. You know, if you were looking at that question and instead of being sitting here in washington, d. C. , you were in new delhi and doing it for the indian tax administration, youd identify the various components of source and youd say we want all of them. Were going to tax all of them. Right. And thats probably the way we should at least start out thinking. But thats where the product is sold or consumed. Well, not necessarily. You think that the Indian Software is developed in india and exported . Theyre not taxing it on a source basis . Theyre finding a way to tax it, trust me. We ought to be thinking im not saying i would conclude on any one of these things. I certainly agree with your proposition that destination is part of the source inquiry. And im not saying this is easy either. But im saying that conversation is a conversation we havent had in this country in 50 years. And im being pragmatic. What we have left in this country is a huge market. So lets use it. China china is throwing its weight around and india. Why not we use our huge market . More questions . Thank you. You always see as the main topic that everyone is heard about is country by country reporting and disour. Disclosure. David you, talked about enforcement being lacking in the country. Do you see that the overseas disclosure and all g20 countries like china and india have adopted or going to adopt, will that enhance enforcement and allow countries to better deploy their resources . And will it maybe negate thin cap rules or cfc rules by increasing disclosure . I think its going to lead to a pretty chaotic situation, myself. I think for a while, maybe even for a long while, the greater amount of Information Available is going to lead countries to what someone called earlier as revenue grabs. I think thats pretty much inevitable. There are going to be countries doing some strange things. And our companies, because theyre present around the world are going to suffer from that. Im not so much concerned about the enforcement abroad. Im concerned about the hollowing out of the Revenue Service in the United States. Just to put this isnt what you asked. Let me just make this one point. We have in the Revenue Service, there is now 85,000 employees. Thats 15,000 less than we had six years ago. Of those 85,000 employees in the Internal Revenue service, there are 250 of them that are under the age of 25. Theyre not getting new people. Theyre not hiring. Its not the most attractive place to work. People dont want to work in a place where you got a bunch of bozos yelling at you all the time about what a terrible job youre doing. Its not the most attractive career path for young person. And in addition, they dont have the money to hire people. This is not good. This is not good. I would agree with david but i would say the tax system is really enforced by the Accounting Firms and law firms, i think we really need more and better resources at the irs. You need more resources to help navigate all the disputes that will arise in the incompetent just to defend Competent Authority cases and so forth. Theres that, too. Do you have a question . Mike . Of all the people that need tax cuts in the u. S. These days, im not sure multinationals should be first on the list. Youre falling into the trap. Think about the consequence of that is. Dont answer them. Dont anthropomorphize them. Theyre not. And the other thing is we live if a world where you set up shop somewhere in a low tax jurisdiction, pretend thats where your residence is and then you enter into sales around the world and you have arrangements every. Where all the places youre selling stuff and making a tiny sliver of profit. And all the real profit is going to tax saving instead of shopping with a few people. And its not surprising under that system that every country wants more than their little sliver. I mean, unless we do something you say well, sources where the Research Takes place and maybe thats right. Ultimately, i think you have to go to where the sales are whether its based solely on sales or Something Like that or else its not surprising all these countries around the world are saying theyre being cheated out of taxes. Theyre not getting any taxes. So thats what i would form lara portion based only on sales sounds like a destination based income tax. And, sure, thats you can think of the dpt as sort of that. The answer is, yes. Theyre complaining about that. Im not complaining. Im thinking its maybe the only solution. Im following davids lead. I would not limit it to that though. Im not if, for example, if research is done in the United States, sales are made around the world, im not saying necessarily i would give up on the u. S. Claim to some of that revenue. On a source basis. In other words, id be prepared to have a multilayered interpretation of sorts. Thats not source. Right . Thats a different definition of source. You can call it what you want. Its not residence for sure. A source country in my experience typically looks to whether they have to bear a deduction. If it bears deduction, the instinctive reaction is, if we bear theeduction for something, were going to tax the income. I dont think thats a crazy way of looking at it. Were wrestling with the problem of an income tax in a world of mobile capital. If you have a value added tax and r d here and the product was sold outside the u. S. , we wouldnt collect a nickel of the money on that. The export would be exempt. When we sold it in the u. S. , wed collect the tax. Were trying to do something that is really impossible which is catch a light beam thats moving around the room much faster than any of us can see it. Income taxes dont work in worlds with mobile capital. We need some kind of destination. There was a great piece. His modern Corporate Income tax is not an income tax at all. Its a consumption tax. He calls it an income tax. Were in the death throes of the income tax. I say since we have all these smart people together, the reason were having this conference is to figure out how can we do a Corporate Income tax. At the individual level. At least whether we should have a vat as more of a revenue is another issue. But even if you believe that, we still are going to want to retain an income tax. [ inaudible question ] if you want to tax the income capital, you have to tax where its not mobile by the owners. Im not taking a position. Any other questions . Yes . [ inaudible ] i said im not in fair of that like me, but you seem to come around. No. Im saying administratively. I was suggesting that every economist will tell you oh, thats because it doesnt tax savings. Its going to create a lot more Economic Growth. And that its much better than income tax for growth. Im just saying im not sure i fully agree with that. Look what it did for italy. Right. I understand that when they can tax something twice, like the accreted wealth, already income tax is paid on, there is a nice bang for the buck. Over time, i dont know why if a government takes money out of the economy in one form either as a vat or as an income tax, it makes a lot of difference to me. I dont have it in my jeans to spend. So thats my only point. Okay. I have one more question. Time for one more question. Going once . Going twice . Yes. We have a lot of high powered former International Tax counsels or deputy secretaries for International Taxing. I often look at double taxation treaties not from the developed countries perspective but from developing countries. Ive come to the conclusion that most of the double taxation treaties should be terminated as mongolia did. The dutch treacy. And maybe countries should start is a simple rule. If you deduct it, it has to be someones income and domestic income. Your reaction . I think it would be really unfortunate if all the network of tax treaties were terminated. They serve really important purposes. One of them is to allocate taxing jurisdiction. But they also serve significant administrative purposes and provide certainty. And i think that certainty is the benefit of developing countries and developed countries alike. So it might be that youd like to see different provisions in some treaties. But i think a World Without treaties would be a much more complicated place. I sort of half agree with that. I think treaties with developing countries ar bit of a con. But i do think that avoiding double taxation and exchanging information, maybe a couple of the other provisions of the typical treaty are useful. Useful in appearance and maybe even useful in practice. I do think that i can see why developing country treaties, i sat through a bunch of lectures and the likes of argentina on this subject that why developing country treaties are from their standpoint are really revenue loss, net revenue loss as we tend to go and tell them you got to sign it in a particular way. I sort of see that point of view. On the other hand, barbara is right. A World Without treaties, youre adding to what is inevitably going to be a pretty chaotic situation is a good last word. So lets end it here. And i want to thank the panel for a very stimulating discussion. [ applause ] on American History on cspan3, this september marks opening of National Museum of africanAmerican History and culture. Live for an all Day Conference with scholars from across the country discussing topics including africanamerican religion, politics and culture, Historic Preservation and interpretation. At 10 00 p. M. Eastern on real america, the 1975 Church Committee hearings convene to investigate intelligence activities of the cia, fbi, irs, and the nsa. The Commission Hears testimony from two fbi informants, Mary Joe Cook and how she penetrated antivietnam organization and Gary Thomas Roe who infiltrated the klan and participated in violence against civil rights absent vices. You mean the Birmingham Policeman set up the beating of the freedom riders and you told the fbi that . Thats correct. And then were they beaten . They were beaten very badly. Did the Birmingham Police give you the time for the beating . We were promised 15 minutes without any intervention from any Police Officer whatsoever. At 8 00 on lectures of history. What that opportunity gave them was an opportunity to go to college. They saved some of that money. They sent them selves through college. They sent siblings through college. They became doctors and lawyers. One became the first female manager of any department at northrop airlines. They became principals, surgeons, politicians, pilots, and they were able to do that because they had access to professional baseball. Marshall University Professor Katt Williams on how women aid i had the war effort in factories and military auxiliary units and the rise of womens baseball leagues, including the all Americans Girls Professional Baseball League that was featured in the movie a league of their own, sunday night at 10 00 on road to the white house rewind. Ladies and gentlemen of the convention, my name is geraldine ferraro. I stand before you to proclaim tonight america is the land where dreams can come true for all of us. 1984 Vice President acceptance speech of new york congresswoman geraldeen ferraro. First woman nominated Vice President for the party. For the schedule go to cspan. Org. Two former republicans, gary johnson of new mexico and bill weld of massachusetts seeking libertarian nomination for president and Vice President. The Libertarian Party Convention Comes up saturday may 28th and youll be able to watch it live on cspan starting at 8 00 eastern. Our campaign 2016 bus continues to travel throughout the country to recognize winners from this years student camp competition. Recently the bus stopped in massachusetts to visit several winning students from that state. They went to sage school in foxborough, all students first through eighth graders attended ceremony for the Honorable Mention, dunning for safety. Also stopped in ledlow, Honorable Mention for veterans services. James elliot for his video lgtb rights, stop the discrimination. The two were honored in front of their classmates, family members and local School Officials and received 250 for the winning video. Our special thank to cable partners, Comcast Cable and Charter Communications for helping coordinate these visits in the community. You can view all the winning documentaries at studentcam. Org. The head of the pipeline and hazards Materials Administration spoke in washington recently about the safety and security challenges facing oil, gas and other pipelines. For the center for strategic and international studies, this is about an hour. I direct energy and National Security program here at csis. Were very pleased to have all of you here today for our discussion, the future of fensa. We have been trying to get her because her agenda is our agenda, how the infrastructure in the United States, transmission on the oil and gas side has been changened and Going Forward and how we manage safety issues associated with that. The u. S. Department Pipeline Hazardous Materials Safety Administration and its responsible for Development Enforcement regulations for safe, reliable and environmentally sound operation of the nations 2. 6 million miles of gas, liquid Pipeline Transportation in a million daily shipments of hazardous by land, sea and air. I know you have that written down but its a pretty Staggering Amount of volume and activity and very important work. Miss dominguez joined in 2015, before that assistant secretary for army for civil works where she provided policy direction and performance oversight of the army corps of engineers Civil Works Program focused on water resources, conservation and development, navigation, flood control, hydroelectric and outdoor recreation. A lady not averse to very complex and difficult to manage issues both from an administrative and sort of technical standpoint. We invited her here to talk about plans for the future of the agency. As you know at csis weve done work to highlight the importance of the nations oil and Gas Infrastructure in the Important Role we think regulators and companies and quite frankly all of us may play to ensure safety of resources. We invite the administrator to make a few remarks then we will open it up for questions and discussions. Thank you very much for taking time to be with us today. All right. Good afternoon, everyone. Thank you, sarah, very much for your kind introduction, and for the invitation to join you all at cis today. And particularly thanks to the energy and National Security program for inviting me to speak today. It is an honor to be here. Your organization, of course, provides a forum for some of todays most cutting edge conversations in economics, security, health, human rights, a whole potpourri of issues including energy, to really inform citizens and i think leaders alike, and i very much appreciate the forum. Im also very excited to be here today for what you called a timely discussion. I couldnt agree more. Its extremely timely. As sarah said, my name is Marie Therese dominguez and i have served as the administrator for the pipeline and Hazardous Materials Safety Administration at the u. S. Department of transportation since august of last year. I formally came on board in june and it was confirmed in august. As phmsa, our mission is to protect people and the environment by advancing the safe transportation of energy and other Hazardous Materials that are essential to our daily lives. Our operating environment is complex. Its diverse, and critical to the way that americans live. In response, those of us at phmsa are addressing the issues at hand, but just important, were going beyond the issues at hand. We have challenged ourselves to invest in and plan for the future of our agency. Today, i would like to share some of our challenges and some of our opportunities. How were responding to our ever growing mission, and our longterm Strategic Vision for advancing safety through our phmsa 2021 framework. Growing up, my dad used to say he could fix anything with a pair of pliers, some duct tape, and wd40. And of course, he was absolutely right. He could fix anything. But what he likely didnt think about was the process involved in getting his tools of choice to him safely. Wd40 is a hazardous liquid transported in an aerosol can, and it has to be regulated during shipment. And it also cant be permitted on any kind of passenger aircraft and it has to follow very specific Hazardous Material labeling and packaging standards. All too susceptible to aerosol can regulations, whipped cream canisters. So my dad and every single 8yearold who has ever had an ice cream sundae with whipped cream from a canister are phmsas biggest fans. So just a quick question here. How many of you all have taken a flight in the last year . Just raise your hands. Okay. Pretty significantumber. Overwhelming. Have you noticed that each time you check in, you have to agree not to bring any Hazardous Materials on your flight or in your checked bag . You have to touch that screen. Okay. Phmsa along with the faa developed these Safety Standards because many common Household Items can become dangerous when transported by air. Last fall, phmsa issued a safety advisory and shortly after an interim final rule banning the transport of electronic smoking devices or ecigarettes in checked bags on commercial flights. After a series of close call incidents, it became clear that these devices, which are powered by lithium ion batteries, were susceptible to overheating in the cargo compartments of commercial aircraft. The interim final rule addressed these concerns and provided guidance for safe transportation of personal devices as long as precautions are taken to reduce the risk of fire. This is just but one example of how phmsa addressed safety issues. By learning from incidents, by analyzing critical data, by Understanding Market and technology advancements, and proactively issuing guidance for safe transportation of these products. As i mentioned, our mission is to protect people and the environment by advancing the safe transportation of energy and other Hazardous Materials. Our operating model demands that we keep a close eye on industry trends, collect and leverage data, and understand emerging technologies and the changing Energy Environment in order to anticipate risk, inform our regulations, and truly drive safety. At phmsa, were transportation, energy, and Hazardous Materials experts. We are engineers, analysts, policymakers, and inspectors. And lawyers, too. We have some of the worlds leading corrosion and welding experts, and we actually hold a chair of the u. N. Subcommittee on transportation of dangerous goods. These are all members of our teams. Of our team. And this team is incredibly dedicated. And their dedication is matched by their expertise, and each of them contributes on a daily basis to safety, our level of enforcement, and response. Its really truly entrusted to our agency. Our regulators, as regulators, our goal is to smartly leverage the full scope of tools at our disposal, from regulation to education and outreach. All in an effort to eliminate incidents and accidents, injury and harm. We inspect and enforce compliance of the Safety Standards that we promulgate. And we incorporate Lessons Learned from these accidents and incidents. Identifying trends and considering the human as well as the environmental impact, as we develop policies, initiatives, and regulations. In the last decade, the way that the American Public consumes and interacts with energy and Energy Products has fundamentally changed. And today, the expectation is that these interactions will be so safe and reliable that the public really doesnt have to think about the risk thats involved. They, the American Public, and you should associate this safe level of transportation with a job that we do every single day at phmsa. Phmsa is a relatively new and unique agency, established in 2004 by the mineta act, the creation of phmsa brought the regulation of the movement of Hazardous Materials by all modes, including pipeline, under one domain. Today, we house these two different programs, and yet interconnected Safety Programs all under one roof. Our office of Pipeline Safety regulates the designs, construction, operation, and inspection of pipelines that transport oil and natural gas across the country. Its also what powers our homes, cars, and the economy. The office of Hazardous Materials regulates the transport, packaging, and labeling of all Hazardous Materials. And provides training to Emergency Responders who deal with transportation incidents involving hazmat. There are over 2. 6 million miles of pipeline in the United States. This is enough pipe to circle the globe 104 times. Phmsa sets the standards for safety for this vast underground Pipeline Infrastructure which moves natural gas, oil, and other Energy Products 24 hours a day. We also regulate the move of movement of 2. 5 billion tons of Hazardous Material, including explosives, poisonous, corrosive, flammable, and radioactive materials. All valued at about 2. 3 trillion every year. These goods are moved on the 307 billion miles of our nations interconnected transportation network. Including land, air, and sea. The reality is that between pipelines and the transport of Hazardous Materials, if something is manufactured, produced, shipped, heated, or cooled, phmsa had a hand in it. This is an enormous responsibility for one agency. And a fairly small one at that, comprised of less than 600 people spread across the country. As an agency, phmsa operates in a constantly changing environment. Energy innovation and Technology Advances faster than regulation can often keep pace. The u. S. Energy renaissance has strengthened Americas Energy security and Economic Prosperity while simultaneously creating new Transportation Safety challenges. Our goal at phmsa is never to let these changes impact safety. The United States is in the midst of an unprecedented increase in Domestic Energy production. As a kid, i remember the gas crisis in the 70s, and now our nation is the number one producer of oil and gas around the world. And the United States no longer imports the majority of the energy it consumes. Its also created new concerns for consumers, pipeline operators, hazmat shippers, safety paramount across the board, no matter where you are in the supply chain, all of these companies that we regulate, the focus needs to be on safety. An example of the dynamic environment is the advancement of liquefied natural gas. Natural gas is an important element of the president s all of the above Energy Strategy to make america more energy independent. The abundant supply of natural gas in the United States has increased demand for it actually on a National Basis and internationally. As the lng energy grows, we have to take a hard look at how the u. S. Produces, uses, and stores l g in this country. Phmsa plays a role in setting Safety Standards in the way the facilities are designed, maintained, and operated. An emphasis on safety, again, is more relevant than ever. Crude oil is also being produced domestically in unprecedented volumes. Yearly, about 5,000 car loads are transported across the United States, and phmsa is working diligently to make sure these products arrive safely at their destinations. In 2015, in collaboration with the federal rail administration, we issued the high hazard flammable rail rule. They designed new requirements designed to reduce the consequences involved trains transported large quantities of Flammable Liquids including crude oil and ethanol by setting new regulations in speed, braking systems, rooting, and tank car design. This comprehensive rule directly addresses the risks associated with this growing and changing marketplace. Advancing the Safe Movement of these products by rail. Our role in the changing Energy Market goes beyond regulating the products that power our cars and homes. Basically, we have been able to fly across the ocean for over a century now, but were now also global consumers. Asking products literally to move around the world with the touch of one button. You may remember the really cool gift last year during the Holiday Season was hoverboards. And in 2015, the embodiment of the hoverboard was the back to the future nostalgia we all had. But i have to tell you that several of the Major International manufacturers of these devices were not compliant with the international Safety Standards for the parts that were actually inside the hoverboards that they had manufactured. Many of the models were found to have faulty batteries, chargers, and cutoff switches that after regular use were not only susceptible to short circuiting but in some cases they were actually spontaneously combusting. It was a collaborative work of both phmsa and the u. S. Customs and Border Patrol as we worked to stop shipments of these faulty goods at the ports. Phmsa issued a safety alert that provided guidance on how hoverboards were to be transported, what their handling should be, the usage, et cetera. And it was the u. S. Consumer Safety Commission that educated the public on the quality and verification of what they actually needed to look for in the product they had purchased, oftentimes online. These collaborative efforts increased overall awareness of the safety risks that was really involved in arguably one of the hottest toys that sold last year. A major objective of phmsas Hazardous Material Safety Program is to maintain a global system of Hazardous Materials regulations that enhances the safe and efficient movement of hazmat from oil to batteries that power everything thats we just talked about, including your phone. They literally cross every border, every jurisdiction, and all international boundaries. The u. S. Is a leader in international harmonization. Working to set Global Compliance standards and Risk Identification and development of safety controls and to insure regulatory consistency. It was these safety stands that alerted us to countries and countries all over the world to stop the faulty batteries, stop the use of these faulty batteries that had been used in the hoverboards and really to make sure that they were stopped at the border. Our leadership and collaboration allows billions of International Shipments worldwide to reach their destination safely. So our challenge is to lead within our dynam environment and create a regulatory atmosphere where innovation can flourish while also protecting and advancing the highest priority of the American People, which is their safety. Our regulated industries have experienced a series of accidents and incidents that have resulted in heightened attention, scrutiny and scepticism about these modes of transportation. Public opinion is clear. There should not be any trade offs as we move products and everyone has a part in protecting the communities and the environment living along these transportation routes while advancing the safety of products an services that we all rely on. The natural gas leak in california last fall was the largest methane leak in u. S. History. This failure at this facility, one of the most critical for Energy Supply in the area in Southern California not only had a disruptive effect and an impact on the People Living in and around that area, it brought heightened attention to inconsistencies in the state standards that regulate underground Natural Gas Storage and the real consequence of not investing in our nations aging infrastructure. I toured the canyon past earlier this year with secretary of energy and it was extremely clear to both of us that there were many lessons to be learned. Last month the department of energy and the u. S. Department of transportation announced the creation of an Interagency Task force on National Gas Storage safety. As part of the work on the task force, phmsa is moving forward with regulations for underground Natural Gas Storage which will provide minimum operating and Safety Standards for all states and improve oversight for all state facilities. We work on behalf of every american no matter their zip sowed, socioeconomic or educational background, their race or gender. Accidents are not a part of acceptable business to the American People nor should they be. That expectation is the foundation of our work and that responsibility is what drives us to our mission. When i started back in august of 2015 having been nominate by the president and confirmed by the senate, coming in it was extremely clear to me that the mission of the agency is indeed expanding and our work is actually more critical than ever. In the last year alone the agency has made some significant accomplishments. We finalized major regulations for the safety of crude Oil Transportation by rail and to prevent excavation damage, one of the leading threats to Pipeline Safety. We proposed new regulations for hazardous liquid and gas pipelines. With the passage of the fast act, we reauthorized Hazardous Materials program for the first time in ten years and have begun working on new requirements outlined in that legislation. And now were fully engaged in the reauthorization of the Pipeline Safety program currently pending in congress. We are hard at work to engage with and address the risks that our dynamic environment presents. As we look to the future, we are investing in the agencys growth, both in the size and in capabilities. To make us the most Innovative Safety agency in the world, one that leverages our predictive capabilities to enhance safety. To better understand our Current Operations we undertook a very purposeful and critical Organizational Assessment at phmsa. We looked at the entire agency to take stock of not only our existing capability to better understand our culture and to develop an Investment Strategy that really is forward looking and looks to the future for what we have to do for Mission Critical capabilities. The reality is that we are in a fundamentally different place from where we were ten years ago when we were originally reorganized and reenacted. We are growing because at the bottom line our mission is growing. And with advancements in technology, were going to continue to grow. The administration, the congress and other Key Stakeholders have all recognized and support the importance of our work. In the last two years weve had significant investments alone from congress, both in terms of people and in dollars. Weve grown our workforce by 25 adding and filling 122 new positions in the last year alone. Even with these increases however we anticipate that the scope and complexity of our Safety Mission will continue to outpace our ability to add resources requiring the agency to fundamentally rethink how we use data, information and technology to achieve our goals. While our hiring surge has helped us but more inspectors in the field, our long term strategic framework drives and will drive investment in our organizational capabilities. This new framework is based on the core principals of safety, trust and innovation and reflects phmsas goals of being more predictive and data driven. To that end we are making important organizational changes that will impact the way the American People and our regulated industries interact with us. We are also establishing a cross functional office of planning and analytics that will allow us to better leverage data and develop a more forward looking regulatory agenda, one that looks at the results in a more timely data informed and economically rigorous way so we can better inform our role making. Our developments in research and development will enhance our ability to understand and learn from incidents, while also embracing innovation and fortifying the indelible link between new technology and new opportunities to increase safety. Because we know that Public Education and Emergency Preparedness is vital to reducing transportation incidents we are expanding our stakeholder outreach and Public Engagement abilities. We are investing in education so we can engage stakeholders locally in their communities and were providing resources to our Emergency Response partners like the training that we just issued thats the framework is a bit of a train the trainer concept. Its called the transportation rail preparedness program. Otherwise known as trpr. It looks at providing best practices for incidents involving flamable liquids and it gets to Emergency Responders in their communities allowing them to replicate the training directly. We use our Emergency Response book. Its the go to manual for First Responders. They carry it on fire trucks and use it to understand what type of Hazardous Material theyre dealing with at any given appoint in time. Weve translated it into a mobile app in three languages. It really does help Emergency Responders in a very immediate way by learning immediately how to manage hazardous transportation incidents within the first 30 minutes which is very critical in any accident. Phmsa 2021 implemented as a whole will transform us as an agency. It will enable us to better leverage data and research to develop a more proactive regulatory agenda and it will ensure meaningful and early engagement with stakeholders and enhance Emergency Preparedness around the country. It will establish processes to develop rules in a more timely and efficient manner. It will empower us to consider the full scope of regulatory and nonregulatory options and enhance our own capabilities as well as provide Additional Program consistency and continuity. So phmsa is looking to better structure our selves to become the next generation safety agency. These changes impact you. You should want a regulator thats informed, predictive, anticipatory and we want to be that regulatory. Phmsa 2021 provides us with the foundation to do exactly that. And as we invest in ourselves to advance safety, we support smart Strategic Investments in industry to advance safety as well. Advancing the implementation of a Safety Management safety and a strong Safety Culture is the next step in continuous Safety Improvement for americas hazardous strategy. Safety Management Systems integrate modern safety concepts into proactive processes creating Standard Operating Procedures that are grounded in the advantagesment of safety. As a part of a companys operational structure, sms takes into account the culture of an organization alongside its systems, rules and procedures and it really does account for that human behavior, that human factor in Decision Making and really looking to mitigate risk and advance safety. The structure of sms provides organizations greater insight into their operational environment. It requires leaders to champion safety and allows employees at all levels to raise safety concerns. This means investing in our predictive analytical capabilities, improving procedures and enhancing performance based standards. For industry this means creating a culture that allows nonpunitive reporting and as well as developing and adopting a platform to share and analyze sat, a in a nofault environment, so that the industry as a whole can identify emerging trends and address risks before an incident or accident occurs. This can be done while still protecting proprietary interests. Theres a compelling Business Case to be made. Only when a major cultural and operational shift has taken place beginning with us at phmsa, where we know if, you know, we have to actually walk the walk if were going to talk the talk, only then will we actually truly see a marked improvement in safety. Yes, it really is an investment. Its an investment of industrys time and money and of ours as the regulators. We really need to focus and look at internal capabilities as well external capabilities, but the payoff is really enormous and it really is the next level of safety that needs to be invested in. Look at the Aviation Industry. There were an unprecedented number of accidents in the 1990s in aviation. Recognizing there was a problem, the Aviation Community to include manufacturers, pilots, carriers, regulators, they created a partnership and began to share data. Inspection and repair data, pilot logs and all different sorts of data. They chose the collaborative framework to partner, securing an independent thirdparty to analyze data and identify emerging risks. Ultimately changing the Safety Culture and resulting in Management Systems that truly did enhanceover all safety. Thankfully the Aviation Industry has not seen a major crash with loss of life in almost 18 years. The industry is reaping the benefits of their investment and so are passengers, because they know when they get on a plane they are not just trusting the pilot to get them from point a to point b, theyre trusting the entire supply chain, whose absolute focus is on safety. The pipeline industry is learning from other modes of transportation. This encampases the key aspects of a Key Management system and provides guidance to all pipeline operators, big and small. We are now urging industry to implement Safety Management systems purposefully and really tackle it head on. All three versions of our pending pipeline reauthorization bills contain language that would establish a working group to consider developing a nofault information sharing system to encourage the sharing of safety data with both regulators and the industry so that Lessons Learned can be identified and actually we can work to address emerging risks. Its time for the industry to lean into this commitment and for individual operators to change their Safety Cultures and adopt new Management Systems. This is truly the next level of safety for the pipeline and Hazardous Waste industries. Its our mission to make the American Public confident in the movement of Hazardous Materials so they can use them and never have to think about the process that got them there. As an agency we are in a time of growth, growth in opportunity, growth in mission, growth in size and theres no part of our agency in which we feel complacent. We are investing in all of our Core Functions to prepare ourselves to deliver long term. Phmsa as a whole, our entire agency, pipeline and masses mat across all our functional areas and offices, must be prepared to respond to our changing environment, and we have the team to do it. One of the most profound results of our Organizational Assessmentened a one that im actually extremely proud of quantifies the dedication of our workforce. Our almost 600 employees are dedicated Public Servant ants who feel a personal responsibility for your safety each and every single day. Theyre an Incredible Group to lead and im inspired every day by their drive and i share their incredible commitment. In the beginning of my career when i worked at the national Transportation Safety board my very first accident launch was the valujet 592 crash in miami. The aircraft went down ten minutes after takeoff claiming the lives of everyone aboard. I stood in the middle of the everglades with the team looking for answers. What became clear was that the cause of the accident was not mechanical. Expired oxygen containers were placed in the cargo hold of this plane without proper packaging or labeling. The investigation revealed to these oxygen containers packed in boxes with only a layer of bubble wrap started a fire and produced a Chemical Reaction that allowed this fire to sustain, burn, explode and ultimately destroy the plane. This experience was foundational to my experience of safety as more than an idea, but rather as a process that can be implemented, developed, learned and continuously improved and there could not be a clearer introduction into how critical proper hazardous transportation material is to our overall greater safety landscape. Ive witnessed firsthand the devastation that accidents in transportation can cause, both the loss of life and the lasting impacts to families and communities. So when i was asked to serve as administrator of phmsa, i was not only honored by the consequentiality of the task, how critical is that this agency be prepared to tackle todays challenges and our future challenges. I hope i have left about you the same sense of urgency and optimism that i feel for phmsa. Thank you very much for your attention, and i appreciate the opportunity to join you today. [ applause ] thank you very much. That was a wonderful overview of all the wonderful things you do at phmsa and i really appreciate you taking the time to do that. I neglected to mention at the beginning, we have a slight change of plans. We do have to let the administrator go at 2 30, she has somewhere she needs to be. I will make my part short so all of you can ask your questions and we can get into a little bit of a discussion. I do have to say as someone married to a First Responder and deeply kented to the community do appreciate the Additional Guidance youve given that community dealing with safety incidents. I also never thought i would be involved in a conversation that included wd 40 and whipped cream at the same time, so that was interesting, too. You noted a couple of times that you guys are in the midst of getting a reauthorization and i hope that goes well, but you have a large agenda on your plate. As anybody involved in the Energy Sector knows, you cant take a break from all of the things youre doing to enact large institutional change. Its a very tricky and complicated thing that many people in our industry have to do, both from a private sector standpoint and on sort of the regulator and public side of the equation. You laid out a lot of things. What are the key things that you need to be able to get to to be that predictive sort of forward looking agency that youre looking to create . Thanks. I think that i think one of the things thats most critical here is were looking to make some key organizational changes that do impact the structure of phmsa. What were looking at doing is creating an office of planning and analytics, which is what i talked about. That office is designed and the thought behind it is to really focus on three main areas. One, Strategic Planning. Two, data and analytics. Three, Economic Analysis. As you take data and we collect an enormous amount of data across the board, what you want to be able to do is make sure that youre using that data to uniform your rule making and make sure we have the right Regulatory Regime in place and that its also fundamentally informing our analysis, so our rule making is as informed as possible, its as consistent as pob, because were taking resources across the agency, leveraging those capabilities and applying those best practices internal to the agency and bringing in some added. Where weve got gaps, skill gaps, bringing in additional folks to help address some of those areas. So thats really the crux of it, so look at policy, Strategic Planning and regulatory picture. Will you be looking to make some of that analysis and data sort of public and sort of well understood because we repeatedly in the sessions that we hold here hear from people about how data is really sort of the currency of trust for them. Its really enabling them to have good stakeholders and you mentioned that was a big part of what you need to do. It is. I think its a big transparency factor. We collect an enormous amount of data. A lot of it is posted on our website already and we try to be as transparent as possible. That said there is opportunity for us to actually display that data, visualize it and analyze it and assess it and inform not only our stakeholders, but ourselves as to what were finding and how that might be better used for regulatory purposes, but also identifying risk. You mentioned you have a lot of things sort of on your plate, so its hard to pick and choose. But you did mention the Natural Gas Task force which we were particularly interested in, setting minimum standards in terms of Natural Gas Storage facilities. I know the canyon has been on the minds of a lot of people and as california heads into the summertime figuring out how to meet their Energy Demand needs. Can you tell us a little bit more about the broader activities of that task force and what you hope to gain from it in addition to the minimum standards. I think a lot of the work in looking at the infrastructure here in the United States is something theres a lot of interest in but not a huge amount of understanding. So can you talk about what the tasks force hopes to achieve. I think one of the things that is significant about the task force, as i mentioned earlier, i had a chance to be out in the canyon with secretary moniz, and it was really quite informative on a number of levels. I think one of the things that really struck me in particular was it brought home yet again this concern about aging infrastructure that we have, and theres been a lot of work thats been done both in the industry and by the states to look at underground Natural Gas Storage for decades. But i really do feel like we have an opportunity now to set some minimum federal standards to look at the regulation of underground Natural Gas Storage, addressing potentially some of the concerns on aging infrastructure, recognizing there are very vastly different geological formations that are out there across the country, but recognizing the work thats been done accounts for a lot of that. And we have a way forward. I think theres going to be more Lessons Learned. The great thing about the department of energy being at the table is theyre leveraging all of the work from the National Labs, so youve got multiple different labs, at least i think five Different National labs that are involved in this task force, where theyre collecting data, theyre conducting workshops around the country to better understand not only the operational content of underground Natural Gas Storage but some of the geologic features and other things. So youre bringing in a lot of expertise and theyre helping inform our rule making and looking to see what are the potential next steps we would have to look at moving down the road. I should know, but do you have a timeline established for this work . Its fairly aggressive. I think its six months. Thats what i thought. I didnt want to bring it up. No pressure. So other work that you have out there pending is a natural Gas Transmission Pipeline Safety rule and then you Just Announced something on lng safety work shops can you talk a little bit what youre looking for in sort of Public Comment and participation in both of those items. So we are we published our nprm, notice of proposed rule making on Gas Transmission. It is a very comprehensive rule making the agency has been working on for a long time. Very proud that were able to publish it. As an nprm. We put out an initial 60day review period and were looking to make sure we host some forums around the actual contents so that people have a chance to come and share some comments directly with phmsa. Weve been trying to host schedule some webinars so we can collect Stakeholder Feedback and inform the rulemaking moving forward. I realize its a dense rule. Its over 500 pages. Again, very comprehensive. Were really looking for some comprehensive comments to come back. So those of you who are interested, i encourage you to submit your comments and please share them with us and then well look to actually hold an Advisory Committee meeting and resolve any outstanding issues through that public and transparent process and look for a final rule on Gas Transmission and same thing on the hazardous liquid rule. I promised to open it up. So people could have questions. Im going to take them in threes so we get through all of them. If you could weve got a couple of ground rules. Please wait for the microphone. We are being web cast and aired and then also name and affiliation please if you could and then question in the form of a question. Well start with mitzy and go right here. Im mitts mitzy. Im so thrilled i have heard your story because to be quite honest, i didnt know it existed. And my concern is that American Public doesnt understand what youre doing. Just think how angry the public is because they dont have stories they can understand. So i would i have a whole series of things i want to ask, one about maintenance, that was not a word i heard you use and i think explain the process and the other a question of fracking but i would suggest you set up some contests for people to write these stories for nonexperts, put them online, they have to be visual, for students to learn this, and they can then educate their parents. But everybodys overwhelmed with what it is we have to know about, learn, and nobody has time. So the question is how do you make it clear, concise, compelling and everyone caring because by god what youre doing is important, but our whole infrastructure is a mess and they dont even discuss that, whether its roads or bridges. Theyre going to close Memorial Bridge for five years and nobody thinks about what will be the traffic congegz in washington and what it will do to the number of hours you can spend working because youre trying to get there. So this is all a piece part of a much bigger story. But thank you very much. Thank you. Good question on communication of the challenges. Good suggestions. Thank you. Im jenny mandle with energy wire. I was interested to hear you say you want to change the way you work with data. Can you tell us more about what it is you want to do using data and how thats different from other regulatory agencies. I think partf we do a lot of work already. Obviously, data is our bread and butter. The question is how can we better organize ourselves internally. Weve conducted an assessment of our data alone. We collected an enormous amount of data. We engaged oakridge National Labs to give us a series of recommendations on one, we can identify if theres gaps in Data Collection, what they might be and look to see how we might address the data gaps. Moving forward what we would do differently is to actually look to see how we can better structure ourselves to use the data we have more effectively, making sure its as up to date as possible, and also matching that very well with the with our Economic Analysis so that data is actually better informing our Economic Analysis. Oftentimes we do that as a regulatory agency, but the question is how can we do it better and what were doing is bringing additional expertise to the table to help organize and structure and streamline that process. For doing that a little better. And maybe, will you need any additional authorities or Data Collection capabilities . One of the things we were talking about ahead of time is we do a lot of work with the Energy Information administration and they found small tweaks in the way theyve been collecting information or better synchronization between how states collect certain information and what they ask for has helped them, not because they werent working with data either in the first place, but really sort of keep up with whats changing in the industry which has been really the challenge for them. Do you have similar types of collection and or types of data issues that youre going to face . A great question. One of the other areas that we have opportunity in as you know, phmsa conducts inspections for interstate transmission, or interstate opportunities. The states do a lot of work on the intrastate side. Bottom line is we have an enormous amount of inspection data that the states actually collect. And being able to have literally i. T. Systems that talk to one another, one of the things were looking to do is invest, further invest in platform to actually make all of that information sharing become a little bit more real between the states and the federal, us as the federal regulator so were sharing some of that operations maintenance, inspection data a little bit more directly, but also its another platform to also help the states. Some of them are still looking to invest in their own procedures. If were able to help them, it also helps the federal regulator. And bottom line is we get a much better picture of the overal operation of any given pipeline, any Given Company if were able to have the data inform our inspection process. Nick snowworth. Oil and gas journal. It sounds as if you have a lot on your plate already and also that your main thrust as far as methane emissions is concerned is in Natural Gas Storage. What are you finding in the states which have regulated this up to now and do you expect to have a lot of conversation with them about this . Thank you. Absolutely. Weve had over the course of time an enormous amount of conversation with the states. The states actually participated i think there were upwards of ten states that participated. Some of the ten most key states with some of the largest underground reserve capacity in their respective states, both for salt mines and other reservoirs. They participated in the recomme recommended the standard setting committees that actually developed the recommended practices that api published last fall. So you had state coordination at that level. You also have literally every single day, we work with the states, we have an entire state program thats devoted to our work with the states and how we invest and provide making money so they can carry out the program on behalf of the entire system