Summary of the Small Business Jobs and Tax Relief Act

1.     Creates an Incentive For Small Businesses to Add New Jobs This Year.  Although the economy is recovering from a severe economic recession, a tax credit designed to stimulate job creation and wage increases could help put more Americans back to work and provide tax relief targeted at America’s small businesses. This proposal would provide a 10 percent income tax credit on new payroll—through either hiring or increased wages—added in 2012. With a maximum increase in eligible wages of $5 million per employer and the amount of the credit capped at $500,000, the benefits of this tax credit will be targeted on America’s small businesses.

• CBO Deems It Effective Way to Spur Growth and Increase Hiring. The Congressional Budget Office has determined that proposals like this, which would reduce the cost to businesses of adding employees or increasing payroll, “would have the largest effects on output and employment per dollar…” compared to those that “affect businesses’ cash flow but would have little impact on their marginal incentives to hire…” [CBO, 11/15/2011]
• Leading Economists Support Tax Relief for New Payroll. Former Vice Chairman of the Board of Governors of the Federal Reserve System Alan Blinder has endorsed the idea as a job creator, proposing that “the basic idea is to offer firms that boost their payrolls a tax break. As one concrete example, companies might be offered a tax credit equal to 10% of the increase in their wage bills (over 2011 levels, say). No increase, no reward.” Other prominent economists who have endorsed the concept of increased payroll incentives include Paul Krugman and Mark Zandi. [Wall Street Journal, 7/12/2011; New York Times, 1/20/10; Moody’s, 9/9/2011]

2.     Extends 100-Percent Depreciation Deduction For Certain Property. Typically, businesses expenditures are tax deductible in the year in which they are made, except for major purchases (such as large equipment or buildings), which must be written off over many years. One hundred percent depreciation allows businesses to write off the entire cost of major purchases in the year they are made rather than depreciate those expenses over many years. By accelerating in time the recovery of investment costs through “bonus depreciation,” additional first-year deductions for new investment lower the after-tax costs of plants and equipment. This encourages new investment and promotes economic recovery. Senate Democrats propose extending 100 percent first-year depreciation for one year, effective for qualified property acquired and placed in service before January 1, 2013 (or January 1, 2014 for certain longer-lived and transportation property).

• Bonus Depreciation is a Bipartisan Approach to Growing the Economy. Bonus depreciation has traditionally garnered bipartisan support:
• The Job Creation and Worker Assistance Act of 2002 was introduced by House Republicans and passed the Senate by a vote of 85 – 9.  [Vote 44, 3/8/02]
• The Tax Relief, Unemployment Compensation Reauthorization and Job Creation Act of 2010 expanded bonus depreciation to 100 percent. The bill was passed in the Senate by a vote of 81 – 19. [Vote 276, 12/15/10]
• Last December, the House Republicans overwhelmingly voted for an extension of 100 percent bonus depreciation in H.R.3630. [Vote 923, 12/13/11]
• Bonus Depreciation is a Proven Way to Help Small Businesses Invest and Grow. According to the U.S. Department of the Treasury’s Office of Tax Policy, extending bonus depreciation will provide a tax cut to over 2 million businesses. In addition, the analysis estimates that 100 percent expensing reduces small businesses average cost of capital across all investment by more than 75 percent. [U.S. Treasury Office of Tax Policy, 11/2010]
• Economists Consider Bonus Depreciation One of the Most Productive Ways to Boost GDP. There is substantial empirical evidence that accelerated depreciation boosts business investment. For example, an analysis by the Institute for Policy Innovation estimated that every $1 of tax cuts devoted to accelerated depreciation generates about $9 of GDP growth. [Institute for Policy Innovation, 10/10/2001]
• Businesses Add Jobs When They Make Capital Investments. Studies by economists across the political spectrum have found that earlier, less generous versions of bonus depreciation have created 2 to 3 hundred thousand jobs. [American Economic Review, 7/2008]

• Immediately Invests in Our Roads, Rails and Airports ($50 Billion):  The Senate bill provides $50 billion in immediate investments for highways, transit, rail and aviation, helping to modernize an infrastructure that now receives a grade of “D” from the American Society of Civil Engineers and putting hundreds of thousands of construction workers back on the job.  This investment will put people to work upgrading 150,000 miles of road, laying/maintaining 4,000 miles of train tracks, restoring 150 miles of runways, and putting in place a next-generation air-traffic control system that will reduce travel time and delays. The plan includes $27 billion to rebuild roads and bridges, $9 billion to repair transit systems, $5 billion for projects selected through a competitive grant program, $4 billion for construction of the high-speed rail network, $2 billion to improve airport facilities and $1 billion for a NextGen air traffic control system.  The call for greater infrastructure investment has been joined by leaders from AFL-CIO President Richard Trumka to U.S. Chamber of Commerce President Thomas Donohue.
• Establishes a National Infrastructure Bank ($10 Billion):  The Senate bill establishes a National Infrastructure Bank capitalized with $10 billion that will leverage private and public capital to help fund a broad range of infrastructure projects. The Bank would be based on the model Senators Kerry and Hutchison have championed, which has been endorsed by the U.S. Chamber of Commerce while building on legislation by Senators Rockefeller and Lautenberg and the work of long-time infrastructure bank champions like Rosa DeLauro and the input of the President’s Jobs Council.
• Asks Millionaires to Pay Their Fair Share Without Adding a Dime to the Deficit. In order to create or save hundreds of thousands of construction jobs, the Senate bill imposes a 0.7% surtax on modified adjusted gross income in excess of $1 million for both single filers and married couples filing jointly.  The surtax is effective for taxable years beginning after December 31, 2012.

AMERICANS OVERWHELMINGLY SUPPORT MODERNIZING OUR NATION’S INFRASTRUCTURE

CNN/ORC Poll: 72% of Americans, 54% of Republicans Support Rebuilding Our Infrastructure. According to a recent CNN/ORC Poll, 72% of Americans support “increasing federal spending to build and repair roads, bridges and schools,” while only 28% oppose. This is up from 64% from September of this year. 70% of Independents and 54% of Republicans support funding our infrastructure. [CNN/ORC Poll, 10/17/11]

Rockefeller Foundation: 72% of Americans Support Infrastructure Bank. The Rockefeller Foundation infrastructure survey, conducted in February 2011, found that 72% of Americans support “Creating a National Infrastructure Bank that helps finance transportation projects that are important to the whole nation or large regions and that funds projects based on merit, not politics.” [Rockefeller Foundation, 2/14/11]

THERE IS BROAD BIPARTISAN SUPPORT FOR INFRASTRUCTURE INVESTMENT

U.S. Chamber of Commerce: President “Was Right to Call For” Transportation Infrastructure Investments. Thomas J. Donohue, President of the U.S. Chamber of Commerce, said after President Obama’s September jobs speech that the President “was right to call for… smart investments in our transportation infrastructure. The administration and Congress must now act on these priorities without further delay in order to save and create hundreds of thousands of American jobs.” [U.S. Chamber of Commerce, 9/8/11]

American Association of State Highway and Transportation Officials: $50 Billion For Infrastructure Projects Could Create or Protect Hundreds of Thousands of Jobs. “John Horsely, executive director of the American Association of State Highway and Transportation Officials, said at its peak a year ago, the Recovery Act helped employ 64,000 workers on highway projects. He says a concentrated infusion of $50 billion now could lead to the employment of hundreds of thousands more. ‘The president wants to jump-start the economy and create jobs, and so if he could manage to get the authority to spend $50 billion all in one year, you would probably have a much higher number of jobs created, if it all happened in one year,’ Horsely said.” [ABC News, 9/8/11]

President of GOP Mayors and Local Officials Coalition: Infrastructure Spending “Puts People to Work,” Needs to Be “Higher Priority” for Congressional Republicans. “Mick Cornett, the GOP mayor of Oklahoma City, welcomes the infrastructure spending that Obama has proposed in his jobs bill, explaining that mayors witness the impact of such investments on the ground level. ‘Mayors see up close the deferred maintenance that’s going on in nation’s cities…it’s just a ticking time bomb. We also know that it puts people to work,’ says Cornett, president of the Republican Mayors and Local Officials coalition within the U.S. Conference. Obama’s jobs plan proposes new infrastructure spending on everything from rebuilding schools to an infrastructure finance bank–all of which Cornett supports… Cornett says that, by contrast, Congressional Republicans have not put forward any substantial plans to revitalize the country’s infrastructure.”  [Washington Post, 9/20/11]

Associated General Contractors: “Should Congress Fail To Enact” President’s Infrastructure Plan, “Too Many Construction Workers Will Remain Unemployed, The Private Sector Will Suffer, And Taxpayers Will End Up Paying More.” Stephen E. Sandherr, CEO of the Associated General Contractors of America, said, “Should Congress fail to enact the desperately needed infrastructure investments the President proposes, too many construction workers will remain unemployed, the private sector will suffer, and taxpayers will end up paying more, later, for infrastructure. Infrastructure projects don’t just create construction jobs… Investing in infrastructure is the most effective way to create good jobs, deliver great roads, build a strong economy and protect taxpayers. That is why the Associated General Contractors of America stands with the president and everyone else who is willing to make the investments needed to revive our industry and rebuild our economy.” [Associated General Contractors, 9/9/11]

American Society of Civil Engineers: Current, Insufficient Funding for Infrastructure Will Cost America More Than 870,000 Jobs and $900 Billion By 2020. Patrick J. Natale of the American Society of Civil Engineers wrote, “Obama’s call for infrastructure investment was not only about jobs but about our competitiveness in global markets. Both the Information Technology & Innovation Foundation and the Building America’s Future Educational Fund have released reports showing how we are rapidly falling behind our global competitors such as China, Japan, and South Korea when it comes to investing and modernizing our transportation systems… A recent economic study from ASCE found that even current investment levels in transportation infrastructure will cost the American economy more than 870,000 jobs and suppress the growth of the country’s Gross Domestic Product by almost $900 billion by the year 2020.” [National Journal, 9/12/11]

President Reagan Said Infrastructure Investment Was Common Sense. “Common sense tells us that it will cost a lot less to keep the system we have in good repair than to let it disintegrate and have to start over from scratch. Clearly this program is an investment in tomorrow that we must make today. It will allow us to complete the interstate system, make most — the interstate repairs and strengthen and improve our bridges, make all of us safer, and help our cities meet their public transit needs.” [Remarks, 1/6/83]

THERE IS BROAD BIPARTISAN SUPPORT FOR THE INFRASTRUCTURE BANK

Earlier This Year, Two Republican Senators Co-Sponsored an Infrastructure Bank. According to the Washington Post, “Earlier this year, in fact, two Senate Republicans — Kay Bailey Hutchison (Tex.) and Lindsey Graham (S.C.) — had co-sponsored Massachusetts Democrat John Kerry’s infrastructure bank bill, which bears close resemblance to the proposal in Obama’s failed jobs bill.” [Washington Post, 10/13/11]

• Sen. Hutchison: “A National Infrastructure Bank is an Innovative Way” to Address the Nation’s Water, Transportation, and Energy Infrastructure Needs. “The idea of a national infrastructure bank is an innovative way to leverage private-public partnerships and maximize private funding to address our water, transportation, and energy infrastructure needs. In our current fiscal situation, we must be creative in meeting the needs of our country and spurring economic development and job growth, while protecting taxpayers from new federal spending as much as possible.” [Hutchison Blog, 9/7/11]

Bipartisan BUILD Act Is Endorsed By Chamber of Commerce & AFL-CIO. “Amid growing concerns that the nation’s infrastructure is deteriorating, a group of Democrats, Republicans, and labor and business leaders called Tuesday for the creation of a national infrastructure bank to help finance the construction of things like roads, bridges, water systems and power grids. The proposal — sponsored by Senator John Kerry, Democrat of Massachusetts, and Senator Kay Bailey Hutchison, Republican of Texas — would establish an independent bank to provide loans and loan guarantees for projects of regional or national significance. The idea is to attract more infrastructure investment from the private sector: by creating an infrastructure bank with $10 billion now, they say, they could spur up to $640 billion worth of infrastructure spending over the next decade… To underscore the need for better infrastructure, two frequent rivals were on hand at the news conference: Richard Trumka, the president of the A.F.L.-C.I.O., and Thomas J. Donohue, the president of the U.S. Chamber of Commerce, the main business lobby. With a nod to the strange-bedfellows experience of having a labor leader as an ally, Mr. Donohue said, ”He and I are going to take our show on the road as the new ‘Odd Couple.’” [New York Times, 3/16/11]

Alliance for American Manufacturing Said Infrastructure Bank Would Create Jobs.  Scott Paul, Executive Director of the Alliance for American Manufacturing, provided a list of recommendations that would create more manufacturing jobs, including, “we need to invest in infrastructure and establish a national infrastructure bank”  [Testimony before the Joint Economic Committee, 6/22/11; The Hill, 8/15/11]

Mark Zandi: Infrastructure Bank Would Boost Manufacturing. Mark Zandi of Moody’s Analytics testified, “To lower the cost of transportation, telecommunications and energy, policymakers could provide consistent support to public investment in transportation networks, the internet backbone, and the electric grid. As a potential example of this support, Build America bonds issued as part of the recent fiscal stimulus efforts have been very successful. A national infrastructure bank, which could marry private capital with financial support from the government, would provide a substantial boost to this effort.” [Testimony before the Joint Economic Committee, 6/22/11]

Private Infrastructure Investment Could Create 1.9 Million Jobs. Sphere Consulting LLC reported, “Over $250 billion of private equity capital is currently available, and some additional legislative and administrative changes could accelerate infrastructure projects and enhance funding.” The firm found that private investment in infrastructure could generate 1.9 million U.S. jobs. They suggested that the U.S. “Create a National Infrastructure Bank (NIB) that is authorized to lend at favorable terms to both the public and private sectors for qualified infrastructure projects.” [Sphere Consulting, July 2011]

SENATE REPUBLICANS HAVE HISTORICALLY SUPPORTED INFRASTRUCTURE INVESTMENTS

Sen. Inhofe Said Conservatives Need To Recognize Transportation is a Place We Need to Be Spending More Money. “I think a lot of the people who are my good friends, and primarily over in the House, who came under the banner of the tea parties and all that, they recognize, yes, they can be a conservative. But when they got home, they said: Wait a minute. We want to not be spending on these big things, but we weren’t talking about transportation. So we have to single out transportation for my friends to recognize there is a place we need be spending more money, not less money.” [Floor Remarks, 10/20/11]

Sen. Johanns Said He “Can’t Imagine” Why Anyone Would “Stand in The Way” of States Working to Rebuild Infrastructure. “I can’t imagine why this body would stand in the way of states trying to rebuild their roads and bridges.” [Senate Floor Speech, 10/19/11]

Sen. Graham: Infrastructure Investments Translates to Job Creation. “So if you’re a Republican and you want to create jobs, then you need to invest in infrastructure that will allow us to create jobs.” [GOP Press Conference, 4/13/11]

Sen. Sessions on the Importance to Invest in Infrastructure: “Jobs Are Created As It’s Being Constructed and You Have a Permanent Improvement to Society That May Be There for a Hundred Years.” Sessions said,“Jobs are created as it’s being constructed and, second, you have a permanent improvement to society that may be there for a hundred years.” [Washington Post, 10/13/11]

Sen. Thune Called Transportation Infrastructure “Critical to Our Nation’s Commerce” “This is a critically important subject for the entire country. Maintaining a transportation infrastructure is just critical to our nation’s commerce. We’ve got a $2.2 trillion backlog out there of infrastructure projects, a $12 billion projected shortfall in gas tax revenues versus current spending levels over the next two years.” [Senate Commerce Committee Hearing, 7/20/11]

Sen. Collins Called Transportation Infrastructure “Essential to Economic Recovery” “One of my highest priorities is to help ensure that our nation’s transportation infrastructure does not fall into disrepair. Safe and efficient transportation is essential to economic recovery and cannot be left solely to state governments, which are struggling with budget shortfalls.” [Press Release, 5/11/11]

Sen. Lugar Said Addressing The Aging Infrastructure Is “Critical To Our Nation’s Economic Viability” “Addressing the aging infrastructure of our roads, bridges and railways is critical to our nation’s economic viability. Indiana has developed a sophisticated rail network that is central to our state’s agricultural and manufacturing economy. It is important to enhance the existing railways in Perry County to provide a vital link and spur economic growth.” [Press Release, 9/10/08]

Sen. Rubio Called Infrastructure Investment “The Proper Role of Government” “And it is the proper role of government to invest in infrastructure. Yes, government should build roads and bridges, but it should do so as part of economic development as part of infrastructure.” [Speech, 8/24/11]

Sen. Shelby Called Infrastructure Spending “Essential” For Our Economy “Infrastructure spending is essential to our long term economic stability and growth.” [Remarks, 5/19/11]

KEY PROVISIONS:

• $30 Billion To Create or Protect Nearly 400,000 Education Jobs. Nearly 300,000 education jobs have been lost since 2008, and state and local budget crisis will put as many as 280,000 teacher jobs at risk next year. The Senate bill will more than offset projected layoffs, providing support for nearly 400,000 education jobs.
• $5 Billion to Keep Thousands of Police and Firefighters on the Job. State and local budget cuts have forced thousands of cops and firefighters off the beat. The Senate bill will create or save thousands of first responder jobs across the nation through competitive grants to states and localities.
• Asking Millionaires to Pay Their Fair Share Without Adding a Dime to the Deficit. In order to create or save hundreds of thousands of teacher and first responder jobs, the Senate bill imposes a 0.5% surtax on modified adjusted gross income in excess of $1 million for both single filers and married couples filing jointly.  The surtax is effective for taxable years beginning after December 31, 2012.

Americans Overwhelmingly Support Funding Teacher and First Responder Jobs.  According to a Gallup Poll from last month 75 percent of Americans support “providing additional funds to hire teachers, police officers and firefighters.”

This Legislation Is Based on Jobs Programs That Republicans Have Supported:

2007: 16 Republicans Voted To Fully Fund The COPS Program. In March 2007, 16 Republican Senators – including Senators Burr, Collins, Corker, Grassley, Hatch, Hutchison, McConnell, Murkowski, Roberts, Snowe, Thune and Vitter – joined Democrats in voting for an amendment that fully funded the COPS program by moving $598 million from another Justice Department function. [Vote 110, 3/23/07]

2006: 28 Republicans Voted For Increased Education Funding. In March 2006, 28 Republicans – including Senators Alexander, Cochran, Collins, Grassley, Hatch, Hutchison, Lugar, Murkowski, Roberts, Snowe and Thune – joined Democrats in voting to increase health, education and training, and low-income programs by $7 billion. [Vote 58, 3/16/06]

2005: 18 Republicans Voted Increase Education Funding By $500 Million. In March 2005, 18 Republicans – including Senators Collins, Crapo, Hatch, Hutchison, Lugar, Shelby, Snowe and Thune – joined Democrats in voting to add $500 million in education funding by diverting it from other programs. [Vote 56, 3/16/05]

2004: 49 Republicans Voted To Help States By Implementing Mandatory IDEA Funding Increases. In May 2004, 49 Republican Senators joined Democrats in voting for an amendment that required IDEA funding to increase by $2.3 billion each year for the next 7 years. [Vote 92, 5/12/04]

2001: 29 Republicans Voted To Fully Fund Grants To Local School Districts Under No Child Left Behind. In May 2001, 20 Republicans – including Senators Cochran, Collins, Crapo, Grassley, Hatch, Hutchison, Lugar, McCain, McConnell, Roberts, Sessions, Shelby and Snowe – joined Democrats in voting for an amendment to authorize full funding of grants to local school districts under Title 1 for ten years. [Vote 91, 5/3/01]

Sen. McConnell Said He Was “Proud to Have Played A Part In Securing Funds” For Emergency Responders. In a press release, Sen. McConnell said “This grant will support the efforts of the Lawrenceburg firefighters who risk their lives in service to others. I am proud to have played a part in securing funds for this vehicle to help ensure that the firefighters are adequately prepared to respond to emergencies.” [Press Release, 5/10/10]

Sen. Alexander Said Federal Funds Gave Firefighters The Resources They Needed to Save Lives. In a press release, Sen. Alexander said “This grant will help give the firefighters in Pikeville the vital resources they need to save lives. I appreciate the Department of Homeland Security’s investment in emergency preparedness, and I will continue to work to ensure that fire departments in Tennessee are ready and able to keep our citizens safe.” [Press Release, 7/30/09]

Sen. Barrasso Called Firefighters “Instrumental to Keeping Our Communities Safe and Secure.” In a press release, Sen. Barrasso said “Firefighters are instrumental to keeping our communities safe and secure.” [Press Release, 7/7/08]

Sen. Blunt Pledged to Fight For Funding For Kansas City Fire Fighters. “Sen. Roy Blunt, a Missouri Republican, said the decision would ‘greatly disadvantage’ Kansas City. ‘We will continue working to call attention to this problem in order to ensure Kansas City receives the funding it needs,’ Blunt said.” [Kansas City Star, 5/21/11]

Sen. Boozman Said Federal Funding Gives Firefighters “The Tools They Need” In a press release, Sen. Boozman said “With the economic constraints many of our communities are experiencing, grants like this provide additional resources to protect Arkansans. This grant will help provide our firefighters the tools they need to stay safe while serving the community.” [Press Release, 7/29/10]

Sen. Scott Brown Said We Owe It To Firefighters “To Provide The Financial Resources To Keep Them Safe” In a press release, Sen. Brown said “Every day, our hardworking firefighters risk their lives to keep our families and communities safe, and we owe it to them to provide the financial resources to keep them safe in their incredibly dangerous jobs.” [Press Release, 5/8/10]

Sen. Burr Said Money To Hire More Firefighters Would Improve Safety, Response Times. “Firefighters risk their lives every day to help others. This grant will allow the Chapel Hill Fire Department to hire additional personnel which will improve firefighter safety and enhance emergency response times.” [Press Release, 10/19/06]

Sen. Cochran Was “Pleased” Federal Emergency Funding Went to Emergency Responders. In a Press Release, Sen. Cochran said “Municipal and volunteer fire departments apply for this federal assistance to improve their capacity to protect the public.  I am pleased that these resources will be used to enhance fire protection in our state.” [Press Release, 4/19/10]

Sen. Collins Said “In Every Case” Federal Firefighter Funding Eases Local Financial Burdens While Advancing The National Interest. In a column, Sen. Collins said “In many cases, these federal dollars enable a community’s department to obtain equipment it simply couldn’t afford on its own. And in every case, the federal grants ease local financial burdens while advancing the national interest in having first responders as prepared as possible for all disasters, whether natural or man-made.” [Press Release, 8/19/11]

Sen. Corker Said He Knows How Important It is That Firefighters Have the Best Possible Resources. In a press release, Sen. Corker said “Firefighters perform a tremendous public service, and as a former mayor I know firsthand how important it is that they have the best possible resources.” [Press Release, 7/30/09]

Sens. Cornyn and Hutchison Said It Is Vital That First Responders Have the Financial Support They Need Without Delay. In a letter to President Obama, Sens. Cornyn and Hutchison said “It is vital that first responders have the financial resources to support emergency protective measures to save lives, protect property and maintain the public’s health and safety. We ask that this be done now without delay.” [Press Release, 9/16/11]

Sen. Murkowski Took Credit for COPS and Law Enforcement Grants. “Through a funding measure signed into law July 29, U.S. Sen. Lisa Murkowski was able to add provisions to the Tribal Law and Order Act that allows villages the same access to funding that cities and towns have long known. On Thursday, President Barack Obama signed a measure into law that now allows the State of Alaska, tribes and tribal organizations to fund VPSO positions with two different grants: Community Oriented Policing, or COPS grants, and Staffing for Adequate Fire and Emergency Response grants. Currently, VPSO positions are funded by the Alaska Department of Public Safety or through congressional earmarks. ‘The VPSOs are the police department, the fire department, the EMS and search and rescue all rolled into one,’ Murkowski said. ‘It is only fair that rural Alaska Native communities have the same access to public safety funds that communities and cities across America have.’” [Homer Tribune, 11/4/10]

Sen. Wicker Said Federal Emergency Funding Ensured Firefighters Had the Resources to Do Their Jobs. In a press release, Sen. Wicker said “Mississippi’s firefighters – many of them volunteers – are on the front lines when it comes to keeping people safe.  This important grant program ensures our firefighters have the resources to continue doing their jobs and protecting the public in emergency situations.” [Press Release, 4/19/10]

Sen. Kirk Said It Was “Imperative” That Emergency Responders “Are Always Properly Equipped and Staffed” In a press release, Sen. Kirk said “Like cities across America, the City of Waukegan has been grappling with serious financial issues in the wake of the Great Recession. It is imperative that our emergency responders are always properly equipped and staffed to keep our communities safe. I know Waukegan city officials–as well as the city’s residents–are grateful the Department of Homeland Security selected the City of Waukegan to receive these funds.” [Press Release, 6/1/11]

Sen. DeMint Was “Pleased” With Grants To Help South Carolina Hire More Fire Fighters. In a press release, Sen. DeMint said “South Carolina’s firefighters risk their lives to protect our families every day. I’m pleased they have been awarded these competitive grants that will assist in hiring more firefighters.” [Press Release, 12/28/06]

Sen. Enzi Said Local Firefighters Deserve Federal Funding For Best Resources Possible. In a press release, Sen. Enzi said “Local firefighters put their lives on the line to protect those they serve, and they should have access to the best resources possible. I am pleased that Campbell County Fire Department will be receiving this money to purchase the equipment they need to keep themselves and our communities safe.” [Press Release, 11/20/08]

Sen. Graham Said Federal Funds Will Help Local Fire Departments. “‘Firefighters and emergency service personnel dedicate themselves to protecting the health and safety of South Carolinians,’ said U.S. Sen. Lindsey Graham, grants. ‘These grants will help our local fire departments and rescue squads by providing them the means to obtain the best equipment and training available.’” [Anderson Independent-Mail, 2/13/10]

Sen. Grassley Said It Was Important For First Responders To Be Adequately Staffed. In a press release, Sen. Grassley said “As the community’s first responders, it’s important that the Urbandale Fire Department be properly trained and adequately staffed. This funding will be used to recruit and retain firefighters to help keep Urbandale secure.” [Press Release, 3/29/10]

Sen. Heller Said Providing First Responders With Necessary Resources is “Vital” In a press release, Heller said “Fire Departments are often the first to arrive in crisis situations. Providing them with the resources necessary for training is vital when every second counts. First responders are critical to the safety of every community and I am pleased this funding has been made available to the Reno Fire Department” [Press Release, 11/1/07]

Sen. Inhofe Said Federal Funding Helped Provide Necessary Resources for First Responders. In a press release, Sen. Inhofe said “These grants help provide the tools and resources necessary to protect the health and safety of Oklahoma firefighters and the Oklahomans they serve and protect. These awards will be used to increase the firefighting operations, fund fire fighter health and safety programs, acquire new fire apparatus, enhance EMS programs, and conduct fire prevention and safety programs.” [Press Release, 10/30/03]

Sen. Isakson Called Federal Funding “Welcome News” For Emergency Personnel. In a press release, Sen. Isakson said “I am grateful for the heroic efforts of the emergency personnel and the firefighters who battled this unwieldy and fast-spreading fire and protected our citizens. This funding is welcome news.” [Press Release, 12/3/07]

Sen. Lugar Called First Responders “The Backbone of Our Communities” In a press release, Sen. Lugar said “First responders are the backbone of our communities and it is vital to ensure they have the proper equipment and training.” [Press Release, 2/11/10]

• A Default Would Cost the Economy Hundreds of Thousands of Lost Jobs Every Year. “According to an analysis by the Federal Reserve, a one-percentage point rise in Treasury yields would reduce economic growth by 0.8 percentage points. That number sounds small, but it is not. Economists tell us it would translate into hundreds of thousands of lost jobs every year.” [Op-Ed by Tom Donohue in USA Today, 7/13/11 ]

• For Every 1 Percent Change in GDP, The U.S. Would Shed 640,000 Jobs. “For every 1% change in GDP growth, there is an estimated 0.46% change in total employment, according to economist William Seyfried. Using his estimation, the U.S. would shed 640,000 jobs.” [Third Way, May 2011 ]

• Bernanke: Default Will Cost Jobs. According to Federal Reserve Chairman Ben Bernanke “the economy may be thrown into reverse and employers would start cutting jobs if Congress fails to raise the nation’s legal borrowing authority.” [Bloomberg, 7/13/11 ]

The Treasury Would Have to Pick Winners and Losers in “Prioritizing” Payments.

• In the Event of a Default, The U.S. Would Have to Defer Paying 44 Percent of Its Obligations. According to the Bipartisan Policy Center, the U.S. has $306.7 billion in payment obligations due August 2011 and will take in an estimated $172.4 billion in revenue for the month. 44 percent of U.S. government bills would go unpaid if the federal government fails to raise the debt ceiling by the August 2 deadline. [Bipartisan Policy Center, 7/12/11 ]

• In the Event of a Default, The Treasury Department Would Have to Decide Who to Pay. According to Jay Powell of the Bipartisan Policy Center and former Under Secretary of the Treasury for Finance under President George H. W. Bush, “Treasury would exhaust all inflows just by paying six major items: interest, Medicare, Medicaid, Social Security, unemployment insurance and defense vendors. Without cutting from these six, there would be no money for entire departments such as Justice, Labor and Commerce among many others, or for veterans’ benefits, IRS refunds, military active duty pay, federal salaries and benefits, special education, Pell Grants for college students or food and rent payments for the poor.” [Bipartisan Policy Center, 7/12/11 ]

The Treasury Would Have to Pay Higher Interest Rates on U.S. Debt To Attract New Investors.

• If the Debt Ceiling is Not Raised by August 2nd, All Three Ratings Agencies Will Put the U.S. on Watch for a Downgrade, at a Minimum.
  • Moody’s Investors Service: U.S. Rating Placed Under Review. “The United States may lose its top-notch credit rating in the next few weeks if lawmakers fail to increase the country’s debt ceiling, forcing the government to miss debt payments, Moody’s Investors Service warned on Wednesday. Moody’s is the first of the big-three rating agencies to place the United States’ Aaa rating on review for a possible downgrade, which means it is close to cutting its rating.” [Reuters, 7/13/11 ]

• Even Without a Downgrade, It is Likely That Rates Would Increase. According to the Bipartisan Policy Center, it is possible that the U.S. Treasury could lose market access during such an unprecedented event and default. [Bipartisan Policy Center, 7/12/11 ]

Failure to Raise Debt Limit Would Deepen Our Deficit By $75 Billion Each Year.

• J.P. Morgan: Default Could Cause a Sustained 50 basis point Increase, Costing Taxpayers an Additional $75 Billion a Year. According to a letter by J.P. Morgan Managing Director Matthew Zames to Treasury Secretary Geithner, “[a] sustained 50 basis point increase in Treasury rates would eventually cost U.S. taxpayers an additional $75 billion each year.” [Letter by J.P. Morgan to Secretary Geither, 4/25/11 ]

While American families are living paycheck to paycheck, Republicans are toying with defaulting on our nation’s debt by opposing every deficit reduction compromise that is offered to them. Should the nation default on its debt, or even come close to default, the consequences would be catastrophic for American families. The cost of owning a home, buying food, filling a gas tank, sending children to college and buying a car will become even more expensive, squeezing already tight family budgets. And the impact will be felt not just immediately, but for generations to come.

Default Would Permanently Raise Interest Rates, Driving Up Costs for American Families

Analysts recently estimated that even a technical default - a brief delay in the payment of interest on Treasury debt - could have significant and long-lasting effects. Based on an analysis of the debt ceiling and government shutdown debate in 1995 and financial crisis in 2008, J.P. Morgan estimated that interest rates on Treasury bonds could rise 75 or even 100 basis points. Between mortgages and credit cards alone, a 75 basis point increase translates into an additional $10 billion in consumer borrowing costs every year.

• Mortgage Payments Will Increase By Over $1,000 for the Average Family. The average monthly mortgage payment in the United States is approximately $1,022. A 75 basis point increase in rates would raise this by roughly $85, or $1,020 per year. There are approximately 5 million new mortgage originations each year. These borrowers would be paying a total of $5 billion per year of additional interest. In addition, one study found that an interest rate hike caused by default would immediately add more than $19,000 to the lifetime cost of a 30-year fixed rate mortgage on a median home loan of $172,000 for an existing home. [Based on Analysis by J.P. Morgan; Third Way, May 2011 ]

• Credit Card Interest Would Increase By $250 For the Average Family. Credit card interest payments in the U.S. total approximately $94 billion per year. A 75 basis point increase in rates would increase this by $5 billion to $99 billion. In 2009, nearly half of Americans had credit card debt, with a median balance of $3,300. That means the average family with credit card debt will pay nearly $250 more in interest. [Based on Analysis by J.P. Morgan; Federal Reserve Board]

Default Would Weaken the Dollar, Driving Up Price Families Pay for Utilities, Food and Gas Analysts estimate that a technical default could cause investors to lose faith in the dollar, causing the dollar to fall between 5 and 10 percent against competing currencies. This could have a direct impact on household expenses such as gas, food and utilities.

• Families Could Pay An Additional $182 Per Year on Utilities. According to a 2009 Labor Department survey, American families spend on average $3,645 a year on utilities ($304 a month). A 5 percent decline in the dollar could cost Americans an extra $182 per year on average. [ Bureau of Labor Statistics ; Based on Analysis by J.P. Morgan]

• Families Could Pay An Additional $318 Per Year on Food. According to the same Labor Department survey, Americans spend on average $6,372 a year on food. A 5 percent decline in the dollar could force families to pay an additional $318 a year. [ Bureau of Labor Statistics ; Based on Analysis by J.P. Morgan]

• Families Could Pay Roughly $100 More Per Year More on Gas. According to a recent Labor Department survey, Americans spend on average $1,986 a year on gasoline and motor oil. A 5 percent decline in the dollar could force families to pay an additional $99 a year. [ Bureau of Labor Statistics ; Based on Analysis by J.P. Morgan]

Default Would Roil the Financial Markets, Causing Huge Losses in Retirement Accounts Economists agree a technical default would have disastrous consequences for families and their retirement accounts. Gains in 401(k) accounts achieved during 2010 and 2009 could be wiped out.

• Families Could Lose Thousands of Dollars In Their Retirement Savings. “The financial services firm Janney Montgomery Scott estimates that default would cause the S&P 500 index to lose 6.3% in value in three months.10 J.P. Morgan estimates the loss to be closer to 9%.” “According to the Employee Benefit Research Institute, the typical 401K of an investor in their 50s at the end of 2009 had $139,932 in their portfolio. A 6.3% loss in the S&P 500 would cost this portfolio $8,816.” [Third Way Report, May 2001 ]

• Families with 401 (k)s Could Lose All Gains Made in 2010 and Most Gains from 2009. “Reaching the debt ceiling will, in all likelihood, trigger a sharp fall in the stock market, which also will likely reduce employment. The drop in stock prices will have an immediate effect on the economy, but also on families. Families with 401(k)s would likely lose all the gains they have made in 2010 and much of their gains in 2009, moving them further below where they were at the end of 2007 after the stock market fell sharply.6 This is magnified by the fact that the very first of the baby boom generation-the largest generation thus far in U.S. history, and the first generation where a majority (near 60 percent) will retire with 401(k)s rather than pensions-is now retiring.” [Testimony by Heather Boushey before Democratic Policy and Steering Committee, 7/7/11 ]

Democrats Are Committed to Improving Access to Cancer Prevention and Treatment Services for Seniors.

The Affordable Care Act provides seniors with new cancer prevention and treatment tools, including free screenings like mammograms and colonoscopies.  In 2008, 43% of female Medicare beneficiaries did not receive a mammogram.  Studies suggest that 3,700 lives could be saved if 90% of women 40 and older receive a mammogram.  The Affordable Care Act eliminated cost sharing requirements for mammograms and other prevention tools, dramatically improving access to important lifesaving services.  [HHS, 3/16/11; HHS, 7/14/10]

Under the Republican Budget, More Than 7 Million Seniors Will Be Required to Pay More for Cancer Prevention Starting Next Year. The Republican budget will require seniors to pay a 20% co-insurance for many cancer prevention services, including screenings like mammograms and colonoscopies.  By forcing seniors to pay the 20% co-insurance, the Republican budget could result in beneficiaries paying an additional $160 out-of-pocket. These increased costs could force thousands of seniors to forego mammograms and colonoscopies, thus possibly putting their lives at greater risk.  [HHS, 3/16/11]

Despite Republican claims that their budget will not impact current seniors, the GOP budget will increase costs for cancer prevention immediately and require:

• More than 7,800,000 senior women pay a 20% co-insurance for breast cancer screening
• More than 2,000,000 senior women pay a 20% co-insurance for cervical cancer screening (pap test)
• More than 1,200,000 senior women pay a 20% co-insurance for cervical cancer screening (pelvic examination)

Cancer Patients Have Already Saved More Than $32 Million on Their Medication This Year, But The Republican Budget Eliminates Those Discounts, Making Lifesaving Drugs Unaffordable for Many Seniors. By re-opening the donut hole, the Republican budget will force seniors with cancer to pay millions more for their life-saving medications. By providing significant discounts on prescription drugs to seniors in the donut hole, Medicare saved seniors with cancer $32 million for cancer drugs in the first part of this year alone.  In fact, nearly 20% of the discounts to date have been for cancer medication. The House budget would eliminate these savings moving forward. According to a recent report, 16 percent of Medicare patients did not fill their cancer drug prescriptions due to the high costs. The Republican budget imposes new costs on seniors with cancer starting in 2012, thereby risking the health of our most vulnerable senior population. [HHS, 5/24/11; Journal of Clinical Oncology, 5/11]

Click here for state-specific data on how the Republican budget will force seniors in your state to pay more for life-saving preventive health services in 2012.

Since passing their reckless budget plan last week, Republicans nationwide have continued to make the false claim that their plan protects today’s seniors. But seniors need to know the facts about the GOP plan. The Republican-passed budget will force nearly four million seniors to pay an additional $2.2 BILLION for prescription drugs next year alone.

Wisconsin: On Sunday, House Budget Committee Chairman Paul Ryan said, “And Medicare, let me just tell you, no change would occur to anybody fifty-five years of age or above.” Rep. Sean Duffy (R-WI) claims, “The fact is, this plan does not affect today’s seniors, or anyone on the verge of retirement, 55 years or older.” Both ignore the fact that, under the Republican budget, 69,167 Wisconsin seniors will pay $39 million more for prescription drugs next year alone.

Virginia: House Majority Leader Eric Cantor said Friday, “To be clear, our plan will not touch benefits for today’s seniors and those nearing retirement.”  Cantor ignores the fact that, under the Republican budget, 91,377 Virginia seniors will pay $51 million more for prescription drugs next year alone.

Kentucky: Rep. Brett Guthrie (R-KY) “says the proposed changes to Medicare in the House bill will not affect anyone currently 55 or older.” Guthrie ignores the fact that, under the Republican budget, 74,669 Kentucky seniors will pay $42 million more for prescription drugs next year alone.

North Carolina: Rep. Renee Ellmers (R-NC) said, “This budget does not cut Medicare funding. It makes no changes to Medicare for anyone 55 or older.” Ellmers ignores the fact that, under the Republican budget, 122,598 North Carolina seniors will pay $69 million more for prescription drugs next year alone.

Pennsylvania: After voting for the budget on Friday, Rep. Mike Kelly (R-PA) said, “Under our proposal, seniors are safe, with no changes to the current program for those 55 and older.” Rep. Glen Thompson (R-PA) asserted, “Contrary to the misinformation, this plan keeps our current commitments to seniors, while ensuring the longevity of our social safety net programs for future generations.” And Rep. Bill Shuster (R-PA) said, “It’s extremely important that people 55 years and older know that there will not be one dime of change to what they’ve been promised.” All three ignore the fact that, under the Republican budget, 266,342 Pennsylvania seniors will pay $149 million more for prescription drugs next year alone.

New York: Rep. Michael Grimm (R-NY) said, “What I like about Ryan’s plan is that if you’re 55 and over — so if you’re about to become a senior or you are a senior — this will not affect you.” Grimm ignores the fact that, under the Republican budget, 273,223 New York seniors will pay $153 million more for prescription drugs next year alone.

West Virginia: Rep. Shelley Moore Capito (R-WV) said the GOP budget “does not affect anyone currently on Medicare or anyone 55 and older.” Capito ignores the fact that, under the Republican budget, 42,114 West Virginia seniors will pay $24 million more for prescription drugs next year alone.

Illinois: Rep. Adam Kinzinger (R-IL) said, “Those 55 years and older will see absolutely no change in their current Medicare plan.” Rep. Judy Biggert (R-IL) claimed, “There will be no changes to Medicare for those who are 55 and older.” Both ignore the fact that, under the Republican budget, 163,630 Illinois seniors will pay $92 million more for prescription drugs next year alone.

New Hampshire: Rep. Frank Guinta (R-NH) said, “The two most important things that I want seniors to be aware of is that if you’re 55 and older, there is no change in Medicare or Medicaid benefits.” Guinta ignores the fact that, under the Republican budget, 15,222 New Hampshire seniors will pay $8.5 million more for prescription drugs next year alone.

California: Rep. Dan Lungren (R-CA) said, “First of all, let’s make it clear, if we’re talking about someone 65 and older — anybody 55 and older will not be affected by any changes whatsoever.” Rep. Ed Royce (R-CA) said, “Americans now age 55 and older will not see a change.” Both ignore the fact that, under the Republican budget, 381,298 California seniors will pay $214 million more for prescription drugs next year alone.

Washington: Rep. Jaime Herrera Beutler (R-WA) said, “I’m not going to touch current seniors.” Herrera Beutler ignores the fact that, under the Republican budget, 67,379Washington seniors will pay $38 million more for prescription drugs next year alone.

Georgia: After voting for the House GOP budget on Friday, Rep. Lynn Westmoreland (R-GA) said, “if you are age 55 or over, these changes will not affect you at all.” Westmoreland ignores the fact that, under the Republican budget, 114,974 Georgia seniors will pay $64 million more for prescription drugs next year alone.

Arkansas: After voting for the House GOP budget on Friday, Rep. Tim Griffin (R-AR) said, “If you are 55 or over, there are no, zero changes to Medicare.”Rep. Donald Young (R-AK) stated, “If you are 55 and older your benefits are preserved.”  Both ignore the fact that, under the Republican budget, 2,503 Alaska seniors will pay $1.4 million more for prescription drugs next year alone.

Ohio: Rep. Jim Renacci (R-OH) said, “The budget plan secures Medicare without making any changes to those currently 55 and older.” Renacci ignores the fact that, under the Republican budget, 159,403 Ohio seniors will pay $89 million more for prescription drugs next year alone.

Florida: After voting for the House GOP budget on Friday, Rep. Gus Bilirakis (R-FL) said, “Make no mistake, those who are 55 years or older would see no changes to Medicare whatsoever.” After voting for the budget on Friday, Rep. Tom Rooney (R-FL) argued, “This is a bold plan to save Medicare for future generations without affecting seniors and anyone 55 and older.” Both ignore the fact that, under the Republican budget, 275,927 Florida seniors will pay $155 million more for prescription drugs next year alone.

Idaho: Rep. Mike Simpson (R-ID), said, “The House Republican plan reforms our ailing Medicare program so that it will be there for future generations without impacting the current benefits of anyone 55 or older.” Simpson ignores the fact that, under the Republican budget, 17,805 Idaho seniors will pay $10 million more for prescription drugs next year alone.

Indiana: After voting for the budget, Rep. Marlin Stutzman (R-IN) argued, “Persons that are 55 and older will not see changes to their Social Security and Medicare benefits.” Stutzman ignores the fact that, under the Republican budget, 96,422 Indiana seniors will pay $54 million more for prescription drugs next year alone.

Oklahoma: On Friday, after voting for the budget, Rep. John Sullivan (R-OK) stated, “This plan would not affect current Medicare beneficiaries, and those approaching retirement age – changes would apply only to people currently 54 years of age and younger.”  Rep. Tom Cole (R-OK) said, “The Ryan plan ensures these programs will be available for our children and grandchildren — without making any changes for those age 55 and above. That’s an important point that bears repeating: The Ryan Budget passed last week will not affect benefits for anyone 55 or older.” Both ignore the fact that, under the Republican budget, 61,466 Oklahoma seniors will pay $34 million more for prescription drugs next year alone.

Texas: After voting for the budget, Rep. Mac Thornberry (R-TX) stated that the Ryan plan, “Makes no changes to Social Security and Medicare benefits for those who are 55 years old or older.” Thornberry ignores the fact that, under the Republican budget, 238,072 Texas seniors will pay $133 million more for prescription drugs next year alone.

Minnesota: After voting for the budget on Friday, Rep. Erik Paulsen (R-MN) said, “This budget also strengthens the senior safety net by preserving Medicare for future generations without any disruptions for those at or nearing retirement.”  Rep. Michele Bachmann (R-MN) said, “So really, in a lot of ways, it should be called the ‘55 and under’ plan, because anybody 55 years of age or older will not be touched.”  Both ignore the fact that, under the Republican budget, 71,867 Minnesota seniors will pay $40 million more for prescription drugs next year alone.

Nevada: After voting for the budget on Friday, Rep. Joe Heck (R-NV) argued that the budget made, “no changes to those over 55.”  Heck ignores the fact that, under the Republican budget, 26,767 Nevada seniors will pay $15 million more for prescription drugs next year alone.

Republican Budget Protects Nearly $44 Billion in Tax Loopholes and Subsidies For Oil and Gas Companies While Forcing Seniors To Pay the Same Amount in Additional Costs for their Prescription Drugs. The Republican budget protects $44 billion in unnecessary and expensive tax breaks and subsidies for oil and gas companies, even as oil companies are reporting record profits. Meanwhile, The Republican proposal would “re-open” the prescription drug donut hole and cost the average senior who falls into the donut hole approximately $11,794 between 2012 and 2020. Over that time, Ryan’s budget will cost seniors an estimated $44 billion in prescription drug costs, including $2.2 billion next year alone.  [Reuters, 2/1/10; OMB, FY12 Budget Proposal; HHS, 11/4/10; DPCC Report, 4/14/11; Republican Budget Proposal, 4/15/11].

Republican Plans To Dismantle Medicare and Provide Tax Giveaways to Big Oil and Gas Companies Extremely Unpopular With Americans. According to a new ABC/Washington Post survey, 84 percent of Americans oppose the Republican plan to privatize Medicare and force seniors to pay twice as much for their health care. Meanwhile, a February 2011 NBC / Wall Street Journal poll found that 74% of Americans support eliminating tax credits for the oil and gas industries in order to reduce the deficit. [ABC/Washington Post Poll, 4/20/11; NBC/Wall Street Journal Poll, February 2011]

Former Big Oil Executive: “Such Subsidies Are Not Necessary.” Large oil companies don’t need tax subsidies when oil prices are high, a former CEO of Shell Oil said in February. “In the face of sustained high oil prices it was not an issue—for large companies—of needing the subsidies to entice us into looking for and producing more oil,” John Hofmeister told National Journal Daily…“The fear of low oil prices drives some companies to say that subsidies should be sustained,” Hofmeister said. “And my point of view is that with high oil prices such subsidies are not necessary.” [National Journal, 2/11/11]

Study: “Oil Production Is Among the Most Heavily Subsidized Businesses.” “An examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the exploration and extraction process… According to the most recent study by the Congressional Budget Office, released in 2005, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry.” [New York Times, 7/4/10]

Biggest Oil Companies’ Profits Continue to Skyrocket. Exxon Mobil reported a 53 percent increase in its fourth-quarter 2010 profit. Exxon Mobil’s profit in the quarter was $9.25 billion compared with $6.05 billion in the period a year ago. Chevron’s fourth-quarter earnings surged 72 percent. Chevron reported a profit of $5.3 billion, up from $3.07 billion a year earlier. Royal Dutch Shell PLC reported that fourth quarter profit more than tripled from a year earlier. Fourth quarter net profit was $6.79 billion, up from $1.96 billion in the same period a year earlier. [New York Times, 1/31/11; Wall Street Journal, 1/28/11; Associated Press, 2/3/11]

Biggest Oil Companies Made Nearly $1 TRILLION in Profits Over the Last 10 Years. The big five oil companies—BP, Chevron, ConocoPhillips, ExxonMobil, and Shell—made a total profit of nearly $1 trillion over the past decade. [Center for American Progress, 1/31/11]

Myth: Health reform will kill 800,000 jobs over a ten year period

Reality: Independent, nonpartisan analyses demonstrate that ACA will grow our economy, empower small businesses, and benefit families.

Republicans are blatantly misrepresenting CBO Director Douglas Elmendorf’s recent testimony before the House Ways and Means Committee, claiming that the Affordable Care Act will “kill” jobs. Republicans are twisting his testimony for political gains. [GOP Report, 2/7/2011] These tactics come after months of Republicans ignoring other CBO projections demonstrating the benefits of the law, including that it will reduce the deficit by $210 billion between 2012 and 2021. [CBO, 2/18/2011]

I. Clarifying CBO Projections

The CBO analysis is more nuanced than the Republicans have articulated.CBO projects that that the Affordable Care Act will slow the growth rate of health care costs while providing access to affordable insurance coverage for individuals, families, and small businesses.  Because less of their hard-earned income will go to pay their insurance premium, the CBO tells us that millions of Americans will have increased financial resources by 2021.  Since they’ll be able to keep more of their own money, rather than paying it out in insurance premiums, some individuals may have decide to leave the labor market earlier than initially anticipated. [CBO, 8/1/2010]

• “The Congressional Budget Office (CBO) estimates that the legislation, on net, will reduce the amount of labor used in the economy by a small amount—roughly half a percent—primarily by reducing the amount of labor that workers choose to supply.” [CBO, 8/1/2010]

For the segment of the population considered in the CBO projection, the amount of labor that workers choose to supply will be impacted by subsidies reducing the cost of health insurance obtained through the state exchanges and the expansion of Medicaid eligibility.

• “The expansion of Medicaid and the availability of subsidies through the exchanges will effectively increase beneficiaries’ financial resources. Those additional resources will encourage some people to work fewer hours or to withdraw from the labor market.” [CBO, 8/1/2010]

New consumer protections, including prohibitions on insurance plans from varying premium prices based on age, will allow more older Americans to purchase plans outside of the workplace and retire earlier than they otherwise would. Additionally, individuals living with pre-existing conditions may no longer have to work two jobs in order to have access to health insurance.

• “As a result, some older workers will choose to retire earlier than they otherwise would.” [CBO, 8/1/2010]

At the same time, CBO projects that the Affordable Care Act could remove some disincentives for Medicaid beneficiaries to work.

• “In contrast, another feature of the Medicaid expansionremoves an existing disincentive to work formany low-income individuals…The health care legislation willallow parents to work and still qualify for Medicaiduntil their income exceeds 138 percent of the FPL.Moreover, parents whose income exceeds the new,higher threshold may be able to work and receive thetax credits and cost-sharing reductions for insurancepurchased through the exchanges.”  [CBO, 8/1/2010]

Although CBO does project that some employers’ decisions could be impacted by the legislation, they conclude that employers will be as likely to hire additional workers as not hire additional workers resulting from the law.

• “Employers with 50 or more employees will be required to pay a penalty if they do not offer insurance or if the insurance they offer does not meet certain criteria and at least one of their workers receives a subsidy from an exchange. … However, firms generally cannot reduce workers’ wages below the minimum wage, which will probably cause some employers to respond by hiring fewer low-wage workers. Alternatively, because firms are penalized only if their full-time employees receive subsidies from exchanges, some firms may instead hire more part-time or seasonal employees.” [CBO, 8/1/2010]
• “Since the law contains dual mandates that most individuals must obtain health insurance coverage and most employers must offer it by 2014, ‘the effect on employment is probably zero or close to it,’ said Amitabh Chandra, a professor of public policy at Harvard University.” [McClatchy Newspapers, 1/17/2011]

As discussed above, Republicans ignore important components of the CBO analysis.  Director Elmendorf had an opportunity to clarify his response during the House Ways and Means hearing.

• Rep. Chris Van Hollen (D-Md.), the ranking member on the Budget Committee, asked Elmendorf to explain clarify his response.  ‘One of the impacts you said was that there will be some individuals who, because they can get their health care through the exchange … would now have the freedom to choose to not get a job simply because they needed the health care,’ Van Hollen said, according to a transcript from CQ. ‘Isn’t that correct?’ ‘Yes, that’s right,’ Elmendorf replied.” [The Hill, 2/10/2011]

II. Independent, nonpartisan analyses demonstrate that ACA will grow our economy, empower small businesses, and benefit families.

ACA will grow our economy:

• Since the Affordable Care Act was signed into law, the economy has created over 1.5 million private sector jobs.  The unemployment rate in February 2011 was 8.9%, lower than it was in March 2010—9.7%. [WH, 3/4/2011]
• With the addition of 220,000 private sector jobs in February, sectors with the largest payroll employment growth were professional and business services (+47,000), and education and health services (+40,000).  [WH, 3/4/2011]
• By slowing the growth of healthcare costs for employers and individuals and increasing demand for healthcare goods and services, ACA could create as many as 400,000 new jobs this decade.  [CAP, 1/2011]
• In a letter to the House Education and Workforce Committee, prominent economists and distinguished scholars argue that, “leaving in place the Patient Protection and Affordable Care Act of 2010 will significantly strengthen our nation’s economy over the long haul and promote more rapid economic recovery in the immediate years ahead. Repealing the Affordable Care Act would cause needless economic harm and would set back efforts to create a more disciplined and more effective health care system.” [Letter to EW, 1/26/2011]

ACA will empower small businesses:

• Research from the Small Business Majority “shows that without reform, small businesses would pay nearly $2.4 trillion over the next 10 years in healthcare costs for their workers; 178,000 small business jobs, $834 billion in small business wages, and $52.1 billion in profits would be lost due to these costs; and nearly 1.6 million small business workers would continue to suffer from ‘job lock.’” [Small Business Majority, 1/26/2011]
• ACA “reduces small businesses’ health care expenses by giving them $40 billion worth of tax credits, and through the creation of new, competitive state-based insurance Exchanges.  Exchanges will enable individuals and small businesses to pool together and use their market strength to buy coverage at a lower cost, the same way large employers do today, giving them the freedom to launch their own companies without worrying whether health care will be available when they need it.” [WH, 1/7/2011]
• “Augustine Faucher, the director of macroeconomics at Pennsylvania-based Moody’s Analytics, said that the law’s deficit savings should ‘bring down interest rates and free up more capital for private firm investment, and therefore could boost long-run growth’ and create more jobs.”  [McClatchy Newspapers, 1/17/2011] It is estimated that 4 million small businesses that provide health care to their employees are eligible for tax credits through the Affordable Care Act starting this year. [WH, 4/1/2011]
• The Main Street Alliance, a national network of small business coalitions, supports the Affordable Care Act, writing that “rolling back the provisions of the Affordable Care Act would be bad business for small business.” [Main Street Alliance, 1/18/2011]

ACA will benefit families:

• “The law widely expands coverage to Americans, thereby reducing the hidden tax of about $1,000 that families with insurance pay each year in additional premium costs to cover the uncompensated costs of the uninsured.” [WH, 1/7/2011]
• “Caps what insurance companies can require families to pay in out-of-pocket expenses, such as co-pays and deductibles, prohibits lifetime limits on how much insurance companies cover if beneficiaries get sick, and regulates the use of annual limits to ensure access to necessary care, until 2014 when annual limits are prohibited.” [DPC, 4/1/2010]
• “Requires premium rate reviews to track any arbitrary premium increases, cracks down on excessive insurance overhead by applying standards on how much insurance companies can spend on non-medical costs, such as bureaucracy and advertising, and provides consumers a rebate if non-medical costs are too high. Provides sliding scale premium tax credits for families that cannot afford quality health insurance.”  [DPC, 4/1/2010]

This DPCC Fact Sheet demonstrates how Republicans blatantly misrepresent CBO Director Douglas Elmendorf’s testimony.  Please find additional resources related to these and other arguments below.

Washington Post: http://voices.washingtonpost.com/fact-checker/2011/02/playing_games_with_cbo_testimo.html

Factcheck.org: http://factcheck.org/2011/01/a-job-killing-law/

White House: http://www.whitehouse.gov/blog/2011/01/07/repealing-affordable-care-act-will-hurt-economy

Myth: Medicaid expansion under the Affordable Care Act will bust state budgets.

Reality: Independent, non-partisan analyses suggest that the Affordable Care Act will produce savings and increased revenues for states.

On March 1, 2011, Republicans released an erroneous report on the costs to states of the Medicaid expansion under the Affordable Care Act. The DPCC Fact Sheet provides information demonstrating how Republican projections are flawed and provides information on recent Administration efforts to ensure state flexibility during implementation.

I. Background on Medicaid Expansion:

The Affordable Care Act fixes our health insurance system while dramatically increasing access for families to affordable, high-quality coverage.  By 2021, the Affordable Care Act will reduce the number of Americans under age 65 without insurance by about 33 million, meaning that 95 percent of legal residents under age 65 will have health insurance coverage. Approximately 23 million of these newly insured Americans will purchase their health insurance through new health insurance Exchanges.  [CBO, 2/18/2011]

The remaining newly insured will obtain coverage through Medicaid and the Children’s Health Insurance Program (CHIP).  Under the Affordable Care Act, Medicaid will be expanded to all individuals under age 65 with incomes at or below 133% of the federal poverty level, thus creating a minimum standard eligibility across states.  All Americans over age 65 will continue to be covered by Medicare.

II. What Percent Do States Actually Pay?

The federal government will cover 100% of the costs to states for the newly eligible population for the first three years, between 2014 and 2016.  The federal government will then cover 95% of all costs costs in 2017, 94% in 2018 and 93% in 2019.  In 2012 and for every year following that, the federal government will pay 90% of all costs for the newly covered Americans.

States will only pay a tiny fraction of the costs to cover the newly insured population. According to the CBO, states will pay only eight percent of the total cost of the 18 million people who will be covered by Medicaid and the Children’s Health Insurance Program between 2012 and 2021, as a result of the new law.  CBO further found that the federal government will pay 92 percent of the $734 billion total cost for this coverage.  CBO has previously found that the entire cost of the legislation, including changes to Medicaid, is fully paid for and reduces the deficit by more than one trillion dollars over the next two decades.  [CBO, 2/18/2011]

III. Republican Accusations on State Medicaid Costs:

Republicans estimated that the expansion will cost state taxpayers an additional $118.4 billion through 2023.  The Republicans’ assertion is about twice the independent Congressional Budget Office estimate of $60 billion through 2021.  The Congressional Budget Office has long been the independent, official scorekeeper of the effects of Congressional legislation. [Republican Congressional Report, 3/1/2011]

What are outside groups saying about the Republicans Accusations?

• The report ignores independent, non-partisan analyses that account for the savings and increased revenues the Affordable Care Act will produce.  These savings could amount to more than $160 billion across all states. [Lewin Group, 12/1/2010]
• Republicans projections cherry-pick “worst-case scenarios from various studies that use different time frames and rely on flawed assumptions.” [CBPP, 3/1/2011]

IV. Rationale for Variation of State Medicaid Costs:

While Republicans highlight an inflated estimate regarding the Medicaid expansion cost to states, other independent, non-partisan analysis showsasavings of $106.8 billion. [Lewin Group, 12/1/2010] According to Kaiser, “There are a number of reasons why the estimates of the ACA on states varies so widely. Expanding Medicaid naturally costs more in states where there are more uninsured residents with Medicaid income levels, and the magnitude of the estimates tend to be larger in high-population states. Moreover, the estimates use different methodologies in projecting costs of new enrollment and in including or omitting other costs, savings, or revenues.” [Kaiser, 2/1/2011]

Republican Projections Exclude Health Reform Savings and Revenue to States

• Republicans projections fail to account for reductions in state support for uncompensated care,“ACA-driven increases in coverage will reduce uncompensated care, especially for public hospitals and clinics, along with private safety net institutions. States could share in the associated savings by making changes in the various ways that they support localities and safety net institutions. No state report estimates savings of this type, perhaps in part because of the complexity of funding flows, although two of our five recognize that they will occur… The national estimates from the Lewin Group and from Dorn and Buettgens projected very large savings of this type, up to $100 billion over ten years, enough to generate overall net savings to states under the ACA, although savings will vary by state.” [Kaiser, 2/1/2011]
• According toRep.  Henry Waxman (D-Ca.), ranking member of the Energy and Commerce Committee, “All of these estimates overstate state costs because they do not include savings from reductions in states’ payments for uncompensated care. For hospitals alone, the spending for uncompensated care in 2009 was estimated to be $40 billion.” [NJ, 3/1/2010]

• Republican estimates do not account for revenue to states from taxes on insurance premiums. According to Kaiser, “Such revenues will be higher because the extent of insurance coverage will rise under the ACA. Maryland’s revenue estimate found that this would generate over two-thirds of the net savings that the state projected.” [Kaiser, 2/1/2011]

• Republican projections do not account for savings tostate programs. According to Kaiser, “The expansion of coverage and benefits under the ACA will very likely mean that people will seek much less care from existing state and local programs, such as those now funded through public health or mental health departments. States that operate high-risk pools should also see reduced demands and therefore savings in these programs.” [Kaiser, 2/1/2011]

• Republicans fail to account for savings through increased efficiency or enhanced value through initiatives in care management, coordination, and payment methods.According to Kaiser, “For example, the ACA provides a new health home initiative to better coordinate care for individuals with chronic conditions with 90 percent match rate for these services. The ACA also allows states to integrate care for ‘dual eligibles,’ people jointly enrolled in Medicaid and Medicare, and thereby improve value or efficiency… Many different opportunities exist to obtain federal funding such as grants, incentive payments, or demonstration support.” [Kaiser, 2/1/2011]

Republicans Use Studies with Different Timeframes and Flawed Assumptions

• Republicans use worst-case scenarios from studies in order to project high costs to states.According to CBPP, the GOP report, “… doesn’t mention that the Urban analysis produced two sets of estimates for each state — one assuming that the Medicaid participation rate would remain at about its current level, and another assuming that it would rise significantly.  Most credible analysts use the lower estimate, but the GOP report references only the higher one.” [CBPP, 3/1/2011]

• Republicans use studies with flawed assumptions.“The report’s cost estimates for Indiana, Mississippi, and Nebraska come from misleading studies conducted by the consulting firm Milliman, Inc. that rely on flawed assumptions.  One estimate assumes that literally everyone who becomes eligible for Medicaid under health reform will sign up for it on Day 1 — something that has never happened in a means-tested public program.” [CBPP, 3/1/2011]

• Republicans extend the timeframe to manipulate the numbers. The report extends the time frame for the estimate by two years to make the numbers look larger.  This exaggeration misleads the reader by providing an apples to oranges comparison.  The standard time frame used by CBO is 10 years, from 2012 through 2021. This report uses a 12 year time frame, from 2012 through 2023, artificially raising the estimate.

• Republicans rely on studies which include costs not related to the Affordable Care Act.“For example, its Utah estimate comes from a state report that seems to assume enhanced federal funding will run out by 2014, forcing Utah to shoulder a larger portion of the expansion’s costs.  Its Florida estimate, also from a state report, not only assumes that 100 percent of newly eligible individuals will enroll but also includes the cost of raising Medicaid’s payment rates for primary care to Medicare levels after 2014 — a change the health reform law does not require.” [CBPP, 3/1/2011]

V. Other Estimates on State Medicaid Costs:

Republicans contend that the Medicaid expansion under the Affordable Care Act will bust state budgets.  They argue that this expansion will cost state taxpayers billions through 2023, with Texas ($27 billion between 2014-2023), Florida ($12.9 billion between 2014-2023), and California ($19.4 billion between 2018-2023) accounting for the majority of the costs.

The Kaiser Commission on Medicaid and the Uninsured recently conducted an analysis of these and other estimates. As demonstrated below, the estimates range from a multi-year total cost of $27 billion in Texas to savings of over $106 billion across all states. [Kaiser, 2/1/2011]

[Kaiser, 2/1/2011]

VI. Governors agree that expanded Medicaid eligibility and increased flexibility benefit states:

Testifying before the House Ways and Means Committee on the Medicaid expansion, Governor Deval Patrick stated “Federal reform is good for Massachusetts, it has given us an affordable way to extend the promise of coverage to Massachusetts residents.” [WP, 3/1/2011]

A number of states, including Connecticut, Minnesota, Washington, and the District of Columbia, have been approved to expand Medicaid eligibility ahead of the 2014 deadline.

• Minnesota Governor Mark Dayton explained the benefits of the changes, “As my first official act as Governor, I’m going to take two important steps. One is to sign an executive order, committing Minnesota to the so-called Early Option for Medicaid…This is a step that benefits all of the people of our state at no, and I repeat no, net cost to the state of Minnesota.”

VII. The Administration is working to ensure that States have the flexibility to secure savings and increase state revenue:

• Under the Affordable Care Act, States may structure their Medicaid programs to more closely resemble the private insurance coverage options available in the Exchanges. States can tailor the benefit packages based on private coverage options available in their States – such as the standard Blue Cross/Blue Shield plan, the State employee health plan, and the largest commercial HMO available in the State. States can go beyond these standards to provide additional benefits but are not required to do so.
  • Governor Martin O’Malley argues, “We in the State of Maryland greatly appreciate Secretary Sebelius’ understanding of the extraordinary budget pressures all governors now face, and her commitment to working with us collaboratively to reduce costs in our Medicaid programs… I welcome Secretary Sebelius’ offer to help us build on our existing efforts here in Maryland to improve quality of care while saving significant Medicaid dollars over the short and long term.”[Office of the Governor, 4/4/2011]

Please find additional resources below:

KFF, “State Budgets Under Health Reform”: http://www.kff.org/healthreform/upload/8149_ES.pdf

KFF, “5 Things to Know About Medicaid:” http://www.kff.org/medicaid/8162.cfm

KFF, “Medicaid Enrollment: June 2010:” http://www.kff.org/medicaid/enrollmentreports.cfm

Center for Budget and Policy Priorities: http://www.offthechartsblog.org/republican-report-inflates-state-medicaid-costs-under-health-reform/

Myth: Health reform will cost $2.6 trillion over a ten year period

Reality: The nonpartisan analysis from CBO estimates that the Affordable Care Act will cost $930 billion and reduce the deficit by $210 billion over a ten year period.[CBO, 2/18/2011]

Republicans contend that CBO utilized a number of “gimmicks” to underestimate the cost of the law, overestimate the savings, and therefore misrepresent its impact on the budget.  Senate Republicans have gone as far to claim that the law will cost close to three times the CBO estimate, $2.6 trillion over a ten year period, and add $701 billion to the deficit. [GOP Report, 2/7/2011]  Republicans are misrepresenting facts and their claims are unfounded.  This DPCC Fact Sheet aims to address their most commonly cited arguments regarding the cost of the law.

Republicans incorrectly claim that CBO double-counts savings to Medicare. Republicans contend that CBO counts savings to Medicare both for extending the solvency of the Hospital Insurance (HI) trust fund and reducing the impact of new programs on the deficit.  As a result of their interpretation, Republicans claim that $398 billion in CBO projected savings are erroneous. [GOP Report, 2/7/2011]

• The Affordable Care Act slows the growth in Medicare spending while simultaneously extending the solvency of the HI trust fund for an additional 12 years.  [Berwick, 8/5/2010]
• In the past, CBO projected Medicare savings to both extend the solvency of Medicare and reduce the deficit for the Balanced Budget Act of 1997 and the Deficit Reduction Act of 2005.  The Republican controlled Congresses did not object to CBO scoring at that time or suggest that CBO was double-counting savings to Medicare [Center on Budget and Policy Priorities, 3/25/2010]

• The Center on Budget and Policy Priorities reiterated this point before the House Committee on the Budget:  “There’s no double-counting involved in recognizing that Medicare savings improve the status of both the federal budget and the Medicare trust funds.  In the same way, when a baseball player hits a homer, it both adds one run to his team’s score and also improves his batting average.  Neither situation involves double-counting.”  [Center on Budget and Policy Priorities, 1/26/2011]

Republicans add the cost of permanently fixing the sustainable growth rate (SGR), commonly known as the “Doc Fix,” to the overall cost of the Affordable Care Act.As a result, Republicans add $208 billion to the cost of the law. [GOP Report, 2/7/2011]

• Over the past eight years, Republicans and Democrats have repeatedly enacted a number of temporary fixes for SGR.  These temporary fixes have historically been bipartisan efforts to ensure that seniors and military families have continued access to healthcare services.
• In 2003, President Bush signed the Medicare Prescription Drug, Improvement, and Modernization Act into law following passage by a Republican Congress.  Although the law included a temporary SGR fix, Republicans did not include the cost of the fix as part of the new law. [CBO, 7/21/2004]
• On December 10, 2010, the Senate passed a one-year SGR fix costing $14.9 billion by unanimous consent.  [CBO, 12/7/2010] The House passed the same bill by a vote of 409 to 2 and the President signed it into law on December 15, 2010.
• Without any precedent, Republicans add the cost of permanently fixing SGR to the cost of the Affordable Care Act.  This cost would be incurred with or without health reform. If the Affordable Care Act had not been enacted, Democrats and Republicans still intended to fix SGR.
• Since 2007, when Democrats took control of Congress, every temporary SGR fix has been paid for with mandatory savings or revenue increases. Republicans are wrong to assume that the SGR costs should be added to the Affordable Care Act without assuming commensurate savings.
• During an interview with Ezra Klein, Rep. Paul Ryan reiterated his commitment to fix SGR, “Oh yeah! I think we should fix the thing. Don’t get me wrong.” [Ezra Klein, 3/5/2010] Rep. Ryan voted for the one-year SGR fix with 188 of his Republican colleagues less than ten months later. In fact, Rep. Ryan voted for temporary SGR fixes five times. [Ezra Klein, 3/5/2010]

Republicans exaggerate the costs of implementing and administering the Affordable Care Act.Republicans contend that an additional $115 billion over ten years will be required in discretionary spending to fully implement and administer the Affordable Care Act. [GOP Report, 2/7/2011]

• Republicans are selective in their interpretation of a CBO analysisregarding the discretionary funds required to implement Affordable Care Act.  Although the CBO analysis states that the law will require an additional $100 billion in discretionary funding over ten years, the analysis includes $85 billion are for “activities that were already being carried out underprior law or that were previously authorized and that PPACA authorized forfuture years.” [CBO, 2/18/2011]  Therefore, the law will require an additional $1.5 billion each year in discretionary funds, not $10.5 billion as the Republicans contend.

Republicans make misleading claims about the Community Living Assistance Services and Support (CLASS) program.CBO projects that the CLASS program will reduce the deficit by $86 billion between 2012-2021. [CBO, 2/18/2011]  These savings are a result of generating more revenue from premiums than spending on benefits.  Republicans contend that the program is not fiscally responsible because, over time, the surpluses initially generated by these additional revenues will be used to pay benefits.    They also claim that the program is not actuarially sound.  Both claims reflect misunderstandings about the program.

• The law is explicit in stating the CLASS program must be able to pay for benefits over the long-term only using the premiums it takes in.  Secretary Sebelius reiterated, “No taxpayer dollars will be used to pay for CLASS benefits.  This is non-negotiable, and it has been the starting point for every conversation we’ve had about this program.” [Kaiser Family Foundation, 2/7/2011]
• During debate on the legislation, CBO assumed premiums would be set to ensure the CLASS program is actuarially sound. To provide additional guarantees of its soundness, Secretary Sebelius and her team are currently considering a number of regulatory modifications—including adjusting the work and income eligibility requirements—to ensure that the program will be on solid financial footing.
• While today they complain about a program that will require not a single taxpayer dollar, many Republicans, in 2003, led an effort to expand health coverage while increasing the deficit: CBO scored the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 as adding $395 billion to the deficit during a ten year period.

This DPCC Fact Sheet addresses some of the flawed arguments made by Republicans to incorrectly increase the cost of the Affordable Care Act to $2.6 billion.  Please find additional resources related to these and other arguments below.

Center on Budget and Policy Priorities: http://www.cbpp.org/cms/index.cfm?fa=view&id=3134

Factcheck.org: http://factcheck.org/2011/01/a-budget-busting-law/

Ezra Klein: http://voices.washingtonpost.com/ezra-klein/2010/03/the_true_cost_of_the_health-ca.html

CENTRAL POINTS:

In order to win the future, America must out-innovate and out-build the rest of the world.  Yet the U.S. patent system lags woefully behind.  Over 750,000 patent applications have yet to be approved due to inefficiencies in the approval process.

The America Invents Act will create jobs and promote innovation by reforming the nation’s patent filing system for the first time in nearly 60 years.

The America Invents Act is self-funding and will not add a dime to the deficit.

LEGISLATIVE BACKGROUND

A patent is a limited property right that the government offers to inventors in exchange for their agreement to share the details of their inventions with the public. The right a patent carries is exclusive, for a designated period of time, and may be sold, transferred or given away. Under Article I, Section 8, Clause 8, of the U.S. Constitution, Congress has the power “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  

Ithas been nearly 60 years since the last meaningful reforms of the nation’s patent system were enacted.  Technological advances, improvements to manufacturing, and an evolving marketplace make it critical to update the United States patent system in a manner that will allow inventors and innovators to compete in the global marketplace.

The America Invents Act of 2011, which was unanimously reported out of the Senate Judiciary Committee on February 3^rd, mirrors key improvements to the long-pending legislation that were announced last March as part of an compromise reached by the bill’s lead sponsors with then-Judiciary Committee Ranking Member Jeff Sessions (R-Ala.), Senator Jon Kyl (R-Ariz.), and others.  The legislation will make the first significant changes to the nation’s patent system in nearly 60 years, creating jobs and boosting the economy without adding to the nation’s deficit.  Different versions of the legislation have been introduced going back to the 109^th Congress. 

The current bill mirrors the Patent Reform compromise legislation introduced by Chairmen Leahy in March 2010, with three exceptions. Most notably, this legislation includes a provision preventing patents on tax strategies, which will reduce the cost of compliance for taxpayers during tax season.  Secondly, S. 23’s provision codifying a heightened judiciary standard for “willful infringement” was struck during committee mark-up.  And finally, to establish greater uniformity and equity in patent law, S. 23 includes a provision that ensures federal court jurisdiction over all patent issues even if the patent issue arises in the defendant’s counterclaim.

KEY FACTS

Reforming America’s patent system will accelerate economic growth, spur job creation, and expand America’s ability to innovate.

• Technological innovation is linked to three-quarters of the nation’s post-WWII growth rate. Two innovation-linked factors—capital investment and increased efficiency—represent 2.5 percentage points of the 3.4 percent average annual growth rate achieved since the 1940’s. [U.S. Commerce Dept. Report,4/13/2010]
   
• Some Estimates Suggest Millions of New Jobs Could Be Created Through Reform.“To be sure, not every patent creates a job or generates economic value. Some, however, are worth thousands of jobs — Jack Kilby’s 1959 patent for a semiconductor, for example, or Steve Wozniak’s 1979 patent for a personal computer. It’s impossible to predict how many new jobs or even new industries may lie buried within the patent office’s backlog. But according to our analysis of the data in the Berkeley Patent Survey, each issued patent is associated with 3 to 10 new jobs.”  [New York Times, 8/05/2010]
   
• Innovation produces high-paying jobs. Average compensation per employee in innovation-intensive sectors increased 50 percent between 1990 and 2007—nearly two and one-half times the national average. [U.S. Commerce Dept. Report,4/13/2010]
   
• Delay in the granting of rights has substantial costs. Recent reports conclude that the U.S. backlog (currently at 750,000 applications) could ultimately cost the U.S. economy billions of dollars annually in “foregone innovation.” [U.S. Commerce Dept. Report, 4/13/2010]
   
• China bucked an unprecedented decline in global patent filings in 2009, boosting its total by 29.7 percent, while the United States saw a fall of 11.4 percent, the world patent watchdog WIPO said in 2010. In October, Thomson Reuters issued a report forecasting that China would surpass the United States in patent filings in 2011. [Reuters, 2/8/2010; Thomson Reuters, 10/5/2010]

The America Invents Acttransitions the United States to a first-inventor-to-file system. This is intended to simplify the application system and bring it in line with the international trading partners. It is designed to reduce costs and improve the competitiveness of American inventors seeking protection in the global marketplace.

• The America Invents Act creates a new “first-inventor-to-file” system that will provide patent applicants in the United States with the efficiency benefits of the first-to-file systems used in the rest of the world. The system will make the filing date most relevant in determining whether an application is patentable.
   
• Under the old first-to-invent system,disputes over who is the first to invent are litigated via complex "interference" proceedings. Though uncommon, these are an expensive deterrent for all but the most financially well-off and commercially viable inventions.[CRS, 2/08/2011] 
   
• A shift to a first-inventor-to-file system will eliminate the need for interference proceedings and, in turn, provide certainty for small businesses and individual inventors that their innovations will be protected. [CRS, 2/08/2011]
   
• The first-to-file system created by the America Invents Actrule does not permit one individual to copy another's invention. The America Invents Act establishes a new administrative “derivation” proceeding to ensure that the first person to file the application is actually a true inventor and not just a copier.
   
• A first- to-file system moves the American system closer to harmony with almost every other patent system in the world, which provides American inventors and businesses greater global patent protection.
   
• “The bill is a significant step forward in improving U.S. patent law. Many of its provisions, including the adoption of a first-inventor-to-file system and the expansion of post-grant review options, will aide in strengthening the system as a whole.” – American Intellectual Property Law Association, March 5, 2010

The America Invents Act will improve patent quality by allowingthird parties to submit information related to a pending application for consideration by a patent examiner.

• By allowing the scientific community to weigh in on patent applications, much like amicus briefs to a court, patent examiners will have better information and valuable additional research which will enable them to grant higher quality patents. 
   
• The America Invents Act also creates a “first window” post-grant opposition proceeding, which will help weed out patents that should not have issued in the first place by allowing an early challenge to such patents.
   
• “Significant improvements have been made in [post-grant review] procedures, reducing the ability to use those procedures for abusive serial challenges to patents and thereby reducing the administrative burden on the U.S Patent and Trademark Office. The resultant procedures will provide a faster, less costly alternative to civil action to challenge patents, improving patent quality by eliminated invalid patents while reducing abusive challenges and reducing litigation costs.”– Higher Education Associations, March 5, 2010

The America Invents Act will make it easier for individuals and small businesses to protect their inventions through improvements to the patent challenge system that provides a more meaningful alternative to litigation.

•  Inefficiencies in the system are bad for challengers who have meritorious challenges but cannot get a final decision from the Patent and Trademark Office. They are also bad for patent owners who can have their patents tied up in review for years, even if the challenge is not ultimately going to be successful.
   
• By establishing an adversarial inter partes review conducted by Administrative Patent Judges, the America Invents Act creates a more meaningful alternative to litigation that  helps curb harassment of patent owners.

The America Invents Act addresses concerns that damage awards sought in patent infringement cases are often excessive and disconnected from the actual harm.

• Patent Courts help protect the innovative concepts and ideas that drive our economy.  This bill strengthens the “gate-keeping role” under which judges will assess the legal basis for the specific damages theories and jury instructions sought by the parties. These “gate-keeping” reform provisions will ensure greater consistency, uniformity and fairness in the way the courts administer patent damages law.

The America Invents Act provides fee-setting authority for the Patent and Trademark Office Director to ensure the PTO is properly funded and can reduce the backlog of patent applications.

• “[T]he USPTO currently has an unexamined patent application backlog of over 750,000…In order to reduce the backlog, the USPTO will have to incur significant additional expenses…However, the fee schedule in the current patent statute fails to provide the USPTO with the flexibility it needs to assure that its future revenues are commensurate with the costs it will incur to modernize its operations. The current fee structure is inflexible and poorly aligned with actual costs, making it exceedingly difficult to fund long-needed modernizations.” [U.S. Commerce Dept. Report,4/13/2010]
   
• The fee-setting authority patent reform gives to the USPTO will contribute significantly to the agency’s planned 40 percent reduction in patent pendency. [U.S. Commerce Dept. Report,4/13/2010]
   
• The bill “requires that smaller businesses continue to get a 50 percent reduction in fees and creates a new "micro-entity" class — with a 75 percent reduction — for independent inventors who have not been named on five or more previously filed applications and have gross incomes not exceeding 2.5 times the average.” [AP, 2/28/2010]

The America Invents Act will benefit taxpayers directly by prohibiting patents on tax strategies, which often lead to additional fees on taxpayers who are simply complying with the tax laws.

• The Patent Office began issuing patents for strategies to comply with, or reduce liabilities under, the tax code in 1998.  But, many of the patents issued since then were on strategies that were obvious and in prior use by tax professionals, and therefore should not have issued. 
   
• The emergence of tax strategy patents has caused tremendous problems for accountants and taxpayers.  As such, the America Invents Act will prevent any further issuance of tax strategy patents, by deeming tax strategies within the prior art, thereby preventing the tax implications of an invention from being the basis for a patent.
   
• The American Institute of CPAs wrote, “the problems associated with tax strategy patents are multiple and complex…No one should have a monopoly on a particular form of tax compliance.  And no taxpayer should be put at risk of lawsuits or royalties simply for complying with Federal tax law. Tax strategy patents undermine the integrity of our tax code and unnecessarily complicate compliance.” [American Institute of CPAs, 1/25/2011

The America Invents Act is bipartisan legislation with broad support from the business community, trade associations, educators and unions.

• “The bill is a significant step forward in improving U.S. patent law. Many of its provisions, including the adoption of a first-inventor-to-file system and the expansion of post-grant review options, will aide in strengthening the system as a whole.” – American Intellectual Property Law Association, March 5, 2010
   
• “The America Invents Act of 2011 would improve the patent system in ways that would benefit all sectors of the U.S. economy by enhancing patent quality and the efficiency, objectivity, predictability, and transparency of the patent system.”  – Biotechnology Industry Organization, February 3, 2011
   
• “Our coalition strongly supports The America Invents Act of 2011 and the Senators’ efforts to introduce a bill early in the Congressional Session, to garner strong bipartisan support, and to build upon the bipartisan compromise that was agreed to last year. Americans want jobs – and patent reform is part of the solution. With passage of patent reform legislation, the United States Patent and Trademark Office will be better able to provide the incentives needed to create jobs. This legislation will ensure our nation’s patent system will promptly provide inventors with high quality patents and protections needed to spur innovation, develop new products, and create jobs.” – Coalition for 21^st Century Patent Reform, January 20, 2011 (Coalition members include ExxonMobil, General Electric, Johnson & Johnson)
   
• “The United States is the most innovative and entrepreneurial nation in the world. If we are going to maintain our enviable position at the forefront of the world economy, it is absolutely essential for us to have an efficient and streamlined patent system. This bipartisan legislation, which would be the first major overhaul of our patent system in nearly six decades, is an important step toward maintaining our global competitive edge.” – Sen. Orrin Hatch, February 3, 2011
   
• “An effective and efficient patent system will help spur innovation and inventions and improve patent quality, and as a result, will provide incentive for entrepreneurs to create jobs.” – Sen. Chuck Grassley, February 3, 2011

STATE & INDUSTRY SPECIFIC RESOURCES

Pending United States Patent & Trade Office patent applications by state: 

2009 Patents Granted by the United States Patent & Trade Office by state:

2009 Patents Granted by the United States Patent & Trade Office by Technology:

SENATE JUDICIARY COMMITTEE: Section-By-Section

THE AMERICA INVENTS ACT OF 2011

Sec. 1.  Short Title; Table of Contents. 

Sec. 2.  Right of the First Inventor to File.  This section converts the United States’ patent system from a first-to-invent to a first-inventor-to-file application system.  The transition will bring needed clarity and certainty to the patenting process and will harmonize the U.S. system with the rest of the world, which will enable greater work sharing and efficiency at the USPTO. 

In general, the earlier-filed application by an inventor for a claimed invention will receive priority.  The transition will retain a one-year grace period, which permits the sharing of information by the inventor or co-inventor without such disclosure constituting prior art for the application.  A new derivation proceeding is created to determine whether the applicant of an earlier-filed application was not an actual inventor for the claimed invention.  This proceeding will be faster and less expensive than current interference proceedings under the first-to-invent system.  The transition will occur eighteen months after enactment. 

This section also limits who can bring false markings claims to the Department of Justice or a person who has suffered a competitive injury as a result of a violation of the false markings provision. 

This section also provides for a study by the Chief Counsel for Advocacy of the Small Business Administration, in consultation with the USPTO, on the effect of the first-inventor-to-file transition, and a report by the USPTO on whether to expand prior user rights. 

Sec. 3.  Inventor’s Oath or Declaration.  This section streamlines the requirement that the inventor submit an oath as part of a patent application, particularly in situations in which an inventor is unable or unwilling to submit the oath, but is under an obligation to do so.  It further facilitates the process by which a person to whom an inventor has assigned an invention may file the patent application.  

Sec. 4.  Damages.  As products have become more complex, often involving hundreds or even thousands of patented aspects, litigation has not reliably produced damages awards in infringement cases that correspond to the value of the infringed patent.  In order to improve consistency, uniformity and fairness in damage awards, this section includes a “gatekeeper” provision for damage awards, giving judges more of a role in determining the factors the trier of fact can consider in assessing damages.  This “gatekeeper” provision requires the court to identify the methodologies and factors that are relevant to a reasonable royalty calculation.  It further requires the court to determine whether one or more of a party’s damages contentions lacks a legally sufficient evidentiary basis, prior to the introduction of any supporting evidence.   Additionally, this section authorizes either party to request that a patent infringement trial be sequenced so that questions of fact relating to the infringement are decided prior to (and separately from) issues relating to damages.  This section makes no substantive changes to the current law guiding the damage calculation itself. 

This section also expands the current prior user defense for business method patents to include affiliates of the prior user and authorizes virtual marking of a patent.  Finally, this section provides that failure to obtain the advice of counsel with respect to any alleged infringement may not be used as evidence of willful infringement. 

Sec. 5.  Post-Grant Review Proceedings.  After a patent is issued, a party seeking to challenge the validity and enforceability of the patent has two avenues under current law: an inter partes reexamination (“IPR”) proceeding at the USPTO or litigation in federal district court.  The former is used sparingly, takes more than three years on average to complete, and is considered not very effective; the latter, district court litigation, is unwieldy and expensive.  This section improves on the current inter partes process and creates a new “first window” post-grant opposition process.

This section makes several key changes to IPR.  First, this section converts IPR from an examination model to an oppositional model, conducted by Administrative Patent Judges, which contains procedural changes that will allow the USPTO to complete most reviews within 12 months.  The challenge will be heard by a panel of three Administrative Patent Judges, and its decision is appealable directly to the Federal Circuit.  Second, to institute a proceeding, a challenger must show a “reasonable likelihood” that it would prevail in invalidating a claim of the patent, which is a new threshold.  Third, the proceeding will include new, procedural safeguards to prevent a challenger from using IPR to harass patent owners.  Fourth, while IPR challenges still must be based on patents or printed publications, they may also now include written statements made by the owner of a patent in court or at the USPTO regarding the scope of the claims.  Finally, this section includes a “reasonably could have raised” estoppel standard, preventing a challenger from raising in court an argument that reasonably could have been raised during an IPR that the challenger instituted and completed.

This section also creates a new “first window” post-grant opposition proceeding, available for nine months after the grant of a patent, to challenge a claim in an issued patent on any basis.  (This is broader than the current inter partes reexamination, which has no time constraint, but is limited to challenges based on prior art and printed publications.)  This will quickly weed out patents that should not have issued, reducing counterproductive litigation later in the life of a patent.  A petition for review under this “first window” proceeding will move forward upon a determination by the USPTO Director that it is more likely than not that one or more of the claims is unpatentable.  

 Sec. 6.  Patent Trial and Appeal Board.  The Board of Patent Appeals and Interferences is replaced with the new Patent Trial and Appeal Board. 

Sec. 7.  Preissuance Submissions by Third Parties.   This section creates a mechanism for third parties to submit timely information during the patent examination process that is relevant to the examination of the application, including a concise statement of the relevance of the submission.

 Sec. 8.  Venue.  This section amends the patent law-specific venue provision in title 28, primarily to prevent plaintiffs from manufacturing venue by allowing any action to be transferred to a venue that the court determines to be clearly more convenient for either party or witnesses. 

Sec. 9.  Fee Setting Authority.  This section gives the USPTO Director rulemaking authority to set or adjust its fees, provided that such fee amounts in the aggregate are set to recover the estimated cost to the Office for the activities performed.  However, this section mandates a reduction of fees by 50% for small entities and 75% for micro-entities.  The Director may also reduce fees upon consultation with the Patent Public Advisory Committee and the Trademark Public Advisory Committee.  This section provides a process by which the Director must consult the Patent Public Advisory Committee and the Trademark Public Advisory Committee on fee changes. 

Any proposal for a change in fees (including the rationale, purpose, and possible expectations or benefits that will result) shall be published in the Federal Register and shall seek public comment for a period of not less than 45 days.  The Director shall notify Congress of any final proposed fee change and Congress shall have up to 45 days to consider and comment before any proposed fee change becomes effective. 

This section also creates an incentive for electronic filings. 

Sec. 10.  Supplemental Examination.  This section provides a patent owner with the opportunity to request a supplemental examination of a patent.  The patent owner may provide corrected or new information to the Office that was not presented, or not accurately presented during the application process.  If the Office concludes a supplemental examination, the patent cannot be held unenforceable on the basis of information considered in the supplemental examination.  A request for supplemental examination must be requested before an allegation of unenforceability is made with particularity in a proceeding under Hatch-Waxman or before an action is instituted under the Tariff Act.   
 

Sec. 11.  Residency of Federal Circuit Judges.  This section repealsthe District of Columbia area residency requirement for Federal Circuit judges, but does not authorize work stations outside of the area.

Sec. 12.  Micro Entity Defined.  This section creates a new definition outlining the qualifications for “micro-entity” status.  Parties meeting the definition will receive a 75% reduction in fees. 

Sec. 13.  Funding Agreements.  This section changes current law to permit a nonprofit organization that has a funding agreement for the operation of a Government-owned-contractor-operated facility to retain 85%, rather than 25% under current law, of licensing royalties in excess of the amount equal to 5% of the annual budget of the facility.

Sec. 14. Tax Strategies.  This section restricts the patentability of tax strategies by deeming tax strategies to be within the prior art, and therefore not novel or nonobvious.

Sec. 15.  Best Mode requirement.  Current law requires that a patent application set forth the “best mode” contemplated by an inventor of carrying out the invention, and can lead to a subjective challenge and review of whether the inventor knew of a particular mode of practicing the invention years after the fact.  This section removes the failure to disclose the “best mode” as a basis for canceling or holding either invalid or unenforceable a patent claim in a civil action.

Sec. 16.  Technical amendments.  This section sets forth technical amendments consistent with the purposes of this Act.

Sec. 17.  Clarification of Jurisdiction. This section clarifies that state courts do not have jurisdiction over claims arising under the patent laws, even if those claims are pled in a counterclaim.  Further, this section clarifies that the Federal Circuit has exclusive jurisdiction from cases in which a party has asserted a compulsory counterclaim under the patent laws.

Sec. 18.  Effective Date; Rule of Construction.  Except as otherwise provided, this Act takes effect one year after the date of enactment and applies to any patent issued on or after that effective date.

Slashes Title I Education Funding, Putting 1 Million Students and 10,000 Jobs at Risk. The House plan cuts an additional $5 billion from the Department of Education, including slashing Title I education funding by nearly $700 million, meaning 2,400 schools serving 1 million disadvantaged students could lose funding, and approximately 10,000 teachers, aides and staff could lose their jobs.

Slashes Maximum Pell Grant Award By $845 Per Student. The House plan will cut the maximum Pell Grant award by $845 from $4,860 to $4,015, a 17 percent cut.

Slashes Head Start By 20%, Eliminating the Program for 218,000 Children and Forcing 55,000 Layoffs. The House bill funds Head Start at $6.1 billion, a cut of nearly $1.1 billion from the FY 2010 enacted level.  At the House level, HHS would have to cut approximately 218,000 low-income children and their families, a cut of over 20 percent.  This would involve laying off an estimated 55,000 teachers and related staff.

Eliminates Race to the Top & AmeriCorps. The House plan provides no funding to key K-12 priorities, including Race to the Top, Investing in Innovation, the Early Learning Challenge Fund.  In addition, the House plan eliminates AmeriCorps.

Slashes Food Safety Inspection Funding By $100 Million, Stopping Inspections and Costing the Economy and Businesses $11 Billion. The House plan reduces funding for the Food Safety and Inspection Service by $100 million. This would force many meat and poultry plants to shut down for more than a month during inspector furloughs, resulting in economic losses of approximately $11 billion and potentially leading to a spike in consumer prices.

Slashes Support for the WIC Program, Covering Fewer Women and Children Struggling to Get Back on Their Feet. The House plan reduces funding for the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) by 10%, or nearly $750 million. At this rate, the program would need to dip into contingency funds or turn families away to cover the 9.3 million participants in 2011.

Slashes EPA Funding By Nearly 30% From Current Levels. The House plan cuts funding for the Environmental Protection Agency by 29% from the FY10 enacted level.

Slashes Funding for Renewable Energy By $787 Million. The House bill provides $787 million below the current level for Energy Efficiency and Renewable Energy. Furthermore, the bill appears to provide no new funds for the Weatherization Assistance Program (WAP), which falls within this account. The bill would significantly delay needed investments in Energy Efficiency and Renewable Energy R&D, demonstration and deployment programs critical to the transition to a Clean Energy Economy.

Slashes Funding for the SEC & CFTC, Hindering Wall Street Enforcement and Consumer Protections. The House bill provides $188 million less for the Securities and Exchange Commission than the Obama Administration requested for FY11 and $149 million less for the Commodity Futures Trading Commission than the FY11 request, severely impairing SEC’s ability to implement the Dodd-Frank Act.

Slashes Funding for the National Institute of Standards and Technology, Rolling Back Critical Investments in Innovation. The House bill reduces funding for NIST by $223 million below the Obama Administration’s FY11 request and $162 million below FY 2010.  This steep reduction could lead to construction halts and damage the Administration’s innovation initiatives.

Slashes Investment in Science Research, Hurting More Than 5,000 Researchers, Teachers and Students. The House bill slashes funding for the National Science Foundation by more than $300 million below current levels. The likely impacts of these cuts are 1,800 fewer research and education grants supporting over 5,000 researchers, teachers, and students, and significant cost and schedule growth for one or more of the major facility construction projects.

Slashes Funding for State and Local FEMA Programs, Impacting First Responders and Homeland Security. The House bill reduces funding for FEMA State and Local Programs by $1.4 billion.   This level significantly reduces funding to hire firefighters and other first responders and cuts funding to support port and transit security.

Slashes Funding for Border Technology Initiatives. The House bill reduces funding for the Department of Homeland Security’s border technology initiative by $243 million (including rescissions of prior year amounts).  This will result in a slow-down in the deployment of new and much needed border surveillance technologies.

Slashes Investment in Job Training When Workers Need it Most. The House bill completely zeroes out all new funding for WIA’s (title I) Adult, Dislocated Workers and Youth formula grant programs in Program Year 2011. If these cuts are enacted, more than 8.5 million job seekers and workers will lose services, including 130,000 veterans. In addition, the 3,000 local one-stop career centers across the country would be forced to close their doors.

Slashes Economic Development Administration Grants. The House bill cuts funding for Economic Development Administration grant programs by $80 million below the FY10 level, hindering EDA’s ability to promote competitiveness and prepare American regions for growth and success in the worldwide economy.

Slashes More Than $1 Billion from NIH. The House bill slashes $1.3 billion from the National Institutes of Health (NIH), which would force NIH to reduce support for more than 25,000 existing research grants and scale back clinical trials and research projects.

Slashes Investment in FAA NextGen, Leading to More Flight Delays and Hurting the Economy. The House bill provides $340 million less funding for the FAA’s NextGen program than the Obama Administration requested for FY11.  This funding level will significantly slow efforts to modernize FAA’s air traffic control system, including initiatives to develop satellite-based surveillance of air traffic, data communications capabilities, and efforts to improve aviation weather observations and forecasting.  This level will likely jeopardize FAA’s 2018 goals of reducing total flight delays by 21 percent and saving 1.4 billion gallons of fuel.

Zeroes Out Funding for High Speed Rail. The House bill zeroes out funding for High Speed Rail Corridors and Intercity Passenger Rail Service.

From May 18, 2009 to January 31, 2011, a total of 406,124 workers were certified under the TAA program, including 170,000 who would not have received benefits if it were not for the now-expiring provisions of TAA. In 2009, the existing TAA program was reformed to fix problems that denied benefits to many workers whose jobs have been shipped overseas and to make the program more flexible and effective.  Prior to those reforms, employees of service firms were excluded from eligibility, as were people who lost their jobs because of a shift in production to countries with which the U.S. does not maintain a trade agreement (e.g., China).   The 2009 changes, however, allows service workers whose jobs are offshored and manufacturing workers whose jobs were offshored to any country to be eligible.  The reforms also included more robust training opportunities and improved health coverage assistance.  If Congress does not act to extend these benefits, tens of thousands of workers laid off due to trade and offshoring – workers in every state — will be cut off from these essential programs. [ETA Sunset of TAA fact sheet, 11/17/2010]  [Note, see charts below for FY2010 TAA participation numbers by state and for number of workers who benefit from TAA expansion by state; Click HERE for broader FY2010 TAA statistics by state.]

If the TAA reforms expire, American workers who lose their jobs due to trade with China and India will no longer be eligible to receive benefits. If Congress fails to take action by February 12, “TAA will revert back to failing to cover service employees or workers whose jobs are exported to countries where the U.S. does not have a free trade agreement, including China and India.” [National Employment Law Project, January 2011]

• U.S. Has Lost 2.4 Million Jobs Due to Trade with China. From 2001 through 2008, 2.4 million American jobs were lost or displaced due to the United States’ trade deficit with China, including 91,400 jobs in 2008 alone. [Economic Policy Institute, 3/23/2010] NOTE: Click HERE for job loss numbers by state and/or Congressional district

Reauthorizing TAA is paramount to boosting our economy by getting hard working Americans back on the job. On the heels of the worst recession in generations, this is not the time to abandon hardworking individuals who lost their jobs through no fault of their own; TAA is a lifeline for families.  As Federal Reserve Chairman Ben Bernanke explained, “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”  Senate Majority Leader Harry Reid echoed those comments saying, “There is nothing more important than creating jobs.  We have a long way to go before our economy is back to normal.  Ask any American and they’ll tell you: We have a lot more jobs to create and fill.”  TAA equips workers with the skills they need to secure stable jobs and strengthen our economy.  [Bloomberg, 2/3/2011; Senator Reid’s press release, 2/3/2011]

If Congress does not renew the TAA reforms:

• Services Workers and Firms Will be Shut Out. The 2009 legislation closed a gaping hole in the TAA program and, for the first time, allowed service sector workers who lose their jobs or service sector firms who lose market share due to trade or outsourcing to obtain TAA benefits.  If Congress doesn’t act, these workers and firms will be cut out of the program.
• Most Manufacturing Workers who are Victims of Offshoring Will be Cut Off. The 2009 legislation fixed a flaw in the TAA program, providing coverage to all manufacturing workers who lose their jobs when their factory shuts down and relocates overseas.  (Prior law created an additional evidentiary hurdle when the factory was offshored to a non-FTA country that was very difficult to meet, effectively shutting these laid off workers out.)  If Congress doesn’t act, this hurdle will be put back in place and most victims of offshore outsourcing will be left out in the cold.
• Most “Secondary Workers” Will be Excluded. When a major factory shuts down in a small community, the impact goes well beyond the employees of that factory, and reverberates to the other “upstream” and “downstream” businesses that provided goods and services to the factory.  The 2009 legislation expanded “secondary worker” eligibility to ensure that when these workers lose their jobs, they can also retrain for a better job to provide for their families.  If Congress doesn’t act, many secondary workers – and small communities throughout the country – will get the cold shoulder.
• Trade-Impacted Workers Will Lose Training Opportunities. The 2009 legislation more than doubled the TAA training funding from $220 million to $575 million to ensure that workers have full opportunity to retrain for new, better jobs.  If Congress doesn’t act, all TAA-eligible workers will see fewer training opportunities and in some States, the money will simply run out.
• Longer-Term Training Opportunities Will be Denied. The very heart of the TAA program is the opportunity to get trained for a better job so that workers can continue to provide for their families.  The 2009 legislation included changes to ensure that workers can complete longer term training that gives them the best opportunity to transition into a new career.  If Congress doesn’t act, these opportunities will be eliminated.
• Participants Will Experience Cuts to the Health Coverage Tax Credit (HCTC) at the Worst Possible Time. The 2009 legislation increased the HCTC credit from 65% to 80%– so that workers who have just lost their jobs won’t also have to pay more for healthcare and can continue coverage for their families.  If Congress doesn’t act, laid off workers and their families will face premium increases of hundreds of dollars a month.
• Flaws in the Program That Were Fixed Will be Undone. The 2009 legislation fixed short and contradictory enrollment deadlines that caused significant confusion among TAA participants and resulted in some workers losing access to TAA benefits.  If Congress doesn’t act, those flaws will return, cutting off many workers.

[Department of Labor, 11/18/2010]

The Department Of Justice’s Office Of Legal Policy Estimates That One-Half Of The Federal Bench Will Be Empty Within 10 Years If Confirmation Rates Do Not Improve.With each new vacancy, more and more Americans will wait years for the most basic opportunity to seek justice. Even today, the average civil litigant must wait nearly two years for a jury trial, and this wait grows even longer if their case is appealed.[Center for American Progress, 1/3/11]

Litigants Are Being Forced To Wait Months And Years Before Their Cases Are Heard. In 2009, for civil litigants with trials, the average median time from filing to trial was over 2 years (25.3 months). As judicial vacancies have been rising, so too have the delays for litigants.  [Administration Office of the U.S. Courts, Judicial Caseload Profile, 2009]

• Columnist: Americans “Ought To Be Livid” By Long Delays For A Fair Trial. One columnist recently wrote of the judicial vacancy crisis, “Those who ought to be livid are ordinary citizens for whom justice delayed is indeed justice denied. Criminal defendants are guaranteed a speedy trial, but long lines of civil cases waiting for a trial date only get longer” [Seattle Times, 9/30/10]

Federal Court Caseloads Are Growing While Judicial Vacancies Persist. “In 2010, nearly all major areas of the federal judiciary had larger caseloads. Filings of bankruptcy petitions climbed 14% to nearly 1.6 million. Filings in the U.S. district courts grew 2% to 361,323 in response to a 2% increase in civil case filings (totaling 282,895) and criminal case filings (totaling 78,428)… Civil filings in the U.S. district courts rose 2%, increasing by 6,498 cases to 282,895… Filings of petitions for bankruptcy totaled 1,596,355, a 14% increase over the previous year’s filings and the highest number received since 2005.” [2010 Year-End Report on the Federal Judiciary, 12/31/10]

In 111^th Congress, Average Circuit Court Nominee Waiting 163 Days for Consideration. In the last Congress, the Senate’s average consideration of a district court judge took 104 days, while the average circuit court nominee took 163 days. [People for the American Way, 1/25/11]

USA TODAY: Judicial Delays Impact Businesses, Environmental Disputes. In 2010, USA Today reported, “There are consequences to the judicial delays. The overwhelming majority of federal civil and criminal cases end in lower courts and never reach the Supreme Court. That means judges at these trial and appeals court levels shape much of the nation’s law — from business concerns to environmental disputes to gay rights.” [USA Today, 6/16/10]

“If You Can’t Get Into a Courtroom… Justice Suffers.” “It stands to reason that if you can’t get into a courtroom, if the docket is too packed for your case to be heard promptly, or if the judge lacks sufficient time to address the issues raised, justice suffers. This will directly affect thousands of ordinary Americans—plaintiffs and defendants—whose liberty, safety, or job may be at stake and for whom justice may arrive too late, if at all. In some jurisdictions, civil litigants may well wait two to three years before going to trial.” [Slate, 9/27/10]

Judges and Officials from Both Parties Recognize the Impact of the Vacancy Crisis

GOP Judges: Senate Must Fill Vacancies To Help Deal With Immigration, Drug & Bankruptcy Cases. In November 2010, seven Republican-appointed federal judges from the largest federal circuit in the country, representing 9 western states, signed a letter urging the Senate to take action on judicial vacancies. They wrote that their case-load “is heavily impacted by increased immigration enforcement, drug interdiction activities, prison litigation, bankruptcy and environmental cases… In order to do our work, and serve the public as Congress expects us to serve it, we need the resources to carry out our mission. While there are many areas of serious need, we write today to emphasize our desperate need for judges.” [U.S. Court of Appeals for the 9^th Circuit Letter, 11/15/10]

Chief Justice John Roberts: Judicial Vacancies Create “Acute Difficulties.” In his 2010 year-end report, Supreme Court Chief Justice John Roberts wrote that the problem of judicial vacancies “has created acute difficulties for some judicial districts. Sitting judges in those districts have been burdened with extraordinary caseloads.” [2010 Year-End Report on the Federal Judiciary, 12/31/10]

Career Federal Prosecutors: Courts “Cannot Function Effectively” With Judicial Vacancies.The National Association of Assistant United States Attorneys, a group of career Federal prosecutors, wrote to Senate leaders in December 2010 saying that, “Our federal courts cannot function effectively when judicial vacancies restrain the ability to render swift and sure justice.” [Sen. Leahy Statement, 2/2/11]

U.S. Attorney General: “Men And Women Who Need Their Day In Court Must Stand In Longer And Longer Lines.”U.S. Attorney General Eric Holder wrote in 2010, “Last year, 259,000 civil cases and 75,000 criminal cases were filed in the federal courts, enough to tax the abilities of the judiciary even when it is fully staffed. But today there are 103 judicial vacancies — nearly one in eight seats on the bench. Men and women who need their day in court must stand in longer and longer lines.  The problem is about to get worse. Because of projected retirements and other demographic changes, the number of annual new vacancies in the next decade will be 33 percent greater than in the past three decades. If the historic pace of Senate confirmations continues, one third of the federal judiciary will be vacant by 2020. If we stay on the pace that the Senate has set in the past two years — the slowest pace of confirmations in history — fully half the federal judiciary will be vacant by 2020. As Justice Anthony Kennedy recently noted, the “rule of law is imperiled” if these important judicial vacancies remain unfilled.” [Washington Post, 9/28/10]

American Bar Association: During Judicial Vacancy Crisis, “Civil Proceedings Are Put Off.” In July 2010, ABA President Carolyn B. Lamm said, “Our courts are already terribly strained at the federal level because of the caseload and the workload, and when you’re a hundred justices down…that’s a big gap.  We have speedy trial rules that require them to put criminal cases first.  As a result, all of the civil proceedings are put off and there is a real gap in terms of a significant delay as a result of the vacancies. It is edging toward a crisis not to have a full bench.” [ABA, 7/12/10]

Examples of Courts in Crisis, and Their Impact on American Families and Communities

In Texas, Drug Cases “Continue Piling Up” While Key Posts Remain Vacant. “Cases in the Western District of Texas, which includes San Antonio and Del Rio, have been climbing steadily in recent years. In fiscal 2001, some 7,423 cases were filed, but in fiscal 2010 the district recorded 10,495 new case filings. The increase in the Western District, which stretches along the U.S.-Mexico border all the way to El Paso, where drug trafficking is heavy, has been fueled largely by criminal cases. Last year, 7,491 new criminal cases were filed, compared with 4,161 in 2001. The district has two vacant federal district court posts, including one in San Antonio and another in El Paso. Overall, Texas has seven federal judicial vacancies… Meanwhile, new drug cases continue piling up in districts along the border.” [San Antonio Express-News, 1/7/11]

In Colorado, Vacancies Impact Businesses Waiting for Civil Rulings, As Well as Rural and Tribal Communities. Describing judicial vacancies in Colorado last year, Sen. Mark Udall said, “Judicial understaffing in Colorado has a real impact on the residents and businesses in our state. As the caseload increases for each judge, more and more time must be devoted to criminal cases – this is because of the Constitutional guarantee of a speedy trial. But as time and energy shifts to clearing the criminal docket, the civil docket suffers. It continues to become increasingly difficult to schedule a trial in Colorado as the backup grows longer. This increased caseload has a significant impact on our rural and tribal communities around the state as well.” [Udall Press Release, 7/29/10]

• In his State of the Union address, President Obama heeded voters’ call and offered a balanced approach to spending, economic growth and job creation.
   
• While it makes sense to cut wasteful and unnecessary programs, we must invest in what moves our country forward, spurs economic growth and strengthens the middle-class. The FAA Reauthorization Act will do just that.
   
• The airline industry accounts for nearly 11 million American jobs and $1.2 trillion in annual economic activity, and this bill gives it the resources it needs to remain strong and competitive.
   
• The FAA bill is estimated to create and protect 280,000 jobs through infrastructure investments alone, and thousands more due to reductions in flight delays.
   
• This bill will protect consumers by improving air travel safety, ensuring access to rural communities and reducing costly, frustrating delays by over 20 percent.

LEGISLATIVE BACKGROUND

Since the long-term FAA authorization expired at the end of Fiscal Year 2007, Congress has passed 17 short-term extensions of FAA programs. The current authorization expires March 31, 2011. FAA needs a long-term reauthorization to provide certainty, safety and jobs for both the industry and air passengers. [CRS, 1/13/11]

The current bill mirrors the FAA authorization bill that passed the Senate 93-0 in March 2010 (Senate Vote #61). The House passed its own FAA authorization bill and negotiations did not produce a conference report.

Past disagreements around the long-term authorization have included: raising the Passenger Facility Charges that airports can add to ticket prices; changing labor laws for FedEx to place workers under the same labor laws as UPS; and potentially expanding long-distance flights at Ronald Reagan Washington National Airport. None of these provisions are in S. 223.

To find your Senator’s recent votes on the FAA, click here.  Scroll down to Key Vote Search Reports and select FAA Reauthorization or FAA Modernization and Improvement.

KEY FACTS

The Nation’s Passenger and Air Cargo Airlines Sustain Nearly 11 Million American Jobs and Generate $1.2 Trillion in Annual Economic Activity. The nation’s passenger and cargo airlines drive nearly 11 million U.S. jobs and $1.2 trillion in annual economic activity.  According to the FAA, the industry also contributes 5.2 percent of U.S. GDP equaling $732 billion a year. [Airline Transport Industry Testimony by President and CEO Jim May, 3/18/10]

The FAA Bill Will Create or Protect Hundreds of Thousands of Jobs.  The bill authorizes $8.1 billion in investments to improve airport infrastructure, which could sustain or create up to 280,000 jobs. [American Association of Airport Executives, 10/28/08]

The FAA Bill Invests in Technology to Reduce Delays.According to the FAA, between January and November 2010, 20 percent of commercial flights were delayed. Weather only caused approximately half-a-percent of delays during that time. [FAA] The bill could reduce delays by over 20 percent by accelerating the FAA’s air traffic control modernization effort known as the NextGen Initiative. NextGen will convert the nation’s air traffic control from a ground-based system to one that uses GPS.  Going to a GPS system will allow aircraft to move precisely into and out of airports. According to FAA data, “by 2018, NextGen will reduce total flight delays by about 21 percent while providing $22 billion in cumulative benefits to the traveling public, aircraft operators and the FAA. In the process, more than 1.4 billion gallons of fuel will be saved during this period, cutting carbon dioxide emissions by nearly 14 million tons.” [Senate Commerce Committee; FAA]

• Total Economic Cost of Air Delays in 2007 Was $32.9 Billion.  According to a study by the National Center of Excellence for Aviation Operations Research (study sponsored by the FAA), the total cost of all US air transportation delays in 2007 was $32.9 billion. Of that, $16.7 billion was borne by passengers, due to time lost from delayed flights, flight cancellations, and missed connections. [NEXTOR, 10/2010]
   
• Travelers Avoided 41 Million Trips in One Year Due to Delays. According to a survey conducted by the U.S. Travel Association, air travelers avoided 41 million trips between May 2007 and May 2008 – or slightly more than 100,000 trips per day.  That loss is estimated to have cost the U.S. economy $26.5 billion. [U.S. Travel Association]

The FAA Bill Requires Airlines to Plan for Delays and Protect Passengers While They Are on an Aircraft. These plans must include how the airlines will provide adequate food, water and access to restrooms. Passengers must also be provided an opportunity to deplane after three hours on the tarmac. Airlines must also provide passengers with timely and accurate information regarding the flight. [Senate Commerce Committee]

The FAA Bill Improves Aviation Safety.In 2010 there were 988 separate runway incursions according to the FAA. Thus far in 2011 there have been 66. [FAA] The bill will help prevent runway incursions, by requiring the FAA to provide runway incursion information to pilots and improve the process for tracking and investigating incursions. [Senate Commerce Committee]

The FAA Bill Improves Access to Rural Communities.The bill not only increases funding for the Essential Air Service Program, it provides incentives to encourage better service and reforms the Program so areas with lower passenger levels continue to be served. The bill also provides increased federal support for small airports by adjusting the government share of certain project costs to 95 percent, and allows small airports with increased operations to receive a higher federal grant share for two years as they transition to a larger airport status.  [Senate Commerce Committee]

The FAA Bill is Bipartisan. In March 2010, the FAA Reauthorization bill passed the Senate 93-0. [Senate Vote #61; 3/22/10]  Discussing FAA reauthorization in September 2010, Sen. John Thune, “said he hoped Congress would stop doing the short-term bills and ‘get a long-term reauthorization in place that provides some certainty and predictability for the users of aviation in this country.’” [CQ Today, 9/23/10]

STATE AND LOCAL RESOURCES

Percentage of Delays in Arrivals and Departures By Airport:
November 2010 (most recent monthly data)
http://airconsumer.dot.gov/reports/2011/January/2011JanuaryATCR.PDF

Dollar Amount of Airport Improvement Program (AIP) Grants Both By State and Airport:
http://www.faa.gov/airports/aip/grant_histories/#history
(Scroll down to Grant History Summaries and choose one or more years)

Current Essential Air Service Program Airports:
http://ostpxweb.dot.gov/aviation/x-50%20role_files/essentialairservice.htm#US

Airport Traffic Reports, Ranking Busiest Airports in North America and Worldwide:
http://www.aci-na.org/stats/stats_traffic

SENATE COMMERCE COMMITTEE: Section-By-Section

Title I: Authorizations

Title I reauthorizes all of the FAA’s four major accounts: Operations; Research, Engineering, and Development (R,E&D); Facilities & Equipment (F&E); and the Airport Improvement Program (AIP) through fiscal year (FY) 2011.  Airport program administrative expenses are also authorized in this legislation.  Table 1 provides details of the exact proposed authorized amounts:
 

The authorizations for F&E, R,E&D, and AIP are set at levels higher than the Administration’s proposal to ensure modernization needs are met.  The total amount authorized in the FAA bill for the FAA’s primary accounts is approximately $34.5 billion over two years.  The budgetary protections for FAA’s authorized budget are also extended through FY 2011. 

Title I also directs $500 million from the Air Traffic Control System Modernization Account to be included in the F&E budget.  Funds from this modernization account can only be used to support the development and implementation of the Next Generation Air Transportation System (NextGen) programs that advance the modernization of the air traffic control system.  The purpose of the modernization sub-account, which was established within the Airport and Airways Trust Fund (AATF, Trust Fund), is to ensure there is adequate funding available for NextGen programs with the first $500 million in annual AATF receipts required to be deposited in the modernization sub-account.

 Other provisions included in the title require the FAA to clearly identify NextGen programs and spending in agency’s 10-year investment plan, and broaden the FAA’s grant program for undergraduate students conducting research aimed at supporting the FAA including those that impact new technologies related to aircraft and air traffic management functions.

Title II: Airport Improvements

Title II focuses on the AIP and the Passenger Facility Charge (PFC) programs, and proposes a number of new initiatives to aid airport development.  It would streamline the PFC process by simplifying approval requirements for imposing or amending PFCs, while still retaining audit controls, and FAA project and expenditure oversight.  Additional requirements are imposed on increasing PFCs or using the revenue for inter-modal projects.  This process is based on a successful pilot program for streamlining the PFC process authorized in the last FAA Reauthorization bill passed into law – Vision 100 (P.L. 108-176).

The title does not change or increase the maximum allowable PFCs that are currently permitted under the program’s authority.  To assess potential improvements to the PFC program, it requires the Secretary to establish and conduct a pilot program in which an airport may impose a PFC without regard to dollar amount limitations if that airport collects the charge directly from passengers at the airport, via the Internet, or in any other reasonable manner.  The same eligibility and oversight criteria applied under the regular PFC authority would still apply to the use of the revenue in this program.  The pilot program is limited to six airports, and the airport may not collect the charge through an air carrier.

Title II provides flexibility to use entitlement funds for relocation or replacement of facilities under certain circumstances, and allows airports to sell land that is no longer needed for noise compatibility purposes and use the proceeds for other AIP projects at that facility rather than putting the money back into the General Fund of the Treasury.  It also provides increased federal support for small airports by adjusting the government share of certain project costs to 95 percent, and allows small airports with increased operations to receive a higher federal grant share for two years as they transition to a larger airport status.  

Other provisions include:

• An expansion of eligibility for the AIP noise set-aside with a guaranteed minimum amount of funding;
• Broader authority for AIP funds to be utilized to streamline environmental reviews for airport capacity projects, and to encourage the implementation of environmentally-beneficial aircraft flight procedures;
• Technical edits to the AIP which include adding veterans from the Afghanistan/Iraq conflict to the list of veterans eligible for employment preference on AIP projects.

Title II also provides for current or former military airports to be eligible for grant funding if an airport is found to be critical to the safety of trans-oceanic air traffic, permits the FAA Administrator to provide a certain level of AIP funding for U.S. territories, and makes certain projects incurred in anticipation of severe weather or the acquisition of glycol recovery vehicles eligible for airport development funding.

In an effort to promote environmental benefits at airports, Title II establishes a pilot program that permits the FAA to carry out a limited number of environmental mitigation projects at public-use airports focused on achieving reductions in aircraft noise, airport emissions, or airport water quality impacts.  It would also expand the type of research that the FAA may conduct or supervise to include support programs designed to reduce gases and particulates emitted from aircraft engines. 

Title III: Air Traffic Control Modernization and FAA Reform

Title III focuses on the advancing the NextGen initiative and improving FAA management practices and oversight of the agency’s modernization efforts.  When fully implemented NextGen will fundamentally transform air traffic control (ATC) from a ground-based radar system to a satellite-based system that uses Global Positioning System (GPS) navigation and surveillance, digital communications, and more accurate weather services.

The primary effort of Title III is to accelerate the planning and implementation of critical NextGen technology.  To this end, it establishes clear deadlines for the adoption of existing GPS navigation technology, including Required Navigation Performance (RNP) and Area Navigation (RNAV) technology, which will allow aircraft to fly precise procedures into and out of airports, and in the “en route” environment.  Title III initially requires the FAA to focus these efforts on the nation’s most congested airports, mandating 100 percent coverage at the top 35 airports by 2014.  The entire National Airspace System (NAS) is required to be covered by 2018.

The title will also require the FAA to accelerate planned timelines for integrating Automatic Dependent Surveillance-Broadcast (ADS-B) technology into the NAS.  ADS-B is considered the cornerstone GPS technology of the NextGen system and will provide substantial operational, environmental, and safety benefits by increasing the situational awareness of controllers and pilots through more precise aircraft tracking.  FAA will be required to mandate the use of “ADS-B Out” technology, which allows the broadcast of ADS-B transmissions from aircraft to other aircraft and air traffic controllers, in all aircraft by 2015.  FAA will be required to initiate a rulemaking that mandates the use of “ADS-B In” technology, which allows aircraft to receive ADS-B data on cockpit displays, on all aircraft by 2018.

To strengthen stakeholder support for the objectives of NextGen, the FAA will be required to report to Congress with specific plans for: implementation of ADS-B ground station infrastructure; milestones for transitioning these new capabilities into the NAS and detailed schedules for air-to-air applications.  In addition, the title directs the agency to identify possible incentives for equipping  aircraft with ADS-B technology, and the development of performance metrics that track the annual performance of the NAS, in detail, after the identification of optimal baselines.

Title III also establishes an “Air Traffic Control Modernization Oversight Board” to provide specific oversight of FAA’s modernization activities.  The Board’s responsibilities include providing advice on strategic plans for FAA modernization; approving modernization expenditures in excess of $100 million; and approving selections of the leaders for the Air Traffic Organization (ATO) and the Joint Planning and Development Office (JPDO).  The Board is proposed to be composed of nine members: the FAA Administrator, a Department of Defense (DOD) representative, one member representing the public interest, one Chief Executive Officer (CEO) of an airport, one CEO of a passenger or cargo airline, one FAA labor union member representing air traffic controllers, one FAA labor union member representing maintenance providers, one member representing aircraft manufacturers, and one general aviation (GA) representative.  This board would replace the FAA’s Management Advisory Committee and its air traffic control subcommittee.

Title III seeks further accountability for modernization at the FAA through the creation of the “Chief NextGen Officer” position.  This individual is designated by the FAA Administrator and will be tasked with responsibility for implementation of all Administration programs associated with NextGen, and would be a tenth ex-officio member of the ATC Modernization Oversight Board.

Another step to strengthen government accountability for NextGen included in the title is a requirement that all federal agencies participating in the airspace modernization effort designate a single office to be responsible for carrying out NextGen responsibilities within their Departments.  This includes the DOD, the National Aeronautics and Space Administration (NASA), the Department of Commerce (DOC) and the Department of Homeland Security (DHS).  This provision also seeks to improve communication and cooperation between each agency.

To address the matter of ATC facility realignment or consolidation as the airspace system is modernized, Title III would require the FAA create a specific process to complete a comprehensive study of this matter. This analysis will consider the Agency’s facility needs and how it may best move forward on realignment to help reduce capital, operating, and maintenance costs, while still ensuring the safety of the air transportation system.  A task force on ATC facilities must also be created to consider the condition of such facilities nationally and make recommendations to FAA, which must develop a plan to address their concerns.

To ensure contracts cannot be “imposed” on FAA workforces in the future, Title III sets up a new process to make certain collective bargaining labor disputes at the FAA are adequately resolved.  If an impasse has been reached during the collective bargaining process, the Administrator of the FAA and employees’ unions are first required to use the mediation services of the Federal Mediation and Conciliation Service (FMCS).  If mediation fails, the Administrator and the employees’ union must use the Federal Services Impasses Panel (FSIP) to resolve their issues through binding arbitration by a private arbitration board consisting of three members.  Decisions of the arbitrators must be reached within 90 days of appointment and are conclusive and binding.

Title III also requires the development of a process to include representatives of federal employees in the planning of ATC modernization projects, and to take specific considerations into account if entering into agreements with non-government providers of NextGen air traffic services.

The title further directs the FAA to move forward on a number of initiatives associated with NextGen including:

• Development of a plan to accelerate the certification of NextGen technologies;
   
• Facilitating the integration of unmanned aircraft systems (UASs) into the NAS, including a pilot program at four test sites in the U.S. by 2012;
   
• Creation of a Surface Systems Program Office to evaluate and implement airport surface detection technology;
   
• Establishment of a pilot program that permits the FAA to work with up to five states to establish ADS-B equipage banks for making loans to help facilitate equipage of aircraft locally;
   
• Requiring semi-annual reports on progress the agency is making on implementing NextGen operational capabilities, and;
   
• Providing the FAA Administrator authority to enter into financial arrangements to support funding to incentivize the costs of aircraft equipage of NextGen technology.

In addition, there are technical changes regarding FAA management, the ability to enter into reimbursable agreements, acquisition authority, management of property, providing assistance to foreign aviation authorities, and employee benefits.

Title IV: Airline Service and Small Community Service Improvements

Title IV focuses on improving airline service and small community access to air service.  Airline service provisions would require air carriers to develop contingency plans to handle situations in which departure of a flight is substantially delayed while passengers are confined to an aircraft.  The plan must outline how the airline will ensure the passengers are provided: a) adequate food, potable water, and restroom facilities, and; b) timely and accurate information regarding the status of the flight.  This plan must be filed with the Department of Transportation (DOT), which must make the information publicly available.  Under the plan, the air carrier must provide the passengers with the option to deplane after three hours have elapsed, except if the pilot determined the flight will leave within 30 minutes after the three hour delay or if there is a safety or security concern with doing so.

The airline service provisions also mandate improved disclosure of flight information to passengers when purchasing tickets.  Airlines are required to post the on-time performance of chronically delayed or cancelled flights on their website – including delays, diversions and cancellations – updated on a monthly basis.  Chronically delayed or cancelled flights must also be identified by the airline when a customer is booking a ticket on a website, prior to purchase.  The title further directs the DOT to expand the breadth of subjects it considers for airline consumer complaint investigations, and establish an advisory committee for aviation consumer protection to advise the Secretary in carrying out air passenger service improvements.  Another section requires the DOT to complete a rulemaking requiring air carriers to provide the public with a list of passenger charges, besides airfare (i.e. baggage fees and meal fees), that may be imposed by the air carrier.  The list must be updated by carriers every 90 days unless there is no increase in the amount or type of fees.

The Title includes provisions that strengthen disclosure requirements for the sellers of airline tickets to properly identify the air carrier providing the service, and notification requirements regarding the taxes and fees that may accompany an airline ticket purchased by a consumer.  

Title IV provisions also propose a number of improvements to the Essential Air Service (EAS) and Small Community Air Service Development Program (SCASDP).  Authorized funding for EAS is increased to $200 million annually, a $73 million increase.  The SCASDP is authorized at $35 million annually through FY 2011.  Other provisions aimed at improving service to EAS communities include: incorporation of financial incentives into contracts with EAS carriers to encourage better service; longer-term EAS contracts if it is determined to be in the public interest; development of a program to create incentives for large carriers to code-share on service to small communities, and; requiring large airlines to code-share on EAS flights in up to 10 communities.

Additional EAS reforms include allowing an air carrier to provide service to a desired location regardless of that location’s per passenger level if a state or local government is willing to pay the difference between the actual per passenger subsidy and the allowable dollar amount for such subsidy.  It also authorizes a state or local government to submit a proposal for a preferred air carrier service if the state or local government is willing to pay the difference between the lowest bid and the preferred air carrier.  The title would further require the establishment of an Office of Rural Aviation within DOT to focus on the development of longer-term EAS contracts and to review and compare air carrier applications for EAS service from different communities.

Other provisions in this title include: allowing AIP funding for converting EAS airports into a GA airport if the EAS community exits the program; increased funding for contract towers that benefit small communities, and; modifying language governing disputes between EAS communities and their air service providers.

Title V: Aviation Safety

Title V proposes measures to address various aviation safety matters.  Among these are several provisions that target particular problem areas identified by the National Transportation Safety Board (NTSB), including a requirement that FAA develop a plan to provide runway incursion information to pilots in the cockpit and initiate an improved process for tracking and investigating runway incursions and operational errors. 

This title seeks to improve safety for helicopter emergency medical service operators and their patients by mandating an FAA rulemaking to require use of a standardized checklist of risk factors to determine whether a mission should be initiated, and creation of a standardized flight dispatch procedure for these operators.  It requires emergency medical aircraft have a terrain awareness and warning system on board within one year after the date of enactment, and the initiation of a rulemaking to require flight data and cockpit voice recorders on board these helicopters.

Title V addresses the 2008 disclosure that domestic commercial air carriers were inconsistent in their application of Airworthiness Directives (ADs).  Among the corrective actions it takes are: (1) improving the FAA’s voluntary disclosure reporting process to ensure adequate actions are being taken in response to such reports; (2) adopting procedural improvements for inspections that prohibit, for two years, FAA inspectors from leaving the agency to work for the air carrier for which they had oversight; (3) an independent review of safety issues, on an annual basis, by the DOT IG to investigate air safety concerns identified by employees and reported to the FAA; (4) creation of a national review team to conduct periodic, random reviews of the FAA’s oversight of air carriers; (5) establishment of an Aviation Safety Whistleblower Investigation Office to consider complaints and make recommendations for corrective actions, and; (6) creation of a process by which the current Air Transportation Oversight System (ATOS) database is reviewed on a monthly basis to assess trends and take appropriate corrective action.

Title V initiates a comprehensive review of the FAA’s ATC Academy and facility training efforts for the air traffic controller workforce.  It requires the FAA to clarify responsibility and direction of the facility training program at the national level and establish standards to identify the number of developmental controllers that can be accommodated by each facility.  For the flight attendant workforce it requires the FAA to move forward on efforts to apply OSHA requirements to crewmembers while working in the aircraft.  It also requires that flight attendants working in the U.S. be proficient in English language skills.

Other provisions in the title would ensure FAA could continue to access criminal history databases to perform critical safety and security functions, and access abandoned type certificates and supplemental type certificates to improve FAA safety reviews.  It further requires the FAA to issue a final rule regarding re-registration and renewal of aircraft registration to promote the accuracy of the FAA’s aircraft registry.  Other provisions in this section extend the timeline for FAA to begin to issue design organization certificates and allow for the use of third party contractors in the development and implementation of performance based navigation procedures.

Title V also requires the FAA to ensure that FAA-certified repair stations outside the U.S. performing work on U.S. commercial air carriers will be required to have drug and alcohol testing programs in place that are acceptable to the FAA and the laws of the country in which the station is located.  It also mandates each foreign repair station have a minimum of two annual inspections from FAA inspectors unless there is a bilateral aviation safety agreement in place that allows for comparable inspection by local authorities.  Similarly, Title V also directs the FAA to issue regulations that limit the ability of a non-certificated maintenance provider to be able to work on the aircraft of Part 121 air carriers to several limited exceptions.

Title VI: Aviation Research

Title VI is focused on improving the research activities of the FAA and promoting environmental benefits for the aviation industry.  It proposes several new research efforts:

• Evaluation of proposals to address wake turbulence effects, volcanic ash avoidance and severe weather research (including de-icing);
   
• Establishment of a Center of Excellence to study the use of clean coal technology for aircraft, and;
   
• Creation of the “Advisory Committee on the Future of Aeronautics” to examine the best governmental and organizational structures for aeronautics research and development.

The title also extends a program to authorize grants to nonprofit research foundations to improve the construction and durability of runway pavements, and reauthorizes funding for an Applied Research and Training Center of Excellence.

Other programs in Title VI seek to reduce the impact of aviation on the environment including:

• A permanent authorization is provided for the Airport Cooperative Research pilot program, which conducts environmental and other research;
   
• Requiring the FAA to consider and issue guidelines for the construction of wind farms in the proximity of critical FAA facilities;
   
• Creation of a program to reduce harmful emissions from airport power sources and increase energy efficiency, and;
   
• Establishment of a pilot program to promote zero emissions from airport vehicles.

Another aviation research program is centered on incorporating UASs into the NAS.  It permits the FAA to conduct developmental research on UASs and directs the agency to assess UAS capabilities.

The title also authorizes funding for two important environmental initiatives currently underway at the agency; the Continuous, Low Energy, Emissions and Noise (CLEEN) program and the Commercial Aviation Alternative Fuel Initiative (CAAFI).  The CLEEN program will focus on expediting the integration of previously conceived noise, emission, and fuel burn reduction technologies into current and future aircraft.  The CAAFI program focuses on developing alternative fuels, especially renewable fuels, that can be used in existing aircraft engines.

Title VII: Miscellaneous

Title VII includes the following provisions:

• An extension of the war risk insurance program.
• A human intervention management study for flight crews.
• Staffing, training and net worth adjustment considerations for the airport concessions disadvantaged business enterprise initiative.
• A requirement for FAA to update its calculation of over-flight fees.
• Requirements to study the training of FAA’s technical specialists and development of a staffing model for its inspector workforce.
• A permanent extension of the competitive access report program for airports.
• Modifications to requirements for air tour overflights of national parks.
• A study of front line manager staffing at air traffic control facilities.
• A phase out of Stage I and II aircraft in the continental United States.
• A prohibition on the FAA taking action to challenge aircraft weight restrictions imposed locally at New Jersey’s Teterboro Airport.
• A pilot program for the redevelopment of airport properties.
• Adjustments to permit for the air transportation of certain musical instruments.
• Adding a plan for recycling to the definition of airport planning requirements.
• Studies of air ambulance services; aeronautical mobile telemetry; Liberty Airport ATC staffing; air-rail codesharing practices, and; aviation fuel prices.
• Development of a plan to fly scientific instruments on commercial flights.
• A repeal of limitations on certain airport authorities.
• Modifications to requirements for volunteer pilots operating charitable medical flights, certain land conveyances, and transporting oxidizing gases. 
• Miscellaneous program extensions and technical corrections.

Revenue Provisions (NOTE: The Senate Finance Committee will markup their sections of the FAA bill on Thursday, Feb 3^rd)

The legislation will include a finance committee title that extends the life of the airport and airway trust fund by making changes to the aviation tax and fee structure. First the general aviation jet fuel tax is increased to 35.9 cents per gallon. The bill also includes a new surcharge on aviation jet fuel used by fractional ownership aircraft of 14.1 cents per gallon. Fractionally owned aircraft will also be subject to the general aviation jet fuel tax of 35.9 cents per gallon rather than the current 4.3 cents per gallon commercial jet fuel tax. The bill also includes an oversight fee review process. [Part of CRS Report R40410 was used for this summary]

MISPLACED PRIORITIES: PAY THE CHINESE FIRST

Under This Plan, Republicans Would Have Government Pay China Before They Provide Earned Benefits to American Veterans & Seniors. “Senate Budget Committee Chairman Kent Conrad, D-N.D., and House Budget Committee ranking member Chris Van Hollen, D-Md., came out strongly against the legislation on Wednesday, saying it jeopardizes not only the credit system but potentially basic government services. ‘I think it is a dreadful idea,’ Conrad said. ‘Basically what they are saying is, pay China first. Are we going to forget about the American public and the things that they need? Somehow they are secondary? And paying the Chinese and the Japanese is the first priority of this country? I don’t even know how to describe that idea; it’s just a very, very bad one.’ ‘What they are saying essentially is that the full faith and credit of the American government extends to a lot of foreign countries, but it doesn’t extend to the American people themselves,’ Van Hollen said.” [National Journal, 1/26/11; The Hill, 1/26/11]

KEY POINTS

• Sen. Toomey has introduced a bill that the Treasury Department says will allow the Republicans to evade responsibility for their failure to honor America’s legal payment obligations.

• Sen. Toomey and his colleagues claim that by prioritizing payment of principal and interest on our public debt, we can avoid default. But in reality Toomey’s bill is not only “unworkable”, according to the Treasury Department, but it would do nothing to protect the creditworthiness of the United States government.

• The Treasury Department says that the public debt is not our only legal obligation – we also need to make Social Security and Medicare payments, to pay our service men and women and military contractors, and distribute Americans’ tax refunds. The government would have to stop or delay making payments on these other obligations in order to ensure that it could make payments on the debt. In basic terms, these Republicans would rather insist that payments to China, Russia and Venezuela be made ahead of payments for benefits to veterans and seniors.

• The Treasury Department says that failure to make those payments will be considered a default by the U.S. government every bit as much as the failure to pay interest on Treasury bonds – it would be a statement to the financial markets and everybody who does business with the U.S. government that we aren’t willing to honor our legal obligations.

• In short, the Treasury Department says that Sen. Toomey’s bill would not avoid any of the disastrous consequences that failing to raise the debt ceiling in the first place would lead to. These include: a massive tax on all households as a result of skyrocketing interest rates, a potentially massive devaluation of the U.S. Dollar and drastic cuts to benefits that middle-class families, veterans and seniors rely on.

• Even by Sen. Toomey’s own estimate, his bill would force the U.S. to default on one-third of its legal obligations, and in reality the number is far higher.

For more information, please see the Treasury Department’s statement on Sen. Toomey’s proposal here: http://www.treasury.gov/connect/blog/Pages/Proposals-to-Prioritize-Payments-on-US-Debt-Not-Workable-Would-Not-Prevent-Default.aspx

In addition, please see Secretary Geithner’s letter to Congress regarding the debt ceiling: http://www.treasury.gov/connect/blog/Pages/letter.aspx

Six Ways That China Engages in Unfair Trade Practices

Below are six ways that various economists and trade experts suggest that China is engaging in unfair trade practices:

1. China demands proprietary technology from non-Chinese firms.  China recently announced a plan to force foreign manufacturers to hand over cutting-edge technology in exchange for access to the Chinese market. Under China’s so-called “indigenous innovation” program, foreign manufacturers that want access to vast swaths of China’s market are concerned they would have to enter joint ventures in which they are limited to minority stakesand share critical technologies.
2. China does little to prevent counterfeiting. China systematically ignores the manufacture and sale of counterfeit goodsof foreign products.  Piracy in China costs U.S. firms billions of dollars per year in lost sales and forceU.S. manufacturers and content providers to spend money fighting Chinese piracy.   China’s widespread counterfeiting not only harms the business interests of foreign rights holders but also can pose a direct threat to the health and safety of consumers in the United States, China and elsewhere, from contaminated pharmaceuticals and deadly food products to substandard car parts and toxic toys.
3. China continues to support illegal subsidies for domestic industries.  Despite its WTO membership, China continues to subsidize industries in direct contravention of global agreements.  In December, the Obama administration initiated a WTO case contesting the subsidies China is providing to wind power firms.  Wind power and other clean energy firmsare the industries of the future, and it is clear China has every intention of trying to subsidize its way to international leadership, instead of competing fairly with American firms.
4. China abets the dumping of underpriced goods.  Hand in hand with its illegal subsidies, the Chinese government does nothing to prevent, and often encourages, the dumping of goods on U.S and other markets.  Many Chinese exporters are state-owned enterprises whose predatory pricing practices are explicitly encouraged by government practices and policies.  When caught, Chinese exporters simply find a way to circumvent those rules as well, devising schemes such ascreating bogus new companies to ship goods,falsely declaring the country of origin or mislabeling the product.  The Chinese government is well aware of these schemes – exporters are not shy about advertising options on the internet – but willfully turns a blind eye.
5. China does not crack down on industrial espionage.  Just this month, the U.S.government announced the prosecution of a Chinese national for stealing secrets from Dow Chemical at the behest of the Chinese government.  Though China may deny it, it is hard to dispute the fact that they have certainly done little to discourage such activities.  In fact, the Congressionally appointed  U.S.-China Economic and Security Review Commission, found last year that “the Chinese government has been a major beneficiary of technology acquired through industrial espionage.”  Much of the industrial espionage from China is done through cyber attacks.
6. Chinakeepsthe Yuan artificially weakby effectivelypeggingits currency to the dollar..  By manipulating currency exchange rates, countries can gain an unfair advantage over U.S. manufacturers by effectively lowering the price of their exports.  This hurts U.S. manufacturers forced to compete at home with artificially cheap imports. Currency manipulation also imposes a direct cost on U.S. exports, making American goods sold in China more expensive and making it more difficult for U.S. exporters to compete with artificially cheap Chinese goods around the globe. This creates an unfair trade advantage, which ultimately harms manufacturers, workers, and farmers, and contributes significantly to the U.S. trade imbalance.

The Obama Administration is Working to Level the Playing Field With China. The Administration has challenged a number of China’s trade practices in front of the World Trade Organization and is actively involved in protecting U.S. firms’ competitive interests.  Eswar Prasad of the Brookings Institute writes, “With its actions and words, the Obama administration has signaled that it wants to deal with China on equal terms and will not back off from conflict where it feels that China is subverting the established rules of the game.”  Last week, Treasury Secretary Tim Geithner noted recent progress, explaining, “The United States is on track to export more than $100 billion of goods and services to China this year. Our exports to China are growing at twice the rate of our exports to the rest of the world.” [Brookings, 1/17/11; Treasury Secretary Tim Geithner, 1/12/11]

The U.S. Trade Deficit With China Has Cost America 2.4 Million Jobs, As China’s Exports Continue to Rise

U.S. Has Lost 2.4 Million Jobs Due to Trade with China. From 2001 through 2008, 2.4 million American jobs were lost or displaced due to the United States’ trade deficit with China, including 91,400 jobs in 2008 alone. [Economic Policy Institute, 3/23/10] NOTE: Click HERE for job loss numbers by state and/or Congressional district

U.S Trade Deficit With China Grew to $25.63 Billion in November; More Than $250 Billion in 2010. “U.S. exports to China hit an all-time high of $9.5 billion in November, an increase of 1.9% from the month before. But the growth in exports doesn’t begin to match U.S. imports from China, which rose 0.9% to $35.12 billion. This pushed the overall U.S. deficit with China up 0.5% to $25.63 billion.” For the first eleven months of 2010, the U.S. trade deficit with China totaled $252 billion. [U.S. Department of Commerce, Bureau of Economic Analysis, 1/13/11; Wall Street Journal, 1/14/11; MarketWatch, 1/13/11]

China’s Exports Rose 31% in 2010. China’s December 2010 exports rose 17.9 percent to $154 billion. Overall in 2010, China’s exports rose 31.3 percent over 2009 to $1.58 trillion. This trade imbalance is far from a recent trend; China’s exports to the U.S. have exceeded its imports since 1990.  Still, China is extremely reliant on the U.S. economy as China’s exports of goods and services to the U.S. currently account for 35 percent of the country’s gross domestic product.  Although Chinese imports are steadily increasing across the board, computers and electronics account for the largest share of imported goods from China. [AP, 1/10/11; Center for American Progress, 12/22/10; Brookings, 1/11]

Perpetuating This Trade Imbalance Threatens Our Security. In a speech to the U.S.-China Business Council last week, Secretary of Commerce Gary Locke implored our government and business community to closely examine current trade policies, explaining, “The gross trade imbalances between our countries are a good place to start, because they have the potential to threaten global stability and prosperity.”  The U.S. cannot continue on this“debt-fueled consumption binge.” [Commerce Secretary Gary Locke, 1/13/11]

China’s Currency Manipulation Hurts U.S. Competitiveness. China’s unwillingness to allow its currency to rise in value is hampering U.S. competitiveness in the global marketplace and harming the Chinese economy, Treasury Secretary Timothy F. Geithner said last week. “Beijing’s currency policies remain the most contentious economic issue between China and Washington. By keeping the value of its currency low, China gives its exporters an advantage by making their goods cheaper on the international market.” [Washington Post, 1/12/11]

China Is Accused of Providing Unfair Subsidies to Energy Companies, Hurting American Manufacturers. In December 2010, the Obama administration “filed a case against China with the World Trade Organization, accusing Beijing of providing unfair government subsidies to Chinese energy companies. The case is in response to a petition from the United Steelworkers union in September. The union alleged that Chinese businesses are able to sell wind and solar equipment on the international market at lower prices than their competitors can because they receive subsidies. The administration’s WTO case alleges that the subsidies are in violation of global trade rules… U.S. Trade Representative Ron Kirk said the type of subsidies the Chinese government employed were ‘particularly harmful and inherently trade distorting.’” [AP, 12/23/10]

International Trade Commission Found That China’s Intellectual Property Infringement and “Indigenous Innovation” Policies Hurt U.S. Businesses. A recent report conducted by the U.S. International Trade Commission, and requested by Senators Baucus and Grassley, noted: “Intellectual property rights (IPR) infringement in China reduces market opportunities and undermines the profitability of U.S. firms when sales of products and technologies are undercut by competition from illegal, lower-cost imitations. Intellectual property (IP) is often the most valuable asset that a company holds, but many companies, particularly smaller ones, lack the resources and expertise necessary to protect their IP in China. ‘Indigenous innovation’ policies, which promote the development, commercialization, and purchase of Chinese products and technologies, may also be disadvantaging U.S. and other foreign firms and creating new barriers to foreign direct investment (FDI) and exports to China.” [U.S. International Trade Commission, November 2010; Senate Finance Committee Press Release, 12/13/10]

China is Racing the U.S. on Education and Innovation

American Students Are Falling Behind While Chinese Students Thrive. According to a recent report from the Organisation for Economic Co-operation and Development (OECD) looking at how students in 65 countries perform in math, science and reading, the United States ranks 15^th in reading, 23^rd in science and 31^st in math. China ranked at or near the top in all three categories. [OECD, PISA 2009 Results]

China is Set to Surpass U.S. in Patent Filings This Year. China bucked an unprecedented decline in global patent filings in 2009, boosting its total by 29.7 percent, while the United States saw a fall of 11.4 percent, the world patent watchdog WIPO said in 2010. In October, Thomson Reuters issued a report forecasting that China would surpass the United States in patent filings in 2011. [Reuters, 2/8/10; Thomson Reuters, 10/5/10]

China Expects Double Digit Growth in 2010

China Expects 2010 Economic Growth to Reach 10%. In the third quarter of 2010, the U.S. economy rose 2.6%. The U.S. economy grew just 1.7% in the 2^nd quarter of 2010 and 3.7% in the 1^st quarter. Meanwhile, a Chinese government official reported that China’s 2010 economic growth was estimated to reach 10% when final numbers are released. [Bureau of Economic Analysis, accessed 1/10/11; UPI, 1/4/11]

Economists Predict China’s Economy Could Overtake U.S. in 2020. In December, The Economist reported, “When Goldman Sachs made its first forecasts for the BRIC economies (Brazil, Russia, India and China) in 2003, it predicted that China would overtake America in 2041. Now it says 2027. In November Standard Chartered forecast that it will happen by 2020. This partly reflects the impact of the financial crisis. In the third quarter of 2010 America’s real GDP was still below its level in December 2007; China’s GDP grew by 28% over the same period.” [The Economist, 12/16/10]

Key Legislation

The China Currency Exchange Rate Oversight Reform Act of 2010:  Sponsored by a bipartisan group of 20 Senators led by Senator Chuck Schumer, Senator Debbie Stabenow and Senator Lindsey Graham, this legislation would provide less flexibility to the Treasury Department when it comes to citing countries for currency manipulation. It would also impose stiff new penalties on designated countries, including tariffs on the countries’ exports and a ban on any companies from those countries receiving U.S. government contracts.  The sponsors have announced their plans to reintroduce this Congress. For more information on this bill, please see: http://schumer.senate.gov/new_website/record.cfm?id=323135&&&search_field=currency%20exchange.

The Currency Reform for Fair Trade Act: Last Congress, Senators Sherrod Brown and Snowe introduced the House-passed currency bill (HR 2378) as an amendment to the tax extenders legislation.   The legislation, which directs the U.S. Department of Commerce to treat currency undervaluation as a prohibited export subsidy, would ensure the government is equipped to respond on behalf of American workers and manufacturers by imposing countervailing duties on subsidized exports from countries like China.  (HR 2378 passed the House by a vote of 348-79 last September.)  For more information on the Brown-Snowe proposal for this Congress, please see: http://brown.senate.gov/newsroom/press_releases/release/?id=349DE095-6495-4363-9929-71FC7FE67299.

Foreign Manufacturers Legal Accountability Act:Sponsored by Senator Sheldon Whitehouse, the Foreign Manufacturers Legal Accountability Act requires foreign companies that manufacture and import consumer goods to designate an agent for service of process in the United States and to consent to the jurisdiction of courts in the state where the agent is located.  In doing so, it ensures that foreign manufacturers that injure Americans can be held accountable in our country, protecting American consumers and leveling the playing field so that American manufacturers can compete fairly and keep creating good American jobs. For more information on this bill, please see: http://whitehouse.senate.gov/newsroom/press/release/?id=995055cc-5976-4b17-8bb1-a68f574b0107

The ENFORCE Act: Chinese suppliers are increasingly engaging in fraud and other complicated schemes to evade and circumvent the special U.S. duties that are in place to protect domestic manufacturers from China’s unfair trade practices. Sponsored by Sen. Wyden, the ENFORCE Act would hold Customs and Border Protection more accountable to investigating allegations of duty evasion so that U.S. producers are no longer harmed by this rampant circumvention of U.S. law. For more information on this bill, please see: http://wyden.senate.gov/newsroom/press/release/?id=3ae656bd-ef29-4bbf-b392-04961bc927bd

For more information, please see:

Senator Wyden’s Report on U.S. Trade in Environmental Goods, Updated 12/14/10 http://wyden.senate.gov/download/?id=b06d7ac2-1067-4606-8cf1-a17ba1d7b750

For information provided by the White House and the Senate Finance Committee on how each state will benefit from select provisions in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act, please click on an individual fact sheet below.

This week, the Senate is expected to consider a Continuing Resolution that will fund federal government operations through March 4, 2011.  Under the new Continuing Resolution, funding would continue at Fiscal Year 2010 enacted levels for most programs. 

This legislation was offered as a Senate amendment, S.Amdt. 4885, to the Fiscal Year 2011 Consolidated Appropriations Act, H.R. 3082.  Senator Reid filed cloture on the underlying legislative vehicle, H.R. 3082, on Sunday, December 19, 2010.  The resulting cloture vote is expected to take place Tuesday, December 21, 2010.  The Continuing Resolution currently in effect, H.J.Res. 105, expires at midnight on December 21, 2010. 

Talking Points

Senate Republicans decided to play politics instead of doing their jobs when they forced Congress to adopt a short-term CR at the very last minute, instead of supporting the bipartisan Senate Omnibus appropriations bill they helped craft and had previously agreed to move forward in the Senate.

By forcing Congress to set aside the Senate Omnibus bill and pass a short-term Continuing Resolution:

• Senate Republicans blocked a bipartisan compromise bill that reflected a careful, yearlong effort by members of both parties who worked together to examine the President’s budget request, hold hundreds of hearings and thousands of meetings, and seek justification from every federal department and agency regarding how taxpayer dollars are being spent. 
   
• Senate Republicans rejected a bill that would have responsibly funded the federal government in line with an overall spending cap (Sessions-McCaskill amendment) that they themselves sought earlier this year.
   
• Senate Republicans abdicated Congress’s basic duty under the Constitution to take responsibility for spending decisions and provide much needed oversight of the Executive Branch’s funding requests.
   
• Senate Republicans showed that they would rather take a blunt approach to the budget regardless of a program’s merit or need, thereby allowing unelected bureaucrats to determine how taxpayer funds are allocated.
   
• Senate Republicans just kicked the can down the road, forcing Congress to revisit the same old issue only a few months later when we should be spending this time on efforts to create jobs and strengthen America’s middle class.
   
• Senate Republicans killed the new funding they requested themselves for local projects directly benefiting constituents in their own home states.

Major Provisions

The following information was provided by the Senate Committee on Appropriations.

Ongoing programs.  Under the new Continuing Resolution, funding would continue at Fiscal Year (FY) 2010 enacted levels for most programs.  In total, the Continuing Resolution would provide funding at a rate approximately $1.16 billion over the FY 2010 level. 

Extended Authorizations and Other Actions.  The Continuing Resolution (CR) extends authorizations or allows for continuous normal operations through March 4, 2011, for certain programs that would otherwise expire or be severely disrupted, including:

New Anomalies:

• Freezes the pay of Federal civilian employees for two calendar years starting in 2011.

• Ensures that the Department of Health and Human Services obligates the same amount for the Low Income Home Energy Assistance Program (LIHEAP) during the CR as it obligated during the same period in FY 2010.

• Ensures that the maximum Pell Grant award remains at the same level it was in FY 2010.

• Clarifies the definition of a “highly qualified teacher.”

• Adjusts the amount available for operations of the National Telecommunications and Information Administration (NTIA) to prevent layoffs that would cause the agency to cease almost all operations.

• Adjusts the current rate of operations for the Veterans Benefits Administration to $2.1 billion, an increase of $460 million over the FY 2010 appropriation, to prevent layoffs of claims processers and to support efforts in reducing the processing times of disability claims.

• Prevents elimination of over $4.3 billion of reduced fee loans for small businesses that would otherwise expire.

• Ensures adequate funding to prevent significant scaling back of critical audits and investigations of the Troubled Asset Relief Program.

• Prevents the need for a rate increase on telecommunications companies that would be passed on to consumers in the form of higher charges to consumer phone bills.

• Extends authority for current surface transportation programs to ensure that State departments of transportation and local transit agencies will be able to continue their ongoing infrastructure investments.

• Provides transfer authority for the Transportation Security Administration to sustain efforts to improve defenses against terrorist attacks, such as the attack on Northwest Flight 253 last December and the recent attempts against all-cargo aircraft.

• Provides transfer authority to the Coast Guard to address operational challenges, such as military pay.

Anomalies continued from the previous CR:

• Allows the Federal Air Marshals to maintain the existing FY 2010 4th quarter coverage level for international and domestic flights.

• Allows the Commissioner of U.S. Customs and Border Protection to maintain the level of Customs and Border Protection personnel in place in the final quarter of FY 2010.

• Extends the authority for the Department of Defense to execute the Commanders Emergency Response Program, which is an essential tool for military commanders in Iraq and Afghanistan.

• Extends the application period for retroactive stop loss benefits throughout the duration of the continuing resolution.

• Extends for the duration of the CR the existing authority for the Department of Homeland Security (DHS) to retain its authority to regulate chemical facilities that present high levels of risk.

• Extends for the duration of the CR the existing Federal Emergency Management Agency (FEMA) authority to provide technical and financial assistance to States and localities for pre-disaster hazard mitigation activities.

• Adjusts the current rate of operations for the National Nuclear Security Administration’s weapons program to $7 billion, a $624 million increase over FY 2010 appropriation, in conjunction with the START Treaty.

• Provides for the continuation of a program included under the Child Nutrition Act, which will allow for school feeding activities where year round activities occur.

• Provides an additional $23 million to the Department of the Interior's Bureau of Ocean Energy Management (formerly the Minerals Management Service) for increased oil rig inspections in the Gulf of Mexico.  The increase in funding is fully offset with a rescission of unobligated balances.

• Allows the National Cord Blood Inventory contracts to continue at their current level through the duration of the CR.

• Extends the Temporary Assistance for Needy Families (TANF) block grant and Child Care Entitlement to States program at their current level through the duration of the CR.

• Reduces the amount available for BRAC 2005 from over $7 billion in FY 2010 to a rate equal to $2.35 billion, the FY 2011 request.

• Adjusts the current rate for operations for the Foreign Military Financing (FMF) program in order to include in the rate for operations the $965 million that was advanced for Israel, Egypt, and Jordan in the FY 2009 Supplemental.

• Continues the rate of operations for the Pakistan Counterinsurgency Capability Fund (PCCF) at $700 million. This section also continues the terms and conditions included in the FY 2009 and FY 2010 Supplemental bills.

• Reduces the amount available for Census programs from over $7 billion in FY 2010 to a rate equal to $964 million annually, the same as the amount recommended for FY 2011.

• Permits the District of Columbia to spend funds under its local budget beginning on and after the October 1, 2010, start of fiscal year.

• Allows the U.S. Interagency Council on Homelessness, which is responsible for coordinating the federal policy relating to homelessness, to continue operating.

• Extends the current Home Equity Conversion Mortgage (HECM) program loan limits for high cost areas through FY 2011.

• Extends the current Federal Housing Administration (FHA) loan limits for high cost areas through FY 2011.

• Extends the current GSE loan limits for high cost areas through FY 2011.

Legislative History

The House-passed Continuing Resolution that is the legislative vehicle for the new Continuing Resolution, H.R. 3082, originated in the House on June 26, 2009, as the Military Construction and Veterans Affairs Appropriations Act for Fiscal Year 2010.  On December 8, 2010, the House amended a Senate-passed version of this bill with a government-wide Continuing Resolution as a substitute amendment.  This House-passed Continuing Resolution was received in the Senate on December 9, 2010. 

On December 14, 2010, Senate Appropriations Committee Chairman Inouye released details of the year-long Senate Omnibus bill.  However, this legislation was set aside in the face of unified Republican obstructionism.  Instead, the Senate will consider a short-term Continuing Resolution through March 4, 2011, S.Amdt. 4885. 

On December 19, 2010, Senator Reid filed cloture on the motion to concur in the House amendment to the Senate amendment to H.R. 3082, with a Reid amendment in the nature of a substitute, S.Amdt. 4885.  The resulting vote is expected to take place on Tuesday, December 21, 2010. 

At present, a Continuing Resolution, H.J.Res. 105, is in effect until midnight on Tuesday, December 21, 2010.

Expected Amendments

DPC will circulate any information related to amendments to its staff listservs.

Administration Position

As of this writing, the White House has not released a Statement of Administration Policy (SAP) on the Continuing Resolution through March 4, 2011. (Previous SAPs were issued for H.R. 3082 when this bill was the appropriations measure for military construction and veterans affairs.)  All SAPs are posted to the White House website here.

Resources

• Full Text of the Continuing Resolution through March 4, 2011, S. Amdt. 4885, and Bill Summary & Status information for H.R. 3082, the legislative vehicle for the amendment

• Bill Summary & Status information for H.J. Res. 105, the Continuing Resolution currently in effect through December 21, 2010

• THOMAS chart on the status of FY11 appropriations legislation

• Congressional Research Service’s list of key CRS reports on appropriations

• Senate Appropriations Committee’s summary of the Continuing Resolution Through March 4, 2011

The federal government shares responsibility with state, local, and private organizations to help protect our nation’s natural resources for current and future generations. In order to help fulfill that responsibility, the 110^th Congress passed and President Bush signed into law the Consolidated Natural Resources Act of 2008.  Furthermore, at the beginning of 111^th Congress, Congress passed and President Obama signed into law the Omnibus Public Land Management Act of 2009.  Each piece of legislation was passed by both houses of Congress with overwhelming bipartisan support.

Throughout the 111^th Congress, committees in the Senate and the House of Representatives have worked to protect the nation’s environment and natural resources by favorably reporting bipartisan ocean, wildlife, tribal, and natural resource bills to the Senate floor.  Recently, Senator Reid announced that the Senate could consider natural resources legislation before the end of the 111^th Congress.

As Senate Majority Leader, Senator Reid combined many of the bipartisan and bicameral pieces of legislation that have been favorably reported by those committees into one bill, as a Senate Amendment to S. 303.  Nearly all of the bills contained in the Senate Amendment to S. 303 have already been passed by the House of Representatives with bipartisan support or enjoy strong bipartisan support in both the House and Senate. 

Major Provisions

Division A—National Park Service Authorization

Title I of Division A of the America’s Great Outdoors Act of 2010 would designate the Valles Caldera National Preserve in New Mexico as a unit of the National Park System.

Title I of Division A of the America’s Great Outdoors Act of 2010 would establish the Waco Mammoth National Monument in Texas as a unit of the National Park Service.

Title II of Division A would authorize the transfer of 4,070 acres of land from the Forest Service to the National Park Service to expand the boundaries of the Oregon Caves National Monument.

Title II of Division A would modify the boundary of the Minuteman Missile National Historic Site by authorizing the Secretary of Interior to transfer 25 acres of Buffalo Gap National Grasslands from the Forest Service to the Minuteman Missile National Historic Site and to establish a visitor center and administrative facility at the site near Philip, South Dakota.

Title II of Division A would authorize the Secretary of the Interior to establish a joint partnership with the Porter County Convention, Recreation and Visitor Commission with regard to the use of the Dorothy Buell Memorial Visitor Center as a visitor center for the Indiana Dunes National Lakeshore.  The legislation would also allow the Secretary to plan, design, construct, and install exhibits in the Center related to the use and management of the resources at the Lakeshore and use park staff from the Lakeshore in the Center to provide visitor information and education.

Title II of Division A would authorize the National Park Service to stock fish in lakes in North Cascades National Park, Ross Lake National Recreation Area, and Lake Chelan National Recreation Area in Washington State.

Title II of Division A of the America’s Great Outdoors Act of 2010 would expand the area of the Petersburg National Battlefield in Virginia by more than 7,000 acres.

Title of Division A would expand the boundaries of the Gettysburg National Military Park in Pennsylvania to include a small parcel of land containing the newly refurbished Gettysburg Train Station and would accept a donation from the Gettysburg Foundation consisting of a 45-acre tract of land along Plum Run in Cumberland Township.

Title II of Division A of the America’s Great Outdoors Act of 2010 would authorize the National Park Service to enter into a cooperative agreement with Northwestern State University of house the curatorial collection Cane River National Heritage Area in the State of Louisiana.

Title III of Division A would require the National Park Service to study the suitability and feasibility of designating the New Philadelphia, Illinois archaeological site and surrounding lands in Illinois as a unit of the National Parks System.

Title III of Division A of the America’s Great Outdoors Act of 2010 would requirethe National Park Service to study whether the General of the Army, George Catlett Marshall National Historic Site at home Dodona Manor and gardens in Leesburg, Virginia should become a National Park System unit.

Title III of Division A of the America’s Great Outdoors Act of 2010 would authorize theNational Park Service to study the suitability and feasibility of adding the Heart Mountain Relocation Center, in the state of Wyoming, as a National Park System unit.

Title III of Division A of the America’s Great Outdoors Act of 2010 would authorize the National Park Service to study the suitability and feasibility of designating the Colonel Charles Young Home in Xenia, Ohio, as a unit of the National Park System.

Title III of Division A would direct the Secretary of the Interior to study ways of protecting and interpreting sites related to the civil rights movement in the United States.

Title III Division A would direct the National Park Service (NPS), to complete a special resource study to determine the suitability and feasibility of designating Camp Hale, in Colorado, as a National Park System unit.

Title IV of Division A of the America’s Great Outdoors Act of 2010 would authorize the National Mall Liberty Fund D.C., a non-profit organization based in the District of Columbia, to construct a memorial on Federal land in the District of Columbia to honor the 5,000 slaves and free black persons who served as soldiers or provided civilian assistance during the American Revolution.

Title V of Division A would amend the Omnibus Public Land Management Act of 2009 to include battlefield sites associated with the Revolutionary War and the War of 1812 among the sites authorized to receive funding under the American Battlefield Protection Program.

Title V of Division A of the America’s Great Outdoors Act of 2010 would reauthorize the National Park System Advisory Board through fiscal year 2020 and the National Park Service Concessions Management Advisory Board through fiscal year 2019 make modifications to the procedures of the National Park Service.

Division B—National Wilderness Preservation System

Title XX of Division B would designate approximately 240,000 acres of land in New Mexico as the Organ Mountains Wilderness, Aden Lava Flow Wilderness, Potrillo Mountains Wilderness, Cinder Cone Wilderness, Whitethorn Wilderness, Robledo Mountains Wilderness, Broad Canyon Wilderness, and Sierra de las Uvas Wilderness.  The bill would also establish the Organ Mountains National Conservation Area, and the Desert Peaks National Conservation Area.

Title XXI of Division B of the America’s Great Outdoors Act of 2010 would designate 22,173 acres of land in the Mount Baker-Snoqualmie National Forest as wilderness. The legislation would also designate a 27.4-mile segment of the Middle Fork Snoqualmie River and the entire Pratt River as additions to the Wild and Scenic River System.  The bill would designate the Pratt River and 6.4 miles of the Middle Fork Snoqualmie River as ‘wild’ and would designate the remaining 21 miles of the Snoqualmie as ‘scenic.’

Title XXII of Division B of the America’s Great Outdoors Act of 2010 would add 30,540 acres of wilderness from land currently managed by the Forest Service and Bureau of Land Management to be designated as the Devil's Staircase Wilderness.  The legislation would also add 14.6 miles of wild and scenic rivers along Franklin and Wasson Creek.

Title XXIII of Division B of theAmerica’s Great Outdoors Act of 2010 would authorize the Secretary of Agriculture to issue a special use authorization for the owners of water storage, transport, or diversion facilities located on National Forest System land in the Frank Church-River of No Return Wilderness and the Selway-Bitterroot Wilderness in Idaho.

Division C—Forest Service Authorizations

Title XXX of Division C would establish the 4,726-acre Chimney Rock National Monument in the San Juan National Forest in southwest Colorado.

Title XXXI of Division C would withdraw federally owned lands and interests in the North Fork Flathead Watershed in Montana from all forms of location, entry, and patent under the mining laws and disposition under all laws relating to mineral or geothermal leasing.

Title XXXII of Division C of the America’s Great Outdoors Act of 2010 would provide for the exchange about five acres of federal land for a similar amount of acreage owned by the Sugar Loaf Fire Protection District of Boulder, Colorado.

Title XXXII of Division C of the America’s Great Outdoors Act of 2010 would direct the Secretary of Agriculture to convey up to two acres of National Forest System land to the town of Alta, Utah for public purposes.

Title XXXII of Division C would direct the Secretary of Agriculture to convey to the town of Mantua, Utah, certain parcels of National Forest System land in the Wasatch-Cache National Forest.

Title XXXII of  Division C of the America’s Great Outdoors Act of 2010 would provide for the exchange of approximately 82 acres of National Forest System land in the Mendocino National Forest for approximately 160 acres of land owned by Solano County, California.

Title XXXII of Division C would direct the Forest Service to convey about one acre of land in Oregon to the city of Wallowa.

Title XXXII of Division C would make technical corrections to the T’uf Shur Bien Preservation Trust Area Act to help facilitate the land transfers called for by the land settlement with the Sandia Pueblo.

Title XXXIII of Division C would amendthe National Forest Ski Area Permit Act of 1986 to clarify the authority of the Secretary of Agriculture regarding additional recreational uses of National Forest System land that are subject to ski area permits.

Title XXXIII of Division C of the America’s Great Outdoors Act of 2010 would help to mitigate the hazards posed by landscape-scale epidemics insect infestations and diseases in the West.  The legislation would also authorize cooperative agreements and contracts with State agencies to facilitate hazardous fuel reduction and forest restoration projects on adjacent parcels of Federal and non-Federal land.

Title XXXIII of Division C would establish a coordinated avalanche protection program and authorize the appropriation of funds for the Forest Service to provide grants to reduce the risks to the public from avalanches on federal land.

Division D—Department of Interior Authorizations

Title XL of Division D would extend the Federal Land Transaction and Facilitation Act authorization to July 25, 2020, and expand the pool of eligible lands to include any lands identified for disposal as of the date of enactment

Title XLI of Division D of the America’s Great Outdoors Act of 2010 wouldauthorize the appropriation of funds for a U.S. Geological Survey program to monitor active volcanoes and to enhance public notification of potentially harmful volcanic activity.

Title XLII of Division D would establish the Connecticut River Grants and Technical Assistance Program in the Department of the Interior to provide grants and technical assistance to state agencies, local governments, non-profit organizations, and private stakeholders in New Hampshire and Vermont to carry out projects for the conservation, restoration, and interpretation of historic and other resources in the upper Connecticut River watershed.

Title XLIII of Division D would amend the Surface Mining Control and Reclamation Act of 1977 by clarifying that the balance of un-appropriated amounts collected by States and Indian tribes from abandoned mine lands funds can be used for non-coal reclamation.

Title XLIV of Division D would amend the Public Lands Corps Act of 1993by renaming the Public Lands Corps as the Public Lands Service Corps. The bill would also create a grant program for the establishment of Indian Youth Service Corps to carry out tribal and community priority projects.

Title XLV of Division D would withdraw approximately 17,000 acres of public land within the Nevada National Security Site (formerly known as the Nevada Test Site) for the Department of Energy to use as a Solar Demonstration Zone.

Title XLV of Division D of the America’s Great Outdoors Act of 2010 would modifythe patent for the Whitefish Point Light Station issued to the Great Lakes Shipwreck Historical Society in Chippewa County, Michigan.

Title XLVI of Division D would implement a Federal Court ordered settlement protecting desert tortoise and other habitat by validating land patents in Clark and Lincoln Counties, Nevada.

Title XLVI of Division D would provide a permanent authorization for the Land and Water Conservation Fund.

Division E—National Heritage Areas

Title L of Division E of the America’s Great Outdoors Act of 2010 would establish theSusquehanna Gateway National Heritage Area in Pennsylvania.  The legislation would designate the Lancaster-York Heritage Region as the management entity for the Area and require the Lancaster-York Heritage Region to prepare and submit a management plan for the area.

Title LI of Division E would establish the Alabama Black Belt National Heritage Area in Alabama.  The Black Belt is a region of the southeastern United States that is known for its fertile soil.  The bill would designate the Center for the Study of the Black Belt at the University of West Alabama as the management entity for the proposed heritage area and would authorize the appropriation of funds for financial assistance to the center and other eligible entities over the next 15 years.

Division F—Bureau of Land Management Authorizations

Title LX of Division F of the America’s Great Outdoors Act of 2010 would designate 13,420 acres of land as the Cerro del Yuta Wilderness and 8,000 acres of land as the Rio San Antonio Wilderness in New Mexico.  The bill would also establish the 235,980 acre Rio Grande del Norte National Conservation Area.

Title LX of Division F of the America’s Great Outdoors Act of 2010 would authorize the Secretary of the Interior, through the Director of the Bureau of Land Management, to purchase the Gold Hill Ranch in Coloma, California – the location of the founding of Wakamatsu Tea and Silk Farm Colony in 1869.  The legislation instructs that the acquisition of the Gold Hill Ranch be from willing sellers with donated or appropriated funds.

Title LX of Division F of the America’s Great Outdoors Act of 2010 would include approximately two acres of land in Orange County within the existing California Coastal National Monument.

Title LXI of Division F of the America’s Great Outdoors Act of 2010 would conveyabout 18,000 acres of land located in western Alaska to the Bering Straits Native Corporation and the State of Alaska in satisfaction of claims made by those parties under the Alaska Native Claims Settlement Act and the Alaska Statehood Act.

Title LXI of Division F wouldconvey over 2,000 acres of land to meet the future needs of colleges and universities in the Nevada System of Higher Education.

Title LXI of Division F of the America’s Great Outdoors Act of 2010 would direct the Bureau of Land Management to convey about 910 acres of land in Oregon to either the City of La Pine or Deschutes County.

Title LXII of Division F of the America’s Great Outdoors Act of 2010 would withdraw approximately 640 acres of land in Clark County, Nevada from mining, mineral, and geothermal laws.

Division G—Rivers and Trails

Title LXX of Division G would add approximately 15.1 miles of the Molalla River and 6.2 miles of the Table Rock Fork of the Molalla River in Oregon as recreational components of the National Wild and Scenic Rivers System.

Title LXX of Division G of the America’s Great Outdoors Act of 2010 would designate a 14.3 mile segment at the headwaters of Illabot Creek in Washington as a Wild and Scenic River.

Title LXX of Division G would addnine miles of the White Clay Creek in Delaware and Pennsylvania to the National Wild and Scenic Rivers System.

Title LXX of Division G would study a five mile segment of the Elk River in West Virginia for potential addition to the Wild and Scenic Rivers System.

Title LXX of Division G would increase the size of the North Country National Scenic Trail in northeastern Minnesota to 4,600 miles by including existing hiking trails along Lake Superior's north shore and in Superior National Forest and Chippewa National Forest.

Division H—Water and Hydropower Authorizations

Title LXXX of Division H would authorize limited federal financial assistance for the planning, design and construction of Phase II of the Magna Water District water reuse and groundwater recharge project.

Title LXXX of Division H of the America’s Great Outdoors Act of 2010 would amend the Reclamation Wastewater and Groundwater Study and Facilities Act to authorize the Secretary of the Interior, in coordination with certain municipalities, to design, plan, and construct recycled water distribution systems in California.

Title LXXX of Division H wouldincrease the amount authorized to be appropriated for a water recycling project at the Calleguas Municipal Water District in California to enable the Bureau of Reclamation to complete a component of that project.

Title LXXX of Division H of the America’s Great Outdoors Act of 2010 would amend the Reclamation Wastewater and Groundwater Study and Facilities Actto authorize the Secretary of the Interior to participate in design, planning, and construction of permanent facilities to reclaim and reuse water in the City of Hermiston, Oregon.

Title LXXX of Division H of the America’s Great Outdoors Act of 2010 would help facilitate voluntary transfers of water supplies between certain users of the Central Valley Project in California.

Title LXXX of Division H of the America’s Great Outdoors Act of 2010 would clarify theadministrative jurisdiction of the Secretaries of the Interior and Agriculture with respect to certain Federal land near the C.C. Cragin Dam and Reservoir in the State of Arizona.

Title LXXX of Division H wouldrequire the Secretary of the Interior to maintain the structural integrity of the Leadville Mine Drainage Tunnel, located one mile north of Leadville, Colorado.

Title LXXX of Division H would extend the authority of the Secretary of the Interior to spend proceeds collected by the Western Area Power Administration for fish recovery programs in the Upper Colorado and San Juan River Basins.

Title LXXXI of Division H of the America’s Great Outdoors Act of 2010 would require the Federal Energy Regulatory Commission to reinstate the license for the proposed 1.5-megawatt Hydroelectric Project No. 12063 in Lincoln County, Idaho and grant a three-year extension to the commencement of construction deadline.

Title LXXXI of Division H of the America’s Great Outdoors Act of 2010 would require the Federal Energy Regulatory Commission to reinstate the license for the proposed 1.5-megawatt Hydroelectric Project No. 12423 in Lincoln County, Idaho and grant a three-year extension to the commencement of construction deadline.

Title LXXXI of Division H would authorize the Secretary of the Interior to facilitate the development of hydroelectric power on the Diamond Fork System of the Central Utah Project.

Title LXXXI of Division H would amend the Hoover Power Plant Act of 1984 by increasing the amount of electricity to be marketed by the Western Area Power Administration and would allocate much of the dam's currently unallocated electricity to Native American Indian tribes and other entities.  The revised allocations would remain in effect from 2017 through 2067.

Title LXXXII of Division H would authorize the Uintah Water Conservancy District in Utah to prepay the net present value of certain amounts the district owes to the U.S. Treasury for its share of the cost to build the Jensen Unit of the Central Utah Project.

Title LXXXII of Division H of the America’s Great Outdoors Act of 2010 would direct the Bureau of Reclamation, to complete a feasibility study for domestic, commercial, municipal, industrial, and irrigation water supply for the Tule River Tribe of the Tule River Reservation, California.

Title LXXXII of Division H would direct the Secretary of the Interior to conduct a study of water resources in the Rialto-Colton Basin in California in order to understand how to  most effectively remediate existing percholorate groundwater contamination in the area.

Division I—Insular Areas

Division I of the America’s Great Outdoors Act of 2010 would convey to the government of the Commonwealth of the Northern Mariana Islands the submerged lands surrounding the islands extending outward three geographical miles from the coastline.

Division J—Wildlife and Habitat Conservation

Subtitle A of Subtitle C of Division J would create the National Fish Habitat Board and establish procedures to implement the goals of the 2006 National Fish Habitat Action Plan – a comprehensive framework developed by non-federal stakeholders in cooperation with local, state, and Federal officials to conserve fish species.  The legislation would also authorize funding for projects that conserve fish habitat and implement the action plan. 

Subtitle B of Subtitle C of Division J of the America’s Great Outdoors Act of 2010 would reauthorize the Marine Turtle Conservation Act and authorize appropriation of funds through 2016 to provide grants for projects designed to conserve, protect and recover threatened and endangered marine turtle populations. 

Subtitle C of  Subtitle C of Division J would reauthorize the Neotropical Migratory Bird Conservation Act through fiscal year 2016.  This Act, which was originally passed in 2000, encourages habitat protection, education, researching, monitoring, and capacity building to provide for the long-term protection of neo-tropical migratory birds, which are critically important multi-billion dollar wildlife watching industry.

Subtitle D of Subtitle C of Division J would authorize the U.S. Fish and Wildlife Service, to conduct a Joint Venture Program to protect, restore, enhance, and manage migratory bird populations, their habitats, and critical ecosystems, through voluntary actions on public and private lands.

Subtitle E of Subtitle C of Division J of America’s Great Outdoors Act of 2010 would require the U.S. Fish and Wildlife Service to establish a grant program to protect and conserve wild cranes and their habitat.  The act would authorize the appropriation of funds to provide financial assistance to eligible government agencies, international or foreign organizations, and private entities engaged in such activities.

Subtitle F of Subtitle C of Division J of the America’s Great Outdoors Act of 2010 would require the U.S. Fish and Wildlife Service to establish a grant program to protect and conserve rare species of great cats and canids and authorizes appropriations of funds through 2016.

Subtitle G of Subtitle C of Division J of the America’s Great Outdoors Act of 2010 would reauthorize the appropriation of funds for the junior duck stamp program through fiscal year 2016.  More than 28,000 students participate in the Nationwide Junior Duck Stamp art contest each year, and the winning entry is reproduced as the annual Junior Duck Stamp.  Proceeds from the sale of these stamps are used to support conservation education programs, awards, and scholarships of Junior Duck Stamp Program participants.

Subtitle A of Subtitle CI of Division J of the America’s Great Outdoors Act of 2010 would authorize the Secretary of the Interior to provide financial assistance to Delaware, Louisiana, North Carolina, Maryland, Oregon, Virginia, and Washington State for the control or eradication of South American nutria, which can cause significant damage to natural habitats and economically important crops.  The bill also would provide assistance for the restoration of marshlands damaged by this invasive species.

Subtitle A of Subtitle CII of Division J would authorize appropriations for the existing Gulf of Mexico Program Office within the Environmental Protection Agency.  This office is responsible for supporting efforts to monitor, restore, and protect the water quality and marine ecosystems of the Gulf of Mexico.

Subtitle B of Subtitle CII of the America’s Great Outdoors Act of 2010 wouldamend the Lake Tahoe Restoration Act of 2000 to authorize appropriations funds to combat invasive species, improve water clarity, reduce the threat of catastrophic wildfire, and restore the environment of the Lake Tahoe Basin. 

Subtitle C of Subtitle CII of Division J wouldamend the Clean Water Act to reauthorize the National Estuary Program through 2016 and enhance transparency of and accountability for participating estuary programs.

Subtitle D of Subtitle CII of Division J would authorize funding to implement high-priority restoration efforts outlined in the Puget Sound comprehensive conservation and management plan known as the Puget Sound Action Agenda. 

Subtitle E of Subtitle CII of Division J would establish a Columbia Basin Restoration Program within the EPA toreduce toxic contamination in the Columbia River.  The bill would authorize funding to assist stakeholders – including state and local agencies, tribal governments, industry, landowners, and environmental organizations – to coordinate and implement voluntary toxic reduction activities throughout the basin and the Flathead River sub-basin.

Subtitle F of Subtitle CII of Division J would authorize funds for the protection and restoration of the Great Lakes, streamline Great Lakes governance and reauthorize the appropriation of funds to reclaim parts of the Great Lakes where contamination has settled into lake-bottom sediment.

Subtitle G of Subtitle CII of Division J of the America’s Great Outdoors Act of 2010 would reauthorize through 2016 two programs to protect the water quality and restore the shore of the Long Island Sound as well as establish additional, targeted resources for wastewater infrastructure improvements in each of the watershed states that have committed to improving water quality in the Sound.

Subtitle H of Subtitle CII of Division J wouldsupport efforts by state and local governments in the Chesapeake Bay Basin to restore its water quality and its tidal segments in order to sustain native fish and wildlife.

Subtitle I of Subtitle CII of Division J of the America’s Great Outdoors Act of 2010 would establish a grant program to restore the San Francisco Bay, which is one of the largest estuaries on the West Coast, home to scores of threatened and endangered species of wildlife, and an important contributor to the regional, state and national economies.  The bill would support implementation of goals outlined in the locally-developed comprehensive conservation and management plan for the San Francisco Bay estuary. 

Subtitle A of Subtitle CIII of Division J of the America’s Great Outdoors Act of 2010 would reauthorize agrants program to support state and local governments’ efforts to monitor coastal water quality around the nation’s beaches, which are important tourist destinations and critical to many local economies. The bill would also help to protect public health by notifying the public when beach water does not meet established standards.  This legislation would modify testing methods for water-borne pathogens and other contaminates in costal recreation waters. 

Subtitle B of Subtitle CIII of Division J of the America’s Great Outdoors Act of 2010 would amendthe Chesapeake Bay Initiative Act of 1998 to make permanent the authorization of appropriations for conservation efforts in the Chesapeake Bay Gateways and Watertrails Network. 

Subtitle C of Subtitle CIII of Division J would reauthorize the U.S. Geological Survey to provide grants to colleges and universities to support research aimed at increasing the effectiveness and efficiency of water treatment systems.  Additionally, the bill would reauthorize appropriations for grants to fund research into regional or interstate water issues.

Subtitle I of Subtitle CIV of Division J of the America’s Great Outdoors Act of 2010 would direct the General Services Administration to select and sell a piece of federal property located in Washington, D.C., to the National Women's History Museum, Inc.  (a non-profit corporation) to develop a National Women’s History Museum.

Division K—Oceans and Fisheries

Title CXI of Division K of the America’s Great Outdoors Act of 2010 would expand Federal efforts to protect and restore the healthiest remaining salmon strongholds in North America.  The legislation would authorize funds to establish a comprehensive, science-based strategy for the conservation of wild salmon.

Title CXII of Division K would close a loophole in the Magnuson-Stevens Act to apply shark finning prohibitions and penalties not only to fishing vessels, but any ship involved in the transfer shark fins at sea.

Title CXIII of Division K would reauthorize funding for National Oceanic and Atmospheric Administration (NOAA) programs that rescue and rehabilitate marine mammals such as whales that become stranded or entangled.

Title CXIV of Division K of the America’s Great Outdoors Act of 2010 would authorize funds for a sea otter research and recovery program along the southern coast of California.  The legislation would augment current authorized funding levels that have not been adequate to support efforts to reduce or eliminate human and environmental factors impacting sea otter populations.

Title CXV of Division K of the America’s Great Outdoors Act of 2010 would establish uniform enforcement policies and procedures for federal statutes that regulate commercial fishing.  The legislation would also authorize funding for programs that improve law enforcement efforts related to international fisheries.

Title CXVI of Division K would add approximately 1,521 square nautical miles to the Gulf of the Farallones Sanctuary and 354 square nautical miles to the Cordell Bank Sanctuary.  This title would also strengthen protections for and provide public education regarding the ecological value and national importance of those marine environments.

Title CXVII of Division K would extend the boundaries of the Thunder Bay National Marine Sanctuary to include 3,722 square miles of Lake Huron and 225 miles of shoreline off Alcona, Alpena, and Presque Isle Counties in Michigan.  This expansion would protect more than 200 additional shipwrecks, traditional commercial fishing sites, historic docks, and underwater archaeological sites.

Title CXVIII of Division K of the America’s Great Outdoors Act of 2010 would reauthorize the Northwest Straits Marine Conservation Initiative Act with minor modifications, including codification of the composition and goals of the Northwest Straits Advisory Commission.

Title CXIX of Division K of the America’s Great Outdoors Act of 2010 would reauthorize and amend the Harmful Algal Bloom and Hypoxia Research and Control Act by allowing for appropriations of fundsfor NOAA efforts to address and mitigate the effects of harmful algal blooms and aquatic hypoxia.  The legislation would also encourage greater collaboration among State and Federal agencies tasked with studying and finding solutions for harmful algal blooms and hypoxia.

Title CXXI of Division K of the America’s Great Outdoors Act of 2010 would increase collaboration between the various programs and activities at the National Oceanic and Atmospheric Administration (NOAA) to further the agency's coastal and marine resource stewardship mission.   The bill authorizes appropriations for 2011-2014 to support stewardship and related activities carried out by the NOAA Chesapeake Bay Office and would permit the office to accept donations of funds, property, and services for use in implementing its programs.

Title CXII of Division K would authorize new appropriations for coral reef programs, establish new protections for coral reefs, and extend those protections to reefs in all U.S. waters.

Division L—Indian Homelands and Trust Land

Title CXXXII of Division L would settle pending land claim disputes along the Blackfoot River in eastern Idaho.

Division M—Budgetary Effects

Division M states that the budgetary effects of this Act, for the purpose of complying with the Statutory Pay-As-You-Go-Act of 2010, shall be determined by reference to the latest statement titled “Budgetary Effects of PAYGO Legislation” for this Act.

Legislative History

Senator Reid introduced the America’s Great Outdoors Act on December 17, 2010.

Expected Amendments

The DPC will distribute information on amendments as it becomes available to staff listservs.

Administration Position

At the time of publication, the Administration had not released a Statement of Administration Policy on theAmerica’s Great Outdoors Act.

Resources

Congressional Research Service, “Wilderness Overview and Statistics,” January 8, 2009, available here.

Congressional Research Service, “Federal Land Management Agencies: Background on Land and Resources Management,” available here.

Democratic Policy Committee, “The Bipartisan Environmental Accomplishments of the Omnibus Public Land Management Act of 2009,” available here.

Among other important provisions, the legislation designates new wilderness areas in three states, adds 4,600 miles to the national trail system, preserves important Revolutionary and Civil Wars sites, increases resources for protecting the worlds remaining marine turtles and great cats, restores critical bodies of water like Lake Tahoe, the Columbia River and the Long Island Sound, slows the decline in the world’s rapidly dwindling shark populations, and permanently authorizes the Land and Water Conservation Fund.

Wilderness

TheAmerica’s Great Outdoors Act of 2010 would designate over 325,000 acres of wilderness throughout Washington, Oregon and New Mexico.  In combination with the Omnibus Public Land Management Act that was signed into law in 2009, the approval of America’s Great Outdoors Act would bring the total amount of wilderness designated in the 111^th Congress to approximately 2.5 million acres.

Rivers

TheAmerica’s Great Outdoors Act of 2010 would add more than 90 miles to the National Wild and Scenic Rivers System.  In combination with the Omnibus Public Land Management Act that was signed into law in 2009, the approval of the America’s Great Outdoors Act would bring the length of wild and scenic rivers designated in the 111^th Congress to approximately 1,100 miles.   TheAmerica’s Great Outdoors Act would also help restore and reduce pollution in the major rivers such as the Connecticut and Columbia Rivers and their associated watersheds.

National Conservation Areas

TheAmerica’s Great Outdoors Act of 2010 would create approximately 400,000 acres of new National Conservation Areas in New Mexico.  In combination with the Omnibus Public Land Management Act that was signed into law in 2009, the approval of the America’s Great Outdoors Act would bring the total amount of national conservation areas designated in the 111^th Congress to approximately 725,000 acres.  National Conservation Areas provide important protections for special natural, cultural, and scenic resource values while improving access and recreational opportunities in those areas.

Land and Water Conservation Fund

The Land and Water Conservation Fund (LWCF) is the principal funding source used by the Departments of Interior and Agriculture to acquire lands for outdoor recreation. Over the history of the program, these LWCF funds have helped to improve key recreation and conservation sites in almost every National Forest and Wildlife Refuge east of the Rockies.  The America’s Great Outdoors Act of 2010would end the years of inadequate funding for the LWCF by making its authorization permanent.

National Parks System

TheAmerica’s Great Outdoors Act of 2010 would designate the Valles Caldera National Preserve in New Mexico as a unit of the National Park System and reauthorize the National Park System Advisory Board through fiscal year 2020 and make a variety of changes to the procedures of the National Park Service.

National Monuments

TheAmerica’s Great Outdoors Act of 2010 would establish two new National Monuments in Texas and Colorado.  The bill would also expand two existing National Monuments in California and Oregon.  In combination with the Omnibus Public Land Management Act that was signed into law in 2009, the approval of theAmerica’s Great Outdoors Act would bring the total number of National Monuments designated in the 111^th Congress to three.  National Monument designations protect areas with important natural, cultural, and historical values.

Trails

TheAmerica’s Great Outdoors Act of 2010 would increase the size of the North Country National Scenic Trail in Minnesota by 4,600 miles.  In combination with the Omnibus Public Land Management Act that was signed into law in 2009, the approval of the America’s Great Outdoors Act would bring the total amount of trails designated in the 111^th Congress to approximately 7,500 miles.

Heritage Areas

TheAmerica’s Great Outdoors Act of 2010 would create two new National Heritage Areas in Alabama and Pennsylvania.  The legislation would also expand the boundaries of an existing National Heritage Area in Louisiana.

Forests

TheAmerica’s Great Outdoors Act of 2010 would reduce the damage and threats posed to forests by bark beetles and other insects and diseases in the West.  These provisions are important because since 1990, bark beetles have killed millions of trees across millions of acres of forest from Alaska to Colorado to southern California.

Protecting Sacred Battlefields, Cold War Sites, and Honoring African American Soldiers from the Revolutionary War

TheAmerica’s Great Outdoors Act of 2010 would expand the boundaries of the Petersburg National Battlefield in Virginia and the Gettysburg National Military Park in Pennsylvania.  The legislation would also improve the Minuteman Missile National Historic Site in South Dakota by transferring 25 acres of land from the U.S. Forest Service to the National Parks Service in order to build a visitor center and administrative facility on-site.

In addition, this legislation would authorize the National Mall Liberty Fund D.C., a non-profit organization based in the District of Columbia, to construct a memorial on Federal land in the District of Columbia to honor the 5,000 slaves and free black persons who served as soldiers or provided civilian assistance during the American Revolution.

Marine Sanctuaries

TheAmerica’s Great Outdoors Act of 2010 would expand the boundaries of the Thunder Bay National Marine Sanctuary in Michigan by 4,000 square nautical miles, the Gulf of the Farallones Sanctuary by 1,521 square nautical miles, and the Cordell Bank Sanctuary by 354 square nautical miles.  National Marine Sanctuary waters provide a secure habitat for sensitive species, protect historically significant shipwrecks and artifacts, serve as natural classrooms to promote understanding and stewardship of our oceans, and offer world-class opportunities for sport fishing and diving.

Lakes, Bays, Estuaries, and Sounds

TheAmerica’s Great Outdoors Act of 2010 would take important steps to help protect the following bodies of water:

• San Francisco Bay;
• Chesapeake Bay;
• Great Lakes;
• Lake Tahoe;
• Puget Sound; and
• Long Island Sound.

TheAmerica’s Great Outdoors Act of 2010 wouldalso reauthorize the National Estuary Program which helps restore coastal water quality and watersheds.

Oceans

TheAmerica’s Great Outdoors Act of 2010 will help to improve our nation’s understanding of the dangers posed by harmful algal blooms and ocean hypoxia by reauthorizing and amending the Harmful Algal Bloom and Hypoxia Research and Control Act.

The legislation would also help to protect coral reefs by extending protections to reefs in all U.S. waters, prohibiting certain actions that destroy or damage or coral reefs, and clarify that the shark finning prohibitions of the Magnuson-Stevens Act apply not only to fishing vessels, but also to non-fishing vessels.

Fishing

TheAmerica’s Great Outdoors Act of 2010 would also authorize the funding of projects to conserve fish habitats and expand Federal support and resources for the protection and restoration of the healthiest remaining salmon strongholds in North America.  The legislation would also establish uniform enforcement policies and procedures among federal statutes that govern the regulation of commercial fishing.

There are hundreds of thousands of immigrants who were brought to the United States by their family at an early age and remain undocumented.   For most, the United States is the only country they have ever known.  Many of these individuals are at risk of being punished because they do not have the proper documentation, even though they were brought here through no fault of their own. 

These young adults are unable to join the military and some are unable to attend college because of their immigration status.  This uncertainty limits the contributions of immigrant students.  Providing a path to legal status for these young adults would encourage them to reach their full potential and contribute more fully to the United States. 

The Development, Relief, and Education for Alien Minors(Dream) Act, S. 3992, reflects a commitment to fix our broken immigration system and give promising young adults a chance to earnlegal status.  This targeted legislation would provide a defined population of immigrant students with the chance to earn legal status if they meet rigorous requirements through a two-step, ten-year process. 

The Act would provide conditional nonimmigrant status to individuals who meet the following criteria: 1) came to the United States as a child; 2) lived continuously in the United States for more than five years; 3) exhibit good moral character; 4) has not engaged in criminal activity (as defined by immigration laws); 5) does not pose a threat to national security; 6) passes a background check; and 7) graduates from an American high school.  If these criteria are met, the individual would receive conditional nonimmigrant status. 

The individual would then be required to complete two years of college or military service and remain in good standing.  After 10 years, the student would be permitted to apply for permanent legal status.  Legal status would only be granted to those who meet the specific requirements.  It is estimated that each year approximately 65,000 students might benefit from the chance to earn legal status. 

On November 30, Senators Durbin and Leahy introduced S. 3992, theDream Act.   Senator Reid filed cloture on the motion to proceed to the bill on December 6.  A cloture vote on the motion to proceed to S. 3992 is expected later this week.

Major Provisions

Cancellation of Removal

The legislation would permit the Secretary of Homeland Security to cancel the removal of an undocumented immigrant and grant the undocumented immigrant conditional nonimmigrant status.  An applicant would be required to demonstrate the following by a preponderance of the evidence:

• continuous presence in the United States for the past five years;
• younger than 16 years of age when s/he entered the United States;
• is a person of good moral character since the initial date of entry into the United States;
• has not abused a student visa;
• has not committed marriage fraud;
• has not engaged in voter fraud or unlawful voting;
• is not likely to become a public charge;
• does not pose a public health risk;
• has not engaged in persecution;
• has not committed a felony or three misdemeanors;
• has either been admitted to an institution of higher education in the United States, graduated from an American high school or obtained a general education development certificate (GED); and  
• is younger than 30 years of age on the date of enactment of the legislation. 

The legislation would require individuals to submit an application for cancellation of removal and conditional nonimmigrant status within one year of the later of the following:

• the date the individual was admitted to an institution of higher education in the United States;
• the date the individual earned a high school diploma or GED; or
• the date of the enactment of the legislation. 

The Act would require applicants to submit biometric and biographic information.  Applicants would also be required to undergo a medical examination.  The Secretary of Homeland Security would be required to perform background checks on applicants.  Applicants would be required to register for the Selective Service, if appropriate. 

Conditional Nonimmigrant Status

The measurewould limit eligibility for conditional nonimmigrant status to 10 years.  A conditional nonimmigrant would be permitted to work in the United States and travel outside of the United States for a limited time.  The Secretary of Homeland Security would be authorized to terminate the conditional nonimmigrant status if the individual engaged in criminal activity, became a public charge, or received a dishonorable discharge from the military. 

Under the legislation, if an individual lost their conditional nonimmigrant status, the individual would return to the individual’s prior immigration status. 

Adjustment of Status

The legislation would provide a conditional nonimmigrant the opportunity to earn legal permanent resident status (LPR).  The conditional nonimmigrant would be eligible to file an application to adjust their status 10 years after receiving conditional nonimmigrant status.  The conditional immigrant would have to meet the following requirements:

• demonstrate good moral character during the entire period as a conditional nonimmigrant;
• maintain residence in the United States;
• complete at least 2 years of college or has served in the military for at least two  years;
• demonstrate the ability to read, write and speak English;
• demonstrate knowledge and understanding of the fundamentals of the history, principles, and form of government of the United States;
• pay back taxes; and
• submit biometric and biographic information and undergo background checks.

Other Provisions

The legislation maintains the ban on in-state tuition for undocumented immigrants.  The legislation prohibits Dream Act applicants who adjust to LPR status from receiving Pell Grants and other federal education grants. 

The measure would require the Department of Homeland Security or the Department of Justice to share information about Dream Act students collected in the application process for legal immigrant status with any federal, state, tribal, or local law enforcement agency, intelligence or national security agency or court for homeland security or national security purposes. 

The legislation would exclude conditional nonimmigrants from participating in the health insurance exchanges created by the Affordable Care Act.  These individuals would also be ineligible to receive Medicaid, food stamps and other government programs.

The Government Accountability Office would be required to submit a report to Congress within seven years of the enactment of the Act.

Legislative History

Senators Durbin and Leahy introduced S. 3992, the Dream Act, on November 30.  On December 1, S. 3992 was placed on the Senate Legislative Calendar. 

The Senate previously voted on a version of the Dream Act in the 110^th Congress.  In October 2007, the Senate voted on the motion to invoke cloture on the motion to proceed to S. 2205, sponsored by Senator Durbin.  The motion failed by a vote of 52 to 44. 

Senator Reid filed cloture on the motion to proceed to S. 3992 on December 6, 2010.  The vote on cloture on the motion to proceed to S. 3992 is expected this week. 

Expected Amendments

The DPC will circulate information about possible amendments as it becomes available.

Administration Position

At the time of publication, the Administration had not released a Statement of Administration policy on S. 3992.

Resources

Congressional Research Service, “Unauthorized Alien Students:  Issues and “DREAM Act” Legislation, available here.

Congressional Research Service, “Unauthorized Alien Students, Higher Education, and In-State Tuition Rates:  A Legal Analysis,” available here.

H.R. 2965, theDon’t Ask, Don’t Tell Repeal Act of 2010 would put in place a process to repeal the “Don’t Ask, Don’t Tell” law prohibiting homosexuals from serving openly in the armed services by striking Section 654 of Title 10 of the United States Code (USC), and allow the Secretary of Defense to manage implementation of a non-discriminatory policy according to the recommendations of the Report of the Comprehensive Review of the Issues Associated with a Repeal of “Don’t Ask, Don’t Tell.”  The repeal would take effect 60 days after the report requested by the Secretary of Defense on March 2, 2010 studying the implementation of the repeal is released (which occurred on November 30, 2010) and once the President, Secretary of Defense and Chairman of the Joint Chiefs each certify in writing to Congress that repeal is consistent with the Armed Forces’ standards of military readiness and effectiveness, unit cohesion, and recruiting and retention.

Major Provisions

This legislation would repeal the “Don’t Ask, Don’t Tell” policy prohibiting homosexuals from serving openly in the armed services by striking Section 654 of Title 10 of the USC.  The repeal would take effect 60 days after the last of conditions a) and b) are fulfilled:

a) The Secretary of Defense receives the Comprehensive Review he requested on March 2, 2010 concerning implementing a repeal of “Don’t Ask, Don’t Tell.” 

b) Congress receives written certification from the President, the Secretary of Defense, and the Chairman of the Joint Chief of Staff  stating that:

1)  The President, the Secretary of Defense, and the Chairman of the Joint Chiefs of Staff have considered the recommendations contained in the report and the report’s proposed plan of action.

2) The Department of Defense has prepared the necessary policies and regulations to implement the repeal.

3) Implementing all necessary modifications required to repeal “Don’t Ask, Don’t Tell” are consistent with the standards of military readiness, military effectiveness, unit cohesion, and recruiting and retention of the Armed Forces.

c) Until all of the conditions described above are met, “Don’t Ask, Don’t Tell” will remain in effect.

d) Should the repeal be enacted, this law will not provide marriage or spousal benefits offered under Section 7 of Title 1 to the USC to homosexuals serving in the Armed Forces.

e) Repealing “Don’t Ask, Don’t Tell” does not create a private cause of action.

Legislative History

The provisions of this legislation were originally included in the National Defense Authorization Act (NDAA) of Fiscal Year 2011.

On December 10, Senator Lieberman (D-CT) introduced S. 4023, a stand-alone version of the provisions contained in the FY 2011 NDAA.  S. 4023 has 49 cosponsors.  On December 14, Representative Patrick Murphy (D-PA) introduced H.R. 6520, a companion bill to S. 4023.

On December 15, 2010, the House amended H.R. 2965 by substituting the text of H.R. 6520, and then passed H.R. 2965 as amended by a vote of 250-175.  Senator Reid filed cloture on the motion to concur with H.R. 2965 on December 16, 2010.  The vote on cloture on the motion to concur with H.R. 2965 is scheduled for December 18, 2010.

Expected Amendments

The DPC will circulate information about possible amendments as it becomes available.

Administration Position

On December 15, 2010, prior to House consideration, the Administration issued a Statement of Administration Policy on the House Amendment to the Senate Amendment to H.R. 2965, Don't Ask, Don't Tell Repeal Act of 2010:

“The Administration strongly supports House passage of the House amendment to the Senate amendment to H.R. 2965, which would repeal the statute underlying "Don't Ask, Don't Tell" after the President, the Secretary of Defense, and the Chairman of the Joint Chiefs of Staff certify that implementation of the necessary policies and regulations related to the statutory repeal is consistent with the standards of military readiness, military effectiveness, unit cohesion, and recruiting and retention of the Armed Forces.  Congressional enactment of this legislation would allow a repeal to be implemented under terms and a timetable that would be informed by the advice of our military leadership.

The recently-released comprehensive study by the Department of Defense shows that overwhelming majorities of our Service members are prepared to serve with Americans who are openly gay or lesbian; it concludes that overall, and with thorough preparation, there would be low risk associated with the repeal.  The existing statute weakens our national security, diminishes our military readiness, and violates fundamental American principles of fairness, integrity, and equality.”

Even though Republican Senators have historically been among the strongest and most vocal champions of such “earmarks,” many are now threatening to vote no on this bill in order to appease certain factions of the Republican party.  Moreover, Republicans are now using the deficit as an excuse to oppose $8 billion for Congressionally-directed funding, even though they did not care about exploding the deficit in order to fight for $830 billion in extra tax breaks for the wealthiest few._[2]

$8 billion for local projects (including aid for hospitals, battered women, law enforcement, foster children, job training for homeless families, small business incubators)	$830 Billion in Extra Tax Breaks for the Wealthiest Few

Supposedly outraged Senate Republicans must have forgotten that Congressionally-directed spending requests have been online for six months, that this bill was put together in bipartisan fashion, and that Congressionally-directed spending has decreased by 75 percent since Democrats took control of the Senate._[3] In fact, it was Democrats who put a stop to the earmark abuse that festered while Republicans controlled the White House and Congress for six years.

Below are just a few examples of the recent Congressionally-directed funding that Republican Senators have sponsored.  Will the Senate GOP vote against the upcoming appropriations bill just to appease the right wing of their party – and despite that fact that doing so will kill valuable new funding for their constituents back home?

Alabama

• Children’s services provided by United Methodist Children’s Home of Alabama and West Florida in Selma, AL [FY2010]
• Services for homeless families provided by the Jimmie Hale Mission in Birmingham, AL [FY2009]
• After school math and science tutoring programs provided by the Cleveland Avenue YMCA, in Montgomery, AL [FY2009]

Arizona

• Fire/crash rescue station, in Davis-Monthan Air Force Base [FY2009]
• Mobile prenatal clinic for the MoMobile program at the Saint Joseph’s Hospital, in Phoenix, AZ [FY2008]
• Law enforcement initiative to target meth in the San Carlos Apache Reservation [FY2008]

Georgia

• Assistance for survivors of domestic violence and sexual assault, provided by the YWCA of Northwest Georgia [FY2009]
• Douglas County Court Team for maltreated infants and toddlers, in Douglasville, GA [FY2010]
• Small business incubator at the University of West Georgia, Carrollton, GA [FY2010]
• A Child is Missing, to assist law enforcement in finding missing children in Georgia [FY2008]

Idaho

• Idaho State Police’s participation in the Criminal Information Sharing Alliance Network [FY2010]
• Dental services for low-income children [FY2010]
• Child neglect and abuse prevention at the Nez Perce Tribe [FY2009]
• Educational materials for the Literacy Matters! Program [FY2008]

Iowa

• Dislocated worker training and job placement in financial services, health care, and construction [FY2010]
• Multi-tier interdiction initiative to combat drug distribution networks [FY2009]
• Coordinated care for abused and neglected infants and toddlers [FY2009]
• Housing and vocational education program for older foster children [FY2008]

Kentucky

• Severe weather warning sirens in populated areas of Henderson County, where no systems currently exist [FY2009]
• Heart disease prevention initiative in rural Kentucky [FY2010]
• Technology to assist trauma victims without immediate access to emergency medical care [FY2008]

Louisiana

• Pre-natal clinic at the CHRISTUS St. Francis Cabrini Hospital, in Alexandria, LA [FY2009]
• Community Nursing Elder Trauma Response Program demonstration project in Metairie, LA [FY2009]
• Mobile unit for the Miles Perret Cancer Services, in Lafayette, LA, to use in rural areas [FY2009]

North Carolina

• Program to combat domestic violence in Mecklenburg County, NC [FY2008]
• Racial disparities and cardiovascular disease initiative at the University of North Carolina, Chapel Hill, NC [FY2010]
• Regional public safety communications systems, for use by the City of Fayetteville, NC [FY2010]

South Dakota

• Meth reduction programs sponsored by the Minnehaha County Sheriff’s Office [FY2008]
• Residential substance treatment center for women and their children in Sioux Falls, SD [FY2009]

Tennessee

• Joint effort by the University of Memphis, Shelby County, the City of Memphis, and the State District Attorney General to deal with growing gang numbers and increased violent crime [FY2009]
• Facilities and equipment at the Jellico Community Hospital in Jellico, TN [FY2010]
• The Gang and Violent Crime Reduction Program at the University of Memphis [FY2008]

Texas

• Homeless job training program in Bexar County, TX [FY2010]
• Juvenile delinquency prevention by Kids Averted from Placement Services [FY2008]
• Facilities and equipment including STAN fetal heart monitors at Harris County Hospital District, Houston, TX [FY2010]

Wyoming

• Efforts to fill gaps in substance abuse treatment and transitional services in the state [FY2009]
• Wyoming Meth Project for fighting the methamphetamine problem [FY2009]

[1] Senate Appropriations Committee, 12/14/10

[2] Center for American Progress, 7/29/10

[3] Senate Appropriations Committee

This week, the Senate will consider the Fiscal Year 2011 Consolidated Appropriations Act [link to full text], legislation to fund the federal government for Fiscal Year 2011.  The Senate Omnibus measure is a substitute amendment to the Continuing Resolution, H.R. 3082, which passed the House on December 8, 2010. 

The Senate Omnibus is $29 billion below the cost of the budget proposed by the President and equal to the topline Budget Authority level of $1.108 trillion as proposed in the Sessions-McCaskill discretionary spending cap amendment.  Less than one percent of the total funding consists of Congressionally-directed funding, or earmarks, which were requested by both Republican and Democratic Senators.  This new funding for local projects will benefit thousands of communities and millions of Americans in all fifty states.

The Senate Omnibus is a compromise written with bipartisan cooperation in the Senate and with the majority in the House.  This legislation reflects a yearlong effort by members of both parties who worked together to examine the President’s budget request, hold hundreds of hearings and thousands of meetings, and seek justification from every federal department and agency regarding how taxpayer dollars are being spent. 

In terms of Congressionally-directed funding, it should be noted that this bill reflects a continuing Democratic effort to put a stop to the earmark abuse that festered while Republicans controlled the White House and Congress for six years.  In fact, according to the Senate Appropriations Committee, Congressionally-directed spending has decreased by 75 percent since Democrats took control of the Senate.

In contrast to a Continuing Resolution, the Senate Omnibus fulfills the constitutional responsibility of Congress to provide federal agencies with the direction and the resources they require, most critically for national defense and homeland security.  If forced to continue operating under a Continuing Resolution for the next ten months, neither the President’s priorities nor Congressional priorities would be accommodated and programs would be funded at the amounts provided last year regardless of merit or need.  Furthermore, the Continuing Resolution abdicates responsibility for providing much needed oversight of the requests of the Executive Branch. 

Important policies and initiatives contained in the Senate Omnibus bill include the following:

• Defense: $667.7 billion in new discretionary spending authority for the Department of Defense, including $157.8 billion for overseas contingency operations.
• Education: Enough funding to close the Pell Grant “shortfall,” thereby preventing a cut to the $5,550 maximum award for college students receiving financial aid.
• Law Enforcement: $3.8 billion for State and Local Law Enforcement grants to aid local and state law enforcement and crime victims. 
• Veterans: $2.6 billion for the health care needs of veterans who have served in Iraq and Afghanistan, which represents an increase of $597 million over last year. 
• Border Security: $3.58 billion to fully fund 20,500 Border Patrol agents, including over 17,000 who will be based on the Southwest Border.  This doubles the number of agents since 2004.

The Senate Omnibus also includes the Senate-passed version of the FDA Food Safety Modernization Act.  (The DPC’s previous summary of this bill can be accessed by clicking here.)

Major Provisions

The following information was provided by the Senate Committee on Appropriations.

I. Agriculture, Rural Development, Food and Drug Administration, and Related Agencies

Discretionary

FY 2010 Enacted:                  $23.135 billion

President’s Request:             $22.866 billion

Subcommittee Mark:            $22.125 billion

Mandatory

FY 2010 Enacted:                  $97.983 billion

President’s Request:             $109.12 billion

Subcommittee Mark:            $110.98 billion

The fiscal year 2011 Agriculture Appropriations bill includes $22.125 billion in discretionary budget authority, a $1.01 billion discretionary decrease from fiscal year 2010 enacted level, and $741 million below the President’s request.  The most significant increases in the bill are in the areas of nutrition, farm support reimbursements (mandatory spending), international food assistance, and food and drug safety, all of which are reflective of the state of the economy, agricultural market conditions, and the world situation.

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

II. Commerce, Justice, Science, and Related Agencies

2010 Enacted:                        $64.4 billion (excludes emergency appropriations)

President’s Request:             $60.5 billion

Omnibus Agreement:           $58.0 billion

The agreement totals $58.0 billion in discretionary budget authority for fiscal year 2011, $6.4 billion below fiscal year 2010, and $2.5 billion below the President’s request.

Priorities for the agreement include: keeping America safe from terrorism and violent crime; investing in America’s scientific infrastructure to create new technologies and new jobs; and ensuring sound stewardship of taxpayer funds by cracking down on waste, fraud, and abuse.

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

III. Defense

The Defense Division of the bill provides $667.7 billion in new discretionary spending authority for the Department of Defense for functions under the Defense Subcommittee’s jurisdiction, including $157.8 billion for overseas contingency operations.  The recommendation is $10.3 billion below the President’s FY 2011 base budget request and provides $4 billion in General Transfer Authority.

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

IV. Energy & Water Development

The FY 2011 bill would provide a total of $34.519 billion for the Army Corps of Engineers, the Department of the Interior water programs, and the Department of Energy (DOE).  The Subcommittee legislation is $825.3 million below President Obama’s budget request and $1.054 billion above the FY 2010 enacted level.  The Subcommittee legislation would fund research in energy efficiency technologies, renewable energy, fossil energy, and other energy activities as well nuclear cleanup, nuclear weapons and nonproliferation initiatives. 

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

V. Financial Services and General Government

Discretionary Funding: $24.472 billion

Compared to President’s Request ($25.518 billion) (- $1.046 billion) (4 percent decrease)   

Compared to FY10 Enacted ($24.35 billion)  + $117 million (0.4 percent increase)

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

VI. Homeland Security

FY 2010 Enacted: $42.665 billion (Includes Coast Guard Overseas Contingencies, excludes emergencies)

FY 2011Request: $43.890 billion (Includes Coast Guard Overseas Contingencies)

FY 2011 Consolidated bill: $43.548 billion (Includes Coast Guard Overseas Contingencies)

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

VII. Interior, Environment, and Related Agencies

2010 Enacted level:                           $32.2 billion

2011 President’s request:                  $32.4 billion

2011 Senate bill:                                 $32.2 billion

An overall amount of $32.2 billion in non-emergency discretionary spending authority is provided for a broad array of programs that help our communities, safeguard our public lands, protect our natural resources, strengthen Native American and Alaska Native programs, and supports our most treasured cultural institutions, memorials and monuments.  The recommended amount is the same as the fiscal year 2010 enacted level and $178.3 million below the President’s request.

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

VIII. Labor, Health and Human Services, Education, and Related Agencies

The fiscal year 2011 Labor, Health and Human Services, Education and Related Agencies Appropriations bill that the Senate will consider as part of the omnibus provides $174.5 billion in discretionary funding for a range of programs that will help create jobs and train American workers, target fraud and abuse, and incentivize States and local communities to reform their health, workforce and education systems.

Highlights include a new $300 million Early Learning Challenge Fund that will provide grants to States to raise the quality of early childhood programs; $217 million for new Workplace Innovation Funds that will improve the delivery of education and training to workers; and an increase of $681 million for childcare services that will help low-income workers hold down a job.  The bill also provides sufficient funding to close the Pell Grant “shortfall” and prevent a cut to the $5,550 maximum award, and additional funding to improve mine safety.

Increases in programs such as these are balanced by significant efforts to eliminate government waste.  The bill eliminates 17 programs totaling nearly $393 million. It also appropriates an increase of $160 million to target fraud and abuse in Medicare and Medicaid, plus additional funds for program integrity efforts for Social Security and unemployment insurance.

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

IX. Legislative Branch

2010 Enacted:                        $4.669 billion

2011 Request:                        $5.131 billion

Committee Mark:      $4.630 billion

The Fiscal Year 2011 Legislative Branch Appropriations bill totals $4.630 billion, which is $39.4 million below the 2010 enacted level and $501.4 million below the request.  Chairman Ben Nelson (D-Nebraska) has achieved his goal of leading by example in reducing Legislative Branch spending in FY 2011.

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

X. Military Construction, Veterans Affairs, and Related Agencies

Fiscal year 2011 funding for Military Construction, Veterans Affairs and Related Agencies totals $141 billion, including $75.6 billion in discretionary funding, $64.3 billion in VA mandatory funding, and $1.25 billion in emergency war funding.  Discretionary funding is $419 million below the President’s FY 11 budget request and $1 billion below the FY 10 enacted level.

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

XI. State, Foreign Operations, and Related Programs

FY 2011 Budget Request: $56.6 billion

FY 2011 Omnibus: $53.5 billion

The bill provides $17.17 billion for Department of State and related agency operations, a decrease of $77.68 million below the President’s request and $1.22 billion above the FY10 enacted level.  The bill also provides $1.39 billion for USAID operating expenses, which is $80.47 million below the President’s request and $3.2 million above the FY10 level, and a total of $22.97 billion for bilateral economic assistance, which is $1.6 billion below the request and $1.12 billion above the FY10 level.

Other funding includes $9.18 billion for international security assistance and peacekeeping operations, $781 million below the request and $2.19 billion above the FY10 level; $2.91 billion for multilateral economic assistance, which is $388.89 million below the President’s request and $481.16 million above the FY10 level; and funding for export and investment assistance.

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

XII. Transportation, Housing and Urban Development, and Related Agencies

Budget Authority Only         Total Resources

FY 2010 Enacted:      $67.9 billion                           $122.2 billion

FY 2011 Request        $68.8 billion                           $123.7 billion

Omnibus                     $66.3 billion                           $121.3 billion

Overall, the fiscal year 2011 Transportation, Housing and Urban Development, and Related Agencies Appropriations bill includes budget authority of $66.3 billion.  This level of budget authority is $1.6 billion or 2 percent below the 2010 enacted level, and $2.5 billion or almost 4 percent below the President’s Request.  Total funding, including limitations on obligations related to programs funded by the Highway Trust Fund, is $121.3 billion.  This total funding level is $900 million or almost 1 percent below the 2010 enacted level, and $2.4 billion or 2 percent below the President’s Request.

The bill helps our communities and transportation system by focusing on five priority areas:

• Investing in transportation infrastructure;
• Providing housing and services to our Nation’s most vulnerable;
• Supporting our communities and addressing the foreclosure crisis;
• Ensuring the safety of our transportation system; and
• Promoting sustainability in our communities.

A detailed summary of this Division of the bill is available from the Senate Appropriations Committee here.

Legislative History

The House-passed Continuing Resolution that is now pending in the Senate, H.R. 3082, originated in the House on June 26, 2009, as the Military Construction and Veterans Affairs Appropriations Act for Fiscal Year 2010.  On December 8, 2010, the House amended a Senate-passed version of this bill with a government-wide Continuing Resolution as a substitute amendment.  This House-passed Continuing Resolution was received in the Senate on December 9, 2010. 

On December 14, 2010, Senate Appropriations Committee Chairman Inouye released details of the Senate Omnibus bill, which will be offered as a substitute amendment to the House-passed Continuing Resolution.  The Senate is expected to vote on this legislation during the week of December 13, 2010. 

At present, a Continuing Resolution, H.J.Res. 101, is in effect through December 18, 2010.

Expected Amendments

DPC will circulate any information related to amendments to its staff listservs.

Administration Position

As of this writing, the White House has not yet released a Statement of Administration Policy (SAP) on the Senate FY11 Omnibus measure. (Previous SAPs were issued for H.R. 3082 when this bill was the appropriations measure for military construction and veterans affairs.)  When a new SAP is released, it is expected to be posted to the White House website here.

Resources

• Congressional Research Service’s list of key CRS reports on appropriations

• THOMAS chart on the status of FY11 appropriations legislation

• Bill Summary & Status information for H.R. 3082, the legislative vehicle for the Senate Omnibus bill

• Bill Summary & Status information for H.J.Res. 101, the Continuing Resolution currently in effect through December 18, 2010

• Links to Senate Appropriations Committee webpages:

o   Senate Omnibus Full Bill Text and Explanatory Statement (Divisions A through C)

o   Agriculture, Rural Development, Food and Drug Administration, and Related Agencies: Website, Bill Division Summary, and Earmark Chart

o   Commerce, Justice, Science, and Related Agencies: Website, Bill Division Summary, Earmark Chart, and Corrections to Prior Year Earmarks

o   Defense: Website, Bill Division Summary, Earmark Chart

o   Energy & Water Development: Website, Bill Division Summary, Earmark Chart   

o   Financial Services and General Government: Website, Bill Division Summary, Earmark Chart

o   Homeland Security: Website, Bill Division Summary, Earmark Chart

o   Interior, Environment, and Related Agencies: Website, Bill Division Summary, Earmark Chart

o   Labor, Health and Human Services, Education, and Related Agencies: Website, Bill Division Summary, Earmark Chart

o   Legislative Branch: Website, Bill Division Summary

o   Military Construction, Veterans Affairs, and Related Agencies: Website, Bill Division Summary, Earmark Chart

o   State, Foreign Operations, and Related Programs: Website, Bill Division Summary, Earmark Chart

o   Transportation, Housing and Urban Development, and Related Agencies: Website, Bill Division Summary, Earmark Chart

The New START Treaty Will Not Constrain Missile Defense.

Assertionsthat New START limits U.S. missile defense capabilities are false.  Numerous Pentagon officials and arms control experts have attested to that fact, including Secretary of Defense Robert Gates, Chairman of the Joint Chiefs of Staff Admiral Mike Mullen, and Missile Defense Agency Director Lieutenant General Patrick O’Reilly.

Our military leaders have said that the prohibition in Article V of the Treaty preventing the conversion of intercontinental ballistic missile (ICBM) and submarine launched ballistic missile (SLBM) launchers into missile defense launchers is not relevant to either current or future U.S. missile defense plans.  Other than the 5 converted ICBM silos at Vandenberg Air Force Base that were grandfathered into the treaty, the Defense Department has no plans to convert any additional silos.  As then-U.S. National Security Advisor James Jones wrote in April, “It’s a limit in theory, but not in reality.”  It is far more cost effective to simply dig a new hole for a missile interceptor silo than convert an existing silo, and the Treaty in no way affects new construction of silos for missile defense purposes. Our military and civilian leaders have also stated that neither the language in the preamble referencing the inter-relationship between strategic offensive and defensive forces nor the Russian unilateral statement place legally binding obligations upon the U.S.[1]

The Senate Foreign Relations Committee made it absolutely clear in the resolution of ratification that the Treaty would not constrain missile defense.  Both Understanding #1 and Declarations #1 and #2 specifically address and reiterate the U.S. commitment to developing and deploying missile defenses.  The Committee’s resolution goes to great lengths to reaffirm and further clarify that the Treaty’s preamble and Russia’s unilateral statement impose no limits on our ability to develop and deploy missile defenses.  A provision similar to the preamble existed in the original START document.  Moreover, Declaration #1 underscores current U.S. policy by restating language in the 1999 Missile Defense Act mandating the implementation of a national missile defense system “as soon as technologically possible.”[2]

The Administration has made a significant down payment on enhancing our nation’s nuclear infrastructure by committing $85 billion over the next ten years to modernize our nuclear weapons complex. The “1251 Report” submitted to Congress by the Obama Administration, as required by the FY 2010 National Defense Authorization Act, lays out a comprehensive plan to enhance our nation’s nuclear weapons infrastructure.  It calls for substantial maintenance to nuclear weapons delivery platforms; outlines a detailed plan for sustaining a safe, secure, and reliable U.S. weapons stockpile; and commits to historic growth in funding for the nation’s nuclear weapons complex.

The Administration has more than demonstrated its commitment to strengthening America’s nuclear infrastructure with dramatic budget increases for FY 2011, issuing a revised “1251 Report,” and by responding to the unorthodox request to release a draft budget for FY 2012, in which the Administration will provide an even larger increase in modernization funding.  In his FY 2011 proposal, the President requested nearly a 10% increase for the National Nuclear Security Administration (NNSA) over FY 2010 levels. For FY 2012, the Administration plans to increase NNSA funding by nearly 9% more than the increased FY 2011 budget.  In addition, the Administration outlined a ten-year budget for NNSA that substantially augments funding for weapons activities, as well as extensive Life Extension Programs (LEP) for the nuclear weapons stockpile.  The Administration also detailed its commitment to constructing two critical new research facilities.

The President’s commitment to invest $80 billion over the next decade will sustain and modernize our nation’s nuclear weapons complex.  Moreover, President Obama pledged an additional $4.1 billion to be injected into the U.S. nuclear infrastructure over the next five years.  These investments will transform America’s nuclear weapons complex into a modern, sustainable 21^st Century Nuclear Security Enterprise.  Such investments to the Stockpile Stewardship Program and its supporting infrastructure are critical for maintaining the U.S. nuclear deterrent, as well as furthering nuclear nonproliferation, preventing nuclear terrorism, strengthening our nation’s emergency response, supporting our intelligence community, and fulfilling our global obligations.

Directors of the three primary Department of Energy/NNSA laboratories involved in nuclear weapons design and development – Lawrence Livermore National Laboratory, Los Alamos National Laboratory, and Sandia National Laboratory – fully endorse the Administration’s commitment to ensuring that U.S. nuclear laboratories and stockpiles are state-of-the-art and sufficiently equipped.  In a letter to Senate Foreign Relations Committee Chairman Kerry and Ranking Member Lugar on December 1, 2010, the Directors write, “[W]e are very pleased by the update to the Section 1251 Report, as it would enable the laboratories to execute our requirements for ensuring a safe, secure, reliable and effective stockpile under the Stockpile Stewardship and Management Plan.”[3]

As an added measure to ensure these pledges are enacted, the Foreign Relations Committee’s advice and consent resolution Condition #9 underscores the nation’s commitment to building and maintaining “a robust stockpile stewardship program” and to maintaining an updated and revitalized nuclear weapons production capability.

The Treaty provides strong verification measures.

New START streamlines verification and tracking procedures using a newly created, state-of-the-art inspections system and strict reporting guidelines.  Compliance and verification measures in New START build on 20 years of verification experience and appropriately reflect technological advances made since 1991, as well as improved relations between the U.S. and Russia since the end of the Cold War.

New START’s enhanced verification measures involve a five-pronged approach comprised of: 1) invasive, on-site inspections; 2) national technical means (NTM); 3) unique identifiers placed on each weapon; 4) regular data exchange; and 5) prompt notifications of movements of weapons.

1. New START permits up to 18 short-notice on-site inspections each year to determine the accuracy of Russia’s data and to verify compliance.  New START’s inspection system is every bit as rigorous and informative as the original START regime.  The original START Treaty allowed for U.S. inspections in 70 nuclear facilities located in Russia, Kazakhstan, Ukraine, and Belarus.  However, the latter three countries have since “denuclearized.”  As a result, all of the former Soviet Union’s nuclear weapons are now centralized in Russia and divided between the country’s 35 nuclear facilities.  Thus, decreasing the number of annual inspections from 28 in Start I to 18 in New START is at least effectively equivalent to those allowed under START I, since the number of facilities to visit and weapons to inspect are fewer and inspectors are allowed to gather more types of data during the inspections.
2. The U.S. is allowed access to employ national technical means (reconnaissance satellites, ground stations, and ships) to verify compliance.  Moreover, the treaty expressly prohibits tampering with the other party’s NTM.
3. Russia must assign and inform the U.S. of its unique alphanumeric identifiers designating deployed and non-deployed ICBMs, SLBMs and nuclear capable heavy bombers.  This information further informs and serves to verify our tracking patterns of Russian equipment throughout each system’s life cycle.
4. The treaty requires Russia to regularly provide to the U.S. aggregate data on their strategic offensive forces, including numbers, locations and technical characteristics of deployed and non-deployed strategic offensive arms.
5. New START establishes a comprehensive notification regime allowing us to track movement of Russia’s strategic forces and changes in any strategic weapons system’s status.

New START employs a robust and effective verification system predicated on decades of arms treaty verification experience.  The verification system was expressly designed to be less complicated, less costly, and more effective than the one in the original START Treaty.  This extensive verification regime is tailored to monitor the limits of the New START Treaty and enables the U.S. to quickly and accurately detect any possible Russian violations and ensure that the U.S. can rapidly and effectively respond.

[1]The Wall Street Journal, 4/20/10.

[2]Text of Senate Executive Report.

[3]Letter to Senators Kerry and Lugar from all three Department of Energy/NNSA laboratories, 12/1/10

Myth: Ratifying the New START Treaty threatens our national security.

Fact: Ratifying the New START Treaty dramatically enhances our national security in 3 specific ways: 1) New START creates stability between the two countries with over 90% of the world’s nuclear weapons and  re-activates inspections that help provide transparency and predictability; 2) New START helps prevent terrorists from gaining access to nuclear capabilities; and 3) New START bolsters our non-proliferation efforts around the world and allows us to increase pressure on countries with dangerous nuclear ambitions, such as North Korea and Iran.

1. Ratifying New START enables the U.S. to have access to the Russian’s nuclear weapons complex, which provides transparency and creates stability between the two countries.  The Treaty includes robust verification and inspection requirements.  Inspections of Russian nuclear facilities have been suspended for over a year since START I expired in December 2009. Reinstating inspections of Russia’s nuclear weapons will allow us to verify that Russia is adhering to the treaty, and to gain insight to Russia’s strategic force posture.  All of these measures increase transparency between our two nations, making it far less likely that an arms race could break out, and engendering trust that will allow us to work together to confront key global challenges.
2. Preventing a nuclear terrorist attack is paramount.  New START’s inspections and verification regime will reduce the number of actively deployed weapons and help ensure that Russia’s vast and deteriorating nuclear infrastructure is safely secured. Failing to ratify New START could damage the Nunn-Lugar program’s cooperative U.S.-Russian efforts to safeguard against loose nuclear materials ending up on the black market and in the hands of terrorists and rogue states.
3. By ratifying the New START Treaty and demonstrating our commitment to the Nuclear Nonproliferation Treaty, the United States will pressure other countries to improve their own nuclear non-proliferation efforts.  In addition, the US will gain leverage over other countries to work with us as we continue to deal with critical nuclear threats from both North Korea and Iran.

Myth:  The New START treaty will limit our missile defense program.

Fact:  Pentagon officials and arms control experts attestthat the New START Treaty does not constrain our missile defense plans. Testifying before the Senate Foreign Relations Committee in June, Missile Defense Agency Director Lieutenant General Patrick O’Reilly stated,“Throughout the treaty negotiations, I frequently consulted the New START team on all potential impacts to missile defense. The New START Treaty does not constrain our plans to execute the U.S. Missile Defense program.”[1] Our military and civilian leaders have repeatedly testified that the language in the preamble referencing the inter-relationship between strategic offensive and defensive forces – which is based on previous treaties – is not legally binding, and neither is Russia’s unilateral statement.  Furthermore, the Senate Foreign Relations Committee made it absolutely clear in its resolution of ratification that the treaty would not constrain missile defense.^[2]

Myth: Not enough is being done to “modernize” our nuclear infrastructure.

Fact:  The United States has a robust modernization program in place that will strengthen and sustain our nuclear arsenal. Two years ago one might have argued that not enough was being done.  But today, the Obama Administration has committed $85 billion over the next ten years to strengthening America’s nuclear weapons complex, ensuring the safety, security, and reliability of the U.S. nuclear stockpile.  The President asked Congress for nearly a 10 percent increase over FY 2010 levels for the National Nuclear Security Administration (NNSA) in his FY 2011 budget request.  In addition, the Administration outlined a 10-year budget for the NNSA that substantially increases funding for weapons activities and Life Extension Programs (LEPs) for the nuclear weapons stockpile.  In response to requests to concerns about the commitments for certain programs, President Obama pledged an additional $4.1 billion to be injected into the U.S. nuclear infrastructure over the next five years.

These investments will transform America’s nuclear weapons complex into a modern, sustainable 21^st Century Nuclear Security Enterprise.  Directors of all three Department of Energy/NNSA laboratories fully endorse the Administration’s commitment to ensuring that U.S. nuclear laboratories and stockpiles are state-of-the-art and sufficiently equipped.  As an added measure, the Foreign Relations Committee’s advice and consent resolution Condition #9 underscores the nation’s commitment to building and maintaining “a robust stockpile stewardship program” and to maintaining an updated and revitalized nuclear weapons production capability.^[3]

Myth: Verification measures in New START are inadequate.

Fact: The New START Treaty contains a strong verification regime to ensure compliance and prevent nuclear breakout. New START streamlines verification and tracking procedures using a newly created, state-of-the-art inspections system and strict reporting guidelines. Compliance and verification measures in New START build on 20 years of verification experience and appropriately reflect technological advances made since 1991, as well as improved relations between the U.S. and Russia since the end of the Cold War.  New START’s enhanced verification measures involve a five-pronged approach comprised of: 1) 18 invasive, on-site inspections; 2) national technical means (NTM); 3) unique identifiers placed on weapons that distinguish between deployed and non-deployed equipment; 4) regular data exchange; and 5) prompt notifications of movement of weapons.  New START employs a robust and effective verification system predicated on decades of arms treaty verification experience.  The verification system was expressly designed to be less complicated, less costly, and more effective than the system established by the original START Treaty.  This extensive verification regime is tailored to monitor the limits of the New START Treaty while reducing, where reasonable, burdens on our own military; it enables the U.S. to quickly and accurately detect any possible Russian violations and ensure that the U.S. can rapidly and effectively respond.

Myth:  It would be dangerous to agree to lower levels of strategic nuclear warheads unless Russia reduces its relatively larger stockpile of nonstrategic, or tactical, nuclear arsenal.

Fact 1:  Russia’s arsenal of tactical nuclear weapons do not actually give Russia a meaningful military advantage. Both Russia and the U.S. maintain arsenals of nonstrategic, or tactical, weapons – shorter-range, lower-yield weapons designed for battlefield use. Russia’s retains more of these weapons than the U.S., and critics have argued Russia’s arsenal is destabilizing. Secretary Gates and Admiral Mullen have stated publicly, “Because of their limited range and very different roles from those played by strategic nuclear forces, the vast majority of Russian tactical nuclear weapons could not directly influence the strategic nuclear balance between the United States and Russia.” General Kevin Chilton, who as Commander of U.S. Strategic Command is responsible for America’s strategic deterrence mission, has explained, “Though numerical asymmetry exists in the numbers of tactical nuclear weapons the [United States] has and we estimate Russia possesses, when considered within the context of our total capability and given force levels as structured in New START, this asymmetry is not assessed to substantially affect the strategic stability between the [United States] and Russia. Furthermore, within the regional context, the [United States] relies on multiple capabilities, including its superior conventional force capabilities, tactical nuclear capabilities, U.S. strategic nuclear capabilities, ballistic missile defenses, and allied capabilities, to support extended deterrence and power projection.” Even former Defense Secretary Donald Rumsfeld, when questioned by the Senate on why the 2002 Moscow Treaty did not address Russia’s tactical nuclear weapons, stated for the record, “I would be perfectly comfortable having them [i.e., the Russians] have a good many more than we have, simply because of the differences in our two circumstances.”[4]

Fact 2:  The Administration has committed to addressing tactical arms reduction in the next, comprehensive round of U.S.-Russian talks. Secretary Clinton and Gates have explained for the record that “A more ambitious treaty that addressed tactical nuclear weapons would have taken much longer to complete, adding significantly to the time before a successor agreement, including verification measures, could enter into force following START’s expiration in December 2009.” As the Resolution of Ratification passed by the Senate Foreign Relations Committee states, the United States is committed to negotiations aimed at reductions and transparency that would cover all nuclear weapons – deployed and non-deployed, strategic and non-strategic. That is in part why Eastern European leaders see ratification of New START as so important to enhancing their security; as Poland’s Foreign Minister Radoslaw Sikorksi wrote on November 20, our NATO Allies see “New START is a necessary stepping-stone to future negotiations with Russia about reductions in tactical nuclear arsenals, and a prerequisite for the successful revival of the Treaty on Conventional Forces in Europe (CFE).”[5]

Myth: The New START Treaty could threaten continued U.S. deterrence capability.

Fact:  The New START Treaty would in no way weaken the U.S. deterrent, even as other countries seek to build their nuclear capabilities. As Commander of U.S. Strategic Command General Kevin Chilton made clear in his testimony before the Senate Foreign Relations Committee: “Under the 700 limit on deployed ICBMs, SLBMs, and nuclear-capable heavy bombers, and 800 limit on deployed and non-deployed ICBM launchers, SLBM launchers, and nuclear-capable heavy bombers, the US will maintain a sufficiently robust and flexible deterrent force.” In support of the New START Treaty negotiation effort, U.S. Strategic Command analyzed the required nuclear weapons and delivery vehicle force structure and posture to meet current guidance and provided options for consideration by the Department of Defense. This appraisal, in the words of General Chilton, “validated both the agreed-upon reductions in the New START Treaty and recommendations in the Nuclear Posture Review.”  With that assessment complete, the U.S. military has strongly supported the Treaty; according to Secretary Gates, “U.S. force structure plans under New START are supported by General Cartwright, as well as by Admiral Mullen and the rest of the Joint Chiefs of Staff, Commander, U.S. Strategic Command General Chilton, and me.”[6]

Myth: The New START Treaty limits Conventional Prompt Global Strike capabilities.

Fact: The New START treaty does not impede current or future conventional prompt global strike capabilities. Our military leaders haverepeatedly stated that the treaty does not impair our ability to build and deploy conventionally armed ballistic missiles, if we choose to do so.  Although conventional warheads on ICBMs and SLMBs will count towards the aggregate warhead limit of 1,550, this ceiling fully accommodates our plans to deploy conventional warheads on ballistic missiles and does not interfere with current and future plans for our strategic nuclear forces. As one DoD official testified to the Senate Foreign Relations Committee, “DoD has concluded that any deployment of conventionally armed ICBMs or SLBMs with a traditional trajectory, which would count under the treaty limits, should be limited to a niche capability. That’s based on military considerations. The required number could easily be accounted for under the treaty’s limits while still retaining a robust nuclear triad.”[7]

Myth: The Bilateral Consultative Commission (BCC) interferes with the Senate’s Constitutional advice and consent responsibilities.

Fact: The BCC is not empowered to amend the main treaty text on its own, nor may it make changes to New START’s protocol or annexes that affect substantive rights or obligations of the parties; it can only implement technical, non-substantive modifications to the treaty. One of the lessons from past arms control treaties is that the two sides will need to talk to one another regularly over the duration of the treaty about how the treaty is working out in practice. The Intermediate-Range Nuclear Forces (INF) Treaty has a Special Verification Commission; START had a Joint Compliance and Inspection Commission (JCIC); the 2002 Strategic Offensive Reductions Treaty has a Bilateral Implementation Commission. Article XII of the New START Treaty follows that tradition and establishes the BCC to promote the objectives and implementation of the treaty.  It is to serve as a venue for the two sides to discuss any concerns regarding the treaty’s implementation.  Similar to the JCIC established in the original START Treaty, the BCC is also authorized to make minor adjustments to the Protocol and Annexes in New START.  At 356 pages, the treaty is very detailed.  As past experience with arms control agreements has shown, some provisions require slight modifications over the life of the agreement.   Administration officials, for instance, envision the BCC making minor adjustments to provisions concerning the content and timing of notifications that are required in the treaty; while certainly important, such alterations are not substantial enough to require an amendment to the treaty that the Senate is constitutionally required to consider and vote upon.

Still, to ensure that the BCC acts accordingly and does not overstep its authority, the

Foreign Relations Committee’s advice and consent resolution specifically addresses the BCC in Condition #8, Understanding #1, and Declaration #6.  Understanding #1 would make clear that any additional New START Treaty limitations on the deployment of missile defenses beyond those contained in paragraph 3 of Article V, including any limitations agreed under the auspices of the BCC, would require an amendment to the New START Treaty which may enter into force for the United States only with the constitutional advice and consent of the Senate.  Condition #8 would require that, prior to any BCC meeting where the Commission will consider proposals to improve provisions in the treaty or resolve questions, the President must first brief the Foreign Relations and Armed Services Committees on the nature of the material that will be addressed.  Furthermore, the President must also consult with the Foreign Relations Committee in advance of any BCC meetings to determine that the BCC is the appropriate venue for addressing the change, or if an amendment to the Treaty is instead necessary, which would require the Senate’s advice and consent.  Declaration #6 makes clear that the Senate expects the executive branch to brief the Foreign Relations and Armed Services Committees before and after each BCC meeting regarding any compliance concerns raised by the United States at the BCC meeting.

Myth:  The START Treaty is a partisan issue.

FACT 1: Bilateral arms control treaties have historically passed by overwhelming margins, despite needing only 67 votes in favor of ratification. The controversial Intermediate-range Nuclear Forces (INF) Treaty passed 93-5. The original START Treaty passed 93-6, theSTART II Treaty passed 87-4, and the SORT (Moscow Treaty) passed 95-0.

FACT 2: Bipartisan National Security Leaders Support the New START Treaty.

Supporters of the Treaty include:

• Secretary of Defense Robert Gates, Chairman of the Joint Chiefs of Staff Admiral Mike Mullen, Gen. Kevin Chilton, Lt. Gen. Patrick O’Reilly, Gen. James Cartwright;
• Former President George H.W. Bush;
• All living former Secretaries of State, including: Condoleezza Rice, Colin L. Powell, James A. Baker III, George P. Schultz, and Henry A. Kissinger;
• Lt. Gen. Brent Scowcroft, James Schlesinger, Stephen Hadley, Sam Nunn, John Warner.

Myth: The Senate Should Not Deal with New START during the 111^th Congress.

Fact: The 111^th Congress has fully and carefully scrutinized New START. During the 111^th Congress, the Senate has held more than 15 hearings and classified briefings, with at least two dozen bipartisan witnesses.  The full Senate was briefed twice on the Treaty. The Administration addressed over 900 questions for the record.  Moreover, a delegation of Senators travelled to Geneva to meet with the negotiators.  The Senate’s bipartisan National Security Working Group received six briefings from treaty negotiators as treaty negotiations were underway. The Foreign Relations Committee conducted ten public hearings and two classified hearings on the New START Treaty.  Between June 17, 2010 and August 6, 2010, the Armed Services Committee conducted five hearings and three classified briefings and the Select Committee on Intelligence also held hearings on the New START Treaty.  Members of the 111^th Congress have been deeply involved in examining New START and are amply prepared to vote on this treaty.

[1] Statement Of LTG Patrick J. O’Reilly, Director, Missile Defense Agency, before the Committee on Foreign Relations, June 16, 2010, p. 280.

[2]The Center for Arms Control and Non-Proliferation, Key U.S. Military Leaders and Influential Moderates and Republicans Strongly Support New START.

[3]Letter to Senators Kerry and Lugar from all three Department of Energy/NNSA laboratories, 12/1/10; Text of Senate Executive Report.

[4]Responses of Secretary Gates and Admiral Mullen to Questions Submitted by Senator Lugar, Committee on Foreign Relations, May 17, 2010, p. 88; Responses of GEN Kevin P. Chilton to Questions Submitted by Senator Risch, Committee on Foreign Relations, June 16, 2010, p. 301; Statement by Secretary of Defense Donald Rumsfeld in testimony before the Committee on Foreign Relations Hearing on the Treaty on Strategic Offensive Reductions: The Moscow Treaty, July 17, 2002, S. Hrg. 107-622.

[5]Responses of Secretary Gates and Secretary Clinton to Questions Submitted by Senator Barrasso, , Committee on Foreign Relations, May 17, 2010, p. 97; The Guardian, 11/20/10.

[6]Responses Of GEN Kevin P. Chilton to Questions Submitted by Senator Risch, Committee on Foreign Relations, June 16, 2010, p. 300; Responses Of GEN Kevin P. Chilton to Questions Submitted by Senator Akaka, Committee on Armed Services, July 20, 2010; Responses Of Secretary Gates to Questions Submitted by Senator Chambliss, Committee on Armed Services, June 17, 2010.

[7]Prepared Statement of Dr. James N. Miller, Jr., Deputy Under Secretary of Defense for Policy, Committee on Foreign Relations, June 16, 2010, p. 272.

The New Strategic Arms Reduction Treaty (New START), negotiated between the United States and the Russian Federation, is a follow-on agreement to the original START Treaty between the U.S. and the Russian Federation, Ukraine, Belarus, and Kazakhstan that expired in December 5, 2009.  Signed by Presidents Obama and Medvedev on April 8, 2010, New START significantly advances our leadership on nuclear security while preserving strategic stability in U.S.-Russian relations. 

The treaty provides for important limitations on the U.S. and Russian nuclear arsenals while ensuring a safe and reliable nuclear deterrent.  It establishes a comprehensive verification regime to advance mutual trust and ensures our military has the flexibility needed to protect and defend America's security.

New START would set three central limits on U.S. and Russian nuclear arsenals:

• A maximum of 1,550 warheads on deployed Intercontinental Ballistic Missiles (ICBMs), warheads on deployed Submarine-Launched Ballistic Missiles (SLBMs), and nuclear warheads counted for deployed heavy bombers. This is 74% lower than the 1991 START Treaty limit and 30% lower than the deployed strategic warhead limit of the 2002 Moscow Treaty.

• No more than 800 deployed and non-deployed launch vehicles, including ICBM launchers, SLBM launchers, and heavy bombers

• Of the total deployed and non-deployed launch vehicles, no more than 700 deployed  launch vehicles, including ICBMs, SLBMs, and heavy bombers

The New START Treaty does not establish sub-limits on specific types of strategic offensive arms. Each party is free to determine its own force structure within these limitations.  Each party has 7 years after the treaty enters into force to meet these limits.  The treaty is to remain in force for 10 years, and it can be extended by mutual agreement for up to an additional 5 years.

The New START Treaty has strong verification mechanisms and includes on-site inspections, data exchanges, notifications, and other methods tailored to the specific requirements of this treaty.  The treaty does not constrain US missile defense plans.  It does prohibit future conversion of ICBM and SLBM launchers into launchers for missile defense interceptors (while specifically excluding from this ban the five ICBM launchers in California that were previously converted to missile defense interceptor launchers). The Pentagon has already stated, however, that it has no plans to carry-out any more conversions, since it would cost less to build new missile defense silos

New START consists of three parts: the main treaty text, a protocol containing ten parts, and three annexes.  All three parts are legally binding.  The preamble to the treaty, however, does not create any binding obligations.

On September 16, 2010, the Senate Foreign Relations Committee agreed by a bipartisan vote of 14 to 4 to report the treaty favorably to the Senate, and to recommend a resolution of advice and consent to ratification that contains 10 conditions, 3 understandings, and 13 declarations.  The committee’s recommended resolution, along with the committee’s analysis of the treaty, is contained in the committee’s report, Executive Report 111-6.

Major Provisions

Article I.  Establishes the basic obligations of the parties to reduce and limit their strategic offensive arms.

Article II.  Establishes the central limits of the treaty.  Each party maintains the right to determine the composition and structure of its strategic offensive arms within the parameters of the agreement. 

Both the U.S. and Russia shall reduce and limit their ICBMs and ICBM launchers, SLBMs and SLBM launchers, heavy bombers equipped for nuclear armaments, ICBM warheads, SLBM warheads, and heavy bomber nuclear armaments within 7 years after ratifying the treaty and until its expiration.  The agreed-upon aggregate numbers of the covered systems cannot exceed:

• 1,550 for warheads on deployed ICBMs, warheads on deployed SLBMs, and nuclear warheads counted for deployed heavy bombers

• 800 for deployed and non-deployed ICBM launchers, deployed and non-deployed SLBM launchers, and deployed and non-deployed heavy bombers

• 700 for deployed ICBMs, deployed SLBMs, and deployed heavy bombers

The treaty does not limit the number of non-deployed warheads or non-deployed ICBMs and SLBMs. 

Definitions (found in Part One of the Protocol):

ICBM: A land-based ballistic missile with a range in excess of 5,500 kilometers.

SLBM: A ballistic missile with a range in excess of 600 kilometers of a type, any one of which has been contained in, or launched from, a submarine.

Deployed ICBM and SLBM: an ICBM or SLBM that is contained in or on a deployed launcher of such missiles. 

Deployed launcher of ICBMs: a launcher that contains an ICBM and is not an ICBM test launcher, an ICBM training launcher, or an ICBM launcher located at a space launch facility. 

Deployed launcher of SLBMs: an SLBM launcher installed on a submarine that is out of port, that contains an SLBM, and is not intended for testing or training.

*Soft site launchers – which are any land-based launchers of ICBMs or SLBMs other than a silo launcher – when used for testing, training, or space launch, do not meet the definition of either deployed or non-deployed launchers, and thus are not covered by the treaty. 

Non-deployed ICBM and SLBM: when ICBMs or SLBMs are removed from their launchers for any reason, then both the missile and launcher become non-deployed for purposes of the treaty and the change of status must be notified within 5 days of the change and noted in the treaty’s database. 

Heavy bomber: a bomber with a range greater than 8,000 kilometers or a bomber that can carry long range nuclear air-launched cruise missiles (ALCMs), nuclear air-to-surface missiles or nuclear bombs.

Deployed heavy bomber: any heavy bomber equipped for nuclear armaments, other than a test heavy bomber or a heavy bomber equipped for nuclear armaments located at a repair facility or production facility. 

Article III.  Establishes counting rules for the limits in Article II.

• Deployed ICBMs, deployed SLBMs and deployed heavy bombers each count as one toward the aggregate limit of 700 deployed systems.  

• The number of warheads for ICBMs and SLBMs is the number of reentry vehicles on a deployed ICBM or SLBM.  Each reentry vehicle, including conventionally-armed reentry vehicles on strategic missiles, is counted as one warhead and counts towards the limit of 1,550 total warheads on deployed ICBMs, SLBMs, and heavy bombers. 

Reentry vehicle: the part of the front section of an ICBM or SLBM payload that can survive reentry through the dense layers of the Earth’s atmosphere and that is designed for delivering a weapon to a target or for testing such a delivery. 

*Conventional reentry vehicles deployed on ICBMs are covered by the limits in START I and are also subject to this treaty.  DOD has concluded that any deployment of conventionally armed ICBMs or SLBMs with a traditional trajectory, which would count under the treaty limits, would be limited to a niche capability over the duration of this treaty, and therefore could easily be accounted for under the treaty’s limits while still retaining a robust nuclear triad. Both parties agreed that it is difficult for the other party to distinguish between a nuclear armed reentry vehicle and conventionally armed reentry vehicle emplaced on an ICBM. They agreed, therefore, in an agreed statement in Part Nine of the protocol, not to emplace both nuclear-armed and conventional warheads simultaneously on a front section of an ICBM or SLBM.

A single, standardized set of warhead counting rules will be used for both parties and the warhead count will reflect the number of reentry vehicles actually emplaced on each ICBM or SLBM (unlike the original START Treaty, which used attribution rules to assign the maximum number of warheads each type could carry to all of the missiles of that type, regardless of how many warheads each missile of that type actually carried).  Objects such as penetration aids and inert ballast objects that may be carried on an ICBM or SLBM will not count toward the treaty’s warhead limits.  As a result, the treaty will allow for greater accuracy in counting each party’s strategic offensive ICBMs and SLBMs.

• Each deployed heavy bomber is counted as having only one warhead, regardless of how many it can carry.  This is similar to provisions in the original START Treaty.

This heavy bomber counting rule encourages greater reliance on bombers.  Bombers are slow, can be recalled, and also can be shot down.  Because they are not first-strike weapons, they are considered to be stabilizing systems. Thus, for heavy bombers, the treaty makes use of an attribution rule, rather than a more exact counting rule, that “discounts” the number of warheads each bomber carries in order to encourage greater bomber reliance and promote strategic stability.  Because neither the United States nor the Russian Federation maintains any nuclear armaments loaded on its deployed heavy bombers, if the counting approach adopted for deployed ballistic missiles had been applied to deployed heavy bombers, each deployed heavy bomber would ordinarily have been counted as having zero nuclear warheads.

New ICBMs, SLBMs, and mobile ICBM launchers become subject to the treaty when they first leave a production facility.  A new ICBM silo launcher becomes subject to the treaty when the silo door is first installed and closed.  A new SLBM launcher becomes subject to the treaty when the submarine in which it is installed is first launched from port.  A new heavy bomber equipped for nuclear armaments becomes subject to the treaty when its airframe is first brought out of the shop, plant, or building in which it is assembled.  Notifications on newly constructed solid-fueled ICBMs and solid-fueled SLBMs must be provided to the other party 48 hours in advance of exit. Such notifications help each side assess missile movements through national technical means of verification (e.g., overhead imagery satellites).

This article also stipulates that conversion or elimination of ICBMs, SLBMs, ICBM launchers, SLBM launchers, and heavy bombers will result in their ceasing to be subject to the treaty. (See Article VI, as well.)

• This Article specifically exempts missile defense interceptors from coverage under the treaty.  A missile of a type developed and tested solely to intercept and counter objects not located on the surface of the Earth is not a ballistic missile to which the provisions of the treaty apply.  Thus, missiles for defense against ballistic missile attack or for air defense are not subject to the treaty’s limitations on ballistic missiles, provided that they are developed and tested solely to intercept and counter objects not located on the surface of the Earth. 

Article IV.  Establishes basing and location restrictions for strategic offensive arms. 

• Deployed launchers of ICBMs, including both mobile and silo launchers, shall be based only at ICBM bases.

• Deployed launchers of SLBMs may be installed only on ballistic missile submarines.  This prohibits installing deployed SLBM launchers on surface ships or other platforms.

Basing: refers to a permanent facility that supports the long-term operations of a particular strategic offensive system on a permanent basis, as distinguishable from the idea of temporary stationing.

ICBM base: an area in which one or more basing areas and one associated maintenance facility are located (for mobile ICBM launchers), or an area in which one or more groups of silo launchers of ICBMs and one associated maintenance facility are located (for silo ICBM launchers). 

There are no restrictions on where deployed mobile launchers of ICBMs may be located.  Because mobile ICBMs are considered survivable when deployed in the field and therefore stabilizing, their unhampered operation while deployed in the field is permitted. 

Each party is limited to 10 test heavy bombers because test heavy bombers are not subject to inspection.

Article V.  Establishes guidelines regarding modernization and replacement of strategic offensive arms.  Subject to the provisions of the treaty, modernization and replacement of strategic offensive arms are permitted. 

• Parties may deploy “new types” of ICBMs, SLBMs, and heavy bombers equipped for nuclear armaments.  They shall notify the other party within five days of the emergence of a new type or variant of strategic offensive arm, and shall exhibit it so that the other party may confirm that the technical characteristics of the weapon are as notified.

“New types”: refers to new types of ICBMs and SLBMs, and heavy bombers equipped for nuclear armaments that meet the definitions of the treaty. For ICBMs and SLBMs, they are ICBMs or SLBMs that differ from the technical characteristics of existing ICBMs or SLBMs along certain technical variables.

“New kinds” of strategic offensive arms: new offensive arms of strategic range that do not meet the treaty’s definitions of these existing strategic offensive arms. 

When a party believes that a new kind of strategic offensive arm is emerging – i.e., one that does not meet the technical definition of an ICBM, SLBM, or heavy bomber – that party has the right to raise the question of how to deal with such weapon in the Bilateral Consultative Commission (BCC), established in Article XII. 

• There is no requirement in the treaty, however, for the deploying party to delay deployment of the new system pending resolution in the BCC.

Article V, paragraph 3 affects missile defense interceptors.  Parties cannot convert ICBM launchers and SLBM launchers to launchers for missile defense interceptors.  Likewise, parties cannot convert launchers of missile defense interceptors to launchers for ICBMs and SLBMs.  The treaty also clearly stipulates that the 5 ICBM silos at Vandenberg Air Force Base in California that were converted to carry missile defense interceptors are not affected by this prohibition and thus are not subject to the treaty.  This article also protects those 5 interceptors and other U.S. missile defense interceptors from the START inspection regime. According to the Defense Department, the U.S. has no plans to use any additional ICBM launchers or any SLBM launchers to hold missile defense interceptors, so this prohibition does not interfere with current or future missile defense plans.

Article VI.  As supplemented by Parts Three and Four of the Protocol, establishes the requirements for converting, eliminating, or other means of removing from accountability strategic offensive arms and facilities.

Article VII.  As supplemented by Parts Two and Four of the Protocol, establishes the creation of a database and mandates specific sets of data that must be provided for documentation and verification purposes.  Notifications required pursuant to this article will enable the United States to follow the travels of each Russian missile, in particular, from base to base and from silo or submarine to maintenance or repair facilities, and back.

Article VIII.  In cases where one of the Parties determines that its actions may lead to an ambiguous situation, that party must take measures to ensure the viability and effectiveness of the treaty and to enhance confidence, openness, and predictability concerning the reduction and limitation of strategic offensive arms.

Article IX.  On an annual basis, parties will exchange telemetric information on up to five ICBM and SLBM launches, on a parity basis.

Article X.  Establishes obligations regarding the use of national technical means (NTM) of verifying compliance.

National technical means (NTM): systems, such as reconnaissance satellites, used to collect information useful in verifying compliance with provisions of the treaty. 

• Each party may use NTM at its disposal.

• Interfering with the other party’s NTM of verification is prohibited.  

• Using concealment measures to impede verification is prohibited.

*The concealment prohibition does not apply to cover or concealment practices at ICBM bases or to the use of environmental shelters for strategic offensive arms, since such prohibitions would disrupt normal operations.

Article XI.  Addresses inspection activities. 

• Each party can conduct up to 18 short-notice on-site inspections each year to determine the accuracy of the other party’s data and to verify compliance.

• Inspections can occur at facilities that house both deployed and non-deployed launchers and missiles.  

• There are 2 types of inspections: Type One inspections, and Type Two inspections. There are also exhibitions.

• Each party can conduct up to 10 Type One Inspections and up to 8 Type Two Inspections per year.  Exhibitions can be conducted as often as needed, and do not count against the limit on inspections.

Type One inspections may be conducted at bases for ICBMs (both for silo-based and mobile launchers), for ballistic missile submarines, and for heavy bombers equipped for nuclear armaments to confirm the accuracy of declared data (including data on the number of warheads on one missile or heavy bomber at each base inspected). 

Type Two inspections will occur at facilities that house non-deployed or converted launchers and missiles to confirm the accuracy of declared data and to confirm the conversion or elimination of strategic offensive arms. 

Exhibitions are used for two purposes: to demonstrate features of new types of strategic offensive arms that distinguish them from existing types; and to demonstrate the results of conversions and verify that such systems have not been reconverted.

Article XII.  Establishes the Bilateral Consultative Commission (BCC) to promote the objectives and implementation of the provisions of the treaty.

Article XIII.  Prohibits any international obligations or undertakings (including both formal written agreements and informal arrangements between governments) that would conflict with the treaty’s provisions. 

Parties may not transfer strategic offensive arms subject to this treaty to third parties.  But this provision does not apply to any existing patterns of cooperation and obligation regarding strategic offensive arms.  The U.S. maintains one existing pattern of cooperation with the United Kingdom at the time the treaty was signed, which the Russians acknowledged during the New START negotiations. 

Article XIV.  Sets rules governing entry into force, duration, and withdrawal from the treaty. 

• The treaty will remain in force for 10 years unless superseded by a subsequent agreement on the reduction and limitation of strategic offensive arms. 

• Upon mutual agreement, the parties may extend the treaty for up to 5 additional years.

• Each party has the right to withdraw from the treaty if it decides that extraordinary events related to the subject matter of the treaty have jeopardized its supreme interests.  Should withdrawal occur, the treaty will terminate 3 months from the date of receipt by the other party of notice to withdraw.

Article XV.  Each party may propose amendments to the treaty.  Amendments to the main treaty text shall enter into force only in accordance with the same procedures governing original entry into force of the treaty. For the United States, this refers to the constitutional requirement of Senate advice and consent to ratification. Only those amendments to the Protocol and the Annexes that do not affect substantive rights or obligations under the treaty may come into force without resorting to the same procedures governing original entry into force of the treaty. This is the same mechanism utilized under the original START Treaty and its corresponding protocols and annexes.

Article XVI.  Restates the obligation in the Charter of the United Nations to register the treaty with the United Nations.

Committee on Foreign Relations’ Recommendations

The Committee on Foreign Relations recommended that the Senate advice and consent to the ratification of the New START Treaty as submitted to the Senate on May 13, 2010, subject to 10 Conditions, 3 Understandings, and 13 Declarations. The committee did not recommend any amendments to the treaty text, nor did it recommend subjecting advice and consent to any reservations (which for a bilateral treaty has the same effect as requiring amendment of the treaty). The text and explanation of the committee’s recommended resolution of advice and consent is in Executive Report 111-6

The 10 conditions recommended by the committee would be binding on the executive branch. As discussed below, a number of the 10 conditions require the President to make a certification or submit a report prior to exchanging the instruments of ratification with the Russian Federation, which under Article XIV is the means by which the treaty is to enter into force. Understandings are interpretive statements that clarify or elaborate a Party’s understanding provisions of the treaty but do not alter or amend those provisions. The 3 understandings in the committee-recommended resolution address missile defense, rail-mobile ICBMs, and strategic range non-nuclear weapon systems. Pursuant to the resolution, the President would be required to include the text of each understanding in the instrument of ratification that is exchanged under Article XIV. The 13 declarations in the resolution express the intent of the Senate. Some of these declarations convey clear expectations of executive branch action. While not legally binding, the executive branch in the past has treated such declarations as requirements, and the committee recommends these declarations with the expectation that the executive branch act in accordance with them.

For comparison, the resolution which provided Senate advice and consent to the START Treaty contained 8 conditions binding on the President, and 6 declarations by the Senate. While the 1993 START II Treaty never entered into force, the Senate did provide its advice and consent to ratification, subject to 8 conditions and 12 declarations. The 2002 Moscow Treaty resolution contained 2 conditions binding on the President, and 6 declarations by the Senate.

Condition 1.   General Compliance

The Committee recommends that the Senate condition its advice and consent to ratification by requiring that the President take several steps should he determine that Russia is acting or has acted in a manner that is inconsistent with the object and purpose of the New START Treaty, or is in violation of the treaty, to such an extent as to threaten the national security interests of the U.S.  In such a case, the President shall consult with the Senate regarding the implications of such actions.  The President shall also urgently seek to bring the Russian Federation into full compliance with its obligations.  Finally, the President must promptly submit a report to the Senate detailing whether or not the U.S. should remain party to the treaty and how the U.S. will redress the impact of Russian actions on the national security interests of the U.S. 

Condition 2.  Presidential Certifications and Reports on National Technical Means

The Committee recommends that, prior to the treaty’s entry into force, and annually thereafter, the President certify that U.S. NTM, in conjunction with the verification activities provided for in the treaty, are sufficient to ensure effective monitoring of Russian compliance with the provisions of the treaty.  Each certification is to be accompanied by a report to the Senate indicating how such NTM will be utilized to ensure effective monitoring of Russian compliance. 

Condition 3.  Reductions

The Committee recommends that the Senate include a condition that would require the President to submit a report to the Senate if he decides, prior to the New START Treaty entering into force, to reduce U.S. nuclear forces below the levels outlined in the Moscow Treaty.  The condition would prohibit the President from implementing any such reductions until submitting to the Senate a determination that such reductions are in the country’s the national security interest.  

Condition 4.  Timely Warning of Breakout

The Committee recommends a condition that, if the President, in consultation with the Director of National Intelligence, determines that Russia intends to break out of the limits on strategic arms, the President must immediately consult with the Senate regarding determining whether adherence to the treaty remains in the national interest of the U.S.

Condition 5.  U.S. Missile Defense Test Telemetry

The Committee recommends a condition that, before ratifying the treaty, the President certify to the Senate that the United States is not required to provide telemetry information on the launch of any satellites, missile defense sensor targets, or missile defense intercept targets, even when such launches use the first stage of an ICBM or SLBM limited by the treaty.

Condition 6.  Conventional Prompt Global Strike

The Committee recommends a condition that would require the President to submit, prior to entry into force of the New START Treaty, a report detailing specific information to the Senate Committees on Armed Services and Foreign Relations containing several items relating to U.S. development and deployment of conventional prompt global strike systems.  If the President concludes that the deployment of conventional warheads on ICBMS and SLBMs is required at levels that cannot be accommodated within the limits specified in Article II of the treaty while sustaining a robust United States nuclear triad, then the President shall consult immediately with the Senate regarding the reasons for such determination.

Condition 7.  U.S. Telemetric Information

The Committee recommends that, prior to agreeing to provide Russia with any telemetric information for a U.S. test launch of a prompt global strike system, the President must certify to the Foreign Relations Committee and Armed Services Committee that providing the information is either intended to demonstrate that such system is not limited by Article II of the treaty or to receive in return significant telemetry on a system not deployed by the Russian Federation prior to December 5, 2009.  The President must also certify that providing the telemetric information is in the national security interest of the United Sates and will not undermine the effectiveness of the system in question.

Condition 8.  Bilateral Consultative Commission

The Committee recommends that, before any meeting of the BCC to consider a proposal for additional measures to improve the viability and effectiveness of the treaty or to resolve questions related to the applicability of provisions of the treaty to a new kind of strategic offensive arm, the President should consult with the Committee regarding whether the proposal would constitute an amendment to the treaty requiring the advice and consent of the Senate pursuant to Article II, section 2, clause 2 of the U.S. Constitution.

Condition 9.  U.S. Commitments Ensuring the Safety, Security, and Performance of its Nuclear Forces

The Committee recommends a condition expressing the sense of the Senate that the United States is committed to proceeding with a robust stockpile stewardship program and to maintaining nuclear weapons production capabilities, in order to ensure the safety, reliability, and performance of the U.S. nuclear arsenal at the New START Treaty levels. The condition includes a reporting requirement related to the President’s 10-year plan on nuclear modernization, submitted pursuant to section 1251 of the National Defense Authorization Act for Fiscal Year 2010 (Public Law 111-84).

Condition 10.  Annual Report

The Committee recommends a condition requiring that the President submit a report to the Committees on Foreign Relations and Armed Services no later than January 31, 2012, and each year thereafter.  The report is to include details on each party’s reductions in strategic offensive arms during the previous calendar year. The report is also to provide a certification that Russia is in full compliance with the terms of the treaty.  In addition, the Committee recommends certification by the President that any conversion or elimination procedures that have been adopted do not result in ambiguities that could defeat the object and purpose of the treaty.  The Committee also recommends that this annual report include an assessment of the treaty’s transparency mechanisms and an assessment of whether a strategic imbalance exists that endangers the national security interest of the U.S.

Understanding 1.  Missile Defense

The Committee recommends that the Senate include in its Resolution an understanding that the New START Treaty does not impose any limitations on missile defense deployments other than the requirements in Article V, paragraph 3.  Any additional New START Treaty limitations on the deployment of missile defenses may enter into force for the U.S. only with the advice and consent of the Senate.  This understanding also specifies that the unilateral statement by the Russian Federation does not impose a legal obligation on the U.S. 

Understanding 2.  Rail-Mobile ICBMS

The Committee recommends an understanding that any rail-mobile-launched ballistic missile with a range in excess of 5,500 kilometers would be an ICBM and that an ejector-launcher mechanism for launching an ICBM and the railcar or flatcar on which it is mounted would be a launcher of ICBMs.  If either party should produce a rail-mobile ICBM system, the BCC would address the application of other parts of the treaty to that system.

Understanding 3.  Strategic-range, Non-nuclear Weapon Systems

The Committee recommends an understanding that the U.S. will not consider future, strategic-range, non-nuclear weapons systems that do not otherwise meet the definitions of the New START Treaty to be “new kinds of strategic offensive arms” subject to the treaty; that nothing in the treaty restricts U.S. research, development, testing and evaluation of strategic-range, non-nuclear weapons, including any weapon that is capable of boosted aerodynamic flight; and that nothing in the treaty prohibits deployments of strategic-range non-nuclear weapons systems. 

Declaration 1.  Missile Defense

The Committee recommends that the Senate declare that it is the sense of the Senate: that U.S. policy, pursuant to the National Missile Defense Act of 1999, is “to deploy as soon as is technologically possible, an effective National Missile Defense system capable of defending the territory of the U.S. against limited ballistic missile attack;” that “defenses against ballistic missiles are essential for new deterrent strategies and for new strategies should deterrence fail;” and that “further limitations on the missile defense capabilities of the United States are not in the national security interest” of the U.S.  The Committee further recommend that the Senate declare that the New START Treaty and the statements made by the Russian Federation do not limit in any way, and must not be interpreted as limiting, activities that the U .S. government currently plans or that might be required over the duration of the treaty to protect the U.S. pursuant to the National Missile Defense Act of 1999, or to protect U.S. Armed Forces and U.S. allies from limited ballistic missile attack, including further planned enhancements to the Ground-Based Midcourse Defense system and all phases of the Phased Adaptive Approach to missile defense in Europe.

Declaration 2.  Defending the U.S. and Allies Against Strategic Attack

The Committee recommends the Senate express its hope that the U.S. and Russia can move cooperatively to a less risky strategic relationship, in which case the U.S. is ready to cooperate with Russia on strategic defenses.  Strategic stability can be enhanced by strategic defenses and the U.S. remains free to construct a layered missile defense system.  Finally, it states that the U.S. remains committed to improving its strategic defensive capabilities.

Declaration 3.  Conventionally Armed, Strategic-range Weapons Systems

The Committee recommends that the Senate declare that conventionally armed weapon systems not co-located with nuclear-armed systems do not affect strategic stability between the U.S. and Russia.

Declaration 4.  Nunn-Lugar Cooperative Threat Reduction

The Committee recommends that the Senate declare that the Cooperative Threat Reduction (CTR) program has made an invaluable contribution to the safety and security of weapons of mass destruction, including nuclear weapons and materials in Russia and elsewhere, and that the President should continue the global CTR assistance to Russia, including for the purpose of facilitating implementation of the New START Treaty.

Declaration 5.  Asymmetry in Reductions

The Committee recommends a declaration that it is the sense of the Senate that the President regulate reductions in U.S. strategic nuclear forces to ensure the number of strategic offensive arms accountable under the New START Treaty that are possessed by Russia does not exceed the comparable number of accountable strategic offensive arms possessed by the U.S. to such an extent that a strategic imbalance endangers the national security interests of the U.S.

Declaration 6.  Compliance

The Committee recommends that the Senate declare that the New START Treaty will remain in the interests of the U.S. only to the extent that Russia is in strict compliance with its obligations under the treaty.  The executive branch must offer briefings regarding compliance issues to the Foreign Relations and Armed Services Committees before and after each meeting of the BCC.

Declaration 7.  Expansion of Strategic Arsenals in Countries Other Than Russia

The Committee recommends including a declaration that if, during the time the treaty remains in force, the President determines that there has been an expansion of the strategic arsenal of any country not party to the treaty, jeopardizing the supreme interests of the U.S., then the President should consult immediately with the Senate to determine whether adherence to the treaty remains in the national interest of the U.S.

Declaration 8.  Treaty Interpretation

The Committee recommends including a declaration restating conditions attached to the Intermediate-Range Nuclear Forces (INF) Treaty passed in 1988 and every subsequent resolution of advice and consent to ratification of an arms control treaty maintaining the constitutional role of the Senate in the treatymaking process. 

Declaration 9: Treaty Modification or Reinterpretation

The Committee recommends including a declaration limiting treaty reinterpretation by the executive branch.  Any agreement or understanding which in any material way modifies, amends, or reinterprets U.S. or Russian obligations under New START should be submitted to the Senate for advice and consent. 

Declaration 10.  Consultations

The Committee recommends including a declaration stating the Senate’s expectation that the President will consult with the Senate prior to any action regarding extending, superseding, or withdrawing from the treaty.

Declaration 11.  Tactical Nuclear Weapons

The Committee recommends including a declaration calling on the President to pursue, following consultation with allies, an agreement with Russia that would address the disparity between the tactical nuclear weapons stockpiles of the U.S. and Russia, and would secure and reduce tactical nuclear weapons in a verifiable manner.

Declaration 12.  Further Strategic Arms and Reductions

The Committee recommends including a declaration reiterating America’s commitment to Article VI of the Nuclear Non-Proliferation Treaty (NPT) regarding ending the nuclear arms race and eventual disarmament.  The Committee believes it is important to stress to other nuclear weapons states that they also have an obligation under the NPT, toward which those states should take similarly concrete steps.

Declaration 13.  Modernization and Replacement of U.S. Strategic Delivery Systems

The Committee recommends including a declaration stating the importance to the U.S. nuclear deterrent of the triad of delivery vehicles – ICBMs, SLBMs, and bombers – and that it state the U.S. commitment to modernizing and replacing those delivery vehicles. 

Treaty History

On April 8, 2010, Presidents Obama and Medvedev signed Treaty 111-5, a Treaty Between the United States of America and the Russian Federation on Measures for the Further Reduction and Limitation of Strategic Offensive Arms (New START).  On May 13, 2010, the New START Treaty was received in the Senate, the injunction of secrecy was removed by unanimous consent, and it was referred to the Committee on Foreign Relations.

The Foreign Relations Committee held ten public hearings and two classified hearings on the New START Treaty.  Between June 17, 2010 and August 6, 2010, the Armed Services Committee conducted five hearings and three classified briefings; Senators Levin and McCain each wrote to the Foreign Relations Committee with their views regarding the treaty.  The Select Committee on Intelligence also held hearings on the New START Treaty; Senators Feinstein and Bond each wrote classified letters to the Foreign Relations Committee concerning their views on the treaty.  On September 16, 2010, the Committee on Foreign Relations agreed by a bipartisan vote of 14 to 4 to report the New START Treaty to the Senate, and to recommend to the Senate a resolution of advice and consent to ratification with 10 conditions, 3 understandings, and 13 declarations.  The resolution and committee analysis, as well as the letters to the Foreign Relations Committee from Senators Levin and McCain and other relevant letters, are included in Executive Report 111-6.

Previous Related Treaties

President Reagan began negotiations on the original START Treaty in the early 1980s and negotiations culminated in the signing of the START Treaty by Presidents George H.W. Bush and Mikhail Gorbachev in July 1991.  The original START Treaty limited each party to 6,000 strategic warheads attributed to 1,600 deployed delivery vehicles.  The START Treaty expired on December 5, 2009.

In 1993, Presidents George H.W. Bush and Boris Yeltsin signed the START II Treaty, which would have reduced U.S. and Russian deployed strategic nuclear forces to between 3,000 and 2,500 warheads, but the treaty never entered into force because of subsequent disagreements over missile defense issues.  In 1997, Presidents Bill Clinton and Boris Yeltsin agreed to a framework for a START III Treaty that would have reduced deployed arsenals to between 2,000 and 2,500 strategic warheads; however, formal negotiations never took place.

In May 2002, Presidents George W. Bush and Vladimir Putin signed the Strategic Offensive Reductions Treaty, commonly referred to as either the Moscow Treaty or SORT, which limits to between 1,700 and 2,200 the number of operationally deployed strategic warheads that each country may possess on December 31, 2012.  However, the Moscow Treaty is a far simpler and shorter accord than the START Treaties and did not supersede the original START Treaty.  The Moscow Treaty relied on START’s verification and transparency mechanisms until the START Treaty expired in December 2009. With the START Treaty’s expiration, there are no verification and transparency mechanisms to verify compliance with the Moscow Treaty’s limits. The treaty officially expires on the same day its limits come into effect, on December 31, 2012, unless the two countries agree to extend it. Pursuant to Article XIV of the New START Treaty, the Moscow Treaty will be superseded by New START as of the date of the latter treaty’s entry into force.

Possible Amendments

The DPC will circulate information about possible amendments as it becomes available. 

Resources

Text of The New Strategic Arms Reduction Treaty (New START), Treaty Number 111-5

Text of Senate Executive Report

Text of Resolution of Ratification

• On April 8, 2010, following a year of intense negotiations, Presidents Obama and Medvedev signed the New Strategic Arms Reduction Treaty (New START).
• The New START Treaty replaces the 1991 START Treaty which expired on 12/5/09.

New START limits the number of strategic offensive arms of the US and Russia (within seven years of the Treaty’s entry into force) to:

• 1,550 warheads on deployed ICBMs, warheads on deployed SLBMs, and nuclear warheads counted for deployed heavy bombers.
• 800 deployed and non-deployed ICBM launchers, deployed and non-deployed SLBM launchers, and deployed and non-deployed heavy bombers.
• 700 deployed ICBMs, deployed SLBMs, and deployed heavy bombers.

The Senate has extensively reviewed and examined New START:

• The Senate has held over 15 hearings on the Treaty and received many classified briefings.
• The Foreign Relations Committee alone held 12 hearings and classified briefings with 21 bipartisan witnesses and received input from the Intelligence and the Armed Services Committees.
• The Obama Administration answered over 900 questions for the record.
• The Obama Administration provided two classified briefings for the full Senate.

The Treaty Received Bipartisan Support from the Foreign Relations Committee:

• By a bipartisan vote of 14-4, the Foreign Relations Committee overwhelmingly approved a Resolution of Ratification with 10 conditions, 3 understandings, and 13 declarations.

The Treaty is unanimously supported by US military leadership and has been strongly endorsed by bipartisan national security leaders including:

• Secretary of Defense Robert Gates, Chairman of the Joint Chiefs of Staff Admiral Mike Mullen, Gen. Kevin Chilton, Lt. Gen. Patrick O’Reilly, Gen. James Cartwright;
• Former President George H.W. Bush;
• All living former Secretaries of State, including: Condoleezza Rice, Colin L. Powell, James A. Baker III, George P. Schultz, and Henry A. Kissinger;
• Lt. Gen. Brent Scowcroft, James Schlesinger, Stephen Hadley, Sam Nunn, John Warner.

The Treaty will allow the US to resume inspections of Russia’s nuclear arsenal:

• The US has not been able to conduct on-site inspections of Russian’s nuclear arsenal since 12/09, when the original START treaty expired.

The Treaty strengthens America’s national security:

• Preserves a strong US nuclear arsenal as an effective strategic deterrent.
• Provides stability, predictability and transparency between the two largest nuclear powers.
• Strengthens critical non-proliferation efforts around the world.
• Increases US ability to work with other countries to confront the nuclear ambitions of countries like Iran and North Korea.

The Lab Directors support the Administration’s plan for the US nuclear complex:

The directors of the three nuclear laboratories wrote a letter stating their support for the plan to provide $85billion over the next ten years to upgrade the nuclear weapons complex.

Basing area: A permanent facility that supports the long-term operations of a particular strategic offensive system on a permanent basis and is distinguishable from temporary stationing.

Conventional Prompt Global Strike (CPGS): The ability to deliver a non-nuclear weapon anywhere in the world within 60 minutes. Such systems may or may not be ballistic missiles (i.e., some possible CPGS systems are not ballistic for most of their flight paths). CPGS systems are also sometimes referred to as “strategic range non-nuclear systems.”

Cruise missile: A missile that is an unmanned, self-propelled weapon-delivery vehicle that sustains flight through the use of aerodynamic lift over most of its flight path.  This definition distinguishes cruise missiles from ballistic missiles and remotely piloted airplanes.

Air-launched cruise missile (ALCM): An air-to-surface cruise missile of a type, any one of which has been flight-tested from an aircraft or deployed on a bomber on a bomber after December 31, 1986   The New START Treaty does not directly limit air-launched cruise missiles, limiting instead the heavy bombers capable of delivering long-range nuclear ALCMs. It does not limit ground- or sea-launched cruise missiles (GLCMs or SLCMs”) or their launchers.

Long-range nuclear ALCM: an ALCM with a range in excess of 600 kilometers that is nuclear armed.

De-MIRVed: An ICBM or SLBM that once carried multiple warheads in its payload but has been modified to carry only a single warhead.

Deployed heavy bomber: Any heavy bomber equipped for nuclear armaments, other than a test heavy bomber or a heavy bomber equipped for nuclear armaments located at a repair facility or production facility.

Each deployed heavy bomber is counted as having only one warhead, regardless of how many it can carry.  This is similar to provisions in the original START Treaty.  This counting rule encourages greater reliance on bombers.  Bombers are slow, can be recalled, and also can be shot down.  Because they are not first-strike weapons, they are considered to be stabilizing systems. Thus, for heavy bombers, the treaty makes use of an attribution rule, rather than a more exact counting rule. This method “discounts” the number of warheads each bomber carries to promote strategic stability.  Because neither the United States nor the Russian Federation maintains any nuclear armaments loaded on its deployed heavy bombers, if the counting approach adopted for deployed ballistic missiles had been applied to deployed heavy bombers, each deployed heavy bomber would ordinarily have been counted as having zero nuclear warheads.

Deployed ICBM and SLBM: An ICBM or SLBM that is contained in or on a deployed launcher of such missiles.

Deployed launcher of ICBMs: A launcher that contains an ICBM and is not an ICBM test launcher, an ICBM training launcher, or an ICBM launcher located at a space launch facility.

Deployed launcher of SLBMs: An SLBM launcher installed on a submarine that has been launched from port, that contains an SLBM, and is not intended for testing or training.

Front Section: The portion of the payload of the final stage of an ICBM or SLBM that contains the reentry vehicle or reentry vehicles and may, depending on design, include a platform for a reentry vehicle or reentry vehicles, penetration aids, and a shroud.

Heavy bomber: A bomber of a type, any one of which satisfies either of the following criteria: (a) its range is greater than 8,000 kilometers; or (b) it is equipped for long-range nuclear air-launched cruise missiles (ALCM) [Protocol, Part One, Paragraph 23]. The existing U.S. types of heavy bombers are B-52G, B-52H, B-1B, and B-2A.

Heavy bomber equipped for nuclear armaments:A heavy bomber equipped for long-range nuclear air-launched cruise missiles (ALCMs), nuclear air-to-surface missiles, or nuclear bombs.

Intercontinental ballistic missile (ICBM): A land-based ballistic missile with a range, demonstrated in flight tests, in excess of 5,500 kilometers.  The distance of 5,500 kilometers is based on the shortest distance between the northeastern border of the continental U.S. and the northwestern border of the Russian Federation. The existing U.S. types of ICBMs are Minuteman II, Minuteman III, and Peacekeeper.

ICBM base: For mobile launchers of ICBMs, an area in which one or more basing areas and one associated maintenance facility are located; for silo launchers of ICBMs, an area in which one or more groups of silo launchers of ICBMs and one associated maintenance facility are located.  The Treaty does not establish outer boundaries for ICBM bases.

Multiple independent reentry vehicles (MIRV): An offensive ballistic missile system that can be launched by a single booster rocket and that carries multiple warheads, each of which can strike a separate target.

“New kinds” of strategic offensive arms: New offensive arms of strategic range that do not meet the treaty’s definitions of existing strategic arms.  When a Party believes that a new kind of strategic offensive arm is emerging, that Party has the right to raise the question of such an arm for consideration within the framework of the Bilateral Consultative Commission (BCC). The Parties understand that, if one Party deploys a new kind of strategic range arm for delivering non-nuclear weapons that it asserts is not a “new kind of strategic offensive arm” subject to the Treaty, and the other Party challenges that assertion, the deploying Party would be obligated to attempt to resolve the issue within the framework of the BCC. There is no requirement in the Treaty for the deploying Party to delay deployment of the new system pending such resolution, however.

“New types” of strategic offensive arms: Refers to new types of ICBM, SLBMs, and heavy bombers equipped for nuclear armaments that meet the definitions of the treaty.  In other words, “new types” of arms are created through modifications to existing ICBM, SLBM, and heavy bomber platforms covered in the Treaty, and are accountable under the central limits established by the Treaty.

Non-deployed ICBM and SLBM: When an ICBM or SLBM is removed from its launcher for any reason, then both the missile and launcher become non-deployed for proposes of the Treaty.

There are no numerical limits on non-deployed ICBMs or SLBMs, but the treaty does restrict non-deployed ICBMs and SLBMs to being placed only at, as appropriate, submarine bases, ICBM or SLBM loading facilities, maintenance facilities, repair facilities for ICBMs or SLBMs, storage facilities for ICBMs or SLBMs, conversion or elimination facilities for ICBMs or SLBMs, test ranges, space launch facilities, and production facilities, except that they may be in transit between these facilities for no more than 30 days at a time.

Reentry vehicle: The part of the front section that can survive reentry through the dense layers of the Earth’s atmosphere and that is designed for delivering a weapon to a target or for testing such a delivery.

Soft site launchers: Land-based launchers of ICBMs or SLBMs, other than a silo launcher, used for testing, training, or space launch that does not meet the definition of either deployed or non-deployed launchers.  Soft site launchers are not covered by the treaty.

Submarine-launched ballistic missile (SLBM): A ballistic missile with a range in excess of 600 kilometers of a type, any one of which has been contained in, or launched from, a submarine.  The range of 600 kilometers was selected in the original START Treaty to avoid limitations on tactical naval systems.

Telemetric information: Information that originates on board a missile during its initial motion (launch) and subsequent flight that is broadcast.

Triad: The strategic nuclear force structure consisting of ICBMs, SLBMs and nuclear-capable heavy bombers.

Warhead: For the purposes of this Treaty, a unit of account, not a physical item, used for counting toward the 1,500 aggregate limit established by the Treaty.  The term represents the declared number of reentry vehicles emplaced on deployed ICBMs and deployed SLBMs, and the one nuclear warhead attributed to each deployed heavy bomber.

This week, the Senate will consider legislation, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act, S. Amdt. 4753, sponsored by Senators Reid and McConnell to extend the vital tax cuts for America’s middle class and a wide range of individuals and businesses that will otherwise expire at the end of this month.  This measure also includes job-creating tax incentives for our economy and a full-year reauthorization of emergency unemployment insurance benefits. 

It is clear that even though time is running out for the 111^th Congress, Republicans are willing to raise taxes on everyone, not just the middle class, unless they can get an extra tax break for the wealthiest few.  Already due to Republican obstructionism, emergency unemployment insurance benefits expired for millions of middle-class Americans at the end of November. 

In the face of such Republican recklessness, Congressional Democrats must step up to govern and make the tough but right decisions that will put America’s middle class and our economic recovery first.  That is why the Democratic leadership is now moving forward with this compromise package.  It is unacceptable to allow the middle-class tax cuts to expire, as Republicans are threatening to do so now.  Democrats remain committed to ensuring that middle-class families do not lose their tax cuts during these difficult financial times.  We will also continue working to provide smart business tax incentives to create jobs and grow the economy, in addition to the $509 billion worth of tax cuts that Democrats have already enacted since President Obama took office.

Legislative Snapshot

Under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act, S.Amdt. 4753, middle-class families and small businesses will see their taxes go down.  This measure contains job-creating tax incentives, including a payroll tax cut for individuals and incentives to create clean energy jobs, energy-efficient homes, and investments in renewable energy.  It also ensures that millions of Americans still looking for work continue to have access to an emergency safety net to afford basic necessities, without extending the amount of time these benefits can be claimed for any given household. 

The specific ways that this bill will benefit middle-class families and aid the economic recovery include the following:

• Preserves the current income tax rate for middle-class families (2 years).
• Cuts the payroll tax for workers by $110 billion (1 year).
• Reauthorizes the current emergency unemployment insurance program (13 months, or through the end of 2011).
• Continues vital middle-class tax credits, including the American Opportunity Tax Credit to help families pay for college, the Child Tax Credit, and the Earned Income Tax Credit (two years).
• Helps businesses by allowing them to deduct 100 percent of certain investments in 2011 and 50 percent in 2012.
• Extends the state and local sales tax deduction, which is particularly important for states without a state income tax (2 years).
• Extends Alternative Minimum Tax relief through 2011 (2 years).
• Extends incentives important for developing the clean energy industry (see detailed summary).

The total net estimated budget effect of this legislation is -$374 billion in 2011 and -$858 billion over ten years (2011-2020), according to the Joint Committee on Taxation and the Congressional Budget Office.

Legislative Details

This summary was provided by the Senate Majority Leader’s office.

Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
December 9, 2010

I. Temporary Extension of Tax Relief

Two major bills enacting tax cuts for individuals expire at the end of 2010:  the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA); and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA).  The following package extends these provisions from EGTRRA and JGTRRA for an additional two years, through 2012, and will provide important tax relief to American taxpayers.  The following package also extends a number of provisions enacted as part of EGTRRA that were modified in the American Recovery and Reinvestment Act.

Reductions in Individual Income Tax Rates

Temporarily extend the 10 percent bracket.  Under current law, the 10 percent individual income tax bracket expires at the end of 2010.  Upon expiration, the lowest tax rate will be 15 percent.  This proposal extends the 10 percent individual income tax bracket for an additional two years, through 2012. 

Temporarily extend the 25 percent, 28 percent, 33 percent, and 35 percent brackets.  Under current law, the 25 percent, 28 percent, 33 percent, and 35 percent individual income tax brackets expire at the end of 2010.  Upon expiration, the rates become 28 percent, 31 percent, 36 percent, and 39.6 percent respectively.  This proposal extends the 25 percent, 28 percent, 33 percent, and 35 percent individual income tax brackets for an additional two years, through 2012. 

Temporarily repeal the Personal Exemption Phase-out.  Personal exemptions allow a certain amount per person to be exempt from tax.  Due to the Personal Exemption Phase-out (“PEP”), the exemptions are phased out for taxpayers with AGI above a certain level.  The EGTRRA repealed PEP for 2010.  The proposal extends the repeal of PEP for an additional two years, through 2012.   

Temporarily repeal the itemized deduction limitation. Generally, taxpayers itemize deductions if the total deductions are more than the standard deduction amount.  Since 1991, the amount of itemized deductions that a taxpayer may claim has been reduced, to the extent the taxpayer’s AGI is above a certain amount.  This limitation is generally known as the “Pease limitation.” The EGTRRA repealed the Pease limitation on itemized deductions for 2010.  The proposal extends the repeal of the Pease limitation for an additional two years, though 2012. 

Capital Gains and Dividends

Temporarily extend the capital gains and dividend rates.  Under current law, the capital gains and dividend rates for taxpayers below the 25 percent bracket is equal to zero percent.  For those in the 25 percent bracket and above, the capital gains and dividend rates are currently 15 percent.  These rates expire at the end of 2010.  Upon expiration, the rates for capital gains become 10 percent and 20 percent, respectively, and dividends are subject to the ordinary income rates.  This proposal extends the current capital gains and dividends rates for all taxpayers for an additional two years, through 2012. 

Child Tax Credit

Temporarily extend the modified child tax credit.  Generally, taxpayers with income below certain threshold amounts may claim the child tax credit to reduce federal income tax for each qualifying child under the age of 17.  The EGTRRA increased the credit from $500 to $1,000.  The EGTRRA also expanded refundability.  The amount that may be claimed as a refund was 15 percent of earnings above $10,000.  The American Recovery and Reinvestment Act of 2009 provided that earnings above $3,000 would count towards refundability for 2009 and 2010.  This proposal extends the current child tax credit for an additional two years, through 2012.

Marriage Penalty Relief

Temporarily extend marriage penalty relief.  The proposal extends the marriage penalty relief for the standard deduction, the 15 percent bracket, and the EITC for an additional two years, through 2012. 

Incentives for Families and Children

Temporarily extend the expanded dependent care credit.The dependent care credit allows a taxpayer a credit for an applicable percentage of child care expenses for children under 13 and disabled dependents.  The EGTRRA increased the amount of eligible expenses from $2,400 for one child and $4,800 for two or more children to $3,000 and $6,000, respectively. The EGTRRA also increased the applicable percentage from 30 percent to 35 percent.  The proposal extends the changes to the dependent care credit made by EGTRRA for an additional two years, through 2012. 

Temporarily extend the increased adoption tax credit and the adoption assistance programs exclusion.Taxpayers that adopt children can receive a tax credit for qualified adoption expenses.  A taxpayer may also exclude from income adoption expenses paid by an employer.  The EGTRRA increased the credit from $5,000 ($6,000 for a special needs child) to $10,000, and provided a $10,000 income exclusion for employer-assistance programs.  The Patient Protection and Affordable Care Act of 2010 extended these benefits to 2011 and made the credit refundable.  The proposal extends for an additional year, through 2012, the increased adoption credit amount and the exclusion for employer-assistance programs as enacted in EGTRRA.

Temporarily extend the credit for employer expenses for child care assistance.The EGTRRA provided employers with a credit of up to $150,000 for acquiring, constructing, rehabilitating or expanding property which is used for a child care facility.  The proposal extends this provision for an additional two years, through 2012. 

Earned Income Tax Credit (EITC)

Temporarily extend third-child EITC.  Under current law, working families with two or more children currently qualify for an earned income tax credit equal to 40 percent of the family’s first $12,570 of earned income. The American Recovery and Reinvestment Act increased the earned income tax credit to 45 percent of the family’s first $12,570 of earned income for families with three or more children and increased the beginning point of the phase-out range for all married couples filing a joint return (regardless of the number of children).  This proposal extends for an additional two years, through 2012, the American Recovery and Reinvestment Act provisions that increased the credit for families with three or more children and increased the phase-out range for all married couples filing a joint return. 

Education Incentives

Temporarily extend expanded Coverdell Accounts.  Coverdell Education Savings Accounts are tax-exempt savings accounts used to pay the higher education expenses of a designated beneficiary.  The EGTRRA increased the annual contribution amount from $500 to $2,000 and expanded the definition of education expenses to include elementary and secondary school expenses.  The proposal extends the changes to Coverdell accounts for an additional two years, through 2012. 

Temporarily extend the expanded exclusion for employer-provided educational assistance.An employee may exclude from gross income up to $5,250 for income and employment tax purposes per year of employer-provided education assistance.  Prior to 2001, this incentive was temporary and only applied to undergraduate courses.  The EGTRRA expanded this provision to graduate education and extended the provision for undergraduate and graduate education to the end of 2010.  The proposal extends the changes to this provision for an additional two years, through 2012. 

Temporarily extend the expanded student loan interest deduction.  Certain individuals who have paid interest on qualified education loans may claim an above-the-line deduction for such interest expenses up to $2,500.  Prior to 2001, this benefit was only allowed for 60 months and phased-out for taxpayers with income between $40,000 and $55,000 ($60,000 and $75,000 for joint filers).  The EGTRRA eliminated the 60 month rule and increased the income phase-out to $55,000 to $70,000 ($110,000 and $140,000 for joint filers).  The proposal extends the changes to this provision for an additional two years, through 2012. 

Temporarily extend the exclusion from income of amounts received under certain scholarship programs.  Scholarships for qualified tuition and related expenses are excludible from income.  Qualified tuition reductions for certain education provided to employees are also excluded.  Generally, this exclusion does not apply to qualified scholarships or tuition reductions that represent payment for teaching, research, or other services.  The National Health Service Corps Scholarship Program and the F. Edward Hebert Armed Forces Health Professions Scholarship and Financial Assistance Program provide education awards to participants on the condition that the participants perform certain services.  The EGTRRA allowed the scholarship exclusion to apply to these programs.  The proposal extends the changes to this provision for an additional two years, through 2012. 

Arbitrage rebate exception for school construction bonds.  Under current law, issuers of tax-exempt bonds must rebate to the U.S. Treasury arbitrage (excess interest income) earned from the investment of tax-exempt bond proceeds in higher-yielding taxable securities.  The calculation of excess interest income can be complex, and as a result, many governments incur large costs to comply with the requirements.  To ease the burden on small issuers, the federal tax code exempts governments that issue a relatively small number of tax-exempt bonds in a given year from the requirement.  In general, the small issuer rebate exception can only be used by state and local governments that issue less than $5 million in governmental and 501(c)(3) bonds annually.  This exception is $10 million for bonds issued for qualified educational facilities.  The EGTRRA increased the small-issuer arbitrage rebate exception for school construction from $10 million to $15 million.  This proposal extends the $15 million arbitrage rebate exception for school construction for an additional two years, through 2012. 

Tax-exempt private activity bonds for qualified education facilities.  Under current law, proceeds from private activity bonds issued by a state or local government qualify as tax-exempt if 95 percent or more of the net bond proceeds are used for a qualified purpose as defined by the Internal Revenue Code.  The EGTRRA expanded the definition of a private activity for which tax-exempt bonds may be issued to include bonds for qualified public educational facilities.  Bonds issued for qualified educational facilities are not counted against a state’s private-activity volume cap.  Instead, these bonds have their own volume capacity limit equal to the lesser of$10 per resident or $5 million.  This proposal extends the allowance to issue tax-exempt private activity bonds for public school facilities for an additional two years, through 2012. 

Temporarily extend the American Opportunity Tax Credit.Created under the American Recovery and Reinvestment Act, the American Opportunity Tax Credit is available for up to $2,500 of the cost of tuition and related expenses paid during the taxable year. Under this tax credit, taxpayers receive a tax credit based on 100 percent of the first $2,000 of tuition and related expenses (including course materials) paid during the taxable year and 25 percent of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent of the credit is refundable.  This tax credit is subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).  This proposal extends the American Opportunity Tax Credit for an additional two years, through 2012. 

Other EGTRRA Provisions

Temporarily extend tax relief for Alaska settlement funds.  The EGTRRA allowed an election in which Alaska Native settlement trusts can elect to pay tax at the same rate as the lowest individual marginal rate, rather than the higher rates that generally apply to trusts.  Beneficiaries of the trust do not pay tax on the distributions of an electing trust’s taxable income.  Finally, contributions by an Alaska Native corporation to an electing trust will not be deemed distributions to the corporation’s shareholders.  This proposal makes extends the elective tax treatment for Alaska Native settlement trusts for an additional two years, through 2012. 

II. Temporary Individual Alternative Minimum Tax (AMT) Relief

Two-year AMT patch.Currently, a taxpayer receives an exemption of $33,750 (individuals) and $45,000 (married filing jointly) under the AMT.  Current law also does not allow nonrefundable personal credits against the AMT.  The proposal increases the exemption amounts for 2010 to $47,450 (individuals) and $72,450 (married filing jointly) and for 2011 to $48,450 (individuals) and $74,450 (married filing jointly).  The proposal also allows the nonrefundable personal credits against the AMT.  The proposal is effective for taxable years beginning after December 31, 2009.   

III. Temporary Estate Tax Relief

Temporary estate, gift and generation skipping transfer tax relief.  The EGTRRA phased-out the estate and generation-skipping transfer taxes so that they were fully repealed in 2010, and lowered the gift tax rate to 35 percent and increased the gift tax exemption to $1 million for 2010.  The proposal sets the exemption at $5 million per person and $10 million per couple and a top tax rate of 35 percent for the estate, gift, and generation skipping transfer taxes for two years, through 2012.  The exemption amount is indexed beginning in 2012.  The proposal is effective January 1, 2010, but allows an election to choose no estate tax and modified carryover basis for estates arising on or after January 1, 2010 and before January 1, 2011.  The proposal sets a $5 million generation-skipping transfer tax exemption and zero percent rate for the 2010 year. 

Portability of unused exemption.  Under current law, couples have to do complicated estate planning to claim their entire exemption (currently $7 million for a couple). The proposal allows the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse without such planning.   The proposal is effective for estates of decedents dying after December 31, 2010.

Reunification.  Prior to the EGTRRA, the estate and gift taxes were unified, creating a single graduated rate schedule for both.  That single lifetime exemption could be used for gifts and/or bequests.  The EGTRRA decoupled these systems.  The proposal reunifies the estate and gift taxes.  The proposal is effective for gifts made after December 31, 2010.

IV. Temporary Extension of Investment Incentives

Extension of bonus depreciation.  Under current law, businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule.  Congress allowed businesses, beginning January 1, 2008 through December 31, 2009, to take an additional depreciation deduction allowance equal to 50 percent of the cost of the depreciable property placed in service in those years.  Under the Small Business Jobs Act of 2010, this temporary increase in the depreciation deduction allowance was extended through December 31, 2010.  The bill extends and temporarily increases this bonus depreciation provision for investments in new business equipment.  For investments placed in service after September 8, 2010 and through December 31, 2011, the bill provides for 100 percent bonus depreciation.  For investments placed in service after December 31, 2011 and through December 31, 2012, the bill provides for 50 percent bonus depreciation.   The provision also allows taxpayers to elect to accelerate some AMT credits in lieu of bonus depreciation for taxable years 2011 and 2012.

Temporarily extend increase in the maximum amount and phase-out threshold under section 179.  Under current law, a taxpayer with a sufficiently small amount of annual investment may elect to deduct the cost of certain property placed in service for the year rather than depreciate those costs over time.  The 2003 tax cuts temporarily increased the maximum dollar amount that may be deducted from $25,000 to $100,000.  The tax cuts also increased the phase-out amount from $200,000 to $400,000.  In 2007, tax cuts temporarily increased these thresholds to $125,000 and $500,000 respectively, indexed for inflation.  These amounts have been further increased and extended several times on a temporary basis, including most recently as part of the Small Business Jobs Act which increased the thresholds to $500,000 and $2,000,000 for the taxable years beginning in 2010 and 2011.  This proposal extends the 2007 maximum amount and phase-out thresholds for taxable years beginning in 2012, at $125,000 and $500,000 respectively, indexed for inflation.  The proposal is effective for taxable years beginning after December 31, 2011. 

V. Temporary Extension of Unemployment Insurance

Extension of unemployment insurance.  The unemployment insurance proposal provides a one-year reauthorization of federal UI benefits.  The proposal continues the Emergency Unemployment Compensation (EUC) benefits for one year. In addition,  it continues 100 percent Federal Financing of Extended Benefits (EB) for one year, and makes changes to the EB look-back enabling states to continue to trigger on EB.

VI. Temporary Employee Payroll Tax Cut

Temporary reduction in employee-paid payroll taxes. Under current law employees pay a 6.2 percent Social Security tax on all wages earned up to $106,800 (in 2011) and self-employed individuals pay a 12.4 percent Social Security self-employment taxes of on all their self-employment income up to the same threshold.   The bill provides a payroll/self-employment tax holiday during 2011 of two percentage points.  This means employees will pay only 4.2 percent on wages and self-employment individuals will pay only 10.4 percent on self-employment income up to the threshold. 

VII. Temporary Extension of Certain Expiring Provisions

Energy

Biodiesel and renewable diesel. The bill extends through 2011 the $1.00 per gallon production tax credit for biodiesel, as well as the small agri-biodiesel producer credit of 10 cents per gallon. The bill also extends through 2011 the $1.00 per gallon production tax credit for diesel fuel created from biomass.

Refined Coal.  The bill extends through 2011 the placed-in-service deadline for qualifying refined coal facilities.

Energy-efficient new homes credit. The bill extends through 2011 the credit for manufacturers of energy-efficient residential homes.

Alternative fuels credit.  The bill extends through 2011 the $0.50 per gallon alternative fuel tax credit. The bill does not extend this credit any liquid fuel derived from a pulp or paper manufacturing process (i.e., black liquor). 

Special rule for sales of electric transmission property. The bill extends through 2011 the present law deferral of gain on sales of transmission property by vertically integrated electric utilities to FERC-approved independent transmission companies.

Special rule for marginal wells. The bill extends through 2011 the suspension on the taxable income limit for purposes of depleting a marginal oil or gas well. 

Section 1603.  The bill extends for one year the start-of-construction deadline for the cash grant in lieu of tax credit program, established in Section 1603 of the American Recovery and Reinvestment Act.

Ethanol.  The bill extends through 2011 the per-gallon tax credits and outlay payments for ethanol.  The bill also extends through 2011 the existing 14.27 cents per liter (54 cents per gallon) tariff on imported ethanol and the related 5.99 cents per liter (22.67 cents per gallon) tariff on ethyl tertiary-butyl ether (ETBE).

Energy-efficient appliances. The bill extends through 2011 and modifies standards for the Section 45M credit for US-based manufacture of energy-efficient clothes washers, dishwashers and refrigerators. 

Energy-efficient existing homes. The bill extends through 2011 the credit under Section 25C of the Code for energy-efficient improvements to existing homes, reinstating the credit as it existed before passage of the American Recovery and Reinvestment Act.  Standards for property eligible under 25C are updated to reflect improvements in energy efficiency. 

Alternative vehicle refueling property.  The bill extends through 2011 the 30 percent investment tax credit for alternative vehicle refueling property.  

Individual Tax Relief

Above-the-line deduction for certain expenses of elementary and secondary school teachers. The bill extends for two years (through 2011) the $250 above-the-line tax deduction for teachers and other school professionals for expenses paid or incurred for books, supplies (other than non-athletic supplies for courses of instruction in health or physical education), computer equipment (including related software and service), other equipment, and supplementary materials used by the educator in the classroom.

Deduction of State and local general sales taxes. The bill extends for two years (through 2011) the election to take an itemized deduction for State and local general sales taxes in lieu of the itemized deduction permitted for State and local income taxes.

Extension of provision encouraging contributions of capital gain real property for conservation purposes. The bill extends for two years (through 2011) the increased contribution limits and carryforward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes.

Above-the-line deduction for qualified tuition and related expenses. The bill extends for two years (through 2011) the above-the-line tax deduction for qualified education expenses.

Extension of tax-free distributions from individual retirement plans for charitable purposes. The bill extends for two years (through 2011) the provision that permits tax-free distributions to charity from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per taxable year. The bill allows individuals to make charitable transfers during January of 2011 and treat them as if made during 2010.

 Estate taxlook-through of certain Regulated Investment Company (RIC) stock held by nonresidents.  Although stock issued by a domestic corporation generally is treated as property within the United States, stock of a RIC that was owned by a nonresident non-citizen is not deemed property within the United States in the proportion that, at the end of the quarter of the RIC’s taxable year immediately before a decedent’s date of death, the assets held by the RIC are debt obligations, deposits, or other property that would be treated as situated outside the United States if held directly by the estate (the “estate tax look-through rule for RIC stock”). The proposal permits the look-through rule for RIC stock to apply to estates of decedents dying before January 1, 2012.

Parity for mass transit benefits. The bill extends through 2011 the increase in the monthly exclusion for employer-provided transit and vanpool benefits to that of the exclusion for employer-provided parking benefits. 

Refund and tax credit disregard for means tested programs.  Current law ensures that the refundable components of the EITC and the Child Tax Credit do not make households ineligible for means-tested benefit programs and includes provisions stating that these tax credits do not count as income in determining eligibility (and benefit levels) in means-tested benefit programs, and also do not count as assets for specified periods of time. Without them, the receipt of a tax credit would put a substantial number of families over the income limits for these programs in the month that the tax refund is received.  The proposal disregards all refundable tax credits and refunds as income for means tested programs.  The proposal is effective for amounts received after December 31, 2009 and does not apply to amounts received after December 31, 2012.

Business Tax Relief

R&D credit. The bill reinstates for two years (through 2011) the research credit.   

Indian employment credit. The bill extends for two years (through 2011) the business tax credit for employers of qualified employees that work and live on or near an Indian reservation. The amount of the credit is 20 percent of the excess of wages and health insurance costs paid to qualified employees (up to $20,000 per employee) in the current year over the amount paid in 1993. 

New Markets Tax Credit. Through the New Markets Tax Credit (NMTC) program, the federal government is able to leverage federal tax credits to encourage significant private investment in businesses in low-income communities. For each dollar of qualified private investment, the NMTC program provides investors with either five cents or six cents of federal tax credits (depending on the amount of time that has passed since the original investment was made). The bill extends for two years (through 2011) the new markets tax credit, permitting a maximum annual amount of qualified equity investments of $3.5 billion each year. This is effective for calendar years beginning after December 31, 2009. 

Extension of railroad track maintenance credit. The bill extends for two years (through 2011) the railroad track maintenance credit. 

Mine rescue team training credit. The bill extends for two years (through 2011) the credit for training mine rescue team members.

Employer wage credit for activated military reservists. The bill extends for two years (through 2011) the provision that provides eligible small business employers with a credit against the taxpayer’s income tax liability for a taxable year in an amount equal to 20 percent of the sum of differential wage payments to activated military reservists.

Tax benefits for certain real estate developments. The bill extends for two years (through 2011) the special 15-year cost recovery period for certain leasehold improvements, restaurant buildings and improvements, and retail improvements.

Extension of seven year straight line cost recovery period for motorsports entertainment complexes. The bill extends for two years (through 2011) the special seven year cost recovery period for property used for land improvement and support facilities at motorsports entertainment complexes.

Accelerated depreciation for business property on an Indian reservation. The bill extends for two years (through 2011) the placed-in-service date for the special depreciation recovery period for qualified Indian reservation property. In general, qualified Indian reservation property is property used predominantly in the active conduct of a trade or business within an Indian reservation, which is not used outside the reservation on a regular basis and was not acquired from a related person.

Extension of enhanced charitable deduction for contributions of food inventory. The bill extends for two years (through 2011) the provision allowing businesses to claim an enhanced deduction for the contribution of food inventory. 

Extension of enhanced charitable deduction for contributions of book inventories to public schools. The bill extends for two years (through 2011) the provision allowing C corporations to claim an enhanced deduction for contributions of book inventory to public schools (kindergarten through grade 12). 

Extension of enhanced charitable deduction for corporate contributions of computer equipment for educational purposes. The bill extends for two years (through 2011) the provision that encourages businesses to contribute computer equipment and software to elementary, secondary, and post-secondary schools by allowing an enhanced deduction for such contributions. 

Election to expense advanced mine safety equipment. The bill extends for two years (through 2010) the provision that provides businesses with 50 percent bonus depreciation for certain qualified underground mine safety equipment. 

Extension of special expensing rules for U.S. film and television productions. The bill extends for two years (through 2011) the provision that allows film and television producers to expense the first $15 million of production costs incurred in the United States ($20 million if the costs are incurred in economically depressed areas in the United States). 

Extension of expensing of environmental remediation costs. The bill extends for two years (through 2011) the provision that allows for the expensing of costs associated with cleaning up hazardous sites. 

Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico. The bill extends for two years (through 2011) the provision extending the section 199 domestic production activities deduction to activities in Puerto Rico.

Extension of special tax treatment of certain payments to controlling exempt organizations. The bill extends for two years (through 2011) the special rules for interest, rents, royalties and annuities received by a tax exempt entity from a controlled entity. 

Treatment of certain dividends of Regulated Investment Companies (RICs).  The bill extends a provision allowing a RIC, under certain circumstances, to designate all or a portion of a dividend as an “interest-related dividend,” by written notice mailed to its shareholders not later than 60 days after the close of its taxable year. In addition, an interest-related dividend received by a foreign person generally is exempt from U.S. gross-basis tax under sections 871(a), 881, 1441 and 1442 of the Code. The proposal extends the treatment of interest-related dividends and short-term capital gain dividends received by a RIC to taxable years of the RIC beginning before January 1, 2012. 

Treatment of RIC investments as “Qualified Investment Entities” under FIRPTA.  The bill extends the inclusion of a RIC within the definition of a “qualified investment entity” under section 897 of the Tax Code through December 31, 2011.

Active financing exception. The bill extends for two years (through 2011) the active financing exception from Subpart F of the tax code. 

Look-through treatment of payments between related controlled foreign corporations. The bill extends for two years (through 2011) the current law look-through treatment of payments between related controlled foreign corporations.

Extension of special rule for S corporations making charitable contributions of property. The bill extends for two years (through 2011) the provision allowing S corporation shareholders to take into account their pro rata share of charitable deductions even if such deductions would exceed such shareholder’s adjusted basis in the S corporation.

Empowerment Zones.The bill extends for two years (through 2011) the designation of certain economically depressed census tracts as Empowerment Zones. Businesses and individual residents within Empowerment Zones are eligible for special tax incentives.

District of Columbia Enterprise Zone. The bill extends for two years (through 2011) the designation of certain economically depressed census tracts within the District of Columbia as the District of Columbia Enterprise Zone. Businesses and individual residents within this enterprise zone are eligible for special tax incentives. The bill also extends for two years (through 2011) the $5,000 first-time homebuyer credit for the District of Columbia.

Extension of temporary increase in limit on cover over of rum excise tax revenues to Puerto Rico and the Virgin Islands. The bill extends for two years (through 2011) the provision providing for payment of $13.25 per gallon to cover over a $13.50 per proof gallon excise tax on distilled spirits produced in or imported into the United States. 

Extension of American Samoa economic development credit. The bill extends through 2011 the American Samoa economic development credit.

Work opportunity tax credit (WOTC).  Under current law, businesses are allowed to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to new hires of one of nine targeted groups.   These groups include members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program, qualified veterans, designated community residents, and others.  The WOTC program is currently set to expire August 31, 2011.  The bill extends this provision through December 31, 2011 and would be effective for employees hired after date of enactment.  

Extension and increase in authorization for qualified zone academy bonds (QZABs).  QZABs are a form of tax credit bond which offer the holder a Federal tax credit instead of interest.  QZABs can be used to finance renovations, equipment purchases, developing course material, and training teachers and personnel at a qualified zone academy. In general, a qualified zone academy is any public school (or academic program within a public school) below college level that is located in an empowerment zone or enterprise community and is designed to cooperate with businesses to enhance the academic curriculum and increase graduation and employment rates. The provision extends the QZAB program providing an additional $400 million for 2011.  It also repeals the direct subsidy feature created as part of the American Recovery and Reinvestment Act for 2011 and for any carryforward of unused allocation. 

Premiums for mortgage insurance deductible as interest that is qualified residence interest.  Under current law, a taxpayer may itemize the cost of mortgage insurance on a qualified personal residence. The deduction is phased-out ratably by 10 percent for each $1,000 by which the taxpayer’s AGI exceeds $100,000.  Thus, the deduction is unavailable for a taxpayer with an AGI in excess of $110,000.  The bill extends this provision for an additional year, through 2011.   

Exclusion of small business capital gains.  Generally, non-corporate taxpayers may exclude 50 percent of the gain from the sale of certain small business stock acquired at original issue and held for more than five years. For stock acquired after February 17, 2009 and on or before September 27, 2010, the exclusion is increased to 75 percent. For stock acquired after September 27, 2010 and before January 1, 2011, the exclusion is 100 percent and the AMT preference item attributable for the sale is eliminated. Qualifying small business stock is from a C corporation whose gross assets do not exceed $50 million (including the proceeds received from the issuance of the stock) and who meets a specific active business requirement. The amount of gain eligible for the exclusion is limited to the greater of ten times the taxpayer’s basis in the stock or $10 million of gain from stock in that corporation. The provision extends the 100 percent exclusion of the gain from the sale of qualifying small business stock that is acquired before January 1, 2012 and held for more than five years. 

Disaster Relief Provisions

Extension of tax incentives for the New York Liberty Zone. The bill extends for two years (through 2011) the time for issuing New York Liberty Zone bonds effective for bonds issued after December 31, 2009. 

Extension of increased rehabilitation credit for historic structures in the Gulf Opportunity Zone. The bill extends for two years (through 2011) the increased rehabilitation credit for qualified expenditures in the Gulf Opportunity Zone. The Gulf Opportunity Zone Act of 2005 increased the rehabilitation credit from 10 percent to 13 percent of qualified expenditures for any qualified rehabilitated building other than a certified historic structure, and from 20 percent to 26 percent of qualified expenditures for any certified historic structure. 

One-year extension of Gulf Opportunity Zone low-income housing placed-in-service date.  The Gulf Opportunity Zone Act of 2005 provided an additional allocation of low-income housing tax credits to the Gulf Opportunity Zone in an amount equal to the product of $18.00 multiplied by the portion of the State population which is in the Gulf Opportunity Zone.  The additional allocations were made in calendar years 2006, 2007, and 2008, and required that the properties be placed in service before January 1, 2011.  The bill extends that placed-in-service date for one year (through 2011). 

Extension of Tax-Exempt Bonds for the Gulf Opportunity Zone.  Under current law, bonds were authorized to help rebuild areas devastated by Hurricane Katrina and must be issued by December 31, 2010.  The amendment provides one additional year to utilize these bonds, through December 31, 2011.

Temporary Depreciation Allowance for Gulf Opportunity Zone Property.  The bill extends for two years, through 2011, an additional depreciation deduction claimed by businesses equal to 50 percent of the cost of new property investments made in the Gulf Opportunity Zone. The provision makes expenditures in 2011 eligible provided the property is placed in service by December 31, 2011.

Legislative History

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act, S.Amdt. 4753, would amend H.R. 4853, the legislative vehicle for the pending tax cuts extension package.  Sponsored by Senators Reid and McConnell, S.Amdt. 4753 was introduced on December 9, 2010. 

On December 9, 2010, Senator Reid filed cloture on the motion to concur in the House amendment to the Senate amendment to H.R. 4853, the Middle Class Tax Relief Act, with this Reid-McConnell substitute amendment, S.Amdt. 4753, and filled the amendment tree.

In accordance with the unanimous consent agreement entered into on December 9, 2010, the resulting vote on the motion to invoke cloture on the motion to concur in the House amendment to the Senate amendment to H.R. 4853, with the Reid-McConnell amendment in the nature of a substitute, S.Amdt. 4753, will occur on Monday, December 13, 2010.

Earlier this month, the Senate considered two measures that would have extended middle-class and business tax cuts: the Baucus substitute amendment, S.Amdt. 4727, and the Schumer substitute amendment, S.Amdt. 4728.  The Schumer amendment would have permanently extended the current individual income tax cuts for all income up to $1 million, rather than $200,000 for individuals and $250,000 for married couples as under the Baucus substitute amendment.  All other provisions of these two substitute amendments are identical.

Votes to advance the Baucus and the Schumer amendments were defeated in the Senate.  On December 4, 2010, the Senate rejected by a vote of 53 to 36 (Roll Call Vote 258) a motion to invoke cloture on the Reid motion to concur with the House amendment to the Senate amendment to H.R.4853, with the Baucus substitute amendment, S.Amdt. 4727.  On the same day, after the vote in relation to the Baucus substitute amendment, the Senate rejected by a vote of 53 to 37 (Roll Call Vote 259) a motion to invoke cloture on the Schumer substitute amendment, S.Amdt. 4728. 

In the House, middle-class tax cuts legislation (a version of H.R. 4853, the Middle Class Tax Relief Act) passed by a vote 234 to 188 on December 2, 2010.  This House-passed version of the legislation, the House amendment to the Senate amendment, was received in the Senate on December 2. 

Expected Amendments

The DPC will circulate information about possible amendments as it becomes available.    

Administration Position

As of December 12, 2010, the White House has not yet released a Statement of Administration Policy (SAP) on S.Amdt. 4753.  When it becomes available, it is expected to be posted to the White House website here. 

The White House’s Fact Sheet on the framework agreement on middle-class taxes and unemployment insurance, on which this legislation is partly based, is available here.

Resources

Legislative Information System (LIS)

• Bill Summary & Status for S.Amdt. 4753, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
• Bill Summary & Status for S.Amdt. 4727, Senator Baucus’s substitute amendment for the Middle Class Tax Cut Act of 2010
• Bill Summary & Status for S.Amdt. 4728, Senator Schumer’s substitute amendment for the Middle Class Tax Cut Act of 2010

Joint Committee on Taxation

• Cost estimate for S.Amdt. 4753: Publication JCX-54-10(December 10, 2010) – Estimated Budget Effects Of The “Tax Relief, Unemployment Insurance Reauthorization, And Job Creation Act Of 2010”
• Technical explanation of present law (including federal individual income tax rates for 2010) and proposed changes: Publication JCX-55-10 (December 10, 2010) – Technical Explanation Of The Revenue Provisions Contained In The “Tax Relief, Unemployment Insurance Reauthorization, And Job Creation Act Of 2010”

Congressional Budget Office

• Cost Estimate for S.Amdt. 4753 to H.R. 4853 (December 10, 2010): The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
• Economic multiplier effects of various policy options, including tax cuts: Report “Policies for Increasing Economic Growth and Employment in 2010 and 2011,” January 2010,  Table 1 (page 26)

Congressional Research Service

• List of key CRS reports on the expiring tax provisions

White House

• Website: “Framework on Tax Cuts, Unemployment Insurance and Jobs”
• Fact Sheet: “Framework Agreement on Middle Class Tax Cuts and Unemployment Insurance”
• Memo to Interested Parties: “Impact of the Tax Agreement on Economic Expansion and Job Growth”
• List of Statements of Administration Policy issued during the 111^th Congress

Tax Policy Center

• The nonpartisan Tax Policy Center offers a calculator tool, available here, that shows how different taxpayers would fare in either 2010 or 2011 should the 2001-2003 tax cuts expire as scheduled.

This legislation would require the implementation of new energy efficiency standards for outdoor lighting and establish or increase energy efficiency standards for several classes of products including electric spas; central air conditioners; refrigerators; clothes washers and dryers; and dishwashers.

The following information provides background on the estimated energy, environmental and consumer savings from implementing these consensus energy efficiency agreements.  This legislation also contains no new authorizations and according to the Congressional Budget Office (CBO), requires no new spending.

Consumer Savings

The American Council for an Energy-Efficient Economy estimates that the bill would result in net economic savings (benefits minus costs) to consumers of more than $50 billion by 2030.

Water

The American Council for an Energy-Efficient Economy estimates that the bill would save nearly 5 trillion gallons of water annually by 2030, roughly the amount needed to meet the current needs of every customer in Los Angeles for 25 years.

Energy

The American Council for an Energy-Efficient Economy estimates that the bill would save over 1.1 Quadrillion British Thermal Units of energy each year by 2030—enough energy to meet the needs of 10 million typical American homes.

Carbon Dioxide Emissions

The American Council for an Energy-Efficient Economy estimates that the bill would improve the environment by reducing carbon dioxide emissions by 63 million metric tons each year by 2030.

On June 17, 2009, the Senate Energy and Natural Resources Committee favorably reported S. 1462 to the Senate.  This legislation contained, among many provisions, a number of important energy efficiency improvements for products like electric spas, commercial furnaces, and certain types of light-bulbs. 

After reporting S. 1462, the Senate Energy and Natural Resources Committee continued to develop legislation that would make additional energy efficiency improvements.   This work led the Committee to report out amendments to S. 1462 which strengthen and add to the energy efficiency provisions in the originally reported language.  Additionally, the Committee recently negotiated four consensus agreements that would make additional energy efficiency appliance upgrades.

More recently, in an effort to consolidate the various energy efficiency provisions into one bill, Senator Bingaman introduced S. 3925, the Implementation of National Consensus Appliance Agreements Act.  This bill would strengthen the Department of Energy’s appliance program, contains no new authorizations, and according to the Congressional Budget Office (CBO), requires no new spending.  Senator Bingaman plans to request unanimous consent to pass H.R. 5470, with a Bingaman substitute amendment.  The text of the substitute amendment to H.R. 5470 will consist of the text of S. 3925 with changes that would add four consensus-based changes to issues that have arisen in the past few weeks regarding portable lamps, gas furnaces, small-duct high-velocity heating and air-conditioning systems, and a technical correction regarding electric motors.

The Senate may consider this legislation under a unanimous consent agreement very soon.  The following summary references the substitute amendment to H.R. 5470 which retains all of the bipartisan support of S. 3925 and the original score provided by the CBO.

Major Provisions

Section 2—Energy conservation standards.  Section 2 of the substitute amendment to H.R. 5470would update the definition of an ‘energy conservation standard’ so that the term covers applicable products with one or more energy or water standard.  This section would also add definitions for certain air-conditioner and heat pump test procedures; add standards and effective dates for certain air-conditioners and heat pumps, as agreed to between manufacturers and efficiency and consumer advocacy groups; and add regional standards and effective dates for certain residential furnaces.  These provisions have been agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 3—Energy conservation standards for heat pump pool heaters.  Section 3 of the substitute amendment to H.R. 5470 would add definitions, standards and effective dates for heat pump pool heaters, as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 4—GU24 base lamps.  Section 4 of the substitute amendment to H.R. 5470 would add definitions, standards and effective dates for the next-generation, GU-24 lamps, lamp sockets, and adaptors, as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 5—Efficiency standards for bottle-type water dispensers, commercial hot food holding cabinets, and portable electric spas.  Section 5 of the substitute amendment to H.R. 5470 would add definitions, exclusions, test procedures, standards and effective dates for bottle-type water dispensers, commercial hot food holding cabinets, and portable electric spas, as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 6—Test procedure petition process.  Section 6 of the substitute amendment to H.R. 5470 would provide that any person may petition the Department of Energy (DOE) to prescribe or amend test procedures, and establishes deadlines for DOE to respond to such petitions; and for certain industrial equipment, clarifies that DOE periodically review test procedures, provides that any person may petition DOE to prescribe or amend test procedures for such equipment, and establishes deadlines for DOE to respond to such petitions.  It also provides that DOE may use the Direct Final Rule procedure currently available to prescribe consensus standards, to prescribe consensus test procedures.  

Section 7—Energy efficiency provisions. Section 7 of the substitute amendment to H.R. 5470would clarify the authority of the DOE to establish test procedures for new covered products and modifies the procedures used by DOE in determining standards including a requirement to consider impacts due to smart grid capabilities. 

This section of the substitute amendment to H.R. 5470 would also require, provide, or modify that:

• The DOE promulgate regulations on the form and content of obtaining information from manufacturers of covered products in a manner designed to minimize burdens on such manufacturers;
• The procedures under which a state may petition for a waiver from federal preemption of a product standard, and how DOE rules on such a petition;
• Any state may seek an injunction to restrain violations of federal energy efficiency standards and sets forth the authority, limitations, and other details of state injunctive enforcement;
• States notify federal officials when the State is considering limitations on the use of alternative refrigerants.

Finally, this section of the substitute amendment to H.R. 5470 updates certain enforcement provisions of the standards program including definitions and how penalties are assessed.

Section 8—Measuring icemaker energy. Section 8 of the substitute amendment to H.R. 5470 would require the DOE to promulgate a rule to incorporate icemaker energy use into refrigerator test procedures, and sets deadlines for finalizing other test procedure rules.

Section 9—Credit for Energy Star smart appliances.  Section 9 of the substitute amendment to H.R. 5470 would direct federal officials to determine whether to update Energy Star criteria for certain products to incorporate smart grid and demand response features.

Section 10—Video game console energy efficiency study.  Section 10 of the substitute amendment to H.R. 5470 would direct the DOE to conduct a study of video game console energy use and opportunities for energy savings, and upon completion to determine whether to establish an efficiency standard. If standards are not established, then DOE shall conduct a follow-up study.

Section 11—Refrigerator and freezer standards.  Section 11 of the substitute amendment to H.R. 5470 would update definitions, exceptions, standards and effective dates for new standards for refrigerators and freezers, as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 12—Room air conditioner standards.  Section 12 of the substitute amendment to H.R. 5470 would establish new standards and effective dates for room air-conditioners,as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 13—Uniform efficiency descriptor for covered water heaters.  Section 13 of the substitute amendment to H.R. 5470 woulddirect the DOE to publish a final rule that establishes a uniform efficiency descriptor and test methods for covered water heaters.  The section also sets forth other provisions necessary to transition from the current two descriptors for two types of water heaters, to a single descriptor for all covered water heaters.

Section 14—Clothes dryers.  Section 14 of the substitute amendment to H.R. 5470 would establish new standards and effective dates for clothes dryers, as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 15—Standards for clothes washers.  Section 15 of the substitute amendment to H.R. 5470 would establish new standards and effective dates for clothes washers,as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 16—Dishwashers.  Section 16 of the substitute amendment to H.R. 5470 would establish new standards and effective dates for dishwashers,as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 17—Standards for certain incandescent reflector lamps and reflector lamps.  Section 17 of the substitute amendment to H.R. 5470 would direct the DOE to establish new standards for certain reflector lamps,as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 18—Petition for amended standards.  Section 18 of the substitute amendment to H.R. 5470 would require the DOE to publish an explanation of DOE’s decision to grant or deny a petition for a new or amended standard (filed under current law), and to publish the new rule in cases where the petition is granted.

Section 19—Efficiency standards for class A external power supplies.  Section 19 of the substitute amendment to H.R. 5470 wouldprovide an exception of the no-load (stand-by) mode efficiency standard for external power supplies for certain security and life safety alarms or surveillance systems.

Section 20—Prohibited acts.  Section 20 of the substitute amendment to H.R. 5470 would update certain enforcement provisions to clarify that prohibitions under the law apply to distributors, retailers, and private labelers as well as manufacturers, and clarifies that prohibitions must be “knowingly” violated in the case of regional standards. 

Section 21—Outdoor lighting.  Section 21 of the substitute amendment to H.R. 5470 would establish definitions, test methods, standards, and effective dates for certain types of outdoor lighting,as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 22—Standards for commercial furnaces.  Section 22 of the substitute amendment to H.R. 5470 would establish a new standard and effective date for commercial furnaces,as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 23—Service over the counter, self-contained, medium temperature commercial Refrigerators: Section 23 of the substitute amendment to H.R. 5470 establish new definitions and a standard and effective date for certain service over the counter refrigerators, as agreed to by manufacturers and efficiency and consumer advocacy groups.

Section 24—Motor market assessment and commercial awareness program.  Section 24 of the substitute amendment to H.R. 5470 would direct the DOE to assess the U.S. electric motor market and develop recommendations on ways to improve the efficiency of motor systems. 

This section would also require DOE to:

• Periodically update this information;
• Estimate the savings attributable to the Save Energy Now Program;
• Make recommendations to the Census Bureau on surveys to support DOE’s motor activities; and
• Prepare an update to the Motor Master+ program of DOE. 

Finally, based on the assessment and recommendations, this section would direct DOE to establish a program to:

• Increase awareness of the savings opportunities of using higher efficiency motors;
• Improve motor system procurement practices; and
• Establish criteria for making decisions regarding electric motor systems.

Section 25—Study of Compliance with Energy Standards for Appliances. Section 25 of the substitute amendment to H.R. 5470 would direct DOE to conduct, and submit to Congress with any recommendations, a study on the degree of compliance with energy standards for appliances including an investigation of compliance rates and options for improving compliance.

Section 26—Study of direct current electricity supply in certain buildings. Section 26 of the substitute amendment to H.R. 5470 would direct DOE to conduct, and submit to Congress with any recommendations, a study of the costs and benefits of requiring high-quality, direct current electricity supply in certain buildings and to determine, if this requirement is imposed, what the policy and role of the federal government should be.

Section 27—Technical corrections.  Section 7 of the substitute amendment to H.R. 5470 would make technical corrections to the Energy Independence and Security Act of 2007, the Energy Policy Act of 2005, and the Energy Policy and Conservation Act regarding the appliance efficiency standards program. 

Legislative History

Senator Bingaman introduced S. 3925 on September 29, 2010 and it was originally cosponsored by Senator Klobuchar.

As of December 2, 2010, the following Senators cosponsored S. 3925:Bayh, Cantwell, Cardin, Coons, Feingold, Johnson, Kerry, Kohl, Lugar, Menendez, Merkley, Murray, Shaheen,Stabenow, Udall (CO),Warner, and Whitehouse.

Administration Position

At the time of publication, the Administration had not released a Statement of Administration Policy on the Bingaman substitute amendment to H.R. 5470.

In responding to the terrorist attacks of September 11, 2001, thousands of first responders and other Americans were exposed to toxins and are now in need of treatment and compensation.  H.R. 847 builds upon the current World Trade Center (WTC) Medical Monitoring and Treatment Program (MMTP) to provide full medical screening, treatment benefits, and compensation to eligible WTC responders and community members. 

The Senate is expected to vote on the motion to invoke cloture on the motion to proceed to H.R. 847 during the week of December 6, 2010.

Major Provisions

Title I – World Trade Center Health Program

Establishment of World Trade Center Health Program.  H.R. 847 would authorize the World Trade Center Health Program (WTCHP), within the National Institute for Occupational Safety and Health (NIOSH), to provide medical monitoring and treatment for WTC-related conditions to WTC responders and survivors.  This program currently exists but is funded every year through discretionary spending.  Since its inception in Fiscal Year 2002, the program has received approximately $475 million in federal funds, and over 57,000 responders and community members have met initial eligibility requirements for the program.  The program will be administered by the Director of NIOSH or his designee.  H.R. 847 would also establish the WTCHP Scientific/Technical Advisory Committee to review and make recommendations on scientific matters and the WTCHP Steering Committees to facilitate the coordination of the medical monitoring and treatment programs for responders and the survivors.

The WTCHP Administrator would be required to develop and implement a program to ensure the quality of medical monitoring and treatment and a program to detect fraud; to submit an annual report to Congress on the operation of the program; and to provide notification to the Congress if program participation has reached 80 percent of the program caps.  H.R. 847 would limit funding for the 10-year health program to $3.348 billion, an amount that CBO estimates would sufficiently fund the program for eight years.  The City of New York would be required to contribute a 10 percent matching cost share, limited to $500 million over 10 years.  In addition to persons already receiving services, the program would serve up to 25,000 new responders and 25,000 new community members.  Medical benefits would be limited to the 22 respiratory, gastrointestinal, or mental health diseases that have been medically certified to be associated with breathing the toxins and other hazards at Ground Zero.

Program of monitoring, initial health evaluations, and treatment.   H.R. 847 would establish a medical monitoring and treatment program for WTC responders and a medical monitoring/screening and treatment program for WTC survivors, to be delivered through Clinical Centers of Excellence and coordinated by Coordinating Centers of Excellence.  H.R. 847 identifies criteria for designating the Centers of Excellence with which the program administrator would enter into contracts, and provides for the addition of clinical centers and providers.

In addition to monitoring and treatment, Clinical Centers of Excellence would provide the following non-monitoring, non-treatment core services: outreach and education; counseling for monitoring and treatment benefits; counseling to help individuals identify and obtain benefits from workers’ compensation, health insurance, disability insurance, or public or private social service agencies; translation services; and collection and reporting of data.

The Coordinating Centers of Excellence would collect and analyze uniform data, coordinate outreach, develop the medical monitoring and treatment protocols, and oversee the steering committees for the responder and survivor health programs.

WTC responder program.  If a responder is determined to be eligible for monitoring, then that responder has a right to medical monitoring paid for by the program.  Once a responder is in monitoring, the patient may receive treatment only if 1) their condition is on the list of identified WTC-related conditions in the bill and 2) the physician determines that ‘exposure to airborne toxins, any other hazard, or any other adverse condition resulting from the attacks is substantially likely to be a significant factor in aggravating, contributing to, or causing the illness.’  The physician’s determination must be evaluated and characterized through the use of appropriate questionnaires and clinical protocols approved by the NIOSH Director.  If the physician diagnoses a condition that is not on the current list of identified conditions, but finds that it is substantially likely to be related to exposure at Ground Zero, then the program administrator, after review by an independent expert physician panel, may determine if the condition can be treated as a WTC-related condition in that individual.  Additional conditions may be added to the list of conditions through regulations promulgated by the Program Administrator.

The program would pay for the costs of medical treatment for certified WTC-related health conditions at a payment rate based on Federal Employees Compensation Act (FECA) rates. Treatment is limited to what which is medically necessary.  The administrator reviews the determination of medical necessity and decides if payment will be made.  Workers’ compensation and public or private insurance are primary payors, followed by the government, if there are no worker’s compensation benefits or public or private insurance.

As of March 31, 2010, there were nearly 53,000 people enrolled in the current Responder Program.  The bill sets a cap of 25,000 additional participants in the program, for a total cap of approximately 80,000 responders.

WTC survivor program. H.R. 847 would establish a survivor program to provide initial health screenings, medical treatment, and follow-up monitoring to eligible survivors.  H.R. 847 would set forth geographic and exposure criteria for defining the potential population who may be eligible for the program (i.e. those who lived, worked or were present in lower Manhattan, South of Houston Street, or in Brooklyn within a 1.5 mile radius of the WTC site for certain defined time periods).  The criteria and procedures for determinations of eligibility, diagnosing WTC-related health conditions, and certification process are the same as for those in the responder health program.

For those WTC-related health conditions certified for medical treatment that are not work-related, the WTC program would be the secondary payor to any applicable public or private health insurance.  For those costs not covered by other insurance, the program would pay for the costs of medical treatment for certified WTC-related health conditions at a payment rate based on FECA rates.  As of March 31, 2010, there were more than 4,000 individuals enrolled in the Survivor program.  The bill would establish a cap of 15,000 additional survivors, for a total cap of around 19,000.

H.R. 847 would establish a contingency fund of $20 million to pay the cost of WTC-related health claims that may arise in individuals who fall outside the more limited definition of the population eligible for the survivor program included in H.R. 847.

WTC national responder program.  Under H.R. 847, the program administrator would establish a nationwide network of providers so that eligible individuals who live outside of the New York area may reasonably access monitoring and treatment benefits near where they live.  These eligible individuals are included in the caps on the number of participants in the responder and survivor programs.  There are more than 4,000 responders enrolled in the current National Responder Program, as of March 31, 2010.

Research into conditions. H.R. 847 would require the Department of Health and Human Services (HHS), in consultation with the WTCHP Steering Committee and under all applicable privacy protections, to conduct or support research about conditions that may be WTC-related, and about diagnosing and treating WTC-related conditions.

World Trade Center Health Registry.  Under H.R. 847,NIOSH would extend and expand support for the World Trade Center Health Registry and provide grants for the mental health needs of individuals who are not otherwise eligible for services under this bill.

Title II – September 11^th Victim Compensation Fund of 2001

Extended and expanded eligibility for compensation. H.R. 847 would reopen the September 11 Victim Compensation Fund (VCF) until 2031, allowing individuals who did not previously file a claim, or who became ill after the original deadline, to be compensated for economic damages and losses stemming from their injuries.  The purpose behind reopening the fund for over 20 years is to protect to the greatest extent possible those persons who were exposed during the rescue and recovery operations, but whose resulting injuries are latent and will manifest over the next two decades.  H.R. 847 would cap the reopened VCF at $8.4 billion; $4.2 billion in the first 10 years and another $4.2 billion in the remaining years.  It would also limit attorney fees to 10 percent in most cases.

Limited liability for certain claims. H.R. 847 would provide protection from liability to the WTC contractors that participated in recovery efforts and debris removal.  H.R. 847 would provide that their liability is limited to the amount of funds held by the World Trade Center Captive Insurance Company, the amount of available insurance coverage identified by the Captive Insurance Company, and the amount of insurance coverage held by certain other entities.  H.R. 847 would also provide that the liability of the City of New York is limited to the City's insurance coverage or $350,000,000, whichever is greater.

H.R. 847 would establish a priority of funds from which plaintiffs may satisfy judgments or settlements obtained in civil claims or actions related to recovery and cleanup efforts.  The priority requires exhaustion of amounts held by the Captive Insurance Company and identified insurance policies, followed by exhaustion of the amount for which the City of New York is liable, followed by exhaustion of the available insurance coverage maintained by the Port Authority and other entities with a property interest in the World Trade Center on September 11, 2001, followed by exhaustion of the available insurance coverage maintained by individual contractors and subcontractors.

Funding.  There is currently a proposed settlement to resolve more than 11,000 lawsuits by responders and clean-up workers for illnesses and injuries from exposure to toxins at the World Trade Center site.  In order to prevent the uncertainty of legislation from impacting the pending potential settlement, H.R. 847 would allow individuals who settled with the Captive Insurance fund and the other defendants to then go to the reopened VCF.  Any future VCF award would be reduced or offset by the amount of the settlement award.

The provision would also limit the possible compensation for attorneys’ fees to 10 percent of the total compensation paid out from both sources.  Under the pending potential settlement, lawyers’ fees are capped at 25 percent.  Under a reopened VCF, lawyers’ fees would be capped at 10 percent.  The provision that would allow those who received a settlement to file a claim from the VCF would also cap lawyers’ fees at 10 percent of total compensation (settlement award +VCF).

Legislative History

On February 4, 2009, H.R. 847 was introduced in the House of Representatives.  H.R. 847 is substantially similar to S. 1334, introduced on June 24, 2009 by Senators Gillibrand, Lautenberg, Menendez, and Schumer, and which now has 11 total cosponsors.  H.R. 847 passed the House on September 29, 2010 by a vote of 268-160 (Roll no. 550) and was placed on the Senate calendar on November 15, 2010.  On December 6, 2010, Senator Reid filed cloture on the motion to proceed to H.R. 847.

Expected Amendments

The DPC will circulate information on amendments to staff listservs as it becomes available.

Administration Position

On September 29, 2010, the White House issued a Statement of Administration Policy in advance of the House vote on H.R. 847:

The Administration supports House passage of H.R. 847, the James Zadroga 9/11 Health and Compensation Act of 2009.  Like all Americans, the Administration has the deepest respect and gratitude for all of the Nation’s 9/11 heroes.  The President is committed to ensuring that rescue and recovery workers, residents, students, and others suffering from health consequences related to the World Trade Center disaster have access to the monitoring and treatment they need.  The President looks forward to signing a 9/11 health bill into law to help those whose health and livelihood were devastated by the terrorist attacks of September 11th.

The Administration looks forward to continuing to work with the Congress to meet the needs of our 9/11 heroes and to strengthen the World Trade Center Health program.

Resources

Congressional Budget Office, James Zadroga 9/11 Health and Compensation Act of 2010, July 28, 2010, available by clicking here.

Congressional Research Service, Comparison of the Current World Trade Center Medical Monitoring and Treatment Program and the World Trade Center Health Program Proposed by Title I of H.R. 847, October 15, 2010, available by clicking here.

The Senate will soon vote on whether to begin consideration of the Emergency Senior Citizens Relief Act, S. 3985,legislation to provide a one-time $250 benefit to Social Security recipients and veterans, as well as other individuals whose federal benefits depend on the annual Social Security cost-of-living adjustment (COLA).[1]  This payment would be provided in lieu of a Social Security COLA, which will not be given in 2011 under the current statutory formula that was developed in 1975.  A COLA has been paid each year since 1975, except 2010 and 2011. 

Today, millions of Americans continue to face financial hardships during the economic downturn.  Retirees and veterans are among the hardest hit by the recession, particularly those still financially struggling due to diminished retirement savings, dramatically reduced home values, and higher health care costs.  In 2009, the Democratic Congress enacted legislation to provide them with a one-time $250 Economic Recovery Payment as part of the American Recovery and Reinvestment Act (P.L. 111-5).  Now, for the second year in a row, our seniors and veterans face another year without a Social Security COLA. 

S. 3985 would address this issue by renewing the $250 payment provided under the Recovery Act to Social Security beneficiaries, veterans, SSI recipients, and Railroad retirees, and the $250 tax credit to government retirees who do not receive Social Security benefits.  Since seniors living on fixed incomes are likely to spend this money, the $250 benefit would also provide a modest boost to the economy as we continue to emerge from the economic crisis.  Furthermore, it should be noted that the Recovery Act provided the $250 benefit for only one year, even though working Americans were provided with a somewhat larger companion benefit for two years through the Making Work Pay tax credit.  Renewing the Recovery Act’s $250 benefit for a second year would provide a modest measure of equity to seniors who have already worked and contributed to their communities throughout their lives.

On November 29, Senator Sanders introduced S. 3985.  Senator Reid filed cloture on the motion to proceed to the bill on December 6.  A cloture vote on the motion to proceed to S. 3985 is expected on Wednesday, December 8.  

Earlier this year, on March 3, 2010, the Senate voted on the motion to waive a point of order against similar legislation sponsored by Senator Sanders, S.Amdt. 3353, to provide an emergency benefit of $250 to seniors, veterans, and persons with disabilities in 2010 to compensate for the lack of cost-of-living adjustment for this year.  This motion was defeated by a vote of 47 to 50.[2]

Major Provisions

The following summary is provided by Senator Sanders’ office.

S.3985would provide an additional year of the $250 “Economic Recovery Payments” and $250 “Economic Recovery Tax Credit” enacted under the American Recovery and Reinvestment Act (P.L. 111-5).  

• Under this proposal, 58 million people would benefit.  These recipients would include over 50 million Social Security beneficiaries; 5 million Supplemental Security Income beneficiaries; 2 million veterans benefit recipients; 500,000 railroad retirement and disability beneficiaries; and approximately 1 million public-employee retirees not entitled to any of the previous benefits.

• Under this legislation, the Economic Recovery Payment (or Economic Recovery Tax Credit) would be $250, which is equivalent to a 2 percent increase in benefits for the average Social Security retiree beneficiary.  Under the rules, no person could “double dip” and receive a $250 Economic Recovery Payment through more than one program.   In addition, no person would be able to receive both an Economic Recovery Payment (or Economic Recovery Tax Credit) and the Making Work Pay tax credit.

• The total cost of S. 3985 is an estimated $14.6 billion, which would not hurt or reduce the solvency of Social Security or other social insurance programs.

• This legislation would extend an effective financial relief program.  The Economic Recovery Payment (or Economic Recovery Tax Credit) under the Recovery Act has been provided to 55 million people, including seniors, veterans, and people with disabilities, for a total cost of $13.7 billion.  Most of these checks were mailed to recipients in May 2009.   The Economic Policy Institute has estimated that this initiative created or saved 125,000 jobs and boosted the Gross Domestic Product by 0.5 percent in the second quarter of 2009.[3]

Legislative History

Senator Sanders introduced S. 3985 on November 29, 2010.  As of December 6, 2010, the following Senators cosponsored S. 3985:  Begich, Sherrod Brown, Casey, Gillibrand, Lautenberg, Leahy, Menendez, Reid, Schumer, Stabenow,and Whitehouse. 

On December 2, 2010, Senator Whitehouse asked for unanimous consent that the Senate Finance Committee be discharged from further consideration of this bill and the Senate proceed to its consideration.  However, Senate Republicans objected to the request.

On December 6, 2010, Senator Reid filed cloture on the motion to proceed to S.3985.  The resulting vote is expected to be held on December, 8, 2010.

Earlier this year, on March 3, 2010, the Senate voted on the motion to waive a point of order against similar legislation sponsored by Senator Sanders, S. Amdt. 3353, to provide an emergency benefit of $250 to seniors, veterans, and persons with disabilities in 2010 to compensate for the lack of cost-of-living adjustment for this year.  This motion was defeated by a vote of 47 to 50.[4]

Administration Position

At the time of publication, the Administration had not released a Statement of Administration Policy on S. 3985.  However, the White House has indicated the President’s support for a $250 Economic Recovery Payment this year for seniors, veterans, and people with disabilities whose benefits depend on the annual Social Security cost-of-living-adjustment.[5]

[1] More information is available from the Congressional Research Service, Report R41488

[2] Roll Call Vote 36

[3] Sen. Sanders’ Office, Press Statement Quoting the Economic Policy Institute, 11/1/10

[4] Roll Call Vote 36

[5] The White House, Press Statement, 10/15/10

Public-safety employees, including police, firefighter and emergency personnel, do not have full collective bargaining rights in approximately 20 states.  These dedicated men and women who serve our communities are not permitted to collectively negotiate with their employers, state and local governments.  First responders are vital to the safety of our communities, but many lack basic workplace rights available to other workers.  Enhanced cooperation between public safety officers and their employers would promote public safety and our national security.

The Public Safety Employer-Employee Cooperation Act, S. 3991, would extend collective bargaining rights, including the right to bargain over hours, wages and working conditions, to public safety employees employed by state and local governments.  The legislation would grant states wide latitude to design a collective bargaining system that fits their needs, and would direct the Federal Labor Relations Authority (FLRA) to determine whether a state substantially provides for specified rights and responsibilities for public safety officers.  Public safety employees would be prohibited from participating in strikes, lockouts, sickouts and work slowdowns.  States and localities would not be required to negotiate over pensions, retirement, and health benefits, and could exclude small cities and sheriff’s offices from coverage.  Existing collective bargaining units and agreements would not be invalidated by the measure. 

On November 30, Senator Reid introduced S. 3991.  Senator Reid filed cloture on the motion to proceed to S. 3991 on December 6, 2010, and a vote on that motion is anticipated on December 8, 2010. 

Major Provisions

Rights and Responsibilities

The legislation would direct the Federal Labor Relations Authority (FLRA) to determine whether state law provides specific rights and responsibility for public safety officers.  The FLRA is an independent federal agency that provides certain federal employees with the rights to organize, bargain collectively, and participate in labor organizations.  The agency adjudicates disputes under the Federal Service Labor Management Relations Statute.

Specifically, the legislation would require states to do the following:  1) grant public safety officers the right to form and join a labor organization; 2) require public safety employers to recognize the employees’ labor organization, to agree to bargain with the labor organization, and commit any agreements to writing; 3) provide the right to bargain over hours, wages, and terms and conditions of employment; 4) make available mediation and comparable procedures; and 5) require a state agency or state courts to enforce workplace rights and applicable contracts between labor organizations and public safety employers. 

S. 3991 would require the FLRA to determine whether a state provides these rights and responsibilities to public safety employees.  If the FLRA determines that a state does not substantially provide these rights to all public safety workers, then the state would be subject to minimum regulations and rules determined by the FLRA.  The FLRA would be required to issue regulations establishing collective bargaining procedures for public safety employees in states that do not provide for such rights and responsibilities.  If the FLRA determines that a state provides adequate protections, then the Act would not preempt state laws. 

The FLRA and public safety workers would be permitted to petition the courts to enforce compliance with FLRA regulations. 

Other Provisions

The Act prohibits public safety employers, employees and labor organization from participating in lockouts, sickouts, work slowdowns, or strikeouts.  The Act does not allow existing collective bargaining organizations and agreements to be invalidated. 

Legislative History

Senator Reid introduced S. 3991,the Public Safety Employer-Employee Cooperation Act, on November 30, 2010.  The House of Representatives passed similar legislation as part of an amendment to a supplemental appropriations bill, H. R. 4899, in July 2010 by a vote of 239 to 182. 

Senator Reid filed cloture on the motion to proceed to S. 3991 on December 6, 2010.  The vote on cloture on the motion to proceed to S. 3991 is expected on December 8, 2010.

Expected Amendments

The DPC will circulate information about possible amendments as it becomes available.

Administration Position

At the time of publication, the Administration had not released a Statement of Administration Policy on S. 3991.

Resources

Congressional Research Service, The Public Safety Employer-Employee Cooperation Act, available here.

Senate Democrats are committed to protecting tax cuts for America’s middle class and bolstering the economy to create jobs, help families and businesses meet the challenges of these tough economic times, and ensure a strong recovery from the recession. 

Unfortunately, Republicans continue to hold critical middle-class tax cuts and job creation incentives hostage in order to provide bonus tax giveaways to millionaires and CEOs who ship American jobs overseas.  Despite extensive Democratic efforts to work in a bipartisan manner, as well as the public’s support for the Democratic approach to tax cuts, Republicans are refusing to roll up their sleeves and join us in fixing the economy. 

As such, Senate Democrats are moving forward with the Middle Class Tax Cut Act of 2010, legislation to permanently cut middle-class taxes; extend job-creating tax cuts for businesses, families, and workers; and reauthorize unemployment benefits for workers continuing to look for jobs.  Provided below is a summary of this legislation’s major provisions.

Major Provisions

This summary was provided by the Senate Committee on Finance.

I.     Permanent Middle Class Tax Relief

Two major bills enacting tax cuts for individuals expire at the end of 2010:  the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA); and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA).  The following package makes permanent several provisions from EGTRRA and JGTRRA that will provide important tax relief to middle class American families and small businesses.

Reductions in Individual Income Tax Rates

Permanently extend the 10 percent bracket.  Under current law, the 10 percent individual income tax bracket expires at the end of 2010.  Upon expiration, the lowest tax rate will be 15 percent.  This proposal makes the 10 percent individual income tax bracket permanent.  The proposal is effective for taxable years beginning after December 31, 2010. 

Permanently extend the 25 percent, 28 percent and part of 33 percent brackets.  Under current law, the 25 percent, 28 percent, and 33 percent individual income tax brackets expire at the end of 2010.  Upon expiration, the rates become 28 percent, 31 percent, and 36 percent respectively.  This proposal makes the 25 percent and 28 percent individual income tax brackets permanent.  This proposal also makes the 33 percent individual income tax bracket permanent for taxpayers with adjusted gross income (AGI) at or below $200,000 for individuals and $250,000 for married couples filing jointly.  The proposal is effective for taxable years beginning after December 31, 2010.   

Permanently repeal the Personal Exemption Phase-out for certain taxpayers.  Personal exemptions allow a certain amount per person to be exempt from tax.  Due to the Personal Exemption Phase-out (“PEP”), the exemptions are phased out for taxpayers with AGI above a certain level.  The EGTRRA repealed PEP for 2010.  The proposal makes permanent the repeal of PEP for taxpayers with AGI at or below $200,000 for an individual and $250,000 for a married couple filing jointly.  The proposal is effective for taxable years beginning after December 31, 2010. 

Permanently repeal the itemized deduction limitation for certain taxpayers. Generally, taxpayers itemize deductions if the total deductions are more than the standard deduction amount.  Since 1991, the amount of itemized deductions that a taxpayer may claim has been reduced, to the extent the taxpayer’s AGI is above a certain amount.  This limitation is generally known as the “Pease limitation.” The EGTRRA repealed the Pease limitation on itemized deductions for 2010.  The proposal makes permanent the repeal of the Pease limitation for taxpayers with AGI at or below $200,000 for an individual and $250,000 for a married couple filing jointly.  The proposal is effective for taxable years beginning after December 31, 2010. 

Capital Gains and Dividends

Permanently extend the capital gains and dividend rates for the middle-class.  Under current law, the capital gains and dividend rates for taxpayers below the 25 percent bracket is equal to zero percent.  For those in the 25 percent bracket and above, the capital gains and dividend rates are currently 15 percent.  These rates expire at the end of 2010.  Upon expiration, the rates for capital gains become 10 percent and 20 percent, respectively, and dividends are subject to the ordinary income rates.  This proposal makes permanent the zero percent capital gains and dividend rates for taxpayers below the 25 percent tax bracket.  This proposal also makes permanent the 15 percent capital gains and dividend rates for taxpayers in the 25, 28, and 33 percent tax brackets with AGI at or below $200,000 for individuals and $250,000 for married couples filing jointly.  The proposal is effective for taxable years beginning after December 31, 2010.   

Capital gains and dividend rates for high-income taxpayers.  This proposal makes the dividends rate equal to the capital gains rate of 20 percent beginning January 1, 2011 for taxpayers with AGI above $200,000 for individuals and $250,000 for married couples filing jointly.  The proposal is effective for taxable years beginning after December 31, 2010.   

Child Tax Credit

Permanently extend the modified child tax credit.  Generally, taxpayers with income below certain threshold amounts may claim the child tax credit to reduce federal income tax for each qualifying child under the age of 17.  The EGTRRA increased the credit from $500 to $1,000.  The EGTRRA also expanded refundability.  The amount that may be claimed as a refund was 15 percent of earnings above $10,000.  The American Recovery and Reinvestment Act of 2009 provided that earnings above $3,000 would count towards refundability for 2009 and 2010.  This proposal makes the current child tax credit permanent.  The proposal is effective for taxable years beginning after December 31, 2010.  

Marriage Penalty Relief

Permanently extend marriage penalty relief.  The proposal makes permanent the marriage penalty relief for the standard deduction, the 15 percent bracket, and the EITC.  The proposal is effective for taxable years beginning after December 31, 2010. 

Incentives for Families and Children

Permanently extend the expanded dependent care credit. The dependent care credit allows a taxpayer a credit for an applicable percentage of child care expenses for children under 13 and disabled dependents.  The EGTRRA increased the amount of eligible expenses from $2,400 for one child and $4,800 for two or more children to $3,000 and $6,000, respectively. The EGTRRA also increased the applicable percentage from 30 percent to 35 percent.  The proposal makes the changes to the dependent care credit permanent.  The proposal is effective for taxable years beginning after December 31, 2010.   

Permanently extend the increased adoption tax credit and the adoption assistance programs exclusion. Taxpayers that adopt children can receive a tax credit for qualified adoption expenses.  A taxpayer may also exclude from income adoption expenses paid by an employer.  The EGTRRA increased the credit from $5,000 ($6,000 for a special needs child) to $10,000, and provided a $10,000 income exclusion for employer-assistance programs.  The Patient Protection and Affordable Care Act of 2010 extended these benefits to 2011 and made the credit refundable.  The proposal makes permanent the increased adoption credit amount and the exclusion for employer-assistance programs as enacted in EGTRRA.  The proposal is effective for taxable years beginning after December 31, 2010.

Permanently extend the credit for employer expenses for child care assistance. The EGTRRA provided employers with a credit of up to $150,000 for acquiring, constructing, rehabilitating or expanding property which is used for a child care facility.  The proposal makes this proposal permanent.  The proposal is effective for taxable years beginning after December 31, 2010.

Earned Income Tax Credit (EITC)

Permanently extend third-child EITC.  Under current law, working families with two or more children currently qualify for an earned income tax credit equal to 40 percent of the family’s first $12,570 of earned income. The American Recovery and Reinvestment Act increased the earned income tax credit to 45 percent of the family’s first $12,570 of earned income for families with three or more children and increased the beginning point of the phase-out range for all married couples filing a joint return (regardless of the number of children).  This proposal makes permanent the American Recovery and Reinvestment Act provisions that increased the credit for families with three or more children and increased the phase-out range for all married couples filing a joint return.  The proposal is effective for taxable years beginning after December 31, 2010. 

II. Permanent Education Tax Relief

Education Incentives

Permanently extend expanded Coverdell Accounts.  Coverdell Education Savings Accounts are tax-exempt savings accounts used to pay the higher education expenses of a designated beneficiary.  The EGTRRA increased the annual contribution amount from $500 to $2,000 and expanded the definition of education expenses to include elementary and secondary school expenses.  The proposal makes permanent the changes to Coverdell accounts.  The proposal is effective January 1, 2011.

Permanently extend the expanded exclusion for employer-provided educational assistance. An employee may exclude from gross income up to $5,250 for income and employment tax purposes per year of employer-provided education assistance.  Prior to 2001, this incentive was temporary and only applied to undergraduate courses.  The EGTRRA expanded this provision to graduate education and extended the provision for undergraduate and graduate education to the end of 2010.  The proposal makes permanent the changes to this provision.  The proposal is effective January 1, 2011.

Permanently extend the expanded student loan interest deduction.  Certain individuals who have paid interest on qualified education loans may claim an above-the-line deduction for such interest expenses up to $2,500.  Prior to 2001, this benefit was only allowed for 60 months and phased-out for taxpayers with income between $40,000 and $55,000 ($60,000 and $75,000 for joint filers).  The EGTRRA eliminated the 60 month rule and increased the income phase-out to $55,000 to $70,000 ($110,000 and $140,000 for joint filers).  The proposal makes permanent the changes to this provision.  The proposal is effective January 1, 2011.

Permanently extend the exclusion from income of amounts received under certain scholarship programs. Scholarships for qualified tuition and related expenses are excludible from income.  Qualified tuition reductions for certain education provided to employees are also excluded.  Generally, this exclusion does not apply to qualified scholarships or tuition reductions that represent payment for teaching, research, or other services.  The National Health Service Corps Scholarship Program and the F. Edward Hebert Armed Forces Health Professions Scholarship and Financial Assistance Program provide education awards to participants on the condition that the participants perform certain services.  The EGTRRA allowed the scholarship exclusion to apply to these programs.  The proposal makes permanent the changes to this provision.  The proposal is effective January 1, 2011.

Arbitrage rebate exception for school construction bonds.  Under current law, issuers of tax-exempt bonds must rebate to the U.S. Treasury arbitrage (excess interest income) earned from the investment of tax-exempt bond proceeds in higher-yielding taxable securities.  The calculation of excess interest income can be complex, and as a result, many governments incur large costs to comply with the requirements.  To ease the burden on small issuers, the federal tax code exempts governments that issue a relatively small number of tax-exempt bonds in a given year from the requirement.  In general, the small issuer rebate exception can only be used by state and local governments that issue less than $5 million in governmental and 501(c)(3) bonds annually.  This exception is $10 million for bonds issued for qualified educational facilities.  The EGTRRA increased the small-issuer arbitrage rebate exception for school construction from $10 million to $15 million.  This proposal makes permanent the $15 million arbitrage rebate exception for school construction.  The proposal is effective January 1, 2011.

Tax-exempt private activity bonds for qualified education facilities.  Under current law, proceeds from private activity bonds issued by a state or local government qualify as tax-exempt if 95 percent or more of the net bond proceeds are used for a qualified purpose as defined by the Internal Revenue Code.  The EGTRRA expanded the definition of a private activity for which tax-exempt bonds may be issued to include bonds for qualified public educational facilities.  Bonds issued for qualified educational facilities are not counted against a state’s private-activity volume cap.  Instead, these bonds have their own volume capacity limit equal to the lesser of $10 per resident or $5 million.  This proposal makes permanent the allowance to issue tax-exempt private activity bonds for public school facilities.  The proposal is effective January 1, 2011.

Permanent American Opportunity Tax Credit. Created under the American Recovery and Reinvestment Act, the American Opportunity Tax Credit is available for up to $2,500 of the cost of tuition and related expenses paid during the taxable year. Under this tax credit, taxpayers receive a tax credit based on 100 percent of the first $2,000 of tuition and related expenses (including course materials) paid during the taxable year and 25 percent of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent of the credit is refundable.  This tax credit is subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).  This proposal makes the American Opportunity Tax Credit permanent.  The proposal is effective for taxable years beginning after December 31, 2010.

Computers as qualified education expenses in 529 education plans.  Section 529 Education Plans are tax-advantaged savings plans that cover all qualified education expenses, including: tuition, room & board, mandatory fees and books.  The American Recovery and Reinvestment Act (ARRA) provided that computers and computer technology qualify as qualified education expenses.  The bill makes this provision in American Recovery and Reinvestment Act permanent.  The proposal is effective for expenses paid or incurred after December 31, 2010. 

III.  Permanent Estate Tax Relief

Estate Tax

Permanent estate, gift and generation skipping transfer tax relief.  The EGTRRA phased-out the estate and generation-skipping transfer taxes so that they were fully repealed in 2010, and lowered the gift tax rate to 35 percent and increased the gift tax exemption to $1 million for 2010.  The proposal reinstates the 2009 law for the estate, gift, and generation skipping transfer taxes permanently, setting the exemption at $3.5 million per person and $7 million per couple and a top tax rate of 45 percent.  The exemption amount is indexed beginning in 2011.  The proposal is effective January 1, 2010, but allows an election to choose no estate tax and modified carryover basis for estates arising on or after January 1, 2010 and before the date of introduction.  The proposal is effective upon date of introduction for gift and generation skipping transfer taxes.

Portability of unused exemption.  Under current law, couples have to do complicated estate planning to claim their entire exemption (currently $7 million for a couple). The proposal allows the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse without such planning. 

Deferral of estate tax for farmland.  The proposal allows taxpayers to defer the payment of estate taxes on farmland of a family farm until the farmland is sold or transferred outside the family or ceases to be used for farming.  The proposal also increases the valuation adjustment for donations of a conservation easement.   

Increase of special use revaluation amount.  The proposal increases the amount of the revaluation to the exemption amount, allowing up to a $3.5 million adjustment.

Minimum 10-year term for grantor retained annuity trusts (GRATs).  The proposal requires that GRATs be set up for a minimum 10-year term.  The proposal applies to transfers for which returns are filed after the date of enactment. 

Basis for estate and income taxes.  The proposal clarifies that the basis of property in the hands of the heir is the same as its value for estate and gift tax purposes.  The proposal also requires the executor or donor to report the value to the IRS and heir.  The proposal applies to transfers for which returns are filed after the date of enactment. 

IV.  Permanent Small Business Tax Relief

Section 179 Depreciation

Permanently extend increase in the maximum amount and phase-out threshold under section 179.  Under current law, a taxpayer with a sufficiently small amount of annual investment may elect to deduct the cost of certain property placed in service for the year rather than depreciate those costs over time.  The 2003 tax cuts temporarily increased the maximum dollar amount that may be deducted from $25,000 to $100,000.  The tax cuts also increased the phase-out amount from $200,000 to $400,000.  In 2007, tax cuts temporarily increased these thresholds to $125,000 and $500,000 respectively, indexed for inflation.  These amounts have been further increased and extended several times on a temporary basis, including most recently as part of the Small Business Jobs Act which increased the thresholds to $500,000 and $2,000,000 for the taxable years beginning in 2010 and 2011.  This proposal makes the 2007 maximum amount and phase-out thresholds permanent at $125,000 and $500,000 respectively, indexed for inflation.  The proposal is effective for taxable years beginning after December 31, 2011. 

V.  Alternative Minimum Tax Relief

Alternative Minimum Tax (AMT) 

Two-year AMT patch.Currently, a taxpayer receives an exemption of $33,750 (individuals) and $45,000 (married filing jointly) under the AMT.  Current law also does not allow nonrefundable personal credits against the AMT.  The proposal increases the exemption amounts for 2010 to $47,450 (individuals) and $72,450 (married filing jointly) and for 2011 to $48,450 (individuals) and $74,450 (married filing jointly).  The proposal also allows the nonrefundable personal credits against the AMT.  The proposal is effective for taxable years beginning after December 31, 2009.   

VI.  Temporary Extension of Certain Provisions Expiring in 2009

Infrastructure Incentives

Build America Bonds (“BABs”). To date, the Build America Bonds program has been used by State and local governments to make over $150 billion of infrastructure investments nationwide. The bill extends this program for one year through 2011. For direct-pay Build America Bonds issued in 2011, the amount of the direct payment would be reduced from 35 percent to 32 percent of the coupon interest. The bill also allows issuers to issue Build America Bonds to effect a current refunding of outstanding Build America Bonds; as a result, issuers and the Federal government could save money if interest rates fall in the future. 

Water and sewer exempt-facility bonds excluded from state volume caps. Under current law, State agencies are generally subject to a cap with respect to the volume of private activity bonds they may issue. Certain bonds are not subject to these state volume caps. For example, bonds to finance airports, docks and wharves are excluded from state volume caps. Furthermore, qualified veterans’ mortgage bonds and qualified 501(c)(3) bonds are also excluded from state volume caps.  The bill excludes bonds financing facilities that furnish water and sewage facilities from state volume caps. The bill also excludes bonds financing facilities that furnish water and sewage facilities from certain limitations on tribal government issuances. 

Eliminate costs imposed on state and local governments by the alternative minimum tax. The alternative minimum tax (AMT) can increase the cost to state and local governments of issuing tax-exempt private activity bonds. In general, interest on tax-exempt private activity bonds is generally subject to the AMT. This limits the marketability of these bonds and, therefore, forces State and local governments to issue these bonds at higher interest rates. The American Recovery and Reinvestment Act excluded private activity bonds from the AMT if the bond was issued in 2009 or 2010, and allowed AMT relief for current refunding of private activity bonds issued after 2003 and refunded during 2009 and 2010. The bill extends both of these American Recovery and Reinvestment Act provisions for one year (i.e., exempt from AMT tax-exempt private activity bonds issued in 2011 and current refunding of private activity bonds issued after 2003 and refunded during 2011). 

Recovery Zone Bonds (“RZBs”). The American Recovery and Reinvestment Act authorized $10 billion in Recovery Zone economic development bonds and $15 billion in Recovery Zone facility bonds. These bonds could be issued during 2009 and 2010. Each state received a share of the national allocation based on that state’s job losses in 2008 as a percentage of national job losses in 2008, with each state receiving a minimum allocation of these bonds. These allocations were then sub-allocated to local municipalities. Municipalities receiving an allocation of these bonds would be permitted to use these bonds to invest in infrastructure, job training, education, and economic development in areas within the boundaries of the State, city or county (as the case may be) that has significant poverty, unemployment or home foreclosures. Because the formula that was used in the American Recovery and Reinvestment Act looked to net job losses instead of unemployment, some areas of the country with significant numbers of unemployed individuals did not receive any allocation of Recovery Zone bonds. The bill makes an additional allocation of Recovery Zone bonds to ensure that each local municipality receives a minimum allocation equal to at least its share of national unemployment in December 2009. The bill also extends the authorization for issuing Recovery Zone bonds through 2011. 

Direct payment in-lieu-of low-income housing credit. The bill extends for two years (through 2011) the program that was enacted as part of the American Recovery and Reinvestment Act that allows state housing agencies to elect to receive a payment in lieu of a portion of the State’s allocation of low-income housing tax credits.

Extension of tax-exempt eligibility for loans guaranteed by Federal Home Loan Banks. State and local governments currently face significant costs when issuing tax-exempt municipal bonds to finance state and local projects. The Housing and Economic Recovery Act of 2008 helped these municipalities by temporarily allowing bonds that are guaranteed by Federal home loan banks to be eligible for treatment as tax-exempt bonds regardless of whether the bonds are used to finance housing programs. Allowing these bonds to be guaranteed by Federal home loan banks has helped state and local governments obtain financing for necessary projects (e.g., constructing roads, repairing bridges, building and renovating schools and hospitals, funding college loans, etc) at a lower cost. The bill extends this benefit for bonds issued through 2011. 

Extension of temporary small issuer rules for allocation of tax-exempt interest expense. Under current law, financial institutions are not allowed to take a deduction for the portion of their interest expense that is allocable to such institution’s investments in tax-exempt municipal bonds. For purposes of this interest disallowance rule, bonds that are issued by a “qualified small issuers” are not taken into account as investments in tax-exempt municipal bonds. Under current law, a “qualified small issuer” is defined as any issuer that reasonably anticipates that the amount of its tax-exempt obligations (other than certain private activity bonds) will not exceed $10,000,000. The American Recovery and Reinvestment Act increased this dollar threshold to $30,000,000 when determining whether a tax-exempt obligation issued in 2009 and 2010 qualifies for this small issuer exception. The small issuer exception would also apply to an issue if all of the ultimate borrowers in such issue would separately qualify for the exception. For these purposes, the issuer of a qualified 501(c)(3) bond shall be deemed to be the ultimate borrower on whose behalf a bond was issued. The bill extends this benefit for bonds issued through 2011. 

Energy

Domestic energy manufacturing.  The bill provides an additional $2.5 billion in funding for the Section 48C advanced manufacturing tax credit.  Section 48C was established in the American Recovery and Reinvestment Act to provide a 30 percent investment tax credit for facilities engaged in the manufacture of advanced energy property. Credits are available only for projects certified by the Secretary of Treasury, in consultation with the Secretary of Energy, through a competitive bidding process.

Payment in lieu of production and investment credits. The bill codifies the direct payment in lieu of tax credit program that was initially created by Section 1603 of the American Recovery and Reinvestment Act, and extends the program through December 31, 2011. 

Credit for electricity produced at certain open-loop biomass facilities. The bill extends the credit period under the production tax credit for electricity produced at open-loop biomass facilities that were placed in service prior to January 1, 2005 from five years to seven years. The credit is reduced in 20 percent increments starting in the sixth year. 

Extension of special rule for sales of electric transmission property. The bill extends for two years (for sales prior to January 1, 2012) the present law deferral of gain on sales of transmission property by vertically integrated electric utilities to FERC-approved independent transmission companies. Rather than recognizing the full amount of gain in the year of sale, this proposal allows gain on such sales to be recognized ratably over an eight-year period.

Natural gas vehicles and heavy hybrid vehicles.  The bill extends through 2011 tax credits for heavy hybrid vehicles (those above 8,500 pounds) and natural gas vehicles.

Alternative vehicle refueling property.  The bill extends the 30 percent investment tax credit for alternative vehicle refueling property for one year, through 2011.   The bill also clarifies eligibility for this credit regarding electric vehicle refueling pump property.

Ethanol.  The bill extends through 2011 the per-gallon tax credits and outlay payments for ethanol.  The blender’s credit would be extended at a rate of 36 cents per gallon, while the small producer’s credit would be extended at a rate of 8 cents per gallon.  The bill also extends through 2011 the existing 14.27 cents per liter (54 cents per gallon) tariff on imported ethanol and the related 5.99 cents per liter (22.67 cents per gallon) tariff on ethyl tertiary-butyl ether (ETBE).

Biodiesel and renewable diesel. The bill extends through 2011 the $1.00 per gallon production tax credit for biodiesel, and the small agri-biodiesel producer credit of 10 cents per gallon. The bill also extends through 2011 the $1.00 per gallon production tax credit for diesel fuel created from biomass.

Alternative fuels credit.  The bill extends through 2011 the $0.50 per gallon alternative fuel tax credit for liquid fuels derived from biomass, compressed or liquefied biogas, natural gas and propane. The bill does not extend this credit any liquid fuel derived from a pulp or paper manufacturing process (i.e., black liquor). 

Extension of energy-efficient new homes credit. The bill extends the tax credit for manufacturers of energy-efficient residential homes through 2011.

Energy-efficient existing homes. The bill extends through December 31, 2011 the period in which the section 25C tax credit (30 percent credit, $1500 maximum) for energy-efficient property in existing homes, as modified by the American Recovery and Reinvestment Act, can be claimed.  Effective January 1, 2010, the bill also links eligibility for windows purchased with the tax credit to Energy Star requirements, which account for different climate regions in the United States.

Energy-efficient appliances. The bill extends through 2011 and modifies standards for the credit for US-based manufacturing of energy-efficient clothes washers, dishwashers and refrigerators.  For appliances manufactured in 2009 and 2010, taxpayers may elect to receive the credit as a direct payment. The direct payment would be equal to eighty-five percent (85 percent) of the tax credit that would otherwise have been allowed.   

Natural gas distribution lines treated at 15-year property.  Under current law, gas distribution lines can be depreciated over 15 years.  Starting January 1, 2011 the depreciation period is 20 years.  The bill extends the 15-year period for one year. 

Extension of steel industry fuel tax credit. The bill extends the placed-in-service date for the $2.83 per barrel-of-oil equivalent tax credit for steel industry fuel by two years (through 2011), and clarifies the definition of steel industry fuel and qualifications for ownership interests and production and sale.

Extension of coke and coke gas production tax credit. The bill extends the placed-in-service date for the $3.36 credit per barrel-of-oil equivalent of coke or coke gas through 2011. 

Extension of special rule for percentage depletion for marginal wells. The bill extends for two years (through 2011) the suspension on the taxable income limit for purposes of depleting a marginal oil or gas well. 

Individual Tax Relief

Above-the-line deduction for certain expenses of elementary and secondary school teachers. The bill extends for two years (through 2011) the $250 above-the-line tax deduction for teachers and other school professionals for expenses paid or incurred for books, supplies (other than non-athletic supplies for courses of instruction in health or physical education), computer equipment (including related software and service), other equipment, and supplementary materials used by the educator in the classroom.

Additional standard deduction for real property taxes. The bill extends for two years (through 2011) the additional standard deduction for State and local real property taxes. 

Deduction of State and local general sales taxes. The bill extends for two years (through 2011) the election to take an itemized deduction for State and local general sales taxes in lieu of the itemized deduction permitted for State and local income taxes.

Extension of provision encouraging contributions of capital gain real property for conservation purposes. The bill extends for two years (through 2011) the increased contribution limits and carryforward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes.

Above-the-line deduction for qualified tuition and related expenses. The bill extends for two years (through 2011) the above-the-line tax deduction for qualified education expenses.

Extension of tax-free distributions from individual retirement plans for charitable purposes. The bill extends for two years (through 2011) the provision that permits tax-free distributions to charity from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per taxable year.

Estate taxlook-through of certain Regulated Investment Company (RIC) stock held by nonresidents.  Although stock issued by a domestic corporation generally is treated as property within the United States, stock of a RIC that was owned by a nonresident non-citizen is not deemed property within the United States in the proportion that, at the end of the quarter of the RIC’s taxable year immediately before a decedent’s date of death, the assets held by the RIC are debt obligations, deposits, or other property that would be treated as situated outside the United States if held directly by the estate (the “estate tax look-through rule for RIC stock”). The proposal permits the look-through rule for RIC stock to apply to estates of decedents dying before January 1, 2012.

Direct payment in-lieu-of low-income housing credit. The bill extends for two years (through 2011) the program that was enacted as part of the American Recovery and Reinvestment Act that allows state housing agencies to elect to receive a payment in lieu of a portion of the State’s allocation of low-income housing tax credits.

Business Tax Relief

R&D credit. The bill reinstates for two years (through 2011) the research credit.  

Indian employment credit. The bill extends for two years (through 2011) the business tax credit for employers of qualified employees that work and live on or near an Indian reservation. The amount of the credit is 20 percent of the excess of wages and health insurance costs paid to qualified employees (up to $20,000 per employee) in the current year over the amount paid in 1993. 

New Markets Tax Credit. Through the New Markets Tax Credit (NMTC) program, the federal government is able to leverage federal tax credits to encourage significant private investment in businesses in low-income communities. For each dollar of qualified private investment, the NMTC program provides investors with either five cents or six cents of federal tax credits (depending on the amount of time that has passed since the original investment was made). The value of these tax credits depends on a taxpayer’s ability to use these credits to offset tax liability. The NMTC program will not encourage investors to make investments in low-income communities if these investors are unable to use these credits to offset tax liability. Taxpayers that are subject to the alternative minimum tax (AMT) are unable to use NMTC to offset their AMT tax liability. The bill extends for two years (through 2011) the new markets tax credit, permitting a maximum annual amount of qualified equity investments of $5 billion. This is effective for calendar years beginning after December 31, 2009.  In order to ensure that the NMTC encourages AMT taxpayers to make qualifying investments, the bill also allows NMTC to be claimed against the AMT with respect to qualified investments made between March 15, 2010 and January 1, 2013.

Extension of railroad track maintenance credit. The bill extends for two years (through 2011) the railroad track maintenance credit. 

Mine rescue team training credit. The bill extends for two years (through 2011) the credit for training mine rescue team members and would allow this credit to be claimed against the AMT.

Employer wage credit for activated military reservists. The bill extends for two years (through 2011) the provision that provides eligible small business employers with a credit against the taxpayer’s income tax liability for a taxable year in an amount equal to 20 percent of the sum of differential wage payments to activated military reservists.

Five year depreciation for farming business machinery and equipment. The bill extends for two years (through 2011) the provision that provides a five-year recovery period for certain machinery and equipment which is used in a farming business.

Tax benefits for certain real estate developments. The bill extends for two years (through 2011) the special 15-year cost recovery period for certain leasehold improvements, restaurant buildings and improvements, and retail improvements.

Extension of seven year straight line cost recovery period for motorsports entertainment complexes. The bill extends for two years (through 2011) the special seven year cost recovery period for property used for land improvement and support facilities at motorsports entertainment complexes.

Accelerated depreciation for business property on an Indian reservation. The bill extends for two years (through 2011) the placed-in-service date for the special depreciation recovery period for qualified Indian reservation property. In general, qualified Indian reservation property is property used predominantly in the active conduct of a trade or business within an Indian reservation, which is not used outside the reservation on a regular basis and was not acquired from a related person.

Extension of enhanced charitable deduction for contributions of food inventory. The bill extends for two years (through 2011) the provision allowing businesses to claim an enhanced deduction for the contribution of food inventory. 

Extension of enhanced charitable deduction for contributions of book inventories to public schools. The bill extends for two years (through 2011) the provision allowing C corporations to claim an enhanced deduction for contributions of book inventory to public schools (kindergarten through grade 12). 

Extension of enhanced charitable deduction for corporate contributions of computer equipment for educational purposes. The bill extends for two years (through 2011) the provision that encourages businesses to contribute computer equipment and software to elementary, secondary, and post-secondary schools by allowing an enhanced deduction for such contributions. 

Election to expense advanced mine safety equipment. The bill extends for two years (through 2010) the provision that provides businesses with 50 percent bonus depreciation for certain qualified underground mine safety equipment. 

Extension of special expensing rules for U.S. film and television productions. The bill extends for two years (through 2011) the provision that allows film and television producers to expense the first $15 million of production costs incurred in the United States ($20 million if the costs are incurred in economically depressed areas in the United States). 

Extension of expensing of “brownfields” environmental remediation costs. The bill extends for two years (through 2011) the provision that allows for the expensing of costs associated with cleaning up hazardous “brownfield” sites. 

Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico. The bill extends for two years (through 2011) the provision extending the section 199 domestic production activities deduction to activities in Puerto Rico.

Extension of special tax treatment of certain payments to controlling exempt organizations. The bill extends for two years (through 2011) the special rules for interest, rents, royalties and annuities received by a tax exempt entity from a controlled entity. 

Extension of exclusion of gain on the sale or exchange of certain “brownfield” sites from unrelated business taxable income. The bill extends for two years (through 2011) the provision that excludes any gain or loss from the qualified sale, exchange, or other disposition of any qualified brownfield property from unrelated business taxable income. 

Taxation of qualified timber gain and timber REIT provisions. Under current law, gains on timber sales are eligible for capital gains tax treatment. The bill provides an extension through 2011 of a provision included in the Farm Bill of 2008 that created an alternative maximum tax rate of 15 percent for gain on qualified timber harvest by a C corporation. Qualified timber gain is gain from the sale or exchange of timber held for at least 15 years. In addition, the bill extends through 2011 other Farm Bill provisions intended to modernize the taxation of timber real estate investment trusts (REITS) including: (1) clarifying that gains from the sale of timber held for less than one year is qualifying income; (2) providing that mineral royalty income is qualifying income; and (3) making changes to the safe harbors for timber property sales.

Treatment of certain dividends of Regulated Investment Companies (RICs).  The bill extends a provision allowing a RIC, under certain circumstances, to designate all or a portion of a dividend as an “interest-related dividend,” by written notice mailed to its shareholders not later than 60 days after the close of its taxable year. In addition, an interest-related dividend received by a foreign person generally is exempt from U.S. gross-basis tax under sections 871(a), 881, 1441 and 1442 of the Code. The proposal extends the treatment of interest-related dividends and short-term capital gain dividends received by a RIC to taxable years of the RIC beginning before January 1, 2012. 

Treatment of RIC investments as “Qualified Investment Entities” under FIRPTA.  The bill extends the inclusion of a RIC within the definition of a “qualified investment entity” under section 897 of the Tax Code through December 31, 2011.

Active financing exception. The bill extends for two years (through 2011) the active financing exception from Subpart F of the tax code. 

Look-through treatment of payments between related controlled foreign corporations. The bill extends for two years (through 2011) the current law look-through treatment of payments between related controlled foreign corporations.

Extension of special rule for S corporations making charitable contributions of property. The bill extends for two years (through 2011) the provision allowing S corporation shareholders to take into account their pro rata share of charitable deductions even if such deductions would exceed such shareholder’s adjusted basis in the S corporation.

Empowerment Zones. The bill extends for two years (through 2011) the designation of certain economically depressed census tracts as Empowerment Zones. Businesses and individual residents within Empowerment Zones are eligible for special tax incentives.

District of Columbia Enterprise Zone. The bill extends for two years (through 2011) the designation of certain economically depressed census tracts within the District of Columbia as the District of Columbia Enterprise Zone. Businesses and individual residents within this enterprise zone are eligible for special tax incentives. The bill also extends for two years (through 2011) the $5,000 first-time homebuyer credit for the District of Columbia.

Renewal Communities. The bill extends for two years (through 2011) the designation of certain economically depressed census tracts as Renewal Communities. Businesses and individual residents within Renewal Communities are eligible for special tax incentives. 

Extension of temporary increase in limit on cover over of rum excise tax revenues to Puerto Rico and the Virgin Islands. The bill extends for two years (through 2011) the provision providing for payment of $13.25 per gallon to cover over a $13.50 per proof gallon excise tax on distilled spirits produced in or imported into the United States. 

American Samoa economic development support. Existing possessions credit corporations with active business operations in American Samoa were allowed an economic development tax credit to offset their U.S. tax liability on income earned in American Samoa from active business operations. This credit was based on the corporation’s employment and capital investment in American Samoa. As a result of the economic downturn, those domestic corporations have been unable to utilize the economic development credit. The bill makes the credit refundable.

Refundable AMT credits for corporations making domestic investments. Under current law, corporations are allowed to take a credit against their regular tax liability for previously paid alternative minimum taxes (AMT). However, in order to claim these tax credits, the corporation must be subject to the regular tax instead of the AMT. Many corporations are subject to the AMT for substantial periods of time. As a result, these corporations accumulate substantial AMT credits. The bill allows corporations to receive a refund of a portion of their AMT credits if they invest during 2010 in capital equipment for use in the United States. 

Study of extended tax expenditures. The bill directs the Chief of Staff of the Joint Committee on Taxation to submit a report to the Committee on Ways and Means and the Committee on Finance on each tax expenditure extended by Title VI of this Act. 

Disaster Relief Provisions

Relaxed mortgage revenue bond limitations for federal disasters. The bill extends for two years (through 2011) the provision that allows states to waive certain rules that limit their ability to use tax-exempt housing bonds to provide loans to taxpayers that wish to acquire residences in Federally-declared disaster areas. The bill also extends for two years (through 2011) the provision that allows states to use their tax-exempt housing bonds to provide loans to repair or reconstruct homes and rental housing units that have been rendered unsafe for use as a residence by reason of a Federally-declared disaster or have been demolished or relocated by reason of government order on account of a Federally-declared disaster. Such loans are limited to the lower of (1) the actual cost of the repair or reconstruction or (2) $150,000. 

Expanded and enhanced casualty loss deductions relating to federal disasters. The bill extends for two years (through 2011) the provision that allows taxpayers who have suffered loss as a result of a Federally-declared disaster to claim a deduction for casualty losses (i.e., both itemizers and non-itemizers) and allows these taxpayers to calculate their casualty loss deduction without regard to their adjusted gross income. The bill also extends for one year (through 2010) the current law $500 per loss threshold. 

Bonus depreciation for qualified disaster property. The bill extends for two years (through 2011) the provision that permits businesses that suffered damage as a result of a Federally-declared disaster to claim an additional first-year depreciation deduction equal to 50 percent of the cost of new real and personal property investments made in the Presidentially-declared disaster area. 

Five-year carry-back period for certain losses relating to federal disasters. The bill extends for two years (through 2011) the provision that allows businesses to carry back to the previous five years the following losses: (1) casualty losses that are attributable to a Federally-declared disaster; and (2) Qualified Disaster Expenses.

Expensing of qualified disaster expenses. The bill extends for two years (through 2011) the provision that allows businesses that have been affected by a Federally-declared disaster to currently deduct demolition, repair, clean-up, and environmental remediation expenses (“Qualified Disaster Expenses”). 

Increased small business expensing for expenditures relating to federal disasters. The bill extends for two years (through 2011) the provision that increases by $100,000 (or the cost of qualified property, if less) the amount of expensing available for qualifying expenditures made in a Federally-declared disaster area. The bill also extends for two years (through 2011) the provision that increases by $600,000 (or the cost of qualified property, if less) the level of investment at which the small business expensing benefits phase-out.

Extension of tax incentives for the New York Liberty Zone. The bill extends for two years (through 2011) the special depreciation allowance for certain real property within the New York Liberty Zone effective for property placed in service after December 31, 2009 and the time for issuing New York Liberty Zone bonds effective for bonds issued after December 31, 2009. 

Extension of increased rehabilitation credit for historic structures in the Gulf Opportunity Zone. The bill extends for one year (through 2010) the increased rehabilitation credit for qualified expenditures in the Gulf Opportunity Zone. The Gulf Opportunity Zone Act of 2005 increased the rehabilitation credit from 10 percent to 13 percent of qualified expenditures for any qualified rehabilitated building other than a certified historic structure, and from 20 percent to 26 percent of qualified expenditures for any certified historic structure. 

Extend Work Opportunity Tax Credit (WOTC) for Hurricane Katrina Employees. The bill extends for one year (through August 28, 2010) the work opportunity tax credit for certain employers hiring in the Hurricane Katrina core disaster area. The proposal is effective for individuals hired after August 27, 2009. 

Two-year extension of Gulf Opportunity Zone low-income housing placed-in-service date. The Gulf Opportunity Zone Act of 2005 provided an additional allocation of low-income housing tax credits to the Gulf Opportunity Zone in an amount equal to the product of $18.00 multiplied by the portion of the State population which is in the Gulf Opportunity Zone. The additional allocations were made in calendar years 2006, 2007, and 2008, and required that the properties be placed in service before January 1, 2011. The bill extends that placed-in-service date by two years (through 2012).

Disaster Low-Income Housing Tax Credits. Under current law, every year states receive allocations of low-income housing tax credits (LIHTC) based on population or a small state set-aside. In response to Hurricane Katrina in 2005, as well as the floods in the Midwest in 2007, the LIHTC was expanded to allow for additional credits, called “disaster credits”, to help affected states rebuild. This amount is on top of what States receive under current law. As part of the American Recovery and Reinvestment Act of 2009, LIHTCs are eligible to be exchanged for grants. This exchange program only applies to LIHTCs allocated based on population – it did not apply to disaster credits. In the underlying bill, LIHTCs allocated in 2010 are eligible to be refundable credits. This proposal also allows disaster credits from the Katrina and Midwestern flood disasters to be exchanged for either grants or refundable credits.

VII.      Technical Corrections to Pension Funding Legislation

Technical corrections to pension funding relief. These proposals provide technical changes to the funding relief the President signed into law on June 25, 2010.   The principal purpose of these changes is to make the provisions that were enacted clearer and more administrable.  This will allow companies access to the important relief without having to wait for administrative guidance.  These technical changes do not represent any change in policy from the funding relief provisions as originally enacted.  In addition, the amendment reflects the intent of the statute as enacted by clarifying that the extra relief for charities is available only for national charities that have many local chapters and provide services with respect to children. 

VIII.  Temporary Extension of Certain Provisions Ending in 2010

Unemployment Insurance

Extension of unemployment insurance.  The unemployment insurance proposal provides a one-year reauthorization of federal UI benefits.  The proposal continues the Emergency Unemployment Compensation (EUC) benefits for one year. In addition,  it continues 100 percent Federal Financing of Extended Benefits (EB) for one year, and makes changes to the EB look-back enabling states to continue to trigger on EB.

Small Business

Exclusion of small business capital gains.  Generally, non-corporate taxpayers may exclude 50 percent of the gain from the sale of certain small business stock acquired at original issue and held for more than five years. For stock acquired after February 17, 2009 and on or before September 27, 2010, the exclusion is increased to 75 percent. For stock acquired after September 27, 2010 and before January 1, 2011, the exclusion is 100 percent and the AMT preference item attributable for the sale is eliminated. Qualifying small business stock is from a C corporation whose gross assets do not exceed $50 million (including the proceeds received from the issuance of the stock) and who meets a specific active business requirement. The amount of gain eligible for the exclusion is limited to the greater of ten times the taxpayer’s basis in the stock or $10 million of gain from stock in that corporation. The provision extends the 100 percent exclusion of the gain from the sale of qualifying small business stock that is acquired before January 1, 2012 and held for more than five years. 

General business credits carried back five years.  Generally, a business’ unused general business credit may be carried back to offset taxes paid in the previous year, and the remaining amount may be carried forward for 20 years to offset future tax liabilities. The Small Business Jobs Act allows certain small businesses to carry back five years unused general business credits generated in the taxpayer’s first taxable year beginning in 2010. Eligible small businesses include those sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.  The proposal extends the five year carry back period for general business credits generated the following year (in the taxable year beginning in 2011).

General business credits not subject to AMT.  Under the Alternative Minimum Tax (AMT), taxpayers may generally only claim allowable general business credits against their regular tax liability, and only to the extent that their regular tax liability exceeds their AMT liability. A few credits may be used to offset AMT liability, such as the credit for small business employee health insurance expense. The Small Business Jobs Act allows certain small businesses to use all types of general business credits generated in the taxpayer’s first taxable year beginning in 2010 against their AMT.  Eligible small businesses include those sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.  The proposal extends the allowance for certain small businesses to use all types of general business credits generated the following year (in the taxable year beginning in 2011) against their AMT. 

Increased deduction for start-up expenditures.  Generally, taxpayers may deduct up to $5,000 in trade or business start-up expenditures. The amount that a business may deduct is reduced by the amount by which start-up expenditures exceed $50,000. Start-up expenditures are defined as expenses paid or incurred in connection with investigating or creating an active trade or business, which would be deductible if paid or incurred in connection with the operation of an existing trade or business. For the taxable year beginning in 2010, the Small Business Jobs Act temporarily increases the amount of start-up expenditures that may be deducted to $10,000 subject to a $60,000 phase-out threshold.  The proposal extends this increased deduction for an additional year, through 2011. 

Deduction for health insurance costs for self-employed. Under current law, business owners are not permitted to deduct the cost of health insurance for themselves and their family members for purposes of calculating self-employment tax. The Small Business Jobs Act allows business owners to deduct the cost of health insurance incurred in 2010 for themselves and their family members in the calculation of their 2010 self-employment tax.  The proposal extends the deduction allowance for health insurance costs for self-employed for an additional year, so that costs can be deducted in the calculation of 2011 self-employment tax. 

Energy

Clean Renewable Energy Bonds (CREBs).  The American Recovery and Reinvestment Act authorized an additional $1.6 billion of new clean renewable energy bonds to finance facilities that generate electricity from the following resources: wind; closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas; marine renewable; and trash combustion facilities.  The $1.6 billion authorization was subdivided into thirds: 1/3 for qualifying projects of State/local/tribal governments; 1/3 for qualifying projects of public power providers; and 1/3 for qualifying projects of electric cooperatives.  As part of the HIRE Act, Congress allowed bond issuers to convert the tax credit bond into a direct subsidy bond.  The proposal provides an additional allocation of $1.6 billion while maintaining the ability for issuers to convert to a direct subsidy bond in lieu of a tax credit bond.

Education

Qualified school construction bonds.  The American Recovery and Reinvestment Act created a new category of tax credit bonds for the construction, rehabilitation, or repair of public school facilities or for the acquisition of land on which a public school facility will be constructed.  There was a national limitation on the amount of qualified school construction bonds that could be issued by State and local governments of $22 billion ($11 billion allocated initially in 2009 and the remainder allocated in 2010).  There was also a national limitation on the amount of qualified school construction bonds that could be issued by Indian tribal governments of $400 million ($200 million allocated initially in 2009 and the remainder allocated in 2010).  As part of the HIRE Act, Congress allowed bond issuers to convert the tax credit bond into a direct subsidy bond.  This bill authorizes an additional $11 billion of QSCBs and extends the period of time that State and local governments can issue these new tax credit bonds for an additional year, through 2011, while maintaining the ability for issuers to convert to a direct subsidy bond in lieu of a tax credit bond. 

Other Employee and Housing Relief

Extension of Making Work Pay tax credit. The American Recovery and Reinvestment Act (ARRA) included a provision that provided a refundable tax credit of up to $400 for working individuals and $800 for working families in 2009 and 2010.  The tax credit is equal to 6.2 percent of earned income, and would phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for married couples filing jointly).  Taxpayers receive this benefit through a reduction in the amount of income tax that is withheld from their paychecks, or through claiming the credit on their tax returns.  The proposal extends this tax credit for an additional year, through 2011.

Work opportunity tax credit (WOTC).  Under current law, businesses are allowed to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to new hires of one of nine targeted groups.   These groups include members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program, qualified veterans, designated community residents, and others.  The WOTC program is currently set to expire August 31, 2011.  The bill extends this provision through December 31, 2011 and would be effective for employees hired after date of enactment.   The proposal also extends the addition of two targeted groups (unemployed veterans and disconnected youth) through 2011.  The extension of the additional two targeted groups is effective for employees beginning work for the employer after December 31, 2010.

Exclusion from income for benefits provided to volunteer firefighters and emergency responders.  The Mortgage Forgiveness Debt Relief Act of 2007 and the Heroes Earnings Assistance and Relief Tax Act provided that volunteer firefighters and emergency responders may exclude certain benefits from income provided on account of the volunteer service.  Beginning January 1, 2008, these benefits also included the value of property tax abatements.  The proposal extends the exclusion of certain benefits from income for an additional year, through 2011. 

Parity for mass transit benefits. The bill extends for one year the increase in the fringe benefit for mass transit, making it equal to the fringe benefit provided for parking. 

Premiums for mortgage insurance deductible as interest that is qualified residence interest.  Under current law, a taxpayer may itemize the cost of mortgage insurance on a qualified personal residence. The deduction is phased-out ratably by 10 percent for each $1,000 by which the taxpayer’s AGI exceeds $100,000.  Thus, the deduction is unavailable for a taxpayer with an AGI in excess of $110,000.  The bill extends this provision for an additional year, through 2011.   

IX.  Other Provisions

1099 Repeal

Repeal of expansion of corporate information reporting.  This proposal repeals expanded information return reporting rules that required businesses that pay $600 or more during the year to both non-corporate and corporate providers of property and services to file an information report with each provider and with the IRS reporting the amount paid for the property provided and services rendered.  Previous information return reporting rules remain in place.

Other EGTRRA Provisions

Permanent tax relief for Alaska settlement funds.  The EGTRRA allowed an election in which Alaska Native settlement trusts can elect to pay tax at the same rate as the lowest individual marginal rate, rather than the higher rates that generally apply to trusts.  Beneficiaries of the trust do not pay tax on the distributions of an electing trust’s taxable income.  Finally, contributions by an Alaska Native corporation to an electing trust will not be deemed distributions to the corporation’s shareholders.  This proposal makes permanent the elective tax treatment for Alaska Native settlement trusts.  The proposal is effective for taxable years beginning after December 31, 2010.

Postponement of tax –related deadlines by reason of presidentially declared disaster. The EGTRRA expanded the period of time that the Secretary of the Treasury could postpone deadlines from 90 days to 120 days for taxpayers affected by a presidentially declared disaster.  This proposal makes permanent the extension of the postponement deadline.  The proposal is effective for taxable years beginning after December 31, 2010.

Means Tested Programs

Refund and tax credit disregard for means tested programs.  Current law ensures that the refundable components of the EITC and the Child Tax Credit do not make households ineligible for means-tested benefit programs and includes provisions stating that these tax credits do not count as income in determining eligibility (and benefit levels) in means-tested benefit programs, and also do not count as assets for specified periods of time. Without them, the receipt of a tax credit would put a substantial number of families over the income limits for these programs in the month that the tax refund is received.  The proposal permanently disregards all refundable tax credits and refunds as income for means tested programs.  The proposal is effective for amounts received after December 31, 2009.

Reverse Morris Trusts

Clarification of gain recognized in certain spin-off transactions (e.g., “Reverse Morris Trust” transactions). Under current law, taxes are generally imposed on parent corporations where they extract value in excess of basis from their subsidiaries prior to engaging in a tax-free spin-off transaction. Therefore, if a subsidiary corporation distributes cash or other property to its parent in excess of the parent’s basis in the subsidiary or if a subsidiary corporation assumes parent debt in excess of the parent’s basis in the subsidiary, the parent corporation will recognize gain. However, taxes are not assessed if a subsidiary corporation distributes its own debt securities to a parent corporation prior to a spin off transaction even where the value of these securities would exceed the parent corporation’s basis in its subsidiary. This proposal treats distributions of debt securities in a tax-free spin-off transaction in the same manner as distributions of cash or other property. Subject to transition rules, the proposal applies to exchanges after December 31, 2010. 

Legislative History

On December 4, 2010, the Senate will proceed to vote on the motion to invoke cloture on the Reid motion to concur with the House amendment to the Senate amendment to H.R.4853, with the Baucus substitute amendment (S.Amdt.4727). 

If cloture is not invoked, the Senate would immediately proceed to vote on the motion to invoke cloture on the Schumer substitute amendment (S.Amdt.4728).  This legislation is identical to the Baucus substitute amendment, except that it would permanently extend the current individual income tax cuts for all income up to $1 million, rather than $200,000 for individuals and $250,000 for married couples as under the Baucus substitute amendment.

You can click below for information about unemployment insurance in each state. 

·         Ensuring Value for Premium Payments

·         Enhanced Insurance Pricing Information for Consumers

·         Keeping the Health Plan You Like

·         Improving Access to Care

·         Supporting Health Care Providers in Underserved Areas

·         Encouraging Innovation to Improve Care, Reduce Costs

·         Establishing CLASS Independence Advisory Council

·         Guidance on Establishing Health Insurance Exchanges

·         Additional Information

Previous updates and other information are available from the DPC. [DPC] 

Ensuring Value for Premium Payments

The Affordable Care Act establishes standards for insurance overhead and requires public disclosure to ensure that consumers receive value for their premium dollars, requiring plans in the individual and small group market to spend 80 percent of premium dollars on clinical services and quality activities, and 85 percent for plans in the large group market. [P.L. 111-148; P.L. 111-152]  The insurance industry refers to such thresholds as ‘medical loss ratios.’  In today’s individual insurance market, more than 20 percent of consumers are enrolled in plans that spend more than 30 cents of every premium dollar on administrative costs, and another 25 percent of consumers are in plans that spend 25 to 30 cents of every premium dollar on administration. [Department of Health and Human Services (HHS), 11/22/10]  All health insurance plans, with the exception of self-insured and very small plans, that do not meet these thresholds starting January 1, 2011 will provide rebates to their policyholders in 2012.  The medical loss ratio provision of the Affordable Care Act will provide greater transparency and accountability, ensuring that Americans receive value for their premium dollars.

On November 22, 2010, the Administration issued an interim final rule to implement this part of the Affordable Care Act. [HHS, 11/22/10]  The regulation certifies and adopts the recommendations unanimously approved by the National Association of Insurance Commissioners (NAIC), which was required by the Affordable Care Act to develop uniform definitions and methodologies for calculating medical loss ratios. [NAIC, 10/27/10]  Estimates indicate that as many as 9 million Americans could be eligible for rebates, which will begin in 2012 and may be worth up to $1.4 billion, with average rebates in the individual market worth as much as $164 per person. [HHS, 11/22/10] 

The rule requires insurance companies to submit aggregate premium and expenditure data for all plans in each state in which it does business, with the exception of “expatriate” and “mini-med” plans, for which insurers may report data separately.  Reports are due June 1 of each year, with the first report due June 1, 2012, and any rebates will be due to consumers by August 1, 2012.  Activities that improve health care quality may be counted toward the 80 or 85 percent of premiums that must be spent on medical care, while federal and state taxes that apply to health insurance coverage will be deducted from an insurer’s premium revenue for purposes of the calculation.  The regulation also ensures a smooth market transition by making accommodations for smaller plans and newer plans, and allowing states to request an adjustment to the medical loss ratio if it is determined that meeting the 80 percent threshold would destabilize the individual insurance market in a state.  More information, including the text of the regulation, is available from HHS. [HHS, accessed 11/22/10]

Enhanced, Transparent Pricing Information for Consumers

The Affordable Care Act enabled creation of a new web portal to facilitate informed consumer choice of health insurance options. [P.L. 111-148; P.L. 111-152]  On July 1, 2010, www.HealthCare.gov launched to help individuals and small businesses identify insurance options in their state.  In addition to helping individuals navigate private insurance options in the individual and small group markets, the website assists users in determining if they are eligible for various public programs, including existing high risk pools, the Pre-Existing Condition Insurance Plan created by the Affordable Care Act, Medicaid, Medicare, and the Children’s Health Insurance Program (CHIP). [HHS, undated] 

As of October 1, 2010, the HealthCare.gov Insurance Finder included price estimates for more than 4,000 private health plans offered by more than 200 insurers, in all 50 states and the District of Columbia. [HealthCare.gov, 10/1/10]  Recently, HHS announced that the Insurance Finder now includes information on more than 8,500 insurance plans offered by nearly 300 insurance companies. [HealthCare.gov, 11/15/10; 11/15/10]  This unprecedented transparency is a result of the Affordable Care Act’s requirement that consumers have easy access to important insurance pricing information, like premium rates and cost-sharing requirements, to help consumers compare health insurance options.  

Keeping the Health Plan You Like

The Affordable Care Act greatly enhances health insurance consumer protections and benefits while ensuring that if you like your current plan, you can keep it.  TheAffordable Care Act protects the ability of individuals and businesses to keep their current plan, provides important consumer protections to put Americans, not insurance companies, in control of their health care, and provides stability and flexibility to insurers and businesses that offer insurance coverage during the transition to a more competitive insurance marketplace in 2014. 

Earlier this year, the Administration issued a new regulation for “grandfathered” health plans, which are plans in place when health reform was signed into law on March 23, 2010. [Federal Register, 6/17/10]  The rule requires all health plans to provide certain, important consumer benefits and protections and allows plans in existence on March 23, 2010, to make routine changes without losing their grandfather status. [HHS, accessed 6/17/10]  Plans that make changes to significantly decrease consumer protections – such as by cutting or reducing benefits, raising co-insurance requirements, significantly raising co-payments or deductibles, significantly reducing employer contributions, or adding or tightening an annual limit – will lose their grandfather status, and individuals in those plans will gain consumer protections in a new plan.  The rule strikes a balance between protecting consumers and allowing plans and employers the flexibility they need to innovate and contain costs. 

Under the regulation as originally proposed, one of the ways an employer-sponsored plan could lose its grandfather status was if it switched to a different insurance company.  While the original regulation allowed self-funded plans to change third-party administrators without losing their grandfather status, the same flexibility was not available to fully-insured plans.  In response to comments, the Administration recently issued an amendment to the regulation, clarifying that all group health plans may switch insurance companies to shop for the same coverage at a lower cost without losing their grandfather status. [Federal Register, 11/17/10; HHS, accessed 11/18/10]

Improving Access to Care

The Affordable Care Act creates an expanded and sustained national investment in community health centers by providing $11 billion over five years to these critical health care providers. [P.L. 111-148; P.L. 111-152]  Last year, health centers provided quality health care to nearly 19 million Americans, nearly 40 percent of them uninsured. [Health Resources and Services Administration, accessed 11/22/10]  The Affordable Care Act’s investment in community health centers will allow them to nearly double the number of patients they serve.  By providing primary care and focusing on preventive services, health centers estimate they save our health care system $9.9 billion to $17.6 billion each year. [National Association of Community Health Centers, accessed 8/23/10]

Recently, HHS announced the awarding of nearly $8 million to existing Community Health Center Cooperative Agreements, which support the development and operation of health centers. [HHS, 11/19/10]  Cooperative Agreement organizations provide training and technical assistance funds to support health centers’ core functions, such as community development, expansion planning, patient-centered medical home development, meaningful use health information technology adoption, and workforce development.  

Supporting Health Care Providers in Underserved Areas

The Affordable Care Act makes improvements to and investments in the National Health Service Corps, which provides scholarships and loan repayment to health care providers in exchange for a commitment to serve in a Health Professional Shortage Areas. [P.L. 111-148; P.L. 111-152; HHS accessed 11/22/10]  By extending and increasing authorization of appropriations, providing enhanced funding, increasing the loan repayment amount, and increasing participation through greater flexibility such as allowing for half-time service and for teaching time to satisfy a portion of the Corps service commitment, the Affordable Care Act improves the NHSC program and helps to ensure that Americans living in medically underserved areas have better access to the quality health care they deserve.

Recently, HHS announced a new application cycle of the NHSC Loan Repayment Program, which includes a $290 million investment from the Affordable Care Act. [HHS, 11/22/10]    Primary care medical, dental, and mental health clinicians may apply for $60,000 in student loan repayment in exchange for two years of service in a medically underserved area.  Application information is available from HHS. [HHS, accessed 11/22/10]  The NHSC Loan Repayment Program addresses the challenges of a primary care workforce shortage, reduced access to care in underserved areas, and the increasing debt burden on new health care providers.

Encouraging Innovation to Improve Care, Reduce Costs

The Affordable Care Act establishes a Center for Medicare and Medicaid Innovation (Innovation Center) within the Centers for Medicare & Medicaid Services (CMS) to research, develop, test, and expand innovative payment and delivery arrangements to improve the quality and reduce the cost of care provided to patients in each program. [P.L. 111-148; P.L. 111-152]  The Affordable Care Act provides dedicated funding for the Innovation Center to allow for testing of models that require benefits not currently covered by Medicare, and successful models may be expanded nationally.

On November 16, 2010, CMS formally established the Innovation Center and launched the first three demonstration projects within the Innovation Center to strengthen primary care and better coordinate care through “health homes” and “medical homes.” [CMS, 11/16/10]  The Innovation Center will drive advancements to improve health care quality and health outcomes while reducing costs by testing new models of care and consulting with stakeholders across health care sectors for input on operations and to build partnerships.  The first three demonstrations include expansion of the Multi-Payer Advanced Primary Care Practice Demonstration, a new Federally Qualified Health Center Advanced Primary Care Practice Demonstration, and a new Medicaid Health Home State Plan Option.  In addition, a future demonstration project will examine programs that integrate care for individuals who are eligible for both Medicare and Medicaid.  A fact sheet on the Innovation Center and the demonstration projects is available from CMS. [CMS, 11/16/10]   

Establishing the CLASS Independence Advisory Council

The Affordable Care Act establishes the Community Living Assistance Services and Supports (CLASS) program, to provide a lifetime cash benefit that offers people with disabilities some protection against the costs of paying for long term services and supports, and helps them remain in their homes and communities. [P.L. 111-148; P.L. 111-152]  CLASS is a voluntary, self-funded, insurance program with enrollment for people who are currently employed.  Individuals qualify to receive benefits when they need help with certain activities of daily living, have paid premiums for five years, and have worked at least three of those five years.  Beneficiaries receive a lifetime cash benefit based on the degree of impairment, which is expected to average roughly $75 a day or more than $27,000 per year, and may be used to maintain independence at home or in the community, and should be sufficient to cover typical costs of home care services or adult day care.  Benefits also can be used to offset the costs of assistive living and nursing home care.

On November 16, 2010, the Department of Health and Human Services announced the establishment of the CLASS Independence Advisory Council (Advisory Council).  Provided for under the Affordable Care Act, the Advisory Council will consist of not more than 15 members appointed by the President to advise the Secretary of Health and Human Services on general policy matters relating to the CLASS program.  Advisory Council members will serve three-year terms and may serve for no more than two consecutive terms. [Federal Register, 11/16/10]  Nominations to the Advisory Council may be submitted to HHS by December 1, 2010.

Guidance on Establishing Health Insurance Exchanges

Starting in 2014, the Affordable Care Act creates state-based Health Insurance Exchanges where individuals and small businesses can compare and purchase health insurance online at competitive prices and access the same coverage options that Members of Congress will have. [P.L. 111-148; P.L. 111-152]  Exchanges will offer consumers a choice of quality, affordable health insurance plans presented in a consumer-friendly format to ensure individuals and families can choose the right plan for their needs.  To make coverage even more affordable, premium and cost-sharing tax credits will also be available through the Exchanges to help middle-class families afford coverage. 

Recently, HHS issued initial guidance to assist states and Territories with planning to establish an Exchange. [HHS, accessed 11/18/10]  In a cover letter accompanying the guidance, Secretary Sebelius wrote that the guidance “provides transparency in our efforts and offers states interested in acting in the coming year input into the structure and function of Exchanges.” [HHS, 11/18/10]  The department indicates regulations are forthcoming in 2011.  The guidance focuses on principles and priorities, statutory requirements, clarifications and policy guidance, and federal support for the establishment of state-based Exchanges.

Additional Information

The Democratic Policy Committee has released 15 previous updates on health reform implementation, available on the DPC website here.  In addition, DPC maintains a centralized listing of health reform implementation resources which is frequently updated and is available here.

The following section-by-section analysis of S. 510 reflects the legislation, as reported to the Senate floor by the Health, Education, Labor, and Pensions Committee.

The FDA Food Safety Modernization Act would help to address serious deficiencies in our nation’s food safety system.  As the legislation was developed, questions were raised about the applicability of certain provisions on the nation’s agricultural producers.  The following Fact Sheet details both the sections of the legislation that have no impact on agricultural producers and those that may potentially  affect their operations.

No Impact on Agricultural Producers

The following information identifies each section of the FDA Food Safety Modernization Act which may be of interest to the nation’s agricultural producers and explains how those provisions would not have an impact on their operations.

Section 101–record inspection.  This section would give the Secretary of Health and Human Services (HHS) the authority to access records if they have a reasonable belief that a related article of food is adulterated and presents a threat of serious adverse health consequences or death to humans or animals.  The FDA Food Safety Modernization Act would exclude farms and restaurants from the new authority given to the FDA to access food facility records. 

Section 102–registration.  This section would expand current registration requirements for food facilities and requires that those registered facilities renew their registration biennially.  The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 first established the requirement that food facilities register with the FDA.  This law already excludes farms from registration requirements and the FDA Food Safety Modernization Act would maintain that exclusion.

Section 103–hazard analysis.  The section would require all registered domestic facilities to identify known or reasonably foreseeable hazards and implement preventive controls to significantly minimize or prevent those identified hazards.  The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 excluded farms from the definition of a “facility” and the FDA Food Safety Modernization Act would maintain that exclusion for farms in that definition.

Section 106–intentional adulteration.  This section would require the FDA, working with the Departments of Agriculture (USDA) and Homeland Security (DHS), to conduct vulnerability assessments and issue regulations to protect against the intentional adulteration of food.  The legislation excludes farms, with the exception of dairy farms, from this provision of the FDA Food Safety Modernization Act.

Section 107–fees.  This section would allow the FDA to assess feesfor compliance failures at facilities and for participation in a voluntary qualified importer program.  The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 excluded farms from the definition of a “facility” and the FDA Food Safety Modernization Act would maintain that exclusion for farms in that definition.

Section 111–sanitary transportation.  This section would require the FDA to establish regulations on the sanitary transportation of food within one year, as currently required by the Federal Food, Drug, and Cosmetic Act.  These future regulations only apply to shippers, carriers by motor vehicle or rail vehicle, receivers, and other persons engaged in the transportation of food.

Section 201–targeting inspection resources.  This section would require the FDA to allocate food inspection resources according to the risk profile of the facility and other important criteria.  The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 excluded farms from the definition of a “facility” and the FDA Food Safety Modernization Act would maintain that exclusion for farms in that definition.

Section 403–jurisdiction.  This section states that no changes made by this legislation or to an amendment made by this legislation should be construed to alter the relationship between the Secretary of Agriculture and Secretary of Health and Human Services.  Additionally, this section reiterates that no changes made by this legislation or to an amendment made by this legislation would “impede, minimize, or affect the authority of the Secretary of Agriculture to prevent, control, or mitigate a plant or animal health emergency, or a food emergency or food-borne illness outbreak involving products regulated under the Federal Meat Inspection Act, the Poultry Products Inspection Act, the Egg Products Inspection Act, or agreements regarding voluntary inspection under the Agricultural Marketing Act.”

Impact on Agricultural Producers

The following information identifies each section of the FDA Food Safety Modernization Act which may be of interest to the nation’s agricultural producers and explains how those provisions might have an impact on their operations.

Section 105–produce safety.  This section would require the Secretaries of Agriculture and Health and Human Services to set commodity-specific standards for produce within one year of enactment of the legislation.  The legislation requires that these proposed standards provide flexibility to agricultural producers by considering the types of businesses that sell produce directly to consumers, naturally occurring hazards, terrorism, environmental protections, conflicts with organic programs, and additional types of agricultural criteria.  The legislation would also allow states to apply for variances from the standards due to local growing conditions.  

This provision of the FDA Food Safety Modernization Act would codify the ongoing work by the FDA and USDA to develop safety standards for fresh produce.  The codification of produce safety standards would ensure that the future standards take into consideration sustainable agriculture and conservation practices; accommodate concerns about the scale of the operations; prevent impacts to organic agriculture; and provide flexibility to direct-to-consumer operations.  Today, the nation has issued only voluntary guidance to industry about produce safety standards.

Section 204–trace-back and record keeping.  This section would require the FDA, in coordination with the produce industry, to establish three pilot projects to test and evaluate new methods for rapidly and effectively tracking and tracing fruits and vegetables.  Upon completion of the pilot projects, the legislation would require the establishment of standards for the types of information, information format, and timeframes for submission of food records to aid the Secretary of Health and Human Services in rapidly performing trace back activities in the event of a food-borne illness outbreak from a raw agricultural commodity.

This provision of the FDA Food Safety Modernization Act would not place any additional recordkeeping requirements on agricultural producers other than distribution records that are kept in the normal course of business.   However, agricultural producers would have to be prepared to submit those records kept in the normal course of business to the Secretary. 

Section 209–decontamination and disposal.  This section would require the Environmental Protection Agency, in coordination with the Departments of Agriculture, Homeland Security, and Health and Human Services to develop decontamination and disposal standards and protocols to help state and local governments prepare for a food or agriculture emergency.  This provision of the FDA Food Safety Modernization Act would impact agricultural producers only if those standards and protocols were used by the applicable state, local, or tribal governments.

Today, women make up half of the workforce yet earn only 77 cents for every dollar paid to men.  This wage disparity places all women at a significant economic disadvantage and harms American families.  The pay gap exists across all education levels and is exacerbated by race and ethnicity.  There is no state in which women have gained economic parity with men.  For American families touched by the Recession, the burden of wage discrimination weighs heavily because women’s economic contributions are even more important to maintain economic stability. 

The Paycheck Fairness Act, S. 3772, reflects a commitment to promote equal pay for women by giving women the legal tools to effectively close the wage gap and fight pay discrimination.  The legislation would update and strengthen the Equal Pay Act of 1963, which provides protection to women who have been discriminated against in the workplace by making it illegal for employers to pay unequal wages to men and women performing equal work.  The Paycheck Fairness Act would improve the protections in the Equal Pay Act by providing more effective remedies to women currently available in other types of employment discrimination cases. 

The Paycheck Fairness Act would:

·         Provide women additional legal safeguards, including compensatory or punitive damages;

·         Clarify appropriate reasons for differences in pay by requiring employers to have a legitimate business reason for paying women less than their male counterparts;

·         Prohibit employers from retaliating against employees who share information about their salary with co-workers; and

·         Establish a negotiation skills training program for girls and women. 

The legislation would build on protections in the Lilly Ledbetter Act passed by the Senate in 2009 and signed into law by President Obama (P.L. 111-2).  The Lilly Ledbetter Act restored the ability of women and others to access the legal system  when they are victims of pay discrimination on the basis of sex, race, religion, age, or disability.  If passed, the Paycheck Fairness Act would help women achieve greater pay equity in the workplace by providing strengthened remedies for instances of pay discrimination.

On September 13, Senator Reid introduced S. 3772.  Senator Reid filed cloture on the bill on September 29.  A cloture vote on S. 3772 is expected on November 17, 2010. 

Major Provisions

Enhanced Enforcement of Equal Pay Requirements

The legislation would close loopholes in the Equal Pay Act by revising remedies for and enforcement of prohibitions against sex discrimination in the payment of wages.  Specifically, women would be able to sue for compensatory and punitive damages like plaintiffs in other wage discrimination cases.  The legislation would extend class action protections to women.

The measure would clarify appropriate defenses to a sex discrimination case.   Employers would be required to identify a business-related reason for maintaining a pay disparity among employees performing equal work.  The employer would also need to show that they could not accomplish their business need by less discriminatory alternate means.

The Act permits salary comparisons to be made between employees in offices in the same county or similar political subdivision of a state.

The legislation prohibits employers from retaliating against employees who share information about their wages.  This protection will allow women to determine whether their salary is fair and promote transparency. 

Collection of Pay Information

The legislation would require the Equal Employment Opportunity Commission to collect employee pay information to effectively enforce laws prohibiting pay discrimination.   The Department of Labor would continue to collect information on women in the workforce and use this information to provide the public with information on wage discrimination. 

Other Provisions

The legislation would permit the Department of Labor to establish a negotiation skills training program for girls and women.   The grants would be available to organizations and government agencies to sponsor negotiation skills programs.  These programs would aim to help girls and women obtain higher salaries equal to those of their male counterparts through enhanced negotiation skills.

The Department of Labor would also be required to conduct studies and provide information to the public about ways to eliminate pay disparities between men and women.   The legislation would require the Department of Labor to convene a national summit to discuss wage disparity. 

The Act would require the Department of Labor to educate small businesses about the law and provide assistance to ensure compliance.   

Legislative History

Senator Reid introduced S. 3772, the Paycheck Fairness Act, on September 13, 2010.  The Paycheck Fairness Act has 33 cosponsors.  The House of Representatives passed similar legislation, H.R. 12, in January 2009 with a vote of 256 – 163. 

Senator Reid filed cloture on the motion to proceed to S. 3772 on September 29, 2010.  The vote on cloture on the motion to proceed to S. 3772 is scheduled on November 17, 2010.

Expected Amendments

The DPC will circulate information about possible amendments as it becomes available.

Administration Position

On November 16, 2010, the Administration issued its Statement of Administration Policy on the Paycheck Fairness Act:

“The Administration strongly supports Senate passage of S. 3772, the Paycheck Fairness Act.  The persistent gap between men’s and women’s wages demonstrates the need for legislative change.  This bill would address this gap by enhancing enforcement of equal pay laws. Specifically, it would prohibit retaliation against employees who ask about or discuss wage information, and it would provide more effective remedies for women subjected to discriminatory pay practices.  S. 3772 would strengthen the Equal Pay Act by closing judicially created loopholes in the law and bringing its class action rules into conformity with the Federal Rules of Civil Procedure.  S. 3772 also requires the Equal Employment Opportunity Commission to collect pay data to better enforce laws prohibiting pay discrimination.”

Resources

Democratic Policy Committee, “Pay Equity Would Boost the Economic Security of American Families,” available here.  

Congressional Research Service, “Pay Equity Legislation,” available here. 

The following summary of S. 510 reflects the manager’s amendment, as released
by the Health, Education, Labor, and Pensions Committee on August 12, 2010.

Summary and Background

During the week of November 15th, the Senate may consider S. 510, the FDA Food Safety Modernization Act.  The Senate’s consideration of this legislation has been preceded by over a year of bipartisan work from, among others, Senators Durbin, Harkin,Dodd, Alexander, Burr, Gregg, and the late Senator Kennedy. 

This bipartisan legislation would overhaul our current food safety system, which has failed to protect far too many Americans and will continue to fail them unless Congress improves the nation’s food safety laws.  The legislation would address a number of the weaknesses of the current system by, among other provisions:

• Giving the Food and Drug Administration (FDA) the authority to recall foods when firms fail to voluntarily recall products on their own, when a food is adulterated or contains undeclared allergens and will cause serious adverse health consequences or death to humans or animals;

• Requiring the Secretary of Health and Human Services (HHS), within three years of enactment, to publish a notice of proposed rulemaking that would establish a national trace-back system;

• Requiring food importers to perform food safety supplier verification activities and prohibit the importation of food by an importer if they do not undertake food safety supplier verification activities;

• Expands the nation’s current food facility registration laws requiring all food facilities (excluding farms) to register with the FDA biennially and gives the FDA the authority and the assurance that it will be permitted to inspect registered facilities as permitted; and

• Requires all registered domestic facilities (excluding farms) to identify known or reasonably foreseeable hazards and implement preventive controls to significantly minimize or prevent those identified hazards.

Major Provisions

Title I–Improving Capacity to Prevent Food Safety Problems

Section 101–inspection of records.  The FDA Food Safety Modernization Act would give the FDA expanded access to food facility records (excluding farms and restaurants) if:

• The Secretary of HHS has a reasonable probability that a food or a related article of food will cause serious adverse health consequences or death to humans or animals.

Section 102–registration of food facilities.  The FDA Food Safety Modernization Act would expand current registration requirements for food facilities by:

• Requiring all food facilities to register and renew their registration biennially;

• Granting FDA the authority to adjust food registration categories; and
• Giving the Secretary of HHS the authority to suspend facility registration if there is a reasonable probability that food from the facility will cause serious adverse health consequences or death to humans or animals.

Section 103–hazard analysis and risk-based preventive controls.  The FDA Food Safety Modernization Act would require:

• All registered domestic facilities to identify known or reasonably foreseeable hazards and implement preventive controls to significantly minimize or prevent those identified hazards; and

• Each owner or operator to have a written plan describing their hazard analysis and preventative controls, which shall be made available to FDA upon request. Failure to comply with this section is a prohibited act under the Federal Food, Drug, and Cosmetic Act.

Section 104–performance standards.  The FDA Food Safety Modernization Act would require the FDA, not less than every two years, to:

• Determine the most significant food-borne contaminants; and

• When appropriate, issue science-based guidance documents, action levels, and/or regulations in order to prevent and reduce the risk of serious illness or death, adulteration, or the spread of communicable disease.

Section 105–standards for produce safety.  The FDA Food Safety Modernization Act would give the FDA authority to:

• Set commodity-specific standards for the safety of fresh produce.  The states may apply for variances from the standards due to local growing conditions.

Section 106–intentional adulteration.  The FDA Food Safety Modernization Act would require the FDA, working with the Department of Homeland Security (DHS) and the Department of Agriculture (USDA), to:

• Conduct vulnerability assessments and issue regulations to protect against the intentional adulteration of food.

Section 107–authority to collect fees.  The FDA Food Safety Modernization Act would:

• Allow the FDA to assess feesfor compliance failures (recalls and re-inspections) and participate in a voluntary qualified importer program.

The legislation would also require appropriated funding to keep pace in order for fees to be collected.

Section 108–national agriculture and food defense strategy.  The FDA Food Safety Modernization Act would require HHS and USDA, in consultations with DHS,

to:

• Develop a National Agriculture and Food Defense Strategy and research agenda, including specific emergency preparedness, detection, response, and recovery goals.

Section 109–food and agriculture coordinating councils.  The FDA Food Safety Modernization Act would require DHS, in consultation with HHS and USDA, to:

• Report to Congress on the activities of the government and private sector coordinating councils for agriculture and food defense, which are designed to improve information sharing between government and private sector partners in protecting the food system.

Section 110–building domestic food safety capacity.  The FDA Food Safety Modernization Act requires a series of reports and actions intended to focus FDA’s attention on several challenges, including:

• Information technology;

• Data sharing;

• Research; and

• Government capacity.

Section 111–sanitary transportation of food.  The FDA Food Safety Modernization Act would require the FDA to:

• Promulgate regulations on the sanitary transportation of food pursuant to section 416(b) of the Federal Food, Drug, and Cosmetic Act.

Section 112–food allergy and anaphylaxis management in children.  The FDA Food Safety Modernization Act directs HHS, in consultation with the Department of Education, to develop voluntary food allergy management guidelines to manage the risk of food allergy and anaphylaxis in schools or early childhood education programs.  The legislation would also provide for non-renewable food allergy management incentive grants for up to two years to assist local educational agencies (LEAs) with adoption and implementation of the voluntary food allergy management guidelines.

Section 113–new dietary ingredients.  The FDA Food Safety Modernization Act would require the FDA to:

• Submit information to DEA if it denies a New Dietary Ingredient notification on the grounds that the dietary ingredient may contain an illegal steroid, and FDA must publish a guidance that clarifies regulation of new dietary ingredients in 180 days.

Section 114–post harvest processing of raw oysters.  The FDA Food Safety Modernization Act would require the FDA to:

• Conduct public health and cost assessments before issuing any guidance or rulemaking related to post harvest processing of raw oysters.

Section 115–port shopping.  The FDA Food Safety Modernization Act would require that until FDA publishes its final rule on the marking of food imports that are refused entry into the United States (as required by the Bioterrorism Act) that the FDA:

• Notify DHS of all instances in which it refuses to admit a food into the United States so that DHS, acting through Customs and Border Protection, can notify all ports in the United States and thereby prevent food that is refused in one port from being admitted into the country by another.

Section 116–alcohol-related facilities.  The FDA Food Safety Modernization Act would require the FDA to:

• Exempt facilities that manufacture alcoholic beverages from several sections of the bill, including the preventive control requirements in section 418.

Title II: Improving Capacity to Prevent Food Safety Problems

Section 201–targeting inspection resources.  The FDA Food Safety Modernization Act would require the FDA to:

• Allocate food inspection resources according to the risk profile of the facility and other important criteria;

• Increase the frequency of inspections at all facilities, with high-risk facilities inspected annually and other facilities inspected at least once every four years; and

• Submit an annual report to Congress regarding the frequency of, and costs associated with, inspections.

Section 202–laboratory accreditation.  The FDA Food Safety and Modernization Act woulddirect the FDA to:

• Recognize laboratory accreditation bodies that accredit food testing laboratories and to establish a publicly available registry of those bodies;

• Require all laboratory testing done for FDA regulatory purposes to be conducted by either an FDA lab or a lab accredited by an FDA-recognized accreditation body; and
• Require a report to Congress on the implementation of the national laboratory Food Emergency Response Network to support early detection, rapid response, and management of food-related emergencies.

Section 203–integrated consortium of laboratory networks.  The FDA Food Safety and Modernization Act would require DHS to work with HHS, Department of Agriculture (USDA), and the Environmental Protection Agency (EPA) to effectively integrate laboratory networks and other relevant data sources to optimize national preparedness by:

• Quickly sharing information; 

• Conducting analyses; and

• Alerting responders.

Section 204–enhancing traceback and recordkeeping.  The FDA Food Safety and Modernization Act would require the FDA, in coordination with the produce industry, to:

• Establish pilot projects to test and evaluate new methods for rapidly and effectively tracking and tracing fruits and vegetables;

• Ensure that methods are appropriate for small businesses; and
• After completion of the pilot project, to establish standards for the types of information, information format, and timeframes for submission of food records to aid the Secretary in rapidly performing trace back activities in the event of a food-borne illness outbreak.

Section 205–pilot project to enhance traceback and recordkeeping with respect to processed food.  The FDA Food Safety and Modernization Act would require the Secretary of HHS to establish a pilot project to:

• Explore and evaluate methods for rapidly and effectively tracking and tracing processed food, so that, if an outbreak which involves processed food occurs, the source of the outbreak and recipients of the contaminated food may be quickly identified. 

Section 206–surveillance.  The FDA Food Safety and Modernization Act would:

• Require the Secretary to enhance food-borne illness surveillance systems to improve the collection, analysis, reporting, and usefulness of data on food-borne illnesses;

• Establish a diverse working group of experts and stakeholders from federal, state, and local food safety and health agencies, the food industry, consumer organizations, and academia to provide recommendations on an ongoing basis regarding the improvement of food-borne illness surveillance; and
• Require the Secretary to develop and implement strategies to leverage and enhance the food safety and defense capacities of state and local agencies.

Section 207–mandatory recall authority.  The FDA Food Safety and Modernization Act would give the FDA Commissioner the authority to:

• Order food recalls when firms fail to voluntarily recall products on their own, or when a food is adulterated or contains undeclared allergens and will cause serious adverse health consequences or death to humans or animals.

Section 208–administrative detention.  The FDA Food Safety and Modernization Act would allow the FDA to:

• Use administrative detention when the FDA has reason to believe that a food is adulterated or misbranded.

Section 209–decontamination and disposal standards and plans.  The FDA Food Safety and Modernization Act would require the EPA, in coordination with HHS, DHS, and USDA, to:

• Develop decontamination and disposal standards and protocols to help state and local governments prepare for a food or agriculture emergency.

Section 210–training of state, local, territorial and tribal food safety officials.  The FDA Food Safety and Modernization Act would require the Secretary to:

• Administer training and education programs for State, local, territorial, and tribal food safety official employees. 

This training relates to the regulatory responsibilities and other policies established by this legislation.

Section 211–grants to enhance food safety.  The FDA Food Safety and Modernization Act would authorize the Department of Health and Human Services to:

• Make grants to states, localities, and Indian tribes to improve local food safety programs;

• Improve state laboratories; and
• Train state officials to conduct food safety inspections.

Title III: Improving the Safety of Imported Food

Section 301–foreign supplier verification program.  The FDA Food Safety and Modernization Act would require importers to:

• Perform food safety supplier verification activities to mitigate risks in imported foods; and

• Prohibit the importation of food by an importer if they do not undertake food safety supplier verification activities.

Importers of seafood, juice, and low-acid canned food that comply with existing regulations would be deemed to be in compliance with this section.

Section 302–voluntary qualified importer program.  The FDA Food Safety and Modernization Act would allow importers to qualify for expedited review and importation of food if:

• They go above and beyond the minimum standards to ensure the safety of imported food.

Section 303–authority to require import certifications for food.  The FDA Food Safety and Modernization Act would allow the FDA to:

• Require certification or other assurance of safety for high-risk food imports.

The legislation also includes a provision which states that FDA may refuse admission of a food import lacking required certification.

Section 304–prior notice of imported food shipments.  The FDA Food Safety and Modernization Act would require:

• HHS to issue an interim final rule that would require prior notice for an imported food to include the name of any country that refused entry of the food.

Section 305–building capacity of foreign governments with respect to food.  The FDA Food Safety and Modernization Act would require the FDA to:

• Develop a comprehensive plan to help expand the technical, scientific, and regulatory capacity of foreign governments and their respective food industries.

Section 306–inspection of foreign food facilities.  The FDA Food Safety and Modernization Act would allow the FDA to:

• Enter into agreements and arrangements with foreign governments to facilitate the inspection of foreign facilities; and

• Refuse entry of food from a foreign facility or country that fails to permit inspection by the United States.

Section 307–accreditation of third-party auditors and audit agents.  The FDA Food Safety and Modernization Act would direct the FDA to:

• Recognize accreditation bodies to accredit third parties to certify that foreign food facilities are in compliance with U.S. food safety standards; and

• Use third party certification for participation in the Voluntary Qualified Importer Program or to fulfill import certification requirements established by the FDA.

Section 308–foreign offices of the FDA.  The FDA Food Safety and Modernization Act would direct the FDA to:

• Establish offices in at least five foreign nationsto improve the agency’s presence overseas and positively impact the safety of FDA-regulated products.

Section 309–smuggled food.  The FDA Food Safety and Modernization Act would require the Secretary of HHS to consult with the Secretary of DHS, Commissioner of Customs and Border Protection, and the Assistant Secretary for Immigration and Customs Enforcement to:

• Develop and implement a strategy to better identify smuggled food and prevent its entry into the United States.  

Title IV: Miscellaneous Provisions

Section 401–funding for food safety.  The FDA Food Safety and Modernization Act would:

• Increase funding for FDA food safety functions; and

• Direct the FDA to incrementally increase field staff by 2014.

Section 402–whistleblower protections.  The FDA Food Safety and Modernization Act would prohibit retaliation by manufacturers, processors, packagers, transporters, distributers, receivers, holders, or importers against their employees who have, in relation to potential or real food safety violations, provided:

• Information to officials;

• Assisted or testified in violation proceedings; or
• Refused to participate in any work-related activity that they believe may be a food safety violation.

Section 403–jurisdiction.  The FDA Food Safety and Modernization Act would clarify that:

• Amendments made by this bill do not change jurisdiction between FDA and USDA; and

• FDA retains its current food safety authority under the FDCA and the Public Health Service Act.

Section 404–compliance with international agreements.  The FDA Food Safety and Modernization Act stipulates that:

• Nothing in the act is to be construed in a manner that is inconsistent with agreements with the World Trade Organization or other international treaties or agreements.

Legislative History

On March 3, 2009, S. 510 was introduced by Senator Durbin and the bill was referred to the Health, Education, Labor, and Pensions Committee.  When introduced, the bill enjoyed bipartisan support and six original cosponsors: Senators Dodd, Kennedy, Alexander, Burr, Gregg, and Isakson.

On November 18, 2009, the Health, Education, Labor, and Pensions Committee approved the legislation by voice vote. 

On December 18, 2009, the Health, Education, Labor, and Pensions Committee reported the legislation to the Senate floor with an amendment.  When placed on the Senate calendar, the legislation had garnered further bipartisan support with nine additional cosponsors: Senators Bingaman, Burris, Gillibrand, Harkin, Klobuchar, Udall (NM), Chambliss, Enzi, and Hatch.

The Health, Education, Labor, and Pensions Committee released a Manager’s Amendment to S. 510 on August 12, 2010. 

Expected Amendments

The DPC will distribute information on amendments as it becomes available to staff listservs.

Administration Position

At the time of publication, the Administration had not released a Statement of Administration Policy on S. 510.

·         Reducing Costs for Medicare Beneficiaries

·         Support for Families of Children with Special Health Care Needs

·         Improving Access to Care

·         How Health Reform Helps Your State

·         Increasing Options for Americans with Pre-Existing Conditions

·         Helping 700 More Businesses Help Early Retirees

·         Investments to Improve Information Technology

·         Encouraging Biomedical Research

·         Additional Information

Previous updates and other information are available from the DPC. [DPC] 

Reducing Costs for Medicare Beneficiaries

Senate Democrats are committed to protecting and strengthening Medicare for America’s seniors.  Medicare is a sacred trust with Americans and the Affordable Care Act ensures that trust is preserved.  The Affordable Care Act increases Medicare benefits and strengthens the program’s sustainability, extending Medicare solvency by twelve years. [Trustees Report, 8/5/10; CMS Office of the Actuary, 4/22/10] 

Recently, the Department of Health and Human Services (HHS) studied how the changes to Medicare made by the Affordable Care Act will save Medicare beneficiaries money. [HHS, accessed 11/11/10]  HHS found that the average Medicare beneficiaries enrolled in traditional Medicare will save approximately $3,500 in out-of-pockets costs over the next ten years, and that beneficiaries with higher prescription drug costs could save as much as $12,300 during that time. 

Support for Families of Children with Special Health Care Needs

The Department of Health and Human Services recently announced the availability of $3.9 million to continue support for Family-to-Family Health Information Centers. [HHS, 10/26/10]  Section 5507 of the Affordable Care Act extended funding for these non-profit organizations through Fiscal Year 2012. [P.L. 111-148; P.L. 111-152]  Family-to-Family Health Information Centers are run by families and for families with children who have special health needs, providing information, education, training and support.  This funding will continue support for centers in 40 states and the District of Columbia.  Centers in the remaining ten states are in the second year of three-year funding and are ineligible for this opportunity.  Grant applications are due December 15, 2010, and more information is available at Grants.gov (CFDA 93.504).

Improving Access to Care

The Affordable Care Act creates an expanded and sustained national investment in community health centers by providing $11 billion over five years to these critical health care providers. [P.L. 111-148; P.L. 111-152]  The country’s 1,250 community health centers provide quality health care to 20 million Americans without regard to a patient’s ability to pay or health insurance coverage. [National Association of Community Health Centers, accessed 8/23/10]  The Affordable Care Act’s investment in community health centers will allow them to nearly double the number of patients they serve.  By providing primary care and focusing on preventive services, health centers estimate they save our health care system $9.9 billion – $17.6 billion each year.

Recently, HHS announced the availability of $335 million to expand access to primary and preventive care at existing community health centers nationwide under the Expanded Service (ES) initiative. [HHS, 10/26/10]  In applying for these funds, existing health centers must demonstrate how the funding will be used to expand medical capacity and services to underserved populations.  Grant applications are due January 6, 2011, and application information is available from the Health Resources and Services Administration. [HRSA, accessed 11/10/10.   

How Health Reform Helps Your State

Recently, HHS updated HealthCare.gov with new information on how the Affordable Care Act helps each state. [HealthCare.gov, accessed 11/10/10]  State-by-state fact sheets are also available from the DPC. [DPC, 6/22/10]

Increasing Options for Americans with Pre-Existing Conditions

For far too long, Americans with pre-existing conditions have struggled to obtain the health insurance and health care they need.  For plan or policy years starting after September 23, 2010, the Affordable Care Act prohibits insurers from discriminating against children with pre-existing conditions, and starting in 2014, the new law protects all Americans from this discrimination. [P.L. 111-148; P.L. 111-152]  But these Americans need help now.  As a bridge to a reformed health insurance marketplace, the Affordable Care Act creates a special high risk insurance pool, called the Pre-Existing Condition Insurance Plan (PCIP), for uninsured Americans who have been denied health insurance because of a pre-existing condition.  More information on the PCIP, including application information, is available at PCIP.gov.

Recently, HHS announced enhanced plan options for PCIP enrollees in the 23 states and the District of Columbia where the program is federally administered through the Office of Personnel Management. [HealthCare.gov, accessed 11/11/10]  This year, enrollees were offered one plan option.  In 2011, enrollees will choose from three plan options, a Standard Plan, an Extended Plan, and a Health Savings Account Option.  Premiums and benefits vary between plans, and plans will be available at child-only rates for enrollees aged 0-18. 

Helping 700 More Businesses Help Early Retirees

The Affordable Care Act creates a $5 billion Early Retiree Reinsurance Program to support employer health plans that provide coverage to retirees who are not yet eligible for Medicare, helping protect access to coverage while reducing costs for employers and retirees. [P.L. 111-148; P.L. 111-152]  HHS recently announced that another 700 employers were accepted into the program, bringing the total number of participating employers to nearly 3,600. [HHS, 10/28/10]  Participating employers come from all 50 states and the District of Columbia, representing large and small businesses, state and local governments, educational institutions, non-profits, and unions.  A fact sheet explaining the program and a list of all participating employers in each state is available at HealthCare.gov and the list will be updated each week as new employers join the program.  Applications are still being accepted, and more information on the Early Retiree Reinsurance Programs, including claims reimbursement information, is available at ERRP.gov. 

The Early Retiree Reinsurance Program is another bridge to the Health Insurance Exchanges and reformed health insurance markets effective in 2014, which will make it easier for earlier retirees to access affordable health insurance.  Skyrocketing health care costs have made it difficult for employers to continue providing health benefits for employees and retirees, and this temporary program will provide financial assistance until 2014.  Earlier this year, a survey found that 76 percent of large employers that offer retiree benefits planned to pursue participation in the program, and that the average federal reimbursement for each early retiree will represent between 25 and 35 percent of each early retiree’s health care costs. [Hewitt Associates, 5/25/10]  

Investments to Improve Information Technology

Starting in 2014, the Affordable Care Act creates state-based Health Insurance Exchanges where individuals and small businesses can compare and purchase health insurance online at competitive prices and access the same coverage options that Members of Congress will have. [P.L. 111-148; P.L. 111-152]  Exchanges will offer consumers a choice of quality, affordable health insurance plans presented in a consumer-friendly format to ensure individuals and families can choose the right plan for their needs.  To make coverage even more affordable, premium and cost-sharing tax credits will also be available through the Exchanges to help middle-class families afford coverage.  A strong, consumer-friendly information technology (IT) infrastructure will be critical to the success of these new insurance marketplaces.

States are already working to design and implement the Exchanges, and HHS recently announced new, competitive “Early Innovator” grants for states that lead the way in developing the technologies and models needed for determining insurance eligibility and enrolling consumers in health plans. [HHS, 10/29/10]  Winning states will develop cutting-edge, consumer-friendly technology to create a simple system that helps families and small businesses choose and enroll in the plan that is best for them.  Five winning states or coalitions of states will receive two-year grants by February 15, 2011.  Grant applications are due December 22, 2010, and more information is available from Grants.gov (CFDA 93.525). 

HHS also issued a notice of proposed rulemaking regarding increased reimbursement for Medicaid eligibility determination and enrollment activities. [HHS, 11/3/10]  Because consumers seeking health plan information through Exchanges may be eligible for an exchange plan, premium assistance tax credits, Medicaid, or CHIP, it is critical that IT systems ensure a coordinated enrollment process.   Under the proposed rule, the design and development of new Medicaid eligibility systems could potentially be eligible for an enhanced federal matching rate of 90 percent, while maintenance and operations of these systems could potentially receive a 75 percent enhanced federal match.  Both rates represent a significant increase over the current, 50 percent match rate for these activities.  The rule is available on the Federal Register. [Federal Register, 11/8/10]

Finally, the Centers for Medicare & Medicaid Services and the Office of Consumer Information and Insurance Oversight recently issued initial technical guidance to assist states as they develop IT systems for the Exchanges, Medicaid, and CHIP. [HHS, 11/3/10]  This guidance is available from HHS. [HHS, accessed 11/10/10]

Encouraging Biomedical Research

The Affordable Care Act creates $1 billion in temporary tax credits and grants for qualifying new therapeutic discoveries to encourage investments in new therapies that prevent, diagnose, and treat acute and chronic diseases,. [P.L. 111-148; P.L. 111-152]  Recently, the Departments of Treasury and HHS and the National Institutes of Health announced that nearly 3,000 small biotechnology companies in 47 states and the District of Columbia received awards under this program. [Treasury, 11/3/10]  The companies may receive a tax credit for up to 50 percent of qualifying investments made in 2009 and 2010 or, to encourage the participation of start-up companies, may elect to receive a grant instead.  A list of all qualifying companies is available from the Internal Revenue Service. [IRS, 11/1/10] 

Additional Information

The Democratic Policy Committee has released 14 previous updates on health reform implementation, available on the DPC website here.  In addition, DPC maintains a centralized listing of health reform implementation resources which is frequently updated and is available here.

In the coming days, the Senate is expected to vote on the motion to invoke cloture on the motion to proceed to S. 3815, the Promoting Natural Gas and Electric Vehicles Act.  This legislation is identical to the natural gas and electric vehicle provisions that were included in S. 3663, the Clean Energy Jobs and Oil Company Accountability Act.

The legislation is designed to reduce oil consumption and improve national security by providing rebates to purchase natural gas vehicles and various types of incentives to help spur the development of electric vehicles.  Providing incentives to reduce oil consumption and improve national security is critically important because:

• The nation’s transportation sector is 95 percent reliant on oil;

• The wide-spread deployment of electric vehicles and the corresponding charging infrastructure could profoundly decrease the nation’s oil consumption.  Certain electric vehicles allow consumers to travel without using any petroleum for over 40 miles, while average vehicle trip lengths are around 10 miles and average commutes are around 12 miles;
• The nation’s medium and heavy truck fleet has expanded from 6.2 million in 2000 to 8.7 million in 2008;
• The nation’s medium and heavy truck fleet has increased its distances driven from 193 billion million traveled in 2000 to 227 billion miles traveled in 2008; and
• The nation’s medium and heavy truck fleet has increased its consumption of diesel fuel from 1.5 million barrels per day in 1998 to over two million barrels per day in 2008.

Major Provisions

Title I – Natural Gas Vehicle and Infrastructure Development

Rebates.  The bill would direct the Secretary of Energy to issue an interim final rule to develop a system for distributing rebates for new purchases and conversions to natural gas vehicles.  The legislation would establish a maximum rebate value provided to a qualified owner (who places a qualified alternative fuel vehicle into service by 2013) at:

• $8,000 for each qualified alternative fuel vehicle with a  gross vehicle weight rating of not more than 8,500 pounds;

• $16,000 for each qualified alternative fuel vehicle with a  gross vehicle weight rating of more than 8,500 but not more than 14,000  pounds;

• $40,000 for each qualified alternative fuel vehicle with a  gross vehicle weight rating of more than 14,000 but not more than 26,000  pounds; and

• $64,000 for each qualified alternative fuel vehicle with a gross vehicle weight rating of more than 26,000 pounds.

Mixed-fuel vehicles are eligible for a rebate equal to 75 percent of the rebate for dedicated natural gas vehicles.  Bi-fuel vehicles are eligible for a rebate equal to 50 percent of the rebate for dedicated natural gas vehicles.

Funding.  Under S. 3815, $3.8 billion would be available to be transferred from the treasury to the Secretary of Energy for this rebate program from funds in the treasury not otherwise appropriated.

Infrastructure development.  The bill would require the Secretary of Energy to issue an interim final rule establishing an infrastructure deployment program and a manufacturing development program, which would include:

• Grants of up to $50,000 per unit to qualified refuelers for  the installation of natural gas refueling property placed in service between  2011 and 2015; and

• Grants in amounts determined to be appropriate by the Secretary to qualified manufacturers for research, development, and demonstration projects on engines with reduced emissions, improved performance, and lower cost.

Funding.  Under S. 3815, $500 million would be available to be transferred from the treasury to the Secretary of Energy for infrastructure development from funds in the treasury not otherwise appropriated.

Direct loans.  The legislation would require the Secretary of Energy to issue an interim final rule establishing a direct loan program to provide loans to qualified manufacturers to pay not more than 80 percent of the cost of reequipping, expanding, or establishing a facility in the United States that will be used for the purpose of producing any new qualified alternative fuel motor vehicle or any eligible component.  

Funding.  Under S. 3815, $200 million would be available to be transferred from the treasury to the Secretary of Energy for direct loans from funds in the treasury not otherwise appropriated.  The $200 million in direct loans would allow for direct loan commitments to approach $2 billion.

Title II – Promoting Electric Vehicles

Assessment and technical assistance.  S. 3815 would require the Secretary to perform a national assessment on opportunities to deploy plug-in electric vehicles in the country and create a national plan for deployment.  This plan would include an assessment of the maximum number of plug-in electric drive vehicles that will be deployed by 2020 and 2030, and national goals for market penetration of plug-in electric vehicles by 2020 and 2030. 

The legislation would also require the Secretary of Energy to provide technical assistance to State, local, and tribal governments to assist with the national deployment of plug-in electric drive vehicles.  Technical assistance to be provided would include:  1) training codes and standards for building and safety inspectors; 2) ideas on how to expedite permits and inspections; and 3) education and outreach on the various types of plug-in electric drive vehicles and the associated technology.

Electric Drive Vehicle Deployment Communities Program.  The bill would create a new program within the Department of Energy entitled the “Electric Drive Vehicle Deployment Communities Program.”  Under S. 3815:

• State, tribal, or local governments could apply to become a deployment community.  The application could be jointly-sponsored with other entities and should describe the community’s plan to encourage the deployment of electric vehicles and related infrastructure, and demonstrate buy-in from relevant stakeholders such as public and private utilities, government agencies, and providers of electric drive motor vehicles and charging infrastructure.

• The Secretary of Energy would select deployment communities that reflect diverse populations, geography, and models for deploying electric drive motor vehicles.  At least one deployment community will have population of less than 125,000.
• Communities could apply for grants to help achieve the plan put forward in their application.  Communities must provide at least 20 percent of the funding for their proposed electric vehicle deployment program from non-federal sources.

Phase one of the program will last for three years from the date that deployment communities receive their grants.  The Secretary of Energy would be required to report to Congress on phase one of the program and will make recommendations to Congress on whether the program should be extended or modified.

Funding.  Under S. 3815, $400 million would be available to be transferred from the treasury to the Secretary of Energy for electric vehicle deployment from funds in the treasury not otherwise appropriated.

Research and Development.  The billwouldestablish a research and development program in the Department of Energy (DOE) to work on all aspects of the development, production, and deployment of electric vehicles.  S. 3815 would also establish a research, development, and demonstration program at DOE to identify and assess possible uses for vehicle batteries at the end of their useful life in a vehicle.  It would provide grants for selected demonstration projects and directs the Secretary of Energy to carry out a study on recycling materials from electric vehicles and batteries.

Raw materials.   The bill would direct the Secretary of the Interior to conduct a study identifying the raw materials needed to manufacture plug-in electric vehicles, batteries, and other components, to describe the known sources of these materials and the risk associated with their supply, and to identify ways to secure the supply chain of critical raw materials.

Study.  Under S. 3815, the Secretary of Energy would enter into an agreement with the National Academy of Sciences to conduct a study to identify what data that may be collected from electric vehicles, such as location, charging patterns and usage of electric vehicles.  This study would be used to provide recommendations on procedures, technologies, and rules relating to the collection, storage and use of this data.

Utilities.  S. 3815 would require electric utilities to consider the potential levels of plug-in penetration that they might expect to see on their systems in the near term, investigate the potential impacts on their transmission and distribution infrastructure, and plan for the deployment of electric vehicles in their service area.  Any utility that does not anticipate meaningful electric vehicle penetration on their system can request that this requirement be waived. 

S. 3815 wouldrequire State Utility Commissions to participate in any local plan for deploying charging infrastructure, require infrastructure interoperability, consider how it interacts with smart grid, and start to consider rate recovery for utility plans.  The Secretary and the Technical Advisory Committee would be directed to convene a group of stakeholders from utilities, charging infrastructure companies and others to investigate potential models for billing, smart grid integration and future vehicle to grid opportunities.

Loan guarantee. S. 3815 would provide loan guarantees for eligible entities that purchase more than 200 qualified automotive batteries in a calendar year for use in nonautomotive applications.  This program would help attract battery manufacturing facilities to the U.S. while plug-in electric drive vehicle production is still ramping up.

Solid Waste Disposal Act.  The bill would ensure that batteries from plug-in electric drive motor vehicles be disposed of in accordance with the Solid Waste Disposal Act (P.L. 89-272).

Title III – Oil Spill Liability Trust Fund

S. 3815 would increase the amount that oil companies are required to pay into the Oil Spill Liability Trust Fund from 8 cents per barrel of oil to 21 cents per barrel of oil.

Legislative History

Senator Reid introduced S. 3815 on September 29, 2010.  The legislation is cosponsored by Senator Menendez.

Senator Reid filed cloture on the motion to proceed to S. 3815 on September 29, 2010.

Expected Amendments

The DPC will circulate information about possible amendments as it becomes available. 

Administration Position

At the time of publication, the Administration had not released a Statement of Administration Policy on S. 3815.

Resources

Democratic Policy Committee, “Background on Medium and Heavy Truck Fleets,” available here.

Democratic Policy Committee, “Background on Reductions in Oil Consumption from the Transportation Sector,” available here.

• Improving Access to Care
• New, Draft Form W-2, and Another Assurance that Health Coverage is Not Taxable
• Helping 1,000 More Businesses Help Early Retirees
• Ensuring Access to Health Insurance for Children with Pre-Existing Conditions
• Putting Patients Back in Charge
• Improving Care and Preventing Abuse in Long-Term Care Facilities
• Legal Challenges to the Affordable Care Act
• Additional Information

Previous updates on health reform implementation and other information are available from the DPC. [DPC]

Improving Access to Care

Community Health Centers

The Affordable Care Act creates an expanded and sustained national investment in community health centers by providing $11 billion over five years to these critical health care providers. [P.L. 111-148; P.L. 111-152]  The country’s 1,250 community health centers provide quality health care to 20 million Americans without regard to a patient’s ability to pay or health insurance coverage. [National Association of Community Health Centers, accessed 8/23/10]  The Affordable Care Act’s investment in community health centers will allow them to nearly double the number of patients they serve.  By providing primary care and focusing on preventive services, health centers estimate they save our health care system $9.9 billion – $17.6 billion each year.

Recently, HHS announced awards of $727 million to 143 community health centers nationwide for construction and renovation projects that, when complete, will allow the health centers to provide care for an additional 745,000 patients. [HHS, 10/8/10]  Community health centers are a constant source of quality, affordable health care to millions of Americans, but especially during this economic downturn, health centers can be a critical source of care for those who have lost their health insurance, who are in between jobs, or who face other financial difficulties.

School-Based Health Centers

HHS and the Health Resources and Services Administrative (HRSA) also recently announced the availability of $100 million in funding for the construction and renovation of school-based health centers. [HRSA, 10/4/10]  The Affordable Care Act includes funding to assist school-based health centers in providing comprehensive and accessible preventive and primary health care services to medically-underserved children and families.  HRSA anticipates 200 grants will be awarded to construct, renovate, or purchase equipment in school-based health centers.  Grant applications are due December 1, 2010, and more information is available at Grants.gov. [Grants.gov, accessed 10/18/10]

New, Draft Form W-2, and Another Assurance that Health Coverage Is Not Taxable

To provide Americans with more information about the value of their health insurance, the Affordable Care Act requires employers to disclose the value of any employer-sponsored health insurance for each employee, on the employee’s annual Form W-2.  Despite an onslaught of rumors to the contrary, employer-sponsored health benefits are absolutelynottaxable, and the Affordable Care Act does not change the tax-free status of these benefits.  Reporting the cost of coverage will be optional in 2011, and, in 2012, all employers who offer health insurance will be required to report the value to each worker on their Form W-2.

Last week, the Internal Revenue Service (IRS) released a draft Form W-2 for 2011. [IRS, 10/12/10]  The new draft form looks a lot like the existing Form W-2, except that it includes a space for employers to report the cost of employer-sponsored health coverage. [IRS, undated]  And, the form itself clarifies that the cost is provided for information purposes only:

Cost of employer-sponsored health coverage (if provided by the employer).  The reporting in Box 12, using Code DD, of the cost of employer-sponsored health coverage is for information only.  The amount reported with Code DD is not taxable.

Helping 1,000 More Businesses Help Early Retirees

The Affordable Care Act creates a $5 billion Early Retiree Reinsurance Program to support employer health plans that provide coverage to retirees who are not yet eligible for Medicare, helping to protect access to coverage while reducing costs for employers and retirees. [P.L. 111-148; P.L. 111-152]  HHS recently announced that another 1,000 employers were accepted into the program, bringing the total number of participating employers to nearly 3,000. [HHS, 10/4/10]  Participating employers come from all 50 states and the District of Columbia, representing large and small businesses, state and local governments, educational institutions, non-profits, and unions.  A fact sheet explaining the program and a list of all participating employers in each state is available at HealthCare.gov and the list will be updated each week as new employers join the program.  Applications are still being accepted, and more information on the Early Retiree Reinsurance Programs is available at ERRP.gov.  This month, participating employers will begin to submit claims and receive reimbursement payments for qualifying expenses.

The Early Retiree Reinsurance Program is another bridge to the Health Insurance Exchanges and reformed health insurance markets effective in 2014, which will make it easier for earlier retirees to access affordable health insurance.  Skyrocketing health care costs have made it difficult for employers to continue to provide health benefits for employees and retirees, and this temporary program will provide financial assistance until 2014.  Earlier this year, a survey found that 76 percent of large employers that offer retiree benefits planned to pursue participation in the program, and that the average federal reimbursement for each early retiree will represent between 25 and 35 percent of each early retiree’s health care costs. [Hewitt Associates, 5/25/10]

Ensuring Access to Health Insurance for Children with Pre-Existing Conditions

On September 23, 2010, the six month anniversary of the enactment of the Affordable Care Act, the Patients’ Bill of Rights took effect.  One of the most critical protections included in the Patients’ Bill of Rights prohibits insurers from denying coverage to children who have pre-existing conditions, for all new plans and for existing plans in the group market.  Before enactment, insurers were free to deny health insurance to children who had a pre-existing condition, such as asthma, or could offer to cover the child but refuse to pay for any treatment related to the pre-existing condition.  The Affordable Care Act ended this practice, providing children and their parents the peace of mind that comes with knowing they can always access coverage.

Despite a March 29, 2010, letter in which AHIP expressed its commitment “to make pre-existing condition exclusions a thing of the past,” some health insurers are still choosing to deny coverage to children who need it by refusing to offer new “child-only” policies.  These types of policies are issued in the individual market and cover only children, not an entire family.  Last week, HHS Secretary Sebelius sent a letter to the National Association of Insurance Commissioners outlining efforts by HHS, working with states, to ensure that children with pre-existing conditions continue to have access to health insurance. [HHS, 10/13/10]  The letter clarifies a range of insurer practices related to child-only policies that are permissible under the Affordable Care Act and highlights answers to frequently asked questions, available online. [HHS, 10/13/10]  In addition, the letter outlines steps some states have taken and other states might consider, including the establishment of open enrollment periods, offering unsubsidized buy-in to a state’s Children’s Health Insurance Program (CHIP), and seeking coverage through existing state high-risk pools.  The Affordable Care Act also created the Pre-Existing Condition Insurance Plan (PCIP) which is available to eligible children and adults with pre-existing conditions who have been uninsured for at least six months.   Information is available at PCIP.gov.

Putting Patients Back in Charge

The Affordable Care Act protects consumers by ending some of the worst health insurance industry abuses.  One way the Affordable Care Act protects consumers and puts patients back in charge of their health care is by providing grants to states to establish or expand offices of health insurance consumer assistance or health insurance ombudsman programs. [P.L. 111-148; P.L. 111-152]  These independent offices will assist consumers with enrolling in coverage and with filing complaints and appeals, educate consumers on their rights and responsibilities, and collect, track, and quantify consumer problems and inquiries.

Earlier this year, HHS issued a grant notice, and on October 19, 2010, HHS announced awards of nearly $30 million for state consumer assistance programs. [HHS, 10/19/10]  Thirty-five states, four territories, and the District of Columbia applied for and received this funding.  More information about this grant program and summaries of how each grantee will use this new funding is available at HealthCare.gov. [HealthCare.gov, accessed 10/19/10; HealthCare.gov, accessed 10/19/10]

Improving Care and Preventing Abuse in Long-Term Care Facilities

In order to improve care and prevent abuse in long-term care facilities, the Affordable Care Act requires the Secretary of HHS to establish a nationwide program for national and state background checks on employees with direct access to patients at certain long-term supports and services facilities or providers. [P.L. 111-148; P.L. 111-152]  Earlier this month, HHS announced it had awarded $13 million to six states to design comprehensive applicant criminal background check programs for jobs involving direct patient care. [HHS, 10/6/10]  The Affordable Care Act provides a total of $160 million for the background check program, which should allow all states to participate.   Another round of grants is expected in the near future.

Legal Challenges to the Affordable Care Act

Since the Affordable Care Act became law, several state Attorneys General have filed lawsuits to challenge its constitutionality.  Opponents of health reform, having failed to prevent it from becoming law, are now taking their opposition to the courts.  But constitutional law scholars are confident these suits have no merit, and that, as President Reagan’s Solicitor General Charles Fried wrote, “the health care law’s enemies have no ally in the Constitution.” [DPC, 3/26/10; Boston Globe, 3/21/10]

On October 7, 2010, in the first substantive ruling on the individual responsibility policy, Judge George Caram Steeh of the U.S. District Court, Eastern District of Michigan, determined that the Affordable Care Act is constitutional.  In considering the Commerce Clause, Judge Steeh wrote:  “Far from ‘inactivity,’ by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $43 billion in 2008, onto other market participants.” [Opinion available here]  In dismissing the lawsuit Judge Steeh concluded:  “The minimum coverage provision, which addresses economic decisions regarding health care services that everyone eventually, and inevitably, will need, is a reasonable means of effectuating Congress’s goal.”

On October 14, 2010, Judge Roger Vinson in Florida dismissed four of the six claims brought by several Republican Attorneys General and issued a procedural ruling allowing the two remaining claims to proceed. [Washington Post, 10/15/10]  The ruling does not address the merits of the constitutional claims raised by the suit, but allows the process to continue to a summary judgment hearing later this year.

Additional Information

The Democratic Policy Committee has released 13 previous updates on health reform implementation, available on the DPC website here.  In addition, DPC maintains a centralized listing of health reform implementation resources which is frequently updated and is available here.

Grand Total of Taxes Cut by Democrats in 111^th Congress: $509 Billion

American Recovery and Reinvestment Act of 2009(P.L. 111-5;JCX-19-09)

Patient Protection and Affordable Care Act(P.L. 111-148;JCX-17-10and CBO, Table 2)

Worker, Homeownership, and Business Assistance Act of 2009(P.L. 111-92;JCX-45-09)

Hiring Incentives to Restore Employment Act(P.L. 111-147;JCX-6-10)