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.

• 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]

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.

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.”

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 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

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.

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.

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.

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.

The Senate began consideration of this legislation on September 28, 2010.

Major Provisions

This summary was provided by the Senate Committee on Appropriations.

Ongoing programs

Under the Continuing Resolution, funding would continue at Fiscal Year 2010-enacted levels for most programs.  In total, the Continuing Resolution will provide funding at a rate approximately $8.2 billion below the Fiscal Year 2010 level. 

Extended Authorizations and Other Actions

The Continuing Resolution would extend authorizations or allow for continuous normal operations through December 3, 2010 for certain programs that would otherwise expire or be severely disrupted.  This would include provisions that would:

·         Allow the Federal Air Marshals to maintain the existing Fiscal Year 2010 4th quarter coverage level for international and domestic flights;

·         Allow 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 Fiscal Year 2010;

·         Extend 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;

·         Extend the application period for retroactive stop loss benefits throughout the duration of the continuing resolution;

·         Extend for the duration of the Continuing Resolution the existing authority for the Department of Homeland Security (DHS) to retain its authority to regulate chemical facilities that present high levels of risk;

·         Extend for the duration of the Continuing Resolution the existing Federal Emergency Management Agency (FEMA) authority to provide technical and financial assistance to States and localities for pre-disaster hazard mitigation activities;

·         Adjust the current rate of operations for the National Nuclear Security Administration’s weapons program to $7 billion, a $624 million increase over Fiscal Year 2010 appropriation, in conjunction with the START Treaty;

·         Provide for the continuation of a program included under the Child Nutrition Act, which will allow for school feeding activities where year round activities occur; 

·         Provide 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;

·         Allow the National Cord Blood Inventory contracts to continue at their current level through the duration of the Continuing Resolution;

·         Extend the TANF block grant and Child Care Entitlement to States program at their current level through the duration of the Continuing Resolution;

·         Reduce the amount available for BRAC 2005 from over $7 billion in Fiscal Year 2010 to a rate equal to $2.35 billion, the Fiscal Year 2011 request;

·         Adjust 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 Fiscal Year 2009 Supplemental;

·         Continue 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 Fiscal Year 2009 and Fiscal Year 2010 Supplementals;

·         Reduce the amount available for Census programs from over $7 billion in Fiscal Year 2010 to a rate equal to $964 million annually, the same as the amount recommended for Fiscal Year 2011;

·         Permit the District of Columbia to spend funds under its local budget beginning on and after the October 1, 2010 start of fiscal year;

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

·         Extend the current HECM loan limits for high cost areas through Fiscal Year 2011;

·         Extend the current FHA loan limits for high cost areas through Fiscal Year 2011;

·         Extend the current GSE loan limits for high cost areas through Fiscal Year 2011; and

·         Provide $193,400 for the survivors of Robert C. Byrd, the late Senator from West Virginia.

Legislative History

H.R. 3081, the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2010, was introduced in the House on June 26, 2009.  On September 24, the Senate voted on the motion to invoke cloture on the motion to proceed to H.R. 3081, as the legislative vehicle for the Continuing Resolution, which would provide for government-wide appropriations through December 3, 2010.  Cloture was invoked on the motion to proceed to the H.R. 3081 by a vote of 84-14. [Roll Call Vote 243]  On September 29, Senator Inouye offered a full-text substitute amendment to H.R. 3081 comprised of the Continuing Resolution outlined above.

The Senate is expected to complete action on the Continuing Resolution on September 29, 2010.

Expected Amendments

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

Administration Position

As of this writing, the Administration has not issued a Statement of Administration Position related to the Continuing Resolution.

On September 21, 2010, Senator Enzi introduced a resolution (S.J. Res 39) that would disapprove and nullify an interim final rule submitted by the Departments of the Treasury, Labor, and Health and Human Services relating to status as a grandfathered health plan under the Patient Protection and Affordable Care Act (P.L. 111-148, 111-152, Affordable Care Act).  The rule that Senate Republicans seek to nullify is consistent with statute, preserves stability in insurance markets, provides insurers and businesses the flexibility to grow and innovate, and provides enhanced consumer protections in health insurance markets.

Background

Health reform is built on the requirement that Americans who like their current health plan can keep it.  On June 17, 2010, the Departments of Treasury, Labor, and Health and Human Services issued interim final regulations to implement this requirement and clarify the meaning of “grandfathered” health plans in the Affordable Care Act.  Many provisions of the Affordable Care Act apply to all health plans, both those in existence on the date of enactment (“grandfathered plans”) and new health plans (“non-grandfathered plans”).  For example, all grandfathered and non-grandfathered plans must comply with:

• A ban on lifetime coverage limits;

• A ban on rescissions of coverage when people get sick and have previously made an unintentional mistake on their application;

• Extension of parents’ coverage to young adults until their 26^th birthday; and

• Limits on administrative costs and profits (also called a medical loss ratio).

For the vast majority of Americans who receive health coverage through their employers, additional benefits will be offered under both grandfathered and non-grandfathered plans, including:

• A ban on coverage exclusions for children with pre-existing conditions; and

• A ban on “restricted” annual limits.

However, some provisions apply only to new health plans, exempting existing, or grandfathered, plans from making certain changes right away, including:

• Coverage of preventive services without cost-sharing;

• Right to internal and external appears of insurer decisions; and
• Patient protections, such as direct access to OB/GYNs without a referral, a ban on higher cost-sharing for out-of-network emergency services, and a ban on prior authorization for emergency care.

The interim final rule outlines the changes a health plan that existed on the date of enactment (March 23, 2010) may make over time and maintain its grandfathered status.  Insurance plans that reduce benefits or reduce costs to consumers no longer have the same characteristics as they did at the time of enactment and will lose their grandfathered status, becoming subject to additional consumer protections listed above (i.e. coverage of preventive services without cost-sharing, etc.).  The following changes will cause a plan to lose its grandfathered status:

• Significant reduction in benefits, such as no longer covering care for a certain condition;

• Increase in co-insurance charges, for example, increasing the fixed percentage consumers are required to pay for a hospital stay;

• Significant increase in co-payment charges of more than the greater of $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15 percentage points;

• Significant increase in deductibles of more than a percentage equal to medical inflation plus 15 percentage points;

• Significant reduction of employer contribution to employees’ health care of more than five percentage points; and

• Addition or tightening of annual limits on coverage.

The interim final rule strikes an appropriate balance, preserving the ability of Americans to keep their current health plan if they wish, while providing new benefits, minimizing insurance market disruption, and paving the way toward competitive, patient-centered private insurance markets of the future.  Most of the 133 million Americans with employer-sponsored health coverage through large firms will maintain the coverage they have now, as these firms already offer most of the benefits and protections that the Affordable Care Act extends to all Americans.  Americans with employer-sponsored coverage through smaller firms and those who purchase coverage in the individual market tend to experience more frequent change of coverage due to annual fluctuations in premiums and will likely experience the benefits and protections offered by the Affordable Care Act sooner rather than later.  This group of individuals will also benefit from competitive Health Insurance Exchanges, established in 2014, which will offer greater plan choices at affordable rates – the same choice of plans offered to Members of Congress.

The grandfather regulation provides flexibility to allow insurers and businesses to continue to innovate and grow and still maintain their grandfather status, while providing the market stability required before 2014 when insurance market reforms and Health Insurance Exchanges provide enhanced protections and more affordable options.   Passage of S.J. Res 39 would reverse course by creating uncertainty and instability in the marketplace, high potential for litigation, and harm to small businesses as their insurers neither give them the option of keeping the same plan nor offer them the benefits of the new consumer protections.   The resolution dismantles the health insurance reform law and rolls back the important consumer protections that ended the worst insurance industry abuses.

Major Provision

S.J. Res 39 is a resolution of disapproval of an interim final rule submitted by the Departments of Treasury, Labor, and Health and Human Services relating to status as a grandfathered health plan under the Patient Protection and Affordable Care Act (P.L. 111-148, 111-152, Affordable Care Act). 

Legislative History

On September 21, 2010, under the authority granted to Congress by the Congressional Review Act, Senator Enzi introduced S.J. Res 39, which was read twice and referred to the Committee on Health, Education, Labor and Pensions. 

On September 28, 2010, the Senate entered into an agreement to consider S.J. Res. 39.  Under the terms of that agreement, on September 29, 2010, the Senate will debate the motion to proceed to S.J. Res. 39, with two hours for debate equally divided and controlled by the Leaders or their designees.  Upon the use or yielding back of time, the Senate will proceed to a vote on the motion to proceed.

If the motion to proceed is agreed to (which requires a simple majority vote), there will be one hour for debate prior to a vote on final passage.  If the motion to proceed is not agreed to, no further motions to proceed to the joint resolution will be in order.

Amendments

Under the expedited procedures established by the Congressional Review Act for consideration of a resolution of disapproval, amendments or motions to recommit are not in order.

Administration Position

On September 29, 2010, the White House released its Statement of Administrative Policy on S.J. Res 39:

The Administration strongly opposes Senate passage of S.J. Res. 39, which would undermine important protections offered to Americans and businesses under the Affordable Care Act.  This resolution is an attempt to put insurance companies back in charge of Americans’ health care by allowing them to dramatically reduce benefits and increase costs while evading the new protections that the Affordable Care Act provides to consumers.

By  dismantling the Interim Final Rule that set out the conditions under which health plans can qualify for "grandfather" status, the resolution would limit individuals’ and businesses’ choice to keep the plan they had in place when the Affordable Care Act was enacted.  Adoption of the joint resolution would result in significant uncertainty as to what kind of changes may be made to coverage without a loss of grandfather status.  If S.J. Res. 39 were approved, it could be argued that any change in coverage could be made while retaining grandfather status, creating confusion about which plans are actually grandfathered and stripping consumers of additional benefits and protections.  

The Interim Final Rule provides guidance that is essential for businesses, individuals, and issuers to determine when health coverage has changed to the point that it can no longer be regarded as the grandfathered plan in effect on the date of enactment.  In specifying what changes can be made without the loss of grandfather status, the Interim Final Rule strikes a careful balance between the goals of the Affordable Care Act of providing new patient protections while minimizing disruption in existing markets.  It achieves these goals by allowing businesses and health insurance issuers flexibility to make the kinds of normal adjustments they have historically made to contain costs and innovate.  The Interim Final Rule ensures that if individuals or businesses choose to change their health coverage so significantly that it is no longer the coverage in place on March 23, the plan will need to provide additional consumer protections required by the Affordable Care Act, such as preventive health benefits without out-of-pocket costs and the right to independent appeals of health plan coverage determinations and claims.  Moreover, the regulators are considering potential specific improvements to and clarifications of the Interim Final Rule in order to be responsive to stakeholders’ comments on particular aspects of the rule while continuing to meet issuers’, employers’ and families’ needs for clear guidance.

S.J. Res. 39 would replace the clarity of a reasoned set of rules for maintaining grandfather status with confusion and uncertainty that will be disruptive for both employers and their workers and families and result in unnecessary litigation.  The Administration estimates that 145 million Americans with employer-sponsored health insurance–who make up the vast majority of those with private health insurance today–will be in grandfathered health plans.  Further, the Administration estimates that 70 percent of small business health plans will be grandfathered in 2011.  To help sustain and promote small business coverage, the Affordable Care Act includes a tax credit for small businesses of up to 35 percent of their premium contributions for employees starting in 2010.

The Affordable Care Act supports Americans’ ability to maintain their current health plan if they like it and if an employer continues to offer it without significant changes.  Under the legislation, individuals are guaranteed new benefits and protections if their plan is significantly changed or if they lose their plan or select a new plan.  S.J. Res. 39 would dismantle this balance and would undermine key provisions of the Affordable Care Act that preserve market stability and flexibility and enhance consumer protections for businesses, health plans and individuals.  If the President is presented with a Resolution of Disapproval, his senior advisors would recommend that he veto the Resolution.

Resources

Departments of the Treasury, Labor, and Health and Human Services, “Group Health Plans and Health Insurance Coverage Relating to Status as a Grandfathered Health Plan Under the Patient Protection and Affordable Care Act,” June 17, 2010, available by clicking here.

Department of Health and Human Services, “Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans,” undated, available by clicking here.

Department of Health and Human Services, “Affordable Care Act Implementation FAQs,” undated, available by clicking here.

Department of Health and Human Services, “Questions and Answers: Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans,” undated, available by clicking here.

Congressional Research Service, “Disapproval of Regulations by Congress: Procedure Under the Congressional Review Act,” October 10, 2001, available by clickinghere.

U.S. workers have faced the most serious financial challenges since the Great Depression.  Employers have slashed jobs at an alarming rate, particularly in the manufacturing sector, with millions of jobs lost over the course of the recession.  That is why Senate Democrats have made a manufacturing-based jobs bill a top priority.  This legislation will provide tax cuts for companies that create American jobs and create disincentives to moving American jobs overseas. 

Specifically, the Creating American Jobs and Ending Offshoring Act (S. 3816) would:

·         Provide a payroll tax cut for companies that return jobs to the United States from overseas; and

·         End tax loopholes that encourage the off-shoring of jobs.

The Senate is expected to consider this legislation the week of September 27, 2010.

Major Provisions

This summary is drawn from an analysis prepared by the Majority Leader’s office.

Incentive to Create American Jobs

Create Payroll Tax Holiday for Companies that Return Jobs to the United States from Overseas

To encourage businesses to create jobs in the United States, the Creating American Jobs and Ending Offshoring Act would provide businesses with relief from the employer share of the Social Security payroll tax on wages paid to new U.S. employees performing services in the United States.  To be eligible, businesses must certify that the U.S. employee is replacing an employee who had been performing similar duties overseas.  This payroll tax relief is available for 24 months for employees hired during the three-year period beginning September 22, 2010.  The Joint Committee on Taxation estimates that this provision will reduce revenues by $1.09 billion over ten years.

Disincentives to Moving American Jobs Overseas

End Subsidies for Plant Closing Costs 

The Creating American Jobs and Ending Offshoring Act would eliminate subsidies that U.S. taxpayers provide to firms that move facilities offshore.  The bill would prohibit a firm from taking any deduction, loss or credit for amounts paid in connection with reducing or ending the operation of a trade or business in the U.S. and starting or expanding a similar trade or business overseas.  The bill would not, however, apply to any severance payments or costs associated with outplacement services or employee retraining provided to any employees that lose their jobs as a result of the offshoring.  Firms would be able to apply to the Treasury Secretary for relief from this rule for transactions that do not result in the loss of employment in the U.S.  The Joint Committee on Taxation estimates that this provision will raise $277 million over ten years.

End Tax Break for Runaway Plants

The Creating American Jobs and Ending Offshoring Act would end the federal tax subsidy that rewards U.S. firms that move their production overseas.  Under current law, U.S. companies can defer paying U.S. tax on income earned by their foreign subsidiaries until that income is brought back to the United States.  This is known as “deferral.”  Deferral has the effect of putting these firms at a competitive advantage over U.S. firms that hire U.S. workers to make products in the United States.  The bill would repeal deferral for companies that reduce or close a trade or business in the U.S. and start or expand a similar business overseas for the purpose of importing their products for sale in the United States.  U.S. companies that locate facilities abroad in order to sell their products overseas are unaffected by this proposal.  The Joint Committee on Taxation estimates that this provision will raise $92 million over ten years. 

Legislative History

On September 21, 2010, Senator Durbin introduced S. 3816.  As of this writing, the bill has seven cosponsors, including Senators Boxer, Brown, Dorgan, Leahy, Reid, Schumer, and Whitehouse.  On September 22, S. 3816 was placed on the Senate Legislative Calendar under General Orders (Calendar No. 578). 

On September 24, Senator Reid asked unanimous consent that the Senate proceed to the consideration S.3816.  Senator McConnell objected to the request.  Senator Reid then moved to proceed to S.3816 and filed a cloture motion on the motion to proceed to the bill.

By unanimous consent, the cloture vote on the motion to proceed to S.3816 will occur on Tuesday, September 28^th.

Expected Amendments

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

Administration Position

As of this writing, the Administration has not issued a Statement of Administration Position related to S. 3816.

Under the old rules, the NMB counted all workers who did not vote in a representation election as a vote against a union.  There are, of course, several reasons why a person may not vote in an election, and it makes no sense to automatically and arbitrarily assign a “no” vote to all non-voters.  As a result, the old process was structurally tilted against union representation, despite the Board’s clear mandate to promote collective bargaining.  More importantly, counting all non-voters as no votes is unfair to the majority of those who choose to vote.

The new NMB rule provides workers with an opportunity to vote either for a union, against a union, or to abstain from voting and have a voting majority decide the outcome.  Despite claims from the supporters of the resolution, this is not “card-check” or “minority rule.”  Rather, it is the same procedure that we use to elect Senators, Members of Congress and is found throughout our democratic society.

As Democratic Senators wrote in a letter to the National Mediation Board:  “[the] same democratic process that governs other elections – requiring a simple majority of those who cast a ballot – should be extended to workers covered by the Railway Labor Act… Aviation and rail workers should not be subject to a different and more onerous process when deciding whether to choose union representation.” [Letter to the NMB, 12/7/2010]

The Senate is scheduled to consider this resolution on September 23, 2010.

Background

The National Mediation Board governs labor relations in the rail and airline industries, much like the National Labor Relations Board does for other types of private sector workers.  The Board recently promulgated a new regulation changing the procedures that govern union elections in these industries.  Prior to the recent change, in order for rail and airline workers to gain union representation, a majority of all eligible voters had to cast a vote for the union.  Workers who did not vote, for whatever reason, were counted as a vote against unionization.  This is contrary to how elections function for other types of workers under the National Labor Relations Act (29 USC §151-169), and to basic principles of democracy.    There are many reasons why a person might not vote.  For example, he or she might be ill, might have forgotten to vote, or simply might be disinterested in the result.  Under the old rules, all such voters were arbitrarily assigned the position of being opposed to the union, regardless whether that was their actual point of view.

Last November, the NMB published a proposed rule that would make these elections more fair and democratic by requiring only a simple majority of those who cast a ballot to choose union representation.  The new rule, very simply, recognizes that in an election, the side with the most votes wins. 

The new rule was proposed and implemented through appropriate channels.  The notice of proposed rulemaking included a detailed explanation of why the Board was considering this change; allowed parties 60 days to comment; and provided a detailed rationale for the proposal.  The Board considered nearly 25,000 public comments and held a public meeting where over 34 members of the public testified.  These new rules were ultimately finalized in May of this year. [95 Fed. Reg. 26062]

Senator Isakson opposes the new rules, arguing that the Board did not have the legal authority to make this change.  This argument was rejected by a federal district court reviewing a legal challenge to the rules, which upheld the change as a proper exercise of the Board’s discretionary authority.  He and Senator Enzi have also argued that Democratic NMB member Linda Puchala did not approach the issue with an open mind, since the rule change was proposed only six months after her confirmation.  There is no evidence to indicate that Puchala prejudged the issue or that she misrepresented her views in any way when she told the Committee during her confirmation process that she would “review [the issue] on the merits… and consider all applicable precedents.”  (This challenge was also rejected by the district court.)

Some opponents of the rule change have also claimed that the NMB is trying to “do card check by running around the back door” through this rule change – that claim could not be further from the truth.  The NMB rule has nothing to do with the Employee Free Choice Act or card check.  It does not modify in any way the mechanism that rail and aviation workers use to vote.  Rather, it simply makes clear that a decision not to vote is not treated as a “no” vote.  

Major Provision

S.J. Res. 30 is a resolution of disapproval of the rule enacted by the National Mediation Board with respect to procedures used for union elections in the rail and airline industries. 

Legislative History

On May 11, 2010, Senator Isakson introduced S.J.Res. 30, which was read twice and referred to the Committee on Health, Education, Labor, and Pensions.

On September 21, 2010, the Senate entered into an agreement to consider S.J.Res.30.  Under this agreement, on Thursday, September 23, there will be 2 hours for debate on the motion to proceed, with the time equally divided and controlled between Senators Harkin and Isakson, or their designees.  Upon the use or yielding back of time, the Senate will proceed to vote on adoption of the motion to proceed.

·         If the motion to proceed is successful (the motion is subject to a simple majority-vote threshold), there would be 1 hour for debate with respect to the joint resolution, with the time equally divided.  Upon the use or yielding back of time, the Senate would proceed to vote on passage of the joint resolution.

·         If the motion to proceed is defeated, then no further motions to proceed to the joint resolution would be in order.

No amendments or any other motions are in order to the joint resolution and all provisions of the statute governing consideration of the joint resolution remain in effect during the pendency of this agreement.

Expected Amendments

Amendments are not in order to this Resolution.

Administration Position

On September 23, 2010, the White House released its Statement of Administration Policy on S.J. Res. 30:

The Administration strongly opposes Senate passage of S.J. Res. 30, which would undermine a fundamental principle of fairness in union representation elections:  that outcomes should be determined by a majority of the valid ballots cast.  S.J. Res. 30 would prohibit workers in the airline and railroad industries from voting whether to join a union on the same basis — majority rules — as most other industries.  The Administration is committed to help working Americans exercise their right to organize under a fair and free process and bargain for a fair share of the wealth their efforts help to create.  The fairest and most effective way to determine the outcome of a union representation election is by the majority of votes cast.  S.J. Res. 30 is contrary to this essential tenet of fair elections. 

If the President is presented with a Resolution of Disapproval that would not safeguard the ability of railroad and airline workers to decide whether or not they would be represented by a union based upon a majority of the ballots cast in an election, his senior advisers would recommend he veto the resolution.

On July 27, 2010, the Senate failed to invoke cloture on the motion to proceed to
S.3628 (Roll Call No. 220) and Senator Reid entered a motion to
reconsider the vote. 

On September 22, 2010, Senator Reid announced on the Floor that he will call the
bill up for reconsideration at the appropriate time.

Summary

In January 2010, the Supreme Court issued a closely divided 5-4 decision in Citizens United v. Federal Election Commission.  Under this ruling, big businesses are permitted to spend unlimited amounts of money on elections, counter to long-standing law and precedent that had restricted political expenditures by corporations.  

In response, Senator Schumer introduced the Democracy Is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act, to mitigate the harmful decision by the Supreme Court in Citizens United.  This legislative response would amend the Federal Election Campaign Act of 1971 to carefully limit the ability of special interests to pour money into our election process.  The original Senate legislation enjoys the support of 49 co-sponsors who recognize the real-world impact of the Supreme Court’s decision.

On June 24, the House passed their version of the DISCLOSE Act by a 219-206 vote.  Senator Schumer subsequently introduced a revised version of the DISCLOSE Act, incorporating some of the changes made in the House, that will be considered by the full Senate (S. 3628).  The bill would provide important protections to the American people by:

·         Promoting effective disclosure of campaign-related activity by special interests;

·         Preventing foreign influence in U.S. elections; and

·         Banning “pay-to-play” by preventing government contractors and government bailout recipients from spending money on elections.

Senator Reid filed cloture on the motion to proceed to S. 3628 on July 22, 2010.  The Senate is expected to consider this legislation the week of July 26.

Background

In January, the Supreme Court’s closely divided 5-4 decision disregarded settled law by ruling that corporations are permitted to spend unlimited amounts of money on elections.  The ruling in Citizens United v. Federal Election Commission overturned long-standing law and precedent that had restricted political expenditures by corporations.  

This ruling gives corporations the same rights as individuals and will have a devastating impact on American elections.  Special interests are now allowed to spend freely on political advertising, specifically advocating the defeat or election of political candidates.  Without adequate information about who is spending the money and how much is being spent, the voices of ordinary Americans are at risk of being drowned out by direct corporate spending on elections – a practice that had been banned for decades.  

Senate Democrats understand that open and fair elections are a cornerstone of our nation’s democratic values.  Special interests, including foreign-controlled interests, should not have the same rights as American citizens.  We are committed to ensuring that individual Americans continue to have a meaningful voice in Washington.  That is why Democrats are fighting to protect American voters and restore public confidence in our electoral system. 

Major Provisions

The following summary is drawn from analyses provided by the Senate Rules Committee.

Regulating Certain Political Spending

Banning Pay-To-Play.  Under the DISCLOSE Act, government contractors would be barred from making campaign-related expenditures (for independent expenditures and electioneering communications).  This is an extension of an existing ban on contributions made by government contractors.  A $10 million contract threshold would be included to exempt small government contractors from the expenditure ban.

Financial service companies that received emergency rescue funding from the federal government should not be permitted to use taxpayer money to influence elections.  The DISCLOSE Act would prohibit TARP beneficiaries from making campaign-related expenditures.  Once the TARP money is repaid, however, the restrictions would be lifted. 

Preventing foreign influence in U.S. elections.  While foreign nationals, including foreign corporations (those incorporated overseas), are banned from making contributions or expenditures to influence U.S. elections, the opinion in Citizens United created a loophole for spending by domestic corporations controlled by foreign nationals.  To close the loophole, the DISCLOSE Act would extend the existing prohibition on contributions and expenditures by foreign nationals to include domestic corporations under the following circumstances:

·         If a foreign country, foreign government official, or a corporation principally owned or controlled by a foreign country or foreign government official owns 5 percent or more of voting shares in the corporation;

·         If any foreign national owns 20 percent or more over of the voting shares;

·         If two or more foreign nationals (each owning 5 percent or more) together own or control 50 percent or more of the voting shares;

·         If a majority of the board of directors are foreign nationals;

·         If one or more foreign nationals have the power to direct, dictate, or control the decision-making of the U.S. subsidiary; or

·         If one or more foreign nationals have the power to direct, dictate, or control the activities with respect to federal, state or local elections.

This would not affect corporations establishing separate segregated funds as long as none of the money in the funds is provided by a foreign national and no foreign national has the power to direct, dictate or control the fund. 

Preventing organizations from coordinating their activities with candidates and parties.  The DISCLOSE Act would ensure that corporations and unions are not allowed to coordinate campaign-related expenditures with candidates and parties in violation of rules that require these expenditures to be independent.

Current Federal Election Commission (FEC) rules bar corporations and unions from coordinating with Congressional candidates and parties about ads that refer to the candidate and are distributed within 90 days before a primary election or within 90 days before the generalelection.  For Presidential contests, current FEC rules prohibit coordination on ads that reference a Presidential candidate in the period beginning 120 days before a state’s Presidential primary election and continuing in that state through the general election. 

The DISCLOSE Act would:

·         For House and Senate races, ban coordination between a corporation or union and the candidate on ads referencing a Congressional candidate in the period beginning 90 days before the primary continuing through general election. 

For Presidential campaigns, ban coordination between a corporation or union and the candidate on ads referencing a Presidential or Vice Presidential candidate in the period beginning 120 days before the first Presidential primary held in any state and continuing through the general election. 

The DISCLOSE Act would not change existing law relating to coordination outside these time periods;

·         Clarify that there will be no finding of coordination based solely on a person’s sharing of their legislative or policy position; and

·         Specifically preserve the safe harbor provision for endorsements and solicitations by federal candidates and for the establishment and use of firewalls within organizations.

Political party communications.  The DISCLOSE Act would subject any payment by a political party committee for the direct costs of an ad or other communication to the coordination party expenditure limits only if the communication is controlled by or made at the direction of the candidate. 

Internet communications.  The DISCLOSE Act would reinforce the current FEC policy that internet communications are not considered to be public political advertising, unless it was placed on another person’s website for a fee, so that internet speech will not be curtailed.

Promoting Effective Disclosure of Campaign-Related Activity

The DISCLOSE Act would ensure that the public will have full and timely disclosure of campaign-related expenditures (both electioneering communications and public independent expenditures) made by covered organizations (corporations, unions, section 501(c)(4), (5), and (6) organizations and section 527 organizations).  There is an exception included for well-established 501(c)(4) organizations who have been in existence for more than ten years, have over 500,000 dues-paying members, including one in each state, and have received less than 15 percent of their funds from corporations or unions in the previous year.

The DISCLOSE Act would impose disclosure requirements that will mitigate the ability of spenders to mask their campaign-related activities through the use of intermediaries.  It would also require disclosure of both disbursements made by the covered organization and also the source of funds used for those disbursements.

Improving Reporting to the Federal Election Commission

The DISCLOSE Act would expand FEC definitions and reporting requirements:

·         Independent Expenditures.  The definition of an “independent expenditure” would be expanded to include both express advocacy and the functional equivalent of express advocacy, consistent with Supreme Court precedent.  The DISCLOSE Act would impose a 24-hour reporting requirement for expenditures of $10,000 or more made 20 days or more before an election, and expenditures of $1,000 or more made within 20 days before an election.  It would require the FEC to make this information publicly available through its website within 24 hours of receipt.

·         Electioneering Communications.  The DISCLOSE Act would expand the definition of “electioneering communications” to include all broadcast ads that refer to a candidate within the periods beginning 30 days before a primary election and 120 days before a general election.  Any such “electioneering communication” would be subject to the disclosure requirements in the DISCLOSE Act.

·         Mandatory Electronic Filing.  The DISCLOSE Act would require electronic filing for individual persons making independent expenditures or electioneering communications exceeding $10,000 at any time.

Expanding Requirements for Disclosure

Improving disbursement reporting requirements.  The DISCLOSE Act would require covered organizations to report all donors who have given $600 or more to the organization during a 12-month period if the organization makes independent expenditures or electioneering communications in excess of $10,000 out of its general treasury. 

If an organization makes a transfer of funds of $10,000 or more to another person for the purpose of making an independent expenditure or electioneering communication, the transfer itself would be treated as making an independent expenditure or electioneering communication. 

If a deemed transfer is made between affiliated organizations and is less than $50,000 aggregate in a calendar year, then it would be exempt from disclosure.  This is to avoid reporting common transfers within organizations that are not for political purposes.  If the covered organization is required to report donor information solely because of deeming, disclosure would only apply to those payments equal to or exceeding $10,000 (in aggregate).

Disclosing use of general treasury funds.  If a donor to a covered organization and the organization mutually agree at the time that the donation is made that the donation will not be used for campaign-related activity, then not later than 30 days after the organization receives the donation it would be required to provide the donor a written certification that the organization will not use the donation for campaign-related activity and it will not include any information about the person in any report filed under the DISCLOSE Act.

If a covered organization makes a disbursement for campaign-related activity, the CEO would be required to file a statement with the FEC certifying that the expenditure was not made in coordination with a candidate, that funds designated by the donor not to be used for campaign-related activity have not been used for any campaign-related activity, and that the spending has been fully disclosed and made in compliance with law.

Creating a separate campaign-related activity account.  Under theDISCLOSE Act, an organization would be permitted to establish a separate “Campaign-Related Activity” account to receive and disburse political expenditures.  If an organization makes campaign-related expenditures exclusively from its separate account, then it would be required to disclose only donors who have contributed $6,000 or more for unrestricted use or donors who have contributed $600 or more specifically for campaign-related activity. 

Enhancing disclaimers to identify sponsors of ads.  If any covered organization makes disbursements for an independent expenditure or electioneering communication, the CEO or highest ranking official of that organization would be required to appear on camera to say that he or she “approves this message,” just like candidates have to do now.  In order to prevent individuals and entities from funneling money through shell groups in order to mask their activities, the DISCLOSE Act would require:

·         The top funder of the advertisement to record a stand-by-your-ad disclaimer including the local jurisdiction and state where the individual resides; and

·         The top five donors of non-restricted funds to an organization that purchases campaign-related TV advertising to be listed on the screen at the end of the advertisement.  This method has been used very successfully in Washington State and is the model for this section in the legislation.

This disclaimer section will also apply to certain mass mailings and political robocalls.

Enhancing Reporting Requirements for Registered Lobbyists

In an effort to add to the transparency of lobbying activities, all registrants under the Lobbying Disclosure Act would be required to disclose the following information on their semiannual reports: the date and amount of each independent expenditure or electioneering communication of $1,000 or more, and the name of each candidate referred to in the communication. 

Requiring Senate Candidates to Electronically File with the FEC

In addition to the increased disclosure and transparency placed on outside organizations, the legislation incorporates language from the bipartisan S. 1858, which requires Senators to electronically file their campaign finance reports directly to the FEC. 

Disclosing Campaign-Related Activity

The DISCLOSE Act would require that all campaign-related expenditures made by a covered organization be disclosed on the organization’s website with a clear link on its homepage to either the information itself or to the FEC’s website page containing the information within 24 hours of reporting such expenditures to the FEC.  Additionally, the DISCLOSE Act would require all campaign-related expenditures made by a covered organization be disclosed to shareholders and members of the organization in any financial reports provided on a periodic and annual basis to its shareholders or members. 

Legislative History

On April 30, 2010, Senator Schumer introduced S. 3295, the Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE)Act, which was referred to the Senate Rules Committee.  The DISCLOSE Act has 49 cosponsors.  On July 21, 2010, Senator Schumer introduced S. 3628,a revised version of the Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act.  On July 22, S. 3628 was placedon the Senate Legislative Calendar under General Orders.  (Calendar No. 476).

A substantially similar bill, H.R. 5175, the Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act,was introduced into the House on April 29, 2010.  The House passed H.R. 5175 on June 24, 2010 by a vote of 219 – 206.  On June 28, 2010, H.R. 5175 was received in the Senate and placed on the legislative calendar. 

On July 22, Senator Reid filed a cloture motion on the motion to proceed to consideration of S. 3628.  The vote on cloture is scheduled on July 27, 2010.

UPDATE:  September 22, 2010

On July 27, 2010, the Senate failed to invoke cloture on the motion to proceed to
S.3628 (Roll Call No. 220) and Senator Reid entered a motion to
reconsider the vote. 

On September 22, 2010, Senator Reid announced on the Floor that he will call the
bill up for reconsideration at the appropriate time.

Expected Amendments

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

Administration Position

On July 27, 2010, the White House released its Statement of Administration Policy, available here, on S. 3628:

“The Administration strongly supports Senate passage of S. 3628.  The Administration believes the DISCLOSE Act is a necessary measure so that Americans will know who is trying to influence the Nation’s elections.  S. 3628 also prevents those who should not interfere in the Nation’s elections – such as corporations controlled by foreign interests – from doing so.  Unless the strong new disclosure rules in S. 3628 are established, the Supreme Court’s decision in the Citizens United case will give corporations undue power to influence elections.  This bill is not perfect. For example, the Administration would have preferred no exemptions.  But, by providing for unprecedented transparency, S. 3628 takes great strides to hold corporations that participate in the Nation’s elections accountable to the American people.  As this is a matter of urgent importance, the Administration urges the Senate to approve the DISCLOSE Act and looks forward to working with both Houses of Congress promptly to produce a final bill for the President’s signature.”

Resources

Congressional Research Service, The DISCLOSE Act: Overview and Analysis (July 16, 2010), available here.

Congressional Research Service, Campaign Finance: Potential Legislative and Policy Issues for the 111^thCongress (June 8, 2010), available here.

Congressional Research Service, Campaign Finance Policy After Citizens United v. Federal Election Commission: Issues and Options for Congress (July 2, 2010), available here.

Congressional Research Service,Legislative Options After Citizens United v. FEC:  Constitutional and Legal Issues (May 24, 2010), available here. 

Democratic Policy Committee, Senate Democrats Are On Your Side: Standing Up to Special Interests to Defend Fair and Transparent Elections, available here.

On May 5, 2010, the Senate Agriculture, Nutrition, and Forestry Committee reported the Healthy, Hunger-Free Kids Act of 2010 (S. 3307).  This bill would reauthorize all child nutrition and women, infant, and children (WIC) programs, currently scheduled to expire on September 30, 2010, though Fiscal Year 2015.  The legislation would also make changes to the laws that fund and set the price of school lunches, school meal access, nutrition standards for school meals, and the child and adult care food program. 

Since the Agriculture Committee reported the Healthy, Hunger-Free Kids Act of 2010 in May, Senators Lincoln and Chambliss have developed a substitute amendment which includes all of the provisions from S. 3307 as reported out of the Senate Agriculture Committee, with the following changes:

1.       Removal of two provisions that were included in the committee-passed bill: the Environmental Quality Incentives Program, and the Efficacy of Foods Eligible for Use Under the Special Supplemental Nutrition Program for Women, Infants, and Children (sections 442 and 353 of S. 3307);

2.      A new provision that would reallocate future unobligated funds provided for the Supplemental Nutrition Assistance Program (SNAP) under the American Recovery and Reinvestment Act(Recovery Act, P.L. 111-5).  This would provide savings of $2.2 billion over the next ten years; and

3.      Minor technical changes to S. 3307.

The amendment is entirely offset with spending reductions.  It provides $4.5 billion in new spending over the next ten years for the reauthorization of child nutrition programs.

The amendment is offset from three sources. 

1.       Extension of USDA authority to count bonus commodities towards the  percent rule (-$1 billion) (contained in the Committee-passed bill);

2.      Restructuring SNAP nutrition education (-$1.3 billion)  (contained in the Committee-passed bill);

3.      Reallocating future unobligated Recovery Act Supplemental Nutrition Assistance Program funding (-$2.2 billion).

The summary of the legislation provided in the section entitled “Major Provisions” below summarizes the text of the substitute amendment.

Background

Despite advances made in strengthening Federal child nutrition programs, significant challenges remain for the low-income children and families who benefit from school lunch and nutrition assistance programs.

First, and most importantly, the need for Federal food assistance has increased dramatically in recent years.  According to USDA’s November 2009 report, Household Food Security in the United States, 14.6 percent of U.S. households (17 million households representing 49.1 million people, including 16.7 million children) were food insecure at least some time during the year.  Of that number, 6.7 million households were classified as having very low food security, meaning that the food intake of one or more household members was reduced and their eating patterns were disrupted at times during the year because the household lacked money and other resources for food.

These statistics represent significant increases in food insecurity from prior years, and were the highest recorded since 1995, when the first national food security survey was conducted.  For low-income households, households with children that were headed by single women or single men, and black and Hispanic households, rates of food insecurity were substantially higher than the national average.  Most notably, 55 percent of all food-insecure households participated in one or more of the three largest Federal nutrition programs (Supplemental Nutrition Assistance Program, National School Lunch Program, and the WIC Program), underscoring the important role that these programs play in providing individuals with critical nutrition benefits.

The recent increases in food insecurity are consistent with larger socioeconomic trends related to poverty and household income.  In December 2007, the United States economy fell into a recession, as indicated by the National Bureau of Economic Research.  During this time period, real median incomes fell, and both the percentage and aggregate number of Americans living in poverty increased.  According to the U.S. Census Bureau, real median household income fell by 3.6 percent between 2007 and 2008, from $52,163 to $50,303, offsetting the gain in income experienced over the past three years.  Additionally, between 2007 and 2008 the official poverty rate increased from 12.5 percent (37.3 million persons) to 13.2 percent (39.8 million persons), the first statistically significant annual increase in the poverty rate since 2004 and the highest poverty rate since 1997.  For children under 18 years of age, the poverty rate was higher than the national average, increasing from 18 percent in 2007 to 19 percent in 2008.

In addition to their importance in addressing food insecurity, Federal child nutrition programs play a critical role in providing nutritious, balanced meals to children and promoting healthy lifestyles.  Major strides have been made in recent years to improve the quality of meals served to children through child nutrition programs.  According to the third USDA School Nutrition Dietary Assessment (SNDA III), in school year 2004-2005, over 95 percent of National School Lunch Program (NSLP) lunches offered and served by most schools met USDA goals for cholesterol over a typical week and were lower in saturated fat than meals served in school year 1998-1999, when the last SNDA was conducted.  Larger proportions of elementary schools met the standards for total fat and saturated fat, and a larger proportion of secondary schools met the standard for saturated fat.

Despite this significant progress, however, considerable work remains to improve children’s diets and to bring Federally-subsidized meals in line with USDA nutritional guidelines.  According to USDA, roughly 99 percent of lunches included amounts of sodium above the recommended levels.  And, only 26 percent and 34 percent of schools served lunches that met USDA guidelines for total fat and saturated fat, respectively.  Additionally, available research has consistently shown that the diets of U.S. children do not meet current national dietary recommendations for nutrition and health.  Overall, children today have diets that are low in fruits, vegetables, whole grains, and dairy, and high in sodium, fat and added sugars.  The 2005 Dietary Guidelines recommend that Americans consume half of their grains as whole grains, but according to the U.S. Department of Health and Human Services report, Healthy People 2010, only 7 percent of children ages two to 19 years currently meet this recommendation.

Statistics on the nutritional profile of school meals and the diets of Americans are often set against broader information about the overall health of American adults and children.  The Department of Health and Human Services notes that 18.2 million Americans have diabetes, with nearly one-third of those unaware that they have the disease, and more than 64 percent of the U.S. adult population is overweight or obese.  Additionally, childhood obesity has increased steadily in recent years, especially during the past two decades.  According to the Institute of Medicine report, Progress in Preventing Childhood Obesity: “Obesity rates among American children and youth have increased dramatically.  Between 1963 and 2004, obesity rates quadrupled for older children, those ages 6 to 11 years (from 4 to 19 percent), and tripled for adolescents, those ages 12 to 19 years (from 5 to 17 percent).  Between 1971 and 2004, obesity rates increased from 5 to 14 percent in 2- to 5 year olds.” 

Available health research shows a strong association between obesity and other chronic diseases, including cardiovascular disease, hypertension, and diabetes.  Cardiovascular disease is the leading cause of death in America, resulting in 500,000 annual deaths.  Risk factors for cardiovascular disease occur with much greater frequency among obese children than they do among normal weight children.  One quarter of children ages five to 10 show early warning signs for heart disease, such as elevated blood pressure or high cholesterol.

In summary, it is evident that tremendous needs exist to reduce childhood hunger and food insecurity, as well as to improve the diets and overall health of American children more generally.  The purpose of this bill is to address those needs so that fewer low-income children have to go without food, and to ensure that more children from all income levels adopt the kind of healthful eating habits and lifestyles that will enable them to live longer, more productive lives.

Major Provisions

Title I–A Path to End Childhood Hunger

Direct Certification–National School Lunch Program.  The substitute amendment to the Healthy, Hunger-Free Kids Act would expand the use of direct certification to include the Medicaid program and would be conducted in areas selected by the USDA based on optional applications submitted by interested states.  The size of the pool of eligible local educational agencies will increase gradually each year, going from local educational agencies that collectively represent 2.5 percent of the students currently certified for free or reduced price school meals nationwide during the 2012-2013 school year, to 5 percent during the 2013-2014 school year, and finally to 10 percent during the 2014-2015 school year and subsequent years.  Participating local educational agencies will use the income information collected by the Medicaid program to directly certify eligible children for free school meals.  The Congressional Budget Office estimates that, by 2015, approximately 115,000 additional students will be certified for free school meals through this provision.

Eligibility–Summer Food Service Program.  The substitute amendment would establish two new options by which schools or local educational agencies with very high proportions of low-income children can receive federal reimbursement without collecting individual paper applications from households and tracking student eligibility in the cafeteria.  Reimbursement for these low-income schools will instead be based on other sources of available data, including the results of direct certification and the U.S. Census Bureau’s American Community Survey.

Expansion–After School Meals for At-Risk Children.  The substitute amendment to the Healthy, Hunger-Free Kids would expand reimbursement for a meal in afterschool programs to all 50 states, which will ensure that more low-income children have access to a nutritious meal during after-school hours. 

For the past several years, appropriations bills have modified the program to permit several states to receive reimbursement for a full meal in addition to a snack.  For the 2009-2010 school year, the reimbursement level for a snack is $0.74, compared with $2.68 for a meal.  Currently, only the District of Columbia, Connecticut, Delaware, Illinois, Maryland, Michigan, Missouri, Nevada, New York, Oregon, Pennsylvania, Vermont, West Virginia, and Wisconsin are permitted to receive reimbursement for a meal.  Participating institutions in all other states may only receive reimbursement for a snack.

Title II–Reducing Childhood Obesity and Improving the Diets of Children

Reimbursement Rate–National School Lunch Program.  The substitute amendment would require the Department of Agriculture to issue regulations to update the meal patterns based on the recommendations of the National Academy of Sciences’ Institute of Medicine (IOM), and would provide an increase in the federal reimbursement to help schools meet the new meal patterns, which the IOM estimates will increase food costs between four and nine percent for participating schools.  Once interim or final regulations are promulgated, the Secretary of Agriculture will provide an additional 6 cents per lunch, adjusted annually for inflation, in reimbursement for local educational agencies that the State agency certifies are in compliance with the new meal patterns.  The Congressional Budget Office estimates that nearly all schools would be able to comply with the new requirements and receive the higher reimbursement rate.

Nutrition Standards–National School Lunch Program.  To promote healthful eating and to protect taxpayer investments in school meals, the substitute amendment would require the Secretary of Agriculture to establish science-based nutrition standards for all foods sold in schools other than foods currently reimbursed through the school lunch or breakfast programs.  Such standards will apply to the entire school campus until the end of the school day.  In establishing nutrition standards, the Secretary is directed to adopt measures  that are consistent with the Dietary Guidelines for Americans, consider authoritative scientific research  and the practical application of nutrition standards, as well as existing voluntary agreements, and provide a process for exemptions for school sponsored fundraisers if they are sanctioned by the school.  The Secretary is also required to update the standards, as practicable and necessary, following the publication of new editions of the Dietary Guidelines for Americans.

Wellness Policy–Child and Adult Care Food Program.  The substitute amendment to the Healthy, Hunger-Free Kids would continue and update the requirements of the local wellness policy included in the Child Nutrition and WIC Reauthorization Act of 2004 reauthorization (P.L. 108-265) by requiring that all local wellness policies include, at a minimum, goals for nutrition education, physical activity, and other school-based policies that promote student wellness; nutrition guidelines for all foods available on school campuses during the school day; participation by the local community in the development and periodic review of the wellness policy; public notification; and periodic assessment and reporting.

Wellness Policy–Child and Adult Care Food Program.  The substitute amendment would make several changes to the nutritional requirements of the Child and Adult Care Food Program.  It would require that CACFP meal patterns be based on the most recent Dietary Guidelines, similar to what is currently required for school lunches and breakfasts.  The provision also requires that child care providers serve only low-fat or fat-free milk to children age two and up, consistent with recommendations of the Dietary Guidelines and the American Academy of Pediatrics, and to make fresh, safe drinking water available to children throughout the day.

In addition to encouraging the adoption of certain nutrition practices, the substitute amendment would require the Department of Agriculture and the Department of Health and Human Services to encourage physical activity and to limit sedentary activity, both of which are recommended by public health organizations and the Dietary Guidelines.  It would also require the Department to provide training and technical assistance for states, sponsors and providers so that they have the tools they need to help children learn healthy nutrition and wellness habits. 

Support for Breastfeeding–WIC Program.  The substitute amendment would require the Secretary of Agriculture to create a program to recognize exemplary breastfeeding support practices.  For state agencies, this provision would establish a set of high performance bonuses to state agencies that have demonstrated either the highest proportion of breastfed infants or the greatest improvement in the proportion of breastfed infants, with an emphasis on fully breastfed infants.   In addition, this provision would expand the collection of WIC program data on breastfeeding rates by requiring the WIC Program to collect and publish breastfeeding data annually, rather than biannually, and also to publish rates of breastfeeding not just at the state agency level, but for local agencies as well.

Title III–Improving the Management and Integrity of Child Nutrition Programs

Electronic Benefit Transfer (EBT)–WIC Program.  In order to facilitate a similar transition from paper to EBT in the WIC program, the substitute amendment to the Healthy, Hunger-Free Kids Act mandates WIC-EBT implementation nationwide by October 1, 2020.  Exemptions are granted to State agencies in the case of unusual technological barriers or operational costs.  Updating technology in the WIC Program will allow State WIC staff at all levels to perform operations more effectively and efficiently, increasing accountability and streamlining program monitoring and business practices through electronic solutions. 

Sharing Materials–WIC Program.  The substitute amendment would authorize State agencies administering WIC to permit local WIC agencies or clinics to share nutrition education materials with institutions participating in the Child and Adult Care Food Program at no cost to the Child and Adult Care Food Program. 

Legislative History

On March 24, 2010, the Senate Committee on Agriculture, Nutrition and Forestry met in open session to mark up the 2010 child nutrition reauthorization bill. The Chairman’s Mark was subsequently reported, with amendment, by voice vote.

On May 5, 2010, the Senate Agriculture, Nutrition, and Forestry Committee reported the Healthy, Hunger-Free Kids Act of 2010 to the Senate.

The Senate is expected to consider this legislation on August 5, 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. 3307.

Resources

Congressional Research Service, “Child Nutrition and WIC Reauthorization: Issues and Legislation in the 111^th Congress,” available here.

Congressional Research Service, “Child Nutrition and WIC Programs: A Brief Overview,” available here.

While the economy is starting to grow and recover from the worst financial and economic crisis since the Great Depression, a real economic recovery is not possible without long-lasting, meaningful job creation.  That’s why Senate Democrats are committed to putting America back to work and strengthening our economy.  As a part of our year-long, multi-bill jobs agenda, Senate Democrats passed the bipartisan HIRE Act (P.L. 111-147) and the Travel Promotion Act (H.R. 1299, as amended) earlier this year.  These two bills have the potential to create and save well over a million jobs, strengthen American businesses, and boost our economy.

Continuing this commitment to job creation, on August 2, 2010, Senators Murray, Harkin, Reid and Schumer proposed a substitute amendment (S. A. 4575) to H.R. 1586, the FAA Air Transportation Modernization and Safety Improvement Act.  The substitute amendment includes support for local school districts to prevent imminent educator layoffs, support for state Medicaid programs, and offsets, including the closure of foreign tax loopholes, which will more than pay for the legislation.

The Senate is expected to consider this amendment the week of August 2, 2010.

Major Provisions

Education Jobs Funding

The amendment would provide $10 billion for additional support to local school districts to prevent imminent layoffs.  It is estimated that this fund will help keep nearly 140,000 educators employed next year.

The fund will be administered by the Department of Education.  After reviewing State applications, the Department will make formula allocations to States based on total population and school age population.  States will then distribute the funds to school districts through their respective funding formulas or based on each district’s share of Title I funds.  If a Governor does not submit an approvable application for funds to the Department, S.A. 4575 directs the Secretary to bypass the State government and make awards directly to other entities within the State.

The amendment includes provisions to ensure that States use these funds for the preservation of jobs serving elementary and secondary education.  Amounts from the Education Jobs Fund may not be used for purposes such as equipment, utilities, renovation, or transportation.  S.A. 4575 prohibits States from using any of these funds to add to “Rainy-Day Funds” or to pay off State debt.

In order to receive an Education Jobs Fund grant, each State must provide assurance that State spending for both K-12 and higher education (measured separately) in fiscal year 2011 will be at or above either:  (1) the fiscal year 2009 level (in aggregate or per pupil);  (2) the same percentage share of the total State budget as in fiscal year 2010, or;  (3) for states demonstrating especially dire fiscal conditions, the 2006 fiscal year aggregate dollar level or percentage share.

State Fiscal Relief

Under current law, the Federal Medical Assistance Percentage (FMAP) (the federal government’s share of Medicaid spending) is increased by 6.2 percentage points for all States, and by additional percentage points for states with high unemployment.  These temporary increases were enacted in the American Recovery and Reinvestment Act (the Recovery Act, P.L. 111-5) in February 2009 in response to the increased Medicaid caseloads and decreased state revenues resulting from the recession.  The increase is scheduled to expire on December 31, 2010.  S.A. 4575 would continue the additional federal assistance for six months, but would phase the level of assistance down.  For January – March, 2011, the federal Medicaid matching rate would be increased by 3.2 percentage points for all States, and for April – June, 2011, the federal Medicaid matching rate would be increased by 1.2 percentage points for all States.  For the same six-month period, states with high unemployment would continue to receive the additional percentage points, as they do under current law.  This will ensure that states continue to receive increases throughout state fiscal year 2011.

Offsets

Addition of Treatment of Certain Drugs for Computation of Medicaid AMP

Under current law, the calculation of the Medicaid average manufacturer price (AMP) excludes certain payments and rebates if received from or provided to entities other than retail community pharmacies.  S.A. 4575 would provide an exception to that exclusion for inhalation, infusion, instilled, implanted or injectable drugs that are not generally dispensed through retail community pharmacies, to ensure accurate calculation of AMP for these types of drugs. 

Food Stamps

Effective March 31, 2014, S.A. 4575 would return food stamp benefits to the levels that individuals would have received under pre-Recovery Act law. 

Other Spending Reductions

S.A. 4575 rescinds funding from programs that no longer require funding, have sufficient funding, or have funding that probably cannot be spent before the authority to do so expires.  Rescissions include nearly $2.4 billion from Recovery Act programs, about $2.3 billion in Department of Defense funds unrelated to current military efforts, and about $2.8 billion from other agencies.  The Department of Education’s Race to the Top, charter school fund, and the Teacher Incentive Fund are not included among these programs.

Closing Foreign Tax Loopholes

S.A. 4575 would include changes developed jointly by the Treasury Department, the Committee on Ways and Means, and the Senate Finance Committee to curtail abuses of the U.S. foreign tax credit system and other targeted abuses.  Foreign tax credits are intended to ensure that U.S.-based multinational companies are not subject to double taxation.  However, taxpayers have taken advantage of the U.S. foreign tax credit system to reduce the U.S. tax due on completely unrelated foreign income in a manner that has nothing to do with eliminating double taxation. 

Rules to prevent splitting foreign tax credits from income

To prevent double taxation (i.e., full taxation by both a foreign country and by the United States on the same item of income), taxpayers are permitted to claim foreign tax credits with respect to foreign taxes paid on income earned offshore.  Taxpayers have devised several techniques for splitting foreign taxes from the foreign income on which those taxes were paid.  With these techniques, the foreign income remains offshore and untaxed by the United States, while the foreign taxes are currently available in the U.S. to offset U.S. tax that is due on other foreign source income.  In many cases, the foreign income is permanently reinvested offshore such that it likely will never be repatriated and taxed in the U.S.  This use of foreign tax credits has nothing to do with relieving double taxation.  The President’s Fiscal Year 2011 Budget proposes to adopt a matching rule to prevent the separation of creditable foreign taxes from the associated foreign income. 

S.A. 4575 would adopt the President’s Budget proposal by implementing a matching rule that would suspend the recognition of foreign tax credits until the related foreign income is taken into account for U.S. tax purposes.  The amendment targets abusive techniques and does not affect timing differences that result from normal tax accounting differences between foreign and U.S. tax rules.  The provision would apply to all “split” foreign taxes claimed by taxpayers after December 31, 2010.

Denial of foreign tax credit with respect to foreign income not subject to United States taxation by reason of covered asset acquisitions

There are certain rules that permit taxpayers to treat a stock acquisition as an asset acquisition under U.S. tax law.  Taxpayers can obtain similar results by acquiring interests in entities that are treated as corporations for foreign tax purposes, but as non-corporate entities (such as partnerships) for U.S. tax purposes.  These transactions (“covered asset acquisitions”) result in a step-up in the basis of the assets of the acquired entity to the fair market value that was paid for the stock (or interest in the business entity).  In the foreign context, this step-up usually exists only for U.S. tax purposes, and not for foreign tax purposes.  As a result, depreciation for U.S. tax purposes exceeds depreciation for foreign tax purposes, such that the U.S. taxable base is lower than the foreign taxable base.  Because foreign taxes – and therefore foreign tax credits – are based on the foreign taxable base, there are more foreign tax credits than are necessary to avoid double tax on the U.S. tax base.  Taxpayers are using these additional foreign tax credits to reduce taxes imposed on other, completely unrelated foreign income. 

S.A. 4575 would prevent taxpayers from claiming foreign tax credits with respect to foreign income that is never subject to U.S. taxation because of a covered asset acquisition.  Subject to a transition rule, the provision would generally apply to transactions occurring after December 31, 2010.

Separate application of foreign tax credit limitation to items resourced under tax treaties

To prevent double taxation (i.e., full taxation by both a foreign country and by the United States on the same item of income), taxpayers are permitted to claim foreign tax credits with respect to foreign taxes paid on income earned offshore. To appropriately limit the use of the foreign tax credit system to the avoidance of double taxation, foreign tax credits are limited to the maximum amount of U.S. tax that could be imposed on the taxpayer’s foreign source income (i.e., 35 percent of the taxpayer’s foreign source income). Taxpayers have devised a technique to use the U.S. treaty network to enhance foreign tax credit utilization – well beyond what is needed to avoid double taxation – by artificially inflating foreign source income. With this technique, ownership of income-producing assets that would ordinarily be held by U.S.-based multinational companies in the United States (e.g., investments in U.S. securities) is shifted to foreign branches and disregarded entities. This income is often lightly taxed on a net basis by the foreign country, but the treaty prevails in categorizing the entire gross amount of the income generated by the U.S. assets as foreign source. This artificially inflates the taxpayer’s foreign source income and allows the taxpayer to use foreign tax credits to reduce taxes on foreign source income beyond the maximum amount of U.S. tax that could be imposed on such income. This unintended tax planning technique has nothing to do with relieving double taxation.

S.A. 4575 respects the treaty commitment to treating such income as foreign source, but would segregate the income so that it is not the basis for claiming foreign tax credits that have nothing to do with double taxation. In doing so, the amendment conforms the foreign tax credit treatment of taxpayers operating abroad through foreign branches and disregarded entities to the treatment already afforded to taxpayers operating through foreign corporations.  The provision would apply to taxable years beginning after the date of enactment.

Limitation on the use of section 956 for foreign tax credit planning (i.e., the “hopscotch” rule)

U.S.-based multinational companies typically have complex foreign structures designed to mitigate their worldwide tax expense.  In many cases, these structures include companies located in low-tax jurisdictions (e.g., tax havens such as Bermuda and the Cayman Islands) in a multi-tier chain of subsidiaries.  If a foreign subsidiary with a relative high tax expense distributes a dividend up through a chain of companies, the foreign tax credit on the dividend ultimately received by the U.S. shareholder is a blend of the tax rates of each foreign subsidiary in that chain.  If there is a tax-haven company in that chain, the U.S. tax due on the dividend may be significantly higher than the tax would have been if the foreign subsidiary’s dividend could have simply “hopscotched” over the chain as a direct distribution to the U.S. shareholder.  Affirmative use of section 956, which was originally enacted as an anti-abuse provision, readily accomplishes this “hopscotch” by deeming a dividend from a foreign subsidiary directly to the U.S. shareholder.  By taking advantage of this “hopscotch” rule, the foreign tax credit on this “deemed dividend” can be greater than the foreign tax credit would be on an actual dividend.  

S.A. 4575 would limit the amount of foreign tax credits that may be claimed with respect to a deemed dividend under section 956 to the amount that would have been allowed with respect to an actual dividend.  The provision would apply to the affirmative use of section 956 after December 31. 2010.

Special rule with respect to certain redemptions by foreign subsidiaries

Where a foreign-based multinational company owns a U.S. company, and that U.S. company owns a foreign subsidiary, the earnings of the foreign subsidiary are generally subject to U.S. tax when they are distributed to the U.S. shareholder.  When those earnings are then distributed by the U.S. company to its foreign shareholder, a 30 percent withholding tax applies, unless reduced by treaty or some other provision of the tax code.  Foreign-based multinational companies have devised a technique for avoiding U.S. taxation of such foreign subsidiary earnings.  This technique involves a provision of the tax code that was originally enacted as an anti-abuse rule that treats certain sales of stock between related parties as a dividend.  For example, under this provision, where a foreign-based multinational corporation sells stock in the U.S. company to its foreign subsidiary, the cash received from the foreign subsidiary in this sale is treated as a dividend from that foreign subsidiary.  This deemed dividend allows the foreign subsidiary’s earnings to completely – and permanently – bypass the U.S. tax system.  

S.A. 4575 would eliminate this type of tax planning by preventing the foreign subsidiary’s earnings from being reduced and, as a result, the earnings would remain subject to U.S. tax (including withholding tax) when repatriated to the foreign parent corporation as a dividend.  The provision would apply to acquisitions after date of enactment.

Modification of affiliation rules for purposes of rules allocating interest expense

To prevent double taxation (i.e., full taxation by both a foreign country and by the United States on the same item of income), taxpayers are permitted to claim foreign tax credits with respect to foreign taxes paid on income earned offshore.  To appropriately limit the use of the foreign tax credit system to the avoidance of double taxation, foreign tax credits are limited to the maximum amount of U.S. tax that could be imposed on the taxpayer’s foreign source income (i.e., 35 percent of the taxpayer’s foreign source income).  Taxpayers have used various techniques to minimize the amount of foreign source interest expense, which has the effect of artificially boosting foreign source income.  In turn, this permits taxpayers to utilize more foreign tax credits than would otherwise be possible, and the use of such additional foreign tax credits has nothing to do with relieving double taxation.  To prevent taxpayers from avoiding these rules, Treasury regulations prevent taxpayers from excluding foreign interest expense from the foreign tax credit limitation by placing it in foreign subsidiaries.  The regulations achieve this result by including certain subsidiaries in the U.S. affiliated group.  As a result, foreign source interest expense will be taken into account in the determination of the foreign tax credit limitation.  

S.A. 4575 would modify the affiliation rules to strengthen these anti-abuse rules.  The provision would apply to taxable years beginning after the date of enactment.

Repeal of 80/20 rules

Under current law, dividends and interest paid by a domestic corporation are generally considered U.S.-source income to the recipient and are generally subject to gross basis withholding if paid to a foreign person. If at least 80 percent of a corporation’s gross income during a three-year period is foreign source income and is attributable to the active conduct of a foreign trade or business (a so-called “80/20 company”), dividends and interest paid by the corporation will generally not be subject to the gross basis withholding rules.  Furthermore, interest received from an 80/20 company can increase the foreign source income of, and therefore the amount of foreign tax credits that may be claimed by, a U.S. multinational company.  Treasury has become aware that some companies have abused the 80/20 company rules.  As a result, the President’s FY 2011 Budget proposes to repeal these rules.  

S.A. 4575 would adopt the President’s Budget proposal to repeal the 80/20 company rules.  The amendment would also repeal the 80/20 rules for interest paid by resident alien individuals.  The amendment would include relief for existing 80/20 companies that meet specific requirements and are not abusing the 80/20 company rules.  Subject to the relief for these existing 80/20 companies, the provision would apply to taxable years beginning after December 31, 2010.

Technical correction to statute of limitations provision in the HIRE Act

S.A. 4575 would make a technical correction to the foreign compliance provisions of the Hiring Incentives to Restore Employment (HIRE) Act (P.L. 111-147) to clarify the circumstances under which the statute of limitations will be tolled for corporations that fail to provide certain information on cross-border transactions or foreign assets.  Under the technical correction, the statute of limitations period will not be tolled if the failure to provide such information is shown to be due to reasonable cause and not willful neglect.

Other Revenue Offsets

Elimination of Advanced EITC

Presently, low- and moderate-income individuals may qualify for a refundable earned income tax credit (EITC).  Individuals have the option of requesting advanced payments of the EITC throughout the year by having their payments of withheld income reduced by their employer.  The advanced EITC payment option, however, is not popular and only about three percent of eligible EITC recipients choose this option. 

S.A. 4575 eliminates the advanced EITC payment option. 

Legislative History

On March 19, 2009, the House passed H.R. 1586 by a vote of 328 – 93 (Roll number 143).  On March 22, 2010, the Senate passed H.R. 1586 with an amendment and an amendment to the title by a vote of 93 – 0 (Record vote number 61).  On March 25, 2010, the House agreed with an amendment to the Senate amendments by a vote of 276 – 145 (Roll number 190).  On August 2, 2010, Majority Leader Reid made a motion to concur in the House amendment to the Senate amendment, with an amendment, Senate Amendment 4575 (described above), and filed a cloture motion on that motion.  The education jobs funding provision included in S.A. 4575 is similar to legislation introduced by Senator Harkin(S. 3206) with 29 cosponsors. 

The Senate is expected to consider this amendment the week of August 2, 2010.

Expected Amendments

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

Administration Position

On August 3, 2010, the White House released a Statement of Administrative Policy on S.A. 4575 to H.R. 1586:

“The Administration strongly supports Senate passage of Amendment 4575 to H.R. 1586, which would provide much-needed relief to teachers and critical assistance to hard-pressed States.  Since teachers are essential to the quality of education that the Nation affords its children and to America’s long-term strength and security, the Administration strongly supports the $10 billion Education Jobs Fund to avert the layoff of hundreds of thousands of public school teachers as students return to school in the coming months.  The Administration strongly supports the extension of the temporary increase in the Federal Medical Assistance Percentage (FMAP) for six months through June 2011, which will provide critical assistance to States to help them maintain their Medicaid programs during a period of high enrollment growth and reduced State revenue.  In addition, to provide this assistance in a fiscally responsible way, the amendment includes revenue-raising provisions similar to those included in the President’s Budget, including proposals to close international tax loopholes that currently allow multinational corporations to inappropriately lower their U.S. taxes.”

Resources

Congressional Budget Office, “Budgetary Effects of Senate Amendment 4575, containing proposals related to education, state fiscal relief, the Supplemental Nutrition Assistance Program, rescissions, and revenue offsets,” available here.

Congressional Research Service, “Education Jobs Fund Proposals in the 111^th Congress,” available here.

Congressional Research Service, “Medicaid: the Federal Medical Assistance Percentage,” available here.

Congressional Research Service, “American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5): Title V, Medicaid Provisions,” available here.

July 28, 2010

On July 28, 2010, the Senate resumed consideration of the Small Business Jobs bill.  H.R. 5297, the Small Business Lending Fund Act of 2010 was originally introduced in the House on May 13, 2010.  On June 17, 2010, the House passed H.R. 5297 by a vote of 241 – 182.

The legislation was received in the Senate on June 18, 2010, and a cloture motion on the motion to proceed to the bill was invoked on June 29, 2010 by a vote of 66-33.  Per a previous agreement, all post-cloture debate time was yielded back and the motion was agreed to.  Senator Reid, for Senators Baucus and Landrieu, then offered the Substitute Amendment (S.A. 4402), the Small Business Jobs of 2010.  Senator Reid then filled the amendment tree.  S.A. 4402, which is described in detail in the original legislative bulletin, was considered in the Senate on July 19 and July 21. 

On July 21, the pending amendments and motion to H.R. 5297 were subsequently withdrawn by Unanimous Consent.  Senator Reid, for Senator Baucus, then offered S.A. 4499, a revised Substitute amendment, with the LeMieux-Landrieu amendment (S.A. 4500) as an amendment to S.A. 4499.  Senator Reid filled the amendment tree and filed cloture on the LeMieux-Landrieu amendment; the revised Substitute; and the underlying bill, H.R. 5297.

The Federal Small Business Lending Fund that had been in S.A. 4402 was struck from the revised Substitute and reintroduced as the LeMieux-Landrieu amendment (S.A. 4500).  The revised Substitute made additional changes to S.A. 4402, including provisions that would:

• Increase by $600 million the amount provided to States for grants to support small business lending programs;

• Extend the American Recovery and Reinvestment Act small business lending program that eliminates the fees normally charged for loans through the SBA 7(a) and 504 loan programs and increases the government guarantees on 7(a) loans from 75 percent to 90 percent;

• “Delist” cell phones so their cost can be deducted or depreciated like other business property, without onerous recordkeeping requirements;

• Allow holders of nonqualified annuities (that is, annuity contracts held outside of a tax-qualified retirement plan or IRA) to elect to receive a portion of the contract in the form of a stream of annuity contracts, leaving the remainder of the contract to accumulate income on a tax-deferred basis;

• Clarify source rules on guarantees, providing that amounts received directly or indirectly for guarantees of indebtedness of the payor issued after the date of enactment will be sourced like interest and, as a result, if paid by U.S. taxpayers to foreign persons will generally be subject to withholding tax.  No inference was intended with respect to the treatment of guarantees issued before the date of enactment;

• Remove a provision that would clarify the application of IRS’s bad check penalty – a provision that was enacted in H.R. 5263, the Homebuyer Assistance and Improvement Act of 2010 (P.L. 111-198); and

• Clarify that Treasury’s continuous levy authority on government payments to Federal contractors who owe back taxes to the IRS applies to amounts paid for property, as well as to payments for goods and services.

The revised Substitute (S.A. 4499) and the LeMieux-Landrieu Amendment (S.A. 4500)  were considered on July 22.  Cloture on the LeMieux-Landrieu Amendment was invoked on July 22, 2010, by a vote of 60 – 37. 

By unanimous consent on July 27, 2010, Senator Reid withdrew all pending amendments and cloture motions to H.R. 5297.  He then offered a new, consolidated Substitute, the Baucus-Landrieu Substitute Amendment (S.A. 4519), and filed cloture on both it and the underlying bill.  Senator Reid did not fill the amendment tree. 

The new consolidated Substitute incorporates the original language from S.A. 4402 (it re-inserts the LeMieux-Landrieu language on the Federal Small Business Lending Fund), adds Senator Lincoln’s Agriculture Disaster Relief language, retains the other changes made with S.A. 4499 (which are outlined above), and makes the following additional changes:

• Elimination of Advanced EITC. Presently, low- and moderate-income individuals may qualify for a refundable earned income tax credit (EITC).  Individuals have the option of requesting advanced payments of the EITC throughout the year by having their payments of withheld income reduced by their employer.  The advanced EITC payment option, however, is not popular and only about three percent of eligible EITC recipients choose this option.  The Baucus-Landrieu Substitute eliminates the advanced EITC payment option.  The provision is estimated to raise $1.131 billion over 10 years.

• Addition of Small Business Lending Fund. The Baucus-Landrieu Substitute authorizes the creation of the Small Business Lending Fund to provide Treasury with the ability to purchase preferred stock and other debt instruments from eligible financial institutions with less than $10 billion in total assets. Eligible institutions include insured depositories, bank and savings and loan holding companies, and certain community development loan funds.  Eligible institutions with less than $1 billion in total assets can apply to receive investments of up to five percent of their risk-weighted assets.  Eligible institutions between $1 billion and $10 billion in total assets can receive investments of up to three percent of risk-weighted assets.  Participating institutions will pay a five percent dividend rate on the preferred stock, but this rate can be reduced to as low as one percent if a bank demonstrates a 10 percent increase in small business lending relative to a baseline set using the four quarters prior to enactment.  The dividend rate is increased to seven percent after two years, if the bank does not increase its small business lending.  To encourage timely repayment, the rate increases to nine percent after four and a half years.  Treasury’s authority to make capital investments under the program is terminated one year after the date of enactment.  This provision is estimated to raise $1.1 billion over ten years.

• Addition of the Export Promotion Act. The Baucus-Landrieu Substitute would assist U.S. small and mid-sized businesses that are looking to export their products but do not have the resources or know-how to find new international customers.  First, it increases the activities and staffing of the Department of Commerce in carrying out its mission to promote U.S. exports.  Second, it authorizes increased funding for export grants available to industry associations and non-profit institutions.  Finally, the amendment requires that decisions to fund manufacturing and innovation grants include exporting potential as one of the application considerations.  Based on estimates provided by the Department of Commerce, this legislation is projected to create over 43,000 jobs once the funds are appropriated.  This change has no cost associated with it.

• Addition of Agriculture Disaster Relief. The Baucus-Landrieu Substitute would provide assistance for 2009 agricultural losses for crops, including specialty crops, livestock, sugar, aquaculture, cottonseed, and poultry.  In addition to approximately $1 billion in supplemental direct payments to producers with a minimum five percent loss in production, the bill would provide $42 million in cottonseed assistance, $25 million in aquaculture assistance, $21 million to a Hawaiian sugar cane cooperative, $75 million to poultry producers, $50 million for livestock producers, and $300 million for specialty crop producers.  The program is designed for payments to be issued quickly through USDA and State block grants.  States may continue to receive Conservation Reserve Program payments for the purposes of school funding.  This provision is estimated to cost $1.479 billion over ten years.

• Addition of a Provision to Reallocate Future Spending. The Baucus-Landrieu Substitute reallocates $500 million of future spending allotted in the Recovery Act and returns Supplemental Nutrition Assistance Program (SNAP), or food stamps, benefits to the levels that individuals would have received in 2017 under pre-Recovery Act law, effective August 31, 2017.  This modification reduces the cost of the bill by $500 million over ten years.

• Use of Predictive Modeling and Other Analytics Technologies to Identify and Prevent Waste, Fraud and Abuse in the Medicare Fee-for Service Program. The Baucus-Landrieu Substitute would require the Secretary to contract with private companies to conduct predictive modeling and other analytics technologies to identify and prevent payment of improper claims submitted under Parts A and B of Medicare.  The Secretary would be required to identify the ten states that have the highest risk of waste, fraud and abuse in the Medicare program, and for one year, predictive modeling and other analytics technologies would be used to identify and stop fraudulent claims in these states.  After this initial year, the Inspector General of the Department of HHS (HHS OIG) would report to Congress on the actual savings to the Medicare fee-for-service during the preceding year, projected future savings to the program as a result of the use of these technologies, and the return on investments as a result of the predictive analytics technologies.  The Secretary would be required to report to Congress on the effect, if any, the technologies have on Medicare beneficiaries and providers.  If the HHS OIG certifies more than nominal savings from the use of the technology, its use would be expanded to ten additional states for another year.  After the second year of use, the Secretary and the HHS OIG, would conduct a second analysis and certification.  If this analysis and certification are positive, the technologies would be expanded to the Medicare fee-for-service program in every state for an additional year.  Finally, after that additional year, a third analysis would be conducted, and if positive, the Secretary would expand the use of the technologies to Medicaid and the Children’s Health Insurance Program (CHIP).  If during any evaluation and certification, the HHS OIG does not certify savings, a moratorium would be imposed on the expansion of the technologies for one year.  This change increases the cost of the bill by $930 million over ten years.

Summary

While the economy is starting to grow and recover from the worst financial and economic crisis since the Great Depression, real economic recovery is not possible without long-lasting, meaningful job creation.  That’s why Senate Democrats are committed to putting America back to work and strengthening our economy.  As a part of our year-long, multi-bill jobs agenda, Senate Democrats passed the bipartisan HIRE Act (H.R. 2847, as amended) and the Travel Promotion Act (H.R. 1299, as amended) earlier this year.  These two bills have the potential to create and save over a million jobs, strengthen American businesses, and boost our economy.  In fact, May 2010 marked the fifth consecutive month of job growth.  Since the beginning of 2010, the American economy has created more than half a million jobs.

But with 15 million out-of-work Americans, and a national unemployment rate still near 10 percent, there is still work to do.  In America, the private sector is the backbone of innovation and job creation.  And within the private sector, small businesses are the principal engine of job creation.  Over the past 15 years, small businesses have generated 12 million new jobs – two-thirds of all new jobs.  But the Great Recession hit small business especially hard.  Over the course of the recession, small firms have accounted for 64 percent of net job losses.

On June 29, 2010, Senate Democrats have brought forward legislation that will promote job creation through a combination of much-needed tax credits, enhancements to Small Business Administration (SBA) lending, counseling and contracting programs, and the development of new community bank lending facilities.  The jobs bill, which is fully paid for, targets the unique needs of small businesses and community banks, giving them the tools they need to help sustain our economic recovery. 

The Small Business Jobs Act will:

• Help small businesses access capital;

• Increase small businesses’ ability to make investments;

• Promote entrepreneurship; and

• Promote equity.

Major Provisions

The following summaries are drawn heavily from analyses

provided by the Senate Finance Committee and Senate Small Business Committee.

Provisions to Promote Access to Capital

100% 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 before January 1, 2011, the exclusion is increased to 75 percent.  At the time of sale, however, 28% of the excluded gain will be treated as a tax preference item subject to the alternative minimum tax (AMT).  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.  This bill would temporarily increase further the amount of the exclusion to 100 percent of the gain from the sale of qualifying small business stock that is acquired after the date of enactment in 2010 and held for more than five years.  Additionally, the bill would eliminate the AMT preference item attributable for that sale.  This provision is estimated to cost $517 million over ten years.

General Business Credit Carried Back Five Years.  Under current law, a business’ unused general business credit may generally 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.  This bill would extend the one year carryback for general business credits to five years for certain small businesses.  This would apply to general business credits for those sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.  This provision is estimated to cost $107 million over ten years.

General Business Credit 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.  This bill would allow certain small businesses to use all types of general business credits against their AMT.  This applies to general business credits for those sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.  This provision is estimated to cost $977 million over ten years.

S Corp Holding Period. Generally, a C corporation converting to an S corporation must hold onto any appreciated assets for 10 years following its conversion or face a business-level tax imposed on the built-in gain at the highest corporate rate of 35 percent. This holding period is reduced where the 7^th taxable year in the holding period preceded the taxable year beginning in 2009 or 2010.  This bill would temporarily shorten the holding period of assets subject to the built-in gains tax to 5 years if the 5^th taxable year in the holding period precedes the taxable year beginning in 2011.  This provision is estimated to cost $70 million over ten years.

Increase Small Business Administration (SBA) Loan Limits.  This provision would increase 7(a) loan limits from $2 million to $5 million, 504 loans from $1.5 million to $5.5 million, and microloans from $35,000 to $50,000.  SBA has estimated that the loan increase would increase lending to small businesses by $5 billion in the first year.  It would increase the 7(a) Express Loans from $300,000 to $1 million to increase working capital to small businesses.  The package would also includes Intermediary Lending Pilot program, which allows the SBA to make direct loans to eligible nonprofit lending intermediaries, in turn allowing them to make loans to new or growing small businesses. It would also provide the authority to guarantee Community Development Financial Institution issued bonds to foster lending in communities that have the least access to capital.  These provisions are estimated to cost $51 million over two years.

Small Business Lending Fund.  The bill would authorize the creation of the Small Business Lending Fund to provide the Treasury Department with the ability to purchase preferred stock and other debt instruments from eligible financial institutions with less than $10 billion in total assets.  Eligible institutions include insured depositories, bank and savings and loan holding companies, and certain community development loan funds.  Eligible institutions with less than $1 billion in total assets can apply to receive investments of up to five percent of their risk-weighted assets.  Eligible institutions between $1 billion and $10 billion in total assets can receive investments of up to three percent of risk-weighted assets.  Participating institutions will pay a five percent dividend rate on the preferred stock, but this rate can be reduced to as low as one percent if a bank demonstrates a 10 percent increase in small business lending relative to a baseline set using the four quarters prior to enactment.  The dividend rate is increased to seven percent after two years, if the bank does not increase its small business lending.  To encourage timely repayment, the rate increases to nine percent after four and a half years.  Treasury’s authority to make capital investments under the program is terminated one year after the date of enactment.   This provision is estimated to raise $1.1 billion over ten years.

State Small Business Credit Access Fund.  The bill would provide $900 million in grants to States to support small business lending programs.  States will apply for the funds to be used for approved programs that leverage private lenders to extend greater credit to small businesses and manufacturers.  The program would allow states to build upon successful models for state small business programs, including capital access, loan participation, collateral support, State-run venture capital, and credit guarantee programs.  Funds would be allocated to the States using formulas based on certain State employment and unemployment rate data.  States have nine months to apply for the program.  If the state does not apply, the largest municipalities of the states can apply.  This provision is estimated to cost $900 million over ten years.

Provisions to Stimulate Investment

Increase of Section 179 Expensing and Expansion to Certain Real Property.  Under current law, taxpayers may elect to write-off the costs of certain tangible personal property that is purchased for use in the active conduct of a trade or business in the year of acquisition in lieu of recovering these costs over time through depreciation.  For the taxable year beginning in 2010, taxpayers may write-off up to $250,000 of these capital expenditures subject to a phase-out once these capital expenditures exceed $800,000.  After 2010, the thresholds revert to $25,000 and $200,000, respectively.  This bill would increase the thresholds to $500,000 and $2,000,000 for the taxable years beginning in 2010 and 2011.  Within those thresholds, this bill would allow taxpayers to expense up to $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property. This provision is estimated to cost $2.2 billion over ten years.

Extension of Bonus Depreciation. Businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule.  Congress temporarily allowed businesses to recover the costs of certain capital expenditures made in 2008 and 2009 more quickly than under ordinary depreciation schedules by permitting those businesses to immediately write-off 50 percent of the cost of depreciable property placed in service in those years.  This bill would extend the additional, first-year 50 percent depreciation for qualifying property purchased and placed in service in 2010.  This provision is estimated to cost $5.5 billion over ten years.

Provisions to Promote Entrepreneurship

Increased Deduction for Start-up Expenditures. Under current law, 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, this bill would temporarily increase the amount of start-up expenditures that may be deducted to $10,000 subject to a $60,000 phase-out threshold. This provision is estimated to cost $230 million over ten years.

Small Business Export Promotion.  The Office of the United States Trade Representative (USTR) plays an important role in promoting U.S. exports, and recently increased its focus on small business export promotion in particular.  USTR has done so in several respects, including the creation of the position of Assistant USTR for Small Business, Market Access, and Industrial Competitiveness within USTR.  This official will help ensure that USTR’s trade policy addresses the challenges facing smaller U.S. exporters and promotes global export opportunities for them.  The bill would authorize funds for USTR’s market access and trade enforcement activities targeted at helping small business increase market access and would ensure a level playing field on which to sell their U.S. made goods.  This provision has no cost associated with it.

Enhanced Small Business Trade Opportunities.  The bill would make key changes to the SBA’s international trade and export assistance programs, establishing the agency as a more robust resource for small businesses seeking export assistance.  Specifically, it would elevate the SBA’s Office of International Trade and adjusts the agency’s international trade loan programs to provide small businesses with practical, user-friendly financing options.  To provide small businesses with a unified and comprehensive network of export assistance resources, the provision would strengthen coordination between federal and state agencies as well as SBA resource partners, and increases the number of SBA Export Finance Specialists assigned to U.S. Export Assistance Centers.  Further, the provision would provide $60 million over two years to establish the State Trade and Export Promotion Grant Program (STEP), which seeks to increase the number of small businesses that export by helping them to defray startup costs associated with exporting.  In addition, this provision would leverage more than $1 billion in export capital for small businesses, helping to create or save as many as 40,000 – 50,000 jobs in 2010.  This provision is estimated to cost $69 million over two years.

Improved Small Business Federal Contracting Opportunities. The bill would remove the red tape and closes loopholes that too often put government work into the hands of multinational corporations instead of Main Street businesses. Increasing contracts to small businesses by just 2 percent can create more than 60,000 jobs.  This legislation would also provide for a periodic review of small business size standards to ensure that size indicators are consistent with inflation and industry growth of small businesses.  It would establish accountability of large business prime contractors for prompt payment to small business subcontractors.  It would also provide $10 million over two years for the Teaming Pilot Program.  This provision is estimated to cost $30 million over two years.

Relief for Community Partners.  This provision would allow SBA to waive or reduce the non-federal share of its funding requirements for up to one year, through fiscal year 2012, for certain Women’s Business Centers (WBCs) and microloan intermediaries, which provide assistance to start and grow small businesses with an emphasis on those in underserved communities.  The SBA estimates that the microloan program will create or save more than 10,000 jobs in Fiscal Year 2011.  This legislation would also provide an additional $50 million for the Small Business Development Centers to provide technical assistance to small business owners and entrepreneurs.  This provision is estimated to cost $51 million for one year.

Provisions to Promote Equity

Modify Section 6707A Penalty.  The bill would revise section 6707A of the Internal Revenue Code to make the penalty for failing to disclose a reportable transaction proportionate to the underlying tax savings.  The penalty for failure to disclose reportable transactions to the IRS would be set at 75 percent of the tax benefit received.  Reportable transactions are defined as investments in transactions that the IRS has identified as listed tax shelters or that have characteristics of tax shelters, including large losses or confidentiality agreements. The minimum penalty under this bill is $10,000 for corporations and $5,000 for individuals, and the maximum penalty is $200,000 for corporations and $100,000 for individuals.  The bill would also requires the IRS to provide an annual report to the Senate Finance Committee and to the House Ways and Means Committee giving an account of certain tax-shelter related penalties asserted during the year.  This provision is estimated to cost $176 million over ten years.

Deductibility of Health Insurance for the Purposes of Calculating Self-Employment Tax. 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.  This provision would allow 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.  This provision is estimated to cost $1.96 billion over ten years.

Enhancements to Small Business Contracting Parity Programs.  This provision makes clear that no single small business contracting program has priority over another.   It would place the small business contracting programs — HUBZone, 8(a), Service-Disabled Veterans and Women-Owned Businesses — on a level playing field when competing for federal contracts.  Until we fix this, socially and economically disadvantaged small businesses will be at a disadvantage in competing for federal contracts, holding back job creation among populations that have been the hardest hit by the unemployment crisis.  This provision has no cost associated with it.  This provision has no cost associated with it.

Improvements to Disaster Recovery to Include Aquaculture.  Currently, the SBA excludes aquaculture businesses (e.g., farmers of  algae, alligators, frogs, turtles, seaweed, clams, crawfish, fish farms/hatcheries, mussels, and oysters) from receiving SBA Economic Injury Disaster Loans (EIDLs).  This section would allow SBA, provided it does not duplicate other Federal disaster programs for that disaster, to make economic injury disaster loans to these businesses.  Currently these businesses are falling through the cracks when there is a disaster on our lakes and coasts, such as with Red Tide on the Eastern Coast, hurricanes in the Gulf of Mexico, and recently with the Deepwater Horizon oil spill.  This provision would eliminate Federal bureaucracy by allowing SBA to assist aquaculture businesses if no other agency is assisting them.  By making this simple change, we can save jobs and businesses in communities where these industries are often the main source of employment and income.  This provision has no cost associated with it. 

Require Federal Agencies to Expand Their Assessments of Economic Effects on Small Businesses.  This provision would strengthen the Regulatory Flexibility Act by requiring agencies to respond to the SBA Chief Counsel of Advocacy’s comments in the final rule.  It also seeks more independence for the Office of Advocacy by mandating a separate line item in the SBA’s annual budget.  This provision has no cost associated with it. 

Offsets – Reducing the Tax Gap

Require Information Reporting for Rental Property Expense Payments.  The bill would require persons receiving rental income from real property to file information returns to the IRS and to service providers reporting payments of $600 or more during the year for rental property expenses.  In general, there is an exception for individuals renting their principal residences, including active members of the military, from the reporting requirements.  This provision is estimated to raise $2.5 billion over ten years.

Increase Penalties for Failure to File Information Returns.  The bill would increase penalties for failure to timely file information returns to the IRS.  The first-tier penalty is increased from $15 to $30, and the calendar year maximum would be increased from $75,000 to $250,000.  The second-tier penalty would be increased from $30 to $60, and the calendar year maximum is increased from $150,000 to $500,000.  The third-tier penalty would be increased from $50 to $100, and the calendar year maximum from $250,000 to $1.5 million.  For small filers, the calendar year maximum is increased from $25,000 to $75,000 for the first-tier penalty, from $50,000 to $200,000 for the second-tier penalty, and from $100,000 to $500,000 for the third-tier penalty.  The minimum penalty for each failure due to intentional disregard is increased from $100 to $250.  The penalty amounts would be adjusted every five years for inflation.  Penalties for failure to file information returns to payees are similarly increased.  This provision is estimated to raise $421 million over ten years.

Application of Levy to Payments to Federal Vendors Relating to Property.  The bill clarifies that Treasury’s continuous levy authority on government payments to Federal contractors who owe back taxes to the IRS applies to amounts paid for property, as well as to payments for goods and services.  This provision is estimated to raise $144 million over ten years.

Application of Continuous Levy to Tax Liabilities of Certain Federal Contractors.  Generally, before the IRS can issue a levy for an unpaid Federal tax liability, it must give the taxpayer an opportunity for a collection due process (CDP) hearing.  Prior to the Federal government making disbursements to Federal contractors, an automated check for a Federal tax liability occurs.  When such a liability is identified, the IRS issues a CDP notice to the contractor but cannot levy on payments to the contractor until the CDP requirements are complete.  The bill allows IRS to issue levies prior to a CDP hearing on Federal tax liabilities of Federal contractors.  It would also provide the taxpayer with an opportunity for a CDP hearing within a reasonable time after a levy is issued.  This provision is estimated to raise $1.1 billion over ten years.

Clarify Bad Check Penalty. The bill would expand the penalty for submitting a bad check to the IRS for payments made through any commercially acceptable means, including electronic payments.  This proposal is estimated to raise $49 million over ten years.

Offsets – Increasing Flexibility in Retirement Preparation

Allow Participants in Governmental 457 Plans to Treat Elective Deferrals as Roth Contributions.  Beginning in 2011, the bill would allow retirement savings plans sponsored by state and local governments (governmental 457(b) plans) to include Roth accounts, which are currently available only in 401(k) and 403(b) plans and will be available in the Federal Thrift Savings Plan in 2011.  Contributions to Roth accounts are made on an after-tax basis, but distributions of both principal and earnings are generally tax-free.  This provision is estimated to raise $506 million over ten years.

Allow Rollovers from Elective Deferral Plans to Roth Designated Accounts.  The bill would allow 401(k), 403(b), and governmental 457(b) plans to permit participants to roll their pre-tax account balances into a Roth account.  The amount of the rollover would be includible in taxable income except to the extent it is the return of after-tax contributions.  If the rollover is made in 2010, the participant can elect to pay the tax in 2011 and 2012.  Plans would be able to allow these rollovers immediately upon enactment.  This provision is estimated to raise $5.1 billion over ten years.

Offsets – Closing Unintended Loopholes

Crude Tall Oil Ineligible for Cellulosic Biofuel Producer Credit.  In 2008, Congress enacted a $1.01 per gallon tax credit for the production of biofuel from cellulosic feedstocks in order to encourage the development of new production capacity for biofuels that are not derived from food source materials.  Some taxpayers are seeking to claim the cellulosic biofuel tax credit for processed fuels that are highly corrosive, such as crude tall oil (another waste by-product of the paper manufacturing process).  The bill would limit eligibility for the tax credit to fuels that are not highly corrosive (i.e., fuels that could be used in a car engine or in a home heating application).  This provision is estimated to raise $1.8 billion over ten years.

Legislative History

H.R. 5297, the Small Business Lending Fund Act of 2010 was introduced in the House on May 13, 2010.  On June 17, 2010, the House passed H.R. 5297 by a vote of 241 – 182. 

The legislation was received in the Senate on June 18, 2010, and a cloture motion on the motion to proceed to the bill was invoked on June 29, 2010 by a vote of 66-33.  Per a previous agreement, all post-cloture debate time was yielded back and the motion was agreed to.  Senator Reid, for Senators Baucus and Landrieu, then offered the Substitute Amendment #4402, the Small Business Jobs Act of 2010.  

Expected Amendments

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

Administration Position

On June 14, 2010, the White House released its Statement of Administration Policy on H.R. 5297:

“The Administration strongly supports House passage of H.R. 5297.  Small businesses are the backbone of the American economy and where most new jobs begin.  One of the major challenges facing small business owners is access to the credit that they need to grow and hire.  The House legislation includes two important Administration proposals to help address that problem.  First, the legislation would establish a Small Business Lending Fund that provides incentives for smaller banks to make new loans.  Second, the legislation would establish a State Small Business Credit Initiative that would spur over $20 billion in new lending through innovative State-based programs at a time when States are being forced to cut back on them due to budget shortfalls.  In addition, related legislation that the Administration understands will be incorporated into H.R. 5297 includes the President’s proposal to eliminate capital gains taxes on owners of small business stock, a step that will spur investment, innovation, and job creation by small businesses.

“In addition to the two lending initiatives described above, the Administration also looks forward to working with Congress on the initiatives the Administration has worked on with the House and Senate Small Business Committees that will allow creditworthy small businesses to expand and create jobs.”

Resources

Senate Democratic Policy Committee

          Unlocking Credit for Small Businesses: The Key to Recovery and Job Creation on

Main Street

Congressional Research Service

           Small Business: Access to Capital and Job Creation (June 2010)

Small Business Administration 7(a) Loan Guaranty Program (June 2010)

Small Business Tax Benefits: Overview of Current Law and Economic Justification (April 2010)

Distribution of Small Business Ownership and Income by Individual Tax Rates and Selected Policy Issues (February 2010)

Small Business Tax Benefits and the American Recovery and Reinvestment Act of 2009 (July 2009)

In January 2010, the Supreme Court issued a closely divided 5-4 decision in Citizens United v. Federal Election Commission.  Under this ruling, big businesses are permitted to spend unlimited amounts of money on elections, counter to long-standing law and precedent that had restricted political expenditures by corporations.  

In response, Senator Schumer introduced the Democracy Is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act, to mitigate the harmful decision by the Supreme Court in Citizens United.  This legislative response would amend the Federal Election Campaign Act of 1971 to carefully limit the ability of special interests to pour money into our election process.  The original Senate legislation enjoys the support of 49 co-sponsors who recognize the real-world impact of the Supreme Court’s decision.

On June 24, the House passed their version of the DISCLOSE Act by a 219-206 vote.  Senator Schumer subsequently introduced a revised version of the DISCLOSE Act, incorporating some of the changes made in the House, that will be considered by the full Senate (S. 3628).  The bill would provide important protections to the American people by:

·         Promoting effective disclosure of campaign-related activity by special interests;

·         Preventing foreign influence in U.S. elections; and

·         Banning “pay-to-play” by preventing government contractors and government bailout recipients from spending money on elections.

Senator Reid filed cloture on the motion to proceed to S. 3628 on July 22, 2010.  The Senate is expected to consider this legislation the week of July 26.

Background

In January, the Supreme Court’s closely divided 5-4 decision disregarded settled law by ruling that corporations are permitted to spend unlimited amounts of money on elections.  The ruling in Citizens United v. Federal Election Commission overturned long-standing law and precedent that had restricted political expenditures by corporations.  

This ruling gives corporations the same rights as individuals and will have a devastating impact on American elections.  Special interests are now allowed to spend freely on political advertising, specifically advocating the defeat or election of political candidates.  Without adequate information about who is spending the money and how much is being spent, the voices of ordinary Americans are at risk of being drowned out by direct corporate spending on elections – a practice that had been banned for decades.  

Senate Democrats understand that open and fair elections are a cornerstone of our nation’s democratic values.  Special interests, including foreign-controlled interests, should not have the same rights as American citizens.  We are committed to ensuring that individual Americans continue to have a meaningful voice in Washington.  That is why Democrats are fighting to protect American voters and restore public confidence in our electoral system. 

Major Provisions

The following summary is drawn from analyses provided by the Senate Rules Committee.

Regulating Certain Political Spending

Banning Pay-To-Play.  Under the DISCLOSE Act, government contractors would be barred from making campaign-related expenditures (for independent expenditures and electioneering communications).  This is an extension of an existing ban on contributions made by government contractors.  A $10 million contract threshold would be included to exempt small government contractors from the expenditure ban.

Financial service companies that received emergency rescue funding from the federal government should not be permitted to use taxpayer money to influence elections.  The DISCLOSE Act would prohibit TARP beneficiaries from making campaign-related expenditures.  Once the TARP money is repaid, however, the restrictions would be lifted. 

Preventing foreign influence in U.S. elections.  While foreign nationals, including foreign corporations (those incorporated overseas), are banned from making contributions or expenditures to influence U.S. elections, the opinion in Citizens United created a loophole for spending by domestic corporations controlled by foreign nationals.  To close the loophole, the DISCLOSE Act would extend the existing prohibition on contributions and expenditures by foreign nationals to include domestic corporations under the following circumstances:

·         If a foreign country, foreign government official, or a corporation principally owned or controlled by a foreign country or foreign government official owns 5 percent or more of voting shares in the corporation;

·         If any foreign national owns 20 percent or more over of the voting shares;

·         If two or more foreign nationals (each owning 5 percent or more) together own or control 50 percent or more of the voting shares;

·         If a majority of the board of directors are foreign nationals;

·         If one or more foreign nationals have the power to direct, dictate, or control the decision-making of the U.S. subsidiary; or

·         If one or more foreign nationals have the power to direct, dictate, or control the activities with respect to federal, state or local elections.

This would not affect corporations establishing separate segregated funds as long as none of the money in the funds is provided by a foreign national and no foreign national has the power to direct, dictate or control the fund. 

Preventing organizations from coordinating their activities with candidates and parties.  The DISCLOSE Act would ensure that corporations and unions are not allowed to coordinate campaign-related expenditures with candidates and parties in violation of rules that require these expenditures to be independent.

Current Federal Election Commission (FEC) rules bar corporations and unions from coordinating with Congressional candidates and parties about ads that refer to the candidate and are distributed within 90 days before a primary election or within 90 days before the generalelection.  For Presidential contests, current FEC rules prohibit coordination on ads that reference a Presidential candidate in the period beginning 120 days before a state’s Presidential primary election and continuing in that state through the general election. 

The DISCLOSE Act would:

·         For House and Senate races, ban coordination between a corporation or union and the candidate on ads referencing a Congressional candidate in the period beginning 90 days before the primary continuing through general election. 

For Presidential campaigns, ban coordination between a corporation or union and the candidate on ads referencing a Presidential or Vice Presidential candidate in the period beginning 120 days before the first Presidential primary held in any state and continuing through the general election. 

The DISCLOSE Act would not change existing law relating to coordination outside these time periods;

·         Clarify that there will be no finding of coordination based solely on a person’s sharing of their legislative or policy position; and

·         Specifically preserve the safe harbor provision for endorsements and solicitations by federal candidates and for the establishment and use of firewalls within organizations.

Political party communications.  The DISCLOSE Act would subject any payment by a political party committee for the direct costs of an ad or other communication to the coordination party expenditure limits only if the communication is controlled by or made at the direction of the candidate. 

Internet communications.  The DISCLOSE Act would reinforce the current FEC policy that internet communications are not considered to be public political advertising, unless it was placed on another person’s website for a fee, so that internet speech will not be curtailed.

Promoting Effective Disclosure of Campaign-Related Activity

The DISCLOSE Act would ensure that the public will have full and timely disclosure of campaign-related expenditures (both electioneering communications and public independent expenditures) made by covered organizations (corporations, unions, section 501(c)(4), (5), and (6) organizations and section 527 organizations).  There is an exception included for well-established 501(c)(4) organizations who have been in existence for more than ten years, have over 500,000 dues-paying members, including one in each state, and have received less than 15 percent of their funds from corporations or unions in the previous year.

The DISCLOSE Act would impose disclosure requirements that will mitigate the ability of spenders to mask their campaign-related activities through the use of intermediaries.  It would also require disclosure of both disbursements made by the covered organization and also the source of funds used for those disbursements.

Improving Reporting to the Federal Election Commission

The DISCLOSE Act would expand FEC definitions and reporting requirements:

·         Independent Expenditures.  The definition of an “independent expenditure” would be expanded to include both express advocacy and the functional equivalent of express advocacy, consistent with Supreme Court precedent.  The DISCLOSE Act would impose a 24-hour reporting requirement for expenditures of $10,000 or more made 20 days or more before an election, and expenditures of $1,000 or more made within 20 days before an election.  It would require the FEC to make this information publicly available through its website within 24 hours of receipt.

·         Electioneering Communications.  The DISCLOSE Act would expand the definition of “electioneering communications” to include all broadcast ads that refer to a candidate within the periods beginning 30 days before a primary election and 120 days before a general election.  Any such “electioneering communication” would be subject to the disclosure requirements in the DISCLOSE Act.

·         Mandatory Electronic Filing.  The DISCLOSE Act would require electronic filing for individual persons making independent expenditures or electioneering communications exceeding $10,000 at any time.

Expanding Requirements for Disclosure

Improving disbursement reporting requirements.  The DISCLOSE Act would require covered organizations to report all donors who have given $600 or more to the organization during a 12-month period if the organization makes independent expenditures or electioneering communications in excess of $10,000 out of its general treasury. 

If an organization makes a transfer of funds of $10,000 or more to another person for the purpose of making an independent expenditure or electioneering communication, the transfer itself would be treated as making an independent expenditure or electioneering communication. 

If a deemed transfer is made between affiliated organizations and is less than $50,000 aggregate in a calendar year, then it would be exempt from disclosure.  This is to avoid reporting common transfers within organizations that are not for political purposes.  If the covered organization is required to report donor information solely because of deeming, disclosure would only apply to those payments equal to or exceeding $10,000 (in aggregate).

Disclosing use of general treasury funds.  If a donor to a covered organization and the organization mutually agree at the time that the donation is made that the donation will not be used for campaign-related activity, then not later than 30 days after the organization receives the donation it would be required to provide the donor a written certification that the organization will not use the donation for campaign-related activity and it will not include any information about the person in any report filed under the DISCLOSE Act.

If a covered organization makes a disbursement for campaign-related activity, the CEO would be required to file a statement with the FEC certifying that the expenditure was not made in coordination with a candidate, that funds designated by the donor not to be used for campaign-related activity have not been used for any campaign-related activity, and that the spending has been fully disclosed and made in compliance with law.

Creating a separate campaign-related activity account.  Under theDISCLOSE Act, an organization would be permitted to establish a separate “Campaign-Related Activity” account to receive and disburse political expenditures.  If an organization makes campaign-related expenditures exclusively from its separate account, then it would be required to disclose only donors who have contributed $6,000 or more for unrestricted use or donors who have contributed $600 or more specifically for campaign-related activity. 

Enhancing disclaimers to identify sponsors of ads.  If any covered organization makes disbursements for an independent expenditure or electioneering communication, the CEO or highest ranking official of that organization would be required to appear on camera to say that he or she “approves this message,” just like candidates have to do now.  In order to prevent individuals and entities from funneling money through shell groups in order to mask their activities, the DISCLOSE Act would require:

·         The top funder of the advertisement to record a stand-by-your-ad disclaimer including the local jurisdiction and state where the individual resides; and

·         The top five donors of non-restricted funds to an organization that purchases campaign-related TV advertising to be listed on the screen at the end of the advertisement.  This method has been used very successfully in Washington State and is the model for this section in the legislation.

This disclaimer section will also apply to certain mass mailings and political robocalls.

Enhancing Reporting Requirements for Registered Lobbyists

In an effort to add to the transparency of lobbying activities, all registrants under the Lobbying Disclosure Act would be required to disclose the following information on their semiannual reports: the date and amount of each independent expenditure or electioneering communication of $1,000 or more, and the name of each candidate referred to in the communication. 

Requiring Senate Candidates to Electronically File with the FEC

In addition to the increased disclosure and transparency placed on outside organizations, the legislation incorporates language from the bipartisan S. 1858, which requires Senators to electronically file their campaign finance reports directly to the FEC. 

Disclosing Campaign-Related Activity

The DISCLOSE Act would require that all campaign-related expenditures made by a covered organization be disclosed on the organization’s website with a clear link on its homepage to either the information itself or to the FEC’s website page containing the information within 24 hours of reporting such expenditures to the FEC.  Additionally, the DISCLOSE Act would require all campaign-related expenditures made by a covered organization be disclosed to shareholders and members of the organization in any financial reports provided on a periodic and annual basis to its shareholders or members. 

Legislative History

On April 30, 2010, Senator Schumer introduced S. 3295, the Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE)Act, which was referred to the Senate Rules Committee.  The DISCLOSE Act has 49 cosponsors.  On July 21, 2010, Senator Schumer introduced S. 3628,a revised version of the Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act.  On July 22, S. 3628 was placedon the Senate Legislative Calendar under General Orders.  (Calendar No. 476).

A substantially similar bill, H.R. 5175, the Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act,was introduced into the House on April 29, 2010.  The House passed H.R. 5175 on June 24, 2010 by a vote of 219 – 206.  On June 28, 2010, H.R. 5175 was received in the Senate and placed on the legislative calendar. 

On July 22, Senator Reid filed a cloture motion on the motion to proceed to consideration of S. 3628.  The vote on cloture is scheduled on July 27, 2010.

Expected Amendments

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

Administration Position

On July 27, 2010, the White House released its Statement of Administration Policy, available here, on S. 3628:

“The Administration strongly supports Senate passage of S. 3628.  The Administration believes the DISCLOSE Act is a necessary measure so that Americans will know who is trying to influence the Nation’s elections.  S. 3628 also prevents those who should not interfere in the Nation’s elections – such as corporations controlled by foreign interests – from doing so.  Unless the strong new disclosure rules in S. 3628 are established, the Supreme Court’s decision in the Citizens United case will give corporations undue power to influence elections.  This bill is not perfect. For example, the Administration would have preferred no exemptions.  But, by providing for unprecedented transparency, S. 3628 takes great strides to hold corporations that participate in the Nation’s elections accountable to the American people.  As this is a matter of urgent importance, the Administration urges the Senate to approve the DISCLOSE Act and looks forward to working with both Houses of Congress promptly to produce a final bill for the President’s signature.”

Resources

Congressional Research Service, The DISCLOSE Act: Overview and Analysis (July 16, 2010), available here.

Congressional Research Service, Campaign Finance: Potential Legislative and Policy Issues for the 111^thCongress (June 8, 2010), available here.

Congressional Research Service, Campaign Finance Policy After Citizens United v. Federal Election Commission: Issues and Options for Congress (July 2, 2010), available here.

Congressional Research Service,Legislative Options After Citizens United v. FEC:  Constitutional and Legal Issues (May 24, 2010), available here. 

Democratic Policy Committee, Senate Democrats Are On Your Side: Standing Up to Special Interests to Defend Fair and Transparent Elections, available here.

On July 20, 2010, the Senate is expected to resume consideration of the House Message with respect to H.R. 4213.  By consent, the motion to reconsider will be agreed to, and the Senate is expected to vote on the motion to invoke cloture on the motion to concur in the House Amendment to the Senate Amendment to H.R. 4213, with a Reid amendment in the nature of a substitute 4425. 

The substitute amendment was originally introduced by Senator Reid on June 29, 2010. On June 30, 2010, the Senate voted on the motion to invoke cloture on the motion to concur in the House Amendment to the Senate Amendment to H.R. 4213 with the ReidS.A.4425.  The vote failed, 58 to 38.  [Roll Call Vote 204] 

S.A. 4425 would retroactively extend unemployment benefits until November 30, 2010.  Unemployed Americans who lost their benefits when the program expired in June would be able to begin receiving their benefits again.   Other measures included in the original substitute amendment were passed separately in H.R. 5623, the Homebuyer Assistance and Improvement Act of 2010, by unanimous consent on June 30, 2010. 

The substitute amendment extends the Emergency Unemployment Compensation (EUC) program which provides up to fifty-three weeks of extended benefits to out-of-work Americans.  The legislation extends the Extended Benefits (EB) program which provides 100 percent federal funding of up to an additional 13 to 20 weeks of benefits in certain states.   The bill eliminates the penalty for part-time employment in the Emergency Unemployment Compensation (EUC) program.

These measures would be considered emergency spending.

Summary

While the economy is starting to grow and recover from the worst financial and economic crisis since the Great Depression, real economic recovery is not possible without long-lasting, meaningful job creation.  That’s why Senate Democrats are committed to putting America back to work and strengthening our economy.  As a part of our year-long, multi-bill jobs agenda, Senate Democrats passed the bipartisan HIRE Act (H.R. 2847, as amended) and the Travel Promotion Act (H.R. 1299, as amended) earlier this year.  These two bills have the potential to create and save over a million jobs, strengthen American businesses, and boost our economy.

On May 20, 2010, Senate Finance Committee Chairman Baucus and House Ways and Means Committee Chairman Sander Levin introduced a proposal that would extend unemployment insurance benefits and eligibility for unemployment health care benefits through the end of 2010.  The legislation would also extend loan programs for small businesses and tax cuts that provide the certainty families and businesses need to create jobs, along with other important safety-net programs that families and communities depend on in this tough economic climate.  The House further revised the legislation before passing the bill on May 28, 2010.  On June 8, 2010, the Senate received the House Message with H.R. 4213.  Senator Baucus then laid down a Substitute Amendment.

Specifically, H.R. 4213, the American Jobs and Closing Tax Loopholes Act of 2010, as amended by the Baucus Substitute Amendment #4301, would:

·         Provide tax relief to businesses and state and local governments to help them invest and create jobs;

·         Provide important tax cuts to put money back in the pockets of working families;

·         Help restore the flow of credit to enable small businesses to expand and hire new workers by extending small business loan programs;

·         Expand career training programs for Americans who are looking for work;

·         Extend eligibility for unemployment insurance benefits, through November 30, 2010; and

·         Ensure that seniors, military service members and Americans with disabilities continue to have access to doctors they know and trust.

Measures included in this bill would be offset by closing tax loopholes for wealthy investment fund managers and foreign operations of multinational companies. 

Major Provisions

The following summaries are drawn heavily from analyses

provided by the Senate Finance Committee and House Ways and Means Committee.

Promoting American Jobs

Small Business

Small Business Administration.  The bill would extend the American Recovery and Reinvestment Act small business lending program that eliminates the fees normally charged for loans through the SBA 7(a) and 504 loan programs and increases the government guarantees on 7(a) loans from 75% to 90%.  Since its creation, the program has supported over $26 billion in small business lending, which has helped to create or retain over 650,000 jobs. 

Infrastructure Investments

The American Jobs Act and Closing Tax Loopholes Act includes a number of provisions that would support infrastructure investments.  The following information summarizes the infrastructure investment provisions in the legislation.

Build America Bonds.  The bill would extend the Build America Bonds program for two years (through 2012). For direct-pay Build America Bonds issued in 2011, the amount of the direct payment would be reduced from 35% to 32% of the coupon interest. For such bonds issued in 2012, the amount of the direct payment would be reduced to 30% of the coupon interest.

Recovery Zone Bonds.  The legislation would make 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 would also extend the authorization for issuing Recovery Zone bonds through 2011.

Water and Sewage Exempt Facility Bonds.  The bill would exclude water and sewage exempt facility bonds from state volume caps. The bill would also exclude bonds financing facilities that furnish water and sewage facilities from certain limitations on tribal government issuances.

Alternative Minimum Tax – State and Local Governments.  The legislation would extend the exclusion given to 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.  These provisions were included in the 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).

Direct payment in-lieu-of low-income housing credit. The bill would extend for one year (through 2010) 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.

Tax-exempt eligibility for loans guaranteed by Federal Home Loan Banks. The legislation would extend the tax-exempt eligibility for loans guaranteed by Federal Home Loan Banks.  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.

Extension of temporary small issuer rules.  The bill would extend the benefits through 2011 the temporary small issuer rules for allocation of tax-exempt interest expense that were created by the American Recovery and Reinvestment Act.

Brownfields. The legislation would extend the expensing of brownfield environmental remediation costs for one year (through 2010) and the exclusion of gain on the sale or exchange of certain “brownfield” sites from unrelated business taxable income for one year (through 2010).

Surface transportation.  The bill would modify sections of the Surface Transportation Extension Act of 2010 to distribute the Projects of National and Regional Significance (PNRS) and National Corridor Infrastructure Improvement (National Corridor) program funding.  The bill would also distribute “additional” highway formula funds (which the bill makes available in lieu of additional Congressionally-designated projects) among all of the highway formula programs rather than among just six formula programs.  The bill also contains a savings clause, in regards to the funding based on the Projects of National and Regional Significance program and the National Corridor Infrastructure Improvement program, to allow each state to receive the greater of the amount that the state received under the Hiring Incentives to Restore Employment Act or the amount the state is authorized to receive under this bill.

Business Tax Relief

R&D credit.  The bill would reinstate for one year (through 2010) the research credit.

Refundable AMT credits for corporations making domestic investments.  The bill would allow 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.

The American Jobs Act would also extend for one year, through 2010:

·         Tax benefits for certain real estate developments, the special 15-year cost recovery period for certain leasehold improvements, restaurant buildings and improvements, and retail improvements;

·         Active financing exception, from Subpart F of the tax code; 

·         Look-through treatment of payments between related controlled foreign corporations; 

·         Employer wage credit for activated military reservists, which provides eligible small business employers with a credit against the taxpayer’s income tax liability for a taxable year in an amount equal to twenty percent of the sum of differential wage payments to activated military reservists; 

·         Five-year depreciation for farming business machinery and equipment that are used in a farming business; 

·         New Markets Tax Credit, permitting a maximum annual amount of qualified equity investments of $5 billion.  In order to ensure that the NMTC encourages AMT taxpayers to make qualifying investments, the bill would also allow NMTC to be claimed against the AMT with respect to qualified investments made between March 15, 2010 and January 1, 2012; 

·         Empowerment Zones:  Businesses and individual residentwithin Empowerment Zones – specially designated economically depressed census tracts – are eligible for special tax incentives;

·         Renewal Communities:  Businesses and individual residentwithin Renewal Communities – specially designated economically depressed census tracts – are eligible for special tax incentives; 

·         District of Columbia Enterprise Zone:  Businesses and individual residents within specially designated economically depressed census tracts within the District of Columbia are eligible for special tax incentives.  The bill would also extend for one year (through 2010) the $5,000 first-time homebuyer credit for the District of Columbia; 

·         Indian employment credit:  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; and 

·         Accelerated depreciation for business property on an Indian reservation:  the placed-in-service date for the special depreciation recovery period for qualified Indian reservation property would be extended.  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. 

Pension Relief

Extended period for single employer defined benefit plans to amortize certain shortfall amortization bases.  Present law provides for a 7-year amortization period in the case of a funding shortfall.  The provision would permit single employer defined benefit plan sponsors to elect an extended 9-year amortization period with interest only being paid in the first 2 years.  Alternatively, the plan sponsor may elect a 15-year amortization period.  Under the provision, the plan’s funding obligation for a plan year is increased if the sponsoring employer makes excessive employee or shareholder payments.  The provision generally allows plan sponsors to elect relief for up to two plan years during the four-plan-year period from 2008 to 2011.

Application of extended amortization period to plans subject to prior law funding rules.  The provision provides for funding relief for plans that are subject to the prior law funding rules (i.e., plans not yet subject to the requirements of the Pension Protection Act of 2006 (PPA)).  Under the provision, a plan sponsor may elect to calculate its minimum required contribution without regard to the deficit reduction contribution rules for up to 2 plan years.  The provision provides for an alternative election under which a plan may instead amortize funding liability under a 15-year payment schedule for one plan year.  The provision generally allows plan sponsors to elect relief for plan years beginning during the three-plan-year period from 2009 to 2011.  The provision also amends the PPA by allowing certain charity plans to elect to be temporarily covered by prior law funding rules.

Suspension of certain funding level limitations.  The provision extends the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) relief for plan years beginning through 2011, allowing single employer defined benefit plans to use their funded percentage for the last plan year beginning before September 30, 2009.  The provision also permits the payment of benefits in the form of a social security leveling payment, which would otherwise be a prohibited payment for an underfunded plan, for 2010 and 2011.  In the case of plant shutdown benefits, present law also requires employers to waive any credit balances that arise from pre-funding in order to avoid funding based restrictions on the payment of the shutdown benefits.  The provision temporarily permits employers to make a contribution to the plan in the amount of the shutdown benefits in lieu of waiving credit balances.

Temporary allowance of election to apply credit balances against minimum required contribution.  Under present law, an employer may maintain a credit balance of contributions that it makes in excess of required minimum contributions, and such credits generally may be used in lieu of later year required minimum contributions unless the plan is less than 80 percent funded.  The provision allows an employer to use its credit balances for the period of 2009 to 2011 if the plan was at least 80 percent funded prior to the financial crisis.

Information reporting.  Under present law, sponsors of pension plans are required to report additional information relating to the sponsor and the plan’s finances to the Pension Benefit Guaranty Corporation (PBGC) if the plan’s funded percentage is below 80 percent.  The provision modifies the reporting requirement by requiring additional reporting if aggregate unfunded vested benefits of plans maintained by the sponsor exceed $75 million.

Rollover of amounts received in airline carrier bankruptcy.  The provision permits qualified airline employees to rollover bankruptcy settlement amounts to a traditional IRA (present law permits rollover of such settlements to a Roth IRA), and to recharacterize a prior contribution of a settlement amount to a Roth IRA as a contribution to a traditional IRA.

Optional use of 30-year amortization periods.  Under present law, multiemployer pension plans must amortize net experience losses over a 15-year period.  The provision would permit plans to elect a 30-year amortization period for certain losses incurred in either or both of the first 2 plan years ending on or after June 30, 2008.  The 30-year amortization extension is not available unless the plan is projected not to have a decrease in its funded percentage in 15 years.  If a plan elects the extended amortization periods, benefit increases are restricted for a two-year period, unless the plan actuary certifies that increases are fully paid for by additional contributions by the plan sponsor and certain funding levels are projected to be met.  The provision also extends the maximum smoothing period for determining plan asset values from 5 years to 10 years for the either or both of the first 2 plan years ending on or after June 30, 2008. 

Optional longer recovery periods for multiemployer plans in endangered or critical status.  Under present law, certain underfunded multiemployer pension plans must improve their funding levels over a 10-year funding improvement period (15 years in the case of a seriously endangered plan) or a 10-year rehabilitation period.  WRERA permitted a 3-year extension of these periods.  The provision extends the WRERA relief so as to permit up to a 5-year extension of these periods (up to an additional 2 years for plans that elected WRERA relief). 

Modification of certain amortization extensions under prior law.  Prior to the Pension Protection Act of 2006 (PPA), amortization waivers were granted by the Internal Revenue Service to multiemployer pension plans, subject to the condition that the plans demonstrate funding improvement over a specified period.  Under the provision, for purposes of determining whether these funding-based conditions have been met, plans with such extensions may treat the return on plan assets for plan years that contain any of the period from June 30, 2008 to October 31, 2008 as the interest rate used for charges and credits to the plan’s funding standard account.

Alternative default schedule for plans in endangered or critical status.  Under the PPA, a default contribution schedule applies in the case of certain underfunded plans if the collective bargaining parties fail to reach agreement on a contribution schedule.  Under the provision, the plan trustees may elect to use as the default schedule the contribution schedule that has been approved by the bargaining parties and that covers at least 75 percent of the employees actively participating in the plan.  The provision is effective to designations of default schedules on or after the date of enactment. Pursuant to section 221 of the PPA, the provision does not apply to plan years beginning after December 31, 2014.

Transition rule for certifications of plan status.  This provision provides transition rules with respect to certifications of a plan’s funded status for plans whose certifications are due after the date of enactment and for certain plans whose most recent certification does not take into account an election to take funding relief with respect to a plan year that begins on or after October 1, 2009.

Summer Jobs

Teens and young adults face some of the highest unemployment rates.  In April 2010, 25 percent of those aged 16 to 19 were unemployed and looking for a job.  The legislation would support over 300,000 jobs for youth ages 16 to 24 through support for summer employment programs.  Funding for the program will allow local Workforce Investment Boards to expand successful summer jobs programs that were funded in the Recovery Act and supported over 300,000 jobs for youth. 

Trade Provisions

Trade Adjustment Assistance for Communities – Community College and Career Training Grant Program.  Under current law, this Trade Adjustment Assistance (TAA) program provides grants to educational institutions to develop, offer and improve education and career training programs for workers eligible for TAA.  In the 2010 Reconciliation, the program received $500 million a year in mandatory funding for FY2011, FY2012, FY2013 and FY2014.  The provisions included in the bill would expand the program by authorizing such grants to also benefit individuals who are eligible for unemployment insurance, who are likely to be eligible for unemployment insurance or who have exhausted their unemployment insurance.  

Wool Trust Fund.  In 2000, Congress enacted a grant and tariff relief program for the U.S. wool industry.  The legislation created a “wool trust fund,” which provides payments to U.S. suit makers to compensate for the competitive damage to the U.S. suit industry caused by an inverted tariff.  (Inverted tariffs occur when the duty on a finished product (e.g., a suit) is lower than the duty on the inputs (e.g., fabric) used to make the finished product.)  The wool trust fund also makes payments to U.S. wool fabric and yarn producers, as well as sheep growers, to encourage more U.S. production of wool fabrics.  The trust fund is funded through the revenue collected from tariffs on wool textile imports (primarily yarns and fabrics).  The wool trust fund and tariff relief package was reauthorized in 2008.  In 2008 and 2009, the revenue generated through wool fabric/yarn tariffs shrank considerably, resulting in much lower payments to U.S. wool suit producers and other recipients under the program.  To address the immediate shortfall, the provision in the bill would use revenue generated from tariffs on other apparel products to fund the wool trust fund at the level authorized in 2004.  This provision would ensure that thousands of textile and apparel workers remain employed.

Cotton Trust Fund.  In 2006, as part of the last miscellaneous tariff bill, Congress enacted a program for U.S. cotton shirt manufacturers to respond to a commercial disadvantage caused by an inverted tariff.  The legislation created a “cotton trust fund,” which provides payments to U.S. shirt makers and U.S. cotton fabric and yarn producers, and created a pima cotton promotion program.  The trust fund is funded through the revenue collected from tariffs on cotton textiles imports (primarily yarns and fabrics).  The legislation also includes duty suspensions and reductions on high-end cotton fabrics and yarns, subject to quantitative limitations.  The authority to transfer tariff revenue to the trust fund expired on October 1, 2008, and the duty suspensions expired on December 31, 2009.  The provision included in the bill would reauthorize the program until December 31, 2013. The provision would ensure that more than 800 textile and apparel workers remain employed.

Relief for Working Families

Individual Tax Cuts

The American Jobs Act would extend for one year, through 2010:

·         Deduction of State and local general sales taxes, allowing individuals to elect 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;

·         Additional standard deduction for real property taxes on State and local real property taxes; 

·         Above-the-line deduction for qualified tuition and related expenses;

·         Above-the-line deduction for certain expenses of elementary and secondary school teachers 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.

Unemployment Insurance

The American Jobs Act would extend unemployment benefits through November 2010. 

Extends Emergency Unemployment Compensation (EUC) Program.  The Emergency Unemployment Compensation (EUC) program provides up to 53 weeks of extended benefits to qualifying individuals who have exhausted state unemployment benefits.  The number of weeks of additional benefits provided depends on a state’s unemployment rate.  After the state-provided benefits are exhausted, a worker can qualify for 34 more weeks of benefits provided by the federal government through EUC.  If a person is unemployed in a state with an unemployment rate above six percent, they qualify for an additional 13 weeks of benefits.  Unemployed workers in states with an unemployment level over 8.5 percent qualify for an additional six weeks of benefits. This program began to be phased out at the end of May 2010.  The legislation would extend EUC through November 2010.

Extends Extended Benefits (EB) program.  The federal government currently pays 100 percent of the cost of Extended Benefits (EB) programs in qualifying states.  The EB program provides between 13 to 20 additional weeks of benefits to unemployed workers who have exhausted regular state benefits or Emergency Unemployment Compensation in states with threshold unemployment rates.  The legislation would extend full federal funding of the EB program through November 2010.

Extends Federal Additional Compensation (FAC).  Last year, the Recovery Act increased weekly unemployment benefits by an additional $25 per week as part of Federal Additional Compensation (FAC).  This additional compensation is scheduled to end at the end of May 2010.  The legislation would extend FAC through November 2010.

Eliminates the penalty for part-time employment in the Emergency Unemployment Compensation (EUC) program.  Individuals eligible for unemployment benefits may unexpectedly encounter hurdles to receiving the proper benefits if they begin part-time work.  The legislation would address some of the unintended consequences and help individuals avoid disqualification for benefits.  The legislation would coordinate EUC benefits with regular benefits by providing States with a number of options to allow EUC claimants to remain eligible for the EUC program when they become newly eligible for State unemployment compensation.  Beneficiaries could qualify for these possible options if switching to state unemployment benefits would reduce their weekly unemployment benefits by at least $100 or by 25 percent.

TANF Jobs and Emergency Fund

Extension of TANF jobs and emergency fund. The American Recovery and Reinvestment Act created a new, $5 billion Emergency Contingency Fund (ECF) within the Temporary Assistance for Needy Families (TANF) program to help states with recession-related expense increases, including funding for subsidized employment programs.  These programs are scheduled to place 185,000 individuals into paid jobs by the time the fund expires, currently scheduled for September 30, 2010.  Expiration of the fund will cause some states to cease ECF-funded subsidized employment programs.  The American Jobs Act would provide $2.5 billion to extend this fund through Fiscal Year 2011 and clarify certain program rules.

Veterans Concurrent Receipt

Veterans concurrent receipt.  The bill would allow for two years concurrent receipt of both DOD military retirement pay and VA military disability pay.  No other federal employees are required to offset their federal retirement benefits if they also receive VA disability compensation.  Disability is to compensate for the impact on quality of life, an issue that military retired pay does not address.

National Housing Trust Fund

The legislation would provide a one-time capitalization of the National Housing Trust Fund (NHTF), which was created in 2008.  This would provide communities with funds to build, preserve, and rehabilitate rental homes that are affordable for very low-income households.  These homes will help address the serious shortage of affordable housing for lowest income families, including people who are unemployed or employed in the low wage work force, veterans, and elderly and disabled people on fixed incomes. 

While the number of extremely low income (ELI) renters increased from 8.9 million to 9.2 million from 2007 to 2008, the number of affordable units available to ELI renters declined from 6.2 million to 6.1 million available units.  These figures show that many renters are unable to find affordable rental options for their families.  It is estimated that an infusion of $1 billion in capital funds into the NHTF and $65 million for project-based vouchers to couple with NHTF capital grants would support the immediate production of 10,000 rental homes, creating 15,000 new construction jobs and 4,000 new jobs in ongoing operations.

Hold Harmless Provisions for Low-Income Families

Extension of poverty line hold harmless.  The American Jobs Act would keep the 2009 federal poverty guidelines in place through 2010 to avoid a reduction in eligibility for poverty-based programs.  A reduction would otherwise occur because of the decrease in the average cost of goods that results from the economic downturn.  This provision would allow all currently eligible individuals to remain eligible for poverty-based programs. 

Uniform tax disregard for federally-funded programs.  The legislation would exclude federal tax refunds from income in the month received and from resources for FY2010 for the purpose of determining eligibility for federal or federally-assisted programs.  This single standard would replace the various disregards that now apply to certain tax credits.  This provision is estimated to cost $2 million over 10 years.

Disaster Response

The American Jobs Act and Closing Tax Loopholes Act includes a number of provisions that would provide disaster assistance.  The following information summarizes those disaster assistance provisions.

Oil Spill. The legislation would increase the $1 billion liability cap of the Oil Spill Liability Trust Fund to $5 billion and increase the amount that oil companies are required to pay into the Oil Spill Liability Trust Fund to 41 cents per barrel.

National Flood Insurance.  The bill would extend the authority of National Flood Insurance Program authority to write and renew flood insurance coverage through December 31, 2010.

Mine Safety. The legislation would extend for one year (through 2010) the credit for training mine rescue team members and would allow this credit to be claimed against the AMT.  The legislation would also extend for one year (through 2010) the provision that provides businesses with fifty percent bonus depreciation for certain qualified underground mine safety equipment.

Federally Declared Disaster Areas.  The bill would extend for one year (through 2010) the provision that allows taxpayers who have suffered loss as a result of a Federally-declared disaster to claim a deduction for casualty losses and would allow these taxpayers to calculate their casualty loss deduction without regard to their adjusted gross income.

Expensing of qualified disaster expenses. The legislation would extend for one year (through 2010) 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.

Five-year carry-back period.  The bill would extend for one year (through 2010) the provision that allows businesses to carry back to the previous five years casualty losses that are attributable to a Federally-declared disaster and qualified disaster expenses.

Mortgage revenue bonds.  The bill would extend for one year (through 2010) 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.

Bonus depreciation.  The bill would extend for one year (through 2010) 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.

Increased small business expensing.  The bill would extend for one year (through 2010) 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.

Agriculture Disaster Relief. The bill would provide assistance for 2009 agricultural losses for crops, including specialty crops, livestock, sugar, aquaculture, cottonseed, and poultry. In addition to approximately $1 billion in supplemental direct payments to producers with a minimum 5-percent loss in production, the bill would provide $42 million in cottonseed assistance, $25 million in aquaculture assistance, $21 million to a Hawaiian sugar cane cooperative, $75 million to poultry producers, and $300 million for specialty crop producers.

New York Liberty Zone.  The bill would extend for one year (through 2010) the special depreciation allowance for certain real property within the New York Liberty Zone and the time for issuing New York Liberty Zone bonds.

Extend Work Opportunity Tax Credit for Hurricane Katrina Employees.  The bill would extend for one year (through August 28, 2010) the work opportunity tax credit for certain employers hiring in the Hurricane Katrina core disaster area.

Extension of increased rehabilitation credit.  The bill would extend 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.

Gulf Opportunity Zone low-income housing placed-in-service date.  The bill would extend that placed-in-service date by two years (through 2012) for additional allocations of low-income housing tax credits created by the Gulf Opportunity Zone Act of 2005.

Domestic Energy

Energy. The American Jobs Act and Closing Tax Loopholes Act includes a number of energy measures and the following information summarizes those provisions.

Biodiesel and renewable diesel. The bill would extend for one year (through 2010) the $1.00 per gallon production tax credit for biodiesel and the small agri-biodiesel producer credit of 10 cents per gallon. The bill would also extend for one year (through 2010) the $1.00 per gallon production tax credit for diesel fuel created from biomass.

Open-loop biomass facilities.  The bill would extend 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 six years. In the sixth year, the credit provided to these facilities is reduced by twenty-percent.

Motor vehicle credit for heavy hybrids.  The bill would extend for one year (through 2010) the alternative motor vehicle credit for heavy hybrids.

Biomass, biogas, natural gas and propane used as a fuel in transportation vehicles.  The bill would extend for one year (through 2010) 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 would not extend this credit any liquid fuel derived from a pulp or paper manufacturing process.

Steel industry fuel tax credit.  The bill would extend the placed-in-service date for the $2.83 per barrel-of-oil equivalent tax credit for steel industry fuel by one year (through 2010) and would allow facilities that qualify for the tax credit to receive this benefit for the first two years from the date that the facility is placed in service.

Coke and coke gas. The bill would extend the placed-in-service date for the $3.36 credit per barrel-of-oil equivalent of coke or coke gas by one year (through 2010).

Energy-efficient new homes credit. The bill would extend the tax credit for manufacturers of energy-efficient residential homes for one year (through 2010).

Energy-efficient windows. Recently, the EPA updated the Energy Star requirements to take climate regions into account for their energy-efficient window specifications.  The legislation would link eligibility for the tax credit to the Energy Star requirements.

Energy-efficient appliance tax credit. The bill would allow manufacturers of energy-efficient appliances to elect to receive a direct payment in lieu of the section 45M energy-efficient appliance tax credit.

Electric transmission property. The bill would extend for one year (for sales prior to January 1, 2011) the present law deferral of gain on sales of transmission property by vertically integrated electric utilities to FERC-approved independent transmission companies.

Marginal wells. The bill would extend for one year (through 2010) the suspension on the taxable income limit for purposes of depleting a marginal oil or gas well.

Extensions of Other Expiring Tax Provisions

Charitable Provisions

The American Jobs Act would extend for one year, through 2010:

·         Extension of provision encouraging contributions of capital gain real property for conservation purposes:  the increased contribution limits and carry forward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes;

·         Extension of enhanced charitable deduction for contributions of food inventory:  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 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 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;

·         Extension of tax-free distributions from individual retirement plans for charitable purposes:  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;

·         Extension of special tax treatment of certain payments to controlling exempt organizations:  the special rules for interest, rents, royalties and annuities received by a tax exempt entity from a controlled entity; and

·         Extension of special rule for S corporations making charitable contributions of property:  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.

Miscellaneous

Timber. The bill would extend the rules created by Congress in 2007 for real estate investment trusts (REITs) that earn timber income.

Railroads. The legislation wouldextend for one year (through 2010) the railroad track maintenance credit.

Closing Foreign Tax Loopholes

The American Jobs Act includes a package of provisions developed jointly by the Treasury Department, the Committee on Ways and Means and the Senate Finance Committee to curtail abuses of the U.S. foreign tax credit system and other targeted abuses.  This system is intended to ensure that U.S.-based multinational companies are not subject to double taxation.  The bill would eliminate $14.451 billion of foreign tax credit loopholes.

Rules to prevent splitting foreign tax credits from income.  To address abuses that have arisen in the wake of rules designed to prevent double taxation by a foreign country and by the United States on the same item of income, the President’s FY2011 Budget proposes to adopt a matching rule to prevent the separation of creditable foreign taxes from the associated foreign income.  The American Jobs Act would adopt the President’s Budget proposal by implementing a matching rule that would suspend the recognition of foreign tax credits until the related foreign income is taken into account for U.S. tax purposes.  The bill targets abusive techniques and does not affect timing differences that result from normal tax accounting differences between foreign and U.S. tax rules.  The provision would apply to all “split” foreign taxes claimed by taxpayers after the date of introduction.

Denial of foreign tax credit with respect to foreign income not subject to United States taxation by reason of covered asset acquisitions.  The bill would prevent taxpayers from claiming the foreign tax credit with respect to foreign income that is never subject to U.S. taxation because of a covered asset acquisition.  The provision would generally apply to related party transactions occurring after the date of introduction and unrelated party transactions occurring after the date of enactment.

Separate application of foreign tax credit limitation to items resourced under tax treaties.  Taxpayers have devised a technique to use the U.S. treaty network to enhance foreign tax credit utilization by artificially inflating foreign source income.  With this technique, ownership of income-producing assets that would ordinarily be held by U.S.-based multinational companies in the United States (e.g., investments in U.S. securities) is shifted to foreign branches and disregarded entities.  This income is often lightly taxed on a net basis by the foreign country, but the treaty prevails in categorizing the entire gross amount of the income generated by the U.S. assets as foreign source.  This artificially inflates the taxpayer’s foreign source income and allows the taxpayer to use foreign tax credits to reduce taxes on foreign source income beyond the maximum amount of U.S. tax that could be imposed on such income.  The bill respects the treaty commitment to treating such income as foreign source, but segregates the income so that it is not the basis for claiming foreign tax credits that have nothing to do with double taxation.  The provision would apply to taxable years beginning after the date of enactment.

Limitation on the use of section 956 for foreign tax credit planning (i.e., the “hopscotch” rule).  The bill would limit the amount of foreign tax credits that may be claimed with respect to a deemed dividend under section 956 to the amount that would have been allowed with respect to an actual dividend.  The provision would apply to the affirmative use of section 956 after the date of enactment.

Special rule with respect to certain redemptions by foreign subsidiaries.  Where a foreign-based multinational company owns a U.S. company, and that U.S. company owns a foreign subsidiary, the earnings of the foreign subsidiary are generally subject to U.S. tax when they are distributed to the U.S. shareholder.  Under certain transactions, the sales of stock between related parties – for example, where a foreign-based multinational sells stock in the U.S. company to its foreign subsidiary – is treated as a deemed dividend.  This allows the foreign subsidiary’s earnings to bypass the U.S. tax system.  The American Jobs Act would prevent a foreign subsidiary’s earnings from being reduced in this way and, as a result, the earnings would remain subject to U.S. tax (including withholding tax) when repatriated to the foreign parent corporation as a dividend. The provision would apply to acquisitions after the date of introduction.

Modification of affiliation rules for purposes of rules allocating interest expense.  Taxpayers have used various techniques to minimize the amount of foreign source interest expense, which has the effect of artificially boosting foreign source income and permitting taxpayers to utilize more foreign tax credits than would otherwise be possible.  To prevent taxpayers from avoiding these rules, Treasury regulations prevent taxpayers from excluding foreign interest expense from the foreign tax credit limitation by placing it in foreign subsidiaries.  The regulations achieve this result by including certain subsidiaries in the U.S. affiliated group.  As a result, foreign source interest expense will be taken into account in the determination of the foreign tax credit limitation.  The bill would modify the affiliation rules to strengthen these anti-abuse rules.  The provision would apply to taxable years beginning after the date of enactment.

Repeal of 80/20 rules.  The bill would adopt the President’s 2011 Budget proposal to repeal 80/20 company rules, which can artificially increase the foreign source income of, and therefore the amount of foreign tax credits that may be claimed by, a U.S. multinational company.  The bill would also repeal the 80/20 rules for interest paid by resident alien individuals.  The bill would include relief for existing 80/20 companies that meet specific requirements and are not abusing the 80/20 company rules.  Subject to the relief for these existing 80/20 companies, the provision would apply to taxable years beginning after December 31, 2010. 

Closing Other Tax Loopholes

Individual Loopholes

Taxation of carried interest.  The bill would prevent investment fund managers from paying taxes entirely at capital gains rates on investment management services income received as carried interest in an investment fund. To the extent that carried interest reflects a return on invested capital, the bill would continue to tax carried interest at capital gain tax rates. However, to the extent that carried interest does not reflect a return on invested capital, the bill would require investment fund managers to treat fifty percent (50%) of the remaining carried interest as ordinary income beginning on January 1, 2011 through December 31, 2012, and then sixty-five percent (65%) thereafter.   The rate is reduced to fifty-five percent (55%) for carried interest that does not reflect a return on invested capital but which is attributable to the sale of assets held for 7 or more years.

Ensuring collection of employment taxes earned by certain service professionals.  Some service professionals have been avoiding Medicare and Social Security taxes by routing their self-employment income through an S corporation.  These taxpayers then pay themselves a nominal salary and take the position that the remaining earnings are exempt from employment taxes.  The bill would address this abuse in situations where (1) an S corporation is engaged in a professional service business that is principally based on the reputation and skill of three or fewer individuals, or (2) an S corporation that is a partner in a professional service business.  The bill would also clarify that individuals that are engaged in professional service businesses are unable to avoid employment taxes by routing their earnings through a limited liability corporation or a limited partnership.

Corporate Loopholes

Clarification of gain recognized in certain spin-off transactions (e.g., “Reverse Morris Trust” transactions).  The bill would treat distributions of debt securities in a tax-free spin-off transaction in the same manner as distributions of cash or other property.  Subject to a transition rule, the provision would apply to exchanges after the date of enactment. 

Taxation of dividends received in certain business reorganizations (e.g., the “boot-within-gain” limitation).  The bill would repeal the boot-within-gain limitation in the case of any reorganization transaction (that is, it would apply to both domestic and cross-border transactions) if the exchange has the effect of the distribution of a dividend.  The bill would also ensure that an appropriate amount of earnings is taken into account in determining the amount of the dividend. Subject to a transition rule, the provision would apply to exchanges after the date of enactment.

Maintaining Access to Affordable Health Care

Sustainable Growth Rate

Medicare physician payment rates.  As of June 1, 2010, the sustainable growth rate formula will require a reduction in physician payments of more than 20 percent.  The American Jobs Act would provide a 2.2 percent increase in payment rates for the remainder of 2010, and a one percent update for 2011.  Rates would return to current law levels in 2012. 

Federal Medicaid matching rate (FMAP)

Extension of temporary increase in Federal Medicaid matching rate (FMAP).  Under current law, the federal Medicaid matching rate is increased by 6.2 percentage points for all States, and by additional percentage points for states with high unemployment.  These temporary increases were enacted in ARRA in February 2009 in response to the increased Medicaid caseloads and decreasing state revenues resulting from the recession.  The increase is scheduled to expire on December 31, 2010.  The bill would extend these increases for six months, through June 30, 2011.  This will ensure that states continue to receive these increases throughout state fiscal year 2011.

Other Health Provisions

Additional health provisions include:

·         Addition of inpatient drug discount program to 340B drug discount program.  This provision would extend discounts provided by drug manufacturers on outpatient drugs to inpatient drugs provided for use by patients who are uninsured or do not have prescription drug insurance coverage, for certain 340B-eligible entities.

·         Continued inclusion of orphan drugs in definition of covered outpatient drugs with respect to children’s hospitals under the 340B drug discount program.

·         Extension of Section 508 reclassifications.  This provision would extend hospital geographic reclassifications, scheduled to expire on September 30, 2010, through FY 2011.

·         Repeal of delay of RUG-IV.  This provision would repeal the existing delay on implementation of Version 4 of the Resource Utilization Groups (RUG IV) for purposes of reimbursing skilled nursing facilities, allowing it to take effect on October 1, 2010.

·         Funding for claims reprocessing.  This provision would provide funding for the Centers for Medicare & Medicaid Services (CMS) to reprocess claims affected by Medicare payment policy extensions that were enacted into law on March 23, 2010.

·         Conforming amendment related to waiver of coinsurance for preventive services.  This provision would clarify that waivers of cost sharing and deductibles for Medicare preventive services apply when those services are furnished at Federally Qualified Health Centers and Rural Health Clinics.

·         Establishment of CMS-IRS data match to identify fraudulent providers.  This provision would help to identify potentially fraudulent providers sooner by authorizing CMS to collaborate with the IRS to determine whether health care providers applying to participate in Medicare have failed to file federal tax returns or have delinquent tax debts.

·         Clarification of effective date of Part B special enrollment period for disabled TRICARE beneficiaries.  To ensure that eligible beneficiaries are able to take advantage of a special enrollment period (SEP), this provision would clarify the effective date of the SEP for disabled Medicare beneficiaries who are also eligible for TRICARE.

·         Limitation on reasonable costs payments for certain clinical diagnostic laboratory tests furnished to hospital patients in certain rural areas.  This provision would repeal the reinstatement of cost-based payments for lab services at certain small hospitals, scheduled to take effect after July 1, 2010.  This policy previously expired on July 1, 2008.

·         Adjustment to Medicare payment localities.  This provision would update the method used to determine the localities used for Medicare’s physician geographic adjustment in California, utilizing an approach that is based on metropolitan statistical areas.

·         Medicaid and CHIP technical corrections.  This provision would make technical corrections to Medicaid and CHIP relating to exclusion from participation, income eligibility levels for children, measurement of payment error rates, coverage of children of state employees, and payment for electronic health records.

·         Clarification of three-day payment window.  This provision would conform current law, which includes all services related to an inpatient admission in a bundled payment for that admission, with recent practice by preventing future unbundling of services and submission of adjustment claims seeking separate and additional Medicare payments.   

Other Provisions

Cobell and Pigford settlements.  The bill also contains $4.6 billion to pay for settlement of both the Cobell and Pigford class action lawsuits.  The Cobell settlement concerns the government’s management and accounting for over 300,000 American Indian trust accounts, and the Pigford settlement ends a decades old discrimination lawsuit brought by black farmers against the USDA.

Extension of State Court Improvement Programs. The legislation would fund the extension of programs that currently provide funds to help courts improve the processing of foster care and adoption cases.  The funding would support a one year extension.

Legislative History

On December 7, 2009, H.R. 4213 was introduced in the House and agreed to by a 241 to 181 vote on December 9 (Roll no. 943). 

On December 10, the measure was received in the Senate and referred to the Committee on Finance.  On March 1, the Senate Committee on Finance discharged H.R. 4213 by Unanimous Consent.  Later that day, the measure was laid before the Senate by unanimous consent.  Senators Baucus, on behalf of Senator Reid and himself, offered a substitute amendment (S.A. 3336), the American Workers, State, and Business Relief Act.

Cloture was invoked on S.A. 3336 on March 10, and the substitute amendment was agreed to by Unanimous Consent.  On the same day, the Senate passed H.R. 4213,as amended by the Baucus substitute, with a vote of 62 to 36.  On March 18, a message on Senate action was sent to the House.  Senator Baucus and House Ways and Means Chairman Sander Levin then worked with House and Senate leadership and their colleagues to merge the two packages into the American Jobs and Closing Tax Loopholes Act.

On May 28, 2010, the House held two roll call votes: By a vote of 215-204, the House concurred in the Senate Amendment, as amended by the House, except for the portion comprising Sec. 523., Medicare Sustainable Growth Rate Reform; by a vote of 245-171, the House concurred in the Senate Amendment, as amended by the House comprising the portion Sec. 523., Medicare Sustainable Growth Rate Reform.

On June 8, 2010, the Senate received the House Message with H.R. 4213.  Senator Baucus then laid down a Substitute Amendment.

Expected Amendments

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

Administration Position

On May 24, 2010, the White House released its Statement of Administration position on the House Amendment to Senate Amendment to H.R. 4213:

“The Administration strongly supports House passage of the House Amendment to the Senate Amendment to H.R. 4213.  Passage of this legislation will provide much-needed relief to families, including extended access to health care benefits for workers who have lost their jobs and extended unemployment insurance benefits for millions of Americans who are looking for work.  It will also provide critical assistance to hard-pressed States while encouraging continued job creation by America’s businesses.  The importance of longer-term extensions for various authorities and programs – and the certainty that such extensions bring – has been highlighted by the severe problems caused by interruptions in authorities for these programs.

“The House Amendment contains several important provisions, including: (1) an extension of extended unemployment insurance and COBRA subsidies through the end of the year; (2) reform of the physician payment formula; (3) an extension of increased American Recovery and Reinvestment Act (ARRA) Federal Medical Assistance Percentage (FMAP) rates that allow for additional Federal support for State Medicaid programs; (4) an extension of the Temporary Assistance for Needy Families (TANF) Emergency Fund to continue support for State-subsidized employment programs for needy parents and youth, among other purposes; (5) an extension of ARRA subsidies so that the Small Business Administration can continue certain lending programs with reduced fees and higher guarantees; (6) additional resources to create summer jobs for youth; (7) targeted pension-funding relief; and (8) extension of provisions that will support affordable housing and create jobs.

“The President has long supported comprehensive, fiscally responsible reform of the physician payment formula to improve the quality of care.  The House Amendment provision represents significant progress toward that goal, and the Administration strongly supports its passage.

“The Administration applauds the Congress for including provisions in the bill to fulfill the obligations set forth in the Cobelland Pigford II settlement agreements.  The settlements that have been achieved are historic and provide full and final resolution to two long-running disputes – a case involving the management of individual Indian trust accounts related to Indian lands and claims of prior discrimination brought by black farmers against the Department of Agriculture.

“The bill also includes several other important measures supported by the Administration.  The extensions to expiring tax cuts include several provisions that will encourage companies to invest in new technologies and create more high-tech jobs for the 21st century, including extending the research and experimentation (R&E) tax credit for another year.  The legislation also extends the tax credit for biodiesel and renewable diesel, providing clean energy companies with the certainty they need to make critical investments in the Nation’s energy future.

“Finally, the House Amendment includes revenue-raising provisions similar to those included in the President’s budget, including proposals to close international tax loopholes that currently allow companies to shift profits among overseas jurisdictions to lower their U.S. taxes and a sensible proposal to make certain that investment managers pay taxes on their earnings at rates closer to the ordinary income tax rates paid by other workers in the Nation’s economy.

“The Administration looks forward to continuing to work with the Congress on these and additional measures to spur private sector job creation, including measures focused on small businesses (including lending provisions, zero capital gains for small businesses and bonus depreciation) and energy (including retrofits and an expansion of the 48C tax credit for manufacturing).”

Resources

Congressional Research Service

Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System (May 24, 2010)

The Housing Trust Fund:  Background and Issues (May 24, 2010)

Certain Temporary Tax Provisions Expiring in 2009 (May 18, 2010)

Unemployment and Health Insurance: Current Legislation and Issues (April 26, 2010)

Health Insurance Premium Assistance for the Unemployed: The American Recovery and Reinvestment Act of 2009 (April 21, 2010)

American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5): Title V, Medicaid Provisions (March 17, 2009)

Senate Democratic Policy Committee

Democrats Are Committed to Putting Americans Back to Work

On Your Side: Democrats Are Delivering Tax Cuts for the Middle Class

Senate Democrats Are On Your Side: Supporting Americans Looking for Work

Senate Democrats Are On Your Side: Bipartisan HIRE Act Creates Jobs and Strengthens Businesses

Senate Democrats Are On Your Side: Creating Jobs, Supporting Economic Recovery

Senate Democrats Are Fighting for Americans Looking for Work

The American Workers Act Helps Those Hit Hardest by the Recession

The Senate has entered into a unanimous consent agreement to consider S.J. Res. 26 on June 10, 2010, which would disapprove of the Environmental Protection Agency’s (EPA) endangerment and cause or contribute findings.  The EPA’s action responds to Supreme Court’s order in Massachusetts v. EPA that it make a determination about whether or not greenhouse gases as pollutants could “reasonably be anticipated to endanger public health or welfare” pursuant to Section 202 (a) of the Clean Air Act.

The EPA responded to the direction provided by the Supreme Court by proposing to find that:

• The emission of six greenhouse gases (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride) threaten the public health and welfare of current and future generations; and

• The combined emissions of carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons from new motor vehicles and motor vehicle engines contribute to the atmospheric concentrations of these key greenhouse gases and, hence, to the threat of climate change.

This judgment was based on scientific findings which show that:

• Concentrations of greenhouse gases are at unprecedented levels compared to the recent and distant past;

• The effects of climate change observed to date and projected to occur in the future will have impacts on the public’s health and welfare; and

• Emissions of greenhouse gases from on-road vehicles regulated by the Clean Air Act contribute to climate change.

EPA Administrator Jackson signed the endangerment and cause or contribute findings on December 7, 2009, after the EPA had held a 60-day comment period, two public hearings, and reviewed 380,000 public comments.  The EPA Administrator’s finding became effective on January 14, 2010.

Major Provisions

S.J. Res. 26 states that “Congress disapproves the rule submitted by the Environmental Protection Agency relating to the endangerment finding and the cause or contribute findings for greenhouse gases under section 202(a) of the Clean Air Act and that such rule shall have no force or effect.”

Legislative History

On January 21, 2010, under the authority granted to Congress by the Congressional Review Act, Senator Murkowski introduced a resolution that disapproved of the EPA’s endangerment finding.

On May 25, 2010, the Senate entered into a unanimous consent agreement with respect to the consideration of S.J. Res. 26.  The following outlines the terms of that unanimous consent agreement.

On Thursday, June 10, the Republican Leader or his designee will be recognized to move to proceed to S.J. Res. 26. There will be up to 6 hours for debate on the motion to proceed to the joint resolution, with the time equally divided and controlled between Senators Boxer and Murkowski or their designees.  Upon the use or yielding back of time, the Senate will proceed to vote on the motion to proceed.

If the motion is successful, there would be up to 1 hour for debate on the joint resolution and upon the use or yielding back of time the Senate would proceed to vote on passage of the joint resolution.

If the motion to proceed is defeated, then no further motions to proceed to the joint resolution would be in order.

No amendment or motion on the subject of the EPA greenhouse gas regulations or relating to the endangerment finding is in order prior to consideration of the motion to proceed to S.J. Res. 26.

No amendments are in order to the joint resolution and all other provisions of the statute governing consideration for the joint resolution remain in effect during the pendency of this agreement.

Senate Floor Consideration

The Congressional Review Act (CRA) established a set of procedures for the consideration of resolutions of disapproval on the Senate floor.  The following information summarizes those established CRA procedures.

The joint resolution is introduced and subsequently is referred to the appropriate committee of jurisdiction.  If a committee does not report the resolution, it can be discharged from committee by a petition signed by 30 Senators. After the joint resolution has been reported by the appropriate committee or discharged by petition, it is placed on the Senate calendar.

Once the joint resolution is placed on the Senate calendar, it is in order to consider a motion to proceed to the consideration of the joint resolution at any time.  The CRA provides that all points of order against the joint resolution (and against consideration of the joint resolution) are waived.  The motion to proceed is not debatable and is also not subject to amendment, or to a motion to postpone, or to a motion to proceed to the consideration of other business.

The CRA also provides that a motion to reconsider the vote by which the motion is agreed to or not agreed to is also not in order.  If a motion to proceed to the consideration of the joint resolution is agreed to, the joint resolution shall remain the unfinished business of the Senate until the joint resolution is disposed of.

If the motion to proceed were agreed to, debate on the joint resolution would be limited to no more than 10 hours (Debate may be less than 10 hours if the Senate agrees to a non-debatable motion to limit debate).  Amendments and motions to recommit are not in order.  The 10 hours of debate would be divided equally between those favoring and those opposing the joint resolution.  Immediately following the conclusion of debate on the joint resolution, the Senate is required to vote on final passage of the joint resolution.

Procedure After Senate Consideration

If S.J. Res 26 were to reach the President’s desk and if the President were to veto the joint resolution, the Congressional Review Act provides no expedited procedure for overriding a veto of a joint resolution of disapproval.  However, a veto does trigger a 30 day of session waiting period during which the regulation will not become effective, pending possible congressional action on the veto. (As with other vetoes, the question of taking up the veto message is not subject to extended debate, but the Senate is not required to consider the veto.)

The Senate generally enters into a unanimous consent agreement to limit time for debate on the question of overriding the veto.  However, the question of overriding a veto is debatable under the rules of the Senate and without a unanimous consent agreement the question could be debated as long as any Senator sought recognition to discuss it (unless cloture is filed and invoked on the veto).

In the event that S.J. Res. 26 were enacted into law (approved by the Senate, House, and signed by the President or allowed to become law without his signature or via a successful veto override), the EPA would be prohibited from:

• Reissuing the disapproved finding; and

• Issuing any future finding that was substantially similar to the disapproved finding.

The EPA would only be able to reissue the finding or issue a substantially similar finding if Congress specifically gave EPA the authority to do so after the date of the joint resolution were enacted into law.

Expected Amendments

Pursuant to the Congressional Review Act, the consideration of amendments on the Senate floor is not in order.  Although the Congressional Review Act does not expressly prohibit the committee of jurisdiction (in this case EPW) from recommending amendments to the Senate its prohibition against amendments on the floor would presumably prevent the Senate from considering any committee amendments.

EPA Analysis

EPA-HQ-OAR-2009-0171 is not a major rule.

EPA has completed a regulatory impact analysis on the proposed rulemaking to establish light-duty vehicle greenhouse gas emission standards and corporate average fuel economy standards.  This document can be accessed by clicking here.

Additional Reading

Senate Democratic Policy Committee, “The Consequences and Significance of the Murkowski Disapproval Resolution,” May 13, 2010, available by clicking here.

Senate Democratic Policy Committee, “The Oil Consumption and Greenhouse Gas Emission Metrics of the Joint EPA/NHTSA Fuel Economy Standards,” May 13, 2010, available by clicking here.

Congressional Research Service, “Disapproval of Regulations by Congress: Procedure Under the Congressional Review Act,” October 10, 2001, available by clickinghere

Administration Position

On June 8, 2010, the Obama administration issued a Statement of Administration Policy (SAP) on S.J. Res. 26.  The SAP states that “if the President is presented with this Resolution of Disapproval, which would seriously disrupt EPA’s ability to address the threat of GHG pollution, as well as the multi-agency Federal GHG and fuel economy program, his senior advisors would recommend that he veto the Resolution.”

The full SAP can be accessed by clicking here.

H.R. 4899, the Supplemental Appropriations Act, 2010, includes provisions to meet the needs of our troops and fund military operations and security initiatives in Iraq, Afghanistan, and Pakistan.  The bill also includes funding for expanding benefits for disabled veterans, and to respond to natural disasters, including the devastating earthquake in Haiti.  

The Senate version of the legislation would provide a total of $58.86 billion for Fiscal Year 2010, including $45.4 billion in discretionary funding and $13.4 billion in mandatory funding, equal to the President’s request.  This amount includes $32.8 billion for the Department of Defense for operations, personnel costs, and equipment reconstitution related to overseas contingency operations, primarily in Afghanistan, including $2.6 billion for the Afghan Security Forces Fund and $1 billion for the Iraqi Security Forces Fund; $5.1 billion for the Federal Emergency Management Agency (FEMA) to pay for the costs of past disasters; $2.8 billion to support relief efforts in Haiti; and $68 million for the Gulf of Mexico oil spill response.

This Legislative Bulletin draws from a summary prepared by the Senate Committee on Appropriations staff, the Committee report, (111-188), as well as the bill language.

Major Provisions

Chapter 1 – Department of Agriculture

Emergency Forest Restoration Program.  The bill would provide $18 million for the Program to restore forest lands damaged by natural disasters that occurred on or after January 1, 2010.

Food for Peace Title II Grants.  H.R. 4899 includes $150 million for P.L. 480 Title II grants, equal to the President’s request, for humanitarian assistance in response to the January 12, 2010 earthquake in Haiti.

Chapter 2 – Department of Commerce

National Telecommunications and Information Administration.  The bill rescinds $111.5 million in unobligated balances for the Digital-to-Analog Converter Box Program.

Economic Development Assistance Programs.  H.R. 4899 includes $49 million for economic development assistance in Presidentially-declared disaster areas to provide disaster relief, long-term recovery and restoration of infrastructure.   

National Oceanic and Atmospheric Administration (NOAA) Operations, Research, and Facilities.  The legislation would provide $5 million for NOAA to work with federal, state, and local partners to provide disaster relief to fisheries.

Chapter 3 – Department of Defense

H.R. 4899 includes $32.79 billion ($352 million below the President’s request) in non-emergency, discretionary spending authority for the Department of Defense, for operations, personnel costs, and equipment reconstitution related to overseas contingency operations in Iraq and Afghanistan and for emergency relief activities related to the earthquake in Haiti.  The bill would:

• Fully fund the addition of 30,000 military personnel in Afghanistan;

• Provide an additional $500 million in general transfer authority;

• Include $924.5 million to acquire and sustain high priority intelligence, surveillance and reconnaissance (ISR) initiatives;

• Provide an additional $616 million to cover fuel shortfalls identified by the Department of Defense; and

• Redirect funds to initiate solutions for four Joint Urgent Operational Needs Statements: Very Low Collateral Damage Precision Air Drop Weapon, Special Operations Command Central (SOCCENT) ISR Payloads, Marine Corps Unmanned Aerial Systems Resupply, and Explosive Ordinance Disposal Team equipment.

Highlights of the bill’s proposed defense-related appropriations include:

  ** Please see the committee report for further detail on proposed funding levels.

Military Personnel.  H.R. 4899 includes $1.8 billion for pay, allowances, and other personnel costs for Active, Reserve, and Guard troops activated for duty in Iraq, Afghanistan, and other contingency operations.      

Operation and Maintenance (O&M). H.R. 4899 includes $24.6 billion for operation and maintenance, $435 million below the President’s request.  The bill includes:

• Afghanistan and Iraq Security Forces Funds.  The bill includes $2.6 billion for the Afghanistan Forces Fund and $1 billion for the Iraq Security Forces Fund, both equal to the President’s request, to train and equip these forces and assist their governments in assuming greater responsibility for their nation’s security.

• Readiness programs. H.R. 4899 would fully fund key readiness programs to prepare military forces for combat operations and other missions, including OPTEMPO flying hours and steaming days, depot maintenance, training, spare parts, and base operations.

• Troop expansion in Afghanistan.  The bill would provide full funding for approved and announced additional units to support the troop expansion in Afghanistan.  These include one-time costs associated with establishing facilities and infrastructure as well as increased support contracts for new force levels.

• Guam. H.R. 4899 includes $50 million for the Department of Defense to transfer to the Department of Transportation in order to carry out required program planning, design and construction of projects for the Port of Guam Improvement Enterprise Fund to improve facilities, relieve port congestion and provide greater access to port facilities.

• Emergency flood repairs.  The bill includes $72.5 million to the Navy for emergency flood repairs.

Procurement.  H.R. 4899 includes a total of $4.9 billion for procurement. 

Aircraft.  The bill would:

• Add funds to replace two Army helicopters lost on the battlefield
• Provide additional funds for ballistic protection of Army helicopters in Afghanistan
• Fund the procurement of Navy helicopters lost in combat operations
• Fully fund 5 MC-12 Liberty aircraft for the Air Force
• Add funds to buy ground stations and fully outfit MQ-8 UAVs for the Central Command area of responsibility

Vehicles/Force Protection.  The bill would:

• Provide $1.1 billion for Mine Resistant Ambush Protected vehicles (MRAPs), equal to the President’s request
• Fully fund Special Operations Command’s requirement for additional protective equipment
• Fully fund additional Army counter-IED jamming devices and upgrades
• Add funds to improve the Army’s automated biometric identification capacity
• Fully fund the Army’s Ground Standoff Mine Detection System
• Provide funds for the Army Base Expeditionary Targeting and Surveillance System
• Fully fund Army physical security systems (vehicle and personnel scanners)
• Fully fund Army Counter Rocket, Artillery and Mortar Systems
• Provide funds for the Army Mine Protection Vehicle Family program
• Approve a Marine Corps request to redirect $144 million to procure urgently needed lightweight mine rollers, Improved Recovery Vehicles, Assault Breacher Vehicles, and field medical equipment

Research, Development, Test and Evaluation (RDT&E).  H.R. 4899 would provide $273.7 million for RDT&E, which is $3.63 million below the President’s request.  Funding is directed to support force protection, improvements, and enhancements for equipment being used in support of overseas contingency operations in Iraq and Afghanistan, and classified activities.

Revolving Management Funds.  The bill would provide $1.1 billion for the Defense Working Capital Funds, which is $159.9 million above the requested amount.  Funds are provided to the services’ working capital fund accounts for fuel requirements as well as funds for the Defense Logistic Agency’s Supply Chain and Energy Management initiatives.

Defense Health Program.  H.R. 4899 includes $33.4 million for the Defense Health Program, which is equal to the requested amount.

Drug Interdiction and Counter-Drug Activities.  The bill includes $94 million for drug interdiction and counter-drug activities in Afghanistan, Pakistan, and Central Asia.

Joint Improvised Explosive Device Defeat Fund (JIEDDO). H.R. 4899 does not include any funds for the Joint Improvised Explosive Device Defeat Organization (JIEDDO) program ($400 million below the requested amount).  As outlined in the Committee Report, while the Committee recognizes the vital role of JIEDDO in protecting our troops and continues to support JIEDDO’s efforts, “it does not condone the use of JIEDDO funds for purposes beyond a direct focus on the IED threat.”  The bill would transfer the $400 million requested by JIEDDO to the Army.

Chapter 4 – Department of Defense – Civil

Army Corps of Engineers.  H.R. 4899 includes funding for the Corps as follows:

• $5.4 million for investigations to study the flood prone areas in states affected by severe storms and flooding
• $18.6 million for the Mississippi River and tributaries to dredge eligible projects, address emergency situations and rehabilitate and repair damage to federal projects caused by natural disasters
• $173 million for operation and maintenance to dredge navigation projects in response to, and to repair damage to federal projects caused by, natural disasters
• $20 million for flood control and coastal emergencies for the Corps to prepare for flood, hurricane, and other natural disasters, and fund repairs and other activities in response to emergencies.

Chapter 5

Department of the Treasury

Departmental Offices.  H.R. 4899 includes $690 million for the Departmental Offices account to fund costs associated with the Treasury Attache program in support of earthquake recovery and reconstruction efforts in Haiti.  The program supports the Treasury Department in promoting sound economic policies in Haiti in pursuit of mutually beneficial economic outcomes for both Haiti and the United States.

Office of the Inspector General.  The bill would rescind $1.8 million in prior appropriations to account for carryover balances from Fiscal Year 2009.

Executive Office of the President

National Security Council: Cybersecurity Incident Response.  H.R. 4899 includes a provision that directs the National Security Council, in coordination with the Secretary of Homeland Security, to provide a report to appropriate congressional committees no later than November 15, 2010 on the development and details of the National Cyber Incident Plan.

Independent Agencies

Financial Crisis Inquiry Commission.  The bill would provide $1.8 million for the Commission to continue its investigations and research related to the causes of the current financial and economic crisis in the United States.  In accordance with the Recovery Act of 2009 (P.L. 111-21), the Commission will deliver its comprehensive report on December 15, 2010.

Chapter 6 – Department of Homeland Security

Coast Guard.  H.R. 4899 includes $50 million for Coast Guard operating expenses, $5 million above the requested amount, to be used for emergency relief, rehabilitation, and other disaster response activities related to Haiti following the January 12, 2010 earthquake.  It includes an additional $15.5 million, not included in the request, to replace a Coast Guard H-60 medium-range recovery helicopter that crashed on March 3, 2010.

Cybersecurity Pilots.  The bill directs the Departments of Defense and Homeland Security, along with other relevant federal agencies, to undertake cybersecurity pilot programs, provides $10 million in funding for the pilot programs, and requires an execution plan to be submitted to the House and Senate Appropriations Committees no later than 90 days after the bill’s enactment.

Federal Emergency Management Agency (FEMA).  H.R. 4899 would provide $5.1 billion for the FEMA Disaster Relief Fund, equal to the President’s request.  This amount is necessary to pay for known costs of past disasters, including Hurricanes Katrina, Ike, and Gustav, the Midwest floods of 2008, and the California wildfires, as well as for addressing the needs that arise from new disasters.  Without this emergency funding, FEMA estimates that the Fund will be exhausted in June, and would be unable to pay claims for either old or new Presidentially-designated disasters.

Further, the bill includes a provision that directs FEMA to create an interagency taskforce, to include the U.S. Army Corps of Engineers as well as the Office of Management and Budget to track, address, and where possible, resolve concerns stemming from FEMA flood insurance mapping efforts in communities with issues related to flood control infrastructure protection.  The provision establishes quarterly reporting requirements to relevant congressional committees.

United States Citizenship and Immigration Services (USCIS).  The bill would provide $10.6 million, $4.4 million below the requested amount, for USCIS for reception and settlement services provided under the Cuban/Haitian Entrant Program, fee waivers for eligible Haitians granted Temporary Protected Status (TPS), and the humanitarian parole program to bring medical evacuees and certain categories of Haitians to the United States.  The lower level of recommended funding reflects a lower-than-anticipated level of TPS application submittals.

Chapter 7 – Department of Labor

H.R. 4899 would provide $18.2 million for mine safety activities and legal services related to the Department of Labor’s caseload before the Federal Mine Safety and Health Review Commission.  It also provides authority to the Secretary to allocate funds to the Mine Safety and Health Administration, provided that congressional Appropriations Committees are given at least 15 days advance notice.

Department Health and Human Services

The bill includes $220 million, equal to the President’s request, for critical response and relief activities related to the Haitian earthquake, including the provision of medical care of evacuees transported to the United States, cash and medical assistance for humanitarian parolees and the state share of Medicaid and Children’s Health Insurance Program services, as well as the development of surveillance systems to track disease outbreaks and other public health infrastructure in Haiti.

Related Agency – Federal Mine Safety and Health Review Commission

H.R. 4899 includes $3.8 million, not included in the request, for reducing the backlog of cases at the Federal Mine Safety and Health Review Commission.

Chapter 8 – Legislative Branch

Capitol Police.  The bill includes $12.9 million for the Capitol Police for ongoing acquisition and installation of a new interoperable radio system to replace their analog system.  

Chapter 9 – Military Construction

H.R. 4899 includes $656.8 million, which is $127.5 million above the requested amount, for military construction in Afghanistan to support ongoing operations in Afghanistan.

Department of Veterans Affairs

The bill would provide $13.4 billion in mandatory funding for the Department of Veterans Affairs (VA), as requested, for disability compensation to Vietnam veterans to implement a recent decision by the VA to expand the number of illnesses presumed to be related to exposure to Agent Orange.  The VA estimates that approximately 86,000 Vietnam veterans or their survivors, who were previously denied disability compensation, are now eligible for retroactive compensation payment.

Chapter 10 – Department of State, Foreign Operations, and Related Programs

H.R. 4899 includes $6.18 billion for the Department of State and Foreign Operations, which is equal to the President’s budget request, to meet emergency humanitarian, reconstruction, and security needs in Afghanistan, Pakistan, Iraq, Haiti, Mexico, El Salvador, Jordan, Vietnam, and the Democratic Republic of the Congo, and for pandemic preparedness and response.

Key appropriations include:  

Diplomatic and Consular Programs.  The bill would provide $1.32 billion for diplomatic and security operations in Afghanistan, Pakistan, Iraq, Haiti, and Mexico, which is $546 million below the requested amount.

Office of Inspector General (OIG).  H.R. 4899 includes $3.6 million for the Office of Inspector General, which is $600,000 above the request, to expand the oversight capacity of the Department of State OIG in Afghanistan, Pakistan, and Iraq.

Embassy Security.  The bill would provide $79 million, $5.5 million below the request, for urgent embassy security, construction, and maintenance costs in Haiti, to support housing for permanent U.S. direct hires and maintenance contracts for the facilities.

International Peacekeeping Activities.  H.R. 4899 includes $96.5 million, which is equal to the request, for contributions for International Peacekeeping activities to support increased peacekeeping assessments in Fiscal Years 2010 and 2011 for the U.N. mission in Haiti.

Other Agency – Broadcasting Board of Governors

H.R. 4899 includes $3 million, which is $2.2 million below the request, to increase Voice of America Creole radio broadcasts in Haiti.

United States Agency for International Development 

The bill includes $7.9 million for the USAID OIG, $6.4 million above the requested amount, for increased oversight of programs in Afghanistan, Pakistan, and Haiti. 

Bilateral Economic Assistance 

Global Health and Child Survival.  H.R. 4899 would provide $45 million for Global Health and Child Survival, which was not included in the request, for USAID’s Avian Influenza and Other Emerging Threats Program.

International Disaster Assistance (IDA).  The bill includes $460 million for IDA, $109.3 million above the requested amount, which may be used to reimburse prior obligations related to emergency relief and recovery efforts in Haiti   

Economic Support Fund (ESF).  H.R. 4899 includes a total of $2.49 billion in ESF, which is $79.3 million below the request.  Funding is provided as follows.

• Afghanistan.  The bill would provide $1.3 billion for assistance in Afghanistan, which is $267 million below the requested amount.  This amount includes $400 million for the Afghan Reconstruction Trust Fund (including $250 million for the National Solidarity Program); $100 million in direct budget support for the Ministry of Finance; $15 million for continued support for the Afghan Civilian Assistance Program; and $25 million to support reforestation programs in key watersheds in Afghanistan.  The bill includes language requiring determinations and reports by the Secretary of State on transparency, corruption, and consultation with local communities and civil society.

• Pakistan.  H.R. 4899 includes $259 million for assistance for Pakistan, which is $15 million above the requested amount, to support ongoing programs to strengthen democratic governance, rule of law, and social and economic services to improve the lives of the Pakistani people.  Of the total, $10 million would be provided for the Pakistani Civilian Assistance Program, $5 million for human rights programs, and $1.5 million to facilitate the implementation and oversight of USAID and Department of State programs in northwestern Pakistan.

• Haiti.  The bill would provide $770 million for relief, rehabilitation, and reconstruction assistance for Haiti, which is $20.7 million above the requested amount.  Of the total, up to $10 million is included for school construction, teacher training, and other education programs, $57 million for community stabilization activities, $144 million for shelter programs, $10 million for medical, rehabilitation, and other programs to assist Haitians with disabilities, and additional funds for watershed restoration and cash for work programs.  The bill provides authority to transfer up to $120 million from the Economic Support Fund to the Department of the Treasury for contributions to the Multi-Donor Trust Fund for Haitian Reconstruction.  The bill also includes language that would require determinations and reports by the Secretary of State on transparency, corruption, and the involvement of local communities and civil society.

• Other assistance.  H.R. 4899 includes additional ESF funding as follows: $100 million for assistance to Jordan to help meet the needs of Iraqi refugees and other economic issues; $12 million for assistance to Vietnam to support the remediation of dioxin contamination at the Da Nang Airport; and additional assistance of $25 million for El Salvador and $15 million for the Democratic Republic of the Congo.

Department of State Migration and Refugee Assistance.  The bill includes $165 million for assistance for Iraqi, Afghan, Pakistani, Congolese, Burmese, and Somali refugees and internally displaced persons (IDPs).

Department of the Treasury International Affairs Technical Assistance.  H.R. 4899 would provide $7.1 million, which is equal to the request, to support up to eight resident advisors as well as additional expertise to assist Haiti in restoring the core functions at the Ministry of Finance and the Central Bank, in coordination with USAID and the Department of State.

International Security Assistance

International Narcotics Control and Law Enforcement (INCLE).  The bill would provide $1.82 billion for INCLE, which is $280.7 million above the requested amount.  Funding is included as follows:

• Afghanistan.  $169 million, which is $31 million below the request, for assistance for Afghanistan, for rule of law programs, drug interdiction, justice reform, and corrections programs.  The amount includes additional funding ($7 million above the request for a total of $15 million) to strengthen women’s justice programs as well as $3 million to assist Afghan orphans and street children who are vulnerable to drug addiction.

• Pakistan.  $40 million, which is equal to the request, for police training, equipment, and infrastructure support, including for women police officers, and corrections assistance for Pakistan.

• Iraq.  $650 million, which is $132.6 million above the request, for assistance for Iraq.  This includes $450 million in one-time start up costs and limited operational costs of the Iraqi police program, and $200 million for implementation, management, and security costs, subject to determination and report by the Secretary of State.  The bill would continue existing matching requirements on U.S. assistance for Iraq.

• Haiti.  $147.7 million, $4.2 million above the request, for assistance for Haiti, including $5.5 million for the Office to Monitor and Combat Trafficking in Persons to combat human trafficking and slavery in Haiti.

• Mexico.  $175 million for assistance for Mexico for judicial reform, institution building, anti-corruption, and rule of law activities, in support of the goals of the three-year, $1.4 billion Merida Initiative to combat drug-related violence and other organized criminal activity.

Foreign Military Financing Program.  H.R. 4899 would provide $100 million for the Program, which is $40 million above the request, including $50 million for the purchase of helicopters for Pakistan and $50 million to address urgent security needs in Jordan.

Debt relief for Haiti.  The bill includes $212 million, as requested, to cancel existing debts owed by Haiti.  The bill also would authorize, as requested, up to $40 million from the Heavily Indebted Poor Countries Trust Fund to be used for Haiti debt relief.

Chapter 11 – Department of Transportation

The bill includes rescissions of $15 million for unobligated balances of the Highway Trust Fund and $44 million for unobligated balances for the Consumer Assistance to Recycle and Save Program. 

Department of Housing and Urban Development

Community Development Fund.  H.R. 4899 would provide $100 million in community development funds for disaster relief, long-term recovery, restoration of infrastructure, and housing and economic revitalization in Presidentially-declared disaster areas.

Title II – Department of Commerce

Economic Development Assistance Programs.  The bill includes $5 million for the Economic Development Administration’s Economic Adjustment Assistance programs to award grants to state, local, and nonprofit entities in regions affected by the Deepwater Horizon oil spill for strategic planning and technical assistance.  Activities to be funded include short- and long-term economic recovery plans and state and local economic recovery coordinators, including assistance to tourism-related businesses in oil impacted areas.

National Oceanic and Atmospheric Administration (NOAA).  H.R. 4899 includes $13 million to the Secretary of Commerce to be available if other sources do not sufficiently mitigate the economic impact of the Deepwater Horizon oil spill on fishermen and fishery-dependent businesses.  The bill also would provide $7 million for NOAA for activities that support the response to the oil spill but may not qualify as recoverable from the responsible parties of the Oil Spill Liability Trust Fund, including the conduct of scientific pre-sampling and post sampling analysis for the Gulf of Mexico and the study of the short and long term effects of dispersants on the Gulf ecosystem.

Department of Health and Human Services

Food and Drug Administration (FDA).  The bill would provide $2 million, as requested, for the FDA to purchase new technology to increase its capability for seafood inspection.

Department of the Interior

H.R. 4899 would provide $29 million for inspections, enforcement, studies and other activities requested by the Secretary related to inspections and investigations for determining the causes and impacts of the Deepwater Horizon oil spill.

Department of Justice

The bill includes $10 million for the Civil Division and the Environment and Natural Resources Division for civil defensive litigation, and civil and criminal enforcement under the Oil Pollution Act, the Federal Torts Claims Act, and the Clean Water Act.

Environmental Protection Agency

H.R. 4899 would provide $2 million, equal to the request, for a study of long-term risks and impacts from crude oil releases and the uses of chemical dispersants.

Legislative History

On May 14, 2010, the Senate Appropriations Committee ordered H.R. 4899, the Supplemental Appropriations Act, FY 2010 with an amendment in the nature of a substitute and an amendment to the title, to be reported to the full Senate by a vote of 30-0. 

On March 24, 2010, the House of Representatives passed its version of H.R. 4899, the Disaster Relief and Summer Jobs Act of 2010, by a vote of 239-175, and 1 Present. 

Administration Position

On March 24, 2010, the Obama Administration issued a Statement of Administration Policy (SAP) for the House-passed version of H.R. 4899, the Disaster Relief and Summer Jobs Act of 2010.  The Statement can be accessed on the Office of Management and Budget’s website: (http://www.whitehouse.gov/omb/assets/sap_111/saphr4899h_20100324.pdf).  At the time of publication, the Administration had not yet released a Statement of Administration Policy for the Senate version of H.R. 4899, the Supplemental Appropriations, FY 2010.  The DPC will circulate the SAP as soon as it is available.

Summary

Over the last two, years millions of Americans have suffered from the effects of the worst financial and economic crises since the Great Depression:  8.4 million Americans have lost their jobs, small businesses have failed, nearly seven million people in the United States have lost their homes to foreclosures, and millions more have seen their savings and retirement accounts lose most of their value – economic pain that tears at the very fiber of the middle class. 

All this was caused by greedy and reckless behavior of Wall Street and the Republican economic policies that encouraged excessive risk-taking and a laissez-faire approach to financial regulation and oversight.  The failures that led to this crisis require bold action to help us recover and ensure that it never happens again. 

On March 22, 2010, the Senate Committee on Banking, Housing, and Urban Affairs marked up and ordered to be reported the Restoring American Financial Stability Act of 2010 (RAFSA).  RAFSA is a direct and comprehensive response to the financial crisis that nearly crippled the U.S. economy beginning in 2008.  The primary purpose of RAFSA is to promote the financial stability of the United States.  It seeks to achieve that goal through multiple measures designed to improve accountability, resiliency, and transparency in the financial system by: establishing an early warning system to detect and address emerging threats to financial stability and the economy, enhancing consumer and investor protections, strengthening the supervision of large, complex financial organizations and providing a mechanism to liquidate such companies should they fail without any losses to the taxpayer, and regulating the massive over-the-counter derivatives market.

Major Provisions

The following summaries are based on an analysis provided by the
Majority Leader’s office and the Senate Banking Committee

Title I – Financial Stability

Title I establishes a new framework that would prevent a recurrence or mitigate the impact of financial crises that could cripple financial markets and damage the economy.  A new Financial Stability Oversight Council, chaired by the Treasury Secretary and comprised of key regulators, would monitor emerging risks to U.S. financial stability, recommend heightened prudential standards for large, interconnected financial companies, and require nonbank financial companies to be supervised by the Federal Reserve if their failure were to pose a risk to U.S. financial stability.

Expert Members.  A 9 member council of federal financial regulators and an independent member would be chaired by the Treasury Secretary and made up of regulators including: the Federal Reserve Board, the Securities and Exchange Commission, Commodity Futures Trading Commission, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, and the new Consumer Financial Protection Bureau.  The council would have the sole job to identify and respond to emerging risks throughout the financial system.

Tough to Get Too Big.  The Council would make recommendations to the Federal Reserve for, and the Federal Reserve would be required to adopt, increasingly strict rules for capital, leverage, liquidity, risk management and other requirements as companies grow in size and complexity, with significant requirements on companies that posed risks to the financial system.

Regulates Nonbank Financial Companies.  The Council would be authorized to require, with a two-thirds vote, that a nonbank financial company be regulated by the Federal Reserve if its failure were to pose a risk to the financial stability of the United States.

Break Up Large, Complex Companies.  The Council would be able to approve, with a two-thirds vote, a Federal Reserve decision to require a large, complex company, to divest some of its holdings if it posed a grave threat to the financial stability of the United States – but only as a last resort.

Technical Expertise.  This title creates a new Office of Financial Research within Treasury that would be staffed with a highly sophisticated staff of economists, accountants, lawyers, former supervisors, and other specialists to support the Council’s work by collecting financial data and conducting economic analysis.

Make Risks Transparent.  Through the Office of Financial Research and member agencies, the Council would collect and analyze data to identify and monitor emerging risks to the economy and would make this information public in periodic reports and testimony to Congress every year.

No Evasion.  Large bank holding companies that received TARP funds would not be able to avoid Federal Reserve supervision by simply dropping their banks. (the “Hotel California” provision)

Title II – Orderly Liquidation Authority

Title II establishes an orderly liquidation authority that would give the U.S. government a viable alternative to the undesirable choice it faced during the financial crisis between bankruptcy of a large, complex financial company that would disrupt markets and damage the economy, and a bailout of such financial company that would expose taxpayers to losses and undermine market discipline.  The new orderly liquidation authority would allow the FDIC, which has extensive experience as receiver for failed banking institutions, including large institutions, to safely unwind a failing nonbank financial company or bank holding company, an option that was not available during the financial crisis.  Once a failing financial company is placed under this authority, liquidation would be the only option; the failing financial company may not be kept open or rehabilitated.  The financial company’s business operations and assets would be sold off or liquidated, the culpable management of the company would be discharged, shareholders would have their investments wiped out, and unsecured creditors and counterparties would bear losses.

Presumption in Favor of Bankruptcy.  There is a strong presumption that the bankruptcy process would continue to be used to close and unwind failing financial companies, including large, complex ones.  The orderly liquidation authority could be used if and only if the failure of the financial company would threaten U.S. financial stability.  Therefore the threshold for triggering the orderly liquidation authority would be very high:

1)      a recommendation by a two thirds vote of the Board of the Governors of the Federal Reserve System;

2)     a recommendation by a two thirds vote of the FDIC;

3)     a determination and approval by the Secretary of the Treasury after consultation with the President, and

4)     a review and determination by a judicial panel.

No Bailouts by the Taxpayers.  In order to protect taxpayers, large financial companies would contribute $50 billion over a period of 5 to 10 years to a fund held at the Treasury.  This fund could only be used by the FDIC in the orderly liquidation of a failing financial company with the approval of the Treasury Secretary, and could not be used for any other purpose.  The FDIC would be required to rely first on these industry contributions if liquidity support is necessary to safely unwind the failing financial company and prevent a fire sale of assets that could further threaten financial stability.  Additional assessments on large financial companies could be imposed if necessary to ensure 100 percent repayment of any funds obtained from the Treasury, and any financial company that received payments greater than what it otherwise would have received in bankruptcy would be assessed at a substantially higher rate.  Taxpayers would bear no losses from the use of the orderly liquidation authority.

Title III – Transfer of Powers to the Comptroller of the Currency, the FDIC, and the Board of Governors

Title III rationalizes the fragmented structure of banking supervision in the U.S. by abolishing one of the multiple banking regulators, consolidating supervision of state banks in a single federal regulator, and consolidating supervision of smaller bank holding companies (those with assets of less than $50 billion) so that the regulator for the bank or thrift would also regulate the holding company.  

FDIC.  The FDIC would regulate state banks and thrifts of all sizes and holding companies of state banks and thrifts with assets below $50 billion.  

OCC.  The Comptroller of the Currency would regulate national banks and federal thrifts of all sizes and the holding companies of national banks and federal thrifts with assets below $50 billion.  The Office of Thrift Supervision would be eliminated.  Existing thrifts would be grandfathered in, but no new charters would be issued for federal thrifts.

Federal Reserve.  The Federal Reserve Board would regulate bank and thrift holding companies with assets of over $50 billion, where the Fed’s capital market experience would enhance its supervision.  As a consolidated supervisor, the Federal Reserve would be able to see risks whether they emerged in the bank holding company or its subsidiaries.  They would be responsible for finding risk throughout the system.  The Vice Chair of the Federal Reserve would be responsible for supervision and would report semi-annually to Congress.

The legislation would also preserve the dual banking system, leaving in place the state banking system that governs most of our nation’s community banks.

Title IV – Private Fund Investment Advisers Registration Act of 2010

Oversight of Hedge Funds.  Title IV would require hedge funds that manage over $100 million to register with the SEC as investment advisors, in order to close a significant gap in financial regulation.  Because hedge funds are currently unregulated, no precise data regarding the size and scope of hedge fund activities are available, but the common estimate is that the funds had at least $2 trillion in capital before the crisis.

Financial Disclosure.  In addition to SEC registration, this title would require hedge funds with more than $100 million in assets under management to disclose information regarding their investment positions and strategies.  The required disclosures would include information on fund size, use of leverage, counterparty credit risk exposure, trading and investment positions, valuation policies, types of assets held, and any other information that the SEC, in consultation with the Financial Stability Oversight Council, determined was necessary and appropriate to protect investors or assess systemic risk.  The Council would have access to this information to monitor potential systemic risk, while the SEC would use it to protect investors and market integrity.

Expanded Scope of Supervision by States.  The legislation would also raise the assets threshold for federal regulation of investment advisers from $25 million to $100 million, a move expected to increase the number of advisors under state supervision by 28 percent.  States have proven to be strong regulators in this area and subjecting more entities to state supervision would allow the SEC to focus its resources on newly registered hedge funds.

Title V – Insurance

Title V establishes the Office of National Insurance within the Department of the Treasury.  The Office, which would be headed by a career Senior Executive Service Director appointed by the Secretary of the Treasury, would have the authority to:

1)      monitor all aspects of the insurance industry;

2)     recommend to the Financial Stability Oversight Council that the Council designate an insurer, including its affiliates, as an entity subject to regulation by the Board of Governors as a nonbank financial company as defined in Title I of the Restoring American Financial Stability Act;

3)     assist the Secretary in administering the Terrorism Risk Insurance Program;

4)     coordinate Federal efforts and establish Federal policy on prudential aspects of international insurance matters;

5)     determine whether state insurance measures are preempted by International Insurance Agreements on Prudential Measures; and

6)     consult with the states regarding insurance matters of national importance and prudential insurance matters of international importance.  

The authority of the Office would extend to all lines of insurance except health insurance and crop insurance.

Title V also incorporates provisions from S. 1363, the Nonadmitted and Reinsurance Reform Act.

Title VI – Bank and Savings Association Holding Company and Depository Institution Regulatory Improvements Act of 2009

This title includes various provisions intended to improve the regulation of bank and savings association holding companies and depository institutions.  Among these is a provision that prohibits or restricts certain types of financial activity – in banks, bank holding companies, other companies that control an insured depository institution, their subsidiaries, or nonbank financial companies supervised by the Board of Governors – that are high-risk or which create significant conflicts of interest between these institutions and their customers.

“Volcker Rule.”  Banks, bank holding companies, other companies that control an insured depository institution, their subsidiaries, or nonbank financial companies supervised by the Board of Governors would be prohibited from proprietary trading, sponsoring and investing in hedge funds and private equity funds, and from having certain financial relationships with those hedge funds or private equity funds for which they serve as investment manager or investment adviser.  A nonbank financial institution supervised by the Board of Governors that engages in proprietary trading, or sponsoring or investing in hedge funds and private equity funds would be subject to Board rules imposing capital requirements related to, or quantitative limits on, these activities. 

Title VII – Transparency and Accountability in the Derivatives Market

NOTE: This description reflects an agreement between Senator Dodd and Senator Lincoln, reflecting the strongest provisions from the Agriculture Committee and Banking Committee texts.  

This title is designed to protect taxpayers against the need for future bailouts and buffer the financial system from excessive risk-taking.  Over-the-counter derivatives would be regulated by the CFTC and the SEC, more would be cleared through centralized clearing houses and traded on exchanges, swap dealers and major swap participants would be subject to additional capital requirements and capital requirements, and all trades would be reported so that regulators could monitor risks in this large, complex market.

Brings 100 Percent Transparency to Market with Real-Time Price Reporting.  Wall Street will no longer be able to make excessive profits by operating in the dark. Exposing these markets to the light of day will put this money where it belongs – on Main Street. The public will see what is being traded, who is doing the trading and, most importantly, regulators can go after fraud, manipulation and excessive speculation.

Central Clearing and Exchange Trading.  The legislation would require central clearing and exchange trading for derivatives that could be cleared and would provide a role for both regulators and clearing houses to determine which contracts should be cleared.  The legislation would require the SEC and the CFTC to pre-approve contracts before clearing houses could clear them.

Closes Loopholes.  Loopholes have allowed far too many to avoid the law of the land or set up shell companies to claim exemptions. This bill gives regulators the authority to close any loophole they find, protecting the markets, taxpayers and the economy.

Protects Jobs on Main Street.  The interests of Main Street will be protected. Commercial businesses and manufacturers who use these markets and customized contracts to manage risk will still be permitted to do so without imposing additional margin costs. This will protect American jobs and keep consumer costs low.

Pushes Out Derivatives Activities From Big Banks.  Banks need to be kept in the business of banking.  All swap dealer activities would be pushed out of banking companies by prohibiting any access to the federal safety net, that being access to the Federal Reserve discount window, deposit insurance, and emergency liquidity.  Other entities, including major swap participants, clearinghouses, exchanges and swap dealers, would also be prohibited from accessing this federal safety net."

Protects Municipalities and Pensions.  Swaps dealers will have a “fiduciary duty,” just like investment advisers, that will require the interests of municipalities and pension retirement funds be put first; ensuring Wall Street doesn’t take advantage of Main Street and taxpayers.

Title VIII – Payment, Clearing and Settlement Supervision Act of 2009

This title provides the Financial Stability Oversight Council a role in identifying systemically important financial market utilities and the Board of Governors of the Federal Reserve System with an enhanced role in supervising risk management standards for systemically important financial market utilities and for systemically important payment, clearing, and settlement activities conducted by financial institutions.

Evaluating Systemic Importance.  In particular, the Financial Stability Oversight Council would be authorized to designate financial market utilities or payment, clearing, or settlement activities as systemically important, and establish procedures and criteria for making and rescinding such a designation.  Criteria for designation and rescission of designation would include the aggregate monetary value of transactions processed and the effect that a failure of a financial market utility or payment, clearing, or settlement activity would have on counterparties and the financial system.

Risk Management Standards.  This title would also authorize the Federal Reserve Board, in consultation with the Financial Stability Oversight Council and the appropriate supervisory agencies, to prescribe risk management standards governing the operations of designated financial market utilities and the conduct of designated payment, clearing, and settlement activities by financial institutions.  This section would establish the objectives, principles, and scope of such standards.

Title IX – Investor Protections

This title addresses a number of securities issues, including provisions that responds to significant aspects of the financial crisis caused by poor securitization practices; erroneous credit ratings; ineffective SEC regulation of Madoff Securities, Lehman Brothers and other firms, and executive compensation practices that promoted excessive risk-taking.  

Improved Regulation and Oversight of Credit Rating Agencies.  The bill would create an Office of Credit Ratings at the SEC with its own compliance staff and the authority to fine agencies.  The SEC would be required to examine Nationally Recognized Statistical Ratings Organizations at least once a year and make key findings public.  Nationally Recognized Statistical Ratings Organizations would be required to disclose their methodologies, their use of third parties for due diligence efforts, and their ratings track record.  Agencies would be required to consider information in their ratings that comes to their attention from a source other than the organizations being rated if they find it credible.   Additionally compliance officers would be prohibited from working on ratings, methodologies, or sales.

The bill would also empower investors to bring private rights of action against ratings agencies for a knowing or reckless failure to conduct a reasonable investigation of the facts or to obtain analysis from an independent source.  And the SEC would be given the authority to deregister an agency for providing bad ratings over time.

Reduction in Risks Posed by Securities.  The bill would require companies that sell products like mortgage-backed securities to retain at least five percent of the credit risk, unless the underlying loans meet standards that reduce riskiness.  Further, issuers would be required to disclose more information about the underlying assets and to analyze the quality of the underlying assets.

Shareholder Empowerment.  The bill would give shareholders a say on pay with the right to a non-binding vote on executive pay.  This would provide shareholders with a powerful opportunity to hold accountable executives of the companies they own, and a chance to disapprove where they see the kind of misguided incentive schemes that threatened individual companies and in turn the broader economy.  The SEC would be given the authority to grant shareholders proxy access to nominate directors.  It would also require directors to win by a majority vote in uncontested elections.  

Standards for listing on an exchange would include the requirement that compensation committees include only independent directors and have authority to hire compensation consultants in order to strengthen their independence from the executives they are rewarding or punishing.  Public companies would be required to set policies to take back executive compensation if it was based on inaccurate financial statements that do not comply with accounting standards.  The bill also would direct the SEC to clarify disclosures relating to compensation, including requiring companies to provide charts that compare their executive compensation with stock performance over a five-year period.

Beefed Up Investor Protections.  The bill would create a program within the SEC to encourage people to report securities violations, creating rewards of up to 30 percent of funds recovered for information provided.  It would mandate an annual assessment of the SEC’s internal supervisory controls and a GAO study of SEC management.  The bill also would create the Investment Advisory Committee, a committee of investors to advise the SEC on its regulatory priorities and practices as well as the Office of Investor Advocate in the SEC, to identify areas where investors have significant problems dealing with the SEC and provide them assistance.  Additionally, the self-funded SEC would no longer be subject to the annual appropriations process.

Better Oversight of Municipal Securities.  The bill would require SEC registration for municipal financial advisers, swap advisers, and investment brokers – unregulated intermediaries who play key roles in the municipal bond market.  The bill would also subject financial advisers, swap advisers, and investment brokers to rules issued by the Municipal Securities Rulemaking Board and enforced by the SEC or a designee.  Investor and public representatives would be given a majority of seats on the Municipal Securities Rulemaking Board (MSRB).

Title X – Bureau of Consumer Financial Protection

This title creates the Consumer Financial Protection Bureau (CFPB), a new streamlined independent consumer entity housed within the Federal Reserve System.  The CFPB would be focused on ensuring that consumers get clear and effective disclosures in plain English and in a timely fashion so that they will be empowered to shop for and choose the best consumer financial products and services for them.

The new CFPB would establish a basic, minimum federal level playing field for all banks and, for the first time, nondepository financial companies that sell consumer financial products and services to American families.  It would do so without creating an undue burden on banks, credits unions, or nondepository providers of these products and services.  

The Consumer Financial Protection Bureau would include the following features:

• Independent Head:  Led by an independent director appointed by the President and confirmed by the Senate.
• Independent Budget:  Dedicated budget paid by the Federal Reserve Board.
• Independent Rule Writing:  Ability to autonomously write rules for consumer protections governing all entities – banks and non-banks – offering consumer financial services or products, including mortgages, credit cards and auto loans.
• Examination and enforcement:  Authority to examine and enforce regulations for banks and credit unions with assets of over $10 billion and all mortgage-related businesses (lenders, servicers, mortgage brokers, and foreclosure scam operators) and large non-bank financial companies, such as large payday lenders, debt collectors, and consumer reporting agencies.  Banks and credit unions with assets of $10 billion or less would be examined by the appropriate prudential regulator.
• Consumer protections:  In order to address the problem of regulatory arbitrage, the bill would combine the consumer protection responsibilities currently handled by seven federal agencies involved in financial protection – the Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, Department of Housing and Urban Development, and Federal Trade Commission.
• Consumer education:  Creates a new Office of Financial Literacy.
• Consumer hotline:  A new national consumer complaint hotline so consumers would have, for the first time, a single toll-free number to report problems with consumer financial products and services.
• Coordination with bank regulators:  Coordinates with other regulators when examining banks to prevent undue regulatory burden.  Consults with regulators before a proposal is issued and regulators could appeal regulations they believe would put the safety and soundness of the banking system or the stability of the financial system at risk.
• Non-preemption clause:  The legislation would not preempt state law if the state law provides greater protection for consumers.
• Exceptions:  The Bureau would have no authority to issue rules or take enforcement action against merchants, retailers, or sellers of nonfinancial goods or services that are not engaged significantly in offering or providing consumer financial products or services.
• Assistance with private education loans:  The Secretary of the Treasury, in consultation with the Director, would be required to designate a Private Education Loan Ombudsman within the Bureau to provide timely assistance to borrowers of private education loans, and to disseminate information about the availability and functions of the Ombudsman to borrowers, potential borrowers, related institutions, agencies, and participants.

Title XI – Federal Reserve System Provisions

Title XI eliminates the ability of either the Federal Reserve or the Federal Deposit Insurance Corporation to rescue an individual financial firm that is failing, while preserving the ability of both regulators to provide needed liquidity and confidence in financial markets during times of severe distress.

Short-term debt during financial crises. The legislation would allow the FDIC to guarantee short-term debt during financial crises, but would limit the guarantees to solvent banks and bank holding companies, restrict the conditions under which such support could be offered, increase accountability of the guarantee program, and eliminate the possibility that taxpayers would have to pay for any losses from the program.

No guarantee could be offered unless the Board of Governors of the Federal Reserve and the FDIC jointly agreed that a liquidity event – essentially a breakdown in the ability of borrowers to access credit markets in a normal fashion – existed.  The FDIC could then set up a facility to guarantee debt, following policies and procedures determined by regulation.  The regulation would be written in consultation with the Treasury.  The terms and conditions of the guarantees would have to be approved by the Secretary of the Treasury.

The Secretary would determine a maximum amount of guarantees, and the President would request Congress to allow that amount.  If the President did not submit the request, the guarantees would not be made.  Congress would have five days under an expedited procedure to disapprove the request.  Fees for the guarantees would be set to cover all expected costs.  If there were to be losses, they would be recouped from those firms that received guarantees.  Firms that defaulted on guarantees would be put into receivership, resolution or bankruptcy.  

Changes to Federal Reserve governance.  The bill would establish the position of Vice Chairman for Supervision on the Federal Reserve Board of Governors.  The Vice Chairman would have the responsibility to develop policy recommendations on supervision and regulation for the Board, and would report twice each year to Congress.  The Federal Reserve would also be given formal responsibility to identify, measure, monitor, and mitigate risks to U.S. financial stability.  In addition, the Federal Reserve would be formally prohibited from delegating its functions for establishing regulatory or supervisory policy to Federal Reserve banks.

Eliminating potential conflicts of interest at Federal Reserve banks.  The Federal Reserve Act would be amended to state that no company, or subsidiary or affiliate of a company that is supervised by the Board of Governors could vote for Federal Reserve Bank directors; and the officers, directors and employees of such companies and their affiliates could not serve as directors.  In addition, to increase the accountability of the Federal Reserve Bank of New York president, who plays a key role in formulating and executing monetary policy, this reserve bank officer would be appointed by the President, by and with the advice and consent of the Senate, rather than by the bank’s board of directors.

Title XII – Improving Access to Mainstream Financial Institutions

This title encourages initiatives for financial products and services that are appropriate and accessible for millions of Americans who are not fully incorporated into the financial mainstream.  

Expanding Access.  The bill would authorize the Treasury Secretary to establish a multiyear program of grants, cooperative agreements, financial agency agreements, and similar contracts or undertakings to promote initiatives designed to expand access to mainstream financial institutions by low and moderate income individuals.

Alternatives to Payday Loans.  The bill would authorize the Treasury Secretary to establish multiyear demonstration programs by means of grants, cooperative agreements, financial agency agreements, and similar contracts or undertakings with eligible entities to provide low-cost, small loans to consumers that provide alternatives to payday loans.  Loans under this section would be required to be made on terms and conditions and pursuant to lending practices that are reasonable for consumers.  Entities awarded a grant under this section would be required to promote financial literacy and education opportunities, such as relevant counseling services, educational courses, or wealth building programs, to each consumer provided with a loan pursuant to this section.

Grants to Community Development Financial Institutions.  The bill would direct the Community Development Financial Institutions (CDFI) Fund to make grants to CDFIs to establish loan-loss reserve funds to help CDFIs defray the costs of operating small dollar loan programs in order to help provide consumers access to mainstream financial institutions and provide payday loan alternatives.  A CDFI receiving grants under this program would be required to provide matching funds equal to 50 percent of the amount of any grant received under this section.  Grants received by a CDFI under this section could not be used to provide direct loans to consumers, and could be used to help recapture a portion or all of a defaulted loan made under the small dollar loan program.

Legislative History

On December 2, 2009, H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, was introduced into the House by Representative Frank.  The legislation passed the House on December 11, 2009 by a vote of 223-202 and on January 20, 2010, was referred to the Senate Committee on Banking, Housing, and Urban Affairs.

On April 15, 2010, S. 3217 was introduced in the Senate by Senator Dodd and placed on the Senate Calendar. 

On Monday April 26, 2010, cloture on the motion to proceed to S. 3217 failed by a vote of 57-41.

Expected Amendments

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

Administration Position

On April 26, the While House releases its Statement of Administration Policy in support of S. 3217:

“The Administration strongly supports Senate passage of S. 3217.  The President has called on the Congress to enact far-reaching Wall Street reform legislation to overhaul the Nation’s financial system in the wake of the recent financial crisis, setting forth clear objectives and principles that were endorsed by congressional leaders.  Wall Street reform is critical to put in place rules that will allow the Nation’s markets to promote innovation while discouraging abuse, to create a framework in which markets can function freely and fairly without the fragility in which normal business cycles bring the risk of financial collapse, and to provide a system that works for businesses and consumers.

“The Administration commends the Senate Banking, Housing, and Urban Affairs Committee for its efforts in developing comprehensive Wall Street reform legislation.  The Administration also commends the Senate Agriculture Committee for additional leadership on provisions related to derivatives.  Senate passage of S. 3217 – including derivatives provisions from the Agriculture and Banking Committees – will move the Nation another important step towards necessary, comprehensive Wall Street reform that will create clear rules of the road and can be consistently and systematically enforced, thus creating a more stable financial system with better protection for consumers and investors.

“The Administration looks forward to working with the Congress to achieve successful comprehensive reform as S. 3217 continues to move through the legislative process.  The Administration will oppose efforts to add loopholes to the bill that undermine consumer and investor protection or that allow institutions to avoid oversight.  The Administration urges the Senate to resist pressure from those who would preserve the status quo and to stand up for long overdue reform that will protect American families and the long-term health of the Nation’s economy.”

Resources

Senate Democratic Policy Committee, “Senate Democrats Are On Your Side: Reforming Wall Street While Protecting Main Street” (March 24, 2010), available here.

Congressional Budget Office, “Cost estimate for S. 3217, Restoring American Financial Stability Act of 2010,” as ordered reported by the Senate Committee on Banking, Housing, and Urban Affairs (March 22, 2010), available here.

Congressional Research Service, “Financial Regulatory Reform and the 111^th Congress” (March 16, 2010), available here.

Congressional Research Service, “Financial Regulatory Reform: Systemic Risk and the Federal Reserve” (March 26, 2010), available here.

Congressional Research Service, “Financial Regulatory Reform: Analysis of the Consumer Financial Protection Agency (CFPA) as Proposed by the Obama Administration and H.R. 4173 (Formerly H.R. 3126)” (January 29, 2010), available here.

On March 25, 2010, Senate Majority Leader Reid moved to proceed to H.R. 4851, the Continuing Extension Act of 2010.  The legislation would extend unemployment insurance benefits and eligibility for unemployment health care benefits, including extending benefits retroactively so families will receive the benefits that were suspended when these programs expired earlier this month.  The legislation would also extend the 2009 poverty guidelines, along with other important programs that families and communities depend on for stability and security. 

Specifically, HR 4851, the Continuing Extension Act, would:

·         Extend economic safety net provisions, including unemployment insurance and COBRA health care assistance; and

·         Extend other programs, including expired or expiring health care measures, the national flood insurance program, and compensation for highway program employees.

Measures included in this bill would be considered emergency spending. 

The Senate is scheduled to consider H.R. 4851, the Continuing Extension Act of 2010, the week of April 12, 2010. 

Background

Senate Democrats have consistently worked to ensure the seamless provision of unemployment benefits and other critical economic safety net provisions as our economy continues to recover.  Unfortunately, Democratic efforts to advance legislation to provide for both a year-long and temporary extension of these benefits have been obstructed by Senate Republicans.

In February, opposition by Senate Republicans blocked Senate passage of the Temporary Extension Act of 2010 (H.R. 4691), a 30-day extension of unemployment benefits COBRA tax credits, and other important measures.  The delay, led by Senator Jim Bunning, caused tens of thousands of Americans to go without their unemployment checks.  Senate Democrats have worked tirelessly to overcome the Republican filibuster.  Senate Democrats asked for an agreement to extend unemployment benefits and other expiring provisions numerous times during the six-day stand-off with Senator Bunning and his fellow Senate Republicans.  Senator Reid even offered Senator Bunning a chance to introduce an amendment to address his concerns, but he refused in order to further delay the payment of benefits.  H.R. 4691, the Temporary Extension Act of 2010, was agreed to in the House by voice vote on February 25, 2010.  Ultimately, the legislation passed the Senate on March 2, 2010 by a vote of 78 to 19. [Roll Call Vote 32]  President Obama signed the legislation into law on March 2, 2010 (P.L. 111-144). 

In March, Senate Democrats fought again against Republican filibusters and partisan obstruction to pass legislation extending unemployment benefits and COBRA tax credits through the end of the year for jobless Americans.  Although the Senate passed S.A. 3336, the American Workers, State and Business Relief Act (AWSBRA) on March 10 – which included these long-term extensions of unemployment benefits and health insurance tax credits – the bill was not able to move through the legislative process before the Temporary Extension Act of 2010 expired in early April. While both chambers of Congress continue to work to resolve differences between the Senate-passed bill and the House-passed bill, a second short-term extension of these programs became necessary to ensure continued coverage to help the unemployed.  In the last week of March, SenatorsReid, Durbin, Stabenow, Baucus, and Reed asked for unanimous consent to pass the Continuing Extension Act of 2010, but Republicans refused tomove forward on this urgent legislation.  Instead, the benefits expired in early April and thousands of families have been forced to go without their benefits because of the political posturing and delay by Senate Republicans.

This week, Senate Democrats are again fighting to extend benefits for jobless Americans against the opposition of Senate Republicans.  According to the National Employment Law Project, nearly 1 million jobless Americans will lose their unemployment benefits by the end of April if the benefits are not extended.  [National Employment Law Project, March 2010] 

Major Provisions

Extension of Economic Safety Net Provisions

Unemployment Insurance Extension

The Continuing ExtensionAct would extend federal unemployment benefits through May 5, 2010.  These unemployment benefits expired on April 5, 2010, after a one month extension was implemented by the Temporary Extension Act of 2010 (H.R. 4691). 

Prior to the expiration, an unemployed worker could receive up to 26 weeks of unemployment benefits provided by the state in which they were employed.  After the state-provided benefits were exhausted, the worker could qualify for 34 more weeks of benefits provided by the federal government.  If that person was unemployed in a state with an unemployment rate above six percent, they qualified for an additional 13 weeks of benefits also provided by the federal government.  Unemployed workers in states with an unemployment level over 8.5 percent qualified for an additional six weeks of benefits also provided by the federal government. 

In addition, until the recent expiration, the federal government paid 100 percent of the cost of state Extended Benefits programs which provide an additional 13 or 20 weeks of benefits for unemployed workers who had exhausted regular state benefits and Emergency Unemployment Compensation. 

Last year the Recovery Act increased weekly unemployment benefits by an additional $25 per week.   This legislation would retroactively extend these provisions. 

Extension of COBRA Premium Assistance

The legislation would extend the 65 percent COBRA continuation coverage subsidy for terminated workers through April 30, 2010.  The subsidy was originally enacted as part of the Recovery Act and was expanded later in 2009. 

Medicare Physician Payment Update

The Continuing ExtensionAct would delay, through April 30, 2010, a scheduled 21.2 percent cut in Medicare physician payments.

Extension of 2009 Federal Poverty Guidelines

The legislation would keep the 2009 federal poverty guidelines in place through April 30, 2010, to avoid a reduction in eligibility for poverty-based programs.  A reduction would otherwise occur because of the decrease in the average cost of goods that results from the economic downturn.  This provision would allow all currently eligible individuals to remain eligible for poverty-based programs. 

Other Provisions

Extension of Exceptions Process for Medicare Therapy Caps

The Continuing ExtensionAct would extend the therapy caps exception process through April 30, 2010.  Current law includes annual per beneficiary payment limits for all outpatient therapy services provided by non-hospital providers. 

Electronic Health Record Clarification

The legislation makes technical corrections to the definition of a hospital-based eligible professional, which was originally included in the HITECH Act, part of the Recovery Act.

Extension of National Flood Insurance Program

The Continuing Extension Act of 2010 would extend the National Flood Insurance Program (NFIP) through April 30, 2010.  The extension would be retroactive.  The NFIP was created by Congress in 1968 to help property owners protect themselves from the risk of flooding.  More than 20,000 communities participate in the program. 

Satellite Home Viewer

The legislation would extend the copyright license and communications regulatory framework used by satellite television providers through April 30, 2010.

Please note the Senate passed S. 3186, the Satellite Television Extension Act of 2010, on March 25, 2010 by unanimous consent.  The bill was passed by House of Representatives the same day.  President Obama signed the legislation into law on March 26, 2010. [P.L. 111-151]  This law reauthorized the Satellite Home Viewer Extension and Reauthorization Act of 2004 through April 30, 2010. 

Highway Programs

The Continuing Extension Act of 2010 would provide compensation to any federal employee that was furloughed due to the lapse in SAFETEA-LU which occurred in March 2010.   The compensation that would be provided would be based on the employee’s standard rate of compensation and the funds would be derived from the Highway Trust Fund.

Legislative History

On March 16, 2010, H.R. 4851 was introduced in the House of Representatives.  On March 17, 2010, the bill was agreed to by voice vote. 

The legislation was placed on the Senate Calendar on March 19, 2010. 

The Senate is expected to begin consideration of the legislation during the week of April 12, 2010.  The Senate is scheduled to vote on a motion to invoke cloture on the motion to proceed to H.R. 4851 on Monday, April 12, 2010.

Expected Amendments

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

Administration Position

On March 12, the White House released its Statement of Administration Policy in support of H.R. 4851:

“The Administration strongly supports enactment of legislation that is important for the economic security of American workers and their families. Accordingly, the Administration supports Senate passage of H.R. 4851, which will extend access to health care benefits for workers who have lost their jobs and extend unemployment insurance benefits for millions of Americans who are looking for work.”

Resources

Senate Democratic Policy Committee, “S.A. 3336, the American Workers, State, and Business Relief Act,” available here.

Congressional Research Service, National Flood Insurance Program:  Background, Challenges, and Financial Status, available here.

Congressional Research Service, Temporary Extension of Unemployment Benefits:  Emergency Unemployment Compensation (EUC08), available here.

Congressional Research Service, Health Insurance Premium Assistance for the Unemployed:  The American Recovery and Reinvestment Act of 2009, available here.

Together with the Patient Protection and Affordable Care Act (H.R. 3590), the Health Care and Education Reconciliation Act (H.R. 4872) will ensure that all Americans have access to quality, affordable health insurance and will put middle class families ahead of private banks.  The Congressional Budget Office has determined that these two bills will reduce health care costs and give 95 percent of non-elderly Americans access to affordable health insurance.  In addition, by eliminating wasteful subsidies to banks and reducing the cost of student loans, the bill will make college more affordable and invest in our nation’s future.  Together, the bills will reduce the deficit by $143 billion over the next ten years and roughly $1.3 trillion in the second decade.  The Health Care and Education Reconciliation Act meets the reconciliation instructions included in the Fiscal Year 2010 Budget Resolution (S. Con. Res. 13) for both the Senate Finance Committee and the Health, Education, Labor and Pensions (HELP) Committee.

Major Provisions

By making targeted improvements to the Patient Protection and Affordable Care Act, the Health Care and Education Reconciliation Act makes a good bill even better.

Coverage, Medicare, Medicaid and Revenues

Title I includes provisions under the jurisdiction of the Finance Committee.

Coverage

• Makes plans in the Exchange more affordable by further limiting the cost of premiums and cost-sharing for individuals under 400 percent of poverty (a family of four with income less than $88,000).  Ensures that if costs grow faster than expected, the amount of tax credits will be reduced to more closely track the overall inflation rate.

• Modifies the assessment that individuals who remain uninsured pay by exempting income below the filing threshold.  The individual assessment is the greater of a flat dollar payment, which has been lowered, and a percentage of income, which has been raised, as compared to the Patient Protection and Affordable Care Act.

• Improves the employer responsibility provisions:

o   Raises large employer penalty cap from $750 per worker to $2,000 per worker;

o   Strikes the penalty for waiting periods between 60 and 90 days;

o   Counts full-time equivalents toward the threshold for triggering a penalty, but does NOT impose any penalties for part-time workers;

o   Phases in the penalties as employers become larger by discounting 30 full-time workers from the per-worker penalty, eliminating a disincentive to creating new jobs; and

o   Eliminates the special rule for construction industry employers.

Medicare

• Provides a $250 rebate for beneficiaries who hit the coverage gap or “donut hole” in 2010 and fills the donut hole for brand and generic drugs by 2020.

• Reduces Medicare Advantage overpayments in a targeted way that reflects the different needs of urban and rural areas.  Provides a more refined approach that varies rates by local fee-for-service costs on a sliding scale.  Includes three to seven year phase-in and increases MA benchmarks for high-performance plans.   Ensures that Medicare Advantage plans spend at least 85 percent of revenue on medical costs or activities that improve quality of care.
• Lowers Medicare Disproportionate Share Hospital (DSH) cuts in the Patient Protection and Affordable Care Act from $25.1 billion to $22.1 billion and revises market basket updates to hospitals by $9.9 billion.
• Adjusts the utilization rate changes included in the Patient Protection and Affordable Care Act to take into account the CMS imaging rule that went into effect on January 1.  Sets the assumed utilization rate at 75 percent for the practice expense portion of advanced diagnostic imaging services.

Medicaid

• Equalizes and increases funding for the Medicaid expansion by providing 100 percent federal match in 2014, 2015, and 2016; 95 percent match in 2017; 94 percent match in 2018; 93 percent match in 2019; and 90 percent thereafter.

• For early expansion states, provides additional federal funding to reduce the cost of covering non-pregnant childless adults beginning in 2014.  In 2019 and thereafter, all states will bear the same costs for covering non-pregnant childless adults. 
• Increases payments for Medicaid primary care to Medicare rates in 2013 and 2014 and provides full federal support to do so.
• Lowers the reduction in federal Medicaid DSH payments in the Patient Protection and Affordable Care Act from $18.1 billion to $14.1 billion over ten years.
• Increases funding for the territories by $2 billion, and provides territories the option to establish an Exchange.
• Delays Community First Choice Option for one year, until Fiscal Year 2011.
• Narrows the definition of new drug formulations for purposes of applying the Medicaid drug rebate.

Fraud, Waste, and Abuse

• Establishes new requirements for community mental health centers to prevent fraud and abuse.

• Modifies Medicare prepayment medical review limitations.

• Increases funding to fight fraud, waste, and abuse by $250 million.

• Requires a 90-day period of oversight for initial claims of DME suppliers.

Revenue

• Delays implementation of the excise tax on high cost health plans until 2018; increases the thresholds for imposing the tax to $10,200 for self-only plans and $27,500 for family coverage.  Adds adjustments for age and gender of enrollees.

• Delays the establishment of a $2,500 cap on FSA contributions until 2013.

• For individuals with Adjusted Gross Income above $200,000 for a single taxpayer and $250,000 for a married couple, equalizes the Medicare contribution treatment for earned and unearned income.

• Closes the “black liquor” loophole that allows certain taxpayers to get an unintended tax credit for cellulosic biofuels.

• Establishes, in statute, the “economic substance doctrine” to prevent the use of transactions that generate tax benefits but which otherwise have no business purpose.

Higher Education Provisions Under the Finance Title

• Provides $2 billion for community colleges to develop and improve educational or career training programs for workers eligible for Trade Adjustment Assistance.

Education and Health

Title II includes provisions under the jurisdiction of the HELP Committee.

Higher Education Provisions

• Beginning July 1, 2010, all new federal student loans will originate through the Direct Loan program, instead of through the Federal Family Education Loan program.

• Includes $36 billion to address the Pell Grant shortfall and to increase the maximum Pell Grant to $5,550 in 2010 and to $5,975 by 2017.  Starting in 2013, the grant will be linked to match rising costs of living for five years by indexing it to the Consumer Price Index.
• Expands the Income-Based Repayment program.  Starting in 2014, the bill will cap a new borrower’s loan payment at 10 percent of their net income, after adjustments for basic living costs, and will forgive any remaining debt after 20 years.
• Invests $2.55 billion in Historically Black Colleges and Universities and other Minority-Serving Institutions.
• Includes $750 million to bolster college access and other supports for students.  It will more than double funding for the College Access Challenge Grant program to fund programs in every state that focus on informing students about college options and financing, increasing financial literacy and helping retain and graduate students.
• Ensures that the reconciliation instructions for the HELP Committee are met by reducing the deficit by at more than $10 billion over ten years.

Health Provisions

• Extends important insurance reforms to existing plans, including bans on lifetime and annual limits, coverage of pre-existing conditions, a ban on rescissions, limits on waiting periods, and expanded coverage for young adults.

• Eliminates 340B inclusion of inpatient drugs; no exceptions to group purchasing exclusion.

• Increases thesubstantial investment in Community Health Centers to expand access to health care in communities where it is needed most.

Legislative History

The Health Care and Education Affordability Reconciliation Act of 2010 (H.R. 4872), makes targeted improvements to H.R. 3590,the legislative vehicle for the Patient Protect and Affordable Care Act of 2009.  H.R. 3590 was presented to President Obama and signed into law on March 23, 2010.

On March 17, 2010, Rep. Spratt introduced H.R. 4872, the Health Care and Education Affordability Reconciliation Act of 2010.  The bill was reported out by the House Budget Committee and, on March 21, 2010, the House passed H.R. 4872 by a vote of 220-211. [Roll Call Vote 167]

On March 23, 2010, the Senate began consideration of H.R. 4872, which follows the reconciliation instructions included in the Fiscal Year 2010 Budget Resolution (S. Con. Res. 13).

Expected Amendments

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

Administration Position

On March 23, 2010, the White House released its Statement of Administrative Policy on H.R. 4872:

“The Administration strongly supports enactment of H.R. 4872, the Health Care and Education Reconciliation Act.  Combined with the Patient Protection and Affordable Care Act, this legislation makes significant improvements that will help to give American families and small business owners more control of their own health care.  Together, they make important changes – ending the worst practices of insurance companies; giving uninsured individuals and small business owners the same kind of choice of private health insurance that Members of Congress have; and bringing down the cost of health care for families and businesses while also reducing Federal budget deficits.

“These bills provide the necessary health reforms that the Administration seeks – affordable, quality care within reach for the tens of millions of Americans who do not have it today by providing the largest middle class tax cuts for health care in history, reducing premium costs and out-of-pocket expenses, and prohibiting insurance companies from denying coverage to the millions of Americans with pre-existing medical conditions.  These bills also make critical improvements for Medicare beneficiaries including closing the coverage gap in the Medicare drug benefit known as the “donut hole.”  They also bring new stability and security for the hundreds of millions who already have insurance by reining in the worst insurance industry abuses and putting in place reforms that increase transparency, improve the quality of care, and contain health care costs.  They contribute to transforming the health care system to make health care more accessible and affordable for the American people.  H.R. 4872 also includes provisions that would eliminate wasteful subsidies for student loan lenders and invest these savings to: fortify the Pell Grant program and increase Pell Grants for millions of students; strengthen community colleges; strengthen Historically Black Colleges and Universities and other Minority-Serving Institutions; and allow students to cap student loan payments at affordable levels.  The education provisions are estimated by the Congressional Budget Office to reduce the deficit.  The Administration urges quick action on this landmark reform.” 

Resources

Information on the Patient Protection and Affordable Care Act (H.R. 3590) and the Health Care and Education Affordability Reconciliation Act of 2010 H.R. 4872 can be accessed here. 

Congressional Budget Office, Cost estimate for the amendment in the nature of a substitute to H.R. 3590, as proposed in the Senate on November 18, 2009 (November 18, 2009) available here.

Congressional Budget Office, Cost estimate for the amendment in the nature of a substitute for H.R. 4872, as passed in the House on March 21, 2010 (March 23, 2010) available here.

Congressional Research Service, “Health-Related Revenue Provisions: Changes Made by the Reconciliation Act of 2010 to H.R. 3590,” available here.

Congressional Research Service, “Health Insurance Premium Credits in Senate-Passed H.R. 3590,” available here.

Congressional Research Service, “Private Health Insurance: Changes Made by the Reconciliation Act of 2010 to Senate-Passed H.R. 3590,” available here

The Federal Aviation Administration (FAA) regulates nearly every aspect of the nation’s aviation industry, including manufacturing, safety, and licensing.  Recently, the FAA has faced challenges in keeping pace with the growing demands of air travel and overseeing the safety of the aviation industry.  These challenges show little sign of abating, because despite recent drops in airline passenger traffic, the FAA forecasts indicate that the aviation system will transport more than one billion airline passengers annually in 2023.  This is a 30 percent increase from the 757 million airline passengers in 2008.

This growing passenger demand has led to growing congestion and delay problems in the air transportation system.  Despite significant cuts in capacity over the past few years, nearly 20 percent of all flights were delayed in 2009.  These delays have a significant economic impact on the national economy.  While estimates vary, it is clear that delays cost the national economy billions of dollars annually.  In 2008, the Department of Transportation (DOT) found that the cost of delays to the national economy totaled $9.4 billion and those delays added hundreds of millions of dollars in costs to general aviation and commercial cargo operators.  The Joint Economic Committee has estimated that domestic air traffic delays cost as much as $41 billion in 2007.

In 2004, former Transportation Secretary Norman Mineta announced the creation of the Next Generation Air Transportation System (NextGen), which is meant to address the increasing demands placed on the nation’s aviation infrastructure.  NextGen will provide substantial operational, environmental, and safety benefits through the use of satellite-based navigation and surveillance, digital communications, and more accurate weather services.  Today’s air traffic control system relies on ground-based radar systems, voice communications, and inadequate weather forecast services.

Questions about the FAA’s ability to implement NextGen in a timely and effective manner have been raised due to the complexity, resource requirements, and sheer size of the modernization effort.  Planning efforts have taken longer than expected, and there are difficulties in coordinating NextGen activities across Federal agencies.  S. 1451 includes several provisions to address these issues, improve accountability, and accelerate modernization programs where possible. 

NextGen will drive significant improvements in aviation safety and there has been strong Congressional interest in these issues.  The FAA’s safety record has also come under intense scrutiny after the FAA discovered that some of the nation’s air carriers had operated aircraft that had not received all safety inspections required by airworthiness directives.  Moreover, the February 2009 crash of  Flight 3407 in Buffalo, New York, has raised concerns regarding pilot training, flight crew fatigue, and ensuring one level of safety exists throughout the entire airline industry.

In addition to safety and modernization efforts, issues that have garnered Congressional concern that are addressed through S. 1451 include:

• Improving commercial airline service to small and rural communities;
• Establishing better consumer rights protections for air travelers;
• Upgrades to air traffic control facilities;
• Research on environmental initiatives and improvements; and
• Creating jobs by investing in airport infrastructure.

In order to help meet those and other aviation challenges, Senators Rockefeller, Dorgan, Hutchison, and DeMint introduced S. 1451, the FAA Air Transportation Modernization and Safety Improvement Act, on July 14, 2009.  On July 21, 2009, S. 1451 was approved by the Commerce Committee by voice vote and the legislation was placed on the Senate calendar on September 29, 2009.  The Senate is expected to begin consideration the legislation during the week of March 8, 2010.

Major Provisions

Title I–Authorizations.  Title I authorizes the FAA’s four major accounts (table 1) through Fiscal Year 2011: Operations; Facilities and Equipment (F&E); Research, Engineering and Development; and the Airport Improvement Program (AIP).  The combined authorized levels for those programs are ($1.06 billion) more than the Administration’s proposed Fiscal Year 2011 levels.  The higher authorized levels would be enacted in order to ensure that modernization needs are addressed.

Table 1: Proposed authorized amounts for FAA accounts

(dollars in millions)

The legislation would direct $500 million from the Air Traffic Control System Modernization Account to be included in the facilities and equipment budget.  The funds from this modernization account would only be used to support the development and implementation of NextGen programs that advance the modernization of the air traffic control system. 

S. 1451 would also require the FAA to clearly identify NextGen programs and spending in the 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 would establish a number of new initiatives that would aid airport development and streamline the current Passenger Facility Charge (PFC) programs. 

Specifically, the major sections of Title II would:

• Streamline the PFC process by simplifying approval requirements for imposing or amending PFC’s, while still retaining audit controls and FAA project and expenditure oversight. Additional requirements are imposed on increasing PFC’s 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 – the Vision 100-Century of Aviation Reauthorization Act (P.L. 108-176).  The title would not change or increase the maximum allowable PFC’s that are currently permitted under the program’s authority;
• Require the Secretary of Transportation to establish and conduct a pilot program that would allow not more than six airports to impose a PFC without regard to dollar amount limitations if the participating airports do not collect the charge through an air carrier.  The same eligibility and oversight criteria applied under the regular PFC authority would still apply to the use of the revenue in this program;
• Provide 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;
• Increase 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;
• Expand the eligibility for the AIP noise set-aside with a guaranteed minimum amount of funding;

• Broaden the 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;

• Promote environmental benefits at airports by permitting 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.  The legislation 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; and

• 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 III–Air Traffic Control Modernization and FAA Reform.  Title III of S. 1451 focuses on advancing the NextGen initiative and improving FAA management practices and oversight of the agency’s modernization efforts.  

Specifically, the major sections of Title III would:

• Establish clear deadlines for the adoption of existing Global Positioning System (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.  The legislation 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;

• Improve the FAA’s management practices by establishing a Modernization Board that would provide the FAA with specific oversight over its modernization activities.  The Modernization Board would specifically provide advice to the FAA on its strategic plan, give approval for modernization expenditures that exceed $100 million, and approve the selections of leaders to the Air Traffic Organization and NextGen’s Joint Planning Development Office (JPDO);

• Create a new process for resolving collective bargaining disputes at the FAA that are at an impasse;

• 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;

• Mandate the use of “ADS-B Out” technology, which allows the broadcast of ADS-B transmissions from aircraft to aircraft and between aircraft and air traffic controllers, by 2015.  The FAA would also 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;

• Require reports 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.  The legislation would also direct the FAA 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;

• Establish 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 JPDO;

• Designate an individual to be a “Chief NextGen Officer” that would responsible for the implementation of the NextGen programs.  This position would improve accountability modernization at the FAA and the position would 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;
• Strengthen government accountability for NextGen implementation by requiring 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 Department of Defense, the National Aeronautics and Space Administration, the Department of Commerce and the Department of Homeland Security;
• Require the FAA create a specific process to complete a comprehensive study of ATC facility realignment or consolidation as the airspace system is modernized;
• Ensure contracts cannot be “imposed” on FAA workforces in the future by establishing a new process to make certain collective bargaining labor disputes at the FAA are adequately resolved by:

o   First requiring that if either the FAA Administrator or an employees’ union determines an impasse has been reached to use the mediation services of the Federal Mediation and Conciliation Service.  Under mutual agreement, the groups may adopt these procedures for the resolution of disputes or impasses arising during the collective bargaining process.

o   If resolution is not reached, then the FAA Administrator and the employees’ union would be required to submit their unresolved issues to the Federal Service Impasses Panel and order binding arbitration by a private arbitration board consisting of three members.

o   In the event that the FAA Administrator and the employees’ union do not agree on the framing of the issues to be submitted for arbitration, then the arbitration board must frame the issues and shall render its decision within 90 days of appointment.

• Require 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;

• Development of a plan to accelerate the certification of NextGen technologies;
• Facilitating the integration of unmanned aerial systems (UASs) into the NAS, including a pilot program at four test sites in the U.S. by 20126;
• 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; and
• 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 Improvements and Small Community Service.  Title IV of S. 1451 focuses on improving airline service and small community access to air service.

Specifically, the major portions of Title IV 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 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.

• Mandate that airlines disclose flight information to passengers when purchasing tickets and require them to post the on-time performance of chronically delayed or cancelled flights on their website including delays, diversions and cancellations that would be updated on a monthly basis.  The legislation would also direct 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. 

• Require a DOT rulemaking that would 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.

• Improve the Essential Air Service (EAS) and Small Community Air Service Development Program (SCASDP) by:

• Initiate reforms of the EAS program to allow 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.  The legislation 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;

• 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;

• Allow AIP funding for converting EAS airports into a General Aviation airport if the EAS community exits the program;

• Increase funding for contract towers that benefit small communities and;

• Modify the language governing disputes between EAS communities and their air service providers.

Title V–Safety.  Title V of S. 1451 would address various aviation safety matters. 

Specifically, the major portions of Title V would:

• Address several safety problem areas identified by the National Transportation Safety Board (NTSB) by:

• 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.  The legislation would also require 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;

• Address the 2008 disclosure that domestic commercial air carriers were inconsistent in their application of Airworthiness Directives by:

• Review the FAA’s ATC Academy and facility training efforts for the air traffic controller workforce.  The legislation also 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 and requires that flight attendants working in the U.S. be proficient in English language skills;

• Ensure that the FAA can 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.  The legislation also 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;

• Mandate that all carriers adopt Aviation Safety Action Programs, Flight Operational Quality Assurance programs, and Line Operations Safety Audit programs, and promotes cooperation among carriers to share best practices and other critical safety information;

• Require air carriers to examine a pilot’s entire history when deciding whether to hire a pilot, annuals reports on the implementation of NTSB recommendations, the revaluation of flight crew training, testing and certification requirements, and requiring annual inspections of pilot training schools and regional air carriers; and

• Ensures 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.  The legislation 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. 

Title VI–Aviation Research.  Title VI of S. 1451 would authorize a series of aviation research and development programs.

Specifically, the major portions of Title VI would:

• Evaluate proposals that address wake turbulence effects, volcanic ash avoidance and severe weather research (including de-icing);

• Establish a Center of Excellence to study the use of clean coal technology for aircraft;
• Create an “Advisory Committee on the Future of Aeronautics” to examine the best governmental and organizational structures for aeronautics research and development;
• Extend 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;
• Permanently authorize the Airport Cooperative Research pilot program which conducts environmental research;
• Require the FAA to consider and issue guidelines for the construction of wind farms in the proximity of critical FAA facilities;
• Create a program that would reduce harmful emissions from airport power sources and increase energy efficiency;
• Establish a pilot program to promote zero emissions from airport vehicles;
• Permits the FAA to conduct developmental research on unmanned aerial systems and directs the agency to assess unmanned aerial systems capabilities; and
• Authorizes funding for two current environmental initiatives 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 of S. 1451 includes a set of provisions that would modify and extend a range of programs.

Specifically, the major portions of Title VII would:

• Extend the authority of the Secretary of Transportation to provide war risk insurance and reinsurance until October 1, 2017;

• Require the FAA Administrator to develop a Human Intervention Management Study program for cabin crews;
• Require the FAA Administrator to establish a certification training program for the airport concessions disadvantaged business enterprise program;
• Direct the FAA to ensure that existing over-flight fees are reasonably related to agency costs of providing air traffic services;
• Instruct the GAO to conduct a study of the training of FAA systems specialists;
• Permanently require that air carriers file competitive access reports;
• Amend the National Parks Air Tour Management Act to incorporate GAO recommendations on commercial air tour operators in national parks;
• Phase out of Stage I and II aircraft in the continental United States;
• Prohibit the FAA from challenging weight restrictions imposed locally at New Jersey’s Teterboro airport;
• Create a pilot program for the redevelopment of airport properties;
• Adjust the permitting for the air transportation of certain musical instruments;
• Include recycling and minimizing the generation of airport solid waste in the definition of airport planning; and
• Miscellaneous program extensions and technical corrections.

Legislative History

The Commerce Committee began holding hearings on reauthorizing the FAA in the 109th and 110th Congresses.  Those hearings were followed up by several hearings in the 111th Congress that were focused on the modernization and safety of the air transportation system.

Senator Rockefeller introduced S. 1451 on July 14, 2009 and it was co-sponsored by Senators Dorgan, Hutchison and DeMint. 

On July 21, 2009, S. 1451 was approved by the Commerce Committee by voice vote.

S. 1451 was placed onto the Senate calendar on September 29, 2009.

The Senate is expected to begin consideration the legislation during the week of March 8, 2010.

Expected Amendments

Senator Rockefeller introduced a substitute amendment (S. Amdt. 3452) to H.R. 1586.  The substitute amendment includes a title related to the Airport and Airway Trust Fund. 

Administration Position

At the time of publication, the Administration had not released a Statement of Administration Position on S. 1451.

Summary

While the economy is starting to growth and recover from the worst financial and economic crisis since the Great Depression, a real economic recovery is not possible without long-lasting, meaningful job creation.  That’s why Senate Democrats are committed to putting America back to work and strengthening our economy.  As a part of our year-long, multi-bill jobs agenda, Senate Democrats passed the bipartisan HIRE Act (H.R. 2847, as amended) and the Travel Promotion Act (H.R. 1299, as amended) last week.  These two bills have the potential to create and save well over a million jobs, strengthen American businesses, and boost our economy.

On March 1, 2010, Senate Finance Committee Chairman Baucus and Senate Majority Leader Reid introduced a proposal that would extend unemployment insurance benefits and eligibility for unemployment health care benefits through the end of 2010, including extending benefits retroactively so families will receive the benefits that were suspended when these programs expired on February 28.  The legislation would also extend loan programs for small businesses and tax cuts that provide the tax certainty families and businesses need to create jobs, along with other important safety-net programs that families and communities depend on in this tough economic climate.

Specifically, S.A. 3336, the American Workers, State, and Business Relief Act (the “American Workers Act” or AWSBRA”), a substitute amendment to H.R. 4213 would:

• Extend tax provisions that expired at the end of 2009, providing much-needed tax relief for individuals and businesses in a time of economic uncertainty;

• Provide pension funding relief for certain plans that suffered significant losses in asset value due to the steep market slide in 2008;

• Extend economic safety net provisions – including unemployment insurance, health care assistance, and federal assistance to states – to support those who have been hardest hit by the recession; and

• Extend other programs, including expired or expiring health care measures, the national flood insurance program and certain SBA loan programs. 

Measures included in this bill would be offset by three tax measures and a reduction in the Medicare Improvement Fund.

The Senate is scheduled to consider the American WorkersAct the week of March 1, 2009. 

Major Provisions

The following summaries are based on an analysis provided by the
Majority Leader’s office and the Senate Committee on Finance

Extension of Expiring Tax Provisions

The American Workers Act would extend several tax provisions that expired at the end of 2009, providing much needed tax relief for individuals and businesses. 

Energy Provisions

The American Workers Act would extend for one year, through 2010:

·         Heavy hybrid credit, analternative motor vehicle credit for so-called heavy hybrids (i.e., hybrid motor vehicles that are not passenger automobiles or light trucks);

·         Tax incentives for biodiesel and renewable diesel, including the$1.00 per gallon tax credit for biodiesel and the small agri-biodiesel producer credit of 10 cents per gallon.  The American Workers Act would also extend through 2010 the $1.00 per gallon tax credit for diesel fuel created from biomass;

·         Biomass Facilities credit period for electricity produced at open-loop biomass facilities placed in service before October 22, 2004;

·         Refined coal placed-in-service deadline for qualifying refined coal facilities;

·         Steel industry fuel placed-in-service deadline for qualifying steel industry fuel facilities;

·         Small business refiners to assist small businessesin complying with EPA sulfur regulations.  One provision would provide for a deduction of up to 75 percent of the costs related to compliance with EPA’s Highway Diesel Fuel Sulfur Control requirement.  A second provision would provide for a credit of five cents for each gallon of low sulfur diesel fuel produced during the taxable year;

·         Credit for producing fuel from coke or coke gas placed-in-service date for qualified facilities producing coke or coke gas, byproducts of the coal refining process that are used to make fuel;

·         Extension of credit for energy-efficiency improvements to new homes:  the credit for the construction of energy-efficient new homes that achieve a 30 percent or 50 percent reduction in heating and cooling energy consumption relative to a comparable dwelling constructed per the standards of the 2003 International Energy Conservation Code (including supplements);

·         Extension and modification of alternative fuels credit for all fuels except hydrogen (which maintains its current-law expiration date of September 30, 2014).  Beginning January 1, 2010, the American Workers Act would modify the definition of alternative fuel to exclude any fuel (including lignin, wood residues, or spent pulping liquors) derived from the production of paper or pulp.  Thus, such fuel would no longer qualify for the alternative fuel credit, alternative fuel mixture credit, and related payment provisions; and

·         Temporary rule for sales or dispositions to implement FERC or state electric restructuring policy for qualified electric utilities.  For sales prior to January 1, 2011, 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, the American Workers Act would allow gain on such sales to be recognized ratably over an eight-year period.

Individual Provisions

The American Workers Act would extend for one year, through 2010, the:

·         Teacher expense deduction that provides teachers an above-the-line deduction for up to $250 for educational expenses.  The proposal is effective for taxable years beginning after December 31, 2009;

·         Additional standard deduction for real property taxes, which is capped at the lesser of the amount of state and local and foreign real property taxes paid, or $500 ($1,000 in the case of a joint return).  This provision would be effective on the date of enactment;

·         Deduction of state and local general sales taxes. The American Jobs Creation Act (P.L. 108-357) provided that a taxpayer may elect to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction for state and local income taxes.  The proposal would extend the provision to the end of 2010.  The proposal is effective for tax years beginning after December 31, 2009;

·         Extension of provision encouraging contributions of capital gain real property for conservation purposes.  The American Workers Act would extend the increased contribution limits and carry-forward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes;

·         Qualified tuition deduction.  The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) (P.L. 107-16) created an above-the-line tax deduction for qualified higher education expenses.  The maximum deduction was $4,000 for taxpayers with AGI of $65,000 or less ($130,000 for joint returns) or $2,000 for taxpayers with AGI of $80,000 or less ($160,000 for joint returns);

·         Tax-free distributions from individual retirement plans for charitable purposes.  This provision would permit tax-free distributions to a charity from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per taxable year;

·         Estate tax look-through for certain regulated investment company (RIC) stock held by nonresidents.  Although stock issued by a domestic corporation is generally 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”).  This estate tax look-through rule for RIC stock does not apply to estates of decedents dying after December 31, 2009.  The American Workers Act would permit the estate tax look-through rule for RIC stock to apply to estates of decedents dying before January 1, 2011.  The proposal is effective for decedents dying after December 31, 2009; and

·         Election for refundable low-income housing credit for 2010.  This program, which was enacted as part of the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), 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 Provisions

The American Workers Act would extend for one year, through 2010, the:

·         Research and development credit equal to 20 percent of the amount by which a taxpayer’s qualified research expenses for a taxable year exceed its base amount for that year and provides an alternative simplified credit of 14 percent.  The proposal is effective for amounts paid or incurred after December 31, 2009;

·         Indian employment credit, which allows a business tax credit for employers of qualified employees that work and live on or near an Indian reservation.  The credit is for wages and health insurance costs paid to qualified employees (up to $20,000) in the current year over the amount paid in 1993.  Wages for which the Work Opportunity Tax Credit is available are not qualified wages for purposes of the Indian employment tax credit;

·         New markets tax credit.  Under current law, new markets tax credits are available on a competitive basis to qualified community development entities investing in low-income census tracts.  In 2009, $5 billion was available under the program.  This proposal would extend the program for one year, providing $5 billion in new markets tax credit authority.  The proposal is effective for calendar years after the date of enactment;

·         Expenditures for maintaining railroad tracks,a creditthat provides Class II and Class III railroads (generally, short-line and regional railroads) with a tax credit equal to 50 percent of gross expenditures for maintaining railroad tracks that they own or lease.  This credit is allowable against the AMT.  This provision is effective for expenses paid or incurred in taxable years beginning after December 31, 2009;

·         Mine rescue team training credit of up to $10,000 for the training of mine rescue team members.  This provision would be effective for taxable years beginning after December 31, 2009;

·         Employer wage credit for activated military reservists, whichprovides eligible small business employers with a credit against 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, up to $4,000.  This provision would be effective for payments made after December 31, 2009;

·         Certain farming business machinery and equipment treated as five-year property.  The American Workers Act would extend for one year, through 2010, the five year recovery period for any machinery or equipment (other than any grain bin, cotton ginning asset, fence, or other land improvement) which is used in a farming business, the original use of which commences with the taxpayer, and is placed in service before January 1, 2011.  For these purposes, the term “farming business” means a trade or business involving the cultivation of land or the raising or harvesting of any agricultural or horticultural commodity.  This provision is effective for property placed in service after December 31, 2009;

·         15-year straight-line cost recovery for qualified leasehold, restaurant, and retail improvements, which are placed in service before January 1, 2011.  The extension is effective for qualified property placed in service after December 31, 2009;

·         7-year recovery period for certain motorsports racetrack property.  This provision would be effective for property placed in service after December 31, 2009;

·         Accelerated depreciation for business property on Indian Reservations.  The American Workers Act would extend the temporary depreciation recovery period for qualified Indian reservation property which is placed in service before January 1, 2011.  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. This provision would be effective for property placed in service after December 31, 2009;

·         Enhanced charitable deduction for food inventory, whichallowsbusinesses to claim an enhanced deduction for the contribution of food inventory;

·         Enhanced charitable deduction for contributions of book inventory to schools, which allows C corporations an enhanced charitable deduction for donations of books to schools, public libraries and literacy programs.  This provision would be effective for contributions made after December 31, 2009;

·         Enhanced charitable deduction for qualified computer contributions, whichencourages businesses to contribute computer equipment and software to elementary, secondary, and post-secondary schools by allowing an enhanced deduction for such contributions.  This provision would be effective for contributions made during taxable years beginning after December 31, 2009;

·         Election to expense advanced mine safety equipment.  This provision wouldallows a 50 percent immediate expensing for the following advanced underground mine safety equipment:  1) communications technology enabling miners to remain in constant contact with individuals above ground; 2) electronic tracking devices that enable individuals above ground to locate miners in the mine at all times; 3) self-rescue emergency breathing apparatuses carried by the miners and additional oxygen supplies stored in the mine; and 4) mine atmospheric monitoring equipment to measure levels of carbon monoxide, methane, and oxygen in the mine.  This provision would apply to property placed in service after December 31, 2009;

·         Temporary expensing rules for certain film and television productions, which would allowan owner to elect to expense up to $15 million of any qualified film or television production costs.  The maximum deduction is increased to $20 million if the costs are significantly incurred in specific, economically distressed areas.  No other depreciation or amortization is allowed for production costs where this deduction is taken.  A qualified film or television production is one in which at least 75 percent of the total compensation spent on the production is for services performed in the United States by actors, production personnel, directors, and producers.  This provision would be effective for productions commencing after December 31, 2009;

·         Expensing of environmental remediation costs.  This provision would beeffective for property placed in service after December 31, 2009;

·         Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.  This provision would allow a section 199 domestic production activities deduction for activities in Puerto Rico and would be effective for tax years beginning after December 31, 2009;

·         Modification of tax treatment of certain payments to controlling exempt organizations.  In general, interest, rent, royalties, and annuities paid to a tax-exempt organization from a controlled entity are treated as unrelated business income of the tax-exempt organization.  The Pension Protection Act (PPA) (P.L. 109-280)provided that if a payment to a tax-exempt organization by a controlled entity is less than fair market value, then the payment is excludable from the tax-exempt organization’s unrelated business income.  This provision would be effective for payments received or accrued after December 31, 2009;

·         Extension of exclusion of gain on the sale or exchange of certain brownfield sites from unrelated business taxable income.  This provision would exclude any gain or loss from the qualified sale, exchange, or other disposition of any qualified brownfield property from unrelated business taxable income.  A brownfield site refers to a category of redevelopment sites where hazardous substances, pollutants, or contaminants are or may be present;

·         Taxation of qualified timber gain and timber REIT provisions.  Under current law, gains on timber sales are eligible for capital gains tax treatment.  The American Workers Act would provide an extension of a provision included in the Food Conservation and Energy Act of 2008 (P.L.110-246) 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, this provision would extend 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 American Workers Act would extend 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.  This provision would extend the treatment of interest-related dividends and short-term capital gain dividends received from a RIC to taxable years of the RIC beginning before January 1, 2011.  This provision would be effective for dividends with respect to taxable years of RICs beginning after December 31, 2009;

·         Extend the treatment of regulated investment companies (RICs) as “qualified investment entities” under section 897 of the Code for those situations in which that inclusion otherwise expired at the end of 2009.  This provision would be effective on January 1, 2010;

·         Exception under Subpart F for active financing income.  The U.S. parent of a foreign subsidiary engaged in a banking, financing, or similar business is eligible for deferral of tax on such subsidiary’s earnings if the subsidiary is predominantly engaged in such business and conducts substantial activity with respect to such business.  The subsidiary must pass an entity level income test to demonstrate that the income is active income and not passive income.  This provision would extend the provision to the end of 2010.  The proposal is effective for tax years beginning after December 31, 2009;

Look-through treatment of payments between related CFCs under the foreign personal holding company rules.  This provision would allow deferral for certain payments (interest, dividends, rents and royalties) between commonly controlled foreign corporations (CFC).   This provision would allow U.S. taxpayers to deploy capital from one CFC to another without triggering U.S. tax.  It would extend present law to the end of 2010 and would be effective for tax years beginning after December 31, 2009;

·         Basis adjustment to stock of an S Corporation making charitable contributions of property.  Prior to the Pension Protection Act (PPA), if an S corporation made a contribution to a charity, shareholders reduced the basis in their stock by their pro rata share of the fair market value of the contribution.  The PPA provided the amount of a shareholder’s basis reduction in the S corporation stock will equal the shareholder’s pro rata share of the adjusted basis of the contributed property.  This provision would extend the provision through December 31, 2010 and would be applicable to contributions made in taxable years beginning after December 31, 2009;

·         Extension of tax incentives for Empowerment Zones. This provision would extend the designation of certain economically depressed census tracts as Empowerment Zones.  Businesses and individual residents within Empowerment Zones are eligible for temporary tax incentives;

·         Tax incentives for investments in the District of Columbia.  The American Workers Act would provide for the designation of certain economically depressed census tracts within the District of Columbia as the D.C. Enterprise Zone.  Businesses and individual residents within this enterprise zone would be eligible for temporary tax incentives.  First time home buyers would receive a $5,000 credit for D.C.   This provision would be effective for tax years beginning after December 31, 2009;

·         Extension of tax incentives for renewal communities.  This provision would extend the designation of certain economically depressed census tracts as Renewal Communities.  Businesses and individual residents within Renewal Communities are eligible for temporary tax incentives;

·         Extension of temporary increase in limit on cover-over of rum excise tax revenues to Puerto Rico and the Virgin Islands.  The American Workers Act would extend a 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 credit.  Certain domestic corporations operating in American Samoa are eligible for a possessions tax credit, which offsets their U.S. tax liability on income earned in American Samoa from active business operations, sales of assets used in a business, or certain investments in American Samoa.  Further, the credit is held to an economic activity-based limit, measuring the credit against wages, depreciation, and American Samoa income taxes.  This provision would be effective for tax years beginning after December 31, 2009; and

·         Percentage depletion for marginal wells.  This provision would extend the suspension on the taxable income limit for purposes of depreciating a marginal oil or gas well.

Disaster Relief Provisions

The American Workers Act would extend for one year, the:

·         Relaxed mortgage revenue bond limitations for federal disasters.  The Emergency Economic Stabilization Act (EESA) (P.L. 110-143) included a provision that waived the 10 percent penalty tax for certain distributions from an individual retirement accounts or tax-favored retirement plans and 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 as a residence due to 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, which 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 adjusted gross income.  This provision would also extend, through December 31, 2010, the current law $500 per loss threshold;

·         Bonus depreciation for qualified disaster property, which 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 federally-declared disaster area;

·         Five-year carry-back period for certain losses relating to federal disasters, which 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, which allows businesses that have been affected by a federally-declared disaster to currently expense demolition, repair, clean-up, and environmental remediation expenses (“Qualified Disaster Expenses”).  In addition, this provision would extend for one year, through 2010, the expensing provision for small businesses that increases by $100,000 (or the cost of qualified property, whichever is less) the amount of expensing available for qualifying expenditures made in a federally-declared disaster area and increases by $600,000 (or the cost of qualified property, whichever is less) the level of investment at which the small business expensing benefits phase-out;

·         Tax incentives for the New York Liberty Zone, a temporary depreciation allowance for certain real property within the New York Liberty Zone and the time for issuing New York Liberty Zone bonds;

·         Temporary depreciation allowance for Gulf Opportunity Zone property, which provides for 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 would apply to property placed in service through December 31, 2010;

·         Increased rehabilitation credit for historic structures in the Gulf Opportunity Zone.  The Gulf Opportunity Zone Act of 2005 (P.L. 109-135) 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;

·         Work Opportunity Tax Credit (WOTC) for Hurricane Katrina employees for certain employers hiring in the Hurricane Katrina core disaster area (through August 28, 2010);

·         Temporary rules for use of retirement fund distributions and loans in Midwestern disaster areas.  A provision enacted in the EESA waived the 10 percent penalty tax for certain distributions from an individual retirement accounts or tax-favored retirement plans (e.g., Code sections 401(k), 403(b), or 457(b) plans).  The penalty tax  is waived if the distribution is made on or after the federally-declared disaster date and before January 1, 2011 and is made to an individual whose principal residence on the applicable declaration date was located in a Midwestern disaster area and who sustained an economic loss by reason of the disaster.  In addition, this proposal would extend the provision enacted in the EESA that effectively doubles the limitation on loans from a 401(k), 403(b), or a governmental 457(b) plan by allowing participants located in a Midwestern disaster area who sustained economic loss by reason of the disaster.  Finally,  for loans made after December 31, 2009 and before January 1, 2011, outstanding loan payments due on or after the applicable declaration date and before January 1, 2011 may be deferred an additional 12 months; and

·         Cancellations of indebtedness related to a Midwestern disaster.  The EESA included a provision that ensures that individuals are not taxed on personal debt that is discharged in response to damage suffered from the Midwestern disaster.  For example, if a house is damaged or destroyed and the mortgage lender discharges all or part of this mortgage debt, the amount discharged would not be treated as income as a result of this proposal.

Pension Funding Relief

The American Workers Act would provide temporary, targeted funding relief for single employer and multiemployer pension plans that suffered significant losses in asset value due to the steep market slide in 2008.  This proposal is estimated to raise approximately $5.3 billion over ten years.

Extension of Economic Safety Net Provisions

Unemployment Insurance Extension

The American Workers Act would extend unemployment benefits through December 31, 2010.  These unemployment benefits expired on February 28, 2010.  Prior to the expiration, an unemployed worker could receive up to 26 weeks of unemployment benefits provided by the state in which they were employed.  After the state-provided benefits were exhausted, the worker could qualify for 34 more weeks of benefits provided by the federal government.  If that person was unemployed in a state with an unemployment rate above six percent, they qualified for an additional 13 weeks of benefits also provided by the federal government.  Unemployed workers in states with an unemployment level over 8.5 percent qualified for an additional six weeks of benefits also provided by the federal government.  In addition, the federal government paid 100 percent of the cost of state Extended Benefits programs which provided up to 13 additional weeks of benefits for unemployed workers who had exhausted regular state benefits or Emergency Unemployment Compensation.  Last year the Recovery Act increased weekly unemployment benefits by an additional $25 per week.   The legislation would retroactively extend these provisions. 

Extension of COBRA Premium Assistance

The American Workers Act would extend the 65 percent COBRA continuation coverage subsidy for terminated workers through December 31, 2010 and also includes technical clarifications to the program.  The subsidy was originally enacted as part of the Recovery Act and was expanded later in 2009. 

Extension of 2009 Federal Poverty Guidelines

The American Workers Act would keep the 2009 federal poverty guidelines in place for 2010 to avoid a reduction in eligibility for poverty-based programs.  A reduction would otherwise occur because of the decrease in the average cost of goods that results from the economic downturn.  This provision would allow all currently eligible individuals to remain eligible for poverty-based programs. 

Extension of Federal Assistance to States

TheAmerican Workers Actwould extend for six months the increased federal medical assistance percentage (FMAP) made available to states in theRecovery Act.  This extension would provide states additional funding through June 30, 2011. 

Other Provisions

Health Care Provisions

Extension of exceptions process for Medicare therapy caps.  This provision would extend the therapy caps exception process through December 31, 2010.  Current law places annual per beneficiary payment limits for all outpatient therapy services provided by non-hospital providers.  The Secretary was required to implement an exceptions process for cases in which the provision of additional therapy services was determined to be medically necessary and this process expired on December 31, 2009. 

Accreditation exemption for certain pharmacies that furnish durable medical equipment.  Under current law, suppliers of durable medical equipment, prosthetics, orthotics, and other supplies (DMEPOS) must prove their compliance with quality standards by being accredited.  Certain eligible professionals are specifically exempted from the accreditation requirement.  The provision would make pharmacies eligible for an exemption from the accreditation requirements under certain circumstances.  

Extension of physician fee schedule mental health add-on.  This provision would extend the five percent increase in payments for certain Medicare mental health services through December 31, 2010. 

Extension of ambulance add-on.  This provision would extend the increased Medicare rates for ambulance services, including in super rural areas, through December 31, 2010. 

Extension of the 1.0 floor on the Work Geographic Practice Cost Index (GPCI).  This provision would extend the existing 1.0 floor on the work geographic adjustment through December 31, 2010. 

Extension of payments for the technical component of certain physician pathology services.  This provision would extend the ability of independent laboratories to receive direct payments for the technical component for certain pathology services through December 31, 2010.

Outpatient hospital hold harmless.  This provision would extend the existing hospital outpatient hold harmless provision for small rural hospitals through December 31, 2010 and also allows Sole Community Hospitals with over 100 beds to qualify. 

Electronic health record clarification.  This provision would clarify the health information technology provision in current law that allows non-hospital-based physicians and other health professionals who bill Medicare and Medicaid through a hospital to receive electronic health record incentives. 

Extension of direct billing for Indian Health Service providers.  This provision would extend the authorization for Indian Health Service providers to be directly reimbursed by Medicare Part B through December 31, 2010. 

Extension of certain payment rules for long-term care hospital services and of moratorium on the establishment of certain hospitals and facilities. This provisionwould extend Sections 114 (c) and (d) of the Medicare, Medicaid and SCHIP Extension Act of 2007 (P.L. 110-173) by one year. 

Extension of the Medicare Rural Hospital Flexibility Program.  This provision would extend the authorization for the Flex Grant program through Fiscal Year 2011. 

Section 508 hospital wage index program.  This provision would extend hospital reclassifications under section 508 of the Medicare Modernization Act (P.L 108-173) through the end of Fiscal Year 2010. 

Technical correction related to Critical Access Hospitals (CAHs).  This provision would make a technical correction to clarify that CAHs are eligible to receive 101 percent of reasonable costs for providing outpatient care regardless of eligible billing method the facility uses and for providing qualifying ambulance services. 

Medicare Advantage changes.  This provision would extend the authority of certain types of private plans to offer coverage under Medicare Advantage for one year (to 2011).  Those plan types are special needs plans, cost plans, and senior housing programs.  This provision would also provide a technical fix for existing employer-sponsored private fee-for-service plans and provides $20 million in added funds for State Health Insurance Assistance Programs and similar organizations that assist beneficiaries with Medicare benefits.

Family to Family Centers.  This provision would extend funding for the development and support of Family to Family Health Information Centers through Fiscal Year 2011, which helps families of children with disabilities or special health care needs make informed decisions about health care.  The policy was first authorized in the Deficit Reduction Act of 2005 (P.L. 109-171).

Implementation funding.  This provision would appropriate funding to the Secretary of Health and Human Services (HHS) from amounts in the general fund of the Treasury to implement provisions in this title.

Extension of gainsharing demonstration.  The Deficit Reduction Act of 2005 authorized a demonstration to evaluate arrangements between hospitals and physicians designed to improve the quality and efficiency of care provided to beneficiaries.  This provision would extend the demonstration through September 30, 2011 and extend the date for the final report to Congress on the demonstration to September 30, 2012. 

National Flood Insurance Program

In 1968, the U.S. Congress established the National Flood Insurance Program (NFIP) to address the nation’s flood exposure and challenges inherent in financing and managing flood risks in the private sector.  NFIP was created to: 1) identify areas across the nation most at risk of flooding; 2) minimize the economic impact of flooding events through floodplain management ordinances; and 3) provide flood insurance to individuals and businesses.  After several short term extensions, the program expired February 28, 2010.  As of October 2009, there were over 5.5 million active policies nationwide. 

SBA Loan Provisions

The Recovery Act provided $375 million to increase guarantees on 7(a) loans from 75 percent to 90 percent and eliminated fees charged to borrowers on 7(a) and 504 loans to small businesses.  These funds were used to provide loans to more than 40,000 small businesses, providing more than $16 billion in loans.  The Recovery Act funding was exhausted in November and the Defense Appropriations Bill provided an additional $125 million to fund the increased guarantee and fee elimination through February.  The American Workers Act would provide for $354 million in funding through the end of the fiscal year and extend the authorization through December 31, 2010.  The Small Business Administration estimates that the extension of Recovery Act funding will support $18.5 billion in 504 and 7(a) loans to small businesses.

Agriculture Disaster Assistance

The Americans Workers Act would provide approximately $1.5 billion in agricultural disaster assistance for crop, cottonseed, aquaculture, poultry, grazing, and specialty crop losses in 2009. 

Satellite Home Viewer

The American Worker, State, and Business Relief Act would provide a five-year reauthorization of satellite home viewer legislation.  The legislation provides a statutory copyright license and communications regulatory framework that enables satellite providers to offer local broadcast stations to their subscribers.  The American Workers Act would expand access for satellite television viewers, especially residents of rural areas, to local network channels normally available through cable operators. 

The legislation would extend for five years the obligation on broadcasters and cable and satellite operators to engage in good faith retransmission consent negotiations. 

The American Workers Act would update existing law to reflect the transition from analog to digital television broadcasts.  It would also update copyright law so that satellite viewers will be able to access statewide public television networks.  This provision would increase the penalties for violating the terms of the licenses in an effort to deter infringement. 

Statutory Licenses

·         Modifications to statutory license for satellite carriers under Section 119.  The American Workers Act would modify the “distant signal” license for satellite carriers to reflect the transition from analog to digital and modernizes the process for determining royalty rates.  The legislation would update the definition of an “unserved” household to fix the “Grade B Bleed issue” in which an out of market station serves some households within a market, preventing a satellite carrier from using the distant signal license to provide an affiliate of that network to the entire Designated Market Area (DMA).   The new definition of “unserved” would include a household in which there is not digital signal of a station affiliated with the network in the household’s local market. 

The American Workers Act would also move quasi-local signals (e.g. significantly viewed, local low power, special exceptions) from the distant signal license to the local license (Section 122). 

·         Modifications to statutory license for satellite carriers in local markets under Section 122.  The American Workers Act would modify secondary transmissions of television broadcast stations within a local market.  This action would expand access to lower power stations by broadening the license for low power stations to cover the entire local market.  Currently, a satellite provider can only carry a low power station within 20 -35 miles of the station’s transmitter, which makes it nearly impossible for a satellite provider to use. 

The American Workers Act would promote consumer access to public television programming by permitting a satellite provider to carry a noncommercial educational broadcast station from within a consumer’s state if the station is part of a state-wide network, even if the station is licensed to a community in a different local market.

·         Modifications to cable system secondary transmission rights under Section 111. The legislation would update the Section 111 statutory license which allows the cable industry to provide secondary transmissions of broadcast programming.   Currently, cable providers may be required to pay royalty fees based on subscribers who do not receive the content for which the royalty is being paid.  The license laws would be modified so that royalty fees are based only on subscribers who actually receive content.  This modification addresses the “phantom signal” issue. 

·         Waivers for providers of local-into-local service for all Designated Market Areas.  The American Workers Act provides an incentive for DISH network to provide local service in all 210 DMAs.

Communications Provisions

·         Extension of authority.  The American Workers Act would extend for five years the statutory provision that permits a satellite carrier to retransmit, without first having to obtain consent, the signal of a distant network station to specified unserved households.

·         Significantly viewed stations.  The American Workers Act would apply provisions relating to satellite transmissions of significantly viewed broadcast signals only to retransmissions to subscribers of a satellite carrier who receive local-into-local service.  This provision would allow a satellite carrier to offer in high definition (HD) format the signal of a significantly viewed station only if the carrier also provides the signal of a local station in the local market of the subscriber in HD format. 

·         Eligibility to receive distant signals.  The American Workers Act would address the “if local, no distant” principle.  This provision would ensure that consumers who are lawfully receiving distant network signals when the legislation is enacted do not lose access to those distant signals until the consumer decides to terminate the distant signal.  New subscribers of satellite, who are not current distant signals subscribers, would not receive such signals, if the satellite carrier offers local signals in the market at the time of subscription.

The legislation also addresses the “buy-through” requirement.  If the local signals become available after a consumer subscribes to a satellite carrier, the consumer may keep distant signals only if the subscriber also subscribes to the local signals within 60 days of the local signals becoming available in the market.  

The American Workers Act would allow satellite carriers to retransmit local-into-local signals in digital and HD to two separate reception antennas.

·         Providing high definition digital signals.  The American Workers Act would require each eligible satellite carrier to offer subscribers HD of public broadcasting television stations in local markets, if the subscribers currently receive local television broadcasts in HD.

Reports and Savings Provisions

The American Workers Act would require the Register of Copyrights to submit a report to Congress on market-based alternatives to statutory licensing.  The legislation would also require the Comptroller General to conduct a study and produce a report on the changes to the communications laws and regulations currently imposed on cable and satellite providers if Congress implemented a phase-out of the current statutory licensing requirements.  The study would be directed to consider the impact these changes would have on consumer prices and access to programming. 

This provision would also require the Federal Communications Commission (FCC) to analyze and report on in-state broadcast programming, including whether there are alternatives to the use of designated market areas to define local markets that would provide consumers with in-state broadcast programming.  All of these reports would be due within a year of the enactment of the American Workers Act.

This provision would require each satellite carrier to submit bi-annual reports to the FCC about local network channel broadcasts. 

Sustainable Growth Rate (SGR) Extension

As of March 1, 2010, the sustainable growth rate update formula will require a 21 percent reduction in physician payments.  This provision would delay this payment reduction by seven months. 

Offsets

Cellulosic Biofuels Loophole.  This provision modifies the $1.01 per gallon cellulosic biofuel producer credit to exclude fuels with significant water, sediment, or ash content, such as black liquor.  The provision excludes from the definition of cellulosic biofuel any fuels that (1) are more than four percent (according to weight) water and sediment in any combination, or (2) have an ash content of more than one percent (according to weight).  The provision is effective for fuel sold or used after date of enactment.  This proposal is estimated to raise $23.9 billion over ten years. 

Increased reporting requirements for homebuyer credit.  The bill tightens the anti-fraud provisions included as part of the homebuyer credit passed into law on November 6, 2009.  Specifically, the legislation clarifies that the changes made apply to home purchases on or after the date of its enactment.  It also clarifies what documentation is necessary for the Internal Revenue Service to properly certify that taxpayers meet the long-time resident requirements and binding contract requirements of the tax credit.  This proposal is has a negligible revenue impact.

Clarification of the economic substance doctrine and penalty for underpayments attributable to transactions lacking economic substance.  This provision clarifies the application of the economic substance doctrine which has been used by courts to deny tax benefits for transactions lacking economic substance.  The provision also imposes a 40 percent strict liability penalty on underpayments attributable to a transaction lacking economic substance (unless the transaction was disclosed, in which case the penalty is 20 percent). This proposal is effective for transactions entered into after the date of enactment.  The proposal is estimated to raise $5.5 billion over ten years. 

Reduction in the Medicare Improvement Fund.  The Medicare Improvement Fund (MIF) contains funds that are available to the Secretary to make improvements to the original fee-for-service program under Parts A and B of Medicare. Under current law, approximately $20 billion is available for services furnished during Fiscal Year 2014.  The provision reduces the funding available in the MIF by $8 billion.  This proposal is estimated to save $8 billion over ten years.

Legislative History

On December 7, 2009, H.R. 4213 was introduced in the House and agreed to by a 241 to 181 vote on December 9 (Roll no. 943). 

On December 10th, the measure was received in the Senate and referred to the Committee on Finance.  On March 1, the Senate Committee on Finance discharged H.R. 4213 by Unanimous Consent.  Later that day, the measure was laid before the Senate by unanimous consent.  Senators Baucus, on behalf of Senator Reid and himself, offered a substitute amendment (S.A. 3336), the American Workers, State, and Business Relief Act, which is the subject of this bulletin.

The Senate is scheduled to consider H.R. 4213 the week of March 1, 2010.

Expected Amendments

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

Administration Position

On March 2, 2010, the White House released its Statement of Administration position on S.A. 3332 to H.R. 4213:

“The Administration supports Senate passage of the proposed substitute amendment 3336 to H.R. 4213.  Passage of this bill will provide much-needed relief to families and to hard-pressed States while encouraging continued job creation by America’s businesses.  The importance of longer-term extensions for various authorities and programs – and the certainty that such extensions bring – has been highlighted by the severe problems caused by interruptions in authorities for these programs.

“H.R. 4213 includes several important provisions, including:  (1) an extension of extended unemployment insurance and COBRA subsidies through the end of the year, including reforms to improve COBRA subsidies; (2) prevention of dramatic cuts in reimbursements for doctors in Medicare along with extensions of other important health provisions; (3) an extension of increased American Recovery and Reinvestment Act (ARRA) Federal Medical Assistance Percentage rates that allow for enhanced Federal support for State Medicaid programs; (4) an extension of subsidies so that the Small Business Administration can continue certain lending programs with reduced fees and higher guarantees through the end of the fiscal year; and (5) targeted pension-funding relief.

“The bill also includes several other important measures supported by the Administration.  The extensions to expiring tax cuts include several provisions that will encourage companies to invest in new technologies and create more high-tech jobs for the 21st century, including extending the research and experimentation (R&E) tax credit for another year.  The legislation also extends the tax credit for biodiesel and renewable diesel, providing clean energy companies with the certainty they need to make critical investments in the Nation’s energy future.

“The Administration also supports the inclusion of other important extensions, either in this bill or in future legislation.  These provisions include:  (1) an extension and expansion of the TANF Emergency Fund; (2) an extension of bonus depreciation; (3) an extension of Economic Recovery Payments; and (4) the expansion of oversubscribed ARRA programs, including the 48C tax credit for manufacturing and TIGER grants for transportation.

“The Administration looks forward to continuing to work with the Congress on these and additional measures to spur private sector job creation.”

Resources

Congressional Research Service, “Certain Temporary Tax Provisions Expiring in 2009,” available here.

Congressional Research Service, “Reauthorizing the Satellite Home Viewing Provisions in the Communications Act and the Copyright Act:  Issues for Congress,” available here.

Congressional Research Service, “Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System,” available here.

Congressional Research Service, “American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5): Title V, Medicaid Provisions,” available here.

Congressional Research Service, “Health Insurance Premium Assistance for the Unemployed: The American Recovery and Reinvestment Act of 2009,” available here.

Senate Democratic Policy Committee, “Democrats Are Committed to Putting Americans Back to Work,” available here.

UPDATE

H.R. 2847, the Hiring Incentives to Restore Employment Act (HIRE Act), enjoys strong bipartisan support and is expected to be taken up on the Senate Floor for final passage the week of March 15.  The Senate passed the original version of the HIRE Actby a 70 – 28 vote on February 24, 2010 [Roll Call Vote 25, 2/24/10].  The House of Representatives subsequently passed the HIRE Act, with an amendment, on March 4, 2010.  The amendment included the following changes:

• A delay in the effective date of the worldwide allocation of interest provision through 2020;

• Restatement of the requirement that at least 10 percent of the amounts made available under titles I, III, and V of SAFETEA-LU, subtitles A and C of the HIRE Act, and section 403 of title 23 of the U.S. Code would be expended through small businesses owned and controlled by socially and economically disadvantaged individuals;

• Extension of the incentives for hiring and retaining new employees to businesses in U.S. territories and possessions;

• Technical corrections to the HIRE Act relating to for the incentives that would be made available to hire and retain employees; and

• Modifications of the value of the direct payment option for certain tax credit bonds.

Despite the strong bipartisan support the Senate has already demonstrated for the HIRE Act, Senate Republicans have threatened to obstruct the passage of this legislation.  This would block or delay measures that would save or create over a million jobs by providing states and localities with the fiscal certainty they need to put contractors and construction workers to work making infrastructure improvements; a tax incentive to businesses that hire a worker that has been without work for at least 60 days prior to employment; and a reduction in the deficit.  Subsequently, on March 11, 2010, Senator Durbin, on behalf of the Majority Leader, filed a cloture motion on the House message on H.R. 2847.  The cloture vote is scheduled to be held on Monday, March 15.

Summary and Background

These are challenging times for American workers and businesses.  Senate Democrats and the Obama administration inherited a fiscal crisis from the Bush Administration. The previous administration took a $236 billion surplus, turned it into trillions in deficits, and watched millions of Americans lose their jobs.  Senate Democrats acted quickly to pass the American Recovery and Reinvestment Act (P.L. 111-5). Unemployment, however, remains at unacceptable rates and individuals continue to struggle to make ends meet.  Senate Democrats are determined to put more Americans back to work and assist those who have lost a job through no fault of their own. 

The Hiring Incentives to Restore Employment Act(HIRE Act) reflects this commitment to promote job creation and stabilize our fragile economy.  The legislation would: 1)reduce the cost to employers who hire new employees with a tax break for any employer who hires an employee who has been out of work for at least 60 days; 2) enhance the write-off that small businesses can take for purchases of certain equipment, freeing up capital to grow and hire workers; 3) expand the Build America Bonds model by making it available to existing Tax Credit Bonds, which provides the bond holder with a federal tax credit in lieu of interest; and 4) extend the surface transportation programs (SAFETEA-LU) through the end of the year.