[Senate Hearing 113-649]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-649
 
                      TAX RELIEF AFTER A DISASTER:
                  HOW INDIVIDUALS, SMALL BUSINESSES, 
                        AND COMMUNITIES RECOVER

=======================================================================

                                HEARING

                               BEFORE THE
                               
               SUBCOMMITTEE ON TAXATION AND IRS OVERSIGHT

                                 OF THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           NOVEMBER 18, 2014

                               __________
                               
                               
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                             
                               
                                                                     

            Printed for the use of the Committee on Finance
            
                               ____________
                               
                         U.S. GOVERNMENT PUBLISHING OFFICE
94-658 PDF                   WASHINGTON : 2015                         
        
________________________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, 
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].  
            


                          COMMITTEE ON FINANCE

                      RON WYDEN, Oregon, Chairman

JOHN D. ROCKEFELLER IV, West         ORRIN G. HATCH, Utah
Virginia                             CHUCK GRASSLEY, Iowa
CHARLES E. SCHUMER, New York         MIKE CRAPO, Idaho
DEBBIE STABENOW, Michigan            PAT ROBERTS, Kansas
MARIA CANTWELL, Washington           MICHAEL B. ENZI, Wyoming
BILL NELSON, Florida                 JOHN CORNYN, Texas
ROBERT MENENDEZ, New Jersey          JOHN THUNE, South Dakota
THOMAS R. CARPER, Delaware           RICHARD BURR, North Carolina
BENJAMIN L. CARDIN, Maryland         JOHNNY ISAKSON, Georgia
SHERROD BROWN, Ohio                  ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado          PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania
MARK R. WARNER, Virginia

                    Joshua Sheinkman, Staff Director

               Chris Campbell, Republican Staff Director

                                 ______

               Subcommittee on Taxation and IRS Oversight

              ROBERT P. CASEY, Jr., Pennsylvania, Chairman

RON WYDEN, Oregon                    MICHAEL B. ENZI, Wyoming
CHARLES E. SCHUMER, New York         ORRIN G. HATCH, Utah
ROBERT MENENDEZ, New Jersey          MIKE CRAPO, Idaho
THOMAS R. CARPER, Delaware           PAT ROBERTS, Kansas
BENJAMIN L. CARDIN, Maryland         JOHN CORNYN, Texas
MICHAEL F. BENNET, Colorado          JOHN THUNE, South Dakota
MARK R. WARNER, Virginia             PATRICK J. TOOMEY, Pennsylvania

                                  (ii)
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Casey, Hon. Robert P., Jr., a U.S. Senator from Pennsylvania, 
  chairman, Subcommittee on Taxation and IRS Oversight, Committee 
  on Finance.....................................................     1
Enzi, Hon. Michael B., a U.S. Senator from Wyoming...............     2
Schumer, Hon. Charles E., a U.S. Senator from New York...........     4
Bennet, Hon. Michael F., a U.S. Senator from Colorado............     6
Roberts, Hon. Pat, a U.S. Senator from Kansas....................     7
Menendez, Hon. Robert, a U.S. Senator from New Jersey............     8

                               WITNESSES

Berke, Hon. Andy, Mayor, Chattanooga, TN.........................    10
Loughery, Hon. Robert G., Chairman, Bucks County Board of 
  Commissioners, Doylestown, PA..................................    11
Ignizio, Hon. Vincent M., Council Member (District 51), New York 
  city council, New York, NY.....................................    13
Cronin, Sean T., executive director, St. Vrain and Left Hand 
  Water Conservancy District, Longmont, CO.......................    15
Ellis, Steve, vice president, Taxpayers for Common Sense, 
  Washington, DC.................................................    16
Lewis, Troy K., chair, Tax Executive Committee, American 
  Institute of Certified Public Accountants, Draper, UT..........    18

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Bennet, Hon. Michael F.:
    Opening statement............................................     6
Berke, Hon. Andy:
    Testimony....................................................    10
    Prepared statement...........................................    31
Casey, Hon. Robert P., Jr.:
    Opening statement............................................     1
    Prepared statement...........................................    35
Cronin, Sean T.:
    Testimony....................................................    15
    Prepared statement...........................................    36
Ellis, Steve:
    Testimony....................................................    16
    Prepared statement...........................................    40
Enzi, Hon. Michael B.:
    Opening statement............................................     2
    Prepared statement...........................................    44
Ignizio, Hon. Vincent M.:
    Testimony....................................................    13
    Prepared statement...........................................    46
Lewis, Troy K.:
    Testimony....................................................    18
    Prepared statement...........................................    50
Loughery, Hon. Robert G.:
    Testimony....................................................    11
    Prepared statement...........................................    61
Menendez, Hon. Robert:
    Opening statement............................................     8
Roberts, Hon. Pat:
    Opening statement............................................     7
Schumer, Hon. Charles E.:
    Opening statement............................................     4

                             Communications

Enterprise Community Partners....................................    65
Housing Action NH................................................    68


                      TAX RELIEF AFTER A DISASTER:



                   HOW INDIVIDUALS, SMALL BUSINESSES,



                        AND COMMUNITIES RECOVER

                              ----------                              


                       TUESDAY, NOVEMBER 18, 2014

                               U.S. Senate,
        Subcommittee on Taxation and IRS Oversight,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 2:30 p.m., 
in room SD-215, Dirksen Senate Office Building, Hon. Robert P. 
Casey, Jr. (chairman of the subcommittee) presiding.
    Present: Senators Schumer, Menendez, Bennet, Enzi, Roberts, 
and Thune.
    Also present: Democratic Staff: Jennifer McCloskey, Staff 
Director for the Taxation and IRS Oversight Subcommittee. 
Republican Staff: Bart Massey, Minority Staff Director for the 
Taxation and IRS Oversight Subcommittee.

OPENING STATEMENT OF HON. ROBERT P. CASEY, JR., A U.S. SENATOR 
 FROM PENNSYLVANIA, CHAIRMAN, SUBCOMMITTEE ON TAXATION AND IRS 
                OVERSIGHT, COMMITTEE ON FINANCE

    Senator Casey. Well, good afternoon. The hearing will come 
to order. This afternoon we convene the Senate Finance 
Subcommittee on Taxation and IRS Oversight to discuss an 
important topic: how the tax code can help areas recover and 
rebuild after major disasters.
    I want to thank Chairman Wyden and Ranking Member Hatch for 
the opportunity to hold this hearing, and our subcommittee 
ranking member, Senator Enzi, who is sitting next to me up 
here. We are grateful he is with us. We have Senator Roberts 
and Senator Menendez. We will be joined by other Senators 
shortly. I also want to acknowledge Senator Schumer--who should 
be here later--for his leadership on this issue by way of 
legislation.
    We know that natural disasters such as floods, hurricanes, 
and tornadoes can have a devastating impact on communities. We 
will hear a lot about that today from our witnesses.
    I know that in Pennsylvania we have seen firsthand the 
tremendous impact, the horrific impact is probably a better way 
to say it, that flooding has had on our Commonwealth. In 2011, 
Hurricane Irene followed by Tropical Storm Lee caused the worst 
flooding in Pennsylvania in 40 years, since Hurricane Agnes in 
1972. In 2012, of course, Hurricane Sandy caused even further 
and severe flooding across the State.
    In the aftermath of these storms, I visited communities 
across our State and witnessed firsthand the impact of the 
devastation: flooded homes and businesses and severely damaged 
infrastructure. Overwhelmed local governments were the norm 
after those storms. To add on a personal note, I remember 
talking to a friend of mine, a lawyer in northeastern 
Pennsylvania, who was one of those confident tough guys, never 
in a bad mood, never down, a very strong person. I had never 
seen him in a vulnerable position. Because of what happened in 
the flooding, when his house was devastated and his family was 
adversely impacted, I walked up to say ``hello'' to him and to 
try to encourage him, and he just collapsed in emotion. That is 
the kind of impact it had.
    Everywhere you would go--I know other Senators saw this--
you would not even have to hear from the person; you could see 
it in their eyes, what happened to them. So, in addition to the 
physical devastation, the impact this had on people's lives in 
a very personal and substantial way will remain with us for a 
long, long time. I had never, ever seen that in my life up to 
that point, how horrific a natural disaster can be for an 
individual.
    The Federal Government, fortunately, has a number of tools 
to help these communities in need. Today we are here to discuss 
one such tool: tax relief. While there are several permanent 
provisions in the code to assist in these situations, the 
reality is that we take a one-off approach in response to 
natural disasters.
    For example, taxpayers were provided free housing in the 
aftermath of Hurricane Katrina and the Midwest tornadoes of 
2007. They received additional tax exemptions for each victim 
they housed, but no similar relief was offered to those who 
housed victims of Hurricanes Sandy and Irene. Similarly, 
families affected by the Gulf Coast hurricanes in 2005 and 
Midwest storms in 2007 were eligible for additional tax credits 
for educational expenses, but victims of other major disasters, 
such as flooding in Pennsylvania in 2011 and 2012, did not 
receive comparable assistance.
    This lack of consistency in our response is troubling. The 
Federal Government should have a fair and equitable approach. 
Today's hearing will offer us a much-needed opportunity to 
examine these policies. I look forward to taking a closer look 
at various types of relief, the benefits and drawbacks of 
temporary and permanent relief provisions, and ways we can 
improve the Internal Revenue Code on these issues.
    Natural disasters can happen to any community. It is 
important that the Federal Government stand ready to help all 
communities rebuild from natural disasters.
    [The prepared statement of Senator Casey appears in the 
appendix.]
    Senator Casey. At this time, I will yield to our ranking 
member, Senator Enzi.

          OPENING STATEMENT OF HON. MICHAEL B. ENZI, 
                  A U.S. SENATOR FROM WYOMING

    Senator Enzi. Thank you, Mr. Chairman, and thank you for 
holding this important hearing on how we can best help and 
support the efforts of small businesses, communities, and 
affected citizens to recover from disasters, primarily focusing 
on tax relief after the disaster.
    For my part as a former Mayor and member of the State 
legislature and as an accountant, I well recall the challenges 
my hometown and surrounding communities had to face to recover 
from a variety of disasters. We needed to call on all of the 
resources we had available to bring our cities and towns back 
from those tragic experiences.
    I mention that because I have always believed that 
responses to disasters should be guided and directed by those 
closest to the folks back home: their elected officials on the 
local and State level. They are the ones who know best how to 
respond to a disaster in a way that is both supportive of those 
affected and mindful of our limited financial resources.
    Yes, I mentioned costs. It is a concept we need to keep in 
mind during our discussions. A sound response requires that we 
balance, on the one hand, our limited government resources with 
the needs of the communities on the other. We strive to 
preserve this equilibrium to make sure that the government, 
over time, can respond equitably to those who have suffered 
losses now, or will in the future, in a sustainable pattern.
    We have all seen the faces of those who are in the midst of 
working to cope with a disaster. Heartbreaking as it is, we 
must not lose sight of the fact that, when we provide Federal 
tax relief for one affected region, all of the Nation's 
taxpayers ultimately help to pay for it. As a grandfather, it 
continues to concern me that my grandchildren might not have it 
as good as we have.
    When the time comes for them to take their place as leaders 
of our country, my fear is that they will find themselves faced 
with a major disaster of their own. What will they find when 
they have to look at our rainy day fund? If we are not careful, 
there will be nothing in it but stacks of IOUs. Clearly we 
cannot allow that to happen.
    That is why we need to use the financial aid we have in a 
very careful and judicious manner. We can no longer afford to 
spend more money than we have without a clear plan of action 
and an even clearer strategy to pay for our relief efforts. 
With that in mind, we should be certain that whatever tax 
changes for specific communities we consider should be based on 
three principles. First, the corresponding tax benefits should 
go to those who need them. Two, they should likely exist for a 
limited period of time. Three, they should come with standards 
of accountability so we can both track our expenses and monitor 
how they are being used, to evaluate their effectiveness.
    We need to ensure that whatever help we provide does not 
evolve into a long-term subsidy that will be around long after 
the community has recovered from the emergency. We just do not 
have the funds necessary to make long-term or permanent 
commitments in response to emergency, short-term needs.
    Back in 2008, Senator Max Baucus and I worked out a 
bipartisan agreement to have the Federal Government on course 
to be better prepared for weather-related disasters that hit 
our Nation's agriculture communities. Our agreement was 
designed to ensure the money would be in the hands of those 
affected by these disasters in a timely manner, which is why we 
placed this new program under the administration of the 
Agricultural Disaster Relief Trust Fund.
    Congress reauthorized the program earlier this year. The 
reauthorization process is important because it gives us an 
opportunity to reevaluate the program's operation to ensure it 
is working as intended. Let us be sure, whether we are granting 
relief through the tax code, making an appropriation, or 
working on an assistance program, that the money we provide 
goes right into the hands of those who need it the most: the 
businesses and individuals who really need our help.
    We must also work in concert with the affected States to 
ensure they are getting what they need--no more, no less. There 
must also be a plan in place to pay for it that will make these 
programs as budget-neutral as possible.
    Thank you, Mr. Chairman, once again, for holding this 
hearing. I am looking forward to the testimony we will receive 
today that will help guide our efforts and provide us with a 
framework for our future work on this issue.
    Senator Casey. Senator Enzi, thank you very much.
    [The prepared statement of Senator Enzi appears in the 
appendix.]
    Senator Casey. We are going to be doing introductions, and 
I will jump ahead a bit and turn to Senator Schumer for an 
introduction.

         OPENING STATEMENT OF HON. CHARLES E. SCHUMER, 
                  A U.S. SENATOR FROM NEW YORK

    Senator Schumer. Well, thank you, and I appreciate the 
committee members. I want to thank you, Senator Casey and 
Senator Enzi, for organizing the hearing. I want to express my 
appreciation to Chairman Wyden for his interest in pursuing a 
package of permanent tax policy to help taxpayers facing the 
challenges associated with natural disasters like hurricane 
Sandy. I am hopeful that Senator Hatch will keep this issue on 
his agenda in the new year.
    It is my pleasure to introduce one of our witnesses, a good 
friend of mine, a fellow elected official from New York City, 
Councilman Vincent Ignizio. I call him Vincenzo, but we won't 
do that here.
    Councilman Ignizio was first elected to the New York city 
council in 2007. He now serves as the council's minority 
leader. Prior to serving on the city council, he was a member 
of the New York State Assembly, serving the South Shore of the 
great borough of Staten Island.
    He has passed a record number of bills for a South Shore 
council member. He helped expand bus and train service in the 
area, cleaned up brownfields, and secured funding for autism 
treatment and research.
    But most importantly for our discussion here today, Mr. 
Chairman and my colleagues, he has played a vital role in 
helping New York rebuild after the devastation of Sandy. In the 
aftermath of the storm, many New York City property owners who 
rebuilt or repaired their homes faced an increase in property 
tax bills because the repairs boosted their home's value. The 
Councilman successfully led efforts to ensure that those forced 
to repair their homes after Sandy were not hit with a property 
tax hike.
    This tax abatement was absolutely critical to many families 
still trying to get back on their feet--who could otherwise be 
priced out of their own homes by doing simply what we hoped 
they all would do: rebuild. The policy change is going to make 
a difference.
    But of course, there is much more to be done. Councilman, 
as we both know, 2 years after Sandy's devastation, many 
communities in New York, the resilient, are still living with 
the aftermath of the storm. Homeowners and businesses continue 
to rebuild and recover.
    The Councilman and I are partnering to rebuild a seawall 
that helped to protect the Atlantic Village that was destroyed 
in the storm. Working together, we secured $60 million in HUD 
funding to build an offshore breakwater and living shoreline 
along the South Shore of Staten Island, and we will make sure 
that the project is built as soon as possible to provide storm 
mitigation for thousands of Staten Island residents.
    Although the Federal and State Governments continue to 
provide this vital relief, many businesses and homeowners have 
taken on substantial debts of their own to rebuild, plan for 
the future, and protect against future storms. While homes on 
Staten Island are no longer literally underwater, many families 
remain financially underwater.
    So it is imperative that we provide tax relief for these 
families, similar to what has been provided for those impacted 
by past storms like Katrina and the 2008 floods in Iowa. I look 
forward to working with my colleagues in this committee to 
secure it.
    Vincenzo, Councilman, I appreciate that you are taking the 
time to be with us. The Councilman is a Republican. I am a 
Democrat. We have worked very closely together over the years, 
and I hope that can be a metaphor for the new Congress on this 
bill and on many other things that we want to do to help our 
constituents.
    Thank you, Mr. Chairman. I thank my colleagues for letting 
me introduce Councilman Ignizio.
    Senator Casey. Thank you, Senator Schumer. I will do a few 
introductions. I will turn to Senator Bennet to do an 
introduction as well.
    The first witness, Mayor Andy Berke of Chattanooga TN, was 
first elected Mayor of Chattanooga in March 2013--I hope I have 
that right--after serving in the State Senate of Tennessee for 
almost 6 years. He was born and raised in Chattanooga. Mayor 
Berke has shed light on the impact of natural disasters on 
local municipalities, and we are grateful that you are here. I 
do not know if you get the prize for traveling the furthest, 
but we are grateful for that.
    Next, I would like to introduce a Pennsylvanian, Chairman 
of the County Commissioners of Bucks County, Robert Loughery. 
Bucks County is one of our major counties in Pennsylvania, one 
of the largest population centers in our State in southeastern 
Pennsylvania and suburban Philadelphia. The Chairman was first 
elected to the board of Bucks County Commissioners in 2011, and 
was unanimously named Chairman in 2012, 2013, and 2014. That is 
not easy to do. He also brings to the panel substantial 
private-
sector as well as public-sector experience in economic 
development. So, Mr. Chairman--I told you I would call you that 
today--we are grateful you are here. Thanks for appearing.
    Next we will turn to Senator Bennet for an introduction.

         OPENING STATEMENT OF HON. MICHAEL F. BENNET, 
                  A U.S. SENATOR FROM COLORADO

    Senator Bennet. Thank you, Mr. Chairman. I have a chance to 
introduce a great Coloradan. I want to thank you for holding 
this hearing.
    We all know that natural disasters can be completely 
devastating to communities. We faced that in Colorado last fall 
when our State saw catastrophic flooding following record 
rainfall.
    In September 2013, communities across Colorado received 
more rain in 1 week than normally falls in an entire year. The 
rainfall caused widespread flooding across a large area from 
Colorado Springs all the way up to Fort Collins. Ten lives were 
tragically lost, and 11,000 people were evacuated from their 
homes.
    In the end, more than 1,500 homes and 200 commercial 
buildings were destroyed. Infrastructure all across the region, 
including roadways, irrigation ditches, and water reservoirs, 
was also severely damaged. In total, the devastating floods 
caused upwards of $3 billion in damage for Colorado.
    Sean Cronin, whom we are lucky to have with us today, is 
the executive director of Colorado's St. Vrain and Left Hand 
Water Conservancy District. He saw this damage firsthand, 
because the St. Vrain River and Left Hand Creek drain in the 
front range of the Rocky Mountains near Longmont in Boulder.
    During these floods, these rivers abandoned their channels, 
destroying their landscapes and any infrastructure that stood 
in the way. Sean witnessed this devastation, and he has been on 
the front lines helping communities ever since.
    For his flood recovery efforts, he recently received the 
Colorado Foundation for Water Education's Emerging Leader 
award. So, Mr. Chairman, I am very proud to welcome Mr. Cronin 
here to the committee and to thank you again for holding 
today's hearing.
    Senator Casey. Senator Bennet, thank you very much. Two 
more introductions, then we will turn to Senator Roberts, and 
then we will have our testimony.
    Next we have Steve Ellis, who is vice president of 
Taxpayers for Common Sense, by the acronym TCS. Mr. Ellis 
serves as a leading media and legislative spokesman for TCS. In 
addition to overseeing several of the organization's programs, 
he is an expert in several fields including earmarks, flood 
insurance, and Federal disaster assistance programs. Prior to 
joining TCS in 1999, he served as an officer in the U.S. Coast 
Guard and received both the Coast Guard Commendation Medal and 
the Coast Guard Achievement Medal. So, we are grateful you are 
here, Mr. Ellis. Thanks very much.
    Finally, we have Troy Lewis. Troy is chairman of the Tax 
Executive Committee at the American Institute of Certified 
Public Accountants, known as AICPA. Like our ranking member, 
Senator Hatch, Mr. Lewis is a resident of Utah, owning a small 
accounting firm in Draper, UT and serving as vice president at 
Heritage Bank, a community bank in St. George, UT. Mr. Lewis 
has testified before the Finance Committee previously and 
brings over 20 years' experience in performing tax-related work 
for small businesses and individuals. Thank you for being here.
    Senator Roberts?

            OPENING STATEMENT OF HON. PAT ROBERTS, 
                   A U.S. SENATOR FROM KANSAS

    Senator Roberts. Well, thank you, Mr. Chairman, for your 
leadership in holding this very timely committee meeting, and 
thanks to Senator Enzi and all concerned. And thank you to the 
witnesses for taking time out of your valuable schedule to be 
here.
    I just wanted to take a moment to reflect on the critical 
importance of tax relief and assistance available to cities and 
towns that have been hit by natural disasters. At 9:45 p.m., 
May 4, 2007, an EF5 tornado, the highest level on the standard 
meteorological scale--it was a different kind of tornado; it 
was a wedge tornado, not a funnel tornado--plowed through the 
city of Greensburg, KS. It killed 12 people and destroyed and 
damaged more than 95 percent of the city's structures, most 
vehicles, and the electricity infrastructure.
    Most residents were displaced from their homes and 
businesses. All city and county services including the schools, 
city hall, hospital, and courthouse were absolutely destroyed. 
Greensburg was literally wiped off the map.
    In the immediate aftermath, I called President Bush. He was 
at Camp David. I told him he needed to get FEMA out to 
Greensburg right away. He informed me that that request had to 
come from the Governor. I told him the Governor was at a jazz 
concert in Louisiana. He said, ``Raise your right hand''--by 
phone, which I did--and he said, ``Please take the following 
oath as Governor of Kansas for only 5 minutes,'' which I did. 
And he said, ``You have FEMA coming.''
    The response of the State, local, and Federal Governments 
was simply tremendous. We were quickly able to safeguard 
residents and secure property and begin the hard task of 
rebuilding. Soon after, I began working with my colleagues on 
the Finance Committee to secure tax relief that would enable 
Greensburg to rise from the dust and also to rebuild. The tax 
relief initiative we developed emulated the Gulf Opportunity 
Zone benefits provided to the Gulf Coast area after Hurricane 
Katrina--in many cases, quite literally, substituting the 
language in the GO Zone legislation.
    Among the measures in this package were changes to the 
casualty loss rules, incentives to hire and retain employees, 
depreciation changes to help offset rebuilding costs, and 
enhanced bonding authority to allow the local government to 
quickly restore its schools and its infrastructure. We were 
able to get tax relief enacted by the end of the year.
    Now remember when this happened--at the end of the year. 
That provides a time of uncertainty that I think we have to 
address in this legislation.
    These provisions were important to putting the town back on 
its feet, rebuilding homes and businesses, and helping 
residents cope with the extreme hardship of the total 
destruction of the town. I am proud to say we are building a 
new Greensburg using the tax relief we were able to provide. 
The town is modernizing and is considered a model for disaster 
response and also redevelopment.
    Seven years later, Greensburg is the world's leading 
community in energy-efficient buildings, including the new city 
hall and the new 48,500 square-foot Kiowa County Memorial 
Hospital. Renewable energy powers the entire community, and the 
streetlights are all LED. The population is growing, and the 
town is back in business.
    Greensburg is proof that tax relief can help a town 
rebuild. We were fortunate in Kansas to be able to move quickly 
with a comprehensive aid package, including tax relief. This 
was a full team effort, including my Kansas colleagues here in 
Washington and the support of my Senate colleagues, most 
especially on this committee.
    Let me say, as I reflect on Greensburg's rebuilding, it is 
clear to me that we could have provided more immediate help, 
help that would have provided strong comfort and certainty that 
the Federal Government would be there to help Greensburg 
rebuild. This is why it is very important that we think about 
enacting a menu of permanent disaster relief that can be 
activated at a moment's notice when an area is hit with a 
disaster meeting the appropriate criteria.
    Having immediate access to relevant tax relief is 
absolutely vital to future disaster response. So, as we discuss 
tax reform, I encourage the chairman, and I encourage all 
Senators present, to keep in mind the experience of Greensburg 
and other disaster-stricken towns.
    There was an emergency relief area at Barclay College in a 
very small community called Haviland, KS, about 15 miles away. 
As I walked into that relief center, I noticed an elderly 
gentleman sitting on the edge of his bunk staring into space. 
He was quite elderly. He was wearing an overcoat. He was 
wearing the shoes of his neighbor--he didn't know what happened 
to his neighbor--and no socks and his pajamas.
    I put my arm around him and identified myself as Senator 
Pat Roberts, and I said, ``We are going to be of help to you, 
sir.'' He said, ``No, I have lost my life.'' But he did not 
lose his life, and we were able to provide help. He did 
eventually go to assisted living in Dodge City, KS, just down 
the road a piece. But I will never forget him staring off into 
space, much like the story in the illustration by the chairman.
    It just seems to me that we could have provided a lot more 
predictability and hope for people to stay the course as 
opposed to moving to other areas--and there were a lot of 
family experiences that way. I hope that we can move on some 
legislation.
    Thank you, Mr. Chairman.
    Senator Casey. Senator Roberts, thank you very much.
    Senator Menendez?

          OPENING STATEMENT OF HON. ROBERT MENENDEZ, 
                 A U.S. SENATOR FROM NEW JERSEY

    Senator Menendez. Thank you, Mr. Chairman. In deference to 
the witnesses, I am going to synthesize, but I do want to speak 
briefly. I have a meeting with the Majority Leader, and I hope 
to be back so I can ask questions and glean the testimony that 
I have read from the conversation that will take place.
    But very briefly, in our case, Superstorm Sandy was New 
Jersey's worst natural disaster in its history, and it was the 
second-most expensive disaster in our Nation's history. Today, 
2 years after the storm, thousands of families are still not 
back in their homes--thousands.
    We talk about the beaches and the boardwalks and all of 
that--which are great and important to our State, important to 
its economic vitality--but the very essence of community is 
people in their homes. And thousands are not there. And they 
faced the wind and the storm and the surge, but what they are 
facing now is far greater in some respects than the natural 
disaster that took place.
    They are facing a government that is not sufficiently 
responsive. They are facing a situation where a Federal judge 
in New York found that insurers were purposely changing 
engineering reports to claim no responsibility to pay the 
insured or to lowball them. In fact, since we, the Federal 
Government under FEMA, are the ones who let these underwriters 
write the insurance policies, we should be looking into that.
    And then finally, we have the tax code, which is why I 
appreciate you and the ranking member having this hearing. I 
just read today of a New Jersey resident from Centerville, NJ. 
She owes the IRS $22,000 in taxes on income she never saw. She 
owes this amount because she was flooded three times in 3 
years--the last one being Sandy. So she accepted a government 
buyout which was $70,000 less than she owed on the mortgage.
    While the bank wrote off the debt, she still owes income 
taxes on the $70,000, leaving her with a tax bill she cannot 
afford because she is on a teacher's salary. This is someone 
who did the right thing, paid her insurances all along, someone 
who took the action to reduce future flood damage through 
repetitive loss and then got hit with a $22,000 tax bill. So we 
have to look at that as a final provision and as one of the 
provisions that I think, whether permanently or otherwise, 
needs to be dealt with.
    The final thing I will say is that I voted to give tax 
relief to similar victims of Hurricane Katrina. I voted for the 
Midwest flood victims from 2007 and 2009 because I understand 
what we mean when we say this is the ``United States of 
America.'' And that is what it means to me.
    Now we have a reticence, it seems, to create the same type 
of relief that we extended to those fellow Americans for the 
challenges we are having on the east coast, and that is simply 
not acceptable. So I hope we can get to the point where we can 
deal with the emergency that exists with these people who, 
through no fault of their own, find themselves with tax bills 
that they never realized any benefit of, and then seek some 
permanency so that we do not have to do this ad hoc and can 
respond to people's lives and get people back in their homes.
    I appreciate the opportunity to speak.
    Senator Casey. Thank you, Senator Menendez, and thanks for 
bringing the witness that each of our Senators brings here from 
their home States and their own experience. That is why this is 
such an important and bipartisan issue.
    I do want to thank our witnesses for being here today. Your 
written statements will be entered into the record. We 
appreciate the fact that you may not be able to get to your 
entire testimony in your 5 minutes, but we will make sure that 
each of your full statements is made a part of the record.
    So, Mayor Berke, we will start with you.

                 STATEMENT OF HON. ANDY BERKE, 
                     MAYOR, CHATTANOOGA, TN

    Mayor Berke. Thank you, Mr. Chairman. Chairman Casey, 
Ranking Member Enzi, members of this committee, I appreciate 
the opportunity to talk with you today about how cities like 
Chattanooga are affected by natural disasters and how, with 
greater tax relief, they can recover.
    Just after lunchtime on Friday, March 2, 2012, a tornado 
crashed through the Island Cove Marina off of Harrison Bay in 
Chattanooga. The restaurant at the marina immediately ushered 
its patrons into the cooler to wait out the storm in a safe 
place. When they emerged, the entire area had been transformed.
    The marina manager, Terry Kelley, first worked to clean up 
the fuel spilling into Chickamauga Lake, and then he paused to 
survey the damage. Snapped trees, sunken boats, and half-
submerged masts dotted the horizon. Downed power lines draped 
over the 
debris-strewn parking lot.
    The storm had a tremendous impact on both the boat owners, 
many of whom were retired and a few who called those boats 
their home, and on the marina owners themselves. Seventy 
percent of the 400 slips at the popular Marina were damaged, 
and it would take years to rebuild.
    From just that single tornado, nine docks were destroyed, 
which added to the $5 million of damage to the property alone. 
Factor in the nearly 250 boats damaged or destroyed, and the 
price tag hits $15 million.
    Island Cove was one of many victims that day. In March 
2012, Tennessee was declared a Federal disaster area after 
flooding and severe storms, including almost 20 tornadoes, 
ravaged our area and impacted the lives of nearly 1,000 
citizens.
    The widespread destruction could be witnessed in over 344 
distinct locations throughout our State. In our area alone, we 
saw over $16.8 million of property damage and a relief effort 
that required 997 volunteers who gave a total of 6,617 hours. 
Dozens of families lost their homes, thousands of residents 
lost power, 82 buildings were completely destroyed, and 
businesses faced both physical damage and lost earnings. In 
just a few short hours, people's lives were changed.
    This level of destruction meant that those who lost the 
most--and that is often our most vulnerable--would face a long 
and difficult road to recovery. There is one thing that we know 
very clearly: when a community suffers this kind of damage, the 
speed at which aid is administered directly correlates to the 
speedwith which a community can heal. I have no doubt that by 
speeding up the time in which tax relief is available to 
families and businesses, we will see our communities recover 
quicker.
    While Island Cove had good insurance, the insurance only 
covered a fraction of the costs. On top of that, they 
immediately lost revenue and carried that loss for 2 years 
while struggling to recover. If the National Disaster Tax 
Relief Act of 2014 would have been in place in March 2012, that 
general manager, Mr. Kelley, believes the 50-percent 
depreciation bonus provision and the extension of the Net 
Operating Loss Carryback provision would have provided crucial 
cash flow during those critical recovery years, bolstering 
their bottom line as they struggled to keep their business 
afloat.
    Through the National Disaster Tax Relief Act of 2014, we 
can help safeguard both our small businesses as well as the 
most vulnerable among us. This is particularly true for 
affordable and workforce housing. For instance, 8 percent of 
the homeowners affected in Tennessee during the 2012 storms 
were low-income. And we know, after a disaster, the need for 
affordable housing is greater than ever. With our rent prices 
rising, giving us the seventh highest rate in the country, 
Chattanooga simply cannot afford to lose any moderately priced 
units when a disaster strikes.
    Today we have over 1,600 citizens on our wait list for 
public housing, with the problem set to grow even worse. 
Chattanooga has lost 931 public housing units in the last 8 
years, with another 900 units coming off line in the near 
future. We are one of five cities nationwide in a program to 
expand landlords' participation in the Housing Choice Voucher 
Program. More than 1,000 Chattanoogans are still struggling to 
find a place to live that will accept their HUD housing 
voucher.
    This is just one snapshot of one moment in one city, but 
these types of disasters happen without warning and without 
mercy. Whether it is the destruction of a home or property, 
damage to a business, or the loss of a life, this body has the 
opportunity to make a real and lasting difference in the 
recovery effort of a city, a State, and a community in their 
time of greatest need.
    Senator Casey. Mayor, thank you very much.
    [The prepared statement of Mayor Berke appears in the 
appendix.]
    Senator Casey. Commissioner Loughery?

 STATEMENT OF HON. ROBERT G. LOUGHERY, CHAIRMAN, BUCKS COUNTY 
             BOARD OF COMMISSIONERS, DOYLESTOWN, PA

    Commissioner Loughery. Good afternoon. Thank you.
    Chairman Casey, Ranking Member Enzi, and other members, I 
appreciate the opportunity to discuss the critical subject of 
how communities can best recover after a major natural 
disaster, and I commend your committee for taking up this 
important topic today.
    As you may recall, Hurricane Irene first made landfall on 
August 22, 2011, as a Category 1 hurricane in Puerto Rico, 
where severe flooding resulted in significant property damage 
and loss of lives. Five days later, it made a second landfall 
over the Outer Banks of North Carolina with sustained winds 
remaining at Category 1 level. Then on August 28th, it reached 
Philadelphia and the surrounding suburbs, where it did 
substantial damage, raising the Schuylkill River to levels not 
seen in nearly 140 years.
    The region was further battered when, just days later, 
Tropical Storm Lee also struck Pennsylvania with torrential 
rainstorms and severe wind damage. By the time these two storms 
had blown themselves out, Hurricane Irene and Tropical Storm 
Lee had inflicted much harm along the entire east coast of the 
United States.
    Of course, we in Bucks are no strangers to weather-related 
disasters. Since 2007, Bucks County has experienced eight 
federally declared weather-related disasters, including 
Hurricane Sandy, Hurricane Irene, and Tropical Storm Lee.
    In each of these events, the Neshaminy Creek, the Delaware 
River, and the Delaware Canal all saw substantial flooding with 
millions of dollars in losses to residents and businesses, with 
hundreds of thousands of lives disrupted, and the livelihoods 
of many thousands threatened.
    Hurricane Irene, in August of that year, racked up big 
numbers for power outages, with more than 131,000 PECO 
customers losing power in our county, and more than half a 
million in Philadelphia and the surrounding suburbs. Less than 
a month later, Tropical Storm Lee caused more than $2 million 
in damages to parks, roads, bridges, and equipment owned by 
Bucks County and 17 of our municipalities. Damage to private 
property was significantly greater.
    Even now, those costs are being borne by the residents and 
the businesses in our county, and further tax relief could 
prove instrumental in restoring their quality of life and the 
lives and the viability of their business enterprises. It is my 
understanding that this relief may also include the 
availability of additional Low-Income Housing Tax Credits, 
which I would also like to encourage you to consider.
    The Low-Income Housing Tax Credit program has been and 
continues to be one of the single most powerful producers of 
high-
quality, affordable rental homes. Over the past 2 decades, 
these tax credits have enabled private developers to produce 
more than 1,100 new high-quality residences for low-income 
working households in Bucks County alone. Spread over 17 
different projects throughout our county, our $5-million tax 
credit allocation has leveraged over $15 million in new private 
investment.
    Without these incentives, the housing market simply does 
not provide an adequate supply of homes within the reach of 
people of modest means. In fact, in Pennsylvania today, as 
noted by the Housing Alliance of Pennsylvania, there is a 
shortage of 220,000 apartments affordable to the working poor, 
those people living on $22,000 a year or below.
    In Bucks County, we experience these same challenges as 
well. Seniors, low-wage workers, and people with disabilities 
face an incredible challenge in finding safe, decent, and 
affordable housing. The lack of good, adequate housing further 
exacerbates other issues and problems that put increasing 
strains on the services our county provides to its residents 
and additional demands on our taxpayers.
    The challenge is further compounded in our county by the 
state of a significant number of existing public housing units 
that are near the end of their useful life that need 
comprehensive rehabilitation. Places such as Venice Ashby, 
located in Bristol Township, Bucks County, would benefit from 
an increased allocation of Low-Income Housing Tax Credits. That 
would allow our housing authority to replace old and rapidly 
deteriorating housing stock constructed in the 1970s with new 
affordable housing, transforming an entire neighborhood and 
surrounding community.
    This is exactly the type of initiative we seek to pursue in 
Bucks County as we tackle affordable housing issues. So, again, 
thank you for the opportunity to share our experiences and our 
vision with you this afternoon, and for your close attention 
and that of your staff to the challenge of addressing this 
important public policy challenge, as the need for the various 
relief measures envisioned is very real.
    Recovering from Hurricane Irene and Tropical Storm Lee has 
proved daunting, and they will not be the last. We speak of 
economic costs today, but storms such as these, the rising 
waters and the fierce winds, not only uproot trees, they uproot 
lives. They wash away not only goods, but hard-fought dreams. 
You have it within your power to lend a hand in rebuilding 
those lives and communities and restoring those dreams. I hope 
that you take it.
    Thank you.
    Senator Casey. Thank you, Commissioner.
    [The prepared statement of Commissioner Loughery appears in 
the appendix.]
    Senator Casey. Councilman?

STATEMENT OF VINCENT M. IGNIZIO, COUNCIL MEMBER (DISTRICT 51), 
              NEW YORK CITY COUNCIL, NEW YORK, NY

    Councilman Ignizio. Good afternoon, Chairman Casey, Ranking 
Member Enzi, and members of the subcommittee. My name is 
Vincent Ignizio. I am the minority leader of the New York city 
council.
    Thank you for allowing me the opportunity to testify on 
behalf of my constituents in Staten Island and all of New York 
City's residents on how Hurricane Sandy affected our 
communities and how we can continue to help them through tax 
relief and other programs. I want to also give a special thanks 
to Senator Chuck Schumer, who has been a great partner with my 
office and all of Staten Island's elected officials, especially 
as we worked together to help our city recover from the worst 
natural disaster in its history.
    Many of you have been familiar with our borough since 
Hurricane Sandy wrought destruction on the northeast coast on 
October 29th and 30th of 2012. On Staten Island, Sandy's surge 
took a particularly devastating toll. Twenty-four people lost 
their lives, thousands of homes and businesses were severely 
damaged or destroyed, and, in some cases, entire neighborhoods 
were taken off the map.
    More than 2 years later, residents of my borough and all of 
New York City are still struggling to recover. Even those who 
have been fortunate enough to get back on their feet are filled 
with angst about what a future disaster might bring, or are 
grappling with the prospect that misguided government policies 
may finish the job Sandy started and put them out of their 
homes.
    Take, for example, Paul DiCristina, who has lived with 
relatives in Brooklyn since the storm destroyed his home and 
his family's restaurant, the Coral Bay Cafe in Tottenville. 
Paul desperately wants to rebuild, but he has received no 
assistance from recovery programs created to help businesses 
and homeowners, though it is clear he is exactly the type of 
person that these programs set out to help.
    In Atlantic Village, a homeowners association consisting of 
152 homes and more than 350 residents in the Annadale section 
of Staten Island is in dire need of assistance as well. To 
protect themselves from the water of the Raritan Bay, the 
association took out an SBA loan to fund the construction of a 
steel-reinforced concrete seawall. But the storm surge from 
Hurricane Sandy ripped the seawall apart as if it were a piece 
of paper. Many of the homes closest to the water were damaged, 
though it would have been far worse had the seawall not been 
there.
    After cleaning up the debris, the association had no money 
left to rebuild their seawall and cannot afford to take out 
another loan, leaving hundreds of residents in harm's way. 
Ironically, they are in worse shape than they were prior to 
Sandy.
    I have been working with Senator Schumer's office to 
identify a source of funding for Atlantic Village, but I think 
we both agree it should not be so difficult. Federal disaster 
recovery programs are welcome and necessary, but in my 17 years 
as a public servant, I have learned that anything you can do in 
government to help people help themselves is usually far more 
effective, more sustainable, and absolutely faster. We should 
provide Federal tax incentives to help homeowners associations 
like Atlantic Village and individual homeowners build 
protections or build to a more resilient standard.
    That type of tax relief would have certainly helped Richard 
White, a city bus driver from Crescent Beach. Rich has been 
more fortunate than many others affected by Sandy. Through his 
sheer determination and resourcefulness, he has been able to 
rebuild his bungalow home.
    He took pension loans, ran up credit card debt, scrimped 
and saved, and applied for every charitable program he could to 
get together the $70,000 to repair his home back to its pre-
Sandy condition. He is still waiting for the city housing 
recovery program to elevate his home to protect him from future 
flooding.
    Meanwhile, when Rich was finally able to move back to his 
family home last year, he was struck with another blow when his 
property tax was increased by over 30 percent. He, like 
thousands of other New York City homeowners, discovered one of 
the unintended consequences of rebuilding their flooded homes: 
soaring property taxes.
    It is because of Rich and many other constituents who 
called my office, shocked by their property tax bills, that I 
work with my colleagues in government to fix the problem. But 
even when we solve our post-disaster property tax problems, 
there is a much greater obstacle to a permanent, sustainable 
recovery in New York that cannot be overcome without Federal 
intervention: the soaring costs of flood insurance.
    While I know it is not the purview of this committee, I 
feel strongly that we cannot talk about economic recovery 
without addressing this crucial problem, which, if not fixed, 
will price our constituents out of their homes. I believe tax 
relief should be considered as part of the solution.
    The IRS can help as well by providing tax credits for 
homeowners who elevate their homes or perform other measures to 
make their homes more resilient, perhaps with something similar 
to the ENERGY STAR rebate program. It can also provide tax 
incentives for homeowners who are not required to purchase 
flood insurance or who are purchasing flood insurance for the 
first time.
    Passage of the National Disaster Tax Relief Act of 2014 
would be another big step forward in the right direction, as it 
would provide substantial assistance to my constituents, 
especially the provisions that would give them the ability to 
expense qualified disaster costs, claim an exclusion from the 
gross income disaster mitigation payments received from State 
and local governments, and take a full Earned Income Tax Credit 
if their home was damaged by Sandy. In fact, I believe the 
provisions of the National Disaster Tax Relief Act should be 
long-term, or periodically renewable, so that the Federal 
Government can instantly turn on a tax relief package for areas 
declared national disasters.
    Such a package would not only help stimulate a faster 
recovery, but would also provide some certainty for effected 
individuals and businesses during a time of uncertainty and 
difficulty. I know elected officials on all levels are working 
hard to make sure Americans who have suffered so much from 
disasters have a government that is helping them recover 
quickly and efficiently, while helping us become more resilient 
for any future storms that come our way.
    Thank you, again, for listening.
    Senator Casey. Thank you, Councilman Ignizio. I appreciate 
your testimony.
    [The prepared statement of Councilman Ignizio appears in 
the appendix.]
    Senator Casey. Mr. Cronin?

STATEMENT OF SEAN T. CRONIN, EXECUTIVE DIRECTOR, ST. VRAIN AND 
       LEFT HAND WATER CONSERVANCY DISTRICT, LONGMONT, CO

    Mr. Cronin. Thank you, Mr. Chairman, Ranking Member Enzi, 
Senator Bennet, and other committee members. I appreciate this 
opportunity to share with you a perspective that relates to 
just a small piece of this bill.
    My name is Sean Cronin. I am the executive director of St. 
Vrain and Left Hand Water Conservancy District. We are located 
40 miles north of Denver, CO. We organized in 1971 and cover 
about 320,000 acres, 70,000 acres of which are for irrigated 
agricultural production.
    Irrigation is provided through a collection of water users 
who incorporated as mutual ditch companies. These ditch 
companies are federally recognized as exempt 501(c)(12) 
organizations so long as 85 percent of the revenue is obtained 
through the water users known as shareholders. The 85-percent 
rule presents challenges to maintaining these complex and vast 
irrigation systems.
    This challenge was worsened following the September 2013 
flood, when we experienced a one in 1,000 year rain event. It 
took 10 lives and caused hundreds of millions of dollars in 
damages. Within my district alone, 44 of the 94 ditch companies 
suffered damages in the flood at approximately $19 million.
    The good news is, farmers do not let grass grow under their 
feet, and they got out there and did the work that needed to be 
done. The repairs were completed, about 95 percent of which are 
expected to be back on line by the end of this year. The bad 
news is that the costs--at least initially--are borne 
completely by the shareholders, who are farmers and the 
backbone of our local economy who grow the food that we eat.
    We are expecting some assistance from FEMA and from HUD. In 
those cases, companies are concerned that the FEMA and the HUD 
reimbursement funds will violate the 85-percent rule and 
possibly create a tax liability. Moreover, many companies could 
creatively finance their repairs without Federal assistance, 
though in doing so could possibly create another tax liability.
    The bill as drafted provides funding options and 
incentivizes these ditch companies to reinvest into irrigation 
infrastructure, the same infrastructure that is critical to the 
agricultural industry, local economy, and our quality of life.
    In closing, in the opinion of the district and its 
agricultural constituents, this bill will have a positive 
impact on the September 2013 flood recovery, will strengthen 
our communities, and will make further investments in critical 
infrastructure to maintain agricultural economies. This is one 
of our country's most recent natural disasters, and this is 
really an opportunity to put into action a bill that addresses 
the needs now and will prevent some of the hindsight stories 
that we heard today. Thank you for the opportunity.
    Senator Casey. Thanks, Mr. Cronin. You get extra credit for 
not using your whole allotted time. [Laughter.]
    [The prepared statement of Mr. Cronin appears in the 
appendix.]
    Senator Casey. Mr. Ellis?

           STATEMENT OF STEVE ELLIS, VICE PRESIDENT, 
           TAXPAYERS FOR COMMON SENSE, WASHINGTON, DC

    Mr. Ellis. Thank you. Good afternoon, Chairman Casey, 
Ranking Member Enzi, and members of the subcommittee. I am 
Steve Ellis, vice president of Taxpayers for Common Sense, a 
national nonpartisan budget watchdog.
    I am very pleased you invited me here today. TCS has been 
involved in national disaster policy since our inception nearly 
20 years ago. I have been engaged in this issue since I was a 
young Coast Guard officer working on the policy response to the 
Great Midwest Flood of 1993.
    I know the hearing today and the committee's jurisdiction 
is on tax policy, but I want to stress that the Nation has to 
reform its policies to take a holistic approach to disaster 
response and recovery that promotes resilience and pre-sponds 
to inevitable future disasters. That encompasses Federal 
appropriations, tax expenditures, rules and regulations, loans 
and loan guarantees, as well as local and State engagement. 
More generally on tax policy, Taxpayers for Common Sense 
strongly supports efforts to enact comprehensive tax reform 
eliminating many tax expenditures.
    Simply put, too much Federal assistance, whether spending 
or revenue loss, goes out without a real plan in place and 
adequate demands to make communities and individuals more 
resilient. Every dime that is spent by the U.S. Treasury in 
disaster response should help ensure that another dime does not 
have to be spent on the same thing in the future for another 
recovery.
    Unlike appropriated spending, however, tax credits, special 
depreciation schedules, and tax-exempt bonds are blunt 
instruments. They can reward much reinvestment that would 
happen regardless, and may create subsidies that are out of 
proportion to the losses incurred when other State, Federal, 
and charitable programs are taken into account.
    As with other areas of the tax code, these disaster-related 
tax expenditures are hidden spending and deserve far more 
scrutiny than they have received. For instance, there is very 
little data available that objectively documents who did what 
with the various tax preferences that were granted post-Katrina 
or for other disasters.
    We do not know if various provisions change behavior, 
increase resiliency, or help people rebuild. But we do know 
that much of the redevelopment did not occur in the areas 
hardest hit, and went 
to areas less affected that presumably did not need the tax-
advantaged bonds to redevelop.
    In some cases, it may not make sense to redevelop certain 
vulnerable areas that were hit hard, but that should be a 
conscious part of the decision-making process that also 
incorporates how the redevelopment is being done, what 
structures are being constructed, and the level of protection 
and/or mitigation involved.
    There has been a push to extend or create provisions to 
increase tax advantages in disaster-affected regions. This has 
been referenced earlier. This includes proposals involving the 
New Markets Tax Credit, charitable contributions, and use of 
tax-exempt retirement plan funds, among others.
    Each of these provisions was part of an earlier disaster 
recovery tax package. All suffer from a lack of effective 
targeting to the greatest needs, and each fails to promote 
greater resilience to future disasters. The New Markets Tax 
Credit is supposed to spur development in low-income 
communities with tax credits, and there are proposals to 
increase the allocations to target some of these same 
communities, specifically in disaster areas. The program has 
its detractors. In some cases, the New Markets Tax Credit not 
only went to development that would have otherwise occurred, it 
was up-scaled.
    Just this summer, the GAO indicated that the program needed 
increased controls and transparency. Beyond these criticisms, 
the program is not structured to promote targeted, more 
resilient development, which is what communities recovering 
from disaster need.
    In the case of charitable contributions, individuals making 
contributions to charities for disaster relief efforts would be 
allowed to deduct more off their income than is currently 
allowed. The Federal Government is effectively saying that 
those impacted by larger disasters are, in effect, more 
important than those affected by smaller ones, or those whose 
plight, such as chronic disease, does not stem from a disaster. 
Finally, the government would be subsidizing contributions to 
these organizations without really knowing the activities the 
organizations would undertake or why.
    Another idea is penalty-free withdrawals from retirement 
accounts. But this provision has not been targeted or limited 
to 
disaster-related activities. The taxpayer could spend the money 
on anything, including items with nothing to do with disaster, 
rebuilding, or increasing resilience. Furthermore, this has the 
potential of turning a retirement plan into disaster insurance, 
which would be a questionable policy from a retirement security 
perspective.
    Disaster-related tax provisions have a place in response, 
but they, like the rest of the government's disaster recovery, 
need to be targeted to promote resilience and reduce risk. 
Current law is ad hoc at best. Free post-disaster funding 
reduces the incentives to invest in pre-disaster efforts to 
mitigate damage and promote resilience.
    I applaud you for conducting the oversight and for 
reviewing the tax expenditures. Whether you enact disaster-
related tax provisions or not, I urge you to request the GAO 
report on how these types of provisions have been implemented 
in the past and whether they have promoted more resilient 
recovery.
    Any Federal spending--whether through the Treasury or the 
tax code--should be evaluated to see whether it has the 
intended impact. Disaster recovery spending should be evaluated 
on whether communities emerge more resilient and less 
vulnerable to future disasters.
    Again, thank you for inviting me to testify here today, and 
I am happy to answer any questions you might have.
    Senator Casey. Thank you, Mr. Ellis.
    [The prepared statement of Mr. Ellis appears in the 
appendix.]
    Senator Casey. Mr. Lewis, I was handed a note here. When I 
read a quick summary of your biography, I saw you did live in 
Pennsylvania, including Scranton, PA, my hometown.
    Mr. Lewis. I did indeed. I lived in Scranton, or Clarks 
Summit, actually.
    Senator Casey. That is close enough. Lackawanna County.
    Mr. Lewis. Right at the turnpike; right.
    Senator Casey. So you will have half an hour to provide 
your testimony. [Laughter.]
    Mr. Lewis. Okay. Thank you. So noted. Yes. I also lived on 
the Susquehanna River in Harrisburg and Camp Hill. Does that 
give me an extra 15 minutes?
    Senator Casey. At least that.
    Mr. Lewis. Okay. Thank you.

  STATEMENT OF TROY K. LEWIS, CHAIR, TAX EXECUTIVE COMMITTEE, 
 AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, DRAPER, UT

    Mr. Lewis. Chairman Casey, Ranking Member Enzi, and members 
of the subcommittee, thank you for the opportunity to testify 
regarding tax relief after a disaster.
    My name is Troy Lewis. I am a vice president of Heritage 
Bank in St. George, UT. I am also a sole tax practitioner, an 
adjunct professor at BYU, and chair of the Tax Executive 
Committee of the American Institute of CPAs. I am testifying 
today on behalf of the AICPA.
    Families and communities impacted by disasters are often 
displaced from their homes, their livelihoods, and their 
businesses. We believe permanent relief will provide disaster 
victims with the utmost amount of certainty and fairness. It 
will also allow them to promptly receive the assistance that 
they need.
    Therefore, I urge you today to consider enacting tax 
legislation that permanently provides meaningful and timely 
relief. Our current system offers inconsistent tax relief. 
Congress generally considers each disaster as an isolated event 
and restricts any special tax relief to that one event.
    Unfortunately, such an unpredictable process results in 
similar taxpayers receiving vastly different tax treatment for 
the same type of loss. In the interest of fairness, it is 
important that all victims, whether they reside in Harrisburg, 
PA, Bucks County, PA, Draper, UT, Greensburg, KS, or some other 
State, and whether they have endured a hurricane, a mudslide, 
or some other type of disaster, receive similar tax treatment.
    We recognize that certain tax benefits may not be available 
to every taxpayer due to his or her personal situation. 
However, the rules should be consistent among the various 
disasters. We need legislation that makes disaster-related tax 
provisions effective immediately when a triggering event 
occurs.
    Most of the time, individuals and businesses do not know 
what tax relief, if any, they will receive until Congress 
enacts legislation, sometimes months or even years after the 
event. However, families and businesses want and need to 
rebuild as soon as possible. But without any guarantee that tax 
relief is on its way, victims are often forced to make 
difficult and financially burdensome decisions. Providing tax 
relief in a timely manner will reduce the uncertainty 
surrounding what tax relief victims will receive and when they 
will receive it.
    The AICPA has submitted ten recommendations for the record. 
I would like to share a few of them with you. First, tax relief 
should automatically be available when a victim resides or has 
a business located in a FEMA-declared disaster area. This 
automatic trigger will ensure that victims are provided tax 
relief for which they are eligible in a timely manner.
    Second, disaster victims should be allowed an itemized 
deduction for the full amount of any related casualty loss. The 
current rules, which have a couple of different limitations, 
are unnecessarily complicated, lack transparency, and do not 
always provide sufficient relief.
    Third, a victim should have the option of carrying back a 
net operating loss attributable to a disaster for 5 years as 
opposed to 2 years under the current rules. An increased 
carryback period would allow businesses to receive refunds 
sooner, helping them more swiftly recover.
    Fourth, it is important that individuals and businesses 
have up to 5 years to replace property that is destroyed by 
disaster, while deferring the resulting gain. For example, many 
impacted communities have historic buildings that require an 
extensive permit application and approval process prior to 
rebuilding.
    In these circumstances, a 2-year replacement period can be 
particularly limiting for victims of a disaster. A 5-year 
replacement period would most likely provide victims sufficient 
time to rebuild their property.
    Next, I urge Congress to allow individuals to immediately 
access their own retirement funds while they are awaiting 
insurance reimbursements or other government assistance. 
Generally, individuals who make early withdrawals are subject 
to an extra 10-
percent excise tax. However, we strongly believe that penalties 
should not be imposed on disaster victims who withdraw up to 
$100,000 from a qualified plan, such as a 401(k) or an IRA, 
assuming that they repay that amount within 5 years.
    Finally, I want to mention a provision that allows 
individuals to exclude cancellation of debt from their taxable 
income, provided the cancellation occurs within 1 year of the 
disaster. As we heard from Senator Menendez from New Jersey, 
this is a real issue.
    The current rules are harsh and many times a shock for 
victims who suffer significant losses. If individuals are 
unable to repay their loans, they are most certainly unable to 
afford the tax on that phantom income.
    In summary, the implementation of timely and permanent tax 
relief provisions will allow victims to have certainty, 
fairness, consistency, and the ability to promptly receive the 
assistance that they so desperately need after a disaster.
    Again, Mr. Chairman, thank you for the opportunity to 
testify. I will be happy to answer any questions.
    Senator Casey. Mr. Lewis, thanks very much.
    [The prepared statement of Mr. Lewis appears in the 
appendix.]
    Senator Casey. We will start with my home-State 
Commissioner. Commissioner Loughery, we know--I mentioned 
earlier--how significant a county Bucks County is in our State, 
probably the fourth or fifth largest by way of population. I 
was looking at the number, a 2013 estimate, 627,000 people--a 
big county.
    You have had eight federally declared weather disasters 
since 2008, right?
    Commissioner Loughery. Yes.
    Senator Casey. And I know you talked about this in your 
testimony, but just in terms of a listing or itemization, if 
you could walk through a couple of examples of policies that 
you think worked well, and where you think we are short on 
policies that would provide the kind of--as you have all 
alluded to in one way or another--relief that has a measure of 
certainty to it as well as relief that is timely so that the 
families and the communities can recover. Can you just kind of 
itemize what is working, or what has worked, and what does not?
    Commissioner Loughery. Sure. As people were saying earlier 
here, one of the hardest things for small businesses is 
managing risks, and they want things to be as predictable as 
possible. Of course, a natural disaster sort of throws 
everything to the wayside.
    Trying to work through and work with those small businesses 
and to help them get back up has been one of the bigger 
challenges that we have had, because there are not a lot of 
tools for the county to use to work with those small 
businesses. We are able to respond to the municipalities. We 
had 17 municipalities impacted by the last tropical storm, and 
we are able to work with PEMA and FEMA, and there is a process 
for going through that.
    I think there seems to be a breakdown from the county side, 
working with the State, to small businesses, thus they do not 
have that predictability as perhaps the municipalities or the 
county would in sort of repairing roads and bridges, even 
though it takes time.
    To answer your question, we need to give more 
predictability to small businesses. And if you think about the 
places I listed in Bucks County along the Delaware River, along 
the Neshaminy, you are talking about first- and second-
generation suburbs: Levittown, historic places like Bristol, 
Washington's crossing along the canal, places like that, where 
the tourism economy is very important. And so I often get phone 
calls from those small businesses to say, ``What do you have to 
help us out?''
    As I said earlier, we usually have more to help the 
municipalities, the public entities, than we do specifically 
for small businesses. I think this tax relief for the families 
as well as the small businesses will give them more 
predictability and an ability to at least plan--should 
something like this happen--how they could best work their way 
out of it.
    Senator Casey. You had mentioned the Low-Income Housing Tax 
Credit as one of the tools that helps substantially. Can you 
walk through how that has helped the county?
    Commissioner Loughery. Well actually, the approach that I 
wanted to present today for the county is really the 
rehabilitation of public housing in Bucks County. Not a lot of 
people think that we have public housing in Bucks County, and 
the fact of the matter is that we do. It is old and it is 
coming to the end of its useful life, located in many of the 
places that I just mentioned in terms of first- and second-
generation suburbs in the county, particularly in the lower 
part of the county.
    We are interested in looking at how to rebuild, 
rehabilitate, revitalize, and really transform these 
neighborhoods and communities in Bucks County, be it lower 
Bucks County or upper Bucks. We believe that that makes for 
safer neighborhoods, more efficient neighborhoods--if you 
will--for today's families. On top of that, the resiliency--we 
heard that word used here today--from the weather disasters and 
storms is important, because most of these places, what they 
suffer first--and what they suffer most--are power outages. I 
know you toured through Bucks County in many of those power 
outages, and they are impacting many of those areas.
    So we see the Low-Income Housing Tax Credit allocation as 
an opportunity for us to begin to rebuild or transform these 
neighborhoods, because getting them to recover after disasters 
is even more difficult given the age of the housing stock. 
Being able to make investments, leverage private-sector 
investments, creates a better neighborhood and one that could 
rebound quicker--if you will--from a lot of these weather-
related disasters.
    Senator Casey. I just remember going through, among other 
places in the State, Yardley and getting firsthand testimony. 
It was for me--and I know for a lot of us in the Senate--a 
learning experience that we do not want to repeat, because you 
heard directly from people. It was not like you went into a 
town and went into a room and had a meeting. You were walking 
into a neighborhood, and people were coming out of their homes 
talking directly to you about what happened to them. So it was 
a searing reminder.
    My time is up for this round, but I wanted to turn to our 
ranking member, Senator Enzi.
    Senator Enzi. Thank you, Mr. Chairman. I want to thank the 
panel. In my 18 years, that is probably the most punctual panel 
that I have heard, with one being substantially under the time. 
[Laughter.]
    I want to thank you for your testimony, for providing a 
great deal of this in advance. There were a number of things in 
your testimony that will be very helpful, as we fashion or 
amend legislation. I know that we try to keep the record open 
so that people can submit questions in writing. That is usually 
very helpful, and everybody is not here and never is able to be 
at a hearing, so I hope you will help us with some of those 
answers.
    One of the reasons I mentioned that is that I am the 
accountant and a lot of my questions are very technical and 
specific, and I do not expect you to have the information with 
you at the moment. But I would appreciate it if you would get 
that for me.
    I will start with Mr. Ellis. I appreciate your experience 
in observing and evaluating the forms of Federal tax relief 
that are provided for disasters. Have you seen tax changes that 
have gone beyond the boundaries of providing relief only to 
victims, and, if so, could you please identify some?
    Mr. Ellis. Sure. Thank you. One of the areas that was 
touched on--Senator Roberts mentioned the GO Zone Bonds. And 
one of the things that the GAO, the Government Accountability 
Office--they were evaluating that--found was that the counties 
in Louisiana, the parishes, obviously had differing impacts 
from Katrina, Rita, and Wilma, which were the ones that were 
targeted with the GO Zone, and also all of the States there. 
Instead of creating a prioritization system of how the bonds 
would be allocated, it was on a first-come, first-served basis.
    So whoever got to the door the fastest was who got the 
money. And generally it would be a parish that was actually 
less affected by Katrina that was able to kind of recover 
quicker. So you definitely had the impact of those bonds going 
to people who were, at least, less affected.
    I would also point out that, just by its definition, the 
increase in the deduction for charitable contributions to 
disaster-related organizations is going to benefit people who 
are not in the disaster. In the case after Katrina, it went 
from 50 percent of income that was eligible to be deducted to 
100 percent. I think in the current legislation it is up to 80 
percent, so that is another area where I would say that that is 
not going to the disaster victims.
    Then I would only add one more thing, and that is part of 
my concern that I raised in my testimony. It is hard to track 
these, and they are not being very well monitored. No one is 
trying to actually evaluate where they are going or how it is 
being done. And that is something that I think will be very 
vital going forward and be important to incorporate into any 
future package.
    Senator Enzi. Thank you. That is very helpful. You also 
suggest taking a holistic approach to the disaster response. 
Can you identify any State or Federal approaches that move kind 
of toward that strategy?
    Mr. Ellis. Well, I mentioned that I was involved after the 
1993 flood, the Great Midwest Flood of 1993, and in that 
instance you actually had a 1995 flood that followed in roughly 
the same area, and you had communities like Arnold, MO and 
Valmeyer, IL that actually relocated lock, stock, and barrel to 
higher ground.
    So you had an effort there that was funded by the Federal 
Government that actually moved them so that, when the 
floodwaters returned in 1995, they were not affected. Also, New 
York City is doing buyouts, and there is a strategy in that 
area. Also looking to New York City, the MTA, the Metropolitan 
Transit Authority, has done an extremely large catastrophe bond 
to try to mitigate their risks going forward.
    So these are creative ways that I think we can look at, and 
one of the things that I mentioned in my written testimony is 
this idea of insuring public infrastructure so its cost is not 
being borne by the Federal taxpayer. So those are just a couple 
of things that I think might illustrate that.
    Senator Enzi. Thank you. That is extremely helpful.
    Mr. Lewis, I appreciate you bringing the accountant's 
viewpoint to this. I am particularly interested in--because of 
my experience and as a small business owner--what types of 
challenges you observed following disasters with respect to 
filing of tax returns and tax penalties? Do you believe that 
there are any changes that need to be made in this area of tax 
compliance? And incidentally, I want to thank you for your list 
of very specific things that you put in your testimony too.
    Mr. Lewis. Thank you. It is a fair question. So there are 
two aspects that you raised. One is in administration and one 
is more of a legal, legislative fix.
    Let's deal with the administrative for just a moment. Under 
most of the existing law, the IRS has some administrative 
leeway to grant victims of disasters some administrative relief 
as you describe it, things such as allowing late filings, 
waiving of notices and penalties. That gets done, but again, as 
we discussed and I repeated in my written and my oral 
testimony, it is done on a one-off basis. There really is not a 
consistent answer.
    That is one of the things that I think is most frustrating 
for us of the CPA community. When a disaster happens, although 
the AICPA will be constantly on the phone with the IRS, they 
seem to not be as uniform in their approach, because there is 
not a defined pattern such as, if FEMA declares a disaster, 
this is the kind of relief that should be granted. It will not 
provide any level of comfort. It provides a lot of confusion 
for our practitioners and for the taxpayers.
    So on the administrative side, I think the thing is, if we 
can get permanent, timely, consistent, and certain 
administrative relief, that would be very helpful. That would 
go a long way to solving some of our challenges with filing.
    From a legislative perspective, again, the real challenge 
is the victim's challenge, which is that we do not know--
because a lot of this legislation has been dealt with on a one-
off basis and it is not permanent--we cannot tell a client, we 
cannot advise them beyond what we have today. So telling 
somebody in Staten Island, for instance, hey, help is on the 
way, you will be able to take additional bonus depreciation or 
some of these items I put in my testimony--that is not 
available. That is a frustration.
    I think victims want consistency, and they want 
predictability. About 10 years ago, our organization put 
together 10 good tax policy ideas, and number one was equity 
and fairness. I think to answer your question, equity and 
fairness need to be a part of this process. If you have equity 
and fairness, you will have consistency, and you will have the 
ability for victims and for the tax professionals who serve 
those victims to be able to advise them appropriately.
    Right now, we are left guessing. As was mentioned earlier 
by several of the Senators, what do you tell a client who is a 
victim of Hurricane Sandy? Is help on the way? I think that is 
a difficult question, and therein lies the complexity for us.
    Senator Enzi. Thank you. If I could just make a couple more 
comments----
    Senator Casey. Sure.
    Senator Enzi. I am going to have to run to a meeting here, 
but I want to thank Mr. Cronin. You bring up one of the most 
important problems in the west, and that is water. I got to 
observe some of those Colorado floods. In fact, I could not go 
straight from Denver up to Wyoming. I flew in on a plane to 
Denver and had to go by way of Nebraska to get home. So I 
appreciate your comments on that, and I will have some more 
specific questions for you on that.
    Mr. Loughery, I would be interested in some of the long-
term strategic budget planning that you might have in mind. And 
I will have questions for the others too.
    I appreciate all of your willingness to testify and, more 
specifically, to answer some written questions. Thank you.
    Senator Casey. Thank you, Senator Enzi.
    I wanted to ask Mayor Berke a question or two about small 
businesses. I know that they become, I guess, at once both 
victims of a disaster and then often the drivers out of the 
ditch, so to speak. The recovery is often driven by what 
happens to small businesses.
    In particular, in your testimony you quoted at the 
beginning Mr. Terry Kelley, the marina manager. And then later 
on, on the second to the last page of your testimony, you said, 
``If the National Disaster Tax Relief Act of 2014 would have 
been in place in March of 2012, Mr. Kelley believes the 50-
percent bonus depreciation provision and the extension of the 
Net Operating Loss Carryback provision would have provided 
crucial cash flow''--probably the three most important words 
there.
    Can you talk a little bit about your experience with the 
importance of focusing on getting small businesses back on 
their feet?
    Mayor Berke. Well, as I said, Island Cove Marina is a great 
example of those kinds of small businesses. This is a place 
that was destroyed as a result of these tornadoes, and for us, 
the quicker that that gets built back, not only do you provide 
that small business with a place to earn money and to provide 
its goods to our constituents, but you also have those 
construction jobs and all of the rebuilding tools that provide 
money for your economy.
    So when we talked to Mr. Kelley--he is a great example of 
somebody who had to work hard even to get started on building 
back this business in Chattanooga. I think--to go to some of 
the points that were made here earlier--if he had known what 
the tax ramifications were for his business, that would have 
allowed him to put that money back into our economy sooner, get 
people back to work, and then eventually get his business back 
up and running as quickly as possible.
    Senator Casey. Is there anything else in terms of what you 
hope we would do that would have a particularly beneficial 
impact on small businesses? Anything else that was not 
discussed or raised already?
    Mayor Berke. The only other thing that I was going to say 
that I think helps small business in a way that we do not often 
talk about is that housing actually affects our small 
businesses, both from the side of building it, but also the 
need to have those units available for people to live in.
    As I said, Chattanooga had the seventh-highest rise in rent 
in the country over the last 5 years. That is good in the sense 
that it means that we have a lot of demand and we have people 
with rising income. It is bad in the sense that many of our 
entrepreneurs, young people and small business owners, need to 
live in workforce housing. So when we lose those valuable 
units, we lose a critical tool that we need to grow business 
around our city and particularly to keep our city vibrant and 
energetic.
    Councilman Ignizio. Mr. Chairman?
    Senator Casey. Yes, Councilman.
    Councilman Ignizio. If I may dovetail on that from Staten 
Island's or from New York City's perspective?
    Senator Casey. I actually had a question for you, but go 
ahead.
    Councilman Ignizio. Okay. If you do not mind. Thank you, 
Mr. Chairman.
    I think part of what is missing is that the small business 
coming back, opening up in the community, sends a message--I 
can tell you from my perspective--that the larger community is 
coming back and that we will rebuild.
    What happened to my community is that, when some businesses 
opened, people felt a certain ``it is going to be okay'' 
scenario. If we offer these businesses some tax incentives to 
do so, then they acknowledge and they have an understanding of 
where their revenues are going to be so they invest and 
reinvest in the community. Then the community as a whole does 
the same and follows in suit. I think it sends a ripple effect 
through the entire city.
    So I think that is something that is important, not only 
for the economics of the community, but also to send the 
message to the community that it is coming back.
    Senator Casey. That message, I think, is critically 
important. What I was going to ask you about was something you 
said in your testimony that was pretty direct and blunt, but 
you were making an important point. On the second page, you 
said, ``Even those who have been fortunate enough to get back 
up on their feet are filled with angst about what a future 
disaster may bring or grappling with the prospect that 
misguided government policies may finish the job Sandy 
started.'' Pretty tough words.
    Walk me through that so that we have a sense of--around 
here, when we are working together and you have bipartisan 
breakthroughs and good policy, that is a good day. On other 
days, we have to worry that we are not somehow violating what 
is, in medical terminology, the Hippocratic Oath: ``do no 
harm.'' I think that is part of what you are getting at here. 
But walk us through what you hope we would not do in the 
response to future disasters.
    Councilman Ignizio. Sure. A couple of points. The 
timeliness of the fact that government really is there--with 
the length of time it took to originally allocate the funding 
for Sandy victims, people were waiting in limbo day after day, 
saying, ``Where is my government trying to help me?''
    The second part was that, sometimes a policy sounds really 
good in the halls of the U.S. Senate or in the U.S. Capitol, 
but when it gets to the people, it does not help at all. Flood 
insurance is a problem that I think is going to face all 
Americans in the coming months and years ahead because, if the 
goal is to ensure that people come back to their home, well, if 
you are charging $1,000 a month--which in some cases, some of 
my constituents have been quoted--that home is unaffordable. So 
government ends up finishing the job that Sandy began.
    I am grateful to Senator Menendez and Congressman Graham 
who worked in a bipartisan fashion in both Houses to get flood 
protections done. I just think that many times programs have a 
hard time getting down to the level of my constituents.
    When you start with the alphabet soup of all the agencies--
you know, we are dealing with a bus driver here in my friend 
Richard White. And he would say, if he was here, ``I am not 
sophisticated in all of the intricacies of government. I just 
want help. I just want to get back into my house; find me an 
easy way of doing it.''
    Then his accountant tells him, well, in this State, this 
was the program. In this State you can deduct this, and we do 
not know what is going to happen for New York State or for 
Sandy, and that is up to what is going on here in Washington. 
People are cynical, and people are saying, ``How can we have a 
government that selects different benefits based on different 
storms in different parts of the country?''
    And that is what I think many of the people, or most of the 
people, talked about: a consistent approach--that a tornado or 
a natural disaster that occurred in California or occurred in 
Colorado or occurred in New York ought be treated as all the 
same, and the help should be there for all of us.
    Senator Casey. That is why it is encouraging that we have a 
bipartisan panel here, and you have worked in a bipartisan 
fashion with folks on this committee, including Senator 
Schumer, as well as Senator Menendez and others.
    I also know that Richard White, the gentlemen you 
referenced, a city bus driver from Crescent Beach--what I was 
struck by was the number you have in your testimony. He took 
out a pension loan, ran up credit card debt, and scrimped and 
saved for every charitable program so he could scrape together 
more than $70,000 to repair his home. Now that is a heck of an 
effort that he made to do that. It sounds like he was on his 
own for a lot of that. He was kind of----
    Councilman Ignizio. Yes, sir, he was. And he is still 
waiting for some help. Ultimately, his house is going to have 
to be elevated, which is going to put him out of his home for 
longer now, several months, while they lift his home. That 
assistance will come from the city program, but it is still 
going to put him out of his house for months while he is still 
paying his mortgage and he has no place to go.
    So that part has not been solved: how do you pay for a 
mortgage and pay for rent on an apartment on a civil servant's 
salary? I do not know that that has been sufficiently addressed 
either by New York City or by New York State.
    Senator Casey. Mr. Cronin, I know that you made reference, 
in your testimony, to the irrigation ditch companies trying to 
rebuild their infrastructure, the infrastructure for water 
delivery. And I know that is obviously crucial to agriculture. 
That theme or that reality is certainly present in other States 
as well, in terms of the adverse impact on agriculture.
    Can you give us some examples or ways that these companies 
would have been better able to meet those challenges if they 
had had more certainty in the code, something that all of us 
have referred to today?
    Mr. Cronin. Yes. Thank you, Mr. Chairman.
    Despite popular opinion, food does not originate in the 
grocery store. It does originate in the fields in the 
breadbasket of this country, so at least in the western part, 
irrigation infrastructure is a significant piece of that. 
Mother Nature does not give us enough water to grow the food 
necessary to provide for the growing demand. So we harvest and 
use rivers and snowmelt to provide that water to grow crops.
    The natural disaster had a significant impact in terms of 
the velocities, and it completely blew out the diversion 
infrastructure that allows us to take water from the rivers and 
put it on crops in fields. So we were left with no choice. One 
of our ditch companies, the Highland Ditch Company, which had a 
meeting quickly following the disaster, was faced with taking 
out a $2-million loan from the State of Colorado.
    Usually those meetings that involve any amount of money, 
whether it is $1 or $2 million, are very lengthy, with a lot of 
farmers hemming and hawing on whether or not they are going to 
assess themselves for those costs. Expecting a long drawn-out 
meeting, everybody strapped in for the debate, one old farmer 
stood up and said, ``We have no choice, do we?'' And they all 
stood up and said, ``You know, we don't have any choice. This 
is our livelihood. This is what produces the food. Let's do 
it.''
    So they went ahead and assessed themselves for the cost of 
a $2-million loan. Fortunately, that loan can be paid off in 30 
years, and the State of Colorado stepped up and said, we will 
waive at least the interest portion of that for the first 3 
years. So they do have some possibility to produce some revenue 
and not trigger this 85 percent, and that would be a loan.
    The concern is whether it is financial assistance through 
the Federal programs or sale of assets that these companies 
own. The concern is that that would trigger a taxable event, 
and, much like the farmer at the Highland Ditch Company who 
said, ``We have no choice,'' they have no choice. They have to 
build this infrastructure. It is completely necessary for their 
livelihood and the growing of those crops.
    So in the end, if there is a sizeable tax bill, in the 
opinion of many in those companies, it just means the Federal 
Government did not fulfill its obligation to provide--in this 
case--75 percent of the cost share reimbursement. It will be 75 
percent less the tax liability.
    Senator Casey. That is real life. We are grateful to you 
for telling us about that.
    I have unlimited time. At the risk of keeping everybody 
here for the day--and I will not have an open mic time--before 
we wrap up, I wanted to give folks time for a closing comment. 
Or often what we like to do at hearings is try to distill it 
down to the most important points, if there is any particular 
message you wanted to bring. Maybe we will just start left to 
right in the order we introduced folks.
    Mayor, we will start with you and anyone who wants to say 
anything going left to right.
    Mayor Berke. Thank you, Mr. Chairman, again, and thank you 
for having this hearing.
    This is a moment where people are often at their most 
disorganized and at their toughest. So anything that this body 
can do to provide predictability for them so that they can get 
back on their feet faster helps those constituents, but it also 
helps our communities. And, in particular, finding ways to 
incent quicker, more sustainable development would truly help 
our cities.
    Senator Casey. Commissioner?
    Commissioner Loughery. Mr. Chairman, again, thank you for 
the opportunity to be here. Thank you for all of your support 
in Bucks County, and I know Senator Toomey has been very 
supportive as well.
    I will just echo what the Mayor said. It is the 
predictability, and I think, for the most part, the American 
people are resilient. We bounce back. For some of us, it takes 
a little bit longer than others, given our circumstances, but 
when there is a path that has predictability to it, when we can 
sort of see where we need to go, especially with small 
businesses trying to get back up, that helps the community, the 
families, and the neighborhoods that are impacted by these 
weather-related disasters.
    So I would just echo the comments of predictability in 
terms of giving a path for those small businesses and the 
families to be able to recover.
    Senator Casey. I appreciate you being here. Thank you.
    Commissioner Loughery. Thank you.
    Senator Casey. Councilman?
    Councilman Ignizio. Yes, thank you, Mr. Chairman. I want to 
thank you for having this hearing and drawing a spotlight on 
this.
    There are people across the country who are still suffering 
from disasters that occurred years ago. I thank you for 
highlighting it, and I hope that this is a first step in what 
ultimately will be a great fix.
    Without sounding coy, I want to thank the American people 
for giving the funds to my community to rebuild. Ultimately, it 
is Americans helping Americans, and I am grateful to that, and 
I hope we can build a better mousetrap in the bills that you 
all are taking up here.
    Thank you very much.
    Senator Casey. Thanks very much.
    Mr. Cronin?
    Mr. Cronin. Thank you, Mr. Chairman. The reason I took as 
little time as I did is, we did some quick math on the total 
investment by the American people on tax incentives such as 
this, and we are probably anywhere from one-tenth of 1 percent 
to 1 percent of the total tax benefit there. So it just did not 
seem fair to take up the full 5 minutes.
    That being said, there is a larger issue at hand, and this 
85-
percent rule is very significant to our constituents really 
west-wide. And whether you are talking about investment in the 
infrastructure that served us greatly for over 100 years, water 
provided for local cities, water provided for the growing of 
food, or water for endangered species, we need that 
reinvestment going into the future. We really hope that this 
committee will, in the future, consider bills such as this to 
make something more permanent and address this 85-percent rule, 
because it is really critical to the settlement of the west and 
the continued quality of life there. Thank you.
    Senator Casey. Thank you.
    Mr. Ellis?
    Mr. Ellis. Thank you, Mr. Chairman. I agree with the 
Councilman that Americans are big-hearted people, but we cannot 
afford to be soft-headed. Part of that is, we have to plan for 
these events. We know they are inevitable. We know that they 
are going to happen, especially in places where they have 
already occurred before.
    So some of it is really not just about the predictability 
in the tax code so that individuals and companies know what to 
expect, but also the predictability for the taxpayers, that 
these communities have done their part to plan for these 
inevitable disasters, so that we can invest wisely and make 
them more resilient before the next disaster occurs. And that 
is why I use the term of the funding disaster response being 
``pre-sponding'' to the next disaster.
    And then, just two other little points very quickly that 
have been raised. I want to point out--and I have done a lot of 
work on the flood insurance program over the years. The program 
is $24 billion in debt to taxpayers, and it takes about $3.5 
billion dollars in premiums. So something has to be figured out 
on that. I agree that you do not want to have unsustainable 
premiums and push people out of their houses, but we have to 
come up with real solutions in that area.
    Then also, on the timing of funding, much of the funding 
post-Sandy was through the Disaster Relief Fund, which has 
about $6 billion in it. I would note--and this gets to the 
point about really figuring this out and planning forward--as 
of August 31st, only 25 percent of the $50 billion that was 
appropriated in the Sandy relief package had actually been 
outlaid.
    So we were almost 2 years out at that point and still had 
not spent a lot of that money. Some of that is, we might be 
thinking about it more wisely, but it also means that Congress 
could look at these events more prudently and, instead of doing 
one big chunk of money, do them as appropriate and track the 
funding.
    I will stop there. Thank you.
    Senator Casey. Thanks very much.
    Mr. Lewis?
    Mr. Lewis. Chairman Casey, thanks again for the opportunity 
to be here.
    This morning, in final preparation for this testimony, I 
spoke to one of our tax practitioners in Louisiana who was on 
the ground working with clients who had suffered from Katrina. 
You could feel in the conversation his deep emotion. I mean, I 
think for most Americans, particularly those who are not 
impacted by these disasters, it becomes a discussion. It 
becomes something that they see on the news.
    But when we talk to people--actually like many of these 
panelists--and you hear how devastated some of these 
communities really are and the difference that programs could 
make, you get a sense of how important what you are doing today 
really is. It changes lives, and it changes them for the 
better.
    I think the key here to doing that is to make these changes 
automatic and make them permanent. This one-off approach that 
we have had for the past decade helps on a discriminative 
basis, and that is the thing that I find most troubling. I 
think, to Mr. Ellis's comments, when we find those programs 
that work well and those tax incentives, we should codify them 
in a way that is predictable, that is consistent, and is fair, 
and I think in that sense that you will get the disaster relief 
that this hearing has been called to propose.
    Senator Casey. Thanks very much. Well said by all of you. 
Thank you, and I appreciate your testimony. If you have more 
that you want to submit for the record, of course, you can do 
that.
    I want to ask my colleagues on the record here to submit 
statements, if they have them, or questions for the record to 
the committee. But we are grateful for your testimony. You 
bring to us a real and immediate sense of what happens in 
communities, and that is why a hearing like this is so 
important. So we are grateful. Thanks very much.
    We are adjourned.
    [Whereupon, at 4 p.m., the hearing was adjourned.]
                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                             Communications

                              ----------                              
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   [all]