[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
__________
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Printed for the use of the Committee on Finance
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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
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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.]
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