[Congressional Record Volume 145, Number 16 (Thursday, January 28, 1999)]
[Senate]
[Pages S1079-S1081]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FEINGOLD:
  S. 320. A bill to amend the Reclamation Reform Act of 1982 to clarify 
the acreage limitations and incorporate a means test for certain farm 
operations, and for other purposes; to the Committee on Energy and 
Natural Resources.


                irrigation subsidy reduction act of 1999

 Mr. FEINGOLD. Mr. President, I am introducing a measure that I 
sponsored in the 105th Congress to reduce the amount of federal 
irrigation subsidies received by large agribusiness interests. I 
believe that reforming federal water pricing policy by reducing 
subsidies is an important area to examine as a means to achieve our 
broader objectives of achieving a truly balanced budget. This 
legislation is also needed to curb fundamental abuses of reclamation 
law that cost the taxpayer millions of dollars every year.
  In 1901, President Theodore Roosevelt proposed legislation, which 
came to be known as the Reclamation Act of 1902, to encourage 
development of family farms throughout the western United States. The 
idea was to provide needed water for areas that were otherwise dry and 
give small farms--those no larger than 160 acres--a chance, with a 
helping hand from the federal government, to establish themselves. 
According to a 1996 General Accounting Office report, since the passage 
of the Reclamation Act, the federal government has spent $21.8 billion 
to construct 133 water projects in the west which provide water for 
irrigation. Irrigators, and other project beneficiaries, are required 
under the law to repay to the federal government their allocated share 
of the costs of constructing these projects.
  However, as a result of the subsidized financing provided by the 
federal government, some of the beneficiaries of federal water projects 
repay considerably less than their full share of these costs. According 
to the 1996 GAO report, irrigators generally receive the largest amount 
of federal financial assistance. Since the initiation of the irrigation 
program in 1902, construction costs associated with irrigation have 
been repaid without interest. The GAO further found, in reviewing the 
Bureau of Reclamation's financial reports, that $16.9 billion, or 78 
percent, of the $21.8 billion of federal investment in water projects 
is considered to be reimbursable. Of the reimbursable costs, the 
largest share--$7.1 billion--is allocated to irrigators. As of 
September 30, 1994 irrigators have repaid only $941 million of the $7.1 
billion they owe. GAO also found that the Bureau of Reclamation will 
likely shift $3.4 billion of the debt owed by irrigators to other users 
of the water projects for repayment.
  There are several reasons why irrigators continue to receive such 
significant subsidies. Under the Reclamation Reform Act of 1982, 
Congress acted to expand the size of the farms that could receive 
subsidized water from 160 acres to 960 acres. The RRA of 1982 expressly 
prohibits farms that exceed 960 acres in size from receiving federally-
subsidized water. These restrictions were added to the Reclamation law 
to close loopholes through which federal subsidies were flowing to 
large agribusinesses rather than the small family farmers that 
Reclamation projects were designed to serve. Agribusinesses were 
expected to pay full cost for all water received on land in excess of 
their 960 acre entitlement. Despite the express mandate of Congress, 
regulations promulgated under the Reclamation Reform Act of 1982 have 
failed to keep big agricultural water users from receiving federal 
subsidies. The General Accounting Office and the Inspector General of 
the Department of the Interior continue to find that the acreage limits 
established in law are circumvented through the creation of 
arrangements such as farming trusts. These trusts, which in total 
acreage well exceed the 960 acre limit, are comprised of smaller units 
that are not subject to the reclamation acreage cap. These smaller 
units are farmed under a single management agreement often through a 
combination of leasing and ownership.
  In a 1989 GAO report, the activities of six agribusiness trusts were 
fully explored. According to GAO, one 12,345 acre cotton farm (roughly 
20 square miles), operating under a single partnership, was reorganized 
to avoid the 960 acre limitation into 15 separate land holdings through 
18 partnerships, 24 corporations, and 11 trusts which were all operated 
as one large unit. A seventh trust very large trust was the sole topic 
of a 1990 GAO report. The Westhaven trust is a 23,238 acre farming 
operation in California's Central

[[Page S1080]]

Valley. It was formed for the benefit of 326 salaried employees of the 
J.G. Boswell Company. Boswell, GAO found, had taken advantage of 
section 214 of the RRA, which exempts from its 960 acre limit land held 
for beneficiaries by a trustee in a fiduciary capacity, as long as no 
single beneficiary's interest exceeds the law's ownership limits. The 
RRA, as I have mentioned, does not preclude multiple land holdings from 
being operated collectively under a trust as one farm while qualifying 
individually for federally subsidized water. Accordingly, the J.G. 
Boswell Company re-organized 23,238 acres it held as the Boston Ranch 
by selling them to the Westhaven Trust, with the land holdings 
attributed to each beneficiary being eligible to receive federally 
subsidized water.
  Before the land was sold to Westhaven Trust, the J.G. Boswell Company 
operated the acreage as one large farm and paid full cost for the 
federal irrigation water delivered for the 18-month period ending in 
May 1989. When the trust bought the land, due to the loopholes in the 
law, the entire acreage became eligible to receive federally subsidized 
water because the land holdings attributed to the 326 trust 
beneficiaries range from 21 acres to 547 acres--all well under the 960 
acre limit.
  In the six cases the GAO reviewed in 1989, owners or lessees paid a 
total of about $1.3 million less in 1987 for federal water then they 
would have paid if their collective land holdings were considered as 
large farms subject to the Reclamation Act acreage limits. Had 
Westhaven trust been required to pay full cost, GAO estimated in 1990, 
it would have paid $2 million more for its water. The GAO also found, 
in all seven of these cases, that reduced revenues are likely to 
continue unless Congress amends the Reclamation Act to close the 
loopholes allowing benefits for trusts.
  The Department of the Interior has acknowledged that these problems 
do exist. Interior published a proposed rulemaking in the Federal 
Register on November 18, 1998. The proposed rulemaking requires farm 
operators who provide services to more than 960 nonexempt acres 
westwide, held by a single trust or legal entity or any combination of 
trusts and legal entities to submit RRA forms to the district(s) where 
such land is located. If the rule is finalized, the districts will be 
required to provide specific information about declaring farm operators 
to Interior annually. This information will be an important step toward 
enforcing the legislation that I am reintroducing today.
  This legislation combines various elements of proposals introduced by 
other members of Congress to close loopholes in the 1982 legislation 
and to impose a $500,000 means test. This new approach limits the 
amount of subsidized irrigation water delivered to any operation in 
excess of the 960 acre limit which claimed $500,000 or more in gross 
income, as reported on their most recent IRS tax form. If the $500,000 
threshold were exceeded, an income ratio would be used to determine how 
much of the water should be delivered to the user at the full-cost 
rate, and how much at the below-cost rate. For example, if a 961 acre 
operation earned $1 million dollars, a ratio of $500,000 (the means 
test value) divided by their gross income would determine the full cost 
rate, thus the water user would pay the full cost rate on half of their 
acreage and the below cost rate on the remaining half.
  This means testing proposal is featured, for the fourth year in a 
row, in this year's 1999 Green Scissors report which is being released 
today. This report is compiled by Friends of the Earth and Taxpayers 
for Common Sense and supported by a number of environmental, consumer 
and taxpayer groups. I am pleased to join with the Senator from New 
Hampshire (Mr. Gregg) in distributing a copy of this report to all 
members of the Senate. The premise of the report is that there are a 
number of subsidies and projects that could be cut to both reduce the 
deficit and benefit the environment. This report underscores what I and 
many others in the Senate have long known: we must eliminate practices 
that can no longer be justified in light of our effort to achieve a 
truly balanced budget and eliminate our national debt. The Green 
Scissors recommendation on means testing water subsidies indicates that 
if a test is successful in reducing subsidy payments to the highest 
grossing 10% of farms, then the federal government would recover 
between $440 million and $1.1 billion per year, or at least $2.2 
billion over five years.
  When countless federal program are subjected to various types of 
means tests to limit benefits to those who truly need assistance, it 
makes little sense to continue to allow large business interests to dip 
into a program intended to help small entities struggling to survive. 
Taxpayers have legitimate concerns when they learn that their hard 
earned tax dollars are being expended to assist large corporate 
interests in select regions of the country who benefit from these 
loopholes, particularly in tight budgetary times. Other users of 
federal water projects, such as the power recipients, should also be 
concerned when they learn that they will be expected to pick up the tab 
for a portion of the funds that irrigators were supposed to pay back. 
The federal water program was simply never intended to benefit these 
large interests, and I am hopeful that legislative efforts, such as the 
measure I am introducing today, will prompt Congress to fully 
reevaluate our federal water pricing policy.
  In conclusion, Mr. President, it is clear that the conflicting 
policies of the federal government in this area are in need of reform, 
and that Congress should act. Large agribusinesses should not be able 
to continue to soak the taxpayers, and should pay their fair share. We 
should act to close these loopholes and increase the return to the 
treasury from irrigators as soon as possible. I ask unanimous consent 
that the text of the measure be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 320

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Irrigation Subsidy Reduction 
     Act of 1999''.

     SEC. 2. FINDINGS.

       Congress finds that--
       (1) the Federal reclamation program has been in existence 
     for over 90 years, with an estimated taxpayer investment of 
     over $70,000,000,000;
       (2) the program has had and continues to have an enormous 
     effect on the water resources and aquatic environments of the 
     western States;
       (3) irrigation water made available from Federal water 
     projects in the West is a very valuable resource for which 
     there are increasing and competing demands;
       (4) the justification for providing water at less than full 
     cost was to benefit and promote the development of small 
     family farms and exclude large corporate farms, but this 
     purpose has been frustrated over the years due to inadequate 
     implementation of subsidy and acreage limits;
       (5) below-cost water prices tend to encourage excessive use 
     of scarce water supplies in the arid regions of the West, and 
     reasonable price increases to the wealthiest western farmers 
     would provide an economic incentive for greater water 
     conservation;
       (6) the Federal Government has increasingly applied 
     eligibility tests based on income for Federal entitlement and 
     subsidy programs, measures that are consistent with the 
     historic approach of the reclamation program's acreage 
     limitations that seek to limit water subsidies to smaller 
     farms; and
       (7) including a means test based on gross income in the 
     reclamation program will increase the effectiveness of 
     carrying out the family farm goals of the Federal reclamation 
     laws.

     SEC. 3. AMENDMENTS.

       (a) Definitions.--Section 202 of the Reclamation Reform Act 
     of 1982 (43 U.S.C. 390bb) is amended--
       (1) by redesignating paragraphs (7), (8), (9), (10), and 
     (11) as paragraphs (9), (10), (11), (12), and (13), 
     respectively;
       (2) in paragraph (6), by striking ``owned or operated under 
     a lease which'' and inserting ``that is owned, leased, or 
     operated by an individual or legal entity and that'';
       (3) by inserting after paragraph (6) the following:
       ``(7) Legal entity.--The term `legal entity' includes a 
     corporation, association, partnership, trust, joint tenancy, 
     or tenancy in common, or any other entity that owns, leases, 
     or operates a farm operation for the benefit of more than 1 
     individual under any form of agreement or arrangement.
       ``(8) Operator.--
       ``(A) In general.--The term `operator'--
       ``(i) means an individual or legal entity that operates a 
     single farm operation on a parcel (or parcel) of land that is 
     owned or leased by another person (or persons) under any form 
     of agreement or arrangement (or agreements or arrangements); 
     and
       ``(ii) if the individual or legal entity--

[[Page S1081]]

       ``(I) is an employee of an individual or legal entity, 
     includes the individual or legal entity; or
       ``(II) is a legal entity that controls, is controlled by, 
     or is under common control with another legal entity, 
     includes each such other legal entity.

       ``(B) Operation of a farm operation.--For the purposes of 
     subparagraph (A), an individual or legal entity shall be 
     considered to operate a farm operation if the individual or 
     legal entity is the person that performs the greatest 
     proportion of the decisionmaking for and supervision of the 
     agricultural enterprise on land served with irrigation 
     water.''; and
       (4) by adding at the end the following:
       ``(14) Single farm operation.--
       ``(A) In general.--The term `single farm operation' means 
     the total acreage of land served with irrigation water for 
     which an individual or legal entity is the operator.
       ``(B) Rules for determining whether separate parcels are 
     operated as a single farm operation.--
       ``(i) Equipment- and labor-sharing activities.--The conduct 
     of equipment- and labor-sharing activities on separate 
     parcels of land by separate individuals or legal entities 
     shall not by itself serve as a basis for concluding that the 
     farming operations of the individuals or legal entities 
     constitute a single farm operation.
       ``(ii) Performance of certain services.--The performance by 
     an individual or legal entity of an agricultural chemical 
     application, pruning, or harvesting for a farm operation on a 
     parcel of land shall not by itself serve as a basis for 
     concluding that the farm operation on that parcel of land is 
     part of a single farm operation operated by the individual or 
     entity on other parcels of land.''.
       (b) Identification of Owners, Lessees, and Operators and of 
     Single Farm Operations.--The Reclamation Reform Act of 1982 
     (43 U.S.C. 390aa et seq.) is amended by inserting after 
     section 201 the following:

     ``SEC. 201A. IDENTIFICATION OF OWNERS, LESSEES, AND OPERATORS 
                   AND OF SINGLE FARM OPERATIONS.

       ``(a) In General.--Subject to subsection (b), for each 
     parcel of land to which irrigation water is delivered or 
     proposed to be delivered, the Secretary shall identify a 
     single individual or legal entity as the owner, lessee, or 
     operator.
       ``(b) Shared Decisionmaking and Supervision.--If the 
     Secretary determines that no single individual or legal 
     entity is the owner, lessee, or other individual that 
     performs the greatest proportion of decisionmaking for and 
     supervision of the agricultural enterprise on a parcel of 
     land--
       ``(1) all individuals and legal entities that own, lease, 
     or perform a proportion of decisionmaking and supervision 
     that is equal as among themselves but greater than the 
     proportion performed by any other individual or legal entity 
     shall be considered jointly to be the owner, lessee, or 
     operator; and
       ``(2) all parcels of land of which any such individual or 
     legal entity is the owner, lessee, or operator shall be 
     considered to be part of the single farm operation of the 
     owner, lessee, or operator identified under subsection (1).
       (c) Pricing.--Section 205 of the Reclamation Reform Act of 
     1982 (43 U.S.C. 390ee) is amended by adding at the end the 
     following:
       ``(d) Single Farm Operations Generating More Than $500,000 
     in Gross Farm Income.--
       ``(1) In general.--Notwithstanding subsections (a), (b), 
     and (c), in the case of--
       ``(A) a qualified recipient that reports gross farm income 
     from a single farm operation in excess of $500,000 for a 
     taxable year; or
       ``(B) a limited recipient that received irrigation water on 
     or before October 1, 1981, and that reports gross farm income 
     from a single farm operation in excess of $500,000 for a 
     taxable year;

     irrigation water may be delivered to the single farm 
     operation of the qualified recipient or limited recipient at 
     less than full cost to a number of acres that does not exceed 
     the number of acres determined under paragraph (2).
       ``(2) Maximum number of acres to which irrigation water may 
     be delivered at less than full cost.--The number of acres 
     determined under this subparagraph is the number equal to the 
     number of acres of the single farm operation multiplied by a 
     fraction, the numerator of which is $500,000 and the 
     denominator of which is the amount of gross farm income 
     reported by the qualified recipient or limited recipient in 
     the most recent taxable year.
       ``(3) Inflation adjustment.--
       ``(A) In general.--The $500,000 amount under paragraphs (1) 
     and (2) for any taxable year beginning in a calendar year 
     after 1998 shall be equal to the product of--
       ``(i) $500,000, multiplied by
       ``(ii) the inflation adjustment factor for the taxable 
     year.
       ``(B) Inflation adjustment factor.--The term `inflation 
     adjustment factor' means, with respect to any calendar year, 
     a fraction the numerator of which is the GDP implicit price 
     deflator for the preceding calendar year and the denominator 
     of which is the GDP implicit price deflator for 1998. Not 
     later than April 1 of any calendar year, the Secretary shall 
     publish the inflation adjustment factor for the preceding 
     calendar year.
       ``(C) GDP implicit price deflator.--For purposes of 
     subparagraph (B), the term `GDP implicit price deflator' 
     means the first revision of the implicit price deflator for 
     the gross domestic product as computed and published by the 
     Secretary of Commerce.
       ``(D) Rounding.--If any increase determined under 
     subparagraph (A) is not a multiple of $100, the increase 
     shall be rounded to the next lowest multiple of $100.''.
       (d) Certification of Compliance.--Section 206 of the 
     Reclamation Reform Act of 1982 (43 U.S.C. 390ff) is amended 
     to read as follows:

     ``SEC. 206. CERTIFICATION OF COMPLIANCE.

       ``(a) In General.--As a condition to the receipt of 
     irrigation water for land in a district that has a contract 
     described in section 203, each owner, lessee, or operator in 
     the district shall furnish the district, in a form prescribed 
     by the Secretary, a certificate that the owner, lessee, or 
     operator is in compliance with this title, including a 
     statement of the number of acres owned, leased, or operated, 
     the terms of any lease or agreement pertaining to the 
     operation of a farm operation, and, in the case of a lessee 
     or operator, a certification that the rent or other fees paid 
     reflect the reasonable value of the irrigation water to the 
     productivity of the land.
       ``(b) Documentation.--The Secretary may require a lessee or 
     operator to submit for the Secretary's examination--
       ``(1) a complete copy of any lease or other agreement 
     executed by each of the parties to the lease or other 
     agreement; and
       ``(2) a copy of the return of income tax imposed by chapter 
     1 of the Internal Revenue Code of 1986 for any taxable year 
     in which the single farm operation of the lessee or operator 
     received irrigation water at less than full cost.''.
       (e) Trusts.--Section 214 of the Reclamation Reform Act of 
     1982 (43 U.S.C. 390nn) is repealed.
       (f) Administrative Provisions.--
       (1) Penalties.--Section 224(c) of the Reclamation Reform 
     Act of 1982 (43 U.S.C. 390ww(c)) is amended--
       (A) by striking ``(c) The Secretary'' and inserting the 
     following:
       ``(c) Regulations; Data Collection; Penalties.--
       ``(1) Regulations; data collection.--The Secretary''; and
       (B) by adding at the end the following:
       ``(2) Penalties.--Notwithstanding any other provision of 
     law, the Secretary shall establish appropriate and effective 
     penalties for failure to comply with any provision of this 
     Act or any regulation issued under this Act.''.
       (2) Interest.--Section 224(i) of the Reclamation Reform Act 
     of 1982 (43 U.S.C. 390ww(i)) is amended by striking the last 
     sentence and inserting the following: ``The interest rate 
     applicable to underpayments shall be equal to the rate 
     applicable to expenditures under section 202(3)(C).''.
       (g) Reporting.--Section 228 of the Reclamation Reform Act 
     of 1982 (43 U.S.C. 390zz) is amended by inserting ``operator 
     or'' before ``contracting entity'' each place it appears.
       (h) Memorandum of Understanding.--The Reclamation Reform 
     Act of 1982 (43 U.S.C. 390aa et seq.) is amended--
       (1) by redesignating sections 229 and 230 as sections 230 
     and 231; and
       (2) by inserting after section 228 the following:

     ``SEC. 229. MEMORANDUM OF UNDERSTANDING.

       ``The Secretary, the Secretary of the Treasury, and the 
     Secretary of Agriculture shall enter into a memorandum of 
     understanding or other appropriate instrument to permit the 
     Secretary, notwithstanding section 6103 of the Internal 
     Revenue Code of 1986, to have access to and use of available 
     information collected or maintained by the Department of the 
     Treasury and the Department of Agriculture that would aid 
     enforcement of the ownership and pricing limitations of 
     Federal reclamation law.''.
                                 ______