[Congressional Record Volume 151, Number 106 (Friday, July 29, 2005)]
[Senate]
[Pages S9472-S9473]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BOND:
  S. 1553. A bill to amend the Internal Revenue Code of 1986 to enhance 
tax incentives for small property and casualty insurance companies; to 
the Committee on Finance.
  Mr. BOND. Mr. President, I rise today to introduce a bill that 
addresses an inequity and helps clarify a tax exemption that exists for 
small property and casualty (P&C) insurance companies under the 
Internal Revenue Code Sections 501(c)( 15) and 831(b). These small P&C 
insurers, often originally organized as mutual companies to offer 
insurance coverage to specific groups, mainly serve rural areas and 
farming communities that otherwise may not have been able to obtain 
affordable coverage. This tax exemption helps to provide additional 
surplus and cash flow for these small companies.
  The Pension Funding Equity Act of 2004, ``2004 Act'', amended the 
small P&C insurer exemption because there were concerns that certain 
investment companies offering only a small amount of insurance could 
use the exemption to improperly shelter investment income from federal 
income tax. Now, under current law, the exemption applies only to P&C 
(i.e., non-life) insurance companies if their ``gross receipts'' for 
the taxable year do not exceed $600,000 and if premiums make up more 
than 50 percent of those gross receipts. A mutual P&C insurance company 
also may be exempt if its premiums make up more than 35 percent of its 
gross receipts and its gross receipts do not exceed $150,000. 
Additionally, P&C companies that have direct or net written premiums, 
whichever is greater, exceeding $350,000 but not exceeding $1.2 
million, Income Election Limit, can elect to be taxed under a similar 
tax structure on their net investment income.
  While the 2004 Act helped to close a potential loophole, the special 
provisions for small P&C insurers are in need of further clarification 
or reform. The term ``gross receipts'' is not defined uniformly for 
purposes of the Internal Revenue Code and the Income Election Limit has 
not been adjusted for inflation since the Tax Reform Act of 1986.
  Without a clear definition of the term ``gross receipts,'' many 
unanswered questions remain with respect to determining whether a small 
P&C insurance company qualifies for exemption under section 501(c)(15). 
For example, such a company typically invests a large portion of its 
assets in government bonds. If the gross proceeds on the sale of an 
asset are included in the measure of ``gross receipts,'' based on a 
broad cash-flow definition of gross receipts, the mere maturation of 
bonds and reinvestment could cause a small P&C insurance company to 
fall out of the exemption even though there has been no change in the 
size of the business and even if the company realizes a loss on the 
sale or redemption. On the other hand, this arbitrary result would not 
occur if a definition of gross receipts that includes gains from the 
sale or exchange of assets is used. Such a definition of gross receipts 
looks to the size of the business in terms of income and overall 
profitability, which in turn ties into the reason for the tax 
exemption.
  If the Income Election Limit is not adjusted to keep pace with 
inflation, the impact could be severe. Take, for instance, a small P&C 
insurer in my State that started insuring the local farmers in the late 
1980s. Over the ensuing years, the company's client base changed very 
little, but the insurance premiums increased gradually to keep pace 
with inflationary pressures. As a result, while the business itself has 
not grown in absolute terms, its premium base has, therefore resulting 
in the loss of the elective alternative and simpler tax on investment 
income.
  For the farmers and consumers covered by the small P&C insurer, this 
loss of the tax exemption or a simpler, more limited tax structure is 
certain to mean higher insurance premiums, leaving the client with the 
choice of cutting coverage or paying higher costs, neither of which is 
a preferred option. This is the last thing our agricultural community 
needs.
  The legislation I am introducing today addresses both of these 
concerns. This legislation would add definitional language for ``gross 
receipts'' clarifying that gross receipts means premiums, plus gross 
investment income. In addition, the proposal simply increases the 
Income Election Limit from $1.2 million to $1.971 million, and indexes 
it annually for inflation.
  According to the National Association of Mutual Insurance Companies, 
this legislation will help hundreds of small P&C insurance companies 
nationwide. Under this proposed legislation, at least 56 of the 82 
small insurance companies in my State will be covered, thereby enabling 
them to continue providing critical insurance coverage to small 
businesses across Missouri.
  With this legislation, we have an opportunity to infuse some fairness 
into our tax code and at the same time help the thousands of farmers, 
homeowners, and entrepreneurs covered by small P&C insurers in this 
country. I ask my colleagues to support this legislation, and I look 
forward to working with the Finance Committee to see it enacted into 
law.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1553

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

     SECTION 1. CLARIFICATION OF DEFINITION OF GROSS RECEIPTS FOR 
                   PURPOSES OF DETERMINING TAX EXEMPTION OF SMALL 
                   PROPERTY AND CASUALTY INSURANCE COMPANIES.

       (a) In General.--Section 501(c)(15) of the Internal Revenue 
     Code is amended by adding at the end the following:
       ``(D) For purposes of subparagraph (A), the term `gross 
     receipts' means the gross amount received during the taxable 
     year from the items described in section 834(b) and premiums 
     (including deposits and assessments).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 2. INCREASE IN LIMITATION FOR ALTERNATIVE TAX LIABILITY 
                   FOR SMALL PROPERTY AND CASUALTY INSURANCE 
                   COMPANIES.

       (a) In General.--Clause (i) of section 831(b)(2)(A) of the 
     Internal Revenue Code of 1986 is amended to read as follows:
       ``(i) the net written premiums (or, if greater, direct 
     written premiums) for the taxable year do not exceed 
     $1,971,000, and''.
       (b) Inflation Adjustment.--Paragraph (2) of section 831(b) 
     of such Code is amended by adding at the end the following 
     new subparagraph:
       ``(C) Inflation adjustment.--In the case of any taxable 
     year beginning in a calendar year after 2006, the $1,971,000 
     amount set forth in subparagraph (A) shall be increased by an 
     amount equal to--
       ``(i) $1,971,000, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year by substituting 
     `calendar year 2005' for `calendar year 1992' in subparagraph 
     (B) thereof. If the amount as adjusted under the preceding 
     sentence is not a multiple of $1,000, such amount shall be 
     rounded to the next lowest multiple of $1,000.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2005.

  By Ms. CANTWELL (for herself, Ms. Collins, Mr. Bingaman, Mrs. Murray, 
Ms. Mikulski, Mr. Kohl, and Mr. Corzine):
  S. 1555. A bill to amend the Farm Security and Rural Investment Act 
of 2002 to reform funding for the Seniors Farmers' Market Nutrition 
Program, and for other purposes; to the Committee on Agriculture, 
Nutrition, and Forestry.
  Ms. CANTWELL. Mr. President, I am proud to rise today with my 
colleagues Senators Collins, Bingaman, Murray, Mikulski, Kohl and 
Corzine, to introduce bipartisan legislation enhancing the Seniors 
Farmers' Market Nutrition Program. As all of my colleagues

[[Page S9473]]

know, the Seniors Farmers' Market Nutrition Program (SFMNP) was created 
through the Farm Security and Rural Investment Act of 2002 (P.L. 107-
171). It is a program that provides grants to States, territories, and 
Native American tribal governments to provide coupons to low-income 
seniors to purchase fresh, locally grown fruits, vegetables, and herbs 
from farmers' markets, roadside stands, and community supported 
agricultural programs. The purpose of the program is to make healthy 
foods available to low-income seniors while simultaneously assisting 
domestic farmers.
  Scientific research increasingly confirms that what we eat may have a 
significant impact on our health, quality of life, and longevity. In 
the United States, high intakes of fat and saturated fat, and low 
intakes of calcium and fiber-containing foods such as whole grains, 
vegetables and fruits are associated with several chronic health 
conditions that can impair the quality of life and hasten mortality.
  According to the United States Department of Agriculture, research 
continues to find strong links between eating lots of fruits and 
vegetables and preventing chronic diseases such as cancer, heart 
disease, and stroke. Eating more fruits and vegetables may also play a 
role in preventing other diseases such as high blood pressure and 
osteoporosis, to name just two.
  Two studies, one here in the U.S. and the other in the Netherlands, 
found eating a diet rich in vitamins E and C may help to lower your 
risk of Alzheimer's disease. Both found that eating foods high in 
vitamin E may reduce your risk of Alzheimer's, a degenerative brain 
disease. The U.S. study found that people with the highest vitamin E 
intake in their diet had a 70 percent lower frequency of Alzheimer's 
than those with the lowest amounts of vitamin E in their diet.
  Vitamin A, which is found in many different fruits and vegetables, is 
very important to the health of your eyes. Other nutrients in produce, 
such as carotenoids, also play a role in maintaining healthy eyes and 
good vision. An example of a carotenoid is lutein. Lutein is found in 
dark green leafy vegetables like spinach.
  While the health benefits of eating fruits and vegetables may seem 
obvious, only 27 percent of women and 19 percent of men eat the 
recommended 5 servings of fruits and vegetables every day.
  The U.S. Department of Agriculture (USDA) Food and Nutrition Service 
administers the Seniors Farmers' Market Nutrition Program; and in 
fiscal year 2003, approximately 800,000 people received SFMNP coupons 
throughout the country. The food made available for sale came from an 
estimated 14,000 farmers at more than 2,000 farmers' markets as well as 
nearly 1,800 roadside stands and 200 community supported agricultural 
programs. In fiscal year 2005, 46 States, U.S. Territories, and 
federally recognized Indian tribal governments will operate the SFMNP. 
Close to 900,000 eligible seniors are expected to receive benefits that 
can be used at over 4,000 markets, roadside stands and community 
supported agricultural programs during the 2005 harvest season.

  In Washington State, the Seniors Farmers' Market Nutrition Program 
has been incredibly successful in ensuring access to healthy foods for 
seniors, as well as bolstering the state's farmers and our farmers' 
markets. In fact, according to the Washington State University 
Nutrition Education program, in Washington State, the Senior Farmers' 
Market Nutrition Program reaches about 8,000 lower-income older adults 
each year in 35 of my State's 39 counties. In 2003, 472 farms, 49 
farmers markets, four roadside stands and one community supported 
agriculture program participated in the SFMNP and the participating 
seniors in Washington state purchased approximately 90 tons of fresh 
produce while learning about the role of nutrition in their health in 
preventing chronic disease.
  The bill that I am introducing today aims to better address the 
growing demand and need for the Seniors Farmers' Market Nutrition 
Program in four ways.
  First, the bill would increase funding from $15 million to $25 
million for the program in fiscal year 2005 and continue to expand the 
program by $25 million each year, until the program's expiration in 
2007, meaning that the SFMNP would be funded at not less than $50 
million in fiscal year 2006, and at not less than $75 million in 2007.
  Second, the bill specifies that funds made available through this act 
will remain available to the program until exhausted. As such, any 
remaining funds from one fiscal year will roll over into the subsequent 
fiscal year budget for the SFMNP.
  Third, provisions in the bill support administrative costs. Not more 
than ten percent of available funds in a fiscal year can be used to 
cover the operating expenses of the SFMNP.
  Finally, the bill grants authority to the Secretary of Agriculture to 
expand the list of foods eligible for purchase to include minimally 
processed foods, such as honey, as deemed appropriate.
  We should not forget, too, that an obvious, positive outgrowth of the 
program is the inherent ability of the SFMNP program to strengthen 
local economies and communities while at the same time works to 
preserve farmland and open spaces. I sincerely appreciate that the 
Washington Association of Area Agencies on Aging, as well as the 
Washington State Farmers Market Association, are supporting this 
legislation.
  The legislation I am introducing today will go a long way in 
expanding the amount of funding available for the Senior Farmers' 
Market Nutrition Program. We all know that value and importance that 
individuals of all ages eat their requisite servings of vegetables and 
fruit each day. Such foods are high in fiber and lower the risk of 
chronic diseases such as heart disease and type 2 diabetes, in addition 
to colon and rectal cancer, high blood pressure, and obesity. However, 
food costs can be a significant barrier to developing and maintaining a 
healthy lifestyle. In establishing the Senior Farmers' Market Nutrition 
Program in 2002, Congress recognized that it is important to provide a 
means for low-income seniors to have access to fruits and vegetables. 
The legislation I introduce today will further our nation's commitment 
to ensuring the health of our nation's seniors, and I urge my 
colleagues to join me in cosponsoring this legislation.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1555

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

     SECTION 1. SENIORS FARMERS' MARKET NUTRITION PROGRAM.

       (a) Funding.--Section 4402 of the Farm Security and Rural 
     Investment Act of 2002 (7 U.S.C. 3007) is amended by striking 
     subsection (a) and inserting the following:
       ``(a) Establishment.--The Secretary of Agriculture shall 
     use funds available to the Commodity Credit Corporation to 
     carry out and expand a seniors farmers' market nutrition 
     program in the following amounts, to remain available until 
     expended:
       ``(1) For fiscal year 2005, not less than $25,000,000.
       ``(2) For fiscal year 2006, not less than $50,000,000.
       ``(3) For fiscal year 2007, not less than $75,000,000.''.
       (b) Purposes.--Section 4402(b)(1) of that Act (7 U.S.C. 
     3007(b)(1)) is amended--
       (1) by striking ``unprepared'' and inserting ``minimally 
     processed''; and
       (2) by striking ``and herbs'' and inserting ``herbs, and 
     other locally-produced farm products, as the Secretary 
     considers appropriate''.
       (c) Administrative Costs; Unexpended Funds.--Section 4402 
     of the Farm Security and Rural Investment Act of 2002 (7 
     U.S.C. 3007) is amended by adding at the end the following:
       ``(d) Administrative Costs.--Not more than 10 percent of 
     the funds made available for a fiscal year under subsection 
     (a) may be used to pay the administrative costs of carrying 
     out this section.''.
                                 ______