[Congressional Record (Bound Edition), Volume 151 (2005), Part 11]
[House]
[Pages 15634-15637]
[From the U.S. Government Publishing Office, www.gpo.gov]




  TREATMENT OF CERTAIN PAYMENTS UNDER NATIONAL FLOOD INSURANCE PROGRAM

  Mr. BAKER. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 804) to exclude from consideration as income certain payments 
under the national flood insurance program, as amended.
  The Clerk read as follows:

                                H.R. 804

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

     SECTION 1. TREATMENT OF CERTAIN PAYMENTS UNDER NATIONAL FLOOD 
                   INSURANCE PROGRAM.

    Chapter I of the National Flood Insurance Act of 1968 (42 U.S.C. 
4011 et seq.) is amended by adding at the end the following new 
section:


                    ``Treatment of certain payments

       ``Sec. 1324. Assistance provided under a program under this 
     title for flood mitigation activities (including any 
     assistance provided under the mitigation pilot program under 
     section 1361A, any assistance provided under the mitigation 
     assistance program under section 1366, and any funding 
     provided under section 1323) with respect to a property shall 
     not be considered income or a resource of the owner of the 
     property when determining eligibility for or benefit levels 
     under any income assistance or resource-tested program that 
     is funded in whole or in part by an agency of the United 
     States or by appropriated funds of the United States.''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Louisiana (Mr. Baker) and the gentleman from Massachusetts (Mr. Frank) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Louisiana (Mr. Baker).


                             General Leave

  Mr. BAKER. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
and include extraneous material on the bill under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Louisiana?
  There was no objection.
  Mr. BAKER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, it was just last year that the United States Congress 
acted to reform the flood assistance programs of this country to ensure 
that those who engaged in abusive practices and thereby were over 
assessing the program for repetitive flood losses would no longer avail 
themselves of that inappropriate opportunity.
  Accordingly, as the House passed legislation, there was an unintended 
consequence, however, pursuant to a ruling by the IRS which found that 
there was no technical or legislative basis on which to exempt payments 
made from the flood assistance program for the purposes of an 
individual qualifying for additional governmental assistance.
  I will translate that into something that is more appropriate. If, 
for example, a person were to accept an assistance mitigation payment 
to reduce the probability of future flooding, that income could then be 
counted and disqualify that person from receiving food stamps, aid to 
dependent children, perhaps Social Security, other health care 
assistance. And that, of course, was not the intent of the legislation 
as passed.
  In fact, under the provisions of the Stafford Act, all other 
emergency assistance granted by FEMA does not count toward qualifying 
individuals for governmental assistance, or for that matter, as income 
qualifying under the IRS for taxable liability.
  The reason for this policy position is quite clear, the whole goal of 
the effort was to incent people to make changes necessary to their 
property so they would no longer call on the Federal Government for 
flood mitigation assistance.
  In one instance, an individual who was to receive significant 
mitigation funding, had he accepted it, would have put him far over the 
qualifying limits for even his Social Security benefits. That is not 
the outcome that one would want to see as a result of trying to assist 
a person with flooding problems.
  Coming on the heels of Hurricane Dennis and many events across the 
Gulf Coast of the past few months, it is now clear this action is not 
only appropriate but necessary and does not violate precedent nor other 
actions of the Congress with regard to other assistance programs.
  For these reasons, I feel the adoption of H.R. 804 is highly 
appropriate and responsive to the needs of our constituents.
  Mr. Speaker, I reserve the balance of my time.
  Mr. FRANK of Massachusetts. Mr. Speaker, I yield myself such time as 
I might consume.
  Mr. Speaker, I agree that this is a very important improvement to 
what was a very important piece of legislation.

[[Page 15635]]

  At a time when people wonder about whether or not we are able to go 
forward, it ought to be noted clearly there are strong ideological and 
partisan differences over some issues, as there should be in a 
democracy, but we have been able, from time to time, to work together 
on things where there is a consensus of common sense.
  In this particular instance, the underlying legislation here was one 
which was strongly supported by a coalition of environmentalists and 
taxpayer groups who had a common understanding that in effect 
encouraging people to continue to rebuild in areas that were going to 
be flooded made no sense from either the environmental or the taxpayer 
perspective.
  There was also an unusually fruitful bipartisan collaboration that 
brought us this bill. Our former colleague, the gentleman from Nebraska 
(Mr. Bereuter), a senior member of the Committee on Financial Services, 
worked very closely with a continuing Member, the gentleman from Oregon 
(Mr. Blumenauer) and they did an excellent job of putting this piece of 
legislation together.
  And we now, having enacted the legislation, encounter something that 
was unanticipated. This would clean it up. It would make a very good 
piece of legislation better.
  Mr. BAKER. Mr. Speaker, will the gentleman yield?
  Mr. FRANK of Massachusetts. I yield to the gentleman from Louisiana.
  Mr. BAKER. Mr. Speaker, I just wanted to express my appreciation to 
the gentleman from Massachusetts (Mr. Frank) and to the gentleman from 
Oregon (Mr. Blumenauer) for his cooperative work in this matter.
  It has been bipartisan. I think it achieves a worthwhile policy goal, 
and I express my appreciation.
  Mr. FRANK of Massachusetts. Mr. Speaker, I yield as much time as he 
would consume to the gentleman from Oregon (Mr. Blumenauer) who will be 
my last speaker.
  Mr. BLUMENAUER. Mr. Speaker, I appreciate the gentleman's courtesy in 
permitting me to speak on this and the leadership of our friend, the 
gentleman from Louisiana (Mr. Baker), who, as was mentioned along with 
our colleague, the former Member, the gentleman from Nebraska (Mr. 
Bereuter), will ironically will be in Washington D.C. this week.
  I cannot think of a better gift for Mr. Bereuter, a recognition for 
his long service to this House and to the people of Nebraska and the 
country, to do this important clarification. I could not agree more 
with my friend from Louisiana (Mr. Baker) how important it is to 
clarify the intent of this legislation.
  The whole thrust of it was to, in some cases, eliminate potential 
abuse of the program. But more than an isolated case of abuse here and 
there, there were a number of people who were trapped in a pattern of 
flood and having to repair and did not know how to get out of it.
  And the bill was designed, as my friend, the gentleman from 
Massachusetts (Mr. Frank), pointed out, in cooperation with 
environmental groups, with taxpayer groups, with industry, the 
insurance industry, home building industry, financial institutions, to 
try and make sure that we did the right job for both the taxpayer and 
people who are in flood-prone areas.
  The National Flood Insurance Program is critical to the lives of over 
4 million policyholders. And many of the people eligible for flood-
mitigation assistance under the flood insurance program were caught in 
this cycle of flooding and rebuilding and flooding again that could be 
ended with mitigation assistance.
  Now, I support strongly this legislation to remove a disincentive for 
people living in flood-prone areas to accept the mitigation grant that 
will help prepare them for floods before they happen, reduce damage for 
future floods, and save lives for future disasters. Everybody wins if 
this program works right.
  The policyholders win because, as we pointed out, as the legislation 
was moving forward, when we have the legislation, only 1 percent of the 
property owners were responsible for 25 percent of the flood-loss 
dollars.
  By reducing the magnitude of this repetitive flood loss program, we 
were able to make a huge difference to a wide range of people. The 
Association of State Flood Plain Managers estimates that avoiding just 
one 10 percent increase will save the 4.4 million policyholders about 
$175 million each year.
  Taxpayers will win if the mitigation program works right, because the 
flood insurance payments are the tip of the iceberg. Because there are 
many, many people in harm's way, who get part of their relief from 
flood insurance, but we have disaster plains on the Federal Government 
that far exceed them.
  By making this program work right, we will save taxpayers money time 
and time again. I appreciate the hard work the Financial Services 
Committee has done in trying to fine-tune the flood insurance program, 
continuing hearings to make sure that it works right, and here, 
clearing up any ambiguity to make sure that we take any disincentive 
for using the mitigation grants and solve that problem to make sure 
that people take advantage of moving out of harm's way, saving money, 
enhancing the environment.
  Mr. FRANK of Massachusetts. Mr. Speaker, I yield back the balance of 
my time.

                              {time}  1045

  Mr. BAKER. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Florida (Ms. Ginny Brown-Waite) who is a strong advocate of our flood 
insurance program.
  Ms. GINNY BROWN-WAITE of Florida. Mr. Speaker, I want to thank, on 
behalf of my constituents, many of whom have to have flood insurance, I 
would like to thank the gentleman from Louisiana (Mr. Baker) for 
introducing H.R. 804.
  As we all know from watching the television, hurricane season has 
arrived again. Residents of the Gulf and east coast face familiar 
anxieties associated with the hurricane season. They begin to cross 
their fingers and hope their home will not be devastated by nature's 
wrath and that their belongings will not be washed away.
  What residents should not have to be crossing their fingers over is 
whether the government is going to hit them with additional liabilities 
after they receive help. Yet, under the National Flood Insurance 
Program today, that is exactly what happens. The IRS considers NFIP 
grants as income which means any person on means-tested assistance 
loses. Residents who accept NFIP grants after their homes are destroyed 
by floods are then slapped with reduced government benefits such as 
health care, education or even nutrition assistance.
  I commend the gentleman from Louisiana (Mr. Baker) for introducing 
this legislation that prevents agencies other than the IRS from 
considering NFIP grants as income and I implore my colleagues to 
support this bill. Those who have been hit by floods should not have to 
choose between NFIP assistance and food stamps.
  Mr. BAKER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I want to express my appreciation to all Members who 
have had an interest and role in perfecting this legislation. Merely 
for the purposes of establishing in the record as we close the chapter 
I believe on the reform of the Flood Mitigation Assistance Program, but 
every dollar of benefit paid is generated by premiums of flood 
insurance paid into the fund by home and property owners. It is a 
program which pays out benefits, and at any time, if there has been an 
advance of funding by the Federal Government when funds on hand have 
been deficient to pay existing claims, all dollars have been repaid 
plus interest over the life of the program. So in fact it is a program 
that functions in an efficient taxpayer-responsible manner.
  And with the adjustments made over the past 18 months to the program, 
I hope it brings to an end further Congressional review and oversight 
of the important flood assistance programs as now constructed.
  Mr. Speaker, the following is the revised cost estimate prepared by 
the Congressional Budget Office:


[[Page 15636]]


                                                    U.S. Congress,


                                  Congressional Budget Office,

                                     Washington, DC, May 11, 2005.
     Hon. Michael G. Oxley,
     Chairman, Committee on Financial Services, House of 
         Representatives, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed revised cost estimate for H.R. 804, a 
     bill to exclude from consideration as income certain payments 
     under the National Flood Insurance Program. This estimate 
     supersedes our original estimate that was transmitted on 
     March 31, 2005.
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contact is Kathleen 
     FitzGerald.
           Sincerely,
                                              Douglas Holtz-Eakin,
                                                         Director.
       Enclosure.
     H.R. 804--A bill to exclude from consideration as income 
         certain payments under the National Flood Insurance 
         Program
       If H.R. 804 were enacted, payments made under the National 
     Flood Insurance Program for flood mitigation activities would 
     not be counted as income or resources when determining 
     eligibility for any federal means-tested program. The Federal 
     Emergency Management Agency (FEMA) awards grants to states 
     and communities, which in turn distribute funds to 
     individuals and businesses for activities that reduce the 
     risk of repetitive flood damage to buildings. Data from FEMA 
     show that the average approved award is about $75,000.
       CBO expects that enacting this bil1 would increase the 
     number of persons eligible for certain means-tested programs 
     including Food Stamps and Medicaid. Currently, flood 
     mitigation grants are counted as income or resources. by 
     these programs and make some people ineligible for benefits 
     or reduce the amount of their benefit. (Certain other FEMA 
     grants are already excluded from income for benefit-
     eligibility purposes.) Based on data from FEMA on the number 
     of flood mitigation grants awarded since fiscal year 1997 CBO 
     estimates that the increase in the number of people newly 
     eligible for these programs as a result of this legislation 
     would be small and that any increase in direct spending for 
     them would not be significant. Enacting the bill would not 
     affect revenues.
       H.R. 804 contains no intergovernmental or private-sector 
     mandates as defined in the Unfunded Mandates Reform Act, and 
     any increased spending by states for public benefits would be 
     minimal.
       This revised estimate supersedes the estimate that CBO 
     transmitted on,this bill on March 31, 2005. Based on new 
     information on both the number of flood mitigation grants and 
     how they are distributed, CBO has lowered its estimate of the 
     number of instances where individual families receive such 
     grants. We previously estimated a cost of about $1 million a 
     year, but now estimate that such costs would be less than 
     $500,000 a year.
       The CBO staff contacts for this estimate are Kathleen 
     FitzGerald (for federal costs), Leo Lex (for the impact on 
     state, local, and tribal governments), and Paige Piper/Bach 
     (for the private-sector impact). This estimate was approved 
     by Peter H. Fontaine, Deputy Assistant Director for Budget 
     Analysis.
                                  ____

                                         House of Representatives,


                                  Committee on Ways and Means,

                                    Washington, DC, July 12, 2005.
     Hon. Michael G. Oxley,
     Chairman, Committee on Financial Services, Rayburn House 
         Office Building, Washington, DC.
       Dear Chairman Oxley: I am writing concerning H.R. 804, a 
     bill ``[t]o exclude from consideration as income certain 
     payments under the national flood insurance program,'' which 
     is scheduled for floor consideration on Tuesday, July 12, 
     2005.
       The bill is within the jurisdiction of the Committee on 
     Ways and Means because it would exclude certain flood 
     insurance mitigation payments from consideration for purposes 
     of determining eligibility for and amount of benefits under 
     certain means-tested programs. As a result the bill could 
     affect eligibility for and benefit levels under certain 
     programs under the Committee's jurisdiction. However, in 
     order to expedite this legislation for floor consideration, 
     the Committee will forgo action on this bill. This is being 
     done with the understanding that it does not in any way 
     prejudice the Committee with respect to the appointment of 
     conferees or its jurisdictional prerogatives on this or 
     similar legislation.
       I would appreciate your response to this letter, confirming 
     this understanding with respect to H.R. 804, and would ask 
     that a copy of our exchange of letters on this matter be 
     included in the Congressional Record during floor 
     consideration.
           Best regards,
                                                      Bill Thomas,
     Chairman.
                                  ____

                                         House of Representatives,


                              Committee on Financial Services,

                                    Washington, DC, July 12, 2005.
     Hon. William M. Thomas,
     Chairman, Committee on Ways and Means, Longworth House Office 
         Building, Washington, DC.
       Dear Chairman Thomas: Thank you for your letter regarding 
     H.R. 804, a bill ``to exclude from consideration as income 
     certain payments under the flood insurance program.''
       I recognize that specifying the treatment of these payments 
     for purposes of determining eligibility for any income 
     assistance or resource-tested programs could affect 
     eligibility for and benefit levels under certain programs, 
     including those under the jurisdiction of the Committee on 
     Ways and Means. I appreciate your cooperation in developing 
     an amended version of the bill, thereby permitting its 
     consideration under suspension of the rules. This cooperation 
     does not prejudice your Committee in any way with respect to 
     the appointment of conferees or its jurisdictional 
     prerogatives on this or similar legislation.
       I intend to place this exchange of letters in the 
     Congressional Record. Thank you again for your assistance.
           Yours truly,
                                                 Michael G. Oxley,
                                                         Chairman.

  Mr. NEY. Mr. Speaker, I appreciate Chairman Baker's effort on 
crafting this piece of legislation and Chairman Mike Oxley's diligence 
in seeing this bill to the floor.
  H.R. 804, introduced on February 15, 2005, will prevent federal 
agencies that administer means-tested or income-tested benefits from 
considering NFIP mitigation grants as income. H.R. 804 is necessary due 
to an IRS ruling in July 2004 that such grants must be reported as 
income for tax purposes. This IRS ruling has caused significant 
uncertainty in the administration of the Bunning-Bereuter-Blumenauer 
Flood Insurance Reform Act of 2004. Anecdotal information has revealed 
that a significant number of homeowners have refused mitigation offers 
not only due to the fear of a potential tax liability, but also the 
potential for other unknown liabilities imposed by other federal 
government agencies. These penalties could include the loss of certain 
federal education, nutrition and health care benefits. H.R. 804 
eliminates the potential for additional penalties by preventing federal 
government agencies (other than the IRS) from considering NFIP flood 
mitigation grants as income.
  The precedent for this exception is found in the Stafford Act, which 
explicitly states that any disaster or pre-disaster mitigation payments 
made to homeowners under that Act are not to be considered as income by 
any federal agency administering a means- or income-tested benefit. By 
incorporating this language in the National Flood Insurance Act, H.R. 
804 will resolve any additional uncertainty by likewise preventing 
federal agencies from considering flood mitigation grants as income.
  Floods have been, and continue to be, one of the most destructive and 
costly natural hazards to our nation. In the aftermath of Hurricane 
Dennis this past weekend, I fear many communities in the South and 
Midwest will witness this unrelenting power firsthand as the tropical 
depression continues to unload heavy, flooding rains inland.
  During this past year, there have been three major floods in my 
district in eastern Ohio. All three of these incidents qualified for 
federal relief granted by the President. Recent flooding in January of 
this year resulted in historic levels in several local dams, and, in 
Tuscarawas County, three communities were forced to evacuate, which 
displaced 7,000 people. I was able to witness this devastation 
firsthand when I toured damaged properties in both Tuscarawas and 
Guernsey counties. Also, I am planning to hold a field hearing in 
Tuscarawas County next month to continue the Subcommittee's oversight 
of the National Flood Insurance Program.
  The National Flood Insurance Program is a valuable tool in addressing 
the losses incurred throughout this country due to floods. It assures 
that businesses and families have access to affordable flood insurance 
that would not be available on the open market.
  Prior to the passage of the National Flood Insurance Act in 1968, 
insurance companies generally did not offer coverage for flood 
disasters because of the high risks involved. Today, almost 20,000 
communities participate in the national flood insurance program. More 
that 90 insurance companies sell and service flood policies. There are 
approximately 4.4 million policies covering a total of $620 billion.
  Last year's Flood Insurance Reform Act achieved significant reforms 
to this important federal program and I look forward to hearing from 
all of our witnesses today as we discuss FEMA's implementation of its 
flood mapping policy, as well as determine whether new reforms and 
initiatives are in order to complement the work we accomplished last 
year.
  I urge my colleagues to approve this legislation.

[[Page 15637]]


  Mr. OXLEY. Mr. Speaker, I rise today in support of H.R. 804, a bill 
that would exclude from consideration as income certain payments under 
the national flood insurance program.
  This bill was introduced by my friend and colleague from Louisiana, 
Mr. Richard Baker, and was reported from the Financial Services 
Committee, by voice vote, on March 16, 2005. I am pleased to see it on 
the floor of the House this morning and am confident that it will 
receive favorable consideration.
  H.R. 804 is a common-sense bill that will prevent Federal agencies 
administering means- or income-tested benefits from considering 
National Flood Insurance Program (NFIP) mitigation grants as income. 
Successful distribution of these mitigation grants is vitally important 
to the financial soundness of the NFIP, since they help prevent costly 
repetitive flood losses by allowing homeowners to elevate their 
properties or take other measures to prevent future flooding.
  In July 2004, an IRS ruling maintained that these mitigation grants 
must be reported to the IRS as income for tax purposes. As a result, 
some homeowners have refused mitigation offers out of a concern that 
mitigation funds could increase their reported income to levels that 
would result in a loss of Federal education, nutrition and health care 
benefits. Other homeowners fear potential tax liabilities.
  We in the Congress have put in a great deal of work over the past 
several years on the repetitive flood loss issue, culminating in the 
Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004. This 
Act expanded the use of mitigation grants and requires homeowners to 
participate in flood mitigation programs. Unfortunately, we are now 
faced with a situation where affected homeowners face the loss of 
benefits such as subsidized school lunches, Federal education grants 
and Medicaid. That is just not right.
  H.R. 804 removes this concern and will allow flood mitigation grants 
to work as intended. I urge my colleagues to help protect homeowners 
throughout our Nation by supporting final passage of H.R. 804.
  Mr. BAKER. Mr. Speaker, I have no further requests for time, and I 
yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Foley). The question is on the motion 
offered by the gentleman from Louisiana (Mr. Baker) that the House 
suspend the rules and pass the bill, H.R. 804, as amended.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

                          ____________________