[Congressional Record (Bound Edition), Volume 151 (2005), Part 4]
[Senate]
[Pages 5278-5279]
[From the U.S. Government Publishing Office, www.gpo.gov]




                      FRATERNAL BENEFIT SOCIETIES

  Mr. SANTORUM. Mr. President, on January 27, the staff of the Joint 
Committee on Taxation released a report requested by Senate Finance 
Chairman Grassley and the ranking member, Senator Max Baucus, entitled 
``Options To Improve Tax Compliance and Reform Tax Expenditures.'' 
While I fully expect that many of the recommendations will be the 
subject of extended debate in the Senate over the coming year, I want 
to highlight one recommendation that should be rejected immediately: 
the joint committee staff's proposal to revoke the tax-exempt status of 
fraternal benefit societies.
  Beginning with the Tariff Act of 1894, every Federal tax law has 
contained a specific exemption for fraternal benefit societies, and 
with good reason. These organizations, some of which have existed since 
the Civil War, are a major force for good in America today. Last year, 
for example, these organizations incurred almost $360 million in direct 
fraternal and charitable expenditures, while their individual members 
devoted more than 80 million volunteer hours--valued at $1.4 billion--
in community and social services. Fraternal benefit societies support 
their communities in every possible way, including helping families 
with critically ill children, supporting homeless shelters and homes 
for the aged, raising funds and supporting local food banks, repairing 
playgrounds and other community facilities, and helping underprivileged 
youth stay away from drugs. Fraternal benefit societies are among our 
Nation's most important first responders; they acted quickly to provide 
almost $17 million in financial relief to families affected by 9/11, 
and have raised upwards of $8 million in tsunami relief and counting.
  What makes this extraordinary effort possible is the requirement 
under the Internal Revenue Code that fraternal societies also make 
available to their members insurance against death, disease, and 
disability, a tradition of mutual aid that goes back to the earliest 
days of fraternalism. I am troubled, Mr. President, by the fact that 
the Joint Committee staff has dredged up an old idea that has been 
rejected once before. In 1984, the Treasury Department made a similar 
recommendation that resulted in Congress mandating an extensive study 
of fraternal benefit societies that was issued in 1993. In that study, 
Treasury concluded that fraternal societies do not use their tax 
exemption to compete unfairly against commercial insurers, but instead, 
use the revenues from insurance to support their fraternal and 
charitable activities. Treasury left the decision up to Congress, but 
noted that if the exemption was taken away, these fraternal and 
charitable activities would be extinguished.

[[Page 5279]]

  If anything, the rationale for encouraging fraternal benefit 
societies is greater today than it has been at any other time in our 
history. Fraternal societies have shown us that the private sector can 
and will step in to make a difference. As our need for fraternal 
societies has grown, so too has their devotion to our communities. 
Fraternal and charitable expenditures were approximately $242 million 
in 1985, and the number of volunteer hours on behalf of society members 
was just over 26 million. Last year fraternal and charitable 
expenditures were almost $365 million and the number of volunteer hours 
had grown to 83 million. At the same time, the share of the insurance 
market represented by fraternals during this time period has remained 
steady at around 1.5 percent. In other words, the good that these 
organizations do has gone way up; they are no more a threat to 
commercial businesses today than they were 20 years ago. Moreover, I 
can tell you from personal experience that the 10 million Americans who 
join fraternal societies are more devoted today to the cause that 
brought them together--whether religious, patriotic, or a shared 
heritage--than ever before. Pennsylvania is fortunate to be home to 
many of these organizations and dedicated citizens.
  The Joint Committee staff has concluded that revoking the tax-
exemption of fraternal benefit societies would raise $500 million over 
10 years. This pales by comparison to the $4 billion that fraternal 
societies are likely to put back into their communities over the same 
time frame in direct fraternal and charitable expenditures, and the 
annual $1.4 billion that their members devote in volunteer time 
throughout the country.
  Recognizing the importance of fostering this type of private sector 
support for our communities, it is interesting to note that the 
platform of the Republican National Committee in 2004, 2000, and 1996 
contained the following statement: ``Because of the vital role of 
religious and fraternal benevolent societies in fostering charity and 
patriotism, they should not be subject to taxation.''
  Mr. President, it often has been said that the power to tax is the 
power to destroy. This is the time to encourage, not destroy, 
organizations that devote themselves to social good, organizations from 
which this Nation has benefited immeasurably for more than 150 years. 
As Congress concluded in 1985, let us again make sure that this joint 
committee recommendation is taken off the table.

                          ____________________