[Congressional Record (Bound Edition), Volume 152 (2006), Part 7]
[Senate]
[Pages 9645-9672]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

                                 ______
                                 
      By Mr. TALENT:
  S. 3061. A bill to extend the patent term for the badge of the 
American Legion Women's Auxiliary, and for other purposes; to the 
Committee on the Judiciary.
  Mr. TALENT. Mr. President, I ask unanimous consent that the text of 
S. 3061, 3062, and 3063 be printed in the Record.
  There being no objection, the text of the bills were ordered to be 
printed in the Record, as follows:

                                S. 3061

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

     SECTION 1. PATENT TERM EXTENSION FOR THE BADGE OF THE 
                   AMERICAN LEGION WOMEN'S AUXILIARY.

       The term of a certain design patent numbered 55,398 (for 
     the badge of the American Legion Women's Auxiliary) is 
     renewed and extended for a period of 14 years beginning on 
     the date of enactment of this Act, with all the rights and 
     privileges pertaining to such patent.
                                 ______
                                 
      By Mr. TALENT:
  S. 3062. A bill to extend the patent term for the badge of the 
American Legion, and for other purposes; to the Committee on the 
Judiciary.

                                S. 3062

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

     SECTION 1. PATENT TERM EXTENSION FOR THE BADGE OF THE 
                   AMERICAN LEGION.

       The term of a certain design patent numbered 54,296 (for 
     the badge of the American Legion) is renewed and extended for 
     a period of 14 years beginning on the date of enactment of 
     this Act, with all the rights and privileges pertaining to 
     such patent.
                                 ______
                                 
      By Mr. TALENT:
  S. 3063. A bill to extend the patent term for the badge of the Sons 
of the American Legion, and for other purposes; to the Committee on the 
Judiciary.

                                S. 3063

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

     SECTION 1. PATENT TERM EXTENSION FOR THE BADGE OF THE SONS OF 
                   THE AMERICAN LEGION.

       The term of a certain design patent numbered 92,187 (for 
     the badge of the Sons of the American Legion) is renewed and 
     extended for a period of 14 years beginning on the date of 
     enactment of this Act, with all the rights and privileges 
     pertaining to such patent.
                                 ______
                                 
      By Mr. NELSON of Florida:
  S. 3114. A bill to establish a bipartisan commission on insurance 
reform; to the Committee on Banking, Housing, and Urban Affairs.
  Mr. NELSON of Florida. Mr. President, today I introduce four bills, 
3114, 3115, 3116, and 3117 that are aimed at providing a comprehensive 
solution to strengthen our Nation's property and casualty insurance 
market. Without serious reform, the Federal Government will be forced 
to continue to spend billions of dollars of taxpayer money to cover the 
costs of natural disasters in the United States. Worse, without Federal 
action, property insurance soon will become more expensive and harder 
to find, preventing some consumers from insuring their homes and 
businesses.
  As we know too well, the last few years have brought a devastating 
cycle of natural catastrophes in the United States. In 2004 and 2005, 
we witnessed a series of powerful hurricanes that caused unthinkable 
human tragedy and property loss. Hurricanes Katrina and Rita alone 
caused over $200 billion in total economic losses, including insured 
and uninsured losses.
  Recently in my own home State of Florida, eight catastrophic storms 
in 15 months caused more than $31 billion in insured damages. Now 
Florida is witnessing skyrocketing insurance rates, insurance companies 
are canceling hundreds of thousands of policies, and Florida's State 
catastrophe fund is depleted.
  In short, the inability of our private markets to fully handle the 
fallout from natural disasters has made our Nation's property and 
casualty insurance marketplace unstable. This market instability 
repeatedly has forced the Federal Government to absorb billions of 
dollars in uninsured losses. This is a waste of taxpayer money, 
especially when we know there are ways to design the system to 
anticipate and plan for the financial impacts of catastrophes.
  As insurance companies struggle to maintain their businesses, costs 
are passed on to homeowners and small businesses in Florida and in 
other States. In essence, the people who can least afford it are being 
forced to bear the disproportionate share of the billions of dollars of 
losses caused by natural catastrophes.
  Many Floridians have seen their insurance bills double in the last 
few years. As I travel around Florida, I hear repeatedly from my 
constituents that they may soon be unable to afford property and 
casualty insurance. That is a frightening proposition for people living 
in a State where increasingly vicious hurricane seasons are predicted. 
I am sure we all agree--consumers never should be put in the untenable 
position of having to choose between purchasing insurance and 
purchasing other necessities.
  While our Nation's property and casualty insurance system is not yet 
completely broken, it is clear that Congress needs to act now to shore 
up the system. Private sector insurance is currently available to 
spread some catastrophe-related losses throughout the Nation and 
internationally, but most experts believe that there will be 
significant insurance and reinsurance shortages. These shortages could 
result in future dramatic rate increases for consumers and businesses 
and the unavailability of catastrophe insurance.
  Let me be clear: these issues will not just affect Florida or the 
coastal States. Natural catastrophes can strike anywhere in our 
country. For example, a major earthquake fault line runs through 
several of our Midwestern States. We also saw firsthand the devastating 
effects of a volcano eruption

[[Page 9646]]

at Mount St. Helens in Washington State.
  In the past few decades, major disasters have been declared in almost 
every State. As I mentioned earlier, the Federal Government has 
provided and will continue to provide billions of dollars and resources 
to pay for these catastrophic losses, at huge costs to all American 
taxpayers.
  Congress has struggled with these issues for decades. Although we 
have talked about these issues time and again, nothing much has gotten 
accomplished. The most notable step Congress did take was to create the 
National Flood Insurance Program. But Congress needs to do much more. 
It is time for a comprehensive approach to solving our Nation's 
property and casualty insurance issues.
  These matters are usually within the purview of the States, and I 
cannot undersate the importance of State-based solutions to these 
insurance issues. Nonetheless, the Federal Government also has a 
critical interest in ensuring appropriate and fiscally responsible risk 
management of catastrophes.
  For example, mortgages require reliable property insurance, and the 
unavailability of reliable property insurance would make most real 
estate transactions impossible. Moreover, the public health, safety, 
and welfare demand that structures damaged or destroyed in catastrophes 
be reconstructed as soon as possible.
  Therefore, the inability of the private sector insurance and 
reinsurance markets to maintain sufficient capacity to enable Americans 
to obtain property insurance coverage in the private sector endangers 
the national economy and our public health, safety, and welfare.
  In order to help protect consumers and small businesses, today I am 
introducing four bills as part of a comprehensive approach to fixing 
our troubled insurance system. Let me summarize each of the four bills 
and tell you how this integrated approach makes good policy sense.
  The first piece of legislation I am introducing today is the 
Homeowners Protection Act of 2006, S. 3117. This bill is a companion 
bill to a bipartisan piece of legislation introduced by Florida 
Representatives Brown-Waite, Hastings, and others.
  This bill would establish a fund within the U.S. Department of 
Treasury, which would sell Federal catastrophe insurance to State 
catastrophe funds, like the fund I helped to set up in Florida. State 
catastrophe funds essentially act as reinsurance mechanisms for 
insurance companies who lack resources to compensate homeowners for 
their losses.
  Under this bill, State catastrophe funds would be eligible to 
purchase reinsurance from the Federal fund at sound rates. However, a 
State catastrophe fund would be prohibited from gaining access to the 
Federal fund until private insurance companies and the State 
catastrophe fund met their financial obligations.
  Why is this good for homeowners? Because this backup mechanism will 
improve the solvency and capacity of homeowners insurance markets, 
which will reduce the chance that consumers will lose their insurance 
coverage or be hit by huge premium increases.
  Importantly, the Homeowners Insurance Protection Act of 2006 also 
recognizes that part of the problem with our broken property and 
casualty insurance system lies with outdated building codes and 
mitigation techniques. Noted insurance experts and consumer groups have 
been pointing out this problem for many years. So, under the bill, the 
Secretary of the Treasury would establish an expert commission to 
assist States in developing mitigation, prevention, recovery, and 
rebuilding programs that would reduce the types of enormous damage we 
have seen caused by recent hurricanes.
  I note that this bill covers not just hurricanes, but catastrophes 
such as earthquakes, cyclones, tornados, catastrophic winter storms, 
and volcanic eruptions. These are disasters that can--and do--occur in 
many different States. Again, every State and every taxpayer is 
affected by this problem, not just Florida.
  This bill has widespread support from a broad range of stakeholders, 
including ProtectingAmerica.org, a national coalition of first 
responders, businesses, and emergency managers. This organization is 
cochaired by former FEMA Director James Lee Witt, one of the most 
respected names in disaster prevention and preparedness.
  The second bill I am introducing today is the Catastrophe Savings 
Accounts Act of 2006, S. 3115. The companion bill was introduced in the 
House of Representatives by a bipartisan group of Members including Tom 
Feeney and Debbie Wasserman Schultz.
  This bill proposes changing the Federal Tax Code to allow homeowners 
to put money aside--on a tax-free basis--to grow over time. If and when 
a catastrophe hits, a homeowner could take the accumulated savings out 
of the account to cover uninsured losses, deductible expenses, and 
building upgrades to mitigate damage that could be caused in future 
disasters. Homeowners could even reduce their insurance premiums 
because their tax-free savings would allow them to choose higher 
deductibles.
  The benefits of this approach are pretty straightforward and very 
consumer friendly. Homeowners would be encouraged to plan in advance 
for future disasters, and they wouldn't be taxed to do it. Moreover, 
homeowners wouldn't be as dependent on insurance companies to help them 
out immediately after a disaster. As one expert has noted, why should a 
consumer continue to give insurance companies thousands of dollars each 
year when the consumer could deposit the same amount of money annually 
in a tax-free, interest-bearing savings account controlled by the 
consumer?
  The third bill I am introducing today is the Policyholder Disaster 
Protection Act of 2006, S. 3116. This bill was introduced in the House 
of Representatives by Mark Foley and has eight cosponsors.
  Under this bill, insurance companies would be permitted to accumulate 
tax-deferred catastrophic reserves, much the way that homeowners would 
be permitted under the bill I just discussed. Depending on their size, 
insurance companies could save up to a certain capped amount, which 
would grow over time.
  Our current Federal Tax Code actually provides a disincentive for 
insurance companies to accumulate reserve funds for catastrophes. Under 
the current system, insurance companies can only reserve against losses 
that already have occurred, instead of future losses. The United States 
is the only industrialized nation that actually taxes reserves in this 
way. It is time for reform, so that consumers are better protected.
  Make no mistake though--this bill is not a giveaway to the insurance 
companies. Instead, the Policy Disaster Protection Act of 2006 would 
strictly regulate when and how insurance companies could access their 
reserves, to make sure the money is used only for its intended 
purposes.
  If implemented correctly, this bill could result in approximately $15 
billion worth of reserves being saved up by insurance companies, which 
later could be spent to pay for policyholder claims and to keep 
insurance policies available and affordable. Consumers could feel more 
protected knowing that their insurance company would have the money 
saved to help them out after a major disaster. Moreover, this approach 
should help make the insurance market more stable and less prone to 
insurers going bankrupt.
  Finally, the fourth bill, S. 3114, that I am introducing as part of 
my comprehensive reform package is the Commission on Catastrophic 
Disaster Risk and Insurance Act of 2006.
  Under this bill, Congress would create a Federal commission--made up 
of a cross-section of the best experts in the Nation--to quickly 
recommend to Congress the best approach to addressing catastrophic risk 
insurance. The experts on the commission would be required to analyze 
the three bills that I am introducing today, along with other potential 
approaches to reforming our insurance system.

[[Page 9647]]

  Creating a Federal commission is not always the best answer, 
especially if it can slow down reform efforts. But in this case, the 
opposite would occur. I say that with cofidence--because I am following 
a successful model that I used when I was insurance commissioner for 
the State of Florida in the 1990s. After Hurricane Andrew devastated 
South Florida in 1992, I created a nonpartisan commission comprised of 
university presidents.
  I asked the Florida commission to study the problems with the 
property and casualty insurance market and recommend what legislative 
reforms were necessary to restore health to Florida's system. Within 
months, the commission acted--breaking through the deep political 
logjam and inertia--to recommend the legislative reforms that 
ultimately became State law.
  That model worked then, and I think it can work now on a Federal 
level. Without the work of an expert, neutral commission to help guide 
us in these incredibly complex matters, I fear that Congress will never 
find the consensus necessary to reform the system and bring stability.
  Let me emphasize again what we need to accomplish to reform our 
current insurance system and to effectively plan for catastrophic 
losses.
  We need a comprehensive approach that will make sure the United 
States is truly prepared for the financial fallout from natural 
disasters. We need a property and casualty insurance system that is not 
forced to spend valuable taxpayer dollars after a catastrophe strikes. 
We need a system that protects consumers and small businesses from 
losing their insurance policies or being forced to pay exorbitant 
insurance rates. We need ways to encourage responsible construction and 
mitigation techniques. And we need a system that helps insurance 
companies use their resources in cost-effective ways so that they will 
not go insolvent after major disasters.
  Our American economy depends on a healthy property and casualty 
insurance system. By enacting meaningful reforms, we can ensure that 
our economy remains protected and remains the most resilient economy in 
the world. I know this complicated process won't be easy for us--but 
let's roll up our shirtsleeves and get it done.
  Mr. President, I ask unanimous consent that the text of these four 
bills, the Commission on Catastrophic Disaster Risk and Insurance Act 
of 2006, the Catastrophe Savings Accounts Act of 2006, the Policyholder 
Disaster Protection Act of 2006, and the Homeowners Protection Act of 
2006, be printed in the Record.
  There being no objection, the text of the bills was ordered to be 
printed in the Record, as follows:

                                S. 3114

       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 ``Commission on Catastrophic 
     Disaster Risk and Insurance Act of 2006''.

     SEC. 2. FINDINGS.

       Congress finds the following:
       (1) Hurricanes Katrina, Rita, and Wilma, which struck the 
     United States in 2005, caused over $200 billion in total 
     economic losses, including insured and uninsured losses.
       (2) Although private sector insurance is currently 
     available to spread some catastrophe-related losses 
     throughout the Nation and internationally, most experts 
     believe there will be significant insurance and reinsurance 
     shortages, resulting in dramatic rate increases for consumers 
     and businesses, and the unavailability of catastrophe 
     insurance.
       (3) The Federal Government has provided and will continue 
     to provide billions of dollars and resources to pay for 
     losses from catastrophes, including hurricanes, volcanic 
     eruptions, tsunamis, tornados, and other disasters, at huge 
     costs to American taxpayers.
       (4) The Federal Government has a critical interest in 
     ensuring appropriate and fiscally responsible risk management 
     of catastrophes. Mortgages require reliable property 
     insurance, and the unavailability of reliable property 
     insurance would make most real estate transactions 
     impossible. In addition, the public health, safety, and 
     welfare demand that structures damaged or destroyed in a 
     catastrophe be reconstructed as soon as possible. Therefore, 
     the inability of the private sector insurance and reinsurance 
     markets to maintain sufficient capacity to enable Americans 
     to obtain property insurance coverage in the private sector 
     endangers the national economy and the public health, safety, 
     and welfare.
       (5) Multiple proposals have been introduced in the United 
     States Congress over the past decade to address catastrophic 
     risk insurance, including the creation of a national 
     catastrophic reinsurance fund and the revision of the Federal 
     tax code to allow insurers to use tax-deferred catastrophe 
     funds, yet Congress has failed to act on any of these 
     proposals.
       (6) To the extent the United States faces high risks from 
     catastrophe exposure, essential technical information on 
     financial structures and innovations in the catastrophe 
     insurance market is needed.
       (7) The most efficient and effective approach to assessing 
     the catastrophe insurance problem in the public policy 
     context is to establish a bipartisan commission of experts to 
     study the management of catastrophic disaster risk, and to 
     require such commission to timely report its recommendations 
     to Congress so that Congress can quickly craft a solution to 
     protect the American people.

     SEC. 3. ESTABLISHMENT.

       There is established a bipartisan Commission on 
     Catastrophic Disaster Risk and Insurance (in this Act 
     referred to as the ``Commission'').

     SEC. 4. MEMBERSHIP.

       (a) Members.--The Commission shall be composed of the 
     following:
       (1) The Director of the Federal Emergency Management Agency 
     or a designee of the Director.
       (2) The Administrator of the National Oceanic and 
     Atmospheric Administration or a designee of the 
     Administrator.
       (3) 12 additional members or their designees of whom one 
     shall be--
       (A) a representative of a consumer group;
       (B) a representative of a primary insurance company;
       (C) a representative of a reinsurance company;
       (D) an independent insurance agent with experience in 
     writing property and casualty insurance policies;
       (E) a State insurance regulator;
       (F) a State emergency operations official;
       (G) a scientist;
       (H) a faculty member of an accredited university with 
     experience in risk management;
       (I) a member of nationally recognized think tank with 
     experience in risk management;
       (J) a homebuilder with experience in structural 
     engineering;
       (K) a mortgage lender; and
       (L) a nationally recognized expert in antitrust law.
       (b) Manner of Appointment.--
       (1) In general.--Any member of the Commission described 
     under subsection (a)(3) shall be appointed only upon 
     unanimous agreement of--
       (A) the majority leader of the Senate;
       (B) the minority leader of the Senate;
       (C) the Speaker of the House of Representatives; and
       (D) the minority leader of the House of Representatives.
       (2) Consultation.--In making any appointment under 
     paragraph (1), each individual described in paragraph (1) 
     shall consult with the President.
       (c) Eligibility Limitation.--Except as provided in 
     subsection (a), no member or officer of the Congress, or 
     other member or officer of the Executive Branch of the United 
     States Government or any State government may be appointed to 
     be a member of the Commission.
       (d) Period of Appointment.--
       (1) In general.--Each member of the Commission shall be 
     appointed for the life of the Commission.
       (2) Vacancies.--A vacancy on the Commission shall not 
     affect its powers, but shall be filled in the same manner as 
     the original appointment was made.
       (e) Quorum.--
       (1) Majority.--A majority of the members of the Commission 
     shall constitute a quorum, but a lesser number may hold 
     hearings.
       (2) Approval actions.--All recommendations and reports of 
     the Commission required by this Act shall be approved only by 
     a majority vote of a quorum of the Commission.
       (f) Chairperson.--The majority leader of the Senate, the 
     minority leader of the Senate, the Speaker of the House of 
     Representatives, and the minority leader of the House of 
     Representatives shall jointly select 1 member appointed 
     pursuant to subsection (a) to serve as the Chairperson of the 
     Commission.
       (g) Meetings.--The Council shall meet at the call of its 
     Chairperson or a majority of its members at any time.

     SEC. 5. DUTIES OF THE COMMISSION.

       The Commission shall--
       (1) assess--
       (A) the condition of the property and casualty insurance 
     and reinsurance markets in the aftermath of Hurricanes 
     Katrina, Rita, and Wilma in 2005, and the 4 major hurricanes 
     that struck the United States in 2004; and
       (B) the ongoing exposure of the United States to 
     earthquakes, volcanic eruptions, tsunamis, and floods; and

[[Page 9648]]

       (2) recommend and report, as required under section 6, any 
     necessary legislative and regulatory changes that will--
       (A) improve the domestic and international financial health 
     and competitiveness of such markets; and
       (B) assure consumers of the--
       (i) availability of adequate insurance coverage when an 
     insured event occurs; and
       (ii) best possible range of insurance products at 
     competitive prices.

     SEC. 6. REPORT.

       (a) In General.--Not later than 90 days after the 
     appointment of Commission members under section 4, the 
     Commission shall submit to the President and the Congress a 
     final report containing a detailed statement of its findings, 
     together with any recommendations for legislation or 
     administrative action that the Commission considers 
     appropriate, in accordance with the requirements of section 
     5.
       (b) Considerations.--In developing any recommendations 
     under subsection (a), the Commission shall consider--
       (1) the catastrophic insurance and reinsurance market 
     structures and the relevant commercial practices in such 
     insurance industries in providing insurance protection to 
     different sectors of the American population;
       (2) the constraints and opportunities in implementing a 
     catastrophic insurance system that can resolve key obstacles 
     currently impeding broader implementation of catastrophe risk 
     management and financing with insurance;
       (3) methods to improve risk underwriting practices, 
     including--
       (A) analysis of modalities of risk transfer for potential 
     financial losses;
       (B) assessment of private securitization of insurances 
     risks;
       (C) private-public partnerships to increase insurance 
     capacity in constrained markets; and
       (D) the financial feasibility and sustainability of a 
     national catastrophe pool or regional catastrophe pools 
     designed to provide adequate insurance coverage and increased 
     underwriting capacity to insurers and reinsurers;
       (4) approaches for implementing a public insurance scheme 
     for low-income communities, in order to promote risk 
     reduction and explicit insurance coverage in such 
     communities;
       (5) methods to strengthen insurance regulatory requirements 
     and supervision of such requirements, including solvency for 
     catastrophic risk reserves;
       (6) methods to promote public insurance policies linked to 
     programs for loss reduction in the uninsured sectors of the 
     American population;
       (7) methods to strengthen the risk assessment and 
     enforcement of structural mitigation and vulnerability 
     reduction measures, such as zoning and building code 
     compliance;
       (8) the appropriate role for the Federal Government in 
     stabilizing the property and casualty insurance and 
     reinsurance markets, with an analysis--
       (A) of options such as--
       (i) a reinsurance mechanism;
       (ii) the modernization of Federal taxation policies; and
       (iii) an ``insurance of last resort'' mechanism; and
       (B) how to fund such options; and
       (9) the merits of the 3 principle legislative proposals 
     currently pending in the 109th Congress, namely:
       (A) The creation of a Federal catastrophe fund to act as a 
     backup to State catastrophe funds;
       (B) Tax-deferred catastrophe accounts for insurers; and
       (C) Tax-free catastrophe accounts for policyholders.

     SEC. 7. POWERS OF THE COMMISSION.

       (a) Hearings.--The Commission or, at the direction of the 
     Commission, any subcommittee or member of the Commission, 
     may, for the purpose of carrying out this Act--
       (1) hold such public hearings in such cities and countries, 
     sit and act at such times and places, take such testimony, 
     receive such evidence, and administer such oaths or 
     affirmations as the Commission or such subcommittee or member 
     considers advisable; and
       (2) require, by subpoena or otherwise, the attendance and 
     testimony of such witnesses and the production of such books, 
     records, correspondence, memoranda, papers, documents, tapes, 
     and materials as the Commission or such subcommittee or 
     member considers advisable.
       (b) Issuance and Enforcement of Subpoenas.--
       (1) Issuance.--Subpoenas issued under subsection (a) shall 
     bear the signature of the Chairperson of the Commission and 
     shall be served by any person or class of persons designated 
     by the Chairperson for that purpose.
       (2) Enforcement.--In the case of contumacy or failure to 
     obey a subpoena issued under subsection (a), the United 
     States district court for the judicial district in which the 
     subpoenaed person resides, is served, or may be found may 
     issue an order requiring such person to appear at any 
     designated place to testify or to produce documentary or 
     other evidence. Any failure to obey the order of the court 
     may be punished by the court as a contempt of that court.
       (3) Confidentiality.--
       (A) In general.--Information obtained under a subpoena 
     issued under subsection (a) which is deemed confidential, or 
     with reference to which a request for confidential treatment 
     is made by the person furnishing such information--
       (i) shall be exempt from disclosure under section 552 of 
     title 5, United States Code; and
       (ii) shall not be published or disclosed unless the 
     Commission determines that the withholding of such 
     information is contrary to the interest of the United States.
       (B) Exception.--The requirements of subparagraph (A) shall 
     not apply to the publication or disclosure of any data 
     aggregated in a manner that ensures protection of the 
     identity of the person furnishing such data.
       (c) Authority of Members or Agents of the Commission.--Any 
     member or agent of the Commission may, if authorized by the 
     Commission, take any action which the Commission is 
     authorized to take by this Act.
       (d) Obtaining Official Data.--
       (1) Authority.--Notwithstanding any provision of section 
     552a of title 5, United States Code, the Commission may 
     secure directly from any department or agency of the United 
     States any information necessary to enable the Commission to 
     carry out the purposes of this Act.
       (2) Procedure.--Upon request of the Chairperson of the 
     Commission, the head of that department or agency shall 
     furnish the information requested to the Commission.
       (e) Postal Services.--The Commission may use the United 
     States mails in the same manner and under the same conditions 
     as other departments and agencies of the Federal Government.
       (f) Administrative Support Services.--Upon the request of 
     the Commission, the Administrator of General Services shall 
     provide to the Commission, on a reimbursable basis, any 
     administrative support services necessary for the Commission 
     to carry out its responsibilities under this Act.
       (g) Gifts.--
       (1) In general.--The Commission may accept, use, and 
     dispose of gifts or donations of services or property.
       (2) Regulations.--The Commission shall adopt internal 
     regulations governing the receipt of gifts or donations of 
     services or property similar to those described in part 2601 
     of title 5, Code of Federal Regulations.

     SEC. 8. COMMISSION PERSONNEL MATTERS.

       (a) Compensation of Members.--Each member of the Commission 
     who is not an officer or employee of the Federal Government 
     shall be compensated at a rate equal to the daily equivalent 
     of the annual rate of basic pay prescribed for GS-18 of the 
     General Schedule under section 5332 of title 5, United States 
     Code, for each day (including travel time) during which such 
     member is engaged in the performance of the duties of the 
     Commission. All members of the Commission who are officers or 
     employees of the United States shall serve without 
     compensation in addition to that received for their services 
     as officers or employees of the United States.
       (b) Travel Expenses.--The members of the Commission shall 
     be allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Commission.
       (c) Subcommittees.--The Commission may establish 
     subcommittees and appoint persons to such subcommittees as 
     the Commission considers appropriate.
       (d) Staff.--Subject to such policies as the Commission may 
     prescribe, the Chairperson of the Commission may appoint and 
     fix the pay of such additional personnel as the Chairperson 
     considers appropriate to carry out the duties of the 
     Commission.
       (e) Applicability of Certain Civil Service Laws.--
     Subcommittee members and staff of the Commission may be--
       (1) appointed without regard to the provisions of title 5, 
     United States Code, governing appointments in the competitive 
     service; and
       (2) paid without regard to the provisions of chapter 51 and 
     subchapter III of chapter 53 of that title relating to 
     classification and General Schedule pay rates, except that an 
     individual so appointed may not receive pay in excess of the 
     annual rate of basic pay prescribed for GS-18 of the General 
     Schedule under section 5332 of that title.
       (f) Experts and Consultants.--In carrying out its 
     objectives, the Commission may procure temporary and 
     intermittent services of consultants and experts under 
     section 3109(b) of title 5, United States Code, at rates for 
     individuals which do not exceed the daily equivalent of the 
     annual rate of basic pay prescribed for GS-18 of the General 
     Schedule under section 5332 of that title.
       (g) Detail of Government Employees.--Upon request of the 
     Chairperson of the Commission, any Federal Government 
     employee may be detailed to the Commission to assist in 
     carrying out the duties of the Commission--
       (1) on a reimbursable basis; and
       (2) such detail shall be without interruption or loss of 
     civil service status or privilege.

[[Page 9649]]



     SEC. 9. TERMINATION.

       The Commission shall terminate 60 days after the date on 
     which the Commission submits its report under section 6.

     SEC. 10. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated $5,000,000 to carry 
     out the purposes of this Act.

  Ms. LANDRIEU. Mr. President, one of the most frequent complaints I 
have been hearing from people in Louisiana whose homes sustained damage 
in Katrina and Rita has been about their property insurance. First, it 
took insurance companies a long time to get adjusters into the area 
after the storm and many people are still waiting for claim payments. 
This was followed by the shock for many of our homeowners that their 
property insurance policies covered wind damage, but not flood damage. 
They could get the roof replaced, but the rest of the house was lost. 
Many of them were not required to have flood insurance because they 
either did not live in a flood plain or did not have a mortgage. And 
now we are beginning to discover that many insurance companies are no 
longer writing policies in Louisiana.
  Our homeowners weathered one, and in some cases two, hurricanes 
already. However, now it's as if our homeowners have been hit by 
another hurricane--one causing a flood of red ink, lost homes, ruined 
lives, and broken communities.
  I hope we never see another storm like Katrina. I would not want any 
of my colleagues' states to face the one-two punch of two hurricanes 
the way Louisiana was. But hurricane season is coming again, starting 
next week on June 1. These insurance issues and problems are going to 
come again. We can rebuild levees and use the lessons of Katrina to 
better prepare for these storms, but finding a solution to this 
insurance issue is much harder.
  First of all, insurance is regulated at the State level. We do not 
control it up here. In all fairness, property casualty insurance 
companies do not cover flood damage because that is covered by the 
National Flood Insurance Program at FEMA. But the potential for 
flooding from hurricanes still remains and our insurance system is not 
ready to handle the amount of uninsured damage a massive storm like 
Katrina.
  I am pleased to join my colleague from Florida, Senator Nelson, as a 
cosponsor of the Commission on Catastrophic Disaster Risk and Insurance 
Act of 2006. This bill will not produce major changes in the insurance 
industry overnight, but it will begin to take a look at this issue to 
identify the best solution to ensuring that home and business owners 
will have insurance coverage to help them rebuild after catastrophic 
natural disasters.
  The commission established by this legislation will take the first 
steps for assessing the casualty insurance market and recommend any 
necessary legislative changes to ensure that consumers will have 
readily available and affordable insurance coverage to protect them 
from natural disasters. Experts from a wide variety of fields in 
disaster preparedness, construction engineering, the insurance 
industry, and government will serve on the commission. While the 
members will be chosen on a bipartisan basis, they will be taking a 
nonpartisan approach to this subject.
  I urge my colleagues to support this legislation. It is a first 
step--a modest step--toward ensuring the financial security of 
Americans in the face of catastrophic disasters.
                                 ______
                                 
      By Mr. NELSON of Florida:
  S. 3115. A bill to amend the Internal Revenue Code of 1986 to create 
Catastrophe Savings Accounts; to the Committee on Finance.

                                S. 3115

       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 ``Catastrophe Savings Accounts 
     Act of 2006''.

     SEC. 2. CATASTROPHE SAVINGS ACCOUNTS.

       (a) In General.--Subchapter F of Chapter 1 of the Internal 
     Revenue Code of 1986 (relating to exempt organizations) is 
     amended by adding at the end the following new part:

                ``PART IX--CATASTROPHE SAVINGS ACCOUNTS

     ``SEC. 530A. CATASTROPHE SAVINGS ACCOUNTS.

       ``(a) General Rule.--A Catastrophe Savings Account shall be 
     exempt from taxation under this subtitle. Notwithstanding the 
     preceding sentence, such account shall be subject to the 
     taxes imposed by section 511 (relating to imposition of tax 
     on unrelated business income of charitable organizations).
       ``(b) Catastrophe Savings Account.--For purposes of this 
     section, the term `Catastrophe Savings Account' means a trust 
     created or organized in the United States for the exclusive 
     benefit of an individual or his beneficiaries and which is 
     designated (in such manner as the Secretary shall prescribe) 
     at the time of the establishment of the trust as a 
     Catastrophe Savings Account, but only if the written 
     governing instrument creating the trust meets the following 
     requirements:
       ``(1) Except in the case of a qualified rollover 
     contribution--
       ``(A) no contribution will be accepted unless it is in 
     cash, and
       ``(B) contributions will not be accepted in excess of the 
     account balance limit specified in subsection (c).
       ``(2) The trustee is a bank (as defined in section 408(n)) 
     or another person who demonstrates to the satisfaction of the 
     Secretary that the manner in which that person will 
     administer the trust will be consistent with the requirements 
     of this section.
       ``(3) The interest of an individual in the balance of his 
     account is nonforfeitable.
       ``(4) The assets of the trust shall not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(c) Account Balance Limit.--The aggregate account balance 
     for all Catastrophe Savings Accounts maintained for the 
     benefit of an individual (including qualified rollover 
     contributions) shall not exceed--
       ``(1) in the case of an individual whose qualified 
     deductible is not more than $1,000, $2,000, and
       ``(2) in the case of an individual whose qualified 
     deductible is more than $1,000, the amount equal to the 
     lesser of--
       ``(A) $15,000, or
       ``(B) twice the amount of the individual's qualified 
     deductible.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified catastrophe expenses.--The term `qualified 
     catastrophe expenses' means expenses paid or incurred by 
     reason of a major disaster that has been declared by the 
     President under section 401 of the Robert T. Stafford 
     Disaster Relief and Emergency Assistance Act.
       ``(2) Qualified deductible.--With respect to an individual, 
     the term `qualified deductible' means the annual deductible 
     for the individual's homeowners' insurance policy.
       ``(3) Qualified rollover contribution.--The term `qualified 
     rollover contribution' means a contribution to a Catastrophe 
     Savings Account--
       ``(A) from another such account of the same beneficiary, 
     but only if such amount is contributed not later than the 
     60th day after the distribution from such other account, and
       ``(B) from a Catastrophe Savings Account of a spouse of the 
     beneficiary of the account to which the contribution is made, 
     but only if such amount is contributed not later than the 
     60th day after the distribution from such other account.
       ``(e) Tax Treatment of Distributions.--
       ``(1) In general.--Any distribution from a Catastrophe 
     Savings Account shall be includible in the gross income of 
     the distributee in the manner as provided in section 72.
       ``(2) Distributions for qualified catastrophe expenses.--
       ``(A) In general.--No amount shall be includible in gross 
     income under paragraph (1) if the qualified catastrophe 
     expenses of the distributee during the taxable year are not 
     less than the aggregate distributions during the taxable 
     year.
       ``(B) Distributions in excess of expenses.--If such 
     aggregate distributions exceed such expenses during the 
     taxable year, the amount otherwise includible in gross income 
     under paragraph (1) shall be reduced by the amount which 
     bears the same ratio to the amount which would be includible 
     in gross income under paragraph (1) (without regard to this 
     subparagraph) as the qualified catastrophe expenses bear to 
     such aggregate distributions.
       ``(3) Additional tax for distributions not used for 
     qualified catastrophe expenses.--The tax imposed by this 
     chapter for any taxable year on any taxpayer who receives a 
     payment or distribution from a Catastrophe Savings Account 
     which is includible in gross income shall be increased by 10 
     percent of the amount which is so includible.
       ``(4) Retirement distributions.--No amount shall be 
     includible in gross income under paragraph (1) (or subject to 
     an additional tax under paragraph (3)) if the payment or 
     distribution is made on or after the date on which the 
     distributee attains age 62.
       ``(f) Tax Treatment of Accounts.--Rules similar to the 
     rules of paragraphs (2) and (4) of section 408(e) shall apply 
     to any Catastrophe Savings Account.''.
       (b) Tax on Excess Contributions.--
       (1) In general.--Subsection (a) of section 4973 of the 
     Internal Revenue Code of 1986 (relating to tax on excess 
     contributions to certain tax-favored accounts and annuities) 
     is

[[Page 9650]]

     amended by striking ``or'' at the end of paragraph (4), by 
     inserting ``or'' at the end of paragraph (5), and by 
     inserting after paragraph (5) the following new paragraph:
       ``(6) a Catastrophe Savings Account (as defined in section 
     530A),''.
       (2) Excess contribution.--Section 4973 of such Code is 
     amended by adding at the end the following new subsection:
       ``(h) Excess Contributions to Catastrophe Savings 
     Accounts.--For purposes of this section, in the case of 
     Catastrophe Savings Accounts (within the meaning of section 
     530A), the term `excess contributions' means the amount by 
     which the aggregate account balance for all Catastrophe 
     Savings Accounts maintained for the benefit of an individual 
     exceeds the account balance limit defined in section 
     530A(c)(1).''.
       (c) Conforming Amendment.--The table of parts for 
     subchapter F of chapter 1 of the Internal Revenue Code of 
     1986 is amended by adding at the end the following new item:

               ``Part IX. Catastrophe Savings Accounts''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.
                                 ______
                                 
      By Mr. NELSON of Florida:
  S. 3116. A bill to amend the Internal Revenue Code of 1986 to provide 
for the creation of disaster protection funds by property and casualty 
insurance companies for the payment of policyholders' claims arising 
from future catastrophic events; to the Committee on Finance.

                                S. 3116

       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 ``Policyholder Disaster 
     Protection Act of 2006''.

     SEC. 2. FINDINGS.

       The Congress makes the following findings:
       (1) Rising costs resulting from natural disasters are 
     placing an increasing strain on the ability of property and 
     casualty insurance companies to assure payment of homeowners' 
     claims and other insurance claims arising from major natural 
     disasters now and in the future.
       (2) Present tax laws do not provide adequate incentives to 
     assure that natural disaster insurance is provided or, where 
     such insurance is provided, that funds are available for 
     payment of insurance claims in the event of future 
     catastrophic losses from major natural disasters, as present 
     law requires an insurer wishing to accumulate surplus assets 
     for this purpose to do so entirely from its after-tax 
     retained earnings.
       (3) Revising the tax laws applicable to the property and 
     casualty insurance industry to permit carefully controlled 
     accumulation of pretax dollars in separate reserve funds 
     devoted solely to the payment of claims arising from future 
     major natural disasters will provide incentives for property 
     and casualty insurers to make natural disaster insurance 
     available, will give greater protection to the Nation's 
     homeowners, small businesses, and other insurance consumers, 
     and will help assure the future financial health of the 
     Nation's insurance system as a whole.
       (4) Implementing these changes will reduce the possibility 
     that a significant portion of the private insurance system 
     would fail in the wake of a major natural disaster and that 
     governmental entities would be required to step in to provide 
     relief at taxpayer expense.

     SEC. 3. CREATION OF POLICYHOLDER DISASTER PROTECTION FUNDS; 
                   CONTRIBUTIONS TO AND DISTRIBUTIONS FROM FUNDS; 
                   OTHER RULES.

       (a) Contributions to Policyholder Disaster Protection 
     Funds.--Subsection (c) of section 832 of the Internal Revenue 
     Code of 1986 (relating to the taxable income of insurance 
     companies other than life insurance companies) is amended by 
     striking ``and'' at the end of paragraph (12), by striking 
     the period at the end of paragraph (13) and inserting ``; 
     and'', and by adding at the end the following new paragraph:
       ``(14) the qualified contributions to a policyholder 
     disaster protection fund during the taxable year.''.
       (b) Distributions From Policyholder Disaster Protection 
     Funds.--Paragraph (1) of section 832(b) of such Code is 
     amended by striking ``and'' at the end of subparagraph (D), 
     by striking the period at the end of subparagraph (E) and 
     inserting ``, and'', and by adding at the end the following 
     new subparagraph:
       ``(F) the amount of any distributions from a policyholder 
     disaster protection fund during the taxable year, except that 
     a distribution made to return to the qualified insurance 
     company any contribution which is not a qualified 
     contribution (as defined in subsection (h)) for a taxable 
     year shall not be included in gross income if such 
     distribution is made prior to the filing of the tax return 
     for such taxable year.''.
       (c) Definitions and Other Rules Relating to Policyholder 
     Disaster Protection Funds.--Section 832 of such Code 
     (relating to insurance company taxable income) is amended by 
     adding at the end the following new subsection:
       ``(h) Definitions and Other Rules Relating to Policyholder 
     Disaster Protection Funds.--For purposes of this section--
       ``(1) Policyholder disaster protection fund.--The term 
     `policyholder disaster protection fund' (hereafter in this 
     subsection referred to as the `fund') means any custodial 
     account, trust, or any other arrangement or account--
       ``(A) which is established to hold assets that are set 
     aside solely for the payment of qualified losses, and
       ``(B) under the terms of which--
       ``(i) the assets in the fund are required to be invested in 
     a manner consistent with the investment requirements 
     applicable to the qualified insurance company under the laws 
     of its jurisdiction of domicile,
       ``(ii) the net income for the taxable year derived from the 
     assets in the fund is required to be distributed no less 
     frequently than annually,
       ``(iii) an excess balance drawdown amount is required to be 
     distributed to the qualified insurance company no later than 
     the close of the taxable year following the taxable year for 
     which such amount is determined,
       ``(iv) a catastrophe drawdown amount may be distributed to 
     the qualified insurance company if distributed prior to the 
     close of the taxable year following the year for which such 
     amount is determined,
       ``(v) a State required drawdown amount may be distributed, 
     and
       ``(vi) no distributions from the fund are required or 
     permitted other than the distributions described in clauses 
     (ii) through (v) and the return to the qualified insurance 
     company of contributions that are not qualified 
     contributions.
       ``(2) Qualified insurance company.--The term `qualified 
     insurance company' means any insurance company subject to tax 
     under section 831(a).
       ``(3) Qualified contribution.--The term `qualified 
     contribution' means a contribution to a fund for a taxable 
     year to the extent that the amount of such contribution, when 
     added to the previous contributions to the fund for such 
     taxable year, does not exceed the excess of--
       ``(A) the fund cap for the taxable year, over
       ``(B) the fund balance determined as of the close of the 
     preceding taxable year.
       ``(4) Excess balance drawdown amounts.--The term `excess 
     balance drawdown amount' means the excess (if any) of--
       ``(A) the fund balance as of the close of the taxable year, 
     over
       ``(B) the fund cap for the following taxable year.
       ``(5) Catastrophe drawdown amount.--
       ``(A) In general.--The term `catastrophe drawdown amount' 
     means an amount that does not exceed the lesser of the amount 
     determined under subparagraph (B) or (C).
       ``(B) Net losses from qualifying events.--The amount 
     determined under this subparagraph shall be equal to the 
     qualified losses for the taxable year determined without 
     regard to clause (ii) of paragraph (8)(A).
       ``(C) Gross losses in excess of threshold.--The amount 
     determined under this subparagraph shall be equal to the 
     excess (if any) of--
       ``(i) the qualified losses for the taxable year, over
       ``(ii) the lesser of--

       ``(I) the fund cap for the taxable year (determined without 
     regard to paragraph (9)(E)), or
       ``(II) 30 percent of the qualified insurance company's 
     surplus as regards policyholders as shown on the company's 
     annual statement for the calendar year preceding the taxable 
     year.

       ``(D) Special drawdown amount following a recent 
     catastrophe loss year.--If for any taxable year included in 
     the reference period the qualified losses exceed the amount 
     determined under subparagraph (C)(ii), the `catastrophe 
     drawdown amount' shall be an amount that does not exceed the 
     lesser of the amount determined under subparagraph (B) or the 
     amount determined under this subparagraph. The amount 
     determined under this subparagraph shall be an amount equal 
     to the excess (if any) of--
       ``(i) the qualified losses for the taxable year, over
       ``(ii) the lesser of--

       ``(I) \1/3\ of the fund cap for the taxable year 
     (determined without regard to paragraph (9)(E)), or
       ``(II) 10 percent of the qualified insurance company's 
     surplus as regards policyholders as shown on the company's 
     annual statement for the calendar year preceding the taxable 
     year.

       ``(E) Reference period.--For purposes of subparagraph (D), 
     the reference period shall be determined under the following 
     table:

The reference period
  shall be--in--
The 3 preceding taxable years. ........................................
The 2 preceding taxable years. ........................................
The preceding taxable year. ...........................................
No reference period applies............................................
       ``(6) State required drawdown amount.--The term `State 
     required drawdown amount' means any amount that the 
     department of insurance for the qualified insurance company's 
     jurisdiction of domicile requires to be distributed from the 
     fund, to the extent such amount is not otherwise described in 
     paragraph (4) or (5).

[[Page 9651]]

       ``(7) Fund balance.--The term `fund balance' means--
       ``(A) the sum of all qualified contributions to the fund,
       ``(B) less any net investment loss of the fund for any 
     taxable year or years, and
       ``(C) less the sum of all distributions under clauses (iii) 
     through (v) of paragraph (1)(B).
       ``(8) Qualified losses.--
       ``(A) In general.--The term `qualified losses' means, with 
     respect to a taxable year--
       ``(i) the amount of losses and loss adjustment expenses 
     incurred in the qualified lines of business specified in 
     paragraph (9), net of reinsurance, as reported in the 
     qualified insurance company's annual statement for the 
     taxable year, that are attributable to one or more qualifying 
     events (regardless of when such qualifying events occurred),
       ``(ii) the amount by which such losses and loss adjustment 
     expenses attributable to such qualifying events have been 
     reduced for reinsurance received and recoverable, plus
       ``(iii) any nonrecoverable assessments, surcharges, or 
     other liabilities that are borne by the qualified insurance 
     company and are attributable to such qualifying events.
       ``(B) Qualifying event.--For purposes of subparagraph (A), 
     the term `qualifying event' means any event that satisfies 
     clauses (i) and (ii).
       ``(i) Event.--An event satisfies this clause if the event 
     is 1 or more of the following:

       ``(I) Windstorm (hurricane, cyclone, or tornado).
       ``(II) Earthquake (including any fire following).
       ``(III) Winter catastrophe (snow, ice, or freezing).
       ``(IV) Fire.
       ``(V) Tsunami.
       ``(VI) Flood.
       ``(VII) Volcanic eruption.
       ``(VIII) Hail.

       ``(ii) Catastrophe designation.--An event satisfies this 
     clause if the event--

       ``(I) is designated a catastrophe by Property Claim 
     Services or its successor organization,
       ``(II) is declared by the President to be an emergency or 
     disaster, or
       ``(III) is declared to be an emergency or disaster in a 
     similar declaration by the chief executive official of a 
     State, possession, or territory of the United States, or the 
     District of Columbia.

       ``(9) Fund cap.--
       ``(A) In general.--The term `fund cap' for a taxable year 
     is the sum of the separate lines of business caps for each of 
     the qualified lines of business specified in the table 
     contained in subparagraph (C) (as modified under 
     subparagraphs (D) and (E)).
       ``(B) Separate lines of business cap.--For purposes of 
     subparagraph (A), the separate lines of business cap, with 
     respect to a qualified line of business specified in the 
     table contained in subparagraph (C), is the product of--
       ``(i) net written premiums reported in the annual statement 
     for the calendar year preceding the taxable year in such line 
     of business, multiplied by
       ``(ii) the fund cap multiplier applicable to such qualified 
     line of business.
       ``(C) Qualified lines of business and their respective fund 
     cap multipliers.--For purposes of this paragraph, the 
     qualified lines of business and fund cap multipliers 
     specified in this subparagraph are those specified in the 
     following table:

    ``Line of Business on Annual                               Fund Cap
        Statement Blank:                                    Multiplier:
      Fire...................................................... 0.25  
      Allied.................................................... 1.25  
      Farmowners Multiple Peril................................. 0.25  
      Homeowners Multiple Peril................................. 0.75  
      Commercial Multi Peril (non-liability portion)............ 0.50  
      Earthquake................................................13.00  
      Inland Marine............................................ 0.25.  
       ``(D) Subsequent modifications of the annual statement 
     blank.--If, with respect to any taxable year beginning after 
     the effective date of this subsection, the annual statement 
     blank required to be filed is amended to replace, combine, or 
     otherwise modify any of the qualified lines of business 
     specified in subparagraph (C), then for such taxable year 
     subparagraph (C) shall be applied in a manner such that the 
     fund cap shall be the same amount as if such reporting 
     modification had not been made.
       ``(E) 20-year phase-in.--Notwithstanding subparagraph (C), 
     the fund cap for a taxable year shall be the amount 
     determined under subparagraph (C), as adjusted pursuant to 
     subparagraph (D) (if applicable), multiplied by the phase-in 
     percentage indicated in the following table:

------------------------------------------------------------------------
                                                              Phase-in
                                                           percentage to
                                                           be applied to
                                                              fund cap
               ``Taxable year beginning in:                   computed
                                                               under
                                                           subparagraphs
                                                            (A) and (B):
------------------------------------------------------------------------
2006.....................................................      5 percent
2007.....................................................     10 percent
2008.....................................................     15 percent
2009.....................................................     20 percent
2010.....................................................     25 percent
2011.....................................................     30 percent
2012.....................................................     35 percent
2013.....................................................     40 percent
2014.....................................................     45 percent
2015.....................................................     50 percent
2016.....................................................     55 percent
2017.....................................................     60 percent
2018.....................................................     65 percent
2019.....................................................     70 percent
2020.....................................................     75 percent
2021.....................................................     80 percent
2022.....................................................     85 percent
2023.....................................................     90 percent
2024.....................................................     95 percent
2025 and later...........................................    100 percent
------------------------------------------------------------------------

       ``(10) Treatment of investment income and gain or loss.--
       ``(A) Contributions in kind.--A transfer of property other 
     than money to a fund shall be treated as a sale or exchange 
     of such property for an amount equal to its fair market value 
     as of the date of transfer, and appropriate adjustment shall 
     be made to the basis of such property. Section 267 shall 
     apply to any loss realized upon such a transfer.
       ``(B) Distributions in kind.--A transfer of property other 
     than money by a fund to the qualified insurance company shall 
     not be treated as a sale or exchange or other disposition of 
     such property. The basis of such property immediately after 
     such transfer shall be the greater of the basis of such 
     property immediately before such transfer or the fair market 
     value of such property on the date of such transfer.
       ``(C) Income with respect to fund assets.--Items of income 
     of the type described in paragraphs (1)(B), (1)(C), and (2) 
     of subsection (b) that are derived from the assets held in a 
     fund, as well as losses from the sale or other disposition of 
     such assets, shall be considered items of income, gain, or 
     loss of the qualified insurance company. Notwithstanding 
     paragraph (1)(F) of subsection (b), distributions of net 
     income to the qualified insurance company pursuant to 
     paragraph (1)(B)(ii) of this subsection shall not cause such 
     income to be taken into account a second time.
       ``(11) Net income; net investment loss.--For purposes of 
     paragraph (1)(B)(ii), the net income derived from the assets 
     in the fund for the taxable year shall be the items of income 
     and gain for the taxable year, less the items of loss for the 
     taxable year, derived from such assets, as described in 
     paragraph (10)(C). For purposes of paragraph (7), there is a 
     net investment loss for the taxable year to the extent that 
     the items of loss described in the preceding sentence exceed 
     the items of income and gain described in the preceding 
     sentence.
       ``(12) Annual statement.--For purposes of this subsection, 
     the term `annual statement' shall have the meaning set forth 
     in section 846(f)(3).
       ``(13) Exclusion of premiums and losses on certain puerto 
     rican risks.--Notwithstanding any other provision of this 
     subsection, premiums and losses with respect to risks covered 
     by a catastrophe reserve established under the laws or 
     regulations of the Commonwealth of Puerto Rico shall not be 
     taken into account under this subsection in determining the 
     amount of the fund cap or the amount of qualified losses.
       ``(14) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection, including regulations--
       ``(A) which govern the application of this subsection to a 
     qualified insurance company having a taxable year other than 
     the calendar year or a taxable year less than 12 months,
       ``(B) which govern a fund maintained by a qualified 
     insurance company that ceases to be subject to this part, and
       ``(C) which govern the application of paragraph (9)(D).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2005.
                                 ______
                                 
      By Mr. NELSON of Florida:
  S. 3117. A bill to establish a program to provide more protection at 
lower cost through a national backstop for State natural catastrophe 
insurance programs to help the United States better prepare for and 
protect its citizens against the ravages of natural catastrophes, to 
encourage and promote mitigation and prevention for, and recovery and 
rebuilding from such catastrophes, to better assist in the financial 
recovery and rebuilding from such catastrophes, and to develop a 
rigorous process of continuous improvement; to the Commitment on 
Banking, Housing, and Urban Affairs.

                                S. 3117

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Homeowners 
     Protection Act of 2006''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.

[[Page 9652]]

Sec. 2. Congressional findings.
Sec. 3. National Commission on Catastrophe Preparation and Protection.
Sec. 4. Program authority.
Sec. 5. Qualified lines of coverage.
Sec. 6. Covered perils.
Sec. 7. Contracts for reinsurance coverage for eligible State programs.
Sec. 8. Minimum level of retained losses and maximum Federal liability.
Sec. 9. Consumer Hurricane, Earthquake, Loss Protection (HELP) Fund.
Sec. 10. Regulations.
Sec. 11. Termination.
Sec. 12. Annual study concerning benefits of the Act.
Sec. 13. GAO study of the National Flood Insurance Program and 
              hurricane-related flooding.
Sec. 14. Definitions.

     SEC. 2. FINDINGS.

       Congress finds that--
       (1) America needs to take steps to be better prepared for 
     and better protected from catastrophes;
       (2) the hurricane seasons of 2004 and 2005 are startling 
     reminders of both the human and economic devastation that 
     hurricanes, flooding, and other natural disasters can cause;
       (3) if a repeat of the deadly 1900 Galveston hurricane 
     occurred again it could cause thousands of deaths and over 
     $36,000,000,000 in loss;
       (4) if the 1906 San Francisco earthquake occurred again it 
     could cause thousands of deaths, displace millions of 
     residents, destroy thousands of businesses, and cause over 
     $400,000,000,000 in loss;
       (5) if a Category 5 hurricane were to hit Miami it could 
     cause thousands of deaths and over $50,000,000,000 in loss 
     and devastate the local and national economy;
       (6) if a repeat of the 1938 ``Long Island Express'' were to 
     occur again it could cause thousands of deaths and over 
     $30,000,000,000 in damage, and if a hurricane that strong 
     were to directly hit Manhattan it could cause over 
     $150,000,000,000 in damage and cause irreparable harm to our 
     Nation's economy;
       (7) a more comprehensive and integrated approach to dealing 
     with catastrophes is needed;
       (8) using history as a guide, natural catastrophes will 
     inevitably place a tremendous strain on homeowners' insurance 
     markets in many areas, will raise costs for consumers, and 
     will jeopardize the ability of many consumers to adequately 
     insure their homes and possessions;
       (9) the lack of sufficient insurance capacity and the 
     inability of private insurers to build enough capital, in a 
     short amount of time, threatens to increase the number of 
     uninsured homeowners, which, in turn, increases the risk of 
     mortgage defaults and the strain on the Nation's banking 
     system;
       (10) some States have exercised leadership through 
     reasonable action to ensure the continued availability and 
     affordability of homeowners' insurance for all residents;
       (11) it is appropriate that efforts to improve insurance 
     availability be designed and implemented at the State level;
       (12) while State insurance programs may be adequate to 
     cover losses from most natural disasters, a small percentage 
     of events is likely to exceed the financial capacity of these 
     programs and the local insurance markets;
       (13) a limited national insurance backstop will improve the 
     effectiveness of State insurance programs and private 
     insurance markets and will increase the likelihood that 
     homeowners' insurance claims will be fully paid in the event 
     of a large natural catastrophe and that routine claims that 
     occur after a mega-catastrophe will also continue to be paid;
       (14) it is necessary to provide a national insurance 
     backstop program that will provide more protection at an 
     overall lower cost and that will promote stability in the 
     homeowners' insurance market;
       (15) it is the proper role of the Federal Government to 
     prepare for and protect its citizens from catastrophes and to 
     facilitate consumer protection, victim assistance, and 
     recovery, including financial recovery; and
       (16) any Federal reinsurance program must be founded upon 
     sound actuarial principles and priced in a manner that 
     encourages the creation of State funds and maximizes the 
     buying potential of these State funds and encourages and 
     promotes prevention and mitigation, recovery and rebuilding, 
     and consumer education, and emphasizes continuous analysis 
     and improvement.

     SEC. 3. NATIONAL COMMISSION ON CATASTROPHE PREPARATION AND 
                   PROTECTION.

       (a) Establishment.--The Secretary of the Treasury shall 
     establish a commission to be known as the National Commission 
     on Catastrophe Preparation and Protection.
       (b) Duties.--The Commission shall meet for the purpose of 
     advising the Secretary regarding the estimated loss costs 
     associated with the contracts for reinsurance coverage 
     available under this Act and carrying out the functions 
     specified in this Act, including--
       (1) the development and implementation of public education 
     concerning the risks posed by natural catastrophes;
       (2) the development and implementation of prevention, 
     mitigation, recovery, and rebuilding standards that better 
     prepare and protect the United States from catastrophes; and
       (3) conducting continuous analysis of the effectiveness of 
     this Act and recommending improvements to the Congress so 
     that--
       (A) the costs of providing catastrophe protection are 
     decreased; and
       (B) the United States is better prepared.
       (c) Members.--
       (1) Appointment and qualification.--The Commission shall 
     consist of 9 members, as follows:
       (A) Homeland security member.--The Secretary of Homeland 
     Security or the Secretary's designee.
       (B) Appointed members.--8 members appointed by the 
     Secretary, who shall consist of--
       (i) 1 individual who is an actuary;
       (ii) 1 individual who is employed in engineering;
       (iii) 1 individual representing the scientific community;
       (iv) 1 individual representing property and casualty 
     insurers;
       (v) 1 individual representing reinsurers;
       (vi) 1 individual who is a member or former member of the 
     National Association of Insurance Commissioners; and
       (vii) 2 individuals who are consumers.
       (2) Prevention of conflicts of interest.--Members shall 
     have no personal or financial interest at stake in the 
     deliberations of the Commission.
       (d) Treatment of Non-Federal Members.--Each member of the 
     Commission who is not otherwise employed by the Federal 
     Government shall be considered a special Government employee 
     for purposes of sections 202 and 208 of title 18, United 
     States Code.
       (e) Experts and Consultants.--
       (1) In general.--The Commission may procure temporary and 
     intermittent services from individuals or groups recognized 
     as experts in the fields of meteorology, seismology, 
     vulcanlogy, geology, structural engineering, wind 
     engineering, and hydrology, and other fields, under section 
     3109(b) of title 5, United States Code, but at a rate not in 
     excess of the daily equivalent of the annual rate of basic 
     pay payable for level V of the Executive Schedule, for each 
     day during which the individual procured is performing such 
     services for the Commission.
       (2) Other experts.--The Commission may also procure, and 
     the Congress encourages the Commission to procure, experts 
     from universities, research centers, foundations, and other 
     appropriate organizations who could study, research, and 
     develop methods and mechanisms that could be utilized to 
     strengthen structures to better withstand the perils covered 
     by this Act.
       (f) Compensation.--
       (1) In general.--Each member of the Commission who is not 
     an officer or employee of the Federal Government shall be 
     compensated at a rate of basic pay payable for level V of the 
     Executive Schedule, for each day (including travel time) 
     during which such member is engaged in the performance of the 
     duties of the Commission.
       (2) Federal employees.--All members of the Commission who 
     are officers or employees of the United States shall serve 
     without compensation in addition to that received for their 
     services as officers or employees of the United States.
       (g) Obtaining Data.--
       (1) In general.--The Commission and the Secretary may 
     solicit loss exposure data and such other information as 
     either the Commission or the Secretary deems necessary to 
     carry out its responsibilities from governmental agencies and 
     bodies and organizations that act as statistical agents for 
     the insurance industry.
       (2) Obligation to keep confidential.--The Commission and 
     the Secretary shall take such actions as are necessary to 
     ensure that information that either deems confidential or 
     proprietary is disclosed only to authorized individuals 
     working for the Commission or the Secretary.
       (3) Failure to comply.--No State insurance or reinsurance 
     program may participate if any governmental agency within 
     that State has refused to provide information requested by 
     the Commission or the Secretary.
       (h) Funding.--
       (1) Authorization of appropriations.--There is authorized 
     to be appropriated--
       (A) $10,000,000 for fiscal year 2007 for the--
       (i) initial expenses in establishing the Commission; and
       (ii) initial activities of the Commission that cannot 
     timely be covered by amounts obtained pursuant to section 
     7(b)(6)(B)(iii), as determined by the Secretary;
       (B) such additional sums as may be necessary to carry out 
     subsequent activities of the Commission;
       (C) $10,000,000 for fiscal year 2007 for the initial 
     expenses of the Secretary in carrying out the program 
     authorized under section 4; and
       (D) such additional sums as may be necessary to carry out 
     subsequent activities of the Secretary under this Act.
       (2) Offset.--
       (A) Obtained from purchasers.--The Secretary shall provide, 
     to the maximum extent

[[Page 9653]]

     practicable, that an amount equal to any amount appropriated 
     under paragraph (1) is obtained from purchasers of 
     reinsurance coverage under this Act and deposited in the Fund 
     established under section 9.
       (B) Inclusion in pricing contracts.--Any offset obtained 
     under subparagraph (A) shall be obtained by inclusion of a 
     provision for the Secretary's and the Commission's expenses 
     incorporated into the pricing of the contracts for such 
     reinsurance coverage, pursuant to section 7(b)(6)(B)(iii).
       (i) Termination.--The Commission shall terminate upon the 
     effective date of the repeal under section 11(c).

     SEC. 4. PROGRAM AUTHORITY.

       (a) In General.--The Secretary, in consultation with the 
     Secretary of Homeland Security, shall carry out a program 
     under this Act to make homeowners protection coverage 
     available through contracts for reinsurance coverage under 
     section 7, which shall be made available for purchase only by 
     eligible State programs.
       (b) Purpose.--The program shall be designed to make 
     reinsurance coverage under this Act available--
       (1) to improve the availability and affordability of 
     homeowners' insurance for the purpose of facilitating the 
     pooling, and spreading the risk, of catastrophic financial 
     losses from natural catastrophes;
       (2) to improve the solvency and capacity of homeowners' 
     insurance markets;
       (3) to encourage the development and implementation of 
     mitigation, prevention, recovery, and rebuilding standards; 
     and
       (4) to recommend methods to continuously improve the way 
     the United States reacts and responds to catastrophes, 
     including improvements to the HELP Fund established under 
     section 9.
       (c) Contract Principles.--Under the program established 
     under this Act, the Secretary shall offer reinsurance 
     coverage through contracts with covered purchasers, which 
     contracts shall--
       (1) minimize the administrative costs of the Federal 
     Government; and
       (2) provide coverage based solely on insured losses within 
     a State for the eligible State program purchasing the 
     contract.

     SEC. 5. QUALIFIED LINES OF COVERAGE.

       Each contract for reinsurance coverage made available under 
     this Act shall provide insurance coverage against residential 
     property losses to--
       (1) homes (including dwellings owned under condominium and 
     cooperative ownership arrangements); and
       (2) the contents of apartment buildings.

     SEC. 6. COVERED PERILS.

       (a) In General.--Each contract for reinsurance coverage 
     made available under this Act shall cover losses insured or 
     reinsured by an eligible State program purchasing the 
     contract that are proximately caused by--
       (1) earthquakes;
       (2) perils ensuing from earthquakes, including fire and 
     tsunamis;
       (3) tropical cyclones having maximum sustained winds of at 
     least 74 miles per hour, including hurricanes and typhoons;
       (4) tornadoes;
       (5) volcanic eruptions;
       (6) catastrophic winter storms; and
       (7) any other natural catastrophe peril (not including any 
     flood) insured or reinsured under the eligible State program 
     for which reinsurance coverage under section 7 is provided.
       (b) Rulemaking.--The Secretary shall, by regulation, define 
     the natural catastrophe perils described in subsection 
     (a)(7).

     SEC. 7. CONTRACTS FOR REINSURANCE COVERAGE FOR ELIGIBLE STATE 
                   PROGRAMS.

       (a) Eligible State Programs.--A program shall be eligible 
     to purchase a contract under this section for reinsurance 
     coverage under this Act only if the State entity authorized 
     to make such determinations certifies to the Secretary that 
     the program complies with the following requirements:
       (1) Program design.--The program shall be a State-
     operated--
       (A) insurance program that--
       (i) offers coverage for--

       (I) homes (which may include dwellings owned under 
     condominium and cooperative ownership arrangements); and
       (II) the contents of apartments to State residents; and

       (ii) is authorized by State law; or
       (B) reinsurance program that is designed to improve private 
     insurance markets that offer coverage for--
       (i) homes (which may include dwellings owned under 
     condominium and cooperative ownership arrangements); and
       (ii) the contents of apartments.
       (2) Operation.--
       (A) In general.--The program shall meet the following 
     requirements:
       (i) A majority of the members of the governing body of the 
     program shall be public officials.
       (ii) The State shall have a financial interest in the 
     program, which shall not include a program authorized by 
     State law or regulation that requires insurers to pool 
     resources to provide property insurance coverage for covered 
     perils.
       (iii) The State shall not be eligible for Consumer HELP 
     Fund assistance under section 9 if a State has appropriated 
     money from the State fund and not paid it back to the State 
     fund, with interest.
       (iv) Upon receipt of assistance from the Consumer HELP 
     Fund, each reimbursement contract sold by a State shall 
     provide for reimbursements at 100 percent of eligible losses.
       (v) A State shall be required to utilize either--

       (I) an open rating system that permits insurers to set 
     homeowners' insurance rates without prior approval of the 
     State; or
       (II) a rate approval process that requires actuarially 
     sound, risk-based, self-sufficient homeowners' insurance 
     rates.

       (B) Certification.--A State shall not be eligible for 
     Consumer HELP Fund assistance unless the Secretary can 
     certify that such State is in compliance with the requirement 
     described in clause (v).
       (3) Tax status.--The program shall be structured and 
     carried out in a manner so that the program is exempt from 
     all Federal taxation.
       (4) Coverage.--The program shall cover perils enumerated in 
     section 6.
       (5) Earnings.--The program may not provide for, nor shall 
     have ever made, any redistribution of any part of any net 
     profits of the program to any insurer that participates in 
     the program.
       (6) Prevention and mitigation.--
       (A) In general.--The program shall include prevention and 
     mitigation provisions that require that not less $10,000,000 
     and not more than 35 percent of the net investment income of 
     the State insurance or reinsurance program be used for 
     programs to mitigate losses from natural catastrophes for 
     which the State insurance or reinsurance program was 
     established.
       (B) Rule of construction.--For purposes of this paragraph, 
     prevention and mitigation shall include methods to reduce 
     losses of life and property, including appropriate measures 
     to adequately reflect--
       (i) encouragement of awareness about the risk factors and 
     what can be done to eliminate or reduce them;
       (ii) location of the risk, by giving careful consideration 
     of the natural risks for the location of the property before 
     allowing building and considerations if structures are 
     allowed; and
       (iii) construction relative to the risk and hazards, which 
     act upon--

       (I) State mandated building codes appropriate for the risk;
       (II) adequate enforcement of the risk-appropriate building 
     codes;
       (III) building materials that prevent or significantly 
     lessen potential damage from the natural catastrophes;
       (IV) building methods that prevent or significantly lessen 
     potential damage from the natural catastrophes; and
       (V) a focus on prevention and mitigation for any 
     substantially damaged structure, with an emphasis on how 
     structures can be retrofitted so as to make them building 
     code compliant.

       (7) Requirements regarding coverage.--
       (A) In general.--The program--
       (i) may not, except for charges or assessments related to 
     post-event financing or bonding, involve cross-subsidization 
     between any separate property and casualty lines covered 
     under the program unless the elimination of such activity in 
     an existing program would negatively impact the eligibility 
     of the program to purchase a contract for reinsurance 
     coverage under this Act pursuant to paragraph (3);
       (ii) shall include provisions that authorize the State 
     insurance commissioner or other State entity authorized to 
     make such a determination to terminate the program if the 
     insurance commissioner or other such entity determines that 
     the program is no longer necessary to ensure the availability 
     of homeowners' insurance for all residents of the State; and
       (iii) shall provide that, for any insurance coverage for 
     homes (which may include dwellings owned under condominium 
     and cooperative ownership arrangements) and the contents of 
     apartments that is made available under the State insurance 
     program and for any reinsurance coverage for such insurance 
     coverage made available under the State reinsurance program, 
     the premium rates charged shall be amounts that, at a 
     minimum, are sufficient to cover the full actuarial costs of 
     such coverage, based on consideration of the risks involved 
     and accepted actuarial and rate making principles, 
     anticipated administrative expenses, and loss and loss-
     adjustment expenses.
       (B) Applicability.--This paragraph shall apply--
       (i) before the expiration of the 2-year period beginning on 
     the date of the enactment of this Act, only to State programs 
     which, after January 1, 2007, commence offering insurance or 
     reinsurance coverage described in subparagraph (A) or (B), 
     respectively, of paragraph (1); and
       (ii) after the expiration of such period, to all State 
     programs.
       (8) Other qualifications.--
       (A) Regulations.--
       (i) Compliance.--The State program shall (for the year for 
     which the coverage is in effect) comply with regulations that 
     shall be issued under this paragraph by the Secretary, in 
     consultation with the National Commission on Catastrophe 
     Preparation and Protection established under section 3.

[[Page 9654]]

       (ii) Criteria.--The regulations issued under clause (i) 
     shall establish criteria for State programs to qualify to 
     purchase reinsurance under this section, which are in 
     addition to the requirements under the other paragraphs of 
     this subsection.
       (B) Contents.--The regulations issued under subparagraph 
     (A)(i) shall include requirements that--
       (i) the State program shall have public members on its 
     board of directors or have an advisory board with public 
     members;
       (ii) the State program provide adequate insurance or 
     reinsurance protection, as applicable, for the peril covered, 
     which shall include a range of deductibles and premium costs 
     that reflect the applicable risk to eligible properties;
       (iii) insurance or reinsurance coverage, as applicable, 
     provided by the State program is made available on a 
     nondiscriminatory basis to all qualifying residents;
       (iv) any new construction, substantial rehabilitation, and 
     renovation insured or reinsured by the program complies with 
     applicable State or local government building, fire, and 
     safety codes;
       (v) the State, or appropriate local governments within the 
     State, have in effect and enforce nationally recognized model 
     building, fire, and safety codes and consensus-based 
     standards that offer risk responsive resistance that is 
     substantially equivalent or greater than the resistance to 
     earthquakes or high winds;
       (vi) the State has taken actions to establish an insurance 
     rate structure that takes into account measures to mitigate 
     insurance losses;
       (vii) there are in effect, in such State, laws or 
     regulations sufficient to prohibit price gouging, during the 
     term of reinsurance coverage under this Act for the State 
     program in any disaster area located within the State; and
       (viii) the State program complies with such other 
     requirements that the Secretary considers necessary to carry 
     out the purposes of this Act.
       (b) Terms of Contracts.--Each contract under this section 
     for reinsurance coverage under this Act shall be subject to 
     the following terms and conditions:
       (1) Maturity.--The term of the contract shall not exceed 1 
     year or such longer term as the Secretary may determine.
       (2) Payment condition.--The contract shall authorize claims 
     payments for eligible losses only to the eligible State 
     program purchasing the coverage.
       (3) Retained losses requirement.--For each event of a 
     covered peril, the contract shall make a payment for the 
     event only if the total amount of insurance claims for 
     losses, which are covered by qualified lines, occur to 
     properties located within the State covered by the contract, 
     and that result from events, exceeds the amount of retained 
     losses provided under the contract (pursuant to section 8(a)) 
     purchased by the eligible State program.
       (4) Multiple events.--The contract shall--
       (A) cover any eligible losses from 1 or more covered events 
     that may occur during the term of the contract; and
       (B) provide that if multiple events occur, the retained 
     losses requirement under paragraph (3) shall apply on a 
     calendar year basis, in the aggregate and not separately to 
     each individual event.
       (5) Timing of eligible losses.--Eligible losses under the 
     contract shall include only insurance claims for property 
     covered by qualified lines that are reported to the eligible 
     State program within the 3-year period beginning upon the 
     event or events for which payment under the contract is 
     provided.
       (6) Pricing.--
       (A) Determination.--The price of reinsurance coverage under 
     the contract shall be an amount established by the Secretary 
     as follows:
       (i) Recommendations.--The Secretary shall take into 
     consideration the recommendations of the Commission in 
     establishing the price, but the price may not be less than 
     the amount recommended by the Commission.
       (ii) Fairness to taxpayers.--The price shall be established 
     at a level that--

       (I) is designed to reflect the risks and costs being borne 
     under each reinsurance contract issued under this Act; and
       (II) takes into consideration empirical models of natural 
     disasters and the capacity of private markets to absorb 
     insured losses from natural disasters.

       (iii) Self-sufficiency.--The rates for reinsurance coverage 
     shall be established at a level that annually produces 
     expected premiums that shall be sufficient to pay the 
     expected annualized cost of all claims, loss adjustment 
     expenses, and all administrative costs of reinsurance 
     coverage offered under this section.
       (B) Components.--The price shall consist of the following 
     components:
       (i) Risk-based price.--A risk-based price, which shall 
     reflect the anticipated annualized payout of the contract 
     according to the actuarial analysis and recommendations of 
     the Commission.
       (ii) Administrative costs.--A sum sufficient to provide for 
     the operation of the Commission and the administrative 
     expenses incurred by the Secretary in carrying out this Act.
       (7) Information.--The contract shall contain a condition 
     providing that the Commission may require a State program 
     that is covered under the contract to submit to the 
     Commission all information on the State program relevant to 
     the duties of the Commission, as determined by the Secretary.
       (8) Additional contract option.--
       (A) In general.--The contract shall provide that the 
     purchaser of the contract may, during a term of such original 
     contract, purchase additional contracts from among those 
     offered by the Secretary at the beginning of the term, 
     subject to the limitations under section 8, at the prices at 
     which such contracts were offered at the beginning of the 
     term, prorated based upon the remaining term as determined by 
     the Secretary.
       (B) Timing.--An additional contract purchased under 
     subparagraph (A) shall provide coverage beginning on a date 
     15 days after the date of purchase but shall not provide 
     coverage for losses for an event that has already occurred.
       (9) Others.--The contract shall contain such other terms as 
     the Secretary considers necessary--
       (A) to carry out this Act; and
       (B) to ensure the long-term financial integrity of the 
     program under this Act.
       (c) Participation by Multi-State Catastrophe Fund 
     Programs.--
       (1) In general.--Nothing in this Act shall prohibit, and 
     this Act shall be construed to facilitate and encourage, the 
     creation of multi-State catastrophe insurance or reinsurance 
     programs, or the participation by such programs in the 
     program established pursuant to section 4.
       (2) Regulations.--The Secretary shall, by regulation, apply 
     the provisions of this Act to multi-State catastrophe 
     insurance and reinsurance programs.

     SEC. 8. MINIMUM LEVEL OF RETAINED LOSSES AND MAXIMUM FEDERAL 
                   LIABILITY.

       (a) Available Levels of Retained Losses.--In making 
     reinsurance coverage available under this Act, the Secretary 
     shall make available for purchase contracts for such coverage 
     that require the sustainment of retained losses from covered 
     perils (as required under section 7(b)(3) for payment of 
     eligible losses) in various amounts, as the Secretary, in 
     consultation with the Commission, determines appropriate and 
     subject to the requirements under subsection (b).
       (b) Minimum Level of Retained Losses.--
       (1) Contracts for state programs.--Subject to paragraphs 
     (3) and (4) and notwithstanding any other provision of this 
     Act, a contract for reinsurance coverage under section 7 for 
     an eligible State program that offers insurance or 
     reinsurance coverage described in subparagraph (A) or (B), 
     respectively, of section 7(a)(1), may not be made available 
     or sold unless the contract requires retained losses from 
     covered perils in the following amount:
       (A) In general.--The State program shall sustain an amount 
     of retained losses of not less than--
       (i) the claims-paying capacity of the eligible State 
     program, as determined by the Secretary; and
       (ii) an amount, determined by the Secretary in consultation 
     with the Commission, that is the amount equal to the eligible 
     losses projected to be incurred at least once every 50 years 
     on an annual basis from covered perils.
       (B) Transition rule for existing programs.--
       (i) Claims-paying capacity.--Subject to clause (ii), in the 
     case of any eligible State program that was offering 
     insurance or reinsurance coverage on the date of the 
     enactment of this Act and the claims-paying capacity of which 
     is greater than the amount determined under subparagraph 
     (A)(i) but less than an amount determined for the program 
     under subparagraph (A)(ii), the minimum level of retained 
     losses applicable under this paragraph shall be the claims-
     paying capacity of such State program.
       (ii) Agreement.--

       (I) In general.--Clause (i) shall apply to a State program 
     only if the program enters into a written agreement with the 
     Secretary providing a schedule for increasing the claims-
     paying capacity of the program to the amount determined for 
     the program under subparagraph (A)(ii) over a period not to 
     exceed 5 years.
       (II) Extension.--The Secretary may extend the 5-year period 
     under subclause (I) for not more than 5 additional 1-year 
     periods if the Secretary determines that losses incurred by 
     the State program as a result of covered perils create 
     excessive hardship on the State program.
       (III) Consultation.--The Secretary shall consult with the 
     appropriate officials of the State program regarding the 
     required schedule and any potential 1-year extensions.

       (C) Transition rule for new programs.--
       (i) 50-year event.--The Secretary may provide that, in the 
     case of an eligible State program that, after January 1, 
     2007, commences offering insurance or reinsurance coverage, 
     during the 7-year period beginning on the date that 
     reinsurance coverage under section 7 is first made available, 
     the minimum level of retained losses applicable under this 
     paragraph shall be the amount determined for the State under 
     subparagraph

[[Page 9655]]

     (A)(i), except that such minimum level shall be adjusted 
     annually as provided in clause (ii) of this subparagraph.
       (ii) Annual adjustment.--Each annual adjustment under this 
     clause shall increase the minimum level of retained losses 
     applicable under this subparagraph to an eligible State 
     program described in clause (i) in a manner such that--

       (I) during the course of such 7-year period, the applicable 
     minimum level of retained losses approaches the minimum level 
     that, under subparagraph (A)(ii), will apply to the eligible 
     State program upon the expiration of such period; and
       (II) each such annual increase is a substantially similar 
     amount, to the extent practicable.

       (D) Reduction because of reduced claims-paying capacity.--
       (i) Authority.--Notwithstanding subparagraphs (A), (B), and 
     (C) or the terms contained in a contract for reinsurance 
     pursuant to such subparagraphs, if the Secretary determines 
     that the claims-paying capacity of an eligible State program 
     has been reduced because of payment for losses due to an 
     event, the Secretary may reduce the minimum level of retained 
     losses.
       (ii) Term of reduction.--

       (I) Extension.--The Secretary may extend the 5-year period 
     for not more than 5 additional 1-year periods if the 
     Secretary determines that losses incurred by the State 
     program as a result of covered perils create excessive 
     hardship on the State program.
       (II) Consultation.--The Secretary shall consult with the 
     appropriate officials of the State program regarding the 
     required schedule and any potential 1-year extensions.

       (E) Claims-paying capacity.--For purposes of this 
     paragraph, the claims-paying capacity of a State-operated 
     insurance or reinsurance program under section 7(a)(1) shall 
     be determined by the Secretary, in consultation with the 
     Commission, taking into consideration the claims-paying 
     capacity as determined by the State program, retained losses 
     to private insurers in the State in an amount assigned by the 
     State insurance commissioner, the cash surplus of the 
     program, and the lines of credit, reinsurance, and other 
     financing mechanisms of the program established by law.
       (c) Maximum Federal Liability.--
       (1) In general.--Notwithstanding any other provision of 
     law, the Secretary may sell only contracts for reinsurance 
     coverage under this Act in various amounts that comply with 
     the following requirements:
       (A) Estimate of aggregate liability.--The aggregate 
     liability for payment of claims under all such contracts in 
     any single year is unlikely to exceed $200,000,000,000 (as 
     such amount is adjusted under paragraph (2)).
       (B) Eligible loss coverage sold.--Eligible losses covered 
     by all contracts sold within a State during a 12-month period 
     do not exceed the difference between the following amounts 
     (each of which shall be determined by the Secretary in 
     consultation with the Commission):
       (i) The amount equal to the eligible loss projected to be 
     incurred once every 500 years from a single event in the 
     State.
       (ii) The amount equal to the eligible loss projected to be 
     incurred once every 50 years from a single event in the 
     State.
       (2) Annual adjustments.--The Secretary shall annually 
     adjust the amount under paragraph (1)(A) (as it may have been 
     previously adjusted) to provide for inflation in accordance 
     with an inflation index that the Secretary determines to be 
     appropriate.
       (d) Limitation on Percentage of Risk in Excess of Retained 
     Losses.--
       (1) In general.--The Secretary may not make available for 
     purchase contracts for reinsurance coverage under this Act 
     that would pay out more than 100 percent of eligible losses 
     in excess of retained losses in the case of a contract under 
     section 7 for an eligible State program, for such State.
       (2) Payout.--For purposes of this subsection, the amount of 
     payout from a reinsurance contract shall be the amount of 
     eligible losses in excess of retained losses multiplied by 
     the percentage under paragraph (1).

     SEC. 9. CONSUMER HURRICANE, EARTHQUAKE, LOSS PROTECTION 
                   (HELP) FUND.

       (a) Establishment.--There is established within the 
     Treasury of the United States a fund to be known as the 
     Consumer HELP Fund (in this section referred to as the 
     ``Fund'').
       (b) Credits.--The Fund shall be credited with--
       (1) amounts received annually from the sale of contracts 
     for reinsurance coverage under this Act;
       (2) any amounts borrowed under subsection (d);
       (3) any amounts earned on investments of the Fund pursuant 
     to subsection (e); and
       (4) such other amounts as may be credited to the Fund.
       (c) Uses.--Amounts in the Fund shall be available to the 
     Secretary only for the following purposes:
       (1) Contract payments.--For payments to covered purchasers 
     under contracts for reinsurance coverage for eligible losses 
     under such contracts.
       (2) Commission costs.--To pay for the operating costs of 
     the Commission.
       (3) Administrative expenses.--To pay for the administrative 
     expenses incurred by the Secretary in carrying out the 
     reinsurance program under this Act.
       (4) Termination.--Upon termination under section 11, as 
     provided in such section.
       (d) Borrowing.--
       (1) Authority.--To the extent that the amounts in the Fund 
     are insufficient to pay claims and expenses under subsection 
     (c), the Secretary--
       (A) may issue such obligations of the Fund as may be 
     necessary to cover the insufficiency; and
       (B) shall purchase any such obligations issued.
       (2) Public debt transaction.--For the purpose of purchasing 
     any such obligations under paragraph (1)--
       (A) the Secretary may use as a public debt transaction the 
     proceeds from the sale of any securities issued under chapter 
     31 of title 31, United States Code; and
       (B) the purposes for which such securities are issued under 
     such chapter are hereby extended to include any purchase by 
     the Secretary of such obligations under this subsection.
       (3) Characteristics of obligations.--Obligations issued 
     under this subsection shall be in such forms and 
     denominations, bear such maturities, bear interest at such 
     rate, and be subject to such other terms and conditions, as 
     the Secretary shall determine.
       (4) Treatment.--All redemptions, purchases, and sales by 
     the Secretary of obligations under this subsection shall be 
     treated as public debt transactions of the United States.
       (5) Repayment.--Any obligations issued under this 
     subsection shall be--
       (A) repaid including interest, from the Fund; and
       (B) recouped from premiums charged for reinsurance coverage 
     provided under this Act.
       (e) Investment.--If the Secretary determines that the 
     amounts in the Fund are in excess of current needs, the 
     Secretary may invest such amounts as the Secretary considers 
     advisable in obligations issued or guaranteed by the United 
     States.
       (f) Prohibition of Federal Funds.--Except for amounts made 
     available pursuant to subsection (d) and section 3(h), no 
     further Federal funds shall be authorized or appropriated for 
     the Fund or for carrying out the reinsurance program under 
     this Act.

     SEC. 10. REGULATIONS.

       The Secretary, in consultation with the Secretary of the 
     Department of Homeland Security, shall issue any regulations 
     necessary to carry out the program for reinsurance coverage 
     under this Act.

     SEC. 11. TERMINATION.

       (a) In General.--Except as provided in subsection (b), the 
     Secretary may not provide any reinsurance coverage under this 
     Act covering any period after the expiration of the 20-year 
     period beginning on the date of the enactment of this Act.
       (b) Extension.--If upon the expiration of the period under 
     subsection (a) the Secretary, in consultation with the 
     Commission, determines that continuation of the program for 
     reinsurance coverage under this Act is necessary or 
     appropriate to carry out the purpose of this Act under 
     section 4(b) because of insufficient growth of capacity in 
     the private homeowners' insurance market, the Secretary shall 
     continue to provide reinsurance coverage under this Act until 
     the expiration of the 5-year period beginning upon the 
     expiration of the period under subsection (a).
       (c) Repeal.--Effective upon the date that reinsurance 
     coverage under this Act is no longer available or in force 
     pursuant to subsection (a) or (b), this Act (except for this 
     section) is repealed.
       (d) Deficit Reduction.--The Secretary shall cover into the 
     General Fund of the Treasury any amounts remaining in the 
     Fund under section 9 upon the repeal of this Act.

     SEC. 12. ANNUAL STUDY CONCERNING BENEFITS OF THE ACT.

       (a) In General.--The Secretary shall, on an annual basis, 
     conduct a study and submit to the Congress a report that--
       (1) analyzes the cost and availability of homeowners' 
     insurance for losses resulting from catastrophic natural 
     disasters covered by the reinsurance program under this Act;
       (2) describes the efforts of the participating States in--
       (A) enacting preparedness, prevention, mitigation, 
     recovery, and rebuilding standards; and
       (B) educating the public on the risks associated with 
     natural catastrophe; and
       (3) makes recommendations regarding ways to improve the 
     program under this Act and its administration.
       (b) Contents.--Each annual study under this section shall 
     also determine and identify, on an aggregate basis--
       (1) for each State or region, the capacity of the private 
     homeowners' insurance market with respect to coverage for 
     losses from catastrophic natural disasters;
       (2) for each State or region, the percentage of homeowners 
     who have such coverage, the catastrophes covered, and the 
     average cost of such coverage; and
       (3) for each State or region, the effects this Act is 
     having on the availability and affordability of such 
     insurance.

[[Page 9656]]

       (c) Timing.--Each annual report under this section shall be 
     submitted not later than March 30 of the year after the year 
     for which the study was conducted.
       (d) Commencement of Reporting Requirement.--The Secretary 
     shall first submit an annual report under this section not 
     later than 2 years after the date of the enactment of this 
     Act.

     SEC. 13. GAO STUDY OF THE NATIONAL FLOOD INSURANCE PROGRAM 
                   AND HURRICANE-RELATED FLOODING.

       (a) In General.--In light of the flooding associated with 
     Hurricane Katrina, the Comptroller General of the United 
     States shall conduct a study of the availability and adequacy 
     of flood insurance coverage for losses to residences and 
     other properties caused by hurricane-related flooding.
       (b) Contents.--The study under this section shall determine 
     and analyze--
       (1) the frequency and severity of hurricane-related 
     flooding during the last 20 years in comparison with flooding 
     that is not hurricane-related;
       (2) the differences between the risks of flood-related 
     losses to properties located within the 100-year floodplain 
     and those located outside of such floodplain;
       (3) the extent to which insurance coverage referred to in 
     subsection (a) is available for properties not located within 
     the 100-year floodplain;
       (4) the advantages and disadvantages of making such 
     coverage for such properties available under the national 
     flood insurance program;
       (5) appropriate methods for establishing premiums for 
     insurance coverage under such program for such properties 
     that, based on accepted actuarial and rate making principles, 
     cover the full costs of providing such coverage;
       (6) appropriate eligibility criteria for making flood 
     insurance coverage under such program available for 
     properties that are not located within the 100-year 
     floodplain or within a community participating in the 
     national flood insurance program;
       (7) the appropriateness of the existing deductibles for all 
     properties eligible for insurance coverage under the national 
     flood insurance program, including the standard and variable 
     deductibles for pre-FIRM and post-FIRM properties, and 
     whether a broader range of deductibles should be established;
       (8) income levels of policyholders of insurance made 
     available under the national flood insurance program whose 
     properties are pre-FIRM subsidized properties;
       (9) how the national flood program is marketed, if changes 
     can be made so that more people are aware of flood coverage, 
     and how take-up rates may be improved;
       (10) the number of homes that are not primary residences 
     that are insured under the national flood insurance program 
     and are pre-FIRM subsidized properties; and
       (11) suggestions and means on how the program under this 
     Act can better meet its stated goals as well as the 
     feasibility of expanding the national flood insurance program 
     to cover the perils covered by this Act.
       (c) Consultation With FEMA.--In conducting the study under 
     this section, the Comptroller General shall consult with the 
     Director of the Federal Emergency Management Agency.
       (d) Report.--The Comptroller General shall complete the 
     study under this section and submit a report to the Congress 
     regarding the findings of the study not later than 5 months 
     after the date of the enactment of this Act.

     SEC. 14. DEFINITIONS.

       For purposes of this Act, the following definitions shall 
     apply:
       (1) Commission.--The term ``Commission'' means the National 
     Commission on Catastrophe Preparation and Protection 
     established under section 3.
       (2) Covered perils.--The term ``covered perils'' means the 
     natural disaster perils under section 6.
       (3) Covered purchaser.--The term ``covered purchaser'' 
     means an eligible State-operated insurance or reinsurance 
     program that purchases reinsurance coverage made available 
     under a contract under section 7.
       (4) Disaster area.--The term ``disaster area'' means a 
     geographical area, with respect to which--
       (A) a covered peril specified in section 6 has occurred; 
     and
       (B) a declaration that a major disaster exists, as a result 
     of the occurrence of such peril--
       (i) has been made by the President of the United States; 
     and
       (ii) is in effect.
       (5) Eligible losses.--The term ``eligible losses'' means 
     losses in excess of the sustained and retained losses, as 
     defined by the Secretary after consultation with the 
     Commission.
       (6) Eligible state program.--The term ``eligible State 
     program'' means--
       (A) a State program that, pursuant to section 7(a), is 
     eligible to purchase reinsurance coverage made available 
     through contracts under section 7; or
       (B) a multi-State program that is eligible to purchase such 
     coverage pursuant to section 7(c).
       (7) Price gouging.--The term ``price gouging'' means the 
     providing of any consumer good or service by a supplier 
     related to repair or restoration of property damaged from a 
     catastrophe for a price that the supplier knows or has reason 
     to know is greater, by at least the percentage set forth in a 
     State law or regulation prohibiting such act (notwithstanding 
     any real cost increase due to any attendant business risk and 
     other reasonable expenses that result from the major 
     catastrophe involved), than the price charged by the supplier 
     for such consumer good or service immediately before the 
     disaster.
       (8) Qualified lines.--The term ``qualified lines'' means 
     lines of insurance coverage for which losses are covered 
     under section 5 by reinsurance coverage under this Act.
       (9) Reinsurance coverage.--The term ``reinsurance coverage 
     under this Act'' means coverage under contracts made 
     available under section 7.
       (10) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury.
       (11) State.--The term ``State'' means the States of the 
     United States, the District of Columbia, the Commonwealth of 
     Puerto Rico, the Commonwealth of the Northern Mariana 
     Islands, Guam, the Virgin Islands, American Samoa, and any 
     other territory or possession of the United States.
                                 ______
                                 
      By Ms. SNOWE (for herself and Mr. Craig):
  S. 3122. A bill to amend the Small Business Act to improve loans for 
members of the Guard and Reserve, and for other purposes; to the 
Committee on Small Business and Entrepreneurship.
  Ms. SNOWE. Mr. President, our country has forever prided itself on 
providing individuals the opportunity to pursue a fair and prosperous 
existence. Our Nation's free markets enable small business owners to 
grow their enterprise and realize their dreams. Yet, small business 
owners and entrepreneurs are not blind to the costs of maintaining a 
free and open society. These same small business owners and 
entrepreneurs play a vital role in protecting freedom, at home and 
abroad, as members of the U.S. National Guard and Reserve Forces.
  In recent years, however, the Department of Defense, DOD, has placed 
greater reliance on our nation's Guard and Reserve forces. In fact, 
since Septeber 2001, over 550,000 Guard and Reserve members have been 
called up in support of current operations, at the same time, making up 
nearly one-third of deployed service members in Iraq and Afghanistan. 
In addition, Guard and Reserve members have been charged in assisting 
with recovery efforts in the Gulf Coast, following some of the most 
devastating natural disasters in our country's history.
  As these brave men and women are called to serve our Nation, the 
small businesses they temporarily leave behind often suffer. Many 
affected small buinesses experience slowing production and lost sales 
or incur additional expenses to compensate for an employee's absence. 
As a result, self-employed Guard and Reserve members and small 
businesses that employ Guard and Reserve members are ``paying'' a 
disproportionate and unfair share of the burden of increased call-ups. 
This is particularly troubling, because according to the majority of 
non-government-employed Guard and Reserve members are either self-
employed or work for small businesses.
  To help stem the ill affects of Guard and Reserve call-ups on small 
businesses, Senator Craig and I are introducing the Patriot Loan Act of 
2006. This legislation improves the U.S. Small Business 
Administration's Military Reservist Economic Injury Disaster Loan, 
MREIDL, program. The MREIDL program was created to provide funds to 
eligible small businesses to meet ordinary and necessary operating 
expenses that the business cannot meet, because an essential employee 
was ``called-up'' to active duty in their role as a military reservist.
  Specifically, our legislation would raise the maximum military 
reservist loan amount from $1,500,000 to $2,000,000. A maximum military 
reservist loan amount of $2,000,000 is the same level as many ofthe 
SBA's other loan programs, including: the 7(a) loans, international 
trade loans, and 504 Certified Development Corporation loans that serve 
a public policy goal.
  This bill would allow the SBA Administrator, either directly or 
through banks to offer loans up to $25,000 without requiring collateral 
fr a loan applicant. Currently, the BA offers military

[[Page 9657]]

reservist loans up to $5,000 without requiring collateral. This 
provision would increase that level to eligible small businesses.
  The bill would also require the Administrator to give military 
reservist loan applications priority for processing and ensure that 
Guard and Reserve members are adequately assisted with their loan 
application by incorporating the support and expertise of SBA 
entrepreneurial development partners, such as Small Business 
Development Centers.
  Finally, the legislation requires the SBA and DOD to develop a joint 
website and printed materials providing information regarding the 
MREIDL program for Guard and Reserve members, and that the SBA and DOD 
jointly conduct a feasibility study on introducing business 
mobilization and interruption insurance for members of the Guard and 
Reserve forces, and increased utilization of credit unions affiliated 
with the DOD.
  I thank Senator Craig for working with me to help address this 
critical issue and I urge my colleagues to support this bill.
                                 ______
                                 
      By Mr. LEAHY:
  S. 3123. A bill to suspend temporarily the duty on ski and snowboard 
pants; to the Committee on Finance.
  Mr. LEAHY. Mr. President, I ask unanimous consent that the text of 
the five bills on suspending duties be printed in the Record.
  There being no objection, the text of the bills was ordered to be 
printed in the Record, as follows:

                                S. 3123

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

     SECTION 1. SKI AND SNOWBOARD PANTS

       (a) In General.--Subchapter II of chapter 99 of the 
     Harmonized Tariff Schedule of the United States is amended by 
     inserting in numerical sequence the following new heading:
       9902.62.03. Ski/snowboard pants (provided for in subheading 
     6210.40.50). Free. No change. No change. On or before 12/31/
     2009.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to goods entered, or withdrawn from warehouse for 
     consumption, on or after the 15th day after the date of the 
     enactment of this Act.
                                 ______
                                 
      By Mr. LEAHY:
  S. 3124. A bill to suspend temporarily the duty on ski boots, cross 
country ski footwear and snowboard boots; to the Committee on Finance.

                                S. 3124

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

     SECTION 1. EXTENSION OF CERTAIN EXISTING DUTY SUSPENSIONS AND 
                   REDUCTIONS

       (a) Other Modifications.--
       (1) Snowboard boots.--Heading 9902.64.04 of the Harmonized 
     Tariff Schedule of the United States is amended--
       (A) by striking ``Snowboard'' and inserting ``Ski boots, 
     cross country ski footwear and snowboard'';
       (B) by striking ``4%'' and inserting ``Free''; and
       (C) by striking ``12/31/2006'' and inserting ``12/31/
     2009'',
       (b) Effective Date.--The amendments made by subsection (a) 
     apply to goods entered, or withdrawn from warehouse for 
     consumption, on or after the 15th day after the date of the 
     enactment of this Act.
                                 ______
                                 
      By Mr. LEAHY:
  S. 3125. A bill to suspend temporarily the duty on ski and snowboard 
pants; to the Committee on Finance.

                                S. 3125

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

     SECTION 1. SKI AND SNOWBOARD PANTS

       (a) In General.--Subchapter II of chapter 99 of the 
     Harmonized Tariff Schedule of the United States is amended by 
     inserting in numerical sequence the following new heading:
       9902.62.01. Ski/snowboard pants (provided for in subheading 
     6203.43.35). Free. No change. No change. On or before 12/31/
     2009.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to goods entered, or withdrawn from warehouse for 
     consumption, on or after the 15th day after the date of the 
     enactment of this Act.
                                 ______
                                 
      By Mr. LEAHY:
  S. 3126. A bill to suspend temporarily the duty on ski and snowboard 
pants; to the Committee on Finance.

                                S. 3126

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

     SECTION 1. SKI AND SNOWBOARD PANTS

       (a) In General.--Subchapter II of chapter 99 of the 
     Harmonized Tariff Schedule of the United States is amended by 
     inserting in numerical sequence the following new heading:
       9902.62.02. Ski/snowboard pants (provided for in subheading 
     6204.63.30). Free. No change. No change. On or before 12/31/
     2009.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to goods entered, or withdrawn from warehouse for 
     consumption, on or after the 15th day after the date of the 
     enactment of this Act.
                                 ______
                                 
      By Mr. LEAHY:
  S. 3127. A bill to suspend temporarily the duty on ski and snowboard 
pants; to the Committee on Finance.

                                S. 3127

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

     SECTION 1. SKI AND SNOWBOARD PANTS.

       (a) In General.--Subchapter II of chapter 99 of the 
     Harmonized Tariff Schedule of the United States is amended by 
     inserting in numerical sequence the following new heading:
       9902.62.04. Ski/snowboard pants (provided for in subheading 
     6210.50.50). Free. No change. No change. On or before 12/31/
     2009.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to goods entered, or withdrawn from warehouse for 
     consumption, on or after the 15th day after the date of the 
     enactment of this Act.
                                 ______
                                 
      By Mr. BINGAMAN (for himself and Mr. Lugar):
  S. 3171. A bill to establish the Department of Commerce an Under 
Secretary for United States Direct Investment, and for other purposes.
  Mr. BINGAMAN. Mr. President, I rise today to introduce ``The United 
States Direct Investment Act of 2006'' with my colleague from Indiana, 
Senator Lugar. This legislation is a necessary step towards making our 
country more competitive in encouraging multinational businesses to 
expand or open new offices, facilities or plants in the United States 
instead of in another country. While the United States continues to be 
the premier place in the world to locate a business, we can no longer 
rely on our inherent advantages alone. This legislation will refocus 
the Administrations efforts so that we do a better job of reaching out 
to businesses around the world and convince them that they should 
expand their current operations or open new facility in the United 
States instead of somewhere else overseas.
  Our legislation creates the United States Direct Investment 
Administration, USDIA, the Commerce Department to be lead by an Under 
Secretary. This new administration shall be responsible for collecting 
and analyzing data related to foreign direct investment flows. They 
shall create an annual Investment Report and an annual Direct 
Investment Agenda to be reported and sent to Congress. They will then 
assume responsibility as the lead agency for advocating and 
implementing strategic policies to encourage more investment in the 
United States from abroad. This new administration will manage an 
investment zone program for communities that have been negatively 
impacted by trade but want to attract international companies to locate 
in their area. Finally, this new administration will be empowered to 
create ten new ``renewal communities'' as currently defined under the 
Internal Revenue Code.
  Many countries, particularly those in Europe, have committed 
significant resources and energy to recruiting foreign direct 
investment. In many cases, they have offices in the United States where 
they meet with U.S. companies to encourage them to consider their 
country for their next expansion. Right now our country does not have 
any comparable operation. We leave these efforts to our states, region 
and cities through economic development agencies and offices. Unlike 
other countries, we don't provide a Federal umbrella organization to 
help these people recruit more effectively. Because of their limited 
resources, this means that many of these economic development agencies 
are unable to effectively target potential businesses that might be an 
ideal fit for their city or State. In some cases, these areas may be 
going through an economic downturn due to the closing of a plant or 
factory making their limited resources even more scarce. This 
legislation would give these agencies the assistance and

[[Page 9658]]

guidance they need to be more successful and effective in their 
recruiting efforts.
  It is important that we focus not only on how to get businesses to 
stay in this country, but also on how we encourage overseas businesses 
to come here. In both cases, the end result is the same--more jobs for 
U.S. workers. Our first responsibility needs to be encouraging 
companies to stay in the United States, but we need to be cognizant of 
the fact that we will not always be successful. If we have a robust 
effort to encourage overseas companies to move facilities to our 
country we will be able to neutralize any unavoidable losses. Many of 
the pieces are already in place. We already collect much of the data 
and have an effective matrix of State, regional and local economic 
development entities. What this legislation does is put these pieces 
together in a way that accomplishes the primary job at hand--creating 
jobs in the United States.
  I ask for unanimous consent the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3171

       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 ``United States Direct 
     Investment Act of 2006''.

     SEC. 2. DEFINITIONS.

       In this Act:
       (1) Administration.--The term ``Administration'' means the 
     United States Direct Investment Administration established 
     under section 4.
       (2) Appropriate congressional committees.--The term 
     ``appropriate congressional committees'' means the Committee 
     on Finance and the Committee on Commerce, Science, and 
     Transportation of the Senate and the Committee on Energy and 
     Commerce and Committee on Ways and Means of the House of 
     Representatives.
       (3) Critical high-technology industries.--The term 
     ``critical high-technology industries'' means industries 
     involved in technology--
       (A) the development of which will--
       (i) provide a wide array of economic, environmental, 
     energy, and defense-related returns for the United States; 
     and
       (ii) ensure United States economic, environmental, energy, 
     and defense-related welfare; and
       (B) in which the United States has an abiding interest in 
     creating or maintaining secure domestic sources.
       (4) Department.--The term ``Department'' means the 
     Department of Commerce.
       (5) Under secretary.--The term ``Under Secretary'' means 
     the Under Secretary of Commerce for United States Direct 
     Investment described in section 4(a).
       (6) United states direct investment promotion committee.--
     The term ``United States Direct Investment Promotion 
     Committee'' means the Interagency United States Direct 
     Investment Promotion Committee established under section 7.
       (7) WTO agreement.--The term ``WTO Agreement'' means the 
     Agreement establishing the World Trade Organization entered 
     into on April 15, 1994.

     SEC. 3. RELATION TO CFIUS.

       The provisions of this Act shall not affect the 
     implementation or application of section 721 of the Defense 
     Production Act of 1950 (50 U.S.C. App. 2170) and the 
     activities of the Committee on Foreign Investment in the 
     United States (or any successor committee).

     SEC. 4. ESTABLISHMENT OF UNITED STATES DIRECT INVESTMENT 
                   ADMINISTRATION.

       (a) In General.--There is established in the Department of 
     Commerce a United States Direct Investment Administration 
     which shall be headed by an Under Secretary of Commerce for 
     United States Direct Investment. The Under Secretary shall be 
     appointed by the President, by and with the advice and 
     consent of the Senate, and shall be compensated at the rate 
     provided for level III of the Executive Schedule in section 
     5314 of title 5, United States Code.
       (b) Deputy Under Secretary.--There shall be in the 
     Administration a Deputy Under Secretary for United States 
     Direct Investment who shall be appointed by the President, by 
     and with the advice of the Senate, and shall be compensated 
     at the rate provided for level IV of the Executive Schedule 
     in section 5315 of title 5, United States Code.
       (c) Staff.--The Under Secretary may appoint such additional 
     personnel to serve in the Administration as the Under 
     Secretary determines necessary.
       (d) Duties.--The Under Secretary, in cooperation with the 
     Economics and Statistics Administration and other offices at 
     the Department, shall--
       (1) collect and analyze data related to the flow of direct 
     investment in the United States and throughout the world, as 
     described in section 5;
       (2) submit to the appropriate congressional committees an 
     annual United States Direct Investment Report, as described 
     in section 6;
       (3) develop and publish an annual United States Direct 
     Investment Agenda;
       (4) assume responsibility as the lead agency for advocating 
     and implementing strategic policies that will increase direct 
     investment in the United States;
       (5) coordinate with the President regarding implementation 
     of section 721 of the Defense Production Act of 1950 (50 
     U.S.C. App. 2170) and the activities of the Committee on 
     Foreign Investment in the United States (or any successor 
     committee); and
       (6) in cooperation with the Economic Development 
     Administration, administer an investment zone program for 
     communities that have been negatively impacted by either 
     trade or economic cycles.
       (e) Conforming Amendments.--
       (1) Section 5314 of title 5, United States Code, is amended 
     by adding at the end the following: ``Under Secretary of 
     Commerce for United States Direct Investment.''.
       (2) Section 5315 of title 5, United States Code, is amended 
     by adding at the end the following: ``Deputy Under Secretary 
     of Commerce for United States Direct Investment.''.

     SEC. 5. ANNUAL DIRECT INVESTMENT REPORT.

       (a) Annual Direct Investment Report.--Not later than April 
     30, 2007, and on or before March 31 of each succeeding 
     calendar year, the Under Secretary shall submit a report on 
     the data identified and the analysis described in subsection 
     (b) for the preceding calendar year (which shall be known as 
     the ``Annual Direct Investment Report''). The Report shall be 
     submitted to the President and the appropriate congressional 
     committees.
       (b) Data Identification.--
       (1) In general.--The data identified and analysis for the 
     Report described in subsection (a) means the data identified 
     and analyzed by the Under Secretary of Commerce, in 
     cooperation with the Economic and Statistics Administration 
     and other offices at the Department and with the assistance 
     of other departments and agencies, including the Office of 
     the United States Trade Representative, for the preceding 
     calendar year regarding the following:
       (A) Policies, programs, and practices at the State and 
     regional level designed to attract direct investment.
       (B) The amount of direct investment attracted in each such 
     State and region.
       (C) Policies, programs, and practices in foreign countries 
     designed to attract direct investment, and the amount of 
     direct investment attracted in each such foreign country.
       (D) A comparison of the levels of direct investment 
     attracted in the United States and in foreign countries, 
     including a matrix of inputs affecting the level of direct 
     investment.
       (E) Specific sectors in the United States and in foreign 
     countries in which direct investments are being made, 
     including the specific amounts invested in each sector, with 
     particular emphasis on critical high-technology industries.
       (F) Trends in direct investment, with particular emphasis 
     on critical high-technology industries.
       (G) The best policy and practices at the Federal, State, 
     and regional levels regarding direct investment policy, with 
     specific reference to programs and policies that have the 
     greatest potential to increase direct investment in the 
     United States and enhance United States competitive advantage 
     relative to foreign countries. Particular emphasis should be 
     given to attracting direct investment in critical high-
     technology industries.
       (H) Policies, programs, and practices in foreign countries 
     designed to attract direct investment that are not in 
     compliance with the WTO Agreement and the agreements annexed 
     to that Agreement.
       (2) Certain factors taken into account in making 
     analysis.--In making any analysis under paragraph (1), the 
     Under Secretary shall take into account--
       (A) the relative impact of policies, programs, and 
     practices of foreign governments on United States commerce;
       (B) the availability of information to document the effect 
     of policies, programs, and practices;
       (C) the extent to which such act, policy, or practice is 
     subject to international agreements to which the United 
     States is a party; and
       (D) the impact trends in direct investment have had on--
       (i) the competitiveness of United States industries in the 
     international economy, with particular emphasis on critical 
     high-technology industries;
       (ii) the value of goods and services exported from and 
     imported to the United States;
       (iii) employment in the United States, in particular high-
     wage employment; and
       (iv) the provision of health care, pensions, and other 
     benefits provided by companies based in the United States.
       (c) Assistance of Other Agencies.--
       (1) Furnishing of information.--The head of each department 
     or agency of the executive branch of the Government, 
     including

[[Page 9659]]

     any independent agency, is authorized and directed to furnish 
     to the Under Secretary, upon request, such data, reports, and 
     other information as is necessary for the Under Secretary to 
     carry out the functions under this Act.
       (2) Restrictions on release or use of information.--Nothing 
     in this subsection shall authorize the release of information 
     to, or the use of information by, the Under Secretary in a 
     manner inconsistent with law or any procedure established 
     pursuant thereto.
       (3) Personnel and services.--The head of any department, 
     agency, or instrumentality of the United States may detail 
     such personnel and may furnish such services, with or without 
     reimbursement, as the Under Secretary may request to assist 
     in carrying out the functions of the Under Secretary.
       (d) Annual Revisions and Updates.--The Under Secretary 
     shall annually revise and update the Report described in 
     subsection (a).

     SEC. 6. ANNUAL DIRECT INVESTMENT AGENDA.

       (a) In General.--Not later than April 30, 2007, and on or 
     before March 31 of each succeeding calendar, the Under 
     Secretary shall submit an agenda based on the data and 
     analysis described in section 5 for the preceding calendar 
     year, to the President and the appropriate congressional 
     committees. The agenda shall be known as the ``Annual Direct 
     Investment Agenda'' and shall include--
       (1) an evaluation of the research and development program 
     expenditures being made in the United States with particular 
     emphasis to critical high-technology industries considered 
     essential to United States economic security and necessary 
     for long-term United States economic competitiveness in world 
     markets; and
       (2) proposals that identify the policies, programs, and 
     practices in foreign countries and that the United States 
     should pursue that--
       (A) encourage direct investment in the United States that 
     will enhance the country's competitive advantage relative to 
     foreign countries, with particular emphasis on critical high-
     technology industries;
       (B) enhance the viability of the manufacturing sector in 
     the United States;
       (C) increase opportunities for high-wage jobs and promotes 
     high levels of employment;
       (D) encourage economic growth; and
       (E) increase opportunities for the provision of health 
     care, pensions, and other benefits provided by companies 
     based in the United States.
       (b) Consultation With Congress on Annual Direct Investment 
     Agenda.--The Under Secretary shall keep the appropriate 
     congressional committees currently informed with respect to 
     the Annual Direct Investment Agenda and implementation of the 
     Agenda. After the submission of the Agenda, the Under 
     Secretary shall also consult periodically with, and take into 
     account the views of, the appropriate congressional 
     committees regarding implementation of the Agenda.

     SEC. 7. UNITED STATES DIRECT INVESTMENT PROMOTION COMMITTEE.

       (a) Establishment.--The President shall establish and the 
     Under Secretary shall assume lead responsibility for an 
     Interagency United States Direct Investment Promotion 
     Committee. The functions of the Committee shall be to--
       (1) coordinate all United States Government activities 
     related to the promotion of direct investment in the United 
     States;
       (2) advocate and implement strategic policies, programs, 
     and practices that will increase direct investment in the 
     United States;
       (3) train United States Government officials to pursue 
     strategic policies, programs, and practices that will 
     increase direct investment in the United States;
       (4) consult with business, labor, State, regional, and 
     local government officials on strategic policies, programs, 
     and practices that will increase direct investment in the 
     United States;
       (5) develop and publish materials that can be used by 
     Federal, State, regional, and local government officials to 
     increase direct investment in the United States;
       (6) create and maintain a database of direct investment 
     opportunities in the United States;
       (7) create and maintain an interactive website that can be 
     used to access direct investment opportunities in different 
     sectors and geographical areas of the United States, with 
     particular emphasis on critical high-technology industries;
       (8) coordinate direct investment marketing activities with 
     State Economic Development Agencies; and
       (9) host regular meetings and discussions with State, 
     regional, and local economic development officials to 
     consider best policy practices to increase direct investment 
     in the United States.
       (b) Members.--The Committee shall be composed of the 
     following:
       (1) The Secretary of Commerce.
       (2) The United States Trade Representative.
       (3) Members of the United States International Trade 
     Commission.
       (4) The Secretary of the Treasury.
       (5) Members of the National Economic Council.
       (6) The Secretary of Agriculture.
       (7) Such other officials as the President determines to be 
     necessary.

     SEC. 8. DESIGNATION OF ADDITIONAL RENEWAL COMMUNITIES.

       Section 1400E of the Internal Revenue Code of 1986 
     (relating to designation of renewal communities) is amended 
     by adding at the end the following new subsection:
       ``(h) Additional Designations Permitted.--
       ``(1) In general.--In addition to the areas designated 
     under subsection (a), the Under Secretary of Commerce for 
     United States Direct Investment, after consultation with the 
     Secretary of the Treasury, may designate in the aggregate an 
     additional 10 nominated areas as renewal communities under 
     this section, subject to the availability of eligible 
     nominated areas.
       ``(2) Period designations may be made and take effect.--A 
     designation may be made under this subsection after the date 
     of the enactment of this subsection and before the date which 
     is 5 years after such date of enactment. Subject to 
     subparagraphs (B) and (C) of subsection (b)(1), a designation 
     made under this subsection shall remain in effect during the 
     period beginning with such designation and ending on the date 
     which is 8 years after such designation.
       ``(3) Application of rules.--Except as otherwise provided 
     in paragraph (1), the rules of this section shall apply to 
     designations under this subsection.''.

  Mr. LUGAR. Mr. President, I rise today in support of S. 3171, the 
United States Direct Investment Act of 2006, introduced by Senator 
Bingaman and myself. At a time when commerce routinely crosses national 
borders, the U.S. should be positioned to compete in all arenas. That 
means not only strengthening the ability of American business to invest 
and sell their products in foreign markets, but equally important, 
attracting foreign companies to the American market. Other nations 
actively recruit and provide incentives for global companies to set up 
operations and create new jobs within their borders. We must do the 
same.
  To this end, we propose to establish a framework within the 
Department of Commerce to specifically study how we can better 
encourage global companies to invest and set up businesses on our 
shores. It is essential as well, that we determine where this 
investment is needed. There are certain communities in the U.S. that 
are in extreme need of an infusion of economic growth and the 
opportunity to take part in the global economy. The U.S. has a talented 
and skilled workforce. We need to lead foreign companies and 
entrepreneurs to the cities and towns where they can find the resources 
they require. If this information is readily available, and if we 
provide incentives for companies to come, we will significantly 
increase the amount of foreign investment coming into our country.
  In 2005, foreign companies accounted for $129 billion worth of 
investments in the United States. This money translates into jobs and 
prosperity for Americans. The best way to ensure that this valuable 
investment is spread more widely throughout the 50 States is by 
conducting the sort of analysis proposed in this bill. We should keep 
track of both the quantity of investment attracted to each particular 
state and region, and as well as the types of investment foreigners 
make, particularly in the high technology industry. We should conduct 
an analysis of the industries that are investing in the U.S. compared 
to the industries that are going to other countries. We also need to 
assess which policies and programs have had the most success in 
attracting foreign investment.
  It is particularly important to attract research and development and 
high technology industries. These have a multiplier effect that helps 
increase the overall competitiveness of the American economy. We should 
create incentives for high technology companies to develop and invest 
in a U.S. presence and workforce.
  Another key feature of the bill is consultations with local and 
regional authorities, as well as Congress. The administration should 
determine the needs of particular localities and what the federal 
government can do to assist local efforts in attracting foreign 
investment. Congress should also be consulted so that information can 
be relayed regarding regions of the country that are suffering from a 
lack of high wage jobs.
  Global business ties are vital tools in shaping our international 
business and

[[Page 9660]]

foreign policy. Cooperation on the commercial front enhances our 
ability to work with nations on other matters, including security and 
intelligence. This bill offers a positive solution to the concerns over 
domestic job growth by seeking to ensure that globalization is a two-
way street with more investment traffic flowing in our direction.
                                 ______
                                 
      By Mr. LEAHY:
  S. 3175. A bill to amend title 35, United States Code, with respect 
to establishing procedures for granting authority to the Under 
Secretary for Commerce for Intellectual Property and Director of the 
Patent and Trademark Office to grant compulsory patent licenses for 
exporting patented pharmaceutical products to certain countries 
consistent with international commitments made by the United States, 
and for other purposes; to the Committee on the Judiciary.
  Mr. LEAHY. Mr. President, I am today introducing a bill which can be 
the catalyst for saving the lives or improving the health of millions 
of families in impoverished nations.
  In far too many nations, thousands of children die needlessly each 
month.
  The concept of my bill--called the Life-Saving Medicines Export Act 
of 2006--is easy to summarize.
  It allows U.S. companies to make low-cost generic versions of 
patented medicines for export to impoverished nations that face public 
health crises but cannot produce those life-saving medicines for 
themselves.
  This bill is based on World Trade Organization agreements permitting 
nations with pharmaceutical industries to help nations in need.
  That WTO agreement was labeled by U.S. Ambassador Portman as ``a 
landmark achievement that we hope will help developing countries 
devastated by HIV and AIDS and other public health crises.''
  Apart from the pressing need for this step in humanitarian terms, 
passage of this bill could go a long way in improving U.S. relations 
with large segments of the world's population.
  On December 6, 2005, the Office of the U.S. Trade Representative 
announced that it ``welcomes'' efforts to ``allow countries to override 
patent rights when necessary to export life-saving drugs to developing 
countries that face public health crises but cannot produce drugs for 
themselves.''
  I am concerned, however, that the administration has taken no steps 
whatsoever to begin to implement that agreement. No implementing 
legislation has been provided to the Hill. I was informed just today 
that the administration has ``no present plans'' to propose legislation 
to implement that international agreement. I am disappointed with that 
answer but am pleased that the administration expressed a willingness 
to work with me on this important effort. I will forward my bill to 
them later today.
  Indeed, the World Health Assembly and the World Health Organization 
have adopted resolutions urging all WTO member nations with a generic 
capability to adopt laws that implement that agreement.
  The World Bank recently issued a guide and model documents on how 
best to implement that international agreement. My bill follows their 
model.
  Like a generation ago, infectious and parasitic diseases remain the 
major killers of children in the developing world. Many of these 
diseases--measles, malaria, river blindness--we can prevent or cure. 
But those countries still lack the public health systems and the vital 
medicines.
  Every hour, more than 500 African mothers lose a child, mostly from 
diseases caused by contaminated water.
  In some sub-Saharan countries, HIV infection rates range as high as a 
third of the adult population, and for this reason 35 percent of 
African children are at higher risk of death than they were a decade 
ago.
  Despite these grim statistics, there is a brighter side.
  We are far more aware today of how much our own health depends on 
what takes place half a world away. Whether it is AIDS, SARS, West Nile 
Virus, the Avian Flu, or some as yet unknown infectious disease, we are 
all at risk, and only an airplane flight away, from wherever the 
outbreak may occur.
  Because of this new awareness, global health is finally recognized as 
an issue of national security. It may seem obvious today, but even ten 
years ago it was not.
  Health threats that once concerned only medical personnel, now 
receive the attention of the highest levels of governments. We are 
supporting policies and programs to help the poorest countries conduct 
better surveillance and respond more quickly to protect their own 
people, and to prevent the spread of disease.
  There is a great deal more we need to do. Today, 15 percent of the 
world's people consume 91 percent of the world's pharmaceuticals. The 
high price of many life-saving medicines--medicines that we take for 
granted in this country--is beyond reach for billions of the world's 
most vulnerable populations.
  President Franklin Roosevelt said: ``The test of our progress is not 
whether we add more to the abundance of those who have much, it is 
whether we provide enough for those who have little.''
  Imagine if you, or a loved one, were dying and you knew the medicine 
to cure the disease exists and costs only a few dollars, but you have 
no way to get it or to pay for it. That is a reality for millions of 
people today.
  Reports by UNICEF, UNAIDS, and Doctors without Borders clearly show 
that the high price of many life-saving medicines is a significant 
barrier to their availability in many very low income areas of the 
world. Indeed, the 4th Global Report of UNAIDS notes the extremely low 
rate of treatment for HIV/AIDS in those areas by pointing out that of 
the 5 to 6 million urgently in need of antiretroviral medicines, only 
some 400,000 were receiving them.
  With respect to AIDS, a recent book by Philip Hilts called 
``Prescription for Survival'' notes the importance of offering 
affordable medicines to populations of impoverished nations:
  ``It was said that the price of the drugs was killing tens of 
thousands . . .''
  Under my bill, U.S. generic manufacturers would be allowed to make 
generic versions of patented drugs without the consent of the patent 
holders.
  Those patent holders would receive compensation in the form of a 
royalty payment under a so-called ``compulsory license'' and the 
generic companies would then be required to sell those less-expensive 
generic drugs only to least-developed or developing nations.
  Use of a compulsory license occurs when Congress determines that 
there is an important need which should be addressed.
  For example, most Americans do not realize that their network 
television programs received by satellite or by cable are provided 
under a compulsory license. The program owners receive a royalty for 
their programs under a formula.
  This way American families can watch network TV programming over 
satellite or cable just like it is made available over-the-air. This 
same compulsory license approach, except with respect to patented 
medicines, is employed in this bill.
  The WTO agreement contains language designed to protect the interests 
of the patent holders by focusing its benefits on areas of the world 
where these important medicines would not otherwise be available except 
for some of the wealthiest residents.
  Thus, implementation of the agreement would not take business away 
from the companies owning the patents, sometimes referred to as the 
``brand-name'' companies, since their medicines are not purchased by 
low-income families in those impoverished nations.
  In addition, the patent holders will receive royalties from the 
generic companies under the bill. Third, generic versions of products 
sold under the agreement have to be clearly marked as not for resale to 
developed nations. This will mean that the bill should not result in 
undercutting the high-priced sales of those medicines by the brand-name 
companies in developed nations.
  Thus, the bill addresses both the urgent needs of millions of low-
income

[[Page 9661]]

families in impoverished nations while protecting the interests of the 
patent owners of these life-saving medicines.
  There have been significant voluntary efforts made by brand-name 
pharmaceutical companies, foundations, and non-profits who have donated 
life-saving medicines and have donated time, personnel and money to 
help in the fight against deadly diseases in other nations. I commend 
and greatly appreciate those efforts.
  Some funding mechanisms have been started including the Global Fund 
to Fight AIDS, Tuberculosis and Malaria and President Bush's Millennium 
Challenge Account. Nonetheless, much remains to be done.
  If this bill is enacted it would complement the above efforts and 
implement the WTO agreements and make low-cost life-saving 
pharmaceutical products, and other medicines, available to hundreds of 
thousands of persons without other access to those products.
  To provide a little history, I am very pleased that all the member 
nations of the World Trade Organization, WTO, agreed to this approach 
to assist people suffering from life-threatening diseases in least-
developed or developing nations. Under this international agreement, 
nations such as the United States with pharmaceutical industries would 
be allowed to make and sell generic medicines to nations in need even 
if the patent owners of those medicines refused to authorize such 
manufacture and sale.
  As I said earlier, on December 6, 2005, the United States announced 
that it ``welcomes'' the WTO amendment to ``allow countries to override 
patent rights when necessary to export life-saving drugs to developing 
countries that face public health crises but cannot produce drugs for 
themselves.'' The amendment will go in effect, for those nations which 
adopt it, once \2/3\ of the member nations adopt it. The current waiver 
approach, allowing nations to implement it now, will remain in place 
until the permanent amendment is adopted. This permits the U.S. to move 
forward with this effort this year. Indeed, Canada has already passed 
implementing legislation.
  Participation by any nation which wants to export such generic 
products is voluntary. In order to participate, each country must pass 
legislation to implement the WTO agreement. The United States needs to 
act as soon as possible.
  This is a moral issue. I am working with a number of religious 
groups, humanitarian organizations, international assistance groups, 
and generic drug companies on this effort. I have also received input 
from some pharmaceutical brand-name companies and hope a few will step 
forward and be leaders in this effort. I will also reach out across the 
aisle to try to form a bipartisan coalition.
  Two recent World Health Organization annual reports, the World Health 
Reports for 2003 and 2004, demonstrate the enormous scope of the need 
for supplying these medicines to needy countries. The ``Life-Saving 
Medicines Export Act of 2006'' that I am introducing today would allow 
the U.S. generic industry to respond to these urgent international 
needs and could save millions of lives in impoverished nations.
  Canada, Norway and the Netherlands have already enacted such 
legislation or rule changes. However, aspects of the Canadian law have 
been an impediment to the willingness of generic companies to 
participate. For example, that law allows Canadian generic companies to 
provide such medicines for at most only 4 years. The Canadian version 
permits dilatory and needless litigation, omits important medicines 
from a complex list of covered drugs, and creates unnecessary 
bureaucratic hoops.
  I have received input from generic companies and my bill addresses 
all of those concerns. For example, it would provide that a 
participating generic manufacturer could provide such medicines for up 
to 14 years which makes it much more likely that U.S. generic companies 
would make the investments needed to make low-cost medicines for export 
to impoverished areas.
  Under my bill, U.S. generic manufacturers would be allowed to make 
generic versions of patented drugs without the consent of the patent 
holders. Those patent holders would receive compensation, a royalty 
payment, under a so-called ``compulsory license'' and the generic 
companies would then be required to sell those less-expensive generic 
drugs only to least-developed or developing nations.
  The WTO agreement contains language designed to protect the interests 
of the patent holders by focusing its provisions on areas of the world 
where these important medicines would not otherwise be available except 
for some of the wealthiest residents. Thus, implementation of the 
agreement would not take business away from the companies owning the 
patents, sometimes referred to as the ``brand-name patent holders since 
their medicines are not purchased by low-income families in those 
impoverished nations. There may be de minimis losses of profits for 
brand-name patent holders but certainly the humanitarian and self-
interest benefits provided by the bill would massively outweigh those 
concerns.
  In addition, the patent holders will receive royalties from the 
generic companies under the bill. Third, generic versions of products 
sold under the agreement have to be clearly marked as not for resale to 
developed nations. This should mean that the bill will not result in 
undercutting the high-priced sales of the patented medicines in 
developed nations. Re-exporting of these generic products is prohibited 
unless it is part of a regional trade alliance among impoverished 
nations as permitted under the WTO agreements.
  Thus, the bill addresses both the urgent needs of millions of low-
income families in impoverished nations while protecting the interests 
of the patent owners of these life-saving medicines and will hopefully 
help enhance America's image in the world.
  For those only interested in self-interest rather than humanitarian 
aid, note that because of the globalization of travel our Nation is at 
risk from failure to contain diseases in other nations. America has a 
strong self-interest in combating diseases in foreign nations. A 
surprising number of new diseases have emerged in recent years. Some of 
these new diseases are variations of existing diseases. The volume of 
people and cargo going to and from distant nations is astounding. 
According to ``Rx for Survival'' by Philip Hilts, if you count only 
travel between nations with a heavy burden of disease and those with 
less disease, more than a million people a week are making the trip.
  The more viruses and bacteria mutant inside animals and people, and 
the more people and goods travel throughout the world, the more 
residents living in the United States are at risk of being harmed by 
dangerous diseases.
  The National Intelligence Estimate of January 2000, published by the 
CIA and the National Intelligence Council noted that: ``New and 
emerging infectious diseases will pose a rising global health threat, 
and will complicate U.S. and global security over the next 20 years. 
These diseases will endanger U.S. citizens at home and abroad, threaten 
United States armed forces deployed overseas and exacerbate social and 
political instability in key countries and regions.''
  I hope all my colleagues will join me in supporting this effort. Here 
is my section-by-section summary of the bill.
  Section 1: Sets forth the name of the Act as the ``Life-Saving 
Medicines Export Act of 2006.''
  Section 2: States that the purpose of the Act is to promote public 
health under World Trade Organization agreements by permitting the 
export of generic versions of life-saving patented pharmaceutical 
products and other medicines including diagnostic tools and vaccines 
needed to prevent or treat potentially life threatening diseases to 
residents of impoverished countries with insufficient or no 
manufacturing capacity to make the medicines. The findings set forth 
determinations by the World Health Organization concerning the millions 
of low-income persons without regular access to medicines in lesser-
developed or developing nations.
  Section 3: This section requires the Director of the United States 
Patent

[[Page 9662]]

and Trademark Office to issue a compulsory license (permission to make 
and sell a patented product under this new Act) to permit generic 
companies to make and export medicines under the terms of WTO 
international agreements under several conditions.
  The recipient country must be a least-developed nation, as defined by 
the United Nations, or a developing nation without the ability to 
manufacture the medicine in question.
  The recipient country, called an ``eligible country'' in the bill, 
must notify the WTO of its interest in participating in this program.
  Efforts must have been made by the generic company to buy the right 
to make and sell the medicine under normal business arrangements with 
the patent holders.
  The medical product exported under this Act must be for life-
threatening public health problems and can only be used in least-
developed or developing nations, and is not for re-export except in 
identified circumstances relating to regional trade alliances.
  Special labeling and packaging must be used to make clear that the 
product is sold under the authority of the WTO agreement only for use 
as allowed under agreement and this bill.
  The permission to make and sell the product, the license, can not 
exceed 7 years, except that the license may be extended once.
  The holder of the compulsory license shall pay a royalty to the 
patent holder, as determined by the Director of the PTO within a 
limited range of possible rates set forth in the bill, taking into 
account such factors as humanitarian needs, the economic value to the 
importing nation, and the need for low-cost pharmaceutical products by 
persons in the importing nation.
  The maximum royalty for any shipment shall not exceed 4 percent times 
the commercial value of the pharmaceutical products to be exported 
under this Act under that supply agreement.
  An alternative royalty payment approach, modeled after the approach 
enacted into law by Canada, would also be permitted with the same 4 
percent maximum. In addition, the Director may accept combined 
applications from multiple eligible countries. Note that in emergency 
situations the Director may waive provisions of the bill in a manner 
consistent with the WTO agreements.
  Section 4: This section makes clear that compulsory licenses issued 
under this Act shall not be considered an infringement of a patent.
  Section 5: This section creates a diverse advisory board of academic, 
patent, trade, medical, international aid, and industry experts to 
advise the Director, and to report to the Congress, on ways to improve 
implementation of the bill to achieve its purposes. Mandatory funding 
for the board is provided out of the general fund of the U.S. at $1.5 
million in fiscal years 2007 and 2008, with modestly declining amounts 
provided in subsequent years through 2011.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3175

       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 ``Life-Saving Medicines Export 
     Act of 2006''.

     SEC. 2. PURPOSES AND FINDINGS.

       (a) Purpose.--The purpose of this Act is to promote public 
     health by permitting the export of life-saving pharmaceutical 
     products and other medicines manufactured in the United 
     States by compulsory license to residents of participating 
     countries with insufficient or no manufacturing capability in 
     the pharmaceutical sector for the product in question 
     consistent with the General Council Decision of the World 
     Trade Organization.
       (b) Findings.--Congress finds the following:
       (1) The United States Trade Representative recently 
     announced that it ``welcomes'' the World Trade Organization 
     amendment to ``allow countries to override patent rights when 
     necessary to export life-saving drugs to developing countries 
     that face public health crises but cannot produce drugs for 
     themselves.''. United States Ambassador Portman called this 
     ``a landmark achievement that we hope will help developing 
     countries.''.
       (2) Compulsory licensing of patents is a ``fixture in 
     almost all patent systems'' in the world as noted in the 
     Berkeley Technology Law Journal in 2003. By the end of the 
     1950s, for example, an estimated 40,000 to 50,000 compulsory 
     licenses were issued regarding patents in the United States. 
     (Access to Patented Medicine in Developing Countries, F.M. 
     Scherer, www.cmhealth.org/docswg4; World Health 
     Organization). Indeed, the WHO paper notes that the ``United 
     States has led the world in issuing compulsory licenses to 
     restore competition when violations of the antitrust laws 
     have been found, or in the negotiated settlement of antitrust 
     cases before full adjudication has occurred.''
       (3) The vast majority of people living in developing 
     countries or least developed nations have limited or no 
     access to many medicines that are saving and extending lives 
     of those in other, more developed nations. Since sales of the 
     patented, brand-name versions of such medicines are minimal 
     or non-existent in many impoverished regions of the world 
     providing generic versions of those medicines under the WTO 
     General Council Decision will have minimal impact on the 
     sales of brand-name, patented versions in such regions.
       (4) The World Health Organization has estimated that \1/3\ 
     of the world's population lacks regular access to essential 
     medicines, including antiretroviral drugs, and that a number 
     of essential medicines are under patent.
       (5) Medicines and vaccines are needed throughout the world 
     to combat newly arising public health threats such as the 
     avian flu. A United States National Intelligence Estimate in 
     January 2000 notes that ``New and emerging infectious 
     diseases will pose a rising global health threat...''.
       (6) Millions of people with HIV/AIDS in developing 
     countries need antiretroviral drugs. More than 40,000,000 
     people worldwide have HIV and 95 percent of them live in 
     developing countries. Malaria, tuberculosis, and other 
     infectious diseases kill millions of people a year in 
     developing nations.
       (7) Comprehensive reports of the World Health Organization 
     of the United Nations, in 2004 and 2005 detail the urgent 
     need for pharmaceutical products in developing countries and 
     in least developed nations.
       (8) The World Trade Organization decisions of August 30, 
     2003, on access to generic medicines is now being considered 
     by member nations of the World Trade Organization for 
     ratification as a permanent amendment to the WTO Agreement on 
     Trade Related Aspects of Intellectual Property Rights.

     SEC. 3. EXPORTATION OF PHARMACEUTICAL PRODUCTS FOR PUBLIC 
                   HEALTH PURPOSES.

       (a) In General.--Chapter 29 of title 35, United States 
     Code, is amended by inserting after section 297 the 
     following:

     ``Sec. 298. Exportation of pharmaceutical products for public 
       health purposes

       ``(a) Definitions.--In this section:
       ``(1) Eligible country.--The term `eligible country' means 
     a country that--
       ``(A)(i) is designated by the United Nations as a least 
     developed country; or
       ``(ii) if not so designated--
       ``(I) has certified to the General Council that the country 
     seeks to participate in the compulsory licensing system under 
     this section as authorized by the General Council Decision; 
     or
       ``(II) has certified through an official government finding 
     if not a member of the World Trade Organization, that the 
     country does not possess sufficient manufacturing capacities 
     to produce the pharmaceutical product that such country seeks 
     to import under this section;
       ``(B) has provided notice to the Director describing such 
     lack of sufficient manufacturing capacities; and
       ``(C) has not terminated that country's participation in 
     such compulsory licensing system by certifying to the General 
     Council or to the Director that it no longer desires to 
     participate in such a system.
       ``(2) General council.--The term `General Council' means 
     the General Council of the WTO established by paragraph (2) 
     of Article IV of the Agreement Establishing the World Trade 
     Organization entered into on April 15, 1994.
       ``(3) General council decision.--The term `General Council 
     Decision' means the decision of the General Council of 30 
     August 2003 on the Implementation of Paragraph 6 of the Doha 
     Declaration on the TRIPS Agreement and Public Health and the 
     WTO General Council Chairman's statement accompanying the 
     Decision (JOB(03)/177, WT/GC/M/82) (collectively known as the 
     `TRIPS/health solution').
       ``(4) Generic manufacturer.--The term `generic 
     manufacturer' means, with respect to a pharmaceutical 
     product, a manufacturer that does not hold the patent to such 
     pharmaceutical product or is not otherwise authorized by the 
     patent holder to make use of the invention.
       ``(5) Pharmaceutical product.--The term `pharmaceutical 
     product' means any patented product, or pharmaceutical 
     product, including components of that product, manufactured 
     through a patented process, of the pharmaceutical sector 
     including any drug, active ingredient of a drug, diagnostic, 
     or vaccine needed to prevent or treat potentially life 
     threatening public health problems, including those listed in 
     Paragraph 6 of

[[Page 9663]]

     the Doha Declaration on the TRIPS Agreement and Public 
     Health.
       ``(6) TRIPS agreement.--The term `TRIPS Agreement' means 
     the Agreement on Trade-Related Aspects of Intellectual 
     Property Rights (described in section 101(d)(15) of the 
     Uruguay Round Agreements Act (19 U.S.C. 3501 note)).
       ``(7) World trade organization.--The term `World Trade 
     Organization' means the organization established pursuant to 
     the WTO Agreement.
       ``(8) WTO agreement.--The term `WTO Agreement' means the 
     Agreement Establishing The World Trade Organization entered 
     into on April 15, 1994.
       ``(9) WTO.--The term `WTO' has the meaning given that term 
     in section 2 of the Uruguay Round Agreements Act (19 U.S.C. 
     3501).
       ``(10) Uruguay round agreements.--The term `Uruguay Round 
     Agreements' has the meaning given such term in section 2(7) 
     of the Uruguay Round Agreements Act (19 U.S.C. 3501(7)).
       ``(b) Issuance of Compulsory License.--Notwithstanding any 
     other provision of part II or this part, and subject to 
     subsections (c) and (d), the Director shall issue a 
     compulsory license to a generic manufacturer of a 
     pharmaceutical product or a patented product under this 
     section consistent with the Life-Saving Medicines Export Act 
     of 2006 for the purposes of--
       ``(1) manufacturing and exporting to an eligible country, 
     (including using nongovernmental agencies to assist in 
     handling and distribution to eligible countries) such 
     pharmaceutical products, including exporting for the purpose 
     of foreign testing and certification and other activities 
     reasonable related to such manufacturing and exporting; and
       ``(2) such other purposes under that Act.
       ``(c) Application for Compulsory License.--
       ``(1) In general.--
       ``(A) Submission.--Except as provided under subsection (g), 
     a generic manufacturer that seeks to manufacture and export a 
     pharmaceutical product to an eligible country (including 
     through the use of a nongovernmental organization) shall 
     submit to the Director an application as developed by the 
     Director for a compulsory license as described in this 
     section.
       ``(B) Assistance.--The Director shall establish an office 
     within the Patent and Trademark Office to assist--
       ``(i) applicants under this section, including aiding 
     persons in identifying what patents cover which 
     pharmaceutical products and in providing other advice and 
     guidance to facilitate the filing of complete applications; 
     and
       ``(ii) eligible countries, nongovernmental organizations, 
     or nations likely to become eligible countries, identify 
     companies in the United States which could provide 
     pharmaceutical products under this section to such countries.
       ``(2) Content of application.--The Director shall approve 
     an application submitted under paragraph (1) if such 
     application contains--
       ``(A) the name of the pharmaceutical product to be 
     manufactured and exported under the license;
       ``(B) an estimate of the quantities of the pharmaceutical 
     product to be manufactured and exported under the license and 
     a stipulation that the amount manufactured and exported shall 
     not exceed the amount necessary to meet the needs of the 
     eligible country;
       ``(C) for each patented invention to which the application 
     relates--
       ``(i) the name of the patent holder and the applicable 
     patent number; or
       ``(ii) a statement by the applicant on information and 
     belief of the name of the patent holder and applicable patent 
     number;
       ``(D) the name of the eligible country to which the 
     pharmaceutical product will be exported and the name of any 
     nongovernmental organization which will assist in the effort;
       ``(E)(i) copies of the notifications of the eligible 
     countries that are member countries of the WTO, as defined in 
     the General Council Decision, made to the Council for TRIPS 
     regarding notifications set forth under 2(a) of such 
     Decision; and
       ``(ii) for eligible countries that are not member countries 
     of the WTO, a copy of the information required by the 
     notification as set forth under 2(a) of such Decision 
     published on a public website and the address of such 
     website;
       ``(F) a copy of a written request for a voluntary license 
     sent by registered mail to each patent holder, which shall 
     have occurred during a period of at least 60 days before the 
     submission of the application to the Director, and a brief 
     description of any subsequent negotiations;
       ``(G) copies of--
       ``(i) notifications required under the General Counsel 
     Decision;
       ``(ii) the name of the authorized designated official of 
     the eligible country, or a nongovernmental organization duly 
     authorized to assist in the distribution of pharmaceutical 
     products--

       ``(I) from whom the generic manufacturer has received a 
     specific request for a pharmaceutical product and is taking 
     steps to prepare such product or related products; or
       ``(II) with whom the generic manufacturer has reached an 
     agreement to manufacture and export the pharmaceutical 
     product; or

       ``(iii) a copy of a valid license, other authorization, or 
     communication issued by a potential eligible country 
     permitting import of the pharmaceutical product from the 
     United States; and
       ``(H) an agreement or understanding entered into by the 
     applicant to comply with the conditions described under 
     subsection (d) and with the provisions of the General Council 
     Decisions; and
       ``(I) any additional information reasonably required by the 
     Director, including information necessary to ensure the 
     identification of the product that is the subject of the 
     application.
       ``(3) Combined license applications.--The Director may--
       ``(A) establish procedures to permit a combined license 
     application from more than 1 eligible country;
       ``(B) issue a multi-country license if appropriate;
       ``(C) issue rules based on the requirements of this section 
     relating to separate country applicants, in consultation with 
     the National Advisory Board on Implementation of the General 
     Council Decision established under section 5 of the Life-
     Saving Medicines Export Act of 2006, except for modifications 
     made to accommodate applying the rules for 1 country to 
     applications filed by more than 1 eligible country in the 
     same filing; and
       ``(D) waive any record keeping, application, or related 
     provision of this subsection to the extent necessary to 
     implement this paragraph for any combined application from 
     multiple countries.
       ``(4) Action by director.--
       ``(A) In general.--Not later than 60 days after the 
     submission of an application, the Director shall approve or 
     deny that application.
       ``(B) Conditional denial.--The Director may deny an 
     application and request additional information or evidence to 
     be submitted within 30 days after making the request. If 
     additional information or evidence is submitted within the 
     30-day period, the Director shall make a final approval or 
     denial of the application within 60 days after the date of 
     submission of the additional information or evidence.
       ``(5) Appeal of denial.--An applicant may seek review of a 
     final adverse decision of the Director, including any adverse 
     decision based on failure to comply with any provision of 
     paragraph (2) in the United States Court of Appeals for the 
     Federal Circuit. The judgement of such court shall be subject 
     to final review by the Supreme Court upon certiorari in the 
     manner prescribed in section 1254 of title 28. The United 
     States Court of Appeals for the Federal Circuit shall decide 
     all relevant questions of law, provide appropriate orders, 
     relief, or judgments, and shall hold unlawful and set aside 
     any determination of the Director that the court finds to 
     be--
       ``(A) arbitrary, capricious, an abuse of discretion, 
     inconsistent with this section, or otherwise not in 
     accordance with law;
       ``(B) contrary to constitutional right, power, privilege, 
     or immunity;
       ``(C) in excess of statutory jurisdiction, authority, or 
     limitations, or in violation of a statutory right; or
       ``(D) without observance of procedure required by law.
       ``(d) Conditions of License.--Under rules issued by the 
     Director, the following conditions shall apply to a 
     compulsory license issued under this section:
       ``(1) The pharmaceutical product--
       ``(A) shall be a generic version of a patented product 
     approved as safe and efficacious by the World Health 
     Organization of the United Nations or the United States Food 
     and Drug Administration; and
       ``(B) shall be manufactured solely for export to the 
     eligible country listed in the application under subsection 
     (c); and
       ``(C) shall not be exported to any other country except for 
     nation parties to a regional trade agreement as set forth in 
     paragraph 6(i) of the General Council Decision.
       ``(2) The pharmaceutical product, or the label or packaging 
     of the pharmaceutical product, for export shall be--
       ``(A) clearly identified as being produced under the system 
     set out in the General Council Decision; and
       ``(B) distinguished from the pharmaceutical product or its 
     label or packaging manufactured by the patent holder through 
     labeling, shaping, sizing, marking, special packaging, or 
     other means or combinations of means, which shall be 
     consistent with paragraph 2(b)(ii) of the General Council 
     Decision and include--
       ``(i) a statement that such pharmaceutical product has been 
     manufactured solely for export to the specific eligible 
     country or to nation parties to a regional trade agreement as 
     provided for in paragraphs 6(i) and 6(ii) of the General 
     Council Decision and is not approved for marketing in the 
     United States;
       ``(ii) a statement indicating that the pharmaceutical 
     product is subject to a compulsory license issued to the 
     generic manufacturer; and
       ``(iii) any other markings determined appropriate by the 
     Director to distinguish such

[[Page 9664]]

     pharmaceutical product from the patented pharmaceutical 
     product, which may include a different trademark name or 
     distinctive color or shaping, so long as--

       ``(I) such distinction is feasible and does not have a 
     significant impact on price and will not undermine the 
     humanitarian purposes of the Life-Saving Medicines Export Act 
     of 2006; and
       ``(II) the Director may temporarily waive the requirements 
     of the distinguishing marks under urgent circumstances for 
     limited quantities of such pharmaceutical products.

       ``(3) The term of such compulsory license shall expire on 
     the date that is the earliest of--
       ``(A) 7 years after the date of issuance of the license;
       ``(B) the date the importing country is no longer an 
     eligible country; or
       ``(C) on a petition from the original patent holder, on the 
     date that the Director, in consultation with the National 
     Advisory Board on Implementation of the General Council 
     Decision established under section 5 of the Life-Saving 
     Medicines Export Act of 2006, determines that the 
     circumstances that have led to the granting of the license 
     cease to exist and it appears probable that such 
     circumstances will not reoccur.
       ``(4) The licensee shall keep accurate records of all 
     quantities of products manufactured and distributed under its 
     license and shall make such records available upon request to 
     an independent person agreed to by the parties, or otherwise 
     approved by the Director, for the sole purpose of ensuring 
     whether the terms of the license have been met.
       ``(5) A generic manufacturer issued a license under this 
     section may notify the Director if the estimated quantity of 
     the pharmaceutical product set forth in the application and 
     subsection (c)(2)(B) will be insufficient to meet the 
     projected need during the remainder of the license period. 
     The Director shall adjust the estimated quantity to the 
     quantity proposed by the licensee unless compelling evidence 
     demonstrates that the proposed quantity is excessive.
       ``(e) Compensation to Patent Holder.--
       ``(1) In general.--The holder of a compulsory license under 
     this section shall pay to the patent holder a royalty in an 
     amount and by a date determined by the Director that shall 
     not be --
       ``(A) earlier than the date of each shipment for export of 
     the pharmaceutical product under the compulsory license; or
       ``(B) later than 45 days after the date of each shipment.
       ``(2) Amount of royalty.--In consultation with the 
     Secretary of Health and Human Services, the Director of the 
     National Institutes of Health, the Director of the United 
     States Agency for International Development, and the Director 
     of the Centers of Disease Control, the Director, when 
     determining a royalty amount under paragraph (1), shall 
     consider the following:
       ``(A) The provisions of paragraph 3 of the General Council 
     Decision and the need for the licensee under this section to 
     make a reasonable return sufficient to sustain a continued 
     participation in humanitarian objectives.
       ``(B) The humanitarian and noncommercial reasons for 
     issuing a compulsory license under this section.
       ``(C) The economic value to the importing country of the 
     use that has been authorized by the Director.
       ``(D) The need for low-cost pharmaceutical products by 
     persons in eligible countries.
       ``(E) Whether the importing country has a patent applicable 
     to the pharmaceutical product sought to be imported under 
     this section.
       ``(F) The ordinary levels of profitability in the United 
     States, of commercial agreements involving pharmaceutical 
     products, and any relevant international trends in relevant 
     prices as reported by the United Nations or other appropriate 
     humanitarian organizations or agencies for the supply of such 
     products for humanitarian purposes.
       ``(3) Royalty rate formulas.--
       ``(A) In general.--
       ``(i) Factors.--Except as provided in subparagraph (B), the 
     amount of the royalty payable to any patentee under this 
     subsection--

       ``(I) shall be based on considerations under paragraph (2); 
     and
       ``(II) shall not exceed the amount determined by 
     multiplying the commercial value of the pharmaceutical 
     product to be exported under the supply agreement by 4 
     percent.

       ``(ii) Multiple patentees.--If more than 1 patentee is due 
     a royalty for a pharmaceutical product under this section, 
     the amount of the royalty payable for the pharmaceutical 
     product shall be divided by the number of patentees.
       ``(B) Alternative royalty rate formula.--
       ``(i) In general.--

       ``(I) Establishment and use.--Subject to subclause (II), 
     the Director may establish and use an alternative royalty 
     rate formula under this subparagraph instead of the royalty 
     rate formula under subparagraph (A), if--

       ``(aa) the Director makes a determination that the 
     alternative royalty rate formula is more appropriate or 
     efficient to employ; and
       ``(bb) the alternative royalty rate formula is based on the 
     methodology described under clauses (ii) through (v).

       ``(II) Limitation.--If the royalty amount determined under 
     the alternative royalty rate formula under subclause (I) 
     exceeds the dollar amount determined by multiplying the 
     commercial value of the pharmaceutical product to be exported 
     under the supply agreement by 4 percent the royalty amount 
     shall be set at such dollar amount.

       ``(ii) Human development index countries.--If the name of 
     the country to which a pharmaceutical product is to be 
     delivered under this section is on the Human Development 
     Index maintained by the United Nations Development Program, 
     the rate for calculation of the royalty to be paid to any 
     patentee shall be determined by--

       ``(I) adding 1 to the total number of countries listed on 
     such Index;
       ``(II) subtracting from the sum determined under subclause 
     (I) the numerical rank on the Index of the country to which 
     the pharmaceutical product is to be exported;
       ``(III) dividing the difference determined under subclause 
     (II) by the total number of countries listed on the Index; 
     and
       ``(IV) multiplying the quotient determined under subclause 
     (III) by 0.04.

       ``(iii) Single and multiple patentees.--For a country 
     described under clause (ii), the amount of the royalty 
     payable to any patentee shall be determined--

       ``(I) if there is only 1 patentee, by multiplying the total 
     monetary value of the agreement pertaining to the 
     pharmaceutical product to be exported under this section by 
     the royalty rate determined in accordance with clause (ii); 
     and
       ``(II) if there is more than 1 patentee, by dividing the 
     amount determined under subclause (I) by the number of 
     patentees.

       ``(iv) Countries not on human development index.--If the 
     name of the country to which a pharmaceutical product is to 
     be delivered under this section is not on the Human 
     Development Index maintained by the United Nations 
     Development Program, the Director shall--

       ``(I) determine if relevant circumstances in that country 
     are reasonably similar to another country on that Human 
     Development Index;
       ``(II) if determining a similar country under subclause 
     (I), use the procedures under clause (ii) to determine a 
     royalty payment using the numerical rank of that other 
     country; and
       ``(III) if determining a royalty rate under subclause (II), 
     state the reasons for making the determination that the 
     country to which the product is to be exported was reasonably 
     similar to the country on such Index used in the calculation.

       ``(v) Regional trade agreements.--If the Director knows 
     during review of an application that the pharmaceutical 
     products are to be delivered under this section to parties to 
     a regional trade agreement where re-exportation is allowed 
     under paragraph 6(i) and (ii) of the General Council 
     Decision, the Director shall--

       ``(I) determine if relevant circumstances in those 
     countries are reasonably similar to a country on the Human 
     Development Index;
       ``(II) if determining a similar country under subclause 
     (I), use the procedures under clause (ii) to determine a 
     royalty payment based on the numerical rank of that other 
     country; and
       ``(III) if determining a royalty rate under subclause 
     (III), shall state the reasons for making the determination 
     that the countries to which the products are to be re-
     exported under paragraph 6(i) and (ii) of such Decision were 
     reasonably similar to the country selected on such Index.

       ``(4) Notice of shipments.--Before each shipment of any 
     product manufactured under this section, the manufacturer 
     shall, within 15 days before such product is exported, 
     provide notice through registered mail specifying the 
     approximate quantity to be exported to--
       ``(A) the patentee;
       ``(B) the purchaser of the product; and
       ``(C) the Director.
       ``(f) Renewal of Compulsory License.--
       ``(1) In general.--A generic manufacturer that is the 
     holder of a compulsory license under this section may submit 
     to the Director an application to renew the compulsory 
     license.
       ``(2) Content of renewal application.--An application under 
     paragraph (1) shall contain--
       ``(A) an assurance that the quantities of the 
     pharmaceutical product authorized to be exported under the 
     renewal compulsory license will not be exported before such 
     original compulsory license ceases to be valid;
       ``(B) an assurance that the applicant has complied with the 
     terms, conditions, and royalty payment required under this 
     section; and
       ``(C) any other information that the Director may 
     reasonably require.
       ``(3) Timing of renewal.--An application for renewal shall 
     be submitted to the Director not later than 45 days before 
     the expiration date of the compulsory license.
       ``(4) Term of renewal.--The term of a renewed compulsory 
     license shall not exceed the term of the original compulsory 
     license.
       ``(5) Limitation.--A compulsory license may not be renewed 
     more than once.

[[Page 9665]]

       ``(g) Effect of Section.--To the extent authorized in 
     Article 31(b) of the TRIPS Agreement, nothing in this section 
     shall be construed as requiring an effort to obtain a 
     voluntary license in the event of--
       ``(1) a national emergency or other circumstances of 
     extreme urgency in the eligible country; or
       ``(2) a public noncommercial governmental use.
       ``(h) Emergencies and Circumstances of Extreme Urgency.--
       ``(1) Expedited approval.--
       ``(A) In general.--The Director may provide approval on an 
     expedited basis for a limited period of time to grant a 
     compulsory license regarding a pharmaceutical product to a 
     generic manufacturer to address a national emergency or other 
     circumstances of extreme urgency under such expedited 
     procedures as the Director determines appropriate.
       ``(B) Procedures.--Procedures under this paragraph may 
     include--
       ``(i) waiving any requirement to seek a voluntary license 
     from the patent holder; and
       ``(ii) delaying the determination of compensation until 
     after an approval is made.
       ``(2) Waiver.--In carrying out expedited approvals under 
     this subsection, the Director may temporarily waive any 
     provision of this section.
       ``(i) Notification to WTO.--The Director shall notify the 
     WTO of the issuance, termination, or renewal of a compulsory 
     license under this section and of the name and address of the 
     licensee, the product for which the license has been granted, 
     the quantities for which it has been granted, and the 
     countries to which the product is to be supplied.''.
       (b) Establishment of Procedures.--
       (1) In general.--The Under Secretary of Commerce for 
     Intellectual Property and Director of the United States 
     Patent and Trademark Office (referred to in this section as 
     the ``Director'') shall establish procedures for implementing 
     this Act and the amendments made by this Act.
       (2) Report.--The Director shall annually submit to the 
     Committee on the Judiciary of the Senate and the Committee on 
     the Judiciary of the House of Representatives a report that 
     describes the activities related to the implementation of 
     this Act and the amendments made by this Act.
       (3) Regulations.--The Director may issue such regulations 
     as are necessary and appropriate to carry out this Act and 
     the amendments made by this Act.
       (c) Technical and Conforming Amendment.--The table of 
     sections for chapter 29 of title 35, United States Code, is 
     amended by adding after the item relating to section 297 the 
     following:

``298. Exportation of pharmaceutical products for public health 
              purposes.''.

     SEC. 4. NONINFRINGEMENT OF PATENT.

       Section 271 of title 35, United States Code, is amended--
       (1) by redesignating subsections (h) and (i) as subsections 
     (i) and (j), respectively; and
       (2) by inserting after subsection (g) the following:
       ``(h)(1) It shall not be an act of infringement to 
     manufacture within the United States or for export outside 
     the United States any patented invention relating to a 
     pharmaceutical product (as defined under section 298) by any 
     person that--
       ``(A) is issued a compulsory license to manufacture and 
     sell that drug under section 298; and
       ``(B) manufactures and exports that drug in compliance with 
     all conditions of that license.
       ``(2) Subsection (d) (4) or (5) shall not apply to any 
     patent affected by a license described under paragraph (1) of 
     this subsection.''.

     SEC. 5. NATIONAL ADVISORY BOARD ON IMPLEMENTATION OF THE 
                   GENERAL COUNCIL DECISION.

       (a) Definitions.--In this section:
       (1) Board.--The term ``Board'' means the National Advisory 
     Board on Implementation of the General Council Decision 
     established under this section.
       (2) Director.--The term ``Director'' means the Under 
     Secretary of Commerce for Intellectual Property and Director 
     of the United States Patent and Trademark Office.
       (3) Eligible country.--The term ``eligible country'' means 
     a country that--
       (A)(i) is designated by the United Nations as a least 
     developed country; or
       (ii) if not so designated, does not possess sufficient 
     manufacturing capacities to produce the pharmaceutical 
     product that such country seeks to import under section 298 
     of title 35, United States Code (as added by this Act); and
       (B) has provided notice to the Director describing such 
     lack of sufficient manufacturing capacities.
       (4) General council.--The term ``General Council'' means 
     the General Council of the WTO established by paragraph (2) 
     of Article IV of the Agreement Establishing the World Trade 
     Organization entered into on April 15, 1994.
       (5) General council decision.--The term ``General Council 
     Decision'' means the decision of the General Council of 30 
     August 2003 on the Implementation of Paragraph 6 of the Doha 
     Declaration on the TRIPS Agreement and Public Health and the 
     WTO General Council Chairman's statement accompanying the 
     Decision (JOB(03)/177, WT/GC/M/82) (collectively known as the 
     ``TRIPS/health solution'').
       (6) Generic manufacturer.--The term ``generic 
     manufacturer'' means, with respect to a pharmaceutical 
     product, a manufacturer that does not hold the patent to such 
     pharmaceutical product or is not otherwise authorized by the 
     patent holder to make use of the invention.
       (7) Pharmaceutical product.--The term ``pharmaceutical 
     product'' means any patented pharmaceutical product, or 
     pharmaceutical product manufactured through a patented 
     process, including any drug, active ingredient of a drug, 
     diagnostic, or vaccine needed to prevent or treat public 
     health problems.
       (8) TRIPS agreement.--The term ``TRIPS Agreement'' means 
     the Agreement on Trade-Related Aspects of Intellectual 
     Property Rights (described in section 101(d)(15) of the 
     Uruguay Round Agreements Act (19 U.S.C. 3501 note)).
       (9) World trade organization.--The term ``World Trade 
     Organization'' means the organization established pursuant to 
     the WTO Agreement.
       (10) WTO agreement.--The term ``WTO Agreement'' means the 
     Agreement Establishing The World Trade Organization entered 
     into on April 15, 1994.
       (11) WTO.--The term ``WTO'' has the meaning given that term 
     in section 2 of the Uruguay Round Agreements Act (19 U.S.C. 
     3501).
       (12) Uruguay round agreements.--The term ``Uruguay Round 
     Agreements'' has the meaning given such term in section 2(7) 
     of the Uruguay Round Agreements Act (19 U.S.C. 3501(7)).
       (b) Establishment.--The Director shall establish the 
     National Advisory Board on Implementation of the General 
     Council Decision in accordance with the Federal Advisory 
     Committee Act (5 U.S.C. App.) to provide advice and guidance 
     regarding the implementation and administration of the 
     compulsory licensing program established under section 298 of 
     title 35, United States Code (as added by this Act), 
     including royalty amounts to be determined under that 
     section.
       (c) Composition of the Board.--The Board shall be composed 
     of 10 members, of which--
       (1) 1 shall be an individual who is an academic expert on 
     the subject of pharmaceutical matters and patent law;
       (2) 2 shall be an individual with expertise relating to the 
     WTO, the TRIPS/health solution, and the General Council 
     Decision;
       (3) 2 shall be an individual with expertise relating to the 
     needs of persons living in least-developed and developing 
     nations with respect to access to low-cost patented 
     pharmaceutical products;
       (4) 2 shall be individuals who represent international 
     organizations, such as the United Nations, the World Bank, 
     international nongovernmental organizations, and religious 
     faiths, and who have expert knowledge regarding the General 
     Council Decision and the issues raised by that decision;
       (5) 1 shall be a physician with experience in treating 
     persons with HIV/AIDS, malaria, tuberculosis, or other 
     infectious diseases;
       (6) 1 shall be an individual representing major 
     pharmaceutical manufacturers in the United States; and
       (7) 1 shall be an individual representing major generic 
     manufacturers of pharmaceutical products in the United 
     States.
       (d) Appointments.--Not later than 120 days after the date 
     of enactment of this Act, the Director, in consultation with 
     the Director of the National Institutes of Health (or a 
     designee), the Director of the United States Agency for 
     International Development (or a designee), and the Director 
     of the Centers for Disease Control (or a designee) shall 
     appoint--
       (1) the members of the Board described under subsection 
     (c)(1), (5), (6), and (7)--
       (A) from nominations received from a request for 
     applications published in the Federal Register; and
       (B) after engaging in other efforts to make institutions of 
     higher education within the United States, international 
     organizations, and groups representing the medical profession 
     aware of the solicitation for nominations;
       (2) 1 member of the Board described under subsection 
     (c)(2), from recommendations of the Majority Leader of the 
     Senate;
       (3) 1 member of the Board described under subsection 
     (c)(2), from recommendations of the Minority Leader of the 
     Senate;
       (4) 1 member of the Board described under subsection (c)(3) 
     from recommendations of the Speaker of the House of 
     Representatives;
       (5) 1 member of the Board described under subsection (c)(3) 
     from recommendations of the Minority Leader of the House of 
     Representatives; and
       (6) 2 members of the Board described under subsection 
     (c)(4) from recommendations of the Secretary of State in 
     consultation with the United States Ambassador to the United 
     Nations.
       (e) Term.--A member of the Board shall serve for a term of 
     4 years, except that the Director shall appoint the original 
     members of the Board for staggered terms of not more

[[Page 9666]]

     than 4 years. A member may not serve a consecutive term 
     unless such member served an original term that was less than 
     4 years.
       (f) Meetings.--The Director shall convene--
       (1) a meeting of the Board not later than 60 days after the 
     appointment of its members;
       (2) subsequent meetings on a periodic basis; and
       (3) at least 2 meetings a year during the first 4 years 
     after the date of enactment of this Act.
       (g) Compensation and Expenses.--A member of the Board shall 
     serve without compensation. While away from their homes or 
     regular places of business on the business of the Board, 
     members of the Board may be allowed travel expenses, 
     including per diem in lieu of subsistence, as is authorized 
     under section 5703 of title 5, United States Code, for 
     persons employed intermittently in the Government service.
       (h) Chairperson.--The Board shall select a chairperson for 
     the Board.
       (i) Quorum.--A majority of the members of the Board shall 
     constitute a quorum for the purpose of conducting business.
       (j) Decisive Votes.--Two-thirds of the votes cast at a 
     meeting of the Board at which a quorum is present shall be 
     decisive of any motion.
       (k) Other Terms and Conditions.--The Director shall 
     authorize the Board to hire a staff director and shall detail 
     staff of the Patent and Trademark Office or allow for the 
     hiring of other staff and may pay necessary expenses incurred 
     by the Board in carrying out this section. The Director shall 
     provide technical assistance, work space, facilities, and 
     other amenities to facilitate the meetings and operations of 
     the Board. The Director, or designated staff, may attend any 
     such meetings and provide advice and guidance.
       (l) Responsibilities of Board.--
       (1) In general.--The Board shall provide recommendations to 
     the Director on the implementation of section 298 of title 
     35, United States Code (as added by this Act), including the 
     appropriate royalty rates for compensating patent holders 
     under that section.
       (2) Technical advisory panels.--The Board may convene 
     technical advisory panels to provide scientific, legal, 
     international, economic, and other information to the Board.
       (m) Evaluation and Reports.--
       (1) In general.--The Board shall evaluate the 
     implementation and administration of section 298 of title 35, 
     United States Code (as added by this Act), and shall provide 
     periodic and special reports to the Director, the Secretary 
     of Health and Human Services, the National Institutes of 
     Health, the Director of the Centers for Disease Control, and 
     to the Committee on the Judiciary of the Senate and the 
     Committee on the Judiciary of the House of Representatives.
       (2) Duties.--If the Director uses the compensation method 
     under section 298(e)(3)(A) of title 35, United States Code 
     (as added by this Act), the Board shall--
       (A) not later than 160 days after the date of enactment of 
     this Act, begin to gather information regarding proposals for 
     the compensation of patent holders and shall carefully 
     examine various compensation options;
       (B) not later than 240 days after the date of enactment of 
     this Act, submit preliminary recommendations to the entities 
     and officers described under paragraph (1);
       (C) advise the Director on various matters raised by the 
     Director;
       (D) submit a report to the Director, the Committee on the 
     Judiciary of the Senate and the Committee on the Judiciary of 
     the House of Representatives at least once each year on--
       (i) recommendations for improving procedures or the 
     administration of the program established under that section; 
     and
       (ii) other factual or policy matters which may provide 
     guidance or assistance to those Committees; and
       (E) submit a report to the Director and the Committee on 
     the Judiciary of the Senate and the Committee on the 
     Judiciary of the House of Representatives on--
       (i) the advantages and disadvantages which might result 
     from allowing nongovernmental organizations to be able to 
     apply to obtain a compulsory license under procedures similar 
     to those set forth in that section for such countries where 
     the national government declines to apply for such a license, 
     including an analysis of whether World Trade Organization 
     understandings would permit such an approach and how such an 
     approach might be implemented; and
       (ii) whether this Act provides sufficient economic 
     incentives to generic companies for the research and 
     development of new generic products.
       (n) Petitions.--The Board shall establish procedures under 
     which persons may petition the Board for the purpose of 
     evaluating various issues related to the implementation and 
     administration of section 298 of title 35, United States Code 
     (as added by this Act).
       (o) Confidentiality.--Any confidential business information 
     obtained by the Board in carrying out this section shall not 
     be released to the public.
       (p) Appropriations.--
       (1) Amounts of appropriations.--There are appropriated out 
     of any money in the Treasury not otherwise appropriated to 
     the United States Patent and Trademark Office for purposes of 
     carrying out paragraph (2)--
       (A) $1,500,000 for the fiscal year ending September 30, 
     2007;
       (B) $1,500,000 for the fiscal year ending September 30, 
     2008;
       (C) $1,300,000 for the fiscal year ending September 30, 
     2009;
       (D) $1,100,000 for the fiscal year ending September 30, 
     2010; and
       (E) $900,000 for the fiscal year ending September 30, 2011.
       (2) Use of appropriations.--Amounts appropriated under 
     paragraph (1) shall be used for the expenses and activities 
     of the Board under this section, except no more than $200,000 
     of such amounts in each fiscal year may be used for the 
     expenses and activities of the Office established under 
     section 298(c)(B) of title 35, United States Code (as added 
     by this Act). Such amounts not obligated in any fiscal year 
     may be carried over into subsequent fiscal years, except that 
     any amounts not obligated by September 30, 2011, shall be 
     provided to the Secretary of the Treasury to be returned to 
     the United States Treasury.
       (q) Termination.--The Board shall terminate on September 
     30, 2011.
                                 ______
                                 
      By Mr. REID (for Mr. Rockefeller):
  S. 3176. A bill to protect the privacy of veterans and spouses of 
veterans affected by the security breach at the Department of Veterans 
Affairs on May 3, 2006, and for other purposes; to the Committee on 
Banking, Housing, and Urban Affairs.
  (At the request of Mr. Reid, the following statement was ordered to 
be printed in the Record.)

 Mr. ROCKEFELLER. Mr. President, every American has the 
justifiable expectation that the Federal Government will protect their 
private personal information--information that they are required to 
provide to a Federal agencies. It is a basic and fundamental 
responsibility of government to make sure that this sensitive data is 
handled appropriately, accessed only by authorized personal, and used 
only for intended purposes.
  Earlier this week, the Veterans Administration, VA, announced that 
computer disks containing as many as 26.5 million veterans' personal 
information were stolen from an employee who had taken the information 
home. I, along with many of my colleagues, am outraged at this enormous 
lapse in security. The Veterans Administration must make sure that 
veterans are not harmed because of the agency's failure to protect 
sensitive personal data.
  This information includes veterans' social security numbers and dates 
of birth, the underpinnings of almost all of our financial information. 
In the wrong hands, this information can be used to steal a person's 
identity causing substantial harm. All of us have constituents who have 
been victims of identity theft. When a person's identity is stolen, it 
can have devastating financial consequences for that person and that 
family. Even if the financial harm is minimal, it often takes years to 
clear your name. For our nation's veterans, many of whom are older and 
disabled, identity theft poses even greater problems.
  I understand that the Veterans Administration has launched an 
internal investigation, but Congress must also conduct a thorough 
investigation into how this security breach occurred. I want to know 
why the Veterans Administration waited almost 3 weeks to inform our 
nation's veterans and Congress of this breach. In my opinion, it is 
inexcusable that veterans were not notified immediately that their 
personal information had been stolen and were not given any guidance as 
to the steps they should take to protect themselves from identity 
theft. I understand the Veterans Administration Inspector General has 
cited the agency for poor security policies and procedures. Congress 
must also begin a comprehensive review of the agency's security 
protocols and policies and force the agency to adopt stricter security 
measures to make sure that the personal data our veterans are required 
to provide the agency is not ever again at risk.
  It is for this reason that I am introducing the Veterans' Privacy 
Protection Act today. Although all Federal agencies need comprehensive 
data privacy policies, this is a targeted bill to address the security 
breach at the Veterans Administration on an urgent basis.

[[Page 9667]]

  Congress has required the Federal Trade Commission to address 
identity theft and its consequences. The agency has taken an aggressive 
approach in combating this devastating crime. My bill would require the 
Federal Trade Commission to develop a hotline explicitly for veterans 
to provide the information, counseling, and help necessary to allow a 
veteran to protect himself from the loss of personal data.
  At this point, our legislative response must cover all 26.5 million 
veterans that the Veterans Administration believes may have had their 
personal information compromised. If further investigations 
conclusively prove that fewer veterans are at-risk, my bill would 
target services and support to the affected individuals. To help 
veterans, my bill would make it easier for them to request a long-term 
credit alert for their records so credit agencies are aware that their 
personal information could be being used by others. It is my 
understanding that a security freeze on an individual's record can have 
a modest cost, and my bill would have the Veterans Administration cover 
that cost.
  Finally, my bill requires the General Accountability Office to 
evaluate the Veterans Administration response to this incident and to 
analyze the agency's security protocols. I believe that an independent 
investigation could generate a number of recommendations to improve the 
security of personal information not just in the Veterans 
Administration but in all Federal agencies.
  It is my great hope that a thorough investigation will find the 
criminals responsible for the theft and determine that they were only 
after the computer and not the millions of valuable private records of 
our veterans. If in fact these thieves were after our veterans' data, 
we will have a major catastrophe on our hands, inexcusably adding more 
hardship to the lives of those who have so ably served their country.
  Mr. President, today the Veterans Administration has failed our 
Nation's veterans. It is inconceivable to me how any Federal agency 
could have let this happen. We all have heard the stories during the 
past year regarding massive breaches of private and confidential data 
by private entities. The Federal Government acted quickly to respond to 
these breaches and now it must act just as quickly if not more so to 
address its own failings. My bill is a critical step in providing the 
necessary assistance that millions of veterans may require, and I urge 
my colleagues to act on it with the urgency this situation demands.
  I ask unanimous constent that text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3176

       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 ``Veterans Privacy Protection 
     Act of 2006''.

     SEC. 2. FEDERAL TRADE COMMISSION PROGRAM FOR VETERANS AN 
                   SPOUSES OF VETERANS AT RISK OF IDENTITY THEFT.

       (a) Program Required.--The Federal Trade Commission shall, 
     in consultation with the Secretary of Veterans Affairs, 
     develop and implement a program to provide financial 
     counseling and support to any veteran or spouse described in 
     subsection (e).
       (b) Access.--The program required by subsection (a) shall 
     be accessible through a toll-free telephone number (commonly 
     referred to as an ``800 number'') established and operated by 
     the Federal Trade Commission for purposes of the program.
       (c) Elements.--Under the program required by subsection 
     (a), the Federal Trade Commission shall--
       (1) provide to veterans and spouses described in subsection 
     (e) such financial and other counseling as the Commission 
     considers appropriate relating to identity theft and the 
     theft of data as described in that subsection; and
       (2) upon request of any veteran or spouse described in 
     subsection (e), assist such veteran or spouse in securing the 
     placement of an extended fraud alert or credit security 
     freeze under sections 605A(b)(3) and 605C of the Fair Credit 
     Reporting Act, as added by this Act, respectively.
       (d) Veterans Not Subject to Identity Theft.--
       (1) Notice to ftc of identification of veterans not subject 
     to identity theft.--Upon conclusively identifying any veteran 
     otherwise described in subsection (e) as not being at risk of 
     identity theft as described in that subsection, the Secretary 
     shall immediately notify the Federal Trade Commission of such 
     identification.
       (2) Notice to veterans.--The program required by subsection 
     (a) shall include mechanisms to ensure that any veteran who 
     seeks counseling and support under the program after receipt 
     by the Commission of notice under paragraph (1) covering such 
     veteran is informed that such veteran is no longer subject to 
     identity theft as described in subsection (e).
       (e) Applicability.--This section shall apply with respect 
     to--
       (1) any veteran, as defined in section 101 of title 38, 
     United States Code, who may be a victim of identity theft as 
     a result of the security breach at the Department of Veterans 
     Affairs on May 3, 2006; and
       (2) any spouse (or former spouse) of such veteran who the 
     Secretary of Veterans Affairs has conclusively identified as 
     being at risk of identity theft as a result of that security 
     breach.

     SEC. 3. EXTENDED CONSUMER CREDIT FRAUD ALERTS AND SECURITY 
                   FREEZES FOR VETERANS AND SPOUSES OF VETERANS 
                   AFFECTED BY SECURITY BREACH.

       (a) Automatic Fraud Alerts.--Section 605A(b) of the Fair 
     Credit Reporting Act (15 U.S.C. 1681c-1(b)) is amended by 
     adding at the end the following:
       ``(3) Automatic extended fraud alerts for certain 
     veterans.--
       ``(A) In general.--Upon the direct request of a veteran or 
     spouse described in subparagraph (D), each consumer reporting 
     agency described in section 603(p)(1) that maintains a file 
     on the veteran shall take the actions specified in 
     subparagraphs (A) through (C) of paragraph (1) with respect 
     to the veteran or spouse.
       ``(B) Automatic alerts.--Notwithstanding the requirements 
     of paragraph (1), a veteran or spouse described in 
     subparagraph (D) is not required to submit any identity theft 
     report, proof of identity, or other documentation with 
     respect to an extended fraud alert required by subparagraph 
     (A).
       ``(C) Veterans not subject to identity theft.--Upon 
     conclusively identifying any veteran as not being at risk of 
     identity theft as a result of the security breach described 
     in subparagraph (A)--
       ``(i) the Secretary of Veterans Affairs shall immediately 
     notify each consumer reporting agency and the veteran 
     involved that such veteran is no longer subject to identity 
     theft as a result of the security breach described in 
     subparagraph (A); and
       ``(ii) the requirements of subparagraph (A) shall no longer 
     apply with respect to any such veteran as of the date of such 
     notification.
       ``(D) Applicability.--This paragraph shall apply to--
       ``(i) each veteran, as defined in section 101 of title 38, 
     United States Code, who may be a victim of identity theft as 
     a result of the security breach at the Department of Veterans 
     Affairs on May 3, 2006; and
       ``(ii) each spouse (or former spouse) of such veteran who 
     the Secretary of Veterans Affairs has conclusively identified 
     as being at risk of identity theft as a result of that 
     security breach.''.
       (b) Security Freezes for Veterans.--The Fair Credit 
     Reporting Act (15 U.S.C. 1681 et seq.) is amended by 
     inserting after section 605B the following:

     ``SEC. 605C. SECURITY FREEZES FOR CERTAIN VETERANS.

       ``(a) Applicability.--This section shall apply with respect 
     to--
       ``(1) any veteran, as defined in section 101 of title 38, 
     United States Code, who may be a victim of identity theft as 
     a result of the security breach at the Department of Veterans 
     Affairs on May 3, 2006; and
       ``(2) any spouse (or former spouse) of such veteran who the 
     Secretary of Veterans Affairs has conclusively identified as 
     being at risk of identity theft as a result of that security 
     breach.
       ``(b) Security Freezes.--
       ``(1) Emplacement.--A veteran or spouse described in 
     subsection (a) may include a security freeze in the file of 
     that veteran or spouse maintained by a consumer reporting 
     agency described in section 603(p)(1), by making a request to 
     the consumer reporting agency in writing, by telephone, or 
     through a secure electronic connection made available by the 
     consumer reporting agency.
       ``(2) Consumer disclosure.--If a veteran or spouse 
     described in subsection (a) requests a security freeze under 
     this section, the consumer reporting agency shall disclose to 
     that person the process of placing and removing the security 
     freeze and explain to that veteran or spouse the potential 
     consequences of the security freeze. A consumer reporting 
     agency may not imply or inform a veteran or spouse that the 
     placement or presence of a security freeze on the file of 
     that veteran or spouse may negatively affect their credit 
     score.
       ``(c) Effect of Security Freeze.--
       ``(1) Release of information blocked.--If a security freeze 
     is in place in the file of a veteran or spouse described in 
     subsection (a),

[[Page 9668]]

     a consumer reporting agency may not release information from 
     the file of that veteran or spouse for consumer credit 
     purposes to a third party without prior express written 
     authorization from that veteran or spouse.
       ``(2) Information provided to third parties.--Paragraph (2) 
     does not prevent a consumer reporting agency from advising a 
     third party that a security freeze is in effect with respect 
     to the file of a veteran or spouse described in subsection 
     (a). If a third party, in connection with an application for 
     credit, requests access to a consumer file on which a 
     security freeze is in place under this section, the third 
     party may treat the application as incomplete.
       ``(3) Credit score not affected.--The placement of a 
     security freeze under this section may not be taken into 
     account for any purpose in determining the credit score of 
     the veteran or spouse to whom the security freeze relates.
       ``(d) Removal; Temporary Suspension.--
       ``(1) In general.--Except as provided in paragraph (4), a 
     security freeze under this section shall remain in place 
     until the veteran or spouse to whom it relates requests that 
     the security freeze be removed. A veteran or spouse may 
     remove a security freeze on his or her credit report by 
     making a request to the consumer reporting agency in writing, 
     by telephone, or through a secure electronic connection made 
     available by the consumer reporting agency.
       ``(2) Conditions.--A consumer reporting agency may remove a 
     security freeze placed in the file of a veteran or spouse 
     under this section only--
       ``(A) upon request of that veteran or spouse, pursuant to 
     paragraph (1); or
       ``(B) if the agency determines that the file of that 
     veteran or spouse was frozen due to a material 
     misrepresentation of fact by that veteran or spouse.
       ``(3) Notification to consumer.--If a consumer reporting 
     agency intends to remove a security freeze pursuant to 
     paragraph (2)(B), the consumer reporting agency shall notify 
     the veteran or spouse to whom the security freeze relates in 
     writing prior to removing the freeze.
       ``(4) Temporary suspension.--A veteran or spouse described 
     in subsection (a) may have a security freeze under this 
     section temporarily suspended by making a request to the 
     consumer reporting agency in writing or by telephone and 
     specifying beginning and ending dates for the period during 
     which the security freeze is not to apply.
       ``(e) Response Times; Notification of Other Entities.--
       ``(1) In general.--A consumer reporting agency shall--
       ``(A) place a security freeze in the file of a veteran or 
     spouse under subsection (b) not later than 5 business days 
     after receiving a request from the veteran or spouse under 
     subsection (b)(1); and
       ``(B) remove or temporarily suspend a security freeze not 
     later than 3 business days after receiving a request for 
     removal or temporary suspension from the veteran or spouse 
     under subsection (d).
       ``(2) Notification of other agencies.--A consumer reporting 
     agency shall notify all other consumer reporting agencies 
     described in section 603(p)(1) of a request under this 
     section not later than 3 days after placing, removing, or 
     temporarily suspending a security freeze in the file of the 
     veteran or spouse under subsection (b), (d)(2)(A), or (d)(4).
       ``(3) Implementation by other agencies.--A consumer 
     reporting agency that is notified of a request under 
     paragraph (2) to place, remove, or temporarily suspend a 
     security freeze in the file of a veteran or spouse shall--
       ``(A) request proper identification from the veteran or 
     spouse, in accordance with subsection (g), not later than 3 
     business days after receiving the notification; and
       ``(B) place, remove, or temporarily suspend the security 
     freeze on that credit report not later than 3 business days 
     after receiving proper identification.
       ``(f) Confirmation.--Except as provided in subsection 
     (c)(3), whenever a consumer reporting agency places, removes, 
     or temporarily suspends a security freeze at the request of a 
     veteran or spouse under subsection (b) or (d), respectively, 
     it shall send a written confirmation thereof to the veteran 
     or spouse not later than 10 business days after placing, 
     removing, or temporarily suspending the security freeze. This 
     subsection does not apply to the placement, removal, or 
     temporary suspension of a security freeze by a consumer 
     reporting agency because of a notification received under 
     subsection (e)(2).
       ``(g) ID Required.--A consumer reporting agency may not 
     place, remove, or temporarily suspend a security freeze in 
     the file of a veteran or spouse described in subsection (a) 
     at the request of the veteran or spouse, unless the veteran 
     or spouse provides proper identification (within the meaning 
     of section 610(a)(1)) and the regulations thereunder.
       ``(h) Exceptions.--This section does not apply to the use 
     of the file of a veteran or spouse described in subsection 
     (a) maintained by a consumer reporting agency by any of the 
     following:
       ``(1) A person or entity, or a subsidiary, affiliate, or 
     agent of that person or entity, or an assignee of a financial 
     obligation owing by the veteran or spouse to that person or 
     entity, or a prospective assignee of a financial obligation 
     owing by the veteran or spouse to that person or entity in 
     conjunction with the proposed purchase of the financial 
     obligation, with which the veteran or spouse has or had prior 
     to assignment an account or contract, including a demand 
     deposit account, or to whom the veteran or spouse issued a 
     negotiable instrument, for the purposes of reviewing the 
     account or collecting the financial obligation owing for the 
     account, contract, or negotiable instrument.
       ``(2) Any Federal, State, or local agency, law enforcement 
     agency, trial court, or private collection agency acting 
     pursuant to a court order, warrant, subpoena, or other 
     compulsory process.
       ``(3) A child support agency or its agents or assigns 
     acting pursuant to subtitle D of title IV of the Social 
     Security Act (42 U.S.C. et seq.) or similar State law.
       ``(4) The Department of Health and Human Services, a 
     similar State agency, or the agents or assigns of the Federal 
     or State agency acting to investigate medicare or medicaid 
     fraud.
       ``(5) The Internal Revenue Service or a State or municipal 
     taxing authority, or a State department of motor vehicles, or 
     any of the agents or assigns of these Federal, State, or 
     municipal agencies acting to investigate or collect 
     delinquent taxes or unpaid court orders or to fulfill any of 
     their other statutory responsibilities.
       ``(6) The use of consumer credit information for the 
     purposes of prescreening, as provided for under this title.
       ``(7) Any person or entity administering a credit file 
     monitoring subscription to which the veteran or spouse has 
     subscribed.
       ``(8) Any person or entity for the purpose of providing a 
     veteran or spouse with a copy of his or her credit report or 
     credit score upon request of the veteran or spouse.
       ``(i) Fees.--
       ``(1) In general.--Except as provided in paragraph (2), a 
     consumer reporting agency may charge a reasonable fee, for 
     placing, removing, or temporarily suspending a security 
     freeze in the file of the veteran or spouse described in 
     subsection (a), which cost shall be submitted to and paid by 
     the Department of Veterans Affairs, pursuant to procedures 
     established by the Secretary of Veterans Affairs.
       ``(2) ID theft victims.--A consumer reporting agency may 
     not charge a fee for placing, removing, or temporarily 
     suspending a security freeze in the file of a veteran or 
     spouse described in subsection (a), if--
       ``(A) the veteran or spouse is a victim of identity theft;
       ``(B) the veteran or spouse requests the security freeze in 
     writing;
       ``(C) the veteran or spouse has filed a police report with 
     respect to the theft, or an identity theft report (as defined 
     in section 603(q)(4), within 90 days after the date on which 
     the theft occurred or was discovered by the veteran or 
     spouse; and
       ``(D) the veteran or spouse provides a copy of the report 
     to the reporting agency.
       ``(j) Limitation on Information Changes in Frozen 
     Reports.--
       ``(1) In general.--If a security freeze is in place in the 
     file of a veteran or spouse described in subsection (a), the 
     consumer reporting agency may not change any of the following 
     official information in that file without sending a written 
     confirmation of the change to the veteran or spouse within 30 
     days after the date on which the change is made:
       ``(A) Name.
       ``(B) Date of birth.
       ``(C) Social Security number.
       ``(D) Address.
       ``(2) Confirmation.--Paragraph (1) does not require written 
     confirmation for technical modifications of the official 
     information of a veteran or spouse, including name and street 
     abbreviations, complete spellings, or transposition of 
     numbers or letters. In the case of an address change, the 
     written confirmation shall be sent to both the new address 
     and to the former address of the veteran or spouse.
       ``(k) Certain Entity Exemptions.--
       ``(1) Aggregators and other agencies.--The provisions of 
     this section do not apply to a consumer reporting agency that 
     acts only as a reseller of credit information by assembling 
     and merging information contained in the data base of another 
     consumer reporting agency or multiple consumer reporting 
     agencies, and does not maintain a permanent data base of 
     credit information from which new consumer credit reports are 
     produced.
       ``(2) Other exempted entities.--The following entities are 
     not required to place a security freeze in the file of a 
     veteran or spouse described in subsection (a) in accordance 
     with this section:
       ``(A) A check services or fraud prevention services 
     company, which issues reports on incidents of fraud or 
     authorizations for the purpose of approving or processing 
     negotiable instruments, electronic fund transfers, or similar 
     methods of payments.
       ``(B) A deposit account information service company, which 
     issues reports regarding account closures due to fraud, 
     substantial overdrafts, ATM abuse, or similar negative 
     information regarding such veteran or spouse, to inquiring 
     banks or other financial institutions for use only in 
     reviewing the request of such veteran or spouse for a deposit

[[Page 9669]]

     account at the inquiring bank or financial institution.''.
       (c) Fees.--Any fee associated with an extended fraud alert 
     or security freeze required by the amendments made by this 
     section that would otherwise be required to be paid by the 
     consumer shall be paid by the Department of Veterans Affairs.

     SEC. 4. PENALTIES FOR IDENTITY THEFT OF VETERANS.

       Section 1028 of title 18, United States Code, is amended--
       (1) in subsection (b), by striking ``The punishment for'' 
     and inserting the following ``Except as provided in 
     subsection (j), the punishment for''; and
       (2) by adding at the end the following:
       ``(j) Identity Theft of Veterans.--
       ``(1) In general.--In determining the punishment applicable 
     under subsection (b), if the offense is an offense described 
     in paragraph (2), the fine and term of imprisonment otherwise 
     applicable under subsection (b) shall be doubled.
       ``(2) Type of offense.--An offense described in this 
     paragraph is an offense under subsection (a) that--
       ``(A) involves any document or other information--
       ``(i) relating to a veteran (as defined in section 101 of 
     title 38) or a spouse of a veteran; and
       ``(ii) obtained as a direct or indirect result of the 
     security breach at the Department of Veterans Affairs on May 
     3, 2006; and
       ``(B) was committed after the date of enactment of this 
     subsection.''.

     SEC. 5. FUNDING.

       (a) Reimbursement.--The Secretary of Veterans Affairs shall 
     reimburse the Federal Trade Commission for any costs incurred 
     by the Commission in carrying out this Act and the amendments 
     made by this Act.
       (b) Availability of Funds.--Amounts appropriated to the 
     Secretary and available for obligation may be utilized for 
     purposes of reimbursement of the Federal Trade Commission 
     under subsection (a).

     SEC. 6. COMPTROLLER GENERAL STUDIES ON DATA PROTECTION AND 
                   OTHER MATTERS.

       (a) Study on Data Protection by Department of Veterans 
     Affairs.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct a study of the data protection 
     procedures of the Department of Veterans Affairs.
       (2) Elements.--The study required by paragraph (1) shall 
     include the following:
       (A) A review and assessment of the data protection 
     procedures of the Department of Veterans Affairs in effect 
     before May 3, 2006.
       (B) A review and assessment of any modifications of the 
     data protection procedures of the Department of Veterans 
     Affairs adopted as a result of the loss of data resulting 
     from the security breach at the Department on May 3, 2006.
       (b) Study on Security Breach Investigation by Department of 
     Veterans Affairs.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct a review and assessment of the 
     investigation carried out by the Department of Veterans 
     Affairs with respect to the security breach at the Department 
     on May 3, 2006.
       (2) Cooperation.--The Secretary of Veterans Affairs shall 
     ensure that the personnel of the Department of Veterans 
     Affairs cooperate fully with the Comptroller General in the 
     conduct of the review and assessment required by paragraph 
     (1).
       (c) Study on FTC Program for Veterans and Spouses at Risk 
     of Identity Theft.--The Comptroller General of the United 
     States shall conduct a study of the program of the Federal 
     Trade Commission for veterans and spouses of veterans at risk 
     of identity theft required by section 2. The study shall 
     include an assessment of the effectiveness of the program in 
     meeting the financial counseling and similar needs of 
     individuals seeking counseling and support through the 
     program.
       (d) Study on Compliance of Federal Agencies With 
     Requirements on Personal Data.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct a study of the compliance of the 
     departments and agencies of the Federal Government with 
     applicable requirements relating to the preservation of the 
     confidentiality of personal data.
       (2) Elements.--The study required by paragraph (1) shall 
     include the following:
       (A) A review and assessment of the current procedures and 
     practices of the departments and agencies of the Federal 
     Government regarding the preservation of the confidentiality 
     of personal data.
       (B) A comparative analysis of the procedures practices 
     referred to in subparagraph (A) with current standards of the 
     Federal Trade Commission for the preservation of the 
     confidentiality of personal data by commercial and non-
     commercial private entities.
       (C) A review and assessment of the modifications of the 
     data protection procedures adopted by the Department of 
     Veterans Affairs as a result of the loss of data resulting 
     from the security breach on May 3, 2006, including an 
     assessment of the feasibility and advisability of the 
     adoption of any such modifications by other departments and 
     agencies of the Federal Government.
       (D) An identification of recommendations for improvements 
     to the procedures and practices of the departments and 
     agencies of the Federal Government regarding the preservation 
     of the confidentiality of personal data.
       (e) Report.--Not later than 18 months after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to Congress a report setting forth the 
     results of each study conducted under this section. The 
     report shall set forth the results of each study separately, 
     and shall include such recommendations for legislative and 
     administrative action as the Comptroller General considers 
     appropriate in light of the studies.

     SEC. 7. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated to the Secretary of 
     Veterans Affairs, such sums as may be necessary to carry out 
     this Act and the amendments made by this Act.
                                 ______
                                 
      By Mr. BUNNING:
  S 3177. A bill to suspend temporarily the duty on certain compounds 
of lanthanum phosphates; to the Committee on Finance.
  Mr. BUNNING. Mr. President, I rise today to introduce a number of 
bills to provide for relief from duties. It is my intention that some 
or all of these duty suspension bills will eventually be included in 
the Miscellaneous Tariff Bill, MTB, that the Senate Finance Committee 
is expected to consider this year.
  As the members of the Senate are aware, Congress on occasion passes a 
bill, known as the Miscellaneous Tariff Bill or MTB, as a vehicle for 
enacting pending non-controversial duty suspensions. The rules for the 
inclusion of a duty suspension in the MTB are straight forward. First 
and foremost, in order to be included in the MTB, a bill must be non-
controversial. A bill will be controversial if it is objected to by a 
domestic producer of the product for which the duty reduction is being 
sought. Secondly, the cost for each bill must amount to less than 
$500,000 of lost revenue per year.
  As my colleagues are aware, the MTB provides an opportunity to 
temporarily eliminate or reduce duties on narrowly defined products 
that are imported into the United States because there is not available 
domestic source for the products. These duty suspensions reduce input 
costs for U.S. businesses and thus ultimately increase the 
competitiveness of their products.
  I have been approached by a number of manufacturers in Kentucky that 
use imported inputs while making their products. These manufacturers 
have represented to me that, to their knowledge, there currently exists 
no American-made source for these inputs.
  In an effort to assist these Kentucky manufacturers, I am introducing 
these duty suspension bills so that the items they address will be able 
to be considered for inclusion in the MTB prepared by the Senate 
Finance Committee.
  My intention in introducing these bills is to begin the process of 
public comment and technical analysis by the International Trade 
Commission (ITC) on the items addressed by the bills. During this 
review, the ITC will determine which of these bills are necessary and 
meet the selection criteria. My support for a duty suspension for the 
items is contingent on a determination by the ITC analysts that the 
items in question are proper candidates for inclusion in the non-
controversial MTB.
  I look forward to working with Chairman Grassley, Ranking Member 
Baucus and my colleagues on the Senate Finance Committee as the process 
for assembling a final MTB package continues.
                                 ______
                                 
      By Mr. REED (for himself and Mr. Chafee):
  S. 3187. A bill to designate the Post Office located at 5755 Post 
Road, East Greenwich, Rhode Island, as the ``Richard L. Cevoli Post 
Office.''; to the Committee on Homeland Security and Governmental 
Affairs.
  Mr. REED. Mr. President, today I pay tribute to one of Rhode Island's 
most highly decorated soldiers, Commander Richard L. Cevoli of East 
Greenwich.
  Commander Cevoli served our nation bravely in both World War II and 
the Korean War. In honor of his sacrifices and service to his nation, I 
am introducing a bill, along with Senator Chafee, to name the post 
office located at 5775 Post Road in East Greenwich,

[[Page 9670]]

RI, the ``Richard L. Cevoli Post Office.''
  Commander Cevoli was born in East Greenwich, Rhode Island, on October 
24, 1919, and died in a tragic plane crash in Florida on January 18, 
1955. He went to Rhode Island State College, which is now the 
University of Rhode Island, and earned a degree in civil engineering. 
In 1941, after graduation, he moved to New York and began working for 
the engineering firm of Merritt, Chapman & Scott.
  The month after the bombing of Pearl Harbor, Richard Cevoli returned 
to Rhode Island and entered the Navy. He was sent to flight training in 
Dallas, Sanford, and Pensacola before being assigned to Squadron VF-18, 
based on the USS Intrepid in the Pacific.
  It was during his service with the VF-18 that Commander Cevoli was 
awarded the second-highest medal awarded in the Navy--the Navy Cross. 
This honor was given to Commander Cevoli during the Battle of Leyte 
Gulf off the Philippines coast in October of 1944. Along with other 
fighters, Commander Cevoli strafed the largest Japanese ship, silencing 
many of its guns. The following day, he severely damaged a Japanese 
aircraft carrier with a 500-pound bomb. On a subsequent attack on the 
Japanese forces, as is recorded in his medal citation, ``Cevoli 
disregarded the terrific antiaircraft opposition and scored a near miss 
on a Kongo class battleship with a 500-pound bomb. Then, pulling out he 
made a second run to strafe a destroyer, silencing its antiaircraft 
weapons and thereby contributing to our successful bombing and torpedo 
attacks which followed. His outstanding courage and determination were 
in keeping with the highest traditions of the United States Naval 
Service.''
  Following his service during the war, he returned to Rhode Island and 
continued his Navy career at Naval Air Station, Quonset Point. However, 
the peace was short-lived. North Korea invaded South Korea, and another 
major conflict quickly began.
  From 1949 until 1951, Commander Cevoli served as the Executive 
Officer in Squadron VF-18 on board the USS Leyte, seeing action in 
Korea. In addition to the Navy Cross, Commander Cevoli earned two 
Distinguished Flying Crosses and eight Air Medals during his active 
flying career.
  Once the conflict in Korea had ended, Commander Cevoli was able to 
spend more time at home. He took classes at the Naval War College in 
Newport and in July, 1954 he was placed in command of Squadron VF-73. 
Tragically, he died serving his country when his plane crashed during a 
training mission.
  Commander Cevoli left behind a wife, Grace, and three children, 
Steven, Carol, and Elizabeth. A life-long resident of East Greenwich, 
Commander Cevoli's legacy is memorialized in the Rhode Island Aviation 
Hall of Fame.
  This legislation will pay tribute to this hero of Rhode Island and 
the United States, and I ask my colleagues to join me in honoring 
Commander Cevoli by supporting this bill.
  Mr. President, I ask unanimous consent that the text of this 
legislation be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3187

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

     SECTION 1. RICHARD L. CEVOLI POST OFFICE.

       (a) Designation.--The post office located at 5755 Post 
     Road, East Greenwich, Rhode Island, shall be known and 
     designated as the ``Richard L. Cevoli Post Office''.
       (b) References.--Any reference in a law, map, regulation, 
     document, paper, or other record of the United States to the 
     post office referred to in subsection (a) shall be deemed to 
     be a reference to the Richard L. Cevoli Post Office.
                                 ______
                                 
      By Mrs. FEINSTEIN:
  S. 3188. A bill to amend the Forest Service use and occupancy permit 
program to restore the authority of the Secretary of Agriculture to 
utilize the special use permit fees collected by the Secretary in 
connection with the establishment and operation of marinas in units of 
the National Forest System derived from the public domain, and for 
other purposes; to the Committee on Energy and Natural Resources.
  Mrs. FEINSTEIN. Mr. President, I rise to introduce legislation that 
will restore authority to the Forest Service to retain marina permit 
revenue for local expenditure.
  Within some National Forests, the Forest Service has partnered with 
local small business owners, allowing them to operate houseboat 
marinas. In exchange, the Forest Service collects occupancy fees from 
these marina operators. A portion of these fees had, until recently, 
been kept in the Forest for local recreation and safety enhancement 
projects. My legislation allows the Forest Service to once again use 
these fees in the Forest where they were generated, and where their 
impact will be most direct.
  Several units of the National Forest system will benefit from this 
legislation, but the unit most affected is the Shasta-Trinity National 
Forest in California. Under the 1996 Recreation Fee Demonstration 
Program, the Shasta-Trinity Forest developed a recreation enhancement 
program at Shasta and Trinity Lakes. Forest Service officials used a 
portion of the revenue from this program for projects like dock repair, 
improved handicapped access, safety markers for boaters, law 
enforcement, and campground construction. Over $4 million was invested 
in the Forest through this program.
  However, the program was inadvertently repealed when the Federal 
Lands Recreation Enhancement Act was passed. My legislation will 
correct this oversight by amending the Forest Service's Special Use 
Permit program, returning this recreation and safety project authority 
to the agency.
  Recreation on Federal lands is important to quality of life in my 
state and throughout the nation. In many rural areas, it also provides 
a boost to the economy. I urge my colleagues to support this 
legislation. It is a simple bill correcting an oversight in the Federal 
Lands Recreation Enhancement Act. Nonetheless, it has important 
implications both for recreation enhancement and for the local 
economies around the affected National Forests.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3188

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

     SECTION 1. RETENTION AND USE OF FOREST SERVICE MARINA PERMIT 
                   FEES FROM NATIONAL FOREST SYSTEM UNITS DERIVED 
                   FROM THE PUBLIC DOMAIN.

       The last paragraph under the heading ``forest service'' in 
     the Act of March 4, 1915 (16 U.S.C. 497), is amended--
       (1) by striking ``The Secretary of Agriculture'' and 
     inserting the following:
       ``(A) Permits for use and occupancy of national forest 
     system lands.--The Secretary of Agriculture'';
       (2) by striking ``The authority'' and inserting the 
     following:
       ``(B) Limitation on use of permits.--The authority''; and
       (3) by adding at the end the following:
       ``(C) Special rules regarding marina permits.--Amounts 
     collected in connection with the issuance of a special use 
     permit under this paragraph for a marina at a unit of the 
     National Forest System derived from the public domain shall 
     be deposited in an existing special account in the Treasury 
     established for the Secretary of Agriculture for recreation 
     management purposes. Amounts so deposited shall be available 
     to the Secretary of Agriculture, until expended and without 
     further appropriation, for repair, maintenance, and facility 
     enhancement related directly to visitor enjoyment, visitor 
     access, and health and safety, for interpretation, visitor 
     information, visitor service, visitor needs assessments, and 
     signs, for habitat restoration directly related to wildlife-
     dependent recreation that is limited to hunting, fishing, 
     wildlife observation, or photography, for law enforcement 
     related to public use and recreation, and for direct 
     operating or capital costs associated with the issuance of 
     such special use permits, including any fee management 
     agreement or reservation service used in the issuance of such 
     permits. The Secretary may not use such amounts for 
     biological monitoring for listed or candidate species under 
     the Endangered Species Act of 1973 (16 U.S.C. 1531 et seq.). 
     Not less than 80 percent of the permit fees collected at a 
     specific unit of the National Forest System shall be expended 
     for that unit, but the Secretary may transfer up to 20 
     percent of such

[[Page 9671]]

     fees to appropriations available to enhance recreation 
     opportunities at other units of the National Forest 
     System.''.
                                 ______
                                 
      By Mrs. FEINSTEIN:
  S. 3189. A bill to allow for renegotiating of the payment schedule of 
contracts between the Secretary of the Interior and the Redwood Valley 
Country Water District, and for other purposes; to the Committee on 
Energy and Natural Resources.
  Mrs. FEINSTEIN. Mr. President, I rise today to introduce the Redwood 
Valley County Water District Loan Renegotiation Act of 2006.
  This legislation seeks to implement prior congressional action taken 
in 1988 to require the Secretary of the Interior to renegotiate debts 
owed by the Redwood Valley County Water District to the United States. 
It is an absolutely essential step if the Redwood County is to obtain a 
firm and reliable water supply.
  In 1983, the Redwood Valley County Water District completed a project 
to supply water to a rural agricultural community near Ukiah, in 
Northern California. Two Bureau of Reclamation loans totaling $7.3 
million partially financed this project.
  Unfortunately, the District was unable to repay these loans. This 
occurred for several reasons: The initial use projections developed by 
the District and reviewed by the Bureau were seriously flawed; the 
District's ability to raise funds was restricted when a moratorium on 
new hook-ups was imposed; and concerns for endangered species reduced 
the District's water allotment by 15 percent.
  As a result of this situation, in 1998 Congress passed Section 15 of 
Public Law 100-516 that indefinitely suspended the District's 
obligations to repay these Bureau loans and ordered the Secretary of 
Interior to renegotiate the terms of the loans. This loan renegotiation 
has never taken place and now the District finds its water supply 
highly uncertain. The Bureau of Reclamation acknowledged in a 2000 
report that the District needs a reliable water supply in order to 
solve its current financial dilemma.
  The District has recently identified two potential new projects, 
either of which could supply a firm and reliable source. No government 
funds will be sought for these projects, and the District will rely on 
private financing, a strategy that the Bureau is encouraging. However, 
before the District can secure private financing for new projects, it 
must renegotiate the existing loans to provide for their repayment 
subsequent to repayment of the new loans.
  This legislation requires the District to repay the United States the 
currently suspended loans once the new loans have been repaid. The new 
water project will provide enough revenue to allow the District to 
repay both its private loan and the United States government. By 
providing a workable and reasonable solution to a longstanding problem, 
the legislation creates a win-win solution for the Bureau of 
Reclamation and the Redwood Valley County Water District.
  I urge my colleagues to support this bill. I ask unanimous consent 
that the text of the bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3189

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

     SECTION 1. RENEGOTIATION OF PAYMENT SCHEDULE.

       Section 15 of Public Law 100-516 (102 Stat. 2573) is 
     amended as follows:
       (1) By amending paragraph (2) of subsection (a) to read as 
     follows:
       ``(2) If, as of January 1, 2006, the Secretary of the 
     Interior and the Redwood Valley County Water District have 
     not renegotiated the schedule of payment, the District may 
     enter into such additional non-Federal obligations as are 
     necessary to finance procurement of dedicated water rights 
     and improvements necessary to store and convey those rights 
     to provide for the District's water needs. The renegotiated 
     schedule of payments shall commence when which additional 
     obligations have been financially satisfied by the District. 
     The date of the initial payment owed by the District to the 
     United States shall be regarded as the start of the 
     District's repayment period and the time upon which any 
     interest shall first be computed and assessed under section 5 
     of the Small Reclamation Projects Act of 1956 (43 U.S.C. 422a 
     et seq.).''.
       (2) By striking subsection (c).
                                 ______
                                 
      By Mr. DAYTON (for himself and Mr. Lott):
  S. 3239. A bill to require full disclosure of insurance coverage and 
noncoverage by insurance companies and provide for Federal Trade 
Commission enforcement; to the Committee on Commerce, Science, and 
Transportation.
  Mr. DAYTON. Mr. President, this legislation I am proud to cosponsor, 
along with my distinguished colleague from Mississippi, is called the 
Uniform Insurance Noncoverage Disclosure Act. I call it ``honesty is 
the best insurance policy act.'' It says very simply that all insurance 
policies--medical, homeowners, whatever they are--must state clearly on 
the cover page what the policy does not cover.
  My colleague from Mississippi can speak eloquently and powerfully 
about his experiences in his State post-Katrina, but even before that 
disaster occurred, I have seen similar situations in Minnesota of good 
people whose lives were devastated by illnesses or natural disasters 
and then were further devastated by discovering that their losses or 
expenses were not covered by their insurance policies. For years, they 
had faithfully paid their premiums believing they had comprehensive 
coverage, only to find out too late that was untrue.
  Insurance companies write the policies, they interpret the policies, 
they decide what they will and will not cover, and then they handle the 
appeals and make the final decisions. If they deny the claims, they 
pocket those dollars in profits. If they honor the claims, they pay 
them out in losses. Talk about a stacked deck in their favor and 
against the consumer.
  I have had aggrieved constituents show me their homeowners policies. 
I am an intelligent, well-educated man, but it is impossible to 
decipher them. They contain cross-references to paragraph numbers in 
other policies that are not part of the agreement. They cannot be 
understood, and they are not meant to be understood.
  One Minnesota homeowner lost almost everything to a flood. Too late 
he discovered that his blanket homeowners insurance did not cover 
losses from a flood. He was protected, according to the policy, if an 
airplane crashed into his house or if civil insurrection--meaning a 
revolution--caused damage to his home, but not flooding. What are the 
chances of those different events possibly occurring?
  Another Minnesota family whose father had worked for a company for 
over 20 years learned that their infant son had been born deaf and 
needed a Cochlear implant. Two of the insurance companies that carried 
those policies for the company covered that operation; the other did 
not, claiming that it was experimental. The family made the unwitting 
mistake of selecting the wrong policy. No one told them that policy 
would not pay for Cochlear implant surgery in its comprehensive family 
coverage, and they, obviously, did not know or could not have known 
that their unborn son would need this surgery some several years later.
  Fortunately, this story has a happy ending. The president of the 
company, Honeywell, Inc., learning of this injustice, overrode the 
policy and decreed that Honeywell, the company, would pay for that 
missing coverage, and that child is now listening to human voices he 
never would have had the opportunity to otherwise.
  But not everyone is in that situation. Not everyone is that 
fortunate.
  So this legislation, again, no costs to it, no bureaucracy, nothing. 
It simply says that the policy must state clearly, in plain English, 
understandable on the cover page, what it will not cover. If it is 
comprehensive, if it is complete, then nothing needs to be said. If it 
is not, if they experience situations that will not be covered, then it 
needs to tell the consumer up front on that front page what they will 
be.
  Mr. President, I yield to my distinguished colleague from 
Mississippi.
  The PRESIDING OFFICER. The Senator from Mississippi is recognized.

[[Page 9672]]


  Mr. LOTT. I thank again my colleagues on the Judiciary Committee and 
Senator Craig for allowing us to go ahead and introduce this 
legislation and make brief statements. It is very generous, and we 
thank him for it.
  I am delighted to join my colleague, Senator Dayton, tonight in 
cosponsoring this legislation. He was kind enough to invite me to do so 
and even said: Why don't you be the lead sponsor? And I said no, but I 
will be glad to cosponsor it.
  I think this is an important statement here tonight. Honesty is the 
best insurance policy. It has a good ring to it. It is not going to 
revolutionize the world, but it could make a real difference. This is a 
time when once again, in many parts of the country and particularly in 
my home area, we are very sensitive to the threat of disasters because 
in only 8 days, on June 1, the next hurricane season will begin, and 
the National Oceanic and Atmospheric Administration predicts four to 
six major hurricanes in the upcoming season. So once again people are 
struggling with situations of having lost their homes or having their 
homes badly damaged and being told: No, your insurance policy didn't 
cover your damage. You didn't have flood insurance because, well, you 
weren't in a flood plain, and oh, by the way, your house was washed 
away. It wasn't blown away even though we had winds of 140 miles per 
hour with gusts of 160 or 170 miles an hour, so therefore you didn't 
have any wind damage. I must say it has been a disappointing shock to 
me, the insensitivity and the decisions of certain insurance companies 
and the positions they have taken. Sometimes they will say: Well, wait 
a minute, we told you in the policy we don't cover this, we don't cover 
that.
  I represent a blue-collar community. Most people work in the paper 
mills and the shipyards and are fishermen in my area. They have high 
school educations, but they are not lawyers. They get a house insurance 
policy and they think: I am covered. Now, go back and take a look at 
your insurance policies. If you really take a look at it, you will find 
that this is not covered, that is not covered, this is not covered, and 
the next thing you know, you haven't got much coverage, but your 
premium still goes forward. The standard policies, for instance, don't 
cover earthquakes and floods, and depending on where you live, 
hurricanes may not even be covered. That is going to be determined in 
legal actions. Sometimes they say: Well, unless the policy specifically 
says the hurricane was covered, then it is not covered. Well, that is 
an ingenious argument, too.
  So we have found that there are lots of problems here, and it breaks 
my heart, what I have seen happen to thousands of my constituents and 
people in the neighboring States of Louisiana, Texas, and Alabama. They 
are being told: No, you didn't read the small print in your policy, you 
are not covered, or because it didn't say you were covered, then you 
are not covered. That is why I have joined in sponsoring this bill. 
Surely we should have honesty in everything, including insurance 
coverage. At least we should find a way to help the people understand.
  So this is what this bill does. It is not all that complicated. It 
would require that insurance companies include a noncoverage disclosure 
box--a noncoverage disclosure box--restating in the body of the policy, 
in font twice the current size of the text, all conditions, exclusions, 
and other limitations of coverage under that policy. In other words, 
make it clear. Don't hide it in legalese and gobbledegook. Make it 
title size, make it bold, where people can go and see what they are not 
getting.
  Some people say: Wait a minute, this may be damaging to the 
companies. No, I think it will help the companies. It will increase 
consumer confidence. It will avoid disagreements or conflicts about 
what is covered. You will have a clarification here, and if you have 
questions, then at least you can clear them up. It would be in their 
interests.
  One other criticism, and that is, what is it going to cost the 
Federal Government? Answer: Nothing. And very little to the companies. 
They have these exclusions woven in there, but they are quite often way 
down in the body of some long policy, incomprehensible to the minds of 
normal and sane men and women.
  So I think this is something which would be good. Frankly, I agree 
with the Consumer Federation of America. This small requirement could 
have saved many people pain and suffering and hundreds of millions of 
dollars, maybe even billions, after Katrina. So I think it is a good 
idea, and it is one I am glad to cosponsor. I hope that as we continue 
to look at what we do in the aftermath of recent disasters and how we 
do a better job compared to future disasters, this can be worked into 
the body of legislation. So I am delighted to join as a cosponsor. I 
thank Senator Dayton, and I thank Senator Leahy and Senator Cornyn for 
allowing us to do this.

                          ____________________