[Congressional Record (Bound Edition), Volume 155 (2009), Part 1]
[Senate]
[Pages 1293-1300]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Ms. SNOWE (for herself, Mr. Dodd, and Mr. Kerry):
  S. 283. A bill to amend the Energy Policy and Conservation Act to 
modify the conditions for the release of products from the Northeast 
Home Heating Oil Reserve Account, and for other purposes; to the 
Committee on Energy and Natural Resources.
  Ms. SNOWE. I rise today to speak on a bill I am introducing with my 
colleagues, Senators Dodd and Kerry, to improve the Northeast Home 
Heating Oil Reserve program to ensure that when our country experiences 
the next energy crisis we are better prepared. Specifically, I believe 
that this legislation will provide flexibility as well as certainty 
that heating oil currently sitting in New England will be used when it 
is most essential to the region's population.
  Through Senator Dodd's leadership in 2000, Congress created the 
Northeast Home Heating Oil Reserve, which put in place a critical tool 
to reduce supply disruptions. At that point, heating oil prices were 
$1.49 per gallon, and while the situation has improved since the price 
spikes this past summer, it is clear that the Northeast remains 
dangerously reliant on a commodity that has shown extreme volatility in 
recent years. The need for the Heating Oil Reserve was clearly 
demonstrated this past summer when a catastrophe was emerging for our 
region with heating oil reaching the unprecedented level of $5 per 
gallon. Thankfully, the Northeast Home Heating Oil Reserve provided a 
basic level of assurance that heating oil could be provided if supplies 
were dramatically interrupted.
  However, the trigger mechanism for the release of the funds is 
convoluted to the point that the program's functionality is in 
question. Indeed, under the law, the President does not have the 
ability to release heating oil from the reserve even if the health and 
safety of the population is at risk. Rather, the current threshold for 
release is when the differential between crude oil and heating oil is 
60 percent

[[Page 1294]]

higher than the 5 year average. As a result, neither the overall price 
of heating oil nor the plight of our constituents has any factor on the 
release of the reserve. The formula trigger in statute is flawed to the 
point that the actual trigger has come close to being met not when 
crude oil prices are rising, but actually falling. This is clearly not 
the intent of the reserve.
  The legislation that I am introducing with Senators Dodd and Kerry 
today streamlines the federal law to provide the President the 
discretion to release the reserve if the health and safety of the 
population is at risk. Furthermore, if heating oil prices are above $4 
per gallon during the critical winter months, the heating oil 
automatically will be distributed for sale. I believe this will 
dramatically improve the functionality of the reserve program and I 
look forward to working with Chairman Bingaman and Ranking Member 
Murkowski of the Energy Committee to enact this legislation.
                                 ______
                                 
      By Mr. FEINGOLD:
  S. 285. A bill to amend the Internal Revenue Code of 1986 to provide 
that reimbursements for costs of using passenger automobiles for 
charitable and other organizations are excluded from gross income, and 
for other purposes; to the Committee on Finance.
  Mr. FEINGOLD. Mr. President, I am pleased to reintroduce legislation 
today that would increase the mileage reimbursement rate for 
volunteers.
  Under current law, when volunteers use their cars for charitable 
purposes, the volunteers may be reimbursed up to 14 cents per mile for 
their donated services without triggering a tax consequence for either 
the organization or the volunteers. If the charitable organization 
reimburses any more than that, they are required to file an information 
return indicating the amount, and the volunteers must include the 
amount over 14 cents per mile in their taxable income. By contrast, for 
2009, the mileage reimbursement level permitted for businesses is 55 
cents per mile, nearly four times the volunteer rate.
  During this economic downturn we are asking volunteers and volunteer 
organizations to bear a greater burden of delivering essential 
services, but the 14 cents per mile limit is imposing a very real 
hardship for charitable organizations and other nonprofit groups. This 
was an even harsher constraint on volunteer activity when gasoline 
prices spiked last summer.
  I have heard from a number of people in Wisconsin on the need to 
increase this reimbursement limit. One of the first organizations that 
brought this issue to my attention was the Portage County Department on 
Aging. Volunteer drivers are critical to their ability to provide 
services to seniors in Portage County, and the Department on Aging 
depends on dozens of volunteer drivers to deliver meals to homes and 
transport people to their medical appointments, meal sites, and other 
essential services.
  As many of my colleagues know, nutrition is one of the most vital 
services provided under the Older Americans Act and ensuring that meals 
can be delivered to seniors or that seniors can be taken to meal sites 
is an essential part of that program. As I discovered during my ten 
years as Chair of the Wisconsin State Senate Committee on Aging, the 
senior nutrition programs not only provide needed nutrition services, 
but in many cases, the congregate meals program provides an important 
community contact point for seniors who may live alone, and the meals 
program may be the point at which many frail elderly first come into 
contact with the network of services that can help them. For that 
reason, the senior nutrition programs are often at the heart of the 
aging services network, and as such are essential for many critical 
services that frail elderly may need.
  Unfortunately, Federal support for the senior nutrition programs has 
stagnated in recent years, increasing pressure on local programs to 
leverage more volunteer services to make up for that lagging Federal 
support. The 14 cents per mile reimbursement limit has made it far more 
difficult to obtain those volunteer services. Portage County reported 
that at 14 cents per mile, many of their volunteers cannot afford to 
offer their services.
  If volunteer drivers cannot be found, either those services will be 
lost, and those most vulnerable in our society will go wanting, or the 
services will have to be replaced by contracting with a provider, 
greatly increasing costs to the Department, costs that come directly 
out of the pot of funds available to pay for meals and other services. 
The same is true for thousands of other nonprofit and charitable 
organizations that provide essential services to communities across our 
Nation.
  By contrast, businesses do not face this restrictive mileage 
reimbursement limit. As I noted earlier, for 2009 the comparable 
mileage rate for someone who works for a business is 55 cents per mile. 
This disparity means that a business hired to deliver the same meals 
delivered by volunteers for Portage County may reimburse their 
employees nearly four times the amount permitted the volunteer without 
a tax consequence.
  This doesn't make sense. The 14 cents per mile volunteer 
reimbursement limit is badly outdated. According to the Congressional 
Research Service, Congress first set a reimbursement rate of 12 cents 
per mile as part of the Deficit Reduction Act of 1984, and did not 
increase it until 1997, when the level was raised slightly, to 14 cents 
per mile, as part of the Taxpayer Relief Act of 1997.
  The bill I am introducing today is identical to a measure I 
introduced in the 109th Congress and the 110th Congress, and largely 
the same as the version I introduced in the 107th and 108th Congresses. 
It raises the limit on volunteer mileage reimbursement to the level 
permitted to businesses, and provides an offset to ensure that the 
measure does not aggravate the budget deficit. The most recent estimate 
of the cost to increase the reimbursement for volunteer drivers is 
about $1 million over 5 years. Though the revenue loss is small, it is 
vital that we do everything we can to move toward a balanced budget, 
and to that end I have included a provision to fully offset the cost of 
the measure and make it deficit neutral. That provision increases the 
criminal monetary penalties for individuals and corporations convicted 
of tax fraud. The provision passed the Senate in the 108th Congress as 
part of the JOBS bill, but was later dropped in conference and was not 
included in the final version of that bill.
  I also extend my thanks to the senior Senator from New York, Mr. 
Schumer, for including my bill in his larger omnibus volunteer driver 
relief measure, the GIVE Act, last year, and the junior Senator from 
Maryland, Mr. Cardin, for including my bill in this year's version of 
the GIVE Act. Both Senators are keenly aware of the need for the change 
provided by this bill, and I thank them for their leadership on this 
issue.
  I urge my colleagues to support this measure. It will help ensure 
charitable organizations can continue to attract the volunteers that 
play such a critical role in helping to deliver services and it will 
simplify the tax code both for nonprofit groups and the volunteers 
themselves.
  Mr. President, 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. 285

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

     SECTION 1. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS 
                   EXCLUDED FROM GROSS INCOME.

       (a) In General.--Part III of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 is amended by inserting 
     after section 139B the following new section:

     ``SEC. 139C. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS.

       ``(a) In General.--Gross income of an individual does not 
     include amounts received, from an organization described in 
     section 170(c), as reimbursement of operating expenses with 
     respect to use of a passenger automobile for the benefit of 
     such organization. The preceding sentence shall apply only to 
     the extent that such reimbursement would be deductible under 
     this chapter if section 274(d) were applied--

[[Page 1295]]

       ``(1) by using the standard business mileage rate 
     established under such section, and
       ``(2) as if the individual were an employee of an 
     organization not described in section 170(c).
       ``(b) No Double Benefit.--Subsection (a) shall not apply 
     with respect to any expenses if the individual claims a 
     deduction or credit for such expenses under any other 
     provision of this title.
       ``(c) Exemption From Reporting Requirements.--Section 6041 
     shall not apply with respect to reimbursements excluded from 
     income under subsection (a).''.
       (b) Clerical Amendment.--The table of sections for part III 
     of subchapter B of chapter 1 of the Internal Revenue Code of 
     1986 is amended by inserting after the item relating to 
     section 139B and inserting the following new item:

``Sec. 139C. Reimbursement for use of passenger automobile for 
              charity.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 2. INCREASE IN CRIMINAL MONETARY PENALTY LIMITATION FOR 
                   THE UNDERPAYMENT OR OVERPAYMENT OF TAX DUE TO 
                   FRAUD.

       (a) In General.--Section 7206 of the Internal Revenue Code 
     of 1986 (relating to fraud and false statements) is amended--
       (1) by striking ``Any person who--'' and inserting ``(a) In 
     General.--Any person who--'', and
       (2) by adding at the end the following new subsection:
       ``(b) Increase in Monetary Limitation for Underpayment or 
     Overpayment of Tax Due to Fraud.--If any portion of any 
     underpayment (as defined in section 6664(a)) or overpayment 
     (as defined in section 6401(a)) of tax required to be shown 
     on a return is attributable to fraudulent action described in 
     subsection (a), the applicable dollar amount under subsection 
     (a) shall in no event be less than an amount equal to such 
     portion. A rule similar to the rule under section 6663(b) 
     shall apply for purposes of determining the portion so 
     attributable.''.
       (b) Increase in Penalties.--
       (1) Attempt to evade or defeat tax.--Section 7201 of the 
     Internal Revenue Code of 1986 is amended--
       (A) by striking ``$100,000'' and inserting ``$250,000'',
       (B) by striking ``$500,000'' and inserting ``$1,000,000'', 
     and
       (C) by striking ``5 years'' and inserting ``10 years''.
       (2) Willful failure to file return, supply information, or 
     pay tax.--Section 7203 of such Code is amended--
       (A) in the first sentence--
       (i) by striking ``misdemeanor'' and inserting ``felony'', 
     and
       (ii) by striking ``1 year'' and inserting ``10 years'', and
       (B) by striking the third sentence.
       (3) Fraud and false statements.--Section 7206(a) of such 
     Code (as redesignated by subsection (a)) is amended--
       (A) by striking ``$100,000'' and inserting ``$250,000'',
       (B) by striking ``$500,000'' and inserting ``$1,000,000'', 
     and
       (C) by striking ``3 years'' and inserting ``5 years''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to underpayments and overpayments attributable to 
     actions occurring after the date of the enactment of this 
     Act.
                                 ______
                                 
      By Mr. SPECTER (for himself, Mr. Vitter, Mr. Inhofe, Mr. Isakson, 
        Mr. Voinovich, Mr. Roberts, and Mr. Chambliss):
  S. 292. A bill to repeal the imposition of withholding on certain 
payments made to vendors by government entities; to the Committee on 
Finance.
  Mr. SPECTER. Mr. President, I have sought recognition to introduce 
the Withholding Tax Relief Act of 2009, which would repeal Section 511 
of the Tax Increase Prevention and Reconciliation Act of 2005. Section 
511 will require a 3 percent withholding on all Government contracts 
beginning on January 1, 2011.
  This legislation was sponsored in the 110th Congress by Senator Larry 
Craig, S. 777, and with his retirement, I have decided to continue to 
press for its passage to protect small businesses, contractors, and 
State and local governments who will be unfairly burdened by this 
onerous provision.
  In 2006 Congress enacted tax relief on capital gains, dividends, and 
the Alternative Minimum Tax, AMT, as part of the Tax Increase 
Prevention and Reconciliation Act of 2005. These provisions provide 
important incentives for small businesses by encouraging investment 
that can lead to job creation and economic growth. At the same time, 
the Section 511 withholding tax provision was inserted at the last 
minute by conferees as a revenue raiser. As a result, the legislation 
which was intended to provide tax relief ended up containing a $7 
billion tax penalty on Government contractors.
  If no action is taken to repeal this provision, Section 511 will 
institute a 3 percent tax withholding on all local, State, and Federal 
Government payments, effective on January 1, 2011. This will apply to 
Governments with expenditures of $100 million or more, and will affect 
payments on Government contracts as well as other payments, such as 
Medicare, grants, and farm payments. Impacted firms will ultimately get 
a refund when they file their tax return if the amount withheld is in 
excess of what is actually owed.
  The proponents of Section 511 argue that it will be an effective tool 
to close the tax gap--the difference between what American taxpayers 
owe and what they actually pay. However, an examination of the 
mechanics of the provision support a different conclusion. At the time 
of passage, Section 511 was estimated to increase revenue by $7 billion 
from 2011 to 2015. However, $6 billion of that amount is attained 
solely because of the initial collection on contracts in 2011, not 
because of an actual revenue increase from increased tax compliance. 
Estimates show that Section 511 will only generate $215 million in 2012 
and increases slightly in each of the 3 years thereafter.
  While I support efforts to close the tax gap, those efforts must be 
weighed on a case-by-case basis against the unintended harm that is 
done to those impacted. For example, the 3 percent figure is an 
arbitrary amount and does not take into account the company's taxable 
income or tax liability. As a result, an honest taxpaying contractor in 
a loss year could be without access to the withheld capital for a 
significant period of time, only to see it returned when it files its 
taxes. Many of these firms do not have extra capital on hand to get by 
and, because some file yearly returns as opposed to quarterly returns, 
will not receive a refund on the amount withheld for 12 to 18 months. 
In many cases, businesses operate with a profit margin that is smaller 
than 3 percent of the contract; and in some cases, there is no profit 
at all. In these cases, Section 511 will effectively withhold entire 
paychecks--interest free--thereby impeding the cash flow of small 
businesses, eliminating funds that can be used for reinvestment in the 
business, and forcing companies to pass on the added costs to customers 
or finance the additional amount.
  Section 511 will also impose significant administrative costs on the 
Federal, State, and local governments who are required to create, or 
expand, collections staffing to comply. The Congressional Budget 
Office, CBO, said the provision constitutes an unfunded mandate on the 
State and local governments. According to CBO, the projected costs of 
Section 511 will exceed the $50 million unfunded mandate annual 
threshold. On a Federal level, there is evidence that the high cost of 
preparation is unnecessary. For example, the Department of Defense 
estimated that the costs to comply with the 3 percent withholding 
requirement could be in excess of $17 billion over the first 5 years, 
which is more than any estimated revenue gains.
  There is strong support from a number of stakeholders for repeal of 
the Withholding Tax requirement, including the Associated Builders and 
Contractors, U.S. Chamber of Commerce, National Association of 
Manufacturers, National Federation of Independent Business, and 
American Farm Bureau Federation.
  I am pleased that this legislation garnered the support of 260 
cosponsors in the House of Representatives, H.R. 1023, in the 110th 
Congress, with a broad mix of support from both parties. For example, 
cosponsors from the Pennsylvania delegation included Representatives 
Altmire, Brady, Carney, Doyle, English, Gerlach, Holden, Murphy, Pitts, 
Platts, Sestak, and Shuster. In the Senate, I will seek to build on the 
efforts of Senator Craig and the 15 other cosponsors, including myself.
  At the time of passage of the Tax Increase Prevention and 
Reconciliation Act of 2005, Congress had not adequately debated the 
merits of the withholding requirement in a committee

[[Page 1296]]

hearing or with debate in either body. An issue of this magnitude 
deserves proper debate, and had that occurred, it is difficult to 
believe that Congress would have included Section 511. For these 
reasons, I urge my colleagues to support repeal of this unfair tax 
penalty.
  Mr. President, I ask unanimous consent that a list of supporters to 
this bill be provided in the Record.
  There being no objection, the material was ordered to be placed in 
the Record, as follows:

                Government Withholding Relief Coalition

       Aeronautical Repair Station Association; Aerospace 
     Industries Association; Air Conditioning Contractors of 
     America; Air Transport Association; America's Health 
     Insurance Plans; American Bankers Association; American 
     Concrete Pressure Pipe Association; American Congress on 
     Surveying and Mapping; American Council of Engineering 
     Companies; American Farm Bureau Federation; American Heath 
     Care Association; American Institute of Architects; American 
     Moving and Storage Association; American Nursery and 
     Landscape Association; American Road & Transportation 
     Builders Association; American Shipbuilding Association; 
     American Society of Civil Engineers; American Subcontractors 
     Association; American Supply Association; American Trucking 
     Associations.
       Associated Builders and Contractors; Associated Equipment 
     Distributors; Association of National Account Executives; 
     Business and Institutional Furniture Manufacturers 
     Association; Coalition for Government Procurement; Colorado 
     Motor Carriers Association; Computing Technology Industry 
     Association; Construction Contractors Association; 
     Construction Industry Round Table; Construction Management 
     Association of America; Contract Services Association; Design 
     Professionals Coalition; Edison Electric Institute; 
     Engineering & Utility Contractors Association; Federation of 
     American Hospitals; Financial Executives International's 
     Committee on Government Business; Financial Executives 
     International's Committee on Taxation; Finishing Contractors 
     Association; Gold Coast Hispanic Chamber of Commerce; 
     Independent Electrical Contractors, Inc.
       Information Technology Association of America; 
     International Council of Employers of Bricklayers and Allied 
     Craftworkers; International Foodservice Distributors 
     Association; Management Association for Private 
     Photogrammetric Surveyors; Mason Contractors Association of 
     America; Mechanical Contractors Association of America; 
     Messenger Courier Association of the Americas; Modular 
     Building Institute; National Association for Self-Employed; 
     National Association of Credit Management; National 
     Association of Manufacturers; National Association of 
     Minority Contractors; National Beer Wholesalers Association; 
     National Burglar and Fire Alarm Association; National Defense 
     Industrial Association; National Electrical Contractors 
     Association; National Federation of Independent Business; 
     National Italian-American Business Association; National 
     Precast Concrete Association; National Office Products 
     Alliance.
       National Roofing Contractors Association; National Small 
     Business Association; National Society of Professional 
     Engineers; National Society of Professional Surveyors; 
     National Utility Contractors Association; National Wooden 
     Pallet and Container Association; North Coast Builders 
     Exchange; Office Furniture Dealers Alliance; Oregon Trucking 
     Association; Plumbing-Heating-Cooling Contractors--National 
     Association; Printing Industries of America; Professional 
     Services Council; Regional Legislative Alliance of Ventura 
     and Santa Barbara Counties; Santa Rosa Chamber of Commerce; 
     Security Industry Association; Sheet Metal and Air 
     Conditioning Contractors National Association, Inc.; Small 
     Business & Entrepreneurship Council; Small Business 
     Legislative Council; Textile Rental Services Association of 
     America; The Associated General Contractors of America.
       The Association of Union Constructors; The Distilled 
     Spirits Council of the U.S.; The Financial Services 
     Roundtable; U.S. Chamber of Commerce; United States Telecom 
     Association; Women Impacting Public Policy.
                                 ______
                                 
      By Mr. SPECTER:
  S. 293. A bill to provide for a 5-year carryback of certain net 
operating losses and to suspend the 90 percent alternative minimum tax 
limit on certain net operating losses; to the Committee on Finance.
  Mr. SPECTER. Mr. President, I have sought recognition to introduce 
legislation to expand a widely-used business tax benefit whereby 
business owners balance-out net losses over prior years when the firm 
has a net operating gain. Spreading out this tax liability helps a 
business to decrease the adverse impact of a difficult year. At the 
current time, there is a critical need for pro-growth policy 
initiatives to ensure an economic recovery.
  Specifically, this legislation increases the general net operating 
loss, NOL, carryback period from 2 years to 5 years in the case of an 
NOL for any taxable year ending during 2007, 2008, or 2009. As an 
example, a company could offset NOLs in 2008 against positive income it 
earned in 2003-2007; resulting in a refund paid in 2009. NOLs represent 
the losses reported by a company within a taxable year and, under 
current law, generally may be carried back 2 years and forward 20 years 
for tax purposes.
  Under current law, NOLs are not allowed to reduce Alternative Minimum 
Tax, AMT, liability by more than 90 percent. My legislation would 
eliminate this limit. This second provision is necessary for this bill 
to achieve its goal of allowing firms dollar-for-dollar access to their 
NOLs. This is because firms with temporarily low income are more likely 
both to create NOLs and to find themselves subject to the AMT.
  From an economic standpoint, the key impact of the bill will be to 
lower the user cost of capital for firms and to encourage business 
fixed investment for those firms that were profitable in the past 5 
years but are not profitable at the current time. Such firms will 
receive an immediate refund for their current costs.
  The U.S. Chamber of Commerce, National Association of Manufacturers, 
and National Federation of Independent Business, NFIB, have all been 
supportive of this proposal in previous years.
  Similar legislation was considered in the 110th Congress, but was not 
enacted. During consideration of the Recovery Rebates and Economic 
Stimulus for the American People Act of 2008, an amendment drafted by 
the Senate Finance Committee leadership included this important 
provision, as well as other items. On February 6, 2008, the Senate 
rejected this broader package on a procedural vote, leaving it just 1 
vote short of the 60 that were required. Ultimately, that bill included 
tax rebates for individuals and capital investment incentives for 
businesses. Following that debate, I introduced the NOL carryback 
provision as a stand-alone bill, S. 2650, with 7 cosponsors.
  Over the long-term, this is a low cost proposal for the taxpayer that 
can stimulate economic growth. According to a February 2004 report 
entitled ``Stimulating Job Creation and Investment: Economic Impact of 
NOL Carryback Legislation,'' by Kevin A. Hassett, Ph.D, and Brian C. 
Becker, Ph.D, ``If enacted, this expansion of the carryback period 
would result in current-year refunds for many companies that otherwise 
would have to wait until future years to apply NOLs. Having done so, 
however, would reduce the quantity of losses that are carried forward, 
and hence increase, relative to baseline, tax revenue in the future. As 
such, the tax revenue implications are negative initially, but positive 
in the future.'' The Joint Committee on Taxation estimated that passage 
of a similar provision as part of the Senate Finance Committee Stimulus 
package, which I referenced earlier in my statement, would have cost 
$15 billion in 2008 and $5.1 billion over 10 years.
  I urge my colleagues to support this important legislation that will 
help numerous industries that are currently struggling to survive in a 
harsh economic downturn.
                                 ______
                                 
      Mr. SPECTER:
  S. 294. A bill to amend the Internal Revenue Code of 1986 to extend 
and modify the special allowance for property acquired during 2009 and 
to temporarily increase the limitation for expensing certain business 
assets; to the Committee on Finance.
  Mr. SPECTER. Mr. President, I have sought recognition to introduce 
legislation to extend two important provisions that were enacted as 
part of the Economic Stimulus Act of 2008: 50 percent Bonus 
Depreciation; and Increased $250,000 limit for the Small Business 
Expensing Allowance.
  I introduced S. 2539 and cosponsored S. 269 similar legislation in 
the 110th Congress.
  I support tax policies to spur new business investments through the 
use of partial and full expensing. When a

[[Page 1297]]

company buys an asset that will last longer than one year, the company 
cannot, under most circumstances, deduct the entire cost and enjoy an 
immediate tax benefit. Instead, the company must depreciate the cost 
over the useful life of the asset, taking a tax deduction for a part of 
the cost each year. By allowing firms to deduct the cost of a new asset 
in year one, expensing spurs new investments quickly and drives 
immediate job creation.
  As part of the Economic Stimulus Act of 2008--passed by Congress and 
signed by the President on February, 13, 2008--I successfully included 
my legislation, S. 2539, to allow for an immediate 50 percent ``bonus 
depreciation'' on new equipment purchases. This provision only applied 
to purchases made in 2008 and my legislation would extend the benefit 
for an additional year.
  The Economic Stimulus Act of 2008 also provided a 1-year boost in the 
Section 179 Small Business Expensing Allowance. This provision, which 
also applies to equipment, was increased to a $250,000 limit for 2008. 
Absent further action, the benefit reverts to $125,000 in 2009 and will 
expire at the end of 2010 and revert to $25,000. On January 25, 2008, I 
cosponsored legislation, S. 269, to increase the Small Business 
Expensing Allowance and to make it permanent. This legislation I am 
introducing today would extend the $250,000 limit for an additional 
year.
  Both of these provisions merely accelerate a benefit that will be 
given to firms over a longer span. To that end, the cost will be higher 
in year one, but tax revenue will be higher in the years thereafter. 
According to the Joint Committee on Taxation, the cost of the ``bonus 
depreciation'' provision as part of the Economic Stimulus Act of 2008 
was $43.9 billion in 2008, but just $7.4 billion over 10 years. The 
Small Business Expensing Allowance provision was scored at $900 million 
in 2008, and only $100 million over 10 years.
  These provisions were included in a broader package drafted by 
Senators Baucus, Grassley, Kennedy, and Enzi at the end of the 110th 
Congress. I look forward to working with these Members to seek 
extension of these expiring provisions in the 111th Congress.
  Enactment of these provisions was an important step in the direction 
of allowing full expensing of new equipment. I urge my colleagues to 
support these pro-growth policies that create incentives for business 
expansion and long-term economic growth.
                                 ______
                                 
      By Mr. BINGAMAN:
  S. 295. A bill to amend title XVIII of the Social Security Act to 
improve the quality and efficiency of the Medicare program through 
measurement of readmission rates and resource use and to develop a 
pilot program to provide episodic payments to organized groups of 
multispecialty and multilevel providers of services and suppliers for 
hospitalization episodes associated with select, high cost diagnoses; 
to the Committee on Finance.
  Mr. BINGAMAN. Mr. President, I rise today to introduce the Medicare 
Quality and Payment Reform Act of 2009. This legislation will help 
improve the quality and efficiency of the Medicare program by analyzing 
readmission and resource use and adjusting Medicare payments 
accordingly. In addition, the legislation develops a large scale pilot 
project to allow for episodic payments to organized groups of 
multispecialty and multilevel providers for select, high cost 
diagnosis. Reforms such as these have been recommended by the non-
partisan Medicare Payment Advisory Commission or ``MedPAC,'' the 
Commonwealth Fund and many other experts. In their December 2008 Budget 
Options report, the Congressional Budget Office, CBO, estimates reforms 
such as these could result in more than 28 billion dollars in savings 
to the Federal Government over 10 years.
  For several years, growth in healthcare spending, including in the 
Medicare program, has far exceeded the rate of inflation for all other 
goods and services without a concomitant rise in health care quality. 
According to the 2007 report of the McKinsey Global Institute, 
``Accounting for the Costs of Healthcare in The United States,'' the 
U.S. spends almost half a trillion dollars more on healthcare than 
other similarly situated countries, when adjusted for population and 
income. Moreover, according to a 2008 Dartmouth report, total waste in 
the U.S. healthcare system accounts for approximately $700 billion. 
These data are startling and deeply troubling to me and many of my 
colleagues in the Congress. As we move to consider comprehensive 
healthcare reform legislation in the 111th Congress, it is critical 
that we consider bold and decisive reforms to incentivize quality and 
efficiency in the U.S. healthcare system.
  Many experts tell us that the present fee-for-service payment system 
does little to encourage the prevention of readmissions or control the 
volume of care and cost of services delivered. MedPAC, CBO, and others 
believe this fee-for-service distortion is a major driver of excess 
spending in the healthcare system. Consequently, per-beneficiary 
spending varies between regions by as much as one-third without any 
measurable difference in patient outcomes. In addition, a la carte 
health care delivery focuses on individual procedures and patient 
interactions without much regard for the integration of care and 
appropriate mix of services necessary.
  For example, MedPAC reports that within 30 days of discharge, 17.6 
percent of Medicare admissions are readmitted for which Medicare spent 
$15 billion in 2005. The Commonwealth Fund Commission on a High 
Performance Health System found that Medicare 30-day readmission rates 
varied from 14 percent to 22 percent with respect to the lowest and 
highest decile of states.
  MedPAC and other expert groups report that the bundling of Medicare 
payments around episodes of care will align financial incentives within 
the program to maximize quality and efficiency for Medicare 
beneficiaries. It is critical to note that such reforms not only lower 
overall healthcare costs but also have the potential to lower Medicare 
beneficiaries out of pocket expenses while improving their health. For 
example, the Medicare Participating Heart Bypass Center Demonstration 
conducted from 1990 to 1996 explored the utility of payment bundling. 
In this demonstration, participating centers were reimbursed with a 
bundled payment for episodes of care related to heart bypass cases. The 
demonstration resulted in reduced spending on laboratory diagnostics, 
pharmacy services, intensive care, and unnecessary physician consults 
while still maintaining a high quality of care. In the end, the 
demonstration saved the Medicare program approximately 10 percent on 
cost of bypass treatments.
  There is considerable agreement in the health policy community about 
a move toward ``episodic'' or bundled payments. The 16th Commonwealth 
Fund/Modern Health Care Opinion Leaders Survey, released November 3, 
2008, found that more than \2/3\ respondents reported that the fee-for-
service system is not effective at encouraging high quality and 
efficient care. More than \3/4\ of respondents prefer a move toward 
bundled per patient payments. Shared accountability for resource use 
also was favored as a means for improving efficiency, and \2/3\ of the 
experts surveyed supported realigning provider payment incentives to 
improve efficiency and effectiveness.
  This legislation makes three broad reforms to the Medicare program 
leading to higher quality and more efficient care. First, the 
legislation requires the U.S. Department of Health and Human Services, 
HHS, to report on risk adjusted readmission rates and resource use to 
Medicare providers, and over time, to the public. Second, the 
legislation establishes risk-adjusted benchmarks based upon these data 
that, over time, will be utilized to adjust Medicare payments. Finally, 
the legislation institutes a voluntary ``episodic payment'' pilot 
program.
  Readmission will be defined by the Secretary of HHS and will include 
a time frame of at least 30 days between the initial diagnosis and 
readmission, insure that the readmission rate captures readmissions to 
any hospital and not be limited to the initial health care

[[Page 1298]]

provider entity, and verify that the diagnosis for both initial and 
readmission are related. Within 1 year from enactment, HHS will be 
tasked with confidentially reporting to provider entities risk adjusted 
for readmission rates and risk adjusted resource use for select high-
volume diagnosis-related groups, DRG, associated with high-rates of 
readmission. After 3 years, HHS will publically release these reports 
with an annual review of the list of DRGs reported. The data reported 
will be risk adjusted taking into account variations in health status 
and other patient characteristics. Physician's not reporting these data 
to HHS for analysis will be penalized; although physicians do have the 
ability to apply for hardship exceptions.
  The legislation requires HHS to establish benchmarks for risk 
adjusted readmission rates and resource utilization for a given DRG and 
within 2 years of enactment, report to Congress on methodologies used 
to develop such benchmarks. Three years from the date of enactment, the 
base operating DRG payment to hospitals not meeting the established 
benchmarks will be reduced by 1 percent or an amount that is 
proportionate to the number of readmissions exceeding the benchmark. 
The Secretary of HHS will devise a mechanism to allocate accountability 
among providers associated with the episode of care with regard to 
penalty distribution. The benchmark and penalty will be evaluated and 
updated annually.
  The legislation goes further and establishes a voluntary pilot 
program to allow for bundled episodic payments to organized groups of 
multispecialty and multilevel providers for select high cost 
interventions. Payments would be risk adjusted and would cover all 
Medicare Part A and B costs associated with a hospitalization episode 
including care delivered 30 days after discharge. Payments would be 
issued to the participating provider group which, in turn, would 
reimburse negotiated payments to all individual providers associated 
with episode of treatment. The pilot would include testing models in a 
variety of settings including rural and underserved areas. The initial 
pilot will begin 2 years from date of enactment and continue for a 
period of 5 years. If the pilot proves successful, the Secretary of HHS 
will have the authority to expand the payment mechanism to a larger set 
of providers.
  I urge my colleagues to join me in supporting this important piece of 
legislation.
  Mr. President, 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. 295

       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 ``Medicare Quality and Payment 
     Reform Act of 2009''.

     SEC. 2. FINDINGS.

       (a) Findings Relating to Medicare Reporting of Readmission 
     Rates and Resource Use and the Medicare Fee-for-Service 
     Payment System.--Congress makes the following findings:
       (1) The Medicare program under title XVIII of the Social 
     Security Act (42 U.S.C. 1395 et seq.) does not publically or 
     privately report to health care providers on resource use 
     and, as a result, many health care providers are unaware of 
     their practices with respect to resource use.
       (2) In 2008, the Congressional Budget Office reported that 
     areas with higher Medicare spending scored lower, on average, 
     on a composite indicator of quality of care furnished to 
     Medicare beneficiaries.
       (3) Feedback on resource use has been shown to increase 
     awareness among health care providers and encourage positive 
     behavioral changes.
       (4) The Medicare program pays for all patient 
     hospitalizations based on the diagnosis, regardless of 
     whether the hospitalization is a readmission or the initial 
     episode of care.
       (5) The Medicare Payment Advisory Commission reports that 
     within 30 days of discharge from a hospital, 17.6 percent of 
     admissions are readmitted to the hospital. In 2005, the 
     Medicare program spent $15,000,000,000 on such readmissions.
       (6) The Commonwealth Fund Commission on a High Performance 
     Health System found that Medicare 30-day readmission rates 
     varied from 14 percent to 22 percent with respect to the 
     lowest and highest decile of States.
       (b) Findings Relating to the Bundling of Medicare Payments 
     to Health Care Providers.--Congress makes the following 
     findings:
       (1) Bundled payments incentivize health care providers to 
     determine and provide the most efficient mix of services to 
     Medicare beneficiaries with regard to cost and quality.
       (2) The Medicare Payment Advisory Commission reports that 
     bundled payments around a given episode of care under the 
     Medicare program would encourage collaboration among 
     providers of services and suppliers, reduce fragmentation in 
     health care delivery, and improve the accountability for cost 
     and the quality of care.
       (3) The Medicare Participating Heart Bypass Center 
     Demonstration which was conducted during the period of 1990 
     to 1996 found that bundled payments for cardiac bypass cases 
     were successful in reducing spending on laboratory 
     diagnostics, pharmacy services, intensive care, physician 
     consults, and post-discharge care while maintaining a high 
     quality of care. The Medicare program saved approximately 10 
     percent on bypass patients treated under the demonstration.
       (4) The 16th Commonwealth Fund/Modern Healthcare Health 
     Care Opinion Leaders Survey, released November 3, 2008, found 
     that more than \2/3\ of respondents reported that the fee-
     for-service payment system under the Medicare program is not 
     effective at encouraging high quality and efficient care and 
     more than \3/4\ of respondents reported preferring a move 
     toward bundled per patient payments under the Medicare 
     program. Respondents favored shared accountability for 
     resource use as a means for improving efficiency, and at 
     least \2/3\ of respondents supported realigning payment 
     incentives for providers of services and suppliers under the 
     Medicare program in order to improve efficiency and 
     effectiveness.

     SEC. 3. PAYMENT ADJUSTMENT FOR READMISSION RATES AND RESOURCE 
                   USE.

       (a) Payment Adjustment.--
       (1) In general.--Title XVIII of the Social Security Act (42 
     U.S.C. 1395 et seq.) is amended by adding at the end the 
     following new section:


      ``payment adjustment for readmission rates and resource use

       ``Sec. 1899.  (a) Reporting of Readmission Rates and 
     Resource Use.--
       ``(1) Annual review.--Beginning not later than 1 year after 
     the date of enactment of this section, the Secretary shall 
     conduct an annual review of readmission rates and resource 
     use for conditions selected by the Secretary under paragraph 
     (5)--
       ``(A) with respect to subsection (d) hospitals and 
     affiliated physicians (or similarly licensed providers of 
     services and suppliers); and
       ``(B) with respect to the program under this title.
       ``(2) Reporting.--
       ``(A) To hospitals and affiliated physicians.--Beginning 
     not later than 1 year after the date of enactment of this 
     section, taking into consideration the results of the annual 
     review under paragraph (1), the Secretary shall provide 
     confidential reports to subsection (d) hospitals and to 
     affiliated physicians (or similarly licensed providers of 
     services and suppliers) that measure the readmission rates 
     and resource use for conditions selected by the Secretary 
     under paragraph (5).
       ``(B) To the public.--Beginning not later than 3 years 
     after such date of enactment, taking into consideration the 
     results of such annual review, the Secretary shall make 
     available to the public an annual report that measures the 
     readmission rates and resource use under this title for 
     conditions selected by the Secretary under paragraph (5). 
     Such annual reports shall, to the extent practicable, be 
     integrated into public reporting of data submitted under 
     section 1886(b)(3)(B)(viii) with respect to subsection (d) 
     hospitals and data submitted under section 1848(m) with 
     respect to eligible professionals.
       ``(3) Definition of readmission.--The Secretary shall 
     define readmission for purposes of this section. Such 
     definition shall--
       ``(A) include a time frame of at least 30 days between the 
     initial admission and the applicable readmission;
       ``(B) capture readmissions to any hospital (as defined in 
     section 1861(e)) or any critical access hospital (as defined 
     in section 1861(mm)(1)) and not be limited to readmissions to 
     the subsection (d) hospital of the initial admission; and
       ``(C) ensure that the diagnosis for both the initial 
     admission and the applicable readmission are related.
       ``(4) Penalties for non-reporting.--The Secretary shall 
     establish procedures for the collection of data necessary to 
     carry out this subsection. Such procedures shall--
       ``(A) subject to subparagraph (B), provide for the 
     imposition of penalties for subsection (d) hospitals and 
     affiliated physicians (or similarly licensed providers of 
     services and suppliers) that do not submit such data; and
       ``(B) include a hardship exceptions process for affiliated 
     physicians (and similarly licensed providers of services and 
     suppliers) who do not have the resources to participate 
     (except that such process may not apply to more than 20 
     percent of affiliated physicians (or similarly licensed 
     providers of services and suppliers)).
       ``(5) Selection of conditions.--

[[Page 1299]]

       ``(A) Initial selection.--The Secretary shall select 
     conditions for the reporting of readmission rates and 
     resource use under this subsection--
       ``(i) that have a high volume under this title; or
       ``(ii) that have high readmission rates under this title.
       ``(B) Updating conditions selected.--Not less frequently 
     than every 3 years, the Secretary shall review and update as 
     appropriate the conditions selected under subparagraph (A).
       ``(6) Time period of measurement.--The Secretary shall, as 
     appropriate and subject to the requirements of this 
     subsection, determine an appropriate time period for the 
     measurement of readmission rates and resource use for 
     purposes of this section.
       ``(7) Risk adjustment of data.--The Secretary shall make 
     appropriate adjustments to any data used in analyzing or 
     reporting readmission rates and resource use under this 
     section, including any data used to conduct the annual review 
     under paragraph (1), in the preparation of reports under 
     subparagraph (A) or (B) of paragraph (2), or in the 
     determination of whether a subsection (d) hospital or an 
     affiliated physician (or a similarly licensed provider of 
     services or supplier) has met the benchmarks established 
     under subsection (b)(1)(A)(i) to take into account variations 
     in health status and other patient characteristics.
       ``(8) Incorporation into quality reporting initiatives.--
     The Secretary shall, to the extent practicable, incorporate 
     readmission rates and resource use measurements into quality 
     reporting initiatives for other Medicare payment systems, 
     including such initiatives with respect to skilled nursing 
     facilities and home health agencies.
       ``(b) Payment Adjustment for Readmission Rates and Resource 
     Use.--
       ``(1) In general.--
       ``(A) Benchmarks.--
       ``(i) In general.--The Secretary shall establish benchmarks 
     for measuring the readmission rates and resource use of 
     subsection (d) hospitals and affiliated physicians (or 
     similarly licensed providers of services and suppliers) under 
     this section.
       ``(ii) Report to congress on methodologies used to 
     establish benchmarks.--Not later than 2 years after the date 
     of enactment of this section, the Secretary shall submit to 
     Congress a report on the methodologies used to establish the 
     benchmarks under clause (i).
       ``(iii) Risk adjustment of data.--In determining whether a 
     subsection (d) hospital has met the benchmarks established 
     under clause (i) for purposes of the payment adjustment under 
     this subsection, the Secretary shall provide for risk 
     adjustment of data in accordance with subsection (a)(7).
       ``(B) Payment adjustment.--Not later than 3 years after the 
     date of enactment of this section, in the case of a 
     subsection (d) hospital that the Secretary determines does 
     not meet 1 or more of the benchmarks established under 
     subparagraph (A)(i) during the time period of measurement, 
     the Secretary shall reduce the base operating DRG payment 
     amount (as defined in subparagraph (C)) for the subsection 
     (d) hospital for each discharge occurring in the succeeding 
     fiscal year by--
       ``(i) 1 percent or an amount that the Secretary determines 
     is proportionate to the number of readmissions of the 
     subsection (d) hospital which exceed the applicable benchmark 
     established under subparagraph (A)(i), whichever is greater; 
     or
       ``(ii) in the case where the Secretary updates the amount 
     of the payment adjustment under paragraph (3), such updated 
     amount.
       ``(C) Base operating drg payment amount defined.--
       ``(i) In general.--Except as provided in clause (ii), in 
     this subsection, the term `base operating DRG payment amount' 
     means, with respect to a subsection (d) hospital for a fiscal 
     year--

       ``(I) the payment amount that would otherwise be made under 
     section 1886(d) for a discharge if this subsection did not 
     apply; reduced by
       ``(II) any portion of such payment amount that is 
     attributable to payments under paragraphs (5)(A), (5)(B), 
     (5)(F), and (12) of such section 1886(d).

       ``(ii) Special rules for certain hospitals.--

       ``(I) Sole community hospitals.--In the case of a sole 
     community hospital, in applying clause (i)(I), the payment 
     amount that would otherwise be made under subsection (d) for 
     a discharge if this subsection did not apply shall be 
     determined without regard to subparagraphs (I) and (L) of 
     subsection (b)(3) of section 1886 and subparagraph (D) of 
     subsection (d)(5) of such section.
       ``(II) Hospitals paid under section 1814.--In the case of a 
     hospital that is paid under section 1814(b)(3), the term 
     `base operating DRG payment amount' means the payment amount 
     under such section.

       ``(2) Shared accountability.--The Secretary shall examine 
     ways to create shared accountability with providers of 
     services and suppliers associated with episodes of care, 
     including how any penalty could be distributed among such 
     providers of services and suppliers as appropriate and how to 
     avoid inappropriate gainsharing by such providers of services 
     and suppliers.
       ``(3) Annual update.--The Secretary shall annually update 
     the benchmarks established under paragraph (1)(A)(i) and the 
     payment adjustment under paragraph (1)(B) to further 
     incentivize improvements in readmission rates and resource 
     use.
       ``(4) Incorporation of new measures.--In the case where the 
     Secretary updates the conditions selected under subsection 
     (a)(5)(B), any new condition selected shall not be considered 
     in determining whether a subsection (d) hospital has met the 
     benchmarks established under paragraph (1)(A)(i) for purposes 
     of the payment adjustment under paragraph (1)(B) during the 
     period beginning on the date of the selection and ending 1 
     year after such date.''.
       (2) Conforming amendment.--Section 1886(d)(1)(A) of the 
     Social Security Act (42 U.S.C. 1395ww(d)(1)(A)), in the 
     matter preceding clause (i), is amended by striking ``section 
     1813'' and inserting ``sections 1813 and 1899''.
       (b) Voluntary Pilot Program for Bundled Payments for 
     Episodes of Treatment.--
       (1) Initial implementation.--
       (A) In general.--The Secretary of Health and Human Services 
     (in this subsection referred to as the ``Secretary'') shall 
     establish a pilot program to provide episodic payments to 
     hospitals and other organizing entities for items and 
     services associated with hospitalization episodes of Medicare 
     beneficiaries with respect to 1 or more conditions selected 
     under subparagraph (B).
       (B) Selection.--The Secretary shall initially implement the 
     pilot program for hospitalization episodes with respect to 
     conditions that have a high volume, high readmission rate, or 
     high rate of post-acute care under the Medicare program under 
     title XVIII of the Social Security Act (42 U.S.C. 1395 et 
     seq.) (as determined by the Secretary).
       (C) Payments.--
       (i) In general.--Under the pilot program, episodic payments 
     shall--

       (I) be risk adjusted; and
       (II) cover all costs under parts A and B of the Medicare 
     program associated with a hospitalization episode with 
     respect to the selected condition, which includes the period 
     beginning on the date of hospitalization and ending 30 days 
     after the date of discharge.

       (ii) Compatibility of payment mechanisms.--The Secretary 
     shall, to the extent feasible, ensure that the payment 
     mechanism under the pilot program functions with payment 
     mechanisms under the original Medicare fee for service 
     program under parts A and B of title XVIII of the Social 
     Security Act and under the Medicare Advantage program under 
     part C of such title.
       (iii) Process.--Under the pilot program, episodic payments 
     shall be made to a hospital or other organizing entity 
     participating in the pilot program. The participating 
     hospitals and other organizing entities shall make payments 
     to other providers of services and suppliers who furnished 
     items or services associated with the hospitalization episode 
     (in an amount negotiated between the participating hospital 
     and the provider of services or supplier).
       (iv) Savings.--The Secretary shall establish procedures to 
     ensure that the Secretary, participating hospitals or other 
     organizing entities, providers of services, and suppliers 
     share any savings associated with higher efficiency care 
     furnished under the pilot program.
       (D) Inclusion of variety of providers of services and 
     suppliers.--In selecting providers of services and suppliers 
     to participate in the pilot program, the Secretary shall 
     establish criteria to ensure the inclusion of a variety of 
     providers of services and suppliers, including providers of 
     services and suppliers that serve a wide range of Medicare 
     beneficiaries, including Medicare beneficiaries located in 
     rural and urban areas and low-income Medicare beneficiaries.
       (E) Duration.--The Secretary shall conduct the pilot 
     program under this paragraph for a 5-year period.
       (F) Implementation.--The Secretary shall implement the 
     pilot program not later than 2 years after the date of 
     enactment of this Act.
       (G) Definition of organizing entity.--In this subsection, 
     the term ``organizing entity'' means an entity responsible 
     for the organization and administration of the furnishing of 
     items and services associated with a hospitalization episode 
     of a Medicare beneficiary with respect to 1 or more 
     conditions selected under subparagraph (B).
       (2) Expanded implementation.--
       (A) Establishment of thresholds for expansion.--The 
     Secretary shall, prior to the implementation of the pilot 
     program under paragraph (1), establish clear thresholds for 
     use in determining whether implementation of the pilot 
     program should be expanded under subparagraph (B).
       (B) Expanded implementation.--If the Secretary determines 
     the thresholds established under subparagraph (A) are met, 
     the Secretary may expand implementation of the pilot program 
     to additional providers of services, suppliers, and episodes 
     of treatment not covered under the pilot program as conducted 
     under paragraph (1), which may include the implementation of 
     the pilot program on a national basis.

[[Page 1300]]

       (3) Authorization of appropriations.--There are authorized 
     to be appropriated such sums as may be necessary to carry out 
     this subsection.

                          ____________________