[Congressional Record (Bound Edition), Volume 155 (2009), Part 14]
[Senate]
[Pages 18736-18757]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. LEAHY:
  S. 1490. A bill to prevent and mitigate identity theft, to ensure 
privacy, to provide notice of security breaches, and to enhance 
criminal penalties, law enforcement assistance, and other protections 
against security breaches, fraudulent access, and misuse of personally 
identifiable information; to the Committee on the Judiciary.
  Mr. LEAHY. Mr. President, today, I am pleased to reintroduce the 
Personal Data Privacy and Security Act. The recent and troubling cyber 
attack on U.S. Government computers is clear evidence that developing a 
comprehensive national strategy for data privacy and cybersecurity is 
one of the most challenging and important issues facing our nation. The 
Personal Data Privacy and Security Act will help to meet this 
challenge, by better protecting Americans from the growing threats of 
data breaches and identity theft.
  When Senator Specter and I first introduced this bill 4 years ago, we 
had high hopes of bringing urgently needed data privacy reforms to the 
American people. Although the Judiciary Committee favorably reported 
this bill twice, in 2005 and again in 2007, the legislation languished 
on the Senate calendar and the Senate adjourned without passing 
comprehensive data privacy legislation.
  While the Congress has waited to act, the dangers to our privacy, 
economic prosperity and national security posed by data breaches have 
not gone away. Just this week, the Government Accountability Office 
released a report finding that almost all of our major federal agencies 
have systemic weaknesses in the information security controls. 
According to the Privacy Rights Clearinghouse, more than 250 million 
records containing sensitive personal information have been involved in 
data security breaches since 2005.
  This loss of privacy is not just a grave concern for American 
consumers;

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it is also a serious threat to the economic security of American 
businesses. The President's recent report on Cyberspace Policy Review 
noted that industry estimates of losses from intellectual property to 
data theft in 2008 range as high as $1 trillion.
  The FBI's Internet Fraud Complaint Center also recently reported that 
complaints of Internet fraud increased by 33 percent in 2008. These 
troubling reports are all compelling examples of why we need to 
promptly pass the Personal Data Privacy and Security Act.
  Earlier this year, the Judiciary Committee held an important hearing 
on the privacy risks associated with electronic health records as the 
Nation moves towards a national health IT system. I am pleased that 
many of the privacy principles developed during that hearing have been 
enacted as part of the President's economic recovery package.
  The Personal Data Privacy and Security Act requires that data brokers 
let consumers know what sensitive personal information they have about 
them, and to allow individuals to correct inaccurate information. The 
bill also requires that companies that have databases with sensitive 
personal information on Americans establish and implement data privacy 
and security programs.
  In addition, the bill requires notice when sensitive personal 
information has been compromised. This bill also provides for tough 
criminal penalties for anyone who would intentionally and willfully 
conceal the fact that a data breach has occurred when the breach causes 
economic damage to consumers. Finally, the bill addresses the important 
issue of the government's use of personal data by requiring that 
federal agencies notify affected individuals when government data 
breaches occur, and placing privacy and security front and center when 
federal agencies evaluate whether data brokers can be trusted with 
government contracts that involve sensitive information about the 
American people.
  Of course, Senator Specter and I have no monopoly on good ideas to 
solve the serious problems of identity theft and lax cybersecurity. 
But, we have put forth some meaningful solutions to this problem in 
this bill.
  We have drafted this bill after long and thoughtful consultation with 
many of the stakeholders on this issue, including the privacy, consumer 
protection and business communities. We have also worked closely with 
other Senators, including Senators Feinstein, Feingold, and Schumer.
  This is a comprehensive bill that not only deals with the need to 
provide Americans with notice when they have been victims of a data 
breach, but that also deals with the underlying problem of lax security 
and lack of accountability to help prevent data breaches from occurring 
in the first place. Passing this comprehensive data privacy legislation 
is one of my highest legislative priorities as Chairman of the 
Judiciary Committee, and I hope all Senators will support this measure.
  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. 1490

       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 ``Personal 
     Data Privacy and Security Act of 2009''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Definitions.

 TITLE I--ENHANCING PUNISHMENT FOR IDENTITY THEFT AND OTHER VIOLATIONS 
                      OF DATA PRIVACY AND SECURITY

Sec. 101. Organized criminal activity in connection with unauthorized 
              access to personally identifiable information.
Sec. 102. Concealment of security breaches involving sensitive 
              personally identifiable information.
Sec. 103. Review and amendment of Federal sentencing guidelines related 
              to fraudulent access to or misuse of digitized or 
              electronic personally identifiable information.
 Sec. 104. Effects of identity theft on bankruptcy proceedings.

                         TITLE II--DATA BROKERS

Sec. 201. Transparency and accuracy of data collection.
Sec. 202. Enforcement.
Sec. 203. Relation to State laws.
Sec. 204. Effective date.

 TITLE III--PRIVACY AND SECURITY OF PERSONALLY IDENTIFIABLE INFORMATION

            Subtitle A--A Data Privacy and Security Program

Sec. 301. Purpose and applicability of data privacy and security 
              program.
Sec. 302. Requirements for a personal data privacy and security 
              program.
Sec. 303. Enforcement.
Sec. 304. Relation to other laws.

                Subtitle B--Security Breach Notification

Sec. 311. Notice to individuals.
Sec. 312. Exemptions.
Sec. 313. Methods of notice.
Sec. 314. Content of notification.
Sec. 315. Coordination of notification with credit reporting agencies.
Sec. 316. Notice to law enforcement.
Sec. 317. Enforcement.
Sec. 318. Enforcement by State attorneys general.
Sec. 319. Effect on Federal and State law.
Sec. 320. Authorization of appropriations.
Sec. 321. Reporting on risk assessment exemptions.
Sec. 322. Effective date.

           Subtitle C--Office of Federal Identity Protection

Sec. 331. Office of Federal Identity Protection.

       TITLE IV--GOVERNMENT ACCESS TO AND USE OF COMMERCIAL DATA

Sec. 401. General services administration review of contracts.
Sec. 402. Requirement to audit information security practices of 
              contractors and third party business entities.
Sec. 403. Privacy impact assessment of government use of commercial 
              information services containing personally identifiable 
              information.
Sec. 404. Implementation of chief privacy officer requirements.

     SEC. 2. FINDINGS.

       Congress finds that--
       (1) databases of personally identifiable information are 
     increasingly prime targets of hackers, identity thieves, 
     rogue employees, and other criminals, including organized and 
     sophisticated criminal operations;
       (2) identity theft is a serious threat to the Nation's 
     economic stability, homeland security, the development of e-
     commerce, and the privacy rights of Americans;
       (3) over 9,300,000 individuals were victims of identity 
     theft in America last year;
       (4) security breaches are a serious threat to consumer 
     confidence, homeland security, e-commerce, and economic 
     stability;
       (5) it is important for business entities that own, use, or 
     license personally identifiable information to adopt 
     reasonable procedures to ensure the security, privacy, and 
     confidentiality of that personally identifiable information;
       (6) individuals whose personal information has been 
     compromised or who have been victims of identity theft should 
     receive the necessary information and assistance to mitigate 
     their damages and to restore the integrity of their personal 
     information and identities;
       (7) data brokers have assumed a significant role in 
     providing identification, authentication, and screening 
     services, and related data collection and analyses for 
     commercial, nonprofit, and government operations;
       (8) data misuse and use of inaccurate data have the 
     potential to cause serious or irreparable harm to an 
     individual's livelihood, privacy, and liberty and undermine 
     efficient and effective business and government operations;
       (9) there is a need to insure that data brokers conduct 
     their operations in a manner that prioritizes fairness, 
     transparency, accuracy, and respect for the privacy of 
     consumers;
       (10) government access to commercial data can potentially 
     improve safety, law enforcement, and national security; and
       (11) because government use of commercial data containing 
     personal information potentially affects individual privacy, 
     and law enforcement and national security operations, there 
     is a need for Congress to exercise oversight over government 
     use of commercial data.

     SEC. 3. DEFINITIONS.

       In this Act, the following definitions shall apply:
       (1) Agency.--The term ``agency'' has the same meaning given 
     such term in section 551 of title 5, United States Code.
       (2) Affiliate.--The term ``affiliate'' means persons 
     related by common ownership or by corporate control.
       (3) Business entity.--The term ``business entity'' means 
     any organization, corporation, trust, partnership, sole 
     proprietorship, unincorporated association,  or venture 
     established to make a profit, or nonprofit.

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       (4) Identity theft.--The term ``identity theft'' means a 
     violation of section 1028 of title 18, United States Code.
       (5) Data broker.--The term ``data broker'' means a business 
     entity which for monetary fees or dues regularly engages in 
     the practice of collecting, transmitting, or providing access 
     to sensitive personally identifiable information on more than 
     5,000 individuals who are not the customers or employees of 
     that business entity or affiliate primarily for the purposes 
     of providing such information to nonaffiliated third parties 
     on an interstate basis.
       (6) Data furnisher.--The term ``data furnisher'' means any 
     agency, organization, corporation, trust, partnership, sole 
     proprietorship, unincorporated association, or nonprofit that 
     serves as a source of information for a data broker.
       (7) Encryption.--The term ``encryption''--
       (A) means the protection of data in electronic form, in 
     storage or in transit, using an encryption technology that 
     has been adopted by an established standards setting body 
     which renders such data indecipherable in the absence of 
     associated cryptographic keys necessary to enable decryption 
     of such data; and
       (B) includes appropriate management and safeguards of such 
     cryptographic keys so as to protect the integrity of the 
     encryption.
       (8) Personal electronic record.--
       (A) In general.--The term ``personal electronic record'' 
     means data associated with an individual contained in a 
     database, networked or integrated databases, or other data 
     system that  is provided to nonaffiliated third parties and 
     includes sensitive personally identifiable information  about 
     that individual.
       (B) Exclusions.--The term ``personal electronic record'' 
     does not include--
       (i) any data related to an individual's past purchases of 
     consumer goods; or
       (ii) any proprietary assessment or evaluation of an 
     individual or any proprietary assessment or evaluation of 
     information about an individual.
       (9) Personally identifiable information.--The term 
     ``personally identifiable information'' means any 
     information, or compilation of information, in electronic or 
     digital form serving as a means of identification, as defined 
     by section 1028(d)(7) of title 18, United States Code.
       (10) Public record source.--The term ``public record 
     source'' means the Congress, any agency, any State or local 
     government agency, the government of the District of Columbia 
     and governments of the territories or possessions of the 
     United States, and Federal, State or local courts, courts 
     martial and military commissions, that maintain personally 
     identifiable information in records available to the public.
       (11) Security breach.--
       (A) In general.--The term ``security breach'' means 
     compromise of the security, confidentiality, or integrity of 
     computerized data through misrepresentation or actions that 
     result in, or there is a reasonable basis to conclude has 
     resulted in, acquisition of or access to sensitive personally 
     identifiable information that is unauthorized or in excess of 
     authorization.
       (B) Exclusion.--The term ``security breach'' does not 
     include--
       (i) a good faith acquisition of sensitive personally 
     identifiable information by a business entity or agency, or 
     an employee or agent of a business entity or agency, if the 
     sensitive personally identifiable information is not subject 
     to further unauthorized disclosure; or
       (ii) the release of a public record not otherwise subject 
     to confidentiality or nondisclosure requirements.
       (12) Sensitive personally identifiable information.--The 
     term ``sensitive personally identifiable information'' means 
     any information or compilation of information, in electronic 
     or digital form that includes--
       (A) an individual's first and last name or first initial 
     and last name in combination with any 1 of the following data 
     elements:
       (i) A non-truncated social security number, driver's 
     license number, passport number, or alien registration 
     number.
       (ii) Any 2 of the following:

       (I) Home address or telephone number.
       (II) Mother's maiden name, if identified as such.
       (III) Month, day, and year of birth.

       (iii) Unique biometric data such as a finger print, voice 
     print, a retina or iris image, or any other unique physical 
     representation.
       (iv) A unique account identifier, electronic identification 
     number, user name, or routing code in combination with any 
     associated security code, access code, or password that is 
     required for an individual to obtain money, goods, services, 
     or any other thing of value; or
       (B) a financial account number or credit or debit card 
     number in combination with any security code, access code, or 
     password that is required for an individual to obtain credit, 
     withdraw funds, or engage in a financial transaction.

 TITLE I--ENHANCING PUNISHMENT FOR IDENTITY THEFT AND OTHER VIOLATIONS 
                      OF DATA PRIVACY AND SECURITY

     SEC. 101. ORGANIZED CRIMINAL ACTIVITY IN CONNECTION WITH 
                   UNAUTHORIZED ACCESS TO PERSONALLY IDENTIFIABLE 
                   INFORMATION.

       Section 1961(1) of title 18, United States Code, is amended 
     by inserting ``section 1030(a)(2)(D) (relating to fraud and 
     related activity in connection with unauthorized access to 
     sensitive personally identifiable information as defined in 
     the Personal Data Privacy and Security Act of 2009,'' before 
     ``section 1084''.

     SEC. 102. CONCEALMENT OF SECURITY BREACHES INVOLVING 
                   SENSITIVE PERSONALLY IDENTIFIABLE INFORMATION.

       (a) In General.--Chapter 47 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1041. Concealment of security breaches involving 
       sensitive personally identifiable information

       ``(a) Whoever, having knowledge of a security breach and of 
     the obligation to provide notice of such breach to 
     individuals under title III of the Personal Data Privacy and 
     Security Act of 2009, and having not otherwise qualified for 
     an exemption from providing notice under section 312 of such 
     Act, intentionally and willfully conceals the fact of such 
     security breach and which breach causes economic damage to 1 
     or more persons, shall be fined under this title or 
     imprisoned not more than 5 years, or both.
       ``(b) For purposes of subsection (a), the term `person' has 
     the same meaning as in section 1030(e)(12) of title 18, 
     United States Code.
       ``(c) Any person seeking an exemption under section 312(b) 
     of the Personal Data Privacy and Security Act of 2009 shall 
     be immune from prosecution under this section if the United 
     States Secret Service does not indicate, in writing, that 
     such notice be given under section 312(b)(3) of such Act''.
       (b) Conforming and Technical Amendments.--The table of 
     sections for chapter 47 of title 18, United States Code, is 
     amended by adding at the end the following:

``1041. Concealment of security breaches involving personally 
              identifiable information.''.

       (c) Enforcement Authority.--
       (1) In general.--The United States Secret Service shall 
     have the authority to investigate offenses under this 
     section.
       (2) Nonexclusivity.--The authority granted in paragraph (1) 
     shall not be exclusive of any existing authority held by any 
     other Federal agency.

     SEC. 103. REVIEW AND AMENDMENT OF FEDERAL SENTENCING 
                   GUIDELINES RELATED TO FRAUDULENT ACCESS TO OR 
                   MISUSE OF DIGITIZED OR ELECTRONIC PERSONALLY 
                   IDENTIFIABLE INFORMATION.

       (a) Review and Amendment.--The United States Sentencing 
     Commission, pursuant to its authority under section 994 of 
     title 28, United States Code, and in accordance with this 
     section, shall review and, if appropriate, amend the Federal 
     sentencing guidelines (including its policy statements) 
     applicable to persons convicted of using fraud to access, or 
     misuse of, digitized or electronic personally identifiable 
     information, including identity theft or any offense under--
       (1) sections 1028, 1028A, 1030, 1030A, 2511, and 2701 of 
     title 18, United States Code; and
       (2) any other relevant provision.
       (b) Requirements.--In carrying out the requirements of this 
     section, the United States Sentencing Commission shall--
       (1) ensure that the Federal sentencing guidelines 
     (including its policy statements) reflect--
       (A) the serious nature of the offenses and penalties 
     referred to in this Act;
       (B) the growing incidences of theft and misuse of digitized 
     or electronic personally identifiable information, including 
     identity theft; and
       (C) the need to deter, prevent, and punish such offenses;
       (2) consider the extent to which the Federal sentencing 
     guidelines (including its policy statements) adequately 
     address violations of the sections amended by this Act to--
       (A) sufficiently deter and punish such offenses; and
       (B) adequately reflect the enhanced penalties established 
     under this Act;
       (3) maintain reasonable consistency with other relevant 
     directives and sentencing guidelines;
       (4) account for any additional aggravating or mitigating 
     circumstances that might justify exceptions to the generally 
     applicable sentencing ranges;
       (5) consider whether to provide a sentencing enhancement 
     for those convicted of the offenses described in subsection 
     (a), if the conduct involves--
       (A) the online sale of fraudulently obtained or stolen 
     personally identifiable information;
       (B) the sale of fraudulently obtained or stolen personally 
     identifiable information to an individual who is engaged in 
     terrorist activity or aiding other individuals engaged in 
     terrorist activity; or
       (C) the sale of fraudulently obtained or stolen personally 
     identifiable information to finance terrorist activity or 
     other criminal activities;
       (6) make any necessary conforming changes to the Federal 
     sentencing guidelines to ensure that such guidelines 
     (including its policy statements) as described in subsection 
     (a) are sufficiently stringent to deter, and

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     adequately reflect crimes related to fraudulent access to, or 
     misuse of, personally identifiable information; and
       (7) ensure that the Federal sentencing guidelines 
     adequately meet the purposes of sentencing under section 
     3553(a)(2) of title 18, United States Code.
       (c) Emergency Authority to Sentencing Commission.--The 
     United States Sentencing Commission may, as soon as 
     practicable, promulgate amendments under this section in 
     accordance with procedures established in section 21(a) of 
     the Sentencing Act of 1987 (28 U.S.C. 994 note) as though the 
     authority under that Act had not expired.

     SEC. 104. EFFECTS OF IDENTITY THEFT ON BANKRUPTCY 
                   PROCEEDINGS.

       (a) Definitions.--Section 101 of title 11, United States 
     Code, is amended--
       (1) by redesignating paragraph (27B) as paragraph (27D); 
     and
       (2) by inserting after paragraph (27A) the following:
       ``(27) The term `identity theft' means a fraud committed or 
     attempted using the personally identifiable information of 
     another person.
       ``(28) The term `identity theft victim' means a debtor who, 
     as a result of an identify theft in any consecutive 12-month 
     period during the 3-year period before the date on which a 
     petition is filed under this title, had claims asserted 
     against such debtor in excess of the least of--
       ``(A) $20,000;
       ``(B) 50 percent of all claims asserted against such 
     debtor; or
       ``(C) 25 percent of the debtor's gross income for such 12-
     month period.''.
       (b) Prohibition.--Section 707(b) of title 11, United States 
     Code, is amended by adding at the end the following:
       ``(8) No judge, United States trustee (or bankruptcy 
     administrator, if any), trustee, or other party in interest 
     may file a motion under paragraph (2) if the debtor is an 
     identity theft victim.''.

                         TITLE II--DATA BROKERS

     SEC. 201. TRANSPARENCY AND ACCURACY OF DATA COLLECTION.

       (a) In General.--Data brokers engaging in interstate 
     commerce are subject to the requirements of this title for 
     any product or service offered to third parties that allows 
     access or use of sensitive personally identifiable 
     information.
       (b) Limitation.--Notwithstanding any other provision of 
     this title, this section shall not apply to--
       (1) any product or service offered by a data broker 
     engaging in interstate commerce where such product or service 
     is currently subject to, and in compliance with, access and 
     accuracy protections similar to those under subsections (c) 
     through (f) of this section under the Fair Credit Reporting 
     Act (Public Law 91-508);
       (2) any data broker that is subject to regulation under the 
     Gramm-Leach-Bliley Act (Public Law 106-102);
       (3) any data broker currently subject to and in compliance 
     with the data security requirements for such entities under 
     the Health Insurance Portability and Accountability Act 
     (Public Law 104-191), and its implementing regulations;
       (4) information in a personal electronic record that--
       (A) the data broker has identified as inaccurate, but 
     maintains for the purpose of aiding the data broker in 
     preventing inaccurate information from entering an 
     individual's personal electronic record; and
       (B) is not maintained primarily for the purpose of 
     transmitting or otherwise providing that information, or 
     assessments based on that information, to nonaffiliated third 
     parties; and
       (5) information concerning proprietary methodologies, 
     techniques, scores, or algorithms relating to fraud 
     prevention not normally provided to third parties in the 
     ordinary course of business.
       (c) Disclosures to Individuals.--
       (1) In general.--A data broker shall, upon the request of 
     an individual, disclose to such individual for a reasonable 
     fee all personal electronic records pertaining to that 
     individual maintained specifically for disclosure to third 
     parties that request information on that individual in the 
     ordinary course of business in the databases or systems of 
     the data broker at the time of such request.
       (2) Information on how to correct inaccuracies.--The 
     disclosures required under paragraph (1) shall also include 
     guidance to individuals on procedures for correcting 
     inaccuracies.
       (d) Disclosure to Individuals of Adverse Actions Taken by 
     Third Parties.--
       (1) In general.--In addition to any other rights 
     established under this Act, if a person takes any adverse 
     action with respect to any individual that is based, in whole 
     or in part, on any information contained in a personal 
     electronic record that is maintained, updated, or otherwise 
     owned or possessed by a data broker, such person, at no cost 
     to the affected individual, shall provide--
       (A) written or electronic notice of the adverse action to 
     the individual;
       (B) to the individual, in writing or electronically, the 
     name, address, and telephone number of the data broker that 
     furnished the information to the person;
       (C) a copy of the information such person obtained from the 
     data broker; and
       (D) information to the individual on the procedures for 
     correcting any inaccuracies in such information.
       (2) Accepted methods of notice.--A person shall be in 
     compliance with the notice requirements under paragraph (1) 
     if such person provides written or electronic notice in the 
     same manner and using the same methods as are required under 
     section 313(1) of this Act.
       (e) Accuracy Resolution Process.--
       (1) Information from a public record or licensor.--
       (A) In general.--If an individual notifies a data broker of 
     a dispute as to the completeness or accuracy of information 
     disclosed to such individual under subsection (c) that is 
     obtained from a public record source or a license agreement, 
     such data broker shall determine within 30 days whether the 
     information in its system accurately and completely records 
     the information available from the licensor or public record 
     source.
       (B) Data broker actions.--If a data broker determines under 
     subparagraph (A) that the information in its systems does not 
     accurately and completely record the information available 
     from a public record source or licensor, the data broker 
     shall--
       (i) correct any inaccuracies or incompleteness, and provide 
     to such individual written notice of such changes; and
       (ii) provide such individual with the contact information 
     of the public record or licensor.
       (2) Information not from a public record source or 
     licensor.--If an individual notifies a data broker of a 
     dispute as to the completeness or accuracy of information not 
     from a public record or licensor that was disclosed to the 
     individual under subsection (c), the data broker shall, 
     within 30 days of receiving notice of such dispute--
       (A) review and consider free of charge any information 
     submitted by such individual that is relevant to the 
     completeness or accuracy of the disputed information; and
       (B) correct any information found to be incomplete or 
     inaccurate and provide notice to such individual of whether 
     and what information was corrected, if any.
       (3) Extension of review period.--The 30-day period 
     described in paragraph (1) may be extended for not more than 
     30 additional days if a data broker receives information from 
     the individual during the initial 30-day period that is 
     relevant to the completeness or accuracy of any disputed 
     information.
       (4) Notice identifying the data furnisher.--If the 
     completeness or accuracy of any information not from a public 
     record source or licensor that was disclosed to an individual 
     under subsection (c) is disputed by such individual, the data 
     broker shall provide, upon the request of such individual, 
     the contact information of any data furnisher that provided 
     the disputed information.
       (5) Determination that dispute is frivolous or 
     irrelevant.--
       (A) In general.--Notwithstanding paragraphs (1) through 
     (3), a data broker may decline to investigate or terminate a 
     review of information disputed by an individual under those 
     paragraphs if the data broker reasonably determines that the 
     dispute by the individual is frivolous or intended to 
     perpetrate fraud.
       (B) Notice.--A data broker shall notify an individual of a 
     determination under subparagraph (A) within a reasonable time 
     by any means available to such data broker.

     SEC. 202. ENFORCEMENT.

       (a) Civil Penalties.--
       (1) Penalties.--Any data broker that violates the 
     provisions of section 201 shall be subject to civil penalties 
     of not more than $1,000 per violation per day while such 
     violations persist, up to a maximum of $250,000 per 
     violation.
       (2) Intentional or willful violation.--A data broker that 
     intentionally or willfully violates the provisions of section 
     201 shall be subject to additional penalties in the amount of 
     $1,000 per violation per day, to a maximum of an additional 
     $250,000 per violation, while such violations persist.
       (3) Equitable relief.--A data broker engaged in interstate 
     commerce that violates this section may be enjoined from 
     further violations by a court of competent jurisdiction.
       (4) Other rights and remedies.--The rights and remedies 
     available under this subsection are cumulative and shall not 
     affect any other rights and remedies available under law.
       (b) Federal Trade Commission Authority.--Any data broker 
     shall have the provisions of this title enforced against it 
     by the Federal Trade Commission.
       (c) State Enforcement.--
       (1) Civil actions.--In any case in which the attorney 
     general of a State or any State or local law enforcement 
     agency authorized by the State attorney general or by State 
     statute to prosecute violations of consumer protection law, 
     has reason to believe that an interest of the residents of 
     that State has been or is threatened or adversely affected by 
     the acts or practices of a data broker that violate this 
     title, the State may bring a civil action on behalf of the 
     residents of that State in a district court of the United 
     States of appropriate jurisdiction, or any other court of 
     competent jurisdiction, to--
       (A) enjoin that act or practice;
       (B) enforce compliance with this title; or

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       (C) obtain civil penalties of not more than $1,000 per 
     violation per day while such violations persist, up to a 
     maximum of $250,000 per violation.
       (2) Notice.--
       (A) In general.--Before filing an action under this 
     subsection, the attorney general of the State involved shall 
     provide to the Federal Trade Commission--
       (i) a written notice of that action; and
       (ii) a copy of the complaint for that action.
       (B) Exception.--Subparagraph (A) shall not apply with 
     respect to the filing of an action by an attorney general of 
     a State under this subsection, if the attorney general of a 
     State determines that it is not feasible to provide the 
     notice described in subparagraph (A) before the filing of the 
     action.
       (C) Notification when practicable.--In an action described 
     under subparagraph (B), the attorney general of a State shall 
     provide the written notice and the copy of the complaint to 
     the Federal Trade Commission as soon after the filing of the 
     complaint as practicable.
       (3) Federal trade commission authority.--Upon receiving 
     notice under paragraph (2), the Federal Trade Commission 
     shall have the right to--
       (A) move to stay the action, pending the final disposition 
     of a pending Federal proceeding or action as described in 
     paragraph (4);
       (B) intervene in an action brought under paragraph (1); and
       (C) file petitions for appeal.
       (4) Pending proceedings.--If the Federal Trade Commission 
     has instituted a proceeding or civil action for a violation 
     of this title, no attorney general of a State may, during the 
     pendency of such proceeding or civil action, bring an action 
     under this subsection against any defendant named in such 
     civil action for any violation that is alleged in that civil 
     action.
       (5) Rule of construction.--For purposes of bringing any 
     civil action under paragraph (1), nothing in this title shall 
     be construed to prevent an attorney general of a State from 
     exercising the powers conferred on the attorney general by 
     the laws of that State to--
       (A) conduct investigations;
       (B) administer oaths and affirmations; or
       (C) compel the attendance of witnesses or the production of 
     documentary and other evidence.
       (6) Venue; service of process.--
       (A) Venue.--Any action brought under this subsection may be 
     brought in the district court of the United States that meets 
     applicable requirements relating to venue under section 1391 
     of title 28, United States Code.
       (B) Service of process.--In an action brought under this 
     subsection, process may be served in any district in which 
     the defendant--
       (i) is an inhabitant; or
       (ii) may be found.
       (d) No Private Cause of Action.--Nothing in this title 
     establishes a private cause of action against a data broker 
     for violation of any provision of this title.

     SEC. 203. RELATION TO STATE LAWS.

       No requirement or prohibition may be imposed under the laws 
     of any State with respect to any subject matter regulated 
     under section 201, relating to individual access to, and 
     correction of, personal electronic records held by data 
     brokers.

     SEC. 204. EFFECTIVE DATE.

       This title shall take effect 180 days after the date of 
     enactment of this Act.

 TITLE III--PRIVACY AND SECURITY OF PERSONALLY IDENTIFIABLE INFORMATION

            Subtitle A--A Data Privacy and Security Program

     SEC. 301. PURPOSE AND APPLICABILITY OF DATA PRIVACY AND 
                   SECURITY PROGRAM.

       (a) Purpose.--The purpose of this subtitle is to ensure 
     standards for developing and implementing administrative, 
     technical, and physical safeguards to protect the security of 
     sensitive personally identifiable information.
       (b) In General.--A business entity engaging in interstate 
     commerce that involves collecting, accessing, transmitting, 
     using, storing, or disposing of sensitive personally 
     identifiable information in electronic or digital form on 
     10,000 or more United States persons is subject to the 
     requirements for a data privacy and security program under 
     section 302 for protecting sensitive personally identifiable 
     information.
       (c) Limitations.--Notwithstanding any other obligation 
     under this subtitle, this subtitle does not apply to:
       (1) Financial institutions.--Financial institutions--
       (A) subject to the data security requirements and 
     implementing regulations under the Gramm-Leach-Bliley Act (15 
     U.S.C. 6801 et seq.); and
       (B) subject to--
       (i) examinations for compliance with the requirements of 
     this Act by a Federal Functional Regulator or State Insurance 
     Authority (as those terms are defined in section 509 of the 
     Gramm-Leach-Bliley Act (15 U.S.C. 6809)); or
       (ii) compliance with part 314 of title 16, Code of Federal 
     Regulations.
       (2) HIPPA regulated entities.--
       (A) Covered entities.--Covered entities subject to the 
     Health Insurance Portability and Accountability Act of 1996 
     (42 U.S.C. 1301 et seq.), including the data security 
     requirements and implementing regulations of that Act.
       (B) Business entities.--A business entity shall be deemed 
     in compliance with the privacy and security program 
     requirements under section 302 if the business entity is 
     acting as a ``business associate'' as that term is defined in 
     the Health Insurance Portability and Accountability Act of 
     1996 (42 U.S.C. 1301 et seq.) and is in compliance with 
     requirements imposed under that Act and its implementing 
     regulations.
       (3) Public records.--Public records not otherwise subject 
     to a confidentiality or nondisclosure requirement, or 
     information obtained from a news report or periodical.
       (d) Safe Harbors.--
       (1) In general.--A business entity shall be deemed in 
     compliance with the privacy and security program requirements 
     under section 302 if the business entity complies with or 
     provides protection equal to industry standards, as 
     identified by the Federal Trade Commission, that are 
     applicable to the type of sensitive personally identifiable 
     information involved in the ordinary course of business of 
     such business entity.
       (2) Limitation.--Nothing in this subsection shall be 
     construed to permit, and nothing does permit, the Federal 
     Trade Commission to issue regulations requiring, or according 
     greater legal status to, the implementation of or application 
     of a specific technology or technological specifications for 
     meeting the requirements of this title.

     SEC. 302. REQUIREMENTS FOR A PERSONAL DATA PRIVACY AND 
                   SECURITY PROGRAM.

       (a) Personal Data Privacy and Security Program.--A business 
     entity subject to this subtitle shall comply with the 
     following safeguards and any other administrative, technical, 
     or physical safeguards identified by the Federal Trade 
     Commission in a rulemaking process pursuant to section 553 of 
     title 5, United States Code, for the protection of sensitive 
     personally identifiable information:
       (1) Scope.--A business entity shall implement a 
     comprehensive personal data privacy and security program that 
     includes administrative, technical, and physical safeguards 
     appropriate to the size and complexity of the business entity 
     and the nature and scope of its activities.
       (2) Design.--The personal data privacy and security program 
     shall be designed to--
       (A) ensure the privacy, security, and confidentiality of 
     sensitive personally identifying information;
       (B) protect against any anticipated vulnerabilities to the 
     privacy, security, or integrity of sensitive personally 
     identifying information; and
       (C) protect against unauthorized access to use of sensitive 
     personally identifying information that could result in 
     substantial harm or inconvenience to any individual.
       (3) Risk assessment.--A business entity shall--
       (A) identify reasonably foreseeable internal and external 
     vulnerabilities that could result in unauthorized access, 
     disclosure, use, or alteration of sensitive personally 
     identifiable information or systems containing sensitive 
     personally identifiable information;
       (B) assess the likelihood of and potential damage from 
     unauthorized access, disclosure, use, or alteration of 
     sensitive personally identifiable information;
       (C) assess the sufficiency of its policies, technologies, 
     and safeguards in place to control and minimize risks from 
     unauthorized access, disclosure, use, or alteration of 
     sensitive personally identifiable information; and
       (D) assess the vulnerability of sensitive personally 
     identifiable information during destruction and disposal of 
     such information, including through the disposal or 
     retirement of hardware.
       (4) Risk management and control.--Each business entity 
     shall--
       (A) design its personal data privacy and security program 
     to control the risks identified under paragraph (3); and
       (B) adopt measures commensurate with the sensitivity of the 
     data as well as the size, complexity, and scope of the 
     activities of the business entity that--
       (i) control access to systems and facilities containing 
     sensitive personally identifiable information, including 
     controls to authenticate and permit access only to authorized 
     individuals;
       (ii) detect actual and attempted fraudulent, unlawful, or 
     unauthorized access, disclosure, use, or alteration of 
     sensitive personally identifiable information, including by 
     employees and other individuals otherwise authorized to have 
     access;
       (iii) protect sensitive personally identifiable information 
     during use, transmission, storage, and disposal by 
     encryption,   redaction, or access controls that are widely 
     accepted as an effective industry practice or industry 
     standard, or other reasonable means (including as directed 
     for disposal of records under section 628 of the Fair Credit

[[Page 18741]]

     Reporting Act (15 U.S.C. 1681w) and the implementing 
     regulations of such Act as set forth in section 682 of title 
     16, Code of Federal Regulations);
       (iv) ensure that sensitive personally identifiable 
     information is properly destroyed and disposed of, including 
     during the destruction of computers, diskettes, and other 
     electronic media that contain sensitive personally 
     identifiable information ;
       (v) trace access to records containing sensitive personally 
     identifiable information so that the business entity can 
     determine who accessed or acquired such sensitive personally 
     identifiable information pertaining to specific individuals; 
     and
       (vi) ensure that no third party or customer of the business 
     entity is authorized to access or acquire sensitive 
     personally identifiable information without the business 
     entity first performing sufficient due diligence to 
     ascertain, with reasonable certainty, that such information 
     is being sought for a valid legal purpose.
       (b) Training.--Each business entity subject to this 
     subtitle shall take steps to ensure employee training and 
     supervision for implementation of the data security program 
     of the business entity.
       (c) Vulnerability Testing.--
       (1) In general.--Each business entity subject to this 
     subtitle shall take steps to ensure regular testing of key 
     controls, systems, and procedures of the personal data 
     privacy and security program to detect, prevent, and respond 
     to attacks or intrusions, or other system failures.
       (2) Frequency.--The frequency and nature of the tests 
     required under paragraph (1) shall be determined by the risk 
     assessment of the business entity under subsection (a)(3).
       (d) Relationship to Service Providers.--In the event a 
     business entity subject to this subtitle engages service 
     providers not subject to this subtitle, such business entity 
     shall--
       (1) exercise appropriate due diligence in selecting those 
     service providers for responsibilities related to sensitive 
     personally identifiable information, and take reasonable 
     steps to select and retain service providers that are capable 
     of maintaining appropriate safeguards for the security, 
     privacy, and integrity of the sensitive personally 
     identifiable information at issue; and
       (2) require those service providers by contract to 
     implement and maintain appropriate measures designed to meet 
     the objectives and requirements governing entities subject to 
     section 301, this section, and subtitle B.
       (e) Periodic Assessment and Personal Data Privacy and 
     Security Modernization.--Each business entity subject to this 
     subtitle shall on a regular basis monitor, evaluate, and 
     adjust, as appropriate its data privacy and security program 
     in light of any relevant changes in--
       (1) technology;
       (2) the sensitivity of personally identifiable information;
       (3) internal or external threats to personally identifiable 
     information; and
       (4) the changing business arrangements of the business 
     entity, such as--
       (A) mergers and acquisitions;
       (B) alliances and joint ventures;
       (C) outsourcing arrangements;
       (D) bankruptcy; and
       (E) changes to sensitive personally identifiable 
     information systems.
       (f) Implementation Timeline.--Not later than 1 year after 
     the date of enactment of this Act, a business entity subject 
     to the provisions of this subtitle shall implement a data 
     privacy and security program pursuant to this subtitle.

     SEC. 303. ENFORCEMENT.

       (a) Civil Penalties.--
       (1) In general.--Any business entity that violates the 
     provisions of sections 301 or 302 shall be subject to civil 
     penalties of not more than $5,000 per violation per day while 
     such a violation exists, with a maximum of $500,000 per 
     violation.
       (2) Intentional or willful violation.--A business entity 
     that intentionally or willfully violates the provisions of 
     sections 301 or 302 shall be subject to additional penalties 
     in the amount of $5,000 per violation per day while such a 
     violation exists, with a maximum of an additional $500,000 
     per violation.
       (3) Equitable relief.--A business entity engaged in 
     interstate commerce that violates this section may be 
     enjoined from further violations by a court of competent 
     jurisdiction.
       (4) Other rights and remedies.--The rights and remedies 
     available under this section are cumulative and shall not 
     affect any other rights and remedies available under law.
       (b) Federal Trade Commission Authority.--Any data broker 
     shall have the provisions of this subtitle enforced against 
     it by the Federal Trade Commission.
       (c) State Enforcement.--
       (1) Civil actions.--In any case in which the attorney 
     general of a State or any State or local law enforcement 
     agency authorized by the State attorney general or by State 
     statute to prosecute violations of consumer protection law, 
     has reason to believe that an interest of the residents of 
     that State has been or is threatened or adversely affected by 
     the acts or practices of a data broker that violate this 
     subtitle, the State may bring a civil action on behalf of the 
     residents of that State in a district court of the United 
     States of appropriate jurisdiction, or any other court of 
     competent jurisdiction, to--
       (A) enjoin that act or practice;
       (B) enforce compliance with this subtitle; or
       (C) obtain civil penalties of not more than $5,000 per 
     violation per day while such violations persist, up to a 
     maximum of $500,000 per violation.
       (2) Notice.--
       (A) In general.--Before filing an action under this 
     subsection, the attorney general of the State involved shall 
     provide to the Federal Trade Commission--
       (i) a written notice of that action; and
       (ii) a copy of the complaint for that action.
       (B) Exception.--Subparagraph (A) shall not apply with 
     respect to the filing of an action by an attorney general of 
     a State under this subsection, if the attorney general of a 
     State determines that it is not feasible to provide the 
     notice described in this subparagraph before the filing of 
     the action.
       (C) Notification when practicable.--In an action described 
     under subparagraph (B), the attorney general of a State shall 
     provide the written notice and the copy of the complaint to 
     the Federal Trade Commission as soon after the filing of the 
     complaint as practicable.
       (3) Federal trade commission authority.--Upon receiving 
     notice under paragraph (2), the Federal Trade Commission 
     shall have the right to--
       (A) move to stay the action, pending the final disposition 
     of a pending Federal proceeding or action as described in 
     paragraph (4);
       (B) intervene in an action brought under paragraph (1); and
       (C) file petitions for appeal.
       (4) Pending proceedings.--If the Federal Trade Commission 
     has instituted a proceeding or action for a violation of this 
     subtitle or any regulations thereunder, no attorney general 
     of a State may, during the pendency of such proceeding or 
     action, bring an action under this subsection against any 
     defendant named in such criminal proceeding or civil action 
     for any violation that is alleged in that proceeding or 
     action.
       (5) Rule of construction.--For purposes of bringing any 
     civil action under paragraph (1) nothing in this subtitle 
     shall be construed to prevent an attorney general of a State 
     from exercising the powers conferred on the attorney general 
     by the laws of that State to--
       (A) conduct investigations;
       (B) administer oaths and affirmations; or
       (C) compel the attendance of witnesses or the production of 
     documentary and other evidence.
       (6) Venue; service of process.--
       (A) Venue.--Any action brought under this subsection may be 
     brought in the district court of the United States that meets 
     applicable requirements relating to venue under section 1391 
     of title 28, United States Code.
       (B) Service of process.--In an action brought under this 
     subsection, process may be served in any district in which 
     the defendant--
       (i) is an inhabitant; or
       (ii) may be found.
       (d) No Private Cause of Action.--Nothing in this subtitle 
     establishes a private cause of action against a business 
     entity for violation of any provision of this subtitle.

     SEC. 304. RELATION TO OTHER LAWS.

       (a) In General.--No State may require any business entity 
     subject to this subtitle to comply with any requirements with 
     respect to administrative, technical, and physical safeguards 
     for the protection of sensitive personally identifying 
     information.
       (b) Limitations.--Nothing in this subtitle shall be 
     construed to modify, limit, or supersede the operation of the 
     Gramm-Leach-Bliley Act or its implementing regulations, 
     including those adopted or enforced by States.

                Subtitle B--Security Breach Notification

     SEC. 311. NOTICE TO INDIVIDUALS.

       (a) In General.--Any agency, or business entity engaged in 
     interstate commerce, that uses, accesses, transmits, stores, 
     disposes of or collects sensitive personally identifiable 
     information shall, following the discovery of a security 
     breach  of such information, notify any resident of the 
     United States whose sensitive personally identifiable 
     information has been, or is reasonably believed to have been, 
     accessed, or acquired.
       (b) Obligation of Owner or Licensee.--
       (1) Notice to owner or licensee.--Any agency, or business 
     entity engaged in interstate commerce, that uses, accesses, 
     transmits, stores, disposes of, or collects sensitive 
     personally identifiable information that the agency or 
     business entity does not own or license shall notify the 
     owner or licensee of the information following the discovery 
     of a security breach involving such information.
       (2) Notice by owner, licensee or other designated third 
     party.--Nothing in this subtitle shall prevent or abrogate an 
     agreement between an agency or business entity required to 
     give notice under this section and a designated third party, 
     including an owner or licensee of the sensitive personally 
     identifiable information subject to the security breach, to 
     provide the notifications required under subsection (a).

[[Page 18742]]

       (3) Business entity relieved from giving notice.--A 
     business entity obligated to give notice under subsection (a) 
     shall be relieved of such obligation if an owner or licensee 
     of the sensitive personally identifiable information subject 
     to the security breach, or other designated third party, 
     provides such notification.
       (c) Timeliness of Notification.--
       (1) In general.--All notifications required under this 
     section shall be made without unreasonable delay following 
     the discovery by the agency or business entity of a security 
     breach.
       (2) Reasonable delay.--Reasonable delay under this 
     subsection may include any time necessary to determine the 
     scope of the security breach, prevent further disclosures, 
     and restore the reasonable integrity of the data system and 
     provide notice to law enforcement when required.
       (3) Burden of proof.--The agency, business entity, owner, 
     or licensee required to provide notification under this 
     section shall have the burden of demonstrating that all 
     notifications were made as required under this subtitle, 
     including evidence demonstrating the reasons for any delay.
       (d) Delay of Notification Authorized for Law Enforcement 
     Purposes.--
       (1) In general.--If a Federal law enforcement agency 
     determines that the notification required under this section 
     would impede a criminal investigation, such notification 
     shall be delayed upon written notice from such Federal law 
     enforcement agency to the agency or business entity that 
     experienced the breach.
       (2) Extended delay of notification.--If the notification 
     required under subsection (a) is delayed pursuant to 
     paragraph (1), an agency or business entity shall give notice 
     30 days after the day such law enforcement delay was invoked 
     unless a Federal law enforcement agency provides written 
     notification that further delay is necessary.
       (3) Law enforcement immunity.--No cause of action shall lie 
     in any court against any law enforcement agency for acts 
     relating to the delay of notification for law enforcement 
     purposes under this subtitle.

     SEC. 312. EXEMPTIONS.

       (a) Exemption for National Security and Law Enforcement.--
       (1) In general.--Section 311 shall not apply to an agency 
     or business entity if the agency or business entity 
     certifies, in writing, that notification of the security 
     breach as required by section 311 reasonably could be 
     expected to--
       (A) cause damage to the national security; or
       (B) hinder a law enforcement investigation or the ability 
     of the agency to conduct law enforcement investigations.
       (2) Limits on certifications.--An agency  or business 
     entity may not execute a certification under paragraph (1) 
     to--
       (A) conceal violations of law, inefficiency, or 
     administrative error;
       (B) prevent embarrassment to a business entity, 
     organization, or agency; or
       (C) restrain competition.
       (3) Notice.--In every case in which an agency  or business 
     agency issues a certification under paragraph (1), the 
     certification, accompanied by a description of the factual 
     basis for the certification, shall be immediately provided to 
     the United States Secret Service.
       (4) Secret service review of certifications.--
       (A) In general.--The United States Secret Service may 
     review a certification provided by an agency under paragraph 
     (3), and shall review a certification provided by a business 
     entity under paragraph (3), to determine whether an exemption 
     under paragraph (1) is merited. Such review shall be 
     completed not later than 10 business days after the date of 
     receipt of the certification, except as provided in paragraph 
     (5)(C).
       (B) Notice.--Upon completing a review under subparagraph 
     (A) the United States Secret Service shall immediately notify 
     the agency or business entity, in writing, of its 
     determination of whether an exemption under paragraph (1) is 
     merited.
       (C) Exemption.--The exemption under paragraph (1) shall not 
     apply if the United States Secret Service determines under 
     this paragraph that the exemption is not merited.
       (5) Additional authority of the secret service.--
       (A) In general.--In determining under paragraph (4) whether 
     an exemption under paragraph (1) is merited, the United 
     States Secret Service may request additional information from 
     the agency or business entity regarding the basis for the 
     claimed exemption, if such additional information is 
     necessary to determine whether the exemption is merited.
       (B) Required compliance.--Any agency or business entity 
     that receives a request for additional information under 
     subparagraph (A) shall cooperate with any such request.
       (C) Timing.--If the United States Secret Service requests 
     additional information under subparagraph (A), the United 
     States Secret Service shall notify the agency or business 
     entity not later than 10 business days after the date of 
     receipt of the additional information whether an exemption 
     under paragraph (1) is merited.
       (b) Safe Harbor.--An agency or business entity will be 
     exempt from the notice requirements under section 311, if--
       (1) a risk assessment concludes that--
       (A) there is no significant risk that a security breach has 
     resulted in, or will result in, harm to the individuals whose 
     sensitive personally identifiable information was subject to 
     the security breach, with the encryption of such information 
     establishing a presumption that no significant risk exists; 
     or
       (B) there is no significant risk that a security breach has 
     resulted in, or will result in, harm to the individuals whose 
     sensitive personally identifiable information was subject to 
     the security breach, with the rendering of such sensitive 
     personally identifiable information indecipherable through 
     the use of best practices or methods, such as redaction, 
     access controls, or other such mechanisms, which are widely 
     accepted as an effective industry practice, or an effective 
     industry standard, establishing a presumption that no 
     significant risk exists;
       (2) without unreasonable delay, but not later than 45 days 
     after the discovery of a security breach, unless extended by 
     the United States Secret Service, the agency or business 
     entity notifies the United States Secret Service, in writing, 
     of--
       (A) the results of the risk assessment; and
       (B) its decision to invoke the risk assessment exemption; 
     and
       (3) the United States Secret Service does not indicate, in 
     writing, within 10 business days from receipt of the 
     decision, that notice should be given.
       (c) Financial Fraud Prevention Exemption.--
       (1) In general.--A business entity will be exempt from the 
     notice requirement under section 311 if the business entity 
     utilizes or participates in a security program that--
       (A) is designed to block the use of the sensitive 
     personally identifiable information to initiate unauthorized 
     financial transactions before they are charged to the account 
     of the individual; and
       (B) provides for notice to affected individuals after a 
     security breach that has resulted in fraud or unauthorized 
     transactions.
       (2) Limitation.--The exemption by this subsection does not 
     apply  if--
       (A) the information subject to the security breach includes 
     sensitive personally identifiable information, other than a 
     credit card or credit card security code, of any type of the 
     sensitive personally identifiable information identified in 
     section 3; or
       (B) the security breach includes both the individual's 
     credit card number and the individual's first and last name.

     SEC. 313. METHODS OF NOTICE.

       An agency or business entity shall be in compliance with 
     section 311 if it provides both:
       (1) Individual notice.--Notice to individuals by 1 of the 
     following means:
       (A) Written notification to the last known home mailing 
     address of the individual in the records of the agency or 
     business entity.
       (B) Telephone notice to the individual personally.
       (C)  E-mail notice, if the individual has consented to 
     receive such notice and the notice is consistent with the 
     provisions permitting electronic transmission of notices 
     under section 101 of the Electronic Signatures in Global and 
     National Commerce Act (15 U.S.C. 7001).
       (2) Media notice.--Notice to major media outlets serving a 
     State or jurisdiction, if the number of residents of such 
     State whose sensitive personally identifiable information 
     was, or is reasonably believed to have been, acquired by an 
     unauthorized person exceeds 5,000.

     SEC. 314. CONTENT OF NOTIFICATION.

       (a) In General.--Regardless of the method by which notice 
     is provided to individuals under section 313, such notice 
     shall include, to the extent possible--
       (1) a description of the categories of sensitive personally 
     identifiable information that was, or is reasonably believed 
     to have been, acquired by an unauthorized person;
       (2) a toll-free number--
       (A) that the individual may use to contact the agency or 
     business entity, or the agent of the agency or business 
     entity; and
       (B) from which the individual may learn what types of 
     sensitive personally identifiable information the agency or 
     business entity maintained about that individual; and
       (3) the toll-free contact telephone numbers and addresses 
     for the major credit reporting agencies.
       (b) Additional Content.--Notwithstanding section 319, a 
     State may require that a notice under subsection (a) shall 
     also include information regarding victim protection 
     assistance provided for by that State.

     SEC. 315. COORDINATION OF NOTIFICATION WITH CREDIT REPORTING 
                   AGENCIES.

       If an agency or business entity is required to provide 
     notification to more than 5,000 individuals under section 
     311(a), the agency or business entity shall also notify all 
     consumer reporting agencies that compile and maintain files 
     on consumers on a nationwide basis (as defined in section 
     603(p) of the Fair Credit Reporting Act (15 U.S.C. 1681a(p)) 
     of the timing and distribution of the notices.  Such notice 
     shall be given to the consumer credit reporting agencies 
     without unreasonable delay and, if it will not delay notice 
     to

[[Page 18743]]

     the affected individuals, prior to the distribution of 
     notices to the affected individuals.

     SEC. 316. NOTICE TO LAW ENFORCEMENT.

       (a) Secret Service.--Any business entity or agency shall  
     notify the United States Secret Service of the fact that a 
     security breach has occurred if--
       (1) the number of individuals whose sensitive personally 
     identifying information was, or is reasonably believed to 
     have been acquired by an unauthorized person exceeds 10,000;
       (2) the security breach involves a database, networked or 
     integrated databases, or other data system containing the 
     sensitive personally identifiable information of more than 
     1,000,000 individuals nationwide;
       (3) the security breach involves databases owned by the 
     Federal Government; or
       (4) the security breach involves primarily sensitive 
     personally identifiable information of individuals known to 
     the agency or business entity to be employees and contractors 
     of the Federal Government involved in national security or 
     law enforcement.
       (b) Notice to Other Law Enforcement Agencies.--The United 
     States Secret Service shall be responsible for notifying--
       (1) the Federal Bureau of Investigation, if the security 
     breach involves espionage, foreign counterintelligence, 
     information protected against unauthorized disclosure for 
     reasons of national defense or foreign relations, or 
     Restricted Data (as that term is defined in section 11y of 
     the Atomic Energy Act of 1954 (42 U.S.C. 2014(y)), except for 
     offenses affecting the duties of the United States Secret 
     Service under section 3056(a) of title 18, United States 
     Code;
       (2) the United States Postal Inspection Service, if the 
     security breach involves mail fraud; and
       (3) the attorney general of each State affected by the 
     security breach.
       (c) Timing of Notices.--The notices required under this 
     section shall be delivered as follows:
       (1) Notice under subsection (a) shall be delivered as 
     promptly as possible, but not later than 14 days after 
     discovery of the events requiring notice.
       (2) Notice under subsection (b) shall be delivered not 
     later than 14 days after the Service receives notice of a 
     security breach from an agency or business entity.

     SEC. 317. ENFORCEMENT.

       (a) Civil Actions by the Attorney General.--The Attorney 
     General may bring a civil action in the appropriate United 
     States district court against any business entity that 
     engages in conduct constituting a violation of this subtitle 
     and, upon proof of such conduct by a preponderance of the 
     evidence, such business entity shall be subject to a civil 
     penalty of not more than $1,000 per day per individual whose 
     sensitive personally identifiable information was, or is 
     reasonably believed to have been, accessed or acquired by an 
     unauthorized person, up to a maximum of $1,000,000 per 
     violation, unless such conduct is found to be willful or 
     intentional.
       (b) Injunctive Actions by the Attorney General.--
       (1) In general.--If it appears that a business entity has 
     engaged, or is engaged, in any act or practice constituting a 
     violation of this subtitle, the Attorney General may petition 
     an appropriate district court of the United States for an 
     order--
       (A) enjoining such act or practice; or
       (B) enforcing compliance with this subtitle.
       (2) Issuance of order.--A court may issue an order under 
     paragraph (1), if the court finds that the conduct in 
     question constitutes a violation of this subtitle.
       (c) Other Rights and Remedies.--The rights and remedies 
     available under this subtitle are cumulative and shall not 
     affect any other rights and remedies available under law.
       (d) Fraud Alert.--Section 605A(b)(1) of the Fair Credit 
     Reporting Act (15 U.S.C. 1681c-1(b)(1)) is amended by 
     inserting ``, or evidence that the consumer has received 
     notice that the consumer's financial information has or may 
     have been compromised,'' after ``identity theft report''.

     SEC. 318. ENFORCEMENT BY STATE ATTORNEYS GENERAL.

       (a) In General.--
       (1) Civil actions.--In any case in which the attorney 
     general of a State or any State or local law enforcement 
     agency authorized by the State attorney general or by State 
     statute to prosecute violations of consumer protection law, 
     has reason to believe that an interest of the residents of 
     that State has been or is threatened or adversely affected by 
     the engagement of a business entity in a practice that is 
     prohibited under this subtitle, the State or the State or 
     local law enforcement agency on behalf of the residents of 
     the agency's jurisdiction, may bring a civil action on behalf 
     of the residents of the State or jurisdiction in a district 
     court of the United States of appropriate jurisdiction or any 
     other court of competent jurisdiction, including a State 
     court, to--
       (A) enjoin that practice;
       (B) enforce compliance with this subtitle; or
       (C) civil penalties of not more than $1,000 per day per 
     individual whose sensitive personally identifiable 
     information was, or is reasonably believed to have been, 
     accessed or acquired by an unauthorized person, up to a 
     maximum of $1,000,000 per violation, unless such conduct is 
     found to be willful or intentional.
       (2) Notice.--
       (A) In general.--Before filing an action under paragraph 
     (1), the attorney general of the State involved shall provide 
     to the Attorney General of the United States--
       (i) written notice of the action; and
       (ii) a copy of the complaint for the action.
       (B) Exemption.--
       (i) In general.--Subparagraph (A) shall not apply with 
     respect to the filing of an action by an attorney general of 
     a State under this subtitle, if the State attorney general 
     determines that it is not feasible to provide the notice 
     described in such subparagraph before the filing of the 
     action.
       (ii) Notification.--In an action described in clause (i), 
     the attorney general of a State shall provide notice and a 
     copy of the complaint to the Attorney General at the time the 
     State attorney general files the action.
       (b) Federal Proceedings.--Upon receiving notice under 
     subsection (a)(2), the Attorney General shall have the right 
     to--
       (1) move to stay the action, pending the final disposition 
     of a pending Federal proceeding or action;
       (2) initiate an action in the appropriate United States 
     district court under section 317 and move to consolidate all 
     pending actions, including State actions, in such court;
       (3) intervene in an action brought under subsection (a)(2); 
     and
       (4) file petitions for appeal.
       (c) Pending Proceedings.--If the Attorney General has 
     instituted a proceeding or action for a violation of this 
     subtitle or any regulations thereunder, no attorney general 
     of a State may, during the pendency of such proceeding or 
     action, bring an action under this subtitle against any 
     defendant named in such criminal proceeding or civil action 
     for any violation that is alleged in that proceeding or 
     action.
       (d) Construction.--For purposes of bringing any civil 
     action under subsection (a), nothing in this subtitle 
     regarding notification shall be construed to prevent an 
     attorney general of a State from exercising the powers 
     conferred on such attorney general by the laws of that State 
     to--
       (1) conduct investigations;
       (2) administer oaths or affirmations; or
       (3) compel the attendance of witnesses or the production of 
     documentary and other evidence.
       (e) Venue; Service of Process.--
       (1) Venue.--Any action brought under subsection (a) may be 
     brought in--
       (A) the district court of the United States that meets 
     applicable requirements relating to venue under section 1391 
     of title 28, United States Code; or
       (B) another court of competent jurisdiction.
       (2) Service of process.--In an action brought under 
     subsection (a), process may be served in any district in 
     which the defendant--
       (A) is an inhabitant; or
       (B) may be found.
       (f) No Private Cause of Action.--Nothing in this subtitle 
     establishes a private cause of action against a business 
     entity for violation of any provision of this subtitle.

     SEC. 319. EFFECT ON FEDERAL AND STATE LAW.

       The provisions of this subtitle shall supersede any other 
     provision of Federal law or any provision of law of any State 
     relating to notification by a business entity engaged in 
     interstate commerce or an agency of a security breach, except 
     as provided in section 314(b).

     SEC. 320. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated such sums as may be 
     necessary to cover the costs incurred by the United States 
     Secret Service to carry out investigations and risk 
     assessments of security breaches as required under this 
     subtitle.

     SEC. 321. REPORTING ON RISK ASSESSMENT EXEMPTIONS.

       The United States Secret Service shall report to Congress 
     not later than 18 months after the date of enactment of this 
     Act, and upon the request by Congress thereafter, on--
       (1) the number and nature of the security breaches 
     described in the notices filed by those business entities 
     invoking the risk assessment exemption under section 312(b) 
     and the response of the United States Secret Service to such 
     notices; and
       (2) the number and nature of security breaches subject to 
     the national security and law enforcement exemptions under 
     section 312(a), provided that such report may not disclose 
     the contents of any risk assessment provided to the United 
     States Secret Service pursuant to this subtitle.

     SEC. 322. EFFECTIVE DATE.

       This subtitle shall take effect on the expiration of the 
     date which is 90 days after the date of enactment of this 
     Act.

           Subtitle C--Office of Federal Identity Protection

     SEC. 331. OFFICE OF FEDERAL IDENTITY PROTECTION.

       (a) Establishment.--There is established in the Federal 
     Trade Commission an Office of Federal Identity Protection.

[[Page 18744]]

       (b) Duties.--The Office of Federal Identity Protection 
     shall be responsible for assisting each consumer with--
       (1) addressing the consequences of the theft or compromise 
     of the personally identifiable information of that consumer;
       (2) accessing remedies provided under Federal law and 
     providing information about remedies available under State 
     law;
       (3) restoring the accuracy of--
       (A) the personally identifiable information of that 
     consumer; and
       (B) records containing the personally identifiable 
     information of that consumer that were stolen or compromised; 
     and
       (4) retrieving any stolen or compromised personally 
     identifiable information of that consumer.
       (c) Activities.--In order to perform the duties required 
     under subsection (b), the Office of Federal Identity 
     Protection shall carry out the following activities:
       (1) Establish a website, easily and conspicuously 
     accessible from ftc.gov, dedicated to assisting consumers 
     with the retrieval of the stolen or compromised personally 
     identifiable information of the consumer.
       (2) Maintain a toll-free phone number to help answer 
     questions concerning identity theft from consumers.
       (3) Establish online and offline consumer-service teams to 
     assist consumers seeking the retrieval of the personally 
     identifiable information of the consumer.
       (4) Provide guidance and information to service 
     organizations or pro bono legal services programs that offer 
     individualized assistance or counseling to victims of 
     identity theft.
       (5) Establish a reasonable standard for determining when an 
     individual becomes a victim of identity theft.
       (6) Issue certifications to individuals who, under the 
     standard described in paragraph (5), are identity theft 
     victims.
       (7) Permit an individual to use the Office of Federal 
     Identity Protection certification--
       (A) in all Federal, State, and local jurisdictions, in lieu 
     of a police report or any other document required by State or 
     local law, as a prerequisite to accessing business records of 
     transactions done by someone claiming to be the individual; 
     and
       (B) to establish the eligibility of that individual for--
       (i) the fraud alert protections under section 605A of the 
     Fair Credit Reporting Act (15 U.S.C. 1681c-1); and
       (ii) the reporting protections under section 605B(a) of the 
     Fair Credit Reporting Act (15 U.S.C. 1681c-2(a)).
       (8) Coordinate, as the Office determines necessary, with 
     the designated Chief Privacy Officer of each Federal agency, 
     or any other designated senior official in such agency in 
     charge of privacy, in order to meet the duties of assisting 
     consumers as required under subsection (b).
       (9) In addition to the requirements in paragraphs (1) 
     through (7), the Federal Trade Commission shall promulgate 
     regulations that enable the Office of Federal Identity 
     Protection to help consumers restore their stolen or 
     otherwise compromised personally identifiable information 
     quickly and inexpensively.
       (d) Authorization of Appropriations.--There are authorized 
     to be appropriated for the Office of Federal Identity 
     Protection such sums as are necessary for fiscal year 2010 
     and each of the 4 succeeding fiscal years.

       TITLE IV--GOVERNMENT ACCESS TO AND USE OF COMMERCIAL DATA

     SEC. 401. GENERAL SERVICES ADMINISTRATION REVIEW OF 
                   CONTRACTS.

       (a) In General.--In considering contract awards totaling 
     more than $500,000 and entered into after the date of 
     enactment of this Act with data brokers, the Administrator of 
     the General Services Administration shall evaluate--
       (1) the data privacy and security program of a data broker 
     to ensure the privacy and security of data containing 
     personally identifiable information, including whether such 
     program adequately addresses privacy and security threats 
     created by malicious software or code, or the use of peer-to-
     peer file sharing software;
       (2) the compliance of a data broker with such program;
       (3) the extent to which the databases and systems 
     containing personally identifiable information of a data 
     broker have been compromised by security breaches; and
       (4) the response by a data broker to such breaches, 
     including the efforts by such data broker to mitigate the 
     impact of such security breaches.
       (b) Compliance Safe Harbor.--The data privacy and security 
     program of a data broker shall be deemed sufficient for the 
     purposes of subsection (a), if the data broker complies with 
     or provides protection equal to industry standards, as 
     identified by the Federal Trade Commission, that are 
     applicable to the type of personally identifiable information 
     involved in the ordinary course of business of such data 
     broker.
       (c) Penalties.--In awarding contracts with data brokers for 
     products or services related to access, use, compilation, 
     distribution, processing, analyzing, or evaluating personally 
     identifiable information, the Administrator of the General 
     Services Administration shall--
       (1) include monetary or other penalties--
       (A) for failure to comply with subtitles A and B of title 
     III; or
       (B) if a contractor knows or has reason to know that the 
     personally identifiable information being provided is 
     inaccurate, and provides such inaccurate information; and
       (2) require a data broker that engages service providers 
     not subject to subtitle A of title III for responsibilities 
     related to sensitive personally identifiable information to--
       (A) exercise appropriate due diligence in selecting those 
     service providers for responsibilities related to personally 
     identifiable information;
       (B) take reasonable steps to select and retain service 
     providers that are capable of maintaining appropriate 
     safeguards for the security, privacy, and integrity of the 
     personally identifiable information at issue; and
       (C) require such service providers, by contract, to 
     implement and maintain appropriate measures designed to meet 
     the objectives and requirements in title III.
       (d) Limitation.--The penalties under subsection (c) shall 
     not apply to a data broker providing information that is 
     accurately and completely recorded from a public record 
     source or licensor.

     SEC. 402. REQUIREMENT TO AUDIT INFORMATION SECURITY PRACTICES 
                   OF CONTRACTORS AND THIRD PARTY BUSINESS 
                   ENTITIES.

       Section 3544(b) of title 44, United States Code, is 
     amended--
       (1) in paragraph (7)(C)(iii), by striking ``and'' after the 
     semicolon;
       (2) in paragraph (8), by striking the period and inserting 
     ``; and''; and
       (3) by adding at the end the following:
       ``(9) procedures for evaluating and auditing the 
     information security practices of contractors or third party 
     business entities supporting the information systems or 
     operations of the agency involving personally identifiable 
     information (as that term is defined in section 3 of the 
     Personal Data Privacy and Security Act of 2009) and ensuring 
     remedial action to address any significant deficiencies.''.

     SEC. 403. PRIVACY IMPACT ASSESSMENT OF GOVERNMENT USE OF 
                   COMMERCIAL INFORMATION SERVICES CONTAINING 
                   PERSONALLY IDENTIFIABLE INFORMATION.

       (a) In General.--Section 208(b)(1) of the E-Government Act 
     of 2002 (44 U.S.C. 3501 note) is amended--
       (1) in subparagraph (A)(i), by striking ``or''; and
       (2) in subparagraph (A)(ii), by striking the period and 
     inserting ``; or''; and
       (3) by inserting after clause (ii) the following:
       ``(iii) purchasing or subscribing for a fee to personally 
     identifiable information from a data broker (as such terms 
     are defined in section 3 of the Personal Data Privacy and 
     Security Act of 2009).''.
       (b) Limitation.--Notwithstanding any other provision of 
     law, commencing 1 year after the date of enactment of this 
     Act, no Federal agency may enter into a contract with a data 
     broker to access for a fee any database consisting primarily 
     of personally identifiable information concerning United 
     States persons (other than news reporting or telephone 
     directories) unless the head of such department or agency--
       (1) completes a privacy impact assessment under section 208 
     of the E-Government Act of 2002 (44 U.S.C. 3501 note), which 
     shall subject to the provision in that Act pertaining to 
     sensitive information, include a description of--
       (A) such database;
       (B) the name of the data broker from whom it is obtained; 
     and
       (C) the amount of the contract for use;
       (2) adopts regulations that specify--
       (A) the personnel permitted to access, analyze, or 
     otherwise use such databases;
       (B) standards governing the access, analysis, or use of 
     such databases;
       (C) any standards used to ensure that the personally 
     identifiable information accessed, analyzed, or used is the 
     minimum necessary to accomplish the intended legitimate 
     purpose of the Federal agency;
       (D) standards limiting the retention and redisclosure of 
     personally identifiable information obtained from such 
     databases;
       (E) procedures ensuring that such data meet standards of 
     accuracy, relevance, completeness, and timeliness;
       (F) the auditing and security measures to protect against 
     unauthorized access, analysis, use, or modification of data 
     in such databases;
       (G) applicable mechanisms by which individuals may secure 
     timely redress for any adverse consequences wrongly incurred 
     due to the access, analysis, or use of such databases;
       (H) mechanisms, if any, for the enforcement and independent 
     oversight of existing or planned procedures, policies, or 
     guidelines; and
       (I) an outline of enforcement mechanisms for accountability 
     to protect individuals and the public against unlawful or 
     illegitimate access or use of databases; and

[[Page 18745]]

       (3) incorporates into the contract or other agreement 
     totaling more than $500,000, provisions--
       (A) providing for penalties--
       (i) for failure to comply with title III of this Act; or
       (ii) if the entity knows or has reason to know that the 
     personally identifiable information being provided to the 
     Federal department or agency is inaccurate, and provides such 
     inaccurate information; and
       (B) requiring a data broker that engages service providers 
     not subject to subtitle A of title III for responsibilities 
     related to sensitive personally identifiable information to--
       (i) exercise appropriate due diligence in selecting those 
     service providers for responsibilities related to personally 
     identifiable information;
       (ii) take reasonable steps to select and retain service 
     providers that are capable of maintaining appropriate 
     safeguards for the security, privacy, and integrity of the 
     personally identifiable information at issue; and
       (iii) require such service providers, by contract, to 
     implement and maintain appropriate measures designed to meet 
     the objectives and requirements in title III.
       (c) Limitation on Penalties.--The penalties under 
     subsection (b)(3)(A) shall not apply to a data broker 
     providing information that is accurately and completely 
     recorded from a public record source.
       (d) Study of Government Use.--
       (1) Scope of study.--Not later than 180 days after the date 
     of enactment of this Act, the Comptroller General of the 
     United States shall conduct a study and audit and prepare a 
     report on Federal agency actions to address the 
     recommendations in the Government Accountability Office's 
     April 2006 report on agency adherence to key privacy 
     principles in using data brokers or commercial databases 
     containing personally identifiable information.
       (2) Report.--A copy of the report required under paragraph 
     (1) shall be submitted to Congress.

     SEC. 404. IMPLEMENTATION OF CHIEF PRIVACY OFFICER 
                   REQUIREMENTS.

       (a) Designation of the Chief Privacy Officer.--Pursuant to 
     the requirements under section 522 of the Transportation, 
     Treasury, Independent Agencies, and General Government 
     Appropriations Act, 2005 (division H of Public Law 108-447; 
     118 Stat. 3199) that each agency designate a Chief Privacy 
     Officer, the Department of Justice shall implement such 
     requirements by designating a department-wide Chief Privacy 
     Officer, whose primary role shall be to fulfill the duties 
     and responsibilities of Chief Privacy Officer and who shall 
     report directly to the Deputy Attorney General.
       (b) Duties and Responsibilities of Chief Privacy Officer.--
     In addition to the duties and responsibilities outlined under 
     section 522 of the Transportation, Treasury, Independent 
     Agencies, and General Government Appropriations Act, 2005 
     (division H of Public Law 108-447; 118 Stat. 3199), the 
     Department of Justice Chief Privacy Officer shall--
       (1) oversee the Department of Justice's implementation of 
     the requirements under section 403 to conduct privacy impact 
     assessments of the use of commercial data containing 
     personally identifiable information by the Department; and
       (2) coordinate with the Privacy and Civil Liberties 
     Oversight Board, established in the Intelligence Reform and 
     Terrorism Prevention Act of 2004 (Public Law 108-458), in 
     implementing this section.
                                 ______
                                 
      By Mr. LEVIN (for himself and Mr. McCain):
  S. 1491. A bill to amend the Internal Revenue Code of 1986 to provide 
that corporate tax benefits based upon stock option compensation 
expenses be consistent with accounting expenses shown in corporate 
financial statements for such compensation; to the Committee on 
Finance.
  Mr. LEVIN. Mr. President, Senator McCain and I are introducing today 
a bill to eliminate Federal corporate tax breaks that give special tax 
treatment to corporations that pay their executives with stock options. 
It is called the Ending excessive Corporate Deductions for Stock 
Options Act, and it has been endorsed by OMB Watch, the Consumer 
Federation of America, the Tax Justice Network-USA, and the AFL-CIO.
  We are in a financial crisis. We are spending hundreds of billions of 
taxpayer dollars to try to stop the housing bust and prop up Wall 
Street. Too many of the middle class are watching the American dream 
slip away, while executives are getting mutli-million dollar 
compensation packages.
  At the same time, mismatched stock option accounting and tax rules 
are shortchanging the Treasury to the tune of billions of dollars each 
year, while fueling the growing chasm between executive pay and average 
worker pay. The mismatch is this: companies are allowed to report one 
set of stock option compensation expenses to investors and the public 
through their public financial statements, and a completely different 
set of expenses to the Internal Revenue Service, IRS, on their tax 
returns. Put simply, our precious tax dollars are being wasted by an 
outdated and unfair corporate tax loophole that encourages corporations 
to hand out massive stock option grants to their executives. It is time 
to put an end to the excessive tax deductions being reaped by 
corporations at taxpayers' expense.
  J.P. Morgan once said that executive pay should not exceed 20 times 
average worker pay. In the United States, in 1990, average pay for the 
chief executive officer of a large U.S. corporation was 100 times 
average worker pay. Recently, CEO pay was nearly 400 times that of the 
average worker.
  The single biggest factor responsible for this massive pay gap is 
stock options. Stock options are a huge contributor to executive pay. A 
key factor encouraging companies to pay their executives with stock 
options is the misguided Federal tax system that favors stock options 
over other types of compensation. Stock options give employees the 
right to buy company stock at a set price for a specified period of 
time, often 5 or 10 years. Virtually every CEO in America is paid with 
stock options, which are a major contributor to sky-high executive pay. 
According to Forbes magazine, in 2008, the CEOs at the 500 largest U.S. 
companies took home a combined $5.7 billion, averaging $11.4 million 
each.
  For example, according to an Equilar Inc. analysis of 2008 filings 
with the Securities and Exchange Commission, SEC, Oracle Corporation's 
CEO was granted options estimated in value at more than $71 million 
just last year. That grant was on top of the pay he received from 
vested and exercised stock options given to him by his company in the 
past. In 2008 alone, those stock options amounted to a personal gain of 
more than $543 million. That is $543 million in stock option gains in a 
single year. Stunningly, his company gets to deduct this outlandish 
``compensation'' from its taxes--even though the company never paid him 
that amount, and even though the existing tax code generally limits 
corporate deductions for executive pay to $1 million per executive.
  Oracle's CEO was not alone. Equilar has identified dozens of U.S. 
executives who obtained tens of millions or even hundreds of millions 
of dollars from stock options in 2008. For example, the CEO of Qualcomm 
Inc., had $209 million in stock options gains in 2008, while the CEO of 
Occidental Petroleum had gains of $184 million.
  Between the repricing of some stock options and grants being made 
while stock prices are low, the recent stock market recovery will 
likely mean that many executives will continue to reap astronomical 
stock option-related compensation, and their companies will continue to 
reap unwarranted tax deductions from stock options gains.
  Why do corporate executives have so many stock options to cash in? A 
key reason is that U.S. accounting rules allow companies to report 
their stock option expenses one way on the corporate books, while 
Federal tax rules require them to report the same stock options a 
completely different way on their tax returns. In most cases, the 
resulting book expense is far smaller than the resulting tax deduction. 
That means, under current U.S. accounting and tax rules, stock option 
tax deductions taken by corporations often far exceed the recorded 
stock option expenses shown on the companies' books. The result is a 
tax windfall.
  Stock options are the only type of compensation where the Federal tax 
code permits companies to claim a bigger deduction on their tax returns 
than the corresponding expense on their books. For all other types of 
compensation--cash, stock, bonuses, and more--the tax return deduction 
equals the book expense. In fact, companies cannot deduct more than the 
compensation expense shown on their books, because that would be tax 
fraud. The sole exception to this rule is stock options. In the case of 
stock options, the tax code allows companies to claim a tax

[[Page 18746]]

deduction that can be two, three, ten or one hundred times larger than 
the expense shown on their books.
  When a company's compensation committee learns that stock options can 
produce a low compensation expense on the books, while generating a 
generous tax deduction that is multiple times larger, it creates a 
temptation for the company to pay its executives with stock options 
instead of cash or stock. It is a classic case of U.S. tax policy 
creating an unintended incentive for corporations to act in a 
particular way.
  This bill is particularly timely given the new administration's 
stated goals to close unfair corporate tax loopholes, strengthen tax 
fairness, and reign in excessive executive compensation. Given the 
current financial crisis, staggering health care costs, and ongoing 
defense needs, now more than ever, we cannot afford this multi-billion 
dollar loss to the Treasury.
  To understand why this bill is needed it helps to understand how 
stock option accounting and tax rules got so out of kilter with each 
other in the first place.
  Calculating the cost of stock options may sound straightforward, but 
for years, companies and their accountants engaged the Financial 
Accounting Standards Board (FASB) in an all-out, knock-down battle over 
how companies should record stock option compensation expenses on their 
books.
  U.S. publicly traded corporations are required by law to follow 
Generally Accepted Accounting Principles, GAAP, issued by FASB, which 
is overseen by the SEC. For many years, GAAP allowed U.S. companies to 
issue stock options to employees and, unlike any other type of 
compensation, report a zero compensation expense on their books, so 
long as, on the grant date, the stock option's exercise price equaled 
the market price at which the stock could be sold.
  Assigning a zero value to stock options that routinely produce huge 
amounts of executive pay provoked deep disagreements within the 
accounting community. In 1993, FASB proposed assigning a ``fair value'' 
to stock options on the date they are granted to an employee, using 
mathematical valuation tools. FASB proposed further that companies 
include that amount as a compensation expense on their financial 
statements. A battle over stock option expensing followed, involving 
the accounting profession, corporate executives, FASB, the SEC, and 
Congress.
  In the end, after years of fighting and negotiation, FASB issued a 
new accounting standard, Financial Accounting Standard, FAS, 123R, 
which was endorsed by the SEC and became mandatory for all publicly 
traded corporations in 2005. In essence, FAS 123R requires all 
companies to record a compensation expense equal to the fair value on 
grant date of all stock options provided to an employee in exchange for 
the employee's services.
  The details of this accounting rule are complex, because they reflect 
an effort to accommodate varying viewpoints on the true cost of stock 
options. Companies are allowed to use a variety of mathematical models, 
for example, to calculate a stock option's fair value. Option grants 
that vest over time are expensed over the specified period so that, for 
example, a stock option which vests over four years results in 25 
percent of the cost being expensed each year. If a stock option grant 
never vests, the rule allows any previously booked expense to be 
recovered. On the other hand, stock options that do vest are required 
to be fully expensed, even if never exercised, because the compensation 
was actually awarded. These and other provisions of this hard-fought 
accounting rule reflect painstaking judgments on how to show a stock 
option's value.
  Opponents of the new accounting rule had predicted that, if 
implemented, it would severely damage U.S. capital markets. They warned 
that stock option expensing would eliminate corporate profits, 
discourage investment, depress stock prices, and stifle innovation. 
2006 was the first year in which all U.S. publicly traded companies 
were required to expense stock options. Instead of tumbling, both the 
New York Stock Exchange and Nasdaq turned in strong performances, as 
did initial public offerings by new companies. The dire predictions 
were wrong. Stock option expensing has been fully implemented without 
any detrimental impact to the markets.
  During the years the battle raged over stock option accounting, 
relatively little attention was paid to the taxation of stock options. 
Section 83 of the tax code, first enacted in 1969 and still in place 
after four decades, is the key statutory provision. It essentially 
provides that, when an employee exercises compensatory stock options, 
the employee must report as income the difference between what the 
employee paid to exercise the options and the market value of the stock 
received. The corporation can then take a mirror deduction for whatever 
amount of income the employee realized.
  For example, suppose a company gave an executive options to buy 1 
million shares of the company stock at $10 per share. Suppose, 5 years 
later, the executive exercised the options when the stock was selling 
at $30 per share. The executive's income would be $20 per share for a 
total of $20 million. The executive would declare $20 million as 
ordinary income, and in the same year, the company would take a 
corresponding tax deduction for $20 million.
  The two main problems with this approach are that: the deduction 
amount is significantly greater than the value of what the company gave 
away, often years earlier, and the $20 million in income obtained by 
the executive did not come out of the company's coffers. In most cases, 
the $20 million was paid by unrelated parties on the stock market. Yet 
the tax code allowed the corporation to declare the $20 million as a 
business expense and take it as a tax deduction. The reasoning was that 
the exercise date value was the only way to get a clear figure for 
stock option tax deduction purposes. That reasoning lost its persuasive 
character, however, once consensus was reached on how to calculate 
stock option expenses when granted.
  Stock option accounting and tax rules have evolved separately over 
the years and are now at odds with each other. Accounting rules require 
companies to expense stock options on their books on the grant date. 
Tax rules provide that companies deduct stock option expenses on the 
exercise date. Companies have to report the grant date expense to 
investors on their financial statements, and the exercise date expense 
on their tax returns. The financial statements report on all stock 
options granted during the year, while the tax returns report on all 
stock options exercised during the year. In short, company financial 
statements and tax returns identify expenses for different groups of 
stock options, using different valuation methods, and resulting in 
widely divergent stock option expenses for the same year.
  To examine the nature and consequences of the stock option book-tax 
differences, the Permanent Subcommittee on Investigations, which I 
chair, initiated an investigation and held a hearing 2 years ago, in 
June 2007. Here is what we found.
  To test just how far the book and tax figures for stock options 
diverge, the Subcommittee contacted a number of companies to compare 
the stock option expenses they reported for accounting and tax 
purposes. The Subcommittee asked each company to identify stock options 
that had been exercised by one or more of its executives from 2002 to 
2006. The Subcommittee then asked each company to identify the 
compensation expense they reported on their financial statements versus 
the compensation expense on their tax returns. In addition, we asked 
the companies' help in estimating what effect the new accounting rule 
would have had on their book expense if it had been in place when their 
stock options were granted. At the hearing, we disclosed the resulting 
stock option data for 9 companies, including three companies that were 
asked to testify. The Subcommittee very much appreciated the 
cooperation and assistance provided by the nine companies we worked 
with.
  The data provided by the companies showed that, under then existing 
rules,

[[Page 18747]]

the nine companies showed a zero expense on their books for that stock 
options that had been awarded to their executives, but claimed millions 
of dollars in tax deductions for the same compensation. The one 
exception was Occidential Petroleum which, in 2005, began voluntarily 
expensing its stock options, but even this company reported 
significantly greater tax deductions than the stock option expenses 
shown on its books. When the Subcommittee asked the companies what 
their book expense would have been if the new FASB rule had been in 
effect, all nine calculated book expenses that remained dramatically 
lower than their tax deductions. Altogether the 9 companies calculated 
that they would have claimed $1 billion more in stock option tax 
deductions than they would have shown as book expenses, even using the 
tougher new accounting rule. Let me repeat that--just nine companies 
produced a stock option book-tax difference of more than $1 billion.
  KB Home, for example, is a company that builds residential homes. Its 
stock price had more than quadrupled over the past 10 years. Over the 
same time period, it had repeatedly granted stock options to its then 
CEO. Company records show that, over five years, KB Home gave him 5.5 
million stock options of which, by 2006, he had exercised more than 3 
million.
  With respect to those 3 million stock options, KB Home recorded a 
zero expense on its books. Had the new accounting rule been in effect, 
KB Home calculated that it would have reported on its books a 
compensation expense of about $11.5 million. KB Home also disclosed 
that the same 3 million stock options enabled it to claim compensation 
expenses on its tax returns totaling about $143.7 million. In other 
words, KB Home claimed a $143 million tax deduction for expenses that 
on its books, under current accounting rules, would have totaled $11.5 
million. That's a tax deduction 12 times bigger than the book expense.
  Occidental Petroleum disclosed a similar book-tax discrepancy. This 
company's stock price had also skyrocketed, dramatically increasing the 
value of the 16 million stock options granted to its CEO since 1993. Of 
the 12 million stock options the CEO actually exercised over a five-
year period, Occidental Petroleum claimed a $353 million tax deduction 
for a book expense that, under current accounting rules, would have 
totaled just $29 million. That's a book-tax difference of more than 
1200 percent.
  Similar book-tax discrepancies applied to the other companies we 
examined. Cisco System's CEO exercised nearly 19 million stock options 
over 5 years, and provided the company with a $169 million tax 
deduction for a book expense which, under current accounting rules, 
would have totaled about $21 million. UnitedHealth's former CEO 
exercised over 9 million stock options in 5 years, providing the 
company with a $318 million tax deduction for a book expense which 
would have totaled about $46 million. Safeway's CEO exercised over 2 
million stock options, providing the company with a $39 million tax 
deduction for a book expense which would have totaled about $6.5 
million.
  Altogether, these nine companies took stock option tax deductions 
totaling $1.2 billion, a figure 5 times larger than the $217 million 
that their combined stock option book expenses would have been. The 
resulting $1 billion in excess tax deductions represents a tax windfall 
for these companies simply because they issued lots of stock options to 
their CEOs.
  Tax rules that produce huge tax deductions that are many times larger 
than the related stock option book expenses give companies an incentive 
to issue massive stock option grants, because they know the stock 
options will produce a relatively small hit to the profits shown on 
their books, while also knowing that they are likely to get a much 
larger tax deduction that can dramatically lower their taxes.
  The data we gathered for nine companies alone disclosed stock option 
tax deductions that were five times larger than their book expenses, 
generating over $1 billion in excess tax deductions. To gauge whether 
the same tax gap applied to stock options across the country as a 
whole, the Subcommittee asked the IRS to perform an analysis of some 
newly obtained stock option data.
  For the first time in 2004, large corporations were required to file 
a new tax Schedule M-3 with their tax returns. The M-3 Schedule asks 
companies to identify differences in how they report corporate income 
to investors versus what they report to Uncle Sam, so that the IRS can 
track and analyze significant book-tax differences.
  This data shows that, for corporate tax returns filed from July 1, 
2005 to June 30, 2006, the first full year in which it was available, 
companies' stock option tax deductions totaled about $61 billion more 
than their stock options expenses on their books. Similar data for July 
1, 2006 to June 30, 2007, showed that the excess stock option tax 
deductions totaled about $48 billion. In addition, the IRS data shows 
that nearly 60 percent of the excess tax deductions in 2007 were 
attributable to only 100 corporations; 75 percent were attributable to 
only 250 corporations. The IRS also determined that stock options were 
one of the most important factors why corporations reported different 
income on their books compared to their tax returns.
  Claiming these massive stock option tax deductions enabled U.S. 
corporations, as a whole, to legally reduce payment of their taxes by 
billions of dollars, perhaps as much as $10 billion, $15 billion, even 
$20 billion per year.
  There were other surprises in the data as well. One set of issues 
disclosed by the data involves what happens to unexercised stock 
options. Under the current mismatched set of accounting and tax rules, 
stock options which are granted, vested, but never exercised by the 
option holder turn out to produce a corporate book expense but no tax 
deduction.
  Cisco Systems told the Subcommittee, for example, that in addition to 
the 19 million exercised stock options previously mentioned, their CEO 
held about 8 million options that, due to a stock price drop, would 
likely expire without being exercised. Cisco calculated that, had FAS 
123R been in effect at the time those options were granted, the company 
would have had to show a $139 million book expense, but would never be 
able to claim a tax deduction for this expense since the options would 
never be exercised. Apple made a similar point. It told the 
Subcommittee that, in 2003, it allowed its CEO to trade 17.5 million in 
underwater stock options for 5 million shares of restricted stock. That 
trade meant the stock options would never be exercised and, under 
current rules, would produce a book expense without ever producing a 
tax deduction.
  In both of these cases, under FAS 123R, it is possible that the stock 
options given to a corporate executive would have produced a reported 
book expense greater than the company's tax deduction. While the M-3 
data indicates that, overall, accounting expenses lag far behind 
claimed tax deductions, the possible financial impact on an individual 
company of a large number of unexercised stock options is additional 
evidence that existing stock option accounting and tax rules are out of 
kilter and should be brought into alignment. Under our bill, if a 
company incurred a stock option expense, it would always be able to 
claim a tax deduction for that expense.
  Another set of issues brought to light by the IRS data focuses on the 
fact that the current stock option tax deduction is typically claimed 
years later than the initial book expense. Normally, a corporation 
dispenses compensation to an employee and takes a tax deduction in the 
same year for the expense. The company controls the timing and amount 
of the compensation expense and the corresponding tax deduction. With 
respect to stock options, however, corporations may have to wait years 
to see if, when, and how much of a deduction can be taken. That is 
because the corporate tax deduction is wholly dependent upon when an 
individual corporate executive decides to exercise his or her stock 
options.
  Our bill would require that, when the company gives away something of

[[Page 18748]]

value, it reflects that expense on its books and claims that same 
expense on its tax return. The company, and the government, should not 
have to wait to see whether the stock options given to executives later 
increased in value and were exercised. As with any other form of 
compensation, the company should determine the value of what it is 
giving away, and take the appropriate tax deduction at that time.
  UnitedHealth, for example, told the Subcommittee that it gave its 
former CEO 8 million stock options in 1999, of which, by 2006, only 
about 730,000 had been exercised. It did not know if or when its former 
CEO would exercise the remaining 7 million options, and so could not 
calculate when or how much of a tax deduction it would be able to claim 
for this compensation expense.
  If the rules for stock option tax deductions were changed as 
suggested in our bill, companies would typically be able to take the 
deduction years earlier than they do now, without waiting to see if and 
when particular options are exercised. Companies would also be allowed 
to deduct stock options that are vested but never exercised. In 
addition, by requiring stock option expenses to be deducted in the same 
year they appear on the company books, stock options would become 
consistent with how other forms of compensation are treated in the tax 
code.
  Right now, U.S. stock option accounting and tax rules are mismatched, 
misaligned, and out of kilter. They allow companies collectively to 
deduct billions of dollars in stock option expenses in excess of the 
expenses that actually appear on the company books. They disallow tax 
deductions for stock options that are given as compensation but never 
exercised. They often force companies to wait years to claim a tax 
deduction for a compensation expense that could and should be claimed 
in the same year it appears on the company books.
  The Levin-McCain bill we are introducing today would cure these 
problems. It would bring stock option accounting and tax rules into 
alignment, so that the two sets of rules would apply in a consistent 
manner. It would accomplish that goal simply by requiring the corporate 
stock option tax deduction to be no greater than the stock option 
expenses shown on the corporate books each year.
  Specifically, the bill would end use of the current stock option 
deduction under Section 83 of the tax code, which allows corporations 
to deduct stock option expenses when exercised in an amount equal to 
the income declared by the individual exercising the option, replacing 
it with a new Section 162(q), which would require companies to deduct 
the stock option expenses shown on their books each year.
  The bill would apply only to corporate stock option deductions; it 
would make no changes to the rules that apply to individuals who have 
been given stock options as part of their compensation. Individuals 
would still report their compensation on the day they exercised their 
stock options. They would still report as income the difference between 
what they paid to exercise the options and the fair market value of the 
stock they received upon exercise. The gain would continue to be 
treated as ordinary income rather than a capital gain, since the option 
holder did not invest any capital in the stock prior to exercising the 
stock option and the only reason the person obtained the stock was 
because of the services they performed for the corporation.
  The amount of income declared by the individual after exercising a 
stock option will likely often be greater than the stock option expense 
booked and deducted by the corporation who employed that individual. 
That's in part because the individual's gain often comes years later 
than the original stock option grant, and the underlying stock will 
usually have gained in value. In addition, the individual's gain is 
typically provided, not by the corporation that supplied the stock 
options years earlier, but by third parties active in the stock market.
  Consider the same example discussed earlier of an executive who 
exercises options to buy 1 million shares of stock at $10 per share, 
obtains the shares from the corporation, and then immediately sells 
them on the open market for $30 per share, making a toal profit of $20 
million. The individual's corporation didn't supply the $20 million. 
Just the opposite. Rather than paying cash to its executive, the 
corporation received a $10 million payment from the executive in 
exchange for the 1 million shares. The $20 million profit from selling 
the shares was paid, not by the corporation, but by third parties in 
the marketplace who purchased the stock. That is why it makes no sense 
for the company to declare as an expense the amount of profit that an 
employee--or former employee--obtained from unrelated parties in the 
marketplace.
  The bill we are introducing today would put an end to the current 
approach of using the stock option income declared by an individual as 
the tax deduction claimed by the corporation that supplied the stock 
options. It would break that old artificial symmetry and replace it 
with a new symmetry--one in which the corporation's stock option tax 
deduction would match its book expense.
  I describe the current approach to corporate stock option deductions 
as artificial, because it uses a construct in the tax code that, when 
first implemented 40 years ago, enabled corporations to calculate their 
stock option expense on the exercise date, when there was no consensus 
on how to calculate stock option expenses on the grant date. The 
artificiality of the approach is demonstrated by the fact that it 
allows companies to claim a deductible expense for money that comes not 
from company coffers, but from third parties in the stock market. Now 
that U.S. accounting rules require the calculation of stock option 
expenses on the grant date, however, there is no longer any need to 
rely on an artificial construct that calculated corporate stock option 
expenses on the exercise date using third party funds.
  It is also important to note that the bill would not affect in any 
way current tax provisions that provide favored tax treatment to so-
called Incentive Stock Options under Sections 421 and 422 of the tax 
code. Under those sections, in certain circumstances, corporations can 
surrender their stock option deductions in favor of allowing their 
employees with stock option gains to be taxed at a capital gains rate 
instead of ordinary income tax rates. Many start-up companies use these 
types of stock options, because they don't yet have taxable profits and 
don't need a stock option tax deduction. So they forfeit their stock 
option corporate deduction in favor of giving their employees more 
favorable treatment of their stock option income. Incentive Stock 
Options would not be affected by our legislation and would remain 
available to any corporation providing stock options to its employees.
  The bill would make one other important change to the tax code as it 
relates to corporate stock option tax deductions. In 1993, Congress 
enacted a $1 million cap on the compensation that a corporation can 
deduct from its taxes, so taxpayers would not be forced to subsidize 
excessive executive pay. However, the cap was not applied to stock 
options, allowing companies to deduct any amount of stock option 
compensation, without limit.
  By not applying the $1 million cap to stock option compensation, the 
tax code created a significant incentive for corporations to pay their 
executives with stock options. Indeed, it is very common for executives 
to have salaries of $1 million, while simultaneously receiving millions 
of dollars more in stock options. It is effectively meaningless to cap 
deductions for executive salary compensation but not also for stock 
options.
  Further, while corporate directors may be comfortable diluting their 
shareholders' interests and doling out massive amounts of stock 
options, that does not mean that the taxpayers should subsidize it. 
This bill would eliminate this favored treatment of executive stock 
options by making deductions for this type of compensation subject to 
the same $1 million cap that applies to other forms of compensation 
covered by Section 162(m).
  The bill also contains several technical provisions. First, it would 
make a

[[Page 18749]]

conforming change to the research tax credit so that stock option 
expenses claimed under that credit would match the stock option 
deductions taken under the new tax code section 162(q). Second, the 
bill would authorize the Secretary of the Treasury to adopt regulations 
governing how to calculate the deduction for stock options issued by a 
parent corporation to the employees of a subsidiary.
  Finally, the bill contains a transition rule for applying the new 
Section 162(q) stock option tax deduction to existing and future stock 
option grants. This transition rule would make it clear that the new 
tax deduction would not apply to any stock option exercised prior to 
the date of enactment of the bill.
  The bill would also allow the old Section 83 deduction rules to apply 
to any option which was vested prior to the effective date of Financial 
Accounting Standard, FAS, 123R, and exercised after the date of 
enactment of the bill. The effective date of FAS 123R is June 15, 2005 
for most corporations, and December 31, 2005 for most small businesses. 
Prior to the effective date of FAS 123R, most corporations would have 
shown a zero expense on their books for the stock options issued to 
their executives and, thus, would be unable to claim a tax deduction 
under the new Section 162(q). For that reason, the bill would allow 
these corporations to continue to use Section 83 to claim stock option 
deductions on their tax returns.
  For stock options that vested after the effective date of FAS 123R 
and were exercised after the date of enactment, the bill takes another 
tack. Under FAS 123R, these corporations would have had to show the 
appropriate stock option expense on their books, but would have been 
unable to take a tax deduction until the executive actually exercised 
the option. For these options, the bill would allow corporations to 
take an immediate tax deduction--in the first year that the bill is in 
effect--for all of the expenses shown on their books with respect to 
these options. This ``catch-up deduction'' in the first year after 
enactment would enable corporations, in the following years, to begin 
with a clean slate so that their tax returns the next year would 
reflect their actual stock option book expenses for that same year.
  After that catch-up year, all stock option expenses incurred by a 
company each year would be reflected in their annual tax deductions 
under the new Section 162(q).
  The current differences between accounting and tax rules for stock 
options make no sense.
  The current book-tax difference is the historical product of 
accounting and tax policies that have not been coordinated or 
integrated. The resulting mismatch has allowed companies to take tax 
deductions that are usually many times larger than the actual stock 
option expenses shown on their books, at the expense of the Treasury 
(i.e., other taxpayers). Companies are incentivized to dole out 
excessive options packages, producing outsized executive pay, while 
being allowed to reflect much smaller ``expenses'' on their books. They 
get to avoid paying their fair share to Uncle Sam by simply giving 
their executives the rights to huge sums of money from the financial 
markets.
  Right now, stock options are the only compensation expense where the 
tax code allows companies to deduct more than their book expenses. In 
the last year for which the data is available, companies used the 
existing book-tax disparity to claim $48 billion more in stock option 
tax deductions than the expenses shown on their books. In these times 
of financial crisis, we cannot afford this multi-billion dollar loss to 
the Treasury, not only because of the need to finance the mounting 
costs of rescuing the economy, but also because this stock option book-
tax difference contributes to the anger and social disruption caused by 
the ever deepening chasm between the pay of executives and the pay of 
average workers.
  The Obama administration has pledged itself to closing unfair 
corporate tax loopholes and to returning sanity to executive pay. It 
should start with supporting the ending of excessive stock option 
corporate deductions. I urge my colleagues to join Senator McCain and 
me in enacting this bill into law this year.
  Mr. President, I ask unanimous consent that the text of the bill and 
a bill summary 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. 1491

       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 ``Ending Excessive Corporate 
     Deductions for Stock Options Act''.

     SEC. 2. CONSISTENT TREATMENT OF STOCK OPTIONS BY 
                   CORPORATIONS.

       (a) Consistent Treatment for Wage Deduction.--
       (1) In general.--Section 83(h) of the Internal Revenue Code 
     of 1986 (relating to deduction of employer) is amended--
       (A) by striking ``In the case of'' and inserting:
       ``(1) In general.--In the case of'', and
       (B) by adding at the end the following new paragraph:
       ``(2) Stock options.--In the case of property transferred 
     to a person in connection with the exercise of a stock 
     option, any deduction by the employer related to such stock 
     option shall be allowed only under section 162(q) and 
     paragraph (1) shall not apply.''.
       (2) Treatment of compensation paid with stock options.--
     Section 162 of such Code (relating to trade or business 
     expenses) is amended by redesignating subsection (q) as 
     subsection (r) and by inserting after subsection (p) the 
     following new subsection:
       ``(q) Treatment of Compensation Paid With Stock Options.--
       ``(1) In general.--In the case of compensation for personal 
     services that is paid with stock options, the deduction under 
     subsection (a)(1) shall not exceed the amount the taxpayer 
     has treated as an expense with respect to such stock options 
     for the purpose of ascertaining income, profit, or loss in a 
     report or statement to shareholders, partners, or other 
     proprietors (or to beneficiaries), and shall be allowed in 
     the same period that the accounting expense is recognized.
       ``(2) Special rules for controlled groups.--The Secretary 
     shall prescribe rules for the application of paragraph (1) in 
     cases where the stock option is granted by a parent or 
     subsidiary corporation (within the meaning of section 424) of 
     the employer corporation.''.
       (b) Consistent Treatment for Research Tax Credit.--Section 
     41(b)(2)(D) of the Internal Revenue Code of 1986 (defining 
     wages for purposes of credit for increasing research 
     expenses) is amended by inserting at the end the following 
     new clause:
       ``(iv) Special rule for stock options.--The amount which 
     may be treated as wages for any taxable year in connection 
     with the issuance of a stock option shall not exceed the 
     amount allowed for such taxable year as a compensation 
     deduction under section 162(q) with respect to such stock 
     option.''.
       (c) Application of Amendments.--The amendments made by this 
     section shall apply to stock options exercised after the date 
     of the enactment of this Act, except that--
       (1) such amendments shall not apply to stock options that 
     were granted before such date and that vested in taxable 
     periods beginning on or before June 15, 2005,
       (2) for stock options that were granted before such date of 
     enactment and vested during taxable periods beginning after 
     June 15, 2005, and ending before such date of enactment, a 
     deduction under section 162(q) of the Internal Revenue Code 
     of 1986 (as added by subsection (a)(2)) shall be allowed in 
     the first taxable period of the taxpayer that ends after such 
     date of enactment,
       (3) for public entities reporting as small business issuers 
     and for non-public entities required to file public reports 
     of financial condition, paragraphs (1) and (2) shall be 
     applied by substituting ``December 15, 2005'' for ``June 15, 
     2005'', and
       (4) no deduction shall be allowed under section 83(h) or 
     section 162(q) of such Code with respect to any stock option 
     the vesting date of which is changed to accelerate the time 
     at which the option may be exercised in order to avoid the 
     applicability of such amendments.

     SEC. 3. APPLICATION OF EXECUTIVE PAY DEDUCTION LIMIT.

       (a) In General.--Subparagraph (D) of section 162(m)(4) of 
     the Internal Revenue Code of 1986 (defining applicable 
     employee remuneration) is amended to read as follows:
       ``(D) Stock option compensation.--The term `applicable 
     employee remuneration' shall include any compensation 
     deducted under subsection (q), and such compensation shall 
     not qualify as performance-based compensation under 
     subparagraph (C).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to stock options exercised or granted after the 
     date of the enactment of this Act.

[[Page 18750]]

     
                                  ____
Summary of the Ending Excessive Corporate Deductions for Stock Options 
                                  Act


                         Section 1--Short Title

       ``Ending Excessive Corporate Deductions for Stock Options 
     Act''


    Section 2--Consistent Treatment of Stock Options by Corporations

       Eliminates favored tax treatment of corporate stock option 
     deductions, in which corporations are currently allowed to 
     deduct a higher stock option compensation expense on their 
     tax returns than shown on their financial books--(1) creates 
     a new corporate stock option deduction under a new tax code 
     section 162(q) requiring the tax deduction to be consistent 
     with the book expense, and (2) eliminates the existing 
     corporate stock option deduction under tax code section 83(h) 
     allowing excess deductions.
       Allows corporations to deduct stock option compensation in 
     the same year it is recorded on the company books, without 
     waiting for the options to be exercised.
       Makes a conforming change to the research tax credit so 
     that stock option expenses under that credit will match the 
     deductions taken under the new tax code section 162(q).
       Authorizes Treasury to issue regulations applying the new 
     deduction to stock options issued by a parent corporation to 
     a subsidiary's employees.
       Establishes a transition rule applying the new deduction to 
     stock options exercised after enactment, permitting 
     deductions under the old rule for options vested prior to 
     adoption of Financial Accounting Standard (FAS) 123R (on 
     expensing stock options) on June 15, 2005, and allowing a 
     catch-up deduction in the first year after enactment for 
     options that vested between adoption of FAS 123R and the date 
     of enactment.
       Makes no change to stock option compensation rules for 
     individuals, or for incentive stock options that qualify 
     under section 422 of the tax code.


        Section 3--Application of Executive Pay Deduction Limit

       Eliminates favored treatment of corporate executive stock 
     options under tax code section 162(m) by making executive 
     stock option compensation deductions subject to the same $1 
     million cap on corporate deductions that applies to other 
     types of compensation paid to the top executives of publicly 
     held corporations. This approach mirrors that taken in the 
     Economic Emergency Stabilization Act to address the financial 
     crisis.
                                 ______
                                 
      By Mr. REID (for Ms. Mikulski (for herself, Mr. Bond, Mrs. 
        Gillibrand, Mr. Menendez, Mr. Burr, and Ms. Collins)):
  S. 1492. A bill to amend the Public Health Service Act to fund 
breakthroughs in Alzheimer's disease research while providing more help 
to caregivers and increasing public education about prevention; to the 
Committee on Health, Education, Labor, and Pensions.
  Ms. MIKULSKI. Mr. President, today, I rise to introduce the 
Alzheimer's Breakthrough Act of 2009. This critical bipartisan 
legislation passed the HELP Committee in 2007, but it has yet to pass 
the Senate. My hope is that we can finish the job this year and finally 
get this legislation signed into law.
  Alzheimer's' disease is an alarming and mounting crisis that we must 
address. Today there are over five million Americans living with 
Alzheimer's disease. That number is expected to triple by 2050 in a 
nation where ten million Americans care for a sick family member.
  We know a lot about Alzheimer's disease but it's been 100 years since 
it was first diagnosed, and we still have no cure or proven ways to 
prevent the disease. Urgency is needed in developing better treatments 
and better assistance for families impacted by the disease as the baby 
boom generation ages. If nothing is done, Alzheimer's will cost 
Medicare and Medicaid $19.89 trillion between 2010 and 2050.
  The Alzheimer's Breakthrough Act of 2009 responds to this crisis in 
four ways.
  First, it doubles funding for Alzheimer's research at NIH to $2 
billion for fiscal year 2010, making Alzheimer's research a priority. 
Through this commitment, the bill gives researchers adequate resources 
to make breakthroughs in diagnosis, prevention and intervention, 
bringing us closer to a cure.
  Second, the bill creates the National Summit on Alzheimer's. This 
Summit will bring together the Nation's best researchers, policymakers 
and public health professionals to discuss the most promising 
breakthroughs for saving lives and livelihood, and to generate 
priorities in moving forward in the fight against Alzheimer's.
  Third, the act enhances public health activities related to 
Alzheimer's through the CDC's ``Roadmap to Maintaining Cognitive 
Health.''
  Finally, the Alzheimer's Breakthrough Act provides family and 
caregiver support by expanding the Alzheimer's 24/7 call center, which 
provides crisis assistance and referrals to local community programs. 
The bill also expands the multilingual capacity of the call center.
  America needs this legislation. Alzheimer's takes a toll on many 
victims. The disease is awful for the person living with it, 
emotionally and financially draining for caregivers and it is now 
costing the nation $175 billion annually, a number that could rise to 
$1 trillion annually by 2050.
  We know the family of an Alzheimer's patient suffers gravely. The 
out-of-pocket cost of caring for an aging parent or spouse averages 
about $5,500 a year for necessities like groceries, household goods and 
drugs and medical copayments. If the care is long-distance, the cost 
could be up to $8,700 a year. Caregivers spend ten percent of their 
household income caring for a sick loved one who is suffering from this 
terrible disease.
  Experts have told us ``we will lose opportunities if we don't move 
quickly'' and that ``we are at a crucial point where NIH funding can 
make a difference.'' We know about the long goodbye. Alzheimer's is a 
disease that affects millions of Americans including our All-American 
President Ronald Reagan and his beloved caregiver, First Lady Nancy 
Reagan. Now we need a response supported by millions that will lead to 
breakthroughs and ensure we are assisting patients and their families 
dealing with this disease on a daily basis.
  Passage of the Alzheimer's Breakthrough Act of 2009 will help us 
advance the study and treatment of Alzheimer's to make a difference in 
the lives of millions of Americans and to equip caregivers with the 
resources and support services they need to care for their loved ones. 
This legislation is critical to the American public and America's 
future. We must act now.
  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. 1492

       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 ``Alzheimer's Breakthrough Act 
     of 2009''.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) Alzheimer's disease is a disorder that destroys cells 
     in the brain. The disease is the leading cause of dementia, a 
     condition that involves gradual memory loss, decline in the 
     ability to perform routine tasks, disorientation, difficulty 
     in learning, loss of language skills, impairment of judgment, 
     and personality changes. As the disease progresses, people 
     with Alzheimer's disease become unable to care for 
     themselves. The loss of brain cells eventually leads to the 
     failure of other systems in the body.
       (2) An estimated 5,300,000 Americans have Alzheimer's 
     disease and 1 in 10 individuals has a family member with the 
     disease. By 2050, the number of individuals with the disease 
     could reach 16,000,000 unless science finds a way to prevent 
     or cure the disease.
       (3) One in 8 people over the age of 65, and nearly half of 
     those over the age of 85 have Alzheimer's disease. Younger 
     people also get the disease.
       (4) The Alzheimer's disease process may begin in the brain 
     as many as 20 years before the symptoms of Alzheimer's 
     disease appear. An individual will live an average of 4 to 6 
     years, and as many as 20 years, once the symptoms of 
     Alzheimer's disease appear.
       (5) In 2005, Medicare alone spent $91,000,000,000 for the 
     care of individuals with Alzheimer's disease and this amount 
     is projected to increase to $160,000,000,000 in 2010.
       (6) Ninety-five percent of Medicare beneficiaries with 
     Alzheimer's disease have one or more other chronic conditions 
     that are common in the elderly, such as coronary heart 
     disease (26 percent), congestive heart failure (16 percent), 
     diabetes (23 percent), and chronic obstructive pulmonary 
     disease (15 percent).
       (7) Seven in 10 individuals with Alzheimer's disease live 
     at home. Cost for care at home is higher for people with 
     Alzheimer's disease

[[Page 18751]]

     than other individuals. Almost all families pay some out-of-
     pocket costs.
       (8) Half of all nursing home residents have Alzheimer's 
     disease or a related disorder. The average annual cost of 
     Alzheimer's disease nursing home care is more than $77,000. 
     Medicaid pays half of the total nursing home bill and helps 2 
     out of 3 residents pay for their care. Medicaid expenditures 
     for nursing home care for people with Alzheimer's disease are 
     estimated to increase from $21,000,000,000 in 2005 to 
     $24,000,000,000 in 2010.
       (9) In fiscal year 2007, the Federal Government spent an 
     estimated $411,000,000 on Alzheimer's disease research. Over 
     the next 40 years, Alzheimer's disease-related costs to 
     Medicare and Medicaid alone are projected to total 
     $20,000,000,000,000 in constant dollars, rising to over 
     $1,000,000,000,000 per year by 2050. This amounts to less 
     than a penny spent on Alzheimer's disease research for each 
     dollar that the Federal Government spends on Alzheimer's 
     disease-related costs each year.
       (10) It is estimated that the annual value of the informal 
     care system is $94,000,000,000. Family caregiving comes at 
     enormous physical, emotional, and financial sacrifice, 
     putting the whole system at risk.
       (11) Almost 60 percent of caregivers of individuals with 
     Alzheimer's disease are women, and over one-fourth have 
     children or grandchildren under the age of 18 living at home. 
     Caregiving leaves them less time for other family members and 
     they are much more likely to report family conflicts because 
     of their caregiving role.
       (12) Most Alzheimer's disease caregivers work outside the 
     home before beginning their caregiving careers, but 
     caregiving forces them to miss work, cut back to part-time, 
     take less demanding jobs, choose early retirement, or give up 
     work altogether. As a result, in 2002, Alzheimer's disease 
     cost American business an estimated $36,500,000,000 in lost 
     productivity, as well as an additional $24,600,000,000 in 
     business contributions to the total cost of care.

   TITLE I--INCREASING THE FEDERAL COMMITMENT TO ALZHEIMER'S RESEARCH

     SEC. 101. DOUBLING NIH FUNDING FOR ALZHEIMER'S DISEASE 
                   RESEARCH.

       For the purpose of conducting and supporting research on 
     Alzheimer's disease (including related activities under 
     subpart 5 of part C of title IV of the Public Health Service 
     Act (42 U.S.C. 285e et seq.)), there are authorized to be 
     appropriated $2,000,000,000 for fiscal year 2010, and such 
     sums as may be necessary for each of fiscal years 2011 
     through 2014.

     SEC. 102. PRIORITY TO ALZHEIMER'S DISEASE RESEARCH.

       Section 443 of the Public Health Service Act (42 U.S.C. 
     285e) is amended--
       (1) by striking ``The general'' and inserting the 
     following:
       ``(a) In General.--The general;'' and
       (2) by adding at the end the following:
       ``(b) Priorities.--The Director of the Institute shall, in 
     expending amounts appropriated to carry out this subpart, 
     give priority to conducting and supporting Alzheimer's 
     disease research.''.

     SEC. 103. ALZHEIMER'S DISEASE PREVENTION INITIATIVE.

       Section 443 of the Public Health Service Act (42 U.S.C. 
     285e), as amended by section 102, is further amended by 
     adding at the end the following:
       ``(c) Prevention Trials.--The Director of the Institute 
     shall increase the emphasis on the need to conduct 
     Alzheimer's disease prevention trials within the National 
     Institutes of Health.
       ``(d) Neuroscience Initiative.--The Director of the 
     Institute shall ensure that Alzheimer's disease is maintained 
     as a high priority for the neuroscience initiative of the 
     National Institutes of Health.''.

     SEC. 104. ALZHEIMER'S DISEASE CLINICAL RESEARCH.

       (a) Clinical Research.--Subpart 5 of part C of title IV of 
     the Public Health Service Act (42 U.S.C. 285e et seq.) is 
     amended by adding at the end the following:

     ``SEC. 445J. ALZHEIMER'S DISEASE CLINICAL RESEARCH.

       ``(a) In General.--The Director of the Institute, pursuant 
     to section 444(d), shall conduct and support cooperative 
     clinical research regarding Alzheimer's disease. Such 
     research shall include--
       ``(1) investigating therapies, interventions, and agents to 
     detect, treat, slow the progression of, or prevent 
     Alzheimer's disease;
       ``(2) enhancing the national infrastructure for the conduct 
     of clinical trials on Alzheimer's disease;
       ``(3) developing and testing novel approaches to the design 
     and analysis of such trials;
       ``(4) facilitating the enrollment of patients for such 
     trials, including patients from diverse populations;
       ``(5) developing improved diagnostics and means of patient 
     assessment for Alzheimer's disease;
       ``(6) the conduct of clinical trials on potential 
     therapies, including readily available compounds such as 
     herbal remedies and other alternative treatments;
       ``(7) research to develop better methods of early 
     diagnosis, including the use of current imaging techniques; 
     and
       ``(8) other research, as determined appropriate by the 
     Director of the Institute after consultation with the 
     Alzheimer's disease centers and Alzheimer's disease research 
     centers established under section 445.
       ``(b) Early Diagnosis and Detection Research.--
       ``(1) In general.--The Director of the Institute, in 
     consultation with the directors of other relevant institutes 
     and centers of the National Institutes of Health, shall 
     conduct, or make grants for the conduct of, research related 
     to the early detection, diagnosis, and prevention of 
     Alzheimer's disease and of mild cognitive impairment or other 
     potential precursors to Alzheimer's disease.
       ``(2) Evaluation.--The research described in paragraph (1) 
     may include the evaluation of diagnostic tests and imaging 
     techniques.
       ``(3) Study.--Not later than 1 year after the date of 
     enactment of this section, the Director of the Institute, in 
     cooperation with the heads of other relevant Federal 
     agencies, shall conduct a study, and submit to Congress a 
     report, to estimate the number of individuals with early-
     onset Alzheimer's disease (those diagnosed before the age of 
     65) and related dementias in the United States, the causes of 
     early-onset dementia, and the unique problems faced by such 
     individuals, including problems accessing government 
     services.
       ``(c) Vascular Disease.--The Director of the Institute, in 
     consultation with the directors of other relevant institutes 
     and centers of the National Institutes of Health, shall 
     conduct, or make grants for the conduct of, research related 
     to the relationship of vascular disease and Alzheimer's 
     disease, including clinical trials to determine whether drugs 
     developed to prevent cerebrovascular disease can prevent the 
     onset or progression of Alzheimer's disease.
       ``(d) Treatments and Prevention.--The Director of the 
     Institute shall place special emphasis on expediting the 
     translation of research findings under this section into 
     effective treatments and prevention strategies for 
     individuals at risk of Alzheimer's disease and other 
     dementias.
       ``(e) National Alzheimer's Coordinating Center.--The 
     Director of the Institute may establish a National 
     Alzheimer's Coordinating Center to facilitate collaborative 
     research among the Alzheimer's Disease Centers and 
     Alzheimer's Disease Research Centers established under 
     section 445.''.
       (b) Alzheimer's Disease Centers.--Section 445(a)(1) of the 
     Public Health Service Act (42 U.S.C. 285e-2(a)(1)) is amended 
     by inserting ``, outcome measures, and disease management,'' 
     after ``treatment methods''.

     SEC. 105. RESEARCH ON ALZHEIMER'S DISEASE CAREGIVING.

       Section 445C of the Public Health Service Act (42 U.S.C. 
     285e-5) is amended--
       (1) by striking ``Sec. 445C. Research Program and Plan 
     (a)'' and inserting the following:

     ``SEC. 445C. RESEARCH ON ALZHEIMER'S DISEASE SERVICES AND 
                   CAREGIVING.

       ``(a) Services Research.--'';
       (2) by striking subsections (b), (c), and (e);
       (3) by inserting after subsection (a) the following:
       ``(b) Interventions Research.--The Director of the 
     Institute shall, in collaboration with the directors of the 
     other relevant institutes and centers of the National 
     Institutes of Health, conduct, or make grants for the conduct 
     of, clinical, social, and behavioral research related to 
     interventions designed to help caregivers of patients with 
     Alzheimer's disease and other dementias and improve patient 
     outcomes.'';
       (4) by redesignating subsection (d) as subsection (c); and
       (5) in subsection (c) (as redesignated by paragraph (4)), 
     by striking ``the Director'' and inserting ``Model Curricula 
     and Techniques.--The Director''.

     SEC. 106. NATIONAL SUMMIT ON ALZHEIMER'S DISEASE.

       (a) In General.--Not later than 3 years after the date of 
     enactment of this Act, and every 3 years thereafter, the 
     Secretary of Health and Human Services (referred to in this 
     section as the ``Secretary'') shall convene a National Summit 
     on Alzheimer's Disease to--
       (1) provide a detailed overview of current research 
     activities relating to Alzheimer's disease at the National 
     Institutes of Health; and
       (2) discuss and solicit input related to potential areas of 
     collaboration between the National Institutes of Health and 
     other Federal health agencies, including the Centers for 
     Disease Control and Prevention, the Administration on Aging, 
     the Agency for Healthcare Research and Quality, and the 
     Health Resources and Services Administration, related to 
     research, prevention, and treatment of Alzheimer's disease.
       (b) Participants.--The summit convened under subsection (a) 
     shall include researchers, representatives of academic 
     institutions, Federal and State policymakers, public health 
     professionals, and representatives of voluntary health 
     agencies as participants.
       (c) Focus Areas.--The summit convened under subsection (a) 
     shall focus on--
       (1) a broad range of Alzheimer's disease research 
     activities relating to biomedical research, prevention 
     research, and caregiving issues;
       (2) clinical research for the development and evaluation of 
     new treatments for Alzheimer's disease;

[[Page 18752]]

       (3) translational research on evidence-based and cost-
     effective best practices in the treatment and prevention of 
     Alzheimer's disease;
       (4) information and education programs for health care 
     professionals and the public relating to Alzheimer's disease;
       (5) priorities among the programs and activities of the 
     various Federal agencies regarding Alzheimer's disease and 
     other dementias; and
       (6) challenges and opportunities for scientists, 
     clinicians, patients, and voluntary organizations relating to 
     Alzheimer's disease.
       (d) Report.--Not later than 180 days after the date on 
     which the summit is convened under subsection (a), the 
     Director of the National Institutes of Health shall prepare 
     and submit to the appropriate committees of Congress a report 
     that includes a summary of the proceedings of the summit and 
     a description of Alzheimer's disease research, education, and 
     other activities that are conducted or supported through the 
     National Institutes of Health.
       (e) Public Information.--The Secretary shall make readily 
     available to the public information about the research, 
     education, and other activities relating to Alzheimer's 
     disease and other related dementias, that are conducted or 
     supported by the National Institutes of Health.

TITLE II--PUBLIC HEALTH PROMOTION AND PREVENTION OF ALZHEIMER'S DISEASE

     SEC. 201. ENHANCING PUBLIC HEALTH ACTIVITIES RELATED TO 
                   COGNITIVE HEALTH, ALZHEIMER'S DISEASE, AND 
                   OTHER DEMENTIAS.

       Part P of title III of the Public Health Service Act (42 
     U.S.C. 280g et seq.) is amended--
       (1) by redesignating the second and third sections 399R as 
     sections 399S and 399T, respectively; and
       (2) by adding at the end the following:

     ``SEC. 399U. ALZHEIMER'S DISEASE PUBLIC EDUCATION CAMPAIGN.

       ``(a) In General.--The Secretary, acting through the 
     Director of the Centers for Disease Control and Prevention, 
     shall directly or through grants, cooperative agreements, or 
     contracts to eligible entities--
       ``(1) conduct, support, and promote the coordination of 
     research, investigations, demonstrations, training, and 
     studies relating to the control, prevention, and surveillance 
     of the risk factors associated with cognitive health, 
     Alzheimer's disease, and other dementias; and
       ``(2) seek early recognition of, and early intervention in 
     the course of, Alzheimer's disease and other dementias.
       ``(b) Certain Activities.--Activities under subsection (a) 
     shall include--
       ``(1) providing support for the dissemination and 
     implementation of the Roadmap to Maintaining Cognitive Health 
     of the Centers for Disease Control and Prevention to 
     effectively mobilize the public health community into action;
       ``(2) the development of coordinated public education 
     programs, services, and demonstrations which are designed to 
     increase general awareness of cognitive function and promote 
     a brain healthy lifestyle;
       ``(3) the development of targeted communication strategies 
     and tools to educate health professionals and service 
     providers about the early recognition, diagnosis, care, and 
     management of Alzheimer's disease and other dementias, and to 
     provide consumers with information about interventions, 
     products, and services that promote cognitive health and 
     assist consumers in maintaining current understanding about 
     cognitive health based on the best science available; and
       ``(4) providing support for the collection, publication, 
     and analysis of data and the prevalence and incidence of 
     cognitive health, Alzheimer's disease, and other dementias, 
     and the evaluation of existing population-based surveillance 
     systems (such as the Behavioral Risk Factors Surveillance 
     Survey (BRFSS) and the National Health Interview Survey 
     (NHIS)) to identify limitations that exist in the area of 
     cognitive health, and if necessary, the development of a 
     surveillance system for cognitive decline, including 
     Alzheimer's disease and other dementias.
       ``(c) Grants.--The Secretary may award grants under this 
     section--
       ``(1) to State and local health agencies for the purpose 
     of--
       ``(A) coordinating activities related to cognitive health, 
     Alzheimer's disease, and other dementias with existing State-
     based health programs and community-based organizations;
       ``(B) providing Alzheimer's disease education and training 
     opportunities and programs for health professionals; and
       ``(C) developing, testing, evaluating, and replicating 
     effective Alzheimer's disease intervention programs to 
     maintain or improve cognitive health; and
       ``(2) to nonprofit private health organizations with 
     expertise in providing care and services to individuals with 
     Alzheimer's disease for the purpose of--
       ``(A) disseminating information to the public;
       ``(B) testing model intervention programs to improve 
     cognitive health; and
       ``(C) coordinating existing services related to cognitive 
     health, Alzheimer's disease, and other dementias with State-
     based health programs.
       ``(d) Authorization of Appropriations.--For the purpose of 
     carrying out this section, there are authorized to be 
     appropriated $15,000,000 for fiscal year 2010, and such sums 
     as may be necessary for each of fiscal years 2011 through 
     2014.''.

                  TITLE III--ASSISTANCE FOR CAREGIVERS

     SEC. 301. ALZHEIMER'S CALL CENTER.

       Part P of title III of the Public Health Service Act (42 
     U.S.C. 280g et seq.), as amended by section 201, is further 
     amended by adding at the end the following:

     ``SEC. 399V. ALZHEIMER'S CALL CENTER.

       ``(a) In General.--The Secretary, acting through the 
     Administration on Aging, shall award a cooperative grant to a 
     non-profit or community-based organization to support the 
     establishment and operation of an Alzheimer's Call Center 
     that is accessible 24 hours a day, 7 days a week, at the 
     national and local levels, to provide expert advice, care 
     consultation, information, and referrals regarding 
     Alzheimer's disease.
       ``(b) Activities.--The Alzheimer's Call Center established 
     under subsection (a) shall--
       ``(1) collaborate with the Administration on Aging in the 
     development, modification, and execution of the Call Center's 
     work plan;
       ``(2) assist the Administration on Aging in developing and 
     sustaining collaborations between the Call Center, the 
     Eldercare Locator of the Administration of Aging, and the 
     grantees under the Alzheimer's disease demonstration program 
     under subpart II of part K;
       ``(3) provide a 24 hours a day, 7 days a week toll-free 
     call center with trained professional staff who are available 
     to provide care consultation and crisis intervention to 
     individuals with Alzheimer's disease and other dementias, 
     their family and informal caregivers, and others as 
     appropriate;
       ``(4) be accessible by telephone through a single toll-free 
     telephone number, website, and e-mail address; and
       ``(5) evaluate the impact of the Call Center's activities 
     and services.
       ``(c) Multilingual Capacity.--The Call Center established 
     under this section shall have a multilingual capacity and 
     shall respond to inquiries in at least 140 languages through 
     its own bilingual staff and with the use of a language 
     translation service.
       ``(d) Response to Emergency and Ongoing Needs.--The Call 
     Center established under this section shall collaborate with 
     community-based organizations, including non-profit agencies 
     and organizations, to ensure local, on-the-ground capacity to 
     respond to emergency and on-going needs of individuals with 
     Alzheimer's disease and other dementias, their families, and 
     informal caregivers.
       ``(e) Authorization of Appropriations.--For the purpose of 
     carrying out this section, there are authorized to be 
     appropriated $1,000,000 for fiscal year 2010, and such sums 
     as may be necessary for each of fiscal years 2011 through 
     2014.''.

     SEC. 302. INNOVATIVE ALZHEIMER'S CARE STATE MATCHING GRANT 
                   PROGRAM.

       (a) Authorization of Appropriations.--Section 398B(e) of 
     the Public Health Service Act (42 U.S.C. 280c-5(e)) is 
     amended--
       (1) by striking ``and such'' and inserting ``such''; and
       (2) by inserting before the period the following: ``, 
     $25,000,000 for fiscal year 2010, and such sums as may be 
     necessary for each of fiscal years 2011 through 2014''.
       (b) Program Expansion.--Section 398(a) of the Public Health 
     Service Act (42 U.S.C. 280c-3(a)) is amended--
       (1) in paragraph (2), by inserting after ``other respite 
     care'' the following: ``and care consultation, including 
     assessment of needs, assistance with planning and problem 
     solving, and providing supportive listening,'';
       (2) in paragraph (3), by striking ``; and'' and inserting 
     the following: ``, and individuals in frontier areas (in this 
     subsection, defined as areas with 6 or fewer people per 
     square mile or areas in which residents must travel at least 
     60 minutes or 60 miles to receive health care services);'';
       (3) in paragraph (4), by striking the period at the end and 
     inserting a semicolon; and
       (4) by adding at the end the following:
       ``(5) to encourage grantees under this section to 
     coordinate activities with other State officials 
     administering efforts to promote long-term care options that 
     enable older individuals to receive long-term care in home- 
     and community-based settings, in a manner responsive to the 
     needs and preferences of older individuals and their family 
     caregivers;
       ``(6) to encourage grantees under this section to--
       ``(A) engage in activities that support early detection and 
     diagnosis of Alzheimer's disease and other dementias;
       ``(B) provide training about how Alzheimer's disease can 
     affect behavior and impede communication in medical and 
     community settings to--
       ``(i) medical personnel, including hospital staff, 
     emergency room personnel, home health care workers and 
     physician office staff;
       ``(ii) rehabilitation services providers; and
       ``(iii) caregivers of individuals with Alzheimer's disease;

[[Page 18753]]

       ``(C) develop guidelines to provide the medical community 
     with up-to-date information about the best methods of care 
     for individuals with Alzheimer's disease;
       ``(D) inform community physicians about available resources 
     to assist the physician in detecting and managing Alzheimer's 
     disease; and
       ``(E) raise awareness among community physicians about the 
     availability of community-based organizations which can 
     assist individuals with Alzheimer's disease and their 
     caregivers;
       ``(7) to encourage grantees under this section to engage in 
     activities that use findings from evidence-based research on 
     service models and techniques to support individuals with 
     Alzheimer's disease and their caregivers; and
       ``(8) to encourage grantees under this section to 
     incorporate best practices for effectively serving 
     individuals with Alzheimer's disease in community-based 
     settings into systems initiatives and long-term care 
     activities.''.
                                 ______
                                 
      By Mr. McCONNELL:
  S. 1493. A bill to designate the current and future Department of 
Veterans Affairs Medical Center in Louisville, Kentucky, as the 
``Robley Rex Department of Veterans Affairs Medical Center''; to the 
Committee on Veterans' Affairs.
  Mr. McCONNELL. Mr. President, I rise today to introduce legislation 
to honor a Kentuckian who is a true American hero: Robley Henry Rex.
  When Robley passed away in April of this year just a few days shy of 
his 108th birthday, he was recognized across my State as Kentucky's 
last World War I-era veteran and hailed as a champion of his fellow 
service members.
  Ninety years ago, Robley bravely put on his country's uniform and 
left Christian County, KY, where he was born and raised, to patrol the 
hills of France in the immediate aftermath of what was then called The 
Great War. After leaving the Army in 1922, he returned to the 
Commonwealth.
  In the years following his Army service, Robley began volunteering at 
the Louisville Veterans Affairs Medical Center, VAMC. He would go on to 
devote over 14,000 hours of service, right up until the last years of 
his long and productive life.
  My legislation would name the current VA hospital in Louisville after 
Robley Rex. It also ensures that when a new VAMC is built, that future 
facility will also bear his name.
  The idea to name this facility after Kentucky's pre-eminent volunteer 
on behalf of veterans came from a constituent of mine, himself also a 
veteran. Moreover, the Kentucky Department of Veterans of Foreign Wars 
had the very same idea and endorsed the proposal during its recent 
state convention. I'm just pleased that as a Kentucky Senator, I am in 
a position to make it happen.
  I can't think of a more appropriate person to name the facility after 
than Robley Rex. And I can't think of a more appropriate source for the 
idea than the Kentucky veterans community.
  The new VAMC will be vital to Kentucky's veterans, as well as to 
Louisville's economy. Once complete, the VA hospital will ensure that 
the men and women who served our country will receive the quality 
health care they deserve.
  That devotion to ensuring quality care to our veterans is exemplified 
in the life and service of Robley Rex. How fitting that his fellow 
veterans--so many of whom knew Robley personally from his countless 
hours of volunteer service--will see his name above the door.
  Finally, I note that this is bipartisan legislation. It enjoys the 
support of Representatives John Yarmuth and Ben Chandler in the other 
chamber. I ask my colleagues to support this 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. 1493

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

     SECTION 1. DESIGNATION OF ROBLEY REX DEPARTMENT OF VETERANS 
                   AFFAIRS MEDICAL CENTER.

       (a) Designation.--The Department of Veterans Affairs 
     Medical Center in Louisville, Kentucky, and any successor to 
     such medical center, shall after the date of the enactment of 
     this Act be known and designated as the ``Robley Rex 
     Department of Veterans Affairs Medical Center''.
       (b) References.--Any reference in any law, regulation, map, 
     document, record, or other paper of the United States to the 
     medical center referred to in subsection (a) shall be 
     considered to be a reference to the Robley Rex Department of 
     Veterans Affairs Medical Center.
                                 ______
                                 
      By Ms. CANTWELL (for herself and Mrs. Murray):
  S. 1497. A bill to amend the Internal Revenue Code of 1986 to allow 
tax-exempt bond financing for fixed-wing emergency medical aircraft; to 
the Committee on Finance.
  Ms. CANTWELL. Mr. President, I rise to introduce legislation that 
will remove an unintended obstacle in the tax-exempt bond rules so that 
states can use these bonds to finance the purchase of fixed-wing air 
ambulances in the same way they can now use them to finance the 
purchase of medical helicopters.
  The difference between a medical helicopter and a fixed wing air 
ambulance may seem minor to some, but if you live in a remote area the 
difference can be as big as life or death.
  Air medical services, AMS, are an essential component of the health 
care system. When appropriately used, air critical care transport saves 
lives and reduces the cost of health care by minimizing the time the 
critically injured and ill spend out of a hospital, by bringing more 
medical capabilities to the patient than are normally provided by 
ground emergency medical services, and by quickly getting the patient 
to the right specialty care. Dedicated medical helicopters and fixed 
wing aircraft are mobile flying emergency intensive care units deployed 
at a moment's notice to patients whose lives depend on rapid care and 
transport.
  In remote rural areas, the use of helicopters often is impractical 
and unsafe because of the long distances that patients must be 
transported, sometimes during poor weather conditions. In these 
situations, the better alternative is a fixed-wing aircraft.
  Both helicopters and fixed wing aircraft cost millions of dollars to 
purchase or lease, operate, house and maintain. But under the way that 
the tax-exempt bond rules currently work, states are prohibited from 
using these bonds to finance air ambulance services in rural areas, 
even though they can use these bonds for helicopters. This result was 
not what Congress intended, and our bill would make that clear.
  Under current law, tax-exempt bonds can not be issued for the 
purchase of any ``airplane, skybox or other privacy luxury box, health 
club facility, facility primarily used for gambling, or store the 
principal business of which is the sale of alcoholic beverages for 
consumption off premises.'' The restrictions were enacted in order to 
prevent tax-exmpt bonds to be used for frivolous or extravagant 
purposes. Unfortunately, the law has been interpreted to exclude the 
purchase of new fixed-wing planes to provide air ambulance services, 
but the purchase of helicopters--which are not airplanes--is permitted.
  This result is not what was intended by the restrictions and our bill 
would simply make it clear that the general restriction against the use 
of tax-exempt bonds for purchasing an airplane does not apply in the 
case of planes that are equipped for and exclusively dedicated to 
emergency medical services.
  There is supporting precedent in distinguishing planes for air 
ambulance services different than other airplanes. The air 
transportation excise tax provides an exemption for air transportation 
that is used to provide ``emergency medical services . . . by a fixed-
wing aircraft equipped for and exclusively dedicated on that flight to 
acute care emergency medical services.''
  This issue hits close to home for me and my colleagues who are 
joining me on this legislation, but we are certainly not alone with 
respect to the need to ensure that folks in our rural and remote areas 
have access to needed medical services.

[[Page 18754]]

  Inland Northwest Health Services, INHS, is a non-profit organization 
that provides critical health care support services in the Inland 
Northwest, including air ambulance services through Northwest MedStar. 
INHS is based in Spokane, Washington, and provides health care services 
in Eastern Washington, Eastern Oregon, Northern Idaho, and Western 
Montana. Unfortunately, this unintended restriction in the tax code is 
preventing INHS from asking the appropriate state authorities to issue 
tax-exempt bonds to finance the purchase of new fixed-wing planes for 
air ambulance service.
  The legislation that I am introducing with Senator Murray is a 
common-sense fix to this problem, and I hope we can address it quickly.
  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. 1497

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

     SECTION 1. TAX-EXEMPT BOND FINANCING FOR FIXED-WING EMERGENCY 
                   MEDICAL AIRCRAFT.

       (a) In General.--Subsection (e) of section 147 of the 
     Internal Revenue Code of 1986 (relating to no portion of 
     bonds may be issued for skyboxes, airplanes, gambling 
     establishments, etc.) is amended by adding at the end the 
     following new sentence: ``The preceding sentence shall not 
     apply to any fixed-wing aircraft equipped for, and 
     exclusively dedicated to providing, acute care emergency 
     medical services (within the meaning of 4261(g)(2)).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to obligations issued after the date of the 
     enactment of this Act.
                                 ______
                                 
      By Mr. CASEY (for himself and Mr. Enzi):
  S. 1502. A bill to establish a program to be managed by the 
Department of Energy to ensure prompt and orderly compensation for 
potential damages relating to the storage of carbon dioxide in 
geological storage units; to the Committee on Energy and Natural 
Resources.
  Mr. CASEY. Mr. President, I rise today on behalf of myself and my 
colleague Senator Enzi of Wyoming to introduce the Carbon Storage 
Stewardship Trust Fund Act of 2009. This bill will encourage the 
commercial deployment of technology that will allow for the continued 
use of our Nation's vast coal resources to produce economical and 
reliable power while at the same time mitigating the impact of climate 
change.
  The capture and storage of carbon dioxide from power generation 
facilities and large industrial sources is a critical component of both 
U.S. and international policy to reduce global emissions of greenhouse 
gases. The criticality of this technology has been driven home by the 
Pew Center on Global Climate Change which has pointed out that ``carbon 
capture and storage, CCS, is the key enabling technology for a future 
in which we can continue to use our vast coal resources and protect the 
climate.'' And former British Prime Minister Tony Blair stated in 
November, 2008, that ``the vast majority of new power stations in China 
and India will be coal fired; not ``may be coal fired''- will be. So 
developing carbon capture and storage technology is not optional, it is 
literally the essence.''
  The commercial deployment of CCS will require further large-scale 
development and demonstration of the technology. Just as important, 
however, it will also require a well thought out approach to address 
the risk and liability of injecting large volumes of CO2 
into geological formations, such as saline aquifers, depleted oil and 
gas fields, and unminable coal seams, where it will be permanently 
stored.
  The risk of geological CO2 storage, also commonly known as 
carbon sequestration, is considered small. In fact, CO2 has 
been safely injected into oil and gas fields to enhance the recovery of 
these hydrocarbons for decades without incident. While the potential 
for CO2 to leak to the surface and cause human or ecological 
harm in a well designed and operated carbon sequestration project is 
minimal, the financial liability associated with this risk is uncertain 
given the huge disparity between the typical lifetime of a firm 
operating a storage facility and the need to ensure the safe storage of 
CO2 in perpetuity. This uncertainty can cause a chilling 
effect on private sector investment in CCS.
  The purpose of this act is to create a program for managing the 
financial risk, or liability, of the long-term storage of 
CO2 . This program will offer the private sector with a 
framework for how legal and financial responsibilities for commercial 
carbon storage operations will be addressed. Moreover, it will provide 
a strong incentive to industry to manage and reduce risk by deploying 
carbon sequestration in the safest possible manner.
  Specifically, the act will require the owner or operator of a 
commercial CO2 storage facility to self insure or obtain 
private insurance or other types of financial assurance to cover 
liability claims during the CO2 injection phase of the 
project and for an extended period of time after injection has stopped. 
After the operator has received a site closure certificate from the 
appropriate regulatory agency, the act would then convey stewardship 
for the long-term management of the site to the U.S. Department of 
Energy. The State where the storage facility is located may request to 
take on stewardship for the site from the Department of Energy. The act 
will also create a trust fund from fees paid by storage facility 
operators on a per ton of CO2 injected basis that will be 
used to pay for claims for damages made after storage facility 
stewardship is transferred to the Federal government.
  In summary, this act will give the private sector the certainty they 
need regarding the longterm stewardship of CO2 storage 
facilities. Just as important, it will strongly encourage the safe and 
responsible operation of these facilities while ensuring the prompt and 
orderly compensation for damages or harm to humans, to the environment, 
and to natural resources, should they occur, from the injection and 
storage of CO2 in geological formations.
  I urge all of my colleagues to join Senator Enzi and me in support of 
this act so that a clear signal is given about our commitment to the 
development, demonstration, and ultimately, the widespread commercial 
deployment of CCS technology as a key component of the Nation's 
strategy to reduce emissions of CO2.
  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. 1502

       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 ``Carbon Storage Stewardship 
     Trust Fund Act of 2009''.

     SEC. 2. PURPOSES.

       The purposes of this Act are--
       (1) to promote the commercial deployment of carbon capture 
     and storage as an essential component of a national climate 
     mitigation strategy;
       (2) to require private liability assurance during the 
     active project period of a carbon dioxide storage facility;
       (3) to establish a Federal trust fund consisting of amounts 
     received as fees from operators of carbon dioxide storage 
     facilities;
       (4) to establish a limit on liability for damages caused by 
     injection of carbon dioxide by carbon dioxide storage 
     facilities subject to certificates of closure;
       (5) to establish a program--
       (A) to certify the closure of commercial carbon dioxide 
     storage facilities; and
       (B) to provide for the transfer of long-term stewardship to 
     the Federal Government for carbon dioxide storage facilities 
     on the issuance of certificates of closure for the 
     facilities;
       (6) to provide for the prompt and orderly compensation for 
     damages relating to the storage of carbon dioxide; and
       (7) to protect the environment and public by providing 
     long-term stewardship of geological storage units.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Active project period.--The term ``active project 
     period'' means the phases of the carbon dioxide storage 
     facility through receipt of a certificate of closure, 
     including--
       (A) the siting and construction of the facility;

[[Page 18755]]

       (B) carbon dioxide injection;
       (C) well capping;
       (D) facility decommissioning; and
       (E) geological storage unit monitoring, measurement, 
     verification, and remediation.
       (2) Administrator.--The term ``Administrator'' means the 
     Administrator of the Environmental Protection Agency.
       (3) Carbon dioxide storage facility.--The term ``carbon 
     dioxide storage facility'' means a facility that receives and 
     permanently stores or sequesters carbon dioxide within a 
     geological storage unit, including carbon dioxide permanently 
     stored as a result of enhanced hydrocarbon recovery.
       (4) Certificate of closure.--The term ``certificate of 
     closure'' means a determination issued by the Administrator 
     or other Federal or State regulatory authority with respect 
     to a carbon dioxide storage facility that certifies that the 
     operator of the carbon dioxide storage facility has completed 
     injection operations, well closure, and any required 
     monitoring and remediation to ensure that any carbon dioxide 
     injected into a geological storage unit would not harm or 
     present a risk to human health, safety, and the environment, 
     including drinking water supplies.
       (5) Civil claim.--The term ``civil claim'' means a claim, 
     cause of action, lawsuit, judgment, court order, 
     administrative order, government or agency order, fine, 
     penalty, or notice of violation, for civil relief with 
     respect to damages or harm to persons, property, or natural 
     resources from the injection of carbon dioxide by a carbon 
     dioxide storage facility.
       (6) Damage.--
       (A) In general.--The term ``damage'' means any direct or 
     indirect damage or harm to persons, property, or natural 
     resources from the injection of carbon dioxide into 
     geological storage units.
       (B) Inclusions.--The term ``damage'' includes personal 
     injury, sickness, real or personal property damage, natural 
     resource damage, trespass, subsidence losses, revenue losses, 
     and loss of profits.
       (7) Enhanced hydrocarbon recovery.--The term ``enhanced 
     hydrocarbon recovery'' means the use of carbon dioxide to 
     improve or enhance the recovery of oil or natural gas from 
     oil or natural gas fields.
       (8) Fund.--The term ``Fund'' means the Carbon Storage Trust 
     Fund established by section 5(d)(1).
       (9) Geological storage unit.--The term ``geological storage 
     unit'' includes saline formations, hydrocarbon formations, 
     basalt formations, salt caverns, unmineable coal seams, or 
     any other geological formation capable of permanently storing 
     carbon dioxide.
       (10) Liability assurance.--The term ``liability assurance'' 
     means privately funded financial mechanisms, including third-
     party insurance, self-insurance, performance bonds, trust 
     funds, letters of credit, and surety bonds.
       (11) Long-term stewardship.--The term ``long-term 
     stewardship'' means the monitoring, measurement, 
     verification, and remediation and related activities 
     associated with a carbon dioxide storage facility after 
     issuance of a certificate of closure.
       (12) Program.--The term ``Program'' means the Carbon 
     Storage Stewardship and Trust Fund Program established by 
     section 5(a).
       (13) Secretary.--The term ``Secretary'' means the Secretary 
     of Energy.

     SEC. 4. LONG-TERM STEWARDSHIP RESPONSIBILITY.

       (a) In General.--Subject to subsection (b), the Secretary 
     shall be responsible for the long-term stewardship of a 
     carbon dioxide storage facility on the issuance of a 
     certificate of closure for the carbon dioxide storage 
     facility.
       (b) Transfer to State.--
       (1) In general.--A State may request that the management 
     responsibilities associated with long-term stewardship of a 
     carbon dioxide storage facility located in the State be 
     transferred to the State in accordance with regulations 
     established by the Secretary.
       (2) Approval of request.--If the Secretary approves a 
     request under paragraph (1), the State shall be responsible 
     for the long-term stewardship of the applicable carbon 
     dioxide storage facility beginning on the date of the 
     approval in accordance with applicable Federal and State laws 
     (including regulations).
       (3) Failure to act by state.--In accordance with any 
     regulations established under paragraph (1), if the Secretary 
     determines that a State that has accepted management 
     responsibilities under paragraph (1) has failed to carry out 
     the responsibilities of the State with respect to the carbon 
     dioxide storage facility, the Secretary shall assume long-
     term stewardship of the carbon dioxide storage facility as 
     soon as practicable after the date of the determination.
       (c) Standards.--The Secretary, in coordination with the 
     Administrator, shall establish standards for any monitoring, 
     measurement, verification, and site remediation activities 
     necessary to protect health, safety, and the environment 
     during long-term stewardship performed by a State or the 
     Federal Government.
       (d) Coordination With Administrator.--If long-term 
     stewardship is vested with the Secretary, the Secretary may 
     coordinate responsibility for site monitoring, measurement, 
     verification, and remediation and related activities with the 
     Administrator.

     SEC. 5. CARBON STORAGE STEWARDSHIP AND TRUST FUND PROGRAM.

       (a) In General.--There is established in the Department of 
     Energy the Carbon Storage Stewardship and Trust Fund Program.
       (b) Liability Assurance Required for Operators of 
     Commercial Carbon Dioxide Storage Facilities.--
     Notwithstanding any other provision of Federal or State law, 
     in carrying out the Program, the Secretary shall require 
     operators of carbon dioxide storage facilities to maintain 
     adequate liability assurance during the active project 
     period.
       (c) Fees.--
       (1) In general.--In carrying out the Program, the Secretary 
     shall require operators of carbon dioxide storage facilities 
     to pay a risk-based fee, in an amount to be established in 
     accordance with paragraph (2), for each ton of carbon dioxide 
     injected by the carbon dioxide storage facility into 
     geological storage units during the operation phase of the 
     facility.
       (2) Amount.--
       (A) In general.--As soon as practicable after the date of 
     enactment of this Act and after taking into account the 
     criteria described in subparagraph (B), the Secretary shall 
     establish--
       (i) the minimum and maximum balance for the Fund; and
       (ii) the amount of the fee required under paragraph (1).
       (B) Criteria.--The criteria referred to in subparagraph (A) 
     are--
       (i) the estimated quantity of carbon dioxide to be injected 
     annually into geological storage units by all operating 
     commercial carbon dioxide storage facilities;
       (ii) the likelihood or risk of an incident resulting in 
     liability;
       (iii) the likely dollar value of any damages relating to an 
     incident;
       (iv) other factors relating to the risk of the carbon 
     dioxide storage facility and associated geological storage 
     unit; and
       (v) impact on commercial and economic viability of carbon 
     dioxide storage facilities.
       (C) Considerations.--In establishing the amount of the fee 
     under subparagraph (A)(ii), the Secretary may consider using 
     a fee system that is based on the level of risk associated 
     with a specific geological storage unit to provide an 
     incentive for the selection and operation of the best carbon 
     dioxide storage facilities.
       (D) Enhanced hydrocarbon recovery.--The Secretary shall 
     determine the most appropriate approach for charging a fee on 
     the quantity of carbon dioxide injected into oil and gas 
     fields, after taking into consideration--
       (i) the quantity of carbon dioxide that is permanently 
     stored;
       (ii) whether or not the enhanced hydrocarbon recovery 
     operation is also being operated as a carbon dioxide storage 
     facility; and
       (iii) any other factors that the Secretary determines to be 
     appropriate.
       (E) Review and adjustment.--The Secretary shall, on at 
     least an annual basis, review the Fund balance--
       (i) to ensure that there are sufficient amounts in the Fund 
     to make the payments required under subsection (d)(3)(A); and
       (ii) to determine whether or not to increase or decrease 
     the amount, or discontinue collection, of the fee, after 
     taking into consideration--

       (I) the annual quantity of carbon dioxide injected by 
     carbon dioxide storage facilities;
       (II) the number and estimated value of claims against the 
     Fund; and
       (III) any other relevant factors, as determined by the 
     Secretary.

       (3) Deposit.--Notwithstanding section 3302 of section 31, 
     United States Code, the fees collected under paragraph (1) 
     shall be deposited in the Fund.
       (d) Carbon Storage Trust Fund.--
       (1) Establishment.--There is established in the Treasury of 
     the United States a revolving fund, to be known as the 
     ``Carbon Storage Trust Fund'', consisting of such amounts as 
     are deposited under subsection (c)(3).
       (2) Use of fund.--
       (A) In general.--Amounts in the Fund shall be made 
     available, without further appropriation or fiscal year 
     limitation--
       (i) to the Secretary for the payment of civil claims from a 
     carbon dioxide storage facility that are brought after a 
     certificate of closure for the carbon dioxide storage 
     facility has been issued;
       (ii) to the Secretary for long-term stewardship after the 
     date of issuance of a certificate for closure; and
       (iii) to the Secretary or other appropriate regulatory 
     authority to pay any reasonable and verified administrative 
     costs incurred by the Secretary or regulatory authority in 
     carrying out the Program.
       (B) Limitation.--Amounts in the Fund shall only be used for 
     the purposes described in clause (i), (ii), or (iii) of 
     subparagraph (A).
       (C) Limitation on payments.--
       (i) In general.--Subject to clause (ii), an aggregate claim 
     for damages brought under subparagraph (A)(i) shall be 
     limited to an amount to be established by the Secretary as 
     soon as practicable after the date of enactment of this Act, 
     based on mechanisms such as--

[[Page 18756]]

       (I) actuarial modeling of probable damage; and
       (II) net present value analysis.

       (ii) Congressional action.--If estimated or actual 
     aggregate damages exceed the amount established under clause 
     (i)--

       (I) the Secretary shall notify Congress; and
       (II) on receipt of notice under subclause (I), Congress may 
     provide for payments in excess of that amount, in accordance 
     with guidelines established by Congress by law.

       (D) Exception for gross negligence and intentional 
     misconduct.--Notwithstanding subparagraph (A), no amounts in 
     the Fund shall be used to pay a claim for liability arising 
     out of conduct of an operator of a carbon dioxide storage 
     facility that is grossly negligent or that constitutes 
     intentional misconduct, as determined by the Secretary.
       (E) Procedures for adjudication of claims.--Claims of 
     damage brought under subparagraph (A)(i) relating to carbon 
     dioxide in a carbon dioxide storage facility subject to a 
     certificate of closure shall be--
       (i) filed in the United States Court of Federal Claims; and
       (ii) adjudicated in accordance with procedures established 
     by the United States Court of Federal Claims.
       (3) Initial funding.--
       (A) In general.--If sufficient amounts are not available in 
     the Fund to cover potential claims during the first years of 
     the Program, the Secretary may request from the Secretary of 
     the Treasury an interest-bearing advance in funding from the 
     Treasury to carry out the Program, subject to subparagraph 
     (B).
       (B) Terms and conditions.--The terms and conditions for the 
     repayment of an advance under subparagraph (A) shall be 
     specified by the Secretary of the Treasury.

     SEC. 6. LIMITATION ON CIVIL CLAIMS.

       (a) In General.--Except as provided in subsection (b), on 
     issuance of a certificate of closure, a civil claim or claim 
     for the performance of long-term stewardship responsibilities 
     under applicable Federal and State law, may not be brought 
     against--
       (1) the operator or owner of the carbon dioxide storage 
     facility subject to the certificate of closure;
       (2) the generator of the carbon dioxide stored in the 
     applicable geological storage unit; or
       (3) the owner or operator of the pipeline used to transport 
     the carbon dioxide to the carbon dioxide storage facility 
     subject to the certificate of closure.
       (b) Exception.--Subsection (a) shall not apply in the case 
     of a civil claim involving the gross negligence or 
     intentional misconduct of an owner, operator, or generator.

  Mr. ENZI. Mr. President, we need clean energy. We need cheap energy. 
We need abundant energy from right here at home. Why not concentrate 
some of our efforts on hitting a triple play?
  Coal is our Nation's most abundant energy source. It provides more 
than 50 percent of our Nation's electricity today and makes electricity 
more affordable for millions of Americans. It provides for thousands of 
well paying American jobs and is an essential part of my home State's 
economy.
  Unfortunately, in the discussions surrounding climate change, some 
have suggested that we should end our Nation's use of coal. Because of 
the abundant, cost-effective nature of this resource, that doesn't make 
sense. Instead of talking about eliminating one of our country's most 
important energy sources, we should be talking about how we can make 
coal cleaner.
  An essential element of the effort to make coal cleaner will be the 
development of carbon capture and storage, CCS, technology. There are 
many pieces to that effort, and today, Senator Casey and I have 
introduced The Carbon Storage Stewardship Trust Fund Act of 2009 to 
address one issue with CCS liability for the stored CO2.
  Our legislation sets up a framework that answers the question of who 
is responsible for the CO2 once it is placed underground. 
The Carbon Storage Stewardship Trust Fund Act of 2009 requires 
companies injecting CO2 into the ground to obtain private 
liability insurance for a period of time. After the CO2 is 
injected and the injection site is certified as closed by the Federal 
Government, liability for the CO2 is transferred to the 
Federal Government.
  To cover any claims that may arise from damages caused by the 
injected CO2, the bill sets up a Federal trust fund that is 
paid for through a small fee charged for each ton of CO2 
that is injected. Additionally, it provides a method for compensation 
for those damages.
  While this legislation is far from everything we need to make 
commercial CCS a reality, it is an important step and answers an 
important question about long-term liability of CO2. I 
appreciate Senator Casey's leadership on this issue and look forward to 
working with him and other Members of the Senate to move this 
legislation forward.
                                 ______
                                 
      Mr. SPECTER:
  S. 1504. A bill to provide that Federal courts shall not dismiss 
complaints under rule 12(b)(6) or (e) of the Federal Rules of Civil 
Procedure, except under the standards set forth by the Supreme Court of 
the United States in Conley v. Gibson, 355 U.S. 41 (1957); to the 
Committee on the Judiciary.
  Mr. SPECTER. Mr. President, I seek recognition to speak on 
legislation I am introducing that will restore the system of notice 
pleading that has served our Federal judicial system well since 1938, 
the year the Federal Rules of Civil Procedure were adopted.
  Civil litigation in our Federal system is commenced by the filing a 
complaint that puts the defendant on notice of the plaintiffs claims. 
Rule 8(a)(2) of the Federal Rules of Civil Procedure provides that a 
complaint need only contain a ``short and plain statement of the claim 
showing the pleader'', usually the plaintiff, ``is entitled to 
relief.'' This is not a demanding standard. An appendix to the Rules 
includes a form complaint for negligence that the drafters of Rule 8 
obviously thought would satisfy Rule 8's standard. That complaint, in 
relevant part, alleges only that ``[o]n June 1, 1936, in a public 
highway called Boylston Street in Boston Massachusetts, defendant 
negligently drove a motor vehicle against plaintiff who was crossing 
the highway.''
  The Federal Rules require the court to await the submission of the 
plaintiff's evidence--first at the summary-judgment stage and, if 
summary judgment is not granted, then at trial--before evaluating or 
passing on the truth of the complaint's allegations. It's only sensible 
that courts do so: Not until a plaintiff has had access to relevant 
information in the defendant's possession during the discovery process 
that follows the filing of a complaint as a matter of right can the 
plaintiff normally offer evidence to support the complaint's 
allegations.
  For over 70 years following the adoption of the Federal Rules, the 
Supreme Court of the U.S. consistently and faithfully implemented Rule 
8's notice-pleading language. Its leading decision on the subject, 
Conley v. Gibson, 355 U.S. 41, 1957, prohibited federal courts from 
dismissing a complaint ``for failure to state a claim unless it appears 
beyond doubt that the plaintiff can prove no set of facts in support of 
his claim that would entitle him to relief.''
  Two years ago in Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 
2007, the Court jettisoned the standard set forth in Conley and 
announced that henceforth it would require not only factual specificity 
in complaints not previously required of plaintiffs, but also that a 
complaint's allegation of wrongdoing appear ``plausible'' to the court. 
This year in Ashcroft v. Iqbal, 129 S. Ct. 1937, 2009, the Supreme 
Court significantly expanded upon Twombly by, to quote Professor 
Stephen Burbank of the University of Pennsylvania Law School, 
effectively authorizing federal judges to indulge their ``subject 
judgments'' in evaluating an allegation's plausibility. According to an 
article that just appeared in The York Times, Justice Ruth Bader 
Ginsburg recently told a group of Federal judges that, as a result of 
these two cases, the Supreme Court has ``messed up the federal rules'' 
governing pleading.
  When it passed the Rules Enabling Act, Congress established a 
carefully designed process for amending the Federal Rules of Civil 
Procedure. The process ends with the Supreme Court's presentation of a 
proposed rule change to Congress for approval. In Twombly and Ashcroft 
the Court effectively end ran that process.
  The effect of the Court's actions will no doubt be to deny many 
plaintiffs with meritorious claims access to the Federal courts and, 
with it, any legal redress for their injuries. I think that is an 
especially unwelcome development at a time when, with the litigating 
resources of our executive-

[[Page 18757]]

branch and administrative agencies stretched thin, the enforcement of 
Federal antitrust, consumer protection, civil rights and other laws 
that benefit the public will fall increasingly to private litigants.
  The Notice Pleading Restoration Act will require the Federal courts 
to test the sufficiency of a complaint's allegations under the well-
established standards that prevailed in the Federal courts until 
Twombly. I urge its passage.

                          ____________________