[House Report 111-225]
[From the U.S. Government Publishing Office]


111th Congress  }                                           {    Report
  1st Session   }         HOUSE OF REPRESENTATIVES          {   111-225
                                                     ======================================================================
 
VETERANS NONPROFIT RESEARCH AND EDUCATION CORPORATIONS ENHANCEMENT ACT 
                                OF 2009

                                _______
                                

 July 23, 2009.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Filner, from the Committee on Veterans' Affairs, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2770]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Veterans' Affairs, to whom was referred 
the bill (H.R. 2770) to amend title 38, United States Code, to 
modify and update provisions of law relating to nonprofit 
research and education corporations, and for other purposes, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.










                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     5
Background and Need for Legislation..............................     5
Hearings.........................................................     7
Subcommittee Consideration.......................................     7
Committee Consideration..........................................     7
Committee Votes..................................................     8
Committee Oversight Findings.....................................     8
Statement of General Performance Goals and Objectives............     8
New Budget Authority, Entitlement Authority, and Tax Expenditures     8
Earmarks and Tax and Tariff Benefits.............................     8
Committee Cost Estimate..........................................     8
Congressional Budget Office Estimate.............................     8
Federal Mandates Statement.......................................     9
Advisory Committee Statement.....................................     9
Constitutional Authority Statement...............................    10
Applicability to Legislative Branch..............................    10
Section-by-Section Analysis of the Legislation...................    10
Changes in Existing Law Made by the Bill as Reported.............    11

                               Amendment

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Veterans Nonprofit Research and 
Education Corporations Enhancement Act of 2009''.

SEC. 2. GENERAL AUTHORITIES ON ESTABLISHMENT OF CORPORATIONS.

  (a) Authorization of Multi-medical Center Research Corporations.--
          (1) In general.--Section 7361 of title 38, United States 
        Code, is amended--
                  (A) by redesignating subsection (b) as subsection 
                (e); and
                  (B) by inserting after subsection (a) the following 
                new subsection (b):
  ``(b)(1) Subject to paragraph (2), a corporation established under 
this subchapter may facilitate the conduct of research, education, or 
both at more than one medical center. Such a corporation shall be known 
as a `multi-medical center research corporation'.
  ``(2) The board of directors of a multi-medical center research 
corporation under this subsection shall include the official at each 
Department medical center concerned who is, or who carries out the 
responsibilities of, the medical center director of such center as 
specified in section 7363(a)(1)(A)(i) of this title.
  ``(3) In facilitating the conduct of research, education, or both at 
more than one Department medical center under this subchapter, a multi-
medical center research corporation may administer receipts and 
expenditures relating to such research, education, or both, as 
applicable, performed at the Department medical centers concerned.''.
          (2) Expansion of existing corporations to multi-medical 
        center research corporations.--Such section is further amended 
        by adding at the end the following new subsection:
  ``(f) A corporation established under this subchapter may act as a 
multi-medical center research corporation under this subchapter in 
accordance with subsection (b) if--
          ``(1) the board of directors of the corporation approves a 
        resolution permitting facilitation by the corporation of the 
        conduct of research, education, or both at the other Department 
        medical center or medical centers concerned; and
          ``(2) the Secretary approves the resolution of the 
        corporation under paragraph (1).''.
  (b) Restatement and Modification of Authorities on Applicability of 
State Law.--
          (1) In general.--Section 7361 of such title, as amended by 
        subsection (a) of this section, is further amended by inserting 
        after subsection (b) the following new subsection (c):
  ``(c) Any corporation established under this subchapter shall be 
established in accordance with the nonprofit corporation laws of the 
State in which the applicable Department medical center is located and 
shall, to the extent not inconsistent with any Federal law, be subject 
to the laws of such State. In the case of any multi-medical center 
research corporation that facilitates the conduct of research, 
education, or both at Department medical centers located in different 
States, the corporation shall be established in accordance with the 
nonprofit corporation laws of the State in which one of such Department 
medical centers is located.''.
          (2) Conforming amendment.--Section 7365 of such title is 
        repealed.
  (c) Clarification of Status of Corporations.--Section 7361 of such 
title, as amended by this section, is further amended--
          (1) in subsection (a), by striking the second sentence; and
          (2) by inserting after subsection (c) the following new 
        subsection (d):
  ``(d)(1) Except as otherwise provided in this subchapter or under 
regulations prescribed by the Secretary, any corporation established 
under this subchapter, and its officers, directors, and employees, 
shall be required to comply only with those Federal laws, regulations, 
and executive orders and directives that apply generally to private 
nonprofit corporations.
  ``(2) A corporation under this subchapter is not--
          ``(A) owned or controlled by the United States; or
          ``(B) an agency or instrumentality of the United States.''.
  (d) Reinstatement of Requirement for 501(c)(3) Status of 
Corporations.--Subsection (e) of section 7361 of such title, as 
redesignated by subsection (a)(1) of this section, is further amended 
by inserting ``section 501(c)(3) of'' after ``exempt from taxation 
under''.

SEC. 3. CLARIFICATION OF PURPOSES OF CORPORATIONS.

  (a) Clarification of Purposes.--Subsection (a) of section 7362 of 
title 38, United States Code, is amended in the first sentence--
          (1) by striking ``Any corporation'' and all that follows 
        through ``facilitate'' and inserting ``A corporation 
        established under this subchapter shall be established to 
        provide a flexible funding mechanism for the conduct of 
        approved research and education at one or more Department 
        medical centers and to facilitate functions related to the 
        conduct of''; and
          (2) by inserting before the period at the end the following: 
        ``or centers''.
  (b) Modification of Defined Term Relating to Education and 
Training.--Subsection (b) of such section is amended in the matter 
preceding paragraph (1) by striking ``the term `education and 
training''' and inserting ``the term `education' includes education and 
training and''.
  (c) Repeal of Role of Corporations With Respect to Fellowships.--
Paragraph (1) of subsection (b) of such section is amended by striking 
the flush matter following subparagraph (C).
  (d) Availability of Education for Families of Veteran Patients.--
Paragraph (2) of subsection (b) of such section is amended by striking 
``to patients and to the families'' and inserting ``and includes 
education and training for patients and families''.

SEC. 4. MODIFICATION OF REQUIREMENTS FOR BOARDS OF DIRECTORS OF 
                    CORPORATIONS.

  (a) Requirements for Department Board Members.--Paragraph (1) of 
section 7363(a) of title 38, United States Code, is amended to read as 
follows:
          ``(1) with respect to the Department medical center--
                  ``(A)(i) the director (or directors of each 
                Department medical center, in the case of a multi-
                medical center research corporation);
                  ``(ii) the chief of staff; and
                  ``(iii) as appropriate for the activities of such 
                corporation, the associate chief of staff for research 
                and the associate chief of staff for education; or
                  ``(B) in the case of a Department medical center at 
                which one or more of the positions referred to in 
                subparagraph (A) do not exist, the official or 
                officials who are responsible for carrying out the 
                responsibilities of such position or positions at the 
                Department medical center; and''.
  (b) Requirements for Non-department Board Members.--Paragraph (2) of 
such section is amended--
          (1) by inserting ``not less than two'' before ``members''; 
        and
          (2) by striking ``and who'' and all that follows through the 
        period at the end and inserting ``and who have backgrounds, or 
        business, legal, financial, medical, or scientific expertise, 
        of benefit to the operations of the corporation.''.
  (c) Clarification That Department Employees May Serve as Executive 
Directors.--Subsection (b) of section 7363 of such title is amended in 
the first sentence, by inserting after ``executive director who'' the 
following: ``may be an employee of the Department and who''.
  (d) Conflicts of Interest.--Subsection (c) of section 7363 of such 
title is amended by striking ``, employed by, or have any other 
financial relationship with'' and inserting ``or employed by''.

SEC. 5. CLARIFICATION OF POWERS OF CORPORATIONS.

  (a) In General.--Section 7364 of title 38, United States Code, is 
amended to read as follows:

``Sec. 7364. General powers

  ``(a) In General.--(1) A corporation established under this 
subchapter may, solely to carry out the purposes of this subchapter--
          ``(A) accept, administer, retain, and spend funds derived 
        from gifts, contributions, grants, fees, reimbursements, and 
        bequests from individuals and public and private entities;
          ``(B) enter into contracts and agreements with individuals 
        and public and private entities;
          ``(C) subject to paragraph (2), set fees for education and 
        training facilitated under section 7362 of this title, and 
        receive, retain, administer, and spend funds in furtherance of 
        such education and training;
          ``(D) reimburse amounts to the applicable appropriation 
        account of the Department for the Office of General Counsel for 
        any expenses of that Office in providing legal services 
        attributable to research and education agreements under this 
        subchapter; and
          ``(E) employ such employees as the corporation considers 
        necessary for such purposes and fix the compensation of such 
        employees.
  ``(2) Fees charged pursuant to paragraph (1)(C) for education and 
training described in that paragraph to individuals who are officers or 
employees of the Department may not be paid for by any funds 
appropriated to the Department.
  ``(3) Amounts reimbursed to the Office of General Counsel under 
paragraph (1)(D) shall be available for use by the Office of the 
General Counsel only for staff and training, and related travel, for 
the provision of legal services described in that paragraph and shall 
remain available for such use without fiscal year limitation.
  ``(b) Transfer and Administration of Funds.--(1) Except as provided 
in paragraph (2), any funds received by the Secretary for the conduct 
of research or education at a Department medical center or centers, 
other than funds appropriated to the Department, may be transferred to 
and administered by a corporation established under this subchapter for 
such purposes.
  ``(2) A Department medical center may reimburse the corporation for 
all or a portion of the pay, benefits, or both of an employee of the 
corporation who is assigned to the Department medical center if the 
assignment is carried out pursuant to subchapter VI of chapter 33 of 
title 5.
  ``(3) A Department medical center may retain and use funds provided 
to it by a corporation established under this subchapter. Such funds 
shall be credited to the applicable appropriation account of the 
Department and shall be available, without fiscal year limitation, for 
the purposes of that account.
  ``(c) Research Projects.--Except for reasonable and usual preliminary 
costs for project planning before its approval, a corporation 
established under this subchapter may not spend funds for a research 
project unless the project is approved in accordance with procedures 
prescribed by the Under Secretary for Health for research carried out 
with Department funds. Such procedures shall include a scientific 
review process.
  ``(d) Education Activities.--Except for reasonable and usual 
preliminary costs for activity planning before its approval, a 
corporation established under this subchapter may not spend funds for 
an education activity unless the activity is approved in accordance 
with procedures prescribed by the Under Secretary for Health.
  ``(e) Policies and Procedures.--The Under Secretary for Health may 
prescribe policies and procedures to guide the spending of funds by 
corporations established under this subchapter that are consistent with 
the purpose of such corporations as flexible funding mechanisms and 
with Federal and State laws and regulations, and executive orders, 
circulars, and directives that apply generally to the receipt and 
expenditure of funds by nonprofit organizations exempt from taxation 
under section 501(c)(3) of the Internal Revenue Code of 1986.''.
  (b) Conforming Amendment.--Section 7362(a) of such title, as amended 
by section 3(a)(1) of this Act, is further amended by striking the last 
sentence.

SEC. 6. REDESIGNATION OF SECTION 7364A OF TITLE 38, UNITED STATES CODE.

  (a) Redesignation.--Section 7364A of title 38, United States Code, is 
redesignated as section 7365 of such title.
  (b) Clerical Amendments.--The table of sections at the beginning of 
chapter 73 of such title is amended--
          (1) by striking the item relating to section 7364A; and
          (2) by striking the item relating to section 7365 and 
        inserting the following new item:

``7365. Coverage of employees under certain Federal tort claims 
laws.''.

SEC. 7. IMPROVED ACCOUNTABILITY AND OVERSIGHT OF CORPORATIONS.

  (a) Additional Information in Annual Reports.--Subsection (b) of 
section 7366 of title 38, United States Code, is amended to read as 
follows:
  ``(b)(1) Each corporation shall submit to the Secretary each year a 
report providing a detailed statement of the operations, activities, 
and accomplishments of the corporation during that year.
  ``(2)(A) A corporation with revenues in excess of $500,000 for any 
year shall obtain an audit of the corporation for that year.
  ``(B) A corporation with annual revenues between $100,000 and 
$500,000 shall obtain an audit of the corporation at least once every 
three years.
  ``(C) Any audit under this paragraph shall be performed by an 
independent auditor.
  ``(3) The corporation shall include in each report to the Secretary 
under paragraph (1) the following:
          ``(A) The most recent audit of the corporation under 
        paragraph (2).
          ``(B) The most recent Internal Revenue Service Form 990 
        `Return of Organization Exempt from Income Tax' or equivalent 
        and the applicable schedules under such form.''.
  (b) Conflict of Interest Policies.--Subsection (c) of such section is 
amended to read as follows:
  ``(c) Each director, officer, and employee of a corporation 
established under this subchapter shall be subject to a conflict of 
interest policy adopted by that corporation.''.
  (c) Establishment of Appropriate Payee Reporting Threshold.--
Subsection (d)(3)(C) of such section is amended by striking ``$35,000'' 
and inserting ``$50,000''.

                          Purpose and Summary

    H.R. 2770 was introduced by Representative Bob Filner of 
California, the Chairman of the Committee on Veterans' Affairs, 
on June 9, 2009. H.R. 2770, as amended, would modernize and 
clarify the original 1988 statute governing nonprofit research 
and education corporations (NPCs), based on 20 years of 
experience operating under the old statute. These updates would 
also help NPCs better meet their mandate to support research 
and education at the U.S. Department of Veterans Affairs (VA).

                  Background and Need for Legislation

    The VA research programs serve to advance medical knowledge 
by discovering new or improved treatments for diseases and 
disabilities affecting veterans. In support of this mission, 
Public Law 100-322 (102 Stat. 501), the Veterans' Benefits and 
Services Act of 1988, authorized VA medical centers to 
establish NPCs as independent, state-chartered, nonprofit 
corporations. NPCs serve as a flexible funding mechanism to 
accept and administer private sector and Federal research and 
education funds. Today, there are 82 NPCs and last year they 
reported securing $250 million to support over 4,000 research 
and education programs at the VA.
    NPCs enhance VA research in many ways. For example, NPCs 
are recognized for their low administrative overhead charges 
which result in more resources being available for research. 
They also improve veterans' medical care, since much of the 
corporate-funded research is clinically focused with a direct 
effect on patient care. In addition, several NPCs support 
clinical research centers within their VA medical centers to 
increase efficient management of clinical trials. Others hire 
clinical research nurses who assist principal investigators 
with all aspects of the research studies, help identify 
research sponsors and grant-making organizations, provide seed 
funding and bridge money to attract high-caliber researchers, 
and sponsor internships and mentoring programs for local 
college students.
    H.R. 2770 would help NPCs better support VA research and 
education by making key improvements to the governing statute. 
First, the legislation would allow two or more VA medical 
centers to share one NPC, thereby permitting higher-revenue 
NPCs to provide research and education services for facilities 
with programs too small to generate the revenue stream 
necessary to sustain a NPC. These multi-medical center research 
corporations would allow economies of scale with the pooling of 
resources to ensure an appropriate level of administrative 
staffing. It is anticipated that as many as 20 existing low-
revenue NPCs may take advantage of the opportunity to close 
down and merge with larger NPCs or simply merge with larger 
NPCs.
    This legislation would amend the requirement that all of 
the senior management officials who comprise the statutory VA 
board at each VA medical center serve on the NPC board. The 
current requirement adds a significant burden, especially for 
those VA medical centers with just a few active research 
projects. H.R. 2770 would require that, at a minimum, the 
medical center director or the person carrying out such duties 
at each VA medical facility serve on the board of the multi-
medical center research corporation. In addition, H.R. 2770 
would modify the requirements to serve on the board of 
directors of NPCs in order to attract individuals with legal 
and financial expertise to foster sound governance and 
financial management.
    H.R. 2770 would refine the purpose of the NPCs so that 
funds may be spent to support activities which cannot be tied 
directly to an approved research project but would benefit 
general VA research. Such expenditures may include travel to 
scientific conferences, improvements in laboratories such as 
equipment purchases, and support for institutional review 
boards.
    In addition, this legislation would provide clarification 
on the financial practices governing the treatment of fees and 
reimbursements. Specifically, it would allow NPCs to charge 
registration fees for education and training programs, and to 
use such funds to offset program expenses for future 
educational programs. H.R. 2770 would permit NPCs to reimburse 
the Office of General Counsel (OGC) for legal services related 
to the review and approval of Cooperative Research and 
Development Agreements (CRADAs). CRADAs are forms used to 
establish terms and conditions for industry-funded studies 
performed at VA medical centers but administered by NPCs. This 
would enable OGC to accommodate the substantial workload 
associated with CRADAs and provide training to VA attorneys on 
CRADA requirements. The VA would also be authorized to 
reimburse NPCs for the salary and benefits of NPC employees 
loaned to the VA under Intergovernmental Personnel Act (IPA) 
assignments. While this has been an accepted practice since the 
inception of NPCs, there have been varying opinions of the 
appropriateness of reimbursements pursuant to IPAs over the 
years. As such, this legislation would make clear that such 
reimbursements are authorized. This legislation would also 
allow VA medical centers to accept funds provided by NPCs which 
may fall outside of VA's gift acceptance authority. This means 
that the VA medical centers are authorized to retain the funds 
locally and deposit them in the appropriate VA account, thereby 
avoiding the cumbersome process of going through the U.S. 
Department of Treasury to bring the funds back to the VA 
medical center.
    H.R. 2770 would provide improved accountability and 
oversight of NPCs by requiring new annual reports and the 
submission of documents NPCs may file with the Internal Revenue 
Service (IRS). Specifically, it would require each NPC to 
submit an annual report to the Secretary of the VA on 
operations, activities, and accomplishments. H.R. 2770 also 
would provide stronger audit requirements. For example, NPCs 
with revenues between $100,000 and $500,000 are required to 
have an audit every three years, while NPCs with revenues over 
$500,000 require an annual audit. This is consistent with OMB 
Circular A-133, which provides government-wide guidance on 
audits of states, local governments, and non-profit 
organizations. As for NPCs with revenues below the IRS 
threshold of $25,000, they would be required to complete and 
submit to the VA an IRS Form 990 and the applicable schedules. 
IRS Form 990 provides a great deal of information about a 
nonprofit's operations regardless of revenues, which will be 
useful for the VA in conducting oversight of the smaller NPCs. 
Next, it would increase from $35,000 to $50,000 the threshold 
for reporting compensation by an NPC to help the VA scrutinize 
compensation for higher paid individuals, consistent with the 
threshold used in IRS Form 990. This threshold is increased to 
focus on those who are paid significant compensation by an NPC, 
instead of capturing a large number of low-paid employees. 
Finally, employees of NPCs, as independent private-sector 
organizations, would be held to a conflict-of-interest policy 
adopted by the corporation.

                                Hearings

    On June 18, 2009, the Subcommittee on Health held a 
legislative hearing on several bills introduced during the 
111th Congress, including H.R. 1293. The following witnesses 
testified: The Honorable Harry Mitchell of Arizona; The 
Honorable Phil Hare of Illinois; The Honorable Deborah L. 
Halvorson of Illinois; The Honorable Jerry McNerney of 
California; The Honorable Thomas S.P. Perriello of Virginia; 
The Honorable Harry Teague of New Mexico; and, Fred Cowell, 
Senior Health Policy Analyst, Paralyzed Veterans of America. 
Those submitting statements for the record included: The 
Honorable Steve Buyer of Indiana; The Honorable Jerry Moran of 
Kansas; Joy J. Ilem, Deputy National Legislative Director, 
Disabled American Veterans; Joseph L. Wilson, Deputy Director, 
Veterans Affairs and Rehabilitation Commission, The American 
Legion; Chris Needham, Senior Legislative Associate, Veterans 
of Foreign Wars of the United States; Bernard Edelman, Deputy 
Director for Policy and Government Affairs, Vietnam Veterans of 
America; the American Academy of Physician Assistants; the 
National Association of Veterans' Research and Education 
Foundation; the Wounded Warrior Project; Barbara Cohoon, Ph.D., 
RN, Government Relations Deputy Director, National Military 
Family Association; and, Robert A. Petzel, M.D., Acting 
Principal Deputy Under Secretary for Health, Veterans Health 
Administration, U.S. Department of Veterans Affairs.

                       Subcommittee Consideration

    On July 9, 2009, the Subcommittee on Health met in open 
markup session and ordered favorably forwarded to the full 
Committee H.R. 2770, as amended, by voice vote. During 
consideration of the bill, the following amendment was 
considered:
    An amendment by Mr. Michaud of Maine to clarify that the 
executive director of the NPC may be an employee of the VA; to 
modify the thresholds for audits to be in line with OMB 
Circular A-133; and to hold employees of NPCs to a conflict-of-
interest policy adopted by the corporation was agreed to by 
voice vote.

                        Committee Consideration

    On July 15, 2009, the full Committee met in an open markup 
session, a quorum being present, and ordered H.R. 2770, as 
amended, reported favorably to the House of Representatives, by 
voice vote. During consideration of the bill, the following 
amendment was considered:
    An amendment by Mr. Michaud of Maine to further modify the 
audit threshold from $10,000 to $100,000 was agreed to by voice 
vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report the legislation and amendments thereto. 
There were no record votes taken on amendments or in connection 
with ordering H.R. 2770 reported to the House. A motion by Mr. 
Buyer of Indiana to order H.R. 2770, as amended, reported 
favorably to the House of Representatives was agreed to by 
voice vote.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                  Earmarks and Tax and Tariff Benefits

    H.R. 2770 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9(d), 9(e), or 9(f) of rule XXI of the Rules of the 
House of Representatives.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate on H.R. 
2770 prepared by the Director of the Congressional Budget 
Office pursuant to section 402 of the Congressional Budget Act 
of 1974.

               Congressional Budget Office Cost Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
for H.R. 2770 provided by the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 22, 2009.
Hon. Bob Filner,
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2770, the Veterans 
Nonprofit Research and Education Corporations Enhancement Act 
of 2009.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sunita 
D'Monte.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 2770--Veterans Nonprofit Research and Education Corporations 
        Enhancement Act of 2009

    H.R. 2770 would amend current law pertaining to certain VA 
research and education facilities. Those facilities are private 
nonprofit entities that are prohibited from using appropriated 
funds and rely solely on cash or in-kind donations to conduct 
medical research and provide training. Nonetheless, such 
facilities would undertake activities on behalf of the federal 
government.
    Section 5 would authorize the facilities to charge fees for 
their education and training programs. Those fees would be 
retained and spent by the facilities, and CBO estimates that 
enacting this provision would not have a significant net effect 
on direct spending. Enacting the bill would not affect spending 
subject to appropriation or revenues.
    H.R. 2770 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    On July 16, 2009, CBO transmitted a cost estimate for S. 
252, the Veterans Health Care Authorization Act of 2009, as 
ordered reported by the Senate Committee on Veterans' Affairs 
on May 21, 2009. Title VI of S. 252 is similar to H.R. 2770, as 
are their estimated costs.
    The CBO staff contact for this estimate is Sunita D'Monte. 
The estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates regarding H.R. 2770 prepared by the Director of the 
Congressional Budget Office pursuant to section 423 of the 
Unfunded Mandates Reform Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act would be created by H.R. 
2770.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for H.R. 2770 is provided by Article 
I, section 8 of the Constitution of the United States.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section provides the short title of H.R. 2770, as 
amended, as the ``Veterans Nonprofit Research and Education 
Corporations Enhancement Act of 2009.''

Section 2. General authorities on establishment of corporations

    This section authorizes the creation of multi-medical 
center research corporations to allow two or more VA medical 
centers to share one nonprofit research corporation (NPC), 
subject to board and VA approval. This section also requires 
the medical center director or one carrying out such duties to 
serve on the board of the multi-medical center research 
corporation. This would replace the requirement that all 
statutory VA board members (medical center director, chief of 
staff, associate chief of staff for research, and associate 
chief of staff for education) serve on the board.

Section 3. Clarification of purposes of corporations

    This section enables NPCs to support functions related to 
the conduct of research and education, including such 
expenditures as travel to scientific conferences, laboratory 
improvements such as equipment purchase, and support for the 
institutional review board (IRB). It also repeals the role of 
NPCs with regard to fellowships because supporting residencies 
and fellowships raises the possibility of the NPC conferring a 
problematic personal benefit on the recipients.

Section 4. Modification of requirements for boards of directors of 
        corporations

    This section broadens the qualifications for the two 
mandatory non-VA board members beyond their familiarity with 
medical research and education. This would enable NPCs to 
acquire board members with legal and financial expertise to 
improve sound governance and financial management. It also 
clarifies that the executive director of the NPC may be an 
employee of the VA.

Section 5. Clarification of powers of corporations

    This section provides clarifications on a wide range of 
financial issues. NPCs may charge registration fees for 
education and training programs and to use such funds to offset 
program expenses or for future educational purposes. However, 
it sustains the existing prohibition against NPCs from 
accepting fees derived from VA appropriations.
    NPCs may reimburse the VA's Office of General Counsel (OGC) 
for legal services related to the review and approval of 
Cooperative Research and Development Agreements (CRADAs), which 
is a NPC-administered form used to establish terms and 
conditions for industry-funded studies performed at VA medical 
centers.
    The VA is authorized to reimburse NPCs for the salary and 
benefits of NPC employees loaned to the VA under 
Intergovernmental Personnel Act (IPA) assignments.
    VA medical centers may accept funds provided by NPCs that 
may fall outside of VA's gift acceptance authority. This is 
because many NPC payments to VA medical centers are more 
accurately described as reimbursements or payments for 
services, which may not be consistent with the VA's gift 
acceptance authority. With this provision, VA medical centers 
can accept the funds directly from NPCs and no longer need to 
send these payments from NPCs to the U.S. Department of 
Treasury, thereby avoiding a cumbersome administrative process 
to bring the funds back to the medical centers.
    NPCs may spend funds for purposes of ``project planning'' 
without violating the requirement that they may spend funds on 
a research project only after it has been approved by the 
facility Research and Development Committee. Examples of 
project planning expenditures include hiring a grant writer or 
a study coordinator to help the VA's Principal Investigator 
prepare a grant proposal.

Section 6. Redesignation of section 7364A of title 38, United States 
        Code

    This section redesignates section 7364A of title 38, United 
States Code as section 7365 of title 38, United States Code.

Section 7. Improved accountability and oversight of corporations

    This section requires each NPC to submit an annual report 
to the Secretary of the VA on operations, activities, and 
accomplishments. It would also require NPCs with revenues in 
excess of $500,000 in any given year to obtain an audit. For 
NPCs with revenues between $100,000 and $500,000, an audit is 
required at least every three years. It also requires all NPCs, 
even those that fall below the IRS threshold of $25,000 in 
revenues, to complete and submit to the VA an IRS Form 990 and 
the applicable schedules. Next, it increases from $35,000 to 
$50,000 the threshold for reporting payees making this VA 
reporting requirement consistent with the threshold used in IRS 
Form 990 to scrutinize compensation for higher-paid 
individuals. Finally, this section holds the employees of NPCs 
to a conflict of interest policy adopted by the corporation.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 38, UNITED STATES CODE

           *       *       *       *       *       *       *



PART V--BOARDS, ADMINISTRATIONS, AND SERVICES

           *       *       *       *       *       *       *


CHAPTER 73--VETERANS HEALTH ADMINISTRATION - ORGANIZATION AND FUNCTIONS


                       SUBCHAPTER I--ORGANIZATION

Sec.
7301. Functions of Veterans Health Administration: in general.
     * * * * * * *

                  SUBCHAPTER IV--RESEARCH CORPORATIONS

     * * * * * * *
[7364A. Coverage of employees under certain Federal tort claims laws.
[7365. Applicable State law.]
7365. Coverage of employees under certain Federal tort claims laws.

           *       *       *       *       *       *       *


                  SUBCHAPTER IV--RESEARCH CORPORATIONS

Sec. 7361. Authority to establish; status

  (a) The Secretary may authorize the establishment at any 
Department medical center of a nonprofit corporation to provide 
a flexible funding mechanism for the conduct of approved 
research and education at the medical center. [Except as 
otherwise required in this subchapter or under regulations 
prescribed by the Secretary, any such corporation, and its 
directors and employees, shall be required to comply only with 
those Federal laws, regulations, and executive orders and 
directives which apply generally to private nonprofit 
corporations.] Such a corporation may be established to 
facilitate either research or education or both research and 
education.
  (b)(1) Subject to paragraph (2), a corporation established 
under this subchapter may facilitate the conduct of research, 
education, or both at more than one medical center. Such a 
corporation shall be known as a ``multi-medical center research 
corporation''.
  (2) The board of directors of a multi-medical center research 
corporation under this subsection shall include the official at 
each Department medical center concerned who is, or who carries 
out the responsibilities of, the medical center director of 
such center as specified in section 7363(a)(1)(A)(i) of this 
title.
  (3) In facilitating the conduct of research, education, or 
both at more than one Department medical center under this 
subchapter, a multi-medical center research corporation may 
administer receipts and expenditures relating to such research, 
education, or both, as applicable, performed at the Department 
medical centers concerned.
  (c) Any corporation established under this subchapter shall 
be established in accordance with the nonprofit corporation 
laws of the State in which the applicable Department medical 
center is located and shall, to the extent not inconsistent 
with any Federal law, be subject to the laws of such State. In 
the case of any multi-medical center research corporation that 
facilitates the conduct of research, education, or both at 
Department medical centers located in different States, the 
corporation shall be established in accordance with the 
nonprofit corporation laws of the State in which one of such 
Department medical centers is located.
  (d)(1) Except as otherwise provided in this subchapter or 
under regulations prescribed by the Secretary, any corporation 
established under this subchapter, and its officers, directors, 
and employees, shall be required to comply only with those 
Federal laws, regulations, and executive orders and directives 
that apply generally to private nonprofit corporations.
  (2) A corporation under this subchapter is not--
          (A) owned or controlled by the United States; or
          (B) an agency or instrumentality of the United 
        States.
  [(b)] (e) If by the end of the four-year period beginning on 
the date of the establishment of a corporation under this 
subchapter the corporation is not recognized as an entity the 
income of which is exempt from taxation under section 501(c)(3) 
of the Internal Revenue Code of 1986, the Secretary shall 
dissolve the corporation.
  (f) A corporation established under this subchapter may act 
as a multi-medical center research corporation under this 
subchapter in accordance with subsection (b) if--
          (1) the board of directors of the corporation 
        approves a resolution permitting facilitation by the 
        corporation of the conduct of research, education, or 
        both at the other Department medical center or medical 
        centers concerned; and
          (2) the Secretary approves the resolution of the 
        corporation under paragraph (1).

Sec. 7362. Purpose of corporations

  (a) [Any corporation established under this subchapter shall 
be established solely to facilitate] A corporation established 
under this subchapter shall be established to provide a 
flexible funding mechanism for the conduct of approved research 
and education at one or more Department medical centers and to 
facilitate functions related to the conduct of research as 
described in section 7303(a) of this title and education and 
training as described in sections 7302, 7471, 8154, and 
1701(6)(B) of this title in conjunction with the applicable 
Department medical center or centers. [Any funds received by 
the Secretary for the conduct of research or education at the 
medical center other than funds appropriated to the Department 
may be transferred to and administered by the corporation for 
these purposes.]
  (b) For purposes of this section, [the term ``education and 
training''] the term ``education'' includes education and 
training and means the following:
          (1) In the case of employees of the Veterans Health 
        Administration, such term means work-related 
        instruction or other learning experiences to--
                  (A) improve performance of current duties;
                  (B) assist employees in maintaining or 
                gaining specialized proficiencies; and
                  (C) expand understanding of advances and 
                changes in patient care, technology, and health 
                care administration.
        [Such term includes (in the case of such employees) 
        education and training conducted as part of a residency 
        or other program designed to prepare an individual for 
        an occupation or profession.]
          (2) In the case of veterans under the care of the 
        Veterans Health Administration, such term means 
        instruction or other learning experiences related to 
        improving and maintaining the health of veterans [to 
        patients and to the families] and includes education 
        and training for patients and families and guardians of 
        patients.

Sec. 7363. Board of directors; executive director

  (a) The Secretary shall provide for the appointment of a 
board of directors for any corporation established under this 
subchapter. The board shall include--
          [(1) the director of the medical center, the chief of 
        staff of the medical center, and as appropriate, the 
        assistant chief of staff for research for the medical 
        center and the assistant chief of staff for education 
        for the medical center, or, in the case of a facility 
        at which such positions do not exist, those officials 
        who are responsible for carrying out the 
        responsibilities of the medical center director, chief 
        of staff, and, as appropriate, the assistant chief of 
        staff for research and the assistant chief of staff for 
        education; and]
          (1) with respect to the Department medical center--
                  (A)(i) the director (or directors of each 
                Department medical center, in the case of a 
                multi-medical center research corporation);
                  (ii) the chief of staff; and
                  (iii) as appropriate for the activities of 
                such corporation, the associate chief of staff 
                for research and the associate chief of staff 
                for education; or
                  (B) in the case of a Department medical 
                center at which one or more of the positions 
                referred to in subparagraph (A) do not exist, 
                the official or officials who are responsible 
                for carrying out the responsibilities of such 
                position or positions at the Department medical 
                center; and
          (2) subject to subsection (c), not less than two 
        members who are not officers or employees of the 
        Federal Government [and who are familiar with issues 
        involving medical and scientific research or education, 
        as appropriate.] and who have backgrounds, or business, 
        legal, financial, medical, or scientific expertise, of 
        benefit to the operations of the corporation.
  (b) Each such corporation shall have an executive director 
who may be an employee of the Department and who shall be 
appointed by the board of directors with the concurrence of the 
Under Secretary for Health of the Department. The executive 
director of a corporation shall be responsible for the 
operations of the corporation and shall have such specific 
duties and responsibilities as the board may prescribe.
  (c) An individual appointed under subsection (a)(2) to the 
board of directors of a corporation established under this 
subchapter may not be affiliated with[, employed by, or have 
any other financial relationship with] or employed by any 
entity that is a source of funding for research or education by 
the Department unless that source of funding is a governmental 
entity or an entity the income of which is exempt from taxation 
under the Internal Revenue Code of 1986.

[Sec. 7364. General powers

  [(a) A corporation established under this subchapter may--
          [(1) accept gifts and grants from, and enter into 
        contracts with, individuals and public and private 
        entities solely to carry out the purposes of this 
        subchapter; and
          [(2) employ such employees as it considers necessary 
        for such purposes and fix the compensation of such 
        employees.
  [(b) A corporation established under this subchapter may not 
spend funds for a research project unless the project is 
approved in accordance with procedures prescribed by the Under 
Secretary for Health for research carried out with Department 
funds. Such procedures shall include a peer review process.
  [(c)(1) A corporation established under this subchapter may 
not spend funds for an education activity unless the activity 
is approved in accordance with procedures prescribed by the 
Under Secretary for Health.
  [(2) The Under Secretary for Health shall prescribe policies 
and procedures to guide the expenditure of funds by 
corporations under paragraph (1) consistent with the purpose of 
such corporations as flexible funding mechanisms.]

Sec. 7364. General powers

  (a) In General.--(1) A corporation established under this 
subchapter may, solely to carry out the purposes of this 
subchapter--
          (A) accept, administer, retain, and spend funds 
        derived from gifts, contributions, grants, fees, 
        reimbursements, and bequests from individuals and 
        public and private entities;
          (B) enter into contracts and agreements with 
        individuals and public and private entities;
          (C) subject to paragraph (2), set fees for education 
        and training facilitated under section 7362 of this 
        title, and receive, retain, administer, and spend funds 
        in furtherance of such education and training;
          (D) reimburse amounts to the applicable appropriation 
        account of the Department for the Office of General 
        Counsel for any expenses of that Office in providing 
        legal services attributable to research and education 
        agreements under this subchapter; and
          (E) employ such employees as the corporation 
        considers necessary for such purposes and fix the 
        compensation of such employees.
  (2) Fees charged pursuant to paragraph (1)(C) for education 
and training described in that paragraph to individuals who are 
officers or employees of the Department may not be paid for by 
any funds appropriated to the Department.
  (3) Amounts reimbursed to the Office of General Counsel under 
paragraph (1)(D) shall be available for use by the Office of 
the General Counsel only for staff and training, and related 
travel, for the provision of legal services described in that 
paragraph and shall remain available for such use without 
fiscal year limitation.
  (b) Transfer and Administration of Funds.--(1) Except as 
provided in paragraph (2), any funds received by the Secretary 
for the conduct of research or education at a Department 
medical center or centers, other than funds appropriated to the 
Department, may be transferred to and administered by a 
corporation established under this subchapter for such 
purposes.
  (2) A Department medical center may reimburse the corporation 
for all or a portion of the pay, benefits, or both of an 
employee of the corporation who is assigned to the Department 
medical center if the assignment is carried out pursuant to 
subchapter VI of chapter 33 of title 5.
  (3) A Department medical center may retain and use funds 
provided to it by a corporation established under this 
subchapter. Such funds shall be credited to the applicable 
appropriation account of the Department and shall be available, 
without fiscal year limitation, for the purposes of that 
account.
  (c) Research Projects.--Except for reasonable and usual 
preliminary costs for project planning before its approval, a 
corporation established under this subchapter may not spend 
funds for a research project unless the project is approved in 
accordance with procedures prescribed by the Under Secretary 
for Health for research carried out with Department funds. Such 
procedures shall include a scientific review process.
  (d) Education Activities.--Except for reasonable and usual 
preliminary costs for activity planning before its approval, a 
corporation established under this subchapter may not spend 
funds for an education activity unless the activity is approved 
in accordance with procedures prescribed by the Under Secretary 
for Health.
  (e) Policies and Procedures.--The Under Secretary for Health 
may prescribe policies and procedures to guide the spending of 
funds by corporations established under this subchapter that 
are consistent with the purpose of such corporations as 
flexible funding mechanisms and with Federal and State laws and 
regulations, and executive orders, circulars, and directives 
that apply generally to the receipt and expenditure of funds by 
nonprofit organizations exempt from taxation under section 
501(c)(3) of the Internal Revenue Code of 1986.

Sec. [7364A.] 7365. Coverage of employees under certain Federal tort 
                    claims laws

  (a) * * *

           *       *       *       *       *       *       *


[Sec. 7365. Applicable State law

  [Any corporation established under this subchapter shall be 
established in accordance with the nonprofit corporation laws 
of the State in which the applicable medical center is located 
and shall, to the extent not inconsistent with any Federal law, 
be subject to the laws of such State.]

Sec. 7366. Accountability and oversight

  (a) * * *
  [(b) Each such corporation shall submit to the Secretary an 
annual report providing a detailed statement of its operations, 
activities, and accomplishments during that year. A corporation 
with revenues in excess of $300,000 for any year shall obtain 
an audit of the corporation for that year. A corporation with 
annual revenues between $10,000 and $300,000 shall obtain an 
independent audit of the corporation at least once every three 
years. Any audit under the preceding sentences shall be 
performed by an independent auditor. The corporation shall 
include the most recent such audit in the corporation's report 
to the Secretary for that year.
  [(c)(1) Each member of the board of directors of a 
corporation established under this subchapter, each employee of 
such a corporation, and each employee of the Department who is 
involved in the functions of the corporation during any year 
shall be subject to Federal laws and regulations applicable to 
Federal employees with respect to conflicts of interest in the 
performance of official functions.
  [(2) Each corporation established under this subchapter shall 
each year submit to the Secretary a statement signed by the 
executive director of the corporation verifying that each 
director and employee has certified awareness of the laws and 
regulations referred to in paragraph (1) and of the 
consequences of violations of those laws and regulations in the 
same manner as Federal employees are required to so certify.]
  (b)(1) Each corporation shall submit to the Secretary each 
year a report providing a detailed statement of the operations, 
activities, and accomplishments of the corporation during that 
year.
  (2)(A) A corporation with revenues in excess of $500,000 for 
any year shall obtain an audit of the corporation for that 
year.
  (B) A corporation with annual revenues between $100,000 and 
$500,000 shall obtain an audit of the corporation at least once 
every three years.
  (C) Any audit under this paragraph shall be performed by an 
independent auditor.
  (3) The corporation shall include in each report to the 
Secretary under paragraph (1) the following:
          (A) The most recent audit of the corporation under 
        paragraph (2).
          (B) The most recent Internal Revenue Service Form 990 
        ``Return of Organization Exempt from Income Tax'' or 
        equivalent and the applicable schedules under such 
        form.
  (c) Each director, officer, and employee of a corporation 
established under this subchapter shall be subject to a 
conflict of interest policy adopted by that corporation.
  (d) The Secretary shall submit to the Committees on Veterans' 
Affairs of the Senate and House of Representatives an annual 
report on the corporations established under this subchapter. 
The report shall set forth the following information:
          (1) * * *

           *       *       *       *       *       *       *

          (3) The amount expended by each corporation during 
        the year, including--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) if the amount expended with respect to 
                any payee exceeded [$35,000] $50,000, 
                information that identifies the payee.

           *       *       *       *       *       *       *


                                  
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