CRS Reports

Tax-Preferred College Savings Plans: An Introduction to Coverdells

In the face of the rising cost of higher education, families may consider a variety of ways to finance their children’s college expenses. In order to make higher education more affordable, Congress has enacted legislation that provides favorable tax treatment for college savings. Among their options, families may choose to use a Coverdell education savings account (ESA) to save for their child’s elementary, secondary, or college education expenses. A Coverdell ESA—often referred to simply as a Coverdell—is a tax-advantaged investment account that can be used to pay for both higher-education expenses and elementary and secondary school expenses. The specific tax advantage of a Coverdell is that distributions (i.e., withdrawals) from this account are tax-free, if they are used to pay for qualified education expenses. If the distribution is used to pay for nonqualified expenses, a portion of the distribution is taxable and may also be subject to a 10% penalty. Several parameters of Coverdells were temporarily modified by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16) and were most recently scheduled to expire at the end of 2012. At the end of 2012, these modifications were made permanent by the American Taxpayer Relief Act of 2012 (P.L. 112-240; ATRA). Two of these EGTRRA modifications which have received recent attention include an increase in the annual contribution limits and an expansion of the definition of qualified expenses. Specifically, EGTRRA increased the annual contribution limit from $500 to $2,000 per beneficiary and allowed elementary and secondary expenses to be considered qualified education expenses. Under current law, these changes are now permanent. This report provides an overview of the mechanics of Coverdells and examines the specific tax advantages of these plans. Specifically, this report is structured to first review the major parameters of Coverdells and second, examine the income and gift tax treatment of Coverdells, using a stylized example to illustrate key concepts. The report also examines the tax treatment of rollovers and the interaction of Coverdells with other education tax benefits. Finally, the report looks at how Coverdells affect a student’s eligibility for federal need-based student aid.

Mar 11, 2014

U.S. Diplomatic Missions: Background and Issues on Chief of Mission (COM) Authority

“Chief of Mission,” or COM, is the title conferred on the principal officer in charge of each U.S. diplomatic mission to a foreign country, foreign territory, or international organization. Usually the term refers to the U.S. ambassadors who lead U.S. embassies abroad, but the term also is used for ambassadors who head other official U.S. missions and to other diplomatic personnel who may step in when no ambassador is present. Appointed by the President, each COM serves as the President’s personal representative, leading diplomatic efforts for a particular mission or in the country of assignment. U.S. ambassadors and others exercising COM authority are by law the cornerstone of U.S. foreign policy coordination in their respective countries. Their jobs are highly complex, demanding a broad knowledge of the U.S. foreign policy toolkit and the ability to oversee the activities and manage the representatives of many U.S. government entities, with some exceptions for those under military command. Congress plays an important role in setting standards for the exercise of COM authority and providing COMs with the resources—training, personnel, monetary—to promote its effective exercise. A number of recent developments have increased congressional attention to issues associated with the roles and responsibilities of COMs. The statutory basis for COM authority and responsibilities is the Foreign Service Act of 1980, as amended (FSA 1980; P.L. 96-465), which states that the COM has “full responsibility for the direction, coordination, and supervision of all Government executive branch employees in that countries,” with some exceptions; and for keeping “fully and currently informed” about all government activities and operations within that country. COM authority is also conferred by other sources of legal authority, which include executive orders and other presidential directives and State Department regulations, some of which provide more extensive authority than the FSA 1980. The Chief of Mission role in conducting and coordinating diplomacy abroad was also invoked in the first Quadrennial Diplomacy and Development Review (QDDR), released by the State Department in 2010. The scope and exercise of COM authority, both generally and in specific instances, have been of ongoing interest and concern to Congress. This report summarizes the current legal authority of Chiefs of Mission to include relevant legislation and executive branch directives and regulations. It includes brief discussion of common questions related to COM authority such as: Does COM authority extend to Department of Defense (DOD) personnel? Who exercises COM authority in countries without a U.S. embassy or diplomatic presence? Is COM authority in effect in countries where the United States is engaging in hostilities? What is the COM’s authority over the legislative branch? Finally, specific concerns, possible options, and reform proposals for improving COM authority and effectiveness are explored. This report may be updated as events warrant.

Mar 10, 2014

The Taxation of Dividends: Background and Overview

The tax treatment of dividends has changed numerous times over the past century. Most recently, the American Taxpayer Relief Act (ATRA; P.L. 112-240) increased the tax rate on dividends, from 15% to 20%, for taxpayers in the top income tax bracket. The change was effective for 2013. Also effective in 2013 is the 3.8% tax on net investment income for taxpayers with modified adjusted gross income above certain thresholds ($200,000 for single, $250,000 for married filing jointly). Further increases in the tax rate on dividends may be considered as part of a base-broadening, rate-reducing tax reform. Rough estimates suggest that taxing dividends as ordinary income could raise enough in revenue to offset a 1.3% reduction in individual income tax rates, which would reduce the top marginal rate from 39.6% to roughly 39.1%. If the revenues were instead used to reduce corporate rates, the corporate tax rate could be reduced by roughly 4.6%, from 35% to roughly 33.2%. House Ways and Means Committee Chairman Dave Camp’s tax reform discussion draft, the Tax Reform Act of 2014, proposes that dividends be taxed as ordinary income, but provides an exclusion of 40% for dividend and capital gain income. Before 2003, dividends were taxed as ordinary income. The tax rate on dividends was reduced as part of the Jobs and Growth Tax Reconciliation Act of 2003 (JGTRRA; P.L. 108-27). Tax rates on dividends were reduced in 2003 to address some of the economic distortions that result from taxing dividends at both the corporate and individual level. Taxation of dividends in both the individual and corporate income tax systems leads to a preference for non-corporate as opposed to corporate investment. Taxation of dividends at both the corporate and individual levels also creates a bias in favor of debt-financed investments, where interest payments are deductible. The reduced tax rate on dividends at the individual level reduces, but does not eliminate, tax-induced distortions in the allocation of capital. Integrating the corporate and individual tax systems, such that capital income is taxed only once, could further improve the allocation of capital in the economy. Rather than increasing taxes on dividends in a base-broadening tax reform, integration may be considered as an option for reducing tax-induced economic distortions. Options for integration include shareholder imputation credits (individual-level credits for corporate taxes paid), a dividends paid deduction, or a dividend exclusion. A trade-off to consider with integration proposals is the budget impact. If integration policies are deficit financed, higher interest rates could crowd out economic growth. Open-economy considerations, in a globalized economy with trade, might also motivate changes in the tax treatment of dividends. Taxing dividends at ordinary rates at the individual level, using the additional revenues to reduce corporate rates, could encourage capital investment in the domestic corporate sector. Increasing taxes on dividends at the individual level would likely increase the progressivity of the U.S. tax system. Correspondingly, a decrease in taxes on dividends would tend to decrease the progressivity of the overall tax system. Ultimately, any change in dividend tax policy is likely to have economic, distributional, and revenue consequences. The trade-offs between these various objectives are something to be considered by policymakers.

Mar 10, 2014

Budgetary and Distributional Effects of Adopting the Chained CPI

This report examines the budgetary and distributional effects of using what is referred to as the Chained Consumer Price Index (C-CPI-U or chained CPI) as the official measure of inflation for adjusting federal revenue and spending programs for inflation. Several other variations of the Consumer Price Index (CPI) are currently used to make automatic adjustments that affect both outlays and revenues. For example, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is the basis for adjusting Social Security benefits, while the Consumer Price Index for All Urban Consumers (CPI-U) is the basis for adjusting personal income tax parameters to keep up with inflation. Concerns over the ability of the Consumer Price Index (CPI) to accurately measure changes in the cost of living are long-standing. At issue then, as now, is a concern that the CPI does not accurately measure changes in the cost of living. In this respect, there is a broad consensus that the chained CPI is a more accurate measure of inflation than those currently in use. Further, if adopting the chained CPI is done for technical reasons, a case can be made that the chained CPI should be used in all cases the federal government attempts to mitigate the effects of inflation. In spite of concerns about the accuracy of the CPI and a consensus that the chained CPI is a more accurate measure of inflation, there are no current legislative proposals to adopt the chained CPI outside of more comprehensive entitlement, budget, or tax reforms, such as the Tax Reform Act of 2014. This observation suggests that interest in adopting the chained CPI may have less to do with improving the technical accuracy of the measure of inflation and more to do with budgetary considerations. In particular, the chained CPI has and would be expected to continue to deliver lower estimates of inflation. This would, in turn, reduce the rate of increase in several mandatory spending programs. The associated deficit reduction from adopting the chained CPI has been noted for some time. For example, the Advisory Commission to Study the Consumer Price Index (often referred to as the Boskin Commission) concluded that adopting the chained CPI would reduce the debt $691 billion between 1996 and 2006. This deficit reduction would be realized in the form of lower federal spending and increased federal tax revenue and was politically unpopular in 1996 at the release of the Boskin Commission Report.

Mar 7, 2014

Keystone XL: Greenhouse Gas Emissions Assessments in the Final Environmental Impact Statement

This report examines the findings and methodology of the State Department's Final Environmental Impact Statement for the Keystone XL pipeline project, which analyses the potential Greenhouse Gas (GHG) emissions in regards to the construction, upkeep, and operation of the pipeline.

Mar 7, 2014

The Budget Control Act of 2011: Legislative Changes to the Law and Their Budgetary Effects

This report provides information on the levels of deficit reduction that would occur if the Budget Control Act's (BCA) automatic cuts are implemented as under current law, contrasted with alternative proposals offered by some Members of Congress and President Obama. It also discusses specific determinations made by the Office of Management and Budget regarding the exempt/non-exempt status of certain programs, as well as a discussion of information to be disclosed regarding the FY2013 BCA sequester impact.

Mar 6, 2014

Highway and Public Transportation Infrastructure Provision Using Public-Private Partnerships (P3s)

Growing demands on the transportation system and constraints on public resources have led to calls for more private sector involvement in the provision of highway and transit infrastructure through what are known as “public-private partnerships” or “P3s.” A P3, broadly defined, is any arrangement whereby the private sector assumes more responsibility than is traditional for infrastructure planning, financing, design, construction, operation, and maintenance. Some P3s involve the leasing by the public sector to the private sector of existing infrastructure, while others provide for a private role in designing, financing, building, and operating new infrastructure. P3 proponents argue that, in addition to injecting additional resources into surface transportation infrastructure, private sector involvement potentially reduces costs, project delivery time, and public sector risk, and may also improve project selection and project quality. Detractors, on the other hand, argue that the potential for P3s is limited, and that, unless carefully regulated, P3s will disrupt the operation of the surface transportation network, increase driving and other costs for the traveling public, and subvert the public planning process. Evidence suggests that there is significant private funding available for investment in surface transportation infrastructure, but that it is unlikely to amount to more than 10% of the ongoing needs of highways over the next 20 years or so, and probably a much smaller share of transit needs. With competing demands for public funds, there is also a concern that private funding will substitute for public resources with no net gain in transportation infrastructure. The effect of P3s on the planning and operation of the transportation system is a more open question because of the numerous forms they can take, and because they are dependent on the detailed agreements negotiated between the public and private partners. Many highway and bridge P3s involve tolling, raising questions about equity and traffic diversion and, more broadly, concerns about whether there is a national public interest justifying federal oversight of P3s. This report discusses two broad policy options for Congress as it considers reauthorizing federal surface transportation programs. The first would be to actively encourage P3s with program incentives as has been done in the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141), but with relatively tight regulatory controls. This might include a requirement for an evaluation of the costs and benefits of the P3 against traditional public delivery methods, new requirements regarding public information and public involvement, and a prohibition against non-compete clauses in P3 agreements (which could prevent public authorities from providing new, competitive infrastructure near a privately controlled facility). The second broad option would be to aggressively encourage the use of P3s through program incentives and deregulation. This might include fewer restrictions on the tolling of Interstate Highways and the enhancement of existing financing programs that encourage P3s, such as the TIFIA (Transportation Infrastructure Finance and Innovation Act) program and private activity bonds, or new initiatives, such as the creation of a national infrastructure bank.

Mar 5, 2014

Federal Minimum Wage, Tax-Transfer Earnings Supplements, and Poverty

Feb 28, 2014

Venezuela: Background and U.S. Relations

This report discusses the current Congressional issues in relation to Venezuela, including background on the political situation and recent developments, the economic conditions, relevant U.S. policies, and the legislative initiatives in the 113th Congress.

Feb 28, 2014

Costs of Government Interventions in Response to the Financial Crisis: A Retrospective

In August 2007, asset-backed securities (ABS), particularly those backed by subprime mortgages, suddenly became illiquid and fell sharply in value as an unprecedented housing boom turned into a housing bust. Losses on the many ABS held by financial firms depleted their capital. Uncertainty about future losses on illiquid and complex assets led to firms having reduced access to private liquidity, sometimes catastrophically. In September 2008, the financial crisis reached panic proportions, with some large financial firms failing or having the government step in to prevent their failure. Initially, the government approach was largely ad hoc, addressing the problems at individual institutions on a case-by-case basis. The panic in September 2008 convinced policy makers that a system-wide approach was needed, and Congress created the Troubled Asset Relief Program (TARP) in October 2008. In addition to TARP, the Treasury, Federal Reserve (Fed) and Federal Deposit Insurance Corporation (FDIC) implemented broad lending and guarantee programs. Because the crisis had many causes and symptoms, the response tackled a number of disparate problems and can be broadly categorized into programs that (1) increased financial institutions’ liquidity; (2) provided capital directly to financial institutions for them to recover from asset write-offs; (3) purchased illiquid assets from financial institutions to restore confidence in their balance sheets and thereby their continued solvency; (4) intervened in specific financial markets that had ceased to function smoothly; and (5) used public funds to prevent the failure of troubled institutions that were deemed systemically important, popularly referred to as “too big to fail.” The primary goal of the various interventions was to end the financial panic and restore normalcy to financial markets, rather than to make a profit for taxpayers. In this sense, the programs were arguably a success. Nevertheless, an important part of evaluating the government’s performance is whether financial normalcy was restored at a minimum cost to taxpayers. By this measure, the financial performance of these interventions far exceeded initial expectations that direct losses to taxpayers would run into the hundreds of billions of dollars. Initial government outlays are a poor indicator of taxpayer exposure, because outlays were used to acquire or guarantee income-earning debt or equity instruments that could eventually be repaid or sold, potentially at a profit. For broadly available facilities accessed by financially sound institutions, the risk of default became relatively minor once financial markets resumed normal functioning. Most of the programs that were introduced have been wound down or have shrunk to a fraction of their previous size. This report presents how much the programs ultimately cost (or benefited) the taxpayers based on straightforward cash accounting as reported by the various agencies. Of the 23 programs reviewed in this report, principal repayment and income exceed initial outlays in 17, principal repayment and income fell short of initial outlays in three, and it is too soon to tell for the remaining three. Of the three programs that lost money, two assisted automakers, not financial firms. Altogether to date, realized gains across the various programs exceed realized losses by tens of billions of dollars. Most of the remaining principal outstanding is to Fannie Mae and Freddie Mac, where net income will exceed principal outstanding once recently announced quarterly payments are transferred. More sophisticated estimates that would take into account the complete economic costs of assistance, such as the time value of the funds involved, are not consistently available. In this sense, cash flow measures overestimate gains to the taxpayers.

Feb 27, 2014

Emergency Water Assistance During Drought: Federal Non-Agricultural Programs

Drought conditions often fuel congressional interest in federal assistance. While drought planning and preparedness are largely individual, business, local, and state responsibilities, some federal assistance is available to mitigate drought impacts. While much of the federal assistance is targeted at mitigating impacts on the agricultural economy, other federal programs are authorized to provide non-agricultural water assistance. Interest in these non-agricultural programs often increases as communities, households, and businesses experience shrinking and less reliable water supplies. Authorized federal assistance is spread across a variety of agencies, and each has limitations on what activities and entities are eligible and the funding that is available. Rural Utilities Service (RUS): The U.S. Department of Agriculture’s RUS provides grants and loans for rural water systems in communities with less than 10,000 inhabitants; its programs are for domestic water service, not water for agricultural purposes. Some of the programs are tailored to emergency situations, while others may prioritize loans and grants for communities and households facing drought-related declines in water quantity or quality. As of mid-February 2014, around $1.3 billion in loans and $370 million in grants are available for rural community water and waste systems. While these funds are provided for assisting with rural water systems broadly, systems affected by drought may receive priority. Also for FY2014, the RUS Household Water Well System Grants had received $1 million in appropriations, and the Administration had reprogrammed to the RUS Emergency Community and Water Assistance Grants program $3 million for California’s rural communities. Bureau of Reclamation: Reclamation’s authorities to assist with emergency water supplies and conservation stem primarily from the Reclamation States Emergency Drought Relief (RSEDR) Program. RSEDR consists of various authorities, including direct Reclamation water assistance to reduce drought losses, water contract authority, technical assistance, drought planning grants, and actions to facilitate water purchases and transfers. Reclamation can provide much of this assistance to water users (including municipalities and water districts), private entities, tribes, and states. Most of the RSEDR program’s authority is limited to the 17 western states and Hawaii. RSEDR emergency actions often are provided by Reclamation at 100% federal expense, although some nonfederal reimbursement is authorized. These emergency actions are available to communities and water providers, regardless of their size, but are prioritized by need and congressional direction. As of mid-February 2014, RSEDR funding was $0.5 million for FY2014. Army Corps of Engineers (USACE): The Corps has authority to assist emergency water supplies and their transport when state resources are exceeded and a public health threat is imminent. This authority has largely been used for assisting tribes with imminent drinking water supply issues. These activities have generally been funded through reprogramming of available agency funds. The agency also has authority to contract for provision of limited quantities of water (if available) from its reservoirs for municipal and industrial purposes. Role of States and Other Federal Authorities. If a drought’s effects overwhelm state or local resources, the President, at the request of a governor or tribal governing body, is authorized under the Stafford Act (42 U.S.C. 5121 et seq.) to issue major disaster or emergency declarations resulting in federal aid to affected parties. Since the 1980s, however, requests by U.S. states for Stafford Act drought-related declarations and related assistance for drinking water supplies have been denied. The U.S. Secretary of Agriculture has overseen most federal drought response through agricultural disaster assistance.

Feb 26, 2014

Drought in the United States: Causes and Current Understanding

This report discusses how drought is defined (e.g., why drought in one region of the country is different from drought in another region) and why drought occurs in the United States. It briefly describes periods of drought in the country's past that equaled or exceeded drought conditions experienced during the 20th century. This is followed by a discussion of the nature and extent of recent droughts that affected Texas and the U.S. midcontinent, and the current drought in California. Lastly, the report discusses future prospects for a climate in the western United States that might be drier than the average 20th-century climate and the possible influence of human-induced climate change.

Feb 26, 2014

Family Violence Prevention and Services Act (FVPSA): Background and Funding

The focus of this report is on the federal response to domestic violence under the Family Violence Prevention and Services Act (FVPSA). "Domestic violence" is used in the report to describe violence among intimate partners, including those involved in dating relationships.

Feb 25, 2014

Independence of Federal Financial Regulators

This report discusses institutional features that make federal financial regulators (as well as other independent agencies) relatively independent from the President and Congress.

Feb 24, 2014

U.S. Nuclear Weapon “Pit” Production Options for Congress

A “pit” is the plutonium core of a nuclear weapon. Until 1989, the Rocky Flats Plant (CO) mass-produced pits. Since then, the United States has made at most 11 pits per year (ppy). U.S. policy is to maintain existing nuclear weapons. To do this, the Department of Defense states that it needs the Department of Energy (DOE), which maintains U.S. nuclear weapons, to produce 50-80 ppy by 2030. While some argue that few if any new pits are needed, at least for decades, this report focuses on options to reach 80 ppy. Pit production involves precisely forming plutonium—a hazardous, radioactive, physically quirky metal. Production requires supporting tasks, such as analytical chemistry (AC), which monitors the chemical composition of plutonium in each pit. With Rocky Flats closed, DOE established a small-scale pit manufacturing capability at PF-4, a building at Los Alamos National Laboratory (LANL). DOE also proposed higher-capacity facilities; none came to fruition. In 2005, Congress rejected the Modern Pit Facility, viewing as excessive the capacity range DOE studied, 125-450 ppy. In 2012, the Administration “deferred” construction of the Chemistry and Metallurgy Research Replacement Nuclear Facility (CMRR-NF) on grounds of availability of interim alternatives and affordability. Nonetheless, options remain: Build CMRR-NF. Congress mandated it in the FY2013 cycle, but provided no funds for it then, and permitted consideration of an alternative in the FY2014 cycle. Remove from PF-4 tasks not requiring high MAR and security. Casting pits uses much plutonium that an accident might release (“Material At Risk,” MAR) and requires high security. Making 80 ppy would require freeing more MAR and floor space in PF-4 for casting. Provide regulatory relief so RLUOB could hold 1,000 grams of plutonium with few changes to the building. AC for 80 ppy needs much floor space but not high MAR or high security. Several options involve LANL’s Radiological Laboratory/Utility/Office Building (RLUOB). Regulations permit it to hold 26 grams of weapons-grade plutonium, the volume of two nickels; AC for 80 ppy would require 500 to 1,000 grams and perhaps space elsewhere. Augmenting RLUOB to hold the latter amounts within regulations would be costly even though the radiation dose if the building collapsed would be very low. Regulatory relief would save time and money, but would raise concerns about compliance with regulations. A complementary option is to perform some AC at Lawrence Livermore National Laboratory or Savannah River Site. Move plutonium-238 work to Idaho National Laboratory or Savannah River Site. Fabricating plutonium-238 into power sources for space probes entails high MAR, but not high security because it is not used in pits. Moving it would free MAR and floor space in PF-4. At issue is whether to conduct all plutonium work at LANL, the plutonium “center of excellence.” Build concrete “modules” connected to PF-4. This would enable high-MAR work to move out of PF-4, so PF-4 and modules could do the needed pit work. At issue: are modules needed, at what cost, and when. Several options have the potential to produce 80 ppy and permit other plutonium activities at relatively modest cost, in a relatively short time, with no new buildings, and with minimal environmental impact. Determining their desirability and feasibility would require detailed study. Observations include: Differing time horizons between Congress and DOE, and between political and technical imperatives, cause problems. Doing nothing entails costs and risks. Keeping a 1950s-era building open while options are explored exposes workers to a relatively high risk of death in an earthquake. Congress may wish to consider limiting a building’s permitted plutonium quantity by estimated dose instead of MAR. A facility can be safe even if it is not compliant with regulations. The political system is more flexible than the regulatory system. Regulations derive their authority from statutes. Regulators, bound by these statutes, cannot make cost-benefit tradeoffs regarding compliance. In contrast, the political system has the authority, ability, and culture to decide which tradeoffs are worth making.

Feb 21, 2014

U.S. and EU Motor Vehicle Standards: Issues for Transatlantic Trade Negotiations

In March 2013, President Obama notified Congress that his Administration would seek a comprehensive Transatlantic Trade and Investment Partnership (TTIP) with the European Union (EU). In addition to addressing tariffs and other trade restrictions, the negotiations seek to reduce regulatory barriers to transatlantic commerce. Among the barriers under discussion are those affecting motor vehicles. Although many automakers build and sell cars in both regions, they must comply with very different safety, fuel economy, and emissions standards, as well as different regulatory processes. TTIP negotiators are seeking to identify ways to narrow the regulatory differences, potentially reducing costs and spurring additional trade in vehicles. U.S. and EU automakers support this initiative, which they see as furthering economic and vehicle design trends already under way. The complexity of complying with different greenhouse gas emissions regulations is also a factor in the industry’s support. This report looks at ways in which TTIP might lead to a convergence of motor vehicle regulatory regimes on both sides of the Atlantic. These regimes govern three distinct aspects of vehicle manufacturing and involve a number of U.S. and EU agencies. Safety. U.S. automakers self-certify that they are meeting U.S. vehicle standards. In Europe, vehicles must obtain “type approval” from a government before an automaker can bring out a new model. Emissions. U.S. and EU emissions regulations are administered by the U.S. Environmental Protection Agency (EPA) and the European Commission (EC), respectively. While U.S. and EC rules address a similar range of pollutants, including carbon monoxide, nitrogen oxide, and non-methane organic oxides, allowable emissions levels in the EU are different from those in the United States—and they are stricter in more than a dozen U.S. states than in the other states. The United States and the EU have similar “type approval” systems for new engine models. Fuel Efficiency. Auto manufacturers selling in the United States must meet the Corporate Average Fuel Economy (CAFE) standards enforced by the National Highway Traffic Safety Administration (NHTSA). Under the Obama Administration, greenhouse gases (GHG) in vehicle emissions are being regulated for the first time, making fuel economy standard-setting a joint venture between NHTSA and EPA. The EU does not directly set fuel economy standards, but it effectively does so by regulating greenhouse gas emissions of new vehicles. There are several different ways a TTIP agreement could promote convergence of automobile regulation, from harmonizing existing U.S. and EU rules to providing for mutual recognition of some or all automotive standards. If a TTIP agreement is reached, it will be subject to congressional approval. To the extent that such an agreement would require changes in motor vehicle regulatory processes or standards, it is possible that Congress will be asked to modify statutes that govern motor vehicle safety, emissions, and fuel economy.

Feb 18, 2014

The Debt Limit Since 2011

This report discusses the federal debt increase. The accumulation of federal debt accelerated in the wake of the 2007-2008 financial crisis and subsequent recession. Rising debt levels, along with continued differences in views of fiscal policy, led to a series of contentious debt limit episodes in recent years.

Feb 18, 2014

The Education Sciences Reform Act

This report discusses the Education Sciences Reform Act (ESRA, Title I of P.L. 107-279) that established the Institute of Education Sciences (IES) as an independent research arm of the Department of Education (ED).

Feb 14, 2014

Itemized Tax Deductions for Individuals: Data Analysis

Reforming or limiting itemized tax deductions for individuals has gained the interest of policy makers as one way to increase federal tax revenue, increase the share of taxes paid by higher-income tax filers, simplify the tax code, or reduce incentives that might lead to inefficient economic behavior. However, limits on deductions could cause adverse economic effects or changes in the distributional burden of the federal income tax code. This report is intended to identify who claims itemized deductions, for how much, and for which provisions. This report analyzes data to inform the policy debate about reforming itemized tax deductions for individuals. In 2011, 32% of all tax filers chose to itemize their deductions rather than claim the standard deduction. In addition, the data indicate that both the share of tax filers who itemize their deductions and the amount claimed by each tax filer increase as adjusted gross income (AGI) increases. AGI is the basic measure of income under the federal income tax and is the income measurement before itemized deductions and personal exemptions are taken into account. Although higher-income tax filers are more likely to itemize their deductions and claim a larger amount of itemized deductions than lower-income tax filers, the majority of itemizers (63.6%) have incomes below $100,000, and 90.3% of itemizers have an AGI below $200,000. Tax filers in different income ranges tend to claim different itemized deductions. In 2011, tax filers in higher income ranges claimed deductions for charitable gifts, state and local taxes, and real estate property taxes at higher rates than tax filers in lower income ranges. For example, the deduction for charitable gifts was claimed by 45% of tax filers with an AGI between $50,000 and $100,000, whereas it was claimed by 75% to 94% of tax filers with an AGI above $100,000. Deductions for state and local taxes and the deduction for charitable gifts comprise a larger share of itemized deductions as income rises. The four largest itemized deductions are estimated to account for 17.8% ($195.7 billion) of the approximately $1.1 trillion in tax expenditures in FY2014. These deductions are for home mortgage interest, state and local taxes, charitable gifts, and real estate taxes. These findings have several implications for policy options that would seek to reform or limit itemized tax deductions. First, efforts to target limits on itemized tax deductions toward higher-income tax filers are limited in the amount of revenue that can possibly be raised. Although higher-income tax filers claim a larger average amount of deductions, these tax filers make up a small share of itemizers. Second, the structure of a limit on itemized deductions could affect which deductions a tax filer might claim. Although a limit based on a percentage reduction in the overall tax benefits of itemized deductions would not likely change the relative choice of deduction claims, limits based on a flat-dollar value cap likely would alter deduction claims and possibly tax filer behavior. This could happen if a tax filer has deductions that exceed a flat-dollar value cap, because the tax filer must make a decision about which deductions to actually claim. Even if a tax filer cannot claim a tax deduction for a particular activity, the tax filer might still engage in the activity for other reasons (although possibly to a lesser extent). Third, the structure of a limit on itemized deductions also has an effect on its ability to raise revenue. Limiting deductions might raise the taxable income of some individuals, thereby pushing them into a higher marginal tax bracket, and tax a higher share of their income at that higher marginal tax rate. However, certain combinations of deduction limits may shift some tax filers to claim the standard deduction instead of itemizing. In this case, the revenue increase by limiting itemized deduction would be partially offset by more tax filers claiming the standard deduction.

Feb 12, 2014

Work Requirements, Time Limits, and Work Incentives in TANF, SNAP, and Housing Assistance

Congress is again debating work requirements in the context of programs to aid poor and low-income individuals and families. The last major debate in the 1990s both significantly expanded financial supports for working poor families with children and led to the enactment of the 1996 welfare reform law. That law created the Temporary Assistance for Needy Families (TANF) block grant, which time-limited federally funded aid and required work for families receiving cash assistance. Work requirements, time limits, and work incentives are intended to offset work disincentives in social assistance programs, promote a culture of work over dependency, and prioritize governmental resources. Another rationale for such policies is that without income from work, a person and his or her family members are almost certain to be poor. For many of these same reasons, some policymakers recently have expressed interest in extending mandatory work requirements and related policiessimilar to those included in TANFto the Supplemental Nutrition Assistance Program (SNAP) and housing assistance (public housing and the Section 8 Housing Choice Voucher program). Some work rules and related policies already exist for SNAP and housing assistance. For example, SNAP time-limits aid for able-bodied adult recipients without dependents who do not work. However, for other able-bodied, nonelderly adults, for the most part, states are only required to have those who are unemployed or underemployed register for work. States may opt to make other SNAP employment and training mandatory or voluntary for recipients. Public housing has an eight-hour-per-month community service and economic self-sufficiency requirement for nonworking, nonexempted individuals. No work requirements apply to those receiving rent subsidies through the Section 8 Housing Choice Voucher program, and neither program has statutory time limits. However, public housing authorities that administer public housing and/or the Section 8 Housing Choice Voucher program may impose work requirements and time limits if they are participating in the Moving to Work Demonstration program. Further, all three programsTANF, SNAP, and housing assistanceinclude some form of earnings disregard policy intended to alleviate the work disincentive inherent in the structure of the benefits provided. Over time, TANF data have reflected relatively modest participation among recipients in work or related activities. However, the cash assistance caseload declined substantially after enactment of TANF, owing mostly to a decline in the share of eligible families actually receiving benefits. TANF work requirements and time limits are likely a part of the cause of that decline, contributing to the behavioral changes of recipients leaving the rolls quicker and some eligible households not coming onto the rolls in the first place. In addition to TANF changes, other policies were put in place in the 1980s and 1990s that helped make work pay more than welfare. If Congress considers extending the lessons of TANF through additional work-related policies in food and housing assistance programs, policymakers face numerous considerations, including the various ways in which TANF differs from SNAP and housing programs. The populations differ: TANF requirements apply mostly to single mothers with children, while SNAP and housing assistance programs serve more men. Additionally, TANF work requirements were intended to spur nonworking recipients into the labor force. SNAP and housing programs often serve households that already include workers, albeit those who earn low wages, as well as a substantial number of individuals not typically expected to work, such as the elderly and persons with disabilities. Additional considerations include whether to implement any new requirements as performance measures applicable to states or other administering entities (like TANF) or as direct requirements for individual recipients. Enforcing these policies, and/or offering supports to ensure their success, also costs money and requires an administrative structure. TANF requirements were put into place following a decades-long period of experimentation and research on welfare-to-work programs. There is currently no such research base for SNAP and housing to help inform policymakers as to what works. Additionally, questions can be raised as to whether TANF-like work requirements, based on evidence from the 1980s and early 1990s, would be effective in the current economic environment. Additional research, either as a part of any reforms or in advance of any reforms to SNAP or housing assistance, might prove helpful in answering these questions.

Feb 12, 2014

The Hurricane Sandy Rebuilding Strategy: In Brief

This report briefly analyzes the Hurricane Sandy Rebuilding Strategy (HSRS), which is the key strategic document released by the Hurricane Sandy Rebuilding Task Force established by executive order. It also discusses overarching issues for Congress that may arise in oversight of the Hurricane Sandy recovery process and how lessons learned from Hurricane Sandy can be applied to future disasters.

Feb 10, 2014

U.S. Rail Transportation of Crude Oil: Background and Issues for Congress

This report discusses the challenges in the transportation of oil, as refineries that once received crude oil principally from oceangoing tankers are now seeing increasing deliveries by domestic transport. It also outlines possible issues for Congress including rail transport of oil versus pipelines, and the possible increase of oil spills from rail transport.

Feb 6, 2014

Community Development Block Grants: Recent Funding History

The Community Development Block Grant (CDBG) program, administered by the Department of Housing and Urban Development (HUD), under the Community Development Fund (CDF) account, was first authorized by Title I of the Housing and Community Development Act (HCDA) of 1974, P.L. 93-383. During the program’s nearly 40-year existence, Congress has allocated approximately $138 billion to help state and local governments undertake housing, economic development, neighborhood revitalization, and other community development activities. In addition to its annual appropriations, Congress, as events have warranted, has used the program’s framework to provide supplemental and special appropriations to assist states and communities in responding to various economic crises and manmade and natural disasters. This report is a review of the CDF account’s funding history from FY2000 to FY2013, as well as current funding in FY2014. It includes a discussion of the three primary components of the CDF account: (1) CDBG formula grants; (2) CDBG-related set-asides and earmarks; and (3) CDBG-linked supplemental and special appropriations. It is intended to provide recent historical background as the 113th Congress considers CDF funding levels and composition. For information on CDF appropriation legislation considered during the 113th Congress, the reader should consult CRS Report Community Development Block Grant Funding Issues in the 113th Congress. From FY2000 to FY2014, total appropriations for the CDF account—excluding special and supplemental appropriations for disasters, mortgage foreclosures, and economic recovery—fluctuated between a high of $5.112 billion in FY2001 and a low of $3.008 billion in FY2012. During this period the average grant amount allocated to CDBG entitlement communities (typically metropolitan-based cities and counties) declined by 43.7% from a high of $3 million in FY2002 to a low of $1.7 million in FY2012. The decline in the average grant amount is both a function of fewer dollars appropriated and an increase in the number of entitlement communities as more cities and counties achieve the population threshold necessary to be designated an entitlement community. From FY2000 to FY2013, the number of jurisdictions receiving a direct allocation as CDBG entitlement communities increased by 171 (16.9%), from 1,012 to 1,183, while the average allocation for entitlement communities declined by 37.9%. Short of appropriating additional funds, Congress may consider a number of options intended to address the decline in average CDBG formula allocations. These may include (1) increasing the population threshold for eligibility as a CDBG entitlement community, or (2) encouraging communities receiving less than a designated minimum allocation to enter into cooperative agreements with the urban county in which they are located. From FY2000 to FY2014, both the number of and appropriations for set-aside programs included in the CDF account have fluctuated significantly. In FY2001 Congress appropriated $713 million for CDF set-asides, with earmarks under the Economic Development Initiative (EDI) and Neighborhood Initiative (NI) programs accounting for 56% of this total. By FY2013 CDBG-linked set-asides reached a low for the period of $57 million as other national priorities have supplanted the programs funded under the account, or those activities have been transferred to other accounts or agencies.

Feb 6, 2014

Transportation Spending and “Buy America” Requirements

The Buy America Act is the popular name for a group of domestic content restrictions that have been attached to funds administered by the Department of Transportation (DOT). These funds are used to make grants to states, localities, and other non-federal government entities for various transportation projects. Specific sources of funding administered by the Federal Highway Administration (FHWA), the Federal Aviation Administration (FAA), the Federal Transit Administration (FTA), the Federal Railroad Administration (FRA), and the National Railroad Passenger Corporation (Amtrak) are covered under various Buy America provisions. Generally, these statutes require applicable agency grant programs and spending to be used to fund projects that only include steel, iron, and/or manufactured products produced in the United States. Each provision includes a series of circumstances under which the agency may issue a nationwide or project-specific waiver to these domestic content requirements. Such exemptions may be based upon a finding that application of the domestic content requirement is not in the public interest, the needed materials are not produced in sufficient quantity and/or quality in the United States, or the cost of using domestic materials is unreasonable, among others. The Buy American Act, another statute requiring domestic content preferences in federal government procurement, does not apply to DOT-administered grant funds because, while the source of the money is federal, purchases are not made directly by the federal government. For more information on the Buy American Act and other domestic preference requirements, see CRS Report R43354, Domestic Content Restrictions: The Buy American Act and Complementary Provisions of Federal Law, by Kate M. Manuel et al.

Feb 4, 2014

Iran: U.S. Economic Sanctions and the Authority to Lift Restrictions

This report identifies the legislative bases for sanctions imposed on Iran, and the nature of the authority to waive or lift those restrictions. It comprises two tables that present legislation and executive orders that are specific to Iran and its objectionable activities in the areas of terrorism, human rights, and weapons proliferation.

Feb 4, 2014

Transatlantic Trade and Investment Partnership (TTIP) Negotiations

This report provides: (1) context for the Transatlantic Trade and Investment Partnership (TTIP) negotiations; (2) analysis of possible trade and investment issues in the negotiations; and (3) discussion of issues for Congress. The U.S.-EU negotiations on TTIP are not public, however, the information and analysis in this report on issues in the negotiations are based on publicly-available information.

Feb 4, 2014

Retirement Benefits for Federal Law Enforcement Personnel

Federal employees who perform specific duties, as defined in statute, are classified as law enforcement officers (LEOs) for the purpose of federal retirement benefits. LEOs and a few legislatively designated groups, including federal firefighters and air traffic controllers, are eligible for enhanced retirement benefits under the Civil Service Retirement System (CSRS), for individuals hired before 1984, or the Federal Employees’ Retirement System (FERS), for individuals hired in 1984 or later. The availability of enhanced retirement benefits for LEOs and similar groups is linked to an expectation of limited federal service. This limited service is due, in turn, to the rigorous physical demands of law enforcement duties and the mandatory retirement age to which these individuals are subject. LEO enhanced retirement benefits are designed to provide adequate retirement income for federal employees with careers that end at an earlier age with fewer years of service than regular civilian federal employees. In general, law enforcement personnel are subject to mandatory retirement at age 57, or as soon as 20 years of service have been completed after age 57. The maximum age of entry, which is intended to ensure full retirement benefits upon reaching mandatory retirement age, is typically age 37. Under both CSRS and FERS, law enforcement personnel are eligible for their enhanced benefits at the age of 50 provided they have completed the minimum requirement of 20 years of service. Under FERS, law enforcement personnel with 25 years of service are eligible for retirement regardless of age. Law enforcement personnel in CSRS and their employing agencies each contribute 7.5% of payroll. CSRS law enforcement personnel accrue benefits at the rate of 2.5% per year for their first 20 years of service and 2% for each year after the 20th year of service. Law enforcement personnel in FERS accrue benefits at the rate of 1.7% per year for the first 20 years of service and 1% per year for each year thereafter. FERS contribution rates vary by date of hire. Law enforcement personnel in FERS first hired before 2013 contribute 1.3% of pay (plus Social Security contributions) and their agencies contribute 26.3% of pay. Under P.L. 112-96, FERS law enforcement personnel first hired in 2013 contribute 3.6% of pay (plus Social Security contributions) and their agencies contribute 24.0% of pay. Finally, under P.L. 113-67, FERS law enforcement personnel first hired in 2014 or later contribute 4.9% of pay (plus Social Security contributions) and their agencies contribute 24.0% of pay. FERS accrual rates remain unchanged for law enforcement personnel first hired in 2013 or later (including individuals first hired in 2014 or later). Many employees in law enforcement occupations are not recognized as LEOs by their agencies and OPM for the purposes of federal retirement coverage and, consequently, are not eligible to receive enhanced retirement benefits. Several employee groups and unions representing individuals in these occupations have sought enhanced retirement benefits through additional legislation. Recent Congresses have responded by introducing legislation that would provide enhanced retirement benefits to additional personnel. Though granting more groups such benefits may alleviate problems of attrition and perceived inequity across law enforcement occupations, it would also increase personnel costs for employing agencies as well as overall federal expenditures on civilian federal retirement benefits.

Jan 30, 2014

“Leahy Law” Human Rights Provisions and Security Assistance: Issue Overview

Congressional interest in the laws and processes involved in conditioning U.S. assistance to foreign security forces on human rights grounds has grown in recent years, especially as U.S. Administrations have increased emphasis on expanding U.S. partnerships and building partnership capacity with foreign military and other security forces. Congress has played an especially prominent role in initiating, amending, supporting with resources, and overseeing implementation of long-standing laws on human rights provisions affecting U.S. security assistance. First sponsored in the late 1990s by Senator Patrick Leahy (D-VT), the “Leahy laws” (sometimes referred to as the “Leahy amendments”) are currently manifest in two places. One is Section 620M of the Foreign Assistance Act of 1961 (FAA), as amended, which prohibits the furnishing of assistance authorized by the FAA and the Arms Export Control Act to any foreign security force unit where there is credible information that the unit has committed a gross violation of human rights. The second is a recurring provision in annual defense appropriations, newly expanded by the FY2014 Department of Defense (DOD) appropriations bill as contained in the Consolidated Appropriations Act, 2014 (P.L. 113-76), to align its scope with that of the FAA provision. (Prior DOD appropriations measures had applied the prohibition to support for any training program, as defined by DOD, but not to other forms of DOD assistance.) As they currently stand, the FAA and DOD provisions are similar but not identical. Over the years, they have been subject to changes to more closely align their language, most recently with the expansion of scope enacted in the FY2014 DOD appropriations law. Nevertheless, some differences remain. Implementation of Leahy vetting involves a complex process in the State Department and U.S. embassies overseas that determines which foreign security individuals and units are eligible to receive U.S. assistance or training. Beginning in 2010, the State Department has utilized a computerized system called the International Vetting and Security Tracking (INVEST) system, which has facilitated a major increase in the number of individuals and units vetted (some 160,000 in FY2012). Congress supports Leahy vetting operations through a directed allocation of funds in State Department appropriations. The Leahy laws touch upon many issues of interest to Congress. These range from current vetting practices and implementation (involving human rights standards, relations and policy objectives with specific countries, remediation mechanisms, and inter-office and inter-agency coordination, among other issues), to legislative efforts to increase alignment between the Foreign Assistance Act and DOD restrictions, to levels and forms of resources dedicated to conduct vetting. More broadly, overarching policy questions persist about the utility and desirability of applying the Leahy laws, and whether there is sometimes a conflict between promoting respect for human rights and furthering other national interests.

Jan 29, 2014

Emergency Relief for Disaster Damaged Roads and Transit Systems: In Brief

This report describes Federal Highway Administration (FHWA) assistance for the repair and reconstruction of highways and bridges damaged by disasters (such as Hurricane Sandy in 2012) or catastrophic failures (such as the collapse of the Skagit River Bridge in 2013). It begins with a brief discussion of the legislative origins of federal assistance and then addresses eligibility issues and program operation.

Jan 28, 2014

Gulf Coast Restoration: RESTORE Act and Related Efforts

This report provides information on environmental damage and restoration activities related to the Deepwater Horizon spill. An overview of how the RESTORE Act is being implemented and a discussion of multiple funding sources and plans to recover and restore the Gulf Coast environment are discussed. Further, potential issues for Congress related to this restoration initiative are presented.

Jan 27, 2014

Crisis in the Central African Republic

This report provides background on the evolving political, security, and humanitarian crisis in the Central African Republic (CAR), which began when a fractious rebel coalition seized control of the central government in March 2013. The report also describes U.S. policy responses and analyzes possible issues for Congress, including oversight of U.S. humanitarian assistance and support for international stabilization efforts in CAR.

Jan 27, 2014

Dynamic Scoring for Tax Legislation: A Review of Models

This report first explains dynamic scoring, including the types of effects incorporated and the types of models used, as well as what groups conduct or have conducted macroeconomic analysis of tax changes. The following section discusses the specific issues associated with tax reform. The final section discusses general issues surrounding the use of various models and reviews the empirical evidence on supply side responses.

Jan 24, 2014

U.S. Circuit and District Court Nominations During President Obama’s First Five Years: Comparative Analysis With Recent Presidents

The selection and confirmation process for U.S. circuit and district court judges is of continuing interest to Congress. Recent Senate debates over judicial nominations have focused on issues such as the relative degree of success of President Barack Obama’s nominees in gaining Senate confirmation compared with other recent Presidents, as well as the relative prevalence of vacant judgeships compared to years past, and the effect of delayed judicial appointments on judicial vacancy levels. This report addresses these issues, and others, by providing a statistical analysis of nominations to U.S. circuit and district court judgeships during the first five years of President Obama’s time in office and that of his three most recent two-term predecessors. Some of the report’s findings include the following: During his first five years in office, President Obama nominated 57 persons to U.S. circuit court judgeships. Of the 57, 41 (71.9%) were also confirmed during this same five-year period. The 41 confirmed Obama circuit court nominees represented the second-lowest number of nominees confirmed during recent Presidents’ first five years. President Clinton had the lowest number at 37. The percentage of circuit court nominees confirmed during President Obama’s first five years, 71.9%, was also the second-lowest, while the percentage confirmed during President Clinton’s, 69.8%, was the lowest. Of the four Presidents, President Reagan had both the greatest number (55) and percentage (94.8%) of circuit court nominees confirmed within the first five years of his presidency. Of the 226 persons nominated by President Obama to U.S. district court judgeships during his first five years, 173 (76.5%) were confirmed. Of the four Presidents, this was the lowest number and percentage of district court nominees confirmed. Of the comparison group, President Clinton had the greatest number of district court nominees confirmed during his first five years (198) while President Reagan had the greatest percentage of district court nominees confirmed (95.5%)—followed closely by the percentage of district court nominees confirmed during the first five years of the G.W. Bush presidency (93.8%). The average number of days elapsed from nomination to confirmation for circuit court nominees confirmed during a President’s first five years ranged from 56.8 days during the Reagan presidency to 402.0 days during the G.W. Bush presidency. The median number of days from nomination to confirmation for circuit court nominees confirmed during a President’s first five years ranged from 37.0 days (Reagan) to 245.0 (G.W. Bush). The average and median number of days from nomination to confirmation for President Obama’s circuit nominees were 253.7 and 228.0 days, respectively. The average number of days elapsed from nomination to confirmation for district court nominees confirmed during a President’s first five years ranged from 50.0 days during the Reagan presidency to 223.3 days during the Obama presidency. The median number of days from nomination to confirmation for district court nominees confirmed during a President’s first five years ranged from 31.0 days (Reagan) to 214.0 (Obama). President Obama is the only President of the four for whom, during his first five years in office, a majority of U.S. circuit and district court nominees waited more than 180 days to be confirmed after being nominated. President Obama is the only President of the four for whom there was an increase in the percentage of both U.S. circuit and district court judgeships that were vacant from January 1 of his fifth year in office to January 1 of his sixth year. The percentage of circuit court vacancies deemed “judicial emergencies” increased from January 1 of the fifth year to January 1 of the sixth year of the Obama presidency and decreased over the same period during the Clinton and G.W. Bush presidencies. The percentage of district court vacancies deemed judicial emergencies increased from January 1 of the fifth to the sixth years of the Clinton and Obama presidencies and decreased over the same period during the G.W. Bush presidency.

Jan 24, 2014

Social Security Disability Insurance (SSDI): Becoming Insured, Calculating Benefit Payments, and the Effect of Dropout Year Provisions

Eligibility for Social Security Disability Insurance (SSDI) benefits are based on a worker’s insured status, and payment levels are associated with the individual’s career earnings under covered employment. Monthly payments are calculated using a formula that takes into account the period of employment, a worker’s average earnings over that period, and the application of “dropout years.” To be insured for SSDI benefits, a claimant must have worked a minimum amount of time in covered employment. First, a worker must be “fully insured,” which requires one quarter of coverage for each calendar year after the age of 21, with a minimum of six quarters and a maximum of 40 quarters. In 2014, each quarter of coverage requires $1,200 in earnings. Second, a recency of work test requires 20 quarters of coverage in the 40 quarters preceding the onset of a disability; that is generally five years of work in the last 10, although fewer quarters are required for younger workers. In calculating the SSDI benefit level, up to five years of a worker’s lowest years of earnings are eliminated or “dropped” to minimize the effect of lower years of earnings on monthly payments. An eligible worker who becomes disabled has one year of earnings dropped (via the disability dropout year provision) for every five years of earnings, known as the one-for-five rule. A separate childcare dropout year (CDY) provision also disregards from benefit calculations up to two years in which a beneficiary received no income during periods when he or she was caring for a young child. The number of CDYs applied to a benefit calculation may be offset by the number of disability dropout years applied and vice versa. The CDY provision largely benefits a small subset of SSDI recipients with lower career earnings. This report provides (1) an overview of the SSDI program and how workers become insured for SSDI benefits, (2) an explanation of how benefit payments are calculated, and (3) a description of how the dropout year provisions affect the calculation of disability benefit payments. The report concludes with a brief analysis of the earnings of disabled workers that have been credited with CDYs.

Jan 24, 2014

Multifamily and Commercial Mortgages: An Overview of Issues

As the recovery from the recession of December 2007-June 2009 continues, congressional interest in multifamily and commercial mortgages has shifted from worries about the immediate impact of foreclosures to consideration of the future of mortgage finance. During the recession, losses on mortgages raised concerns about the risk to tax payers through Federal Deposit Insurance Corporation (FDIC) insurance, which is backed by the full faith and credit of the federal government. Significant parts of these losses occurred due to commercial loans at smaller insured depositories. The federal government has invested more than $187 billion in Fannie Mae and Freddie Mac, which guarantee single-family and multifamily mortgages. Although Fannie Mae and Freddie Mac do not have explicit full faith and credit backing from the federal government, they do have a legal agreement that would provide additional government funds, if needed. Congressional interest in mortgage reform, including multifamily mortgages, is reflected in several bills that have been introduced. In the House, only H.R. 2767, the Protecting American Taxpayers and Homeowners Act of 2013 (PATH Act), has been ordered to be reported by the Financial Services Committee. In the Senate, hearings have been held on S. 1217, commonly referred to as the Corker-Warner bill. Both would wind down Fannie Mae and Freddie Mac, which have been key sources of multifamily finance. (Fannie Mae and Freddie Mac are prohibited by their congressional charters from activities not directly related to single-family and multifamily mortgages and have not been involved in commercial lending.) The PATH Act makes no mention of multifamily housing finance. Corker-Warner would create a new entity, the Federal Mortgage Insurance Corporation (FMIC), which would take over Fannie Mae’s and Freddie Mac’s role in multifamily finance. The PATH Act would greatly reduce the government’s role in the mortgage system whereas the Corker-Warner bill would reshape the government’s role. This report is an overview of multifamily and commercial mortgage issues that may be of interest to Congress. It compares multifamily and commercial mortgages to the more familiar single-family mortgages. For an analysis of legislation, see CRS Report R43219, Selected Legislative Proposals to Reform the Housing Finance System, by Sean M. Hoskins, N. Eric Weiss, and Katie Jones.

Jan 23, 2014

Small Business Administration Trade and Export Promotion Programs

Jan 22, 2014

Financial Assets and Conflict of Interest Regulation in the Executive Branch

Congressional offices reviewing or conducting oversight concerning the operations of executive agencies and departments, reviewing executive branch nominees for high-level appointments, or responding to constituent inquiries or petitions, may often be confronted with issues and questions of possible “conflicts of interest” of agency officials or nominees. This report summarizes and analyzes the issues of conflicts of interest that are addressed in federal law and regulation regarding officers and employees in the executive branch of the federal government. Federal conflict of interest laws and regulations deal for the most part with the potential conflict between the official duties and responsibilities of a public officer on the one hand, and the outside, personal economic or financial interests of that individual (including the financial interests of that individual’s spouse and minor children) on the other. When a particular governmental matter may have a real and predictable impact on an officer’s or employee’s personal financial interests or assets, that officer’s or employee’s work on such a matter for the government would raise conflict of interest issues. The concern in such cases is that the judgment of the officer or employee could be influenced and affected, even subtly or unconsciously, by his or her own personal financial stake in the matter, as opposed to decisions, advice, and official actions of public officers being based solely on the overall, general public interest. Although federal officials may have many and varied outside, personal “interests,” federal conflict of interest law and regulation focuses specifically on regulating outside, personal financial interests of the officer. The regulatory scheme for conflicts of interest in the executive branch of the federal government may generally be summarized in three broad categories: disqualification, disclosure, and divestiture. The principal conflict of interest statute under federal law is a criminal provision which requires federal executive branch officials to disqualify or “recuse” themselves from working personally and substantially on any particular matter before the government in which that official (or those close enough to the official that their interests may be imputed to the official) has any “financial interest.” 18 U.S.C. § 208. There are certain financial interests which are considered either de minimis, or too remote or inconsequential to affect the duties expected of employees, and such interests are exempted from the prohibition by regulations of the Office of Government Ethics. Most high-ranking federal officials must file public annual financial disclosure reports, as well as periodic disclosure reports on certain financial transactions, which detail financial holdings, assets, property, and financial transactions of the official, the official’s spouse, and dependent children. Additionally, there may be confidential financial disclosure reports required from certain rank-and-file employees who do not file publicly. All of these disclosure reports are reviewed by agency ethics personnel, and are intended to facilitate conflict of interest regulation by identifying assets, property, and ownerships with a conflict potential, and to resolve any such conflicts of interest. Although there is no overall, general divestiture requirement in federal law, the divestiture of assets may be one method of conflict of interest resolution or avoidance that could be required by agency ethics personnel for assets with conflict of interest potential. Additionally, there are particular statutes and regulations applicable to certain officers and agencies which may prohibit the ownership of a range or category of particular assets. These provisions, in addition to prohibiting the acquisition of such assets, may also require the divestiture of such assets already held by incumbent officers or nominees to certain positions.

Jan 17, 2014

Recent Trends in Consumer Retail Payment Services Delivered by Depository Institutions

Congressional interest in the performance of the credit and debit card (checking account services) markets and how recent developments are affecting customers is growing. This report discusses these developments and examines the costs and availability of consumer retail payments services, particularly those provided by depository institutions, since the recent recession and subsequent legislative actions. Consumer retail payment services include products such as credit cards, cash advances, checking accounts, debit cards, and prepayment cards. Some depository institutions have increased fees and decreased availability of these services; many others are considering the best way to cover rising costs to provide these services without alienating customers. Recent declines in the demand for loans, a historically and persistently low interest rate environment, higher capital requirements, and the existence of potential profit opportunities in non-traditional banking markets may have motivated these reactions. In addition, passage of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act; P.L. 111-24) and Section 920 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act; P.L. 111-203), which is known as the Durbin Amendment, placed limitations on fee income for credit cards and debit cards, respectively. Determining the extent to which one or all of these factors have influenced changes in the consumer retail payment services markets, however, is challenging. Market outcomes are often influenced by multiple simultaneous or overlapping events, thus making it difficult to attribute the reactions of financial service providers and their customers solely to any one particular factor. Any one or all of the factors listed above that occurred after 2007 may have driven changes in the costs or availability of consumer retail payment services, making it difficult to determine which one had the greatest influence on market outcomes. Depository institutions reduced credit card loan limits during the recent recession, but those limits have since been rising. Customers with impaired credit, however, have seen increases in credit card rates and reduced access to this product. Many large depository institutions have also discontinued debit card rewards programs and “free” checking. Many small financial institutions have not increased checking account fees as aggressively, but many have increased fees on less frequently used financial services and are considering further fee increases to cover anticipated higher costs. The consumer retail payment services market may also be growing more bifurcated. For example, customers more likely to repay obligations or maintain high checking account balances may experience few changes in costs or availability of traditional payments services. At the same time, customers likely to face higher costs to use or limited access to traditional payment services may increase their usage of direct deposit cash advances and prepayment cards, as depository institutions make these options increasingly available to this market segment.

Jan 16, 2014

Block Grants: Perspectives and Controversies

This report provides an overview of the six grant types with criteria for defining a block grant and a list of current block grants. It also examines competing perspectives concerning the use of block grants versus other grant mechanisms to achieve national goals, provides an historical overview of the role of block grants in American federalism, and discusses recent changes to existing block grants and proposals to create new ones.

Jan 16, 2014

U.S. Naturalization Policy

Naturalization is the process that grants U.S. citizenship to lawful permanent residents (LPRs) who fulfill requirements established by Congress in the Immigration and Nationality Act (INA). In general, U.S. immigration policy gives all LPRs the opportunity to naturalize, and doing so is a voluntary act. LPRs in most cases must have resided continuously in the United States for five years, show they possess good moral character, demonstrate English competency, and pass a U.S. government and history examination as part of their naturalization interview. The INA waives some of these requirements for applicants over age 50 with 20 years of U.S. residency, those with mental or physical disabilities, and those who have served in the U.S. military. Naturalization is often viewed as a milestone for immigrants and a measure of their assimilation and socioeconomic integration to the United States. Practically, naturalized immigrants gain important benefits, including the right to vote, security from deportation in most cases, access to certain public-sector jobs, and the ability to travel with a U.S. passport. U.S. citizens are also advantaged over LPRs for sponsoring relatives to immigrate to the United States. Despite the clear benefits of U.S. citizenship status over LPR status, millions of LPRs who are eligible to naturalize do not do so. In the past two decades, the number of LPRs who submitted petitions to naturalize has increased more than four-fold, from about 207,000 in FY1991 to 899,000 in FY2012. Since 2003, the number of denied petitions has declined. Naturalization petition volume spiked to roughly 1.4 million in FY1997 and FY2007 due primarily to passage of the Immigration Reform and Control Act of 1986, which legalized many unauthorized foreign born, and the Immigration Act of 1990, which increased statutory limits on the numbers of legal immigrants admitted. Research on determinants of naturalization suggests that the propensity to naturalize is positively associated with youth and educational attainment. Those who immigrate as refugees and asylees are more likely to naturalize than those who immigrate as relatives of U.S. residents. Immigrants from countries with less democratic or more oppressive political systems are more likely to naturalize than those from more democratic nations. Immigrants from Mexico or other nearby countries in Central America have among the lowest percentages of naturalized foreign born. Congress is currently considering extensive reforms to U.S. immigration laws, which could affect naturalization policy and the number of persons who naturalize each year. Although concerns regarding U.S. Citizenship and Immigration Services (USCIS) petition processing capabilities sometimes arise when large numbers of foreign nationals petition for immigration benefits, the agency’s capacity and recent modernization efforts have minimized excessive processing delays. Several issues for Congress center on facilitating naturalization. Immigrant advocacy organizations contend that the current level of naturalization fees discourages immigrants from seeking U.S. citizenship. Other immigration policy observers argue that current fees recover the full cost of a process that is intended to be self-financing. Some in Congress have repeatedly expressed interest in facilitating language and civics instruction as a means to promote naturalization. Others argue that English language proficiency as well as civics education is the responsibility of immigrants and not the federal government. Recent efforts have focused on further streamlining and expediting naturalizations for military personnel and in providing immigration benefits for their relatives. Proposals have also been introduced that would revise the naturalization oath to place greater emphasis on allegiance to the United States.

Jan 16, 2014

The Consumer Financial Protection Bureau (CFPB): A Legal Analysis

In the wake of the worst U.S. financial crisis since the Great Depression, Congress passed and the President signed into law sweeping reforms of the financial services regulatory system through the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), P.L. 111-203. Title X of the Dodd-Frank Act is entitled the Consumer Financial Protection Act of 2010 (CFP Act). The CFP Act establishes the Bureau of Consumer Financial Protection (CFPB or Bureau) within the Federal Reserve System (FRS) with rulemaking, enforcement, and supervisory powers over many consumer financial products and services, as well as the entities that sell them. The CFP Act substantially, though not completely, consolidates in the CFPB federal consumer protection powers that previously were held by seven other regulators. It has the authority to write rules to implement a broad array of federal consumer financial protection laws, as well as most consumer compliance supervisory and enforcement powers over larger depositories. However, the CFPB did not acquire from the banking regulators the primary supervisory and enforcement powers over smaller depositories. The Bureau also wields new federal consumer financial protection powers to regulate nondepository financial institutions, which previously were largely unregulated at the federal level. However, the CFP Act wholly exempts certain nondepository financial institutions from the Bureau’s regulatory reach and curtails the CPFB’s authority to regulate others. Although the powers that the CFPB has at its disposal are largely the same or analogous to those that other federal regulators have held for decades, there is a great deal of uncertainty in how the new agency will exercise these broad and flexible authorities, especially in light of its almost exclusive focus on consumer protection and the novel expansion of federal oversight to nondepository financial institutions. This uncertainty has some anxious that the Bureau, in the name of protecting consumers, may excessively restrict consumer credit and unduly increase regulatory costs. As the Bureau continues to exercise its authorities, policy makers will have a performance record on which to evaluate how the CFP Act is working and whether amendments might improve consumer protections, increase access to credit markets, reduce the costs of consumer financial products and services, or reduce compliance costs. The 113th Congress has been actively involved in conducting oversight of the implementation of the CFP Act. The 113th Congress also has considered bills that would either eliminate the CFPB altogether or significantly alter the structure of the Bureau by, for example, making the CFPB’s primary funding subject to the traditional appropriations process, converting the CFPB’s leadership structure from a sole directorship to a commission, or allowing the Financial Stability Oversight Council (FSOC) to overturn CFPB-issued regulations with a simple majority vote, as opposed to the current supermajority vote. This report provides an overview of the regulatory structure of consumer finance under existing federal law before the Dodd-Frank Act went into effect and examines arguments for modifying the regime in order to more effectively regulate consumer financial markets. It then analyzes how the CFP Act changes that legal structure, with a focus on the Bureau’s organization; the entities and activities that fall (and do not fall) under the Bureau’s supervisory, enforcement, and rulemaking authorities; the Bureau’s general and specific rulemaking powers and procedures; and the Bureau’s funding.

Jan 14, 2014

President Obama's Climate Action Plan

This report discusses President Obama's Climate Action Plan (CAP) to reduce emissions of carbon dioxide (CO2) and other greenhouse gases (GHG), and to encourage adaptation to expected climate change. The report outlines pledged actions under the plan and possible issues for Congress.

Jan 14, 2014

Chemical, Hazardous Substances, and Petroleum Spills: CRS Experts

A recent spill from a storage tank of 4-methyl cyclohexane methanol from Freedom Industries into the Elk River near Charleston, West Virginia in early January 2014 has raised questions about the adequacy of spill response and chemical safety. Thousands of oil and chemical spills of varying size occur in the United States each year. State and local officials located in proximity to these incidents generally are the first responders and may elevate an incident for federal attention if greater resources are desired. The National Oil and Hazardous Substances Pollution Contingency Plan, often referred to as the National Contingency Plan (NCP), establishes the procedures for the federal response to oil and chemical spills. The scope of the NCP encompasses discharges of oil into or upon U.S. waters and adjoining shorelines and releases of hazardous substances into the environment. Several hundred toxic chemicals and radionuclides are designated as hazardous substances under the NCP, and other pollutants and contaminants also may fall within the scope of its response authorities. Unlike most federal emergency response plans that are administrative mechanisms, the NCP is codified in federal regulation and is binding and enforceable. The NCP was developed in 1968 and has been revised on multiple occasions to implement the federal statutory response authorities that Congress has expanded over time. Three federal environmental statutes authorized the development of the NCP: the Clean Water Act, as amended; the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980, as amended; and the Oil Pollution Act of 1990. Several executive orders have delegated the presidential response authorities of these statutes to the federal departments and agencies tasked with implementing the NCP. The lead federal agency serves as the On-Scene Coordinator to direct the resources used in a federal response. The Environmental Protection Agency (EPA) generally is the lead agency responsible for coordinating the federal response within the inland zone, and the U.S. Coast Guard generally serves as the lead agency within the coastal zone. However, a response to an incident occurring on a federal facility is coordinated by the federal department or agency that administers the facility. The NCP established the National Response System (NRS) as a multi-tiered framework for coordinating the roles of 15 federal departments and agencies that serve as standing members of the National Response Team to offer specialized resources and expertise that the On-Scene Coordinator may call upon to carry out a response. The NRS also outlines the framework for integrating the participation of non-federal entities, including state and local officials, the responsible parties, and other private entities who may wish to contribute resources or expertise. Although the framework of the NRS is the same for responding to discharges of oil or releases of hazardous substances, the NCP establishes separate operational elements for responding to each type of incident, and these elements differ in some respects. The source of federal funding to carry out a response also differs. The Oil Spill Liability Trust Fund finances the federal response to a discharge of oil, and the Superfund Trust Fund finances the federal response to a release of a hazardous substance. Monies spent from these trust funds may be recouped from the responsible parties under the liability provisions of the Oil Pollution Act and CERCLA, respectively. For multi-faceted incidents, such as major disasters or emergencies, the NCP also could be invoked under the National Response Framework (NRF) to address an aspect of an incident involving a discharge of oil or release of a hazardous substance. The NRF is a broader administrative mechanism for coordinating the array of federal emergency response plans. However, the NRF itself is not an operational plan that dictates a step-by-step process. The NRF Oil and Chemical Spills: Federal Emergency Response Framework instead merely may apply the NCP as the operational plan to respond to a discharge of oil or release of a hazardous substance. This report discusses the statutory authorities of the NCP and relevant executive orders; outlines the federal emergency response framework of the NCP to coordinate federal, state, and local roles; and identifies the funding mechanisms to carry out a federal response to a discharge of oil or a release of a hazardous substance. The federal government, primarily the Environmental Protection Agency (EPA), administers a number of laws, largely through states and local agencies, established by Congress to protect human health and the environment. Numerous congressional committees and subcommittees have jurisdiction over these environmental laws for purposes of authorizations, appropriations, and oversight. Analysis of environmental policy issues requires an understanding of the impacts to, and from, various industries including coal, oil and gas, manufacturing, and agriculture resulting in overlapping policy issues (e.g., energy, natural resources, and pollution control) requiring coordination among experts on environmental statutes and those industries. Sentence structure is a bit awkward. The following table provides names and contact information for CRS experts on various environmental policy issues, including the Clean Air Act, Clean Water Act, Comprehensive Environmental Response, Compensation, and Liability Act (“Superfund”), National Environmental Policy Act, Oil Pollution Act, Federal Insecticide Fungicide and Rodenticide Act, Resource Conservation and Recovery Act, Safe Drinking Water Act, Surface Mining Control and Reclamation Act, Toxic Substances Control Act, and related policy, economic, and technical issues facing Congress. Broad policy areas include air and water quality and pollution control, federal financing for wastewater and drinking water treatment, other types of financial assistance, hazardous and nuclear waste management and cleanup, chemicals in commerce, and international environmental issues, including “sustainability.” (See also CRS Report R42617, Water Resources and Water Quality: CRS Experts, by Betsy A. Cody and Mary Tiemann and CRS Report R42598, Farm Bill: CRS Experts, by Ralph M. Chite.) Environmental regulation, permits, permitting, permit requirements, permit delays, regulatory overreach, wetlands, inspections Water pollution control, , coal mining, mineral mining, strip mining, Spruce No. 1 mine, milk spillage, dairy regulation Climate change, global warming, CO2, carbon dioxide, carbon pollution Keystone XL pipeline, Canadian tar sands, oil sands, pipeline leak, greenhouse gas footprint Toxics inventories, TRI/EPCRA Solid Waste Disposal Act, storage tanks, LUST Trust Fund Clean Air Act, Clean Water Act, Comprehensive Environmental Response Compensation and Liability Act (“Superfund”), National Environmental Policy Act, Oil Pollution Act, Federal Insecticide Fungicide and Rodenticide Act, Resource Conservation and Recovery Act, Safe Drinking Water Act, Surface Mining Control and Reclamation Act, Toxic Substances Control Act Air and water quality and pollution control, federal financing for wastewater and drinking water treatment, water infrastructure, hazardous and nuclear waste management and cleanup, chemicals in commerce, international environmental issues, “sustainability” CHARLESTON, W.Va. chemical spill in a local river, West Virginia American Water, Chemical Safety Board, an independent federal agency that investigates industrial chemical accidents, tap water, one part per million threshold, Centers for Disease Control and Prevention, State Department of Environmental Protection, chemical tank that ruptured, potable water, bottled water, water buffalo, Freedom Industries, chemical 4-methylcyclohexane methanol, or MCHM, American Conference of Governmental Industrial Hygienists,

Jan 13, 2014

Medicaid: An Overview

Jan 10, 2014

Food Fraud and “Economically Motivated Adulteration” of Food and Food Ingredients

Food fraud, or the act of defrauding buyers of food or ingredients for economic gain—whether they be consumers or food manufacturers, retailers, and importers—has vexed the food industry throughout history. Some of the earliest reported cases of food fraud, dating back thousands of years, involved olive oil, tea, wine, and spices. These products continue to be associated with fraud, along with some other foods. Although the vast majority of fraud incidents do not pose a public health risk, some cases have resulted in actual or potential public health risks. Perhaps the most high-profile case has involved the addition of melamine to high-protein feed and milk-based products to artificially inflate protein values in products that may have been diluted. In 2007, pet food adulterated with melamine reportedly killed a large number of dogs and cats in the United States, followed by reports that melamine-contaminated baby formula had sickened thousands of Chinese children. Fraud was also a motive behind Peanut Corporation of America’s actions in connection with the Salmonella outbreak in 2009, which killed 9 people and sickened 700. Reports also indicate that fish and seafood fraud is widespread, consisting mostly of a lower-valued species, which may be associated with some types of food poisoning or allergens, mislabeled as a higher-value species. Other types of foods associated with fraud include honey, meat and grain-based foods, fruit juices, organic foods, coffee, and some highly processed foods. It is not known conclusively how widespread food fraud is in the United States or worldwide. In part, this is because those who commit food fraud want to avoid detection and do not necessarily intend to cause physical harm. Most incidents go undetected since they usually do not result in a food safety risk and consumers often do not notice a quality problem. Although the full scale of food fraud is not known, the number of documented incidents may be a small fraction of the true number of incidents. The Grocery Manufacturers Association estimates that fraud may cost the global food industry between $10 billion and $15 billion per year, affecting approximately 10% of all commercially sold food products. Fraud resulting in a food safety or public health risk event could have significant financial or public relations consequences for a food industry or company. There is no statutory definition of food fraud or “economically motivated adulteration” (EMA) of foods or food ingredients in the United States. However, as part of a 2009 public meeting, the Food and Drug Administration (FDA) adopted a working definition, defining EMA as the “fraudulent, intentional substitution or addition of a substance in a product for the purpose of increasing the apparent value of the product or reducing the cost of its production, i.e., for economic gain.” Efforts are ongoing to compile and capture current and historical data on food fraud and EMA incidents through the creation of databases and repositories. Over the years, Congress has introduced a number of bills intended to address concerns about food fraud for a particular food or food ingredient. Such legislation has not addressed food fraud in a comprehensive manner. However, although no single federal agency or U.S. law directly addresses food fraud, a number of existing laws and statutes already provide the authority for various federal agencies to address fraud. Currently, food fraud is broadly addressed through various food safety, food defense, and food quality authorities as well as border protection and import authorities across a number of federal agencies. FDA and the U.S. Department of Agriculture are the principle agencies that are working to protect the food supply from food safety risks—both unintentionally and intentionally introduced contamination—in conjunction with border protection and enforcement activities by the U.S. Department of Homeland Security. Other agencies also play a role.

Jan 10, 2014

Border Security: Immigration Inspections at Port of Entry

Jan 9, 2014

The Ability-to-Repay Rule: Possible Effects of the Qualified Mortgage Definition on Credit Availability and Other Selected Issues

Jan 9, 2014

Threats to U.S. National Security Interests in Space: Orbital Debris Mitigation and Removal

After decades of activities in space, Earth’s orbit is littered with man-made objects that no longer serve a useful purpose. This includes roughly 22,000 objects larger than the size of a softball and hundreds of thousands of smaller fragments. This population of space debris potentially threatens U.S. national security interests in space, both governmental (military, intelligence, and civil) and commercial. Congress has broadly supported the full range of these national security interests and has a vested concern in ensuring a strong and continued U.S. presence in space. Two events in recent years dramatically increased the amount of fragmentation debris in orbit. One was the 2007 Chinese anti-satellite test and, in 2009, an active U.S. commercial satellite accidentally collided with a defunct Russian satellite. Although the 2013 movie Gravity exaggerated the issue and took certain artistic liberties, the film graphically depicted and drew the public’s attention to the potential destruction of operational satellites and other platforms in space from collisions with orbital debris. Some experts maintain the population growth of debris in space will be primarily driven by catastrophic collisions that are likely to occur every five to nine years. For decades, the United States has worked to minimize the amount of orbital debris left from its space launches and inactive satellites. Many space-faring nations have adopted similar mitigation measures, and additional voluntary international codes of conduct are being pursued. Many experts now believe that mitigation efforts alone are insufficient to prevent the continual increase of space debris. A growing view among experts holds that some level of active removal of debris from the space environment is necessary. Nevertheless, such efforts are technologically immature and face significant budgetary and legal obstacles. Congress has an opportunity to explore these issues through hearings, for instance with major stakeholders in the U.S. national security and civil space communities, and the commercial sector. Efforts to find international agreement on mitigation may involve congressional prerogatives on advice and consent, and any program to pursue remediation will likely entail appropriations support from Congress.

Jan 8, 2014

Financial Services and General Government (FSGG): FY2014 Appropriations

This report discusses the Financial Services and General Government (FSGG) appropriations bill that provides funding for the Department of the Treasury, the Executive Office of the President (EOP), the judiciary, the District of Columbia, and more than two dozen independent agencies.

Jan 7, 2014

Domestic Content Restrictions: The Buy American Act and Complementary Provisions of Federal Law

Broadly understood, domestic content restrictions are provisions which require that items purchased using specific funds appropriated by Congress be produced or manufactured in the United States. Federal law contains a number of such restrictions, each of which applies to different entities and supplies, and imposes somewhat different requirements. Some of these restrictions have, however, been waived pursuant to the Trade Agreements Act (TAA). The Buy American Act of 1933 is the earliest and arguably the best known of the major domestic content restrictions. It generally requires federal agencies to purchase “domestic end products” and use “domestic construction materials” on contracts exceeding the micro-purchase threshold (typically $3,000) performed in the United States. Unmanufactured end products or construction materials qualify as “domestic” if they are mined or produced in the United States. Manufactured ones are treated as “domestic” if they are manufactured in the United States, and either (1) the cost of components mined, produced, or manufactured in the United States exceeds 50% of the cost of all components, or (2) the items are commercially available off-the-shelf items. Agencies may, however, purchase “foreign” supplies in exceptional circumstances. The TAA permits the President to waive the application of domestic content restrictions that would discriminate against “eligible” products or suppliers from countries that have trade agreements with the United States or meet certain other criteria. The Buy American Act is one restriction that has been so waived. This means that certain federal agencies must generally treat end products or construction materials that have been wholly grown, produced, or manufactured in designated countries, or that have been “substantially transformed” into new and different articles within designated countries using materials from other countries, the same as domestic ones when acquiring goods or services whose value exceeds certain monetary thresholds. The Berry Amendment, as currently codified in 10 U.S.C. §2533a, requires that food, clothing, tents, certain textile fabrics and fibers, and hand or measuring tools purchased by the Department of Defense (DOD) using appropriated or other funds be entirely grown, reprocessed, reused, or produced within the United States, with certain exceptions (e.g., procurements by vessels in foreign waters). Until 2006, the Berry Amendment also required that any “specialty metals” (certain types of steel and metal alloys) contained in aircrafts, missile and space systems, ships, tank and automotive items, weapon systems, ammunition, or any components thereof, purchased by DOD be melted or produced in the United States, with certain exceptions. However, that prohibition has since been codified in 10 U.S.C. §2533b. The Buy America Act is the name commonly given to domestic content restrictions imposed on states, localities, and other non-federal entities as a condition of receiving certain grant funds administered by the Department of Transportation. The nature of the restrictions can vary depending upon the funds involved. However, by way of example, 23 U.S.C. §313 generally requires Title 23 funding recipients to use in funded projects steel and iron produced in the United States, as well as manufactured products consisting “predominantly” of steel and iron that were produced in the United States, with certain exceptions (e.g., materials needed are not produced in the United States in sufficient and reasonably available quantities of satisfactory quality). There are also a number of other domestic content restrictions that apply in specific contexts and, in many cases, are intended to address perceived “gaps” left by the four major domestic content regimes noted above.

Jan 6, 2014