Datasets:

pszemraj

/

govreport-summarization-8192

like 3

Crusader XM2001 Self-Propelled Howitzer: Background and Issues for Congress RS21218 -- Crusader XM2001 Self-Propelled Howitzer: Background and Issues for Congress Updated June 25, 2002 Summary The Army has been seeking to enhance its self-propelled 155mm artillery capabilitiessince the late 1970's. In additionto several programs to modify the M109 artillery system, culminating in the current M109A6 Paladin, since 1987these efforts have focused on what is now calledthe XM2001 Crusader. Initially begun in order to match the mobility and firepower of Soviet artillery, the Crusaderprogram is now the center of a controversyover whether it is an appropriate investment given the Army's on-going transformation to a lighter, more mobileforce. Secretary of Defense Rumsfeld hasannounced his intent to terminate the program, however the Crusader's supporters in the House and Senate ArmedServices Committees are seeking legislativeprovisions to maintain the program until at least May 2003 while an assessment of alternatives is conducted. Thisreport will be updated as further events occur. The Army has been seeking to enhance its self-propelled 155mm artillery capabilities since the late 1970's. Among other tasks, artillery systems providedirect-fire maneuver forces, such as tanks and infantry, with immediate, heavy, indirect fires from a distance. Inaddition to several programs to modify theexisting M109 artillery system, culminating in the current M109A6 Paladin, these efforts have focused since 1987on what is now called the XM2001 Crusader. Initially begun in order to match the mobility and firepower of Soviet artillery, the Crusader program is now thecenter of a controversy over whether it is anappropriate investment given the Army's on-going transformation to a lighter, more mobile force. (1) The Crusader program is still in research and development, and was scheduled to undergo a "Milestone B" evaluation in April 2003, which would have decidedwhether the program would move into the "system development and demonstration" R&D phase. A prototypehowitzer was delivered in early 2000 and hasdemonstrated the Crusader's firing capabilities. The plan has been to begin equipping units in FY2008. Approximately $2 billion has been spent on the Crusaderthrough FY2002, with the total program estimated to cost at least $11 billion. This reflects a 1999 reduction in theprocurement objective from 1,138 to 480vehicles. The FY2003 Crusader budget request, as originally submitted, was $475 million. The Crusader has beenfrequently mentioned over the last few years asa program that could be cut or terminated because it did not fit - by some analysts' definitions - the Army'stransformation goals; and, its termination could freeup funds for more technologically advanced systems. Its supporters, however, have maintained that a re-designed,lighter Crusader could play a vital role in bothexpeditionary and traditional heavy units. The controversy intensified on May 3rd when Undersecretary of Defense for Acquisition Pete Aldridge directed the Army to prepare an "assessment ofalternatives" to the Crusader by June 10, 2002. On May 8th, however, it was announced that SecretaryRumsfeld, with the concurrence of President Bush, wasrecommending an amendment to the FY2003 DOD budget request terminating the Crusader program. DeputySecretary Paul Wolfowitz explained that the decision to terminate the Crusader without the review of alternatives was determined by the congressional schedulefor consideration of the DOD FY2003authorization legislation. (2) Press reports indicate that within the Departmentof the Army there was considerable opposition to the Crusader's cancellation, whichled to a controversy over whether inappropriate steps were taken to provide congressional supporters with "talkingpoints" in favor of the program after SecretaryRumsfeld had made his decision. (3) The Crusader would be built by UnitedDefense, LP in a new plant in Oklahoma. The United Defense headquarters is inMinnesota and major subcontractors are in California, Michigan, New Mexico, Pennsylvania, Vermont, andVirginia. Almost simultaneously, proponents of the Crusader program gained the support of the House Committee on Armed Services, which included language in its May3rd report on the DOD FY2003 authorization legislation ( H.R. 4546 / H.Rept. 107-436 ) directing that there be no change to the Crusader development schedule, funding or procurement requirements, to includetermination, until the completion of the Army's Milestone B Analysis of Alternatives. The Secretary of the Armyshall present a report of the completed analysis tothe congressional defense committees by March 1, 2003. The committees will respond to that analysis within 30days so that the scheduled Milestone B reviewcan be completed in April 2003. On May 14, an amendment to the FY2002 Supplemental Appropriation was introduced in the House that was characterized as stopping "the Pentagon fromkilling the Crusader artillery program before it justifies its decision to Congress and recommends an alternative." (4) On June 24, the House AppropriationsCommittee reluctantly agreed to the termination of Crusader but added $173 million to the Administration's proposalfor the purpose of incorporating Crusadertechnologies into a Future Combat System artillery successor by 2008. (5) As the Senate Armed Services Committee (SASC) considered its FY2003 DOD authorization legislation ( S. 2514 ), Crusader supporters there soughtto obtain a similar provisions, although in statutory rather than report language. The SASC invited the Secretaryof Defense and the Chief of Staff, U.S. Army totestify about this matter on May 16, 2002. (6) One unresolved issue at that timewas what it would cost to terminate the Crusader program; proposed estimatesvaried from $136.3 to $500 million. (7) On June 13, the SASC approved anamendment to S. 2514 that would prevent the Administration fromdisbursing any Crusader funds for alternative systems until the Army presents Congress a study on alternatives 30days after enactment of the bill. (8) Congress has become actively involved in deciding the fate of the Crusader, whether that be to endorse the DOD cancellation decision, continue the currentdevelopment schedule, or to choose another option. There are many factors to weigh in considering this issue,including: DOD arguments, Army arguments,industrial base implications, affordability issues, and comparing shorter-term versus longer-term security interests. In the past, Congress has forced reversal ofprevious Administration decisions to cancel major weapons programs; witness the continued existence of the V-22Osprey Tilt-Rotor Aircraft. (9) Compiled beloware the major arguments made by advocates for canceling and for continuing the Crusader program. In seeking to cancel the Crusader program, DOD officials maintain that it is "a system originally designed for a different strategic context, i.e. high intensitywarfare against Soviet forces in Europe, than currently exists." They also assert that it is important, whereverpossible, to invest in truly transformational ratherthan legacy-type systems. While acknowledging that the requirement for long-range all-weather fire supportremains, Crusader opponents suggest that there arealternatives more in keeping with the Army's transformation to a more mobile and deployable force, and that thesecould be available in approximately the sametime-frame as the Crusader. On May 13, Under Secretary of Defense for Acquisition, Technology and Logistics Pete Aldridge banned the Army from spending more money on Crusader andordered a separate review of which Crusader technologies the Army wishes to carry forward into the Future CombatSystem (FCS) program, due by June 30,2002. (10) Deputy Secretary of Defense Paul Wolfowitz has suggested thatfunds allocated to the Crusader in the FY2004-2009 Defense Planning Guidance couldbe applied to a variety of new long-range fire support technology programs, including: Excaliber Guided Artillery Munition (Raytheon) Guided Multiple Launch Rocket System (Lockheed-Martin) High Mobility Artillery Rocket System (Lockheed-Martin) Non-Line-of-Sight Future Combat System (Boeing/SAIC) The weight and timing of the Crusader are seen as key disadvantages. Its weight, about 40 tons, is twice the target weight of all other transformational weaponssystems planned for the Army. It is designed to fight with the 70-ton Abrams tank, which will be phased out within30 years. The General Accounting Office hasnoted that the Crusader will first be deployed in 2008, and this is the same year that the Army plans to begindeployment of the FCS, which would eventuallyreplace the Crusader. (11) In his SASC testimony, Secretary Rumsfeldemphasized that Crusader was not designed to deliver precision fires and he favoredtransformational investments in precision fires. Finally, cancellation of the Crusader is the kind of bold step forward that President Bush proposed during his election campaign with the concept of "skipping ageneration" in weapons deployments. To illustrate the importance attached to this principle, the Office ofManagement and Budget stated that "The President'ssenior advisors would recommend that he veto any bill which included statutory restrictions limiting his ability tocancel this program." (12) Many artillerymen believe that the howitzer will continue to occupy an important niche on the future battlefield. (13) U.S. infantrymen fighting recently in theAfghan mountains during Operation Anaconda had only man-packed mortars for fire support when combat aircraftwere not available. The Excaliber roundtouted by the Administration would still require a 155 mm howitzer to fire it; and according to Crusader supporters,the advanced computers and battlefieldnetworking capabilities of the Crusader would use Excaliber to better advantage than any other howitzers proposed. Supporters of the Crusader emphasize that it has performed well in its live-firing tests, is on schedule, and believe that, with the weight reduction efforts thecontractor has undertaken, has improved its deployability. The Program Manager Col. Russell Hrdy has also notedthat with the Crusader's increased rate of fire,deploying 3 units would be the equivalent of deploying 6 M-109A5/6 Paladins, the Army's current self-propelled155mm artillery system. In other words, the 40tons and 3-man crew of one Crusader would require less lift than the equivalent 60 tons and 8 crewmen of twoPaladins. In regards to substituting the twoadvanced multiple launch rocket systems (GMLRS and HIMARS), it should be noted that one MLRS rocket weighsabout 650 pounds, compared to about 100pounds for one 155 mm artillery round. The Army believes that Crusaders would remain in service until at least 2032, when the transformation to the Army's new Objective Force and full deployment ofthe Future Combat Systems would be complete. (14) During that time,supporters have said the Crusader could provide excellent fire support to the Army's InterimForce in a variety of scenarios and invaluable support to the Legacy Force of Abrams tanks - particularly should itface major combat against enemies equippedwith Soviet-style artillery, e.g. North Korea, Iraq, China, and Russia. (15) Inhis SASC testimony, General Shenseki pointed out that precision weapons do not fulfillone important Crusader requirement, the ability to deliver, cost effectively, massed suppressive fires against close-inand imprecisely located enemy forces. Also, most proposed alternative fire support systems do not provide armored protection for their crews, as doesCrusader. Crusader supporters believe that the program should definitely not be terminated until a thorough review of alternatives for long-range fire support is completed. They point out that most of the alternatives suggested by DOD leadership are all in R&D (in the case of theFCS indirect fire variant, the technology has not evenbeen decided), and have not clearly demonstrated that they could fulfill the long-range fire support requirement ina timely fashion. The Army appears to be fullycommitted to transformation and has cancelled many programs on its own to free up funds for the FCS. (16) The full support the Crusader program received fromthe Army leadership (including Army Chief of Staff General Shinseki), up to the cancellation decision, may betaken as an indication of the program's importanceto current Army war-fighting doctrine. 1. For a discussion of the U.S. Army's efforts to transform, see CRS Report RS20787 , Army Transformation and Modernization: Overview and Issues forCongress, , by [author name scrubbed]. For discussions of transformation efforts in the other Services, see CRS Report RS20859 , Air Force Transformation:Background and Issues for Congress, by [author name scrubbed]; and CRS Report RS20851 , NavalTransformation: Background and Issues for Congress, by[author name scrubbed]. 2. Department of Defense News Briefing, May 8, 2002. 3. Ibid. The DOD IG conducted an investigation into the allegation, which resulted inthe resignation of a mid-level appointee in the Army legislative liaisonoffice. 4. Lisa Caruso. Congress Daily, "Controversial Votes on Supplemental WillBe Delayed," May 14, 2002. 5. Frank Wolfe. Defense Daily , "HAC-D Adds $173 Million ForTechnology Integration of Crusader Successor," June 25, 2002, p.1. 6. SASC held hearings on Thursday, May 16 with Panel 1 consisting of SECDEF DonaldRusfeld, DEPSECDEF Paul D. Wolfowitz, and USD for Aquisition,Technology and Logisitics Edward C. Aldridge. Panel 2 consisted of General Eric K. Shinseki, Chief of Staff, U.S.Army. Transcripts provided by Federal NewsService. 7. Erin Q. Winograd. Inside the Army, "Amended Budget Request ShiftsCrusader Money To Other Army Efforts," May 20, 2002, p. 10. 8. Winograd. Op. cit. , "Senate Committee Rejects Bush Administration'sCrusader Amendment, June 17, 2002, p.1. 9. See CRS Report RL31384 , V-22 Osprey Tilt-Rotor Aircraft, by[author name scrubbed]. 10. Erin Q. Winograd. Inside Defense.com, "OSD Bans Army FromSpending Money On Crusader Development," May 13, 2002. 11. Defense Acquisition: Army Transformation Faces Weapon SystemsChallenges (21-May-01, GAO-01-311) 12. Jon M. Donnelly. Defense Week Daily Update, "White House Threatensto Veto Defense Bill Over Crusader," May 9, 2002. 13. For a more extensive list of these arguments, see Ann Roosevelt. DefenseDaily, "Army Weighs Options Beyond Howitzers," May 13, 2002. 14. [author name scrubbed]. CQ Weekly, "Army's Three-Part Plan Causes Budget, HillDisharmony," April 27, 2002, p.1105. 15. Ann Roosevelt, op. cit. 16. Frank Tiboni. Defense News, "U.S. Army Targets 18 Programs forCancellation," February 18-24, 2002. Included examples are: Armored CombatEarthmover, Follow-on TOW ATGM, M113 A3, Wolverine Assault Bridge, and the Armored Security Vehicle.

The Army has been seeking to enhance its self-propelled 155mm artillery capabilitiessince the late 1970's. In additionto several programs to modify the M109 artillery system, culminating in the current M109A6 Paladin, since 1987these efforts have focused on what is now calledthe XM2001 Crusader. Initially begun in order to match the mobility and firepower of Soviet artillery, the Crusaderprogram is now the center of a controversyover whether it is an appropriate investment given the Army's on-going transformation to a lighter, more mobileforce. Secretary of Defense Rumsfeld hasannounced his intent to terminate the program, however the Crusader's supporters in the House and Senate ArmedServices Committees are seeking legislativeprovisions to maintain the program until at least May 2003 while an assessment of alternatives is conducted. Thisreport will be updated as further events occur.

T he Public Safety Officers' Benefits (PSOB) program was authorized by P.L. 94-430 , the Public Safety Officers' Benefits Act of 1976 ("the PSOB Act"). The PSOB program was "designed to offer peace of mind to men and women seeking careers in public safety and to make a strong statement about the value that America places on the contributions of those who serve their communities in potentially dangerous circumstances." The program was created by Congress out of a concern that "the hazards inherent in law enforcement and fire suppression and the low level of state and local death benefits might discourage qualified individuals from seeking careers in public safety, thus hindering the ability of communities to protect themselves." The PSOB program is administered by the Department of Justice, Bureau of Justice Assistance's (BJA's), PSOB Office. The PSOB Office is responsible for reviewing, processing, and making determinations about claims for benefits under the PSOB program. The PSOB program originally provided only death benefits to survivors of public safety officers killed in the line of duty. Since its inception in 1976, the PSOB program has been expanded to provide disability benefits to public safety officers disabled by an injury suffered in the line of duty and education benefits to the spouses and children of public safety officers killed or disabled in the line of duty. Each of these benefits is discussed in more detail below. The PSOB death benefit is a mandatory program, and the disability and education benefits are discretionary programs. As such, Congress appropriates "such sums as are necessary" each fiscal year to fund the PSOB death benefit program while appropriating separate amounts for both the disability and education benefits programs. Only individuals who are public safety officers, or their eligible survivors, are eligible to receive PSOB benefits. For the purposes of the PSOB Act, a "public safety officer" is defined as an individual serving a public agency in an official capacity, with or without compensation, as a law enforcement officer, firefighter, or a chaplain; an employee of the Federal Emergency Management Agency (FEMA) who is performing official duties, if those official duties are related to a major disaster or emergency that has been or is later declared to exist with respect to the area under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.) and are determined by the Administrator of FEMA to be hazardous duties; an employee of a state, local, or tribal emergency management or civil defense agency who is performing official duties in cooperation with FEMA, if those official duties are related to a major disaster or emergency that has been or is later declared to exist with respect to the area under the Robert T. Stafford Disaster Relief and Emergency Assistance Act and are determined by the head of the agency to be hazardous duties; or a member of a rescue squad or ambulance crew who, as authorized or licensed by law and by the applicable agency or entity, is engaging in rescue activities or providing emergency medical services. The PSOB program provides a death benefit to eligible survivors of a public safety officer whose death is the direct and proximate result of a traumatic injury sustained in the line of duty or certain work-related heart attacks or strokes. To receive a death benefit, the claimant must establish that the public safety officer died as the direct and proximate result of an injury sustained in the line of duty. Under the program, it is presumed that a public safety officer who dies from a heart attack, stroke, or vascular rupture while engaged in, on duty after, or within 24 hours of participating in a non-routine stressful or strenuous physical law enforcement, fire suppression, rescue, hazardous material response, emergency medical services, prison security, disaster relief, or other emergency response activity or a training exercise involving non-routine stressful or strenuous physical activity, has died in the line of duty for death benefit purposes. However, the statutory presumption can be overcome with competent medical evidence to the contrary. The PSOB program pays a one-time lump sum death benefit to eligible survivors of a public safety officer killed in the line of duty. The amount paid to the officer's survivors is the amount authorized to be paid on the date that the officer died, not the amount authorized to be paid on the date that the claim is approved. The current death benefit is $350,079. Survivors of state and local law enforcement officers and firefighters may receive a death benefit if the officer or firefighter died on or after September 29, 1976. Survivors of federal law enforcement officers and firefighters may receive a death benefit if the officer or firefighter died on or after October 12, 1984. A death benefit may be awarded to survivors of members of federal, state, and local public rescue squads or ambulance crews who died on or after October 15, 1986. A death benefit may be awarded to survivors of FEMA personnel and state, local, and tribal emergency management and civil defense agency employees working in cooperation with FEMA who died on or after October 30, 2000. Survivors of chaplains who serve a police or fire department in an official capacity who died on or after September 11, 2001, are eligible to receive a death benefit under the PSOB program. Finally, the survivors of an officer who died of a heart attack, stroke, or vascular rupture on or after December 15, 2003, are eligible to receive a death benefit. PSOB death benefits are paid to eligible survivors in the following order: If the officer is survived by only a spouse and no children, 100% of the death benefit goes to the spouse. If the officer is survived by a spouse and children, 50% of the death benefit goes to the spouse and the remaining 50% is distributed equally among the officer's children. If the officer is survived by only children and not a spouse, the death benefit is equally distributed among the officer's children. If the officer is survived by neither a spouse nor children, the death benefit is paid to the individual(s) designated by the officer in the most recently executed designation of beneficiary on file at the time of the officer's death. If the officer does not have a designation of beneficiary on file, the benefit is paid to the individual(s) designated by the officer in the most recently executed life insurance policy on file at the time of the officer's death. If the officer is survived by neither a spouse nor eligible children, and the officer does not have a life insurance policy, the death benefit is equally distributed between the officer's surviving parents. If the officer is survived by neither a spouse, nor eligible children, nor parents, and the officer did not have a designation of beneficiary or a life insurance policy on file at the time of his or her death, the benefit is paid to surviving adult, non-dependent, children of the officer. Title XIII of P.L. 101-647 expanded the scope of the PSOB program to provide a disability benefit to public safety officers who have been permanently and totally disabled as the direct and proximate result of a catastrophic injury sustained in the line of duty, if the injury permanently prevents the officer from performing any gainful work. The claimant is responsible for establishing that he or she suffered a permanent and total disability as the direct and proximate result of an injury sustained in the line of duty. Like the PSOB death benefit program, the disability benefit program pays a one-time lump sum disability benefit to public safety officers disabled in the line of duty. The current disability benefit is $350,079. Most public safety officers (federal, state, and local law enforcement officers; firefighters; and members of rescue squads and ambulance crews) are eligible to receive disability benefits if they were disabled by an injury suffered in the line of duty on or after November 29, 1990. As of October 30, 2000, employees of FEMA and state, local, and tribal emergency management and civil defense agency employees working in cooperation with FEMA are also eligible to receive disability benefits. Chaplains who serve a police or fire department in an official capacity who are disabled on or after September 11, 2001, are also eligible to receive disability benefits under the PSOB program. A death or disability benefit will not be paid if the fatal or catastrophic injury was caused by the intentional misconduct of the public safety officer or the officer's intention to bring about his or her death, disability, or injury; if the public safety officer was voluntarily intoxicated at the time of his or her fatal or catastrophic injury; if the public safety officer was performing his or her duties in a grossly negligent manner at the time of his or her fatal or catastrophic injury; if an eligible survivor's actions were a substantial contributing factor to the officer's fatal or catastrophic injury; or with respect to any individual employed in a capacity other than a civilian capacity. When making a determination about whether a death or disability benefit is to be paid, the PSOB Office is required to presume that none of the above conditions applied in the case of the officer's death or disability. In addition, the PSOB Office shall not determine that the above conditions applied absent clear and convincing evidence. The Federal Law Enforcement Dependents Assistance Act of 1996 ( P.L. 104-238 ) authorized the Public Safety Officers' Educational Assistance (PSOEA) program. PSOEA provides assistance to spouses and children of public safety officers killed or disabled in the line of duty who attend a program of higher education at an eligible educational institution. PSOEA funds may be used to defray expenses associated with attending college, including tuition, room and board, books, supplies, and education-related fees. The spouse of a deceased or disabled public safety officer is eligible to receive education benefits under PSOEA anytime during his or her lifetime. However, the child of a deceased or disabled public safety officer is no longer eligible for assistance after his or her 27 th birthday, absent a finding of extraordinary circumstances. However, the age limitation can be extended for certain circumstances related to delays in approving a claim for benefits. A spouse or child of a deceased or disabled public safety officer cannot receive PSOEA funds for more than 45 months of full-time education or a proportionate period of part-time education. Currently, the amount of the PSOB educational benefit is $1,041 per month of full-time college attendance. Under the PSOEA program, the families of federal, state, and local police, fire, and emergency public safety officers are covered for line-of-duty deaths that occurred on or after January 1, 1978. Families of disabled federal law enforcement officers are eligible for benefits if the officer was disabled on or after October 3, 1996, whereas families of disabled state and local police, fire, and emergency public safety officers are eligible for benefits if the officer was disabled on or after November 13, 1998. Families of FEMA personnel and state, local, and tribal emergency management and civil defense agency employees are covered for such injuries sustained on or after October 30, 2000. Claimants are allowed to appeal claims that are denied by the PSOB Office. A claimant has 33 days after being served with a notice of denial to request a determination by a hearing officer. The claimant may file supporting evidence or legal arguments along with the request for a hearing officer determination. After the appeal is assigned to a hearing officer, the claimant is notified that any supporting evidence and legal arguments he or she wishes to provide must be filed with both the hearing officer and the PSOB Office. The hearing officer, who reviews the claim de novo--meaning that the hearing officer reviews the entire claim anew rather than reviewing the finding, determinations, decisions, judgments, rulings, or other actions of the PSOB Office--and makes a determination. A claimant appealing the denial of a death or disability benefit can request that the hearing officer hold a hearing. A request for a hearing will not be granted if the claimant does not request a hearing within 90 days of the claim being assigned to a hearing officer, unless, for good cause shown, the Director of BJA (the Director) extends the filing deadline. The purpose of the hearing is to allow the hearing officer to collect evidence from the claimant and his witnesses and any other evidence the hearing officer may decide is necessary or useful. At the hearing, the hearing officer may exclude evidence whose probative value is substantially outweighed by undue delay, waste of time, or needless presentation of cumulative evidence. Witnesses (other than the claimant and anyone who the claimant has shown to be essential to the presentation of the claim) are prevented from hearing the testimony of other witnesses at the hearing. If a claim is denied by the hearing officer, the claimant can appeal to the Director. If the denied claim is not appealed to the Director, the hearing officer's determination is considered the final agency determination of the claim. A claimant has 33 days after being notified by the hearing officer that the claim has been denied to file an appeal with the Director, unless, for good cause shown, the Director extends the filing deadline. Like the request for a hearing officer determination, the claimant may file supporting evidence or legal arguments along with the request for an appeal. If the Director denies the claim, the claimant can appeal the denial in the United States Court of Federal Claims pursuant to 28 U.S.C. SS 1491(a). However, to petition the court to review the denial of a claim, the claimant must exhaust the administrative remedies available, meaning that the claimant must have asked for both a hearing officer determination and a Director review. The Director's determination constitutes the final agency determination of the claim.

The Public Safety Officers' Benefits (PSOB) program provides three different types of benefits to public safety officers and their survivors: death, disability, and education benefits. The PSOB program is administered by the Department of Justice, Bureau of Justice Assistance's (BJA's) PSOB Office. The PSOB death benefit is a mandatory program, and the disability and education benefits are discretionary programs. As such, Congress appropriates "such sums as are necessary" each fiscal year to fund the PSOB death benefit program while appropriating separate amounts for both the disability and education benefits programs. The PSOB program provides a one-time lump sum death benefit to eligible survivors of public safety officers whose deaths are the direct and proximate result of a traumatic injury sustained in the line of duty or from certain line-of-duty heart attacks, strokes, and vascular ruptures. The PSOB program provides a one-time lump sum disability benefit to public safety officers who have been permanently and totally disabled by a catastrophic injury sustained in the line of duty, if the injury permanently prevents the officer from performing any gainful work. The PSOB program also provides assistance for higher education expenses (e.g., tuition and fees, books, supplies, and room and board) to spouses and children of public safety officers who have been killed or disabled in the line of duty. Educational assistance is available to the spouse and children of a public safety officer after the PSOB death or disability claim has been approved and awarded. Claimants have the opportunity to appeal denied claims. If the PSOB Office denies a claim, the claimant can request that a hearing officer review the claim. If the hearing officer denies the claim, the claimant can request that the Director of BJA review the claim. Claimants may file supporting evidence or legal arguments along with their request for a review by a hearing officer or the Director. If the claim is denied by the Director, claimants can appeal the denial in the United States Court of Federal Claims pursuant to 28 U.S.C. SS1491(a).

The recent trend in state laws requiring voters to present identification when casting their ballots has raised questions about the burdens imposed on individuals who do not have photo identification, including those who object to photographs based on religious beliefs. Proposed legislation in the 112 th Congress addresses state efforts to implement these requirements, including one bill that would prohibit states from requiring voter identification in federal elections. Photo identification has been a recurring issue in a number of contexts, and Congress recently has considered questions regarding whether photo ID can or should be required under the REAL ID Act of 2005. Intended to improve security for driver's licenses and personal identification cards, the REAL ID Act also requires, without exemption, that a digital photograph appear on each document. A number of religious beliefs may interfere with requirements for photo identification, leading to questions about whether a religious exemption to photograph requirements may be required to comport with the Free Exercise Clause of the First Amendment and the Religious Freedom Restoration Act of 1993 (RFRA). This report will analyze the legal issues associated with religious exemptions to photo identification laws. Although no lawsuits appear to have challenged federal laws with photo requirements, state photo identification laws have been challenged for several decades. After discussing the legal requirements of the Free Exercise Clause and RFRA, the report will explain the elements of analysis necessary for legal challenges involving religious objections to photo requirements. The report will also analyze lawsuits that have challenged state photo requirements, including significant factors of consideration in such cases. Finally, the report will analyze what factors may be relevant in future decisions that may arise related to federal photo identification requirements as well as U.S. Supreme Court opinions related to religious objections to voter identification requirements. The First Amendment of the U.S. Constitution provides that "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof...." These clauses are known respectively as the Establishment Clause and the Free Exercise Clause. Under the Free Exercise Clause, individuals are guaranteed the right to practice their religious beliefs without government interference. Historically, the U.S. Supreme Court applied a heightened standard of review to government actions that allegedly interfered with a person's free exercise of religion. Under that heightened standard, the government could not interfere with a person's religious exercise if it did not have a compelling governmental interest. In 1990, the Court reinterpreted that standard in Employment Division, Department of Human Resources of Oregon v. Smith , holding that the compelling interest was not necessary for governmental interference with religious exercise in all circumstances. Since then, the Court has held that the Free Exercise Clause never "relieve[s] an individual of the obligation to comply with a valid and neutral law of general applicability." Under this interpretation, the constitutional baseline of protection was lowered, meaning that laws that do not specifically target religion or do not allow for individualized assessments are not subject to heightened review under the Constitution. Rather, these laws of general applicability are required only to be rationally related to a legitimate government purpose, and this baseline of constitutional protection analysis is often referred to as rational basis review. Congress responded to the Court's holding in Smith by enacting RFRA, which statutorily reinstated the standard of protection of heightened scrutiny for government actions interfering with a person's free exercise of religion. When RFRA was originally enacted, it applied to federal, state, and local government actions, but the Supreme Court later ruled that its application to state and local governments was unconstitutional under principles of federalism. Therefore, RFRA now applies only to federal actions. RFRA provides that a statute or regulation of general applicability may lawfully burden a person's exercise of religion only if it (1) furthers a compelling governmental interest and (2) uses the least restrictive means to further that interest. This standard reflects the pre- Smith compelling interest requirement and is sometimes referred to as strict scrutiny analysis. In 2006, the Supreme Court addressed the issue of whether religious exemptions were required from generally applicable laws under RFRA. In Gonzales v. O Centro Espirita Beneficente Uniao Do Vegetal , the Court held that the government must demonstrate a compelling interest to prohibit any exceptions for generally applicable laws to accommodate religious exercise. Specifically, the Court stated that the government must "demonstrate a compelling interest in uniform application of a particular program by offering evidence that granting the requested religious accommodations would seriously compromise its ability to administer the program." As a statutory enactment, rather than a constitutional standard, RFRA is not necessarily absolutely binding against all post-RFRA legislation. Rather, it is possible that future statutes may not be required to comply with RFRA. In other words, RFRA may be preempted by another federal law. Congress may amend RFRA's scope of application generally or may provide specific exemptions from RFRA in future legislation. Members of some religious groups may object to having their photograph taken as many identification laws require. The teachings of several religious groups may prohibit their members from being photographed in general or from revealing some parts of their body. For instance, some Christians, including some Amish, believe photographs violate the Ten Commandments. Members of other religious groups may believe that members must wear head coverings or veils for religious reasons. Identification laws that require individuals to be photographed or require individuals to be photographed without religious head covering may infringe upon these individuals' First Amendment right to exercise their religious beliefs freely, leading to potential legal challenges to determine whether the individuals' First Amendment right must be accommodated. The most common type of identification law to be challenged are state driver's license laws, but the legal issues may also apply in other cases with photograph requirements. In challenges to legal requirements that may infringe on an individual's religious exercise, courts generally consider three questions: (1) Is the individual's religious belief sincerely held?; (2) Would the legal requirement impose a substantial burden on the individual's religious exercise?; and (3) Is the burden sufficient to overcome the government's interest in applying the requirement without an exemption? In order for an individual's religious beliefs to be protected by the Free Exercise Clause, the beliefs must be sincerely held. An individual's beliefs are not required to conform with the beliefs of other members of his or her religious group, nor is the individual required to be a member of a religious group at all. Furthermore, the accuracy of an individual's religious belief need not be verified by factual findings. The U.S. Supreme Court has held that courts are not to judge the truth or falsity of religious beliefs. Instead, courts generally examine whether the individual applies the belief consistently in his or her own practices. Even if an individual's belief is sincerely held, the government action that allegedly infringes on that belief must impose a substantial burden on the individual's religious exercise. A substantial burden on religious exercise is one that puts "substantial pressure on an adherent to modify his behavior and to violate his beliefs." The Supreme Court has required evidence that the legal requirement in question violates the individual's sincerely held belief. That is, if the legal requirement that the individual opposes does not actually interfere with the religious practice, the government may still require the individual to comply with the requirement. For example, a religious organization challenged the imposition of a sales tax on religious products that it sold, claiming the tax burdened the organization's religious exercise. The organization's religious doctrine did not include a belief that payment of taxes was forbidden, but rather claimed that the government was taking part of the money it raised as a part of its religious practice. The Supreme Court held that a sales tax applied generally to products distributed by religious and non-religious entities did not constitute a significant burden on religious exercise because the tax itself did not violate the religious entity's sincerely held beliefs. Therefore, in the case of a religious organization's objections to paying sales tax on products it sells, the organization would be substantially burdened by the tax if its sincerely held beliefs prohibited the payment of taxes, because the tax requirement forces the organization to act in violation of its beliefs. However, because the action being regulated by the government was not one that directly affected the organization's sincerely held beliefs, the Court held that the burden did not implicate the organization's religious exercise. Once a court has determined that a substantial burden has been imposed on a sincerely held belief, it must balance that burden on the individual's religious exercise with the governmental interest associated with it. That is, the right to religious exercise is not absolute. Burdens on religious exercise may be constitutionally permissible if the appropriate legal standard is met. The standard that this balance must meet is determined by the applicable law protecting religious exercise. For cases brought under the Free Exercise Clause of the U.S. Constitution, the governmental interest generally may be deemed to outweigh the burden on religious exercise if the governmental action is rationally related to a legitimate government purpose--the minimum constitutional standard of review sometimes referred to as rational basis review. For cases brought under the heightened statutory standard provided by RFRA, the governmental interest outweighs the burden on religious exercise if the government has a compelling interest that is achieved by the least restrictive means to meet that end--the strict scrutiny standard of review. Cases may also be brought under state constitutional or statutory provisions relating to free exercise, which may impose either of these standards. Over the past several decades, lawsuits challenging state photo identification laws, particularly driver's license photo requirements, have been filed in federal and state courts. The U.S. Supreme Court has never ruled on the issue of religious exemptions to photo identification requirements. One driver's license photo case, Jensen v. Quaring, made its way to the Court, but because one Justice did not participate in the case and the other Justices split evenly in the decision, the Court issued no opinion, resulting in the automatic affirmance of the decision of the Court of Appeals for the 8 th Circuit. The 8 th Circuit's decision required state officials to issue a driver's license without a photograph. A review of the decisions concerning whether exemptions are required for individuals with religious objections to photograph requirements for driver's licenses indicates a few common considerations by courts in such cases. Among the factors addressed by courts hearing such challenges were (1) the demonstration of the sincerity of the individual's religious belief; (2) the nature of the burden imposed by the photo requirement; (3) the strictness of the underlying religious doctrine; (4) whether the state offered exemptions to the photo requirement in other instances; and (5) the purpose of the identification card. The outcome of these cases also appears to have depended on the timing of the case, whether it was decided under the pre- Smith heightened constitutional standard or decided after the heightened security concerns existing after 9/11. Courts consistently address the sincerity of the beliefs that allegedly forbid individuals from complying with legal photo requirements. Without comparing the individual's beliefs to those of other members of the same religious sect or considering the veracity of the beliefs, courts examine the individual's beliefs to determine whether the belief is sincerely held or being used as a false claim to avoid compliance with governmental regulation. In several cases challenging photograph requirements, courts have considered evidence that the individual consistently opposes photographs or revealing parts of the body. In cases where the individual challenging the photograph requirement does so because of a belief that photographs are prohibited by biblical teachings, several courts have noted that the individual does not display photographs, videos, or artwork at home and removes pictures from books and other products purchased from stores. The 8 th Circuit summarized its finding that the individual's belief was sincerely held, recognizing that the individual could support her interpretation of the Bible, based on her knowledge of several portions of the Old Testament. In addition, her behavior in every way conforms to the prohibition as she understands it.... Because [her] beliefs are based on a passage from scripture, receive some support from historical and biblical tradition, and play a central role in her daily life, they must be characterized as sincerely held religious beliefs. Courts have also considered the nature of the burden imposed by the photo requirement on the individual seeking exemption. If the individual relies heavily on the use of his or her driver's license in daily life, courts have recognized a significant burden imposed by the photograph requirement. For instance, courts have noted that individuals whose jobs require them to maintain a valid driver's license for transportation and specific job duties, such as a self-employed house painter who must transport supplies to various locations or a farm manager who must have access to the entire farm operation, face a severe burden if they do not comply with the photo requirement. Although courts generally avoid inquiries regarding the factual veracity of religious beliefs, at least one court has considered the strictness of the religious belief that the individual claimed would be violated by the photo requirement. In that case, a woman sought an exemption to a requirement that licensees' full face be photographed, without any covering including a veil that was part of her traditional Muslim headdress. A state court held that the woman's religion was not burdened by the full face photo requirement. The court, interpreting a state religious exercise protection statute, relied on the state supreme court's definition of a substantial burden as "one that either compels the religious adherent to engage in conduct that his religion forbids or forbids him to engage in conduct that that his religion requires." Noting that expert testimony indicated that Islamic law permitted exceptions to its veiling requirements, the court held that the woman had not demonstrated the requisite substantial burden for photo identification cards. Because the state was willing to accommodate the woman's beliefs when taking the photograph (e.g., having a female photographer take the picture privately), the court held that the state had not placed an impermissible burden on the woman's religious exercise by requiring her to have a photo driver's license. One of the most common factors considered by courts in these cases is the existence of alternative methods of identification or other exemptions to the photo requirement. The 8 th Circuit noted that "the state [Nebraska] already allows numerous exemptions to the photograph requirement," including "learner's permits, school permits issued to farmers' children, farm machinery permits, special permits for those with restricted or minimal driving ability, or temporary licenses for individuals outside the state whose old licenses have expired." Because the state provided such a wide variety of exemptions, the court held that the state could not claim the requisite compelling state interest in denying an exemption based on religion. Other courts have used the same reasoning in other states that permitted exemptions. For example, a federal district court held that because Colorado issues special licenses without photographs in certain circumstances, the state violated an individual's religious exercise by not permitting a religious exemption. The Colorado Supreme Court had previously held that exemptions were not required because any exemption would undermine the central purpose of the photo requirement law. However, the U.S. Court of Appeals for the 10 th Circuit, when remanding the case to the district court, held that if the state issued some driver's licenses without photographs, the state interest found to be compelling by the Colorado Supreme Court would be undermined and an exemption based on religion would be required. Some courts have also been persuaded by the existence of alternative methods of identification. The Indiana Supreme Court held that while "the state has a strong interest in insuring driver competency, the idea that the photograph requirement is necessary to that interest is patently absurd." The court held that "there are other alternatives available ... which would satisfy this purpose without impinging on the rights" of individuals with religious objections. The court stated that "the statistics which are traditionally included on a driver's licenses, such as license number, height, weight, eye and hair color, have long proven adequate to enable the Bureau to fulfill its important duties." In cases challenging photo requirements for identification, the arguments to prohibit exemptions generally include (1) reliable and efficient identification by law enforcement officials; (2) facilitation of identification for private activities, for example, financial transactions or identity theft; and (3) prevention of administrative burdens on the state posed by applications for exemption. Courts have reached differing outcomes in cases involving these arguments, depending on the specific facts of the cases before them. The 8 th Circuit, in a pre- Smith decision, did not agree that any of these arguments met the requisite compelling interest standard. The court noted that many individuals did not have photographs on their licenses or did not have licenses at all, undermining the first two arguments. The court also held that there was no evidence to show "that allowing religious exemptions to the photograph requirement will jeopardize the state's interest in administrative efficiency." A California state appellate court, using a lower standard of review in a post- Smith decision for the federal Free Exercise claim, reached a different outcome in these arguments. The court held that no exemption was required for individual religious objections to the state's photograph requirement because the law "is a neutral, generally applicable requirement that is rationally related to achieving the legitimate interests of promoting highway safety, discouraging fraud, and deterring identity theft." When the court applied strict scrutiny review under the state's constitutional free exercise protection provision, it reached the same outcome, permitting the state to refuse to grant an exemption to the photo requirement. The court explained that driving on the state's roads is a privilege rather than a right, and that the state's interest in enforcing traffic laws and ensuring public safety justified a policy prohibiting exemptions because "unchallenged evidence showed that a driver's license photograph is the most reliable, accurate, and timely means of identifying persons while on the public roadways." The court also agreed with a Maryland state attorney general opinion that justified the photo requirement as a tool in protecting individuals against victimization. Although most challenges to photo requirements arise in the context of driver's license laws, some individuals have challenged photo requirements for other identification laws. For example, while the 8 th Circuit initially held that an exemption was required for a driver's license photo requirement, it later held that an exemption was not required for a law that mandated individuals charged with federal felonies be photographed. In such cases, the court held that the government had a compelling interest in having a photograph of defendants and parolees to aid in identifying and apprehending such individuals if necessary. Although photo identification requirements most often are enacted at the state level, federal identification requirements also exist. U.S. passports must include a photograph that displays "a good likeness" of the individual, and the U.S. Department of State does not permit exemption from this requirement based on religious objections. Additionally, Congress enacted the REAL ID Act of 2005, which contains a number of provisions relating to improved security for driver's licenses and personal identification cards, as well as instructions for states that do not comply with its provisions. The REAL ID Act requires, without exemption, that a digital photograph appear on each document. Although it is unclear because courts have not considered federal photo requirements under RFRA, it appears likely that a religious exemption would not be required under either the Free Exercise Clause or RFRA. Based on considerations of lawsuits involving state law requirements, it appears that the government could provide a strong argument that uniform application of a federal photo identification law would meet even RFRA's heightened standard requiring a compelling interest, depending on the purpose and actual application of the law. Again, Congress also has authority to exempt statutes from complying with RFRA, and may choose to do so if it believes a statute may not meet the strict scrutiny review that RFRA would otherwise require. Many of the lawsuits requiring exemptions for individuals with religious objections to photo requirements occurred prior to the U.S. Supreme Court's decision in Smith , which lowered the constitutional standard used to protect religious exercise for laws of general applicability. Before Smith , the government had to demonstrate a compelling interest in requiring photographs without exemptions for religious objectors. But after Smith , the government only needed to demonstrate that the generally applicable requirement was rationally related to a legitimate government purpose. The pre- Smith standard used to review the exemption cases was therefore much more difficult to meet, leading to numerous courts requiring the states to allow exemptions to photo requirements, particularly if other exemptions or alternatives were available. However, even under the strict scrutiny standard, courts have been willing to recognize photo identification as a compelling purpose under strict scrutiny, provided the photo requirement was applied uniformly and without exemption. Courts have also been more likely to find a compelling interest and hold that an exemption was not required in cases in which the identification was not specifically a license to drive, but rather identification for some other purpose (e.g., photo following arrest, photo for gun permit). In cases brought after Smith , photo requirements have generally been held to withstand rational basis review under constitutional Free Exercise claims, with courts finding that a mandatory photograph is rationally related to the legitimate governmental purpose of identification of citizens using its highways or engaging in commerce. The enactment of RFRA after Smith means that in addition to meeting the constitutional requirements for religious exercise, federal actions must also meet the statutory requirements for religious exercise. At this time, however, it appears that no lawsuits have challenged federal photo requirements under the statutory strict scrutiny standard provided by RFRA. Because RFRA applies the standard that was used pre- Smith , it might appear that the pre- Smith cases would indicate the likely outcome of courts considering legal questions regarding federal photo requirements. However, the events of September 11, 2001, have resulted in heightened security standards and given new context to legal identification requirements. In post-9/11 cases, courts generally have not required exemptions for photo requirements in identification laws. Even in cases where exemptions were allowed prior to 9/11, courts have held that refusal of applications for exemption since then is permissible. One state appellate court held that a prohibition on exemptions for the photo requirement in state identification laws survived rational basis review under the federal Free Exercise Clause and strict scrutiny review under the relevant state constitutional protection for religious exercise. The court held that, as a result of public safety concerns, "the DMV was justified in revoking a religious exemption that would provide a ready means for criminal offenders and potential terrorists to conceal their identities, obtain fraudulent driver's licenses, and frustrate airport security." Under the analysis used in photo identification cases, if a legal requirement for a photograph infringes on an individual's sincerely held religious beliefs, the government must prove that the individual's religious exercise is not substantially burdened by the requirement or that the state's interest outweighs the burden under the standard imposed by the relevant law under which the photo requirement is challenged. Particularly after 9/11, courts appear more likely to apply the photo requirement strictly, without exemption, if the government's compelling interest is directly related to security concerns. However, although the events of 9/11 have created heightened security concerns that have been used to justify a prohibition on exemptions to photo requirements in several cases, courts have not summarily dismissed the possibility of exemptions. Accordingly, it is important to remember that evidentiary concerns are very significant in this context. That is, these cases are very fact-specific and the outcome may depend on nuanced details of the individual's religious beliefs or the government's specific purposes. A federal district court required one individual to be photographed because it found that her religion permitted her to be photographed under certain circumstances and the woman did not provide evidence to refute those findings. The court held that the woman was not substantially burdened and never reached the question of whether the government's interest was justified under the relevant standard of review. Had the woman demonstrated a personal belief that conflicted with the official teachings of her religion, the court may have held otherwise. Another important consideration in determining whether an exemption should be provided for federal photo identification laws is the uniformity of application of the photo requirement. Courts are more likely to require a religious exemption if other alternatives are available. Thus, if Congress includes, or courts require, other exemptions to the federal photo identification requirements, it is more likely that a religious exemption would also be required. If Congress does provide an exemption based on religion to federal identification requirements, it is unlikely that such an exemption would be considered a violation of the Establishment Clause. The Establishment Clause prohibits preferential treatment of one religion over another or preferential treatment of religion generally over nonreligion. Some argue that providing some individuals an exemption from a legal requirement because of their religion provides special treatment based on religion, in violation of the Establishment Clause. However, the Supreme Court has upheld religious exemptions for government programs, where the exemptions were enacted to prevent government interference with religious exercise. In recent years, an increasing number of states have enacted voter identification laws, some of which have required individuals to show photo identification in order to cast a ballot in an election. So-called voter ID requirements have been very controversial amid claims that such requirements impose impermissible burdens on individuals' right to vote. The U.S. Supreme Court considered the constitutionality of Indiana's Voter ID law, and although a majority of Justices did not agree upon a rationale, the Court did uphold the law as constitutional on its face. The decision held that the case presented insufficient evidence to demonstrate that Indiana's requirement that voters present photo identification when voting in person imposed an unconstitutional burden as a general matter. However, two of the opinions issued in the case, one supporting the decision and one written in dissent, revealed that a majority of Justices questioned whether the requirements that the Indiana law would impose on voters with religious objections would withstand an "as applied" challenge. In other words, the Court definitively upheld the law when presented with a challenge to the general requirement that voters present identification, but in nonbinding comments included in some opinions, it appears probable that the Court may reach a different result if that law were challenged as it was applied to religious objectors. Such a challenge would involve a more substantial burden than that imposed on non-objectors, according to the opinions. In the lead opinion, expressing the views of Chief Justice Roberts and Justices Stevens and Kennedy, Justice Stevens noted that in order to officially cast a ballot, voters with religious objections to photo ID must "cast a provisional ballot that will be counted only if she executes an appropriate affidavit before the circuit court clerk within 10 days following the election." The opinion recognized that this imposed "a somewhat heavier burden" on these voters compared to the general electorate. The Justices noted that "even assuming that the burden may not be justified as to a few voters," the law's application to that narrow class would not justify invalidating it entirely. The opinion critically commented that the burden imposed on religious objectors seemed unnecessary: "It is, however, difficult to understand why the State should require voters with a faith-based objection to being photographed to cast provisional ballots subject to later verification in every election when the [State] is able to issue these citizens special licenses that enable them to drive without any photo identification." Justice Souter's dissenting opinion, joined by Justice Ginsburg, also questioned the permissibility of the burden imposed by Indiana on religious objectors. Noting that religious objectors have a less burdensome option for other forms of identification (i.e., driver's licenses), the opinion suggested that the two-step process for religious objectors to cast their vote (casting a provisional ballot and appearing in person before a county official within 10 days) was significantly more burdensome than necessary. Justice Souter explained that the exemption for driver's licenses required objectors to appear only once every four years and may be done at any of the numerous license branches, whereas the exemption for voter ID required objectors to appear for every election and could be done only at the county seat, which may be "particularly onerous." Accordingly, "nothing about the State's interest in fighting voter fraud justifies this requirement of a postelection trip to the county seat instead of some verification process at the polling places." Crawford is not binding precedent on the issue of the constitutionality of voter ID for religious objectors. Furthermore, it considered only Indiana's law, and it is notable that state laws requiring identification may vary significantly. Thus, the Court may resolve the question differently in a different case involving religious objections to photo requirements. It is important to note that these voter ID requirements are state government actions, and therefore not subject to RFRA's heightened standard of review. However, because the U.S. Constitution provides only a baseline of protection, it is possible that states may have imposed heightened review through their state constitutions or enacted separate statutory protections similar to RFRA.

Recent controversies over state laws requiring voters to present identification when casting their ballots have raised questions about the burdens imposed on individuals who do not have photo identification, including those who object to photographs based on religious beliefs. The 112th Congress has introduced a number of bills directed at so-called voter ID requirements. Congress also has previously considered federal photo identification requirements, most recently in the REAL ID Act of 2005. A number of religious beliefs may conflict with requirements for photo identification, leading to questions about whether a religious exemption may be required to protect religious exercise. The Free Exercise Clause of the U.S. Constitution generally prohibits Congress from enacting laws that restrict the free exercise of religion, guaranteeing individuals the right to practice their religious beliefs without government interference. To comport with the Free Exercise Clause, any neutral law of general applicability (i.e., those that do not target religion or require individual assessments) must be rationally related to a legitimate government purpose. If a state law with a photo requirement meets this standard of review, an exemption based on religion is not necessary under the federal constitution. Federal laws burdening religious exercise must also comport with the Religious Freedom Restoration Act (RFRA), which provides a heightened level of review for such laws. Under RFRA, any federal law burdening religion generally must have a compelling governmental interest achieved by the least restrictive means possible. If the government can meet this standard of review, an exemption based on religion is not necessary under RFRA. State laws requiring photo identification would be required to comport with the Free Exercise Clause, as well as with any applicable state provisions that may provide heightened standards of review. Generally, courts considering challenges to legal requirements that may infringe upon religious exercise consider whether the religious belief is sincerely held; whether it is substantially burdened; and whether the government's interest in burdening the belief is sufficient under the applicable standard of review. These questions tend to distinguish sincere objections with actual burdens from so-called claims of convenience. In other words, courts look for evidence that the objector's religious exercise is in direct conflict with a particular requirement, rather than being used as an excuse to avoid compliance with a law with which the individual merely disagrees. This report will analyze the legal issues associated with religious exemptions to photo identification laws. Although no lawsuits appear to have challenged federal laws with photo requirements, state photo identification laws have been challenged for several decades. After discussing the legal requirements of the Free Exercise Clause and RFRA, the report will explain the elements of analysis necessary for legal challenges involving religious objections to photo requirements. The report will also analyze lawsuits that have challenged state photo requirements, including significant factors of consideration in such cases. Finally, the report will analyze what factors may be relevant in future decisions that may arise related to federal photo identification requirements and state voter identification requirements.

The U.S. electric power system has historically operated at such a high level of reliability that any major outage, either caused by sabotage, weather, or operational errors, makes news headlines. As the August 14, 2003, Midwest and Northeast blackout demonstrated, a loss of electric power is very expensive and can entail considerable disruption to business, travel, government services, and daily life. The electric utility industry operates as an integrated system of generation, transmission, and distribution facilities to deliver power to consumers. The electric power system in the United States consists of over 9,200 electric generating units with more than 950,000 megawatts of generating capacity connected to more than 300,000 miles of transmission lines; more than 210,000 miles of the transmission lines are rated at 230 kilovolts (kV) or higher ( Figure 1 ). In addition, approximately 150 control centers manage the flow of electricity through the system under normal operating conditions. Most electricity in the United States is generated at power plants that use fossil fuels (oil, gas, coal), nuclear fission, or renewable energy (hydropower, geothermal, solar, wind, biomass). At the power plant, energy is converted into a set of three alternating electric currents, called three-phase power. After power is generated, the first step in delivering electricity to the consumer is to transform the power from medium voltage (15-50 kilovolt (kV)) to high voltage (138-765 kV) alternating current ( Figure 2 ). This initial step-up of voltage occurs in a transformer located at transmission substations at the generating facilities. High voltages allow power to be moved long distances with the greatest efficiency, i.e. transmission line losses are minimized. The three phases of power are carried over three wires that are connected to large transmission towers. Close to the ultimate consumer, the power is stepped-down at another substation to lower voltages, typically less than 10 kV. At this point, the power is considered to have left the transmission system and entered the distribution system. The transmission system continues to become more congested, and siting of transmission lines continues to be difficult. To try to maximize operation of existing infrastructure, efforts are being made in both industry and government to modernize electric distribution equipment to improve communications between utilities and the ultimate consumer. The goal is to use advanced, information-based technologies to increase power grid efficiency, reliability, and flexibility, and reduce the rate at which additional electric utility infrastructure needs to be built. Some utilities have been using smart metering: meters that can be read remotely, primarily for billing purposes. However, these meters do not provide communication back to the utility with information on voltage, current levels, and specific usage. Similarly, these meters have very limited ability to allow the consumer the ability to either automatically or selectively change their usage patterns based on information provided by the utility. The term Smart Grid refers to a distribution system that allows for flow of information from a customer's meter in two directions: both inside the house to thermostats and appliances and other devices, and back to the utility. It is expected that grid reliability will increase as additional information from the distribution system is available to utility operators. This will allow for better planning and operations during peak demand. For example, new technologies such as a Programmable Communicating Thermostat (PCT) could connect with a customer's meter through a Home Area Network allowing the utility to change the settings on the thermostat based on load or other factors. PCTs are not commercially available, but are expected to be available within a year. It is estimated that a 4% peak load reduction could be achieved using Smart Grid technologies. Both regulatory and technological barriers have limited the implementation of Smart Grid technology. The Federal Energy Regulatory Commission (FERC) regulates the wholesale transmission system and the states regulate the distribution system. In general, the federal government has not interfered with state regulation of the electric distribution system. However, the Energy Policy Act of 2005 (EPACT05) required states to consider deploying smart meters for residential and small commercial customers. At issue is whether a distinction for cost allocation purposes can be made between Smart Grid technologies' impact on the wholesale transmission system and retail distribution system. If FERC and the states cannot determine which costs should be considered transmission related (federally regulated) and which should be considered distribution related (state regulated) utilities may be reluctant to make large investments in Smart Grid technologies. Another issue limiting the deployment of this technology is the lack of consistent standards and protocols. There currently are no standards for these technologies. Most systems are able to communicate only with technologies developed by the same manufacturer. This limits the interoperability of Smart Grid technologies and limits future choices for companies that choose to install any particular type of technology. The Department of Energy's (DOE's) Office of Electricity Delivery and Energy Reliability in partnership with industry is developing standards for advanced grid design and operations. In addition, DOE is funding research and development projects in this area. Smart Grid technologies are currently being used by several utilities in small applications, mainly for testing purposes. However, the technologies within the customer's house or business cannot allow for dynamic control of thermostats, for instance, but rather use switches to either turn an appliance on or off depending on preset criteria. The following applications of Smart Grid technologies represent some of the largest installations. The California Public Utility Commission as well as the California Energy Action Plan call for smart meters as part of the overall energy policy for California. On July 31, 2007, Southern California Edison Company (SCE) filed an application with the Public Utility Commission of California for approval of advanced metering infrastructure (AMI) deployment activities and a cost recovery mechanism for the $1.7 billion in estimated costs. Beginning in 2009, SCE proposes to install through its SmartConnect™️ program advanced meters in all households and businesses under 200 kW throughout its service territory (approximately 5.3 million meters). It is expected that demand response at peak times could save SCE as much as 1,000 megawatts of capacity additions. Dynamic rates such as Time of Use and Critical Peak Pricing should provide incentives to customers to shift some of their electricity usage to off-peak hours. According to SCE's application before the California Public Utility Commission: Edison SmartConnect™️ includes meter and indication functionality that (i) measures interval electricity usage and voltage; (ii) supports nonproprietary, open standard communication interfaces with technologies such as programmable communicating thermostats and device switches; (iii) improves reliability through remote outage detection at customer premises; (iv) improves service and reduces costs by remote service activation; (v) is capable of remote upgrades; (vi) is compatible with broadband over powerline used by third parties; (vii) supports contract gas and water meter reads; and (viii) incorporates industry-leading security capabilities. In its filing, SCE is requesting approval to recover the operation and maintenance and capital expenditures associated with deployment of Edison SmartConnect™️. SCE is planning to use three telecommunications elements in addition to a smart meter. The telecommunications system will include a Home Area Network (HAN) that is a non-proprietary open standard two-way narrowband radio frequency mesh network interface from the meter to customer-owned smart appliances, displays, and thermostats. Second, there will be a Local Area Network (LAN) consisting of a proprietary two-way narrowband radio frequency network that will connect the meter to the electricity aggregator. Finally, a Wide Area Network (WAN) will be installed using a non-proprietary open standard two-way broadband network that will be used to communicate between the aggregator and the utility back office systems. The meter will integrate the LAN and HAN in order to provide electric usage measurements, service voltage measurements, and interval measurements for billing purposes. These meters will have net-metering capability to support measurement of solar and other distributed generation at the customer's location. In addition, the meters will have security that has sophisticated cryptographic capabilities. For the consumer, benefits include load reduction and energy conservation, which could result in lower electric bills. Outage information will automatically be sent to the utilities so customers won't need to report these disturbances. SCE is expecting to achieve greater reliability over time as additional information from the system is available to manage operations. For the utility, manual meter reading will be eliminated as will field service to turn power on to new customers. The Pacific Northwest National Laboratory (PNNL) is teaming with utilities in the states of Washington and Oregon to test new energy technologies designed to improve efficiency and reliability while at the same time increasing consumer choice and control. The utilities involved in the demonstration projects include the Bonneville Power Administration, PacifiCorp, Portland General Electric, Mason County PUD #3, Clallam County PUD, and the City of Port Angeles, Washington. PNNL has received in-kind contributions from industrial collaborators, including Sears Kenmore dryers, and communications and market integration software from IBM. Two demonstration projects involve 300 homes as well as some municipal and commercial customers. The first project on the Olympic Peninsula involves 200 homes that are receiving real-time price signals over the Internet and have demand-response thermostats and hot water heaters that can be programmed to respond automatically. The goal is to relieve congestion on the transmission and distribution grid during peak periods. These 200 homes will test a "home information gateway" that will allow smart appliances such as communicating thermostats, smart water heaters, and smart clothes dryers to respond to transmission congestion due to peak demand or when prices are high. In addition, consumers will be able to see the actual cost of producing and delivering electricity, and cash incentives will be used to motivate customers to reduce peak demand. Part of the demonstration will study how existing backup generators can be used to displace demand for electricity. The second demonstration involves 50 homes on the Olympic Peninsula in Washington, 50 homes in Yakima, Washington, and 50 homes in Gresham, Oregon. Clothes dryers will be installed in 150 homes and water heaters will be installed in 50 homes to test the ability of PNNL-developed appliance controllers to detect fluctuations in frequency. Fluctuations in frequency can indicate that the grid is under stress, and the appliance controllers can quickly respond to that stress by reducing demand. The appliance controllers will automatically turn off some appliances for a few seconds or minutes, allowing grid operators to rebalance the system. In October 2006, TXU Electric Delivery entered into an agreement to purchase 400,000 advanced meters. TXU Electric Delivery plans to have 3 million automated meters installed primarily in the Dallas-Fort Worth area by 2011. As of December 31, 2006, TXU had installed 285,000 advanced meters, 10,000 of which had broadband over powerline (BPL) capabilities. This system combines advanced meters manufactured by Landis+Gyr with BPL-enabled communications technology provided by CURRENT Technologies. TXU Electric Delivery in the near-term will primarily use the advanced meters for increased network reliability and power quality and to prevent, detect, and restore customer outages more effectively. It is expected that TXU electric delivery will eventually include time-of-use options and new billing methods to its consumers. On May 10, 2007, the Public Utility Commission of Texas issued an order allowing for the cost recovery of advanced meters. H.R. 6 , signed by the President, contains a provision on Smart Grid technologies to address some of the regulatory and technological barriers to widespread installation. This section summarizes Title XIII. It is the policy of the United States to support the modernization of the electric transmission and distribution system to maintain reliability and infrastructure protection. The Smart Grid is defined to include: increasing the use of additional information controls to improve operation of the electric grid; optimizing grid operations and resources to reflect the changing dynamics of the physical infrastructure and economic markets, while ensuring cybersecurity; using and integrating distributed resources, including renewable resources; developing and integrating demand response, demand-side resources, and energy-efficiency resources; deploying smart technologies for metering, communications of grid operations and status, and distribution automation; integrating "smart" appliances and other consumer devices; deploying and integrating advanced electricity storage and peak-shaving technologies; transferring information to consumers in a timely manner to allow control decisions; developing standards for the communication and the interoperability of appliances and equipment connected to the electric grid; identifying and lowering of unreasonable or unnecessary barriers to adoption of smart grid technologies, practices, and services. No later than one year after enactment, and every two years thereafter, the Secretary of Energy shall issue a report to Congress on the status of the deployment of smart grid technologies and any regulatory or government barriers to continued deployment. Within 90 days of enactment, the Secretary of Energy shall establish a Smart Grid Advisory Committee, whose mission is to advise the Secretary of Energy and other relevant federal officials on the development of smart grid technologies, the deployment of such technologies, and the development of widely-accepted technical and practical standards and protocols to allow interoperability and integration among Smart Grid capable devices, and the optimal means for using federal incentive authority to encourage such programs. In addition, a Smart Grid Task Force shall be established within 90 days of enactment. This task force will be composed of employees of the Department of Energy, Federal Energy Regulatory Commission, and the National Institute of Standards and Technology. The mission of the Smart Grid Task Force is to ensure coordination and integration of activities among the federal agencies. The Secretary of Energy, in consultation with appropriate agencies, electric utilities, the states, and other stakeholders, is directed to carry out a program, in part, to develop advanced measurement techniques to monitor peak load reductions and energy efficiency savings from smart metering, demand response, distributed generation, and electricity storage systems; to conduct research to advance the use of wide-area measurement and control networks; to test new reliability technologies; to investigate the feasibility of a transition to time-of-use and real-time electricity pricing; to promote the use of underutilized electricity generation capacity in any substitution of electricity for liquid fuels in the transportation system of the United States; and to propose interconnection protocols to enable electric utilities to access electricity stored in hybrid vehicles to help meet peak demand loads. The Secretary of Energy shall also establish a Smart Grid regional demonstration initiative focusing on projects using advanced technologies for use in power grid sensing, communications, analysis, and power flow control. The Director of the National Institute of Standards and Technology is primarily responsible for coordinating the development of a framework for protocols and model standards for information management to gain interoperability of smart grid devices and systems. The Secretary of Energy shall establish a program to reimburse 20% of qualifying Smart Grid investments. The Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2621 (d)) is amended to require each state to consider requiring electric utilities demonstrate that prior to investing in non-advanced grid technologies, Smart Grid technology is determined not to be appropriate. States must also consider regulatory standards that allow utilities to recover Smart Grid investments through rates. Within one year of enactment, the Secretary of Energy shall submit a report to Congress detailing a study of the laws and regulations affecting the siting of privately owned electric distribution wires on and across public rights-of-way. This study will assess whether privately owned electric distribution wires would result in duplicative facilities and whether duplicate facilities are necessary or desirable. Within 18 months of enactment, the Secretary of Energy shall report to Congress the results of a study which provides a quantitative assessment and determination of the existing and potential impacts of the deployment of Smart Grid systems on the security of the electricity infrastructure and its operating capability.

The term Smart Grid refers to a distribution system that allows for flow of information from a customer's meter in two directions: both inside the house to thermostats and appliances and other devices, and back to the utility. This could allow appliances to be turned off during periods of high electrical demand and cost, and give customers real-time information on constantly changing electric rates. Efforts are being made in both industry and government to modernize electric distribution to improve communications between utilities and the ultimate consumer. The goal is to use advanced, information-based technologies to increase power grid efficiency, reliability, and flexibility, and reduce the rate at which additional electric utility infrastructure needs to be built. Both regulatory and technological barriers have limited the implementation of Smart Grid technology. At issue is whether a distinction for cost allocation purposes can be made between the impact of Smart Grid technology on the wholesale transmission system and its impact on the retail distribution system. Another issue limiting the deployment of this technology is the lack of consistent standards and protocols. There currently are no standards for these technologies. This limits the interoperability of Smart Grid technologies and limits future choices for companies that choose to install any particular type of technology. H.R. 6, as signed by the President, contains provisions to encourage research, development, and deployment of Smart Grid technologies. Provisions include requiring the National Institute of Standards and Technology to be the lead agency to develop standards and protocols; creating a research, development, and demonstration program for Smart Grid technologies at the Department of Energy; and providing federal matching funds for portions of qualified Smart Grid investments.

Hamas, a U.S. State Department-designated Foreign Terrorist Organization, surprised most observers by winning a majority of seats in the Palestinian legislative election in January 2006. The election was judged by international observers to be competitive and "genuinely democratic." Hamas had boycotted previous Palestinian national elections because they were held under the terms of the Oslo Accords, which the group rejected. Immediately after the election, the Middle East Quartet (the United States, Russia, the European Union (EU), and the United Nations) indicated that assistance to the PA would only continue if Hamas renounced violence, recognized Israel, and accepted previous Israeli-Palestinian agreements, which Hamas refused to do. In March 2006, Hamas formed a government without Fatah, the secular party that had dominated Palestinian politics for decades, which refused to join a Hamas-led coalition. On April 7, 2006, the United States and the EU announced they were halting assistance to the Hamas-led PA government but that humanitarian aid would continue to flow through international and non-governmental organizations (NGOs). The EU has been the PA's largest donor since it was created in 1996 under the Oslo peace accords. At the same time, Israel began withholding about $50 million in monthly tax and customs receipts that it collects for the PA. In 2005, international assistance and the Israeli-collected revenues together accounted for about two-thirds of PA revenues. In addition, the PA lost access to banking services and loans as banks around the world refused to deal with the it for fear of running afoul of U.S. anti-terrorism laws and being cut off from the U.S. banking system. The resulting fiscal crisis left the Hamas-led government unable to pay wages regularly and deepened poverty levels in the Palestinian territories. The Hamas-led government was forced to rely on shrinking domestic tax revenues and cash that Hamas officials carried back from overseas. Press reports indicate that much of this cash emanated from Iran. By the end of 2006, tensions in the West Bank and Gaza Strip were rising as living conditions deteriorated and PA employees, including members of the security forces, went unpaid for weeks or months. Armed supporters of Fatah and Hamas clashed repeatedly, trading accusations of blame, settling scores, and drifting into lawlessness. More than 100 Palestinians were killed in the violence. After months of intermittent talks, on February 8, 2007, Fatah and Hamas signed an agreement to form a national unity government aimed at ending both the spasm of violence and the international aid embargo that followed the formation of the initial Hamas-led government. The accord was signed by PA President and Fatah leader Mahmud Abbas and Hamas political leader Khalid Mish'al in Mecca, Saudi Arabia, after two days of talks under the auspices of Saudi King Abdullah. Under the agreement, Ismail Haniyeh of Hamas remains prime minister. In the new government, Hamas controls nine ministries and Fatah six, with independents and smaller parties heading the remainder. Among the independents are Finance Minister Salam Fayyad, an internationally respected economist, and Foreign Minister Ziad Abu Amr, a reformer and ally of President Mahmud Abbas. Demonstrating the differing priorities of Fatah and Hamas, the new government's platform calls for establishment of a Palestinian state "on all the lands that were occupied in 1967 with Jerusalem as its capital," and at the same time affirms the Palestinians' right to "resistance in all its forms" and to "defend themselves against any ongoing Israeli aggression." The new government commits to "respect" previous agreements signed by the Palestine Liberation Organization (PLO) but does not explicitly renounce violence or recognize Israel. The government platform states that any peace agreement reached will be submitted for approval to either the Palestine National Council (the PLO legislature) or directly to the Palestinian people in a referendum. The Bush Administration expressed disappointment with the unity government platform and said that Prime Minister Haniyeh of Hamas had "failed to step up to international standards." The Administration, however, is keeping open the option of meeting with non-Hamas members of the new government. A spokeswoman for the U.S. Consulate in Jerusalem said "We won't rule out contact with certain individuals with whom we have had contact before. We will evaluate the situation as we go along." On March 20, U.S. Consul General in Jerusalem Jacob Walles met with Palestinian Finance Minister Fayyad in Ramallah, the first diplomatic contact between the United States and the Palestinians in a year. On April 17, Secretary of State Condoleezza Rice held a half-hour meeting with Fayyad at the State Department. According to press reports, Fayyad separately controls accounts held by the PLO, and U.S. officials are examining regulatory ways to allow donor funds from Arab and European countries--but not from the United States--to flow to those accounts without violating U.S. law. The Administration also has sought to redirect some assistance to PA President Abbas. In late 2006, the State Department notified Congress of the President's intent to reprogram up to $86 million in prior-year funding to support efforts to reform and rehabilitate Palestinian civil security forces loyal to Abbas. However, the House Appropriations Committee placed a hold on these funds, seeking more information on where and why the money was to be spent. After the Palestinians reached agreement on the Fatah-Hamas power sharing arrangement, other Members of Congress reportedly expressed further doubts about where the money was going, fearing it may end up with Hamas. In March 2007, Secretary Rice told a House Appropriations subcommittee that the Administration was now seeking $59 million for Abbas ($43 million for training and non-lethal assistance to the Palestinian Presidential Guard and $16 million for improvements at the Karni crossing, the main terminal for goods moving in and out of Gaza). No holds were placed on this request. The EU's reaction to the Palestinian unity government has tracked closely with the United States thus far. EU officials have begun meeting with non-Hamas members of the PA government, but left in place the ban on direct aid. The EU has had some success in forging consensus on its approach to the Israeli-Palestinian conflict over the last few years. The EU views resolving the Israeli-Palestinian conflict as key to reshaping the Middle East and promoting stability on Europe's periphery. Moreover, EU member states are committed to maintaining a common EU policy on this issue to boost the credibility of the Union's evolving Common Foreign and Security Policy. Still, differences persist among member states. According to some press reports, France, Spain, and Italy may be more inclined to resume direct aid to the PA in the near term while other EU members, such as the UK and Germany, are more wary. A Quartet statement after the unity government was formed said it will be measured not only on the basis of its composition and platform, "but also its actions." Some observers saw this as a softening of the Quartet position, which could allow for a possible resumption of direct aid. European officials reportedly argued for more flexibility, saying the government should not be judged purely on the semantics of its official platform but on the future actions of Hamas. Many European policy makers hope that this strategy will encourage a further moderation of Hamas' position and facilitate forward movement in the peace process. Defying the EU policy, 10 European Parliament members met with Hamas Prime Minister Haniyeh in Gaza on May 1. An EU spokesman said there had been no change in the EU policy. Norway, which is not a member of the EU, has gone the farthest among European states by normalizing relations with the Palestinian government and announcing it was prepared to resume direct aid to the PA. Norwegian Foreign Minister Jonas Gahr Stoere met with Prime Minister Haniyeh in March. Although a member of the Quartet, Russia has taken a different approach to the Hamas government from the beginning by maintaining contact with Hamas officials and recently arguing to lift the aid embargo. Hamas political leader Khalid Mish'al has twice visited Moscow since Hamas took power, most recently in February 2007. Foreign Minister Sergey Lavrov has urged Hamas leaders to meet the Quartet conditions, but without success. Russian officials prefer to keep lines of communication open with all parties as they seek to position themselves as a mediator between Arabs and Israelis. This in turn would serve their larger ambition of reestablishing Moscow as a significant player in the region. Nonetheless, the Russians continue to see the Quartet as a useful and necessary mechanism and are unlikely to break ranks with it completely. Neither the U.N. Security Council nor the U.N. General Assembly have adopted resolutions or taken a position in response to the formation of the unity government. U.N. officials continue to stress the necessity for the Palestinian government to meet the three Quartet conditions. Secretary-General Ban Ki-Moon declined to meet Hamas officials on a March visit to the region. After meeting with PA President Abbas, Ban welcomed the new government's formation, but said that "the atmosphere is not fully right" for talks with Hamas. After brokering the Mecca Accord, the Saudis continued their diplomatic push at the Arab League summit in Riyadh in March. During a speech at the summit, Saudi King Abdullah called for an end to the international boycott of the PA in light of the agreement between Fatah and Hamas to form a unity government. In addition, the summit communique relaunched the Arab Peace Initiative of 2002, which calls for full Israeli withdrawal from the territories occupied in 1967, creation of an independent Palestinian state with East Jerusalem as its capital, and a just, agreed upon solution to the refugee problem in exchange for an end-of-conflict agreement in which all Arab states would enter into peace agreements and establish normal relations with Israel. Analysts speculate that the recent Saudi diplomatic drive has several purposes. First is to end the intra-Palestinian violence and resume long-stalled peace negotiations with Israel. Second, by securing Arab and perhaps international recognition of a government that includes Hamas and then relaunching peace talks with full Arab backing, the Saudis hope to bring Hamas into the Arab consensus, moderate its anti-Israeli ideology, and ultimately get it to accept a two-state solution. Finally, by creating momentum toward peace, the Saudis are seeking to undermine the regional influence of Iran and rejectionist groups like Hezbollah. Some observers also note that Saudi efforts to gain acceptance of the unity government and restart Israeli-Palestinian peace talks may be an effort to set the price for Saudi cooperation on other U.S. policies in the region, notably toward Iran. Among the Arab states, only Libya refused to attend the Riyadh summit and join the call to back the new Palestinian government and the Arab peace initiative. The Arab League subsequently appointed Jordan and Egypt to promote the initiative with Israel and persuade it to accept the plan as the basis for peace talks. Jordan's King Abdullah II has been the most outspoken Arab leader on the need to seize the Arab peace initiative as a way to restart Israeli-Palestinian peace talks. In March 2007, speaking to a joint meeting of Congress, he urged renewed international, and especially U.S., engagement to move the process forward. In April, he told a group of visiting Israeli Knesset (parliament) members that the initiative was a historic opportunity for Israel to gain recognition by the Arab states and true integration into the region. The Israeli government is maintaining a complete ban on meetings with Palestinian ministers, including non-Hamas ministers, and continues to withhold tax and customs revenues that it collects on behalf of the PA. Israel is unwilling to enter into direct talks with a Palestinian government that includes Hamas, which has killed hundreds of Israelis in terrorist attacks and whose charter calls for an Islamic state in all of the former British mandate of Palestine. However, Prime Minister Ehud Olmert meets regularly with PA President Abbas and in mid-April the two reportedly discussed economic aspects of a future Palestinian state. Olmert has also spoken of "positive aspects" of the Arab peace initiative and stated his willingness to meet any Arab leader to discuss it. Since the early 1990s, Iran has supplied cash, arms, and training to Hamas, but most observers say the relationship has been an uneasy one. Iran has sought a foothold in the Palestinian territories, while Hamas jealousy guards its political and operational independence. The relationship has been relatively unaffected by the widening rift between Sunni and Shiite Islam, although Hamas protested the December 2006 execution of Saddam Hussein by the pro-Iranian government of Iraq. Since the aid boycott was enacted, Iran has increased its assistance to Hamas. Hamas officials visiting Tehran in the past year often returned carrying large sums of cash, according to press reports. The International Monetary Fund (IMF) estimates that in 2006 some $70 million in cash was carried into the territories, most of it thought to be from Iran. After a visit to Iran in December 2006, Prime Minister Haniyeh said Iran had agreed to provide $120 million in assistance in 2007 and up to $250 million in total. Israeli security officials have warned of growing Iranian influence in Gaza. The head of the Israel Defense Force Southern Command, Maj. Gen. Yoav Galant, said in April 2007 he believes a large number of "Iranian terror and guerrilla experts" are operating in the Gaza Strip, training Palestinian terrorists. On December 21, 2006, President Bush signed into law P.L. 109-446 , the Senate version of the Palestinian Anti-Terrorism Act of 2006, which bars aid to the Hamas-led Palestinian government unless, among other things, it acknowledges Israel's right to exist and adheres to all previous international agreements and understandings. It exempts funds for humanitarian aid and democracy promotion. It also provides $20 million to establish a fund promoting Palestinian democracy and Israeli-Palestinian peace. The law limits the PA's representation in the United States as well as U.S. contact with Palestinian officials. In a signing statement, the President asserted that these and several other provisions of the bill impinge on the executive branch's constitutional authority to conduct foreign policy and he therefore viewed them as "advisory" rather than "mandatory." The original House version of the bill ( H.R. 4681 , passed on June 23, 2006) had been seen by many observers as more stringent as it would have made the provision of U.S. aid to the PA more difficult even if Hamas relinquishes power. In March 2007, Representative Ileana Ros-Lehtinen introduced H.R. 1856 , the Palestinian Anti-Terrorism Act Amendments of 2007, which would amend the original Act to further restrict contact with and assistance to the PA.

The new Palestinian unity government established in March 2007 complicates U.S. policy toward the Palestinian Authority (PA) and the peace process. When Hamas took power last year, the Bush Administration, along with its Quartet partners and Israel, responded by cutting off contact with and halting assistance to the PA. The Administration sought to isolate and remove Hamas while supporting moderates in Fatah, led by President Mahmud Abbas. The international sanctions have not driven Hamas from power, and instead, some assert they may have provided an opening for Iran to increase its influence among Palestinians by filling the void. Now that Hamas and Fatah are sharing power, it will be harder to isolate Hamas. The United States and European countries have held meetings with non-Hamas members of the new government, while Israel continues to rule out all contact with PA ministers. Arab states, led by Saudi Arabia, are pressing for recognition of the new government and an end to the international boycott. Some observers believe Saudi efforts to gain acceptance of the unity government and restart Israeli-Palestinian peace talks may be an effort to set the price for Saudi cooperation on other U.S. policies in the region. In 2006, Congress passed P.L. 109-446 , the Palestinian Anti-Terrorism Act of 2006, to tighten existing restrictions on aid to the Palestinians. In 2007, Representative Ileana Ros-Lehtinen introduced H.R. 1856 , which would amend the original Act to further restrict contact with and assistance to the PA. This report will be updated as events warrant.

Tunisia's 2011 popular uprising, known as the "Jasmine Revolution," ended the 23-year authoritarian rule of then-President Zine el Abidine Ben Ali and sparked a wave of unrest in much of the Arab world. Since then, Tunisia has taken key steps toward democracy. Civil and political liberties have expanded dramatically, and Tunisia has experienced far less violence than some other transitional countries. An elected National Constituent Assembly adopted a new constitution in 2014, and presidential and parliamentary elections were held the same year, formally ending a series of transitional governments. During the transitional period, Islamist and secularist political factions overcame repeated political crises through consensual negotiations, a feat for which a mediator quartet of Tunisian civil society groups subsequently won the Nobel Peace Prize. President Beji Caid Essebsi, who founded the secularist ruling party Nidaa Tounes ("Tunisia's Call"), is a 92-year-old political veteran. Prime Minister Youssef Chahed (41), in office since 2016, leads a broad coalition government that includes Tunisia's main Islamist party, Al Nahda (alt: Ennahda, "Renaissance"), the country's other leading political force. (Al Nahda leaders do not refer to themselves as Islamist, preferring the term "Muslim Democrats."). The coalition has advanced some economic reforms, political decentralization, and efforts to improve gender equality, including a gender-based violence law enacted in 2017. Fiscal austerity efforts and a stalled transitional justice process remain divisive, however. Prime Minister Chahed has struggled to retain political support within the coalition in the face of a public backlash against austerity measures, as well as a power struggle within Nidaa Tounes ahead of elections due in 2019. Leaders in Nidaa Tounes and Al Nahda have referred to their pragmatic partnership as necessary for stability in a fragile new democracy, and the alliance has arguably quieted the overt Islamist-secularist polarization that characterized the transitional period. Some critics view the two parties' entente as "grounded in mutual self-preservation," however, and assert that it is alienating party leaders from their respective bases. Some observers have expressed concern at the slow pace of constitutional implementation, the appointment of former-regime figures to top posts, the government's sometimes antagonistic relationship with critical civil society groups, and a years-long state of emergency that suspends some civil liberties. As one journalist wrote in 2016, "To many Tunisians, Nidaa Tounes feels like the return of the old regime: some of the same politicians, the same business cronies, the same police practices." Although many Tunisians are proud of their country's progress, opinion polls have repeatedly revealed anxiety over the future. The country suffered several large terrorist attacks in 2015-2016, and continues to confront threats along its borders with Libya and Algeria. Per-capita GDP has fallen every year since 2014, leading Tunisia to lose its "upper middle income" status in 2015. Efforts to address the socioeconomic grievances that fueled the 2011 uprising have not made significant progress, and corruption is perceived to have expanded. While Tunisia shares many characteristics with neighboring countries, some of its attributes are unique: a small territory, a relatively homogenous population, a relatively liberalized economy, a large and educated middle class, and a history of encouraging women's socioeconomic freedoms. Tunisia's population is overwhelmingly Arabic-speaking and Sunni Muslim (although tribal and ethnic divisions persist in some areas), while its urban culture reflects European influences. The legal and socioeconomic status of women is among Tunisia's particularities within the Arab world. Polygamy is banned, and women enjoy equal citizenship rights and the right to initiate divorce. (Inheritance laws and practices are nonetheless disadvantageous toward women.) Women serve in the military and in many professions, and constitute more than half of university students; the first woman governor was appointed in 2004. Many Tunisians attribute these advances to the country's relatively liberal Personal Status Code, promulgated in 1956 under then-President Habib Bourguiba, as well as Bourguiba-era educational reforms. Prior to 2011, Tunisia was widely viewed as exhibiting a stable and authoritarian regime that focused on economic growth while staving off political liberalization. It had had only two leaders since independence from France in 1956: Bourguiba, a secular nationalist and independence activist, and Ben Ali, a former interior minister and prime minister who assumed the presidency in 1987. Ben Ali cultivated the internal security services and the Constitutional Democratic Rally (RCD) party as his power base, and harshly repressed political participation, freedom of expression, and religious activism. This repression, along with corruption and nepotism, undermined the regime's popular legitimacy, despite relatively effective state services and economic growth. Another factor driving popular dissatisfaction was the socioeconomic divide between the developed, tourist-friendly coast and the poorer interior. Anti-government unrest rooted in labor and economic grievances has often originated in the interior--as it did in 2011. The 2014 constitution, adopted by an overwhelming margin by a transitional parliamentary body, lays out a semi-presidential political system with a directly elected president and relatively strong legislature. Dozens of parties contested elections held later that year, but the top two--Al Nahda and Nidaa Tounes--have come to dominate Tunisia's post-2011 politics. Nidaa Tounes, a big-tent secularist party, was formed in 2012 in opposition to a transitional government led by Al Nahda, an Islamist party that reentered national politics in 2011 after being banned under Ben Ali. Nidaa Tounes won a plurality of seats in the 2014 elections but defections have drained its ranks, leaving Al Nahda with the largest bloc of seats, 69 out of 217. The secularist leftist Popular Front (FP after its French acronym) is the largest opposition party in parliament with 15 seats. The FP includes prominent activists from parties banned under Ben Ali, and two of its members were assassinated in 2013, reportedly by Islamist militants. Today, Al Nahda and Nida Tounes remain wary rivals but have agreed to share power in an arrangement referred to as "consensus politics." Al Nahda has simultaneously sought to separate its political party activities from religious proselytization, embracing the label of "Muslim Democrats." Leaders in both parties have asserted that a government of "national unity" regrouping parties across the political spectrum is necessary to ensure stability and push through difficult economic reforms. In practice, both institutional and economic reforms have been slow to advance. The alliance appears to have been motivated, in part, by Nidaa Tounes's need to cultivate allies given its internal divisions, and by fears on each side that further Islamist-secularist polarization could fuel political exclusion of, respectively, former-regime figures or Islamists. For some observers and Tunisian civil society activists, developments in 2017 sparked concerns about Tunisia's democratic trajectory. In September 2017, parliament voted narrowly to adopt an extremely controversial "administrative reconciliation law" drafted by President Caid Essebsi, which grants amnesty for state employees implicated in corruption. A local protest movement and international human rights groups had characterized the bill as a threat to democratic accountability and a blow to Tunisia's transitional justice mechanism. A cabinet reshuffle the same month saw the appointment of new ministers with ties to the Ben Ali regime. President Caid Essebsi later suggested on national television that he was considering changing the constitution, deepening some observers' concerns that his apparent efforts to strengthen the presidency could undermine democratic consolidation. In May 2018, Tunisia held landmark local elections to fill posts created under a new political decentralization law. The accomplishment of holding elections, which had been repeatedly delayed, arguably restored a sense of momentum on political reforms. The elections are viewed by many observers as a key step toward more accountable governance as well as a means to address "long-standing issues of dramatic regional disparity" in health care, education, poverty, and infrastructure--although the concrete devolution of policymaking and fiscal authority is likely to be a long-term process at best. Turnout was low at 34%, which some attributed to political apathy among young people. Al Nahda won 29% of votes, followed by Nidaa Tounes at 21%, but independent lists collectively outpolled both leading parties, garnering 32% nationally. The contours of future political competition are uncertain ahead of national elections due in 2019. Nidaa Tounes, whose base includes business leaders, trade unionists, Arab nationalists, and former-regime figures, has struggled to contain its ideological and individual fractures. The president, 92, has not stated whether he will run for another five-year term in 2019. The decision to ally with Al Nahda was controversial within the party, leading several senior figures to leave and form a breakaway parliamentary group. Prime Minister Youssef Chahed, who has sought to impose fiscal austerity measures, has come under pressure from trade unions to resign, and as of mid-2018 he appeared to be in a power struggle with President Caid Essebsi. Perceptions that the president is positioning his son, Hafedh, currently head of Nidaa Tounes, to succeed him have also sparked public backlash and splits within the ruling party. Not all Tunisian Islamists back Al Nahda, and the party's willingness to compromise may have cost it some support among some of its supporters as well as more radical factions of public opinion. Some religiously conservative Salafists, who became more visible in the wake of the 2011 uprising, openly support the creation of an Islamic state, and some have challenged government authorities--as well as artists, labor union activists, journalists, academics, and women deemed insufficiently modest--through protests, threats, and/or violence. A handful of Salafist groups have registered as political parties, but many operate outside the political system. Since 2011, armed Islamist extremist groups across North and West Africa have exploited porous borders, security sector weaknesses, and access to Libyan weapons stockpiles to expand their activities. These groups have also capitalized on divisive identity issues as well as popular frustrations with poor governance. Some have sought affiliation with Al Qaeda or the Islamic State (IS, alt. ISIS/ISIL), including the Algerian-led regional network Al Qaeda in the Islamic Maghreb (AQIM) and its various offshoots, as well as several IS-linked cells operating along Tunisia's borders with Algeria and Libya. Many, however, appear primarily focused on local or regional objectives. The degree of competition or coordination between Al Qaeda- and IS-linked factions in North Africa is debated. Tunisia has seen the rise of local violent extremist organizations since 2011, and has also faced threats from groups and individuals based in Libya. U.S. and Tunisian officials notably blamed a Tunisian-led group known as Ansar al Sharia (AST) for an attack against the U.S. Embassy and American school in Tunis in 2012. Tunisia declared AST a terrorist group in 2013, and the U.S. State Department designated it a Foreign Terrorist Organization (FTO) in 2014. The group's leader, known as Abou Iyadh, relocated to Libya, where he was reportedly killed in a U.S. airstrike in June 2015. In 2015, deadly terrorist attacks in Tunis and the coastal city of Sousse rattled Tunisians and dealt a blow to the tourism sector. In early 2016, an IS-linked assault on the border town of Ben Guerdane prompted fears of a nascent domestic insurgency. Tunisian officials affirmed that these attacks were planned at least partly from Libya; a 2016 U.S. military strike in the Libyan town of Sabratha reportedly killed a number of Tunisian fighters. Internal security conditions have since improved, seemingly due to changes within the security apparatus as well as donor assistance. Tunisia has been a top source of Islamist foreign fighters in Syria and Libya, and several terrorist attacks in Europe have been carried out by individuals of Tunisian origin. In April 2017, then-Interior Minister Hadi Majdoub stated that some 3,000 Tunisian militants remained active abroad and 760 had been killed, adding that the authorities had prevented over 27,000 Tunisian youths from joining their ranks since 2012. Majdoub added that some 800 fighters had returned to Tunisia at that point. Youth marginalization and the mass release of terrorism suspects in 2011 may partly explain Tunisia's high number of foreign fighters, as well as perceptions that state institutions remain corrupt, unresponsive, and/or abusive. Tunisia has a diverse economy and large middle class. Textile exports, tourism, agriculture, and phosphate mining are key sectors. Tunisia also produces some petroleum, but is a net energy-importer. Until recently, Tunisia was an upper-middle-income country. Strong annual growth prior to 2011, however, masked corruption and inequalities that fed discontent. Notably, after President Ben Ali was pushed out of office in 2011, the World Bank documented that government regulations had been manipulated to favor firms closely tied to the Ben Ali family. More broadly, wealth is concentrated along the urban and tourist-friendly coast, while the interior suffers from relative poverty and a lack of investment. Many Tunisians are highly educated, but the economy has generally created low-skilled and low-paid jobs, fueling unemployment. Efforts since 2011 to promote private sector-led growth and create jobs have faced challenges, including investor perceptions of political risk, terrorist attacks on tourist sites, partisan disputes, and labor unrest that has periodically shut down mining operations. Per-capita GDP has fallen every year since 2014, dipping below the upper middle-income threshold of $4,036 in 2015 and remaining below it since. Youth unemployment, estimated at 38% in 2012, reportedly remains high. Corruption has apparently flourished since the political transition, undermining public faith in institutions and further entrenching regional divisions. Economic growth is projected to reach 2.4% in 2018, the highest rate since 2014, due to strong agricultural production and exports. The International Monetary Fund (IMF) has expressed concerns, however, about Tunisia's rising inflation (7.7% in April 2018, the highest rate since 1991), declining foreign exchange reserves, and vulnerability to rising global energy prices. The IMF has urged Tunisian policymakers to cut costs stemming from energy subsidies, which "disproportionately benefit the better-off"; public sector wages, described as "among the highest in the world as a share of GDP"; and pensions. Such austerity measures, which have been embraced by Prime Minister Chahed, sparked large protests in early 2018. Tunisia's powerful national trade union federation, the UGTT, has since decried efforts to end state subsidies for fuel and other consumer commodities, asserting that "rising prices will only accentuate the social and economic crisis." Domestic constituencies are also likely to oppose other economic structural reforms advocated by donors, including protectionist trade policies and the liberalization of labor laws. Tunisian transparency advocates, meanwhile, have called for economic reforms to focus more on changing laws and state practices that they view as enabling high-level corruption. U.S. high-level contacts and aid have expanded significantly since 2011, as U.S. officials have hailed the country's peaceful political transition and as Congress has appropriated increased bilateral assistance funding. President Trump and President Caid Essebsi spoke over the phone in February 2017 and discussed Tunisia's democratic transition and continued security threats. The two presidents "reaffirmed the historic United States-Tunisia relationship and agreed to maintain close cooperation...and seek additional ways to expand cooperation between the two countries." Deputy Secretary of State John Sullivan visited Tunisia in 2017, and in early 2018 he affirmed that the United States "will continue to support Tunisia's efforts to improve security and modernize its economy, amid formidable challenges." The U.S. military conducts intelligence, surveillance, and reconnaissance (ISR) activities at a Tunisian facility and U.S. Special Operations Forces have reportedly played an advisory role in Tunisian counterterrorism operations. President Obama designated Tunisia a Major Non-North Atlantic Treaty Organization Ally in 2015, after meeting with President Caid Essebsi at the White House. Tunisia cooperates with NATO's Operation Active Endeavor, which provides counterterrorism surveillance in the Mediterranean; participates in NATO's Mediterranean Dialogue; and allows NATO ships to make port calls. United States Agency for International Development opened an office in Tunis in 2014, reflecting increased bilateral economic aid allocations. The U.S. Embassy in Tunis also hosts the U.S. Libya External Office, through which U.S. diplomats engage with Libyans and monitor U.S. programs in Libya. (The State Department suspended operations at the U.S. Embassy in Tripoli in 2014.) U.S. bilateral aid--totaling $205.4 million in FY2017--has provided support for fiscal stabilization, economic growth initiatives, good governance, civil society capacity-building, and assistance to the police and military. A U.S.-endowed Tunisian-American Enterprise Fund invests in small- and medium-sized enterprises, and three U.S. loan guarantees for which Congress directed funds have allowed Tunisia to access up to $1.5 billion in affordable financing from international capital markets. U.S. economic assistance has also supported the political decentralization process, as well as efforts to address youth marginalization and counter violent extremist ideology. State Department-administered military and police assistance has supported tactical capabilities as well as institutional reforms. The Department of Defense (DOD) has provided substantial additional military aid, focused on counterterrorism and border security ( Table 2 , below). Tunisia is one of 12 countries participating in the State Department-led Trans-Sahara Counter-Terrorism Partnership (TSCTP) and is one of six focus countries of the U.S. interagency Security Governance Initiative (SGI), initiated in 2014. The Trump Administration proposed $54.6 million in bilateral aid for Tunisia in its FY2018 budget request, proposing to eliminate bilateral Foreign Military Financing (FMF) and to cut bilateral economic aid by more than half. The FY2018 Department of State, Foreign Operations, and Related Programs Appropriations Act, 2018 (Division K of P.L. 115-141 ), however, provided "not less than" $165.4 million in aid for Tunisia. The Act also made available DOD funds from the Counter-ISIS Train and Equip Fund to support border security programs for Tunisia. The Administration's FY2019 aid budget request for Tunisia totals $94.5 million. In addition, the U.S. Millennium Challenge Corporation (MCC) FY2019 budget proposal includes $292 million for an anticipated multi-year development compact with Tunisia that would aim to reduce water scarcity and address regulations seen as constraining job creation. Tunisia has expanded its acquisitions of U.S. defense materiel in order to maintain its U.S.-origin stocks and expand its counterterrorism capacity. The State Department licensed the sale of 12 Black Hawk helicopters in 2014, and Tunisia has also received significant equipment through the Excess Defense Articles (EDA) program, including 24 Kiowa helicopters. U.S.-Tunisian relations date back over 200 years. Tunisia was also the site of significant World War II battles, and a U.S. cemetery and memorial in Carthage (outside Tunis) holds nearly 3,000 U.S. military dead. During the Cold War, Tunisia pursued a pro-Western foreign policy, despite an experiment with leftist economic policy in the 1960s. Still, U.S.-Tunisian ties were strained by the 1985 Israeli bombing of the Palestine Liberation Organization headquarters in Tunis, which some Tunisians viewed as having been carried out with U.S. approval. More recently, the 2012 attack on the U.S. embassy and American school, days after the Benghazi attacks in Libya, temporarily cooled relations as U.S. officials criticized the interim government's handling of the investigation and prosecution of suspects. Tunisia has peacefully achieved many political milestones since 2011, prompting observers to portray it as the lone success story of the "Arab Spring." Internal political tensions, socioeconomic pressures, security threats, and regional dynamics nonetheless pose ongoing challenges. Despite a relative lack of conflict, Tunisia remains a potential locus of regional struggles among rival political ideologies, and among violent extremist groups vying for prominence and recruits. Key questions include whether Tunisia's broad-based coalition government is likely to remain cohesive , and how it will respond to terrorist threats, advance political and economic reforms, foster civil liberties, and satisfy popular demands for quality-of-life improvements. Tunisian leaders have welcomed U.S. assistance since 2011, but the local appetite for outside policy influence has also been shown to be limited in cases where donors have advocated economic reforms that domestic constituencies view as harmful.

Tunisia has taken key steps toward democracy since its 2011 "Jasmine Revolution," and has so far avoided the violent chaos and/or authoritarian resurrection seen elsewhere in the Middle East and North Africa region. Tunisians adopted a new constitution in 2014 and held national elections the same year, marking the completion of a four-year transitional period. In May 2018, Tunisia held elections for newly created local government posts, a move toward political decentralization that activists and donors have long advocated. The government has also pursued gender equality reforms and enacted a law in 2017 to counter gender-based violence. Tunisians have struggled, however, to address steep economic challenges and overcome political infighting. Public opinion polls have revealed widespread anxiety about the future. Tunisia's ability to counter terrorism appears to have improved since a string of large attacks in 2015-2016, although turmoil in neighboring Libya and the return of some Tunisian foreign fighters from Syria and Libya continue to pose threats. Militant groups also operate in Tunisia's border regions. U.S. diplomatic contacts and aid have expanded significantly since 2011. President Trump spoke on the phone with Tunisian President Beji Caid Essebsi soon after taking office in early 2017, and Deputy Secretary of State John Sullivan visited Tunisia in November 2017. President Obama designated Tunisia a Major Non- North Atlantic Treaty Organization Ally in 2015 after meeting with President Caid Essebsi at the White House. United States Aid for International Development opened an office in Tunis in 2014, reflecting increased bilateral economic aid allocations. The U.S. Embassy in Tunis also hosts the U.S. Libya External Office, through which U.S. diplomats engage with Libyans and monitor U.S. programs in Libya. (The State Department suspended operations at the U.S. Embassy in Tripoli in 2014.) U.S. bilateral aid administered by the State Department and USAID totaled $205.4 million in FY2017. The Trump Administration requested $54.6 million for FY2018, proposing to eliminate bilateral Foreign Military Financing (FMF) and to cut bilateral economic aid by more than half. The FY2018 Department of State, Foreign Operations, and Related Programs Appropriations Act, 2018 (Division K of P.L. 115-141), however, provided "not less than" $165.4 million in aid for Tunisia. The Department of Defense (DOD) has provided substantial additional military aid focused on counterterrorism and border security. For FY2019, the Administration has requested $94.5 million in State Department and USAID-administered bilateral funds for Tunisia. In addition, the U.S. Millennium Challenge Corporation (MCC) has requested $292 million for an anticipated multi-year development compact with Tunisia. Much of Tunisia's defense materiel is U.S.-origin, and it has pursued U.S. arms sales to maintain its stocks and expand its capabilities. The State Department licensed the sale of 12 Black Hawk helicopters in 2014, and Tunisia has received significant equipment through the Excess Defense Articles (EDA) program, including 24 Kiowa helicopters and 24 guided missile "Hellfire" launchers notified to Congress in 2016. The U.S. military has acknowledged conducting intelligence, surveillance, and reconnaissance (ISR) activities from a Tunisian facility, and U.S. military advisors have reportedly played a role in some Tunisian counterterrorism operations. Congress has focused on Tunisia's democratic progress, economic stability, and counterterrorism efforts through legislation, oversight, and direct engagement with Tunisian leaders. There is a bipartisan Tunisia Caucus. Relevant bills in the 115th Congress include the FY2019 Department of State, Foreign Operations, and Related Programs Appropriations Act, and the Combatting Terrorism in Tunisia Emergency Support Act of 2017 (H.R. 157).

Congress generally authorizes new Army Corps of Engineers water resources studies and projects before appropriating funds for these activities. Authorization typically occurs in a Water Resources Development Act (WRDA). The 110 th Congress overrode a presidential veto of WRDA 2007. WRDA 2007 ( P.L. 110-114 ) became law on November 9, 2007, authorizing approximately 900 projects, studies, and modifications to existing authorizations. The President vetoed WRDA 2007, citing "excessive authorizations" and a lack of fiscal discipline and priorities. This was the first congressional override of a veto by President George W. Bush. (For information on the override process, see CRS Report RS22654, Veto Override Procedure in the House and Senate , by [author name scrubbed].) A central issue in the debate over WRDA 2007 was its level of authorizations. A Congressional Budget Office (CBO) analysis of the conference report estimated the 15-year impact at $23 billion. The conference report's authorization level exceeded the estimates for the House and Senate versions of the bill, which were around $14 billion and $15 billion. Principal among the reasons for the higher authorization levels in the conference report were that it included a majority of authorizations in the House and Senate bills, and many of the authorizations were only in one of those bills; the Army Corps in August 2007 increased federal cost estimates for New Orleans hurricane protection by approximately $3.6 billion (previous estimates had been for approximately $2.2 billion in federal funding beyond the supplemental appropriations already provided for this work); and, to a lesser extent, approximately 20 provisions in the conference report were in neither the House bill nor the Senate bill, including a more than $250 million modification to the Santa Ana (CA) River Mainstem project. The Administration supported limiting authorizations to projects in the Corps' primary missions (navigation, flood and storm damage reduction, and ecosystem restoration) that demonstrated an economic and environmental justification for federal participation. Throughout congressional consideration of WRDA 2007, independent review remained a debated policy issue. Conferees were faced with the challenge of reconciling the House and Senate language. The provisions had differed on which projects could be reviewed (i.e., the scope of the review), which projects could be exempted or included for review, who would be performing and directing the reviews, and how recommendations resulting from the reviews would be treated. WRDA 2007 used the technical review approach of the House bill, rather than the Senate's broader policy review. WRDA 2007 did not create a separate office of independent review, which had been part of the Senate language. WRDA 2007 also established a safety assurance review process for hurricane protection and flood damage projects; it gave the Corps' Chief of Engineers discretion regarding when to call for a safety review. Other issues that shaped WRDA 2007 included different opinions about the specifics of project authorizations, including the billion-dollar regional authorizations for: Coastal Louisiana wetlands restoration, flood and storm protection, and navigation projects (including authorization of the Morgana-to-the Gulf project, and the authorization levels and specifics of wetlands restoration activities for coastal Louisiana); Florida Everglades ecosystem restoration projects (including authorization of activities under the Modified Water Deliveries Project); and Upper Mississippi River Illinois Waterway (UMR-IWW) navigation and ecosystem restoration projects (including concerns about linking the funding of navigation and restoration activities). WRDA 2007 created a Committee on Levee Safety to make recommendations for a national levee safety program. It also authorized the Corps to participate in more than 200 municipal water and wastewater infrastructure projects (called environmental infrastructure at the Corps). Some taxpayer groups spoke out against these authorizations, arguing that other government agencies had existing, competitive programs to assist with these municipal infrastructure needs, and that these projects were outside the scope of the agency's core missions. Proponents of environmental infrastructure argued that these authorizations were necessary to assist projects that were ineligible or unsuccessful at obtaining funds through other programs. Some new issues entered the WRDA debate during consideration by the 110 th Congress. For example, some environmental groups raised concerns that WRDA 2007 did not directly address the impact of climate change on flood risk across the nation. Interest in directing the Corps to study the energy and fuel-related consequences of dam removal also was raised. The U.S. Army Corps of Engineers is a federal agency in the Department of Defense with military and civilian responsibilities. At the direction of Congress, the Corps plans, builds, operates, and maintains a wide range of water resources facilities in U.S. states and territories. The agency's traditional civil responsibilities have been creating and maintaining navigable channels and controlling floods. In the last two decades, Congress has increased the Corps' responsibilities in ecosystem restoration, municipal water and wastewater infrastructure, disaster relief, and other activities. The agency's regulatory responsibility for navigable water extends to issuing permits for private actions that might affect wetlands and other waters of the United States. WRDA is the main legislative vehicle for Corps civil works authorizations. After providing background information on WRDA, this report considers the major issues that shaped WRDA 2007 in the 110 th Congress, including changes to Corps project development practices and policies, coastal Louisiana wetlands restoration activities, UMR-IWW investments, and Everglades restoration projects. WRDA legislation provides the Corps with authority to study water resource problems, construct projects, and make major modifications to projects. The provisions and contents of a WRDA are cumulative and new acts do not supersede or replace previous acts unless explicit language modifies, replaces, or terminates previous authorizations. A new WRDA adds to the original language and often amends provisions of previous acts. Congress generally authorizes Corps water resources studies as part of a WRDA, or in a resolution by an authorizing committee--the House Transportation and Infrastructure Committee (T&I) or the Senate Environment and Public Works Committee. Authorization for construction projects and changes to the policies guiding the Corps civil works program, such as project cost-share requirements, are typically in WRDAs. Authorization of Corps projects generally does not expire; however, there is a process to deauthorize projects that have not received appropriations for seven years. Although Congress has historically authorized Corps projects as part of a WRDA, authorizations also have been included in appropriations bills, especially in years when a WRDA has been delayed or not enacted at all. Corps authorizing committees generally discourage authorizations in appropriations bills; authorization in appropriations bills may be subject to a point of order on the House floor. Authorization establishes a project's essential character, which is seldom substantially modified during appropriations. The appropriations process, however, plays a significant role in realizing a project; appropriations determine which studies and projects receive federal funds. Many authorized activities never receive appropriations. During the last 15 years, Congress has authorized not only navigation and traditional flood control projects, but also ecosystem restoration, environmental infrastructure assistance, and other activities, increasing competition for construction funds. Prior to WRDA 2007, the Corps had an existing "backlog" of more than 800 authorized projects with more than 500 projects not consistently receiving construction appropriations. Before the enactment of WRDA 2007, the Corps estimated the construction backlog at $39 billion for authorized projects that remained active Corps projects. WRDA 1986 ( P.L. 99-662 ) was a milestone for the Corps; it marked the end of a decade-long stalemate between Congress and the executive branch regarding authorizations, and changed the relationship and cost-sharing requirements between the agency and the nonfederal sponsors of its projects. It also established user fees and environmental requirements. Pressure to authorize new projects, increase authorized funding levels, and modify existing projects is often intense, thus promoting consideration of WRDA. Enactment, however, may be complicated because of a more general debate about the Corps' missions, and how best to use the agency's resources and budget. Since 1986, a cycle of biennial consideration of a WRDA has been loosely followed; biennial enactment has been less consistent, with WRDAs enacted in 1988 ( P.L. 100-676 ), 1990 ( P.L. 101-640 ), 1992 ( P.L. 102-580 ), 1996 ( P.L. 104-303 ), 1999 ( P.L. 106-53 ), and 2000 ( P.L. 106-541 ). After 2000, the 107 th , 108 th , and 109 th Congresses considered but did not enact WRDA legislation. Because of the number of projects awaiting authorization and the length of time since Congress enacted the last WRDA in 2000, there was considerable support among some stakeholders for the 110 th Congress to enact a WRDA 2007. The Bush Administration did not send Congress a WRDA proposal; instead, it expressed its position through Administration letters and Statements of Administration Policy by the Office of Management and Budget (OMB). A reason cited by the President for vetoing WRDA 2007 was billions in new authorizations (including billions for projects that the Administration considers to be outside the core mission of the agency) that create unrealistic expectations among local communities of likely federal actions and funding. The Administration also opposed provisions that would increase the federal financing of Corps projects. Some stakeholders sought changes to the agency and its procedures like those in S. 564 , the Water Resources Planning and Modernization Act of 2007; others opposed changes to the Corps. Support for changing the Corps' practices gained momentum in 2000 in the wake of a series of critical articles in the Washington Post , whistleblower allegations, and ensuing investigations. Many of the allegations raised were particularly critical of the Corps UMR-IWW navigation studies that were underway in the 1990s. The failure of Corps-constructed floodwalls in New Orleans and the findings of subsequent investigations strengthened support for some Corps reform measures and heightened concerns about the quality of the agency's work. Many advocates for change, primarily environmental groups, sought to modify Corps project planning (e.g., by changing the benefit-cost analysis and consideration of environmental impacts and benefits), to require additional review of Corps projects (e.g., through external review of Corps feasibility reports), and to strengthen environmental protection (e.g., through modifications to fish and wildlife mitigation requirements); these kinds of changes often were referred to as "Corps reform." Although Corps reforms were discussed in the 106 th , 107 th , 108 th , and 109 th Congresses, no significant changes were enacted. The Corps argued that it had transformed itself by policies it had implemented since 2000. These included refinements in consideration of environmental benefits during planning, internal peer review, and guidance about optional external review. Other stakeholders argued that any changes should have moved the agency in a different direction than the measures pursued by environmental groups. Supporters of streamlining Corps practices, which included many of the nonfederal sponsors for Corps projects, argued that the provisions supported by the environmental groups were unnecessary and would add delay, cost, and uncertainty to an already lengthy project development and construction process. They wanted to increase the predictability of the Corps planning process by making changes such as standardizing planning procedures, models, and data; limiting the length of studies; and requiring tracking of the agency's construction backlog. WRDA 2007 contains a range of provisions that changed Corps policies, including an independent review provision. The House and Senate provisions had differed on which projects could be reviewed (i.e., the scope of the review), which projects could be exempted or included for review, who would be performing and directing the reviews, and how recommendations resulting from the reviews would be treated. The Senate version included requirements for independent safety reviews of the construction of Corps flood and storm damage reduction projects, a requirement prompted by the floodwall failures in New Orleans. No similar safety review was included in the House bill. WRDA 2007 includes a safety assurance review for hurricane protection and flood damage projects, but gives the Corps' Chief of Engineers discretion regarding when to call for a safety review. Overall, WRDA 2007 adopted the technical review approach of the House bill, rather than the Senate's broader policy review, and did not create a separate office of independent review, which had been part of the Senate language. It also adopted the sunset provision for the independent review requirements from the House bill but extended the deadline from four years to seven years. WRDA 2007 allowed the Chief of Engineers to exempt from review projects considered routine, some projects involving rehabilitation and replacement, and projects that pose minimal loss of life risks. The Administration, some Members of Congress, and some stakeholders oppose authorizations for projects outside the agency's core mission areas of navigation, flood control, and ecosystem restoration; in particular, they oppose environmental infrastructure projects (i.e., municipal water and wastewater projects). Before 1992, the Corps had not been involved in these types of projects. In recent years, appropriations for Corps environmental infrastructure have ranged from $94 million in the FY2007 work plan for the agency to more than $200 million in some years, representing between 2% and 4% of the agency's budget. Opponents of Corps involvement in environmental infrastructure argue that other government agencies have existing, competitive programs to assist with these municipal infrastructure needs. Proponents of environmental infrastructure argue that these Corps projects are necessary because existing federal programs are unable to address all the existing needs, either because of program eligibility criteria or constrained resources. WRDA 2007 authorized more than 200 new Corps environmental infrastructure projects. The Corps has a prominent role in New Orleans and southeast Louisiana hurricane recovery efforts, including repairing damaged floodwalls and levees and strengthening hurricane resiliency through infrastructure fortification and long-term wetlands restoration. The Corps continues to repair and strengthen many of the area's hurricane protection levees and floodwalls using authority and funding provided in supplemental appropriations legislation; funding for this work is an ongoing appropriations issue. The 109 th Congress, on the last day of the session (December 9, 2006), passed the Gulf of Mexico Energy Security Act of 2006 ( P.L. 109-432 ). It shares 37.5% of certain offshore oil and gas revenues with four specified Gulf coast states, including Louisiana. These funds may total almost $350 million over the next decade and more than $25 billion over the next 45 years, according to an OMB projection from July 2006. They are to be used for projects and activities to provide coastal protection, including conservation, coastal restoration, hurricane protection, and infrastructure directly affected by coastal wetland losses, as well as fish and wildlife mitigation. The law increases funding available in Louisiana to commit to the nonfederal portion of restoration and hurricane protection efforts authorized in WRDA 2007. Coastal wetlands in Louisiana have been disappearing at a high rate, as a result of both human activities and natural processes. Those losses are forecast to continue if no actions are taken to reverse current trends. Federal agencies, led by the Corps and in coordination with the state, developed several versions of plans to slow the rate of loss and restore some of these wetlands. The current Corps feasibility report was released in November 2004, before Hurricanes Katrina and Rita. It received a favorable recommendation in January 2005 in a report by the Corps' Chief of Engineers. The report recommended measures totaling an estimated $2.0 billion--$1.1 billion for projects and programs for immediate authorization, more than $0.1 billion for investigations of "large-scale concepts" that have already been authorized, and $0.7 billion for future authorization of 10 restoration features. The Corps' feasibility report proposed activities to divert water from the Mississippi River to convey sediments into nearby wetlands, and to help stabilize the coastline. (It is important to note that even if this plan is fully implemented, losses will continue, but at a much slower rate.) The federal government would pay about 65% of the total estimated cost. In the diversions, wetlands would gradually reestablish themselves on newly deposited sediments. The Coastal Louisiana title of WRDA 2007, Title VII, used the Corps feasibility report as a starting point. To reflect concerns raised and knowledge gained by Hurricanes Katrina and Rita, additional provisions were added by the House and Senate, and further changes were made in the conference report. The conference report makes a number of adjustments to language on what is to be considered in restoration, often combining language from the two chambers' bills. The enacted title authorizes more projects than were included in either of the passed bills, either directly if the Secretary determines they are feasible, or with the approval by resolution of the two authorizing committees: the House Transportation and Infrastructure Committee and the Senate Environment and Public Works Committee. More specifically, Title VII authorized the development and periodic update of a comprehensive plan for coastal Louisiana, and listed several planning priorities, including not only wetlands creation but also flood protection. It also created a federal-state task force to participate in developing and implementing the plan, supported by expert working groups. The task force makes recommendations to the Secretary and submits a biennial report to Congress. Title VII also authorized funding for activities in several areas the task force might examine, including $10 million for modification of existing projects; $100 million for related scientific and technical work; $100 million for demonstration projects (with no single project exceeding $25 million); and $100 million to explore using dredged materials in restoration. Title VII authorized a number of specific projects--$828.3 million for five restoration projects that are close to ready to start (including $105.3 million for environmental restoration work that would not have any navigation benefits for the controversial Mississippi River Gulf Outlet). The Corps must provide a report to the authorizing committees describing any modifications before it starts any of these five projects. It also limited cost increases for each of these initial projects to 150% of the current estimated cost. It also authorized the Corps to carry out four additional projects that are in earlier stages of planning with a total estimated cost of $184.6 million if they are determined to be feasible, and to submit feasibility reports to the authorizing committees by the end of 2009, and to provide feasibility reports on six other projects with a total estimated cost of $534.6 million by the end of 2008. The Corps can carry out any of these 10 projects if a favorable Chief's report is completed by the end of 2010 and both authorizing committees have approved a resolution. Title VII allows the Secretary to forgo economic evaluations if these projects' environmental benefits to the coastal Louisiana ecosystem are demonstrated. In addition to the reports to Congress listed above, Title VII called for several other status reports on progress of the work, the most significant of which may be a comprehensive overview to be provided six years after the date of enactment. Hurricanes Katrina and Rita altered the debate over wetlands restoration proposals and the cost-share for restoration investments. Many restoration proponents are calling for more extensive efforts than those authorized in WRDA 2007; generally, their support has centered on a $14 billion proposal developed by a team of state and federal agencies in the Coast 2050 Plan from 1998. Decisions that Congress may face in the future include whether to authorize any additional coastal Louisiana restoration efforts beyond those authorized in WRDA 2007, and whether to seek additional synergies between wetlands restoration and hurricane protection. At the state level, the Louisiana Coastal Protection and Restoration Authority released a draft plan in February 2007 titled Integrated Ecosystem Restoration and Hurricane Protection: Louisiana ' s Comprehensive Master Plan for a Sustainable Coast . In addition to provisions authorizing coastal wetlands restoration efforts, WRDA 2007 also contains numerous provisions related to Corps hurricane protection and navigation projects in Louisiana. It authorized multiple activities to improve New Orleans-area flood and hurricane storm damage reduction projects, including work to provide a level of protection that would protect the area from a 100-year flood, and thus qualify the area for the National Flood Insurance Program (NFIP). Many of these activities were already appropriated funds through the $7 billion in supplemental appropriations legislation in FY2005 and FY2006 for coastal Louisiana hurricane storm protection. Since the supplemental funds were appropriated, revised estimates for the work indicate that nearly $6 billion in additional federal appropriations would be needed to complete the activities. WRDA 2007 provided for expedited consideration of measures analyzed as part of a comprehensive hurricane protection study for the larger coastal Louisiana area. WRDA 2007 established that legislative proposals submitted by the President based on the results of the study shall be eligible for expedited consideration by the Senate. Expedited consideration would consist of a 45-legislative-day window for Senate Committee action. WRDA 2007 also authorized other hurricane protection and navigation projects, such as the $0.9 billion Morganza-to-the Gulf of Mexico project. It also authorized up to $90 million for the Larose to Golden Meadow project to provide the 100-year level of flood protection, and $100 million to study and construct a flood damage reduction project in Lower Jefferson Parish. WRDA 2007 also deauthorized the navigational aspects of much of the Mississippi River Gulf Outlet. WRDA 2007 authorized $2.2 billion in navigation improvements and $1.7 billion in ecosystem restoration activities on the Upper Mississippi River and Illinois Waterway (UMR-IWW). The UMR-IWW is a 1,200-mile, 9-foot-deep navigation channel created by 37 lock-and-dam sites and thousands of channel structures. The UMR-IWW makes commercial navigation possible between Minneapolis and St. Louis on the Mississippi River, and along the Illinois Waterway from Chicago to the Mississippi River. It permits upper midwestern states to benefit from low-cost barge transport. Since the 1980s, the system has experienced increasing traffic delays, purportedly reducing competitiveness of U.S. products (primarily agricultural products) in some global markets. The river is also losing the habitat diversity that allowed it to support an unusually large number of species for a temperate river system. This loss is partially attributable to changes in the distribution and movement of river water caused by navigation structures and operation of the 9-foot navigation channel. The Corps' Chief of Engineers approved the completed feasibility report on UMR-IWW improvements in December 2004. The Chief's approval and the Corps' feasibility report failed to significantly reduce the debate over the urgency, necessity, and national benefit of expanded navigation capacity. The Assistant Secretary of the Army (Civil Works) requested that an economic reevaluation of the navigation investments be made available by the end of September 2007. The reliability and completeness of the Corps' analysis of the UMR-IWW navigation investments previously had been the subject of controversy and investigation. Critics of the investments argued that the economic justification for the navigation locks were decreasing with the use of corn in the region for ethanol production (rather than the corn being shipped on the waterway to international markets). The critics questioned the urgency, necessity, and national benefit of the investments. Supporters of the investments argued that competitiveness of U.S. products was being harmed by the additional cost and travel time incurred during transit through and waiting for availability of the existing shorter locks. The Corps' ecosystem restoration plan was less controversial than the UMR-IWW navigation investments. General agreement existed that the ecosystem is declining, and general support existed for the first 15-year increment of the Corps' 50-year ecosystem restoration plan. Debate over the restoration proposal focused primarily on implementation strategies, including linkages between the ecosystem restoration and navigation investments, and the federal-nonfederal cost share for restoration activities. The largest Corps ecosystem restoration effort to date is in the Florida Everglades, with a three-decade, $10.9 billion restoration program. Congress approved the Corps' implementation of the Comprehensive Everglades Restoration Plan (CERP) as a framework for Everglades restoration in WRDA 2000 with a 50% federal-50% nonfederal cost share for the program. The principal objective of CERP is to store freshwater that currently flows to the ocean, and redirect it back to the Everglades, where it originally was kept. The retained water is expected to help restore the natural hydrologic functions of the Everglades ecosystem. WRDA 2000 authorized an initial set of CERP restoration projects (with total costs estimated at $1.4 million, representing $700 million in federal responsibility). It also established a process for additional projects outlined in CERP to be developed and authorized. WRDA 2007 authorized more than $1.8 billion in CERP activities (representing $0.9 billion in federal responsibility). Prior to CERP, the federal government and the State of Florida had undertaken other Everglades restoration activities, including the Modified Water Deliveries Project (Mod Waters). The project is a controversial ecological restoration effort in south Florida designed to improve water delivery to Everglades National Park. Completion of Mod Waters is required for implementation of some CERP projects. The conference report for WRDA 2007 ( H.Rept. 110-280 ) provided multiple directions to the Corps on Mod Waters. For example, it directed the Chief of Engineers to take immediate steps to increase flows to the Everglades National Park, without significantly increasing the risk of roadbed failure. It also directed the Chief of Engineers to reexamine prior reports and environmental documentation associated with modifying water deliveries to the park and to submit to Congress by July 1, 2008, recommendations on practicable alternatives for increasing the flow of water under Tamiami Trail and into the park. In addition to directing future federal investments in water resources through WRDA authorizations, Congress also is confronted with addressing water resources issues that are not resolved through authorizing new projects. An example of an ongoing water resource issue affecting the Corps and the nation that may receive congressional attention outside of WRDA is multi-use river management. An array of interests are questioning current river management practices across the nation and how management can balance benefits (and harm) across multiple river uses, including in-stream uses. How the nation uses and values its rivers has changed over time. Rivers now are seen as providing not only economic benefits but also recreational opportunities and species habitat. This shift has resulted in a reexamination by the courts, agencies, and stakeholders of the distribution of economic and other benefits of management alternatives. For example, Missouri River management raises some fundamental questions about water resources management, such as whether some river uses should take priority over others (e.g., threatened and endangered species protection over inland waterway transportation, or vice versa) and how precedence should be decided (e.g., balancing competing uses versus maximizing economic benefits, versus maintaining minimum levels of some values). The river's management is a prime example of the complex issues in which the Corps is embroiled that often result in congressional consideration through oversight or legislative language in WRDA or other bills. A broad water resource issue that is unlikely to be directly addressed by WRDA, but is significant to the agency and the nation, is the federal role in water resources. Hurricane Katrina raised questions about this role; in particular, the disaster brought attention to the trade-offs in benefits, costs, and risks of the current division of responsibilities among local, state, and federal entities for flood mitigation, preparedness, response, and recovery. The question of the federal role also is raised by increasing competition over water supplies, not only in the West but also for urban centers in the East (e.g., Atlanta), which have resulted in a growing number of communities seeking financial and other federal assistance, actions, and permits related to water supply development (e.g., desalination and water reuse projects, reservoir expansions and reoperations). Congress rarely chooses to pursue broad legislation on federal water resources policies for many reasons, including the challenge of enacting changes that affect such a wide breadth of constituencies. Instead, Congress traditionally has pursued incremental changes through WRDA bills and other legislation, and this pattern seems likely to continue. Like WRDA debates in recent Congresses, the WRDA 2007 debate was dominated by different opinions over the desirability and need for changing the agency's policies, practices, and accountability, and for authorizing billions of dollars in investments in ecosystem restoration, navigation, and flood and storm damage reduction measures. The debates surrounding WRDA 2007 illustrated the continuing differences of opinions over the role of authorizations in guiding and prioritizing the agency's activities. The growing backlog of Corps construction and maintenance activities, constraints on federal water resources funds, the nation's aging water resources infrastructure, failure of the Corps-constructed floodwalls in New Orleans during Hurricane Katrina, and increased attention to the flood risks of urban areas have raised concerns about continuing the practice of adding billions of dollars in authorizations to the Corps' portfolio of activities through omnibus WRDA legislation. However, many factors maintain the popularity of the WRDA vehicle among legislators, and nonfederal project sponsors create demand for its passage, prompting its likely continued use. CRS Report RS20866, The Civil Works Program of the Army Corps of Engineers: A Primer , by [author name scrubbed] and [author name scrubbed]. CRS Report RL32064, Army Corps of Engineers Water Resources Projects: Authorization and Appropriations , by [author name scrubbed] and [author name scrubbed]. Congressional Budget Office, H.R. 1495 Water Resources Development Act of 2007, as reported by the House Committee on Transportation and Infrastructure on March 15, 2007 , http://www.cbo.gov/ ftpdocs/ 79xx/ doc7974/ hr1495.pdf . Letter to Honorable Barbara Boxer, May 8, 2007, on amendment in nature of a substitute to S. 1248 , the Water Resources Development Act of 2007, available at http://www.cbo.gov/ftpdocs/80xx/doc8093/s1248am.pdf . H.R. 1495 Water Resources Development Act of 2007, Conference Report filed on July 31, 2007, available at http://www.cbo.gov/ftpdocs/86xx/doc8651/hr1495conference.pdf . Executive Office of the President, Office of Management and Budget, Statement of Administration Policy on H.R. 1495 (House) (made on April 18, 2007), available at http://www.whitehouse.gov/ omb/ legislative/ sap/ 110-1/ hr1495sap-r.pdf . Statement of Administration Policy on H.R. 1495 (Senate) (made on May 11, 2007), available at http://www.whitehouse.gov/omb/legislative/sap/110-1/hr1495sap-s.pdf . Rob Portman (Executive Office of the President, Office of Management and Budget) and John Paul Woodley, Jr. (Assistant Secretary of the Army (Civil Works), letter to Chairman James Oberstar, August 1, 2007. CRS Report RS22276, Coastal Louisiana Ecosystem Restoration After Hurricanes Katrina and Rita . CRS Report RS22110, Coastal Louisiana Ecosystem Restoration: The Recommended Corps Plan . CRS Report RS22467, Coastal Wetlands Planning, Protection, and Restoration Act (CWPPRA): Effects of Hurricanes Katrina and Rita on Implementation . CRS Report RL33597, Mississippi River Gulf Outlet (MRGO): Issues for Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33188, Protecting New Orleans: From Hurricane Barriers to Floodwalls , by [author name scrubbed]. CRS Report RL32470, Upper Mississippi River - Illinois Waterway Navigation Expansion: An Agricultural Transportation and Environmental Context , by [author name scrubbed] et al. CRS Report RL32630, Upper Mississippi River System: Proposals to Restore an Inland Waterway ' s Ecosystem , by [author name scrubbed] and [author name scrubbed]. CRS Report RS22048, Everglades Restoration: The Federal Role in Funding , by [author name scrubbed] and [author name scrubbed]. CRS Report RS20702, South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan , by [author name scrubbed] and [author name scrubbed].

Congress generally authorizes new Army Corps of Engineers water resources studies and projects in a Water Resources Development Act (WRDA) before appropriating funds to them. WRDA 2007 (P.L. 110-114) became law on November 9, 2007. This was the first congressional override of a veto by President George W. Bush. WRDA 2007 authorized approximately 900 Corps projects, studies, and modifications to existing authorizations. A central issue in the debate over WRDA 2007 was its level of authorizations. A Congressional Budget Office analysis estimated its 15-year impact at $23 billion. The President returned WRDA 2007 to Congress, citing its lack of fiscal discipline and priorities. The Administration supported limiting authorizations to projects in the Corps' primary missions (navigation, flood and storm damage reduction, and ecosystem restoration) that demonstrate an economic and environmental justification for federal participation. Other issues that shaped the WRDA 2007 debate included different opinions on Corps reform measures (such as independent review and project planning) and the need for prioritizing among authorized projects, increases in the federal cost for some water resources activities and nonfederal cost share credits, and expansion of the Corps' authorizations in municipal water and wastewater infrastructure (called environmental infrastructure projects). WRDA 2007 authorized more than $2 billion in construction activities to restore wetlands in coastal Louisiana, as well as $6 billion in actions to improve hurricane protection in New Orleans. Authorizations for navigation improvements ($2.2 billion) and ecosystem restoration ($1.7 billion) on the Upper Mississippi River-Illinois Waterway, and Florida Everglades restoration (around $2 billion), also are included. WRDA 2007 created a Committee on Levee Safety to make recommendations for a national levee safety program. It also established a requirement for independent technical review of plans for Corps projects exceeding $45 million and a process for determining which flood and storm damage construction activities would undergo a safety review.

Political information--particularly political advertising--has been at the heart of American campaigns and elections for more than a century. Throughout the last century, candidates, parties, and interest groups have competed to make their case to voters in the hopes of winning elections and shaping policy debates. At the same time, Congress, regulatory agencies, and the courts have wrestled with how much, and what kind, of information should be available to the public about the sources of those political messages. Questions have also emerged about whether certain actors, such as corporations and unions, should be permitted to participate in elections and other political debates to the same extent as voters. Modern campaign finance policy and law, which emerged in the 1970s, but which built on reforms first pursued in the early 1900s, has responded with a combination of provisions designed to restrict the amounts and sources of funds in federal elections on one hand, and documenting the sources and amounts of funds that are permitted on the other. Political advertising has both enabled the public to become more informed about campaigns and policy contests, and, perhaps, made it more challenging for the electorate and policymakers to keep track of the various players and issues involved in political debates. This has been particularly true since the 1960s, when broadcast political advertising first became prominent, political professionals began to specialize in media production, and the electorate increasingly turned to television for information. The latest iteration of the debate over which corporations, unions, and other groups should be permitted to spend funds on political ads, and how so, was renewed on January 21, 2010, when the U.S. Supreme Court issued its highly anticipated decision in Citizens United v. Federal Election Commission (FEC) . The DISCLOSE Act, "Democracy is Strengthened by Casting Light on Spending in Elections," which the Committee on House Administration reported, as amended, on May 25, 2010, is the most prominent legislative response to Citizens United to date. As with the case itself, the DISCLOSE Act is particularly relevant for the ongoing policy debate surrounding political advertising and its transparency. This report is designed to provide an overview and analysis of (1) major policy issues addressed in Citizens United and the DISCLOSE Act; (2) major provisions of H.R. 5175 , S. 3295 , and S. 3628 compared with current federal campaign finance law, as shown in Table 1 at the end of this report; and (3) selected issues for congressional consideration and potential implications of enacting or not enacting the DISCLOSE Act. Legislative developments surrounding the DISCLOSE Act have generally unfolded quickly since the House and Senate bills were introduced. As such, this report will be updated periodically to reflect recent developments and emerging issues. Citizens United is significant because of its potential to change the ways in which corporations, unions, and tax-exempt organizations participate in American elections. Although restrictions on those actors have evolved over time, corporations, unions, and certain tax-exempt organizations were largely banned from spending treasury funds in federal elections for decades. As a result of Citizens United , these groups are permitted to use general treasury funds to make independent expenditures, which are defined as communications "expressly advocating the election or defeat of a clearly identified candidate" and that are not coordinated with any candidate or party, and electioneering communications, which are defined as broadcast, cable or satellite transmissions that refer to a clearly identified federal candidate, aired within 60 days of a general election or 30 days of a primary. Corporations and unions are still subject to the prohibition on using general treasury funds to make contributions to candidates and political parties. The 1907 Tillman Act, which is considered to be the first major federal campaign finance law, prohibited corporations from making contributions to political parties. With the 1947 Taft-Hartley Act, Congress expanded the prohibition to include corporate contributions to both parties and candidates, as well as expenditures in federal elections. Taft-Hartley also included labor unions in the prohibition. The early prohibitions on corporate and labor union treasury funded contributions and expenditures were included in the first modern federal campaign finance law, the Federal Election Campaign Act of 1971, also known as FECA. The prohibitions are codified at 2 U.S.C. SS 441b. In an exception to the prohibition on corporate and union treasury spending, FECA allows for the creation of separate segregated funds or political action committees , also known as PACs . Specifically, corporations and unions can use their treasury funds to establish, operate and solicit voluntary, limited contributions to their PACs. These voluntary PAC donations can then be used to contribute to federal campaigns or to make expenditures that expressly advocate election or defeat of federal candidates. In the 1976 landmark Supreme Court decision, Buckley v. Valeo , the constitutionality of many provisions in FECA was challenged. This case is important because it established the framework for constitutional analysis of campaign finance regulation. In Buckley , the Court upheld reasonable contribution limits, invalidated certain expenditure limits, and upheld reporting and disclosure requirements. In addition, the Court created the distinction between issue advocacy and express advocacy , finding that a communication could be regulated if it contained words express advocacy of the election or defeat of a candidate, which includes words such as "vote for" or "vote against." By contrast, such ads could not be regulated if they only contained general public policy messages that fell short of calling for election or defeat of candidates, sometimes referred to as issue advocacy . A generation would pass between the enactment of FECA and the next time that Congress would again enact major campaign finance legislation--the Bipartisan Campaign Reform Act of 2002 (BCRA)--but political advertising and the funding sources for that advertising remained prominent during both legislative debates. As the legislation that became BCRA was being debated in the late 1990s and early 2000s, a chief concern surrounding issue advocacy was whether the ads were actually about public policy issues--as proponents of the advertisements suggested--or whether they were really messages designed to encourage votes for or against candidates within in the context of ads that were only nominally related to public policy. In an effort to restrict issue advocacy, BCRA created a new concept within FECA known as electioneering communications in order to regulate messages that might affect elections, but did not expressly advocate for the election or defeat of a clearly identified federal candidate. Importantly, BCRA prohibited corporations and unions from using general treasury funds to pay for electioneering communications, meaning that potentially any ad that even mentioned a political candidate during pre-election periods would have to be paid for with PAC funds or not aired. In 2007, in FEC v. Wisconsin Right to Life, Inc., the Supreme Court limited the application of the prohibition, thereby easing some restrictions on corporate- and union-funded ads that would otherwise be classified as electioneering communications. As a result of the Court's ruling, if an advertisement could reasonably be interpreted as something other than calling for a vote for or against a candidate, it could not be prohibited. While this ruling limited the application of the electioneering communication prohibition, it did not expressly overrule it. Citizens United, a corporation exempt from taxes under Internal Revenue Code (IRC) SS 501(c)(4), produced a documentary about a presidential candidate, then-Senator Hillary Clinton. The group released the film in theaters and on DVD, and planned to make it available through video-on-demand and to fund broadcast and cable television advertisements promoting the movie. In Citizens United v. Federal Election Commission (FEC), the U.S. Supreme Court considered to what extent the organization was subject to the federal prohibitions on corporate treasury funding of independent expenditures, electioneering communications, and related reporting requirements. On January 21, 2010, the Supreme Court issued its long-awaited ruling in this case, and invalidated the prohibition on corporations and labor unions using their general treasury funds to make independent expenditures and electioneering communications. The Court determined that these prohibitions constitute a "ban on speech" in violation of the First Amendment. In so doing, the Court also overturned its 1990 ruling in Austin v. Michigan Chamber of Commerce , which had upheld restrictions on corporate-funded independent expenditures, finding that it provided no basis for allowing the government to limit such independent expenditures. The Court also overturned the portion of its decision in McConnell v. FEC upholding the facial validity of the prohibition on electioneering communications in BCRA, finding that the McConnell Court relied on Austin. The Court in Citizens United , however, upheld the disclaimer (which is sponsor information included within a communication) and disclosure requirements for electioneering communications as applied to the documentary. These requirements, the Court held, could be applied to the film and related advertisements that Citizens United had produced. According to the Court, while they may burden the ability to speak, disclaimer and disclosure requirements "impose no ceiling on campaign-related activities." It does not appear that the Court's ruling in Citizens United affects the validity of Title I of BCRA, which generally bans the raising of unregulated, also known as "soft," money by national parties and federal candidates or officials, and restricts soft money spending by state parties for "federal election activities." Furthermore, Citizens United does not appear to affect the ban on corporate or union contributions to political candidates. As a consequence of Citizens United , federal campaign finance law does not limit corporate and labor union treasury funding for independent expenditures and electioneering communications. Corporations and unions may still establish PACs, but are only required to use PAC funds in order to make contributions to candidates, parties, and other political committees. Given these developments, questions have emerged about how political advertising might be affected by the Court's decision in Citizens United and whether the airwaves will be flooded with corporate and labor union express advocacy. Similar questions have arisen about the extent to which the Court's decision might lead to increased campaign activity by tax-exempt organizations, particularly SS 501(c)(4) social welfare organizations and SS 501(c)(6) trade associations. Many of the these organizations are incorporated, and thus, prior to Citizens United , were generally prohibited from using their treasury funds for independent expenditures and electioneering communications. Additionally, all SS 501(c) organizations, regardless of whether they were incorporated, could not serve as conduits for corporate or labor union treasury funds to fund independent expenditures and electioneering communications. In light of the Court's decision in Citizens United , some are expecting increased campaign activity by tax-exempt organizations. Additionally, some have expressed concern that organizations might be used as shadow groups--groups to which corporations, other entities, and individuals might give funds to engage in campaign activity with little or no public disclosure. Because this is the first time in modern history that corporate and union independent expenditures have been permitted at the federal level, it remains to be seen how much additional money, if any, might flow into the political system. A more complete understanding of how Citizens United will affect the political environment, including campaign spending, will likely be unavailable until after the 2010 election cycle, at the earliest. Proponents of legislative action have, nonetheless, argued that preemptive legislation is necessary to avoid or at least document an expected onslaught of new political advertising. Legislative responses to Citizens United began developing immediately after the January 21 ruling. More than 40 bills that are potentially relevant have been introduced in the 111 th Congress. The primary focus has been on the DISCLOSE Act. Representative Van Hollen introduced the House measure, H.R. 5175 , on April 29, 2010. Senator Schumer introduced the initial Senate version, S. 3295 , on April 30, 2010. Senator Schumer introduced S. 3628 , a second version of the DISCLOSE Act--apparently intended to supersede the other Senate measure--on July 21, 2010. S. 3628 was placed on the Senate calendar, rather than being referred to committee. The measure would, therefore, rapidly become available for floor consideration. Although committees in both chambers have held hearings on Citizens United , the House has largely focused on the DISCLOSE Act rather than other legislation. Both the Committee on House Administration and House Judiciary Subcommittee on the Constitution, Civil Rights, and Civil Liberties held hearings to assess the Citizens United ruling on February 3, 2010. The Committee on House Administration held two hearings on H.R. 5175 specifically, on May 6, 2010, and May 11, 2010. The committee held a markup on May 20, 2010, when H.R. 5175 was ordered favorably reported, as amended. After the House Administration Committee reported an amended version of H.R. 5175 on May 25, the House of Representatives passed the bill, with additional amendments, on June 24, 2010, by a 219-206 vote. The versions of the bill as introduced in the House and as passed by the House were generally similar. There were, however, some notable differences. In particular, the House-passed measure modified the bill to raise the threshold for prohibiting expenditures by government contractors from contracts valued of at least $50,000 to contracts of at least $10 million; clarify that Internet communications are generally not subject to FECA's disclosure and disclaimer requirements, except for paid political advertising; require that independent expenditures and electioneering communication reports be filed electronically and in a format that permits sorting and searching data (for reports with at least $10,000 in expenditures); and require automated political telephone calls ( robo calls ) to include "stand-by-your-ad" disclaimers. Despite some differences (discussed below), these versions of the DISCLOSE Act would generally expand the current definitions of independent expenditure and electioneering communication , thereby mandating expanded disclosure and disclaimer requirements for certain political communications run by corporations, unions, and certain tax-exempt SS 527 and SS 501(c) organizations ( covered organizations ), and broadening the kind of communications that may be subject to FECA prohibitions; require covered organizations to report to the FEC information about their donors (including transfers) and spending for certain independent expenditures and electioneering communications; require corporate chief executive officers or other high-ranking officials in covered organizations to state their approval for advertising content, similar to current "stand by your ad" requirements for candidate ads; prohibit certain government contractors from making independent expenditures and electioneering communications in federal elections; prohibit TARP recipients from making contributions, independent expenditures, and electioneering communications in federal elections; and prohibit corporations subject to certain control or ownership by foreign nationals (e.g., U.S. subsidiaries of foreign corporations) from making contributions, independent expenditures, and electioneering communications in federal, state, and local elections; and remove existing limits on coordinated party expenditures if a candidate or candidate campaign does not control the expenditure. Despite the general similarities discussed above, there are some important differences between the version of the DISCLOSE Act passed by the House and the two introduced in the Senate. Major differences between the House and Senate bills include the following provisions. The two Senate bills contain lengthy findings sections. H.R. 5175 as introduced and reported from the Committee on House Administration contained similar findings, but the relevant section was omitted from the version of the bill passed by the House. The bills contain different thresholds for restricting independent expenditures and electioneering communications by government contractors. S. 3295 would bar such expenditures for entities holding contracts of at least $50,000. H.R. 5175 as passed by the House would set the threshold contract value at $10 million, as would S. 3628 . The bill passed by the House also contains a restriction on Outer Continental Shelf oil and gas lessees not found in the Senate bill. The House bill would prohibit entities holding or negotiating these leases from making contributions, independent expenditures, and electioneering communications in federal elections. Neither Senate measure contains such a provision. The bills would redefine foreign nationals , who are restricted from making contributions or expenditures in U.S. elections, differently. All three measures would expand the current foreign national definition to include certain foreign-controlled U.S. corporations, but H.R. 5175 and S. 3628 contain additional prohibitions on entities owned by or under control of foreign governments or foreign-government officials. Unlike H.R. 5175 and S. 3628 , S. 3295 would revise the lowest unit charge ( LUC , also called the lowest unit rate ). Currently, the LUC essentially permits candidate committees to purchase preemptible broadcast advertising time at the cheapest price offered to commercial advertisers for comparable time. In addition to other revisions, S. 3295 would bar preemption of LUC ads (unless beyond a broadcaster's control) and would extend the rate to national party committees in some circumstances. Both Senate bills would require Senate political committee reports to be filed electronically and directly with the Federal Election Commission (FEC) rather than with the Secretary of the Senate. Senate campaign committees, party committees, and PACs currently are not required to file campaign finance reports electronically. The House bill does not address these provisions. H.R. 5175 , as passed by the House, excludes SS 501(c)(3) organizations and certain large SS 501(c)(4) organizations from the disclosure and disclaimer provisions. Table 1 at the end of this report and the following discussion provide additional detail. As Congress evaluates the DISCLOSE Act, several factors could be relevant. It could first be useful to consider what the bill would and would not do. In short, the DISCLOSE Act's provisions are essentially tailored to political advertising--the main policy issue raised by Citizens United . In brief, the DISCLOSE Act appears aimed at documenting additional political advertising in general, and restricting it where potential corruption might occur in specific circumstances. Nonetheless, the disclosure provisions would not necessarily affect political spending per se, nor would they necessarily deter those entities that wished to call for election or defeat of federal candidates. As such, the bill would not necessarily ensure an equal playing field among various political advertisers--including campaigns--nor could it necessarily do so. In general, the bills would broadly apply additional disclosure and disclaimer provisions to entities making independent expenditures and electioneering communications, as defined in the bills. Corporations, unions, and certain tax-exempt SS 501(c) and SS 527 organizations would all be subject to the disclosure and disclaimer provisions--provided that their activities met the financial and time thresholds required to classify their communications as independent expenditures or electioneering communications. On the other hand, the bills' restrictions on political expenditures apply only to specific kinds of organizations--namely those government contractors, entities subject to foreign control, or TARP recipients falling under the DISCLOSE Act's provisions barring certain political expenditures. The bills would not, however, directly affect candidate campaigns in most cases. Indeed, the provisions of the bills appear to be aimed primarily at non-campaign actors, particularly corporations, unions, and tax-exempt organizations. The bills do not increase contribution limits for candidate campaigns; they also generally do not address other political committees--parties and PACs. A notable exception, discussed below, would permit parties to make additional coordinated expenditures supporting their candidates. This is the only instance in which the bills explicitly allow for more political spending than would be possible under the status quo. In addition to the general policy approaches described above, specific provisions in the legislation could be the subject of debate during House and Senate consideration of the DISCLOSE Act. Because the effects of Citizens United will be unclear until at least the conclusion of the 2010 election cycle, and because of the quickly evolving debate in Congress, all the bills' major implications cannot be predicted. The following sections discuss some of the potential implications of the bill, which Congress may wish to consider when evaluating the legislation. As noted previously, other issues may also be relevant; additional analysis will be included in future updates to this report as developments warrant. If Congress chooses to maintain the status quo by not enacting a legislative response, some argue that certain spending by corporations, unions, and tax-exempt organizations to influence elections could go undocumented under current campaign finance law. In particular, it is possible that under certain circumstances, undisclosed funds could be transferred from one organization to another for the purpose of funding independent expenditures or electioneering communications. Those organizations that the bill proposes to prohibit making expenditures, such as certain U.S. subsidiaries of foreign corporations, would also be free to fund advertising as they saw fit. On the other hand, if substantial additional spending following Citizens United does not occur, it is possible that additional legislative action is unnecessary. In addition, some might contend that existing law is sufficient to cover many of the topics addressed in the DISCLOSE Act. As noted previously, now that corporations and unions are free to use general treasury funds for independent expenditures and electioneering communications, the legislation proposes to document such spending through disclosure and disclaimer requirements--and to prohibit some entities from making such expenditures. The activities to which these requirements would apply depend largely on how key terms are defined. Importantly, the bills would broaden the definitions of independent expenditures and electioneering communications, thereby expanding the scope of FECA's regulation. Specifically, the bills would expand the definition of independent expenditure to include an expenditure "that, when taken as a whole, expressly advocates the election or defeat of a clearly identified candidate, or is the functional equivalent of express advocacy because it can be interpreted by a reasonable person only as advocating the election or defeat of a candidate, taking into account whether the communication involved mentions a candidacy, a political party, or a challenger to a candidate, or takes a position on a candidate's character, qualifications, or fitness for office." In other words, it is possible that an advertisement could be subject to DISCLOSE Act regulation as an independent expenditure even if it does not explicitly call for election or defeat of a clearly identified candidate if the ad can reasonably be interpreted only as advocating election or defeat of a candidate. In addition, the bills would increase the period (from 60 to 120 days for the House bill and S. 3628 , and from 60 to 90 days for S. 3295 ) prior to general election in which communications are treated as electioneering communications. These provisions are noteworthy because they would affect the kind of political advertising subject to regulation under the DISCLOSE Act and, by extension, other provisions in FECA. The bills' disclosure, disclaimer, and shareholder/member reporting requirements would apply to covered organizations , which would be defined as corporations, labor organizations, tax-exempt SS 501(c)(4), (c)(5), and (c)(6) organizations, and SS 527 political organizations that are not political committees for purposes of FECA. H.R. 5175 , as passed by the House, and S. 3628 would expressly exclude SS 501(c)(3) charitable organizations and qualifying large SS 501(c)(4) organizations from the definition of covered organization . S. 3295 does not contain similar exemptions. Many tax-exempt entities are incorporated and therefore would fall within the definition of covered organization , absent an exclusion. Therefore, under S. 3295 , the term covered organization would include incorporated SS 501(c)(3) organizations. It is important to note that the IRC imposes restrictions on the ability of tax-exempt organizations to engage in campaign activity; for example, SS 501(c)(3) organizations are prohibited from engaging in such activity. The activities that constitute electioneering under the IRC and FECA are not always the same. For example, it appears possible that an issue advocacy communication, depending on its timing and content, might be an electioneering communication under FECA, but might not be treated as campaign activity under the IRC. In addition to its disclosure, disclaimer, and reporting requirements, the legislation contains several prohibitions. Specifically, it would prohibit certain government contractors, TARP recipients, and corporations subject to certain control or ownership by foreign nationals from making expenditures or contributions in connection with federal elections. Table 1 , at the end of this report, contains additional detail on individual prohibitions. Section 101 of H.R. 5175 as passed by the House and S. 3628 would prohibit government contractors from making electioneering communications or independent expenditures "only if the value of the contract is equal to or greater than $10,000,000." This language appears to suggest that this prohibition is intended to apply only to contractors holding a single contract of at least $10 million. S. 3295 would apply to contracts of at least $50,000. Although the original House bill had a similar limit, the House-passed bill increased the threshold to $10 million. Some have suggested that this modification was made to exempt small business government contractors from the prohibition. While the value of the "average" federal procurement contract may seem low ($120,634 in FY2008), even small businesses routinely receive much larger contracts, arguably providing one rationale for exempting contractors who have not received a contract valued at more than $10 million from the proposed ban on independent expenditures and electioneering communications. Agencies may, for example, award contracts valued at up to $3.5 million ($5.5 million for manufacturing contracts) to small businesses participating in the 8(a) Minority Business Development Program without competing them, and some small businesses have received contracts valued at over half a billion dollars. "Large" government contractors, in contrast, can receive contracts valued at over $1 billion. Section 101 of all three bills would prohibit prospective recipients of TARP funds from directly or indirectly making contributions, independent expenditures, or electioneering communications. Notably, it appears that the prohibitions would apply to TARP recipients using TARP funds, as well as their own funds. The applicable period of the prohibition would begin on the later of the commencement of the negotiations for financial assistance under title I of the Emergency Economic Stabilization Act of 2008 or the date of enactment of one of these bills, and end on the later of the ending of negotiations or the repayment of such financial assistance. In addition, H.R. 5175 contains a similar prospective prohibition for those holding or negotiating for Outer Continental Shelf oil and gas leases. S. 3295 and S. 3628 do not contain a similar prohibition. Several questions of interpretation could be raised by Section 102 of the legislation, which would apply existing prohibitions on contributions or expenditures by foreign nationals to foreign-controlled domestic corporations (e.g., U.S. subsidiaries of foreign corporations). For example, it is unclear how the FEC or a court would interpret or administer some of the key terms contained in the various thresholds for establishing foreign control, as proposed in Section 102. One such threshold focuses upon direct or indirect ownership by a foreign national of various amounts of the voting shares of a corporation (see Table 1 ), but would appear to leave the FEC substantial discretion in determining what constitutes "indirect ownership" or at what point in time ownership is determined. Other criteria similarly focus upon whether one or more foreign nationals "has the power to direct, dictate, or control the decision-making process of the corporation" with respect to its interests in the United States or in connection with its federal, state, or local election activities, including PAC administration and making contributions and expenditures. However, this standard would also appear to leave the FEC substantial discretion to determine what forms of conduct or business arrangements would indicate that a foreign national has the power to "direct, dictate, or control" corporate decision-making. Section 104 of the legislation appears to lift the existing caps on coordinated party expenditures unless "the communication is controlled by, or made at the direction of, the candidate or an authorized committee of the candidate." In the absence of increased contribution limits, candidates may face substantial obstacles responding to corporate and union advertising post- Citizens United . Lifting the caps on coordinated party expenditures arguably provides parties with a way to help their candidates facing potential corporate, union, or tax-exempt organization-funded advertising. On the other hand, some may object to increasing the amount of money in the political system, even if it is to respond to corporate or union advertising. In addition, the standard for communications "controlled by, or made at the direction of, the candidate or an authorized committee of the candidate" is not defined. Given this potential ambiguity, and an ongoing FEC rulemaking on coordination, some in Congress might wish to clarify terms. The bills would require additional disclosure of donors to covered organizations. The provisions may be understood, at least in part, as a mechanism to limit the possibility that non-profit organizations might be used as "shadow groups"--groups to which corporations, other entities, or individuals would give funds to be used for campaign activities with little or no public disclosure. A notable aspect of the bills is that they would require the disclosure of certain donors who did not give money specifically for political activities, unlike, for example, the existing independent expenditure provision, which only requires the disclosure of donors who gave "for the purpose of furthering" the expenditure. Another potentially notable aspect of the donor disclosure provisions is that they would apply FEC reporting requirements to SS 527 political organizations that are not political committees under FECA. These political organizations would include the "SS 527 groups" that have been controversial in recent years because they seem intended to influence federal elections in ways that might be outside the scope of FECA. Under current law, political committees report to the FEC, while the SS 527 groups report to the IRS. In both cases, the information is publicly available. The other types of covered organizations are not currently subject to similar reporting requirements. The bills' disclosure and disclaimer requirements would not necessarily, in and of themselves, limit overall spending on political advertising. Ultimately, corporations, unions, and other groups intent on making independent expenditures and electioneering communications could choose to do so regardless of such requirements. The additional requirements proposed in the bills might, however, cause potential advertisers to consider whether they wish to be publicly accountable for the advertising. Section 213 of the bills would permit covered organizations to establish optional accounts for campaign-related activity, including independent expenditures and electioneering communications. Because such accounts do not currently exist, it is unclear how significant this provision might be. Several issues, however, could be relevant. First, it appears that once an organization elected to establish the account, it would be required to use that account exclusively for future campaign-related activity -- a strategic or administrative decision that some organizations might not be willing to make on a permanent basis. Second, the provisions specify that amounts in the account be "exclusively for disbursements by the covered organization for campaign-related activity." Given this language, it is unclear whether or not an organization using a campaign-related activity account could dispose of its funds if it decided to abandon political spending altogether. If Congress wishes to provide a non-campaign-related mechanism to do so, existing provisions in FECA permitting charitable contributions could be an option. Even if Congress enacts the DISCLOSE Act quickly, aspects of the legislation will require agency implementation. The process could affect how quickly and how clearly the act affects campaigns and related spending (e.g., independent political advertising). Because the DISCLOSE Act would primarily amend FECA, the FEC would be responsible for administering and enforcing most of the bill's provisions. It is possible that the FEC could implement the DISCLOSE Act quickly, although various factors suggest that it is unlikely the Commission could fully implement the act before the 2010 November general elections. In addition to the time required to develop and reach agreement on rules, for those rules to be finalized (upon publication in the Federal Register ), the Commission would have to also approve an explanation and justification (E&J) statement explaining its rationale and offering practical guidance about what the regulations mean and how they will be enforced. This process routinely takes months, even for expedited rulemakings. The Commission would have to also amend its reporting forms to adhere to the act's new requirements. Importantly, FECA requires that adopting rules and developing forms (among other provisions) requires affirmative votes from at least four of the six Commissioners. A series of deadlocked votes (e.g., 3-3 ties) among members of the current Commission, however, suggests that disagreement among Commissioners is possible--particularly on controversial or ambiguous aspects of the legislation. If disagreements resulted in deadlock or failure to implement the law as Congress intends, the DISCLOSE Act's effectiveness could be delayed or compromised. Perhaps in response to those concerns, many of the DISCLOSE Act's provisions would become effective 30 days after enactment, with at least one becoming effective immediately upon enactment. The bills specify that their provisions would generally take effect regardless of whether the FEC had promulgated rules to implement the legislation. Nonetheless, the "regulated community" might lack practical and administrative guidance about how to comply with the act's provisions until the Commission could issue rules and begin considering advisory opinions. Nonetheless, even if rulemaking or amending forms were delayed, the law itself would still take effect as stated in the act. Therefore, even if some details remained to be determined, enacting the DISCLOSE Act or other legislation could permit Congress to place additional requirements on political advertisers or other campaign actors regardless of Commission action or inaction. As Congress considers the DISCLOSE Act, it may be too soon to predict precisely how Citizens United might affect campaigns or political advertising in the absence of legislation. If Congress chooses to enact the DISCLOSE Act, it would provide additional information to the public and regulators about political advertising funded by corporations, unions, and tax-exempt organizations. It would also prohibit certain entities from funding electioneering communications and independent expenditures, as well as providing political parties with greater ability to make coordinated party expenditures in some cases. Except for the spending prohibitions in the bill, nothing in the legislation would necessarily prevent corporations, unions, or other entities from funding political advertising calling for election or defeat of clearly identified candidates. The disclosure and disclaimer provisions could, however, provide the public and regulators with additional information about the sources of that advertising. Public disclosure could also cause would-be advertisers to think carefully before making political expenditures. For those who believe that Citizens United will usher in a new era of corporate or union dominance in elections, such an outcome might be welcome. On the other hand, those who believe that Citizens United correctly strengthens corporate and union speech rights might be wary of any provisions perceived as stifling the ability to participate in elections. As Congress considers the DISCLOSE Act, issues related to how terms are defined, the kinds of organizations that would be regulated, implementation, and other concerns may be relevant.

As it has periodically for decades, Congress is again considering how or whether to regulate campaign financing. The latest iteration of the debate over which kinds of groups should be permitted to spend funds on political advertisements, and how so, was renewed on January 21, 2010, when the Supreme Court of the United States issued its decision in Citizens United v. Federal Election Commission. Following Citizens United, corporations and labor unions may now fund political advertisements explicitly calling for election or defeat of federal candidates--provided that the advertisements are not coordinated with the campaign. The legislative response receiving the most attention to date--and the emphasis of this report--is the DISCLOSE ("Democracy is Strengthened by Casting Light on Spending in Elections") Act. The House measure, H.R. 5175, sponsored by Representative Van Hollen, was reported, as amended, by the Committee on House Administration on May 25, 2010. The House of Representatives passed the bill, with additional amendments, on June 24, 2010, by a 219-206 vote. Senator Schumer's companion legislation that was first introduced in the Senate, S. 3295, is generally similar to the bill passed by the House. The same is true for S. 3628, a second measure--apparently intended to supersede S. 3295--that Senator Schumer introduced on July 21, 2010. There are, however, some important differences across the three bills, as discussed in this report. The bills appear to be aimed primarily at non-campaign actors, particularly corporations, unions, and tax-exempt organizations. The bills propose a combination of disclosure provisions and disclaimer provisions (which are sponsorship information included within a communication) that would apply to these entities and are designed to give regulators and the public additional information about political advertising that could emerge following Citizens United. The legislation also prohibits certain government contractors, foreign-controlled or owned corporations (including some U.S. subsidiaries of foreign corporations), and prospective recipients of Temporary Asset Relief Program (TARP) funds from making certain political expenditures. The bills do not increase contribution limits for candidate campaigns; they also generally do not address other political committees--parties and PACs. A notable exception would permit parties to make additional coordinated expenditures supporting their candidates. This is the only instance in which the bills explicitly allow for more political spending than would be possible under the status quo. This report provides an overview and analysis of (1) major policy issues addressed in the DISCLOSE Act, which responds to Citizens United; (2) major provisions of H.R. 5175, as passed by the House, and S. 3295 and S. 3628 as introduced in the Senate, versus current federal law; and (3) issues for congressional consideration and potential implications of enacting or not enacting the DISCLOSE Act. The report will be updated as events warrant.

During the last week of August 2016, the 10,000 th Syrian refugee was admitted to the United States in FY2016. The Obama Administration had pledged to admit at least 10,000 Syrian refugees in FY2016. While some policymakers are celebrating the Syrian admissions, others have raised concerns about the refugee admission process, particularly security vetting procedures. Some policymakers have urged the Obama Administration to stop admitting Syrian refugees for now and a number of governors have expressed an unwillingness to accept Syrian refugees in their states. To assist Congress in addressing issues related to Syrian refugees and U.S. refugee policy generally, this report details the U.S. refugee admissions process and the placement and resettlement of arriving refugees in the United States. The admission of refugees to the United States and their resettlement here are authorized by the Immigration and Nationality Act (INA), as amended by the Refugee Act of 1980. The 1980 act had two basic purposes: (1) to provide a uniform procedure for refugee admissions; and (2) to authorize federal assistance to resettle refugees and promote their self-sufficiency. The intent of the legislation was to end an ad hoc approach to refugee admissions and resettlement that had characterized U.S. refugee policy since World War II. Prior to the enactment of the Refugee Act, refugees were admitted through a variety of mechanisms in immigration law, such as parole. The INA defines a refugee as a person who is outside his or her country and who is unable or unwilling to return because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. In special circumstances, a refugee also may be a person who is within his or her country and who is persecuted or has a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Under INA Section 207, the maximum annual number of refugee admissions (refugee ceiling) and the allocation of these numbers by region of the world are set by the President after consultation by Cabinet-level representatives with members of the House and Senate Judiciary Committees. INA Section 207(a)(3) further directs that "admissions ... shall be allocated among refugees of special humanitarian concern to the United States." Typically, the Administration submits a refugee proposal before the start of the new fiscal year that serves as the basis for the congressional consultations. The law requires congressional consultation but not congressional approval. Following the consultations, the President issues a Presidential Determination that sets the refugee ceiling and regional allocations for that fiscal year. Once the Presidential Determination for a fiscal year has been issued, INA Section 207 also allows for additional refugee admissions in response to an "emergency refugee situation." In such a situation, the President may, after congressional consultations, issue an Emergency Presidential Determination providing for an increase in refugee admissions numbers. For FY2016, the Obama Administration initially proposed a refugee ceiling of 75,000 and held consultations with Congress on that proposal. The proposal reportedly included an allocation of 33,000 for the Near East/South Asia, the region that includes Syria. The Administration subsequently announced that the United States would admit at least 10,000 Syrian refugees in FY2016. On September 29, 2015, the Obama Administration released the Presidential Determination on Refugee Admissions for Fiscal Year 2016. It sets the FY2016 refugee ceiling at 85,000, with 79,000 admissions numbers allocated among the regions of the world and 6,000 admissions numbers comprising an unallocated reserve. The allocation for the Near East/South Asia region is 34,000. In FY2015, the United States admitted 69,933 refugees. The Near East/South Asia region accounted for 24,579 admissions, of which 1,682 were Syrian refugees. In the first 11 months of FY2016 (through August 31, 2016), total refugee admissions were 72,354, Near East/South Asia region admissions were 30,356, and Syrian admissions were 10,740. (See Appendix for data on placement of FY2016 Syrian arrivals by state.) From October 1, 2010, through August 31, 2016, the United States admitted a total of 12,623 Syrian refugees. In addition to meeting the INA definition of a refugee, a prospective refugee must meet other requirements enumerated in INA Section 207(c)(1) in order to be eligible for admission to the United States. These requirements are that the individual is not firmly resettled in another country, is determined to be of special humanitarian concern to the United States, and is admissible under the INA. These statutory requirements are implemented through the refugee processing system, as detailed below. Successful applicants are admitted to the United States in refugee status. After one year in the United States, refugees must apply to adjust to lawful permanent resident (LPR) status. The Department of State's (DOS's) Bureau of Population, Refugees, and Migration (PRM) is responsible for coordinating and managing the U.S. Refugee Admissions Program. Prospective refugees can be referred to the U.S. program by the United Nations High Commissioner for Refugees (UNHCR), a U.S. embassy, or a designated nongovernmental organization (NGO), or in some cases, as described below, can access the U.S. refugee program directly. PRM generally arranges for an NGO, an international organization, or U.S. embassy contractors to manage a Resettlement Support Center (RSC) that assists in refugee processing. RSC staff conduct pre-screening interviews of prospective refugees to make a preliminary determination as to whether they qualify for access to the U.S. refugee program. Access is determined through a system of processing priorities. To be considered for resettlement in the United States, a prospective refugee must fall within one of the following three priorities or categories of cases: Priority 1 (P-1) covers refugees for whom resettlement seems to be the appropriate durable solution, who are referred to the U.S. refugee program by UNHCR, a U.S. embassy, or a designated NGO. Priority 2 (P-2) covers groups of special humanitarian concern to the United States. It includes specific groups that may be defined by their nationalities, clans, ethnicities, or other characteristics. P-2 cases can access the U.S. refugee program directly. Priority 3 (P-3) covers family reunification cases. This priority is limited to designated nationalities. Refugee applications under Priority 3 are based upon an affidavit of relationship filed by an eligible relative in the United States. P-3 cases can access the U.S. refugee program directly. All refugee cases that are preliminarily determined to be eligible for access to U.S. resettlement consideration go through the same processing steps. The RSCs assist applicants in completing documentary requirements and schedule refugee eligibility interviews with the Department of Homeland Security's U.S. Citizenship and Immigration Services (USCIS). As part of the security screening process, the RSCs initiate biographic name checks for all applicants. (The RSCs' role following the USCIS interview is discussed in " Post-Adjudication Steps .") USCIS adjudicates refugee applications and makes decisions about eligibility for refugee status. USCIS officers in the Refugee Corps interview each applicant in person and consider other evidence and information to determine whether the individual is eligible for refugee status. At the interview, the fingerprints of applicants aged 14 to 79 are collected for biometric checks. The USCIS officer must determine whether the applicant is qualified under one of the processing priorities, meets the INA definition of a refugee, is not firmly resettled in another country, and is admissible to the United States under the INA. With respect to the latter requirement, INA Section 212(a) sets forth various grounds of inadmissibility, which include health-related grounds, criminal grounds, and security-related grounds. USCIS has described the security screening process for refugees as "the most robust of any population processed by USCIS." Refugees are vetted against the Consular Lookout and Support System (CLASS) database, the Federal Bureau of Investigation (FBI) databases, and the National Counterterrorism Center (NCTC) databases, among others. Refugee applicants must clear all required checks before their applications can receive final approval. In July 2015, USCIS summarized the refugee security check process, as follows: Security checks are an integral part of the U.S. Refugee Admissions Program (USRAP) for applicants of all nationalities. Refugee applicants of all nationalities are subject to rigorous biographic and biometric screening. These procedures and partnerships have been substantially enhanced over time since the launch of large-scale Iraqi refugee resettlement in 2007. A standard suite of required biographic and biometric security checks has been developed for all refugee applicants. Through close coordination with the federal law enforcement and intelligence communities, these checks are continually reviewed to identify potential enhancements and to develop approaches for specific populations that may pose particular threats. The biographic checks include vetting refugee data against the State Department's Consular Lookout and Support System (CLASS). CLASS is a biographic name check database used to access critical information for visa adjudication and is run on all refugee applicants. CLASS contains information from TECS (formerly the Treasury Enforcement Communication System), the Terrorist Screening Database (TSDB), the Department of Health and Human Services (HHS), the Drug Enforcement Agency (DEA), Interpol, and the Federal Bureau of Investigations (FBI). In addition, refugee applicants meeting certain criteria are subject to Security Advisory Opinions (SAOs), including law enforcement and intelligence communities checks. SAO checks are run on applicants who meet these criteria and are between the ages of 16 to 50. Refugee applicants are subject to a third biographic check referred to as the Interagency Check (IAC); the IAC consists of screening biographic data against a broader range of intelligence community holdings. IACs are run on applicants who are age 14 and older. The biometric (fingerprint) checks (for applicants ages 14-79) include screening against the holdings of the Federal Bureau of Investigation (FBI) Next Generation Identification (NGI), the Department of Homeland Security (DHS) Automated Biometric Identification System (IDENT), and the Department of Defense Automated Biometric Identification System (ABIS). In addition to this standard suite of security checks, USCIS Headquarters staff are reviewing all Syrian refugee cases prior to DHS interview to identify potential national security concerns. For those cases with potential national security concerns, USCIS conducts open source and classified research on the facts presented in the refugee claim and synthesizes an evaluation for use by the interviewing officer. This information provides case-specific context relating to country conditions and regional activity and is used by the interviewing officer to develop lines of inquiry related to the applicant's eligibility and credibility. USCIS has also instituted Syria-specific training for officers adjudicating cases with Syrian applicants, which includes a classified briefing on country conditions. USCIS is continuing to engage with the law enforcement and intelligence communities, including exploring training opportunities and potential screening enhancements, to ensure that refugee vetting for Syrian refugee applicants is as robust as possible. In a subsequent fact sheet on refugee security screening, USCIS provided additional information about the "Syria Enhanced Review," as follows: USCIS' Refugee, Asylum and International Operations Directorate and Fraud Detection and National Security Directorate (FDNS) have collaborated to provide for enhanced review of certain Syrian cases. This review involves FDNS providing intelligence-driven support to refugee adjudicators, including threat identification, and suggesting topics for questioning. FDNS also monitors terrorist watch lists and disseminates intelligence information reports on any applicants who are determined to present a national security threat. With respect to prospective Syrian refugees, concerns have been raised by some about how effectively the U.S. government can perform security checks in light of the limited data available about this population. The United States does not have diplomatic relations with Syria and thus does not have access to on-the-ground intelligence. At the end of the process, while a refugee applicant awaits final approval to be resettled in the United States, RSC staff guide the refugee through the post-adjudication steps, which include obtaining medical screening exams and attending cultural orientation programs. The RSC obtains sponsorship assurance as part of the DOS Reception and Placement program (see " Placement Process and Initial Resettlement ") and, once all required steps are completed, refers the case to the International Organization for Migration to arrange for transportation to the United States. Refugees of all nationalities who are accepted for U.S. resettlement are placed in communities throughout the United States. In FY2016, arriving refugees have been placed in 47 states and the District of Columbia. The initial placement of refugees has received increased attention since the November 2015 attacks in Paris, as some governors have expressed an unwillingness to accept Syrian refugees in their states. These announcements, in turn, have raised a number of legal questions. Regardless of where refugees are initially resettled, however, they are free to relocate at any time. Once admitted to the United States, refugees are eligible for initial and longer-term resettlement assistance. (See Appendix for data on placement of Syrian arrivals in FY2016, by state.) The placement of arriving refugees in communities in the United States and the provision of initial resettlement assistance to them is the responsibility of DOS's Reception and Placement Program. Under this program, PRM funds cooperative agreements with domestic resettlement agencies. The placement process works as follows: Every week, representatives of each of [the resettlement] agencies meet to review the biographic information and other case records sent by the overseas Resettlement Support Centers (RSC) to determine where a refugee will be resettled in the United States. During this meeting, the resettlement agencies match the particular needs of each incoming refugee with the specific resources available in a local community. If a refugee has relatives in the United States, he or she is likely to be resettled near or with them. Otherwise, the resettlement agency that agrees to sponsor the case decides on the best match between a community's resources and the refugee's needs. Under the INA, the director of the Office of Refugee Resettlement at the Department of Health and Human Services and the agency administering the Reception and Placement Program are required to "consult regularly (not less often than quarterly) with State and local governments and private nonprofit voluntary agencies concerning the sponsorship process and the intended distribution of refugees among the States and localities before their placement in those States and localities." There is no statutory requirement, however, for state approval. The resettlement agencies provide services to refugees in their first 30 to 90 days in the United States. These services include reception upon arrival in the United States; basic needs support (e.g., housing, furnishings, food, and clothing) for at least 30 days; and referrals to health, employment, education, and other services, as needed. The Department of Health and Human Services' Office of Refugee Resettlement (ORR), within the Administration for Children and Families (ACF), administers a transitional assistance program for refugees, Cuban/Haitian entrants, and other specified groups. The ORR-funded resettlement assistance activities are authorized in INA Section 412. They include refugee cash and medical assistance, social services to help refugees become socially and economically self-sufficient, and targeted assistance for impacted areas. ORR assistance is provided mainly through state-administered refugee resettlement programs. As explained by ORR: "States provide transitional cash and medical assistance and social services, as well as maintain oversight for the care of unaccompanied refugee minors." INA Section 412 sets conditions on state receipt of resettlement assistance. To receive assistance, a state is required to submit a plan to ORR with specified components, meet ORR standards and goals to assure effective resettlement of refugees, and submit an annual report to ORR on use of provided funds. States are not required to administer a refugee resettlement program. If they choose not to participate in whole or in part, however, ORR regulations provide for the designation of a replacement. Under ORR regulations at 45 C.F.R. SS400.301: (a) In the event that a State decides to cease participation in the refugee program, the State must provide 120 days advance notice to the Director before withdrawing from the program. (b) To participate in the refugee program, a State is expected to operate all components of the refugee program, including refugee cash and medical assistance, social services, preventive health, and an unaccompanied minors program if appropriate.... (c) When a State withdraws from all or part of the refugee program, the Director may authorize a replacement designee or designees to administer the provision of assistance and services, as appropriate, to refugees in that State.... As of August 31, 2016, 10,740 Syrian refugees have arrived in the United States in FY2016. These refugees were placed in 40 states, as shown in the following table.

The admission of Syrian refugees to the United States has generated public controversy, with opponents citing concerns chiefly about terrorism and national security. As of August 31, 2016, the United States has admitted 10,740 Syrian refugees in FY2016, meeting the Obama Administration's fiscal year goal. These new arrivals have been placed in 40 states. From October 1, 2010, through August 31, 2016, the United States admitted a total of 12,623 Syrian refugees. The admission of refugees to the United States and their resettlement here are authorized by the Immigration and Nationality Act (INA), as amended by the Refugee Act of 1980. The INA defines a refugee as a person who is outside his or her country and who is unable or unwilling to return because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. In special circumstances, a refugee also may be a person who is within his or her country and who is persecuted or has a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. The maximum annual number of refugee admissions (refugee ceiling) and the allocation of these numbers by region of the world are set by the President after consultation by Cabinet-level representatives with members of the House and the Senate Judiciary Committees. The Department of State's (DOS's) Bureau of Population, Refugees, and Migration (PRM) is responsible for coordinating and managing the U.S. Refugee Admissions Program. Prospective refugees can be referred to the U.S. program by the United Nations High Commissioner for Refugees, a U.S. embassy, or a designated nongovernmental organization (NGO), or in some cases, they can access the U.S. refugee program directly. PRM generally arranges for an NGO, an international organization, or U.S. embassy contractors to manage a Resettlement Support Center (RSC) that assists in refugee processing. The RSCs assist applicants in completing documentary requirements and schedule refugee eligibility interviews with the Department of Homeland Security's U.S. Citizenship and Immigration Services (USCIS), which adjudicates refugee applications. The USCIS officer must determine whether the applicant is qualified under one of the refugee processing priorities, meets the INA definition of a refugee, is not firmly resettled in another country, and is admissible to the United States under the INA. Refugee applicants must clear all required security checks before their applications can receive final approval. Refugees who are accepted for U.S. resettlement are placed in communities throughout the United States. Regardless of where refugees are initially resettled, they are free to relocate at any time. Once admitted to the United States, refugees are eligible for initial resettlement assistance through the DOS Reception and Placement Program and longer-term resettlement assistance through the Department of Health and Human Services' Office of Refugee Resettlement (ORR).

In 1988, the Supreme Court, in Communications Workers of America v. Beck (hereinafter referred to as Beck ), ruled against organized labor and held that non-union employees could not be required to pay full union dues if some of those funds were to be used for activities unrelated to collective bargaining. Under SS 8(a)(3) of the National Labor Relations Act (NLRA), a labor union and an employer can enter into a contractual agreement requiring all employees in the bargaining unit to pay union dues as a condition of employment no matter whether such employees became union members or not. The Supreme Court in Beck concluded that SS 8(a)(3) of the NLRA (1) does not permit a labor union to expend funds on non-related union activities, such as lobbying and political activities, when dues-paying non-member employees object and (2) authorizes only those dues and fees necessary to the duties relating to labor-management relations. In 1991 the Supreme Court in Lehnert v. Ferris Faculty Association , expanded the scope of the Beck holdings to include public sector employees so that such employees may not be compelled to subsidize political or ideological activities of public employee unions. During the 1992 presidential election year, on April 13, 1992, President George Bush issued Executive Order 12800 requiring federal contractors to post notices informing employees of their rights under the Beck decision. It required notification to federal contractor non-union employees that their union dues may not be used to support political activities that they oppose. It also required the Secretary of Labor to issue rules providing for financial disclosure and reporting requirements for labor unions in order to provide enforcement of the Beck holdings. However, when President Bill Clinton took office, he repealed former President Bush's Executive Order by issuing Executive Order 12836 on February 1, 1993, which revoked certain executive orders concerning federal contracting. Prior to the Beck and Lehnert decisions, the Supreme Court regularly revisited this issue in a line of decisions which held that labor unions cannot use dissenting non-union employees' dues for political and ideological activities outside the scope of the activities related to collective bargaining. Such cases include: (1) International Association of Machinists v. Street , 367 U.S. 740 (1961); (2) Railway Clerks v. Allen , 373 U.S. 113 (1963); (3) Abood v. District Board of Education, 431 U.S. 209 (1977); (4) Ellis v. Brotherhood of Railway Clerks, 466 U.S. 435 (1984); and (5) Chicago Teachers Union v. Hudson, 475 U.S. 292 (1986). These cases will be discussed in more detail in part four of this report. Although this report will not discuss the case in more detail since it does not concern labor unions, note that in Keller v. State Bar of California , 496 U.S. 1 (1990), the Supreme Court held that an integrated state Bar, which by statute is the regulatory body for the legal profession in a state and requires the payment of mandatory dues by its members, is analogous to a union. Therefore, according to the Court, using mandatory dues to fund political and ideological activities, where such expenditures are not necessarily and reasonably incurred for the purpose of regulating the legal profession or improving the quality of the legal services available to the people of the State, the Bar violated the integrated Bar members' First Amendment rights. Generally, political activities by labor unions in federal elections are prohibited. First, the Labor Management Relations Act of 1947 prohibited labor union contributions to federal election campaigns. Later, the Federal Election Campaign Act of 1971, as amended, (FECA), generally continued this broad prohibition of labor union activities and funds in federal elections. However, the FECA provided for three broad exemptions to this general prohibition of labor union political activities in federal elections: (1) communications by a labor organization directed at its members or their families on any subject: (2) non-partisan voter registration and get-out-the-vote activities by a labor organization which are directed to its members or their families: and (3) the establishment and administration of a political action committee or separate segregated fund (commonly known as a PAC) for the purpose of the solicitation of contributions to such fund for political purposes. Generally, any other type of political activity by labor unions in federal elections is prohibited under the FECA, and labor union contributions and expenditures concerning federal elections outside these exceptions are prohibited. Various advisory opinions of the Federal Election Commission (FEC) have further clarified the proper roles of labor unions in federal elections. For example, according to the FEC: a teacher's union could pay for the expenses of interns working in a Member of Congress' mobile office as long as their activities were non-political and exclusively related to the performance of the Member's official duties; a labor union could circumvent political contribution requirements if it bought voter poll results from a candidate's campaign committee; a labor organization could not pay for travel and living expenses of its members who were serving as delegates to a national nominating convention; funds received by a labor PAC for the sale of membership lists would be treated as a contribution to the PAC; a labor union's PAC funds could be used to pay the expenses of lobbying activities conducted by labor union officials; a labor union's contributions to state and local candidates should specify that such funds cannot be used for federal candidates; and a labor union PAC can solicit employees of subsidiary corporations for contributions when the corporate PAC solicits such employees even though the employees are not union members and the subsidiary corporation is not subject to a union contract. FEC regulations also address the scope of a labor organization's participation in federal elections. Most notably, the regulations restrict those labor union communications directed to the general public and to union participation in voter registration and get-out-the vote-drives from containing express advocacy and prohibit coordination with any candidate or political party. The revised regulations permit a labor organization to make registration and get-out-the-vote (GOTV) communications to the general public if such communications: (1) do not expressly advocate the election or defeat of a clearly identified candidate or candidates of a clearly identified political party or (2) are not prepared or distributed with the coordination of a candidate or political party (will subsequently be referred to as "coordinated" or "coordination"). A labor union may also distribute to the general public, official registration and voting information and forms and absentee ballots (if permitted by applicable State law) provided that such distributions do not contain express advocacy and are not coordinated. A labor organization may donate funds to State or local government agencies to help defray the costs of printing and distributing these materials. Moreover, a labor organization may also prepare and distribute to the general public the voting records of Members of Congress and voter guides, provided that the these materials do not contain express advocacy and that there was no coordination involved. FEC regulations also permit a labor organization to support or conduct voter registration or GOTV drives aimed both at employees outside its restricted class and the general public, provided that: (1) the labor organization does not expressly advocate the election or defeat of a clearly identified candidate, or candidates of a clearly identified political party; (2) the labor organization does not coordinate with any candidate or political party; (3) the services are not primarily directed at individuals favored by the labor organization; (4) the services are made without regard to the voter's political preference; (5) the workers conducting such services are not paid only to register or transport voters supporting one or more particular candidates or political party; and (6) at the time these services are provided, the labor organization notifies, in writing, those receiving information or assistance regarding registration or voting of the availability of these services without regard to a potential voter's political preference. Finally, a labor organization may donate funds to qualified nonprofit organizations to stage candidate debates. Various federal court decisions have determined the legality of certain types of labor union activities involving federal elections. For example, in the 1957 decision United States v. United Automobile Workers, the Supreme Court held that labor union expenditures, in connection with a federal election, would be prohibited to the extent that such activity amounted to electioneering for a particular candidate or political party. The Court asserted that the legislative history of a provision of the Federal Corrupt Practices Act, prohibiting labor union contributions and expenditures in federal elections, would disallow the expenditure of union dues to pay for commercial broadcasts that are designed to urge the public to elect a certain candidate or political party. In United States v. Boyle , in 1973, the United States Court of Appeals for the District of Columbia Circuit, in affirming the conviction of a labor union president for consenting to unlawful contributions to federal candidates, held that there are compelling governmental reasons for justifying the federal prohibition against labor union contributions and expenditures in federal elections despite First Amendment free speech and association rights of the labor union. The Court of Appeals in Boyle concluded that for a labor union disbursement to be illegal under federal law, it must be shown that the labor organization: (1) made a contribution or an expenditure, (2) in connection with a federal election, and (3) for the purpose of active electioneering. In a 1972 Supreme Court decision in Pipefitters v. United States , reversing certain convictions of labor union officers concerning the use of a political fund, the Court concluded that a legitimate labor union political fund must be separate from the labor union in that there must be a strict segregation of the political fund's monies from the union's dues and assessments. The Court noted that, while former 18 U.S.C. SS 610, which prohibited labor organizations from making contributions or expenditures connected with a federal election, might be interpreted to prohibit the use of union funds to establish and maintain a union political fund for the purposes of soliciting and making political contributions in federal campaigns, the provision of the Federal Election Campaign Act of 1971 allowing labor unions to establish separate segregated funds or political action committees may have impliedly repealed Section 610. The question frequently arises as to whether compulsory labor union dues may be used by a union for political purposes and, if so, under what restrictions or conditions may such dues be used. In order to understand that issue properly, it is necessary to understand the various types of union security agreements between employers and labor unions that require employees to provide some form of financial support to the unions as a condition of employment. One type of security agreement is the so-called "closed shop" whereby the employer agrees to employ only members in good standing with the union. This type of agreement was recognized by the National Labor Relations Act of 1935 (NLRA), popularly known as the Wagner Act, but was later prohibited by the Labor Management Relations Act of 1947. Another type of a union security agreement is the agency shop agreement whereby the employees do not have to join the union or have full union membership in good standing within thirty days, but must support the union by paying a sum of money equivalent to union dues in order to retain employment. Most agency shop agreements provide for a service fee, which includes an initiation fee as well as certain dues that are paid by full union members. Another form of a union security agreement is the union shop, which does not condition employment on union membership, but requires that employees join the union after a certain grace period on the job and remain members during the term of the labor-management agreement. A "maintenance of membership" clause in a union contract is another form of union security which imposes no obligation to join the union, but requires that one remain a member once voluntarily becoming one until the expiration of the collective bargaining agreement. Other less formal union security agreements are: (1) a dues-checkoff provision, (2) a fair-share agreement, or (3) a hiring-hall provision. The dues-checkoff provision does not require anyone to join a union or retain union membership, but simply requires that the employer shall deduct from the salary of the union members their union dues and credit that amount to the union. A fair-share agreement would require all employees to pay the prorated share of the union's collective bargaining and representational expenses, but not irrelevant expenses. The hiring-hall provision is a device for job security in certain industries such as in the maritime and construction industries whereby the union and the employer agree that the union-hall is to be the exclusive mode for job referrals. In 1956, the Supreme Court in a unanimous opinion in Railway Employees ' Dept., A.F.L. v. Hanson upheld the union shop provision of SS 2, Eleventh of the Railway Labor Act, as amended, which provided that notwithstanding the law of any state, a carrier and a labor organization may make an agreement requiring all employees within a stated period of time to become members of the labor organization provided that there is no discrimination against any employee and provided further that membership is not denied or terminated for any reason other than the non-payment of periodic union dues, fees, and assessments. The Court found that the union shop provision of SS 2, Eleventh was within the power of the Congress under the Commerce Clause and did not violate either the First or the Fourteenth Amendments. The Hanson Court noted that it is argued that the union shop agreement forces employees into ideological and political associations that violate their freedom of conscience, freedom of association, and freedom of thought. However, the Court intimated that if the union shop arrangement were used to impose membership conditions, other than the payment of periodic dues, initiation fees, and assessments, involving ideological or political associations to which members may be opposed, it might present First Amendment problems. Several years after the Supreme Court upheld the validity of union security agreements, it was faced with the issue of whether a union may use funds, raised pursuant to a union-shop agreement, to support candidates for public office against the wishes of dissenting employees. The Court, in International Association of Machinists v. Street, found that such expenditures fall outside of the scope of the reasons that justified union shop agreements. The Court asserted, however, that any dissent by employees to the use of labor union funds for political causes is not to be presumed, but must be made known by them to the labor union. Moreover, only those employees who had identified themselves as being opposed to the political uses of their funds would be entitled to relief. The Court was quick to note that this holding would not curtail the traditional political activities of labor unions, but required only that labor unions must not support those activities against the expressed wishes of dissenting employees. The Court also suggested the following two possible remedies: (1) an injunction against expenditures for political causes opposed by complaining employees, in the amount of union dues exacted from them in proportion to the union's total expenditures for political purposes to the union's total budget, or (2) restitution to each dissenting employee of the portion of his or her dues which was spent by the union for political purposes. In 1963, the Supreme Court in Railway Clerks v. Allen reaffirmed that, under SS 2, Eleventh of the Railway Labor Act, labor unions cannot, over an employee's objection, use exacted funds to support political activities which such employees oppose. The Allen Court extended Street, finding that "it would be impractical to require a dissenting employee to allege and prove each distinct union political expenditure to which he objects," but retained its requirement that such opposition be made known to the union by each dissenting employee. The Allen Court reaffirmed the remedies suggested by the Street Court, but offered suggestions of its own. It suggested a practical decree which would order: (1) a refund to the dissenting employee of a portion of the exacted dues in the same proportion that the political expenditures bore to the total union expenditures, and (2) a future reduction of dues from the dissenting employee by the same proportion. The Court placed the burden of determining the appropriate proportions on the unions since they were in possession of the relevant materials. In 1977, the Supreme Court, in Abood v. Detroit Board of Education , extended Street and Allen to encompass dissenting non-union public employees, basing its decision, however, on constitutional grounds that were not at issue in the prior cases. While a labor organization can constitutionally expend funds for the expression of political and ideological views which are not germane to its collective-bargaining activities, it can only finance such expenditures from the dues of non-dissenting employees. Dissenting, non-union employees have a constitutional First Amendment right to prevent a labor union from using a proportionate share of their service fees for certain political and ideological activities unrelated to the union's collective-bargaining activities. The Abood Court noted that in determining a remedy, the objective of the Court would be to devise a method to prevent the compulsory subsidization of political and ideological activities by dissenting, non-union employees without restricting the union's ability to require all employees to pay for the union's collective-bargaining activities. As it had previously in Street and Allen , the Abood Court, in remanding the case for further proceedings, suggested remedies which included: (1) a refund of that portion of the exacted dues in the proportion that union political expenditures bore to the total union expenditures and (2) a reduction of future union dues to dissenting non-union employees by the same proportion. In Ellis v. Brotherhood of Railway Clerks , the Court was asked to determine the validity of a rebate scheme, in which a labor union collected dues from employees and used them for certain political and ideological activities, later paying a rebate to employees who dissented from the political and ideological use of such dues. The Court noted that under the rebate scheme the union obtains an involuntary loan for those political and ideological activities to which the dissenting employees object. Since there were readily available acceptable alternatives to such union borrowing, such as advance reduction of dues and/or interest-bearing accounts, the Court found that a union cannot be allowed to use the dissenting employees' funds even temporarily. Thus, the Court found that although the rebate scheme reduces the statutory violation, it does not eliminate the violation. In reaching its decision, the Court developed the following test for determining whether certain activities must be paid for by dissenting employees subject to a labor-management agreement: "... the test must be whether the challenged expenditures are necessarily or reasonably incurred for the purpose of performing the duties of an exclusive representative of the employees in dealing with the employer on labor-management issues." Under such a standard dissenting employees could be required to pay their fair share of: (1) the direct costs of negotiating a collective bargaining contract; (2) the direct costs of administering such a contract; (3) the costs of settling grievances and disputes; and (4) certain costs of activities or undertakings by a labor union to implement or effectuate the duties of the labor union as the exclusive representative of the employee. The Court found that dissenting employees could be charged for such union activities as: (1) conventions which are essential to the labor union's discharge of its duties as a collective-bargaining agent; (2) labor union social activities which are reasonably related to the union's collective bargaining activities; (3) labor union publications which report on labor-management relations and collective bargaining activities; (4) organizing expenses for the purpose of making the labor union stronger; and (5) litigation expenses incurred in negotiating and administering a labor contract or in settling grievances and disputes. Two years later, in Chicago Teachers Union v. Hudson, the Court was presented with an issue involving the procedural safeguards related to the collection of agency fees by a union. Under the agency shop agreement between the union and the Chicago Board of Education, "proportionate share payments" which approximated 95 percent of the regular union dues were deducted from non-members' paychecks. The union established a three-stage procedure with the union's administration to consider non-members' objections to such deductions. The Court found that the union's procedure failed to minimize the risk that the exacted fees of non-union employees might be used for impermissible ideological and political purposes. The Court concluded that this procedure was inadequate even though the exacted funds of the non-members were placed in an escrow account. The procedure contained three fundamental flaws: (1) failure to minimize the risk that non-union employees' contributions might be temporarily used for political and ideological purposes; (2) failure to provide sufficient information to non-members about the basis of their proportionate shares and the method of determining their "advance reduction of dues;" (3) failure to provide a reasonably prompt decision by an impartial arbitrator in determining whether or not a non-member's dues should be further reduced. Accordingly, the Supreme Court held that the constitutional requirements for the union's collection of agency fees from non-members would include: (1) an adequate explanation for the basis of the fee; (2) a reasonably prompt opportunity to challenge the amount of the fee before an impartial arbitrator; and (3) the establishment of an escrow fund for the amounts reasonably in dispute while any challenges are pending. The Supreme Court remanded the case to the district court for further proceedings consistent with such holdings. Like the prior decisions, the 1988 Supreme Court decision in Communications Workers of America v. Beck held that SS 8(a)(3) of the National Labor Relations Act does not permit a labor union to spend funds exacted from dues-paying non-union employees on certain activities unrelated to collective bargaining when those employees object to such expenditures. The Court found that SS 8(a)(3) of the National Labor Relations Act was like SS 2, Eleventh of the Railway Labor Act in that it authorized the exaction of only those dues which would be necessary to "performing the duties of an exclusive [bargaining] representative of the employees in dealing with the employer on labor-management issues." In examining the legislative history of SS 8(a)(3), the Court found that Congress wished to afford non-members adequate protection by allowing the collection of only those fees which would be necessary to finance collective bargaining activities. Even though Congress under SS 8(a)(3) did not in any way limit the uses for which the unions could expend such fees exacted from non-members, such silence was not to be interpreted to mean that there was congressional acquiescence in the use of funds for activities that were unrelated to collective bargaining activities. Congress' purpose in providing for compulsory unionism was to force employees to bear their fair share of the costs related to negotiations, administration of collective bargaining agreements, and the settlement of disputes, but not to support union political activities which they oppose. Under SS 8(a)(3), Congress' justification for the union shop would limit the union's expenditures which can be passed on to non-members only to those relating to labor-management relations. The Court concluded that it was not the intent of Congress under SS 8(a)(3) of the National Labor Relations Act to allow unions in agency shop agreements to have free rein to exact dues from non-members in any amounts they please and then to spend them on activities which are unrelated to collective bargaining activities. Beck, however, does not extend to union members. The only way that such an employee may fall under the ruling in Beck is to first resign his union membership and then object to the use of his exacted dues for political or other purposes unrelated to collective bargaining. The last case concerning the use of agency fees decided by the Supreme Court was Lehnert v. Ferris Faculty Association. In Lehnert, the Court upheld the constitutionality of the Michigan statute providing for agency-shop agreements in the public sector, and set forth a three-part test for determining permissible non-political and non-ideological uses for the service fee that non-members are required to pay the unions for their services as sole collective bargaining agent for all employees. The Michigan statute applied to faculty members of Ferris State College, a public educational institution, who are represented by the Ferris Faculty Association (FFA), a local bargaining unit affiliated with the Michigan Education Association (MEA) and the National Education Association (NEA). The non-union faculty brought suit to challenge certain uses of the service fees which they were compelled to pay the FFA and which were equivalent to the amount of dues required of a union member. They claimed that the use of fees for purposes other than the negotiation and administration of the collective bargaining agreement was in violation of their rights under the First and Fourteenth Amendments of the Constitution. The Supreme Court established a test, derived from the preceding line of cases, for determining whether a particular expenditure of union funds could be charged to non-member employees. Chargeable uses must: (1) be germane to collective bargaining activities; (2) be justified by the governmental interest in the maintenance of labor peace and the prevention of "free riders" who benefit from the union's collective bargaining activities without contributing to the costs of such activities; and (3) not add significantly to the burdening of free speech inherent in the existence of an agency or union shop. The Court also rejected the petitioners' contentions that they could only be charged for collective bargaining activities undertaken directly for their local unit and that there must be a direct link between an activity and a tangible benefit to the local unit. Four activities were found by the Supreme Court to be chargeable to the non-members. First, non-members should subsidize NEA program expenditures for collective-bargaining services provided in states other than Michigan and reportage of such activities in the MEA publication, the Teacher ' s Voice. Second, non-members may be charged for the reportage of general information in the Teacher ' s Voice, such as news about teaching and education generally, professional development, unemployment, job opportunities, MEA award programs, and other matters that are neither public nor political, benefit all, and do not additionally burden First Amendment rights. Third, non-members may be charged for the cost of participation by local-unit delegates in the NEA and MEA conventions and the Coordinating Council meeting. And finally, strike preparations are chargeable to non-members, even where the contemplated strike would be illegal under state law if it actually occurred, because the strike preparations constitute part of collective bargaining strategy and do not additionally burden First Amendment rights. The Supreme Court also ruled that four other uses may not be charged constitutionally to the non-members. First, lobbying other than for ratification and implementation of the collective bargaining agreement is not chargeable to non-members. Second, a union program aimed at securing funds for public education in Michigan and reportage on this program in the Teacher ' s Voice were not chargeable to non-members because they were public-relations and lobbying-type activities unrelated to ratification and implementation of the collective-bargaining agreement. Third, litigation that does not concern the local bargaining unit and reportage of such litigation in union publications may not be supported by funds from non-members. Finally, public relations activities of the local unit which are designed to improve the image of the teaching profession may not be charged to non-members.

Under union shop agreements, labor unions must establish strict safeguards and procedures for ensuring that non-members' dues are not used to support certain political and ideological activities that are outside the scope of normal collective bargaining activities. The "union shop" or "agency shop" agreement essentially provides that employees do not have to join the union, but must support the union in order to retain employment by paying dues to defray the costs of collective bargaining, contract administration, and grievance matters. In a line of decisions, the Supreme Court has addressed this issue and has concluded that compulsory union dues of non-members may not be used for political and ideological activities that are outside the scope of the unions' collective bargaining and labor-management duties when non-members object to such use. Seven Supreme Court decisions have held that union dues exacted from dissenting non-members may not to be used for political and ideological purposes and must be expeditiously refunded to dissenting non-members according to proper procedural safeguards: (1) International Association of Machinists v. Street, 367 U.S. 740 (1961); (2) Railway Clerks v. Allen, 373 U.S. 113 (1963); (3) Abood v. District Board of Education, 431 U.S. 209 (1977); (4) Ellis v. Brotherhood of Railway Clerks, 466 U.S. 435 (1984); (5) Chicago Teachers Union v. Hudson, 475 U.S. 292 (1986); (6) Communications Workers of America v. Beck, 487 U.S. 735 (1988); and Lehnert v. Ferris Faculty Association, 500 U.S. 507 (1991).

On August 8, 2005, President Bush signed the Energy Policy Act of 2005 (EPAct 2005; P.L. 109-58 ). Among other provisions, EPAct 2005 established a renewable fuel standard (RFS) requiring gasoline to contain a minimum amount of fuel produced from renewable biomass. Through 2007 the requirement was largely met using corn-based ethanol, although other fuels such as biodiesel played a limited role. The law directed EPA to establish a credit trading system to provide flexibility to fuel producers; ethanol produced from cellulosic feedstocks was granted extra credit. Also, P.L. 109-58 required that a relatively small amount (250 million gallons, or roughly 0.2% of gasoline consumption) of cellulosic ethanol be blended in gasoline annually starting in 2013. The Energy Independence and Security Act of 2007 (EISA; P.L. 110-140 ), signed by President Bush on December 19, 2007, significantly expanded the RFS to include diesel fuel, requiring the use of 9.0 billion gallons of renewable fuel in 2008, increasing to 36 billion gallons in 2022. These mandates represent roughly 5% and 18% of motor fuel consumption by volume, respectively. EISA also requires an increasing amount of the mandate be met with "advanced biofuels"--biofuels produced from feedstocks other than corn starch and with 50% lower lifecycle greenhouse gas emissions than petroleum fuels. Within the advanced biofuel mandate, there are specific carve-outs for cellulosic biofuels and biomass-based diesel substitutes (e.g., biodiesel). Under EPAct 2005, the Environmental Protection Agency (EPA) released a final rulemaking for 2007 and beyond. Included in the rule were provisions for credit trading, as well as for generating credits from the sale of biodiesel and other fuels. Because of the changes in the RFS from P.L. 110-140 , EPA proposed rules in May 2009, and finalized those rules on February 3, 2010. Perhaps most importantly, EPA developed rules for determining the lifecycle greenhouse gas emissions from renewable fuels. As required by EISA, fuels from new biorefineries (i.e., excluding existing corn ethanol plants) must achieve at least a 20% lifecycle greenhouse gas reduction relative to petroleum fuels, and advanced biofuels (i.e., fuels other than corn ethanol) must achieve at least a 50% reduction, with cellulosic biofuels needing a 60% reduction. To classify biofuels under the RFS, EPA must calculate the lifecycle emissions of each fuel relative to gasoline or diesel fuel. As there are specific carve-outs for certain fuels, how the lifecycle emissions of each fuel are assessed will have direct effects on the application of that fuel under the RFS. Debate is ongoing on how each factor in the biofuels lifecycle should be addressed, and the issues surrounding direct and indirect land use are particularly controversial. For example, whether sugar-based ethanol from Brazil is classified as an advanced biofuel or a conventional biofuel will determine whether it must compete with less expensive corn-based ethanol from the Midwest or with more expensive advanced biofuels (see Figure 1 ). If it were determined that, for example, Brazilian sugar ethanol did not achieve the 50% reduction necessary for advanced biofuels, then it could only qualify as part of the overall RFS, as opposed to the advanced biofuel carve-out. Likewise, if corn ethanol were found to not achieve the necessary 20% reduction in lifecycle emissions, then ethanol from new corn-based biorefineries would not qualify for inclusion in the RFS, while fuel from plants that began construction before December 19, 2007, is grandfathered under the law. In EPA's Notice of Proposed Rulemaking (NPRM), several fuels did not achieve EISA's threshold requirements, including sugarcane ethanol and soy-based biodiesel. However, EPA's proposed methodology was criticized by many stakeholders. In response to comments by peer reviewers and the public, EPA modified its methodology to reflect some of those criticisms. EPA made three key conclusions that lowered the land use impact of most biofuels: (1) crop yields would likely increase, requiring less additional land to grow those crops; (2) some biofuel co-products (e.g., animal feed) were more efficient than assumed in the proposal; and (3) satellite data allowed more precise assessment of what types of land would be converted. In the final rule, all assessed biofuels met the threshold requirements for their category. For example, soy-based biodiesel met the 50% reduction requirement for biomass-based diesel fuel, sugarcane ethanol met the 50% reduction requirement for advanced biofuels, and corn ethanol from new natural gas-fired refineries met the 20% reduction requirement for all renewable fuels. Under EISA, the RFS requires the use of just over 11 billion gallons of renewable fuel in 2009, increasing to 36 billion gallons by 2022 (see Table 1 ). Within that mandate, there is a specific carve-out for advanced biofuels, increasing from 0.6 billion gallons in 2009 to 21 billion gallons by 2022. The remaining share of the RFS, which is capped at 15 billion gallons by 2015, will likely be met using corn-based ethanol, although there is no specific carve-out for that fuel (see Figure 2 ). Within the advanced biofuel carve-out, there are specific carve-outs for biofuels produced from cellulosic materials (e.g., perennial grasses, fast-growing trees) and for biomass-based diesel substitutes. The remaining share of the advanced biofuel mandate is unspecified and could potentially be met using sugar-based ethanol or other biofuels (see Figure 3 ). To be classified as advanced biofuel, biomass-based diesel fuel, or cellulosic biofuel under the RFS, fuels must have lower lifecycle emissions relative to petroleum products (see Table 2 ). Further, conventional biofuels produced from new biorefineries must have 20% lower lifecycle emissions than petroleum products. Under the definition of lifecycle greenhouse gas emissions under Section 201 of EISA, EPA must consider all significant emissions, both direct and indirect, from a wide array of fuels and feedstocks. Therefore, the potential number of variables EPA must consider is high, as will be discussed below. Further, EISA does not specify the methodology for EPA to make its determinations on lifecycle emissions. Thus, EPA needed to develop the methodology for that analysis. EPA's methodology in the final rule is described in a subsequent section of this report. Estimations of the greenhouse gas emissions attributable to a fuel require detailed analysis of three key components: (1) the processes required to produce feedstocks, convert them into fuel, and deliver the fuel to the end-user; (2) the emissions from the vehicle itself; and (3) any direct or indirect changes in emissions not attributable to fuel production or use, including changes in land use. The first two components are often referred to as "well-to-tank" and "tank-to-wheels" emissions; both taken together are referred to as "well-to-wheels" emissions. Figure 4 shows some of the main elements of the biofuels life cycle. There are many steps in producing and delivering fuel to an end-user. For gasoline, these steps include--but are not necessarily limited to--extraction of crude oil, crude oil transport, refining, gasoline transport, and delivery. For corn ethanol, these steps include corn production, harvesting, and transport; corn processing and ethanol distillation; and transport and delivery. Each of these larger steps can be broken down into smaller pieces, each of which requires energy and produces greenhouse gas emissions. For example, in the case of corn production, energy is required to operate machinery and to produce fertilizers. Further, greenhouse gases are released from the application of nitrogen-based fertilizers, and from other agricultural operations. Varying assumptions of which inputs are relevant can lead to a wide range in total energy requirements, and thus, greenhouse gas emissions. Further, different assumptions about factors such as resource use, process efficiency, production yields, and the role of co-products (e.g., animal feed) can also lead to differences in emissions estimates. The emissions from the end use of the fuel ("tank-to-wheels") are easier to quantify. Assuming the carbon content of the fuel is known, then taking a given rate of consumption (the vehicle's fuel economy), estimates of carbon dioxide emissions can be calculated. Added to these are the expected emissions of any non-CO2 greenhouse gases (e.g., methane, nitrous oxide). Arguably, the most difficult variable to quantify in assessing fuel lifecycle emissions is the role of land use change. Land is a requisite input to grow feedstock for biofuel production. Some contend that significant land use change, both direct and indirect, will occur to accommodate annual RFS requirements. Inclusion and measurement of greenhouse gas emissions associated with direct and indirect land use change happening as a result of a burgeoning biofuels market is a pressing concern. Particular attention is being paid to the carbon debt brought about from land use change to accommodate biofuel feedstock production. Including the carbon debt may lessen the emission reduction ability of said biofuels. Measurement techniques to quantify, verify and monitor the carbon debt rely on the robustness of land use data sets and land use change models. The biofuels lifecycle analysis has placed scientists, environmentalists, industry representatives, and policy makers in a quandary. The lack of a precedent by which interested groups can seek guidance further complicates matters. Apprehension exists mainly regarding the land use components within the analysis and sound measurement techniques to accurately quantify the land use components. Currently, EISA ( P.L. 110-140 ) requires EPA to account for "significant" greenhouse gas emissions from both direct and indirect land use change. As such, major implications may arise concerning the type and quantity of biofuels produced to meet RFS requirements. Some researchers argue that greenhouse gas emissions from land use change have not been accounted for in earlier biofuel emissions estimates. If so, crop-based biofuel production may result in larger quantities of greenhouse gas emissions than previously thought. Others contend that some newer models of lifecycle emissions may overstate the effects of land use. Biofuels developed from agricultural and crop waste may not be subject to the additional greenhouse gas emissions from land use change, direct or indirect. Indirect land use change (ILUC) involves the greenhouse gas emission estimation of land cleared or converted for crop production by entities other than the feedstock producer, including the conversion of land in foreign countries. Some argue any ruling issued by the EPA that consists of ILUC is premature as the predicted impacts may be based on models using incomplete data sets, and assumptions and calculations that may not be based on sound scientific methodology or observations. Some biofuels supporters contend that EPA should be mindful of the barriers to biofuel generation and use as the agency implements the statutory language to account for indirect land use change in the biofuel lifecycle analysis. There may be a substantial decrease in the continued development of second-generation advanced biofuels. Innovators may be drawn away from further exploration and refinement of second-generation advanced biofuels if monetary supplements or fuel credits are not granted due to a poor biofuel lifecycle analysis score. Land use change is a relatively new subject area for researchers to simulate real-world conditions using models, economic or spatial. The certainty of simulation models for land use change compared to real world action is subject to various human and economic considerations. Quantification of greenhouse gas emissions associated with land cover and land use change are contingent upon reliable land use and land cover measurements. Techniques to quantify, verify and monitor emissions from land use change rely on the robustness of land use change prediction methods. Forecasting land use change--specifically conversions as a consequence of the RFS program--may prove challenging. Computer models and satellite imagery can assist decision makers with identifying land areas ideally suited for conversion assuming current land use data sets are acquired on a recurring basis. However, the development of land use change estimates is complicated, and the methodology for determining the greenhouse gas impacts of indirect land use change is in the very early stages of development. According to the Roundtable on Sustainable Biofuels (RSB), It is difficult to link direct causality of land use changes in one region or country to biofuel production in another. Nevertheless, the potential for negative indirect impacts is high, and within the spirit of the Precautionary Principle, sustainable biofuel supporters should be assured that their good intentions do not have unintended consequences. According to a group of biofuels experts cited by the RSB, addressing indirect impacts explicitly requires: continued global research to identify and quantify links between biofuels and land use change; mechanisms to promote biofuels that do not have negative land use change impacts; mechanisms that mitigate these negative impacts but do not unduly increase transaction costs for consumers; and social safeguards at the national level, that ensure that vulnerable people are not further disadvantaged through food and energy price increases and other potential negative economic side effects. Models to predict indirect land use change are essentially economic models, as they aim to predict the macroeconomic effects of any direct changes in land use. Critics are concerned that including indirect land use change in such accounting could make biofuel feedstock producers liable for decisions made by actors they can not control, including potentially their competitors. Ultimately, how EPA certifies each combination of fuel type, feedstock, and production processes will directly affect the marketability of that fuel. On May 26, 2009, EPA issued a Notice of Proposed Rulemaking (NPRM) to issue new RFS regulations. The NPRM included suggested methodology for a lifecycle analysis of significant greenhouse gas emissions--both direct and indirect--from the production of renewable fuels. Under the NPRM, the lifecycle analysis (LCA) was to be conducted to ensure that fuels from new biorefineries (i.e., excluding existing corn ethanol plants) achieve a 20% lifecycle greenhouse gas reduction relative to petroleum fuels, and that advanced biofuels (i.e., fuels other than corn ethanol) and cellulosic biofuels achieve at least a 50% and 60% reduction, respectively. Those renewable fuels that do not meet the specified emission reduction thresholds would not qualify for credits under the RFS. The following paragraphs summarize the major points of the methodology put forth by EPA in its Notice of Proposed Rulemaking to account for land use change in the LCA, as well as key changes between the NPRM and the final rule issued on February 3, 2010. In the NPRM, EPA identified two criteria most likely to affect the LCA methodology: secondary agricultural sector GHG impacts from increased biofuel feedstock production, and the international impact of land use change from increased biofuel feedstock production. Land use change is considered by many to be the most pressing concern. Various entities expressed an opinion about the inclusion of land use change in the LCA, and how to account for its impact. Some contended that robust methods to evaluate domestic land use change should be well understood before incorporating international land use estimates. Some also argued that it is unfair to penalize agricultural producers and biofuel production entities because of land use change that may or may not occur in a foreign territory. EPA representatives expressed on multiple occasions that, while recognizing that land use change analysis is an emerging science, they are required to proceed with implementing the law. EPA proposed using two models, imagery data, and emission factors to estimate GHG emissions associated with land use change for the LCA (see Figure 5 ). Models are employed because resources to monitor and analyze land use change are limited. A single cohesive model or data source to estimate GHG emissions from land use change for the LCA does not exist. The models and data sources will give an assessment of the amount of land converted, the type of land converted, location for the land conversion, and GHG emissions associated with land use change (see Table 3 ). In the NPRM, models included the Forest and Agricultural Sector Optimization Model (FASOM) and the Food and Agricultural Policy Research Institute (FAPRI) modeling system. Imagery data was obtained from the Moderate Resolution Imaging Spectoradiometer (MODIS) satellite. Winrock emission factor data was proposed for use in estimating international GHG emissions from land types. In the final Rule, EPA used these models and data sources, but also used results from the Global Trade Analysis Project (GTAP) model to test the land use change results from the above models. EPA's analysis indicates that the largest release of GHG emissions from biofuel production occurs during the first few years immediately following land conversion. Lower GHG emissions are released in subsequent years of biofuel production. EPA proposed a time horizon as part of its methodology to denote the length of time emissions from land use conversion will be included in the LCA. Time horizon is defined as the time period for which biofuel production is projected to occur. Additionally, EPA proposed to discount emissions to place a value on near-term emissions, which may be estimated with more certainty than long-term emissions. In the NPRM, the suggested frameworks were a 100-year time horizon with a 2% discount rate and a 30-year time horizon with a 0% discount rate. In the final rule, EPA chose a 30-year time frame with a 0% discount rate. EPA gave two key reasons for this decision. There are several reasons why the 30 year time frame was chosen. The full life of a typical biofuel plant seems reasonable as a basis for the timeframe for assessing the GHG emissions impacts of a biofuel, because it provides a guideline for how long we can expect biofuels to be produced from a particular entity using a specific processing technology. Also, the 30 year time frame focuses on GHG emissions impacts that are more near term and, hence, more certain. EPA chose a 0% discount rate for many reasons, but a key reason is that the agency believes that there is a lack of consensus on the best way to apply an economic valuation (discounting) to a physical quantity, in this case (GHG) emissions, or whether such a calculation is even valid. While using some of the best data and models available, EPA recognized that uncertainty exists regarding the proposed methodology to assess international GHG emissions from land use change. EPA acknowledged that a transparent and scientific analysis of the GHG emission impact of renewable fuels going forward will be further refined as additional data sources and models become available. In the NPRM, EPA sought peer review and public comment regarding: use of satellite data to project future type of land use changes; land conversion GHG emissions factors estimates EPA used for different types of land use; estimates of GHG emissions from foreign crop production; methods to account for the variable timing of GHG emissions; and how the several models EPA relied upon are used together to provide overall lifecycle GHG estimates. From the peer review process and public comments, EPA concluded that various changes should be made in its lifecycle methodology between the NPRM and the final rule. These changes generally led to lower lifecycle emissions (i.e., greater emissions reductions) for most fuels (see Figure 6 ). The lower emissions estimates largely resulted from reductions in estimated emissions from international land use change. In some cases, these reductions were dramatic (see Figure 7 ). For example, the vast majority of net emissions for soy biodiesel come from international land use change (roughly 80% in the proposal and roughly 100% in the final rule). According to EPA, the diminished effect of land use change on emissions came from three key factors: (1) higher crop yields than estimated in the proposal; (2) higher efficiency of co-products such as animal feed; and (3) improved satellite data that provided better estimates of which types of land would actually be affected. For example, according to EPA: for corn ethanol the final rule analysis found less overall indirect land use change (less land needed), thereby improving the lifecycle GHG performance of corn ethanol. The main reasons for this decrease are: * Based on new studies that show the rate of improvement in crop yields as a function of price, crop yields are now modeled to increase in response to higher crop prices. When higher crop yields are used in the models, less land is needed domestically and globally for crops as biofuels expand. * New research available since the proposal indicates that distillers grains and solubles (DGS), a corn ethanol production co-product, is more efficient as an animal feed (meaning less corn is needed for animal feed) than we had assumed in the proposal. Therefore, in our analyses for the final rule, domestic corn demand and exports are not impacted as much by increased biofuel production as they were in the proposal analysis. * Improved satellite data allowed us to more finely assess the types of land converted when international land use changes occur, and this more precise assessment led to a lowering of modeled GHG impacts. Based on previous satellite data, the proposal assumed cropland expansion onto grassland would require an amount of pasture to be replaced through deforestation. For the final rulemaking analysis we incorporated improved satellite data, as well as improved economic modeling of pasture demand, and found that pasture is also likely to expand onto existing grasslands. This reduced the GHG emissions associated with an amount of land use change. Going forward, in the final rule EPA has determined that it will periodically reevaluate its LCA methodology, and that it could make changes in the future. However, these changes would only apply to biofuel plants constructed after any new rule is finalized. EPA will request that the National Academy of Sciences over the next two years evaluate the approach taken in this rule, the underlying science of lifecycle assessment, and in particular indirect land use change, and make recommendations for subsequent rulemakings on this subject. This new assessment could result in new determinations of threshold compliance compared to those included in this rule that would apply to future production (from plants that are constructed after each subsequent rule). On January 12, 2009, the state of California finalized regulations for a state low carbon fuel standard (LCFS). The LCFS requires increasing reductions in the average lifecycle emissions of most transportation fuels. The rule does not require total emissions to decrease, but the emissions intensity (emissions per unit of energy delivered) must be 10% below that of gasoline and diesel fuel by 2020. California concluded that some biofuels lead to higher emissions (i.e., lower emission reductions) than what EPA has proposed (e.g., corn ethanol). (See Table 4 .) In other cases, the California estimates are more favorable to biofuels (e.g., waste biodiesel). This difference highlights the ongoing debate over lifecycle analysis methods. The 111 th Congress will likely address issues surrounding biofuels lifecycle in two ways: (1) oversight of EPA's implementation of the RFS; and (2) integration of fuel lifecycle emissions into other relevant legislation. Definitions for various biofuels under the RFS could directly affect the supply of eligible fuels in the program. If supply is curtailed through the exclusion of certain fuels, then consumer fuel prices could increase. Thus, Congress may look to determine whether any regulations promulgated by EPA adversely affect fuel supply and availability. Likewise, Congress may look to determine whether the goal of reducing greenhouse gas emissions is achieved through the lifecycle requirements of the RFS. The 111 th Congress has debated legislation to address climate change and energy issues. Transportation plays a key role in both U.S. energy consumption and U.S. greenhouse gas emissions. Therefore, any policy to address these issues will almost certainly affect the implementation of the renewable fuel standard, and vice versa. Specific proposals include a carbon tax or a cap-and-trade system that would put a price on carbon emissions, promoting a switch to lower-carbon fuels; and a federal low-carbon fuel standard, which would require lower carbon emissions from all transportation fuels (as opposed to just biofuels). The specifics of any new legislation on fuel carbon emissions would determine how that legislation interacts with the RFS requirements. New legislation could be integrated with the RFS requirements, or it could lead to competing, or even contradictory, requirements. Therefore, the integration of the RFS with any potential climate or energy policy should be considered.

The Energy Independence and Security Act of 2007 (EISA; P.L. 110-140) significantly expanded the renewable fuel standard (RFS) established in the Energy Policy Act of 2005 (EPAct 2005; P.L. 109-58). The RFS requires the use of 9.0 billion gallons of renewable fuel in 2008, increasing to 36 billion gallons in 2022. Further, EISA requires an increasing amount of the mandate be met with "advanced biofuels"--biofuels produced from feedstocks other than corn starch and with 50% lower lifecycle greenhouse gas emissions than petroleum fuels. Within the advanced biofuel mandate, there are specific carve-outs for cellulosic biofuels and biomass-based diesel substitutes (e.g., biodiesel). To classify biofuels under the RFS, the Environmental Protection Agency (EPA) must calculate the lifecycle emissions of each fuel relative to gasoline or diesel fuel. Lifecycle emissions include emissions from all stages of fuel production and use ("well-to-wheels"), as well as both direct and indirect changes in land use from farming crops to produce biofuels. Debate is ongoing on how each factor in the biofuels lifecycle should be addressed, and the issues surrounding direct and indirect land use are particularly controversial. How EPA resolves those issues will affect the role each fuel plays in the RFS. EPA issued a Notice of Proposed Rulemaking on May 26, 2009, for the RFS with suggested methodology for the lifecycle emissions analysis. EPA issued a final rule on February 3, 2010. The final rule includes EPA's methodology for determining lifecycle emissions, as well as the agency's estimates for the emissions from various fuels. In its proposed rule, EPA found that many fuel pathways did not meet the threshold requirements in EISA. However, its methodology was criticized by biofuels supporters. In the final rule, EPA modified its methodology to reflect some of those comments. However, some biofuels opponents counter that the final rules went too far in the opposite direction. In most cases, estimated emissions decreased (i.e., emissions reductions increased), leading to more favorable treatment of biofuels in the final rule. Because of the ongoing debate on the lifecycle emissions from biofuels, including finalized regulations by the state of California for a state low carbon fuel standard (LCFS) in January 2009, there is growing congressional interest in the topic. Congressional action could take the form of oversight of EPA's rulemaking process, or could result in legislation to amend the EISA RFS provisions. Further, related legislative and regulatory efforts on climate change policy and/or a low-carbon fuel standard would likely lead to interactions between those policies and the lifecycle determinations under the RFS.

O ne of the ongoing controversies related to the Affordable Care Act (ACA) has been the scope of exemption from certain health care coverage requirements, including the contraceptive coverage requirement. A series of regulations have been promulgated to address concerns of certain entities with religious objections to the coverage requirement, but until 2014, the regulations applied only to churches and nonprofit religious organizations, not to for-profit corporations. Though closely divided, the U.S. Supreme Court's 5-4 decision in Burwell v. Hobby Lobby Stores, Inc . has settled the question of whether certain for-profit corporations must be exempt from the requirement, unless Congress chooses to amend the statute providing those corporations legal protection. Imputing the beliefs of owners of closely held corporations to the corporations themselves, the Court found that the ACA could not require such companies to provide contraceptive coverage in group health plans offered to their employees. It based its decision on the Religious Freedom Restoration Act (RFRA), which provides heightened protection for burdens on religious exercise. Although the case has been analogized to Citizens United v. Federal Election Commission , a 2010 case holding that corporations have free speech rights under the First Amendment, the Hobby Lobby decision was not decided on constitutional grounds. Instead, it provides protection on a statutory basis, meaning that Congress has the ability to respond to the decision if it disagrees with the Court's ruling. This report analyzes the Court's opinions in Hobby Lobby , examining the rights of closely held corporations under the Religious Freedom Restoration Act. It also addresses the implications for the contraceptive coverage mandate under ACA and discusses potential legislative responses to the Court's decision. Finally, it analyzes the impact that Hobby Lobby may have in other contexts in which employers may claim religious objections, including developments in a separate set of legal challenges brought by religious nonprofit organizations, which have claimed that the process for the accommodation imposes an impermissible substantial burden under RFRA. The companies challenging the contraceptive coverage requirement alleged violation of their religious exercise rights under both the First Amendment's Free Exercise Clause and RFRA. The Free Exercise Clause prohibits the government from prohibiting the free exercise of religion. Traditionally it had been interpreted to require that the government show a compelling interest for any government action that interfered with a person's exercise of religious beliefs. However, in 1990, the Supreme Court reinterpreted that standard, explaining that the Free Exercise Clause never "relieve[s] an individual of the obligation to comply with a valid and neutral law of general applicability." The Court's decision lowered the baseline of protection, but emphasized that Congress remained free to consider whether additional protection would be appropriate through the legislative process. Congress responded to the Court's decision by enacting RFRA, which essentially reinstated the heightened standard of protection. RFRA states that the "[g]overnment shall not substantially burden a person's exercise of religion even if the burden results from a rule of general applicability, except as provided in subsection (b)." Subsection (b) requires that any substantial burden must further a compelling governmental interest and use the least restrictive means to achieve that interest. RFRA's language indicates that in order to raise a claim under the statute, "a person's exercise of religion" must be affected. However, when enacting RFRA, Congress never defined the term person for purposes of the act. Only if a court determines that the party challenging the government's action is "a person" under the terms of the statute and that the party exercises religion, can the court address the merits of the case--whether an improper substantial burden has been placed on that party. One of the most significant points of the Hobby Lobby decision was its declaration that closely held corporations are "persons" eligible for protection under RFRA. The Court noted the absence of a statutory definition of person under RFRA and consequently relied upon the Dictionary Act to ascertain the default meaning of the term. The Dictionary Act defines person to "include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals." Rejecting the assertion that businesses organized as corporations are divested of RFRA's protections, the majority wrote that "[t]he plain terms of RFRA make it perfectly clear that Congress did not discriminate [with regard to the business structure chosen by owners] who wish to run their businesses as for-profit corporation in the manner required by their religious beliefs." The Court reasoned that RFRA was enacted to provide broad protection for religious liberty and, without a specifically applicable definition provided in RFRA, explained that the definition of person was not limited by for-profit status: "No known understanding of the term 'person' includes some but not all corporations. The term 'person' sometimes encompasses artificial persons ..., and it sometimes is limited to natural persons. But no conceivable definition of the term includes natural persons and nonprofit corporations, but not for-profit corporations." The majority acknowledged that the threshold issue arguably is conditioned on the person's ability to exercise religion, a point emphasized by the dissent. However, the majority cited previous cases in which the Court had recognized claims involving exercise of religion of individuals who owned for-profit businesses as sole proprietorships and nonprofit corporations. Despite the dissent's argument that religious corporations could be distinguished from for-profit corporations because they "foster the interests of persons subscribing to the same religious faith," the majority held that the Court's precedent indicated that neither for-profit status nor corporate status are prohibitive factors in analysis of an organization's rights under RFRA. Notably, when responding to concerns that applying RFRA to for-profit corporations would raise challenges of ascertaining "the religious identity of large, publicly traded corporations," the majority emphasized that its decision applied only to such companies as the ones challenging the contraceptive coverage requirement in this case. In effect, the decision therefore is limited to "closely held corporations, each owned and controlled by members of a single family." Additionally, the majority alluded to the general requirement inherent to religious exercise cases that the parties must base their challenge on sincerely held religious beliefs, meaning that even if RFRA would apply to a particular entity, if the entity is asserting a religious belief for the convenience of avoiding compliance with an unpopular mandate, it could not claim legal protection. The sincerity of the companies' beliefs in Hobby Lobby was not disputed. Although the majority noted that it was recognizing RFRA's applicability to closely held corporations only, it did not foreclose the possibility that in a future case, a court may extend RFRA protection to other types of corporations such as those which are publicly traded. Instead it suggested only that "it seems unlikely" that such "corporate giants" would assert RFRA rights and that "numerous practical restraints would likely prevent that from occurring." The dissent was highly critical of this point, characterizing the decision as one of "startling breadth:" "The Court's determination that RFRA extends to for-profit corporations is bound to have untoward effects. Although the Court attempts to cabin its language to closely held corporations, its logic extends to corporations of any size, public or private." Indeed, the dissent's argument that the decision may provide a basis for expanding the protection of RFRA further in the future may reasonably give pause. As noted, the majority did not preclude future application of RFRA to a broader range of corporations, using tentative language and noting a lack of obvious challenges. Furthermore, the majority's explanation that the Dictionary Act's definition of person could not be read to distinguish between types of corporations related to the company's profit status suggests that it also may not be read to distinguish between types of corporations on other grounds (e.g., size or public trading status). After determining that RFRA's protections would apply, the Court examined the merits of the RFRA claim, first identifying the burden that compliance with the contraceptive coverage mandate would impose on the companies challenging the mandate. According to the Court, requiring the owners of the companies to arrange for "health insurance that covers methods of birth control that ... may result in the destruction of an embryo" means that the "mandate demands that they engage in conduct that seriously violates their religious beliefs." If the owners were to refuse to comply with the demand, the companies would face penalties under the ACA that the Court characterized as "surely substantial." If the companies continued to provide their preferred health coverage without including the mandated contraceptive coverage, they would face penalties each day of noncompliance, ranging from $40,000 per day to $1.3 million per day. If the companies stopped providing any insurance coverage to avoid covering contraceptives and avoid the consequent daily penalties, they would risk paying a different penalty under ACA, which could range from $800,000 per year to $26 million per year. The majority recognized the substantial burden arising from the owners' religious objections and potential financial penalties over strong objection from the dissenting Justices. Justice Ginsburg, who authored the principal dissent, criticized the majority's assessment as equating a sincere religious objection with a substantial burden, instead of distinguishing between the two. In other words, simply because a government mandate conflicts with a person's religious belief, the mandate is not necessarily a substantial burden. The dissent explained that the relationship between the belief and the burden must be linked in order to identify the requisite substantial burden: [T]he connection between the families' religious objections and the contraceptive coverage requirement is too attenuated to rank as substantial. The requirement carries no command that Hobby Lobby or Conestoga purchase or provide the contraceptives they find objectionable. ... Importantly, the decisions whether to claim benefits under the plans are made not by Hobby Lobby or Conestoga, but by the covered employees and dependents, in consultation with their health care providers. ... Any decision to use contraceptives made by a woman covered under Hobby Lobby's or Conestoga's plan will not be propelled by the Government, it will be the woman's autonomous choice, informed by the physician she consults. The dissent emphasized that the "linkage" between the burden imposed by the government's mandate and the religious beliefs offended by the mandate would be "interrupted by independent decisionmakers (the woman and her health counselor)" in a manner that would undermine characterization of the burden imposed by the government as "substantial." The Court's analysis of the government's interest in requiring contraceptive coverage appeared skeptical, but ultimately it assumed that the interests were sufficiently compelling. The majority noted that the government's justifications--public health and gender equality--were too broadly defined, explaining that RFRA requires a "'more focused' inquiry." It cited a 2006 case in which the Court held that, under RFRA, the government must demonstrate a compelling interest for prohibiting an exemption for a religious purpose while allowing exemptions for other purposes. The majority's discussion suggested that the stated interests were undermined by the extent of other businesses that were exempt from offering their employees coverage (e.g., grandfathered plans, employers with fewer than 50 employees). Though the Court noted its concern regarding the sufficiency of the government's asserted interest, it conceded the compelling interest prong of the RFRA analysis with little discussion. However, the dissent addressed the compelling interest in greater detail, responding to the majority's concern about other exemptions undermining the government's alleged interest by citing a number of other federal laws that include exemptions for small employers without undermining the statutory interests. The Court rejected the argument of the Department of Health and Human Services (HHS) that it lacked other means to ensure availability of contraceptive coverage without burdening these companies' religious exercise, noting a few alternatives it considered "less restrictive." First, the majority suggested that "[t]he most straightforward way ... would be for the Government to assume the cost of providing" coverage to women whose employers object to providing coverage. Second, the Court highlighted the availability of the accommodation already established for nonprofit employers with religious objections, which would "protect the asserted needs of women as effectively" as the contraceptive coverage requirement without "requiring employers to fund contraceptive methods that violate their religious beliefs." Though the Court cited the accommodation as one potential less restrictive alternative, it explicitly noted that it was not determining its sufficiency under RFRA for the purpose of any other legal challenge. Discussed in further detail later in this report, the accommodation currently is available to certain nonprofit religious organizations who self-certify their objection to qualify as eligible to have the insurance issuer provide coverage to the employees outside of the employer's group health plan. In response to these alternatives, the dissent questioned the extent to which the majority would allow employers with religious objections to government mandates to avoid compliance: And where is the stopping point to the "let the government pay" alternative? Suppose an employer's sincerely held religious belief is offended by health coverage of vaccines, or paying the minimum wage, or according women equal pay for substantially similar work? Does it rank as a less restrictive alternative to require the government to provide the money or benefit to which the employer has a religion-based objection? According to the majority, the dissent's concern with the potential assumption of costs by the government for private objections to various legal requirements was unfounded because its decision reached only to the contraceptive coverage requirement. It explained that its decision should not be interpreted to mean that insurance coverage mandates generally cannot be upheld if they conflict with an employer's religious beliefs. The majority stated that "[o]ther coverage requirements, such as immunizations, may be supported by different interests ... and may involve different arguments about the least restrictive means of providing them." A number of potential legislative responses have been mentioned since the Court announced its decision in Hobby Lobby . It is important to remember that the Court's decision was based on the statutory protections in RFRA, not in constitutional protections of the First Amendment. Just as Congress may enact heightened protections for religious exercise as it did in RFRA and as it may determine the scope of protection available, it may enact statutory language to clarify the effect of RFRA regardless of the Court's decision. The Court essentially created a working definition of person under RFRA, but Congress may confirm or alter that definition at its discretion. Alternatively, it may consider preempting RFRA with respect to certain legislative requirements. The most direct congressional response to Hobby Lobby would be to amend RFRA to include a definition of person and in effect clarify the scope of RFRA's applicability generally. This legislative option creates a number of possibilities, ranging from a definition of person to include only natural persons at one end to a definition that includes all natural and artificial persons at the other end, similar to the definition provided under the Dictionary Act used by the Court. Aside from these two extreme ends of the spectrum, Congress may consider a number of intermediate definitions. The working definition resulting from the Court's decision in Hobby Lobby has been considered as one type of compromise between eliminating protection for any corporations and extending protection for all corporations. Although not necessary in light of the decision, Congress may choose to adopt explicitly the Court's definition to avoid any future cases from expanding or restricting the status quo following Hobby Lobby . Alternatively, Congress may consider other examples when considering the scope of "persons" to which it wants RFRA to apply. The preeminent example of Congress's provision of protection for potential religious objectors from a generally applicable mandate is found in Title VII of the Civil Rights Act of 1964. Title VII, in part, prohibits employers from discriminating against employees on the basis of their religious beliefs. Because this provision may interfere with religious employers' religious practices (e.g., hiring employees of the same faith of the organization), Congress included an exemption for religious entities, stating that the prohibition against religious discrimination does not apply to "a religious corporation, association, educational institution, or society with respect to the employment of individuals of a particular religion.... " This provision explicitly applies only to religious organizations, and courts generally have interpreted the scope of the provision to take into account (1) the purpose or mission of the organization; (2) the ownership, affiliation, or financial support of the organization; (3) requirements placed upon staff and members of the organization; and (4) the extent of religious practices in or the religious nature of the products and services offered by the organization and whether it operates for a profit. A definition of person that would include language similar to Title VII likely would cover religious nonprofit organizations (e.g., charities, hospitals, schools), but would not cover commercial entities like Hobby Lobby. Another option that may be used in response to Hobby Lobby would be to consider preempting RFRA in federal legislation. Under the legal principle of entrenchment, a legislative action in one Congress cannot bind a future Congress. That is, Congress cannot entrench a legislative action by providing that it may not be repealed or altered. Accordingly, Congress may decide to enact legislation that would make RFRA not applicable to certain federal actions. For example, if Congress determined that it did not want to extend heightened protection that is otherwise provided under RFRA in certain instances (e.g., the contraceptive coverage mandate), it could enact a provision in the relevant legislation indicating that RFRA would not apply. Unlike the previous potential legislative response, this approach would mean that Congress considers RFRA's applicability to each present and future law on a case-by-case basis. Shortly after Hobby Lobby was announced, the House and Senate in the 113 th Congress introduced legislation that used this approach. The Protect Women's Health From Corporate Interference Act of 2014 prohibited employers from denying coverage of any health care services required to be covered under federal law or regulation. However, to prevent employers from claiming exemption under RFRA, the bill stated that the prohibition "shall apply notwithstanding any other provision of Federal law, including [RFRA]." Accordingly, to the extent that a party may be covered by RFRA as a general matter, such parties would not be protected from coverage requirements imposed by federal law or regulation if the bill were enacted. Generally speaking, the Hobby Lobby decision clarified the scope to which persons may be eligible for protection under RFRA, but in the practical context of the contraceptive coverage requirement, it essentially addressed the question of whether the requirement's implementing regulations sufficiently addressed the range of entities with religious objections. Since ACA's enactment, HHS has developed various iterations of administrative regulations to address religious objections. The rules in effect at the time Hobby Lobby was decided were promulgated in July 2013, and respond to religious entities' objections to contraceptive coverage in two ways: (1) an exemption for religious employers covered under subsections (a)(3)(A)(i) or (a)(3)(A)(iii) of Section 6033 of the tax code and (2) an accommodation for other eligible organizations. Entities covered by the relevant provisions for the exemption generally include churches, church auxiliaries, church associations, or other religious orders. Under the exemption, employees of religious employers would not receive contraceptive coverage either from their employers or from the issuers directly. Eligible employers that are not covered by the exemption may instead seek protection through the accommodation . To qualify for the accommodation under the July 2013 final rules, an organization was required to (1) object to coverage of at least some of the contraceptive services based on religious beliefs; (2) be a nonprofit entity; (3) hold itself out as a religious organization; and (4) comply with the self-certification requirements of the rule. Following Hobby Lobby , the regulations implementing the accommodation were amended to reflect broader eligibility, as discussed in more detail below. Under the accommodation, employees of eligible organizations would not receive contraceptive coverage from their employers, but would have coverage provided directly through the health plan issuers at no cost to the employee or the employer. Simply put, Hobby Lobby held that the regulations also must provide some accommodation for closely held for-profit corporations. However, the Court did not examine the sufficiency of the existing regulations with regard to other types of entities with religious objections. It did not decide any legal issues with respect to the merits of the exemption or accommodation available to churches and religious organizations, respectively, nor did it address protection from state contraceptive coverage requirements. As a result, a number of legal questions remain with regard to the obligations of employers to provide contraceptive coverage. In addition to its decision in Hobby Lobby , the Court has considered procedural requests filed by nonprofits that objected to the process under which they could qualify for accommodation, specifically claiming that the certification process required under the July 2013 rules burdens their religious exercise. Notably, three days after the Hobby Lobby decision was announced, the Court issued an injunction in Wheaton College v. Burwell , effectively preventing enforcement of the contraceptive coverage requirement against Wheaton College pending a final decision in its case if the school provided written notice to HHS of its qualifications for the accommodation. Providing such a letter would allow the school to claim eligibility without using the official form--to which it objects--prescribed by the regulations. Although the order explicitly emphasized that it was not "an expression of the Court's views on the merits" of the case, three Justices wrote in dissent from the Court's order. The dissenting Justices stated that the college's assertion "that its filing of a self-certification form will make it complicit in the provision of contraceptives by triggering the obligation for someone else to provide the services to which it objects" was not a viable claim under RFRA and therefore not eligible for injunctive relief. The dissenters noted that the Hobby Lobby decision considered the accommodation to be "'an alternative that achieves all of the Government's aims while providing greater respect for religious liberty.'" Despite the widespread attention focused on the Wheaton College order, it indeed does not provide any final decision on the merits of the challenge to the accommodation. Additionally, though the majority in Hobby Lobby noted the possibility that the accommodation could be a "less restrictive" means to achieve the government's interest in the contraceptive coverage mandate, it did not determine it to be the least restrictive means. In other words, simply because the Court pointed to the accommodation as an option that burdened the companies' religious exercise less does not mean that there may not be a third option that minimized the burden even more effectively. In July 2015, the Obama Administration issued final regulations regarding the scope and procedure for seeking accommodation. The final regulations clarify that the accommodation is available to organizations that (1) oppose providing coverage for required contraceptive services; (2) are either nonprofit religious organizations or closely held for-profit entities whose governing body takes official action to establish its objection to the required contraceptive services; and (3) self-certify their objections, either by use of a standard form or written notice to the relevant agency. The regulations generally define closely held entities as ones with no publicly traded ownership interests and having five or fewer individuals who own over 50% of its ownership interests (or a substantially similar structure). Despite the final rules' expansion to apply to certain for-profit entities as a result of the Court's decision in Hobby Lobby , implementation of the accommodation has continued to be challenged in courts, particularly by nonprofit religious entities, which object to the process by which the accommodation is granted. In November 2015, the Supreme Court announced it would review seven consolidated cases. Prior to the Court's granting certiorari, each of the federal circuit courts to decide the issue on the merits had upheld the accommodation, until September 2015, when the U.S. Court of Appeals for the Eighth Circuit granted a preliminary injunction after finding that the method for qualifying for the accommodation likely would violate the nonprofit organizations' rights under RFRA. Hobby Lobby involved a challenge to the federal contraceptive coverage requirement by companies seeking protection under the federal RFRA. Thus, the decision to expand protection under RFRA to closely held corporations affects only federal law. A number of states have enacted separate contraceptive coverage requirements, predating ACA. Therefore, the closely held companies that now have been recognized as protected by RFRA may still be obligated to provide contraceptive coverage under state requirements if the states do not have an applicable exemption to such coverage requirements. In some cases, such companies may seek protection under state versions of RFRA, as the federal RFRA only applies to protect against burdens imposed by federal actions. Many states enacted laws modeled on the federal RFRA to prohibit state or local governments from substantially burdening religious exercise. The applicability of these state RFRAs to various types of organizations would depend on each state's legislative language. If the state RFRA did not define the entities which may claim protection, a court may look to Hobby Lobby as guidance in interpreting the proper scope, but would not be bound to reach the same conclusion as the Court did. Notably, a recent trend in state RFRA legislation has reflected a broader approach to religious freedom protections, though proposed laws have had mixed success. For instance, in March 2015, Indiana enacted a version of RFRA that defined covered "persons" to include individuals, religious organizations, and a broad range of business entities, regardless of their for-profit or nonprofit status or the type of ownership, if the entity exercised religious beliefs held by its owners. That definition extends further than the Supreme Court's interpretation, which presently includes only business entities that are closely held. However, a similar law was vetoed in Arizona in February 2014. The controversy raised over the expansion of persons and entities subject to RFRA protection has highlighted one of the potential impacts of Hobby Lobby --could a RFRA be used to avoid compliance with a variety of laws of general applicability, including, as one example, public accommodations requirements in civil rights laws? In response to these concerns, Indiana enacted an amendment to its RFRA, stating that the law does not authorize individuals or entities generally "to refuse to offer or provide services, facilities, use of public accommodations, goods, employment, or housing ... on the basis of race, color, religion, ancestry, age, national origin, disability, sex, sexual orientation, gender identity, or United States military service," or establish a defense to such claims in civil or criminal proceedings. The amendments do not apply to entities which are tax-exempt churches and nonprofit religious organizations, or to ministerial employees of a church or nonprofit religious organization.

A 5-4 decision, issued over a highly critical dissent, Burwell v. Hobby Lobby Stores, Inc. resolved one of the many challenges raised in response to the contraceptive coverage requirement of the Affordable Care Act (ACA). Imputing the beliefs of owners of closely held corporations to such corporations, the U.S. Supreme Court found that closely held corporations that hold religious objections to certain contraceptive services cannot be required to provide coverage of those services in employee health plans. The Court's decision was based on the protections offered under the federal Religious Freedom Restoration Act (RFRA), a statute prohibiting the government from imposing a substantial burden on a person's religious exercise unless it can show a compelling interest achieved by the least restrictive means. The Court declined to address the constitutional challenge, holding that the companies were protected under RFRA. In the absence of a definition under RFRA, the majority interpreted the term "person" to include closely held corporations, even if they operated for-profit, and determined that the penalties that such companies would face if they failed to comply with the contraceptive coverage requirement would impose a substantial burden. Though the Court assumed that the government had a compelling interest to require contraceptive coverage under ACA, it found that less restrictive means (e.g., expanding the regulatory accommodation available to nonprofit employers with similar objections) could achieve that interest without requiring companies with religious objections to be subject to the requirement. Although Hobby Lobby resolved the question regarding the applicability of RFRA to closely held corporations--defined by the Court as "each owned and controlled by members of a single family"--the decision leaves open a number of questions about the scope of RFRA's protections and future enforcement of the contraceptive coverage requirement. One such question, now awaiting review by the Court, is whether RFRA may provide protection for nonprofit religious entities already eligible for the accommodation, but which nonetheless object to the process of qualification for eligibility. Because the Court's decision was based on statutory grounds, Congress remains free to define which entities may be governed by ACA or other federal laws generally. This report analyzes the Court's decision in Hobby Lobby, including arguments made between the majority and dissent, to clarify the scope of the decision and potential impacts for future interpretation of RFRA's applicability. It also examines potential legislative responses, should Congress consider addressing the current applicability of RFRA. Finally, the report addresses the decision's effect on requirements that employers offer contraceptive coverage in group health plans under federal or state law.

From July 25 to July 28, 2017, the Senate agreed to proceed to consideration of the American Health Care Act, considered several amendments to the bill, and then agreed to place the bill back on the Senate calendar. The House Budget Committee reported H.Con.Res. 71 , a budget resolution for FY2018 on July 21, 2017. CBO released An Update to the Budget and Economic Outlook: 2017 to 2027 on June 29, 2017. OMB released the Trump Administration's FY2018 Budget on May 23, 2017. The President signed the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) into law on May 5, 2017, providing discretionary appropriations funding for the remainder of FY2017. The House passed H.R. 1628 , the American Health Care Act, on May 4, 2017. On April 28, 2017, the President signed a continuing resolution, providing further continuing appropriations for FY2017 through May 5, 2017. CBO released The 2017 Long-Term Budget Outlook on March 30, 2017. The Office of Management and Budget released summary information for the FY2018 President's Budget on March 16, 2017. The statutory debt limit was reinstated at $19.809 trillion on March 16, 2017. Secretary Mnuchin informed Congress of Treasury's intent to invoke extraordinary measures to stay under the statutory debt limit upon its reinstatement on March 8, 2017. CBO released The Budget and Economic Outlook : 2017 to 2027 on January 24, 2017. The House and Senate agreed to a budget resolution for FY2017 ( S.Con.Res. 3 ) in early January, triggering the budget reconciliation process. At the end of 2016, Congress acted on several pieces of significant budgetary legislation. A number of tax provisions, which had previously been extended by the Protecting Americans from Tax Hikes Act of 2015 as part of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), expired on December 31, 2016. Those provisions have been extended on several occasions in the past, at times in the calendar year following their expiration. The House and Senate passed H.R. 2028 , a continuing resolution (CR) that provides funding through April 28, 2017, for the programs covered by 11 of the 12 regular appropriations bills. The bill was signed into law ( P.L. 114-254 ) by President Obama on December 10, 2016. Each year, the Congressional Budget Office (CBO) releases a projection of budgetary and economic outcomes titled The Budget and Economic Outlook . These projections include an estimate of federal spending and receipts under current law, referred to as the baseline . The baseline covers the current fiscal year and the 10 subsequent fiscal years. Congress uses the baseline in many ways as it makes budgetary decisions. For example, the baseline assists Congress in assessing the current budget and economic situation to develop a budget resolution for the upcoming fiscal year. In addition, the baseline provides a benchmark against which Congress can measure the budgetary impact of legislative proposals. This is used not only to weigh the merits of legislation, but also to enforce budgetary constraints. Changes in budget projections between baselines are sorted into three categories: (1) legislative changes, which are adjustments due to enacted laws since the last baseline publication; (2) economic changes, which are reflective of shifts in underlying economic conditions; and (3) technical changes, which are modeling adjustments made in an effort to improve the accuracy of projections. The Budget and Economic Outlook is generally released in January, and updates are typically issued both following the release of the President's Budget and in August. CBO released An Update to the Budget and Economic Outlook: 2017 to 2027 on June 29. That forecast projected an FY2017 budget deficit of $693 billion (3.6% of GDP), which represented an increase of $134 billion from its January forecast. Those changes were due almost entirely to economic and legislative changes in the forecast. The increased deficit projection was due to an $89 billion decrease in FY2017 revenues, driven largely by lower than expected receipt levels in early 2017, and an increase of $45 billion in FY2017 outlays, primarily due to increases in the subsidy costs of federal loans issued to the public. The June forecast projected a cumulative deficit from FY2018 to FY2027 of $10.112 trillion, an increase of $686 billion from the January forecast. A $624 billion increase in projected outlays accounted for most of the increased deficit projection, with a $62 billion decline in revenues making up the rest of the difference from the January baseline. The June forecast projected a deficit of $563 billion (2.8% of GDP) in FY2018 and a deficit of $1,463 billion (5.2% of GDP) in FY2027 under current law. CBO released The Budget and Economic Outlook: 201 7 to 202 7 on January 24, 2017. The forecast included federal budget deficit projections of $559 billion in FY2017, equivalent to 2.9% of annual gross domestic product (GDP). That total represents a decrease in the deficit total from FY2016, which was $587 billion (3.2% of GDP). CBO projected that the budget deficit would then fall in FY2018 to 2.4% of GDP but increase in subsequent years, rising to $1,408 billion (5.0% of GDP) in FY2027, the final year of the budget window. The outlook projected a cumulative deficit from FY2017 through FY2026 of $8.577 trillion, a 0.1% increase ($0.006 trillion) from projections over the same period in the August 2016 baseline. The deficit increase was attributable to projected decreases in federal revenues (by $315 billion) that were slightly higher than projected decreases in outlays (by $310 billion). Legislation enacted in late 2016 increased the projected deficit by $127 billion from FY2017 to FY2026, with nearly all of that change resulting from increased outlays. Technical changes to the baseline reduced budget deficits by a combined $133 billion through outlay reductions that exceeded revenue reductions over the 10-year window. Finally, economic adjustments to the baseline increased budget deficits by $12 billion from FY2017 through FY2026, as revisions to the economic forecast were quite small by historical standards. In addition to the budget and economic outlook, CBO also releases a long-term budget outlook, typically on an annual basis. This forecast uses a similar set of assumptions employed in the Budget and Economic Outlook to project federal spending and revenue levels through at least 25 years beyond the current fiscal year. Information included in the long-term budget outlook includes projections of publicly held debt and key macroeconomic indicators, as well as calculations on how federal spending goals would need to change in order to hit certain public debt benchmarks at the end of the forecast. Though the long-term outlook does not affect the budgetary impact of legislative proposals, it helps to inform Congress about the long-term trends of certain budgetary components under current law. CBO released The 2017 Long-Term Budget Outlook on March 30, 2017. The forecast includes budget and debt projections through FY2047. The current outlook increased its projection of long-term publicly held debt as compared with the previous forecast, as estimated publicly held debt in FY2046 (the last year estimated in each publication) rose from 141% of GDP to 146% of GDP. The long-term projections include a deficit to 9.8% of GDP in FY2047, the final year of the forecast, with publicly held debt equal to 150% of GDP in that year. Publicly held debt is currently estimated to be 77% of GDP, well above the 50-year historical average of 40% of GDP. CBO projects that policy changes that would increase revenues or decrease noninterest spending by 1.9% of GDP in each year relative to the baseline forecast would be required for publicly held debt to remain at its current level in 2047. CBO also projects that policy adjustments that would increase revenues or decrease noninterest spending by 3.1% of GDP in each year would be needed for publicly held debt to equal its 50-year historical average of 40% of GDP in 2047. The Budget and Accounting Act of 1921 (P.L. 67-13), as amended, requires the President to submit a budget request to Congress for the upcoming fiscal year. The budget is required to include (1) estimates of spending, revenues, borrowing, and debt; (2) detailed estimates of the financial operations of federal agencies and programs; (3) the President's budgetary, policy, and legislative recommendations; and (4) information supporting the President's recommendations. The budget request, which is submitted by the Office of Management and Budget (OMB), is required to be submitted on or after the first Monday in January, but no later than the first Monday in February. The President's budget has been submitted after the statutory deadline on several occasions. Following the initial submission, the President then often sends Congress an updated request in the second half of the fiscal year, with revisions to prior estimates. The Trump Administration released the FY2018 version of the President's Budget on May 23, 2017. Consistent with past versions of the President's Budget, the publication included a number of policy proposals along with OMB estimates of budgetary outcomes under both current law and if the policy proposals were fully implemented. The proposals with the largest budgetary impact included (1) reductions in outlays for nondefense discretionary programs, Medicaid, and other mandatory programs; and (2) unspecified proposals devoted to repeal and replacement of the Affordable Care Act and to individual and corporate tax changes. If the policies proposed in the budget were fully implemented, the Administration estimates that total FY2018 outlays would be $4,094 billion (20.5% of GDP) and revenues would be $3,654 billion (18.3% of GDP), resulting in a budget deficit of $440 billion (2.2% of GDP). Under the proposed budget, OMB estimates that deficits would steadily decrease from FY2019 through FY2026, and produce a budget surplus of $16 billion (0.1% of GDP) in FY2027. The net budget deficit from FY2018-FY2027 totals $3.15 trillion. The President's budget uses economic projections in its calculations that differ from those used in congressional budget operations. The budget projects that the real economic growth rate (measured as the percentage change in GDP) will rise from 1.6% in FY2016 to 3.0% per year over the FY2021 through FY2027 period. The increased growth accounts for improved economic outcomes under the President's budget, reducing deficits by $2.06 trillion over the FY2018 to FY2027 window. CBO released their analysis of the President's Budget on July 13. CBO's forecast includes a much smaller reduction in federal deficits if the policy proposals were fully implemented, projecting a federal deficit of $720 billion (2.9% of GDP) under that scenario. Lower economic growth assumptions account for much of the difference in projections relative to OMB estimates. Summary information for the FY2018 President's Budget was submitted to Congress on March 16, 2017. The submission included overall discretionary budget authority levels for FY2017 and FY2018 and topline budget requests for most federal agencies. Specifically, the budget allows for $1,182 billion in total FY2017 discretionary budget authority, which represents an increase of $14 billion (or 1.2%) from discretionary budget authority provided for in FY2016. The budget provides for $1,152 billion in FY2018 discretionary budget authority, a $30 billion (or 2.5%) decrease relative to its FY2017 figure. Taken together, the budget authority requested represents a decrease of $14 billion (or 0.6%) relative to the totals included in CBO's January 2017 current law baseline. In both FY2017 and FY2018, the President's Budget includes increases in defense budget authority and decreases in nondefense budget authority, as defined by the Budget Control Act of 2011 ( P.L. 112-25 ) as amended. The Congressional Budget Act of 1974 (the Budget Act) provides for the annual adoption of a budget resolution. The budget resolution reflects an agreement between the House and Senate on a budgetary framework for the upcoming fiscal year, designed to establish parameters within which Congress will consider subsequent budgetary legislation. The budget resolution does not become law: therefore, no money is spent or collected as a result of its adoption. Instead, it is meant to assist Congress in considering an overall budget plan. Once the budget resolution has been agreed to by both chambers, certain levels contained in it are enforceable through points of order. The budget resolution is required to include a spending limit for each committee, referred to as "302(a) allocations." Each appropriations committee is then responsible for subdividing its 302(a) allocation among its 12 subcommittees. These allocations, referred to as 302(b) subdivisions, establish the maximum amount that each of the 12 appropriations bills can spend. The budget resolution is under the jurisdiction of the House and Senate Budget Committees, and its content, consideration, and implementation are shaped primarily by requirements in the Budget Act. While the timetable in the Budget Act states that Congress is to complete action on a budget resolution by April 15, Congress often does so later than April 15. Furthermore, since the current timetable for action on the budget resolution was established in 1985, there have been nine years when the House and Senate did not reach agreement on a budget resolution. In such years, Congress often employs alternative legislative tools to serve as a substitute for a budget resolution. These substitutes are typically referred to as "deeming resolutions," because they are deemed to serve in place of an annual budget resolution for the purposes of establishing enforceable budget levels for the upcoming fiscal year. On March 16, 2017, the House Budget Committee held a markup on a budget resolution for FY2017, and subsequently voted to report the resolution ( H.Con.Res. 125 ) by a vote of 20-16 (no floor action occurred on this budget resolution). The committee estimated that H.Con.Res. 125 would reduce projected deficits relative to CBO's January 2016 baseline. Over the FY2017-FY2026 period, the outlays reported in H.Con.Res. 125 were $7.2 trillion lower than the projections in the latest CBO baseline, and the revenues in H.Con.Res. 125 were $0.3 trillion higher than the latest CBO budget projections. The committee-reported budget resolution also contained reconciliation instructions to 12 House committees, directing them to report legislation that would reduce the deficit over the period of FY2017 to FY2026. The directives required between $15 million and $1 billion in savings from each committee, totaling $8.315 billion in deficit reduction over the 10-year period. In addition to reconciliation instructions, the resolution included a policy statement declaring that the House would consider legislation, early in the second session of the 114 th Congress, to achieve mandatory spending savings of not less than $30 billion over the period of FY2017 and FY2018 and $140 billion over FY2017-FY2026. No further action was taken on the committee-reported budget resolution. Soon after the 115 th Congress convened, the House and Senate adopted a budget resolution for FY2017 ( S.Con.Res. 3 ). Congressional leaders stated that action was taken on the FY2017 budget resolution primarily to trigger the budget reconciliation process in an effort to pass legislation making changes to the Affordable Care Act using the expedited procedures of the budget reconciliation process. Further, congressional leaders stated that instead of adopting solely a budget resolution for FY2018 in the spring, as would be done traditionally, the House and Senate were planning to adopt two budget resolutions in calendar year 2017--one for FY2017 (to be adopted in January), and one for FY2018 (to be adopted in the spring). (Using two budget resolutions in one year increases the potential number of bills that Congress may consider under the expedited procedures of the budget reconciliation process.) S.Con.Res. 3 was introduced in the Senate on January 3, 2017, by Senate Budget Committee Chairman Senator Enzi. Pursuant to Senate precedent, the Budget Committee was automatically discharged from consideration of the budget resolution, and the budget resolution was placed on the Calendar. On January 4, the Senate began consideration of the budget resolution, and on January 11 the Senate adopted the resolution without amendment, by a vote of 51-48. On January 13, the House considered the budget resolution pursuant to the special rule reported from the House Rules Committee, H.Res. 48 . The special rule provided for two hours of debate, and made in order one substitute amendment, which was defeated, offered by the ranking member of the House Budget Committee, Representative Yarmuth. The House adopted the resolution the same day by a vote of 227-198. S.Con.Res. 3 recommends total levels for federal revenues and outlays in FY2017 through FY2026 that are consistently lower than those projected in CBO's January 2017 baseline. From FY2017 through FY2026, S.Con.Res. 3 recommends federal revenue totals that are $8.99 trillion lower than the CBO forecast, and federal outlay totals that are $9.65 trillion lower than CBO's latest baseline. FY2017-FY2026 nominal deficits in S.Con.Res. 3 sum to $7.92 trillion, which is $0.66 trillion lower than CBO's January 2017 nominal deficit projections over the same period. On July 21, the House Budget Committee reported H.Con.Res. 71 , a budget resolution for FY2018. The budget resolution includes reconciliation instructions to 11 committees, directing them to report by October 6, legislation that would collectively achieve a total of more than $200 billion in deficit reduction over the period of FY2018-FY2027. Budget reconciliation is an optional congressional process that operates as an adjunct to the budget resolution. If Congress intends to use the reconciliation process, reconciliation directives (also referred to as reconciliation instructions) must be included in the budget resolution. These directives trigger the second stage of the process related to mandatory spending, revenue, or the debt limit. Once a specified committee develops legislation, that legislation is eligible to be considered under expedited procedures in both the House and Senate. It is privileged for fast track consideration, particularly in the Senate, and therefore does not require the support of three-fifths of Senators to invoke cloture in order to reach a final vote on a reconciliation bill in the Senate. As with all legislation considered through reconciliation, any differences in the legislation passed by the two chambers must be resolved. Congress has not employed the reconciliation process annually. Since 1980, it has passed 24 bills through reconciliation. As described above, in early January 2017, the House and Senate agreed to a budget resolution for FY2017 ( S.Con.Res. 3 ) which included reconciliation instructions to four congressional committees. In the House, the two committees directed to engage in reconciliation are the Committee on Ways and Means and the Energy and Commerce Committee. In the Senate, the two committees directed to engage in reconciliation are the Finance Committee and Committee on Health, Education, Labor and Pensions. The committees were directed to submit their reconciliation legislation to their respective Budget Committee. The reconciliation instructions included in S.Con.Res. 3 instruct each of the four committees to report, by January 27, 2017, legislation within their jurisdiction that would reduce the deficit by $1 billion over the period of FY2017 through FY2026. On March 6, 2017, the Committee on Ways and Means and the Energy and Commerce Committee independently held markups, and then each voted to transmit legislative text to the House Committee on the Budget in response to their reconciliation instructions. Combined, the legislative text has been referred to as the American Health Care Act (AHCA). For more information on the AHCA, see CRS Report R44785, H.R. 1628: The American Health Care Act (AHCA) , coordinated by [author name scrubbed]. On March 13, 2017, CBO and the Joint Committee on Taxation (JCT) published an estimate of the budgetary effects of the AHCA. CBO and JCT estimated that the AHCA would reduce budget deficits in FY2017-FY2026 by a combined $337 billion, or an average of 0.15% of GDP per year. That $337 billion decrease reflects a decrease in outlays of $1,219 billion and a decrease in revenues of $883 billion over the FY2017-FY2026 period. On March 16, 2017, the House Committee on the Budget held a markup and voted to report a reconciliation bill, H.R. 1628 , American Health Care Act (AHCA) of 2017. On March 22, the House Rules Committee held a hearing on the AHCA, and on March 24, the Rules Committee reported H.Res. 228 , providing for the consideration of the AHCA. H.Res. 228 , which was agreed to by the House on March 24, provided for four hours of debate on the AHCA and automatically amended the AHCA to incorporate five "manager's amendments" described as making technical and policy changes to the version of AHCA as reported by the House Budget Committee. After debate occurred on the bill, the Speaker pro tempore postponed further consideration of the bill. On April 6, the House Rules Committee reported H.Res. 254 , which provided that should the House return to consideration of the AHCA, an additional amendment would be automatically agreed to upon adoption of the resolution. H.Res. 254 was subsequently tabled, however, and as a result is no longer available to be considered by the House. On May 3, the House Rules Committee reported H.Res. 308 , providing for further debate of the AHCA, as amended by H.Res. 228 . H.Res. 308 , which was agreed to by the House on May 4, provided for one hour of further debate on the AHCA and automatically amended the AHCA (as amended by H.Res. 228 ) to incorporate three further amendments (one of which had previously been included in H.Res. 254 ). The House subsequently passed the AHCA on May 4, by a vote of 217 to 213. An estimate of the budgetary effects of the AHCA as passed by the House has not yet been issued by CBO and JCT. In early June, the AHCA was placed on the Senate Calendar, and on July 25 the Senate agreed to proceed to consideration of the bill by a vote of 51-50. Over the next few days, the Senate considered several amendments to the bill, and on July 28, the Senate agreed by unanimous consent to place the bill back on the calendar. The bill is currently still privileged for consideration under the expedited procedures specified in the Congressional Budget Act. This section will be updated to reflect actions on budget reconciliation as they occur. Appropriations legislation provides authority to agencies to obligate a specific amount of money and directs the Treasury to make the payments for such obligations. Appropriations, also known as discretionary spending, are under the jurisdiction of the House and Senate Appropriations Committees. The appropriations process contemplates annual enactment of 12 regular appropriations bills providing funding for various categories of federal programs. As described above, the budget resolution is required to include a spending limit for each committee, referred to as "302(a) allocations." Each appropriations committee is then responsible for subdividing its 302(a) allocation among its 12 subcommittees. These allocations, referred to as 302(b) subdivisions, establish the maximum amount that each of the 12 appropriations bills may include, and are enforced through points of order on the House and Senate floor. Appropriations in some form must be enacted by the beginning of a new fiscal year (October 1) or a government shutdown may occur. The content and consideration of appropriations measures are shaped primarily by House and Senate rules, amounts in the budget resolution, the Budget Act, and statutory limits on annual discretionary spending. Congress regularly employs continuing resolutions (or CRs) to continue funding programs in the absence of the enactment of regular appropriations measures. Congress has concluded their work on regular appropriations for FY2017. One regular appropriations bill was enacted for FY2017 before the beginning of FY2017, the Military Construction and Veterans Affairs Appropriations bill. All other appropriations for FY2017 were provided in the form of three continuing resolutions (spanning October 1-May 5), followed by the enactment of an omnibus appropriations bill. On September 28, the House and Senate each passed H.R. 5325 , a continuing resolution (CR) that provided funding through December 9, 2016, for the programs and activities covered by 11 of the 12 regular appropriations bills. The legislation also included the Military Construction and Veterans Affairs Appropriations bill for all of FY2017, as well as emergency funds to combat the Zika virus and provide relief for flood victims. On September 29, 2016, the bill was signed into law by President Obama ( P.L. 114-223 ). For activities funded through December 9, 2016, the continuing resolution provided for funding at a level 0.496% below FY2016 levels. The Budget Control Act of 2011 (BCA; P.L. 112-25 ) as amended allows for increases in FY2017 discretionary cap levels relative to their FY2016 values. The BCA provides for a FY2017 discretionary cap on defense budget authority of $551.068 billion, or 0.543% greater than the FY2016 value, and a FY2017 discretionary cap on nondefense budget authority of $518.531 billion, or 0.008% above its FY2016 value. For more information on H.R. 5325 , see CRS Report R44653, Overview of Continuing Appropriations for FY2017 (H.R. 5325) , coordinated by [author name scrubbed]. On December 8, 2016, the House and Senate each passed H.R. 2028 , a CR that provided funding through April 28, 2017, for the programs and activities covered by the 11 appropriations bills without full-year appropriations. On December 10, the bill was signed into law by President Obama ( P.L. 114-254 ). For activities funded through April 28, 2017, H.R. 2028 provided for funding at a level 0.1901% below FY2016 levels. For more information on H.R. 2028 , see CRS Report R44723, Overview of Further Continuing Appropriations for FY2017 (H.R. 2028) , coordinated by [author name scrubbed]. On April 28, 2017, the House and Senate each passed and the President signed H.J.Res. 99 , a CR that provided funding through May 5, 2017, for the programs and activities covered by the 11 appropriations bills without full-year appropriations ( P.L. 115-30 ). On May 5, the President signed H.R. 244 , the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), an omnibus appropriations bill that consists of 11 appropriations bills providing funding for the remainder of FY17. The House passed the bill on May 3 by a vote of 309-118, and the Senate passed the bill on May 4 by a vote of 79-18. CBO estimates that the Consolidated Appropriations Act, 2017 will provide for FY2017 discretionary budget authority that exactly complies with the BCA as amended: $551.068 in defense discretionary budget authority and $518.531 billion in nondefense discretionary budget authority. Those estimates match the projections of FY2017 discretionary budget authority issued in CBO's January 2017 baseline. The Consolidated Appropriations Act, 2017 also provides for a total of $118 billion in FY2017 discretionary budget authority that is classified as an upward adjustment to the discretionary caps established by the BCA as amended. That level of upward adjustment, which includes activities classified as Overseas Contingency Operations and Global War on Terror (OCO/GWOT), disaster relief, program integrity, and emergency requirements, represents a $20 billion increase in funding relative to CBO's latest baseline projections. Other provisions in the Consolidated Appropriations Act, 2017 were estimated by CBO and JCT to result in direct spending and revenue changes that increased budget deficits from FY2017 through FY2027 by a combined $0.249 billion. For more information on committee and floor action related to FY2017 appropriations in calendar year 2016, see CRS Report R44347, Congress and the Budget: 2016 Actions and Events , by [author name scrubbed] and [author name scrubbed]. On July 27, the House passed H.R. 3219 , the Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act of 2018. In addition to including 4 of the 12 regular appropriations bills, H.R. 3219 also includes the Department of Homeland Security Border Infrastructure Construction Appropriations Act, 2018, which provides funding to U.S. Customs and Border Protection for the construction of fencing and a wall along the southern border, as well as additional Overseas Contingency Operations/ Global War on Terrorism funding. During the August recess, the House Rules Committee released legislative text in the form of a committee print, signaling an intention to bring a bill to the House floor consisting of the remaining eight regular appropriations bills. The committee print is titled, "Interior and Environment, Agriculture and Rural Development, Commerce, Justice, Science, Financial Services and General Government, Homeland Security, Labor, Health and Human Services, Education, State and Foreign Operations, and Transportation, Housing and Urban Development Appropriations Act, 2018." Mandatory spending programs are generally those federal programs under which beneficiaries that meet the requirements established by law are entitled to receive payments. Such programs, also referred to as direct spending programs or entitlement programs, generally continue annually without any congressional action required. Most legislative committees have jurisdiction over some type of mandatory spending program. The content and consideration of mandatory spending legislation are shaped primarily by House and Senate rules, the budget resolution, and the Budget Act. Each year, Congress typically considers some legislation that affects mandatory spending in varying degrees. See the American Health Care Act as described above in the section titled " Budget Reconciliation Legislation ." Revenue legislation provides authority for the collection of taxes, fees, and tariffs to fund the federal government. Most revenue is collected by the federal government as a result of previously enacted law that continues in effect without any need for congressional action. Congress, however, routinely considers revenue legislation that repeals or modifies existing provisions, extends expiring provisions, or creates new provisions. Generally revenue is under the jurisdiction of the House Ways and Means Committee and the Senate Finance Committee. The content and consideration of revenue measures is shaped primarily by House and Senate rules and the budget resolution. Each year Congress passes legislation that affects revenue in varying degrees. Congress has extended a number of short-term tax provisions several times in recent years (some of which included retroactive extensions). In late 2015, legislation was enacted that extended 56 expiring tax provisions which had expired at the end of tax year 2014 in Section I of the Protecting Americans from Tax Hikes (PATH) Act of 2015 ( P.L. 114-113 ), with some of the provisions made permanent. All tax provisions in the PATH Act were scheduled to remain in effect through 2016. See the American Health Care Act as described above in the section titled " Budget Reconciliation Legislation ." Some of the short-term revenue provisions last extended by the PATH Act expired on December 31, 2016. Several proposals have been introduced in the 115 th Congress that would extend some or all of these tax provisions. The Constitution allows Congress to restrict the amount of federal debt that may be incurred as part of its power of the purse. Under current law Congress exercises this power through the statutory debt limit. Debt subject to the limit is more than 99% of total federal debt, and includes debt held by the public (which finances budget deficits and the federal loan portfolio) and intragovernmental debt (which represents money borrowed from federal trust funds and other federal accounts). When debt levels approach the statutory debt limit, Congress can choose to (1) leave the debt limit in place; (2) increase the debt limit to allow for further federal borrowing; (3) maintain the current debt limit and require the implementation of "extraordinary measures" that will postpone (but not prevent) a binding debt limit from being reached; or (4) temporarily suspend or abolish the debt limit. The House Ways and Means Committee and the Senate Finance Committee have jurisdiction over debt limit legislation generally. Consideration of debt limit legislation is shaped largely by House and Senate rules as well as the budget resolution and the Budget Act. The Bipartisan Budget Act of 2015 ( P.L. 114-74 ) suspended the debt limit until March 15, 2017, and dictates that the debt limit be increased upon reinstatement as needed to exactly accommodate any additional federal borrowing undertaken up to that point. On March 16, 2017, the debt limit was reinstated at $19.809 trillion. On March 8, Secretary Mnuchin sent a letter to congressional leadership stating Treasury's intent to undertake extraordinary measures upon debt limit reinstatement on March 16, 2017, and requested a raise of the debt limit. The implementation of extraordinary measures does not typically require legislative action. In the past, the Treasury Secretary has notified Congress when preparing to adopt extraordinary measures. Extraordinary measures were previously adopted in March 2015, when Congress was also faced with a debt limit reinstatement to exactly accommodate federal borrowing needs. Coupled with short-run budget surpluses in March and April of that year (which result primarily from the receipt of annual income tax returns), those measures were estimated to be exhausted in early November 2015, or shortly after the most recent debt limit suspension. The latest CBO budget forecast projects a larger nominal budget deficit in FY2017 ($693 billion) than the federal deficit in FY2015 ($466 billion). Such an increase may reduce the length of time extraordinary measures would postpone a binding debt limit relative to what was experienced in 2015. In a July 28 letter to Congress, Secretary Mnuchin indicated that the ability to use extraordinary measures will be exhausted by September 29, 2017. A binding debt limit would prevent the Treasury from selling additional debt and could prevent timely payment on federal obligations, resulting in default. Possible consequences of a binding debt limit include (1) a reduced ability of Treasury to borrow funds on advantageous terms, resulting in further debt increases; (2) negative outcomes in global economies and financial markets; and (3) acquisition of penalties or fines from the failure to make timely payments. More broadly, a binding debt limit may also affect the perceived credit risk of federal government borrowing. Consequently, the federal "fiscal space," or the amount of borrowing that creditors are willing to finance, could decline. Because interest rates are presently lower than their historical averages, there is little concern that the federal government is in danger of running out of fiscal space in the short run. Congress may consider legislation designed to create new methods of budget enforcement or alter existing budget enforcement mechanisms. Such budgetary restrictions can take many forms. If they are to be enforced internally by the House and Senate they may be added to the House and Senate rules, included in a budget resolution, or included in a rule-making statute that becomes law. Congress has typically incorporated some type of internal budget enforcement in each recent Congress. Congress has also passed legislation that creates budgetary requirements that are enforced outside of the House and Senate. For example, in 2011 Congress passed the Budget Control Act creating discretionary spending limits, among other things. Since the enactment of the BCA, several pieces of legislation have been enacted making changes to the spending limits and the enforcement procedures. Most recently, the Bipartisan Budget Act of 2015 ( P.L. 114-74 , enacted November 2, 2015) increased discretionary spending limits for FY2016 and FY2017, among other things. Such budget enforcement legislation is primarily within the jurisdiction of the House and Senate Budget Committees and often the Rules Committees as well. Consideration of such legislation is shaped primarily by House and Senate Rules as well as the Budget Act. This year, the House and Senate Budget Committees have held hearings and released papers related to reforming the congressional budget process. The House Budget Committee held a number of hearings and released a series of "working papers focused on the committee's effort to overhaul the Congressional Budget Act of 1974 and reform the congressional budget process." The hearings and working papers can be accessed here: http://budget.house.gov/budgetprocessreform/ . Likewise, the Senate Budget Committee held a number of hearings, and released several "Budget Bulletins" related to budget process reform. The Budget Bulletins can be viewed here: http://www.budget.senate.gov/chairman/newsroom/budget-bulletins . Also of note, the Bipartisan Budget Act of 2015 made changes to the discretionary spending caps for FY2017. In addition, it established spending targets for overseas contingency operations/global war on terrorism for FY2017 and amended the limits of adjustments allowed under the discretionary spending limits for Program Integrity Initiatives.

The Constitution grants Congress the power of the purse, but does not dictate how Congress must fulfill this constitutional duty. Congress has, therefore, developed certain types of budgetary legislation, along with rules and practices that govern its content and consideration. This set of budgetary legislation, rules, and practices is often referred to as the congressional budget process. There is no prescribed congressional budget process that must be strictly followed each year, and Congress does not always consider budgetary measures in a linear or predictable pattern. Such dissimilarity can be the result of countless factors, such as a lack of consensus, competing budgetary priorities, the economy, natural disasters, military engagements, and other circumstances creating complications, obstacles, and interruptions within the policymaking process. Since the budget process will vary significantly each year, it is better understood not as a definite set of actions that must occur annually, but instead as an array of opportunities for affecting the federal budget. This report seeks to assist in (1) anticipating what budget-related actions might occur within the upcoming year, and (2) staying abreast of budget actions that occur this year. It provides a general description of the recurrent types of budgetary actions, and reflects recent events that have unfolded in each category during 2017. In addition, it includes information on certain events that may affect Congress's work on the budget, such as the President's budget request and the Congressional Budget Office's budget and economic outlook. The most-recent budget actions will be noted at the beginning of the report.

There is little doubt that technology is fast becoming intertwined with our jobs, our social life, and even our most private interactions with each other. This phenomenon creates friction among many compelling interests. The first is a clash between two contrasting values: the desire for privacy and the longing to be connected through the newest and most advanced technology. To a certain extent, as one advances, the other must necessarily recede. Meanwhile, courts are tasked with determining the balance between government's law enforcement needs and the people's privacy. The Fourth Amendment to the U.S. Constitution provides the measuring stick to determine this balance. The amendment ensures "[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated." Its primary function is to prohibit government intrusion upon the privacy and property rights of the people. When new technology is involved, achieving this balance is not an easy undertaking. United States v. Jones presented such a challenge to the Supreme Court. The question posed was whether the installation and month-long monitoring of a GPS device attached to Jones's car constituted a violation of the Fourth Amendment's prohibition against "unreasonable searches and seizures." This usage of the Global Positioning System (GPS) is not unusual in criminal investigations, but up to that point longer-term monitoring had not been directly tested by the Court. Thus, many observers awaited the Jones ruling for its potential impact not only on government monitoring programs, but also on general Fourth Amendment cases involving prolonged government surveillance. In prior government tracking cases, the Court applied the test from Katz v. United States , which addresses whether the individual had a reasonable expectation of privacy in the area to be searched. Because the police in Jones physically invaded his property to attach the GPS device--whereas in the previous cases they had not--the Court declined to apply Katz , but instead based its decision on a trespass theory. The trespass theory asks whether there was a physical intrusion onto a constitutionally protected area coupled with an attempt to obtain information. In Jones , there was, so the Court applied this more limited test and held that a search occurred. Though the majority bypassed the Katz approach, Justice Alito, concurring with Justices Breyer, Ginsburg, and Kagan, would have applied Kat z . Long-term surveillance, Justice Alito wrote, violated Jones's reasonable expectation of privacy under Katz . Justice Sotomayor agreed with both the majority and Alito's concurrence, but called for additional protection by questioning the viability of the third-party doctrine, which holds that any information voluntarily given to a third party loses all privacy protections. This report will analyze all three opinions in an attempt to determine how Jones might affect future use of GPS tracking and other government surveillance techniques. First, it will briefly recount the facts that led to Jones's prosecution, his appeal, and the Supreme Court's review. Next, it will analyze the majority's property-based test, evaluating it against similar Fourth Amendment case law. Additionally, this section will raise issues concerning the possible impact of this approach on similar search and seizure cases. Next, the report will examine both Justice Alito's and Justice Sotomayor's concurrences and their potential impact on cases involving technology. Because the Court did not express whether a warrant is required, the report will posit several theories on how this issue may be resolved in the future. In 2004, a Joint Task Force of the FBI and the District of Columbia Metropolitan Police Department suspected Antoine Jones was part of a drug distribution ring. Based on information obtained from wiretaps, a pen register, and video surveillance, the task force obtained a warrant to monitor Jones's Jeep with a GPS tracking device. According to the terms of the warrant, the officers had 10 days to install it and were required to do it in the District of Columbia. The officers installed the device on the 11 th day in Maryland while the Jeep was parked in a public parking lot. For the next four weeks the device tracked Jones's every movement, creating 2,000 pages of monitoring data. During this time, the device tracked Jones's movements to and from a known stash house. Jones was indicted for conspiracy to distribute and possession with intent to distribute cocaine. At trial, the prosecution relied heavily on Jones's movements derived from the GPS to connect him with a larger drug ring. He moved to dismiss this information as a warrantless search under the Fourth Amendment. The United States District Court for the District of Columbia excluded the data derived when his car was parked in his garage but allowed into evidence all of his public movements. Jones was ultimately convicted and sentenced to life imprisonment. The United States Court of Appeals for the District of Columbia Circuit reversed, holding that the GPS data were derived in violation of Jones's reasonable expectation of privacy under the Fourth Amendment. The Supreme Court then granted a writ of certiorari, agreeing to review Jones's case. Most observers assumed the Supreme Court would, like the D.C. Circuit Court of Appeals, apply the reasonable expectation of privacy test developed in Katz v. United States to determine if the tracking was a Fourth Amendment search. Under the Katz test, a search in the constitutional sense has occurred if the individual had an actual expectation of privacy in the area to be searched that society would deem reasonable. Since 1967, when Katz was handed down, the Court had developed a body of case law applying this privacy-based formulation of the Fourth Amendment. The Jones majority, led by Justice Scalia, took a different route. It held that the attachment of the GPS device, coupled with its use to monitor Jones's movements, was a constitutional search. The Fourth Amendment ensures that "[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated." Because Jones's vehicle is an effect --listed in the text of the Fourth Amendment--the police's physical intrusion by attaching the GPS for tracking purposes constituted a search . This theory hinges on common law trespass as it was known in 1791 (when the Fourth Amendment was adopted). It does not rely on Katz , nor any subjective conception of privacy. The majority contended that Jones's rights should not strictly depend on whether his reasonably expected zone of privacy was pierced. Rather, the majority asserted, property rights also define an individual's right to be free from government intrusion. Justice Alito, in concurrence, contended that the majority's reliance on "18 th -century tort law" which "might have provided grounds in 1791 for a suit based on trespass to chattels," "strains the language of the Fourth Amendment; it has little if any support in current Fourth Amendment case law; and it is highly artificial." Justice Alito would have instead applied the Katz formulation. This criticism prompts two central questions: (1) Does the majority's property-based approach enjoy textual, historical, or jurisprudential support?; and (2) What effect will this approach have on other areas of government investigations? The seeds for the property-based approach were planted in England in Entick v. Carrington , a case considered by many as an ancestor of the Fourth Amendment. There, the English court forbade government agents from searching through Entick's home, looking for papers intended to prove his seditious writing. The agents had a general warrant to search the home, but the warrant lacked a specific description of the area to be searched and the items to be seized. Lord Camden declared that no government agent nor any other person may enter the property of another without permission, even if no harm is done. This theory carried over to the colonies and prompted the framers to include a prohibition against unreasonable searches and seizures when drafting the Bill of Rights. Under this common law trespass approach, the key inquiry is not necessarily the content of the information obtained by the police, but rather their method of retrieving it. The Jones Court had no doubts that the attachment of the GPS device (which required a trespass of Jones's car) would have been a search when the Fourth Amendment was adopted--when Entick was fresh in the framers' minds. Although property certainly controlled Fourth Amendment thinking during the infancy of the Fourth Amendment, its control waned in later years. Olmstead v. United States provides an example. There, federal agents installed several wiretaps on the telephone wires coming from Olmstead's house. In upholding this electronic eavesdropping, the Court ruled that the Fourth Amendment applied only when there was an official search or seizure of a person, his tangible papers and effects, and an "actual physical invasion" of the individual's home. Because the installation of the wiretap did not require the agents to trespass onto Olmstead's property, the Court held that it was not a search or seizure under the Fourth Amendment. Forty years later, the Court began its shift away from this property-centric approach. In Warden v. Hayden , the Court noted the property-based approach had been discredited over the years, and that privacy should be the focus of the inquiry under the Fourth Amendment. Subsequently, the Court decided K atz v. United States , where it held an electronic surveillance of Katz's conversations while he was in a public telephone booth was impermissible, despite the fact that no property rights were involved. The "Fourth Amendment protects people, not places," the Court declared, and any search that invaded a person's "reasonable expectation of privacy" should be considered a search in the constitutional sense. This seemingly conflicting line of cases left many wondering whether property and privacy could coexist under the Fourth Amendment. The Court attempted to reconcile these two lines in Soldal v. County of Cook . There, while under the supervision of local police, a landlord had his tenant's trailer home towed from the rented lot. The tenant sued the police under Section 1983, a civil rights statute, for a violation of his Fourth Amendment right to be free from unreasonable seizure. The Seventh Circuit Court of Appeals denied the tenant's claim, holding that any Fourth Amendment violation must be supported by some invasion of privacy. The police did not invade the tenant's privacy, but only his possessory interest in the property, enough for the court to hold the Fourth Amendment inapplicable. Instead, the panel noted that the due process clause was the proper avenue of relief for a "pure deprivation of property." The Supreme Court disagreed, ruling that the police action was a seizure notwithstanding the lack of a privacy interest at stake. The Court took pains to note that privacy-based cases like Katz and Warden had not "snuffed out the previously recognized protection for property under the Fourth Amendment," but instead had "demonstrated that property is not the sole measure of Fourth Amendment violations." The Court noted that the amendment does not protect possessory interests in all kinds of property, such as an open field not closely connected with a person's home, but certainly covers things specifically listed in the constitutional text--persons, houses, papers, and effects. This idea that the Fourth Amendment protects both privacy and property independently is infused throughout the majority opinion in Jones . As Justice Scalia noted, Katz did not supplant the common law trespass approach, but merely supplemented it. But is a simple trespass alone enough to constitute a violation? The Court answered no: in addition to the physical intrusion, there must be "an attempt to find something or to obtain information." Also, not every police trespass will be a constitutional search. The government must intrude upon an area enumerated in the text of the amendment (person, houses, papers, and effects). This leaves several questions. If a car is an effect, what other personal property may be covered under this approach? Will computer data constitute an effect ? Will an e-mail constitute an electronic paper ? If a police officer walks onto one's porch, is that an invasion of his house ? There are no easy answers to these questions. Additionally, because the Court focused on the attachment of the device and the property interests involved, there remain questions of whether prolonged tracking with a device is permissible under the Fourth Amendment if there is no trespass. As the majority noted, "[s]ituations involving merely transmission of electronic signals without trespass would remain subject to Katz analysis." Justice Alito's and Sotomayor's concurrences in Jones may be scrutinized for how the Court might handle these scenarios under Katz . As more cell phones and cars are outfitted with GPS tracking technologies, police need not physically attach a device to track its movements. Because the Jones majority opinion is based on a physical trespass into a constitutionally protected area, it seemingly will not apply where GPS is preinstalled. Justices Alito, and his four-Justice concurrence, and Sotomayor, concurring separately, provide insight into how a future court may apply the Fourth Amendment to evolving technologies. These opinions rely, to a certain extent, on the mosaic theory first discussed in the D.C. Circuit opinion, which says that tracking a person's public movements over a long duration is constitutionally unacceptable even if tracking each of the movements individually may be permitted. Whether this approach will garner a majority on the Court is unclear. However, at a minimum, these concurrences have engendered discussion in the lower courts, with several courts citing the mosaic theory as a viable alternative. The question then becomes how much weight should the Alito and Sotomayor concurring opinions be accorded? There is no one rule to answer this question. Generally, there are two types of concurrences in Supreme Court opinions. The first is the true concurrence, in which the Justice concurs in the judgment, but disagrees with the reasoning. Justice Alito's opinion exemplifies that type of concurrence; he agreed that the surveillance constituted a Fourth Amendment search, but would have decided the case under the traditional reasonable expectation of privacy test instead of the trespass test. The second category is the simple concurrence, where the Justice agrees with the judgment and the reasoning of the majority, but also poses possible new theories that may not be directly relevant to that particular case, but can be used later to move the law in a particular direction. Justice Sotomayor's opinion seems to fit this latter category. Although these two concurrences chart somewhat different courses in their strategy and reasoning, when combined they appear to command five votes on the Court--a potential majority. Justice Alito spends most of his concurrence attempting to counter the majority's common law trespass theory. He argued that Scalia's reversion to the law as it stood in 1791 was unwise, and a return to the much-criticized property approach. The focus of this report, however, is Justice Alito's discussion of long-term GPS tracking under Katz 's reasonable expectation of privacy test. Before coming up on appeal, the D.C. Circuit below examined whether Jones's whereabouts over the month-long period of tracking were exposed to the public. A person's movements are not actually exposed, the court answered, because the likelihood that anyone could actually follow someone for a month is highly improbable. Further, the movements are not constructively exposed because in many instances the whole is greater than the sum of the parts. This last proposition is premised on the mosaic theory. The mosaic theory supposes that tracking the whole of one's movements over an extended period of time reveals significantly more about that person than each individual trip does in isolation. For instance, police cannot infer much about a person from one trip to the liquor store. However, a daily trip to the same liquor store would provide greater insight into the person's habits. The government has employed this theory in the national security context for protecting intelligence sources and methods of obtaining information. The thrust of the argument is that unless a person has a broad view of the situation in question, he will not understand the importance of a single piece of evidence. Thus, with GPS tracking, following someone for one trip may not say much about a person, but following his every movement for an extended period presumably reveals considerably more. United States v. Knotts created an obstacle to the panel's adoption of the mosaic theory. In Knotts , the Supreme Court held that a person has no reasonable expectation of privacy in his movements on public streets. The Court, however, did not foreclose the argument that, even if traveling on public roadways, pervasive or intrusive police activity may violate the Fourth Amendment. The Court suggested it would revisit the issue if police were to use "dragnet-type law enforcement practices." Although the purport of this phrase is somewhat obscure, the D.C. Circuit understood it to mean that 24-hour surveillance of a single individual was sufficient for it to apply. As such, the panel ruled that the previous tracking cases were not controlling, allowing it to apply the mosaic theory. Based on this application, the court granted Jones's motion to dismiss all location evidence obtained from the GPS device. As noted earlier, Justice Scalia and the majority did not apply the mosaic theory. Instead they grounded their decision in a common law trespass theory. Justice Alito, on the other hand, wanted to confront directly this question of how technology affected a society's expectations of privacy. He first posited that the ubiquity of cell phones, video monitoring, and other technologies in modern life shapes the average person's expectation of privacy--presumably reducing that expectation. Based on his understanding of Katz , Alito would have asked whether the use of GPS tracking involved an intrusion a reasonable person would not have expected. Under his approach, "relatively short-term monitoring of a person's movements on public streets accords with expectations of privacy that our society has recognized as reasonable." However, the use of "longer term" GPS monitoring will in most instances violate the Fourth Amendment. Justice Alito declined to create a rule for determining at what point police tracking crosses this constitutional line. He concluded that four weeks of tracking was a search. Because of the limited nature of Justice Alito's discussion, it is difficult to discern precisely which theory he employed. It is arguable that he and the three other Justices implicitly support the mosaic theory. To say that short-term monitoring is permissible, but longer-term monitoring is not, indicates there is something about the aggregation of a person's movements that prompted these Justices to deem it a Fourth Amendment search. It could also be argued that Justice Alito's concurrence did not accept the mosaic theory, but instead applied the probabilistic model of Fourth Amendment theory. This theory supposes that when government conducts an investigation in a way that would surprise an individual, or "interferes with customs and social expectations," it violates a reasonable expectation of privacy. Justice Alito categorizes the Katz test as looking at the "privacy expectations of the hypothetical reasonable person"--a hypothetical person who has "a well-developed and stable set of privacy expectations." Justice Alito notes that in precomputer days, the police had the time and resources to track only persons of exceptional interest to the police. He seems to accord much importance in the belief that the hypothetical reasonable person would be surprised to learn that the police would be tracking their every movement for a month-long period--an act beyond society's expectations. As far as Fourth Amendment rights are concerned, Justice Sotomayor provided the broadest interpretation in Jones by joining the majority's trespass approach, openly supporting Justice Alito's privacy-based approach, and putting into question the continuing viability of the third-party doctrine--a theory many believe creates the largest gap in privacy protection, especially in the realm of technology. Whereas it is unclear whether Justices Alito, Breyer, Kagan, and Ginsburg support the mosaic theory, Justice Sotomayor maintained that this theory should directly guide the Court's determination of a person's privacy expectations in their public movements. She noted that "GPS monitoring generates a precise, comprehensive record of a person's public movements that reflects a wealth of detail about her familial, political, professional, religious, and sexual associations." As part and parcel of the mosaic theory, she contended that an individual's awareness that the government may be constantly watching can chill one's freedom of speech and association under the First Amendment. Although the police might obtain the same evidence through traditional surveillance, there is something about the technology that troubled Justice Sotomayor. She seemed concerned that there will no longer be a logistical barrier between the government and the people. Police now have access to a cheap technology that can produce a significant amount of data. The Court must consider this a search--presumably requiring a warrant--to provide adequate oversight over the executive branch. This idea seems to coincide with Justice Jackson's well-worn saying that courts prefer that searches be overseen by a "neutral and detached magistrate instead of being judged by the officer engaged in the often competitive enterprise of ferreting out crime." Additionally, Justice Sotomayor called for a reexamination of the third-party doctrine. This doctrine supposes that any information a person voluntarily conveys to a third party is no longer entitled to Fourth Amendment protection, as the person cannot have a reasonable expectation that the third party will guard the privacy in that information. This rule has been used to justify access to bank records, the telephone numbers a person dials, electric billing records, and cell phone billing records. Some argue that when individuals give documents to a third party, usually in a commercial transaction, they consent to the release of such information to the government, or at a minimum assume the risk that the person trusted with the information would hand it over. Justice Sotomayor suggests that perhaps this theory should not be permitted to reach its logical extent in the digital age, in which people convey a wealth of personal information to third parties. She contends that the Fourth Amendment rules should not require a person to keep secret any information the person does not want the government to obtain. In the end, she leaves it to another day to reevaluate the third-party doctrine in an age where most private information is handed over in the course of commercial transactions. In the meantime, Justice Sotomayor believed the physical intrusion theory was enough to resolve the case. All nine Justices agreed that tracking a person for four months is a constitutional search. Where there is little agreement among Court observers, though, is what level of suspicion is required to conduct GPS monitoring or whether a warrant is required. Because the government failed to argue that a warrant was not required or that something less than probable cause would be enough to conduct this surveillance, the Court considered the arguments forfeited. Thus, to determine if a warrant or something less will be required in future cases, general Fourth Amendment principles must suffice until the courts provide further guidance. The "ultimate touchstone" of the Fourth Amendment is reasonableness, as required by the history and text of the prohibition against "unreasonable searches and seizures." That is to say, once a court determines a search has occurred, it must then inquiry whether it was reasonable. In most instances, the Supreme Court has required the government to obtain a warrant based upon probable cause for a search to be considered reasonable. A review of the cases, however, shows that this rule is not ironclad, and that the exceptions are commonplace. Some commentators argue that the automobile exception could apply to the use of a GPS tracking device. The automobile exception--one of the warrantless search exceptions--evolved from the exigency requirement. It was first formulated in the 1925 case of Carroll v. United States , in which the Court permitted the police, who had probable cause to suspect that the defendant's car was carrying bootlegged liquor, to conduct a warrantless vehicle search. The Court noted that it was not practicable to obtain a warrant for evidence secreted on a "ship, motor boat, wagon or automobile" because the vehicle can be "quickly moved out of the locality or jurisdiction." In later cases, the Court developed a second rationale for the automobile exception, reasoning that drivers have a diminished expectation of privacy when in their vehicles. This is based on the notion that cars travel on public thoroughfares where the driver and occupants are in plain view of the public. Further, cars and drivers alike are subject to extensive government regulation, and vehicles must undergo periodic inspections. As noted in Carroll , because a vehicle can be moved quickly from the jurisdiction, requiring a warrant to attach a GPS device may not be feasible. Also, tracking someone's public movements may not be as invasive as searching through a person's belongings as is currently permitted under the traditional automobile exception. On the reverse side, police will generally know in advance when they intend to use a GPS device, thereby negating the presumed exigency that is linked with cars. A court could hold that warrants are generally required for GPS devices, unless a true exigency existed beyond that presumed in general automobile cases, for example, in a case of kidnapping or a fleeing suspect. Additionally, some commentators believe that the general reasonableness standard may apply, vitiating a need for a warrant. These theories suppose that the intrusion on the individual is minimal and the government interest significant. In line with this reasoning, one observer posited that a Terry -type standard would be sufficient--that is, that the police must have reasonable suspicion to conduct a search, but need neither probable cause nor a warrant. A court would review the reasonableness after the fact, unlike warrants, where the review comes before the search. Nine Justices are seemingly in agreement that, based on the facts of Jones , the attachment of a GPS device to the bottom of Jones's car and tracking him for a month-long period was a constitutional search. Presented with a different set of facts, the Court's unanimity may disintegrate. For instance, if the police need not attach the device, but it is preinstalled, for example, in a cell phone or a navigation system in a car, the outcome may differ. Further, even though this surveillance was considered a search, the Court gave no guidance on whether a warrant is required or what quantum of suspicion is enough to use GPS monitoring. That said, it is within the power of Congress or state legislatures to propose their own requirements. The federal Constitution sets the minimum constitutional standard. Legislatures (state or federal) may create more protection of privacy and property. Congress has done this on several occasions, most notably in the field of communications with the wiretap statutes. When technology is in flux, one may argue that the institutional capabilities of a legislature may be the better venue to develop these rules. Justice Alito suggested this approach in his Jones concurrence: "In circumstances involving dramatic technological change, the best solution to privacy concerns may be legislative. A legislative body is well situated to gauge changing public attitudes, to draw detailed lines, and to balance privacy and public safety in a comprehensive way." There has been legislative activity in recent Congresses to update privacy laws to cover new technologies such as GPS. Senator Leahy has introduced the Electronic Communications Privacy Act Amendments Act of 2011 ( S. 1011 ), which would prohibit the government from accessing or using a device to acquire geolocation information, unless it obtains a warrant based upon probable cause or a court order under Title I or Title IV of the Foreign Intelligence Surveillance Act (FISA) of 1978. Similarly, Senator Ron Wyden and Representative Jason Chaffetz have introduced identical legislation, S. 1212 and H.R. 2168 , entitled the Geolocational Privacy and Surveillance Act, or GPS bill, which would make it unlawful for law enforcement to intercept or use a person's location unless they obtained a warrant based upon probable cause or one of the limited exceptions applied. With each advance in technology, the courts and Congress are asked to balance a host of competing interests including privacy, property, technology, and the needs of law enforcement. It will take future cases and statutes to better delineate a proper balance.

In United States v. Jones, 132 S. Ct. 945 (2012), all nine Supreme Court Justices agreed that Jones was searched when the police attached a Global Positioning System (GPS) device to the undercarriage of his car and tracked his movements for four weeks. The Court, however, splintered on what constituted the search: the attachment of the device or the long-term monitoring. The majority held that the attachment of the GPS device and an attempt to obtain information was the violation; Justice Alito, concurring, argued that the monitoring was a violation of Jones's reasonable expectation of privacy; and Justice Sotomayor, also concurring, agreed with them both, but would provide further Fourth Amendment protections. This report will examine these three decisions in an effort to find their place in the body of existing Fourth Amendment law pertaining to privacy, property, and technology. In Jones, the police attached a GPS tracking device to the bottom of Jones's car and monitored his movements for 28 days. At trial, the prosecution relied on Jones's movements to a stash house to tie him to a drug conspiracy. Jones was convicted and given a life sentence. The United States Court of Appeals for the District of Columbia Circuit reversed, holding that the evidence was unlawfully obtained under the Fourth Amendment. The Supreme Court agreed. The majority, speaking through Justice Scalia, explained that a physical intrusion into a constitutionally protected area, coupled with an attempt to obtain information, can constitute a violation of the Fourth Amendment. Although the Court's landmark decision in Katz v. United States, 389 U.S. 347 (1967), supposedly altered the focus of the Fourth Amendment from property to privacy, the majority argued that it left untouched traditional spheres of Fourth Amendment protection--a person and his house, papers, and effects. Because the police had invaded Jones's property--his car, which is an effect--that was all the Court needed to hold that a constitutional search had occurred. The majority's test, however, provides little guidance in instances where the government need not physically install a device to conduct surveillance, for instance, by using cell phones or preinstalled GPS devices in vehicles. To understand how the Court may rule on these technologies, one must look to the two concurrences, which provide a more global interpretation of the Fourth Amendment. Justice Alito, writing for a four-member concurrence, would have applied the Katz privacy formulation, asserting that longer-term monitoring constitutes an invasion of privacy, whereas short-term monitoring does not. He left it to future courts to distinguish between the two. Justice Sotomayor's concurrence appears to provide the most protection, finding that both the trespass approach and the privacy-based approach should be utilized. She also questioned the rule that any information provided to a third party, which occurs in many commercial transactions like banking or computing, should lose all privacy protections. Although all three opinions concluded that the government's action in Jones was a search, none expressly required that police get a warrant in future GPS tracking cases. (The government forfeited the argument.) Further, there is no clear indication of the level of suspicion--probable cause, reasonable suspicion, or something less--that is required to attach a GPS unit and monitor the target's movements. Additionally, there have been several bills filed in the 112th Congress, including Senator Patrick J. Leahy's Electronic Communications Privacy Act Amendment Act of 2011 (S. 1011) and Senator Ron Wyden's and Representative Jason Chaffetz's identical legislation, S. 1212 and H.R. 2168, the Geolocational Privacy and Surveillance Act (GPS bill), that would require a warrant based upon probable cause to access geolocation information.

This section describes data and statistics from government, industry, and information technology (IT) security firms regarding the current state of cybersecurity threats in the United States and internationally. These include incident estimates, costs, and annual reports on data security breaches, identity thefts, cybercrimes, malwares, and network securities. Table 2 contains descriptions of and links to glossaries of useful cybersecurity terms, including those related to cloud computing and cyber warfare.

This report describes data and statistics from government, industry, and information technology (IT) security firms regarding the current state of cybersecurity threats in the United States and internationally. These include incident estimates, costs, and annual reports on data security breaches, identity thefts, cybercrimes, malware, and network securities. Much is written on this topic, and this CRS report directs the reader to authoritative sources that address many of the most prominent issues. The annotated descriptions of these sources are listed in reverse chronological order, with an emphasis on material published in the last several years. Included are resources and studies from government agencies (federal, state, local, and international), think tanks, academic institutions, news organizations, and other sources. The following reports comprise a series of authoritative reports and resources on these additional cybersecurity topics: CRS Report R44405, Cybersecurity: Overview Reports and Links to Government, News, and Related Resources, by Rita Tehan CRS Report R44406, Cybersecurity: Education, Training, and R&D Authoritative Reports and Resources, by Rita Tehan CRS Report R44408, Cybersecurity: Cybercrime and National Security Authoritative Reports and Resources, by Rita Tehan CRS Report R44410, Cybersecurity: Critical Infrastructure Authoritative Reports and Resources, by Rita Tehan CRS Report R44417, Cybersecurity: State, Local, and International Authoritative Reports and Resources, by Rita Tehan CRS Report R44427, Cybersecurity: Federal Government Authoritative Reports and Resources, by Rita Tehan CRS Report R43317, Cybersecurity: Legislation, Hearings, and Executive Branch Documents, by Rita Tehan

Trips by the President, Vice President, and First Lady are almost always classified as official travel or political travel, or a combination of the two. Official, or nonpolitical, travel is normally defined as anything having to do with the carrying out of presidential duties and responsibilities. Official travel may involve, for example, presenting information; giving direction; and explaining, and securing public support for, Administration policies. Political travel normally involves the President and Vice President in their positions as leaders of their political party. Attending party functions, participating in fundraising, and campaigning for candidates are examples of political activities. The terms are rather general, and the White House determines whether a trip is for official or political purposes, or for a combination of the two. The travel policies of specific Administrations concerning the reimbursement of expenses for unofficial travel generally are not publicly available. However, the Reagan Administration established written guidelines in 1982 to determine when the President, Vice President, and any assistants accompanying them on military aircraft travel at government expense and when they, or the political organizations on whose behalf they travel, are to reimburse the government with the equivalent of the airfare that they would have had to pay had they traveled on commercial airlines. The guidelines evolved in response to general legal principles that federal funds are to be used only for the purposes for which they are appropriated, opinions from the Office of Legal Counsel in the Department of Justice, rules of the Federal Election Commission (FEC), and occasional audits by the General Accounting Office (GAO). The guidelines, which also cover the First Lady and the Vice President's spouse, apply only to trips in the United States and its territories, since all foreign travel is considered official. It appears likely that subsequent Administrations have used the Reagan Administration guidelines as a foundation for their own travel policies. When White House personnel are on official travel, certain personal expenses, which include per diem (food and lodging), car rentals, and other incidentals, are paid by the government. These expenses are paid by the White House for domestic travel, and by the State Department for foreign travel. Members of the President's staff and his immediate family, including the First Lady, are on official travel whenever their trips are designed to assist the President in discharging his duties and responsibilities. The same is true for members of the Vice President's staff and his immediate family. According to the Office of the Vice President, the Vice President's wife uses a military aircraft only when she accompanies him, or when she is designated as the Vice President's representative to attend a special function. When travel is for political purposes, the President, Vice President, and First Lady, and any assistants accompanying them, are required to reimburse the government the comparable airfare they would have paid had they traveled by commercial airline. On such trips, they pay for their own food, lodging, and other incidental expenses. Certain staff accompanying them, however, such as Secret Service agents, are always considered to be on official travel, and all their travel costs are paid by the government. When travel involves both official and political functions, the White House uses a formula to determine how much airfare is to be paid by the traveler, and how any per diem and other travel-related costs are to be paid by the government. For example, if the day is divided equally between an official and an unofficial event, then the President, Vice President, First Lady, and accompanying staff, or a political organization, must reimburse the government for 50% of the amount that would have been owed to the government if the entire trip had been political. A more detailed explanation is as follows: In the instance of a mixed trip, the amount of the reimbursement for use of government aircraft will be prorated as indicated by the nature of the activity. Prorating the cost of air travel on mixed official/political trips may be accomplished through a formula based on the amount of time actually spent by the President and Vice President in meetings, receptions, rallies and similar activity. Time spent in actual travel, private study, or rest and recreation will not be included in the computation. The formula is as follows: Time spent in official meetings, receptions, etc. + Time spent in political meetings, receptions, rallies = Total activity time. Time spent in official activity / Total activity time = Percentage of trip that is official. Time spent in political activity / Total activity time = Percentage of trip that is political. The percentage figure that represents the political portion of the trip is then multiplied by the amount that would be reimbursed to the government if all of the travel was political. The product of that calculation represents the amount to be reimbursed to the government. Other factors may result in adjustments to any amount of reimbursement. For example, if a traveling party would have returned to the point of departure on a given day, but delayed its return one day (or more) because of a political activity, then the cost of accommodations is to be assessed solely to the political sponsor. Sometimes it is difficult to determine whether a trip, or part of a trip, should be characterized as official or unofficial. This is especially the case when a trip involves certain activities having partisan consequences, because an inherent part of the official duties of the President and Vice President involves their efforts to present, explain, and secure public support for their policies and goals. When they travel and appear in public to defend their policy positions, the difference between their official duties and their activities as leaders of their political party can be difficult to assess. As a result, the White House decides the nature of travel on a case-by-case basis, attempting to determine whether each trip, or part of a trip, is or is not official by considering the nature of the event involved, and the role of the individual involved. It is unclear how the White House designates travel that is not directly related to a governmental or political function, because of traditional reluctance to address this matter. It appears that, in most cases, such travel is treated as official, under the assumption that the President and Vice President are always on duty. Vacation trips, for example, fall under the official travel category. Security considerations and the need to be able to communicate instantly with military and other officials at any time are the reasons the President flies on a military aircraft when he travels. Moreover, having a military plane readily available enables the President to fly whenever and wherever he may wish to go. Security considerations are also the primary reason for use of military aircraft by the Vice President and First Lady. Airfare and related travel expenses associated with the trips taken by the President, Vice President, and First Lady are only a fraction of the total cost of such trips. Most of the costs involve operational costs of the aircraft, and include fuel, maintenance, engineering support, and per diem expenses for the crew. The military aircraft used by the White House are operated by the 89 th Airlift Wing (AW) located at Andrews Air Force Base in Maryland, just outside Washington, DC. Among the aircraft in the 89 AW are two Boeing 747s (also known as VC-25As) that have been specially configured for the President's needs, and that are exclusively for his use. Electronic and communications equipment in the 747s enables the President to keep in touch at all times with civilian and military officials. The President flies on one of the 747s on most of his trips. Occasionally, he will use a smaller plane when the area he is visiting cannot accommodate a 747. "Air Force One" is the designation given to whatever plane the President is using at the time. Information provided by the U.S. Air Force in 2012 shows that the cost per hour for the President's 747 (which is designated "VC-25" by the Air Force) is $179,750. The Vice President and First Lady use aircraft different from the presidential 747. The Vice President primarily flies on a C-32; the First Lady primarily flies on a C-40 (the C-32 is an alternate). Costs associated with these trips, however, generally involve much more than the operational costs of the specific passenger aircraft. When the President travels abroad, several passenger and cargo aircraft accompany Air Force One. When the Vice President or First Lady make such a trip, a single cargo aircraft accompanies either of them. On domestic trips, a cargo aircraft and a backup aircraft normally accompany only Air Force One. If the President is accompanied by more than 75 assistants and subordinates, including Secret Service staff, an additional passenger aircraft also makes the trip. Sometimes, an additional aircraft accompanies Air Force One to be available to take the President to a second city whose airport cannot accommodate a 747. Finally, in preparation for a trip, whether domestic or foreign, an advance party may make several trips to the destination or destinations that will be visited in order to assure that everything goes as planned. Besides the maintenance and operational costs of the aircraft, there are the per diem and related costs mentioned earlier, when the trip is official, and the costs for those designated "official travelers" when the trip is not official. On a presidential trip, the number of these "official travelers" may be quite high, since it includes Secret Service agents, communications personnel, and various other officials. Only recently has information become available regarding the overall cost associated with travel by the President, Vice President, and First Lady. In 1992, the House Committee on Post Office and Civil Service estimated that two presidential trips, one to Europe in 1989 and the other to Hawaii in 1990, cost the Air Force $1 million to $1.5 million, and that the average vice presidential trip cost the Air Force $250,000 to $500,000. These estimates involved operational costs; they did not include per diem and other travel-related expenses. In 1999, GAO estimated the incremental costs, including per diem and related expenses, of presidential trips in 1998 to Africa, Chile, and China to be at least $42.8 million, $10.5 million, and $18.8 million respectively. In 2000, GAO estimated that the Department of Defense "spent at least $292 million to provide fixed-wing airlift and air refueling support for 159 White House foreign trips" (27 by the President, 20 by the First Lady, 8 by the Vice President, and 104 directed by the President) from January 1, 1997, through March 31, 2000. These estimates did not include per diem and other travel-related expenses. Comparable information is not available regarding the cost of White House foreign (or domestic) trips for earlier or subsequent Administrations.

For security and other reasons, the President, Vice President, and First Lady use military aircraft when they travel. The White House generally categorizes the trips as fulfilling either official or political functions. Often, a trip involves both official and political, or unofficial, activities. When a trip is for an official function, the government pays all costs, including per diem (food and lodging), car rentals, and other incidental expenses. When a trip is for political or unofficial purposes, those involved must pay for their own food and lodging and other related expenses, and they must also reimburse the government with the equivalent of the airfare that they would have paid had they used a commercial airline. When a trip involves both official and political activities, a formula determines the amount to be reimbursed for that part of the trip involving political activities. Whether a trip is for official or political purposes, the Air Force pays all operational and other costs incurred by the use of the aircraft. While the travel policies of specific Administrations concerning the reimbursement of expenses for unofficial travel generally are not publicly available, it appears that policy guidelines developed by the Reagan White House have served as a basis for the travel policies of subsequent Administrations. This report will be updated as new information becomes available.

New federal tax credits were authorized in the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 , as amended), to help certain individuals pay for health insurance coverage, beginning in 2014. The tax credits apply toward premiums for private health plans offered through "exchanges" (also referred to as health insurance marketplaces). ACA also establishes subsidies to reduce cost-sharing expenses. This report describes the eligibility criteria applicable to the premium tax credits and cost-sharing subsidies, and the calculation method for the credit and subsidy amounts. It also highlights selected issues addressed in the final regulation on premium credits. ACA requires health insurance exchanges to be established in every state by January 1, 2014, either by the state itself or by the Secretary of Health and Human Services (HHS). These exchanges are not insurance companies; rather, they are "marketplaces" that offer private health plans to qualified individuals and small businesses. Generally, exchange plans provide a comprehensive set of health services and meet all ACA market reforms, as applicable. In addition, most exchange plans comply with a requirement that measures how much a given plan will pay for a group of individuals (who vary in terms of medical use and expenses); that measure is referred to as actuarial value (AV). Most exchanges plans meet a specific AV, with each AV designated by a precious metal: bronze (actuarial value of 60%), silver (70%), gold (80%), and platinum (90%). For AVs, the higher the percentage, the lower the cost-sharing, on average . Given that ACA specifically requires exchanges to offer insurance options to individuals and small businesses, exchanges are structured to assist these two different types of "customers." Consequently, there is an exchange to serve individuals and families, and another to serve small businesses ("SHOP exchanges"), within each state. However, ACA gives states the option to merge both exchanges and operate it under one structure. Certain enrollees in the individual exchanges are eligible for premium assistance in the form of federal tax credits. Such credits are not provided through the SHOP exchanges. The premium credit is an advanceable, refundable tax credit, meaning taxfilers need not wait until the end of the tax year in order to benefit from the credit, and may claim the full credit amount even if they have little or no federal income tax liability. Receiving the credits as advanced payments means that monthly insurance premiums will be automatically reduced by the credit amount. Therefore, the direct cost of insurance to an individual/family generally will be lower than the "advertised" cost for a given exchange plan. The Treasury Department promulgated final regulation on the premium credits on May 23, 2012. The final regulation confirmed certain eligibility and other requirements, as specified in statute; such requirements are discussed in applicable sections of this report. In addition, the Internal Revenue Service (IRS) has issued guidance and other documentation (such as Q&As) relevant to premium credits. ACA specifies that premium credits will be available to "applicable taxpayers" in a "coverage month" beginning in 2014. An applicable taxpayer is an individual who is part of a tax-filing unit; is enrolled in a plan through an individual exchange; and has household income at or above 100% of the federal poverty level (FPL), but not more than 400% FPL. A coverage month refers to a month in which the applicable taxpayer paid for coverage offered through an exchange, not including any month in which the taxpayer was eligible for "minimum essential coverage" with exceptions. These eligibility criteria are discussed in greater detail below. Given that the premium assistance is provided in the form of tax credits, they are administered through the tax system (although advance payments go directly to insurers). The credits can only be obtained by qualifying individuals who file federal tax returns. Married couples are required to file joint tax returns to claim the credit. The final regulation includes special rules relating to the calculation and allocation of credit amounts due to changes in filing status during a given tax year (e.g., taxpayers who marry or divorce). The final regulation acknowledges that certain circumstances may make filing jointly a challenge (e.g., domestic abuse, abandonment, etc.); it states that the IRS will propose additional rules to address these kinds of circumstances. Premium credits are available only to individuals and families enrolled in a plan offered through an individual exchange; premium credits are not available through the small business ("SHOP") exchanges. Individuals may enroll in a plan through their state's exchange if they are (1) residing in a state in which an exchange was established; (2) not incarcerated, except individuals in custody pending the disposition of charges; and (3) "lawfully present" residents. Only lawful residents are allowed to obtain exchange coverage. Undocumented individuals are prohibited from purchasing coverage through an exchange, even if they could pay the entire premium without a subsidy. Because ACA prohibits undocumented individuals from obtaining exchange coverage, they are not eligible for premium credits. The final regulation clarifies the potential credit eligibility for family members of individuals who themselves are not eligible to enroll in an exchange due to incarceration or legal status. For example, while the final regulation restates ACA's prohibition on incarcerated individuals enrolling in exchange plans, the rule confirms that family members (of incarcerated individuals) who enroll in exchange plans may receive premium credits, as long as the family members meet all eligibility criteria. To be eligible for premium credits, individuals must have "household income" within statutorily defined guidelines based on the federal poverty level (FPL). For purposes of premium credit eligibility, household income is measured according to the definition for "modified adjusted gross income" (MAGI). An individual whose MAGI is at or above 100% FPL up to and including 400% FPL may be eligible to receive premium credits. Table 1 displays the income levels at 400% FPL, the amount beyond which individuals and families would not be eligible for premium credits in 2014 (using 2013 HHS poverty guidelines). To receive a premium credit, an individual may not be eligible for "minimum essential coverage," with exceptions (described below). ACA broadly defines minimum essential coverage to include Medicare Part A; Medicare Advantage; Medicaid (with exceptions); the State Children's Health Insurance Program (CHIP); Tricare; Tricare for Life, a health care program administered by the Department of Veterans Affairs (VA); the Peace Corps program; any government plan (local, state, federal) including the Federal Employees Health Benefits Program (FEHBP); any plan offered in the individual health insurance market; any employer-sponsored plan (including group plans regulated by a foreign government); any grandfathered health plan; any qualified health plan offered inside or outside of exchanges; and any other coverage (such as a state high risk pool) recognized by the HHS Secretary. ACA provides certain exceptions regarding eligibility for minimum essential coverage and receipt of premium credits: An individual who is only eligible to obtain coverage through the individual (nongroup) health insurance market may be eligible to receive a premium credit. An individual eligible for an employer-sponsored plan may still be eligible for premium credits if the employer's coverage is either (1) not affordable; that is, the employee's premium contribution toward the employer's self-only plan exceeds 9.5% of household income; or (2) does not provide minimum value; that is, the plan's payments cover less than 60% of total allowed costs on average. An individual who is eligible for limited benefits under Medicaid may still be eligible for premium credits (see " Medicaid " section below for additional information). Certain small employers (and in later years, large employers at state option) may offer and contribute toward coverage through SHOP exchanges. If an individual is enrolled in an exchange through an employer who contributed toward that coverage, the individual will not be eligible for premium credits. ACA's Medicaid expansion provisions have the potential for affecting eligibility for premium credits if certain low to middle income individuals and families seek health insurance through the exchanges. Under ACA, states have the option to expand Medicaid eligibility to include all non-elderly, non-pregnant individuals (i.e., childless adults and certain parents, except for those ineligible based on certain noncitizenship status) with income up to 133% FPL. (ACA does not change noncitizens' eligibility for Medicaid. ) States that have chosen to implement the ACA Medicaid expansion have received substantial federal subsidies. If a person who applied for premium credits in an exchange is determined to be eligible for Medicaid, the exchange must have them enrolled in Medicaid. Therefore, any state that has expanded Medicaid eligibility to include persons with income at or above 100% FPL (or any state that currently includes such individuals) has made such individuals ineligible for premium credits. Premium credit eligibility in such a state begins at the income level where Medicaid eligibility ends. In general, a person may be eligible for only one subsidized health coverage program at a time. However, exceptions are made for individuals who are eligible only for limited benefits under Medicaid; limited benefits include the pregnancy-related benefits package, treatment of emergency medical conditions only, and other limited benefits. Individuals who have access to only these specific limited benefits under Medicaid may qualify for premium credits if such individuals enroll in exchanges. The amount of the premium tax credit varies from person to person; the credit is based on the household income of the taxfiler (and dependents), the premium for the exchange plan in which the taxfiler (and dependents) is (are) enrolled, and other factors. In certain instances, the credit amount may cover the entire premium and the taxfiler pays nothing toward the premium. In other instances, the taxfiler may pay part (or all) of the premium. The calculation of the credit amount is based on a comparison of two amounts that result from two different scenarios. The first scenario (and amount) is straightforward: the premium for the exchange plan in which the person/family enrolls. The second scenario is more complicated, involving a formula that considers the premium for a standard plan in the local area in which the person/family resides, and an amount that the person/family may be required to contribute toward the premium. Based on a comparison of the amounts resulting from each scenario, the premium credit will be the lesser amount. The following text box, "Calculation of the Premium Credit Amount," discusses these two scenarios in more detail. Under Scenario B, the amount that a taxfiler who receives a premium credit is required to contribute toward the premium (for the reference plan) is capped as a percent of household income; that is, the maximum premium contribution is the product of the taxfiler's household income and the "applicable percentage," as specified in ACA. In general, the applicable percentage is less for those with lower incomes compared with those with higher incomes; where income is measured relative to the federal poverty level. Under Scenario B, the amount that taxfilers with income between 100% FPL and 133% FPL may be required to contribute toward the reference plan's premium is capped at 2% of household income. For taxfilers with income 300%-400% FPL, their premium contribution is capped at 9.5% of income. ACA further specifies the applicable percentages that taxfilers, whose incomes are between those two income bands, may be required to pay toward the cost of exchange coverage under Scenario B (see Figure 1 ). The line graph shows the "applicable percentage" used to calculate the taxfiler's required premium contribution at each income level, as measured relative to the federal poverty level. The ACA statute specifies the applicable percentage at certain incomes (income at 100% FPL, 133% FPL, 150% FPL, etc.). At each of those incomes, the line changes slope. Specifically, at and above 133% FPL up to 300% FPL, the applicable percentage increases incrementally as income increases. For example, a person with income at 150% FPL may be required to pay a maximum of 4% of household income toward exchange coverage. A 1% increase in income (i.e., person has income at 151% FPL) results in a maximum premium contribution equal to 4.05% of income. In contrast to this gradual change in the maximum premium contribution for incomes between 133% and 300% FPL, there is a "cliff" for a person/family with income below 133% FPL. Instead of the incremental change discussed above, the contribution amount jumps when you compare income just below 133% FPL with income at 133% FPL. This cliff reflects statutory and regulatory requirements and is discussed in greater detail below. Calculation of the premium credit amount (under Scenario B) is the arithmetic difference after subtracting the taxfiler's required premium contribution from the premium for the second-lowest cost silver plan ("reference plan") available to the taxfiler. It is theoretically possible that a person's required premium contribution could be equal to or exceed the reference plan's premium, leaving that taxfiler with a premium credit of zero. Moreover, while the credit amount under this scenario is based on the reference plan, the individual/family may enroll in any metal-tier plan and still be eligible for credits. However, when a premium credit recipient enrolls in a plan that is more expensive than the reference plan, that person must pay the additional amount. Premium tax credits to be used toward paying for health insurance in the exchanges became available in 2014. Table 2 displays selected annual income levels used in the calculation of premium credit amounts and required premium contributions, as discussed above. Table 3 displays the maximum monthly premium contributions for individuals and families who receive premium tax credits, provided that they enroll in the applicable reference plan. Both Figure 1 and Table 3 illustrate the cliff effect that occurs at 133% FPL (as mentioned above). For individuals with income below 133% FPL, the credits ensure that such individuals pay no more than 2% of their income for the second-lowest cost silver plan. For incomes at or above 133% FPL, individuals and families may pay up to 3% of their income toward premiums for their reference plan. For example, an individual with income at 132.99% FPL (annual income of $15,281) may be required to pay $26 in monthly premiums for the second-lowest cost plan in 2014 (see Table 3 ). With one additional dollar of income (annual income of $15,282, equivalent to 133% FPL), this person may be required to pay $39 in monthly premiums. Therefore, the additional $1 in annual income may lead to an additional $156 in premium contributions for this hypothetical person in 2014. Nevertheless, some might observe that prior to implementation of the ACA premium credits in 2014, there were no federal subsidies for health coverage for individuals with income at this level and above, except for some narrowly defined groups. Thus, more individuals overall may be eligible for subsidized private coverage under the ACA, than before enactment of the law. The following hypothetical examples use actual exchange information about premiums, enrollee contributions, and premium credit amounts; the information was compiled using the plan finder tool at healthcare.gov. To facilitate comparisons across hypothetical individuals and families, the premium and tax credit amounts apply to the same geographic location: Autauga County in Alabama (the first state and first county in the drop down menus in the plan finder tool). The examples in Table 4 assume that the hypothetical individual (or family) is enrolled in the reference plan (second-lowest cost silver plan). As the 2014 premium data indicate, individuals at the same income level will face different (pre-credit) premiums based on age. This reflects the limited age rating allowed for health insurance policies, including those offered in the individual exchanges. The practical effect of ACA's age rating requirements means that, for any given metal-tier plan in a specific geographic area, premiums vary for adults between 21 and 64+ years of age by a 3:1 ratio. (For examples that illustrate the 3:1 ratio for adults, see hypothetical persons A, B, C, and D in Table 4 , and the following analysis included under "Discussion of Self-Only Coverage Examples.") Moreover, the premium credit amounts are greater for those with lower incomes, compared with higher-income individuals of the same age , reflecting the income-based structure of the premium credits. As indicated in Table 4 , the monthly (pre-credit) premiums for self-only coverage in the second-lowest cost silver plan in Autauga County, AL, are $201 for a 21-year-old individual and $603 for a 64-year-old individual. Given the 3:1 age-rating among adults between 21 and 64+ years of age, it follows that the premium for the same plan in the same county is three times higher for the older adults (hypothetical persons B and D), than it is for the younger adults (hypothetical persons A and C). However, for premium credit recipients, age does not determine the amount that a given person contributes toward her premium. The formula for calculating premium contributions from enrollees is based on income, not age (see Table 3 ), and such contributions are calculated prior to determining the credit amount. Therefore, the actual amount that tax credit recipients will pay toward exchange premiums may be the same for individuals with the same income levels, regardless of age. For example, persons A and B are very different in age but have the same income level; therefore, their monthly contributions toward premiums are the same amount ($58). Person C is an example of the exception to this general rule. Persons C and D have the same income level, so you would expect their premium contributions to be the same amount ($319, see Table 3 ). However, person C's premium ($201) is lower than the maximum premium contribution allowed for an enrollee at that income level. Therefore, person C pays the entire premium amount for the second-lowest cost silver plan available in that county. The rules applicable to self-only coverage regarding age-rating for adults and calculation of enrollee premium contributions based on income likewise apply to family coverage. Table 4 includes examples for hypothetical families comprised of two adults of the same age and one child who is age 19. Similar to the self-only coverage examples, the families with the older adults (families F and H) face a larger (pre-credit) premium than the families with the younger adults (families E and G). However, the families with the same income pay the same amount toward premiums. That is, families E and F pay $99 toward the monthly premium, while families G and H pay $542, for the same exchange plan. Under ACA, the amount received in premium credits is based on the prior year's income tax returns. These amounts are reconciled when individuals file tax returns for the actual year in which they receive premium credits. If a tax filing unit's income decreases during the tax year, and the filer should have received a larger tax credit, this additional credit amount will be included in the tax refund for the year. On the other hand, any excess amount that was overpaid in premium credits will have to be repaid to the federal government as a tax payment. However, ACA imposes limits on the excess amounts to be repaid under certain conditions. For households with incomes below 400% FPL, the law includes specific limits that apply to single and joint filers separately--limits that will be indexed by inflation in future years. Since the enactment of ACA, these limits have been amended twice: first under the Medicare and Medicaid Extenders Act of 2010 ( P.L. 111-309 ), and then under the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayment Act of 2011 ( P.L. 112-9 ). The current repayment limits vary by income band (see Table 5 ). For example, say a family received overpayments for the tax credits they should have received in a given tax year. They will have to repay the excess when they file federal income taxes for that year. However, if such a family has income below 200% FPL, the IRS may only require them to repay up to $600 (for tax credit overpayments during that tax year). In other words, while such a family may technically owe a larger amount, repayment is limited to a maximum of $600 for a family with income below 200% FPL. As of March 31, 2014, the cumulative total of persons who selected a metal plan through the individual exchanges was approximately 8 million. At least 6.67 million of these individuals qualified for premium tax credits. In its estimates for ACA's health coverage provisions, the Congressional Budget Office (CBO) projects exchange enrollment to be modest in the first couple years, then increase significantly afterwards. Likewise, the estimates of federal outlays for premium credits are relatively moderate initially, but increase rapidly after the first few years. According to its latest estimates, CBO projects exchange enrollment in 2014 to total 8 million persons: 6 million and 2 million enrolled in individual and SHOP exchanges, respectively. By 2024, CBO estimates that 29 million individuals total will be enrolled in exchange coverage. Of those exchange enrollees who are enrolled in the individual exchanges (25 million), 19 million are projected to receive premium credits (see Figure 2 ). CBO estimates that federal outlays for premium credits will total $726 billion, from FY2015 through FY2024. In addition to the premium credits, ACA establishes subsidies that are applicable to cost-sharing expenses. An individual who qualifies for the premium credit and is enrolled in a silver plan (actuarial value of 70%) through an exchange is also eligible for cost-sharing assistance. The assistance is provided in two forms, and both forms are based on income (see descriptions below). Individuals who receive cost-sharing subsidies may receive both types, as long as they meet the applicable eligibility requirements. ACA requires each metal tier plan to limit the total amount an enrollee will be required to pay out of pocket for use of covered services in a year (referred to as an annual cost-sharing limit in this report), and establishes separate limits for self-only coverage and family coverage. For 2014, the annual cost-sharing limit for self-only coverage is $6,350; the corresponding limit for family coverage is $12,700. Given that tiered plans will already be required to comply with those annual cost-sharing limits, one form of cost-sharing assistance reduces such limits (see Table 6 ). The cost-sharing assistance reduces the annual limit faced by eligible individuals with income between 100% and 250% FPL; greater reductions are provided to those with lower incomes. In general, this cost-sharing assistance targets individuals and families who use a great deal of health care in a year and, therefore, have high cost-sharing expenses. Enrollees who use very little health care do not generate enough cost-sharing expenses to reach the annual limit. The second form of cost-sharing assistance also applies to individuals with income between 100% and 250% FPL. For eligible individuals, the cost-sharing requirements (in the plans they have enrolled) have been reduced to ensure that the plan covers a certain percentage of allowed health care expenses, on average. The practical effect of this cost-sharing assistance is to increase the actuarial value (AV) of the exchange plan in which the person is enrolled (see Table 7 ), so enrollees face lower cost-sharing requirements than they would have without this assistance. Given that this form of cost-sharing assistance directly affects cost-sharing requirements (e.g., lower deductible), both enrollees who use minimal health care and those who use a great deal of services may potentially benefit from this assistance. In order to be eligible for cost-sharing subsidies, an individual must be enrolled in a silver plan, so that coverage already has an AV of 70%. For an individual who receives the subsidy referred to in Table 7 , the health plan imposes a set of different cost-sharing requirements, so the "silver" plan will meet the new applicable AV. ACA does not specify how a plan reduces cost-sharing requirements in order to increase the AV from 70% to one of the higher AVs. Through regulations, HHS requires each insurance company that offers a plan that is subject to these cost-sharing reductions to develop variations of its silver plan; these plan variations must comply with the higher levels of actuarial value (73%, 87%, and 94%). When an individual is determined by an exchange to be eligible for a cost-sharing subsidy, the person is enrolled in the plan variation that corresponds with that person's income (as indicated in Table 7 ). This approach ensures that the individual automatically benefits from this cost-sharing assistance, as soon as exchange coverage becomes effective. The HHS Secretary will provide full reimbursements to exchange plans that provide cost-sharing subsidies. CBO estimates that that federal outlays for the cost-sharing subsidies will total $175 billion, from FY2015 through FY2024.

New federal tax credits, authorized under the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended), first became available in 2014 to help certain individuals pay for health insurance. The tax credits apply toward premiums for private health plans offered through "exchanges" (also referred to as health insurance marketplaces). ACA also establishes subsidies to reduce cost-sharing expenses. Exchanges have been established in every state, either by the state itself or by the Secretary of Health and Human Services (HHS), as required under ACA. Exchanges are not insurers, but provide eligible individuals and small businesses with access to private health insurance plans. Generally, the plans offered through the exchanges provide a comprehensive set of health services and meet all ACA market reforms, as applicable. The new premium credits established under ACA are advanceable and refundable, meaning taxfilers need not wait until the end of the tax year in order to benefit from the credit, and may claim the full credit amount even if they have little or no federal income tax liability. Premium tax credits are generally available to individuals who enroll in an exchange plan; are part of a tax-filing unit; have household income between specified amounts; are not eligible for other forms of comprehensive health coverage; and are U.S. citizens or lawfully present residents. This report provides examples of hypothetical individuals and families who qualify for the premium credits; the examples use actual 2014 premium and tax credit amounts. The amounts received in premium credits are based on federal income tax returns. These amounts are reconciled in the next year and can result in overpayment of premium credits if income increases, which must be repaid to the federal government. ACA limits the amount of required repayments for lower-income enrollees. In addition to premium credits, ACA authorizes new cost-sharing subsidies. Certain premium credit recipients will also be eligible for reductions in their annual cost-sharing limits. Moreover, certain low-income individuals will receive additional subsidies in the form of reduced cost-sharing requirements (e.g., lower deductible).

Argentina's political upheaval in late 2001 that led to the resignation of President Fernando de la Rua should be viewed in the context of its historical political development. Before 1930, Argentina enjoyed some 70 years of political stability that facilitated rapid economic development and made Argentina one of the world's wealthiest countries. It ranked seventh in the world in per capita income in the 1920s. In contrast, from 1930 until 1983, Argentina experienced significant political instability, characterized by numerous military coups, 25 presidents, 22 years of military rule, and 13 years of "Peronism." When the military intervened in 1943, the regime came to be dominated by a colonel serving as Secretary of Labor, Juan Peron, who went on to build a formidable political base through support from the rapidly growing union movement. Peron's mobilization of the working class had an enduring effect on Argentina's political system over the next four decades. Even when Peron was ousted by the military in 1955, Peronism as a political movement survived despite attempts by the military and anti-Peronist sectors to defeat it. After his ouster, a series of civilian and military governments ruled until 1973 when Peron was reelected to office after 18 years of exile. Just a year later, however, Peron died and was succeeded by his second wife Isabel, who had little political experience. Economic and political chaos ensued, with political violence surging and Argentina experiencing its first bout of hyperinflation. As a result, the military intervened once again in 1976, but this time ruled directly until 1983, when it fell into disrepute in the aftermath of its failure in the Falkland Islands (Islas Malvinas) war with Great Britain in 1982. It was during this period that the military conducted the so-called "Dirty War" against leftists, guerrillas, and their sympathizers, and thousands of Argentines "disappeared." In 1983, Argentina returned to civilian democratic rule with the election of Raul Alfonsin of the moderate Radical Civic Union (UCR). Alfonsin was widely credited with restoring democratic institutions, but economic conditions during his tenure were chaotic, with hyperinflation and considerable labor unrest. As a result, Alfonsin left office six months before his six-year term ended, letting the winner of the 1989 election, Carlos Menem of the Justicialist Party (PJ, or the Peronist Party), take office early. Menem transformed Argentina from a state-dominated protectionist economy to one committed to free market principles and open to trade. Most state enterprises were privatized; hyperinflation was eliminated; and the economy was opened up to foreign trade and investment. In 1991, under the direction of Minister of Economy Domingo Cavallo, the government pegged the Argentine peso to the U.S. dollar and limited the printing of pesos to the extent that they were backed by U.S. dollars, a policy which helped keep inflation in check, but as is now known, became a major factor in Argentina's recent financial turmoil. (The dollar peg led to an overvaluation of the peso, and continued overspending led to large increases in external debt.) What made Menem's transformation of Argentina even more extraordinary was that he broke with the traditional Peronist protectionist policies favorable to the working-class and labor. Yet increasing corruption and high unemployment at the end of Menem's second term were factors that led to the defeat of his party in the October 1999 elections. Fernando de la Rua won the October 1999 presidential race as the candidate of a coalition known as the Alliance for Work, Justice, and Education, that brought together de la Rua's moderate Radical Civic Union (UCR) and the leftist Front for a Country in Solidarity (Frepaso). Although there was initial optimism when de la Rua took office in December 1999, that optimism had faded by the end of 2000 because of doubts about the government's ability to bring about economic recovery and because of corruption in the administration. While the government negotiated several financial arrangements with the IMF in 2000 and 2001, it was unable to fulfill IMF-imposed conditions relating to spending cuts. The IMF ultimately declined further financial support in December 2001, because Argentina could not produce a balanced budget. Argentines began rapidly withdrawing dollars from banks until the government limited withdrawals to $1,000 per month. The denial of access to bank funds, combined with already high poverty and unemployment rates after four years of recession, sparked widespread opposition to the government. As confidence in the government evaporated, widespread demonstrations erupted around the country, with thousands calling for the President's resignation. Protests turned violent with rioters battling police with stones and bottles; 27 people were killed in the protests and hundreds were injured. Some blamed riot police for overreacting to peaceful demonstrations. As a result of the violent protests, President de la Rua fled the presidential palace and resigned on December 20, 2001, paving the way for a series of interim presidents from the Peronist party. Peronist Senator Eduardo Duhalde ultimately became president on January 1, 2002, with a mandate from Congress to serve out the remainder of de la Rua's term. Duhalde, who had been Vice President under Menem from 1989-1991, Governor of the Buenos Aires province, and the PJ's 1999 presidential candidate, was one of the most well-known and powerful Peronist leaders. President Duhalde faced daunting political and economic challenges when he assumed office, most significantly the ability to quell social unrest associated with the country's financial instability. Protests against banks and politicians continued in the first half of 2002, but the widespread social violence of December 2001 was not repeated, and the Duhalde government survived. Duhalde initially promised such populist measures as increasing the state's role in the economy and protecting local industries, but he did not pursue a protectionist economic model. In the end, the Argentine economy stabilized under the Duhalde government. As part of his economic plan, Duhalde abandoned the Argentine currency's one-to-one peg to the U.S. dollar that had been in place since 1991 and ultimately adopted a unified floating exchange rate in February 2002. While the Duhalde government was unable to secure IMF financing in 2002 because of lack of progress on key fiscal and other structural reforms, it did secure a seven-month IMF arrangement in January 2003, valued at almost $3 billion. The Duhalde government was also able to clear Argentina's arrears with the World Bank and the Inter-American Development Bank, which allowed new loans in early 2003 to finance social safety net programs in order to reduce the impact of the economic crisis on the poor. Provincial governor Nestor Kirchner, a center-left Peronist, was inaugurated to a four-year term as president on May 25, 2003. Kirchner had emerged from the crowded 19-candidate first presidential election round held April 27 with 22% of the vote. Former President Carlos Menem, a center-right Peronist, topped the field with 24.36% of the vote, and the two candidates were scheduled to compete in a second round on May 18. But when it became apparent that Kirchner was forecast to win with nearly 70% of the vote, Menem pulled out of the race. During the campaign, Menem had advocated a neo-liberal free-market strategy to resolve Argentina's economic problems, including adoption of the U.S. dollar and increased economic linkages with the United States. In contrast, Kirchner advocated a continuation of Duhalde's economic policies and pledged to keep on the current Minister of Economy, Roberto Lavagna, viewed as the man behind the country's recent economic recovery. He attacked Menem's neo-liberal rhetoric and vowed to demand a reduction in debt and interest rates when negotiating with international creditors. Kirchner was viewed as somewhat of a political outsider, not associated with the corruption legacy of the past, and his candidacy attracted independents, an important factor given that traditional politicians had been discredited. President Kirchner's bold policy moves in the areas of human rights, institutional reform, and economic policy have helped restore Argentines' faith in government. He has attacked corruption in the federal police force and in Argentina's Supreme Court, which had been stacked with the supporters of former President Menem. Upon taking office, President Kirchner purged the military's top officers and vowed to prosecute current and retired military officials responsible for human rights violations conducted during the last era of military rule. At a dedication of a Museum of Memory commemorating the thousands of Argentines killed in the so-called "Dirty War," Kirchner asked "for forgiveness on behalf of the state for the shame of having remained silent about these atrocities during 20 years of democracy." He strongly supported the Supreme Court's June 2005 overturning of two amnesty laws from the 1980s that had blocked prosecution for killings under military rule. The action opened the door for trials of former military and police officials. In August 2006, a former federal police official was sentenced to 25 years in prison in the first trial since the Supreme Court's action, and in September 2006, the former police commissioner of Buenos Aires, Miguel Etchecolatz, was sentenced to life in prison. A key witness in the Etchecolatz case, Jorge Julio Lopez, disappeared after his testimony, provoking widespread concerns about a potential return of death squads intended to intimidate witnesses in future human rights trials. President Kirchner has called for Argentines to stay on alert so that the past is not repeated. In the economic arena, the Kirchner government has overseen a strong revival of the Argentine economy, with economic growth rates of 8.8% in 2003, 9% in 2004, 9.2% in 2005, and an estimated growth rate of 7.8% in 2006. Unemployment decreased from a high of about 24% in 2002 to about 11% in early 2006. In June 2005, the Kirchner government was successful in restructuring more than $100 billion in defaulted bond debt at about 34 cents on the dollar, saving the country more than $67 billion in the largest debt-reduction ever achieved by a developing country. Although Argentina's macroeconomic recovery has been impressive, many poor and middle-class Argentines have yet to see major improvements in living standards. Although poverty rates have declined over the past three years, about 34% of the population was still estimated to be in poverty in 2005, with almost 12% of the population living in extreme poverty. The Kirchner government also faces the challenges of curbing inflation, which is forecast to average 11% in 2006, while at the same time maintaining strong economic growth. Argentina's relations with the IMF under the Kirchner government have been contentious at times. In September 2003, after months of tough negotiations, Argentina reached a three-year stand-by agreement that provided a credit line of about $12.5 billion. Although IMF accords are not normally politically popular, the accord was widely praised in Argentina as an agreement with realistic fiscal targets that would enable Argentina to deal with such issues as employment and social equity. Argentina suspended its IMF loan program in August 2004 because of IMF pressure on completion of debt negotiations with bondholders and on Argentine progress in implementing key economic reforms. In January 2006, Argentina ultimately chose to repay its $9.5 million debt owed to the IMF in order to give the government autonomy on economic policy. Although the move was politically popular in Argentina, some critics argue that it would have been wiser to pay down other more expensive debt or to use the money on infrastructure or social spending. President Kirchner remains widely popular. For many observers, the October 2005 legislative elections served as a referendum on the Kirchner government and demonstrated continued strong support. One-third of the Senate and one-half of the Chamber of Deputies were contested in the elections. Kirchner emerged from the elections with his supporters having a majority of 40 seats in the 72-member Senate and 108 seats in the 257-member Chamber of Deputies, including a number of pro-Kirchner supporters from parties other than the PJ. The contest was significant because it asserted Kirchner's dominance over the Peronist party faction led by former President Duhalde. Most analysts believe that Kirchner would likely win the October 2007 presidential election if he chooses to run. U.S.-Argentine relations have been strong since the country's return to democracy in 1983 and were especially close during the Menem presidency. U.S. officials commend Argentina's contributions to peacekeeping operations worldwide, including a contribution to the current U.N. peacekeeping mission in Haiti. Because of its military contributions, the United States designated Argentina as a major non-NATO ally in 1997, a status that gives Argentina access to grants of surplus military hardware. Although U.S.-Argentine relations are close, at times there have been irritants in the bilateral relationship. The tough U.S. approach toward Argentina during its political and financial crisis in 2001-2002 caused some friction in the relationship. This turned around to some extent in 2003 when the United States supported Argentina in its negotiations with the IMF. In terms of trade, the United States exported $4.1 billion in goods to Argentina in 2005 (with machinery, organic chemicals, and electrical machinery exports topping the list) and imported $4.6 billion in goods, almost half consisting of oil imports. In 2004, the United States Trade Representative (USTR) placed Argentina on the Special 301 Priority Watch list regarding intellectual property rights protection because of serious concerns over the lack of adequate protection for copyrights and patents. Although the country made some improvements to its international property protection, USTR kept Argentina on the Priority Watch List for 2005 and 2006 because of continued problems with patent protection and copyright piracy. U.S. officials have highlighted concerns about the tri-border area (TBA) of Argentina, Brazil, and Paraguay because of activities of the radical Lebanon-based Hezbollah (Party of God) and the Sunni Muslim Palestinian group Hamas (Islamic Resistence Movement). The TBA has long been used for arms and drug trafficking, contraband smuggling, document and currency fraud, money laundering, and the manufacture and movement of pirated goods. The State Department's 2005 annual report on terrorism (issued in April 2006) maintains that the United States remains concerned that Hezbollah and Hamas were raising funds among the sizable Muslim communities in the region but stated that there was no corroborated information that these or other Islamic extremist groups had an operational presence in the area. U.S. officials in the past have lauded engagement with Argentina on counter-terrorism issues, including efforts to crack down on Middle East fund-raising activities in the TBA. In September 2006, however, a U.S. Treasury Department official maintained that Argentina could risk international financial isolation if it did not take action to criminalize terrorist financing. Congress has expressed concern regarding Argentina's investigation into the July 1994 bombing in Buenos Aires of the Argentine-Israeli Mutual Association (AMIA) that killed 85 people. In the 108 th Congress, both houses approved similar resolutions ( H.Con.Res. 469 and S.Con.Res. 126 ) in July 2004, that urged Argentina to provide resources to investigate all areas of the AMIA case. Allegations have linked Hezbollah to that bombing as well as to a 1992 bombing of the Israeli Embassy in Buenos Aires that killed 30 people. In September 2004, all 22 Argentine defendants charged in the 1994 bombing were acquitted by a three-judge panel that faulted the investigation of the original judge (the judge was ultimately removed from office for bribery in August 2005). Despite the acquittal, an Argentine court reconfirmed the validity of international arrest warrants for 12 Iranian nationals and one Lebanese official believed to head Hezbollah's terrorist wing. (Interpol suspended international wanted notices, or Red Notices, for the 12 Iranians, in October 2004, and cancelled the notices in September 2005, maintaining that new arrest warrants were needed.) A new Argentine investigation of the AMIA case began in September 2004, and in November 2005, the prosecutor named a Lebanese militant from Hezbollah as the suicide bomber in the AMIA case. In June 2006, the House approved H.Con.Res. 338 (Ros-Lehtinen), which "recognizes the potential threat that sympathizers and financiers of Islamist terrorist organizations that operate in the Western Hemisphere pose to the United States, our allies, and interests." The resolution also encourages the President to direct the U.S. representatives to the Organization of American States to seek support for the creation of a special task force to assist governments in investigating and combating the proliferation of Islamist terrorist organizations in the region.

Argentina's restructuring of over $100 billion in defaulted bond debt in June 2005 demonstrated the country's emergence from its 2001-2002 economic crisis that had caused severe stress on the political system. Current President Nestor Kirchner, elected in 2003, has made bold policy moves in the areas of human rights, institutional reform, and economic policy that have helped restore Argentines' faith in democracy. The October 2005 legislative elections demonstrated strong support for President Kirchner, whose popularity at this juncture bodes well for his re-election if he chooses to run in the October 2007 presidential election. Economic growth has rebounded since 2003, and in January 2006, Argentina paid off its $9.5 billion debt to the International Monetary Fund. Looking ahead, the government faces such challenges as reducing poverty and controlling inflation while maintaining strong economic growth. Issues of concern to Congress include continued cooperation with Argentina on counter-terrorism issues and progress in Argentina's investigation of the 1994 Argentine-Israeli Mutual Association bombing. For additional information, see CRS Report RL32637, Argentina ' s Sovereign Debt Restructuring , by [author name scrubbed] (pdf).

Supervised release is the successor to parole in the federal criminal justice system. In 1984, Congress eliminated parole to create a more determinate federal sentencing structure. In its place, Congress instituted a system of supervised release, which applies to all federal crimes committed after November 1, 1987. Both parole and supervised release call for a period of supervision following release from prison and for reincarceration upon a failure to observe designated conditions. Parole ordinarily stands in lieu of a portion of the original term of imprisonment, while supervised release begins only after full service of the original term (less any "good time" credits). Sentencing courts determine the terms and conditions of supervised release at the same time that they determine other components of a defendant's sentence, and "[t]he duration, as well as the conditions of supervised release are components of a sentence." Sentencing courts are said to have broad discretion when imposing the conditions for supervised release, although such discretion must be understood within the confines established for mandatory conditions, the scope of permissible standard discretionary conditions and special conditions, and the deference that must be afforded the Sentencing Guidelines. Except in specified drug and domestic violence cases, courts may technically exercise discretion to decline to impose supervised release altogether for a particular defendant. However, the Sentencing Guidelines, promulgated by the United States Sentencing Commission, recommend that sentencing courts impose a term of supervised release in most felony cases. A term of supervised release begins when a prisoner is actually released, regardless of when he should have been released. There is a split among the circuits, however, over when the term of supervised release begins for a defendant whose release from federal custody is stayed pending a civil commitment determination. A court may sentence a defendant to several terms of supervised release for each of several crimes, but the terms are served at the same time rather than consecutively. This rule applies even where criminal statutes require a defendant to serve the multiple terms of imprisonment consecutively. Section 3583(b) sets the authorized duration for a term of supervised release, subject to exceptions for certain drug, terrorism, and sex offenses. It authorizes a term of supervised release of not more than five years, when the defendant is convicted of a Class A or B felony (e.g., bank fraud); not more than three years, when the defendant is convicted of a Class C or D felony (e.g., bank robbery); and not more than one year, when the defendant is convicted of a Class E felony or a misdemeanor (crimes with a maximum penalty of imprisonment of three years or less). The exceptions for various drug, terrorism, and sex offenses permit supervised release terms for any number of years up to life, and often come with mandatory minimums. While possession with intent to distribute illicit drugs ordinarily permits a sentence of supervised release for any term of years up to life, the accompanying mandatory minimum terms will vary according to the dangerousness of the drug, the volume involved, and whether the defendant is a recidivist. Similar mandatory minimum terms of supervised release apply in the case of kidnaping a child and certain sex offenses. In those instances, the mandatory minimum is five years, regardless of the triggering offense or the defendant's criminal record. For federal "crimes of terrorism," that is, those listed in 18 U.S.C. 2332b(g)(5)(B), the courts must impose a term of supervised release of any term of years or life. The obligation applies regardless of whether the offense was committed for terrorist purposes. In any event, the court may terminate a defendant's term of supervised release at any time after the defendant has served a year on supervised release, based on the defendant's conduct, the interests of justice, and consideration of several of the general sentencing factors. The circuits are divided over whether the court may dismiss such a petition out of hand or must explain its action. Conversely, a court may extend a defendant's term of supervised release, unless the term has already run or unless the court initially imposed the maximum permissible term. Conditions for supervised release are determined during a federal defendant's initial sentencing, based on the nature of the offense, the defendant's particular history, and other factors. When determining applicable conditions, courts consider both federal statutory requirements and federal Sentencing Guidelines. There are two kinds of conditions for supervised release: mandatory and discretionary. Section 3583 insists upon imposition of several mandatory conditions that apply to all defendants, and a few additional conditions that apply only in cases involving domestic violence or sex offenses. All supervised release orders require defendants to (1) refrain from criminal activity; (2) forgo the unlawful possession of controlled substances; (3) cooperate with collection of DNA samples; and (4) submit to periodic drug tests. In addition, prior to release, all prisoners must agree to adhere to the payment schedule for any unpaid fine imposed; however, the statute does not specify that such agreements will be enforced as conditions of supervised release after the agreement is made. To fill this gap, the Sentencing Guidelines identify the payment of fines and restitution as a mandatory condition of supervised release. Additional mandatory conditions apply to domestic violence and sex offenses. Specifically, first-time domestic violence offenders must attend an approved rehabilitation program if one is located within 50 miles of their residence, and convicted sex offenders must register with relevant authorities if the federal sex offender registry requirements apply. Courts have relatively broad discretion to impose supervised release conditions that supplement the mandatory conditions for a particular defendant. Section 3583(d) is very specific about a few of these discretion conditions. For example, it provides that a court may condition an alien's supervised release upon his deportation and remaining outside the United States. It also authorizes a court, in the case of an offender required to register as a sex offender, to condition supervised release upon the offender's submission to warrantless, suspicionless searches by his probation officer, or with reasonable suspicion warrantless searches by any law enforcement officer. Section 3583(d) permits a wider range of specific conditions by adopting most of the probation discretionary conditions. Finally, it allows a court to impose any other appropriate condition as long as the condition is reasonably related to one of several sentencing goals and as long as it involves no greater deprivation of liberty than is reasonably necessary to accommodate those goals. The Sentencing Guidelines quote some of the statutorily identified discretionary conditions, suggest expanded versions of others, and propose additional considerations in still other situations. They divide the discretionary conditions into three groups--"standard" conditions, which courts impose as a matter of practice in most cases; "special" conditions that may be applied to particular kinds of cases; and "additional" conditions, such as community confinement, curfews, and occupational restrictions. Standard Discretionary Conditions : For the most part, the Sentencing Guidelines replicate the probation conditions and standard conditions of supervised release. Courts regularly impose the Sentencing Guidelines' standard conditions as a matter of practice. Many of these conditions ensure that defendants remain in regular contact with their probation officers. For instance, they recommend that courts order defendants to report to a probation officer on a regular basis; allow their probation officer to visit them; respond honestly to their probation officer's questions and follow the officer's instructions; notify their probation officer of any change in address or employment; remain in the district unless the court or probation officer approves leaving; and notify their probation officer if they are arrested or questioned by law enforcement officers. Other standard conditions prevent criminal entanglements. For example, they recommend that courts require defendants to avoid criminal associations; illicit drug markets, stash houses, and crack houses; the use of illicit drugs or the excessive use of alcohol; and becoming an informant without permission of the court. A related condition requires a defendant to stay gainfully employed during the term of supervised release. The remaining standard conditions instruct defendants to honor specific or general legal obligations. For example, they recommend that courts require each defendant to support his family; pay any unpaid special assessment; advise his probation officer of circumstances that might prevent his making fine, restitution, or special assessment payments; and notify victims and those possibly at risk. Special or Any Other Discretionary Conditions : The conditions which the statute refers to as "other" discretionary conditions, the Sentencing Guidelines divide into special and additional discretionary conditions. The so-called "special" discretionary conditions address case-specific factors, such as the nature of an offense, the defendant's character, or another condition contained in a defendant's sentence. For example, the Sentencing Guidelines recommend that a court ban possession of weapons during supervised release, if the defendant used a weapon in the commission of the crime at issue or had a record including prior felony convictions. Likewise, when a conviction is for a sex or child pornography offense or a defendant has a history of sexual misconduct, a court might mandate sex-offender treatment, limit computer use, or authorize warrantless searches of the defendant's possessions. Other special conditions based on a particular defendant's character or history include requiring participation in a drug or mental health treatment program based on a history of substance abuse or mental health problems or ordering deportation if the defendant is an alien who is eligible for deportation under immigration laws. In cases involving financial offenses, unpaid fees, or restitution orders, the Sentencing Guidelines recommend that a court prohibit a defendant from incurring new credit charges or opening additional lines of credit without approval of the probation officer unless the defendant is in compliance with his scheduled payments or mandate probation officers' access to a defendant's financial information. Moreover, when reasonably related to an offense, such conditions might include demands to provide information concerning the financial activities of a defendant's spouse or legal entities under the releasee's control. Additional Discretionary Conditions : "Additional" conditions address defendants' mobility and work activities. They include community confinement; home detention; community service; curfew; and restrictions on a defendant's occupation. Perhaps because many additional conditions restrict defendants' freedom of movement, commentary accompanying these additional conditions in the federal Sentencing Guidelines shows a special caution that such restrictions not become excessive. For example, the commentary advises that "[c]ommunity confinement generally should not be imposed for a period in excess of six months," although "[a] longer period may be imposed to accomplish the objectives of a specific rehabilitative program, such as drug rehabilitation." Likewise, it limits community service conditions to no more than 400 hours. As noted earlier, a court may impose a discretionary condition only if it (1) is "reasonably related" to specified factors; (2) "involves no greater deprivation of liberty than is reasonably necessary"; and (3) is "consistent with" policy statements issued by the U.S. Sentencing Commission. Reasonably Related : The threshold question for any general discretionary condition of supervised release is whether it is reasonably related to the offense, the defendant, increased public safety, or one of several other sentencing factors. Factors to which the condition must be "reasonably related" include (1) the nature and circumstances of the offense and the defendant's history and character; (2) deterrence of crime; (3) protection of the public; and (4) the defendant's rehabilitation. Thus, since a condition may be reasonably related to a defendant's history or future protection of the public, it need not be related to the offense for which supervised release was ordered. Yet, "reasonably related" may turn on the currency and seriousness of past misconduct. Although the statutory language repeats the conjunction "and" between factors and thus appears on its face to require that a particular condition relate to all, rather than just one, of these factors, courts have sometimes interpreted the statute so that a reasonable relationship to any one factor is sufficient to justify a discretionary condition. Unnecessary Deprivation of Liberty : The courts' general discretionary authority to order conditions of supervised release is likewise bound by the requirement that it "involve[] no greater deprivation of liberty than is reasonably necessary" for the reasonably related purposes. The assessment is one of balancing. A considerable deprivation of liberty will be considered justified, when a condition is clearly reasonably related to a serious crime of conviction and a criminal history that cries out for close supervision. At the other end of the spectrum, a serious deprivation of liberty will not be considered justified, when the connection between the condition and the defendant's crime and his past is tenuous. Between the two poles, some courts see the standard as "a narrow tailoring requirement," one that compels the district court to "choose the least restrictive alternative." Consistent with Guidelines' Policy Statements : The third discretionary condition requirement, that it be consistent with pertinent Sentence Guideline policy statements, is rarely mentioned except in passing. It "mandates only that the conditions not directly conflict with the policy statements. Therefore, when considering challenges to supervised release conditions brought under SS3583(d)(3), courts tend to evaluate them under SS3583(d)(1), which requires that conditions be reasonably related to certain SS3553(a) factors." Although a sentencing court's primary role in supervised release occurs at the time of initial sentencing, it retains an important decision-making function, and broad discretion, throughout a defendant's term of supervised release. In addition to earlier termination of a defendant's term of supervised release, a court may modify supervised release conditions at any time, may revoke a defendant's term of supervised release, require him to return to prison for an addition term of imprisonment, and impose an additional term of supervised release to be served thereafter. Modification of supervised release conditions usually occurs following a hearing, although a defendant may waive under some circumstances. In considering whether to modify the conditions of supervised release, the court weighs the same sentencing factors that it considers in an early termination of a term of supervised release. Breach of an existing condition or a change in circumstances may justify modification, but neither is required. In some instances, the courts have greeted objections to the imposition of a condition at sentencing with the observation that it can be changed after the defendant is released from prison. In others, they have observed that this can be an uncertain benefit. Sometimes revocation is required. Sometimes it is not. By statute, a court must revoke a defendant's supervised release for (1) unlawful drug or firearm possession; (2) refusal to comply with a drug testing condition; or (3) three or more positive drug tests within a single year. The Sentencing Guidelines are far more demanding. They declare that a court must revoke a defendant's supervised release for the commission of any federal or state crime punishable by imprisonment for more than a year. Courts may revoke supervised release for breach of any other conditions. A court's revocation jurisdiction, however, expires when the term of supervised release has expired, unless the government began the revocation process prior to expiration, or unless the defendant is imprisoned for 30 days or more in "connection with" a conviction for a federal, state, or local crime. The defendant facing revocation of supervised release enjoys many, but not all, of the rights that attend a criminal trial. He must be taken promptly before a magistrate following his arrest for violation of the conditions of supervised release. The federal bail statutes apply to his pre-hearing release, although he has the burden of establishing that he is neither dangerous nor a flight risk. He is entitled to a probable cause preliminary hearing at which he may be represented by appointed counsel if he cannot secure one. He may present evidence at the preliminary hearing and has a limited right to confrontation. Upon a finding of probable cause to believe that he has violated a condition of his supervised release, the defendant is entitled to a hearing and enjoys the benefit of counsel, appointed if necessary. As in the case of the preliminary hearing, he is entitled to notice of the charges, to present evidence, to make a statement and offer mitigating evidence, as well as, to a limited extent, confront witnesses against him. A defendant at a revocation hearing, however, is not entitled to a jury, or to the benefit of proof beyond a reasonable doubt. The court may revoke his supervised release if it finds by a preponderance of the evidence that he has breached one or more of the conditions of his release. Any time served under supervision prior to revocation is erased. Upon revocation of a term of supervised release, a defendant may be imprisoned for a term ranging from one to five years depending upon the seriousness of the original crime, and upon release from imprisonment may be subject to a new term of supervised release. Appellate courts will uphold the sentence imposed upon revocation, unless it is procedurally or substantively unreasonable. The Constitution limits the range of permissible conditions. Even if a condition of supervised release satisfies all statutory requirements, a court will invalidate it if it runs afoul of a defendant's constitutional rights. On the other hand, a condition which raises constitutional concerns is likely to offend statutory norms as well and can be resolved on those grounds. The Constitution vests the judicial power of the United States in the Supreme Court and such inferior courts as Congress shall ordain and establish. It cannot be exercised elsewhere. The issue arises most often in the context of the extent of discretion which a court assigns a probation officer. In crafting the conditions for a particular defendant, a sentencing court will often delegate initial implementing responsibilities to a probation officer. The line between permissible and impermissible delegation is not always clear. In some cases, it is a question of whether the task assigned a probation officer in a condition of supervised release touches upon a defendant's significant liberty interest. In others, it is a matter of whether the court has declared that a particular condition is to be imposed, even though thereafter the court may have delegated considerable implementing discretion. Yet elsewhere, the issue turns on the level of court oversight of the probation officer when implementing a condition. The sex offender conditions have generated a number of First Amendment challenges, primarily in two areas: overbreadth and freedom of association. Under the First Amendment overbreadth doctrine, a condition is overbroad if it sweeps in a substantial amount of constitutionally protected speech along with legitimately targeted unprotected speech. The courts also recognize a right to intimate or familial relationships as a component of the freedom of association which extends to "personal decisions about marriage, childbirth, raising children, cohabiting with relatives and the like." Defendants have often contended that a particular condition to which they are subject is overbroad, or improperly intrudes upon their freedom of association. Both doctrines have companions in due process, discussed below. Both challenges are often resolved by recourse to Section 3583(d)'s "reasonably related" and "no unnecessary deprivation of liberty" requirements, which can provide the narrow tailoring that the First Amendment demands. In fact, cases that have First Amendment implications are often resolved on those statutory grounds. The Fourth Amendment guarantees a right "against unreasonable searches and seizures." Following an individual's criminal conviction, however, the Supreme Court has used a "general balancing" test, in which it assesses "on the one hand, the degree to which [the government action] intrudes upon an individual's privacy and, on the other, the degree to which it is needed for the promotion of legitimate interests." Because people on supervised release, like others along the "continuum of punishment," have a "reduced expectation of privacy" under the Court's Fourth Amendment jurisprudence, their privacy interests carry less weight in this balancing test. Section 3583(d) and the corresponding Sentencing Guideline authorize warrantless, suspicionless search conditions in the case of offenders required to register as sex offenders. Elsewhere, it has been said a search condition must satisfy the "reasonably related" standards. Yet the courts are divided over the question of whether probation officers may conduct a warrantless search in the absence of a specific condition. The Fifth Amendment declares that "[n]o person shall ... be deprived of life, liberty, or property, without due process of law.... " Due process requires that an individual facing revocation of his supervised release be given a reasonably prompt hearing, and be "given adequate notice, represented at all times, [permitted to] appear[] at the hearing, and ... afforded an opportunity to make a statement and present information in mitigation." "The minimum requirements of due process [also] include the right to confront and cross examine adverse witnesses (unless the hearing officer specifically finds good cause for not allowing confrontation)." Due process also colors the extent to which a condition of supervised release may bar an individual's access to his own children. One of the more common due process complaints is that a particular condition of supervised release is constitutionally vague. "A condition of supervised release is unconstitutionally vague if it would not afford a person of reasonable intelligence with sufficient notice as to the conduct prohibited." The popularity of the challenge may have something to do with the fact that the statutory and Guideline conditions are worded generally in order to allow sentencing courts to adjust them to the facts before them. The Sixth Amendment assures the accused a number of rights during the course of his trial. As just noted, the Fifth Amendment assures the defendant of comparable, if more limited, rights at sentencing and during supervised release revocation hearings. The Sixth Amendment rights, however, do not apply there. More specifically, the Sixth Amendment's right to a speedy trial is not implicated by the passage of time between a defendant's conviction and the revocation hearing triggered by allegations of a violation of the defendant's condition of supervised release. The Sixth Amendment right to a jury trial does not apply to such revocation hearings; neither does the Sixth Amendment Confrontation Clause. The Eighth Amendment prohibits cruel and unusual punishment. Its proscription encompasses both the inherently barbaric and in rare cases those grossly disproportionate to the crime for which punishment was inflicted. Eighth Amendment challenges of a sentence of supervised release are rare, and thus far, even more rarely successful.

Supervised release replaces parole for federal crimes committed after November 1, 1987. Like parole, supervised release is a term of restricted freedom following an offender's release from prison. The nature of supervision and the conditions imposed during supervised release are also similar to those that applied in the old system of parole. However, whereas parole functions in lieu of a remaining prison term, supervised release begins only after an offender has completed his full prison sentence. A sentencing court determines the duration and conditions for an offender's supervised release term at the time of initial sentencing. As a general rule, federal law limits the maximum duration to five years, although it permits, and in some cases mandates, longer durations for relatively serious drug, sex, and terrorism-related offenses. A sentencing court retains jurisdiction to modify the terms of an offender's supervised release and to revoke the term and return an offender to prison for violation of the conditions. Several conditions are standard features of supervised release. Some conditions, such as a ban on the commission of further crimes, are mandatory. Other conditions, such as an obligation to report to a probation officer, have become standard by practice and by the operation of the federal Sentencing Guidelines, which courts must consider along with other statutorily designated considerations. Together with these regularly imposed conditions, the Sentencing Guidelines recommend additional conditions appropriate for specific circumstances. Courts also have the discretion to impose "any other" conditions, as long as they involve no greater deprivation of liberty than is reasonably necessary and "reasonably relate" to at least one of the following: the nature of the offense; the defendant's crime-related history; deterrence of crime; protection of the public; or the defendant's rehabilitation. The conditions of supervised release have been a source of constitutional challenges. Yet a constitutionally suspect condition is also likely to run afoul of statutory demands. In which case, the courts often resolve the issue on statutory grounds. This report is an abridged version of a longer report, CRS Report RL31653, Supervised Release: A Brief Sketch of Federal Law, without footnotes or citations to authority found in the longer report.

Federal debt represents, in large measure, the accumulated balance of federal borrowing of the U.S. government. The portion of gross federal debt held by the public consists primarily of investment in marketable U.S. Treasury securities. Investors in the United States and abroad include official institutions, such as the U.S. Federal Reserve; financial institutions, such as public banks; and private individual investors. Table 1 provides December 2015 data, available as of March 2016, on estimated ownership of U.S. Treasury securities by type of investment and the percentage of that investment attributable to foreign investors. The table shows that from December 2011 to December 2015, foreign holdings of debt increased by $1.1 trillion to approximately $6.1 trillion. During the same period, total publicly held debt increased by approximately $3.5 trillion to $15.1 trillion. Because the total debt has increased at about the same pace as the debt held by foreigners, the share of federal debt held by foreigners has been relatively steady. In December 2015, foreigners held 40% of the publicly held debt. Interest on the debt paid to foreigners in 2015 was $94.9 billion. Although 2015 was the first time in the past 10 years that foreign holdings declined, it is too soon to say whether this is a turning point in the heretofore upward trend. Data on major foreign holders of federal debt by country are provided in Table 2 . According to the data, the top three estimated foreign holders of federal debt by country, ranked in descending order as of December 2015, are China ($1,246.1 billion), Japan ($1,122.6 billion), and Caribbean Banking Centers ($351.7 billion). Based on these estimates, China holds approximately 20.3% of all foreign investment in U.S. privately held federal debt; Japan holds approximately 18.3%; and Caribbean Banking Centers holds approximately 5.7%. Foreign holdings as estimated by the Treasury Department can be divided into official (governmental investment) and private sources. Figure 1 provides data on the current breakdown of estimated foreign holdings in U.S. federal debt. As the figure shows, 66.6% ($4,094.6 billion) of foreign holdings in U.S. federal debt are held by governmental sources. Private investors hold the other 33.4% ($2,053.5 billion). After increasing for several years, overall foreign holdings have been relatively flat since 2013. From an economic perspective, foreign holdings of federal debt can be viewed in the broader context of U.S. savings, investment, and borrowing from abroad. For decades, the United States has saved less than it invests. Domestic saving is composed of saving by U.S. households, businesses, and governments; by accounting identity, when government runs budget deficits, it reduces domestic saving. By the same accounting identity, the shortfall between U.S. saving and physical investment is met by borrowing from abroad. When the deficit rises (i.e., public saving falls), U.S. investment must fall (referred to as the deficit "crowding out" investment) or borrowing from abroad must rise. If capital were fully mobile and unlimited, a larger deficit would be fully matched by greater borrowing from abroad, and there would be no crowding out of domestic investment. To be a net borrower from abroad, the United States must run a trade deficit (it must buy more imports from foreigners than it sells in exports to foreigners). Since 2000, U.S. borrowing from abroad and the trade deficit each have exceeded $300 billion each year. Borrowing from abroad peaked at $800 billion in 2006 and was $484 billion in 2015. Borrowing from abroad has occurred through foreign purchases of both U.S. government and U.S. private securities and other assets. As a result of foreign purchases of Treasury securities, the federal government must send U.S. income abroad to foreigners. If the overall economy is larger as a result of federal borrowing (because the borrowing stimulated economic recovery or was used to productively add to the U.S. capital stock, for example), then this outcome may leave the United States better off overall on net despite the transfer of income abroad. In other words, without foreign borrowing, U.S. income would be lower than it currently is net of foreign interest payments in this scenario. From 2008 to 2014, the output gap (the difference between actual gross domestic product [GDP] and potential GDP) was large, meaning the economy had significant idle capital and labor resources. In the presence of a large output gap, government budget deficits have a greater potential than usual to stimulate the economy and increase total income. As the economy gets closer to full employment, the scope for deficits to stimulate the economy diminishes. Because the federal government has run deficits almost every year since the 1960s, the mainstream economic view is that these budget deficits have not led to a larger economy on net over the long run for two reasons. First, the government has run deficits in many years when the economy was near or at full employment, precluding the role of deficit stimulus. Second, federal spending on capital is small relative to the overall budget. It can be argued that the underlying long-term economic problem is the budget deficit itself, and not that the deficit is financed in part by foreigners. This can be illustrated by the counterfactual--assume the same budget deficits and U.S. saving rates without the possibility of foreign borrowing. In this case, budget deficits would have had a much greater "crowding out" effect on U.S. private investment, because only domestic saving would have been available to finance both. The pressures the deficit has placed on domestic saving would have pushed up interest rates throughout the economy and caused fewer private investment projects to be profitably undertaken. With fewer private investment projects, overall GDP would have been lower over time relative to what it would have been. The ability to borrow from foreigners avoids the deleterious effects on U.S. interest rates, private investment, and GDP, to an extent, even if it means that the returns on some of this investment now flow to foreigners instead of Americans. In other words, all else equal, foreign purchases of Treasury securities reduce the federal government's borrowing costs and reduce the costs the deficit imposes on the broader economy. The burden of a foreign-financed deficit is borne by exporters and import-competing businesses, because borrowing from abroad necessitates a trade deficit. It is also borne by future generations, because future interest payments will require income transfers to foreigners. To the extent that the deficit crowds out private investment rather than is financed through foreign borrowing, its burden is also borne by future generations through an otherwise smaller GDP. Because interest rates are at historically low levels, this burden has not grown significantly given the increase in borrowing. Were rates to rise, however, the burden would rise with some lag as new borrowing was made at the new higher rates and old borrowing matured and "rolled over" into new debt instruments with higher rates. Thus far, this report has considered the impact of the government's budget deficit and the low U.S. saving rate on U.S. Treasury yields, but not investor demand. Since interest rates fell to historic lows at a time when the supply of Treasury securities rose to historic heights, it follows that Treasury rates have been driven mainly by increased investor demand in recent years. In the wake of the 2008 financial crisis, investor demand for Treasury securities increased as investors undertook a "flight to safety." Treasury securities are perceived as a "safe haven" compared with other assets because of low perceived default risk and greater liquidity (i.e., the ability to sell quickly and at low cost) than virtually any alternative asset. For foreign investors, their behavior also implies that they view the risk from exchange rate changes of holding dollar-denominated assets to be lower than alternative assets denominated in other currencies. The reasons for this flight to safety are varied. For example, investors who had previously held more risky assets may now be more averse to risk and are seeking to minimize their loss exposure; investors may not currently see profitable private investment opportunities and are holding their wealth in Treasury securities as a "store of value" until those opportunities arise; or investors may now need Treasury securities to post as collateral for certain types of transactions (such as repurchase agreements) where previously other types of collateral could be used (or used at low cost). Flight-to-safety considerations are likely to subside if economic conditions continue to normalize, reducing the incentive for foreigners to buy Treasuries and raising their yields, all else equal. More normal economic conditions would also be expected to increase domestic investment demand, which would either push up domestic interest rates or lead to more foreign borrowing. Recently, relatively stronger economic growth in the United States compared with other advanced economies has led U.S. interest rates to begin to rise relative to foreign rates. This relative movement in rates could attract additional foreign capital inflows. Finally, any discussion of foreign holdings of Treasuries would be incomplete without a discussion of the large holdings of foreign governments (referred to as "foreign official holdings" in Figure 1 ). Foreign official holdings are motivated primarily by a desire for a liquid and stable store of value for foreign reserves; relatively few assets besides U.S. Treasury securities fill this role well. Depending on the country, foreign reserves may be accumulated as a result of a country's exchange rate policy, the desire to reinvest export proceeds, or the desire to build a "war chest" to fend off speculation against the country's exchange rate and securities. If motivated by any of these factors, rate of return may be a lesser consideration for foreign governments than it is for a private investor. Although large, foreign official holdings have not been significantly increasing since 2013, after more than a decade of rapid growth before then. Since 1986, the United States has had a net foreign debt, and that debt grew to $7 trillion in 2014. The growth in net foreign debt is unsustainable in the long run, meaning that it cannot continuously grow faster than GDP, as it has generally done in recent decades. This net foreign debt has not imposed any burden on Americans thus far, however, because the United States has consistently earned more income on its foreign assets than it has paid on its foreign debt, even though foreigners owned more U.S. assets than Americans owned foreign assets. Although it is likely that the United States would begin to make net debt payments to foreigners at some point if the net foreign debt were to continue to grow, it has not been a cause for concern yet. To date, the primary drawback is the risk that its unsustainable growth poses, albeit slight in the short run. Unsustainable growth in the net foreign debt could lead to foreigners at some point reevaluating and reducing their U.S. asset holdings. If this happened suddenly, it could lead to financial instability and a sharp decline in the value of the dollar. Alternatively, were the growth in the debt to decline gradually, it is unlikely to be destabilizing. A related concern is whether the major role of foreigners in Treasury markets adds more risk to financial stability. In other words, would financial stability be less at risk if the United States borrowed the same amount from foreigners, but foreigners invested exclusively in private securities instead of U.S. Treasury securities? Empirical evidence does not shed much light on this question, although the fact that some foreign crisis countries, such as Ireland, had accumulated mainly private, not government, debt might suggest that avoiding foreign ownership of government debt is not a panacea. Although countries like Greece with large foreign holdings of government debt have experienced financing problems, a large share of Italy's large government debt was held domestically, and it has nevertheless faced financing problems. The major role of foreign governments as holders of U.S. Treasuries could reduce financial instability if foreign governments are less motivated by rate of return concerns because that implies they would be less likely to sell their holdings if prices started to fall. Finally, foreign official holdings of U.S. debt may have foreign policy (as opposed to economic) implications that are beyond the scope of this report. What policy options exist if policymakers decided foreign ownership of federal debt was undesirable? Absent strict capital controls, it is unlikely that foreigners could effectively be prevented from buying Treasury securities. After Treasury securities are initially auctioned by Treasury, they are traded on diffused and international secondary markets, and turnover is much higher on secondary markets than initial auctions. A foreign ban on secondary markets would be hard to enforce because secondary market activity could shift overseas, and even if it could be enforced, the U.S. saving-investment imbalance would likely shift foreign investment into other U.S. securities--perhaps even newly created financial products that allowed foreigners to indirectly invest in Treasury securities. Thus, a ban would not address the underlying economic factors driving foreign purchases. Economically, the only way government could reduce its reliance on foreign borrowing is by raising the U.S. saving rate, which could be done most directly by reducing budget deficits.

This report presents current data on estimated ownership of U.S. Treasury securities and major holders of federal debt by country. Federal debt represents the accumulated balance of borrowing by the federal government. To finance federal borrowing, U.S. Treasury securities are sold to investors. Treasury securities may be purchased directly from the Treasury or on the secondary market by individual private investors, financial institutions in the United States or overseas, and foreign, state, or local governments. Foreign investors have held slightly less than half of the publicly held federal debt in recent years, prompting questions on the location of the foreign holders and how much debt they hold. This report will be updated annually or as events warrant.

Economic conditions in China are of considerable concern to U.S. policymakers, given the potential impact of China's economy on the global and U.S. economy. The recent large inflow of financial capital into China, commonly referred to as "hot money," has led some economists to warn that such flows may have a destabilizing effect on China's economy. In an op-ed column in the Financial Times , two China experts wrote of hot money's "ensuing money creation is fueling rising inflation, systemic overinvestment, and an overextended banking system." There are also indications that "hot money" flows have played a role in the recent rise and fall of China's stock and real estate markets. Other economists have expressed concerns that efforts by the Chinese government to control "hot money" inflows could have significant negative consequences for the U.S. and global economy in the form of slower growth, greater inflation, or both. There is no formal definition of "hot money," but the term is most commonly used in financial markets to refer to the flow of funds (or capital) from one country to another in order to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts. These speculative capital flows are called "hot money" because they can move very quickly in and out of markets, potentially leading to market instability. Many economists maintain that the rapid outflow of "hot money" first from Thailand and then from other Southeast Asian economies was a significant contributing factor to the onset and severity of the East Asian Financial Crisis of 1997. Because "hot money" flows quickly and is poorly monitored, there is no well-defined, direct method for estimating the amount of "hot money" flowing into a country during a period of time. In addition, once an estimate is made, the amount of "hot money" may suddenly rise or fall, depending on the economic conditions driving the flow of funds. One common way of approximating the flow of "hot money" is to subtract a nation's trade surplus (or deficit) and its net flow of foreign direct investment (FDI) from the change in the nation's foreign reserves. For the first half of 2008, China's foreign reserves increased by $280.6 billion. Over the same time period, China's accumulated trade surplus was $99.0 billion and its FDI inflow was $52.0 billion. Using the method described above, China received an inflow of $129.6 billion in "hot money" during the first half of 2008. According to the former director of China's National Bureau of Statistics, Li Deshui, China's research institutes estimate that about $500 billion in "hot money" has accumulated in China. However, Zhang Ming, an economist at the Chinese Academy of Social Sciences, reportedly estimated that $1.75 trillion in "hot money" could have accumulated over the last five years. Some Chinese experts reportedly predict that the amount of "hot money" in China will rise to $650 billion by the end of 2008. Some western analysts think the Chinese figures underestimate the amount of "hot money" in China because they do not take into account changes in China's monetary policies, such as the raising of reserve requirements and the creation of China's sovereign wealth fund, the China Investment Corporation. Taking into account these other factors, U.S. financial analyst Brad Setser estimates that China received over $400 billion in "hot money" flows between April 2007 and March 2008. While there may be some uncertainty about the precise amount of "hot money" flowing into China, there appears to be a general agreement as to why speculators are moving their capital into China. Analysts point to two key factors: (1) the relative interest rates in China and the United States; and (2) expectations of the future appreciation in the value of China's currency, the renminbi (RMB). Over the last year, interest rates in China and the United States have been moving in opposite directions. The U.S. Federal Reserve lowered the federal funds rate nine times over the last year from a high of 5.25% in June 2007 to its current low of 2.00%. Over the same time period, the People's Bank of China raised its benchmark one-year interest rate on deposits from 2.52% to 4.14%. The reversal in the relative interest rates of the two nations has created an incentive for investors to move their deposits from the United States to China in order to earn a higher rate of return. In addition to the attraction of the interest rate difference, speculators are moving "hot money" into China because of the general expectation that the RMB will continue appreciate in value against the U.S. dollar and other currencies. On July 21, 2005, China announced it was dropping its fixed exchange rate policy for a "managed float" policy that would allow the value of the RMB to fluctuate within a specified range on a daily basis. Since then, through July 15, 2008, the RMB has appreciated in value by 21.6%. Most analysts expect the Chinese government to continue the RMB's appreciation. The combined effects of the interest rate differences and the expected appreciation of the RMB provide a strong incentive for "hot money" flows into China. Li Yang, a financial researcher at China's Academy for Social Sciences calculated that "hot money" speculators can obtain profit rates of over 10% per year with little investment risk. In theory, despite its recent capital market liberalizations, China still maintains some restrictions over foreign exchange and international capital flows, providing it with various instruments to prevent the inflow of the unwanted "hot money." However, sources report that speculators are using various methods to circumvent Chinese laws and regulations. According to a Deutsche Bank survey of 200 companies and 60 "high income" individuals, over half of the "hot money" coming into China is being done in the form of over-reported or false foreign direct investment (FDI). An additional 11% of the "hot money" is generated by underreporting the value of imports, and another 10% comes from the overvaluing exports. The Deutsche Bank study also reported that 5% of the "hot money" enters China via "underground money exchangers" ( dixia qianzhuang ). Employee compensation (wages sent to China by overseas workers and remuneration paid by Chinese enterprises to overseas staff working in China) and current transfers (emigrant remittances, gifts, and donations) may be another major source of hot money. According to some analysts, U.S. economic policies (and the slow U.S. economy) may be exacerbating China's "hot money" problem, creating a "Catch-22" situation for Beijing. Years of large federal deficits and comparatively low U.S. interest rates have contributed to the weakening of the U.S. dollar against many currencies (including the RMB) and the outflow of "hot money" from the United States. One Chinese official indicated that he thought the U.S. subprime crisis was also fueling "hot money" flows. The main concern in China over the influx of "hot money" has been that it may add to China's inflationary pressures. In July 2008, the government reported that the consumer price index had risen by 7.9% over the first half of 2008 over the same period in 2007 (due largely to food prices), which was much higher than the government's target ceiling of 4.8%, and the producer price index rose by 7.6%. High inflation is a serious issue for the government because of concerns that rapid inflation could produce protests and political instability. At the same time, the government needs rapid growth to help employ the 27 million new job seekers each year. Under Chinese law, most foreign exchange entering the country must be converted into RMB. The large flow of "hot money" is causing a sharp rise in China's money supply, resulting in inflation. The Chinese government has attempted to "sterilize" the foreign exchange by selling bonds to "soak up" the RMB put into circulation, but this has resulted in higher interest rates that attract even more "hot money." China has attempted to nullify the inflationary impact of "hot money" by other means, such as the imposition of lending quotas on banks, increasing the ratio of reserves commercial banks are required to maintain (it was raised to 17.5% in June 2008 compared to 9.0% in January 2007), raising interest rates, instituting government controls to limit investment in overheated sectors (such as real estate and the steel industry), and imposing price controls on certain products (mainly food and energy). A big concern by some Chinese analysts is that "hot money" may be creating bubbles in its stock and real estate markets, although recent evidence suggests that the "hot money" is being largely deposited into bank accounts. If the Chinese government determines it is necessary to take action, it has a number of options on how to slow down the flow of "hot money." However, each option has potentially negative side effects. An increase in the value of the RMB would arguably be an effective option for controlling inflationary pressures caused by "hot money." A sharp appreciation in the RMB vis-a-vis the dollar--either by a sharp revaluation or quickening the pace of appreciation under its "managed float" regime--would eliminate one of the two main incentives driving the speculators. The move would probably lower the price of imports (including raw materials) and possibly slow the growth in foreign exchange reserves. Other analysts have suggested that China depreciate the RMB, a move that would undermine the speculators, but could prompt Congress to pass currency legislation (including sanctions) against China. Some Chinese officials contend that although a stronger RMB might reduce inflationary pressures, it would also likely raise the price of China's exports and diminish China's attractiveness as a destination for FDI, leading to widespread layoffs, factory closings, and slower economic growth. While export growth over the first six months of 2008 has been strong (up 22% over the same period in 2007), there is concern that rising costs in China and economic weakness in the United States could greatly slow China's export growth and reduce the domestic value of its foreign exchange reserves. Another option for slowing the inflow of "hot money" is to tighten restrictions on the flow of foreign capital into China, a trend contrary to recent U.S. efforts to persuade China to liberalize its financial markets. During his first speech as Vice Premier on May 9, 2008, Wang Qishan spoke of "reinforcing supervision over cross-country capital flow." There have also been reports that China is tightening its supervision of bank accounts held by non-residents to curb the influx of "hot money." In addition, China could attempt to further promote the outflow of capital to reduce the inflationary impact of "hot money," using some of its foreign exchange reserves. However, many policymakers, including those in the United States, are concerned over the potential impact of wide-scale (and potentially government directed) Chinese investment in "strategic" economic sectors (such as oil and gas, high technology, etc.). Some U.S. analysts contend that the large levels of "hot money" pouring into China will force China to accelerate the appreciation of the RMB relative to the U.S. dollar and make the government enact other reforms to make the currency more flexible. This, they maintain, could in the short run help boost U.S. exports to China and reduce imports from China, thus improving the U.S. bilateral trade balance with China. Others warn that appreciating the RMB would also make U.S. imports from China more expensive, which could add to inflationary pressures in the United States. In addition, China might reduce its purchases of U.S. Treasury securities (used to help fund the federal deficit), which could push up U.S. interest rates. Another concern is that Chinese efforts to fight hot money/inflation could lead to a slowdown in China's economic growth. This could have numerous implications for the U.S. and global economies. Over the past few years, China has been one of the fastest growing economies, which has made it a major market for U.S. exports. In 2007, China surpassed Japan to become the 3 rd largest U.S. export market, and thus a Chinese slowdown could reduce its demand for U.S. goods and services. Additionally, inflationary problems or an economic slowdown could cause Chinese officials to delay economic reforms, particularly to its financial system and currency policy. The issues concerning the potential dangers of "hot money" flows to China reinforces the U.S. argument (and has been acknowledged by the Chinese government as a long term goal), that China needs to do more to implement policies to encourage domestic demand and lessen its dependence on exporting and fixed investment for its economic growth. Some U.S. analysts contend that adopting a free floating exchange rate is the best way to stop hot money inflows and to provide the government with the monetary tools it needs to control inflation. However, Chinese officials contend that such a move at this time would shock the economy, especially the export sector, and thus would be too risky (although they contend that a fully convertible currency is a long range goal). The "hot money" issue is a further indicator of the growing economic integration between the United States and China.

China has experienced a sharp rise in the inflow of so-called "hot money," foreign capital entering the country supposedly seeking short-term profits, especially in 2008. Chinese estimates of the amount of "hot money" in China vary from $500 billion to $1.75 trillion. The influx of "hot money" is contributing to China's already existing problems with inflation. Efforts to reduce the inflationary effects of "hot money" may accelerate the inflow, while actions to reduce the inflow of "hot money" may threaten China's economic growth, as well as have negative consequences for the U.S. and global economy. This report will be updated as circumstances warrant.

The Every Student Succeeds Act (ESSA), signed into law on December 10, 2015 ( P.L. 114-95 ), comprehensively reauthorized the Elementary and Secondary Education Act of 1965 (ESEA). Among other changes, the ESSA amended federal K-12 educational accountability requirements for states and local educational agencies (LEAs) receiving ESEA funds, including those regarding the identification, support, and improvement of high schools with low graduation rates. Under the ESSA, states seeking Title I-A funds are required to submit accountability plans to the Department of Education (ED) that must address, among other things, their approaches toward dealing with low high school graduation rates. In implementing these plans, states must identify for support and improvement all public schools failing to graduate one-third or more of their students. LEAs that serve schools identified for support and improvement are required to develop a plan to improve graduation rates. If a school does not improve within a state-determined number of years, the school is subject to more rigorous state-determined actions. The national graduation rate for the Class of 2016 was 84.1%--the highest rate recorded since 2010-2011, when most states and LEAs began consistently reporting under 2008 federal guidelines. Improvement in the national rate has been accompanied by improvements in nearly every state and across all reported groups of students, including all racial and ethnic subgroups, low-income students, English learners, and students with disabilities. However, graduation rate gaps persist among the several student subgroups. Moreover, the graduation rate varies enormously among individual high schools across the country, with a large number of schools doing poorly on this measure. Importantly for ESSA accountability implementation, CRS analysis of school-level data reveals that as many as 16% of high schools may fail to graduate at least one-third of their students. Thus, there are potentially thousands of high schools nationwide that may be identified for intervention in the coming years. Implementation of the accountability rule occurs in school year 2017-2018 and relies on additional criteria that would undoubtedly impact this estimate. In addition to new accountability rules, the ESSA provided the first definition of the high school graduation rate in federal education law. This was the culmination of years of effort at the national, state, and local levels to achieve national uniformity of measurement and establish statewide longitudinal data systems. Put simply, the ESSA defines the Four-Year Adjusted Cohort Graduation Rate (ACGR) as the number of students who graduate in four years with a regular high school diploma divided by the number of students who form the adjusted cohort for the graduating class. From the beginning of 9 th grade, students entering that grade for the first time form a cohort that is adjusted by adding students who subsequently transfer into the cohort and subtracting students who subsequently transfer out, emigrate to another country, or die. The following formula provides an example of how the ACGR is calculated for the class of 2016: As Figure 1 shows, the rate of high school completion in the United States increased dramatically after World War II. The rate displayed in this figure is not the ACGR; rather, it represents the number of persons ages 25 to 29 whose highest level of educational attainment was at least a high school diploma (or its equivalent). It is based on responses to the Current Population Survey (CPS). After 10-15 percentage-point increases every decade, this measure plateaued at about 85% in 1980 and stood at 92.5% in 2017. Although the overall rate of high school completion has reached an historically high level, inequities persist among racial and ethnic groups. In general, these groups have made progress similar to the overall trend with one exception: Hispanics have seen a rapid increase in high school completion in recent years. Even with this increase, the attainment gap between white, non-Hispanics and Hispanics remains wide--13 percentage points in 2017. Black attainment also continues to lag behind that of Asians and non-Hispanic whites--maintaining a roughly five percentage point gap below the latter since the early 1990s. The CPS educational attainment rate is presented here (in Figure 1 ) because it is useful for tracking long-term trends. It is important to note the differences between the ACGR and the CPS educational attainment rate. The CPS is a cross-sectional measure (i.e., taken at a single point in time) of those included in the survey sample. The ACGR is a longitudinal measure that tracks an entire cohort of students from entry into high school to graduation. Another distinction between the two measures is that the CPS includes diploma equivalencies (such as the General Educational Development (GED) test) in its rate, while the ACGR only includes "regular" diplomas. The inclusion of equivalencies may partly explain why the CPS rate is higher than the ACGR. Additionally, the CPS rate shown in Figure 1 is for people ages 25 to 29--giving them more time to complete high school or receive a GED compared to the four years allotted to cohorts in the ACGR. More broadly, while the ACGR is confined to those engaged in the school system, the CPS captures a wider population of persons in society, generally. Even with these differences, the overall ACGR collected since 2010-2011 shows similar trends. As Table 1 shows, the overall graduation rate increased five percentage points between 2011 and 2016--a rate similar to the three percentage point increase in the overall CPS educational attainment rate estimate for the same time period. The two high school completion measures show somewhat different trends among racial/ethnic groups. In the CPS data, the white, non-Hispanic rate increased less than 1% between 2011 and 2016, while it increased over 4% in the ACGR data. During the same period, the CPS rate for blacks increased less than 3%, while the ACGR for blacks increased over 9%. The CPS rate grew just over 1% for Asians while the ACGR grew almost 4%. Both measures had similar changes for Hispanics. Because the ESSA accountability requirements apply to both the total student body within schools as well as specified subgroups, states must report the ACGR for several subgroups including low-income students, English language learners, students with disabilities, and various racial/ethnic categories. The data spanning 2011-2016 indicate progress among all three of these subgroups: graduation rates among low-income students increased more than seven percentage points, English language learners increased nearly ten percentage points, and students with disabilities increased six and a half percentage points. The rate of on-time high school completion varies widely across the country. For the Class of 2016, the ACGR in 27 states was above the national average (84.1%) and below the national average in 23 states. New Mexico had the lowest ACGR (71%) and Iowa had the highest (91.3%). Figure 2 displays the ACGR for the Class of 2016 by state. Four states graduated fewer than 76.1% of their students, nineteen states graduated 76.2%-84.1%, seventeen states graduated 84.1%-87.7%, and ten states graduated 87.8% or more. As shown in Table 2 , graduation rates have increased or remained the same in every state between the graduating classes of 2011 and 2016. The largest increase occurred in Alabama, which saw an increase from 72% (which was below the national average), to 87.1% (which was above the national average). Four states--Alaska, Georgia, Nevada, and West Virginia--had increases of more than ten percentage-points. Three states--Indiana, South Dakota, and Vermont--saw increases of less than one percentage point over this same period. ESSA provisions require that, beginning with the 2017-2018 school year, each state must use the ACGR as an indicator in their accountability systems and in calculating long-term and interim goals. Analysis of school-level data for the Class of 2015 reveals 2,512 high schools--16% of schools nationwide--had an ACGR of less than 70% ( Table 3 ). [Note that, due to privacy protections imposed on publically available data, this analysis uses 70% (instead of 66.7%) as the cutoff for schools to be identified for intervention. These limitations only apply to published data; states would not face such constraints as they have access to the complete data of actual rates reported for every school.] Because this analysis uses 70% instead of 66.7%, it likely overestimates the number of schools that may be identified for intervention due to low graduation rates. This analysis may further overestimate the number of schools that may be identified for intervention because the accountability provisions do not take effect until the 2017-2018 school year and graduation rates have been improving. Even with these caveats, this analysis suggests that there are potentially thousands of high schools that may be identified for improvement due to failure to graduate more than one-third of their students. Whether or not these schools would be uniquely identified for intervention based upon graduation rates (or identified for other reasons as well) is unknown. That is, it is unclear how much overlap may exist among schools identified by graduation rate and those identified for other reasons (i.e., the lowest-performing 5% of Title I schools and those with chronically underperforming subgroups). Nonetheless, the number of schools identified as being in need of comprehensive support for this reason may be large in some states. The Department of Education (ED) collects the Adjusted Cohort Graduation Rate (ACGR) from states through its EDFacts Initiative. These data are made public on ED's website. Disclosure avoidance techniques are applied to comply with privacy protections required by the Family Educational Rights and Privacy Act. These steps result in complete suppression of the ACGR for schools with cohorts of fewer than 6 students, reporting of ACGR ranges for cohorts between 6 and 200 students, and reporting of exact rates for cohorts over 200 students. The widths of the ACGR ranges are determined by cohort size and get progressively wider as a cohort size decreases. The actual ACGR reported by states lies somewhere within the published range. ACGR ranges reported by EDFacts are shown in Table A-1 .

The Every Student Succeeds Act (ESSA) comprehensively reauthorized the Elementary and Secondary Education Act of 1965 (ESEA). Among other changes, the ESSA amended federal K-12 educational accountability requirements for states and local educational agencies (LEAs) receiving ESEA funds, including those regarding the identification, support, and improvement of high schools with low graduation rates. In addition to new accountability rules, the ESSA provided the first definition of the high school graduation rate in federal education law. States and LEAs have been reporting their rates using the same definition, originally laid out in 2008 regulations, since the 2010-2011 school year. The national graduation rate for the Class of 2016 was 84.1%--the highest rate recorded using the new methodology. The graduation rate for the Class of 2011 was 79.0%. This national-level improvement has been accompanied by improvements in nearly every state and across all reported groups of students, including all racial and ethnic subgroups, low-income students, English learners, and students with disabilities. Still, graduation rate gaps persist among several student subgroups. At the state level, 27 states were above the national average in 2016 and 23 were below. Three states graduated fewer than 75% of their students, nine states graduated 75%-79.9%, eleven states graduated 80%-84.9%, seventeen states graduated 85%-87.9%, and ten states graduated 88% or more. Importantly for ESSA accountability implementation, analysis of 2014-2015 school-level data reveals that as many as 16% of high schools may fail to graduate at least one-third of their students. Thus, there are potentially thousands of high schools nationwide that may be identified for intervention in the coming years.

"Services" refers to a range of economic activities that involve the sale and delivery of an intangible product, such as audiovisual, construction, and computer and related services; energy; express delivery; e-commerce; financial, accounting, and legal services; retail and wholesaling; transportation; telecommunications; and travel. For many countries, including the United States, trade in services is a large and growing component of their overall trade. The 1995 World Trade Organization (WTO) General Agreement on Trade in Services (GATS), and subsequent annexes, established basic rules for global trade in services. The purpose of the ongoing Trade in Services (TiSA) negotiations is to build on those rules by further increasing liberalization among the 23 negotiating parties, including the United States and European Union (EU), to open markets to foreign service providers and enhance rules governing services trade. Congress has interest in the TiSA negotiations, as services accounted for $750.9 billion (33%) of U.S. exports in 2015. Congress also has a direct role in overseeing the ongoing TiSA negotiations, including in the context of the U.S. trade negotiating objectives on services it set under the Trade Promotion Authority (TPA) legislation passed in June 2015 ( P.L. 114-26 ). If TiSA is concluded, Congress would face legislation to approve and implement U.S. commitments under TiSA. This report provides a brief overview of U.S. trade in services, background on services in U.S. trade agreements, and an in-depth discussion of the ongoing TiSA negotiations. For more information on trade in services, please see CRS Report R43291, U.S. Trade in Services: Trends and Policy Issues , by [author name scrubbed]. For an executive-level summary of the TiSA negotiations, please see CRS In Focus IF10311, Trade in Services Agreement (TiSA) Negotiations , by [author name scrubbed]. The United States is a global leader in services and the service sector is an important part of the overall U.S. economy. Services accounted for 78% of U.S. private sector gross domestic product (GDP) and for 91.8 million (82%) private sector employees in 2015. Services encompass a broad range of economic participants and activities from express delivery to education and digital trade. Services not only function as end-use products but are often referred to as the "lifeblood" of the rest of the economy, facilitating goods and enhancing productivity and overall competitiveness of an economy. Global value chains, where different stages of production are located in different countries, are redefining the role that services play in international trade. Today, more than half of global manufacturing imports are intermediate goods traveling within supply chains, while over 70% of the world's services imports are intermediate services. Intermediate services embedded within a value chain include, for example, transportation, logistics, and distribution to move goods along; research and development to invent new products; telecommunications to open e-commerce channels; business services such as legal, accounting, marketing or human resources; and financial services to provide credits for the manufacture and consumption of goods. Compared to goods, the basic characteristics of services are complex. Services are intangible and can be conveyed in various formats, including electronically and direct provider-to-consumer contact. To address this complexity, members of the WTO have adopted a system of classifying four modes of delivery for services to measure trade in services (see the text box below). These modes are also used to classify government policies that affect trade in services in international agreements. Distinguishing among the various modes of delivery of services is important for analyzing and measuring the volume of services trade, and because the different modes of delivery can raise different policy issues. There are two distinct categories for measuring trade in services: cross-border trade and services supplied through affiliates. Cross-border services trade data measures U.S. exports and imports, and includes Modes 1, 2, and 4, as noted above. Looking at total cross-border trade, in 2015, services accounted for 33.2% of the $2.2 trillion total U.S. exports (of goods and services) and 17.7% of the $2.76 trillion total U.S. imports. The United States has continually realized surpluses in services trade, which have partially offset large trade deficits in goods trade in the U.S. current account. Many services require direct contact between the supplier and consumer and, therefore, service providers often need to establish a presence in the country of the consumer through foreign direct investment (FDI) as characterized by Mode 3. In 2013, U.S. firms supplied $1.3 trillion in services to foreigners through their majority-owned foreign affiliates. In 2013, foreign firms sold $878.5 billion in services to U.S. residents through their majority-owned foreign affiliates located in the United States ( Table 1 ). Unlike goods trade where many trade barriers are primarily at the border (e.g., tariffs or quotas), restrictions on services trade occur largely within the importing country, so-called "behind-the-border" barriers. These non-tariff barriers (NTBs) are often in the form of government regulations. Governments regulate service industries to pursue legitimate policy objectives and protect consumers from harmful or unqualified providers (e.g., licensing doctors to ensure they have the relevant medical training to protect public health). Concerns may arise if regulations are protectionist or are applied in a discriminatory and unnecessarily trade restrictive manner to foreign service providers that limits market access, favoring domestic providers. Because services transactions more often require direct contact between the consumer and provider than is the case with goods trade, many of the "trade barriers" that foreign companies face pertain to the establishment of a commercial presence in the consumers' country in the form of direct investment (Mode 3) or to the temporary movement of providers and consumers across borders (Modes 2 and 4). As the world's largest exporter of services, the United States has an interest in opening international markets and has been at the forefront of efforts to liberalize trade in services. The United States has a long history in tackling trade barriers in services in multiple forums, most recently in the proposed Trans-Pacific Partnership (TPP). The Trade Promotion Authority (TPA) legislation that Congress renewed and was signed into law on June 29, 2015 ( P.L. 114-26 ), contains specific provisions establishing U.S. trade negotiating objectives on services trade. The text broadly states that "[t]he principal negotiating objective of the United States regarding trade in services is to expand competitive market opportunities for the United States." Congress also specifically pointed to the utilization of global value chains and supported pursuing the objectives of reducing or eliminating trade barriers through "all means, including through a plurilateral agreement" with partners able to meet high standards. If the parties reach agreement on TiSA while TPA is in effect, and if the Administration meets certain statutory requirements and timelines, TPA allows Congress to consider the required implementing bill under expedited ("fast track") procedures. The 1995 multilateral GATS is the first and only multilateral framework of principles and rules for government policies and regulations affecting trade in services among the current 162 WTO members. The GATS also contains annexes for specific sectors: movement of natural persons, financial services, telecommunications, and air transport services. In the GATS, market access obligations and national treatment commitments are made on a positive, or opt-in, basis subject to a member's specific reservations. That is, each member identifies only those sectors and the modes covered by their liberalization commitments. As members can tailor the sectoral coverage to fit their national policy objectives, certain limitations, such as the number of suppliers, may be imposed. The GATS provides the foundation or floor on which rules in other agreements on services are based, including in U.S. free trade agreements (FTAs). Trade in services has been included in subsequent U.S. bilateral and regional FTAs, including in the TPP. These agreements have built on the GATS, and on each other, to further liberalize trade in services. Services and services trade have evolved significantly since GATS went into effect in 1995. Technology innovation such as the Internet has allowed for a greater volume and range of services to be traded and also has led to new barriers to trade in services. Efforts to expand the GATS have been ongoing as part of the WTO Doha Development Agenda (Doha Round) that was launched in December 2001. The Doha negotiations are stalled, and the 10 th Ministerial Conference of the World Trade Organization (WTO), held in Nairobi, Kenya, concluded in December 2015 with no clear path forward on the Doha Round. The Nairobi Declaration underscored the importance of a multilateral rules-based trading system with complementary regional and plurilateral agreements. Largely because of the lack of progress in the WTO Doha Round, a group of 23 WTO members are engaged in discussions on a potential sector-specific, plurilateral agreement to liberalize trade in services. Contrary to the WTO MFN principle, a plurilateral agreement applies only to those countries that have signed it. The WTO has allowed exceptions to MFN in plurilateral agreements, such as the WTO Government Procurement Agreement (GPA) and WTO Information Technology Agreement (ITA). Negotiations on a Trade in Services Agreement (TiSA) were launched in April 2013, initially led by Australia and the United States. The 23 TiSA participants account for about 70% of world trade in services (see Figure 1 ). The group has been referred to as a "coalition of the willing," as each participant sees a national interest in further liberalizing trade in services. The United States has, or is negotiating, regional and bilateral FTAs with most of the TiSA partners (see Figure 1 ). Supporters believe a single plurilateral agreement would ensure a common level playing field across a broad set of countries, simplifying conducting business across multiple TiSA counties, and set a new global standard for services trade that could ultimately be incorporated into the WTO in the future. Critics contend that the United States could achieve a higher level of ambition by negotiating separate agreements rather than a "one size fits all" agreement. Twelve of the Group of 20 (G-20) members are participating in TiSA, but some key major emerging markets in the G-20 are not currently parties to the TiSA negotiations, including Brazil, China, and India. While many large emerging economies have relatively small service markets today, the potential for expansion of their markets as providers and consumers of services is great. This not only gives the industries in those countries room to grow domestically, but could make these emerging markets attractive to foreign providers as well. Of those emerging market countries currently not participating, only China has expressed interest in joining TiSA to date. China's interest has generated differences among TiSA participants. Reportedly, the United States has expressed concerns about China's readiness to undertake the commitments that TiSA would require, given China's limited implementation of other agreements to date, including its GATS commitments and its failure to date to join the GPA. The EU and some observers have argued for China's participation sooner rather than waiting for the conclusion of TiSA. Other observers argue it would be easier to conclude TiSA negotiations without the involvement of these large emerging economies, and then invite those countries to join once the high level of liberalization commitment is established. Supporting this argument is the concept that the agreement overall is reportedly being structured so that it can be "multi-lateralized" in the future and incorporated into the WTO. The chances or timeline of such an event are uncertain, as the TiSA itself remains under negotiation. If TiSA is incorporated into the GATS, in whole or in parts, one concern may be whether it would become harder to update as services evolve, as any new negotiations could be impeded similar to the Doha Round. On the other hand, participants may be able to update TiSA as a stand-alone agreement similar to the current negotiation. The structure of the agreement, while still under negotiation, is expected to include four parts: A core text that incorporates and builds on key provisions of the GATS and includes horizontal provisions that would apply to all parts of the agreement; Commitments on market access and national treatment with each party's schedule and list of exceptions or non-conforming measures; Specific sectoral regulatory annexes; and Institutional provisions that set the ground rules for how TiSA would function, addressing issues such as amending the agreement in the future or how new members could join. The current text reportedly contains multiple proposed sectoral annexes, including on land and air transport, e-commerce, distribution/direct selling, energy and environmental services, telecommunications, financial services, and performance requirements, among others. The United States Trade Representative (USTR) and many observers have expressed a desire for TiSA to meet or exceed the level of ambition in the services chapters of the proposed TPP, but have acknowledged that this may not be possible for all aspects given the diversity of TiSA parties' level of development and priority interests. Like GATS, TiSA would not apply to "services supplied in the exercise of governmental authority." TiSA would not constrain a government from taking measures for legitimate policy reasons to protect national security or maintain public order; protect human, animal, or plant health; prevent fraud and deception; or protect individual privacy and safety. TiSA would build on the foundational principles of the GATS. Some rules, such as non-discrimination among TiSA partners, would be in the core text and apply horizontally to all sectors across the agreement. Other rules would be sector-specific. General Obligations . As mentioned, the core text of TiSA would reinforce and build on the core disciplines of GATS, including most-favored nation treatment, national treatment, and facilitating agreements between parties to establish sector-specific mutual recognition agreements (MRAs). Transparency. Improved transparency and predictability are key principles the United States seeks in its trading partners. TiSA provisions may include good governance and regulatory practices similar to those in other U.S. FTAs. These commitments go beyond GATS, including requirements to publish current and proposed regulations and provide a sufficient period for anyone to comment. Negotiators are working to reconcile the regulatory obligations with the varied processes for consulting with public stakeholders that are used by various TiSA participants. The United States and EU, for example, have different processes for developing regulations and timelines for permitting public comment. One option may be for TiSA to permit multiple pathways for parties to achieve transparency and public consultation objectives. According to the EU report of the November 2016 round, the Transparency annex is complete though the text is not yet public. Domestic R egulation . The section on domestic regulation would establish rules related to the licensing and qualification requirements for professional services that are set by each party. Movement of Natural Persons. Rules on the movement of foreign nationals (Mode 4) aim to facilitate people providing services through temporary entry and stay for business travel. This has been an issue of concern to Congress. As such, the United States has not yet put forward an offer in this category and may only extend a limited offer, if at all. In the proposed TPP, USTR Ambassador Michael Froman committed that the agreement would not have an impact on U.S. immigration law or policy or visa system. The EU has proposed including commitments on the temporary entry and stay of highly skilled professionals in a separate protocol rather than within the TiSA core text. State-Owned Enterprises (SOEs). The United States has proposed rules on SOEs, a newer discipline that has gained importance because of the growing economic significance of SOEs in some markets. The TPP SOE chapter is said to be the basis for the TiSA text to ensure non-discrimination, transparency, competition, and fair treatment regardless of ownership. The United States reportedly is seeking to expand on the TPP definition of SOEs to also include cooperatives. Government Procurement. TiSA participants are discussing whether to include disciplines on government procurement of services to complement the WTO Government Procurement Agreement (GPA). Most TiSA participants, including the United States and EU, are active or observer parties to the GPA. The TiSA could present an opportunity to encourage or require that all participants become members of the GPA or could build on the GPA commitments. Reportedly, the draft TiSA language is less ambitious than the GPA, and the United States is currently deferring to the existing WTO GPA rather than seeking additional commitments in TiSA. To address market access liberalization commitments, TiSA participants have agreed to a hybrid approach, combining both a negative list and a positive list. Under a negative list, FTA provisions apply to all categories and subcategories of services in all modes of delivery, unless a party to the agreement has listed a service or mode of delivery as an exception. In contrast, under a positive list, each party must specifically opt in for a service sector to be covered and may include limitations. The United States typically uses a more comprehensive negative list approach in its bilateral and regional FTAs for both market access and national treatment. Because of disagreements among the TiSA participants, and in the interest of being compatible with the positive list approach in the GATS, TiSA negotiating parties decided to use a hybrid approach: market access obligations to liberalize service markets are being negotiated under a positive list, while national treatment obligations are being negotiated under a negative list. Each participant's offer is built on the GATS structure for market access commitments, including horizontal commitments and those by individual service sector. The positive list may be viewed as less ambitious because new inventions or sectoral innovations would not be covered under TiSA unless they are explicitly added in the future. As national treatment obligations are made on a negative list basis, each participant's schedule would list any reservations that would be excluded from the obligations (including existing measures, or specific sectors or areas of regulation). One source of contention is whether parties are able to broadly carve out "new services." The EU and some other negotiating parties are pressing to exempt all "new services" from all non-discrimination rules to ensure their ability to regulate in the future, but others fear the precedent it would set for future TiSA participants. Participants agreed to submit their "best FTA" commitments for TiSA market access offers. This concept is not without controversy, as some participants have limited liberalization commitments in other trade agreements. The U.S. market access offer is reportedly similar to that of the services portion of the TPP, and, as mentioned, is said to exclude Mode 4 for temporary movement of people. Some parties express concern that some participants have included a high number of market access reservations, or exemptions. Trade agreements on services often require sectoral annexes because many trade barriers are sector-specific. As mentioned, after the Uruguay Round, WTO members reached agreement on sectoral annexes on telecommunications, financial services, and movement of natural persons. TiSA participants are negotiating which sectoral annexes to include, and some of the sectors under discussion are of particular interest to U.S. stakeholders. Given the competitiveness of U.S. industry in the audiovisual sector, the United States supports this sector's inclusion in TiSA. Some other countries have traditionally opposed including audiovisual, citing their exception aligns with the United Nations Educational, Scientific, and Cultural Organization (UNESCO) agreement. France and Canada, for example, advocate the "cultural exception" concept, and seek to exclude cultural goods and services from international trade agreements, and thus protect and promote domestic artists and other elements of their domestic culture. With competitive industries in express delivery, the United States and EU have put forward a proposal to open markets, but it is unclear what the scope of this annex would include. A chapter or annex on e-commerce or digital trade would likely address trade barriers to cross-border data flows, consumer online protection, and interoperability, among other areas, similar to the provisions in TPP. It is not clear if TiSA would specify international regulatory cooperation on matters of cybersecurity or in support of small and mid-sized enterprises as in TPP. Data localization and cross-border data flows are a contentious topic in international trade. Data transfer regulations that restrict cross-border data flows ("forced" localization barriers to trade), such as requiring locally based servers, may limit the type of transactions and services that a firm can sell in a given country. These types of regulations can create additional costs and may serve as a deterrent for firms seeking to enter new markets. On the other hand, localization supporters claim they increase local control and data security. In its report to the USTR, the Information Technology Industry Council (ITI) noted that its members have experienced "a significant increase in the use" of forced localization requirements that has inhibited their ability to conduct business or do so efficiently. While most of the examples cited by ITI are in non-TiSA countries, the potential future expansion of TiSA makes this a key issue for U.S. technology companies seeking greater access to markets abroad. The U.S. International Trade Commission (ITC) noted that localization measures often create trade barriers, citing examples from multiple countries, including TiSA participants such as the EU. In TPA, Congress provided trade negotiating objectives specific to "digital trade in goods and services and cross-border data flows," instructing the President to ensure that cross-border data flows and electronically delivered goods and services have the same level of coverage and protection as those in physical form, and are not impeded by regulation, except for legitimate objectives. Congress recognized the challenges presented by localization regulations, and sought to ensure that trade agreements eliminate and prevent measures requiring the locating of "facilities, intellectual property, or other assets in a country." While the United States and EU completed negotiations of the EU-U.S. Privacy Shield replacing the Safe Harbor agreement to permit Trans-Atlantic data flows, the Privacy Shield has been challenged, renewing legal uncertainty for such data flows. TiSA discussions on cross border data flows had been on hold during the Privacy Shield negotiations and the EU yet to put forward a proposal on cross-border data flows. Additionally, a group of U.S. and EU privacy experts issued a report recommending a set of "privacy bridges" to resolve differences via regulatory cooperation. Requiring such regulatory cooperation and ongoing dialogue between TiSA members could provide a path forward without changing existing laws in each TiSA country. Negotiators may aim for language that is open enough to enable trade and address evolving technology, but concrete enough for regulators to protect privacy and safeguard cybersecurity. The United States also proposed provisions in TiSA on the liability of Internet platforms. Many U.S. companies in the technology and Internet industry raise concerns that holding intermediaries accountable for content or transactions hosted on their platforms impedes the growth of the digital economy, deterring companies from investing and entering new markets. Many seek provisions similar to those in the U.S. Digital Millennium Copyright Act ( P.L. 105-304 ) safe harbors and Section 230 of the Communications Decency Act ( P.L. 104-104 ). Supporters point to a United Nations joint declaration stating: internet service intermediaries must not be held responsible for content generated by third parties; nor may they be required to control user-generated content. They shall be held responsible only when they fail to exclude content when directed to do so in a lawful court order, issued in accordance with due process, and provided that they have the technical capacity to do so. The intermediaries must be required to be transparent with respect to their practices for the management of traffic or information, and must not discriminate in any way in the treatment of data or traffic. Others, including some musicians whose content has been pirated online, believe intermediaries should be held responsible for reviewing all content posted to their online properties. TiSA is expected to build on the commitments in the GATS annex on financial services and any additional commitments put forward during earlier discussions in the stalled Doha round. In the proposed TPP, financial services are explicitly carved out of the e-commerce chapter, and are therefore not covered by provisions to remove data flow restrictions and localization requirements. Instead, the financial services chapter provision that protects data flows for this sector is more limited. U.S. financial regulators advocated for the explicit ability to restrict cross-border data flows in TPP, in addition to the flexibility provided by the prudential exception. To address concerns raised by Congress and many in the financial services industry opposed to a potential sector-specific carve out in TiSA (as in TPP), the United States proposed new language for TiSA that would prohibit financial services regulators from imposing barriers to cross-border data flows and data localization requirements except in certain circumstances. The U.S. proposal is based on post-TPP discussions between U.S. regulators, Congress, and industry that resulted in support of TPP by many financial services stakeholders. Eight of the TPP partners are participating in the TiSA negotiations. EU positions in the financial services negotiations also raise potential concerns. For example, the EU stated its position in TiSA is to maintain all existing EU and national laws on privacy protection pertaining to financial services which may not align with the U.S. proposal. The continued uncertainty over the United Kingdom's status and the potential political and economic impact of the vote to exit the EU (the so-called "Brexit") also raises questions about the EU's negotiating position given London's current status as the largest global financial center. Another question is to what extent TiSA will include regulatory cooperation on financial services, whether through TiSA or another venue such as the G-20. The EU has pressed for regulatory cooperation on financial services in the Transatlantic Trade and Investment Partnership (T-TIP) negotiations between the United States and EU. The United States, however, currently supports regulatory cooperation for financial services through other venues such as (1) the Joint Financial Regulatory Forum, established in July 2016 to replace the U.S.-EU Financial Markets Regulatory Dialogue and include more representatives of regulatory agencies from each side, (2) the broader G-20, or (3) Basel III. In most U.S. FTAs, including the proposed TPP, and in U.S. bilateral investment treaties (BITs), the financial services provisions incorporate selected investor-state dispute settlement provisions (ISDS) from the applicable investment chapter. This provides private financial service providers access to ISDS under certain circumstances to resolve disputes about alleged breaches of investment obligations by host governments. As TiSA does not include an investment chapter, no ISDS mechanism would exist. Rather, disagreements presumably would be resolved through any government-to-government dispute settlement mechanism set up under TiSA, rather than through an arbitration panel as in ISDS. Maritime Services. While many countries may seek to include this sector to gain greater access to foreign markets, the United States and some other parties may oppose it. U.S. negotiators are currently constrained by law that prohibits any foreign-built or foreign-flagged vessel from engaging in coastwise trade within the United States. Maritime services potentially could be addressed in a broader transportation services annex but a U.S. market access offer would likely not include this sector or would be limited to those port services as allowed for by existing U.S. law. Professional Services. Current negotiations do not include explicit mutual recognition agreements, but rather discussion aims to facilitate interested parties in recognizing foreign professionals (e.g., lawyers, accountants) and expediting their licensing (similar to TPP provisions). Medical services are said to be excluded from TiSA. Telecommunications. TiSA would likely build on the GATS telecommunications annex and commitments made by parties to facilitate trade and open markets to competition. According to reports, the scope is undetermined as participants debate whether obligations would apply to measures relating to access and use of only public telecommunications networks or to measures related to value added services. Initial GATS offers focused on value added services, but, in the context of Doha, many members have put forward offers to improve their existing GATS commitments or to make initial commitments. TiSA could leverage or build on these offers. Telecommunications is one of the most restricted sectors in foreign markets for U.S. companies, according to the USTR's annual "National Trade Estimate Report on Foreign Trade Barriers." The institutional provisions in the proposed TiSA would provide clarity on how the agreement would operate. This section could address how to admit observers or new members into the agreement, or how TiSA could be incorporated into the WTO in the future. Negotiators are also considering whether to implement a rotating secretariat position. A state-to-state dispute settlement mechanism will reportedly be included, but no investor-state dispute settlement mechanism as is contained in more comprehensive U.S. FTAs that have a broader scope beyond services. Trade negotiations can be a contentious issue in the United States as in other countries. On one hand, the limited scope and focus on services of TiSA may make it less controversial compared to other trade agreements because it excludes sensitive areas of investment, agriculture, and certain manufactured goods that are often hotly debated in trade discussions. Many in the business community support TiSA as an opportunity to increase consistency and predictability among trading partners, to eliminate trade barriers, and to strengthen and update multilateral rules on trade in services beyond the WTO GATS. On the other hand, TiSA may raise general debates about agreements to liberalize trade, as well as debates specific to liberalization in the services sector, especially as services can cover sensitive public policy issues like healthcare. Opponents of services liberalization, including some labor unions and civil society groups, are concerned about a number of issues, including the potential impact of TiSA on wages and employment as well as the authority of national, state, and local governments to regulate services. Import-sensitive sectors that might become more open under TiSA, and thus more competitive, may be more likely to oppose it. One issue specific to services regulation is that, while USTR is the lead trade negotiator for the United States, individual U.S. states and localities regulate many services. Lawyers, for example, are state-licensed and are often required to re-apply in order to practice in other states. Similarly, insurance services are regulated at a state level. Some observers contend that it is unclear how USTR is consulting with state regulators who would be responsible for implementing any commitments made by USTR. The USTR has taken different approaches in the past. For example, in the proposed TPP, the United States listed all state regulations as non-conforming measures and thus excluded them from any TiSA requirements. Another option could be for USTR to engage a subset of state regulators and potentially open market access in some sectors in a subset of states who voluntarily agree to the commitments. One current issue is the application of the TiSA commitments to non-participants. TiSA participants agreed to conduct the negotiations on a non-MFN basis, that is, the benefits of the commitments made by TiSA participants would apply to only those countries that have signed on to the agreement, thereby avoiding "free-riders." Also being debated is whether or not each TiSA participant would be required to automatically extend to all TiSA participants the same benefits that it grants to other countries in future bilateral or regional free trade deals it enters. The United States supports this "MFN-forward" approach for future trade agreements while others, including the EU, oppose it. Negotiators are said to be considering a compromise proposal that would allow TiSA parties to opt-in to the MFN-forward approach. Since negotiations were launched in April 2013, 21 rounds of TiSA negotiations and intercessional meetings have taken place in an effort to make further progress. Recognizing that outstanding issues remain and the U.S. position under a new administration is unclear, the parties canceled the planned December 2016 meeting but are meeting to determine how best to move forward in 2017. Given the progress to date, it is unlikely new members will join the TiSA negotiations unless they are willing to accept the provisions agreed to thus far in negotiations. The outlook and timeline for the ongoing TiSA negotiations remain uncertain, as participants are tackling difficult and complex issues. The congressional oversight role in trade negotiations could include monitoring progress on the TiSA negotiations and whether they are advancing or fulfilling TPA negotiating objectives on services trade. Over the past two years, Congress has conducted oversight of TiSA during House and Senate hearings in the context of digital trade and cross-border data flows, the USTR budget and nominations, and TPA. Some Members voiced support of using TiSA to set "21 st century rules" and open markets to expand exports, while others have expressed concern about potential policy impacts in such areas as immigration and cybersecurity. Congress may consider holding TiSA-specific hearings to focus on certain aspects or areas of concern for members. Potential policy issues for Congress and negotiators to address include the following. To what extent are TiSA negotiations consistent with U.S. trade negotiating objectives on services as defined in the TPA legislation? How would TiSA fit with other existing and potential U.S. FTAs, such as the proposed TPP and T-TIP? What impact would a completed TiSA have on the U.S. economy and various stakeholders? What would be the positive and negative impacts of completing TiSA? Should TiSA participants encourage other countries, such as the emerging economies with potentially large services markets and industries--Brazil, China, and India--to join? Would their presence dilute the negotiations' current level of ambition or spur more countries to join? Would the incorporation of TiSA into the WTO GATS make it more effective because of the expanded geographic reach or less effective if it becomes harder to update due to diverse interest of WTO members? As advancements in information technology expand the number and types of services that can be traded and help to create new types of services, traditional companies and start-ups are pushing for a modernized legal and regulatory framework to reflect the fast-evolving digital world. Is it possible to develop a trade arrangement that is precise enough to be effective and flexible enough to take into account rapid changes in the services sector? How should policymakers balance the responsibility of sovereign governments to regulate services to ensure the safety and privacy of their citizens against the objective of expanding markets in order to increase economic growth and efficiency? Should the United States pursue regulatory cooperation efforts in addition to trade agreements in specific service areas such as cross-border data flows where cultural and legal differences and changes in technology limit what can be achieved in trade agreements? Given that many regulations in the United States are set by states, should federal policymakers involve states on a regular or formalized basis in ongoing and future trade negotiations or regulatory cooperation efforts, and if so, how? Are there significant service trade barriers to U.S. service providers at the sub-central level in key markets overseas?

Congress has broad interest in trade in services, which are a large and growing component of the U.S. economy. It also has a direct interest in establishing trade negotiating objectives and potential consideration of a future Trade in Services Agreement (TiSA). Services account for 78% of U.S. private sector gross domestic product (GDP), 82% of private sector employees in 2015, and an increasing portion of U.S. international trade. "Services" refer to a growing range of economic activities, such as audiovisual, construction, and computer and related services; energy; express delivery; e-commerce; financial, legal, and accounting services; retail and wholesaling; transportation; telecommunications; and travel. Services include end-use products, such as legal services and financial products. Many services, such as distribution or transportation services, also facilitate other parts of the economy, helping goods move through global supply chains. To open foreign markets to U.S. businesses and address trade barriers to services, which may be in the form of government regulations, the United States has engaged in multiple trade agreement negotiations. The World Trade Organization (WTO) General Agreement on Trade in Services (GATS) provides the foundation or floor on which rules in other agreements on services are based, including in U.S. free trade agreements (FTAs). Trade in services is addressed in U.S. bilateral and regional FTAs, including the proposed Trans-Pacific Partnership (TPP), concluded in October 2015. However, ongoing negotiation efforts to update GATS are stalled, even as technology and services trade have evolved significantly since GATS went into effect in 1995. To address these issues, 23 parties are engaged in discussions on a potential sector-specific, plurilateral agreement to further liberalize trade in services. Negotiations on a proposed Trade in Services Agreement (TiSA) were launched in April 2013, with the United States and Australia initially at the lead. TiSA participants account for about 70% of world trade in services and include the European Union, in addition to the United States and Australia. Some key major emerging markets, including Brazil, China, and India, are not currently parties to the TiSA negotiations, though China has indicated an interest in joining. While TiSA negotiations are occurring outside of the WTO, the agreement is reportedly being structured so that it can be potentially "multi-lateralized" in the future and incorporated into the GATS, making it applicable to all WTO members. The final structure and sectors to be covered in TiSA remain under negotiation, but some key issues have emerged. For the United States, significant interests include expanding market access beyond the current GATS commitments, building disciplines on transparency, setting common rules for cross-border data flows and digital trade, and ensuring fair competition with state-owned enterprises. TiSA participants have conducted 21 negotiating rounds through 2016, and aim to complete negotiations in 2017 but no new rounds are scheduled. The outlook and timeline for the ongoing TiSA negotiations remains uncertain, as participants are tackling difficult and complex issues such as regulatory processes and digital trade frameworks. The new U.S. administration position on TiSA is unclear. TiSA is one of several trade agreements that may be considered by Congress in the near future. Congress passed, and the President signed into law, Trade Promotion Authority (TPA) legislation in June 2015 which expires on July 1, 2018, with a possible extension to July 1, 2021. As part of TPA, Congress established principal trade negotiating objectives for services. If agreement on TiSA is reached while TPA is in effect, and if certain statutory requirements are met, TPA would provide for expedited legislative consideration of legislation to implement a final TiSA. Congress may opt to exercise oversight on the progress of the ongoing TiSA negotiations and consider a number of related factors such as comparisons with other agreements.

The size of the Armed Forces is a topic of perennial congressional interest and debate, as each year Congress sets minimum and maximum strength levels for the active components (AC); and maximum strength levels for the reserve components (RC). The number of military personnel in each service is directly related to how many units of various types they can deploy for use in operational missions. The number of military personnel also affects the cost of the military. More personnel require additional funding for their pay and benefits; combined into units, they require additional funding for training, operations, equipment, maintenance, and travel. The number of military personnel also has a long-term impact on the cost of veterans benefits. The House and Senate versions of the National Defense Authorization Act (NDAA) for FY2017 authorized differing levels for active duty personnel in each of the services, but these authorizations diverge most significantly with respect to the Army. This report provides an overview of active duty Army personnel strength changes in recent years, highlights the factors which have contributed to these diverging approaches in the respective NDAAs, and outlines some factors which Congress may consider. Congress regulates the size of the Armed Forces by authorizing specific personnel strength levels in law each year. Active component "end strength" for the Army has changed substantially over the past several decades, as shown in Figure 1 . With the collapse of the Soviet Union and the end of the Cold War, Army personnel strength declined rapidly in the 1990s, levelling off at about 480,000 soldiers. Congress increased the Army's strength in response to the demands of wars in Iraq and Afghanistan, but began reversing those increases in light of the withdrawal of U.S. forces from Iraq in 2011, the drawdown of U.S. forces in Afghanistan beginning in 2012, and budgetary constraints. The end strength for the Army in FY2016, as established by Section 401 of the FY2016 National Defense Authorization Act, is 475,000 soldiers. For FY2017, the Administration proposed lowering the Army's end strength to 460,000. The Senate version of the FY2017 National Defense Authorization Act approved Army end strength identical to the Administration request, while the House version approved Army end strength of 480,000. The divergence between the Administration request and the House and Senate bills reflects differing assessments of a variety of factors, including operational tempo, budgetary constraints, and, most frequently, readiness (see text box below for a summary of these competing perspectives). Readiness is a term policymakers, analysts, and military leaders often use when describing the state of the U.S. military. The Department of Defense defines readiness as "the ability of military forces to fight and meet the demands of assigned missions." Army readiness evaluations revolve around four main components: personnel, equipment availability, equipment readiness, and training. The unit's overall readiness assessment--its ability to accomplish its core functions, provide its intended capabilities, and carry out its mission-essential tasks--is determined by the lowest rating of these four areas. As the lowest rating factor determines the overall readiness evaluation, an improvement in one area will not necessarily improve the overall readiness rating of a unit. Additionally, as the individual factors can influence each other (for example, increasing personnel in a unit without providing them sufficient training could improve the personnel rating but lower the training rating), one cannot necessarily make future readiness predictions based on projected improvement in one area. For a more detailed discussion of how the Army determines and reports unit readiness, see CRS Report R43808, Army Active Component (AC)/Reserve Component (RC) Force Mix: Considerations and Options for Congress , by [author name scrubbed] and [author name scrubbed]. As Congress continues to debate the appropriate size for the Army several considerations are particularly significant. These include the strategic environment, the role of the Army within this environment, how the Army might use additional end strength, the results of a congressionally directed study on the future of the Army, and the constraints of the Budget Control Act of 2011. Each of these topics is discussed in more detail below. For many observers, questions regarding the appropriate end strength of the Army are related to the changing international security landscape, and the perception that those changes are resulting in heightened threats to the United States and its interests abroad. For others, the cost of increasing the size of the Army is the predominant factor in the debate. The National Military Strategy (NMS), published in June 2015, describes a global environment marked by increasing interdependence, complexity, and the diffusion of information and technologies across state boundaries. The NMS organizes threats to the United States into two primary categories: "revisionist" states and "violent extremist organizations" (VEOs). With respect to "revisionist states," the NMS calls attention to the challenges posed by four different nations: Russia, Iran, North Korea, and China. Russia, it states, has demonstrated its willingness to redraw international boundaries and violate international law using military force. Further, the NMS states that Iran is a state sponsor of terrorism that has undermined stability in Israel, Lebanon, Syria, and Yemen. North Korea, according to the NMS, threatens its regional neighbors (including Japan and South Korea) with its production of nuclear weapons. Finally, the NMS argues that China's recent "land reclamation" (also referred to as "island building") activities in the South China Sea are destabilizing. With respect to VEOs, the NMS points out that these actors use a combination of low-technology weaponry (such as suicide vests and improvised explosive devices) as well as sophisticated propaganda and messaging strategies to spread their influence. While the NMS assesses the VEO threat as "immediate" due to the fact that they are currently destabilizing the Middle East, it also notes--for the first time in several decades--that the probability that the United States may find itself at war with another great power is "low but growing." The NMS also discusses "hybrid" warfare, whereby state and non-state actors (Russia and its Ukrainian proxies, for example) "blend techniques, capabilities, and resources to achieve their objectives." The ensuing ambiguity in the battle space makes it difficult for the United States and its allies to plan for, and coordinate, their responses. Indeed, as Director for National Intelligence James Clapper testified before the Senate Armed Services Committee, "[i]n my 50-plus years in the intelligence business, I don't--I cannot recall a more diverse array of challenges and crises that we confront as we do today." Although there is a general consensus that the global security environment is becoming significantly more challenging, the role that the U.S. military generally--and the Army specifically--ought to play in advancing U.S. interests is the subject of considerable debate. On the one hand, there are those who maintain that in the face of these myriad threats, the utility of ground forces will increase in the coming years. This is for a variety of reasons including (but not limited to) bolstering deterrent postures, prosecuting "grey zone" or "hybrid" warfare, providing enabling and logistical functions for the rest of the joint force, and prosecuting military campaigns in which terrain must be seized. First, moreso than remote or offshore military capabilities, the presence of ground forces can send unique political-military signals that can help deter adversaries and reassure allies. This is because the placement of ground forces abroad--which is, in essence, risking soldiers' lives--communicates a high degree of U.S. commitment to the pursuit of national strategic objectives. The Cold War provides a historical example of these dynamics playing out. As the logic went, if the Soviets initiated a conflict, the large numbers of American troops stationed across Europe meant that U.S. casualties would be inevitable. The loss of American life in Europe would, in turn, prompt a significant U.S. military response to repel a Soviet attack. This is why the presence of U.S. troops in Europe during the Cold War was viewed as critical to underscoring the overall deterrent posture in that theater--in addition to the other military capabilities, including nuclear weapons, the presence of U.S. troops signaled the credibility of U.S. security guarantees in theater. Second, as was demonstrated in Iraq (2003-2010), Afghanistan (2001-present), and the Balkans (1990-present) operations that take place among local populations, to include peacekeeping, stability operations, counterinsurgencies, and "hybrid" or "grey zone" conflicts, generally require a significant presence on the ground. This is because such operations often use personnel-intensive techniques such as patrolling, intelligence collection, and targeted strikes in order to create stability that can subsequently be translated into sustainable political outcomes. As one argument goes, higher troop numbers are required for contingencies in which U.S. forces must operate among indigenous communities. The Army's 2006 field manual on counterinsurgency notes that for past conflicts, troop numbers were based on the number of insurgents , suggesting that 10 to 15 troops per insurgent were needed to ensure success; but a better means to determine troop requirements based on inhabitants now suggests 20 troops per 1,000 residents is the minimum density needed for effective counterinsurgency operations. This leads to the third role for large portions of U.S. ground forces--providing enabling and logistical support for both combat and steady-state operations. These combat-support and/or combat service support functions include life support, headquarters staffing, and logistics. Even "light footprint" counterterrorism operations require supporting infrastructure, much of which is personnel intensive. As General McChrystal (ret.), former U.S. commander in Afghanistan, remarked in an interview with T he New York Times : Q: Can one maintain a counterterrorism capability in Afghanistan without a complementary counterinsurgency effort? A. If you take the raid into Abbotabad, that was years of gathering intelligence, some on the ground, some in the air, some signals intelligence. It was launched from bases -- not just a single base, it needed a network. It had medevac [medical evacuation] available. It had this infrastructure that supported it that isn't seen by people who just look at a couple helicopters landing in a compound. CT [counterterrorism] typically requires that.... Otherwise, it's really, really hard. Indeed, the Army provides a number of enablers to the joint force that allow the U.S. military--and, at times, other agencies of the government--to conduct global operations. According to a study released by the Army War College, the Army currently has executive agency for 41 out of 84 enabling and logistical tasks that support two or more services. While some observers argue that the proportion of forces dedicated to logistical and enabling functions is out of balance with those actually performing operations (the so-called "tooth to tail ratio"), others counter that the logistical requirements for expeditionary forces are now highly complex, and that without medevac, intelligence, financial (such as the Commander's Emergency Response Program), and other enablers, deploying combat troops would be considerably more risky. Finally, ground forces are essential in those military operations wherein terrain must be seized and held. In recent campaigns, the United States generally has preferred to build the capacity of local forces in order to "hold" territory once it has been cleared. While these missions, in theory, require fewer ground forces than ones primarily conducted by U.S. forces, depending on the size of the training mission, this still can amount to a sizeable troop requirement. Currently, the United States has 3,870 troops in Iraq, the overwhelming bulk of which are focused on garrison-based, higher-level headquarters training of Iraqi Security Forces. Operation Resolute Support, the NATO mission in Afghanistan, currently comprises 12,930 troops who are entirely focused on training and equipping the Afghan Security Forces. Furthermore, given the NMS statement that there is a small but growing likelihood that the United States might find itself in a conflict with a major power, the United States must also plan and prepare for those contingencies in which U.S. forces must shoulder the majority of the combat burden in confronting major adversaries. This would likely require even more troops than those contingencies wherein the United States can operate "by, with and through," local forces, especially given recent advances in the lethality of the military forces of other major powers like Russia. On the other hand, the above arguments notwithstanding, other observers maintain that most of the functions listed above can be adequately performed with lower troop levels due to emerging technologies, tactical innovations, and military capability advancements. Proponents of this concept, which is often referred to as "transformation," or a "revolution in military affairs," maintain that special operations forces, combined with precision guided munitions, can have the kinds of decisive effects on the battlefield that used to be achieved through massive ground troop formations. Others believe that the Army is "overreacting" in its arguments for increased troop strength to meet the emerging strategic environment. Contrary to arguments that the Army would be overmatched in a contest with Russian forces, some maintain that "it is exceedingly unlikely the U.S. Army will ever be 'outranged and outgunned'" due to advances in joint warfare, and in particular, Air Force and Naval Air support to ground operations. Finally, some question whether the United States has the political appetite to engage in these kinds of ground-force-intensive contingencies in the future. As evidence, they refer to the 2012 Defense Strategic Guidance, which states that "U.S. forces will no longer be sized to conduct large-scale, prolonged stability operations." Indeed, as former Secretary of Defense Robert Gates said, "in my opinion, any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should 'have his head examined,' as General MacArthur so delicately put it." Still, he went on to note, ...when it comes to predicting the nature and location of our next military engagements, since Vietnam, our record has been perfect. We have never once gotten it right, from the Mayaguez to Grenada, Panama, Somalia, the Balkans, Haiti, Kuwait, Iraq, and more--we had no idea a year before any of these missions that we would be so engaged. Another factor that Congress may consider when debating the appropriate Army strength level is how any additional personnel would be used by the Army. An increase in end strength would allow the Army to create new units or bolster the capacity of existing units. Nevertheless, Army leadership has not publicly provided specifics on how additional end strength would be used. While the Army has not offered much detail on how additional end strength might be used, it is reasonable to speculate it would not solely be used to create new units but also to add capacity to existing units and supporting organizations as well. In terms of new units, the National Commission on the Future of the Army--discussed later in this report--pointed out shortfalls in air defense; tactical mobility; missile defense; chemical, biological, radiological, and nuclear (CBRN) defense; field artillery; fuel distribution; water purification; Army watercraft; and military police. Additional end strength could result in the creation of additional units of these types. Other Army initiatives could also benefit from increased end strength. In June 2016, Army Chief of Staff General Mark Milley stated that the Army plans to stand up a number of Train, Advise, and Assist Brigades over the next four to five years. These brigades, manned primarily as "chain of command" units with officers and noncommissioned officers only, would serve a dual purpose to both deploy overseas to advise, assist, and help train partners and allies and also as a means to expand the Army in the case of emergency but adding soldiers to the brigade's existing chain of command to form a BCT. Furthermore, General Milley noted before the Senate Armed Services Committee on April 7, 2016, that "manning requires an appropriate mix of forces across the Army--Regular Army, Army National Guard, and the Army Reserve--to accomplish our national military objectives," suggesting that additional end strength decisions also need to consider Army force mix as well. Without knowing specifics on the types of units and organizations that would be the beneficiaries of an end strength increase--as well as what component--it is difficult to ascertain the impact on readiness. An important factor is that of operational tempo. If the Army is committed to additional operations or if troop levels in existing operations are increased, additional end strength could be helpful as General Milley has indicated. Perhaps one of the most important considerations of additional end strength is that of additional funding to support readiness. On February 24, 2016, when asked about a possible increase to Army end strength during a Senate Appropriations Committee hearing, General Milley reportedly stated "I think that having increased numbers would help out readiness, if and only if we had the money to support that." If end strength is increased but readiness funding is either inadequate or not provided, the Army could have difficulty paying for their training and equipment. Title XVII of the FY2015 NDAA established an independent commission to study Army strength and force structure and directed it to ... undertake a comprehensive study of the structure of the Army, and policy assumptions related to the size and force mixture of the Army, in order-- (A) to make an assessment of the size and force mixture of the active component of the Army and the reserve components of the Army; and (B) to make recommendations on the modifications, if any, of the structure of the Army related to current and anticipated mission requirements for the Army at acceptable levels of national risk and in a manner consistent with available resources and anticipated future resources. The committee report which accompanied the Senate version of this NDAA explained the rationale for the commission as follows: The committee is aware that the Army and the Department of Defense continue their analysis, course of action development, and decisionmaking process with respect to the distribution of reductions of both end strength and force structure necessary to achieve the savings required by the Budget Control Act of 2011. The committee believes that under these circumstances an independent and objective review of Army size and force structure by a national commission is worthwhile. The commission would be required to submit a report to the congressional defense committees not later than February 1, 2016. The NCFA reported its findings to Congress and the Administration on January 28, 2016. The 208-page report contained 63 recommendations, many of which could have an impact on Army end strength. Major end strength-related recommendations are summarized below: An Army of 980,000 soldiers (Regular Army of 450,000; Army National Guard of 335,000; and an Army Reserve of 195,000) is the minimally sufficient force to meet current and anticipated missions with an acceptable level of risk. This finding is consistent with the end strength and force mix minimums established by Army leadership in 2014. The Army should retain an 11 th Regular Army Combat Aviation Brigade (CAB) instead of drawing down to 10 CABs as proposed under the Aviation Restructuring Initiative (ARI). The Army should convert the U.S. Army Europe administrative aviation headquarters to a warfighting mission command element similar to a CAB headquarters. Noting the security situations in Ukraine and Syria, concern was expressed that no short-range air defense battalions were in the Regular Army and a sizeable percentage of the National Guard's short-range air defense capability was devoted to protecting the National Capital Region, leaving little spare capacity for contingency operations. Shortfalls were identified in tactical mobility; missile defense; chemical, biological, radiological, and nuclear (CBRN) defense--particularly as it relates to homeland defense; field artillery; fuel distribution; water purification; Army watercraft; and military police. If the Army's 980,000 soldier strength cannot be increased to address the creation of units to address the aforementioned shortfalls, the Army should consider eliminating two Regular Army Infantry Brigade Combat Teams (IBCTs) to free up spaces to create these units. The Army should increase Armored Brigade Combat Team (ABCT) capacity based on current and projected threat environment. The Army should ensure Combatant Commands (COCOM) and Army Service Component Commands have the ability to provide operational mission command in proportion to the unique mission for each COCOM. Regarding the Army's proposed Aviation Restructuring Initiative (ARI), the commission recommended the Army maintain 24 manned AH-64 Apache battalions--20 in the Regular Army and 4 in the National Guard. To help decrease the costs to the commission's recommendation, only 2 UH-60 Black Hawk transport helicopter battalions would be added to the National Guard as opposed to the 4 Black Hawk battalions under the Army's ARI proposal. The NCFA's findings on shortfalls in air defense; tactical mobility; missile defense; chemical, biological, radiological, and nuclear (CBRN) defense; field artillery; fuel distribution; water purification; Army watercraft; and military police have potential implications for Army end strength. Depending on the Army's analysis, it could choose to create a number of units of varying size (likely ranging from company to brigade-sized) to address the aforementioned shortfalls as well as other recommendations such as an 11 th CAB or increased ABCT capacity. Required personnel aside, the creation of these units would likely not be done "immediately" but instead over a number of years, based on the perceived urgency of the capability shortfall and dependent on the availability of necessary weapon systems, combat vehicles, and equipment needed to outfit new units. The Army has three basic ways of creating new units or adding capacity to existing units--it can convert existing units to create new units or add capacity; it can deactivate existing units to free up personnel and equipment resources to create new units or add capacity; or it can ask for additional end strength and associated readiness funding to create new units or add capacity. Converting existing units considered excess or no longer relevant to perceived operational needs is considered the "easiest" option, and the Army did a significant number of unit conversions when it instituted Modularity in 2003 to meet rotational demands of the wars in Iraq and Afghanistan. Nevertheless, following the Army's significant downsizing since 2010, fewer units are likely candidates for conversion. In a similar manner, deactivating units to free up personnel and equipment resources for new units/additional capacity might also prove impractical, as evidenced by the Army's reluctance to deactivate two Regular IBCTs. Army leadership has indicated that the NCFA's recommendation of eliminating two Regular Army Infantry Brigade Combat Teams (IBCTs) to free up spaces to create new units is not practical or desired. The Army's report to the Department of Defense (DOD) on which NCFA recommendations it plans to implement was reportedly provided to the Secretary Defense in mid-April 2016. However, DOD's response has not yet been publically released. This being the case, additional end strength is an option to meet capability and capacity shortfalls. Finally, independent from the NCFA's recommendations, the Army might also have internally identified additional units or capacity that it believes are needed to meet current and projected national security needs that might also have an impact on Army end strength requirements. The Budget Control Act of 2011 (BCA) established statutory limitations on spending by imposing a series of caps on discretionary budget authority for defense and nondefense programs from FY2012 through FY2021. For FY2017, the BCA cap on defense spending limits the DOD military budget to $523.9 billion. The President's FY2017 budget request allocated the $523.9 billion in available funding across the military departments. The Army's share of the allocation, $123 billion, is distributed across appropriation titles (military personnel; operation and maintenance [O&M]; research, development, test and evaluation [RDT&E]; and military construction/other accounts) as depicted in Figure 2 . As indicated above, the Administration's request for a $523.9 billion military budget matches the BCA cap. Should Congress decide to increase the size of the Army beyond the level funded by the President's budget, the increase would need to be accompanied with an associated increase in budget authority for the Army or sufficient reductions from other Army accounts. Options for doing so are discussed below. In contemplating increased Army end strength, Congress may consider costs by type of Army unit the personnel may be assigned to. Doing so would account for variances in organizational structure (officer to enlisted ratios), training requirements, and assigned equipment requirements, which affect the annual average cost of the unit. For example, an active duty infantry brigade combat team (BCT) is typically comprised of about 4,230 personnel (mainly enlisted) and several hundred generally unarmored wheeled vehicles. The average annual direct cost per troop in such a brigade is estimated at $106,383. In comparison, an active duty Aviation Brigade is typically comprised of 3,020 personnel, many of whom are officers or warrant officers, and is outfitted with a fleet of helicopters and the associated support equipment. As result, the average annual direct cost per troop for an Aviation Brigade is estimated at $162,252 (or 53% more). See Table 2 for a comparison of average annual cost per troop by selected unit type. If an increase in the size of the Army is desired, Congress could raise or repeal the BCA caps, which it has done three times since the BCA was enacted in 2011. In 2012, 2013, and 2015 the limits on defense and nondefense spending were raised--each time adjusting only the limits for the two succeeding years. Figure 3 depicts the changes to the BCA limits on defense spending. Without an increase to the BCA limits, another alternative is to fund the increased force structure by designating it as an "emergency" or for "Overseas Contingency Operations/Global War on Terror" (OCO/GWOT) requirements. Doing so would exempt the funding from the BCA limits. This approach was supported by the House in passage of H.R. 4909 , the National Defense Authorization Act for Fiscal Year 2017. The measure provided an additional $18.0 billion in funding for base requirements of the DOD and designated the funding as OCO/GWOT for the purposes of the BBEDCA exemption. In addition to $1.6 billion in funding for Military Personnel in the Army (active and reserve components), H.R. 4909 also increased Army procurement, O&M, and RDT&E (see Table 3 ). This approach has been criticized by some, mainly because OCO funding is not a guaranteed source of funding in future years. Secretary of Defense Carter, in testimony before the Senate Appropriations Subcommittee on Defense, called the House proposal to fund base requirements out of OCO "deeply troubling and flawed" and went on to explain, "It buys force structure without the money to sustain it and keep it ready, effectively creating hollow force structure, and working against our efforts to restore readiness." Funding an increase to Army end strength through a reduction to the other military departments' budgets is another option; however, reducing funding to the other departments might have an adverse impact on their combat capabilities, readiness, and the joint force overall. The FY2017 Defense Budget Overview describes the rationale behind the President's request, which provided for an Army of 980,000 soldiers. With continuing fiscal and strategic uncertainty, the FY2017 budget request reflects the Department's responsible choices to develop a coherent defense program with the proper balance between capacity, capabilities, and current and future readiness....This budget adjusts programs that support joint force technological superiority, stabilizes total ground force end strength, funds important reforms of health care, retirement, and family programs, focuses on building the force of the future, and continues to make better use of defense resources through acquisition reform, management reform, and reducing lower priority programs to comply with the Bipartisan Budget Act. If increases to Army end strength were to be funded by reductions to the Department of the Air Force, the Department of the Navy, or both, Congress may consider risk to the joint force's ability to meet mission requirements in other areas, such as countering advanced anti-access and area-denial capabilities, nuclear deterrence, space, missile defense, cyber, precision strike, and special operations. Another option to pay for additional Army end strength would be to reduce Army spending in other areas, but this approach could have a negative impact on Army readiness, depending on where the spending reductions were applied. For example, then-Secretary of Defense Robert Gates warned an audience at the American Enterprise Institute in May 2011 about the potential for a "hollow force" if budget limitations are not applied in a manner that balances the size of the force with the readiness of the force: I am determined that we not repeat the mistakes of the past, where the budget targets were met mostly by taking a percentage off the top of everything, the simplest and most politically expedient approach both inside the Pentagon and outside of it. That kind of "salami-slicing" approach preserves overhead and maintains force structure on paper, but results in a hollowing-out of the force from a lack of proper training, maintenance and equipment--and manpower. That's what happened in the 1970s--a disastrous period for our military--and to a lesser extent during the late 1990s. Secretary Gate's comments are applicable in consideration of increasing the size of the Army while the BCA caps constrain availability of funds to train, equip, sustain, and modernize the larger force. General Joseph Dunford, Chairman of the Joint Chiefs of Staff, told the Senate Appropriations Subcommittee on Defense "To me, the number one priority that we have today is to make sure whatever size force we have is capable.... So, trying to achieve that balance [Senator] is really what this year has been all about." The National Commission on the Future Army raised similar concerns. Commenting on the President's FY2017 budget request in their final report, the commission cautioned: In this constrained budget environment, the Army prioritized manpower numbers and force readiness to hedge against near-term demands, accepting substantial risk in modernization. The Commission finds this solution regrettable but understandable; given the persistence of challenges to the United States and the ongoing strain those challenges are putting on ground forces.... Nevertheless...these risks to modernization cannot be sustained if the Army is to protect the mission readiness of the force in the long term. Another alternative to funding an increase in Army end strength without an increase in defense spending is to find "savings" in existing DOD activities. In its annual consideration of defense authorization and appropriation bills, Congress routinely identifies programs that are under-executing (carrying unobligated balances), economic factors such as changes in the cost of fuel and foreign currency fluctuations, and activities that can be deferred. Congress may consider targeted reductions such as those to fund--in whole or in part--a desired increase in the size of the Army. The Department of Defense plans further reductions in the size of the Army, proposing a FY2018 end strength of 450,000. To reconcile competing interpretations and judgments about the proper size of the Army, Congress may gather additional information from the Army and outside experts. Some key questions Congress may pose to them include include the following: Although the international security environment is arguably becoming more challenging and complex, the role of ground forces--relative to other services--in helping the nation meet those challenges is somewhat unclear. What are the tasks that the Army, specifically, needs to accomplish for the nation? Within a coalition context? On behalf of the other U.S. military services? Compounding matters, the United States has a somewhat precarious track record when attempting to predict the type and character of future conflicts. What might an agile Army force structure, capable of more rapidly adapting to future security challenges, look like? At present, it is not known what types of new units the Army would create should it be provided with additional end strength, making it difficult to assess the benefit of any additional strength. What would the Army do with additional end strength? Would it build new units and, if so, what types? Would it augment existing units and, if so, in what ways? How would these units enhance the capabilities or capacity of the Army to perform essential missions? What existing capability gaps would be addressed? How quickly would the Army be able to field these new or augmented units? How would such plans coincide with or conflict with congressional priorities for Army force structure? Additional military personnel generates costs beyond their pay and benefits. When combined into units, they require additional funding for training, operations, equipment, maintenance, and travel so they can effectively conduct their designated mission. What additional resources would be associated with creating new units or augmenting existing units--for example, equipment, training, facilities, and funding? Is there excess equipment that can be used or would there also be a requirement to procure new equipment and major weapon systems? How long would it take to equip and train new units? How much would this cost?

Article I, Section 8, of the U.S. Constitution vests Congress with broad powers over the Armed Forces, including the power "To raise and support Armies" and "To provide and maintain a Navy." As such, the size of the Armed Forces is a topic of perennial congressional interest and debate. Congress annually sets minimum and maximum strength levels for the active components and maximum strength levels for the reserve components. The House and Senate versions of the National Defense Authorization Act (NDAA) for FY2017 authorized differing levels for active duty personnel in each of the services, but these authorizations diverge most significantly with respect to the Army. The Senate version of the FY2017 National Defense Authorization Act approved Army end strength of 460,000 soldiers, while the House version approved an Army end strength of 480,000. The Senate figure represents a decrease of 15,000 soldiers in comparison to the Army's FY2016 end strength of 475,000, while the House figure represents an increase of 5,000. Congress's decision about the size of the Army for FY2017 will likely hinge on how it reconciles competing interpretations and judgments about key issues, including the current and emerging strategic environment; the role of the Army in advancing national security interests within that environment; how any additional end strength would be used by the Army; the results of a congressionally directed study on the future of the Army; and the trade-offs associated with various options to fund additional strength in the context of budgetary constraints. In addition to the decision for FY2017, the debate about the size of the Army may well continue into the next Congress, as the Department of Defense plans further reductions in the size of the Army, proposing FY2018 end strength of 450,000. There will also be a new President in January, and his or her policy priorities may revise the contours of this debate. This report provides an overview of active duty Army personnel strength changes in recent years, outlines the different end strength authorizations in the House and Senate versions of the FY2017 NDAA, highlights the perspectives which have contributed to these diverging approaches in the respective NDAAs, and outlines some factors which Congress may consider as it determines the appropriate size for the Army.

As parties to the General Agreement on Tariffs and Trade 1994 (GATT 1994), World Trade Organization (WTO) Members must under Article I:1 of the General Agreement on Tariffs and Trade (GATT) grant most-favored-nation (MFN) treatment "immediately and unconditionally" to like products of other Members with respect to customs duties and import charges, internal taxes and regulations, and other trade-related matters. Thus, whenever a WTO Member accords a benefit or advantage to a product of one country, whether it is a WTO Member or not, the Member must accord the same benefit or advantage to the like product of all other WTO Members. Tariff preference programs for developing countries, however, are facially inconsistent with MFN obligations. Nevertheless, because preference programs have been viewed as vehicles of trade liberalization and economic development for developing countries, GATT Parties have accommodated them in a series of joint actions. In 1965, the GATT Parties added Part IV (Arts. XXXVI-XXXVIII) to the General Agreement . This amendment recognizes the special economic needs of developing countries and asserts the principle of nonreciprocity. Under this principle, developed countries forgo the receipt of reciprocal benefits for their negotiated commitments to reduce or eliminate tariffs and restrictions on the trade of less developed contracting parties. Because of the conflict with MFN obligations, GATT Parties in 1971 adopted a waiver of Article I for the Generalized System of Preferences (GSP) to allow developed contracting parties to accord more favorable tariff treatment to the products of developing countries for 10 years. The waiver describes the GSP as a "system of generalized, nonreciprocal and nondiscriminatory preferences beneficial to the developing countries." At the end of the GATT Tokyo Round in 1979, developing countries secured adoption of the Enabling Clause, a permanent deviation from MFN agreed to by the GATT Contracting Parties. The Enabling Clause states that notwithstanding GATT Article I, "contracting parties may accord differential and more favorable treatment to developing countries, without according such treatment to other contracting parties" and applies this exception to (1) preferential tariff treatment in accordance with the GSP; (2) multilateral nontariff preferences negotiated under GATT auspices; (3) multilateral arrangements among less developed countries; and (4) special treatment of the least-developed countries "in the context of any general or specific measures in favour of developing countries." The Enabling Clause has since been incorporated into the GATT 1994. In 1999, the WTO General Council adopted a decision, captioned "Preferential Tariff Treatment for Least-Developed Countries," which waived GATT Article I:1 until June 30, 2009, "to the extent necessary to allow developing country Members to provide preferential tariff treatment to products of least-developed countries (LDCs), designated as such by the United Nations, without being required to extend the same tariff rates to like products of any other Member." Along with setting out various standards and notification and procedural requirements, the waiver, at paragraph 6, provides that it "does not affect in any way and is without prejudice to rights of Members in their actions pursuant to" the Enabling Clause. The waiver was recently extended until June 30, 2019. WTO Members maintaining preference programs or preferential trade agreements that fall outside the scope of the Enabling Clause or particular GATT articles may seek waivers of Article I:1 and other GATT obligations under Article IX:3 of the Agreement Establishing the World Trade Organization (WTO Agreement). Article IX:3 permits WTO Members as a whole to waive obligations imposed on a WTO Member by WTO multilateral agreements, including the GATT. A request for a GATT waiver must first be submitted by the requesting Member to the WTO Council for Trade in Goods, which, after considering the request, reports to the WTO General Council. The waiver becomes effective after the General Council agrees to the proposal. One program that fell outside the scope of the Enabling Clause was the European Union (EU) Lome IV Convention, a preferential, nonreciprocal trade arrangement between the European Economic Community (EEC) and African, Caribbean and Pacific (ACP) countries. The Convention extended beneficial tariff and quota treatment to ACP imports as well as development assistance to ACP countries. The EU argued that it could deviate from Article I:1 MFN requirements for nonreciprocal free trade with developing countries under GATT Part IV, as well as Article XXIV, which provides an MFN exception for customs unions and free trade areas meeting specified conditions. GATT panels concluded in unadopted 1993 and 1994 reports that such a deviation was not justified under either provision. Regarding the Article XXIV claim, the 1994 report concluded that because Lome IV involved non-GATT Parties, the Article did not cover the agreement and thus could not be used to justify the inconsistency with Article I of trade preferences for bananas imported from ACP countries. The European Union subsequently obtained a temporary waiver of GATT Article I:1 for the Lome agreement; a waiver was later granted for the successor ACP-EC Partnership Agreement (Cotonou Agreement) until December 31, 2007. The European Union has since been negotiating Economic Partnership Agreements (EPAs) with ACP countries to replace the Cotonou Agreement. Various WTO Members have raised concerns as to whether MFN clauses in the EPAs, under which trade benefits negotiated by ACP countries with third countries would be accorded to the European Union, are consistent with the Enabling Clause. Along with maintaining its long-standing GSP program, the United States administers various regional preferences for which it holds WTO waivers. GATT Article I:1 has been waived for tariff preferences for the former Trust Territory of the Pacific Islands until December 31, 2016. The United States has also obtained waivers for the following programs: (1) the Caribbean Basin Economic Recovery Act (CBERA), as amended, through December 31, 2014; (2) the Andean Trade Preference Act (ATPA), as amended, through December 31, 2014; and (3) the African Growth and Opportunity Act (AGOA), through September 30, 2015. These programs extend duty-free treatment that in some cases is subject to quantitative restrictions, and, thus, the WTO has agreed to waive not only GATT Article I:1 but also GATT Article XIII, paras. 1 and 2, which require nondiscrimination in administering quotas. The United States submitted a waiver request for AGOA, as well as requests for renewals of expired or expiring waivers for the CBERA and ATPA programs, in February 2005. Revised requests were submitted in March 2009, reflecting legislative amendments to the CBERA and ATPA programs. During this period, Brazil, China, India, and Pakistan raised questions on the U.S schemes focused primarily on textile issues, while Paraguay questioned why it had not been included in the ATPA program. The U.S. requests were ultimately approved by the WTO Council on Trade in Goods in March 2009, and by the WTO General Council in May 2009. In European Communities -- Conditions for the Granting of Tariff Preferences to Developing Countries , the WTO Appellate Body (AB) explained how developed country WTO members may design preferential-tariff programs within the requirements of the Enabling Clause. The dispute between India and the European Union (EU) stemmed from an EU Regulation which awarded tariff preferences to a closed group of 12 beneficiary countries on the condition that they combat illicit drug production (the Drug Arrangements). India brought the claim alleging that the Drug Arrangements were inconsistent with GATT Article I:1 and unjustified by the Enabling Clause. The initial dispute panel, in a report issued on December 1, 2003, concluded that the EU was in violation of its WTO obligations, with one panelist dissenting on procedural grounds. Addressing the nature of the Enabling Clause and its procedural implications, a two member majority first concluded that the Enabling Clause functions as an exception to the GATT Article I:1 MFN obligation and that, consequently, the burden of proof rests on the party that invokes the Enabling Clause as a defense. The lone dissenter argued that the MFN obligation does not apply to the Enabling Clause and that India did not properly bring the claim under the Enabling Clause. Employing a broad reading of the term "non-discriminatory" in the Enabling Clause's description of the GSP, the panel concluded that developed countries were required to provide "identical tariff preferences" under GSP schemes to "all developing countries without differentiation, except for the implementation of a priori limitations." Applying this standard, the panel then ruled that the Drug Arrangements were inconsistent with GATT Article I:1 and could not be justified under the Enabling Clause. The European Union appealed. The AB report, issued on April 7, 2004, first addressed the relationship between GATT Article I:1 and the Enabling Clause. The AB upheld the panel's findings that the Enabling Clause is an exception to GATT Article I:1 and that the Enabling Clause does not exclude the applicability of Article I:1. The AB explained that the Enabling Clause is to be read together with Article I:1 in the procedural sense, since a challenged measure, such as the Drug Arrangements, is "submitted successively to the test of compatibility with the two provisions." In other words, when the Enabling Clause is implicated, the dispute panel first examines whether a measure is consistent with Article I:1, "as the general rule," and, if it is found not to be so, the panel then examines whether the measure may be justified under the Enabling Clause. Noting the "vital role" played by the Enabling Clause "in promoting trade as a means of stimulating economic growth and development" and the intent of WTO Members through the Enabling Clause to encourage the adoption of preference schemes, the AB found that the Enabling Clause was not a typical GATT exception or defense. Thus, the AB modified the panel's finding and held that, unlike the ordinary practice with respect to GATT exceptions, under which exceptions are invoked only by the responding party, "it was incumbent upon [complainant] India to raise the Enabling Clause in making its claim of inconsistency with Article I:1 of the GATT 1994" and to identify specific provisions of the Enabling Clause which it believed were violated by the respondent's measure. At the same time, the burden of justifying GSP schemes under the cited Enabling Clause provisions still rests on a respondent. In application, the AB found that India sufficiently raised the issue, thereby placing the burden on the EU to justify the Drug Arrangements under the Enabling Clause. Most important, the AB reversed the panel's substantive decision regarding the breadth of acceptable preference programs under the Enabling Clause. The AB found instead that developed countries can grant preferences beyond those provided in their GSP to developing countries with particular needs, but only if identical treatment is available to all similarly situated GSP beneficiaries. The AB elaborated that similarly situated GSP beneficiaries are all GSP beneficiaries that have the "'development, financial and trade needs' to which the treatment in question is intended to respond." In reaching this conclusion, the AB reversed the panel's reading of the term "non-discriminatory" as used to define the GSP in the Enabling Clause. Even under the more expansive view of the Clause, however, the AB upheld the Panel's ruling that the EU had failed to prove that the Drug Arrangements were in fact "non-discriminatory." Two factors led the AB to its conclusion: (1) the closed list of beneficiary countries in the Drug Arrangements could not ensure that the preferences would be available to all GSP beneficiaries suffering from illicit drug production and trafficking; and (2) the Drug Arrangements did not set out objective criteria that distinguished beneficiaries under the Arrangements from other GSP beneficiaries. Before the WTO Dispute Settlement Body adopted the ruling, the U.S. representative stated, according to meeting minutes, that the United States was pleased that the AB had "reversed the Panel's finding that the Enabling Clause required developed countries under their GSP programs to provide identical preferences to all developing countries" and that the AB's decision "would help maintain the viability of GSP programs." The United States raised concerns, however, about the AB's finding that complainant India needed to raise the Enabling Clause, but that the EU bore the burden of proving that the Drug Arrangements were consistent with the Enabling Clause. The United States questioned the legal basis for this "hybrid approach" suggesting that difficulties might ensue in allowing the complaining party to set the burden of proof for the respondent. In December 2009, Congress extended the GSP and Andean trade preference programs to December 31, 2010, continuing an existing denial of benefits to Bolivia. In December 2010, Congress enacted legislation extending Andean trade preferences, as accorded to Colombia and Ecuador, through February 12, 2011. Andean benefits for Peru, which has been a party to a free trade agreement with the United States since February 2009, were terminated as of December 31, 2010, in the same enactment. While Congress did not reauthorize the GSP program upon its December 2010 expiration, it has since extended the program through July 31, 2013, and authorized the retroactive application of duty-free rates and other GSP benefits to entries of goods made after December 31, 2010, in P.L. 112-40 . The U.S-Colombia Trade Promotion Agreement Implementation Act, P.L. 112-42 , extended ATPA benefits to Colombia and Ecuador through July 31, 2013, with retroactive application to February 12, 2011; however, pursuant to the act, the President removed Colombia from the GSP and ATPA programs when the U.S-Colombia Trade Promotion Agreement entered into force on May 15, 2012. Congress has made the Caribbean Basin Economic Recovery Act (CBERA) program permanent and has authorized through September 30, 2020, the expanded tariff benefits contained in the Caribbean Basin Trade Partnership Act and as well as tariff preferences for Haiti enacted in 2010. The African Growth and Opportunity Act (AGOA) program is authorized through September 30, 2015. H.R. 2387 (McDermott), S. 105 (Ensign), and S. 1244 (Inouye) would extend duty-free benefits to certain apparel items from the Philippines subject to the President's certification that the Philippines is meeting enumerated trade and customs-related conditions. Under H.R. 2387 and S. 1244 , benefits would remain in effect for seven years after they were proclaimed by the President and would terminate were the Philippines to become ineligible for GSP treatment. S. 105 would extend benefits for 10 years after proclamation, subject to GSP eligibility. S. 1443 (Feinstein) would authorize through December 31, 2022, duty-free treatment for certain items deemed import-sensitive under the GSP as well as extend certain AGOA textile benefits for certain least-developed countries in Asia and the South Pacific. While Congress has extended the GSP and ATPA programs through July 31, 2013, other legislation to reauthorize these programs has also been introduced in the 112 th Congress. H.R. 913 (Aderholt) and S. 433 (Sessions) would extend the GSP program through June 30, 2012, with retroactive application to entries made after December 31, 2010; make certain sleeping bags ineligible for GSP benefits; and extend ATPA benefits to Colombia and Ecuador through June 30, 2012, with the extension effective as of February 12, 2011. S. 308 (Casey) would extend the GSP program and the ATPA, as applicable to Colombia and Ecuador, to June 30, 2012, with retroactive application to their current expiration dates, and make certain sleeping bags ineligible for GSP benefits, with exceptions for higher-value bags and certain kits. S. 380 (McCain) would extend ATPA benefits to Colombia and Ecuador through November 30, 2012, with retroactive application to entries made after February 12, 2011.

Article I:1 of the General Agreement on Tariffs and Trade (GATT) requires World Trade Organization (WTO) Members to grant most-favored-nation (MFN) treatment "immediately and unconditionally" to like products of other Members with respect to tariffs and other trade-related measures. Programs such as the Generalized System of Preferences (GSP), under which developed countries grant preferential tariff rates to developing country goods, are facially inconsistent with this obligation because these programs accord goods of some countries more favorable tariff treatment than that accorded to like goods of other WTO Members. Because such programs have been viewed as trade-expanding, however, parties to the GATT incorporated a clause to provide a legal basis for one-way tariff preferences (the Enabling Clause) into the GATT 1994 agreement. In 2004, the WTO Appellate Body ruled that the Enabling Clause allows developed countries to offer differing treatment to developing countries in a GSP program, but only if identical treatment is available to all similarly situated beneficiaries. In addition to GSP programs, some WTO Members may also grant preferences to products of particular groups of countries. In such cases, Members have generally obtained time-limited WTO waivers of GATT Article I:l and, if needed, other GATT obligations. The United States holds temporary WTO waivers for tariff preferences granted to the former Trust Territory of the Pacific Islands and for three regional preference schemes: (1) the Caribbean Basin Economic Recovery Act (CBERA), as amended; (2) the Andean Trade Preference Act (ATPA), as amended; and (3) the African Growth and Opportunity Act (AGOA). Congress has made the CBERA program permanent and has authorized through September 30, 2020, the expanded tariff benefits contained in the Caribbean Basin Trade Partnership Act and subsequent legislation particular to Haiti. The AGOA program is authorized through September 30, 2015. In December 2010, Congress extended Andean trade preferences, as accorded to Colombia and Ecuador, through February 12, 2011, and terminated Andean benefits for Peru, which has been a party to a free trade agreement with the United States since February 2009. While Congress did not reauthorize the GSP program upon its December 2010 expiration, it has since extended the program through July 31, 2013, and authorized the retroactive application of duty-free rates and other GSP benefits to entries of goods made after December 31, 2010, in P.L. 112-40. The U.S.-Colombia Trade Promotion Agreement Implementation Act, P.L. 112-42, extended ATPA benefits to Colombia and Ecuador through July 31, 2013, with retroactive application to February 12, 2011; however, pursuant to the act, the President removed Colombia from the GSP and ATPA programs after the U.S-Colombia Trade Promotion Agreement entered into force on May 15, 2012. H.R. 2387 (McDermott), S. 105 (Ensign), and S. 1244 (Inouye) would extend duty-free benefits to certain apparel items from the Philippines subject to the President's certification that the Philippines is meeting enumerated trade and customs-related conditions. Under H.R. 2387 and S. 1244, benefits would remain in effect for seven years after they were proclaimed by the President and would terminate were the Philippines to become ineligible for GSP treatment. S. 105 would extend benefits for 10 years after proclamation, subject to GSP eligibility. S. 1443 (Feinstein) would authorize through December 31, 2022, duty-free treatment for certain items deemed import-sensitive under the GSP as well as extend certain AGOA textile benefits for certain least-developed countries in Asia and the South Pacific.

Appropriations for intelligence activities represent a significant part of both the federal and defense budget at a time of growing fiscal austerity. In the past, spending levels for intelligence activities were shrouded in secrecy. Today, overall totals of intelligence spending are made public, but the process for appropriating funds for intelligence activities remains complicated and not well understood. Steady, yearly increases in intelligence funding in the past decade helped create an intelligence apparatus that, many experts agree, has been effective at accomplishing its ultimate goal of preventing another terrorist attack on the scale of 9/11. But in the new era of fiscal limits, intelligence officials and Members of Congress are addressing ways to reduce intelligence spending while ensuring continued effectiveness against al-Qaeda and while adapting to new priorities other than counterterrorism. Director of National Intelligence (DNI) James R. Clapper Jr. recently stated that sequestration would require a 7% cut, or roughly $4 billion, to the National Intelligence Program (NIP) budget and warned of reduced global coverage and decreased human and technical intelligence collection. Mr. Clapper also warned of repercussions similar to those that occurred in the 1990s when, in concert with a one-third decrease in active duty military personnel, the intelligence community saw a 23% cut in its budget, resulting in what he characterized as a "damaging downward spiral." The Washington Post on August 29, 2013, published details about the Administration's FY2013 NIP budget request, based on a document provided by former NSA contractor Edward Snowden. Because the document leaked to the news media is classified, CRS is unable to provide a discussion of the specific detail of that budget submission. Nonetheless, the disclosure may drive further public debate about the size of the intelligence budget and about the effectiveness of intelligence spending. This report discusses the historic trend in intelligence spending, as well as broader issues concerning the intelligence budgeting process, and may help Members of Congress contextualize information concerning the FY2013 budget. Total intelligence spending can be understood as the combination of (1) the NIP, which covers the programs, projects, and activities of the intelligence community oriented towards the strategic needs of decision makers, and (2) the Military Intelligence Program (MIP), which funds defense intelligence activity intended to support tactical military operations and priorities. Later sections of this report describe these programs in more detail. It is important to recognize that public comments about intelligence spending do not always distinguish between the NIP, the MIP, and the total of the two, complicating discussions on a subject about which there are already few details. The 9/11 Commission recommended that the amount of money spent on national intelligence be released to the public. In accordance with the Implementing the Recommendations of the 9/11 Commission Act, the Director of National Intelligence (DNI) in 2007 began to announce each year the amount of money appropriated for the NIP. The Intelligence Authorization Act of 2010 also required the President to publicly disclose the amount requested for the NIP in his budget. The Secretary of Defense began to release annual MIP appropriations figures in 2010 and specified those figures back to 2007. These actions have provided public access to previously classified budget numbers for national and military intelligence efforts. Table 1 provides these recently released figures in both nominal and constant 2014 dollars. Unless otherwise noted, values in this report are in constant dollars. Appropriations for intelligence activities amounted to over $78 billion in FY2012, the last year for which there is complete data. The President's budget requested $73 billion for FY2013. This does not take into account sequestration, and actual appropriated amounts are not yet available for 2013. Since peaking in 2010, total intelligence spending has fallen by at least 15%, which largely reflects a decrease in military intelligence spending. The NIP and MIP figures above include funding for Overseas Contingency Operations (OCO)--roughly $10 billion annually for intelligence activities. It can be useful to distinguish OCO funding, including OCO funding for military intelligence, from other defense spending because that funding pays for wartime-related activities that differ from activities funded by the DOD base budget. For broader intelligence spending in the NIP, however, it is not clear what activity is supported by NIP OCO funds or to what extent that activity is qualitatively different than other intelligence operations taking place across the globe. Figure 1 breaks out OCO funds from other MIP and NIP funding. Base budget intelligence spending grew by more than $10 billion, peaking in FY2010, while OCO intelligence spending grew by about $3 billion, peaking in FY2011. Policy makers have remarked that intelligence spending has doubled since September 11, 2001. CRS analysis suggests that the NIP slightly more than doubled in real terms from 2001 to 2012 while the MIP grew at a slower pace. The NIP budget in 2001 (then referred to as the National Foreign Intelligence Program--NFIP) was roughly $24 billion in constant 2014 dollars, or less than half of the NIP budget for FY2012. After sequestration, the NIP budget from 2001 to 2013 will have roughly doubled. Publicly available data suggest the total intelligence budget in FY2001 was roughly $37 billion, or almost half of the $78 billion intelligence budget for FY2012. Total intelligence spending previously peaked in 1989, at 125% above spending in 1980, before declining in the mid-1990s to 80% above spending in 1980. It is possible to estimate that total intelligence spending in 1980 was slightly less than $21 billion, in current dollars. Spending appears to have quadrupled between 1980 and 2010 before declining over the past three years. These estimates are based on information provided by the 1996 Commission on the Roles and Capabilities of the U.S. Intelligence Community, which described the trend in intelligence spending from 1980 to the mid-1990s and the projected spending trend from the mid-1990s to 2001. The commission specified the percentage change at key points in time but not actual spending levels. The Director of Central Intelligence (DCI) also publicly disclosed the amount appropriated for intelligence for FY1997 and FY1998. Using the trends described by the commission and the figure for FY1997, CRS estimated spending in 1980 and 1989. The methodology for the estimates is further explained in the "notes" below Figure 2 . Both the DCI disclosures and the commission appear to combine national and military intelligence spending. Data are not available specifically for national intelligence over this extended timeframe. The vast majority of intelligence spending falls within the national defense function--the budget category that includes the military activities of DOD as well as other national security activities. Using the estimates above, it is possible to separate total intelligence spending from the national defense function and to compare the growth in intelligence spending to the growth in national defense spending without intelligence. Total intelligence spending grew more sharply than other national defense spending in both the 1980s and after 2001. As noted, total intelligence spending previously peaked in 1989, at 125% above spending in 1980, before declining in the mid-1990s to 80% above spending in 1980. In comparison, national defense excluding intelligence grew by 55% from 1980 to its peak in 1985 before declining in the mid-1990s to roughly equal that in 1980. As shown in Figure 2 , total intelligence spending grew from $34.4 billion to $78.4 billion or by about 110% in real terms from 2001 to 2012. National defense excluding intelligence grew by 55% over that time period. As a result of these trends, when measured from 1980, total intelligence spending by 2012 had grown 274%, while national defense spending without intelligence had grown 82% over that time period (see Figure 3 ). Perhaps one of the most critical questions facing Congress is whether intelligence spending will fall in concert with other defense spending. Some argue that as defense spending decreases, intelligence spending should remain flat or rise because a robust intelligence apparatus would be necessary to compensate and provide forewarning to a smaller, more nimble DOD. While plausible, this argument belies the fact that, as demonstrated by Figure 3 , intelligence spending has already been decoupled from defense spending--the two in recent decades have tended to move in the same direction but have changed by different degrees. Another argument about the relationship between defense and intelligence spending concerns the diversity and magnitude of the threats to U.S. interests. Intelligence spending might appropriately be correlated to the diversity of threats. The intelligence community has argued that, especially after September 11, 2001, the range and complexity of threats to the United States has expanded to include not only state actors, but also non-state actors involved in activities such as terrorism, cyber-attacks, and drug trafficking. To fulfill the strategic needs of decision makers, the community must to some degree dedicate resources towards those threats. In comparison, while DOD must do contingency planning to address a diversity of threats, it does not necessarily need to dedicate resources towards each of them. Further, the cost to DOD of addressing new threats may not be as large as the cost associated with challenges from traditional state actors like the Soviet Union. Defense spending might thus be understood to correlate to the total size of the threat to U.S. interests. Hence, this would explain and to some extent justify the divergence of intelligence spending from other national defense spending since the end of the Cold War, when many experts agree the number of threats to U.S. interests multiplied even while the sheer magnitude of the threat may have decreased. The question remains whether, after a decade of sharp growth and after the most critical improvements to intelligence capabilities have by some accounts already been made, intelligence spending can now be pared back while preserving necessary tools and capabilities. DNI James R. Clapper, in March 2013 testimony before the Senate Select Committee on Intelligence, stated that "in my almost 50 years in intelligence, I do not recall a period in which we've confronted a more diverse array of threats, crises and challenges around the world.... Threats are more interconnected and viral." The challenge for Congress and the intelligence community in light of this assessment may be to better establish priorities and to align relevant budgets accordingly. Absent such a process, resources may not be focused on the most critical issues, making it difficult to respond effectively to the myriad threats that the intelligence community argues are in need of attention. During a previous round of budget cuts in the 1990s and prior to the establishment of the DNI, some critics argued that the intelligence community lacked a rigorous system to establish priorities and to shape the intelligence budgets to meet those priorities. The intelligence community at the time was overseen by the Director of Central Intelligence, who also served as the head of the Central Intelligence Agency (CIA) and who many argue was too focused on the CIA, to the detriment of his broader duties. This by some accounts made it difficult to adapt to the new fiscal realities of the 1990s when spending fell in response to the dissolution of the Soviet Union. A 1996 report from the Council on Foreign Relations questioned the role of intelligence community management in priority setting, stating that, "Intelligence requirements are most often set by intelligence producers or by relatively junior officials in the policymaking departments." The 1996 Commission on the Roles and Capabilities of the United States Intelligence Community found that not only were requirements often set by lower level staff, but any guidance from the DCI may often have come too late in the process to affect program priorities: The [Director of Central intelligence] is charged by law to "provide guidance to elements of the Intelligence Community for the preparation of their annual budgets." Usually, this guidance is issued by the DCI's staff or jointly with the Office of the Secretary of Defense after an overall level of funding has been decided by the Secretary of Defense and the DCI, and takes into account presidentially directed needs and priorities, statements of national security strategy, analyses of intelligence "gaps" and future needs, and other pertinent direction. Often, however, this guidance comes after the program and budget process has begun, and the program managers have already incorporated their own assumptions about intelligence requirements into budget estimates. Similarly, a House Permanent Select Committee on Intelligence (HPSCI) report from 1996 referred to a problem of the "tail trying to wag the dog," with respect to the intelligence budget process, meaning that community-level staff would compile the budget proposals of different agencies but exercised little oversight or control over those budgets. Thus, individual intelligence community components were able to establish their intelligence priorities and to shape their budgets to meet those priorities without effective overall rationalization of effort. Some observers believed the community-level staff under the DCI lacked sufficient authority and insight into the budget of individual agencies while others believed the DCI had significant budgetary authority that he never used effectively. In part because of the concerns above, the Intelligence Reform and Terrorism Prevention Act of 2004 created the DNI and arguably expanded its budgetary authorities beyond those previously possessed by the DCI. While the act stated that the DNI would "develop and determine an annual consolidated National Intelligence Budget," that language almost matched the budget formulation authorities granted to the DCI. However, the 2004 law also granted the DNI additional reprogramming authority and the means to monitor and execute the NIP, authorities the DCI lacked. Since 2004, the DNI has adopted two primary administrative mechanisms to establish intelligence priorities and then allocate resources towards those priorities, the National Intelligence Priorities Framework (NIPF) and the Intelligence Planning, Programming, Budgeting, and Evaluation (IPPBE) process. The NIPF, which was developed under the DCI and adopted by the DNI in 2005, is the process by which the DNI identifies intelligence topics relevant to policy makers and assigns priorities to intelligence targets based on those topics. The NIPF is designated as "the DNI's sole mechanism for establishing national intelligence priorities." Members of the intelligence community are directed to allocate collection and analytic resources in accordance with the NIPF. The DNI Chief Financial Officer is responsible for ensuring that NIP resources are allocated towards priorities identified in the NIPF. However, some have questioned the effectiveness of this process. Ambassador Robert Hutchings, the chairman of the DNI's National Intelligence Council from 2003 to 2005, stated in a 2007 hearing before the House Permanent Select Committee on Intelligence that the NIPF was "little more than diplomatic or bureaucratic busywork." A point to stress is that there is little publicly available information that would help corroborate or refute the Ambassador's claim. Intended to parallel DOD's programming and budgeting process, the IPPBE system is the budgetary mechanism used to develop the NIP. Of note, the intelligence community directive that describes the IPPBE does not mention the NIPF, suggesting the DNI's key mechanism for developing intelligence priorities might have a limited role in the budget formulation process. The planning phase of the IPPBE does involve an analysis of intelligence community priorities and gaps, although how and to what extent the NIPF informs that analysis us unknown. After IPPBE analysis is completed by the DNI's staff, it is then used to provide programmatic guidance to members of the intelligence community, and such guidance should be reflected in responses provided to the DNI that are used to actually formulate the NIP. Before the creation of the DNI, the reports discussed in the previous section suggested that administrative mechanisms intended to establish intelligence priorities were perfunctory exercises. Priorities and corresponding budget allocations reflected the priorities in individual agencies. Such was the situation prior to intelligence reform in 2004 and the establishment of a DNI with expanded budgetary authorities over the different components of the intelligence community. Recently, observers have raised concerns that the intelligence community has become too focused on counterterrorism and support to the military, to the detriment of other, more strategic intelligence priorities. A press account published in early 2013 alleged that a classified report prepared by the President's Intelligence Advisory Board (PIAB) in 2012 found that, after a decade of counterterrorism and intelligence support to the wars in Iraq and Afghanistan, the CIA and other members of the intelligence community had become too focused on tactical operations. In light of these considerations and growing budgetary pressures, Congress may act to examine the NIPF and IPPBE processes to determine their effectiveness at shaping the NIP. Possible oversight questions include: How and to what extent does the NIPF affect the collection and analytic priorities of individual agencies? Does the DNI's staff exercise its full authority over the budgets of individual intelligence agencies? To what extent do individual agencies incorporate the planning guidance from the DNI when formulating their budgets? After intelligence community components provide their budget proposals, to what extent does the DNI adjust budget submissions in accordance with intelligence community priorities? Intelligence appropriations are inherently complicated because of the nature of both the intelligence community and the budgeting and execution processes that have developed over time. Funds for the large national-level intelligence agencies--CIA, the National Security Agency (NSA), National Reconnaissance Office (NRO), National Geospatial-Intelligence Agency (NGA), and Defense Intelligence Agency (DIA)--are included in the NIP and are generally believed to consume a large portion of annual intelligence funding. The NIP also includes funding for the State Department's Bureau of Intelligence and Research (INR) and intelligence efforts in other civilian agencies, including the Federal Bureau of Investigation (FBI) and the Departments of Justice, Commerce, and the Treasury. Funds for the intelligence components of the military departments are included in the MIP. In addition, the MIP includes some funds for the tactical intelligence activities of the NSA, NRO, NGA, and DIA. The DNI develops and determines the NIP budget and presents it to the President for his approval "together with any comments from the heads of departments containing agencies or organizations." The President's annual budget is then submitted to Congress, normally in early February of each year. Congress reviews the President's budgets and appropriates funds for intelligence mostly in defense appropriations legislation, which has always included the vast bulk of intelligence spending--probably well over 90% of the NIP. Appropriations for the CIA are included in defense appropriations acts, but are transferred directly to the Director of the CIA, and the Defense Department has no role in the apportionment or allocation of CIA funds. Funding for intelligence activities of some departments, namely State, Justice, Homeland Security, Energy, and the Treasury, is provided in other appropriations measures. Once appropriations legislation (or a continuing resolution) is enacted prior to the beginning of the new fiscal year, the Office of Management and Budget (OMB) apportions funds to the various agencies with national intelligence programs based on the Administration request and congressional adjustments. Reprogrammings and transfers are others tools that the DNI can use to manage intelligence resources by transferring funds to meet unanticipated, higher priority needs. The Intelligence Reform and Terrorism Prevention Act of 2004 provided the DNI with the authority to reprogram or transfer NIP funds to a higher priority intelligence activity, with the approval of the Director of the Office of Management and Budget and after consultation with the heads of affected agencies or organizations. Cumulative reprogrammings or transfers out of any department or agency must be less than $150 million and less than 5% of the NIP budget for that department or agency. The DNI may exceed these limits with the concurrence of the relevant department head. In addition, the Consolidated Appropriations Act of 2012, ( P.L. 112-74 ) and the Consolidated and Further Continuing Appropriation Act of 2013 ( P.L. 113-6 ) stated that the DNI could transfer at most $2 billion of NIP funds appropriated for FY2012 and FY2013. The complexities of the intelligence appropriations process have led to a number of proposals for different approaches that seek in various ways to disentangle national intelligence funding from the defense budget. Although the DNI has a statutory responsibility to manage NIP funds, the Office of the Secretary of Defense also has a major role in budget execution, to some extent sharing responsibility with the DNI. The Intelligence Reform Act provides that the DNI "shall be responsible for managing appropriations for the National Intelligence Program by directing the allotment or allocation of such appropriations," but also provides that this be done in a manner "that respects and does not abrogate the statutory responsibilities" of heads of departments. A key issue here is the potential for competing goals and different priorities that may derive from the respective roles of the DNI and the Secretary of Defense in preparing the annual budgets for intelligence agencies and for allocating appropriated funds for intelligence activities within national-level DOD agencies. The "does not abrogate" language creates a level of ambiguity regarding the respective budgetary authorities of the DNI and Secretary of Defense. While the DNI effectively has authority over the NIP today, in the event of major changes to the budgets of the DOD component of the intelligence community, this ambiguity in the statute could result in challenges to the DNI's stewardship of the intelligence community. Even absent such changes, the fact that much of the NIP is buried within the defense budget might complicate budget formulation and execution. Some observers have suggested that intelligence appropriations should be separated from defense appropriations and that Congress should consider a separate appropriations act (or a separate title in a larger appropriations act) for intelligence. Others have suggested establishing separate intelligence appropriations subcommittees. Such approaches, proponents maintain, would provide a better opportunity for Congress to consider the national intelligence effort as a collective whole and give the DNI a greater role in ensuring that government-wide requirements are not sacrificed to meet the immediate needs of DOD programs. On the other hand, skeptics argue that these changes would provide the DNI no new insights that he cannot currently obtain, and that they would complicate ties between intelligence programs and closely related non-intelligence DOD programs such as satellite launch programs. Sections below discuss these proposals in more detail. One option for policy makers would be for defense appropriations subcommittees, as presently constituted, to report a defense appropriation bill that would include a separate title for the NIP. Current defense appropriations bills include a Title VII, Related Agencies, that provides funding for the CIA Retirement and Disability System Fund and for the Intelligence Community Management Account (which includes the Office of the DNI and the National Counterterrorism Center (NCTC)). A new title could be established, or Title VII could be expanded, to include all NIP funding, with corresponding reductions in other defense accounts. This approach would give greater visibility to NIP funding and would not necessarily require separate 302(b) allocations, which set limits for each appropriations subcommittee as part of the congressional budget process. A major advantage of this approach is that it would require fewer changes to the intelligence appropriations process compared to the two proposals discussed below. The 9/11 Commission, in addition to recommending that amounts appropriated for national intelligence be disclosed, urged that "Congress should pass a separate appropriations act for intelligence, defending the broad allocation of how these tens of billions of dollars have been assigned among the varieties of intelligence work." Overall amounts requested and appropriated are now made public. This development arguably facilitates the preparation of a separate intelligence appropriations act. The option of a stand-alone intelligence appropriations act would entail the separation of appropriations for the NIP from the DOD budget. Although not calling for a separate appropriations bill, DNI Clapper spoke favorably of separating the NIP from the DOD budget during his confirmation hearing as DNI in July 2010. Responding to a question from Senator Russ Feingold, DNI Clapper stated: I would support and I've also been working and have had dialogue with actually taking the National Intelligence Program out of the DOD budget since the reason, the original reason for having it embedded in the department's budget was for classification purposes. Well, if it's going to be publicly revealed, that purpose goes away. And it also serves the added advantage of reducing the topline of DOD department budget, which is quite large, as you know and that's a large amount of money that the department really has no real jurisdiction over. Four months later, in November 2010, Mr. Clapper suggested that this would be the Administration's approach beginning with the budget submission for FY2013 that will be forwarded to Congress in February 2012. However, DNI Clapper indicated in an address to the Geospatial Intelligence Foundation in October 2011 that the NIP would not be placed in a separate budgetary category under the DNI. Although he provided no details regarding the decision, it is possible that concerns reflected in House-passed legislation may have affected the decision. To improve tracking of the NIP, Section 433 of the FY2012 Intelligence Authorization Bill, H.R. 1892 ( P.L. 112-87 ), which was signed by the President on January 3, 2012, permits the establishment of separate accounts in the Treasury to which intelligence funds could be transferred and separately accounted for. This capability was advocated by DNI Clapper as a means to improve the management of the NIP in his September 2011 testimony. "Specifically, managing this program as a coherent whole would improve efficiency, transparency and accountability." He added at another point in the hearing that "it is a challenge to watch execution. And a lot of it is because we simply don't have the auditable tools in order to watch how the money's actually being spent." Some suggest that a separate intelligence appropriations bill would call for a separate appropriations subcommittee for national intelligence. Both the House and Senate took steps in this direction, but ultimately neither established separate subcommittees for intelligence. A separate intelligence appropriations subcommittee would be given a separate budget allocation in accordance with Section 302(b) of the Congressional Budget Act that would limit spending levels in bills. Furthermore, with a separate intelligence appropriations subcommittee, it would be difficult to shift intelligence funds to defense activities. This option would probably encounter opposition in Congress because it would require changes to the appropriations committee structure. Proposals for separating intelligence appropriations from defense appropriations or even initiatives to provide procedures for identifying intelligence programs have encountered significant congressional resistance in the past. In particular, language in the FY2012 defense appropriations bill, H.R. 2219 , passed by the House in July 2011, appeared to prohibit efforts to separate the NIP from DOD funding. Section 8116 of H.R. 2219 provides that: None of the funds appropriated in this or any other Act may be used to plan, prepare for, or otherwise take any action to undertake or implement the separation of the National Intelligence Program budget from the Department of Defense budget. A similar provision was not included in the version of the FY2012 defense appropriations bill that was reported in the Senate on September 15, 2011. However, this provision survived the conference committee and was included in H.R. 3671 , the Consolidated Appropriations Act, 2012, which became law in January 2012 ( P.L. 112-74 ). The same language was included in H.R. 933 , the Consolidated and Further Continuing Appropriations Act, 2013, which became law in March 2013 ( P.L. 113-6 ). The House version of the FY2014 National Defense Authorization Act ( H.R. 1960 ) went further. The act precluded the use of DOD funds to move NIP out of the DOD budget, to consolidate the NIP budget within DOD, or to establish a new appropriations account for the NIP. The Senate has not yet passed its authorization act. Specific proposals to change the intelligence appropriations process have been controversial. There is strong resistance to separate intelligence appropriations bills, and little attention has as yet been given to a separate title for the NIP within defense appropriations legislation. DNI Clapper has apparently dropped plans to separate the NIP from DOD's budget. Moreover, the intelligence oversight structure, which the 9/11 Commission characterized as "dysfunctional," has remained largely unchanged. Efforts to establish new congressional committees with both authorization and appropriations responsibilities appear to have generated little interest. A separate appropriations subcommittee for intelligence was approved by the Senate but never established, nor has the House created an entirely separate subcommittee. Thus, for the moment, Members of Congress have to work with existing intelligence appropriations and oversight mechanisms to help shepherd the intelligence community into a new fiscal era. These issues also raise broader questions about the extent and sufficiency of DNI authorities, a topic of much debate in the years immediately following intelligence reform, especially as it related to the personnel and funding of the Department of Defense elements of the intelligence community. Regarding the proposal to move the intelligence community out of DOD's budget, DNI Clapper stated that it would give "ODNI a lot more authority and insight and transparency over [the NIP]," suggesting he currently lacks sufficient authority and insight. There currently appears to be little appetite for a debate about an expansion of DNI authorities, probably in part because of unanswered questions about the current remit and effectiveness of the Office of the DNI. Nonetheless, DNI authorities may be more critical now, when declining budgets force choices between different intelligence platforms and agencies, as opposed to when the DNI faced the relatively easy process of managing a decade of budgetary growth. The 9/11 Commission recommendations included a variety of changes intended to strengthen congressional oversight of intelligence and streamline the intelligence budgeting process. Responding to those recommendations about intelligence appropriations, Congress undertook a number of initiatives, but some measures have not been implemented and others have been reversed. None appears to have fundamentally altered the process. House Initiatives Both the House and Senate responded to the 9/11 Commission's recommendations to set up separate appropriations subcommittees for intelligence. H.Res. 35 of the 110 th Congress established a Select Intelligence Oversight Panel within the House Appropriations Committee. The panel was to consist of not more than 13 Members of whom no more than 8 came from the same political party, including the chairman and ranking Member of the Appropriations Committee, the chairman and ranking Members of the defense appropriations subcommittee, six additional Members of the Appropriations Committee, and three Members of the intelligence committee. The select panel was established to: Review and study on a continuing basis budget requests for and execution of intelligence activities; make recommendations to relevant subcommittees of the Committee on Appropriations; and, on an annual basis, prepare a report to the Defense Subcommittee of the Committee on Appropriations containing budgetary and oversight observations and recommendation for use by such subcommittee in preparation of the classified annex to the bill making appropriations for the Department of Defense. Proponents of H.Res. 35 indicated their determination to support the intent of the recommendations of the 9/11 Commission and pointed to three principal concerns: The first was that the intelligence authorizing committee was routinely ignored by the administration and the intelligence community because they didn't provide the money. In this town, people follow the money. Secondly, the Appropriations Committee, frankly, was negligent in its responsibilities for oversight.... The third problem that we faced is that there was grossly insufficient staff on the part of the Appropriations Committee to have decent congressional oversight.. . . The other problem was that there was not sufficient emphasis on intelligence matters by the Defense Appropriations Subcommittee because they had a lot of other things to do. Opponents argued that the proposal did not significantly change the previously existing structure: "Rather than consolidating oversight authority into a single committee that has both authorizing and appropriating authority, it just creates a new committee that has neither, doesn't have either of those powers." In July 2008, the chairman of the panel, Representative Rush Holt, described the panel's recommendations to the Defense Appropriations Subcommittee, claiming that "in the course of a year and [a] half since the creation of this Panel we have directly influenced the intelligence fund for five bills. Three of these bills were supplemental appropriations and this is the second annual appropriations bill that we have acted upon." He indicated that the panel forwarded recommendations higher than the previous year's levels but lower than the Administration's request. The panel's recommendations sought, he maintained, to require the ODNI to better manage the budget and enhance the role of Congress in reviewing the budget request and overseeing the DNI's performance. Rush argued: "One of the problems of past Congressional oversight has been that the Intelligence Community was forced to cut or add programs based on the changing whims of Congress. The creation of this Panel and stronger budgetary oversight over intelligence programs will hopefully provide stability for our nation's intelligence professionals." Representative Holt also noted that the panel recommended changes to space programs and encouraged a robust investment in foreign language training. In January 2011, the 112 th Congress eliminated the Select Intelligence Oversight Panel in H.Res. 5 . In March 2011, the chairman of the House Permanent Select Committee on Intelligence, Representative Mike Rogers, announced a plan to permit three members of the Appropriations Committee to participate in House Permanent Select Committee on Intelligence hearings and briefings. The goal of the initiative, according to Representative Rogers, was to "knit together the Intelligence Committee with the Appropriators and ... allow key appropriators important insights into the intelligence committee which they fund." The proposal did not, however, change the responsibilities of the two committees. Senate Initiatives The Senate also recognized the need to respond to the 9/11 Commission's recommendations. In January 2004, the Senate adopted S.Res. 445 to improve the effectiveness of the Senate Select Committee on Intelligence and for other purposes. Section 402 of the resolution, which passed by a vote of 79-6-15, established a Subcommittee on Intelligence within the Senate Appropriations Committee "as soon as possible after the convening of the 109 th Congress." S.Res. 445 did not, however, actually constitute a change to the Senate Rules, and the 109 th Congress reshuffled appropriations subcommittees and jurisdictions without creating a subcommittee on intelligence. In considering intelligence authorization in 2009, however, the Senate returned to the issue. The Intelligence Committee reported its version of FY2010 authorization legislation, S. 1494 , which included a provision (Section 341) to express the sense of the Senate that a Subcommittee on Intelligence should be established within the Committee on Appropriations with the responsibility for approving an annual appropriations bill for the National Intelligence Program that would be considered by the full Appropriations Committee "without intervening review by any other subcommittee." The intelligence subcommittee would, however, automatically include the chairman and ranking Member of the Subcommittee on Defense. This provision was the subject of conversations between the chair of the Intelligence Committee and the ranking Member of the Appropriations Committee, and Section 341 was dropped from the bill before it passed the Senate by unanimous consent on September 16, 2009. (The provision was not included in the final version of the FY2010 Intelligence Authorization Act, P.L. 111-259 , that was eventually enacted in October 2010.) During consideration of S.Res. 445 and on other occasions, it was argued that it would be difficult to create a subcommittee with a classified budget. The actions taken by the Senate reflect the fact that classification has always been a key consideration in the congressional approach to intelligence appropriations. There has been little public discussion of the extent to which other factors relating to subcommittees' jurisdiction may have been important.

It is now publicly acknowledged that intelligence appropriations are a significant component of the federal budget, over $78 billion in FY2012 for both the national and military intelligence programs. Limited publicly available data suggest intelligence spending, measured in constant 2014 dollars, has roughly doubled since the September 11, 2001, terrorist attacks and, before declines over the last three years, was almost double spending at its peak at the end of the Cold War. The recent disclosure by the Washington Post of details from the Administration's FY2013 National Intelligence Program (NIP) budget request may spark further debate about intelligence spending. It is likely that Members of Congress will more closely examine intelligence programs to ensure they are both effective and affordable. Perhaps the most important questions for Members are how and to what extent intelligence spending, after a decade of sharp growth, should fall in comparison to declines in other defense spending. See the section titled "Comparison with National Defense Spending" for further discussion on that topic. Fiscal pressures today will require intelligence officials to more clearly establish priorities and to make difficult choices between different intelligence collection platforms and agencies. Such choices may not have been required during the past decade, during which additional funding could be found to address new threats and to fix organizational weaknesses. In the 1990s, during a previous round of budget cuts and prior to the establishment of the Director of National Intelligence (DNI), it was argued that the intelligence community lacked a rigorous system to establish priorities and to tailor the intelligence budgets to meet those priorities. It remains unclear whether intelligence reforms after September 11, 2001, sufficiently addressed this issue. Intelligence spending is spread across the 17 organizations comprising the intelligence community. Over 90% of NIP funding, which focuses on strategic needs of decision makers and is notionally under DNI control, falls within the Department of Defense (DOD) budget. DOD members of the intelligence community also receive funding for tactical intelligence from the Military Intelligence Program (MIP), which is under the authority of the Secretary of Defense but which may fund intelligence collection platforms that could be used for both tactical and strategic purposes. The remaining portions of the NIP fall within several other Cabinet departments and two independent agencies. These overlaps complicate both budget formulation and the congressional appropriation process. The appropriations process for intelligence activities is complex and not widely understood. A number of changes have been proposed that would streamline the process or disentangle the NIP from the Department of Defense budget. Some, such as the proposal by a 9/11 Commission to combine authorization and appropriation responsibilities in a single committee, would be inconsistent with congressional practices during the past century. Other proposals to separate intelligence appropriations from defense appropriations, or to establish a separate intelligence title within defense appropriations acts, are less radical, but have met with opposition. As a result, the congressional intelligence appropriations process is likely to receive continued attention. Congress may choose to review the DNI budget formulation process and appropriations procedures to ensure that they maximize effective decision making at a time when both national budgets and international threats to the United States remain issues of major public concern.

Section 3092 of Title 50, U . S. Code , requires that the congressional intelligence committees be kept "fully and currently informed" of all intelligence activities, other than a covert action, by the Director of National Intelligence (DNI) and the head of any of the component organizations of the intelligence community. Notifications shall be in writing and include the nature of the circumstances and an explanation of their significance. Intelligence Community Directive (ICD) 112, Congressional Notification , specifies that it is the specific component organization that determines which activities are reportable. Some notifications, by their nature, are after the fact, such as a significant intelligence failure "extensive in scope, continuing in nature" impacting U.S. national security. ICD 112 also provides guidance on significant anticipated activities that might qualify as reportable beforehand. They include, for example 1. intelligence activities that entail, with reasonable foreseeability, significant risk of exposure, compromise, and loss of human life; 2. intelligence activities that are expected to have a major impact on important foreign policy or national security interests; or 3. significant activities undertaken pursuant to specific direction of the President or the National Security Council (other than covert action). Typically, intelligence activities that are considered less sensitive are briefed to the membership of each committee in line with statute. In certain circumstances, however, the Section 3092 requirement may be met through notifications to select members of the House and Senate, a group colloquially known as the Gang of Four . Gang of Four intelligence notifications are usually oral briefings provided only to the chairs and ranking members of the two congressional intelligence committees. Gan g of Four notifications are not based in statute or in the rules of either of the two congressional intelligence committees. They are a practice generally accepted by the leadership of the intelligence committees in circumstances when the executive branch believes a non-covert action intelligence activity--often a collection program--to be of such sensitivity that a restricted notification is warranted in order to reduce the risk of disclosure, inadvertent or otherwise. These notifications are provided as briefs without any written record or notetaking. Section 3093 of Title 50, U . S. Code sets out how the congressional intelligence committees are to be informed of covert actions, to include use of cyber capabilities when employed as a covert action. The President may authorize the conduct of a covert action only if he or she determines such an action is "necessary to support identifiable foreign policy objectives of the United States, and is important to the national security of the United States." Such determinations are to be generally set forth in a written finding to be reported to the congressional intelligence committees as soon as possible after the approval of a finding, and before the covert action starts. Findings must be made in writing unless immediate United States action is required. If time constraints prevent the initial preparation of a written finding , a written finding is to be produced as soon as possible but not later than 48 hours after the authorizing decision was made. Findings may not authorize or sanction a covert action, or any aspect of any such action, that already has occurred, and may not authorize any action that would violate the Constitution or any statute of the United States. Findings are to specify each department, agency, or entity of the U.S. government authorized to fund or otherwise participate in any significant way in the activity. They also are to specify whether it is contemplated that any third party not an element of, or a contractor or contract agent of, the U.S. government, or who is not otherwise subject to U.S. government policies and regulations, will be used to fund or otherwise participate in any significant way, or be used to undertake the covert action on behalf of the United States. The DNI and responsible component of the intelligence community must also keep the congressional intelligence committees informed of any significant change to a finding or failure of the covert action. If the President determines that it is "essential" to limit access to a covert action finding in order to "meet extraordinary circumstances affecting vital interests of the United States," he may limit the notification of such a finding to the chairs and ranking minority members of the House and Senate intelligence committees, the Speaker and minority leader of the House of Representatives, and the majority and minority leaders of the Senate. These Members are colloquially known as the Gang of Eight . Whenever such a limited notification is given, the President is further required to "fully inform" the congressional intelligence committees in a "timely fashion" of the relevant finding, and is further required to provide a statement summarizing executive rationale for not providing prior notice of the relevant finding. After 180 days, the President must either provide all Members of the intelligence committees with access to the finding or explain why access must remain limited. Gang of Four and Gang of Eight notifications differ in several ways. A principal difference is that the Gang of Four notifications procedure is not based in statute, and is a more informal process that generally has been accepted by the leadership of the intelligence committees over time. By contrast, the Gang of Eight procedure is provided in statute, and imposes certain statutory obligations on the executive branch. For example, when employing this particular notification procedure, the President must make a determination that vital U.S. interests are at stake if a notification is to be restricted to the Gang of Eight and provide a written statement setting forth the reasons for limiting notification to the Gang of Eight , rather than notifying the full membership of the intelligence committees. Another distinction between the two notification procedures, at least since 1980 when the Gang of Eight procedure was first adopted in statute, is that Gang of Four notifications generally are limited to non-covert action intelligence activities, including principally but not exclusively intelligence collection programs viewed by the intelligence community as being particularly sensitive. In contrast, Gang of Eight notifications are statutorily limited to particularly sensitive covert action programs. Notwithstanding these distinctions, there is no provision in statute that restricts whether and how the chairs and ranking members of the intelligence committees share with committee members information pertaining to the intelligence activities that the executive branch has provided only to the committee leadership, either through Gang of Four or Gang of Eight notifications. Nor, apparently, is there any statutory provision that sets forth any procedures that would govern the access of appropriately cleared committee staff to such classified information. Some critics of restricted intelligence notification of Congress, such as the Gang of Eight procedures, maintain that they do not allow for effective oversight because participating Members "cannot take notes, seek the advice of their counsel, or even discuss the issues raised with their committee colleagues." Other critics contend that restricted notifications such as Gang of Eight and Gang of Four briefings have been "overused." Still others believe Gang of Four notifications are unlawful because they are not statutorily based. Supporters of Gang of Eight notifications assert that such restricted notifications continue to serve their original purpose, which is to protect operational security of particularly sensitive intelligence activities while they are ongoing. Further, they point out that although Members receiving these notifications may be constrained in sharing detailed information about the notifications with other intelligence committee members and staff, these same Members can raise concerns directly with the President and the congressional leadership and thereby seek to have any concerns addressed. Supporters also argue that Members receiving these restricted briefings have at their disposal a number of rarely used legislative remedies if they decide to oppose particular programs, including the capability to use the appropriations process to withhold funding. The four congressional defense committees exercise oversight of sensitive Department of Defense (DOD) activities. These activities, on occasion, may appear similar to clandestine activities or covert action conducted by the intelligence community. However, they differ in that they are conducted under a military chain of command, generally in support of, or in anticipation of a military operation or campaign conducted under Title 10 authority. Insofar as Congress exercises oversight over these activities, DOD's requirements for notifying Congress differ from those of the intelligence community. Greater integration of military and intelligence activities--desired from an operational standpoint--has presented challenges when determining whether they fall primarily under Title 10 or Title 50 authority. Moreover, prior notification, which is generally required for covert action and significant anticipated intelligence activities, is not typical of congressional notifications of sensitive DOD activities conducted in support of a larger military operation. Following are notification requirements for sensitive military activities that, from an operational standpoint, could be confused with covert or clandestine activities of the intelligence community. Traditional military activities are referenced but not defined in statute. They have been described as military activities "under the direction and control of a United States military commander...preceding and related to hostilities which are either anticipated...or ... ongoing, and, where the fact of the U.S. role in the overall operation is apparent or to be acknowledged publicly." Traditional military activities can be conducted covertly (i.e., U.S. sponsorship is secret and unacknowledged) or clandestinely (i.e., the activity itself is secret) in support of the overall military operation. Some have maintained that because these activities can resemble covert action in that they can influence political, military or economic conditions abroad, they warrant greater oversight. In statute, however, traditional military activities and routine support to these activities are exempt from the congressional notification requirements for covert action. Operational Preparation of the Environment (OPE) is defined in DOD doctrine --not in statute--as "activities in likely or potential areas of operations to prepare and shape the operational environment." OPE can be conducted covertly or clandestinely and often involves the employment of U.S. Special Operations Forces (SOF) in counterterrorism operations. Joint Publication 3-05 cites examples of OPE as "close-target reconnaissance...reception, staging, onward movement, and integration...of forces...[and] infrastructure development." Because the military conducts OPE as a category of traditional military activities, these operations are not subject to congressional notification as a covert action or significant anticipated intelligence activity. Congress has been concerned that the military overuses the term OPE resulting in these operations effectively circumventing oversight by the congressional intelligence committees. OPE can also include clandestine intelligence collection, conducted under Title 10 authority, for example, that falls outside the jurisdiction of congressional defense committees, and, as part of a larger military operation, might not be brought to the attention of the congressional intelligence committees. Routine support to traditional military activities might include logistic support to impending or ongoing military operations which involve U.S. Armed Forces unilaterally and in which the U.S. role is generally acknowledged. They can be conducted clandestinely or covertly, however because they have a supporting function to a larger military operation in which the role of the United States is acknowledged, they are not considered covert action and do not require congressional notification separate from the operations they support. Other-than-routine support to traditional military activities includes activities abroad that involve other than unilateral employment of U.S. forces. They may be conducted covertly and clandestinely (i.e., the activity as well as U.S. sponsorship are secret). They include recruitment, training or other assistance to non-U.S. individuals, organizations or populations to conduct activities--wittingly or not--that support U.S. military objectives. Because they may be conducted well in advance of an anticipated military operation and because they can be intended to influence political, economic or military conditions in another country --such as swaying public opinion--other-than-routine support to traditional military activities is subject to congressional notification for covert action under Section 3093, Title 50 of the U. S. Code . Under Title 10, U. S. Code , the Defense Clandestine Service, subordinate to the Defense Intelligence Agency, is designed to provide dedicated clandestine support to DOD to meet unique strategic military intelligence priorities. The Secretary of Defense shall provide to the defense and intelligence committees of the House and Senate quarterly briefings on the deployments and collection activities of personnel of the Defense Clandestine Service. Section 485 of Title 10, U.S. Code requires the Secretary of Defense to provide monthly briefings to the congressional defense committees that describe DOD counterterrorism operations and related activities. Under the statute, each such briefing must include specific elements a global update on activity within each geographic combatant command and how such activity supports the respective theater campaign plan; an overview of authorities and legal issues, including limitations; an overview of interagency activities and initiatives; and any other matters the Secretary considers appropriate. Section 130k of Title 10 of the U . S. Code provides notification requirements for cyber capabilities "intended for use as a weapon" that specifically do not constitute covert action. Section 130k specifies that covert actions are exceptions to these notification requirements. For these operations, the Secretary of Defense must notify the congressional defense committees in writing within 48 hours of the use of a cyber weapon that has been approved for use under international law; on a quarterly basis for any cyber capability developed for use as a weapon; and immediately following the unauthorized disclosure of a cyber weapon capability. Offensive cyberspace operations are defined as operations "intended to project power by the application of force in and through cyberspace." Defensive cyberspace operations are defined as active or passive cyberspace operations "to preserve the ability to utilize friendly cyberspace capabilities and protect data, networks, net-centric capabilities, and other designated systems." Section 484 of Title 10 U . S. Code mandates the Secretary of Defense to provide the congressional defense committees in writing quarterly briefings "on all offensive and significant defensive military operations in cyberspace carried out by the Department of Defense during the immediately preceding quarter." The briefings are to include the command involved and an overview of the legal authorities under which the operations took place. Sensitive Military Operations are defined in Section 130f(d) of Title 10 U. S. Code as (1) kill or capture operations conducted by U.S. Armed Forces outside a declared theater of active armed conflict , or conducted by a foreign partner in coordination with the U.S. Armed Forces that target a specific individual or individuals; or (2) an operation conducted by the U.S. Armed Forces outside a declared theater of active armed conflict in self-defense or in defense of foreign partners, including during a cooperative operation. The Secretary of Defense shall submit notice in writing to the congressional defense committees within 48 hours of the operation (or within 48 hours of providing verbal notice to Congress), to include occasions when DOD provides support to covert actions conducted under Title 50 authority ; immediately following an unauthorized disclosure of an operation; "periodically" in the form of briefs detailing the personnel and equipment assigned. The Secretary of Defense is further required to brief the congressional defense committees periodically on DOD personnel and equipment assigned to sensitive military operations, including DOD support to such operations conducted under Title 50 authorities. Sensitive military cyber operations are a subcategory of sensitive military operations. Section 130j(c) of Title 10 of the U . S. Code defines sensitive military cyber operations as operations carried out by the armed forces of the United States that are intended to cause cyber effects outside a geographic location where the Armed Forces of the United States are involved in hostilities or where hostilities have been declared by the United States. The Secretary of Defense shall provide the congressional defense committees notice within 48 hours of the operation taking place; immediately subsequent to an unauthorized disclosure of a sensitive military cyber operation.

Covert action and clandestine activities of the intelligence community and activities of the military may appear similar, but they involve different notification requirements and usually are conducted under different authorities of the U. S. Code. The requirements for notifying Congress of activities of the intelligence community originated from instances in the 1970s when media disclosure of past intelligence abuses underscored reasons for Congress taking a more active role in oversight. Over time, these requirements were written into statute or became custom. Section 3091 of Title 50, U. S. Code requires the President of the United States to ensure that the congressional intelligence committees are "kept fully and currently informed of the intelligence activities of the United States, including any significant anticipated intelligence activity," significant intelligence failures, illegal intelligence activities, and financial intelligence activities. Intelligence activities also include covert action as outlined under Section 3093(e) of Title 50, U.S. Code. Section 3092 of Title 50, U. S. Code sets out the congressional notification requirements for non-covert action intelligence activities. Section 3093 of Title 50 sets out the congressional notification requirements for covert actions. Both sections 3092 and 3093 explicitly state such notification is to be provided to the "extent consistent with due regard for the protection from unauthorized disclosure of classified information relating to sensitive intelligence sources and methods, or other exceptionally sensitive matters." The President and intelligence committees are responsible for establishing the procedures for notification, which are generally to be done in writing. Partly in deference to this higher standard, such notifications are sometimes limited to specific subgroups of Members of the Senate and the House of Representatives in certain circumstances, as defined by law and custom.

Historically, electricity service has been defined as a natural monopoly, meaning that theindustry has (1) an inherent tendency toward declining long-term costs, (2) high thresholdinvestment, and (3) technological conditions that limit the number of potential entrants. In addition,many regulators have considered unified control of generation, transmission, and distribution as themost efficient means of providing service. As a result, most people (about 75%) are currently servedby a vertically integrated, investor-owned utility. As the electric utility industry has evolved, however, there has been a growing belief that thehistoric classification of electric utilities as natural monopolies has been overtaken by events and thatmarket forces can and should replace some of the traditional economic regulatory structure. Forexample, the existence of utilities that do not own all of their generating facilities, primarilycooperatives and publicly owned utilities, has provided evidence that vertical integration has notbeen necessary for providing efficient electric service. Moreover, recent changes in electric utilityregulation and improved technologies have allowed additional generating capacity to be providedby independent firms rather than utilities. The Public Utility Holding Company Act (PUHCA) (1) and the Federal Power Act(FPA) of 1935 (Title I and Title II of the Public Utility Act) (2) established a regime ofregulating electric utilities that gave specific and separate powers to the states and the federalgovernment. A regulatory bargain was made between the government and utilities. In exchange foran exclusive franchise service territory, utilities must provide electricity to all users at reasonable,regulated rates. State regulatory commissions address intrastate utility activities, including wholesaleand retail rate-making. State authority currently tends to be as broad and as varied as the states arediverse. At the least, a state public utility commission will have authority over retail rates, and oftenover investment and debt. At the other end of the spectrum, the state regulatory body will overseemany facets of utility operation. Despite this diversity, the essential mission of the state regulator in states that have notrestructured is the establishment of retail electric prices. This is accomplished through an adversarialhearing process. The central issues in such cases are the total amount of money the utility will bepermitted to collect and how the burden of the revenue requirement will be distributed among thevarious customer classes (residential, commercial, and industrial). Under the FPA, federal economic regulation addresses wholesale transactions and rates forelectric power flowing in interstate commerce. Federal regulation followed state regulation and ispremised on the need to fill the regulatory vacuum resulting from the constitutional inability of statesto regulate interstate commerce. In this bifurcation of regulatory jurisdiction, federal regulation islimited and conceived to supplement state regulation. The Federal Energy Regulatory Commission(FERC) has the principal functions at the federal level for the economic regulation of the electricityutility industry, including financial transactions, wholesale rate regulation, transactions involvingtransmission of unbundled retail electricity, interconnection and wheeling of wholesale electricity,and ensuring adequate and reliable service. In addition, to prevent a recurrence of the abusivepractices of the 1920s (e.g., cross-subsidization, self-dealing, pyramiding, etc.), the Securities andExchange Commission (SEC) regulates utilities' corporate structure and business ventures underPUHCA. The electric utility industry has been in the process of transformation. During the past 25years, there has been a major change in direction concerning generation. First, improved technologieshave reduced the cost of generating electricity as well as the size of generating facilities. Priorpreference for large-scale -- often nuclear or coal-fired -- powerplants has been supplanted by apreference for small-scale production facilities that can be brought online more quickly and cheaply,with fewer regulatory impediments. Second, this has lowered the entry barrier to electricitygeneration and permitted non-utility entities to build profitable facilities. Recent changes in electricutility regulation and improved technologies have allowed additional generating capacity to beprovided by independent firms rather than utilities. The oil embargoes of the 1970s created concerns about the security of the nation's electricitysupply and led to enactment of the Public Utility Regulatory Policies Act of 1978 (PURPA). (3) For the first time, utilitieswere required to purchase power from outside sources. The purchase price was set at the utilities'"avoided cost," the cost they would have incurred to generate the additional power themselves, asdetermined by utility regulators. PURPA was established in part to augment electric utilitygeneration with more efficiently produced electricity and to provide equitable rates to electricconsumers. In addition to PURPA, the Fuel Use Act of 1978 (FUA) (4) helped qualifying facilities(QFs) become established. Under FUA, utilities were not permitted to use natural gas to fuel newgenerating facilities. QFs, which by definition are not utilities, were able to take advantage of newlyabundant natural gas as well as new generating technology, such as combined-cycle plants that usehot exhaust gases from combustion turbines to make steam to generate additional power. Thesetechnologies lowered the financial threshold for entrance into the electricity generation business aswell as shortened the lead time for constructing new plants. FUA was repealed in 1987, but by thistime QFs and small power producers had gained a portion of the total electricity supply. This influx of QF power challenged the cost-based rates that previously guided wholesaletransactions. Before implementation of PURPA, FERC approved wholesale interstate electricitytransactions based on the seller's costs to generate and transmit the power. But, as non-utilitygenerators typically do not have enough market power to influence the rates they charge, FERCbegan approving certain wholesale transactions whose rates were a result of a competitive biddingprocess. These rates are called market-based rates. This first incremental change of traditional electricity regulation started a movement towarda market-oriented approach to electricity supply. Following the enactment of PURPA, two basicissues stimulated calls for further reform: whether to encourage nonutility generation and whetherto permit utilities to diversify into non-regulated activities. The Energy Policy Act of 1992 (EPACT) (5) removed several regulatory barriers to entry into electricitygeneration to increase competition of electricity supply. Specifically, EPACT provides for thecreation of entities, called "exempt wholesale generators" (EWGs), that can generate and sellelectricity at wholesale without being regulated as utilities under PUHCA. Under EPACT, EWGsare also provided with a way to assure transmission of their wholesale power to a wholesalepurchaser. However, EPACT does not permit FERC to mandate that utilities transmit EWG powerto retail consumers (commonly called "retail wheeling" or "retail competition"), an activity thatremains under the jurisdiction of state public utility commissions. PURPA began to shift moreregulatory responsibilities to the federal government, and EPACT continued that shift away from thestates by creating new options for utilities and regulators to meet electricity demand. EPACTallowed for a robust wholesale market in electricity. The transmission system is now usedextensively for bulk-power transfers between utilities, even though the physical system was designedto handle primarily intra-utility transfers. Utilities now depend on a combination of self-generation,merchant generators, and other utilities to meet their retail electricity demand. Shortly after enactment of EPACT, states began considering whether to allow retail choice. It was argued that retail prices would decline with additional competition. Most state plans have notmet initial expectations. Few alternative suppliers have remained in the market, consumers arereluctant to switch suppliers, and default service rates set by the states are generally equal to or lessthan wholesale market prices plus retail margin needed to cover retail service costs. (6) Currently, 24 states and theDistrict of Columbia have either enacted legislation or issued regulatory orders to implement retailaccess. California had the first active retail program. However, California suspended itsrestructuring program following the California energy crises in 2001 that was marked by retail andwholesale price spikes as well as a decrease in reliability. Eighteen states have active restructuringprograms. Six states, Arkansas, Montana, Nevada, New Mexico, Oklahoma, and West Virginia,have delayed implementation of retail access. Since 2000, no additional states have announced plansto introduce retail competition. Electric utility provisions are included in comprehensive energy legislation( H.R. 6 ) that was signed into law by President Bush on August 8, 2005. In part, this law repeals the Public Utility Holding Company Act (PUHCA). The electric utilityindustry has long been a proponent of such a repeal while consumer groups have been opposed. Asa compromise, a provision was included that strengthens FERC's merger review authority. Inaddition, language is included that is intended to prevent cross-subsidization. The mandatorypurchase requirement under the Public Utility Regulatory Policies Act (PURPA) is repealed. AnElectric Reliability Organization(ERO) is created and the ERO will promulgate mandatory,enforceable reliability standards for the electric industry that includes cybersecurity protection. Alsoincluded in the law is a Sense of Congress that FERC should carefully consider the states' objectionsto the locational installed capacity (LICAP) mechanism for New England. In addition to creating a new type of wholesale electricity generator, exempt wholesalegenerators (EWGs), the Energy Policy Act (EPACT) provides EWGs with a system to assuretransmission of their wholesale power to its purchaser. However, EPACT did not solve all of theissues relating to transmission access. As a result of EPACT, on April 24, 1996, FERC issued Orders888 and 889. (7) In issuingits final rules, FERC concluded that these orders will "remedy undue discrimination in transmissionservices in interstate commerce and provide an orderly and fair transition to competitive bulk powermarkets." Under Order 888, the Open Access Rule, transmission line owners are required to offer bothpoint-to-point and network transmission services under comparable terms and conditions that theyprovide for themselves. The rule provides a single tariff providing minimum conditions for bothnetwork and point-to-point services and the non-price terms and conditions for providing theseservices and ancillary services. This rule also allows for full recovery of so-called stranded costs,with those costs being paid by wholesale customers wishing to leave their current supplyarrangements. The rule encourages but does not require creation of independent system operators(ISOs) to coordinate intercompany transmission of electricity. Order 889, the Open Access Same-time Information System (OASIS) rule, establishesstandards of conduct to ensure a level playing field. The rule requires utilities to separate theirwholesale power marketing and transmission operation functions, but does not require corporateunbundling or divestiture of assets. Utilities are still allowed to own transmission, distribution, andgeneration facilities but must maintain separate books and records. On December 20, 1999, FERC issued Order 2000, which described the minimumcharacteristics and functions of regional transmission organizations (RTOs). (8) The required characteristicsof an RTO are: The RTO must be independent from marketparticipants. It must serve a region of sufficient size to permit the RTO to performeffectively. An RTO will be responsible for operational control, and It will be responsible for maintaining the short-term reliability of the grid. The required functions of an RTO outlined in Order 2000 are: It must administer its own transmission tariff. It must ensure the development and operation of market mechanisms tomanage congestion. It must address parallel flow issues both within and outside itsregion. It will serve as supplier of last resort for all ancillary services; it mustadminister an Open Access Same-time Information System. It must monitor markets to identify design flaws and market power and proposeappropriate remedial actions; it must provide for interregional coordination,and An RTO must plan necessary transmission additions and upgrades. Order 2000 does not require a utility to participate in an RTO, set out RTO boundaries, ormandate the acceptable RTO structure. RTOs will be able to file with FERC as an independentsystem operator (ISO), a for-profit transmission company (transco), or another type of entity that hasnot yet been proposed. Although RTO participation is voluntary under Order 2000, FERC built inguidelines and safeguards to ensure independent operation of the transmission grid. RTOs arerequired to conduct independent audits to ensure that owners do not exert undue influence over RTOoperation. FERC Order 2000 required the existing ISOs to submit to FERC by January 1, 2001, a planthat described whether their transmission organization met the criteria established in the RTOrulemaking. Electric utilities that were not members of an ISO had to file plans with FERC byOctober 1, 2000. The order does not mandate RTO formation, but if an individual utility opts notto join an RTO, the utility is required to prove why it would be harmed by joining such an entity. On July 12, 2001, FERC issued several orders requiring utilities to enter into talks to formRegional Transmission Organizations. Even though FERC Order 2000 did not set out RTOboundaries, in effect the July 12, 2001, order does. On September 17, 2001, FERC's AdministrativeLaw Judge Mediator H. Peter Young filed his report, which presented a blueprint for creating asingle RTO in the Northeast. (9) FERC has granted RTO status to three entities and conditional approval to four others. On December 20, 2001, FERC granted RTO status to the Midwest IndependentTransmission System Operator (MISO). (10) On September 18, 2002, FERC approved the RTO West, since renamed GridWest, proposal. RTO West includes all, or part of, Washington, Idaho, Montana, Oregon, Nevada,Wyoming, Utah, and a small part of northern California adjacent to Oregon. FERC granted PJM RTO status on December 19, 2002. PJM manages the gridin parts of Ohio, West Virginia, Pennsylvania, New Jersey, Delaware, Maryland, Virginia, and theDistrict of Columbia. Other RTOs have received conditional approval from FERC. Most recently, FERC conditionally approved the New England RTO (ISO-NE)on March 24, 2004. (11) ISO-NE serves customers in Connecticut, Massachusetts, New Hampshire, Rhode Island, Vermont,and portions of Maine. FERC also granted conditional approval to the Southwest Power Pool (SPP)on February 10, 2004. (12) Arkansas-based SPP serves 4 million customers in all, or parts of, Arkansas, Kansas, Louisiana,Mississippi, Missouri, New Mexico, Oklahoma, and Texas. FERC conditionally approved SeTrans RTO and WestConnect RTO onOctober 10, 2002. (13) SeTrans includes utilities in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, SouthCarolina, and Texas. WestConnect RTO includes parts of Arizona, Colorado, New Mexico, andUtah. In the past, utilities and some state utility commissioners have argued against large RTOs,stating that currently the expertise is not available to integrate a large geographic region withmultiple control centers and power pools. On February 26, 2002, FERC released a report thatassessed the potential economic costs and benefits of RTOs. (14) The study concluded theannual savings from RTO formation could range from $1 billion to $10 billion. However, the studydid not find significant differences in savings between larger and smaller RTOs. Those in favor oflarge RTOs argue that they would provide the most efficient operations of the transmission system. On November 7, 2001, FERC issued an order that stated FERC's goals and process for creatingRegional Transmission Organizations. (15) On May 14, 1999, the U.S. Court of Appeals for the Eighth Circuit ruled in a case betweenFERC and Northern States Power Company. The court held that the commission overstepped itsauthority when it ordered Northern States Power Company to treat wholesale customers the sameas it treats native load customers in making electricity curtailment decisions. This decision raisedfederal-state jurisdictional questions, particularly a state's right to guarantee system reliability. On October 3, 2001, the U.S. Supreme Court heard arguments in a case (New York et al. v.Federal Energy Regulatory Commission) that challenged FERC's authority under Order 888 toregulate transmission for retail sales if a utility unbundles transmission from other retail charges. In states that have opened their generation market to competition, unbundling occurs when customersare charged separately for generation, transmission, and distribution. Nine states, led by New York,filed suit, and argued that the Federal Power Act gives FERC jurisdiction over wholesale sales andinterstate transmission and leaves all retail issues up to the state utility commissions. Enron arguedthat FERC clearly has jurisdiction over all transmission and FERC is obligated to preventtransmission owners from discriminating against those wishing to use the transmission lines. OnMarch 4, 2002, the U.S. Supreme Court ruled in favor of FERC and held that FERC has jurisdictionover transmission including unbundled retail transactions. (16) At issue for Congress iswhether to allow certain utilities to give preferential treatment to native load customers (customerswithin their service territories.) The blackout of August 2003 in the Northeast, Midwest, and adjoining parts of Canada hashighlighted the need for infrastructure and operating improvements. The North American ElectricReliability Council (NERC) has responsibility for reliability of the bulk power system. NERC hasestablished reliability guidelines, but compliance with the guidelines is voluntary. The FederalPower Act gives FERC jurisdiction over unbundled transmission and was intended to regulatewholesale rates; however, no authority was provided to regulate reliability. As a result of the recommendations of the joint U.S.-Canada task force investigating theAugust 2003 blackout, NERC is conducting reliability readiness audits of reliability coordinators. All audits are expected to be completed by 2006. FERC held a technical conference on September29, 2004, to discuss the status of the Reliability Readiness Reviews. More than two-thirds of theaudited control areas and reliability coordinators need to make staff training improvements and addsupport to their control centers in case of an emergency. (17) At the conference, NERC, FERC, and industry officials agreedthat absent mandatory reliability standards, there is little assurance that operators of the system willcomply with more rigorous guidelines. Both NERC and FERC agree that implementation of an electric reliability organization(ERO) will improve the reliability of the electric system. The Energy Policy Act of 2005, as signedby the President on August 8, 2005, includes the creation of an ERO. The law requires FERC topromulgate rules to create a FERC-certified electric reliability organization. The ERO will developand enforce reliability standards for the bulk-power system. All ERO standards will be approvedby FERC. Under the law, the ERO can impose penalties on a user, owner, or operator of thebulk-power system that violates any FERC-approved liability standard. In addition, FERC can ordercompliance with the reliability standard and can impose a penalty if FERC finds that a user, owner,or operator of the bulk-power system has engaged in a violation of the reliability standard. However, this law would not give an ERO or FERC authorization to order construction of additionalgeneration or transmission capacity. Generally, the ERO is noncontroversial. Advocates of giving FERC authority over the EROcontend that central jurisdiction would provide more accountability. FERC would be ultimatelyresponsible for reliability issues. If the penalties employed by the ERO are not successful, thenFERC will have the authority to enforce penalties for entities that did not comply with reliabilitystandards. Establishing this new relationship between FERC and the ERO could have the potentialto improve coordination between market functions and reliability functions. Those opposed togiving FERC jurisdiction over bulk power system reliability contend that FERC has no experiencein this area. They argue that by giving FERC this authority, it will have to rely on NERC for muchof its expertise. Placing FERC in this position may add to the uncertainty associated with thechanges in institutional structure as FERC takes on this new role. A conflict exists between the apparent goal of increasing competition in the generation sectorand assuring adequate transmission capacity and management of the system to move the power. Additions to generating capacity are occurring at a more rapid pace than transmission additions. Thetraditional vertically integrated utility no longer dominates the industry structure. (18) In addition, demand forelectric power continues to increase. Unresolved regulatory issues that have emerged after 1992have resulted in considerable uncertainty in the financial community. As a result of all of thesefactors, investment in the transmission system has not kept pace with demand for transmissioncapacity. Siting. One reason transmission lines have notbeen built in recent years is the difficulty in siting lines. Even though the transmission of electricityis considered interstate commerce, the siting of transmission lines is the responsibility of the states. In addition, several federal agencies play various roles in the siting process, primarily with regardto environmental impacts. Siting and building transmission lines have been very difficult becauseof citizen opposition as well as inconsistent siting requirements among states. While controversial,since the blackout of 2003, FERC commissioners are now supporting federal siting backstopauthority. (19) In addition,the electric industry is in favor of giving FERC siting authority. (20) States are generallyopposed to this proposal. The Energy Policy Act of 2005 includes federal backstop authority forsiting transmission lines. Pricing. Some transmission-owning utilitiesargue that the current pricing mechanism for transmission discourages investment. FERC regulatesall transmission, including unbundled retail transactions. Under the Federal Power Act (FPA),FERC is required to set "just and reasonable" rates for wholesale transactions. (21) FERC has traditionallydetermined rates by using an embedded cost method that includes recovery of capital costs, operating expenses, improvements, accumulated depreciation, and a rate of return. Traditionally, transmissionowners have been compensated for use of their lines based on a contract path for the movement ofelectricity, generally the shortest path between the generator and its customer. However, electricityrarely follows a contract path and instead follows the path based on least impedance. (22) Transmission lines oftencarry electricity that has been contracted to move on a different path. As more bulk power transfersare occurring on the transmission system, transmission owners not belonging to RTOs are not alwaysbeing compensated for use of their lines because a contract path rarely follows the actual flow. Thiscreates a disincentive for transmission owners to increase capacity. (23) Under Order 2000, (24) FERC stated its interest in incentive ratemaking and, inparticular, performance-based ratemaking. Those in favor of incentive ratemaking argue thatincentives are needed (1) to encourage participation in regional transmission organizations(RTOs) (25) ; (2) tocompensate for perceived increases in financial risk because of participation in a regionaltransmission organization, and (3) to facilitate efficient expansion of the transmission system. FERC uses a "license plate" rate for transmission: a single rate based on customer location. As FERC is encouraging formation of large regional transmission organizations, FERC may movetoward a uniform access charge, sometimes called postage stamp rates. With a postage stamp rate,users pay one charge for moving electricity anywhere within the regional transmission organization. Postage stamp rates eliminate so-called rate pancaking, or a series of accumulatedtransmission charges as the electricity passes through adjacent transmission systems, and increasesthe pool of available generation. On the other hand, by moving to postage stamp rates, customersin low-cost transmission areas may see a rate increase, and high-cost transmission providers in thesame area may not recover embedded costs because costs are determined on a regional basis. Regulatory Uncertainty. Transmission ownersand investors have expressed concern that the regulatory uncertainty for electric utilities is inhibitingnew investment in and construction of transmission facilities. For example, repeal of PUHCA hasbeen debated since 1996 without resolution. Without clarification on whether PUHCA will berepealed, utilities state that they are reluctant to invest in infrastructure. Repeal could significantlyexpand the ability of utilities to diversify their investment options. In addition, FERC has been moving toward requiring participation in regional transmissionorganizations to create a more seamless transmission system. A fully operational regionaltransmission organization would operate the entire transmission system in a region and be able toreplace multiple control centers with a single control center. (26) This type of control canincrease efficiencies in the operation of the transmission system. RTO participants are required toadhere to certain rules, but these are not currently enforceable in court. Uncertainty over the form of an RTO, its operational characteristics, and the transmissionrates for a specific region have apparently made utilities wary of investing in transmission. FERChas granted RTO status to several entities and conditionally approved others. If RTOs are able tooperate successfully and develop a track record, some regulatory uncertainty will diminish. Some have argued that the wholesale power markets cannot be competitive withoutadditional market transparency for both generation and transmission. Some proposals would requireFERC to issue rules to establish an electronic information system to provide the public, FERC, statecommissions, buyers and sellers of wholesale electric energy, and users of transmission services withinformation on the availability and price of wholesale electric energy and transmission services. The Energy Policy Act of 2005 repeals PUHCA and gives FERC additional merger reviewauthority. One argument for additional PUHCA reform has been made by electric utilities that wantto further diversify their assets. Under PUHCA, a holding company could acquire securities orutility assets only if the Securities and Exchange Commission (SEC) found that such a purchasewould improve the economic efficiency and service of an integrated public utility system. It hasbeen argued that reform to allow diversification would improve the risk profile of electric utilitiesin much the same way as in other businesses: The risk of any one investment is diluted by the riskassociated with all investments. Utilities have also argued that diversification would lead to betteruse of underutilized resources (due to the seasonal nature of electric demand). Utility holdingcompanies that have been exempt from SEC regulation argue that PUHCA discourageddiversification because the SEC could repeal exempt status if exemption would be "detrimental tothe public interest." For a number of years there has been significant bipartisan congressional support forrepealing much of PUHCA, and giving FERC and state commissions access to books and records. Since the 1980s, the Securities and Exchange Commission has testified before Congress that manyprovisions of PUHCA are no longer relevant and other provisions are redundant with state and otherfederal regulations. (27) However, as a result of Enron's collapse, some in Congress have taken a somewhat different viewtoward significantly amending or repealing PUHCA. (28) Even though Enron had claimed exemption from PUHCA, onFebruary 6, 2003, Securities and Exchange Commission Chief Administrative Law Judge BrendaP. Murray denied Enron's PUHCA exemption applications of February 28, 2002, amended on May31, 2002, and April 12, 2000. (29) In the case of Enron, PUHCA and many other laws did not deteror prevent fraudulent filing of information with the SEC. State regulators have expressed concerns that increased diversification could lead to abuses,including cross-subsidization: a regulated company subsidizing an unregulated affiliate. Cross-subsidization was a major argument against the creation of EWGs and re-emerged as anargument against PUHCA repeal. In the case of electric and gas companies, non-utility ventures thatare undertaken as a result of diversification may benefit from the regulated utilities' allowed rate ofreturn. Moneymaking non-utility enterprises would contribute to the overall financial health of aholding company. However, unsuccessful ventures could harm the entire holding company,including utility subsidiaries. In this situation, utilities would not be penalized for failure in termsof reduced access to new capital, because they could increase retail rates. Several consumer and environmental public interest groups, as well as state legislators,expressed concerns about PUHCA repeal. PUHCA repeal, such groups argue, could only exacerbatemarket power abuses in what they see as a monopolistic industry where true competition does notyet exist. A prospective repeal of SS210 of PURPA, the mandatory purchase requirement provisions,is included in the Energy Policy Act of 2005. Proponents of PURPA repeal -- primarilyinvestor-owned utilities (IOUs) located in the Northeast and in California -- argued that their stateregulators' "misguided" implementation of PURPA in the early 1980s has forced them to paycontractually high prices for power they do not need. They argued that, given the currentenvironment for cost-conscious competition, PURPA is outdated. The PURPA Reform Group,which promotes IOU interests, strongly supported repeal by contending that the PURPA's mandatorypurchase obligation was anti-competitive and anti-consumer. Opponents of PURPA reform (industrial power customers, some segments of the natural gasindustry, the renewable energy industry, and environmental groups) have many reasons to supportPURPA as it was enacted. Mainly, their argument was that PURPA introduced competition in theelectric generating sector and, at the same time, helped promote wider use of cleaner, alternativefuels to generate electricity. Since the electric generating sector is not yet fully competitive, theyargued, repeal of PURPA would decrease competition and impede the development of the renewableenergy industry. Additionally, opponents of PURPA repeal argued that it would result in lesscompetition and greater utility monopoly control over the electric industry. State regulatorsexpressed concern that mandatory purchase requirement repeal would prevent them from decidingmatters currently under their jurisdiction. The National Association of Regulatory UtilityCommissioners has opposed legislation that would allow FERC to protect utilities from costsassociated with PURPA contracts.

The Public Utility Holding Company Act of 1935 (PUHCA) and the Federal Power Act(FPA) were enacted to eliminate unfair practices and other abuses by electricity and gas holdingcompanies by requiring federal control and regulation of interstate public utility holding companies. Prior to PUHCA, electricity holding companies were characterized as having excessive consumerrates, high debt-to-equity ratios, and unreliable service. PUHCA remained virtually unchanged for50 years until enactment of the Public Utility Regulatory Policies Act of 1978. PURPA was, in part,intended to augment electric utility generation with more efficiently produced electricity and toprovide equitable rates to electric consumers. Qualifying facilities (QFs) are exempt from regulationunder PUHCA and the FPA. Electricity regulation was changed again in 1992 with passage of the Energy Policy Act(EPACT). The intent of Title 7 of EPACT is to increase competition in the electric generating sectorby creating new entities, called "exempt wholesale generators" (EWGs), that can generate and sellelectricity at wholesale without being regulated as utilities under PUHCA. This title also providesEWGs with a way to assure transmission of their wholesale power to their purchasers. The effect ofthis act on the electric supply system has been more far-reaching than PURPA. On April 24, 1996, the Federal Energy Regulatory Commission (FERC) issued Orders 888and 889. FERC issued these rules to remedy undue discrimination in transmission services ininterstate commerce and provide an orderly and fair transition to competitive bulk power markets.Order 2000, issued December 20, 1999, established criteria for forming transmission organizations. Comprehensive electricity legislation may involve several components. The first is PUHCAreform. Some electric utilities want PUHCA changed so they can more easily diversify their assets. State regulators have expressed concerns that increased diversification could lead to abuses,including cross-subsidization. Consumer groups have expressed concern that a repeal of PUHCAcould exacerbate market power abuses in a monopolistic industry where true competition does notyet exist. The second issue is PURPA's requirement that utilities purchase power from QFs. Manyinvestor-owned utilities support repeal of these mandatory purchase provisions. They argue that theirstate regulators' "misguided" implementation of PURPA has forced them to pay contractually highprices for power that they do not need. Opponents of this legislation argue that it would decreasecompetition and impede development of renewable energy. The third main issue is reliability. Without mandatory and enforceable reliability standards,proponents argue that reliability of the electric power system will not be at acceptable levels. Opponents say these standards are unnecessary. This report will be updated as events warrant.

Private equity firms buy and sell other businesses. The industry can be roughly divided into two parts: venture capital and buyout funds. Venture capitalists invest in small, startup firms, providing financing and management expertise. Their payoff usually comes when the firms are sold, either by selling shares into the public stock market through an initial public offering (IPO), or by an outright sale to a larger company. Buyout funds acquire ownership stakes in businesses of all sizes. The best-known form of buyout transaction is the leveraged buyout (LBO). In an LBO, an existing publically traded company is purchased using a combination of equity and debt and then taken private. For example, in the proposed $24.4 billion LBO of Dell Computers by a group headed by Dell founder and CEO Michael Dell a consortium of banks is being used to fund the debt portion of the proposed deal. If the LBO is completed the company will stop being traded on a public stock exchange (go private). The LBO deal can be very lucrative for the private equity investors: they receive a premium above the going market price for their stake in the target, and at the end of the transaction they own the entire target company, even though they have sold their shares. After completion of the LBO, as owners of a private corporation, they can pay themselves fees, salaries, and dividends without having to answer to public shareholders or Wall Street analysts. An increasingly common practice is to issue debt and use the proceeds to pay a special dividend to the shareholders--who are the private equity investors themselves. At the end of the process, usually several years after the acquisition, the company is resold, either to public investors through an IPO (in this case called a "reverse LBO"), or to another firm. Hedge funds trade in all financial markets, employing a very broad range of investment strategies. Some take simple speculative positions on the direction of prices of financial assets--stocks, bonds, commodities, currencies, etc.--while others construct very complex portfolios based on price relationships across asset classes and across markets, designed to produce positive returns whatever the direction of prices in the underlying markets. Some funds follow high risk strategies; others are quite conservative. Hedge fund trading is not always based on short-term strategies, but in general their investment horizons are shorter than those of private equity funds, whose holding periods average 6 to 10 years. The line between private equity and hedge funds is often blurred. A significant subset of hedge funds, called "activist" funds, also operates in the corporate takeover market. Such funds typically buy a stake in a public company and then pressure the target firm to make changes in operations (such as spinning off underperforming units or assets), governance (e.g., replacing top executives or appointing a hedge fund designee to the board of directors), or financial structure (announcing a stock buyback or a special dividend) that will boost the share price. If these efforts do not succeed in the short term, the funds may hold on to their investments for years, in essence replicating the strategy of value investors like Warren Buffett. Between 2000 and 2007, both private equity and hedge funds grew rapidly in size and number, because of a number of factors that some call a "perfect storm." When the bull market ended in 2000 and interest rates fell, institutional investors such as pension funds and foundations turned to "alternative" investments to make up for low yields in traditional asset classes. Hedge funds and private equity were the primary beneficiaries of this shift. Falling share prices and the availability of low-cost debt capital created an unusually favorable situation for private equity funds: they could borrow to finance acquisitions at relatively low cost, and expect to sell into a recovering stock market. Private equity and hedge fund performance, however, has not been immune to the economic turmoil which began in 2008. Hedge funds ended 2008 and 2011 with negative aggregate returns for the first times on record (since 2000). Similarly, private equity returns are forecast significantly below historical levels through 2014. While there are no official or comprehensive statistics on the size of either industry, an often cited estimate is that there are now over 9,000 hedge funds, with over $2.2 trillion in investor funds under management. A decade ago, the comparable estimates were 2,500 funds and $200 billion in capital. In private equity, firms have raised more than $1 trillion in the past decade, with about $200 billion-$250 billion in 2006 alone. In 2012, LBOs accounted for 9% of the dollar value of all corporate mergers, up from about 2% in the late 1990s but within the range of 3% to 29% observed in the past 10 years. In short, private equity and hedge funds, once marginal players, now exert what could be characterized as significant influence in the markets where they operate. As a result, how those who operate in this industry are taxed, relative to other participants in this industry and the general public, has come under increased congressional scrutiny. While private equity firms and hedge funds may differ in their investment strategies, their structures are similar. Nearly all are organized as partnerships, which means that their earnings are not taxed at the firm level. Most partnerships are simply straightforward conduits of taxable income or loss and tax attributes to the individual partners. They can, however, also be used to manipulate the allocation of tax attributes and to shelter income and assets from taxation as a result of the allocation of tax attributes. There are two kinds of partners. The fund managers, who guide the investment strategy, are general partners. Their background typically includes experience at a Wall Street investment bank, although two former Secretaries of the Treasury and a former Securities and Exchange Commission (SEC) chairman now run hedge funds. The general partners often invest their own capital in the funds, but this is usually a small share of the total managed by the fund. Outside investors, who contribute capital but have no say in investment or management decisions, are the limited partners. They are generally institutional investors--public and corporate pension funds, insurance companies, foundations, and endowments--or individual investors with significant amounts of resources. In contrast to the general partners, the contributions of limited partners is usually a large share of the total managed by the fund. Hedge funds typically establish multiple funds to accommodate the tax planning preferences of different investors. While they generally share a common pool of underlying assets, they are chartered in different jurisdictions to cater to different clientele. By one estimate, nearly 11,000 hedge funds, or about 80% of the total, are registered in the Cayman Islands as well as their home country. Foreign investors and U.S. tax-exempt institutions may prefer to invest in foreign-chartered funds, while other types of U.S. investors find it disadvantageous to invest in foreign funds. Small public investors are generally not able to invest in hedge funds, because they lack either the assets or income. Under U.S. law, the sale of shares, or interests, in an investment partnership constitutes an offering of securities, and must be registered with the SEC if the offering is public. In order to avoid registration, and the associated disclosure requirements, most funds rely on exemptions in the securities laws that allow them to make unregulated "private" offerings. In order to qualify for these exemptions, prospective limited partners must meet various income and asset thresholds. (The most basic is the "accredited investor" standard--income of $200,000 or more in the past two years and at least $1 million in assets.) Recently, a number of hedge funds and private equity partnerships have gone public, by selling shares (or units) in an IPO. Their securities are now traded on the New York Stock Exchange and other major markets, and may be purchased by anyone. These firms, which include the Fortress Investment Group and Blackstone, will operate much as before, but will be required to file quarterly and annual financial statements and make the full range of disclosures required by the SEC. When the funds' investments yield a positive return, both limited and general partners receive income, as the value of their share of the fund increases. This income, as mentioned above, is not taxed at the partnership level; only the individual partners pay taxes, usually at the capital gains rate. In addition, the general partners receive compensation from the limited partners. Compensation structures may vary from fund to fund, but the standard pay formula is called "2 and 20." That is, fund managers take 2% of the fund's assets each year as a management fee, and 20% of the total profits as a kind of performance bonus. The percentage-of-assets management fee is usually paid in cash and is taxed at ordinary income rates. The 20% performance fee is sometimes paid in cash, and sometimes credited to the manager's account. Because the amount is often carried over from year to year until a cash payment is made, usually following the closing out of an investment, it is called "carried interest." The carried interest is taxed at the capital gains rate (20%) which is currently below the top ordinary income tax rate (39.6%). Given the fact that these funds are private, no comprehensive figures on managers' compensation are available, although a number of consultants and trade groups do publish estimates. According to Alpha magazine, the top 25 hedge fund managers earned $14.4 billion in 2012, down from more than $22 billion in 2010. Comparable annual lists are not published for private equity managers, probably because cash distributions occur less frequently than in hedge funds, and there is greater year-to-year variation. One estimate is that managers earned $45 billion over the past six years. Congressional proposals have evolved since the 110 th Congress from the full taxation of carried interest as ordinary income to more nuanced approaches that account for "enterprise value" and tax carried interest at some blend of the capital gains and ordinary income tax rates. Similarly, the President's FY2014 Budget Proposal calls for the taxation of carried interest as ordinary income less compensation from "enterprise value." As noted above, carried interest is the portion of fund managers' compensation that represents a percentage of the funds' total investment gains. Under current tax rules, it is generally taxed at the capital gains rate (generally 20%) when realized. The current law treatment follows from the long-standing principle that the distributions of a partnership should be taxed the same as underlying income--or that the income should retain its character. However, the current law treatment, according to a particular point of view, violates the economic principle of horizontal equity. According to this point of view, fund managers provide labor to the fund the same as other workers provide to their employers. As such, the principle of horizontal equity says the fund manager and worker should be taxed similarly. One option to correct this potential issue would be to tax carried interest as ordinary income. In the 113 th Congress, S. 268 and the President's FY2014 Budget Proposal take a nuanced approach that treats carried interest as a mix of capital gains and ordinary income. The Tax Reform Act of 2014 would exempt carried interests derived from real estate but tax a portion of the remainder as ordinary income. As a result, each proposal would treat a portion of carried interest as ordinary income and the remainder as capital gains income. According to the Joint Committee on Taxation, the provision in the Tax Reform Act of 2014 would raise $3.1 billion in revenue in the FY2014-FY2023 budget window, while the provision in the President's FY2014 Budget Proposal would raise $17.4 billion in revenue in the FY2014-FY2023 budget window. Supporters of these proposals have argued that carried interest is essentially a fee for investment advisory services, and that the appropriate treatment is to tax it like other ordinary income. Opponents maintained that since the source of carried interest is earnings on the fund's investments, it should be treated like any other investment income: capital gains if held for more than a year, ordinary income if the holding period is less. Along with its reduced tax rates, capital gains income receives another benefit--termed a tax deferral--because it is not taxed until realized. Carried interest shares this benefit. The concept of tax deferral relates to the timing of tax payments--with the idea that a taxpayer prefers to pay taxes in the future, rather than today because he or she can control the funds longer, use them in some other way, and benefit from the time value of money. Deferral increases in value with both the length of the deferral period and the taxpayer's marginal tax rate. Carried interest, discussed above, benefits from deferral since it is only taxed when realized--as is the case with capital gains. In addition, hedge fund managers can amplify the benefits of deferral by electing to receive their compensation in shares of foreign-chartered funds. As mentioned earlier, these foreign-chartered funds may appeal to different types of investors than their U.S.-chartered counterparts. In addition to deferring U.S. tax as long as the money is held offshore, and not related to the conduct of a trade or business, the returns on the investment can compound tax-free--resulting in a substantial tax advantage. The advantage is such that the New York Times reported that a single hedge fund, Citadel, has deferred at least $1.7 billion since it was founded in 1990. In the 110 th Congress, H.R. 3996 , H.R. 4351 , and H.R. 6049 , all introduced by then Committee on Ways and Means Chairman Rangel, would have included compensation deferred through foreign-chartered funds in the gross income of the hedge fund manager in the year the income is earned. As mentioned above, H.R. 3996 was passed by both the House of Representatives and the Senate, though the Senate amended the bill to remove this provision. H.R. 4351 was passed by the House of Representatives and referred to the Senate Committee on Finance on January 22, 2008. H.R. 6049 was passed by the House of Representatives on May 21, 2008. The value of investment services management partnerships is generally viewed as the present value of the future returns from fees and carried interest plus the value of traditional capital assets like stockholdings in companies, real estate, and goodwill (often referred to as enterprise value). How to tax this enterprise value has been central to the more recent debates concerning carried interest. While there is a general common ground in the definition of enterprise value, there is not a consensus on its proper tax treatment. From one perspective, the current law treatment of enterprise value (as a capital gain) is entirely unjustified and violates economic equity principles and long-standing tax policy principles on the treatment of business income. The alternative view is that the current tax law treatment is justified on the grounds of long-standing tax policy principles on the treatment of pass-through income and is consistent with the treatment of other businesses. The unsettled nature of how to tax enterprise value is, perhaps, reflected in S. 268 and the President's FY2014 Budget Proposal. These proposals both reflect the position that enterprise value contains characteristics of both capital and ordinary income. As a result, each proposal would allow enterprise value that is separable from other partnership value and unrelated to the provision of investment services to be taxed as capital gains. Instead of changing the tax treatment of fund managers' income, another approach would change the tax treatment of some hedge funds that are organized as publicly traded partnerships. Publicly traded partnerships are partnerships whose interests are traded on an established exchange or in a secondary market. They are generally treated as corporations for tax purposes and subject to the corporation income tax with its 35% general rate, with two exceptions. One exception consists of partnerships with at least 90% of their gross income from passive investments, such as dividends, interest, rents, capital gains, and mining and natural resources income. A second exception consists of those partnerships that were publicly traded on December 17, 1987; these partnerships, originally grandfathered in for 10 years, may now elect to retain partnership treatment by paying a tax of 3.5% of gross income from the active conduct of business. These partnerships are not taxed at the corporate level. In the 110 th Congress, S. 1624 , introduced on June 14, 2007, by Senator Max Baucus, and others, with Senator Chuck Grassley as an original co-sponsor, would have changed the tax treatment of publicly traded partnerships that provide investment advisory and related asset management services: they would have been taxed as though they were corporations. That is, they would have had to pay the corporate income tax on their earnings, rather than pass those earnings through to be taxed only as the partners' individual income. In a news release, Senator Baucus stated that the bill was needed to ensure that some corporations are not disadvantaged because they conduct business in the corporate form and pay taxes as a corporation. Asset management service and investment advisory partnerships provide the same types of active business services as their corporate competitors. Our tax system functions best when it is fair. The tax law ought to treat similarly situated taxpayers the same. Thus, these publicly traded partnerships should be taxed as corporations. The bill was criticized by Henry Paulson, then Secretary of the Treasury, on the grounds that tax policy ought not to single out one industry sector. Chairman Baucus held a hearing on the bill in the Finance Committee in August 2007. The bill was referred to the Senate Finance Committee but did not advance.

Private equity and hedge funds are investment pools generally available only to institutions and individuals able to make investments in excess of $200,000. Private equity funds acquire ownership stakes in other companies and seek to profit by improving operating results or through financial restructuring. Hedge funds follow many strategies, investing in any market where managers see profit opportunities. The two kinds of funds are generally structured as partnerships: the fund managers act as general partners, while the outside investors are limited partners. Fund managers are compensated in two ways. First, to the extent that they invest their own capital in the funds, they share in the appreciation of fund assets. Second, they charge the outside investors two kinds of annual fees: a percentage of total fund assets, and a percentage of the fund's earnings. The latter performance fee is called "carried interest" and is treated as capital gains under current tax rules. Since the 110th Congress, concerns have been raised that the current tax rules are inequitable and inconsistent with some tax policy principles. Proposals that address this concern have focused on taxing some portion (or all in some cases) of carried interest as ordinary income. In the 113th Congress, the Tax Reform Act of 2014 would tax carried interest, exempting income earned from real estate, as ordinary income. S. 268 and the President's FY2014 Budget Proposal would tax carried interest as ordinary income, while taxing another form of compensation, known as enterprise value, as capital gains income. According to the Joint Committee on Taxation, the provision in the Tax Reform Act of 2014 would raise $3.1 billion in revenue in the FY2014-FY2023 budget window, while the provision in the President's FY2014 Budget Proposal would raise $17.4 billion in revenue in the FY2014-FY2023 budget window. This report discusses the major issues surrounding the tax treatment of hedge fund and private equity managers and will be updated as legislative developments warrant.

Unmanned vehicles (UVs) are viewed as a key component of U.S. defense transformation. Perhaps uniquely among the military departments, the Department of the Navy (DON), which includes the Navy and Marine Corps, may eventually acquire every major kind of UV, including unmanned air systems (UASs)--which include unmanned aerial vehicles (UAVs) and armed UAVs known as unmanned combat air vehicles, or UCAVs--unmanned surface vehicles (USVs), unmanned underwater vehicles (UUVs) and autonomous underwater vehicles (AUVs), and unmanned ground vehicles (UGVs). Section 220 of the FY2001 defense authorization act ( H.R. 4205 / P.L. 106-398 of October 30, 2000) states, "It shall be a goal of the Armed Forces to achieve the fielding of unmanned, remotely controlled technology such that--(1) by 2010, one-third of the aircraft in the operational deep strike force aircraft fleet are unmanned; and (2) by 2015, one-third of the operational ground combat vehicles are unmanned." A 2005 report by the Naval Studies Board (NSB) recommended that the Navy and Marine Corps should accelerate the introduction of UAVs, and UUVs, UGVs; the report made several additional recommendations concerning DON UV efforts. The Navy Unmanned Combat Air System (N-UCAS) is the Navy's program for acquiring a UAS that can operate from aircraft carriers and penetrate enemy defenses to conduct surveillance and reconnaissance operations or suppress enemy air defenses (SEAD). The Navy plans to demonstrate the aircraft's suitability for carrier-based operations in 2013, and have it enter service in 2021 as a penetrating surveillance and reconnaissance system. The N-UCAS program was initiated as the UCAV-N program in conjunction with the Defense Advanced Research Projects Agency (DARPA). In December 2002, the Department of Defense (DOD) decided to merge the Air Force and Navy UCAV programs into a Joint Unmanned Combat Air System (J-UCAS) program. In October 2005, management of J-UCAS was transferred from DARPA, which had managed it since October 2003, to a joint Air Force-Navy office led by the Air Force. In February 2006, DOD announced that it was restructuring the J-UCAS program into a Navy-oriented UCAV program. The effort became a Navy program once again at the start of FY2007. Details about the J-UCAS program are being defined. The Broad Area Maritime Surveillance UAS (BAMS UAS) is the Navy's program for acquiring an unmanned, persistent, multi-sensor (radar, electro-optical/infrared, and electronic support measures) maritime ISR system that can cover any part of the world. BAMS UAS is to work with the Navy's planned P-8 Multi-Mission Aircraft (or MMA--the Navy's planned successor to the P-3 Orion maritime patrol aircraft). Competitors for BAMS UAS include variants of the existing Global Hawk and Predator UAVs, and possibly an unmanned version of the Gulfstream 550. The Navy's FY2008-FY2013 aircraft procurement plan calls for procuring the first four BAMS UASs in FY2011, and four more each in FY2012 and FY2013. The first BAMSs are expected to enter service in 2013. In support of the BAMS UAS program, the Navy, under the Global Hawk Maritime Demonstration (GHMD) program, has procured two Global Hawks under an Air Force production contract for use as test and demonstration assets in developing a concept of operations and tactics, training, and procedures for persistent ISR. Fire Scout --a small, unmanned helicopter--is the Navy's program for acquiring a Vertical Takeoff and Landing UAV (VTUAV) for use aboard Littoral Combat Ships (LCSs) as an ISR and communications-relay platform. Five Fire Scouts were procured in FY2006 and four were procured in FY2007. The Navy's FY2008-FY2013 aircraft procurement plan calls for procuring three in FY2008, five in FY2009, six each in FY2010 and FY2011, nine in FY2012, and 10 in FY2013. A planned improvement for Fire Scout is the Coastal Battlefield Reconnaissance and Analysis (COBRA) mine countermeasures payload. The Tactical Control System (TCS) , a part of the Fire Scout system, is being evaluated by the Navy as a possible control system for BAMS UAS (see above) and STUAS (see below). The Small Tactical UAS (STUAS) is a Navy-Marine Corps program(with additional Air Force and Special Operations Command [USSOCOM] participation in developing program requirements) initiated in FY2008 to develop a small UAV for persistent ISR operations. For the Navy, STUAS is to support ship and small-unit commanders involved in the Navy's participation in what the Administration refers to as the global war on terrorism (GWOT). The Navy and Marine Corps want to have STUAS enter service in FY2010. The Marine Corps organizes its UAS acquisition efforts into three tiers based on the level of the Marine Corps commander supported. Tier I UASs support small-unit (platoon and company) commanders. The current Tier I UAS is the Dragon Eye . In September 2006, the Marine Corps selected the Raven B --a UAS also operated by the Army and the USSOCOM--as the Marine Corps' follow-on Tier I UAS. The Marine Corps as of November 2006 operated more than 100 Tier I systems. Tier II UASs support battalion, Marine Expeditionary Unit (MEU), regimental, and division commanders. The Marine Corps wants the STUAS (see discussion above) to be its new Tier II system. Between now and STUAS' planned entry into service in FY2010, the Marine Corps is filling its need for Tier II UASs in Iraq through ISR service contracts. Boeing/Insitu is the current contractor; future contracts will be competed. Tier III UASs support Marine Expeditionary Force (MEF) and Joint Task Force (JTF) commanders. The current Tier III UAS is the Pioneer , which entered service with the Navy and Marine Corps in 1986 and is now in sustainment status. The Marine Corps is changing the Pioneers' ground control system (GCS) to a Replacement GCS based on the Army's "One System" GCS, providing a common GCS capability with the Army. The Marine Corps plans to ultimately use the One System GCS across all three UAS tiers. The Vertical UAS (VUAS) is the Marine Corps' planned follow-on Tier III UAS. The Marine Corps is currently developing requirements documentation and conducting an analysis of alternatives (AOA) for the program, and is evaluating options for sustaining its current Tier III capability until VUAS is fielded. The Navy reportedly was to complete a new USV master plan by the end of 2006. The Remote Minehunting System (RMS ) is a high-endurance, semi-submersible vehicle that tows a submerged mine-detection and -classification sensor suite. The Navy originally envisioned procuring at least 12 systems for use on at least 12 DDG-51-class Aegis destroyers, but in FY2003 reduced the program to 6 systems for 6 DDG-51s. Additional RMSs are now to be deployed from LCSs. The Office of Naval Research (ONR) reportedly is developing two USV prototypes as future options for a common USV or family of USVs. The Navy's Spartan Scout USV program uses an unmanned 7-meter (23-foot) or 11-meter (36-foot) boat capable of semi-autonomous operations that can be launched from surface ship or shore. The craft can be equipped with modular payload packages for missions such as mine warfare and antisubmarine warfare (ASW). The Navy accelerated deployment of Spartan; the first system was deployed in October 2003. The Navy's 2005 UUV master plan sets forth nine high-priority missions for Navy UUVs: (1) ISR, (2) mine countermeasures (MCM), (3) anti-submarine warfare (ASW), (4) inspection/identification, (5) oceanography, (6) communication/ navigation network nodes (CN3), (7) payload delivery, (8) information operations, and (9) time-critical strike operations. The plan stresses the need for commonality, modularity, and open-architecture designs for Navy UUVs, organizes Navy UUVs into four broad categories: Man-portabable UUVs with diameters of 3 to 9 inches and weights of 25 to 100 pounds, for use in special-purpose ISR, expendable CN3, very-shallow-water MCM, and explosive ordnance disposal (EOD); Lightweight vehicles with 12.75-inch diameters and weights of up to 500 pounds (the same as lightweight Navy torpedoes), for use in harbor ISR, special oceanography, mobile CN3, network attack, and MCM area reconnaissance; Heavyweight vehicles with 21-inch diameters and weights up to 3,000 pounds (the same as heavyweight Navy torpedoes), for use in tactical ISR, oceanography, MCM, clandestine reconnaissance, and decoys; and Large vehicles with diameters of 36 to 72 inches and weights of up to 20,000 pounds, for use in persistent ISR, ASW, long-range oceanography, mine warfare, special operations, EOD, and time-critical strike operations. The Navy is using its single Long-term Mine Reconnaissance System (LMRS) (which includes two UUVs) and its single Advanced Development UUV (which includes 1 vehicle) to support the development of the Mission-Reconfigurable UUV System (MRUUVS) . The MRUUVS is a 21-inch-diameter, submarine-launched and -recovered UUV being developed for conducting mine countermeasures and ISR missions in areas denied to inaccessible to other Navy systems. The Navy wants the MRUUVS program to start in FY2009, and the first MRUUVs to enter service in 2016. The Large-Displacement, Mission-Reconfigurable UUV System (LD-MRUUVS) is a large, clandestine UUV for launching from submarines, LCSs, and amphibious ships that is to be used for conducting multiple missions, including mine countermeasures (including neutralization), delivery of payloads for special operations forces, persistent ISR, and limited ASW in areas denied or inaccessible to other Navy systems. The Navy is currently developing requirements for the system, and the development effort will leverage technology developed for the 21-inch MRUUVS. The Surface Mine Countermeasure (SMCM) UUV System for use on older Avenger (MCM-1) class mine countermeasures ships and LCSs. The Navy plans to develop and field a few Increment 1 and Increment 2 versions of the SMCM UUV as user operational evaluation systems (UEOS), and then produce an Increment 3 version as a heavyweight-class UUV for use aboard LCSs, with the system entering service in FY2011. The Battlespace Preparation Autonomous Undersea Vehicle (BPUAV) is a 21-inch-diameter AUV with a side-looking sonar for mine detection for use aboard LCSs as a complement to other LCS mine countermeasures systems. The first BPAUV is to be delivered in December 2006 for integration into the first LCS. The Semi-Autonomous Hydrographic Reconnaissance Vehicle (SAHRV) , sponsored by USSOCOM, is a small, man-portable vehicle to be used by Navy Special Warfare (NSW) forces (i.e., Navy SEALs) for hydrographic reconnaissance and mapping operations in very shallow waters. The Navy states that SAHRV "has completed all phases of the acquisition cycle to the point of fielding and sustaining 17 operational units. As such, the SAHRV has achieved Full Operational Capability (FOC) defined by USSOCOM and continues to fulfill a critical requirements capability of NSW forces in the War on Terror." The Navy plans to improve the system's capabilities over time. The Armored Breaching Vehicle (ABV) , currently undergoing developmental testing and field user test and evaluation, is an unmanned, tracked combat engineer vehicle for breaching minefields and complex obstacles. The Army is considering purchasing some for its own use in Iraq. The Gladiator is a wheeled, tele-operated, semi-autonomous UGV for armed reconnaissance and breaching operations. It cab be equipped with machine guns, the Shoulder-Launched Multipurpose Assault Weapon (SMAW), an obscuration smoke system, and a system for breaching anti-personnel systems. The Marine Corps states that Gladiator "was recently removed from System Design and Development (SDD) but development of the revised system continues, test and contingency assets are being designed and built at Carnegie Mellon University (CMU). The Gladiator Baseline 0 Contingency project design and build [effort] is progressing, [and] delivery of the first system is scheduled for 3 rd qtr FY07 with developmental testing to commence in 4 th Qtr FY07. " The MarcBot IV is a small, tele-operated UGV for reconnaissance and surveillance, particularly in investigating improvised explosive devices (IEDs). More than 500 have been fielded for Marine Corps and Army use. An improved design (MarcBot V) is being developed. The Talon is a small (two-man-portable), commercial-off-the-shelf (COTS), tele-operated UGV used by explosive ordnance disposal (EOD) personnel. Numerous systems have been fielded for Marine Corps and Army use, and use of additional payloads (Such as metal detectors, explosive detectors, infrared devices, radars, and weapons) is being explored. The FIDO-PackBot is a UGV equipped with an explosive vapor detector for detecting vehicle-and personnel-borne IEDs at checkpoints and major points of entry. A large number of units are planned for Marine Corps and Army use., with the first entering service in early FY2007. Potential issues for Congress regarding naval UVs include the following: What implications might UVs have for required numbers and characteristics of naval ships and manned aircraft, and naval concepts of operations? Since the current Navy UCAV and Gladiator UGV programs will likely fall far short of meeting the goals established by Section 220 of P.L. 106-398 , should the these programs be accelerated so as to come closer to meeting the goals, or should the goals in Section 220 be amended? How will the restructuring of the J-UCAS program into the Navy-oriented UCAV program affect the Navy UCAV effort? Are the Marine Corps' UAV and UGV programs adequately coordinated with those of the Army? Is the Marine Corps' plan for using upgraded Pioneers as an interim tactical UAV the best approach? The Department of the Navy's proposed FY2008 budget, with funding for various Navy and Marine Corps UV programs, was submitted to Congress in February 2007.

Unmanned vehicles (UVs) are viewed as a key element of the effort to transform U.S. military forces. The Department of the Navy may eventually acquire every major kind of UV. Navy and Marine Corps UV programs raise several potential issues for Congress. This report will be updated as events warrant.

Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term services and supports. Participation in Medicaid is voluntary for states, though all states, the District of Columbia, and five territories choose to participate. Each state designs and administers its own version of Medicaid under broad federal rules, and Medicaid is jointly financed by the federal government and the states. States incur Medicaid costs by making payments to service providers (e.g., for beneficiaries' doctor visits) and performing administrative activities (e.g., making eligibility determinations), and the federal government reimburses states for a share of these costs. The federal government's share of a state's expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP). The FMAP varies by state according to each state's per capita income. For FY2016, FMAPs range from 50% to 74%. The state share of Medicaid expenditures is funded through a variety of sources. At least 40% of each state's share of Medicaid expenditures must be financed by the state, and up to 60% of the state's share may come from local governments. In state fiscal year (SFY) 2014, states reported that about 74% of the state share of Medicaid costs was financed by state general funds (most of which are raised from personal income, sales, and corporate income taxes). The remaining 26% was financed by other funds (including local government funds, provider taxes, fees, donations, assessments, and tobacco settlement funds). Currently, many states use provider taxes to finance a portion of their state share of Medicaid expenditures. Federal statute and regulations define a provider tax as a health care-related fee, assessment, or other mandatory payment for which at least 85% of the burden of the tax revenue falls on health care providers. In order for states to be able to draw down federal Medicaid matching funds, the provider tax must be both broad-based (i.e., imposed on all providers within a specified class of providers) and uniform (i.e., the same tax for all providers within a specified class of providers). States are not allowed to hold the providers harmless for the cost of the provider tax (i.e., they cannot guarantee that providers receive their money back). In SFY2016, 49 states and the District of Columbia are using at least one provider tax to finance Medicaid. Many of these states use the provider tax revenue to increase Medicaid payment rates for the class of providers, such as hospitals, responsible for paying the provider tax. This financing strategy allows states to fund increases to Medicaid payment rates without the use of state funds because the increased Medicaid payment rates are funded with provider tax revenue and federal Medicaid matching funds. States also use provider tax revenue to fund other Medicaid or non-Medicaid purposes. This report provides background regarding states' use of provider taxes in the 1980s and describes the relevant federal statutes and regulations, which were mostly established in the early 1990s. The report explains how states use provider taxes to help finance Medicaid and provides information regarding the extent to which states currently use such taxes. The report ends with a discussion of the provider tax provisions in past and present proposals that would impact Medicaid provider taxes. In the mid-1980s, states began using provider taxes along with provider donations to help finance Medicaid. Essentially, Medicaid providers would donate funds or agree to be taxed, and the revenue from these taxes and donations would be used to finance a portion of the state's share of Medicaid expenditures. In some cases, Medicaid providers initiated these provider tax and donation arrangements because states would often use the provider tax and donation revenue to raise Medicaid payment rates. Plus, these arrangements were often designed in such a way as to hold the Medicaid providers harmless for the cost of their taxes or donations. Here is an example of how the provider tax arrangements operated in the 1980s. In a state, hospitals with high Medicaid utilization could agree to pay $10 million in provider taxes, and the state would increase Medicaid reimbursement rates for hospitals with high Medicaid utilization by $20 million. Assuming the state had a 60% FMAP, the state would then receive $12 million in federal Medicaid matching funds (60% of $20 million). In the end, hospitals with high Medicaid utilization would have gained $10 million ($20 million in increased Medicaid rates minus $10 million in tax payments), the state would have gained $2 million ($22 million from the hospitals and the federal government minus the $20 million paid to the hospitals), and the federal government would have paid $12 million. Essentially, states were borrowing funds from Medicaid providers in order to draw down federal funds and increase Medicaid payment rates to the providers that had paid taxes or donated funds. The providers were often fully reimbursed for the cost of their tax payment or donation. For this reason, provider tax mechanisms were politically viable for states. These financing arrangements became a point of contention between the federal government and the states. While not all states were using these Medicaid financing strategies, some states were particularly aggressive in their use of provider taxes and donations in financing Medicaid. This aggressive use of these Medicaid financing strategies motivated congressional action to curb states' use of the provider tax and donation arrangements. In 1991, Congress passed the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments ( P.L. 102-234 ) to restrict the use of provider donations in financing Medicaid to extremely limited situations and to limit states' ability to draw down federal Medicaid matching funds with provider tax revenue. The 1991 law defines a provider tax as any licensing fee, assessment, or other mandatory payment in which 85% or more of the burden falls upon health care providers. In order for states to claim federal matching payments for provider tax revenues, the 1991 law requires provider taxes to be broad-based (i.e., imposed on all providers within a specified class of providers) and uniform (i.e., the same tax for all providers within a specified class of providers)--in other words, states cannot limit the provider taxes to only Medicaid providers; and prohibits states from a direct or indirect guarantee that providers receive their money back (or be "held harmless"). The Secretary of Health and Human Services (HHS) is authorized to waive the broad-based and uniform requirements of provider taxes. In order to waive either the broad-based or uniform requirement, a state needs to prove that the net impact of the tax is "generally redistributive" and the amount of the tax is not directly correlated to Medicaid payments. "Generally redistributive" is defined as the tendency of a state's provider tax to derive revenues from non-Medicaid services in a class and to use these revenues as the state's share of Medicaid expenditures. According to the quantitative tests set forth in regulation, a provider tax is perfectly redistributive if the tax burden for Medicaid providers is the same under a tax without the waiver as under the tax with the waiver. The redistributive nature of a provider tax increases as the tax burden falls more heavily on providers with relatively fewer Medicaid patients. The specified 19 classes of providers used to ensure that tax programs are "broad-based" are those that provide the following: inpatient hospital services, outpatient hospital services, nursing facility services, services of intermediate care facilities for individuals with intellectual disabilities, physicians' services, home health care services, outpatient prescription drugs, services of Medicaid managed care organizations (including health maintenance organizations, preferred provider organizations, and such other similar organizations as the Secretary may specify by regulation), ambulatory surgical centers, dental services, podiatric services, chiropractic services, optometric/optician services, psychological services, therapist services, nursing services, laboratory and X-ray services, emergency ambulance services, and other health care items or services for which the state has enacted a licensing or certification fee. Requiring that all providers within a class be taxed, as opposed to only Medicaid providers, dampened the appeal of provider taxes. Prior to the 1991 law, provider taxes were often imposed only on Medicaid providers. These provider tax arrangements were agreed to (and sometimes initiated) by the Medicaid providers because the Medicaid providers could be held harmless from the cost of the tax through increased Medicaid payment rates. However, because non-Medicaid providers cannot be as easily held harmless from the cost of the tax, the broad-based requirement restricted the use of provider taxes because the non-Medicaid providers are more likely to oppose the imposition of provider taxes. Regulations describe three tests that are applied to provider taxes in order to determine whether taxpayers (i.e., the providers paying the provider tax) are held harmless. Taxes that fail any of these tests are determined to have a hold harmless provision in violation of the law. The three tests are as follows: A positive correlation test is used to determine whether a state or other unit of government imposing the tax provides directly or indirectly for a non-Medicaid payment to the taxpayers in an amount that is positively correlated to either the tax amount or the difference between their Medicaid payment and the tax amount. The Medicaid payment test is violated if all or any portion of the Medicaid payment to the taxpayer varies based only on the amount of the total tax payments. The guarantee test is violated if the state or other unit of government imposing the tax provides directly or indirectly for any payment, offset, or waiver that guarantees to hold taxpayers harmless for all or a portion of the tax. Under the guarantee test, the existence of an indirect guarantee is determined through a two-prong test. The first prong of the guarantee test relates to the rate at which taxpayers are taxed. That is, if the provider tax is applied at a rate less than 6% of the net patient service revenues received by the taxpayer, the tax is permissible under the guarantee test. The second prong of the guarantee test is the "75/75 rule," which is applied to provider taxes imposed at a rate greater than the threshold amount specified in the first prong of the guarantee test (currently 6%). When the provider tax produces revenue in excess of the threshold amount, the tax is considered to hold the taxpayers harmless (i.e., violate the hold harmless test) if more than 75% of the taxpayers in the provider class receive 75% or more of the cost of the tax back through enhanced Medicaid payments or other state payments. In other words, a state can impose a provider tax above the threshold amount (currently 6%) and draw down federal matching funds on the tax revenue, as long as the state can prove that the "75/75 rule" has not been violated (i.e., more than 75% of the taxpaying providers do not receive more than 75% of the cost of the tax back through enhanced Medicaid rates). If a state imposes a provider tax above the threshold amount and violates the "75/75 rule" (i.e., more than 75% of the taxpaying providers receive more than 75% of the cost of the tax back through enhanced Medicaid rates), then the full amount of the tax revenue would be offset from the state's Medicaid expenditures. This means the provider tax revenue could still be used to fund Medicaid, but the state would not be able to draw down federal Medicaid matching funds on the provider tax revenue. Specifically, the revenue from provider taxes that do not meet federal requirements would be deducted from the state's Medicaid expenditures prior to the calculation of the federal financial participation. To date, no state has imposed a provider tax at a rate above the threshold amount specified in the first prong of the guarantee test. States' use of provider tax revenue varies from state to state, but states often use provider tax revenue to draw down federal Medicaid matching funds in order to increase Medicaid payment rates for the same providers that are responsible for paying the tax. A simple example of this is illustrated in Figure 1 . In this example, a state with a 60% FMAP imposes a provider tax on all nursing homes in the state, and the state collects $10 million in tax revenue through this provider tax. The state then increases Medicaid reimbursement rates to nursing homes, which means nursing homes with Medicaid enrollees receive an additional $8 million. With these Medicaid expenditures, the state draws down $4.8 million (60% of $8 million) in federal Medicaid matching funds. In this example, the state was able to increase Medicaid payment rates to nursing homes without the use of any state general funds, and the state is left with $6.8 million to use for other Medicaid or non-Medicaid purposes. In SFY2016, 49 states and the District of Columbia are using at least one provider tax to help finance Medicaid. While federal requirements allow states to impose taxes on 19 classes of providers, the classes of providers that are most often taxed include nursing facilities, hospitals, and intermediate care facilities for individuals with intellectual disabilities (ICF/ID). Detail regarding the types of provider taxes used by each state is provided in Table A-1 of the Appendix . The full amount of provider tax revenues used by states to help finance the state share of Medicaid expenditures is unknown. The Center for Medicare & Medicaid Services (CMS) collects some information from states regarding the amount of provider tax revenue through data included on the CMS-64 form, but this information is underreported. The National Association of State Budget Officers (NASBO) augments the information collected by CMS, but the NASBO information is also incomplete. A portion of the CMS-64 form collects information regarding the provider donations, taxes, fees, and assessments collected by states. While states are required to provide this information to CMS for informational purposes, states report this information inconsistently, and the provider tax information is likely underreported. For example, in FY2012, 6 states did not report any provider tax revenue on the CMS-64 form, even though 47 states reported having at least one provider tax during that period of time. NASBO publishes an annual State Expenditure Report that provides information regarding the state and federal shares of Medicaid expenditures. The report specifies the sources of the states' share of Medicaid expenditures as either state general funds or "other state funds," which are revenues collected by the state that are restricted by law for particular governmental functions or activities. Provider taxes comprise a significant portion of "other state funds," while tobacco tax revenue, donations, and local funds are also common sources of "other state funds." The primary source for NASBO's "other state funds" information is the CMS-64 expenditure data, but NASBO augments this data. Specifically, NASBO collects detailed information from some states regarding the amount of provider taxes, fees, donations, assessments, and local funds used to finance the state share of Medicaid expenditures. However, NASBO acknowledges that its State Expenditure Report does not capture 100% of the provider taxes, fees, assessments, and local funds used to finance the state share of Medicaid expenditures. The available data (shown in Figure 2 ), while limited, indicate a trend showing that states' use of "other state funds" has increased significantly as a percentage of the state share of Medicaid expenditures since SFY1990. For SFY2013 through SFY2015 (estimate), "other state funds" have comprised about 26% of the state share of Medicaid expenditures. While NASBO data does not provide detail about the "other state funds," a Government Accountability Office (GAO) analysis of data reported by states in response to a GAO questionnaire focusing on the nonfederal share of Medicaid payments found that provider taxes comprised 34% of "other state funds" in SFY2012. States' use of Medicaid provider taxes has increased in recent years. Figure 3 shows that the number of states with different types of Medicaid provider taxes has increased. The number of states with any Medicaid provider tax has increased from 35 states in SFY2004 to 50 states in SFY2013, and the number of states with at least one provider tax has remained at 50 through SFY2016. Thirty-two states had three or more provider taxes in place in SFY2015. In response to a GAO questionnaire about the new Medicaid provider taxes established from 2008 through 2012, states mentioned multiple uses of the revenue from the new Medicaid provider taxes. For instance, states cited funding Medicaid provider payment rates (34 times), non-DSH supplemental payments (31 times), DSH payments (13 times), avoiding Medicaid benefit cuts (27 times), and expanding Medicaid benefits (11 times). In addition, seven states reported planning to use provider tax revenue to fund all or part of the ACA Medicaid expansion starting in SFY2017. CMS is responsible for determining whether states abide by the statutory and regulatory requirements pertaining to provider taxes. States are not required to receive CMS approval for provider taxes that adhere to the federal requirements. However, states seeking waivers from the broad-based and uniform requirements do need CMS approval. From 2008 through 2012, CMS reviewed and approved Medicaid provider tax waivers in 29 states. Limiting or eliminating states' use of provider taxes in financing Medicaid has been identified as a way to reduce federal Medicaid spending. A few years ago, there were a few proposals to limit or eliminate states' use of provider taxes, but provider tax proposals had not been discussed in the past couple years. However, recently, the House Energy and Commerce Committee marked up a bill ( H.R. 4725 ) that includes a Medicaid provider tax provision. Proposals to limit states' ability to use provider taxes in financing the state share of Medicaid expenditures usually focus on lowering the threshold for provider taxes, which would decrease federal Medicaid payments to states. This would effectively shift more of the Medicaid program's growing costs to the states. As a result, states would have to weigh the impact of maintaining current Medicaid reimbursement and/or service levels against other state priorities for spending. They could choose to constrain Medicaid expenditures by reducing provider payment rates, limiting benefit packages, or restricting eligibility. These types of programmatic changes could also affect access to and the quality of medical care for Medicaid enrollees. For example, if states reduced the Medicaid reimbursement rates to providers, such as hospitals, physician, and nursing homes, these providers may be less willing to accept Medicaid patients. Below are short descriptions of the past proposals impacting Medicaid provider taxes and the most recent proposal to limits states' use of provider taxes. The President's FY2013 budget proposal included a provision to phase down the Medicaid provider tax threshold from the current level of 6% to 3.5% from FY2015 to FY2017. The President's budget estimated that this proposal would reduce federal Medicaid expenditures by $21.8 billion from FY2015 through FY2022. According to a survey of states, in SFY2013, 41 states and the District of Columbia reported that this provision would reduce the provider tax rates for at least one provider tax in their state. The National Commission on Fiscal Responsibility and Reform recommended restricting and eventually eliminating states' use of provider taxes. The commission estimated this provision would reduce federal Medicaid expenditures by $44 billion from FY2012 through FY2020. On March 15, 2016, the House Energy and Commerce Committee marked up the Common Sense Savings Act of 2016 ( H.R. 4725 ) and reported the bill to the House floor. Section 4 of this bill would reduce the Medicaid provider tax threshold from 6% to 5.5%. The Congressional Budget Office estimates this provision would reduce federal Medicaid expenditures by $4.6 billion from FY2016 through FY2026. A vast majority of states use provider taxes to finance Medicaid. As shown in Table A-1 , 50 states (including the District of Columbia) used at least one provider tax in SFY2016. Nursing home taxes were the most popular type of provider tax, with 44 states using a nursing home tax. Hospital and ICF/ID provider taxes were used by a majority of states, with hospital taxes in 40 states and ICF/ID taxes in 37 states. In addition, 22 states had other types of provider taxes.

States are able to use revenues from health care provider taxes to help finance the state share of Medicaid expenditures. Federal statute and regulations define a provider tax as a health care-related fee, assessment, or other mandatory payment for which at least 85% of the burden of the tax revenue falls on health care providers. For states to be able to draw down federal Medicaid matching funds, the provider tax must be both broad-based (i.e., imposed on all providers within a specified class of providers) and uniform (i.e., the same tax for all providers within a specified class of providers). Also, states are not allowed to hold the providers harmless for the cost of the provider tax (i.e., states cannot guarantee that providers receive their money back). A vast majority of states use at least one provider tax to help finance Medicaid. Many of these states use the provider tax revenue to increase Medicaid payment rates for the class of providers, such as hospitals, responsible for paying the provider tax. This financing strategy allows states to fund increases to Medicaid payment rates without the use of state funds because the increased Medicaid payment rates are funded with provider tax revenue and federal Medicaid matching funds. States also use provider tax revenues to fund other Medicaid or non-Medicaid purposes. States first began using health care provider taxes to help finance the state share of Medicaid expenditures in the mid-1980s. Some states were particularly aggressive in their use of provider taxes. As a result, in the early 1990s, the federal government imposed statutory and regulatory limitations on states' use of health care provider tax revenue to finance Medicaid. While federal requirements allow states to impose provider taxes on 19 classes of health care providers, the classes of providers that are most often taxed include nursing facilities, hospitals, and intermediate care facilities for individuals with intellectual disabilities (ICF/ID). States' use of Medicaid provider taxes has increased in recent years. Limiting or eliminating states' use of provider taxes in financing Medicaid has been identified as a way to reduce federal Medicaid spending. A few years ago, there were a few proposals to limit or eliminate states' use of provider taxes, but provider tax proposals had not been discussed in the past couple years. However, recently, the House Energy and Commerce Committee marked up a bill (H.R. 4725) that includes a Medicaid provider tax provision. This report provides background regarding states' use of provider taxes in the 1980s and describes the relevant federal statutes and regulations, which were mostly established in the early 1990s. The report explains how states use provider taxes to help finance Medicaid and provides information regarding the extent to which states currently use such taxes. The report ends with a discussion of past and present proposals that would impact Medicaid provider taxes.

The term "tax-exempt organization" generally refers to an organization that is exempt from federal income taxes under the Internal Revenue Code (IRC). Although the IRC describes more than 30 types of organizations that qualify for exemption, the type that people often mean when using the term "tax-exempt organization" is found in Section 501(c)(3). That section describes entities organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals.... Other types of organizations that qualify for tax-exempt status include social welfare organizations, labor unions, trade associations, social clubs, veterans' organizations, and fraternal organizations. A list of the types of tax-exempt organizations appears at the end of this report ( Table A-1 ). The term "tax-exempt organization" is often used interchangeably with the term "nonprofit organization." This can be misleading depending on the context. The term "tax-exempt organization" generally refers to an organization that meets the criteria in federal law (the IRC) to be exempt from federal income taxes. The term "nonprofit organization" can be used to mean a corporation that is not intended to be a profit-making corporation and is organized as such under state law. The status and privileges of the entity are determined under state law. The requirements vary by state but usually take into account the fact that nonprofit corporations typically do not have shareholders or the same business motives as for-profit corporations. A nonprofit corporation is not automatically a tax-exempt organization. Because the qualifications for nonprofit status vary among states, it is possible for the term "nonprofit organization" to be broader than, narrower than, or identical to the term "tax-exempt organization." For a nonprofit organization to be exempt from federal income taxes, it must meet the statutory requirements found in the IRC and, in some cases, file an application with the IRS. Section 501(c) describes many types of organizations that qualify for tax-exempt status. When an organization applies for exemption or files an annual return with the IRS, it must tell the IRS under which paragraph of Section 501(c) it qualifies. In general, this is not difficult to determine because most paragraphs describe discrete categories--for example, Section 501(c)(8) describes fraternal societies and Section 501(c)(14) describes credit unions. However, Sections 501(c)(3) and 501(c)(4) describe organizations with some overlapping characteristics in that both types can operate for charitable purposes. Despite these similarities, Section 501(c)(3) and Section 501(c)(4) organizations differ in two significant ways. First, Section 501(c)(3) organizations are eligible to receive tax-deductible charitable contributions, while Section 501(c)(4) organizations generally are not. When a contribution is deductible, the donor may subtract it from his or her income when calculating federal income tax liability, subject to restrictions found in Section 170. (See Question 6.) This is an important benefit for the organization because it may encourage donors to contribute to the organization in order to lower their taxable income and to make larger contributions since the after-tax cost of each contribution is reduced. The second difference is that Section 501(c)(3) organizations are substantially limited in their ability to lobby and are prohibited from engaging in campaign activity; Section 501(c)(4) organizations are not so limited. (See Questions 7 and 8.) These two differences are important when an organization is choosing whether to be a Section 501(c)(3) or Section 501(c)(4) organization. If the group's agenda depends on influencing public opinion or the legislative process, it may be appropriate to form as a Section 501(c)(4) organization. Otherwise, it will usually make more sense to be a Section 501(c)(3) organization in order to have the advantage of tax-deductible contributions. While an organization must identify itself as one type of Section 501(c) organization, it may be linked with another Section 501(c) organization under certain circumstances. For example, it is common to see a group that wants to lobby as well as conduct charitable activities set up both a Section 501(c)(4) organization and a Section 501(c)(3) organization. Another common example is for a Section 501(c)(6) trade association, such as the American Bar Association or American Medical Association, to have a similarly named foundation that conducts charitable activities. In addition, a Section 501(c) organization may be linked with another type of tax-exempt organization, such as a Section 527 political organization. (See Question 8.) In all of these situations, the organizations must be legally separate entities, and their activities and funds must be kept separate. A Section 501(c)(3) organization is either a public charity or private foundation. Public charities have broad public support and tend to provide charitable services directly to the intended beneficiaries. Private foundations often are tightly controlled, receive significant portions of their funds from a small number of donors or a single source, and make grants to other organizations rather than directly carry out charitable activities. Because these factors create the potential for self-dealing or abuse of position by the small group controlling the entity, private foundations are more closely regulated than public charities. As such, private foundations are subject to penalty taxes for doing things such as failing to distribute a certain amount of their income each year; making investments that jeopardize their charitable purpose; having excess business holdings; and failing to maintain expenditure responsibility over certain grants. Section 501(c)(3) organizations are presumed to be private foundations and, if they want to be treated as a public charity, must tell the IRS how they qualify for public charity status based on the support and control tests found in IRC Section 509. Under Section 170, contributions made for charitable purposes are tax deductible when made to qualifying Section 501(c)(3) organizations, governmental units, veterans' organizations, fraternal organizations, and cemetery companies. The IRS determines whether a Section 501(c)(3) organization is eligible to receive tax-deductible contributions at the time it considers the organization's application for exempt status. A donor can check to see whether an organization is eligible to receive tax-deductible charitable contributions using the "Exempt Organizations Select Check" search engine on the IRS website. Charitable contributions that otherwise meet the requirements of Section 170 are not deductible if the organization provides goods or services in exchange for the contribution. However, if the contribution exceeds the fair market value of the goods or services provided, then the excess may be deductible. When an organization receives more than $75 in exchange for goods or services, it must inform the donor of the amount of the contribution, if any, that is tax-deductible. Even if a contribution is deductible, individual taxpayers may not be able to deduct the entire contribution. For example, only individuals who itemize deductions may deduct their charitable contributions, and Section 170 may restrict the amount of the deduction depending on the size and nature of the contribution. In addition, taxpayers must comply with certain substantiation requirements, including that (1) a written acknowledgment be obtained from the organization for any contribution that exceeds $250 in value and (2) any cash donation be substantiated by a bank record or written communication from the organization showing its name and the date and amount of the contribution. When a contribution to a tax-exempt organization is not deductible, the organization must generally notify the potential contributor of that fact at the time of solicitation. An organization that fails to provide the notification faces a fine of $1,000 for each day the failure occurs, with an annual cap of $10,000. The fines are higher and the cap is eliminated for organizations that intentionally disregard the notification requirement. Dues to some tax-exempt organizations, such as Section 501(c)(5) labor unions and Section 501(c)(6) trade associations, may be deductible as business expenses under IRC Section 162. If an organization conducts lobbying or political activities, Section 162(e) disallows a deduction for the portion of dues that represents lobbying or political expenditures. In general, an organization must notify its members of the amount that is nondeductible or be subject to a proxy tax on its lobbying or political expenditures. Furthermore, individuals face additional restrictions in being able to deduct their dues. For example, only individuals who itemize deductions and have significant business expenses (i.e., exceeding 2% of adjusted gross income) may deduct the dues. Under the IRC, some types of tax-exempt organizations are restricted in the amount of lobbying they may do and the rest may conduct unlimited lobbying. Section 501(c)(3) organizations are the primary example of entities that are limited in the amount of lobbying they may do: "no substantial part" of their activities can be lobbying. The IRC does not define "no substantial part." In interpreting the term, courts have looked at the amount of expenditures or time spent on lobbying, or examined the lobbying in the broad context of the organization's purpose and activities. Because the "no substantial part" standard is indefinite, Section 501(c)(3) organizations, with the exception of churches and related organizations, may elect to have their lobbying activities measured by a numerical limit found in IRC Section 4911. Most organizations do not make this election. A Section 501(c)(3) organization that conducts substantial lobbying may lose its exempt status and face possible excise taxes under Sections 4911 and 4912. Notably, private foundations (discussed in Question 5) are taxed under IRC Section 4945 on any lobbying expenditures made during the year, regardless of whether such activities are substantial. Most other types of tax-exempt organizations are not subject to any tax law limits on the amount of lobbying that can be done. These include Section 501(c)(4) social welfare organizations, Section 501(c)(5) labor unions, and Section 501(c)(6) trade associations. A tax-exempt organization's lobbying may affect the amount that its contributors would otherwise be able to deduct as dues (See Question 6.) Although Section 501(c)(4) organizations may lobby under the tax laws, Section 18 of the Lobbying Disclosure Act of 1995 ( P.L. 104-65 ) prohibits them from receiving federal grants, loans, or other awards if they engage in lobbying activities. This prohibition applies even if the lobbying is conducted with the organization's own funds. The Lobbying Disclosure Act also imposes registration and disclosure requirements on organizations with paid lobbyists whose lobbying activities exceed time and monetary limits. Some tax-exempt organizations are prohibited from participating in political campaign activity. For example, Section 501(c)(3) organizations are prohibited from participating in "any political campaign on behalf of (or in opposition to) any candidate for public office." This means Section 501(c)(3) organizations can lose their tax-exempt status for engaging in activity that is specifically linked to election periods and supports or opposes particular candidates. Section 501(c)(3) organizations may, however, participate in activities that might be described as political in nature, so long as they are not campaign intervention. Permissible activities include--so long as no candidate is endorsed or opposed--conducting public forums, publishing candidate responses to a questionnaire on a variety of subjects, issue advertising, nonpartisan public opinion polling, and nonpartisan voter registration drives. Although these non-campaign political activities are not prohibited, they may be subject to tax under IRC Sections 527, 4945, and 4955, or treated as lobbying activities. (See Question 7.) The IRC generally allows most other types of Section 501(c) organizations to engage in campaign activity so long as it (and any other non-exempt purpose activities) is not the organization's primary activity. Thus, for example, Section 501(c)(4) social welfare organizations, Section 501(c)(5) labor unions, and Section 501(c)(6) trade associations may conduct a limited amount of campaign activity under the IRC. It is important to note that while the IRC may allow these organizations to participate in such activities, the organizations must still comply with applicable election laws. For example, organizations may be required to report certain election spending to the Federal Election Commission. Even though some Section 501(c) organizations may engage in campaign activity, they are subject to tax under Section 527(f) if they make an expenditure for influencing the selection, nomination, election, or appointment of an individual to public office or certain related activities. The tax is imposed at the highest corporate rate on the lesser of the expenditures or the organization's net investment income. Thus, for organizations with little or no net investment income or those making low-cost expenditures, the tax is of minimal import. For others, however, it might serve as a disincentive to directly engage in the activities, in which case the group might choose to set up a separate segregated fund to conduct them. Finally, one type of tax-exempt organization--Section 527 political organizations--is expected to primarily engage in electioneering and similar activities. Although considered tax-exempt organizations, Section 527 organizations are subject to special tax rules that exempt income used for political activities from tax and tax other types of income (e.g., investment income). For many tax-exempt organizations, the first step is to incorporate the organization. Incorporation is not required for federal tax-exempt status, but organizations incorporate for a variety of reasons, including to receive limited personal liability for their members. Formation of the organization is achieved under state law and requirements vary by state. An organization will likely need to register with the appropriate Secretary of State to reserve that organization's name and to enable the group to solicit charitable contributions, do business, and own property in the state. If the organization incorporates, it will also usually have to file articles of incorporation that include the organization's purposes and the names of its incorporators. Whether or not the organization incorporates, it may need to file for recognition of tax-exempt status from the IRS depending on its tax status. If the organization will be a Section 501(c)(3) organization, it is generally required to file an application for tax-exempt status with the IRS. Some organizations that qualify for Section 501(c)(3) status, including organizations with gross receipts of normally not more than $5,000 and churches, are excused from the filing requirement. Organizations seeking Section 501(c)(3) status file IRS Form 1023. Notably, in 2014, the IRS released a simplified application form (Form 1023-EZ) for Section 501(c)(3) groups that meet certain size and other requirements (e.g., the organization must expect that its annual gross receipts will not annually exceed $50,000 for the current and next two years). An organization filing the Form 1023 or Form 1023-EZ must pay a fee, as described below. It must also obtain an employer identification number (IRS Form SS-4), even if it does not have any employees. Other types of Section 501(c) organizations are generally not required to file an application for tax-exempt status, although they may choose to do so. If they so choose, these groups would file an application using the IRS Form 1024. Organizations filing for recognition of tax-exempt status must pay a filing fee with IRS Form 8718 ( User Fee for Exempt Organization Determination Letter Request ). For an organization filing for exemption under Section 501 that has had annual gross receipts averaging $10,000 or less during the past four years, or for a new organization that anticipates gross receipts averaging $10,000 or less during the next four years, the application fee is $400. The application fee is $850 for a Section 501(c) organization with more than an average of $10,000 in gross receipts for the prior four years, as well as for a new Section 501(c) organization anticipating gross receipts in excess of an average of more than $10,000 in gross receipts for the coming four years. If the IRS does not act on the application of a Section 501(c)(3) organization within 270 days, the organization may seek a declaratory judgment in federal court regarding its status. This provision does not apply to other types of Section 501(c) entities. In general, once an organization has tax-exempt status, it can continue as a tax-exempt organization unless there is a material change in its character, purposes, or methods of operation. The IRS may revoke an organization's exempt status because it violates the law (e.g., if a Section 501(c)(3) organization engages in prohibited campaign activity) or because of changes in the law or regulations or for other good cause. Furthermore, the IRS can suspend the tax-exempt status of an organization that is (1) designated a terrorist organization by executive order or under authority found in the Immigration and Nationality Act, the International Emergency Economic Powers Act, or the United Nations Participation Act or (2) designated by executive order as supporting terrorism or engaging in terrorist activity. With the exception of organizations whose status is suspended due to terrorism issues, organizations may ask for court review of any IRS attempt to revoke their exempt status. An individual who believes that an organization should lose its exempt status may file a complaint with the IRS using Form 13909 Tax-Exempt Organization Complaint (Referral) Form. The complaint may cause the IRS to review the propriety of the organization's exempt status, but the IRS cannot reveal whether it has followed up on a particular complaint because of confidentiality rules. It does not appear possible to bring a legal suit to challenge the IRS's granting of an exemption to an organization. Although prior to 1976, third parties had been successful in bringing suits to challenge IRS policies in administering the tax laws, the Supreme Court in 1976 severely limited this practice by requiring plaintiffs to show a direct personal injury that is likely to be redressed by a favorable decision in the case. Subsequently in the 1989 case United States Catholic Conference v. Baker , the Second Circuit Court of Appeals reviewed the standing of various parties to force the IRS to examine the tax-exempt status of the Catholic Church because of its political activities and concluded that it would be a very rare case when a third party would have standing to bring such a suit. Under Section 6033, most tax-exempt organizations are required to file an annual information return (Form 990 or Form 990-EZ) that discloses information related to income, expenses, assets, and officers and employees. The Form has several schedules that ask for information on such things as the organization's substantial donors (Schedule B); campaign and lobbying activities (Schedule C); and related organizations (Schedule R). The penalty for failure to file the return is $20 per day for each day the failure continues, which is increased to $100 per day if the organization has annual gross receipts exceeding $1 million in any year. Organizations with gross receipts that are normally less than $50,000 must file the Form 990-N with the IRS (unless they choose to file the Form 990 or 990-EZ). The Form 990-N is also known as the e-Postcard. It asks for the organization's basic contact information and must be filed electronically. An organization that fails to file the Form 990-N for three consecutive years will have its tax-exempt status revoked. Tax-exempt organizations are sometimes subject to tax, in which case they must file a tax return. For example, an organization that conducts business activities unrelated to its exempt purpose must file a Form 990-T. Any exempt organization with political organization taxable income will need to file a Form 1120-POL, and one that has been assessed a penalty tax must file Form 4720. Furthermore, exempt organizations must generally pay the same employment taxes as for-profit employers. Thus, if they have employees, exempt organizations usually must file the employment tax returns for income tax withholding and Social Security and Medicare taxes (Form 941), income reporting (W-2, W-3, Form 1099), and unemployment taxes (Form 940). Exempt organizations are subject to the same penalties as other taxpayers for failing to file a tax return or pay their taxes, including failing to make estimated tax payments and failing to properly handle and deposit employment taxes. Finally, some organizations are subject to additional requirements. For example, under Section 527(j), political organizations must file periodic reports to the IRS that disclose contributions and expenditures (Form 8872) unless they are political committees for purposes of federal election law or otherwise qualify for an exception. Under the IRC, the application for exempt status and the annual information return (Form 990) are open to public inspection. In addition, Section 501(c)(3) organizations must disclose their unrelated business income tax returns (Form 990-T). This requirement has two parts: the organization must allow the public to inspect the documents and must provide copies upon request. For inspection purposes, the information must be made available during normal business hours at the organization's principal office and any district office with more than three employees. With respect to providing copies, requests for copies of the documents may be made in writing or in person. The organization must furnish copies immediately if the request is made in person and within 30 days for written requests. The organization is permitted to charge a reasonable fee for reproduction and mailing costs. An organization is not required to provide individual copies if either (1) the organization makes these documents widely available on the internet or (2) the requests are part of a harassment campaign and compliance is not in the public interest. Certain information does not have to be disclosed. Organizations are generally not required to disclose the names and addresses of any contributors. Furthermore, the IRS is permitted to create exceptions to public disclosure of information relating to trade secrets, patents, processes, styles of work, or apparatus, if public disclosure would adversely affect the organization or if the information would adversely affect the national defense. If an organization refuses to provide a copy of its returns, the requestor may file Form 13909 Tax-Exempt Organization Complaint (Referral) Form with the IRS. If an organization fails to provide the return, the IRS may assess statutory penalties under IRC Section 6652. Any return or application that must be disclosed to the public by the organization must also be made publicly available by the IRS. The information may be obtained from the IRS by using Form 4506-A, Request for Public Inspection or Copy of Exempt or Political Organization. In addition, the IRS has some information submitted by Section 527 political organizations on its website. The organizations listed under Question 13 also provide information on various tax-exempt organizations. In particular, GuideStar [www.guidestar.org] may have copies of the organization's recent Form 990s on its website. The following are examples of organizations that report on the activities of charities. The information comes from the organizations' websites. http://www.charitywatch.org Charity Watch (formerly the American Institute of Philanthropy) is a nonprofit charity watchdog and information service that provides ratings, opinions, and other information on the financial and managerial practices of selected charities. Access to the reports is not free, but the website does list charities that have received the highest grades. http://www.give.org The BBB Wise Giving Alliance collects information and prepares reports on several hundred national charitable organizations. The Alliance does not recommend or rate charities, but serves to report information on the organization's background, staff and governance, financial status and fund raising practices. The report will also state whether the charity meets the Alliance's standards for charitable solicitations. These reports are available on the Alliance's website. http://www.guidestar.org The GuideStar website contains information on more than 1 million organizations. Notably, the site contains the annual returns (Form 990) for many organizations. Access to recent Form 990s and certain other information is free (although registration is required); more in-depth information is available for a membership fee. The following organizations provide further information on general topics related to tax-exempt organizations, including management, accountability, and fund-raising practices. http://www.independentsector.org The Independent Sector is a coalition of charitable organizations and others interested in the nonprofit sector. A prime focus of the group is to help nonprofit organizations implement effective accountability and ethical standards, and the group's website includes various standards and models to address these issues. The group also provides information on public policy issues of interest to nonprofit organizations and conducts and publishes research on various aspects of charitable giving and volunteering in the United States. http://www.consumer.ftc.gov The Federal Trade Commission (FTC) website offers information to consumers, businesses, and nonprofit organizations about how to guard against charity fraud. The site provides numerous FTC articles highlighting common scam practices and offering advice on safe methods to donate, as well as ways to determine if a charitable organization is legitimate, such as a Charity Checklist, available at http://www.consumer.ftc.gov/articles/0074-giving-charity . http://www.snpo.org The Society for Nonprofit Organizations (SNPO) is an organization whose purpose is to provide a forum for the exchange of information on nonprofit organizations, offering services to directors, board members, volunteers, and anyone interested in nonprofit organizations operations. It offers professional support services and referral services to members and maintains an information center of books, periodicals, and tapes. A list of the type of entities found in IRC Chapter 1, Subchapter F ("Exempt Organizations") is provided in Table A-1 .

This report answers frequently asked questions about tax-exempt organizations. It provides basic answers and refers to sources of additional information that might be useful. The report focuses on the types of organizations described in Internal Revenue Code (IRC) Section 501(c), with the main emphasis on Section 501(c)(3) charitable organizations. One set of questions addresses some of the primary characteristics of tax-exempt organizations, including whether they may participate in lobbying and election-related activities, and defines the terms "tax-exempt," "nonprofit (not-for-profit)," and "private foundation." Another group of questions provides general information on how to form a tax-exempt organization, what information must be disclosed to the IRS and the public, and how an organization might lose its tax-exempt status. The report ends with questions intended to help the reader find resources that provide information on specific organizations and additional information on tax-exempt organizations in general. This report summarizes information with respect to tax-exempt organizations. It should not be relied on for specific tax advice. Such advice should be sought directly from the IRS or qualified tax professionals.

With the passage of the health reform law, interest turned to determining not only how the new law may be interpreted and implemented, but also how it may interact with existing law. The Patient Protection and Affordable Care Act of 2010 (ACA, P.L. 111-148 , as amended by the Health Care and Education Reconciliation Act, P.L. 111-152 ), among other things, created a number of significant reforms to the private health insurance market. These reforms include changes that will limit the ability of a group health plan or health insurance issuer to set premiums or determine eligibility for coverage based on criteria such as health status. Title I of the Genetic Information Nondiscrimination Act of 2008 (GINA, P.L. 110-233 ) also contains requirements affecting health insurance premiums and coverage eligibility, and thus questions may be raised about the potential for interaction between these two acts. In addition, the ACA includes provisions relating to the implementation of employer wellness programs. Title II of GINA prohibits discrimination in employment based on genetic information and generally prohibits the collection of genetic information. However, there is a specific exception for wellness programs with attendant privacy protections. This raises questions about the potential for interaction between these two sets of provisions, specifically with respect to requirements around the release of genetic information and incentives for participation in such a program. This report provides a brief overview of GINA, an overview of relevant ACA and GINA provisions relating to the provision of health insurance through the private market, an overview of relevant ACA and GINA provisions relating to the implementation of employer wellness programs, and statutory analysis of the potential interactions between the related provisions in both laws. On May 21, 2008, the Genetic Information Nondiscrimination Act of 2008 (GINA), referred to by its sponsors as the first civil rights act of the 21 st century, was enacted. GINA prohibits discrimination by health insurers and employers based on genetic information. Genetic information is considered sensitive for a number of reasons, including that it may be predictive or indicate a predisposition to disease, and that it can affect not only an individual but also family members. GINA is divided into two main parts: Title I, which prohibits discrimination in health insurance based on genetic information, and Title II, which prohibits discrimination in employment based on genetic information. Title I of GINA amends the Employee Retirement Income Security Act of 1974 (ERISA), the Public Health Service Act (PHSA), and the Internal Revenue Code (IRC), as well as the Social Security Act (SSA), to prohibit group health plans and health insurance issuers providing group and individual health coverage from engaging in genetic discrimination and to strengthen and clarify existing HIPAA nondiscrimination and portability provisions with respect to genetic information and genetic testing. The complexity of the health care financing system required this multifaceted approach in order to ensure protection for all individuals, regardless of their coverage arrangements. On October 7, 2009, the Departments of Labor, Health and Human Services, and Treasury issued interim final regulations implementing the majority of provisions in Title I of GINA. These regulations became effective as of December 7, 2009, and specifically for plan years beginning on or after December 7, 2009, for group health plans and health insurance issuers. In addition, on January 25, 2013, the Department of Health and Human Services, Office for Civil Rights, published a final rule to implement Section 105 of GINA. Title II of GINA prohibits discrimination in employment based on genetic information and, with certain exceptions, prohibits an employer from requesting, requiring, or purchasing genetic information. The law prohibits the use of genetic information in employment decisions--including hiring, firing, job assignments, and promotions--by employers, unions, employment agencies, and labor management training programs. On November 9, 2010, the Equal Employment Opportunity Commission (EEOC) issued final regulations for Title II that take effect on January 10, 2010. These regulations generally closely track the statutory language. GINA prohibits the use of genetic information in determining premiums for individuals or groups or for serving as the basis for conditioning health coverage. The ACA, on the other hand, specifically defines the factors on which insurers may predicate issuance of coverage or determination of premiums. Thus, questions may be raised as to how the two statutes might interact with one another in the specific area of private health insurance market reforms. This section provides an overview of relevant GINA and ACA provisions concerning coverage eligibility and premium determination to provide context for a statutory analysis outlining the potential interactions between the relevant provisions. Broadly, GINA prohibits group health plans and health insurance issuers from engaging in three practices: (1) using genetic information about an individual to adjust a group plan's premiums, or, in the case of individual plans, to deny coverage, adjust premiums, or impose a preexisting condition exclusion; (2) requesting, requiring, or purchasing genetic information for underwriting purposes or prior to enrollment; and (3) requiring or requesting genetic testing. Each of these prohibitions is discussed below in more detail. GINA prohibits health plans, group and individual health insurance issuers, and issuers of Medicare supplemental policies from adjusting a group or individual's premium or contribution amount based on genetic information about an individual in the group, an individual seeking individual coverage, or an individual's family members. GINA prohibits health plans, group and individual health insurers and issuers, and issuers of Medicare supplemental policies from requesting, requiring, or purchasing genetic information for the purposes of underwriting or prior to an individual's enrollment or in connection with enrollment. "Incidental collection" of genetic information--genetic information obtained incidentally to the requesting, requiring, or purchasing of other information concerning any individual--would not be considered a violation of the prohibition on collecting genetic information prior to enrollment if it is not done for underwriting purposes. "Underwriting purposes," as defined by GINA, includes (1) rules for, or determination of, eligibility for benefits; (2) the computation of premium or contribution amounts; (3) the application of any preexisting condition exclusion; and (4) other activities related to the creation, renewal, or replacement of a contract of health insurance or health benefits. GINA also prohibits individual insurers from conditioning eligibility or continuing eligibility on genetic information, and prohibits individual insurers from treating genetic information as a preexisting condition. Issuers of supplemental Medicare policies may not deny or condition the issuance of a policy based on genetic information (and may not impose a preexisting condition exclusion based on genetic information). GINA prohibits health plans, group and individual health insurance issuers, and issuers of Medicare supplemental policies from requesting or requiring that individuals or their family members undergo a genetic test. This prohibition does not limit the authority of a health care professional to request that an individual undergo genetic testing as part of his or her course of health care. The act provides for a research exception to this provision, by allowing a group or individual insurance issuer to request, but not require, an individual to undergo genetic testing if specific conditions are met. As noted above, the ACA creates new federal standards applicable to private health insurance coverage. The ACA establishes new rating requirements that allow insurers to vary premiums based only on certain key characteristics. These characteristics are self or family enrollment in a plan or coverage; rating area (as established by a state and reviewed by the Secretary); age (by no more than a 3:1 ratio across age rating bands established by the Secretary, in consultation with the National Association of Insurance Commissioners [NAIC]); and tobacco use (by no more than a 1.5:1 ratio). Thus, health insurance issuers subject to this provision are precluded from charging premiums based on health factors and other additional criteria (e.g., the sex of the covered individual). Further, the ACA prohibits group health plans and health insurance issuers in the individual and group markets from excluding coverage for preexisting health conditions. In addition, the ACA requires individual and group health insurance issuers to offer coverage on a guaranteed issue and guaranteed renewal basis. Under the act, health insurance issuers offering health insurance coverage in the individual or group market in a state must accept every employer and individual in the state that applies for such coverage, subject to certain conditions. Further, the ACA provides that health insurance issuers offering coverage in the individual or group market must renew or continue in force such coverage at the option of the plan sponsor or the individual, subject to exceptions such as nonpayment of premiums, or an act or practice of fraud. Thus, based on these provisions, a health insurance issuer would be precluded from denying coverage, or denying a renewal of coverage, based on factors such as the individual's health. In examining provisions of GINA in relation to comparable provisions in Title I of the ACA pertaining to health insurance, there appears to be some overlap in the reach of these acts. For example, under GINA, a group health plan and a health insurance issuer may not adjust premium or contribution amounts on the basis of genetic information. Alternatively, under Section 2701 of the PHSA, as created by the ACA, certain health insurance issuers may only vary premiums based on certain specified factors (i.e., tobacco use, age, geographic area, and self-only or family enrollment). In evaluating the interaction of these two statutes, one may argue that it is possible to read these statutes together as establishing non-conflicting limitations on insurance premiums. While the ACA creates criteria for premium rates, GINA prohibits premium adjustments based on genetic information. Further, it seems that a health insurance issuer can simultaneously comply with the requirements of the ACA and GINA. While a violation of this provision of GINA may also be a violation of Section 2701 of the PHSA, there does not appear to be a barrier to offering penalties for the same conduct under these two statutes. Though one may argue that Section 2701 of the PHSA renders GINA, at least in part, ineffective and therefore amends or repeals GINA by implication, given that amendments by implication are disfavored, and without a demonstrated clear intention to override its provisions, a court may be more likely to dismiss this argument. Further, it should be noted that these provisions of the ACA and GINA are not identical in scope. For example, the limitations on premium amounts as added by the ACA apply only to health insurance issuers in the individual and small group markets, and do not apply (as GINA does), for example, to self-insured group health plans or insurers in the large group market. Further, this section of the ACA applies only to premium rates, whereas GINA applies to premiums as well as contribution amounts. The provisions of GINA seem likely to remain intact, because the reach of GINA is beyond that of the ACA and, where there is not a direct conflict, courts are reluctant to amend or repeal a statute by implication. As discussed above, GINA also prohibits group health plans and health insurance issuers from requesting, requiring, or purchasing genetic information for the purposes of underwriting or prior to an individual's enrollment or in connection with enrollment. As mentioned above, underwriting purposes include, among other things, rules or determination of eligibility for benefits, the application of any preexisting condition exclusion, and other activities related to the creation, renewal, or replacement of a contract of health insurance or health benefits. The ACA, however, curtails application of these underwriting practices and contains requirements related to insurance enrollment. For example, under the ACA, a group health plan and a health insurance issuer will no longer be able to impose a preexisting condition exclusion. In addition, as discussed above, health insurance issuers must accept every individual and employer that applies for coverage and renew or continue such coverage at the option of the plan sponsor or individual. Thus, it seems that the provisions of the ACA may obviate some of the requirements of GINA. If a health insurance issuer generally cannot use certain underwriting practices or limit enrollment to certain individuals, they may not be inclined to obtain genetic information for these purposes. However, this is not to say that GINA is therefore repealed by the ACA. It is likely that a court may read these statutes in concert with each other: while the ACA removes certain limitations to obtaining health insurance, GINA prohibits obtaining genetic information as part of certain insurance practices. Further, it should also be noted that these provisions of GINA and the ACA are also not identical in scope. For example, the guaranteed availability and renewability requirements of the ACA apply only to health insurance issuers and, accordingly, the effects of this provision of GINA on self-insured group health plans may not be affected by the ACA. Finally, in terms of the prohibition on group health plans and health insurers from requiring an individual or family member to undergo a genetic test, there does not seem to be a comparable provision in the ACA. Given no express language in the ACA that alters this provision, and because the ACA does not seem to have a requirement that interacts with this provision, it appears that this requirement is also not affected by the ACA. GINA and the ACA both include provisions that relate specifically to employer wellness programs, although neither statute specifically requires the use of wellness programs. In GINA, the relevant provisions are limited to the conditions under which an employer might lawfully collect genetic information pursuant to an employer wellness program. The ACA's provisions are broader, encourage the use of wellness programs, and include specifics about these programs, including the extent of financial incentives that an employer may use to encourage participation in wellness programs. This raises questions about the potential interaction between these two statutes with respect to employer wellness programs. This section provides an overview of relevant employer wellness program provisions in GINA and the ACA to provide context for a statutory analysis of the potential interactions between these provisions. As the cost of health insurance has continued to rise in recent years, employers providing health insurance, as well as other insurance providers, have worked to find ways to contain costs. This has led to the introduction of incentives to promote healthy behaviors, often referred to as wellness programs. These programs take a myriad of forms, from providing a gym at the workplace to subsidizing the co-pays of certain medications and linking health care benefits or discounts to certain healthy lifestyles. In Arkansas, for example, state employees who exercise more frequently or eat healthier foods can earn up to three extra days off from work each year. These healthy lifestyle programs can include requirements for no tobacco use, as well as requirements for certain cholesterol, blood pressure, and body mass index (BMI) measurements. Most, if not all, employer wellness programs collect medical information from participants. Programs may request or require participating employees to answer questions about family history of certain diseases, conditions, or disorders. This information falls under the definition of genetic information under GINA, and therefore its acquisition and use by employers is strictly regulated and is protected differently than is employer acquisition of other medical information. GINA broadly prohibits both the acquisition of genetic information, as well as the use of genetic information by employers in employment decisions; however, it does provide for several exceptions to the prohibition on employer acquisition of this information. Specifically, Title II of GINA allows employers, employment agencies, labor organizations, and training programs to acquire genetic information pursuant to the offering of health or genetic services, including services offered as part of a wellness program. The statute states, in pertinent part, "[i]t shall be an unlawful employment practice for an employer to request, require, or purchase genetic information with respect to an employee or a family member of the employee except - ... (2) where health or genetic services are offered by the employer, including such services offered as part of a wellness program." The exception provided for by this provision is materially identical for employment agencies, labor organizations, and training programs. However, employers may collect genetic information as part of a wellness program, pursuant to this exception, only if they meet three requirements: the employee must provide prior, knowing, voluntary, and written authorization; only the employee and the licensed health care professional or board-certified genetic counselor involved in providing such services receive individually identifiable information concerning the results of such services; and any individually identifiable genetic information provided in connection with the health or genetic services provided under this exception is only available for the purposes of such services and shall not be disclosed to the employer except in aggregate terms that do not disclose the identity of specific employees. The EEOC final regulations reiterate the exception for wellness programs and its requirements. In the proposed regulations, EEOC emphasized that such programs must be voluntary, and asked for comments concerning the appropriate level of inducement offered for participation in a wellness program. In the final regulations, the EEOC concluded that inducements may be offered to encourage individuals to participate in wellness programs, but inducements may not be offered to provide genetic information. The EEOC provides the following example in the regulations as a situation that does not violate GINA: A covered entity offers $150 to employees who complete a health risk assessment with 100 questions, the last 20 of them concerning family medical history and other genetic information. The instructions for completing the health risk assessment make clear that the inducement will be provided to all employees who respond to the first 80 questions, whether or not the remaining 20 questions concerning family medical history and other genetic information are answered. However, if the health risk assessment does not make clear which questions must be answered, it would violate GINA. Similarly, the regulations state that financial inducements may be offered to encourage participation in wellness programs for individuals who have voluntarily provided genetic information. In order to comply with GINA, these programs must also be offered to individuals with health conditions or life style choices that put them at an increased risk of developing a condition. For example, it would not violate GINA to offer $150 for participation in a weight loss program to employees who voluntarily disclose a family history of diabetes, heart disease, or high blood pressure, and to employees who have a current diagnosis of one of these conditions. Importantly, regardless of how an employer may acquire genetic information (either inadvertently or through these exceptions), the employer is still absolutely prohibited from using the information to discriminate in employment decisions, such as hiring, firing, and promotion. The ACA contains several provisions specifically relating to wellness programs. Of most significance in the context of a discussion of GINA are ACA Section 1001, which creates a new Section 2717 in the Public Health Service Act (PHSA) concerning reporting requirements for group health plans; ACA Section 1201, which creates a new Section 2705 in the PHSA prohibiting discrimination on the basis of health status; ACA Section 4303, amended by Section 10404 of P.L. 111-152 , creates sections in the PHSA, including Section 399MM, which provides for Centers for Disease Control (CDC) technical assistance for employer-based wellness programs; and ACA Section 10408, concerning workplace wellness grants. The new Section 2705 in the PHSA (ACA SS1201) prohibits discrimination by group health plans and health insurance issuers on the basis of health status and specifically includes genetic information as a health status related factor. Effective for plan years beginning on or after January 1, 2014, this section generally codifies HIPAA wellness program regulations. Wellness programs that do not require the satisfaction of a standard relating to a health factor and are made available to all similarly situated individuals are not considered discriminatory. If, however, a wellness program conditions receiving a reward (such as a premium rebate) on meeting a health factor-related standard (such as a blood pressure measurement), there are specific requirements, including a cap on the amount of the reward. The reward in these situations must be capped at 30% of the cost of the employee-only coverage under the plan. Under pre-ACA HIPAA regulations, the cap was set at 20%. In addition, under the ACA the Secretaries of HHS, Labor, and Treasury have the discretion to increase this reward to up to 50%. Wellness programs that provide a reward must also be reasonably designed to promote health or prevent disease and not be a subterfuge for discriminating based on a health status factor; provide eligible individuals the opportunity to qualify for the reward at least once a year; be available to all similarly situated individuals; and disclose in all plan materials the availability of a reasonable alternative standard or the possibility of a waiver. The requirement that the program be available to similarly situated individuals is further elaborated on in the ACA. The law states that this requirement is not met unless the wellness program allows for "a reasonable alternative standard (or waiver of the otherwise applicable standard) for obtaining the reward for any individual for whom, for that period, it is unreasonably difficult due to a medical condition to satisfy the otherwise applicable standard" or for whom is it is medically inadvisable to attempt to satisfy the otherwise applicable standard. The ACA allows the plan or issuer, "if reasonable under the circumstances," to seek verification "such as a statement from an individual's physician, that a health status factor makes it unreasonably difficult or medically inadvisable for the individual to satisfy or attempt to satisfy the otherwise applicable standard." The other three ACA sections mentioned above, ACA Sections 1001, 4303, and 10408, all encourage the provision of wellness programs. Both Title II of GINA and the ACA include provisions relating to wellness programs, although the statutes have a different focus. The ACA addresses wellness programs as a means to increase the health of employees and reduce medical costs; Title II of GINA prohibits employment discrimination, generally prohibiting employers from collecting genetic information, and contains broad privacy protections. GINA permits the collection of genetic information for the purpose of wellness programs and contains detailed requirements including, for example, written authorization for the collection of this data. The ACA does not contain similar privacy protections and does not address its relationship with GINA; however, the two statutes do not directly contradict one another. Thus, it could be argued that the disfavored statutory construction approach of repeal by implication would not be appropriate; the two statutes can be read in a complementary manner. Another rule of statutory construction states that where there is a conflict between the statutes, the most recent statute generally takes precedence. However, it would appear that the provisions of the ACA and GINA are complementary, not contradictory. Like the previous analysis, the ACA and Title II of GINA could be read together in such a way as to give effect to both. Although the ACA does not contain the specific detailed privacy provisions regarding wellness programs contained in GINA, it could be argued that GINA's provisions supplement the ACA's nondiscrimination requirements. This argument is further supported by the fact that the nondiscrimination requirements were in the pre-ACA version of HIPAA and the HIPAA regulations contained similar, but not identical, requirements relating to wellness programs. It could even be contended that reading the provisions together would advance the ACA goal of prohibiting discrimination against individuals based on health status, because privacy protections regarding genetic information would decrease the likelihood of discrimination. Thus, it would appear likely that a court would interpret the wellness provisions of the ACA and Title II of GINA as complementary. The Preserving Employee Wellness Programs Act ( H.R. 1189 / S. 620 ) was introduced on March 2, 2015. As noted, ACA and GINA --as well as the Americans with Disabilities Act (ADA) --may be implicated by any given employer-based wellness program. Generally, S. 620 / H.R. 1189 would seek in part to clarify the interaction of these three laws by indicating that those workplace wellness programs that comply with the requirements of the ACA are not in violation of GINA or the ADA. A recent case has highlighted the lack of clarity around the interaction between these three statutes in the context of employer wellness programs. Specifically, on November 6, 2014, a federal district judge in Minnesota declined to enjoin the operation of Honeywell International's corporate wellness program involving biometric testing in a case brought by the EEOC, claiming violations of both Title II of GINA and the ADA. Although the judge did not express an opinion on either party's likelihood of success on the merits, she observed that great uncertainty persists in regard to how the ACA, ADA, and other federal statutes such as GINA are intended to interact." On April 20, 2015, the EEOC published a proposed rule to clarify the interaction between the ADA and the ACA employer wellness program provisions; this proposed rule noted that the interaction between GINA and the ACA wellness provisions would be addressed in future rulemaking. As noted above, both GINA and the ACA contain provisions affecting certain elements of health insurance, as well as wellness programs. GINA is a civil rights statute and has as its purpose the prohibition of discrimination against individuals on the basis of genetic information. In order to effectuate this prohibition, GINA not only contains certain requirements for health insurance and a general prohibition of employment discrimination provisions, but also has strong privacy protections. On the other hand, the ACA is comprehensive health care legislation that is intended to, among other things, enhance consumer protections in the private health insurance market and expand health coverage. The ACA, the more recent statute, does not specifically amend GINA and also does not reference GINA's requirements. Generally, when interpreting the interactions of two statutes that address similar situations or subject matter, courts will try to read the statutes in such a way as to give effect to the language of both. Further, when Congress enacts legislation to amend an existing statute, courts may attempt to read new provisions together with those that were left unchanged and to interpret the provisions so they do not conflict. A leading treatise on statutory construction also notes that repeal of a prior law by implication is disfavored, and observes that "[t]he point of the rules of interpretation is to give harmonious effect to all acts on a subject where reasonably possible." However, where a new statute is a comprehensive revision of a subject area there is "a strong implication of a legislative intent to repeal former statutory law." While the ACA has been described as a comprehensive revision of federal law regarding health care, the act evidences no intent to be the sole regulation of the health care system. Therefore, courts would be more likely to examine the issue through the specific requirements of the statutes of the ACA and GINA and attempt to reconcile these statutes. This more nuanced approach would appear to better reflect and give full effect to the actual language of GINA and the ACA. Ultimately, the precise landscape of these requirements may await final regulations from these agencies and, perhaps, judicial decisions.

Upon the enactment of the Patient Protection and Affordable Care Act (ACA), as amended, certain questions have been raised about how the ACA might affect existing law. One such existing law, the Genetic Information Nondiscrimination Act (GINA), is a civil rights statute and has as its purpose the prohibition of discrimination against individuals on the basis of genetic information. In order to effectuate this prohibition, GINA not only contains certain requirements for health insurance and a general prohibition of employment discrimination provisions, but also has strong privacy protections. On the other hand, the ACA is comprehensive health care legislation that is intended to, among other things, enhance consumer protections in the private health insurance market. Both GINA and the ACA contain provisions affecting certain elements of health insurance, as well as employment-based wellness programs. The ACA, the more recent statute, does not specifically amend GINA and also does not reference GINA's requirements. The two laws serve different but complementary purposes, and there is no explicit conflict or contradiction in their terms. Still, the interaction of these two acts may be analyzed. This report provides a brief overview of GINA; an overview of relevant ACA and GINA provisions relating to the provision of health insurance through the private market and the implementation of employer wellness programs; and statutory analysis of the potential interactions between the related provisions in both laws.

The authority for congressional review and approval of the District of Columbia's budget is derived from the Constitution and the District of Columbia Self-Government and Government Reorganization Act of 1973 (Home Rule Act). The Constitution gives Congress the power to "exercise exclusive Legislation in all Cases whatsoever" pertaining to the District of Columbia. In 1973, Congress granted the city limited home rule authority and empowered citizens of the District to elect a mayor and city council. However, Congress retained the authority to review and approve all District laws, including the District's annual budget. As required by the Home Rule Act, the city council must approve a budget within 56 days after receiving a budget proposal from the mayor. The approved budget must then be transmitted to the President, who forwards it to Congress for its review, modification, and approval through the annual appropriations process. The District of Columbia's budget is included in the Financial Services and General Government (FSGG) Appropriations bill. Congress not only appropriates federal payments to the District to fund certain activities, but also reviews, and may modify, the District's entire budget, including the expenditure of local funds as outlined in the District's Home Rule Act. Since FY2006, the District's appropriations act has been included in a multi-agency appropriations bill; before FY2006 the District budget was considered by the House and the Senate as a stand-alone bill. It is currently included in the Financial Services and General Government Appropriations Act (FSGG). District of Columbia appropriations acts typically include the following three components: 1. Special federal payments appropriated by Congress to be used to fund particular initiatives or activities of interest to Congress or the Administration. 2. The District's operating budget , which includes funds to cover the day-to-day functions, activities, and responsibilities of the government, enterprise funds that provide for the operation and maintenance of government facilities or services that are entirely or primarily supported by user-based fees, and long-term capital outlays such as road improvements. District operating budget expenditures are paid for by revenues generated through local taxes (sales and income), federal funds for which the District qualifies, and fees and other sources of funds. 3. General provisions are typically the third component of the District's budget reviewed and approved by Congress. These provisions can be grouped into several distinct but overlapping categories with the most predominant being provisions relating to fiscal and budgetary directives and controls. Other provisions include administrative directives and controls, limitations on lobbying for statehood or congressional voting representation, congressional oversight, and congressionally imposed restrictions and prohibitions related to social policy. On February 13, 2012, the Obama Administration released its detailed budget request for FY2013. The Administration's proposed budget included $677.8 million in special federal payments to the District of Columbia, which was $12.2 million more than the District's FY2012 appropriation of $665.6 million. Approximately 78% ($526.7 million) of the President's proposed budget request for the District would have been targeted to the courts and criminal justice system. This includes $219.6 million in support of court operations; $49.9 million for Defender Services; $215.5 million for the Court Services and Offender Supervision Agency for the District of Columbia, an independent federal agency responsible for the District's pretrial services, adult probation, and parole supervision functions; $1.8 million for the Criminal Justice Coordinating Council; $39.4 million for the public defender's office; and $500,000 to cover costs associated with investigating judicial misconduct complaints and recommending candidates to the President for vacancies to the District of Columbia Court of Appeals and the District of Columbia Superior Court. The President's budget request also included $95.6 million in support of education initiatives, including $60 million to support elementary and secondary education, $500,000 to support the D.C. National Guard college access program, and $35.1 million for college tuition assistance. This represented 14% of the Administration's federal payment budget request for the District of Columbia. On March 23, 2012, the mayor of the District of Columbia submitted a proposed budget to the District of Columbia Council. On May 15, 2012, the council approved an FY2013 budget that included $11.4 billion in operating funds and $1.1 billion in capital outlays. The mayor signed the measure (A19-0381) on June 15, 2012. Included in the act was a provision that would have granted the District some level of budget autonomy in the expenditure of local funds if Congress failed to pass and the President failed sign a District of Columbia appropriations act before the beginning of the 2013 fiscal year. The provision would have allowed the District to obligate and expend local funds at the rate set forth in the act during the period in which there is an absence of a federal appropriations act authorizing the expenditure of local funds. Similar language was included in the bill, S. 3301, reported by the Senate Appropriations Committee. The provision was also supported by the Administration. The House and Senate FSGG bills (H.R. 6020 and S. 3301) considered during the 112 th Congress, P.L. 112-175 (six-month continuing resolution), and P.L. 113-6 (full year FY2013 appropriations) all included language that referenced the District's FY2013 budget submission for purposes of congressional review and approval. On June 14, 2012, the Senate Appropriations Committee reported S. 3301, its version of the Financial Services and General Government Appropriations Act for FY2013, with an accompanying report (S. Rept. 112-177). As reported, the bill recommended $676.2 million in special federal payments to the District. This was $10.6 million more than appropriated for FY2012, and $1.6 million more than requested by the Administration. The bill included $5.7 million more in funding for court operations than requested by the Administration, but $7.4 million less than appropriated in FY2012. It would have appropriated $6.5 million less than the President's FY2013 request or the FY2012 appropriated amount for elementary and secondary education initiatives. These funds would have been allocated among three specific initiatives: public school improvements, support for public charter schools, and funding a private school voucher program. The Administration's budget request did not include funding the school voucher program. As noted above, S. 3301 included a provision that would have allowed the District to obligate and expend locally raised funds in the absence of congressional approval of a District of Columbia appropriations act. The Senate bill's general provisions mirror some of the language included in the House bill. Like the House bill, S. 3301 included provisions governing budgetary and fiscal operations and controls. It also included provisions restricting or prohibiting the use of federal funds to support District statehood or congressional voting representation, including provisions that would have continued prohibiting the use of federal funds to support or defeat any legislation being considered by Congress or a state legislature; cover salaries, expenses, and other costs associated with the office of Statehood Representative and Statehood Senator for the District of Columbia; and support efforts by the District of Columbia Attorney General or any other officer of the District government to provide assistance for any petition drive or civil action seeking voting representation in Congress for citizens of the District. The bill also included changes in three provisions that city officials had sought to eliminate or modify. The bill would have lifted the prohibition on the use of District funds to provide abortion services, but would have continued the prohibition against the use of federal funds; prohibited the use of federal funds to regulate and decriminalize the medical use of marijuana; and maintained the prohibition on the use of federal funds to support a needle exchange program. On June 26, 2012, a House Appropriations Committee approved the Financial Services and General Government Appropriations Act of 2013, H.R. 6020 , with an accompanying report ( H. Rept. 112-550 ). The bill included $673.7 million in special federal payments to the District. This was $12.2 million more than appropriated for FY2012, $4.1 million less than requested by the Obama Administration and $2.5 million less than recommended by the Senate bill. The bill included a substantial increase ($12.5 million) in the amount requested by the Administration for court operations, and a $5.1 million reduction in the amount that would have been appropriated for the Resident Tuition Support (college access) program. The bill also would have directed $60 million in funding to support the District of Columbia Public Schools ($20 million), public charter schools ($20 million), and private school vouchers ($20 million). Like its Senate counterpart, the House bill included several general provisions governing budgetary and fiscal operations and controls including prohibiting deficit spending within budget accounts, establishing restrictions on the reprogramming of funds, and allowing the transfer of local funds to capital and enterprise fund accounts. In addition, the bill would have required the city's Chief Financial Officer to submit a revised operating budget for all District government agencies and the District public schools within 30 days after the passage of the bill. The House bill also included several general provisions relating to statehood or congressional representation for the District, including provisions that would have continued prohibiting the use of federal funds to support or defeat any legislation being considered by Congress or a state legislature; cover salaries, expenses, and other costs associated with the office of Statehood Representative and Statehood Senator for the District of Columbia; and support efforts by the District of Columbia Attorney General or any other officer of the District government to provide assistance for any petition drive or civil action seeking voting representation in Congress for citizens of the District. Unlike the Senate bill, H.R. 6020 would have prohibited the use of both District and federal funds for abortion service. In addition, the bill would have continued to prohibit the use of federal funds to administer needle exchange or to decriminalize or regulate the medical use of marijuana. Despite the federal prohibition, on June 12, 2012, the city announced the certification of four privately operated medical marijuana dispensaries. The dispensaries were set to open in the fall of 2012, but the first was not operational until June 2013. The Obama Administration issued a Statement of Administration Policy (SAP) on H.R. 6020, on June 28, 2012. The SAP urged the House to include language that would have allowed the District to expend its own funds should Congress fail to approve the District budget before the beginning of the fiscal year. The statement also included language objecting to the provision that would prohibit the use of federal funds to support the District's needle exchange program, noting that the restriction "is contrary to current law and the Administration's policy to allow funds to be used in locations where local authorities deem needle exchange programs to be effective and appropriate." The statement also objected to a provision that would have prohibited the use of District funds for abortion services, noting that the restriction undermines the principle of home rule. Unable to pass a full-year appropriation before the beginning of the 2013 fiscal year, Congress passed (H.J. Res. 112-117) and the President, on September 28, 2012, signed into law P.L.112-175, a continuing resolution that provided appropriations for most federal programs at 0.612% above their FY2012 funding levels through March 27, 2013 (approximately the first six months of the fiscal year). P.L. 112-175 also allowed the District of Columbia to spend its locally-raised funds at the levels outlined in the District of Columbia Budget Request Act of 2012. In addition, the act appropriated $24.7 million in special federal payments for emergency planning and security costs, including $9.8 million for expenses associated with the Presidential Inauguration. On March 26, 2013, the President signed into law P.L. 113-6, the Consolidated and Further Continuing Appropriations Act, 2013. The measure superseded P.L. 112-175, and included provisions allowing the District of Columbia to expend its local funds as set forth under "District of Columbia Funds--Summary of Expenses'' as included in the Fiscal Year 2013 Budget Request Act of 2012 (D.C. Act 19-381). With the exception of special federal funds for emergency planning and security, the act, P.L. 113-6, established appropriations levels for special federal payments to the District at the FY2012 funding levels, subject to sequestration under the Budget Control Act. Both the President and Congress may propose financial assistance to the District in the form of special federal payments in support of specific activities or priorities. As noted in the sections above, the Obama Administration budget proposal for FY2013 included a request for $677.8 million in special federal payments for the District of Columbia. The Financial Services and General Government Appropriations Act for FY2013, H.R. 6020, as reported by the House Appropriations Committee on June 26, 2012, included $673.7 million in special federal payments to the District of Columbia. Weeks earlier, on June 14, 2012, the Senate Appropriations Committee reported its version of the Financial Services and General Government Appropriations Act, S. 3301. The Senate bill recommended $676.2 million in special federal payments for the District of Columbia. Unable to reach agreement on appropriation measures, including the FSGG, before the beginning of FY2013, the 112 th Congress passed H.J. Res.117 extending funding at an annualized rate of 0.6% above the FY2012 funding levels through March 27, 2013. The act, which was signed into law as P.L. 112-175 by the President on September 28, 2012, (1) allowed the District to spend its local funds as outlined in the District of Columbia Budget Request Act of 2012 and (2) appropriated $9.8 million for expenses associated with the Presidential Inauguration. On March 26, 2013, the President signed into law P.L.113-6, the Consolidated and Further Continuing Appropriations Act, 2013, which superseded P.L. 112-175. P.L. 113-6 funded special federal payments to the District at the FY2012 funding levels, except for emergency planning and security, which was funded at $24.7 million. Table 2 shows details of the District's federal payments, including the FY2012 enacted amounts, the amounts included in the President's FY2013 budget request, and the amounts recommended by the House and Senate Appropriations Committees, and final appropriations for FY2013. As noted previously, the District's General Fund Budget for FY2013, which was signed by the mayor on June 15, 2012, as A19-0381, was incorporated in both the House and Senate bills (H.R. 6020 and S. 3301) by reference for the purpose of congressional review and approval. The District's FY2013 General Fund Budget totaled $11.4 billion, including $9.4 billion for operating expenses and $1.9 billion for enterprise funds ( Table 3 ). Of the $11.4 billion budgeted for operating expenses, $998.2 million was projected to be derived from federal grants and $1.672 billion from Medicaid payments. Whether to continue a needle exchange program or whether to use federal or District funds to address the spread of HIV and AIDS among intravenous drug abusers is one of several key policy issues that Congress faced in reviewing the District's appropriations for FY2013. The controversy surrounding funding a needle exchange program touches on issues of home rule, public health policy, and government sanctioning and facilitating the use of illegal drugs. Proponents of a needle exchange program contend that such programs reduce the spread of HIV among illegal drug users by reducing the incidence of shared needles. Opponents of these efforts contend that such programs amount to the government sanctioning illegal drugs by supplying drug-addicted persons with the tools to use them. In addition, opponents contend that public health concerns raised about the spread of HIV and AIDS through shared contaminated needles should be addressed through drug treatment and rehabilitation programs. Another view in the debate focuses on the issue of home rule and the city's ability to use local funds to institute such programs free from congressional restrictions. The prohibition on the use of federal and District funds for a needle exchange program was first approved by Congress as Section 170 of the District of Columbia Appropriations Act for FY1999, P.L. 105-277. The 1999 act did allow private funding of needle exchange programs. The District of Columbia Appropriations Act for FY2001, P.L. 106-522, continued the prohibition on the use of federal and District funds for a needle exchange program; it also restricted the location of privately funded needle exchange activities. Section 150 of the District of Columbia Appropriations Act for FY2001 made it unlawful to distribute any needle or syringe for the hypodermic injection of any illegal drug in any area in the city that is within 1,000 feet of a public elementary or secondary school, including any public charter school. The provision was deleted during congressional consideration and thus from the District of Columbia Appropriations Act of FY2002, P.L. 107-96. The act also included a provision that allowed the use of private funds for a needle exchange program, but it prohibited the use of both District and federal funds for such activities. At present, one entity, Prevention Works, a private nonprofit AIDS awareness and education program, operates a needle exchange program. The FY2002 District of Columbia Appropriations Act required such entities to track and account for the use of public and private funds. During consideration of the FY2004 District of Columbia Appropriations Act, District officials unsuccessfully sought to lift the prohibition on the use of District funds for needle exchange programs. A Senate provision, which was not adopted, proposed prohibiting the use of federal funds for a needle exchange program, but allowing the use of District funds. The House and final conference versions of the FY2004 bill allowed the use of private funds for needle exchange programs and required private and public entities that receive federal or District funds in support of other activities or programs to account for the needle exchange funds separately. The Financial Services and General Government Appropriations Act for FY2008, P.L. 110-161, contained language that modified the needle exchange provision included in previous appropriations acts. The act allowed the use of District funds for a needle exchange program aimed at reducing the spread of HIV and AIDS among users of illegal drugs. The provision was a departure from previous appropriations acts which prohibited the use of both District and federal funds in support of a needle exchange program. In addition, the explanatory statement accompanying the act encouraged the George W. Bush Administration to include federal funding to help the city address its HIV/AIDS health crisis. The President's budget proposal for FY2013 and House and Senate bills included language that retained language included in the FY2012 appropriations act that allowed the use of District funds, but prohibited the use of federal funds, in support of a needle exchange program. However, the Obama Administration, in a Statement of Administration Policy issued on June 28, 2012, included language that urged the House to remove language prohibiting the use of federal funds in support of a needle exchange program arguing that current federal law allows the use of federal funds for such programs to prevent or limit the spread of HIV/AIDS among intravenous drug users. The Senate bill included a similar provision prohibiting the use of federal funds for a needle exchange program in the District. P.L. 113-6 maintained the prohibition on the use of federal funds for a needle exchange program. The city's medical marijuana initiative is another issue that engenders controversy. The District of Columbia Appropriations Act for FY1999, P.L. 105-277 (112 Stat. 2681-150), included a provision that prohibited the city from counting ballots of a 1998 voter-approved initiative that would have allowed the medical use of marijuana to assist persons suffering from debilitating health conditions and diseases, including cancer and HIV infection. Congress's power to prohibit the counting of a medical marijuana ballot initiative was challenged in a suit filed by the D.C. Chapter of the American Civil Liberties Union (ACLU). On September 17, 1999, District Court Judge Richard Roberts ruled that Congress, despite its legislative responsibility for the District under Article I, Section 8, of the Constitution, did not possess the power to stifle or prevent political speech, which included the ballot initiative. This ruling allowed the city to tally the votes from the November 1998 ballot initiative. To prevent the implementation of the initiative, Congress had 30 days to pass a resolution of disapproval from the date the medical marijuana ballot initiative (Initiative 59) was certified by the Board of Elections and Ethics. Language prohibiting the implementation of the initiative was included in P.L. 106-113 (113 Stat. 1530), the District of Columbia Appropriations Act for FY2000. Opponents of the provision contend that such congressional actions undercut the concept of home rule. The District of Columbia Appropriations Act for FY2002, P.L. 107-96 (115 Stat. 953), included a provision that continued to prohibit the District government from implementing the initiative. Congress's power to block the implementation of the initiative was again challenged in the courts. On December 18, 2001, two groups, the Marijuana Policy Project and the Medical Marijuana Initiative Committee, filed suit in U.S. District Court, seeking injunctive relief in an effort to put another medical marijuana initiative on the November 2002 ballot. The District's Board of Elections and Ethics ruled that a congressional rider that has been included in the general provisions of each District appropriations act since 1998 prohibits it from using public funds to do preliminary work that would put the initiative on the ballot. On March 28, 2002, a U.S. district court judge ruled that the congressional ban on the use of public funds to put such a ballot initiative before the voters was unconstitutional. The judge stated that the effect of the amendment was to restrict the plaintiff's First Amendment right to engage in political speech. The decision was appealed by the Justice Department, and on September 19, 2002, the U.S. Court of Appeals for the District of Columbia Circuit reversed the ruling of the lower court without comment. The appeals court issued its ruling on September 19, 2002, which was the deadline for printing ballots for the November 2002 general election. On June 6, 2005, the Supreme Court, in a six-to-three decision, ruled that Congress possessed the constitutional authority under the Commerce clause to regulate or prohibit the interstate marketing of both legal and illegal drugs. This includes banning the possession of drugs in states and the District of Columbia that have decriminalized or permitted the use of marijuana for medical or therapeutic purposes. Since the passage of the District of Columbia Appropriations Act for FY2010, subsequent appropriations acts have not included language prohibiting the use of District funds to regulate the medical use of marijuana. In 2010, the District of Columbia Council approved legislation (A18-0429) regulating the medical use of marijuana. Although the legislation was subject to a 30-day congressional review period, which would have allowed it to pass a resolution of disapproval, Congress took no action to block its implementation. The legislation directed the city's Health Department to license up to five facilities to dispense medical marijuana to authorized patients. The first of those dispensaries is set to begin operations in the fall of 2012. Both the House and Senate bills (H.R. 6020 and S. 3301) would have continued to prohibit the use of federal funds to carry out any law or regulation that would legalize or reduce federal penalties associated with the use or distribution of any controlled substance, including the medical use of marijuana. P.L. 113-6 continued to prohibit the use of federal funds to carry out any law that would decriminalize the medical use of marijuana. The public funding of abortion services for District of Columbia residents is a perennial issue debated by Congress during its annual deliberations on District of Columbia appropriations. District officials have cited the prohibition on the use of District funds as another example of congressional intrusion into local matters. Since 1979, with the passage of the District of Columbia Appropriations Act of 1980, P.L. 96-93 (93 Stat. 719), Congress has placed some limitation or prohibition on the use of public funds for abortion services for District residents. From 1979 to 1988, Congress restricted the use of federal funds for abortion services to cases where the woman's life was endangered or the pregnancy resulted from rape or incest. The District was free to use District funds for abortion services. When Congress passed the District of Columbia Appropriations Act for FY1989, P.L. 100-462 (102 Stat. 2269-9), it restricted the use of District and federal funds for abortion services to cases where the woman's life would be endangered if the pregnancy were taken to term. The inclusion of District funds, and the elimination of rape or incest as qualifying conditions for public funding of abortion services, was endorsed by President Reagan, who threatened to veto the District's appropriations act if the abortion provision was not modified. In 1989, President George H. W. Bush twice vetoed the District's FY1990 appropriations act over the abortion issue. He signed P.L. 101-168 (103 Stat. 1278) after insisting that Congress include language prohibiting the use of District revenues to pay for abortion services except in cases where the woman's life was endangered. The District successfully sought the removal of the provision limiting District funding of abortion services when Congress considered and passed the District of Columbia Appropriations Act for FY1994, P.L. 103-127 (107 Stat. 1350). The FY1994 act also reinstated rape and incest as qualifying circumstances allowing for the public funding of abortion services. The District's success was short-lived, however. The District of Columbia Appropriations Act for FY1996, P.L. 104-134 (110 Stat. 1321-91), and subsequent District of Columbia appropriations acts, limited the use of District and federal funds for abortion services to cases where the woman's life was endangered or cases where the pregnancy was the result of rape or incest. In FY2010, with the passage of P.L. 111-117, Congress lifted the prohibition on the use of District funds for abortion services, but maintained the restriction on the use of federal funds for such services except in cases of rape, incest, or a threat to the life of the woman. The position was reversed with the passage of the appropriations acts for FY2011 (P.L. 112-10) and FY2012 (P.L. 112-74). Those acts included provisions restricting the use of both federal and District funds for abortion services, except in instances of rape, incest, or the woman's life was endangered if the pregnancy was carried to term. The Obama Administration's FY2013 budget request included a provision that would have prohibited the use of federal funds for abortion services except in cases of rape, incest, or when the mother's life would be endangered if the pregnancy were carried to term, but did not include language that would have restricted the use of District funds for abortion services. The Senate bill, S. 3301, supported the Administration position restricting the use of federal funds. The House bill, H.R. 6020, included language that would have restricted the use of both federal and District funds for abortion services, except in instances of rape, incest, or the woman's life is endangered. P.L. 113-6 continues to allow the District to use its own funds to provide abortion services, but only in cases of rape, incest, or the life of the pregnant women was jeopardized. During the 112 th Congress two bills advanced in the House that would have banned or restricted the provision of abortion services in the District of Columbia. On May 4, 2012, the House passed H.R. 3, the No Taxpayer Funding for Abortions Act. The measure included a provision, Section 309, that would have permanently prohibited the use of federal and District funds for abortion services, except in instances of rape, incest, or a threat to the life of the woman. On June 17, 2012, the House Judiciary Committee ordered reported H.R. 3803 , the District of Columbia Pain-Capable Unborn Child Protection Act. The bill would have permanently banned doctors and health facilities from performing abortions in the District after the 20 th week of pregnancy, except when the pregnancy will result in the woman suffering from a physical disorder, injury, or illness that endangers her life. It would have imposed fines and imprisonment on doctors who violated the act and would have allowed the pregnant woman, the father of the unborn child, or the maternal grandparents of the unborn child of a pregnant minor to bring a civil action against any person who performed an abortion after the 20 th week of pregnancy. The act would have required any physician that performs an abortion to report specific information to the relevant health agency in the District, including post-fertilization age of the fetus and the abortion method used. The District health agency would have been required to compile such information and issue an annual report to the public. The District's delegate to Congress, Eleanor Holmes Norton, though not allowed to testify before the committee, spoke out against the measures as infringements on home rule. The Consolidated Appropriations Act for FY2004, P.L. 108-199, which combined six appropriations bills--including the FY2004 District of Columbia Appropriations Act--authorized and appropriated funding for the Opportunity Scholarship program, a federally funded school voucher program for the District of Columbia. The program provides scholarships (also known as vouchers) to students in the District of Columbia to attend participating private elementary and secondary schools, including religiously affiliated private schools. P.L. 108-199 also provided funding for the District of Columbia Public Schools (DCPS) for the improvement of public education and for the State Education Office for public charter schools. The provision of federal funds for DCPS, public charter schools, and vouchers is commonly referred to as the "three-prong approach" to supporting elementary and secondary education in the District of Columbia. The Opportunity Scholarship program was subsequently reauthorized through the Scholarship for Opportunity and Results Act (division C of the Department of Defense and Full-Year Continuing Appropriations Act, 2011; P.L. 112-10). Appropriations for the program were authorized for FY2012 through FY2016 at $60 million each year. P.L. 112-10 requires that appropriations provided for the program be divided evenly among DCPS for the improvement of public education, public charter schools to improve and expand quality public charter schools, and the Opportunity Scholarship program, regardless of the actual amount appropriated. Thus, the reauthorized Opportunity Scholarship program continues to be included in a broader approach to supporting elementary and secondary education in the District of Columbia. The Obama Administration's proposed budget for FY2013 included funds only for DCPS and public charter schools. No funds were requested to support the Opportunity Scholarship program. S. 3301, as reported, would have provided a total of $53.5 million for a federal payment for school improvement. Rather than dividing these funds equally between the aforementioned three prongs, funds would have been provided as follows: $20 million for DCPS, $20 million for public charter schools, and $13.5 million for the Opportunity Scholarship program. H.R. 6020, as reported, would each of the three prongs. P.L. 113-6 appropriated $59.8 million to support elementary and secondary education in the District, divided evenly among the three initiatives: public schools, public charter schools, and school vouchers.

On February 13, 2012, the Obama Administration released its detailed budget request for FY2013. The Administration's proposed budget included $677.8 million in special federal payments to the District of Columbia, which was $12.2 million more than the District's FY2012 appropriation of $665.6 million in special federal payments. Approximately 78% ($526.7 million) of the President's proposed budget request for the District would have been targeted to the courts and criminal justice system. The President's budget request also included $95.6 million in support of education initiatives. This represented 14% of the Administration's federal payment budget request for the District of Columbia. On May 15, 2012, the District of Columbia Council approved a FY2013 budget that included $11.4 billion in operating funds and $1.1 billion in capital outlays. The mayor signed the measure (A19-0381) on June 15, 2012. Included in the act was a provision that would have granted the District some level of budget autonomy in the expenditure of local funds, if Congress failed to pass and the President failed to sign a District of Columbia appropriations act before the beginning of the 2013 fiscal year on October 1, 2012. On June 14, 2012, the Senate Appropriations Committee reported S. 3301, its version of the Financial Services and General Government Appropriations Act for FY2013 (FSGG), with an accompanying report (S.Rept. 112-177). As reported, the bill recommended $676.2 million in special federal payments to the District. This was $10.6 million more than appropriated for FY2012, and $1.6 million less than requested by the Administration. On June 26, 2012, a House Appropriations Committee approved its version of the Financial Services and General Government Appropriations Act of 2013, H.R. 6020, with an accompanying report (H.Rept. 112-550). The bill included $673.7 million in special federal payments to the District. This was $8.1 million more than appropriated for FY2012, $4.1 million less than requested by the Administration and $2.5 million less than recommended by the Senate bill. The Senate bill, S. 3301, included changes in two provisions that city officials had sought to eliminate or modify. The bill would have lifted the prohibition on the use of District funds to provide abortion services, but would have continued the prohibition against the use of federal funds. The House bill would have restricted the use of District and federal funds for abortion services to instances involving rape, incest, or a health threat to the life of the pregnant woman. Both the House and Senate bills would have continued to prohibit the use of federal funds to regulate and decriminalize the medical use of marijuana and would have provided funding for a school voucher program, which was not funded in FY2012. The private school voucher program was opposed by some city leaders, but supported by others. The Administration did not include funding for school vouchers in its budget submission to Congress. Unable to reach agreement on appropriation measures, including the FSGG, before the beginning of FY2013, the 112th Congress passed H.J.Res. 117 extending funding at an annualized rate of 0.6% above the FY2012 funding levels through March 27, 2013. The act, which was signed into law as P.L. 112-175 by the President on September 28, 2012, (1) allowed the District to spend its local funds as outlined in the District of Columbia Budget Request Act of 2012 and (2) appropriated $9.8 million for expenses associated with the Presidential Inauguration. On March 26, 2013, the President signed into law P.L. 113-6, the Consolidated and Further Continuing Appropriations Act, 2013, which superseded P.L. 112-175. P.L. 113-6 funded special federal payments to the District at the FY2012 funding levels, except for emergency planning and security, which was funded at $24.7 million. The act also continued the prohibition on the use of federal funds for abortion services and needle exchange programs.

The Journal of the House of Representatives of the United States is the official record of House proceedings. The Constitution, House rules and practices, and certain statutes define which proceedings are to be recorded, while the House itself controls how and to what extent the Journal 's contents are presented. The Journal enables Members, government officials, state legislatures, and members of the public to follow the actions of Congress. It is prepared under the direction of the Clerk of the House. After the close of a session, it is printed, distributed to Members and selected government offices, and posted on the U.S. Government Publishing Office (GPO) website. The Speaker announces approval of the daily Journal at the start of each legislative day. In current practice, the House automatically agrees to approval unless a Member calls for a vote. Occasionally, a Member demands a Journal vote to reconsider the Journal 's content. More often, though, a Journal vote is called for unrelated reasons, such as to assemble Members before a major vote or to protest the actions of leadership. The Journal is the official record of House proceedings. Unlike the Congressional Record , it is not a transcript of debate. Rather, it is a listing of legislative actions. If there is a discrepancy between the actions cited in the Journal and the Congressional Record , the Jo urnal is considered the correct account of actions taken. As such, it is the record of House activities that is provided as evidence in legal proceedings. The term House Journal is used for both the daily Journal and the session Journal . After one legislative day adjourns, the Journal clerk prepares the day's minutes and presents them to the Speaker. At the start of the next legislative day, the Speaker announces his or her approval of the previous day's Journal (the daily Journal ). When each session of Congress concludes, the minutes of all the legislative days are assembled together into a session Journal . GPO prints the session Journal as a bound book and posts a digital copy on its website. If a vote is called, it is for approval of the daily Journal containing those proceedings that occur between the commencement of one legislative day and its time of adjournment. In this report, all subsequent references to Journal are to the daily Journal . The Constitution directs the two houses of Congress to maintain and publish journals of their proceedings: "Each House shall keep a Journal of its Proceedings, and from time to time publish the same, excepting such Parts as may in their Judgment require Secrecy." Article I, Sections 5 and 7, identifies two types of proceedings that must be entered: presidential veto messages and "yeas and nays" votes. The Members' yeas and nays are to be recorded at the "desire of one fifth of those present" or if the vote is a congressional attempt to override a presidential veto. The Constitution does not specify additional proceedings to record, allowing each chamber to identify the majority of its official actions. Nor does the Constitution "indicate with what fullness" any proceeding should be documented--the manner in which a proceeding is recorded is up to the House to decide. Therefore, the House, not the Constitution, is in control of its Journal of proceedings. Since the first Congress (1789-1791), the House has determined which proceedings, aside from the constitutional requirements, to include in the Journal . House-mandated proceedings include: the introduction of bills and resolutions (listed with number, title, sponsors, and committee(s) of referral); committee and conference reports (titles); documents, petitions, memorials, and points of order; the disposition of measures considered in the House or the Committee of the Whole; House, Senate, and presidential messages, as well as other executive communications; the times of daily commencement and adjournment; and record votes, which in current practice, are usually conducted by electronic device. Proceedings are defined in the House Manual (commonly referred to as Jefferson's Manual , due to the section originally authored by Thomas Jefferson); House Practice : A Guide to the Rules, Precedents, and Procedures of the House ; and the three collections of House precedents (Hinds, Cannon, and Deschler). These documents outline the inclusion of both routine and less common proceedings, such as discharge petitions, debate limitations under a special order of business (i.e., a "special rule"), unanimous consent agreements, expungements from the Congressional Record , and the disciplinary censure of a Member. House Rule XX provides specific requirements for the recording of votes and quorum calls. The Journal must state the general subject of all votes, record the results of votes and quorum calls, and list the names of Members with their responses to record votes and quorum calls. If Members do not vote, and a quorum is present, the Speaker or another Member can demand that their names be recorded in the Jo urnal . To a limited extent, statutes also identify proceedings that must be entered into the Journal . For instance, one statute requires newly sworn Members to take a signed copy of their oaths of office to the Clerk for entry into the Journal . Another statute directs each chamber to count and confirm the presidential electoral vote. The announcement confirming the election results, along with the list of electoral votes by state, are to be recorded in the Journal . As former House Parliamentarian Asher Hinds noted, "The Journal records acts, but not the reasons therefor." Thus, the Journal does not provide a transcription of statements, deliberations, opinions, or debate made in the House or the Committee of the Whole--those discussions are printed in the Congressional Record . In addition, the Journal does not record parliamentary inquiries or other matters not considered by the House to be legislative business. Nor does it record motions that are not entertained by the Speaker or motions that are withdrawn before the end of the legislative day. Likewise, any unanimous consent agreements, points of order, and discharge petitions that are not successful are not recorded. However, because the House controls the Journal's contents, it is the final arbiter on what constitutes its actions. The Journal may omit "things actually done" or record "things not done." In either case, it becomes the official record when the House agrees to the Speaker's approval either through tacit acceptance or as the result of a vote on the floor. The duty to keep a journal is mandated by the Constitution, following the practice of British Parliament. The British House of Commons has maintained a record of decisions since the 1500s. The daily version, Votes and Proceedings , is later compiled into the Journal . Like the House Journal , the British version is a public account of actions taken, not a transcription of debate. Prior to the enactment of the Constitution, the Articles of Confederation defined the national government from 1781 to 1789. Article IX directed the Confederation Congress to publish a monthly journal of proceedings, including the yeas and nays on any question, which could be laid "before the legislatures of the several states." The drafters of the U.S. Constitution were familiar with the British and American precedents. While the delegates to the Constitutional Convention (1787) easily accepted the need to keep legislative journals, they divided over the mandate to have them published. Delegate Oliver Ellsworth considered a publishing requirement unnecessary, as "[t]he Legislature will not fail to publish their proceedings from time to time." In defense of the mandate, Delegate James Wilson stated: "The people have a right to know what their Agents are doing or have done, and it should not be in the option of the Legislature to conceal their proceedings." On August 11, 1787, the delegates adopted provisions mandating the duty to keep and publish House and Senate records of proceedings. Since the Constitutional Convention, legal commentators have interpreted the Constitution's clauses and the justifications for them. Regarding the duty to keep a journal, Supreme Court Justice Joseph Story, in 1833, wrote: "The object of the whole clause is to insure publicity to the proceedings of the legislature, and a correspondent responsibility of the members to their respective constituents.... The public mind is enlightened by an attentive examination of the public measures." For Story, the legislative Journals provide three functions: transparency into the workings of Congress, stronger relations between Members and constituents, and an educated public. House Practice , and the three published collections of House precedents, identify the main purpose of the Journal is "to ensure that the proceedings of the House be a matter of public record." In the House's earlier years, government officials and state legislators were the main parties that consulted the public record. Now any member of the public can access previous volumes of the House Journal online through GPO, Federal Depository Libraries, and the Library of Congress's Century of Lawmaking website. The Journal is the official record of House proceedings. As such, every Member may inspect it, "and anyone may take and publish votes therefrom." When necessary, the House Journal is provided as evidence in legal proceedings. The courts review the Journal , rather than the Congressional Record , to confirm the outcome of votes, the presence of quorums, and that Members have taken the oath of office. Under House Rules I and XIV, the Speaker announces his or her approval of the Journal as the first order of business after the chaplain's prayer. Without objection, the Journal stands approved. However, if a Member does object, that Member may demand a vote on the Speaker's approval . During each daily session, the Journal clerk records handwritten notes into the "Journal Minute Book." At the end of the legislative day, another clerk types these minutes, adding additional details of the proceedings. The computer-generated manuscript (the daily Journal ) is then proofed and presented to the House Parliamentarian for review. Prior to the start of each legislative day, the Speaker receives the previous day's J ournal from the Journal clerk. Usually, after the chaplain's prayer, the Speaker (or the Speaker's designee) will say, "The Chair has examined the Journal of the last day's proceedings and announces to the House his (or her) approval thereof. Pursuant to clause 1, Rule I, the Journal stands approved." If there is no objection, the House continues to the Pledge of Allegiance, followed by legislative business. If a Member objects to the Journal's approval, however, the Member rises and says, "Mr. [or Madam] Speaker, pursuant to clause 1, Rule I, I demand a vote on agreeing to the Speaker's approval of the Journal ." The Speaker will then conduct a voice vote and, in nearly every case, announce that the ayes appear to have it. A Member may then seek a record vote. To do so, the Member may demand the yeas and nays. Provided that the request is supported by one-fifth of the Members present, the yeas and nays are ordered. In this case, a record vote is guaranteed, but it may be postponed until later in the legislative day pursuant to clause 8 of Rule XX. The Member may also object by noting the absence of a quorum. If the point of order is sustained, the yeas and nays are automatically ordered. In this scenario, the Member may say, "Mr. [or Madam] Speaker, I object to the vote on the grounds that a quorum is not present and make the point of order that a quorum is not present." The Speaker responds by either holding an immediate record vote by electronic device, which decides the motion and ascertains a quorum (218 Members), or says, "Pursuant to clause 8, Rule XX, further proceedings on this question will be postponed," and the point of no quorum is considered withdrawn. If the proceedings are postponed, the Speaker, later in the legislative day, puts the question on agreeing to the Journal 's approval de novo (as if new), and a voice vote occurs. The same or a different Member may object to the results of the voice vote by, depending on the situation, (1) noting the absence of a quorum, (2) demanding the yeas and nays, or (3) demanding a recorded vote. In the first case, the yeas and nays are automatically ordered provided that the quorum point of order is sustained. If the Member initially demands the yeas and nays, the yeas and nays are ordered if the demand receives the support of one-fifth present. Alternatively, a Member may demand a recorded vote, which requires the support of 44 Members. In each of these cases, a record vote occurs assuming the specified requirements have been met. In current practice, the Journal is not read unless the House votes against the Speaker's approval. Should the House vote against approval, House Rule I authorizes one motion to have the Journal read. The motion is privileged, meaning it can be decided by the House without debate. Under this scenario, a Member may say: "Mr. [or Madam] Speaker, I move that the Journal be read." The Speaker replies: "The question is, shall the Journal be read?" If the question is decided in the affirmative by voice or record vote, the Clerk reads the previous day's Journal , omitting the names of Members responding to votes or the texts of messages unless a Member demands a full reading. Once the reading is completed, or it is terminated by unanimous consent, a Member may move to approve the Journal "as read." The motion to approve the Journal "as read" may be tabled; otherwise, it is debatable until a Member moves the previous question and that motion is adopted. (Successful votes on the previous question close debate and force a vote on the pending question.) If the motion to approve the Journal is adopted, no further motions related to the Journal are in order. However, if the House rejects the motion to approve the Journal "as read," the Journal is subject to amendment. There are two ways to amend the Journal : by unanimous consent (used occasionally for noncontroversial alterations) and by motion (a rarely used procedure for more contentious changes). Changes by unanimous consent may correct the previous day's Journal as well as previous legislative days within the same Congress. Amendment by motion pertains to the prior day's Journal only following an unsuccessful vote to approve that day's Journal . The motion to amend occurs once the House rejects the Speaker's approval, the Clerk reads the Journal , or the reading is terminated by unanimous consent, and the House rejects the Journal "as read." The motion to amend is not in order after the House approves the Journal or if the previous question has been demanded on the motion to approve. The motion to amend the Journal takes precedence over a motion to approve. A Member may stand and, once recognized, say, "Mr. [or Madam] Speaker, I move to amend the Journal by inserting _____ (or by striking or by striking and inserting _______)." The Member is then to be recognized under the hour rule. At the end of the hour, a Member may move the previous question, and the House, if the previous question is agreed to, votes on the amendment. If the amendment is adopted, the House then votes to approve the Journal "as amended." The amendment process reflects the House's ability to control its Journal and define its own proceedings. According to Cannon's Precedents , this ability extends to "omitting things actually done or of recording things not done." For instance, if the House neglects to perform a required procedure, the House can vote on a motion, or agree by unanimous consent, to amend the Journal to indicate that the procedure had been followed. In 1912, the Speaker was informed that a necessary procedural motion had not been observed, so he suggested amending the Journal "by common consent to make it show that the actual thing was done." In response to a Member's objection, the Speaker stated, "Mr. Speaker Cannon ruled a number of times that by unanimous consent anything can be done, and the Chair thinks he was right." Journal approval votes rarely fail. In fact, between 1990 and 2016, Journal approval never failed in a record vote. The House Manual , however, did identify one voice vote, in 1990, when the House rejected the Speaker's approval. The occurrence illustrates the possible steps taken when the House votes against agreeing to the Journal 's approval. On March 19, 1990, the Speaker pro tempore announced the approval of the Journal . In response, Representative Robert Walker, a member of the minority party, demanded a vote on agreeing to the approval. The Speaker pro tempore held a voice vote and declared that the noes appeared to have it. Representative Walker then moved that the Journal of the last day's proceedings be read. The motion was agreed to by voice vote. The Clerk began to read the Journal . During the reading, Walker asked for "unanimous consent that the Journal be considered as read and open to amendment at any point." There was no objection. Walker moved to amend the Journal , striking an executive communication that transmitted an annual report "in compliance with the Government in Sunshine Act." The Speaker pro tempore recognized the Member for one hour. While debating the amendment, Walker noted that the House was "unwilling to work in sunshine itself," so it should not accept communications relating to government transparency. Specifically, he objected to late changes in the House schedule and restrictions on floor amendments. Representative Jon Kyl, also in the minority party, noted that Walker was making a "symbolic point," to which Walker responded, "When I read through the Journal for last Thursday, this was about the best we could do in order to get a little bit of talk about what we think is a substantive issue." As he concluded his remarks, Walker yielded back the remainder of his time. The Speaker pro tempore held a vote on the amendment, which was agreed to by voice vote. Finally, Representative George Miller, a member of the majority party, moved to approve the Journal "as amended." The House approved the Journal , as amended, by voice vote. According to the U.S. House of Representatives Roll Call Votes database, the House held 472 Journal -approval record votes from 1991 to 2016 (102 nd -114 th Congresses, Table 1 ). None of these votes failed. Instead, such votes have received support, on average, from three out of four Members. The 75% approval rate is not a strict reflection of party-line division. However, party and political considerations may play a role in the decision to demand or vote against approval of the Journal . When a Member demands a vote to agree to the Speaker's approval of the Journal , it may be seen as an attempt to amend the Journal 's contents. Indeed, motions to amend are in order only after the House votes against the Speaker's approval. The most common way to amend the Journal , however, is by unanimous consent, and such requests may be unrelated to a Journal -approval vote. In the 1990 case discussed above, the Member stated that the primary purpose of his motion was to bring attention to the majority party's actions. Thus, the original Journa l -approval vote, which enabled the subsequent motion to amend, could be considered a party protest against leadership, using the motion to amend the Journal 's contents as a way to allow debate. Journal -approval votes may be used to protest actions or delay legislative business. Such votes provide opportunities for Members to criticize practices that are related or unrelated to the Journal 's contents. Record votes, in particular, consume valuable floor time and can be used to disrupt committee meetings occurring concurrently. However, since a House rules change in 1983 (98 th Congress), the Speaker has been able to postpone Journal record votes until later in the legislative day, allowing the House to consider other business before voting to agree to the Journal 's approval. In 1985, Representative Harry Reid confirmed the use of Jo urnal votes as an act of protest. Speaking on the House floor, he said, "We all recognize that the Journal or more specifically approval of the Journal can be used as a procedural tool; that is, Members that want to express disfavor with the preceding day's business can call for a vote, thus officially expressing their displeasure." An example of a Journal vote that was both a protest and a dilatory action occurred in 1993 (103 rd Congress). On March 2, Representative Gerald Solomon, a member of the minority party, demanded a vote on the Journal . Later, in debate, he stated that his party had called the Journal vote, as well as record votes on five noncontroversial items, due to leadership's restrictions on debate and amendments. He informed the Speaker: "We are not going to be pushed around by dictatorial policies of the Democrat leadership.... You are going to treat us fair, or else." Under House Rule XX, House Members may object to the results of a voice vote by noting the absence of a quorum. This objection may trigger a subsequent record vote, which in addition to deciding the question, verifies the existence of a quorum. Thus, a Member may initiate a Journal -approval vote in order to ascertain the presence of a quorum. In 1985, Representative Robert Walker contended that the changes to quorum procedures in Rule XX led to an increase in Journal -approval votes. In defense of his own call for a vote, he said: The fact is that the reason why people get Journal votes is to find out who is here and whether or not there are enough people here to do business. The reason we have got to resort to that is because some years ago in their wisdom the Democratic Party decided that we would no longer have quorum calls, that we would no longer have a process around here by which we could get a quorum at the beginning of the day to find out who was here.... So the one way that you have early in the day to find out whether or not there are enough Members in town to even do business here is to get a vote on the Journal. The act of assessing a quorum is related to another use of Journal -approval votes: to assemble Members prior to a major vote or leadership announcement. Indeed, when Walker defended himself in 1985, he stated the reason he had called an earlier Journal vote: That was on the day that we were going to have a very, very important vote from our side of the aisle which our leadership was very interested in ... and my leadership did ask me that day to make certain that we got a vote on the Journal, which I was glad to do.... I think it was fully justified to try to establish whether or not there was a quorum here and just who was here, given the fact that my leadership was going to come to the floor. Political scientist John W. Patty tested the "gathering Members" premise in a study examining record votes from 1991 to 2002 (102 nd -107 th Congresses). He found that on days that the House voted to agree to the Speaker's approval of the Journal , the chamber was more likely to vote on major legislation and that such votes were "more likely to be close and more likely to be party-line votes than those recorded on other days." According to Patty, leaders from both parties may prompt their Members to call Journal -approval votes in advance of high-priority measures. By doing so, Patty argues, they "block off" a voting period and "signal" the importance of the votes to come. Once the Members are on the floor, bill managers can "count heads, poll the rank and file, and potentially influence members' votes." Party leaders also use a Journal -approval vote to assemble Members before an announcement or presentation. For instance, in 1999, a majority-party Member initiated an immediate record vote on the Journal . Minutes later, the House swore in a new Member, and Representative Bob Livingston gave his farewell remarks to Congress. Members may vote against Journal -approval votes in order to demonstrate their independence from leadership. Journal -approval votes, in particular, provide ample opportunities for Members to vote in opposition to most of their fellow partisans without harming their parties' policy agendas. Several associations, research groups and media outlets rate Members by their positions on record votes. When Members vote contrary to their party, they decrease their party unity scores--a potential benefit to Members from competitive or moderate districts. However, some organizations, such as Congressional Quarterly , have begun to omit the results of procedural votes, including Journal -approval votes, from their ranking criteria in order to produce voting scores that are more relevant to constituent interests. From 1991 through 2016, there were 472 Journal -approval record votes (2.8% of the total number of record votes). In a single Congress, the number has ranged from a low of eight in the 109 th Congress (2005-2006) to a high of 77 in the 103 rd Congress (1993-1994), with the average number of votes being 36. During the 35-year period, a Member of the party in power initiated 52.5% of all Journal record votes, showing that approval votes were requested in roughly equal amounts by members of the majority and minority ( Table 1 ). J our nal voting and procedural trends that extend over several Congresses are considered below. Perhaps the most significant trend is the increased postponement of record Journal votes ( Table 2 ). These postponed votes are now frequently triggered by demands for yeas and nays, in addition to quorum points of order. In 1983 (98 th Congress), the House amended what is now Rule XX, clause 8, to allow the Speaker to postpone Journal votes until later in the same legislative day. However, Speakers (or their designees) continued to hold more immediate votes than postponed votes until the 104 th Congress (1995-1996). In the 108 th Congress (2003-2004), there was one immediate record vote. The 111 th Congress (2009-2010) also featured one immediate vote. All other Journal -approval record votes since the 108 th Congress have been postponed until later in the legislative day ( Table 2 ). In current practice, the Speaker is likely to postpone and group Journal votes with other record votes. The voting window is typically announced in advance, minimizing scheduling conflicts with Members and committees. Between the 102 nd and the 105 th Congresses (1991-1998), all Journal -approval record votes were triggered by a Member noting the absence of a quorum after a voice vote. Under this still-common procedure, the Speaker responds with either an immediate record vote to confirm the presence of a quorum or instead postpones the question until later in the legislative day, at which point the question is considered de novo (as if new), and a record vote may or may not be requested following a voice vote. As of the 106 th Congress (1999-2000), Members began initiating some Journal votes by demanding the yeas and nays. This demand guarantees a record vote within the legislative day provided that the demand has the support of one-fifth of the Members present. When a quorum point of order was the initial triggering method, a record vote immediately followed in 40% of the occurrences. In contrast, when the initial method was a demand for the yeas and nays, the resulting vote was postponed in every instance. From 1991 to 2016, there were 396 record votes triggered by quorum points of order, compared to 76 votes triggered by a demand for the yeas and nays. However, from the 109 th through the 114 th Congresses (2005-2016), there were 72 yeas and nays initial requests compared to 62 quorum points of order, signifying an increase in the use of yeas and nays and a decrease in the point of order method to obtain a record vote. When a Member objects to an initial voice vote on the Speaker's approval of the Journal , the Member may make a quorum point of order or demand the yeas and nays in an attempt to obtain a record vote. The quorum method requires no additional support on the floor at the time of the request. This is helpful for Members who have not enlisted fellow supporters prior to calling for a vote on the Speaker's approval. Making a successful quorum point of order ensures that the Journal 's approval will be considered again (immediately or at a later time) within the legislative day. The yeas and nays method is useful when a Member desires a guaranteed record vote later in the day--so long as the demand receives sufficient support for a second. If the yeas and nays are ordered, the demand locks in a vote period, which is likely to include important votes on issues not connected to the Journal .

The Journal of the House of Representatives is the official record of the chamber's legislative actions. The Journal's contents include the titles of introduced legislation, the results of votes, presidential veto messages, and any other matters the House deems to be official proceedings. Unlike the Congressional Record, it is not a transcript of debate. Rather, the Journal is a listing of House actions without the debate accompanying those actions. The Constitution mandates that each House keep a journal of its proceedings (Art. 1, SS5). The Constitution, House rules and practices, and, to a lesser extent, statutes direct which proceedings must be recorded. The Journal is public, enabling citizens to follow House actions, excepting those that require secrecy, such as matters of national security. Under House rules, the Speaker announces his or her approval of the Journal at the start of each legislative day. In current practice, approval is automatic unless a Member demands a vote. If that occurs, the Speaker then holds or postpones a voice or record vote to agree to the approval of the Journal. Members may call for a vote, or vote against the Journal's approval, in order to pursue changes to the Journal or for strategic reasons unrelated to the Journal's contents. For instance, Members may use votes to ascertain the presence of Members, delay proceedings, protest an action, assemble Members prior to a vote or announcement, or establish independence from leadership. If the vote to approve the Journal fails, the Journal may be subject to amendment. In the period examined (1990-2016), no record vote on approval of the Journal has failed. However, in 1990, a voice vote failed, allowing a Member to offer an amendment, which was approved. This report considers the origin and purpose of the Journal as well as the procedures related to its approval. It discusses why a Member might call for a vote and why a Member might vote against the Journal's approval. The report also examines record approval votes from 1991 to 2016 (102nd-114th Congresses), addressing trends in the frequency of these votes, the percentage of votes initiated by majority party Members, and the procedures used to call for or postpone record votes.

The Antiquities Act of 1906 (54 U.S.C. SSSS320301-320303) authorizes the President to proclaim national monuments on federal lands that contain "historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest." Monument proclamations typically seek to provide protections to federal lands and resources. The President is to reserve "the smallest area compatible with the proper care and management of the objects to be protected." The act does not further specify the process to be used by Presidents in proclaiming monuments. From 1906 to the date of this report, Presidents have established 157 monuments and have enlarged, diminished, or otherwise modified previously proclaimed monuments. In 2017, the Trump Administration engaged in a review of certain national monuments proclaimed by Presidents under the Antiquities Act since 1996. Presidential establishment and modification of national monuments has sometimes been contentious, and litigation and legislation have been pursued. Criticism has centered on the size of the areas and the types of resources protected; the effect of monument designations on land uses; the inclusion of nonfederal lands within monument boundaries; and the lack of requirements for public participation, congressional and state approval, and environmental reviews in the Antiquities Act, among other issues. Monument advocates believe the President needs authority to act promptly to protect valuable resources. They assert that the public has supported and courts have upheld presidential designations and that many initially controversial designations have come to be widely supported. Congress continues to face a variety of issues related to national monuments. Whether to establish, amend, or abolish national monuments is of current interest. Congress has broad authority to take these actions, and has created national monuments on federal lands and has increased and decreased monument sizes on numerous occasions. In establishing and amending national monuments, questions for Congress include the optimal size of the areas to be protected and the extent to which various land uses and activities will be allowed, barred, or restricted. In the past, Congress, but not the President, has abolished some monuments and converted others to different protective designations, such as national parks. Whether the President has authority to abolish national monuments is debated and has not been tested in courts. Congress also oversees presidential exercise of authority to proclaim monuments and has considered measures to alter this authority. Controversy over presidential monument designations is one component of a broader debate over federal land ownership and management. Discontent over federal land management has sometimes led to conflict, as in the 2016 takeover of the Malheur National Wildlife Refuge in Oregon. A central issue in this debate is the extent to which the federal government should dispose of, retain, or acquire lands. Some stakeholders seek disposal to foster state and local ownership and control over federal lands and resources, especially in the West, where federal lands are concentrated. Advocates of federal land retention and acquisition point to benefits of federal ownership, including protection of resources and public access for recreation. Another focus is the condition of federal lands and infrastructure. Debates also encompass the extent to which federal lands should be developed and/or open to recreation and whether they should be managed primarily to produce local or national benefits. On April 26, 2017, President Trump issued an executive order requiring the Secretary of the Interior to review national monuments established or expanded by Presidents since 1996. The order required review of national monuments where the size at establishment or after expansion exceeded 100,000 acres or where the Secretary determined that the action was taken "without adequate public outreach and coordination with relevant stakeholders." With regard to monument size, the Antiquities Act requires the President to reserve "the smallest area compatible with the proper care and management of the objects to be protected," as noted. The act does not specifically require public outreach and coordination in monument designations. The executive order set out a policy with regard to monument designation, including that designations are made "in accordance with the requirements and original objectives" of the Antiquities Act and "appropriately balance the protection of landmarks, structures, and objects against the appropriate use of Federal lands and the effects on surrounding lands and communities." The review was to determine if the establishment or expansion of post-1996 monuments conformed to the policy in the executive order and to develop any recommendation for presidential actions, legislative proposals, or other actions to carry out the policy. Factors for the Interior Secretary to evaluate in his review were specified in the executive order. They included the requirements and objectives of the Antiquities Act, including that designations be confined to "the smallest area compatible with the proper care and management of the objects to be protected"; whether designated lands are "appropriately classified" as historic landmarks, historic and prehistoric structures, or other objects of historic or scientific interest; the effect of monument designation on uses of federal and nonfederal lands inside and outside of the monument boundaries; concerns of affected state, tribal, and local governments; availability of federal resources to manage designated areas; and other factors determined by the Secretary. The executive order required the Secretary to provide an interim report to the President, within 45 days of the executive order's issuance, on Bears Ears National Monument in Utah and other monuments the Secretary determined appropriate. A final report on the secretarial review of monuments was due within 120 days of the issuance of the executive order--August 24, 2017. These reports were to include recommendations for presidential actions, legislative proposals, or other actions, as noted. Most of the post-1996 monuments are managed by agencies within the Department of the Interior (DOI), but some are managed by other agencies (e.g., the Forest Service, in the Department of Agriculture), as shown in Table 1 . The executive order called for the Interior Secretary to consult and coordinate with heads of other federal departments; state governors; and other state, local, and tribal officials. Since 1996, Presidents Clinton, George W. Bush, and Obama have issued 64 monument-related proclamations. Of these, 54 proclamations established monuments (about one-third of all presidentially proclaimed monuments) and 8 proclamations expanded monuments. The remaining two proclamations had other purposes. The total area of the designations and expansions is approximately 774.1 million acres, or about 92% of all monument acreage proclaimed since enactment of the Antiquities Act, as shown in Table 3 . Most of this acreage--762.6 million (98.5%)--is in marine areas designated or expanded by Presidents Bush and Obama, with the remaining 11.5 million acres (1.5%) in terrestrial areas. Of the monuments established and expanded since 1996, it appears that Presidents have established or expanded 26 national monuments exceeding 100,000 acres. These monuments are in 10 states and 4 marine areas. In a May 5, 2017, press release, DOI identified 27 national monuments that would be reviewed under the President's executive order (see Table 1 ). One of the 27 monuments, Katahdin Woods and Waters National Monument, was reviewed based on the adequacy of public outreach and coordination with stakeholders in establishing the monument. The other 26 monuments were reviewed because the size at establishment or after expansion exceeded 100,000 acres. Five of the 27 monuments are marine based, and the Secretary of Commerce was to take the lead in reviewing these monuments. Twenty-two of the 27 monuments are land based, and the Secretary of the Interior led their review. On monuments under review, the Administration sought public comment from May 11, 2017, through July 10, 2017. A total of 2,839,046 comments were received. In summarizing the comments, the Interior Secretary stated that comments "were overwhelmingly in favor of maintaining existing monuments." According to the Secretary, commenters favored monument designations for their economic benefits from increased tourism and to prevent the sale of federal land. By contrast, other commenters supported abolishing or modifying monument designations to allow for a broader array of activities on the lands, among other reasons. The Secretary also held meetings at several monuments in different states to receive input from stakeholders, including elected officials and interest groups. On June 10, 2017, the Secretary of the Interior issued an interim report focused only on Bears Ears National Monument. In the interim report, the Secretary stated that the designation of Bears Ears National Monument "does not fully conform with the policies" set out in the executive order. According to the Secretary, the monument size was not the "smallest area compatible" with care of the objects requiring protection. The Secretary further asserted that some areas within the monument have other congressional or administrative designations, making "unnecessary" their protection under the Antiquities Act; some monument lands would be better managed as other types of designations, such as national recreation areas; some management provisions are too restrictive; and tribes do not have an "adequate role" in managing the monument. The Secretary made several interim recommendations, such as revising the monument boundary. However, he recommended that DOI conclude the full review of monuments before making more specific recommendations for Bears Ears. The final report contained more extensive recommendations on Bears Ears, and these recommendations are discussed below (under " Recommendations in Final Report ") and shown in Table 2 . Before the issuance of the final report, the Secretary of the Interior concluded the review of six monuments: Craters of the Moon, Hanford Reach, Upper Missouri River Breaks, Grand Canyon-Parashant, Canyons of the Ancients, and Sand to Snow. In press releases issued between July 13, 2017, and August 16, 2017, the Secretary stated that no changes were being recommended to these areas. On August 24, 2017, the Secretary of the Interior sent to the President a final report on monuments reviewed, which included recommendations. The document was not publicly released. Instead, the Administration provided to the public a two-page summary of the report. A version of the Secretary's full report, marked "Draft Deliberative--Not for Distribution," subsequently became available to the public through the media. In the final report, Interior Secretary Ryan Zinke stated that each of the reviewed monuments is unique, and that some monuments are currently supported strongly by the local communities. However, some monument designations remain controversial for a variety of reasons, according to the Secretary. Among the controversial aspects of proclaimed monuments, the final report cited the size of the areas, types of objects protected, effect on land uses, extent of public access, sufficiency of public consultation, adequacy of protection of resources, inclusion of private lands within monument boundaries, and "overlap" with other federal land designations. In the final report to the President, the Interior Secretary made individual recommendations for 10 of the 27 monuments that were reviewed. (See Table 2 .) According to the Secretary, these recommendations were made with the concurrence of the Secretary of Agriculture and the Secretary of Commerce. Some Members and stakeholders supported the recommendations, whereas other lawmakers and stakeholders opposed them. The recommendations included amending monument proclamations regarding protection and management of resources, and, for some areas, revising monument boundaries. The Secretary of the Interior called for these changes to be made "through the use of appropriate authority, including lawful exercise of the President's discretion granted by the [Antiquities] Act." Congress has authority to modify management of lands within, and boundaries of, monuments established by presidential proclamation under the Antiquities Act. The Secretary did not fully detail the changes to be made to monument proclamations or identify the precise locations and sizes of the boundary alterations. Rather, the final report provided that "[r]ecommendations for specific monument modifications reflecting the above considerations will be submitted separately from this Final Report should you concur with my recommendations." The number of recommendations per monument ranged from one recommendation for each of three marine monuments (Northeast Canyons and Seamounts, Pacific Remote Islands, and Rose Atoll), to six recommendations for each of two monuments (Bears Ears and Organ Mountains-Desert Peaks). The most common recommendation was to amend the proclamations for specified purposes. For 8 of the 10 monuments, the Secretary recommended amending the proclamations, whereas for the other 2 monuments--Pacific Remote Islands Marine and Rose Atoll Marine--the Secretary recommended either amending the proclamations or making boundary revisions. Six of the 10 proclamations would be amended for several purposes, namely "to protect objects and prioritize public access; infrastructure upgrades, repair, and maintenance; traditional use; tribal cultural use; and hunting and fishing rights." The six monuments are Bears Ears, Cascade Siskiyou, Gold Butte, Grand Staircase-Escalante, Organ Mountains-Desert Peaks, and Rio Grande del Norte. For these six monuments, as well as Katahdin Woods and Waters, the Secretary recommended similar changes to agency management plans or development of plans with these emphases. The other four proclamations would be amended for a primary purpose, either regarding commercial fishing for certain marine monuments (Northeast Canyons and Seamounts, Pacific Remote Islands, and Rose Atoll) or active timber management for Katahdin Woods and Waters. Boundary changes were proposed for four national monuments: Bears Ears, Cascade-Siskiyou, Gold Butte, and Grand Staircase-Escalante. As mentioned, for two additional monuments--Pacific Remote Islands Marine and Rose Atoll Marine--the Secretary recommended either amending the proclamations or making boundary revisions. For all but Grand Staircase-Escalante, the Secretary specified the purposes of the boundary changes, and these purposes differed among the monuments. In the case of Bears Ears, the boundaries would be revised "to protect objects and ensure the size is conducive to [their] effective protection." The Gold Butte boundary change would "protect historic water rights." The Cascade-Siskiyou revision pertained to allowing sustained timber yield and reducing impacts on private lands, whereas the Pacific Remote Islands Marine and Rose Atoll Marine boundary adjustments related to allowing commercial fishing. The final report contained other recommendations for the 10 monuments, some of which recommend additional authority or other action from Congress. As shown in Table 2 , the Secretary recommended that DOI and Congress work together "to secure funding for adequate infrastructure and management needed to protect objects effectively," for six monuments; the President request authority from Congress to enable tribal comanagement of cultural areas, for four monuments; Congress "make more appropriate conservation designations, such as national recreation areas or national conservation areas," for Bears Ears; and DOI work with the Department of Homeland Security to assess risks to border safety in a specified area, and with the Department of Defense to assess risks to operational readiness of nearby military installations, for Organ Mountains-Desert Peaks. In addition to the recommendations for the 10 areas, the final report contained broader proposals. They included changes to the monument designation process to establish standards for public input and processes and to include "clear criteria for designations and methodology for meeting conservation and protection goals." According to the Secretary, these changes to the monument designation process could be made through "legislation, regulations, or internal guidance within the Executive Branch, such as an Executive Order or a Secretary's Order." The Secretary asserted that the Antiquities Act has been used many times for the "proper stewardship of objects of cultural, historic, or scientific interest." He further noted that some additional areas suggested by stakeholders "merit protection and designation" through the Antiquities Act. The final report identified these areas as Camp Nelson in Kentucky, the Medgar Evers Home in Mississippi, and the Badger-Two Medicine area in Montana. The Secretary recommended that these three areas be evaluated for national monument designation. The Secretary recommended that the President ask Congress to take certain actions. They included clarifying the limits of executive authority under the Antiquities Act and the intent of Congress regarding land use in monument areas containing other protective designations. According to the Secretary, DOI has sometimes been too restrictive in implementing monument management plans for protection of monument objects, so as "to impede allowable uses" on monument lands. DOI will review monument management plans and update them as needed to address this issue, according to the final report. Since the enactment of the Antiquities Act in 1906, Presidents have issued 259 proclamations to establish new monuments and to modify national monuments established by earlier presidential proclamation. Such modifications have included enlargement or diminishment of monument boundaries and other changes, as shown in Table 3 . Secretary Zinke's final report does not specifically recommend monument enlargements, and has been generally interpreted as likely recommending reductions instead. Nevertheless, it is worth noting that in the past, Presidents have expanded existing monuments on 76 occasions, as shown in Table 3 . These enlargements were made over the past century, with the first in 1909 and the last in 2017. They were of widely varying acreages and percentages of the sizes of the original monuments. The biggest acreage expansion occurred in 2016, when President Obama enlarged the Papahanaumokuakea Marine National Monument by 283.4 million acres, more than quadrupling the size of the monument to approximately 373 million acres. The largest expansion of a terrestrial monument occurred in 1931, when President Hoover expanded the Katmai National Monument by 1,609,600 acres, a 148% increase over the 1,088,000 acreage at establishment. By contrast, in 1958, President Eisenhower proclaimed the smallest acreage expansion, by adding 0.15 acres to the Tumacacori National Monument. Some monuments have been expanded multiple times. For instance, four different Presidents enlarged the Muir Woods National Monument following its establishment in 1908. Past Presidents also have diminished national monuments, although less frequently than they have expanded them. Specifically, Presidents reduced monuments on 12 occasions, with the first such action occurring in 1911 and the most recent in 1960. The diminishments varied widely in terms of acreages and percentages of the original monument sizes. Acreage reductions ranged from 52 acres, in 1941 for the Wupatki National Monument, to 313,280 acres, in 1915 for the Mount Olympus National Monument, as shown in Table 4 . Percentage reductions varied from 0.03%, in 1912 for the Mount Olympus National Monument, to 89%, in 1912 for the Navajo National Monument. Some monuments have been reduced multiple times. Three different Presidents diminished Mount Olympus National Monument following its establishment in 1909, for example. The final report does not make clear whether the Secretary proposed boundary changes that would both remove areas from one part of a monument while adding acreage to another area of the monument. Since enactment of the Antiquities Act, six presidential proclamations have both enlarged and diminished national monuments, as shown in Table 5 . These proclamations all were issued between 1956 and 1963. They typically added acreage to one area of a monument and removed acreage from another portion of the monument. Of the six proclamations, four removed more land than was added, thus reducing the size overall; one added more land than was removed, for a net gain in land; and one added and removed the same number of acres, resulting in no change in size. The six proclamations reflected varying percentages of change to the original monument sizes, ranging from -20% to +179%. Presidential changes to monument sizes have sometimes occurred after congressional enactment of revisions to monument boundaries/sizes, and have included both enlargement and diminishment of monuments. The Craters of the Moon National Monument, established by presidential proclamation in 1924, offers two examples. In the first example, following congressional removal of areas from the monument in 1936, President Franklin D. Roosevelt further diminished the monument (1941), and then President Kennedy enlarged it (1962). In the second example, following congressional revision in 1996 in the form of enlargement of some areas of the monument and diminishment of others, President Clinton enlarged the monument in 2000. The Pinnacles National Monument provides a third example. In 1976, Congress added areas to the monument; in 2000, President Clinton further enlarged the monument. The final report did not recommend the abolition of any national monuments. The Antiquities Act does not expressly authorize a President to abolish a national monument established by an earlier presidential proclamation, and no President has done so. There have been no court cases deciding the issue of the authority of the President to abolish a national monument. The final report recommends amending monument proclamations regarding resource management. On eight occasions, between 1911 and 2007, Presidents have issued proclamations whose primary purpose was other than to enlarge or diminish monument size, as shown in Table 6 . Two of the eight proclamations appear to pertain to resource management. In 1936, President Franklin D. Roosevelt modified the Katmai National Monument to make the reservations in the earlier proclamations subject to valid existing rights, since maintained. In 2007, President George W. Bush amended the Papahanaumokuakea Marine National Monument regarding conditions for issuing permits for Native Hawaiian practices, as well as to change the name (from Northwestern Hawaiian Islands Marine National Monument). Another two of the eight proclamations, for Great Sand Dunes and Buck Island Reef, revised the descriptions of the areas included in the monuments. The Great Sand Dunes revision followed a resurvey, and the Buck Island revision sought to correct an error. The remaining four proclamations essentially affirmed the monument boundaries. The final report recommended that three areas be evaluated for national monument designation. Since the enactment of the Antiquities Act in 1906, Presidents have established 157 national monuments. Congress, too, has created national monuments on federal lands on numerous occasions under its constitutional authority to enact legislation regarding federal lands. This authority is not defined or limited by the provisions of the Antiquities Act. For instance, Congress could enact legislation providing more land uses than are typical for national monuments created by the President, such as allowing new commercial development, or could choose to provide additional protections. Congress also has modified monuments (including those created by the President)--for instance, by changing their boundaries. Congress has abolished some monuments outright and converted others into different protective designations, such as national parks. Approximately half of the current national parks were first designated as national monuments, for instance.

The Antiquities Act of 1906 (54 U.S.C. SSSS320301-320303) authorizes the President to proclaim national monuments on federal lands that contain "historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest." Monument proclamations typically seek to provide protections to federal lands and resources. The President is to reserve "the smallest area compatible with the proper care and management of the objects to be protected." The act does not further specify the process to be used by Presidents in proclaiming monuments. From 1906 to date, Presidents have established 157 monuments and have also enlarged, diminished, or otherwise modified previously proclaimed monuments through a total of 259 proclamations. Presidential establishment and modification of national monuments has sometimes been contentious, and litigation and legislation have been pursued. Criticism has centered on the size of the areas and types of resources protected; effect of monument designations on land uses; inclusion of nonfederal lands within monument boundaries; and extent of public consultation. Monument advocates believe the President needs authority to act promptly to protect valuable resources. They assert that the public has supported and courts have upheld presidential designations and that many initially controversial designations have come to be supported. In 2017, the Trump Administration reviewed certain national monuments proclaimed by previous Presidents. The effort began on April 26, 2017, with an executive order requiring the Secretary of the Interior to review national monuments established or expanded by Presidents since 1996. The order required review of national monuments where the size at establishment or after expansion exceeded 100,000 acres or where the Secretary determined that the action was taken "without adequate public outreach and coordination with relevant stakeholders." The Antiquities Act does not specifically require public outreach and coordination in monument designations. The review was to determine if the establishment or expansion of post-1996 monuments conformed to a policy set out in the executive order and to develop any recommendation for presidential actions, legislative proposals, or other actions to carry out the policy. The executive order called for interim and final reports on the monuments under review, within specified time periods. The Department of the Interior (DOI) reviewed a total of 27 monuments, one based on the adequacy of consultation and the others based on their size. During the review, the Administration received 2,839,046 comments from the public and visited several monument areas to receive public input. On August 24, 2017, the Secretary submitted to the President a final report on all 27 monuments reviewed. The report, marked "draft," was made public by the news media. It contained recommendations for 10 of the 27 monuments, with between one and six recommendations per monument. The types of recommendations varied. They included amending monument proclamations for specified purposes, changing monument boundaries, agency revision of monument management plans, and seeking authority from Congress for tribal comanagement of cultural areas. The report also contained broader recommendations, including changing the monument designation process, establishing new monuments, and seeking congressional clarification of the limits on executive authority under the Antiquities Act and the intent of Congress regarding land uses of monument areas with other protective designations. Congress continues to face a variety of national monument issues. Congress has broad authority to establish, amend, or abolish national monuments and has done so on numerous occasions, including amending and redesignating monuments proclaimed by Presidents. Congress also oversees presidential exercise of authority to proclaim monuments and has considered measures to alter this authority.

From postal mail to social media, Members of Congress have regularly adopted and utilized new communications tools to better inform constituents about the workings of Congress and important policy matters. Some of these communications advancements also facilitate better information within Congress as it un dertakes its legislative work. By the mid-20 th century, radio and television broadcasts offered Congress the ability, for the first time, to provide real-time information about events unfolding on the chamber floors or in committees. The idea of offering live video broadcasts initially appealed to some, but others had reservations about the potential effects of broadcasting on congressional behavior. Technical challenges also existed, including setting up the necessary lights, microphones, cameras, and other equipment and making arrangements with media outlets for broadcast coverage. Although the House and Senate experimented with television broadcasts as early as 1948, regular coverage of the House floor began in 1977 and regular coverage of the Senate floor began in 1986. Many people are familiar with congressional video because it is continually broadcast on the privately operated, nonprofit Cable-Satellite Public Affairs Network (C-SPAN). One C-SPAN channel was created for House proceedings in 1979, another for Senate proceedings in 1986, and a third for additional congressional or public affairs programming in 2001. C-SPAN operates independently from Congress--it receives no financial support from the House or Senate, and it does not have any contractual agreement with either chamber. The House and Senate separately administer their video feeds, and each chamber maintains exclusive control over its videos. Congressionally produced video feeds are available for free to any accredited news organization. Committees in each chamber often allow video coverage of public hearings or other proceedings, and have discretion to adopt additional rules to govern video coverage, which can include allowing media outlets to film using their own cameras. Beginning in 2011 and 2012, respectively, the House and Senate began streaming their floor video feeds directly to the public over the Internet, in addition to allowing C-SPAN and other media outlets to rebroadcast their video feeds. Most committees also provide Internet video broadcasts of their open proceedings. Additional technological advancements in recent years, like the ubiquity of smartphones with video cameras and the ability to broadcast over wireless networks, may challenge the ability of the House and Senate to maintain exclusive control over video coverage of their proceedings. This report begins with a brief history of early congressional experiences with television coverage and background on the decisions to allow regular committee and floor broadcasts. The next sections describe how video coverage is administered within Congress, discussing rules, regulations, and authorities affecting video recording and broadcasting for House committees, House floor proceedings, Senate committees, and Senate floor proceedings. A brief overview of C-SPAN's history, organization, and operating structure is then provided. The final sections of this report discuss some recent events related to congressional video and highlight some of the new challenges presented by smartphone and wireless broadcasting technologies. Prior to the 1979 House and 1986 Senate decisions to broadcast proceedings, television cameras rarely covered floor proceedings in either chamber. In 1947, the House allowed television cameras to broadcast portions of the opening session of the 80 th Congress, but no other regular sessions were broadcast over the next few decades. The State of the Union address was also first televised in 1947, an event that continued to be broadcast and was often the public's only televised glimpse inside the House chamber. The only video broadcast from the Senate floor prior to 1986 was the swearing-in ceremony of Vice President Nelson Rockefeller on December 19, 1974. Committee hearings, although not regularly televised, were more frequently broadcast than floor proceedings in this early period, at the discretion of individual committees. In spring 1948, the Senate Armed Services Committee became the first congressional committee to broadcast a hearing, and the House Un-American Activities Committee followed a few months later. In these instances, committees allowed camera operators from the television networks to attend and film the hearings. This practice was formalized in the Legislative Reorganization Act of 1970, which provided that House and Senate committees could, but were not required to, allow hearings to be filmed. Prior to this legislation, it was not universally agreed upon who exercised authority over committee broadcasts; some believed that television broadcasts fell under the authority of House committees to open and publicize their own hearings, but others believed the Speaker needed to grant the committees permission to broadcast. In 1974, the Joint Committee on Congressional Operations, a bicameral panel established by the 1970 act, expressed concern that the American public lacked information about how Congress worked. Noting that the President had successfully utilized radio and television to increase executive branch exposure and prestige, the joint committee considered a number of ways to improve congressional mass communications, including televised floor proceedings. Instead of relying upon broadcast networks to air portions of congressional coverage in newscasts or in lieu of other programming, new cable and satellite technologies offered Congress the possibility of its own designated channels that could provide all proceedings in their entirety. The joint committee recommended that the House and Senate provide radio and television coverage of their regular proceedings, but each chamber still needed to adopt the recommendation, establish broadcasting rules, and work out technical logistics and funding. House floor proceedings and many House committee proceedings are available as live or recorded video footage which may be used by media outlets, members of the public, and Congress itself. Regulations governing these videos are generally found in the Rules of the House of Representatives. Media outlets seeking access to House proceedings or House-provided video footage must be accredited by the House Radio and Television Correspondents' Gallery. Those approved may show portions of proceedings, as in part of a newscast, or show congressional proceedings in their entirety, as C-SPAN chooses to do. Committees may adopt additional rules that affect how videos of their hearings, meetings, or other proceedings are produced or used. The Speaker of the House has the ability to administer and direct video coverage of House floor proceedings, and often delegates some responsibilities to other House offices. For example, the House Recording Studio generally operates the video equipment to film the House floor and the Clerk of the House maintains the online video services provided by the House. Section 116(b) of the Legislative Reorganization Act of 1970 enabled House committees to allow photographic, radio, and television coverage of their proceedings. This legislation amended Rule XI of the House, outlining certain guidelines to preserve "acceptable standards of dignity, propriety, courtesy, and decorum," stating, for example, that audio and video recordings can only be used for educational or informational purposes and not for any partisan campaign purposes. Committee videos cannot be used to discredit or dishonor a Member, the committee, or the House, nor can videos be used to distort the purpose of the hearing. Rule XI also enables House committees to adopt individual rules to govern video coverage. Typically, television, radio, and photography coverage are permitted if a committee or subcommittee proceeding is open to the public. Some committees adopt more detailed rules, addressing, for example, the number of journalists allowed or where cameras must be positioned in a hearing room. Committee rooms may only be able to accommodate a certain number of cameras. In the past, news networks or C-SPAN often had to provide their own cameras for committee coverage, and some broadcast outlets may continue this practice. Today, many House committee websites broadcast videos of eligible proceedings live and provide archives of past videos. In recent years, the Internet and advancements in digital video equipment have enabled committees to create, broadcast, and archive videos more easily and inexpensively. Often, these videos are posted on YouTube, with the content embedded into the committee website. Alternatively, some committees simply provide a link to their YouTube page for video content. Although most House committees post their own videos online, they usually have not adopted formal committee rules that apply to Internet video broadcasting or archiving. By the 1970s, many House Members were interested in television as a means to better inform the public about the workings of Congress, yet others were concerned that cameras in the chamber might be distracting or cause disruptions. In addition to these concerns, the House faced a number of logistical matters related to video production and distribution. Ultimately, the House chose to control its own video production but rely on privately-operated television stations to distribute the content. This decision alleviated some concerns about the cost of televising the House, but others remained worried that the House's exclusive control of video coverage could lead the public to believe they only saw "a censored view of our activities." The Internet made it possible for the House to distribute video easily and inexpensively, and in 2011, the House chose to supplement its existing means for distributing videos by providing video access through its website. Following a preliminary closed-circuit video broadcasting test, the House adopted H.Res. 866 in October 1977. Under H.Res. 866 , the Speaker of the House set up a closed-circuit video system to show floor proceedings in locations throughout the Capitol and House office buildings. The Committee on Rules would study "all alternative methods" for providing video and audio coverage of the proceedings and provide recommendations by February 15, 1978, for how the House should proceed with video coverage. The Speaker would then devise a system for broadcasting, distribution to news organizations, and storage and preservation of recordings. Many of the provisions found in H.Res. 866 were incorporated in the Standing Rules of the House of Representatives at the start of the 96 th Congress (1979-1980) and continue to apply to House video coverage and its use by media outlets. For example, H.Res. 866 stipulated that video footage would be "complete, gavel-to-gavel, and unedited," and it would be made available to any news station, network, or correspondent accredited by the House Radio and Television Correspondents' Galleries. These provisions helped alleviate concerns that a House-controlled broadcast might be censored for political reasons or violate the rights of a free press. Additionally, House video footage can be used for news or public affairs programs, but it cannot be used for commercial or political purposes. The Rules Committee considered several options, including using a pool of broadcast network cameras, but ultimately recommended that the House operate its own television system. The Legislative Branch Appropriations Act for FY1979 stated that House funds could be used for broadcasting floor proceedings if the cameras were controlled and operated by House employees as part of the House Recording Studio. The first live broadcast from the House floor was a speech by Representative Al Gore on March 19, 1979. This, and some of the other early broadcasts from the House floor, aired on C-SPAN and on local public broadcasting. The commitment of C-SPAN to cover House floor proceedings in their entirety provided an opportunity for House broadcasts to continually reach interested audiences, avoiding the scheduling challenges and ratings pressures that other television networks often face. Under House Rule V, authority to administer, direct, and control the broadcasts of House floor proceedings remains with the Speaker of the House. Occasionally, the Speaker has issued directions modifying floor television coverage. For example, in 1984, the Speaker directed the Clerk of the House to provide a caption during special-order speeches to indicate that legislative business was complete for the day and to implement periodic wide-angle camera shots to show more of the chamber during these speeches. Similarly, in 2010, live Internet streaming of House floor video feed was launched as HouseLive under the direction of the Clerk of the House. HouseLive includes archived House videos dating back to 2009 and enables users to download audio or video recordings or embed clips on their own websites. Video broadcasts and recordings of Senate floor proceedings and many Senate committee proceedings are available to the media and the public. Broadcast media outlets seeking to use Senate-produced video or to transmit Senate proceedings must be accredited by the Senate Radio and Television Correspondents' Gallery. C-SPAN 2 has voluntarily committed to broadcast live Senate floor proceedings and other related programming. The Standing Rules of the Senate enable Senate committees to allow video coverage of their public proceedings, and committees may adopt additional rules to facilitate broadcasting or recording. Floor video coverage is authorized by a Senate resolution, subject to oversight by the Committee on Rules and Administration, and is operated by the Senate Recording and Photographic Studio. Throughout the 1950s and 1960s, some Senate committees decided to permit television and radio coverage of important hearings. Statutory authority for broadcasting Senate committee hearings was provided in Sections 116(a) and 242(a) of the Legislative Reorganization Act of 1970. Under this legislation, committee hearings that were open to the public could also be broadcast on radio and television, subject to additional rules adopted by the committees. This provision is also found in Rule XXVI of the Standing Rules of the Senate. Committees may adopt additional requirements or regulations regarding video coverage as part of their own committee rules. Beginning in the 110 th Congress (2007-2008), Rule XXVI required that Senate committee records for open proceedings, whether in video, audio, or written format, must be made publicly available on the Internet within 21 business days of the committee proceeding. All of the Senate standing committees in the 115 th Congress (2017-2018) embed videos of their public hearings on their websites, along with the written statements and testimony from witnesses. During the early 1980s, the Senate Rules and Administration Committee considered changing the Senate rules to allow for the broadcast of Senate floor proceedings. Some Senators were concerned about the impact television might have on the Senate, affecting its efficiency, traditions, institutional role, and public reputation. To address these concerns, many of the proposals to televise the Senate floor were accompanied by additional procedural rule changes. Some Senators, for example, thought that televised proceedings would make the Senate less efficient, speculating that their colleagues might employ vote-delaying tactics in order to be on television longer. Unlike the House, where the House Rules Committee could place limits on debate or amendments, the Senate traditionally engaged in more extensive discourse, and many Senators wanted to maintain this characteristic of the institution. Other Senators also believed the "burden of statesmanship" sometimes required them to make unpopular decisions, made on behalf of the nation at large and its longer-term interests. With immediate, comprehensive coverage of these decisions, they feared that the Senate's reputation, overall, could be damaged. The Senate agreed to S. Res. 28 on February 27, 1986, which initiated an approximately two month test period for radio and television broadcasts from the Senate floor, and instituted a few other Senate rules changes affecting floor proceedings and procedural requirements. One of the rule changes under S. Res. 28, for example, reduced the length of time a committee report needed to be available to all Senators prior to a measure's consideration from three to two calendar days. Another change reduced the time for consideration after cloture had been invoked from 100 hours to 30 hours. These procedural rule changes reflected the interests many Senators had in balancing the Senate's tradition of deliberation while enabling them to proceed with its work. To provide Senate floor video under S. Res. 28, the Architect of the Capitol, in consultation with the Sergeant at Arms and Doorkeeper of the Senate, would be responsible for setting up broadcast facilities, with any related contracts subject to approval by the Committee on Rules and Administration. After this initial set-up, the Sergeant at Arms and the Doorkeeper would be responsible for employing staff to operate and maintain the audio and video broadcasting equipment, in conjunction with the Senate Recording and Photographic Studios. Funding to produce the video feed would come from the contingent fund of the Senate. Video of Senate floor proceedings was available for public broadcast on June 2, 1986, following a month-long test within the closed-circuit network serving Capitol and Senate offices. The Senate provided video feed access to accredited members of the Senate Radio and Television Correspondents Gallery and to other news or educational entities authorized by the Committee on Rules and Administration. C-SPAN pledged to cover the Senate proceedings on a second channel, C-SPAN 2, but no formal agreement was made between the network and the Senate to govern this relationship. The Senate agreed to S.Res. 444 on July 15, 1986, which enabled video broadcasts to continue beyond the initial test period established by S.Res. 28 , covering Senate sessions, unless the Senate expressly voted on a resolution to end coverage. Many of the rules that govern Senate video broadcasting today remain the same and are found in the Standing Orders of the Senate. The Senate cameras film continuous, gavel-to-gavel video of floor proceedings, and the cameras typically follow the individuals who are speaking. During roll call votes, the camera pans to show the entire chamber. Recorded footage may be used in an informational or educational context, but not for political purposes. Video recording is administered by the Senate Recording Studio, under the direction of the Sergeant at Arms and the Committee on Rules and Administration. The Committee on Rules and Administration can make minor adjustments to rules or procedures that affect video broadcasts, but significant changes must be adopted via Senate resolution. Since January 2012, the Senate has provided live floor webcasts and has archived past videos on its website, in addition to allowing accredited media outlets like C-SPAN 2 to carry proceedings. Although the House and Senate each decided to produce video footage of their respective floor proceedings, neither chamber had the means to televise these proceedings to an audience beyond the Capitol complex's closed-circuit system. The Cable-Satellite Public Affairs Network, commonly known as C-SPAN, became the primary way most people would watch House and Senate proceedings. C-SPAN and its related channels are owned and operated by the National Cable Satellite Corporation, a private, nonprofit company. C-SPAN began as a television channel dedicated to carrying the live feed of the House of Representatives in March 1979. In the early 1970s, Brian Lamb, the founder of the station, sought to provide more comprehensive public affairs coverage on television and recognized the ability of cable and satellite technologies to provide such a service. At the same time, Members of Congress were considering ways to improve their communications with the public, which included proposals to televise floor proceedings. During 1977 and 1978, Lamb met with members of the House to discuss his plans for a cable network devoted to House proceedings. Although C-SPAN would become almost synonymous with congressional television in the following years, no formal contract or financial agreement has ever been made between the House or Senate and C-SPAN. The original funding for C-SPAN came from donations by individuals involved in the cable and satellite industries, and its operating expenses today come from license fees paid by cable operators. The House chose to own its video recording equipment, hire its own camera operators, and maintain its own video feed. C-SPAN operates an independent public affairs television network, voluntarily committed to continuously distributing the House video feed. When the Senate decided to televise its floor proceedings in 1986, C-SPAN 2 began to show gavel-to-gavel Senate floor proceedings under a voluntary commitment, similar to the way C-SPAN operates with the House. The Senate maintains control over its cameras and produces its own video feed, and C-SPAN 2 relies upon cable license fees to operate. A third network, C-SPAN 3, was created in 2001 to show additional programming, including congressional committee hearings, political events, and original programs on American history. C-SPAN subscribers can also stream the television stations online at http://www.cspan.org/ . In 1997, C-SPAN launched a radio station, available in the Washington, DC, area at 90.1 FM and nationwide via XM Satellite Radio subscription. C-SPAN and Congress generally have a cooperative and symbiotic working arrangement, but the separate administration of the network and the congressional video feed has occasionally created challenges. Video ownership and camera control are two areas where some concerns have arisen. C-SPAN often uses its own cameras to record committee hearings, and its footage is copyrighted by C-SPAN. Video feeds produced by the House and Senate, however, are provided free of charge to any accredited media outlet and are not copyrighted. In 1981, for example, the Speaker's Advisory Committee on Broadcasting wanted C-SPAN to provide its committee hearing coverage to the House free of charge. When C-SPAN would not make this footage available, the chair of the committee blocked C-SPAN from airing on televisions in the House cable system. More recently, in 2007, the Speaker of the House posted a video clip of a committee hearing from C-SPAN on a website and was issued a cease-and-desist notification. After this incident, C-SPAN revised its copyright policy to allow for noncommercial copying, sharing, or posting of C-SPAN videos online with attribution. C-SPAN has also sometimes requested permission to use its own cameras to cover floor proceedings, and these requests are regularly denied by the House and the Senate. C-SPAN provides public affairs programming, much like local networks or public broadcasting stations, but C-SPAN operates cable television channels, which has sometimes meant there are limits to its reach. Americans who do not pay for a cable subscription service, for example, do not have access to C-SPAN channels, nor can they watch C-SPAN live online. Moreover, cable companies are not required to include C-SPAN in their subscription packages, which can mean that certain channel lineups may not include any or all of the C-SPAN channels. In recent years, wireless networks, video-hosting websites, and the abundance of cell phone cameras have resulted in a new media environment where specialized equipment is no longer required to produce and distribute video to a wide public audience. These developments may present challenges for the House and Senate traditions of chamber-controlled video feeds. The House and Senate maintain rules that prohibit individuals from filming or broadcasting footage from within their chambers, but it may be difficult for the chambers to fully prevent the use of such technologies. On June 21-22, 2016, several Members used their smartphones and social media platforms to broadcast a sit-in that occurred on the House floor. When the House went into recess, the Speaker turned the floor cameras off, in accordance with the rules of the House. People outside of the House chamber, however, still watched the sit-in occur live, as some Members broadcast video from the floor via Facebook Live and Twitter's Periscope. With no official House video footage to rely upon, C-SPAN and other television networks broadcast the Members' videos. The sit-in highlighted some important contemporary considerations related to the video coverage of congressional floor proceedings. First, under the current rules, the House and Senate each maintain exclusive control over floor video coverage for their respective chambers; in the House, filming may be suspended at the discretion of the Speaker. Concerned that video coverage may be restricted arbitrarily, some believe that there should be an alternative means to provide real-time information about what is happening in Congress, like allowing credentialed press to record and broadcast their own footage. Others believe these types of changes would breach decorum. Similarly, current rules only provide for floor coverage when the House or Senate is in session. When the House and Senate are not in session, the chambers are usually empty and there is no activity to film, but the sit-in illustrated that a newsworthy event may occasionally occur on the floor while a chamber is in recess. Another issue raised by the sit-in is the use of cell phones or other wireless devices capable of recording and transmitting video within the House and Senate chambers. Cell phone videos present a challenge to the tradition of video controlled by the chambers themselves. Generally, cell phones are prohibited in the House and Senate--visitors may not bring them into the galleries, and Members, though allowed to bring their cell phones with them, often are not permitted to use them on the floor. In the House, under Rule XVII, clause 5, use of a mobile device that impairs decorum is prohibited, and no photography, audio recording, or video recording is allowed. Other language in Rule XVII, clause 5, however, may indicate that its provisions apply to keep order while the House is in session and conducting business. In the Senate, use of electronic devices is allowed only if the Senate Sergeant at Arms determines they are "necessary and proper" for official business and do not "distract, interrupt, or inconvenience the business or Members of the Senate." None of the Members involved in the June 2016 sit-in were cited with infractions of Rule XVII, clause 5, or any other House rule, although the Sergeant at Arms reportedly asked Members to stop taking photos and filming video from the floor during the sit-in. House leaders also reportedly discussed the possibility of disciplining sit-in participants. One resolution addressing House video broadcasts was introduced after the sit-in. H.Res. 804 , introduced on July 5, 2016, would have allowed "independent, non-government television cameras to broadcast House floor proceedings." The resolution proposed a change to House Rule V, clause 2(b), which states that television and radio broadcasters accredited by the House Radio and Television Correspondents' Gallery can access the House's live coverage feed. H.Res. 804 included language permitting these accredited press members "to record and broadcast at any time a Member is present on the floor," whether the House was in session or not. A "Dear Colleague" letter sent requesting support for the resolution referred to the lack of footage available from House video cameras during the sit-in on June 21-22, 2016, while the House was out of session. No further action was taken on this measure. H.Res. 5 , agreed to January 3, 2017, established rules for the House of Representatives in the 115 th Congress, which include financial penalties for House Members who disrupt decorum by taking photographs or for audio or video recording or broadcasting. Existing language in House Rule XVII, clause 5, prohibits the use of a mobile device on the House floor if it impairs decorum, and prohibits photography, audio recording, or video recording. Under H.Res. 5 , language was added to Rule II, clause 3, authorizing and directing the Sergeant at Arms to impose a fine against Members who use an electronic device in the House chamber for photographs, audio or video recordings, or broadcasts in violation of Rule XVII, clause 5. For a first-time offense, the rule established a fine of $500; for any subsequent violation, the fine is $2,500. Those charged fines could appeal, in writing, to the Ethics Committee within five legislative days or 30 calendar days of the charge, whichever is later. If the fine stands, the Ethics Committee notifies the Member in question, the Speaker, and the Chief Administrative Officer (CAO); the Speaker then notifies the House and the CAO deducts the amount of the fine from the Member's salary. In the debates on the rule change, supporters consistently argued that the measure would help preserve free speech by maintaining a floor environment in which legislative debate could occur without disruptive behavior. By reinforcing the role of the House floor as a forum for debate and business, not protest and demonstration, the rule change would help the House maintain legislative efficiency. Under Article I, Section 5, the House may determine its own rules and punish its own Members, and these punishments have occasionally included fines. The inclusion of a process for appeal before the Ethics Committee helped alleviate some concerns that penalties could be arbitrarily enforced for political purposes. Opponents of the rule change were more varied in their arguments against it. Some believed that under Article I, Section 5, punishments against a Member for disorderly behavior must be imposed by the full House, not delegated to an administrative officer or committee like the Sergeant at Arms or Ethics Committee. Other opponents argued that a penalty levied on floor behavior may violate the immunity for legislative acts granted to Members in the speech or debate clause from Article I, Section 6. Because the penalty itself is imposed as a salary garnishment, they argued that it may also violate another provision of that constitutional section, stating that changes to congressional compensation must be made through statute, not chamber rules. The House and Senate decided to provide video broadcasts of their proceedings after spending several years considering the impact cameras might have on policymaking and legislative behavior. Since the decisions were made to broadcast from the House and Senate, the cameras have operated with little controversy. Video broadcasts have become a common part of congressional life, valued for facilitating public information about Congress and information within Congress. This acceptance was illustrated when the chambers began their own Internet broadcasts, which expanded access to House and Senate video and was readily accepted as a necessary transition to help Congress adapt to a new informational environment. Congress has largely embraced video coverage, but the House and Senate have historically sought to retain control over the footage that is recorded and broadcast. Technological advancements have both enabled and hindered Congress's ability to retain this control. Limited television bandwidth and signal strength, for example, initially prevented the House and Senate from obtaining the unedited, gavel-to-gavel coverage they desired on existing networks. Cable and satellite technology made specialized, nationwide television stations, like C-SPAN, possible. The House and Senate initially sought the commitment of a network to ensure an audience for their broadcasts, and C-SPAN needed access to the video content exclusively provided by the House and the Senate. Congress and C-SPAN have maintained this partnership for many years, yet neither chamber has any formal agreement with C-SPAN to cover their proceedings, nor do they grant C-SPAN any special access. Today, the combination of cell phones or other pocket-sized cameras, wireless networks, and video broadcasting websites present new challenges to congressional video coverage controlled by the House and the Senate. Although the House and Senate typically discourage cell phone use within their chambers, their rules also recognize that Members may bring their devices with them to the floor for productivity and safety reasons. Widespread cell phone video could affect congressional decorum; however, when no official video coverage is available from the chambers, these alternative means of broadcasting might provide a way to keep the public informed about what is happening in Congress. As video footage becomes easier for anyone to produce and broadcast, the House and Senate may continue to address institutional rules regarding technology use and video coverage of their proceedings.

Video broadcasts of congressional proceedings enable constituents, policy professionals, and other interested individuals to see Congress at work, learn about specific Members, and follow the legislative process. Members of Congress have always considered communication with constituents an essential part of their representational duties. Members also often utilize new tools and technologies to reach and engage their constituents and colleagues. Background The Legislative Reorganization Act of 1970 first enabled congressional committees to broadcast their proceedings, if desired. Separate decisions were then made by the House and the Senate in 1977 and 1986, respectively, to provide audio and video broadcasts of chamber proceedings. Congressional video and audio feeds are operated by the House and Senate but are available for any credentialed press gallery member to broadcast. Many Americans are familiar with these feeds in video format, as the primary content on the privately operated, nonprofit Cable-Satellite Public Affairs Network (C-SPAN). C-SPAN launched a dedicated television channel for House proceedings in 1979 and another for Senate proceedings in 1986, and they continue to be key information resources for Congress and the public. Live broadcasts provided real-time information about Congress to anyone outside of the Capitol. Previously, only credentialed press or members of the public seated in the galleries could see floor proceedings as they occurred. In addition to augmenting the legislative information available to the public, these broadcasts arguably were also of value to Congress. Broadcasts diminished the need to wait for transcripts or a reporter's account of events. Members and congressional staff could follow a variety of live proceedings from their offices or elsewhere. Key Issues Technological advancements over the last decade have presented new considerations for congressional video broadcasting. The House and Senate video feeds and C-SPAN all originated in an era when television was the presumed source for video-based news, and the ability to record or transmit video required specialized equipment. As the Internet became an influential medium, the House, Senate, and C-SPAN each adjusted and began to provide online access to live video streams and past recordings. These online videos expand the potential reach of congressional video, as cable television subscriptions are no longer required to watch Congress in action. The House and Senate continue to maintain exclusive control over their video and audio feeds, whether they are broadcast on television, radio, or over the Internet. Yet technology now exists enabling anyone with a smartphone to produce and broadcast an online video. This creates a greater potential for unauthorized videos to be broadcast from the House and Senate chambers. Some believe that these videos may disrupt decorum in Congress, while others view them as an essential alternate means of distributing congressional information. In light of these new technological capabilities, the use and regulation of wireless devices or broadcasting from the chambers may be reexamined. New rules adopted by the House at the start of the 115th Congress, for example, enable the Sergeant at Arms to impose fines on Members who disrupt decorum by taking photographs, recording audio or video, or broadcasting using an electronic device.

Several temporary provisions affecting the taxation of capital income were adopted in the 2001-2003 period, and further changes may be considered. The 2001 tax cuts provides a phased-in reduction of individual tax rates (typically around three percentage points), which are scheduled to sunset in 2010. The 2002 tax provides bonus depreciation for equipment, allowing 30% of investment to be deducted immediately (with the remainder depreciated under standard rules). This bonus depreciation provision was enacted as a temporary stimulus applicable only to acquisitions before 2005. The bonus depreciation share was increased to 50% by the 2003 tax cut. This provision has now expired, but it might be considered for reinstatement if fundamental tax reform is considered. Temporary tax reductions on dividends and capital gains received by individuals were also adopted in 2003. The top capital gains tax rate was reduced from 20% to 15%, and dividends were also made eligible for these lower tax rates. The 2003 tax cut also accelerated some of the planned individual rate reductions in the 2001 tax cut. While bonus depreciation was explicitly enacted as a temporary provision to stimulate investment in the short run, proposals have been made for a further extension. The dividend and capital gains relief proposal was originally proposed by the President to be permanent, and its temporary status, like the temporary status of individual tax provisions, may be reconsidered. Individual rate reductions enacted in the 2001 tax cut, which were sunsetted, but accelerated in 2003, would affect tax burdens of unincorporated businesses directly and of all businesses indirectly through their effects on interest income. Congress also enacted general corporate tax cuts in a bill that terminated the extraterritorial income (ETI) provision of the tax law that has been found to be an illegal export subsidy by the World Trade Organization (WTO). The European Union, which brought the claim, is currently levying countervailing tariffs on U.S. goods imported into its member states if the tax provision remains. After a number of proposals were introduced, H.R. 4520 which phased out the ETI provision and introduced a deduction for manufacturing and certain other production activities. This tax revision also included a number of other provisions largely directed at business. A number of issues are associated with these tax provisions. Many of them were directed at short term fiscal stimulus. Indeed, bonus depreciation was expected to work more effectively because it was temporary, encouraging firms to invest earlier than they might otherwise have done to take advantage of a temporary tax benefit. However, a standard way of evaluating the effects of permanent tax changes that affect the returns to investment is to examine their effects on the allocation of capital. The method for examining this issue usually begins with measuring the effective tax rate on the returns to capital invested in different types of assets. In the absence of external effects or other "market failures," capital is allocated most efficiently when all returns are taxed in at the same rate and when financial choices are not influenced by the tax code. This report focuses on estimating the effects of these basic proposals on effective tax rate (or tax burden) on earnings, and comparing the resulting tax rates across asset types, organizational form (e.g. corporations versus unincorporated businesses), and source of finance. Effective tax rates presented in this report are estimated effective rates on income from prospective investments; they take into account the timing of deductions and the fact that a tax benefit received today is more valuable than a tax benefit received in the future because of the time value of money (i.e. money received today can be invested and yield more money in the future). (See appendix for a more detailed explanation.) These effective tax rates can differ substantially from average tax rates in the economy because the timing of deductions has a different (and in the long run, more powerful) effect on tax burdens on new investment than is reflected in average tax rate measures. Indeed, it is possible for effective tax rates on new investments to be negative, while average tax rates are positive. However, it is the effective tax rates on new investment that affect the allocation and size of the capital stock. Aside from the statutory tax rate, the main provision affecting the tax burden on new investment is how quickly the cost of the asset is recovered via depreciation deductions. When tax depreciation matches economic depreciation, the effect is to tax the return to capital (investment income) in each period and the effective tax rate is the statutory rate. The same effect occurs as long as the present discounted value of depreciation deductions are equal to the present discounted value of economic depreciation deductions. Two opposing forces can affect depreciation (and therefore effective tax rates). Because depreciation is based on historical acquisition cost, the real value of depreciation deductions is undermined by inflation. Thus, higher inflation means higher effective tax rates. This inflation effect, other things equal, raises the effective tax rate more for shorter lived investments than for longer lived ones. However, depreciation deductions are generally allowed more quickly than the rate that would be justified by economic decline and that tendency is particularly pronounced in the case of equipment, which increases the deductions value and leads to a lower effective tax rate. Most equipment assets, for example, have their costs deducted in five to seven years, although they last a much longer period of time. The Internal Revenue Code specifies that buildings are deducted over 39 years (although residential structures are deducted over 27.5 years). Tax rates can be measured in different ways. The tax rate at the corporate level on equity financed investment, which is calculated in the next section, shows the effects of depreciation rules across assets types (e.g., computing equipment, buildings). Effective corporate tax rates can also be measured as the total tax at both the corporate and personal level, which also reflects the deductibility of interest by corporations and the imposition of individual income taxes on interest, dividends, and capital gains. This measure indicates the change in the total burden on corporate investment. It can also be compared with tax rates on noncorporate investment to measure the differential between the total tax on investment in the corporate and noncorporate sectors, as well as federal income taxes on owner-occupied housing (which tend to be around zero). Tax rates can also be separated into total rates on debt financed and equity financed investment, to examine the degree of distortion that favors debt finance. Tax rates also affect the dividend payout choice, arising from differential treatment of retained earnings (which give rise to capital gains) and dividends. Finally, the overall tax rate in the economy, which requires weighting by asset type, can affect savings decisions. One of the objectives of the Tax Reform Act of 1986 was to tax the earnings from different types of capital investment more evenly than had been the case in the past. Before 1986, with the statutory corporate income tax rate at 46%, effective tax rates on earnings (taking into account depreciation and statutory tax rates but not debt finance) were less than 10% for most equipment assets, while they were about 35% to 40% for buildings. After the 1986 act, the statutory rate was reduced to 34%, but depreciation was altered and the investment tax credit repealed. As a result, equipment tax rates were only slightly below the statutory rate (about 32%) and buildings slightly above it (still about 35% to 40%). (Oil and gas structural investments, which include investment in the acquisition of reserves, though purchase or lease, and exploration and intangible drilling costs continued their favorable historical treatment.) The rationale for equal taxation is straightforward. Private markets will allocate investment to different types of capital to produce the highest after-tax returns. Absent external effects, these private market choices will lead to the most productive capital stock only if returns to assets are taxed at the same rates; in that case, the pretax or social rates of return will be equal across investments and no increase can be achieved by shifting investment from one type to another. In the ensuing 17 years since the passage of the 1986 act, tax legislation and economic effects have re-introduced a significant difference between tax burdens on earnings from investments in equipment and structures. This differential is increased by bonus depreciation which would further favor the allocation of capital to equipment. (A temporary subsidy should not have lasting effects on the allocation of capital, so this argument applies only to making bonus depreciation permanent.) Legislative changes increased effective tax rates, especially for buildings. In 1993, the top corporate tax rate was increased by one percentage point, a relatively neutral change that raised most tax rates by approximately one percentage point. The 1993 legislation also, however, increased the useful life for non-residential buildings (commercial structures and some industrial structures) from 31.5 years to 39 years. Although this change was large in terms of the write-off period, its effect on effective tax rates on earnings from the affected assets was relatively small, raising the tax rates of these assets by another percentage point. Tax rates on earnings for all assets fell, however, because of the decline in inflation, which now averages around 2% but was projected to be around 5% in 1986. The fall in inflation rate reduces the effective tax rate on the return to short lived assets much more than on long lived assets, and thus favors equipment. Thus, while the corporate rate increase was relatively neutral, the depreciation change penalized buildings, and the drop in inflation, while benefitting all assets, benefitted equipment and shorter lived assets the most. The resulting effective tax rates reflecting permanent depreciation rules are shown in the first column of effective tax rates in Tables 1 and 2. While buildings are taxed at rates slightly above the statutory rate, equipment is taxed at rates well below it. On average equipment effective tax rates are only 26%, or about three quarters of the statutory rate. Structures overall are taxed at 32% but that average reflects favorable treatment for mining, farm and public utility structures (the latter are generally treated as equipment in the tax law). Buildings are taxed at rates in excess of the statutory rate. Tables 1 and 2 also illustrate the effects of the various levels of bonus depreciation. The 30% bonus depreciation reduces effective tax rates for equipment, on average, from 26% to 20%; the 50% bonus depreciation reduces the rate to 15%. Unlike incentives such as investment credits, bonus depreciation cannot reduce tax rates on equity investment below zero; 100% bonus depreciation leads to a zero rate. Another issue particularly related to dividend and capital gains relief is the differential tax treatment, within the corporate sector, of debt versus equity financed capital. Debt is favored at the corporate level because corporations deduct interest payments. However, equity is favored at the individual level because capital gains tax rates are lower, taxes are deferred (not due until the stock is sold), and are never paid if shares are passed on at death. Individual taxes on the return to capital are also reduced because they are imposed on profits after the corporate tax and thus the corporate tax is effectively deductible from the individual tax base. For an individual in the 30% tax bracket, for example, the tax on interest income is 30% for a dollar of earnings, but the additional individual tax on equity is only 20% (0.3 X (1-0.35)). The recent temporary revisions lowered the tax rate on capital gains (for most recipients) from 20% to 15 % and extended these lower tax rates to dividends - a change favoring equity investment. There was also a temporary benefit to debt finance, from the individual tax rate reductions, so that one cannot be sure of the direction of the effect. The effective tax rate on debt vs. equity is complicated by the existence of tax favored forms of individual investment, through pensions and IRAs, where individual tax rates are effectively zero. If these effects are taken into the account, current tax rates are lower and the effect of changes in individual tax rates less important. Since these pension funds and IRA account managers (whether or not self directed) can also choose between debt and equity, the case with these effects incorporated is probably more realistic. Table 3 presents estimated effective tax rates on debt and equity under a variety of scenarios. The first four rows consider the case without tax favored forms of individual investment, comparing debt and equity under permanent tax rates and those enacted in the 2001 and 2003 tax cuts. The last four average in the tax favored forms. The columns consider the effects of bonus depreciation in each case. In each case, the debt-equity distortion has been reduced, but the reduction is small because both debt and equity benefit from lower individual tax rates and from bonus depreciation. In comparing tax rates with large discrepancies and particularly negative rates, a more meaningful comparison is the tax wedge, or the excess by which the pretax return must exceed a fixed after tax return, which is measured by t/(1-t), where t is the tax rate. Thus under current law without considering pension effects, a debt financed return must exceed the after tax return by 19% (0.16/(1-0.16)) while an equity financed return must exceed the after tax return by 82% (0.45/(1-0.45)). The difference between those is 63% of after tax return. The new rates (first column of rates) reduce the difference to 52%, which is a change of 11% (closing about one sixth of the gap). The effect of bonus depreciation is a change of about 7%. The combined change is 15%. If pensions and IRAs are taken into account, the differentials are smaller (in fact negligible for the individual rate changes). The initial gap change is about the same, but the change is 2%, which closes about one thirtieth of the gap. The effect of bonus depreciation is about 5% and the combined effects about 11%. If the pension and IRA case is taken to be the most reasonable one, then there is a very minimal effect on the distortion between debt and equity due to individual rate changes not only because they benefit both debt and equity but also because the changes are quite small. Aside from the distortion between debt and equity, the corporate tax also discourages investment in the corporate sector. Table 4 examines the total effective tax rate in the corporate sector as compared with the non-corporate sector under the different tax regimes. As in the case of the debt vs. equity case, calculations are also done taking into account the lower individual tax rates for pensions and IRAs. Since these entities would not invest directly in unincorporated businesses (such as sole proprietorships and partnerships), the non-corporate numbers consider only the case when the providers of loans are not fully subject to tax. However, since non-corporate investment is not a viable alternative for passive investment entities such as pension plans, the more relevant measure may be the tax rates without incorporating these effects, since it is among taxable accounts that choices might be made about investing directly in businesses rather than financial instruments. This analysis suggests a reduction in the tax differential between corporate and non-corporate investments, but that reduction is relatively small regardless of the rules on bonus depreciation. That effect is again because the tax bill provided reductions for all four forms of investments: corporate debt, corporate equity, non-corporate debt, and non-corporate equity. All forms of business investment benefit from bonus depreciation. The dividend relief provisions (and slightly lower capital gains tax rates) benefit corporate equity, but the lower individual tax rates benefit corporate and non-corporate debt and non-corporate equity. The dividend relief provision will significantly reduce the favorable treatment of retained earnings by lowering the tax rate on dividends to the tax rate on capital gains. Under permanent law, the tax on a dollar of dividends was the marginal tax rate of the individual which could be as high as 39.6%. The top tax on capital gains is fixed at 20% (for those in the permanent 28% or higher brackets). However, the effective rate on gains is lowered because tax is deferred until the stock is sold; deferring the tax by an estimated average of five years leads to a tax rate of 18%. Moreover, since CRS has found that approximately half of these gains are held until death and not taxed, the rate is about 9%. This spread is greatly narrowed by the dividend relief provision, which lowers both rates to 15%. The tax rate on capital gains falls to about 7%, but the gap between the 15% dividend rate and the new 7% rate is much smaller than the gap between the 28% to 39.6% rates and the 9% rate in prior law. However, these pre-existing distortions and the magnitude of the reduction due to the dividend rate would be reduced by half if the assets held in non-taxable accounts such as pensions and IRAs were included. The overall effective tax rate for new investment needs to account for tax rates on the assets already considered (corporate and non-corporate investment in plant and equipment) and also owner-occupied housing as well as business inventories. Business inventories tend to be taxed at slightly higher rates, while owner occupied housing is generally subject to a zero tax. The effective tax rates depend on whether the lower individual tax rates on funds invested in pensions and IRAs are marginal (affecting new investment) or infra-marginal as well as how much individuals are willing to substitute between savings within and outside the plans. Table 5 reports tax rates calculated two ways, one with individual tax rates, assuming no marginal investment takes place in these plans, and the other weighting the tax burdens between tax favored and regular savings accounts 50/50, reflecting the approximate shares of current earnings in these forms. As this table indicates the effect of the individual tax rates is, as expected, about twice as large in the case where no infra-marginal investment is in pensions - reducing (under permanent depreciation rules) the overall effective tax rate from 30% to 26% or four percentage points. With IRAs and pensions, tax rates are much lower (about 22%) and the reduction is two percentage points, to 20%. Thus, the individual rate reductions reduce effective tax rates on all capital, on average, by about 10% to 15%. Bonus depreciation has about the same percentage point effect regardless of the tax regime - about two percentage points for 30% bonus depreciation and about four for 50% bonus depreciation. It reduces effective tax rates by 7% to 9% for 30% bonus depreciation and 13% to 19% for 50% bonus depreciation. If both the rate reductions and 50% bonus depreciation are considered, the percentage point reduction is six to eight percentage points, reducing overall effective tax rates by a quarter to a third. Several bills introduced to repeal the Extraterritorial Income Tax (ETI) provision, found to be an illegal export subsidy according to the World Trade Organization (WTO), contain broadly applicable provisions affecting corporations. This sections examines the effect, not only of the provision finally enacted, but also of some of the other proposed provisions on some of the tax rates discussed above. Chairman Thomas's 2003 bill, H.R. 2896 , included two provisions that have general effects: a provision allowing manufacturing equipment a shorter recovery period (by two years) and a provision extending the 50% bonus depreciation for a year. Effects of bonus depreciation have already been discussed. Table 6 calculates the effects of the shorter depreciation lives on some typical types of manufacturing equipment. Typically the shorter lives reduce effective tax rates about five percentage points under permanent law, about four percentage points for 30% bonus depreciation, and about three percentage points for 50% bonus depreciation. The provision would have increased the differences between equipment and structures within manufacturing as well as favor manufacturing in general. The overall effects on tax burdens are small, however, because these provisions would have covered only manufacturing equipment, estimated to be about 20% to 25% of equipment assets, and about 10% of combined equipment and structures. For manufacturing overall, equipment is about a third of reproducible capital so the overall rate reduction in the industry is about 1.5 percentage points with no bonus depreciation. (See appendix for data sources on asset allocation). Since manufacturing represents about 25% of the overall corporate capital stock, the overall corporate tax rate would fall by less than a half a percentage point with no bonus depreciation, and even less with bonus depreciation. Corporate assets are in turn about 50% of the total capital stock, so the overall effect would be quite small (i.e., less than a quarter of a percent). H.R. 2896 also contained some other provisions relating to multinational corporations that would lower effective tax rates, but they do not apply to investment in general. These provisions would reduce effective tax rates, and there would also be an offset due to the repeal of the ETI. Senator Hatch's bill, S. 1495 , was similar to H.R. 2896 but proposed 100% expensing, which would reduce equipment investment tax rates to zero. As in H.R. 2896 , however, this provision would be a temporary extension. A bill co-sponsored by Representatives Crane and Rangel, H.R. 1769 (and a similar Senate bill, S. 970 (Hollings)), would have provided a deduction of up to 10% percent of income from domestic production. The deduction would have been multiplied by the share of the total business that is domestic. Thus, the deduction for total income would be multiplied by the share domestic squared. If 50% of a firms output was domestic, its effective rate for domestic earnings would be 5% and the effective deduction overall would be 2.5% (10% X(0.5) 2 ). (Tax paid on foreign source income is often received by the foreign government rather than the U.S. government, but the effects on marginal tax rates still occur.) Based on data from the Internal Revenue Service (see appendix), controlled foreign corporations in manufacturing accounted for 82% of receipts and 87% of assets of American manufacturing corporations in 1998. Thus, the effective rate is from 67% to 76% as large - the midpoint results in an effective tax rate of 32.5% (0.35X(1-0.1X0.71). S. 1637 (Grassley and Baucus) proposed a general rate cut that would lower the tax rate on manufacturing by 9%, or to approximately 32%, and since it applies to domestic income will be similar to the rate in the Crane and Rangel bill. A reduction in corporate tax rate to 32% would reduce effective tax rates on manufacturing structures by close to three percentage points. It would reduce the rate on manufacturing equipment by about 2.5 percentage points with no bonus depreciation and by 1.6 percentage points under 50% bonus depreciation. For this industry, therefore it would narrow the difference between equipment and structures, while, of course, favoring investment in domestic manufacturing in general. Since about a third of manufacturing assets are in equipment and a third in structures, the overall effect on manufacturing plant and equipment investment would be similar to the depreciation provisions in the 2003 Thomas bill at the firm level. Investment in inventories would, however, also benefit; at the same time the depreciation provision applies to debt financed investment but the rate reduction does not benefit debt. Overall manufacturing investment would have a reduction in effective tax rate of about 1.5 percentage points - about the same as the depreciation speedup; thus, as in the case of the depreciation provision, the reduction in the total tax rate in the economy would be less than a quarter of a percent. The final bill would have a slightly larger overall reduction in tax rate in the economy because it would apply to a broader range of productive. Qualified production activities income is allowed a deduction from taxable income of 9% (3% in 2005-2006, 6% in 2007-2009). The deduction cannot exceed total taxable income of the firm and is limited to 50% of wages. Production property is property manufactured, produced, grown or extracted within the United States and includes domestic film, energy, and construction, and engineering and architectural services. The law specifically excludes the sale of food and beverages prepared at a retail establishment, transmission and distribution of electricity, gas, and water, and receipts from property leased, licensed, or rented to a related party. The 50% wage limit excludes sole proprietorships where no wages are paid. In a letter dated September 22, 2004 to Mark Prator and Patrick Heck, responding to a query about the similar (although slightly different) Senate version of the provision, the Joint Tax Committee indicated that three quarters of the benefit would have gone to corporations, 12% would have gone to Subchapter S firms (smaller incorporated firms that elect to be treated as partnerships) and cooperatives, 9% would have gone to partnerships, and 4% to sole proprietorships. Based on the revenue estimates ($3 billion for 2006) and projected corporate tax receipts of $249 billion for that year, the implication is that around a third of corporate activity qualifies. Thus the overall effect on the economy is somewhat larger, perhaps closer to 1/2 of one percent - although still quite small. The effects of these two approaches - faster depreciation of equipment as compared to a rate cut - are similar in some ways. They are about the same aggregate size and both relatively small for the economy as a whole. Both provisions reduce taxes in the manufacturing sector (and favor that industry over others) but since manufacturing is largely corporate, both measures reduce corporate taxes overall whether the corporate rate itself is specified or more general tax reduction allowed. While the magnitudes of the bills' reduction on manufacturing and on the economy in general are similar, the approaches differ in some ways. The accelerated depreciation for equipment increases the favoritism for equipment relative to structures in this sector and does nothing to reduce the debt-equity distortion, while the corporate rate cut reduces the differences between tax rates across assets as well as reducing the distortion for debt. The Crane-Rangel bill would have also encouraged more investment in the United States relative to the other proposals, which may or may not be desirable. The depreciation provision would, however, be much easier to administer and would have more "bang for the buck" (i.e. decrease tax burdens at a smaller revenue cost) because it would apply only to returns to new investment. Note, however, that this comparison relates only to these two aspects of the proposals. The bills contained provisions in several other areas, including repeal of ETI. The extension of bonus depreciation has already been noted, but the 2003 House bill would also have reduced the depreciation period for leasehold improvements and restaurants, which would lower tax rates on this group of structures' investments (which are currently subject to relatively high rates); these effects are difficult to measure but would be small. This provision was included, on a temporary basis in the final legislation. There were provisions in the 2003 House bill aimed at small business including a lower inframarginal corporate tax rate and a temporary increase in the amount of equipment investment that can be deducted on acquisition. These provisions are inframarginal for some firms and would not have effects on investment: the rate reduction would encourage investment in small corporations, and the extension of expensing would favor investment in equipment for certain small businesses. This extension of expensing was made, on a temporary basis, in the final legislation (but the lower corporate rate cuts were not). To the extent that small businesses tend to be unincorporated, the favorable treatment of the noncorporate sector would be increased, as would the favorable treatment of equipment in those businesses. There are a number of provisions that would significantly reduce the tax on income from investment overseas (foreign investments are currently favored in some cases and penalized in others), and would address some tax shelter issues. Finally there are provisions affecting carryovers of losses, application of the alternative minimum tax, and temporary extension of the R&D tax credit. It is very difficult to quantify these effects. S. 1637 also contained additional provisions, but the focus on a more limited number of foreign tax revisions. Overall, H.R. 2896 lost $128 billion over 10 years according to the Joint Committee on Taxation, while S. 1637 is roughly revenue neutral. The final bill was roughly revenue neutral and contained a number of international provisions. The 2001-2003 temporary tax cuts have a mixed effect in that they magnify some existing distortions while reducing others. All capital income tax cuts reduce the distortion that favors consumption over investment, although it is by no means clear that tax cuts for capital income increase saving (because of offsetting income and substitution effects ) and debt financed tax cuts could well reduce the national (government plus private) savings rate. Any capital income tax cut also reduces the favorable treatment of owner occupied housing. In looking at the allocation of business capital, the dividend relief provision seems most consistent with economic efficiency, because it reduces distortions affecting payout choices, choice of finance, and sectoral allocation, without magnifying any existing distortions. Reducing individual tax rates magnifies existing distortions, by favoring debt finance and noncorporate investment. Bonus depreciation, if made permanent, has aspects that detract from efficiency, by expanding the favorable treatment of the returns from equipment investments relative to returns from investment in structures, while doing little to reduce financial or sectoral distortions. The revisions in the bills addressing the ETI provision favor manufacturing and other eligible activities. When accomplished via equipment depreciation, they would have expanded the favorable treatment of equipment within that sector. The overall effects outside of that sector are very small, however. Of course, there are other issues aside from the efficiency considerations that might be considered in making the temporary provisions permanent or in enacting new ones. Many of these provisions, particularly bonus depreciation, were originally aimed at short run stimulus of the economy. An investment subsidy such as bonus depreciation is a more effective stimulus if it is temporary, and making it permanent might undermine the credibility of the government and hamper its ability to manage fiscal policy in the future. That is, the effectiveness of a temporary investment stimulus depends on investors believing it to be temporary, and if the government transforms the current temporary stimulus into a permanent one, firm managers may be less likely to believe that another temporary stimulus enacted in the future will actually be temporary. Capital income taxes play an important role in the revenue base and the overall distribution of tax burdens, which might be considered. Some tax revisions may add to administrative costs while others reduce those costs, and others (such as changing rates) are largely neutral. For example, tax rate cuts confined to manufacturing create a classification issue for firms (or related firms) that engage in activities both within and without manufacturing. These tax rate cuts require allocation rules that may add significantly to both administrative costs and opportunities for tax sheltering. The tax rates in this paper are calculated by first determining, given a required after-tax return and an expected rate of decline in productivity of the asset due to depreciation, how much the investment must initially produce in order for the sum of profits after tax over time, discounted by the after-tax return, to equal the individual investment outlay (i.e., to break even). Then all of the tax payments and deduction are eliminated and the before profit flows are used to determine what pre-tax discount rate would sum the flows to original cost. The effective tax rate is the pretax rate of return minus the after tax rate of return, divided by the pretax rate. Discounting means dividing each flow by a discount factor; for a flow earned a year from now, the discount factor is ( 1 + r ), for a flow earned two years from now ( 1 + r ) 2 , for a flow three years from now ( 1 + r ) 3 , where r is the discount rate. In practice, however, the analysis uses a continuous time method with continuous compounding. The formula derived from this method is (1) r = ( R + d )( 1 - u z ) / ( 1 - u ) - d where r is the pre-tax return, R is the after tax-discount rate of the corporation, d is the economic depreciation rate, u is the statutory tax rate and z is the present value of depreciation deductions (discounted at R + p , where p is the inflation rate). The effective tax rate for equity at the firm level is ( r - R ) / r . When including individual level taxes and debt finance, the tax rate is measured by determining r as above, where R = f ( i ( 1 - u ) - p) + ( 1 - f ) E , where f is the share debt financed, i is the nominal interest rate, and E is the real return to equity before individual tax but after corporate tax. E is equal to D + g, where D is the dividend rate and g is the growth rate. The after tax real return, R , is f ( i ( 1 - t ) - p ) + ( 1 - f )( D ( 1 - t ) + g ( 1 - c )), where t is the effective individual tax rate and c is the effective capital gains tax rate. The total tax rate is ( r - R ) / r . For a more complete description of the methodology and data sources, including useful lives for depreciation purposes, formulas for measuring z, and the allocation of assets in the economy see [author name scrubbed], The Economic Effects of Taxing Capital Income , Cambridge, MA, MIT Press, 1994. For purposes of this analysis, the following assumptions were made: the interest rate is 7.5%, the inflation is 2%, and the real return to equity before individual taxes is 7% , with a 4% (or 57% of real profits) paid as dividends. The corporate rate is 35%, the average individual marginal tax rate on investment income is 26% under permanent law and 23% under the lower individual rates (data consistent with calculations in the National Bureau of Economic Research TAXSIM model). Tax rates on dividends fall from 26% to 15% and the statutory tax rate on capital gains falls from 20% to 15%. One half of corporate stock is sold (and the remaining half held until death); the holding period is five years. Half of financial assets are held in tax exempt forms such as pensions and IRAs. Data to calculate domestic shares of income for purpose of analyzing the Crane-Rangel bill data on receipts and assets for controlled foreign corporations were taken from John Comisky, "Controlled Foreign Corporations, 1998," Statistics of Income Bulletin , Winter 2002-2003, pp. 47-86. Data for U.S. corporations overall were taken from Internal Revenue Service, Statistics of Income 1998, Corporation Income Tax Returns , Washington DC, 2000.

Several temporary provisions affecting the taxation of capital income were adopted in the 2001-2003 period. These provisions include lower individual tax rates, bonus depreciation (which allows part of the cost of equipment to be deducted upon acquisition), and lower individual income tax rates on dividends and capital gains. Bonus depreciation has expired, but there are some indications such provisions might be included as part of a major tax reform; the other provisions remain currently in effect. This study measures their effect on tax burdens on income from different prospective investments, differentiated by physical type, form of finance, and sector. Further provisions of a permanent nature enacted in 2004 in a bill to eliminate the extraterritorial income (ETI) provision, ruled an illegal export subsidy by the World Trade Organization (WTO), are also discussed. Effective tax burdens are determined by the statutory tax rate and value of depreciation deductions. Although the 1986 depreciation revision left income from equipment and structures investments taxed at close to the statutory rate (now 35% for large corporations), the fall in inflation and legislative changes led to a growing differential between these assets, with equipment taxed at 26% and buildings taxed slightly above 35%. Bonus depreciation widens that discrepancy, lowering the equipment tax rate to 20% (15%) for 30% (50%) bonus depreciation. The distortions between debt and equity finance within the corporate sector and between the corporate and non-corporate sector investment are narrowed, but only slightly, by the changes, especially if tax exempt financial holdings (through pensions and IRAs) are considered. This small effect occurs because bonus depreciation covers all types of equipment investment (whether financed by debt or equity and regardless of sector), and while dividend and capital gains relief benefits corporate equity, individual rate cuts benefit non-corporate investment and debt-financed corporate investment. There is a significant reduction in the differential rates on retained earnings and dividends, however. The reduction in the total tax rate on investment income in the economy is about two to four percentage points for all individual tax changes and two to four percentage points for 30% to 50% bonus depreciation. The temporary provisions have mixed effects. All changes reduce the total tax rate and the current favorable treatment of owner-occupied housing. Within the business sector, the dividend relief provisions lead to a more neutral tax system as well, but the effects of bonus depreciation lead to less efficiency because the benefits are confined to equipment. Tax changes in the 2004 tax bill include provisions directed at the manufacturing sector. The tax cuts directed at manufacturing would lower tax rates in that industry by about 1.5 percentage points but they would have a negligible effect on the total tax rate (lowering it by less than a quarter of a percentage point). The bill also contains other provisions (e.g. benefitting foreign source investment) which would lower tax rates, but also include repeal of the ETI which would raise rates. For the aggregate economy, these effects are small, although the changes favor some assets and sectors over others. This report will be updated for legislative changes.

From its inception in 1947, the General Agreement on Tariffs and Trade (GATT), signed by the United States and ultimately by a total of 128 countries, provided for consultations and dispute resolution between GATT parties. A party could invoke Articles XXII and XXIII, the GATT consultation and dispute settlement provisions, if it believed that another party's measure, whether violative of the GATT or not, nullified or impaired benefits accruing to it under the agreement. Because the GATT did not set out specific dispute procedures, GATT Parties developed a more detailed process including ad hoc panels and other practices. Over time, however, the GATT procedure was perceived to have certain deficiencies, among them a lack of deadlines, a consensus decision-making process that allowed a GATT party against whom a dispute was filed to block the establishment of a dispute panel and the adoption of a panel report by the GATT Parties as a whole, and laxity in surveillance and implementation of panel reports even when reports were adopted and had the status of an official GATT decision. Congress made reform of the GATT dispute process a principal U.S. negotiating objective in the GATT Uruguay Round of Multilateral Trade Negotiations, begun in 1986 and concluded in 1994 with the signing of the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement). The resulting WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding, or DSU) reflects the U.S. negotiating objective of creating a mechanism that is more judicial in approach (and, it was hoped, fairer and more predictable) than the diplomatically oriented system favored by other trading partners. While the DSU retains diplomatic elements--for example, the goal of the process is to secure a "mutually agreed solution" and contains provisions that may foster a negotiated outcome--the DSU sets out a mechanism that is overall more "rule-bound" than the process developed under the GATT. Further, the DSU applies to disputes arising under virtually all WTO agreements (referred to in the Understanding as "covered agreements") and thus exists in the context of the full Uruguay Round package of multilateral trade agreements, all of which must be accepted by a country as a condition of WTO membership. The Uruguay Round package not only carried forward original GATT obligations--for example, according goods of other parties most-favored-nation (MFN) and national treatment, not placing tariffs on goods in excess of negotiated or "bound" rates, generally refraining from imposing quantitative restrictions such as quotas and embargoes on imports and exports, and avoiding injurious subsidies --but also expanded on these obligations in new agreements such as the Agreement on Agriculture, the Agreement on the Application of Sanitary and Phytosanitary Measures, the Agreement on Antidumping, the Agreement on Subsidies and Countervailing Measures, and the General Agreement on Trade in Services (GATS). The application of the DSU to these new agreements thus created the potential not only for trade disputes on matters that had not been subject to adjudication in the past, but also for adjudication of these disputes under a more judicially styled process than had existed in the past. Congress approved and implemented the WTO Agreement and the other agreements negotiated in the Uruguay Round in Section 101 of the Uruguay Round Agreement Act. The agreements entered into force on January 1, 1995. While the DSU continues past GATT dispute practice, a variety of new features are aimed at strengthening the prior system. These include a "reverse consensus" voting rule at key points in the process, legal review of panel reports by a new Appellate Body, deadlines for various phases of the dispute procedure, and improved multilateral oversight of compliance. Under the integrated system of dispute settlement created by the DSU, the same dispute settlement rules apply to disputes under virtually all WTO agreements, subject to any special or additional rules in an individual agreement. The WTO Dispute Settlement Body (DSB), created in Article 2 of the DSU and consisting of representatives of all WTO Members, administers WTO dispute settlement proceedings. As was the case under the GATT, the DSB ordinarily operates by consensus (i.e., without objection). The DSU reverses past practice, however, in a manner that prevents individual Members from blocking certain DSB decisions that are considered critical to an effective dispute settlement system. Thus, unless it decides by consensus not to do so, the DSB will (1) approve requests to establish panels, (2) adopt panel and Appellate Body reports, and (3) if requested by the prevailing Member in a dispute, authorize the Member to impose a retaliatory measure where the defending Member has not complied. In effect, these decisions are virtually automatic. Given that panel reports would otherwise be adopted under the reverse consensus rule, WTO Members have a right to appeal a panel report on legal issues. The DSU creates a standing Appellate Body to carry out this added appellate function. The Appellate Body has seven members, three of whom serve on any one case. Notwithstanding the rule-oriented nature of the DSU, dispute settlement in the WTO is primarily Member-driven. In other words, it is up to the disputing Members (complaining or defending, as the case may be) to decide whether or not to take particular actions available to them. These actions include initiating the dispute; requesting a panel and, in doing so, setting out the scope of dispute; asking the WTO Director-General (DG) to appoint panelists if the disputing Members cannot agree on the WTO Secretariat's proposed slate; seeking authorization to impose countermeasures against a non-complying Member; requesting that the prevailing Member's retaliation proposal be arbitrated; and imposing retaliatory measures even if the DSB has authorized them. As stated in Article 3.7 of the DSU, the preferred outcome of a dispute is "a solution mutually acceptable to the parties and consistent with the covered agreements." Absent this, the primary objective of the process is withdrawal of a violative measure, with compensation and retaliation being avenues of last resort. As of the date of this report, 450 complaints have been filed under the DSU. Not all of these have resulted in panels, however, and in some cases where panel proceedings were initiated, the panel process was discontinued due to a settlement of the dispute or for other reasons. To date, 153 original panel reports have been publicly circulated. Some original panels have also issued compliance panel reports as a result of proceedings initiated by complaining Members under Article 21.5 of the DSU to determine whether defending Members had complied in particular disputes; 29 compliance panel reports have been issued thus far. Well over one-half of all panel reports have been appealed, resulting in 108 Appellate Body reports issued as of this writing. Nearly one-half of the 450 WTO complaints filed to date involve the United States as complaining party or defendant. The United States Trade Representative (USTR) manages U.S. participation and is the chief representative of the United States in the WTO, including in WTO disputes. The DSU was scrutinized by WTO Members under a Uruguay Round Declaration, which called for completion of a review within four years after the WTO Agreement entered into force (i.e., by January 1999). Members did not agree on any revisions in the initial review and continued to negotiate on dispute settlement issues during the WTO Doha Development Round of multilateral trade negotiations initiated in 2001, doing so on a separate track permitting an agreement to be adopted apart from any overall Doha Round accord. In 2008, the chairman of the dispute settlement negotiations prepared a consolidated draft legal text based mainly on Member proposals, which Members agreed to use in their negotiations; in April and September 2011, the chairman issued reports summarizing subsequent discussions. Although the Doha Round negotiations have stalled, discussions of revisions to the DSU have continued into 2012. The United States has proposed such revisions as greater Member control over the process, guidelines for WTO adjudicative bodies, and increased transparency--for example, open meetings and timely access to submissions and final reports. Other Member proposals include, inter alia, a permanent roster of panelists, enabling the Appellate Body to remand decisions to panels for further proceedings, rules for sequencing and the termination of retaliatory measures (see below), tightened time frames, enhanced third-party rights, and special treatment for developing country disputants. The WTO dispute settlement process consists of three broad stages: (1) consultations; (2) panel and, if requested, Appellate Body review; and (3) if needed, implementation. In conducting their work, WTO panels and the Appellate Body are guided by Article 3.2 of the DSU, which provides that the WTO dispute settlement system "serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law," adding that "[r]ecommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements." In an early WTO dispute settlement proceeding, the WTO Appellate Body confirmed that the "general rule of interpretation" set out in Article 31 of the Vienna Convention on the Law of Treaties constitutes an interpretative rule under international law for purposes of Article 3.2. Article 31 generally states that a treaty or other international agreement "shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose." Following are the steps in a WTO dispute settlement proceeding, with the applicable DSU articles for each. Under the DSU, a WTO Member may request consultations with another Member regarding "measures affecting the operation of any covered agreement taken within the territory" of the latter. If a WTO Member requests consultations with another Member under a WTO agreement, the latter Member must enter into consultations with the former within 30 days. If the dispute is not resolved within 60 days, the complaining Member may request a panel. A panel may be requested before this period ends if the defending Member has failed to enter into consultations or if the disputants agree that consultations have been unsuccessful. The WTO Member requesting a panel must do so in writing and "identify the specific measures at issue and provide a brief summary of the legal basis for the complaint sufficient to present the problem clearly." Under GATT and now WTO dispute settlement practice, a Member may challenge a measure of another Member "as such," "as applied," or both. An "as such" claim challenges the measure independent of its application in a specific situation and, as described by the WTO Appellate Body, seeks to prevent the defending Member from engaging in identified conduct before the fact. If a panel is requested, the DSB must establish it at the second DSB meeting at which the request appears as an agenda item, unless it decides by consensus not to do so. Thus, while a defending Member may block the establishment of a panel the first time the complaining Member makes its request at a DSB meeting, the panel will be established, virtually automatically, the second time such a request is placed on the DSB's agenda. Although the DSB ordinarily meets once a month, the complaining Member may request that the DSB convene for the sole purpose of considering the panel request. Any such meeting must be held within 15 days after the complaining Member requests that the meeting be held. The panel is ordinarily composed of three persons. The WTO Secretariat proposes the names of panelists to the disputing parties, who may not oppose them except for "compelling reasons" (Art. 8.6). If the disputing parties fail to agree on panelists within 20 days from the date that the panel is established, either disputing party may request the WTO Director-General to appoint the panel members. Because the Director-General may only act upon request in this situation, it is possible that disputing Members may not make such a request immediately or may not do so at all, thus permitting them to attempt to resolve their dispute before the adjudicatory process begins. Once the panel is constituted, it hears written and oral arguments from the disputing parties. After considering these presentations, it issues the descriptive part of its report (facts and argument) to the disputing parties. Taking into account any comments from the parties, the panel then submits this portion of the report, along with its findings and conclusions, to the disputants as an interim report. Following a review period, a final report is issued to the disputing parties and later circulated to all WTO Members. A panel must generally provide its final report to disputants within six months after the panel is composed, but may take longer if needed; extensions are common in complex cases. The period from panel establishment to circulation of a panel report to WTO Members should not exceed nine months. In practice, panels have been found to take more than 13 months on average to publicly circulate reports. Within 60 days after a panel report is circulated to WTO Members, the report is to be adopted at a DSB meeting unless a disputing party appeals it or the DSB decides by consensus not to adopt it. Article 17.6 of the DSU limits appeals to "issues of law covered in the panel report and legal interpretations developed by the panel." Within 60 days of being notified of an appeal (extendable to 90 days), the WTO Appellate Body (AB) must issue a report that upholds, reverses, or modifies the panel report. The AB report is to be adopted by the DSB, and unconditionally accepted by the disputing parties, unless the DSB decides by consensus not to adopt it within 30 days after circulation to Members. The period of time from the date the panel is established to the date the DSB considers the panel report for adoption is not to exceed 9 months (12 months where the report is appealed) unless otherwise agreed by the disputing parties. In the event that the WTO decision finds the defending Member has violated an obligation under a WTO agreement, the Member must inform the DSB of its implementation plans within 30 days after the panel report and any AB report are adopted. If it is "impracticable" for the Member to comply immediately, the Member will have a "reasonable period of time" to do so. The Member is expected to implement the WTO decision fully by the end of this period and to act consistently with the decision after the period expires. Compliance may be achieved by withdrawing the WTO-inconsistent measure or, alternatively, by modifying or replacing it. Under the DSU, the "reasonable period of time" is (1) that proposed by the Member and approved by the DSB; (2) absent approval, the period mutually agreed by the disputants within 45 days after the report or reports are adopted by the DSB; or (3) failing agreement, the period determined through binding arbitration. Arbitration is to be completed within 90 days after adoption of the reports. To aid the arbitrator in determining the length of the compliance period, the DSU provides a non-binding guideline of 15 months from the date of adoption. Arbitrated compliance periods have ranged from six months to 15 months and one week. The DSU envisions that a maximum 18 months will elapse from the date a panel is established until the reasonable period of time is determined. Either disputing Member may request that a compliance panel be convened under Article 21.5 of the DSU in the event the disputants disagree as to whether the defending Member has complied. The disagreement may have do with whether a compliance measure exists, or whether a measure that has been taken to comply is consistent with the WTO decision in the case. The DSU provides that, wherever possible, the original panel should be re-convened to hear the compliance dispute. A compliance panel is expected to issue its report within 90 days after the dispute is referred to it, but it may extend this time period if needed. Compliance panel reports may be appealed to the WTO Appellate Body and both reports are subject to adoption by the DSB. If the defending Member fails to comply with the WTO decision within the established compliance period, Article 22 permits the prevailing Member to request that the defending Member negotiate a compensation agreement. If such a request is made and agreement is not reached within 20 days after the compliance deadline expires, or, more likely, if negotiations have not been requested, the prevailing Member may request authorization from the DSB to retaliate, that is, suspend concessions or obligations owed the non-complying Member under a WTO agreement. Article 22 requires the DSB to authorize the request within 30 days after the compliance deadline expires unless the DSB decides by consensus not to do so, or the defending Member requests that the retaliation proposal be arbitrated. Generally, a Member should first try to suspend concessions or obligations in the same trade sector as the one at issue in the dispute. If this is "not practicable or effective," the Member may then seek to suspend concessions in another sector under the same WTO agreement. If, however, suspending concessions in other sectors under the same agreement is not "practicable or effective" and "the circumstances are serious enough," the Member may seek to suspend concessions or obligations under another WTO agreement, or "cross-retaliate." Retaliation most often involves the suspension of GATT tariff concessions--that is, the imposition of tariff surcharges--on selected products from the non-complying Member. In some cases, however, that Member may not be a major exporter of goods to the prevailing Member or some or all of the goods that are exported may be critical to the prevailing Member's economy. Thus, if firms of the non-complying Member are active service providers or exercise significant intellectual property rights in the other Member's territory, the prevailing Member may seek to suspend market access obligations under the General Agreement on Trade in Services (GATS) or obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (Agreement on TRIPS). As noted above, the defending Member has a right under the DSU to object to a retaliation proposal. Article 22.6 of the DSU permits the defending Member to object to the level of the proposed retaliation (i.e., that it is not equivalent to the level of trade injury in the dispute), claim that DSU principles and procedures for requesting cross-retaliation have not been followed, or both. Once requested, arbitration is automatic and is to be completed within 60 days after the compliance period ends. An arbitral decision is considered final. After the arbitral decision is issued, the prevailing party may request that the DSB approve its proposal, subject to any modification by the arbitrator. The prevailing Member is not required to request authorization, nor is the Member required to do so by a given date if it chooses to pursue such a request. Further, even if measures are authorized, the prevailing Member is not required to impose them. If the Member does so, however, the measures may not remain in effect once the offending measure is removed or the disputing parties otherwise resolve the dispute. Article 23 of the DSU requires that WTO Members invoke DSU procedures in disputes involving WTO agreements and that they act in accordance with the DSU--that is, not unilaterally--when taking various dispute-related actions. These are (1) determining if another Member has violated a WTO agreement (Art. 23(a)); (2) determining a date by which the Member must comply with a WTO decision (Art. 23(b)); and (3) taking any retaliatory action against a non-complying Member (Art. 23(c)). Regarding retaliatory action, the prevailing Member must follow DSU procedures in determining the amount of trade retaliation to be imposed and must obtain authorization from the DSB in accordance with DSU procedures before suspending WTO tariff concessions or other WTO obligations in the event the defending Member has failed to comply. Although many WTO rulings have been satisfactorily implemented, difficult cases have tested DSU implementation articles, highlighting deficiencies in the system and prompting suggestions for reform. For example, gaps in the DSU have resulted in the problem of "sequencing," which first manifested itself in 1998-1999 during the compliance phase of the successful U.S. challenge of the European Union's banana import regime. Article 22 allows a prevailing party to request authorization to retaliate within 30 days after a compliance period ends, while Article 21.5 provides that disagreements over the existence or adequacy of compliance measures are to be decided using WTO dispute procedures, including resort to panels. A compliance panel's report is due within 90 days after the dispute is referred to it and may be appealed. The DSU does not integrate the Article 21.5 procedure into the 30-day Article 22 deadline, nor does it expressly state how compliance is to be determined so that a prevailing party may pursue retaliatory action under Article 22. Absent the adoption of multilateral rules on the matter, disputing parties have entered into ad hoc procedural agreements in individual disputes under which compliance panel proceedings and procedures involving retaliation requests, including the arbitration of retaliation proposals, advance in sequence. Generally, Members agree that if a compliance panel finds that a Member has not complied, the prevailing Member may proceed with its retaliation request even though the 30-day DSU deadline has passed. The DSU is also silent on how authorized retaliation is to be terminated in the event a defending Member believes that it has complied in a dispute. This issue was the subject of United States -- Continued Suspension of Obligations in the EC--Hormones Dispute (DS320), a dispute initiated by the European Union (EU) against the United States in 2004 for continuing to maintain increased (i.e., 100% ad valorem ) tariffs on EU goods first imposed in 1999 in retaliation for the EU's failure to comply with the adverse WTO ruling on the EU's ban on hormone-treated beef. The EU also initiated a separate case against Canada on the same basis. The Appellate Body and modified panel reports in the underlying beef hormone case, EC--Hormones , found that an EU ban on imports of meat and meat products from cattle produced from six specific growth-promotion hormones violated the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement); the reports were adopted by the WTO in February 1998. Claiming that a 2003 European Union Directive rendered it WTO-compliant, the EU argued that the United States and Canada were violating the following WTO obligations in continuing to impose their retaliatory tariffs: (1) the GATT most-favored-nation article; (2) the GATT prohibition on tariff surcharges; and (3) various DSU provisions, including Article 23, which requires WTO Members to invoke WTO dispute settlement for disputes arising under WTO agreements and precludes certain unilateral actions in trade disputes, and Article 22.8, which permits sanctions to be imposed only until the defending Member's WTO-inconsistent measures have been removed or the dispute is mutually resolved. In separate panel reports issued March 31, 2008, the WTO panel found that the EU was maintaining bans on certain hormones without a sufficient scientific basis in violation of the SPS Agreement, and that the United States and Canada had breached Article 23 requirements to resort to WTO dispute settlement and to refrain from unilateral actions by (1) not initiating a WTO proceeding to resolve the EU compliance issue and (2) determining unilaterally that the EU was still in violation of the EC--Hormones decision. The panel also found, however, that to the extent that the challenged EU measure had not been removed, the United States and Canada had not violated Article 22.8, which requires that sanctions be removed once the offending measure is withdrawn. The panel noted that it had functioned similarly to a compliance panel for the sole purpose of determining whether Article 22.8 was violated and, because it did not have jurisdiction to make a definitive determination in this regard, it suggested that the United States and Canada initiate a compliance panel proceeding against the EU under Article 21.5 in order to comply with their DSU obligations and to promptly resolve the dispute. The Appellate Body, in separate reports issued October 16, 2008, reversed the panel's findings that the United States and Canada were in breach of the DSU as well as the panel's findings that the EU was still in violation of the SPS Agreement. Because the Appellate Body could not complete the analysis needed to determine whether the contested EU measure had been withdrawn, however, it recommended that the parties initiate an Article 21.5 compliance panel proceeding to resolve their disagreement as to whether the EU is in compliance with the EC--Hormones decision and thus whether the U.S. and Canadian countermeasures have a legal basis. The AB and modified panel reports were adopted November 14, 2008. The EU requested consultations under Article 21.5 in December 2008, but the proceeding involving the United States has been suspended under a bilateral agreement. In a May 2009 memorandum of understanding (MOU) intended to resolve the underlying beef hormone dispute, the United States and the EU agreed, inter alia, that the EU will expand market access for exports of U.S. beef in three phases. In the first phase, the United States may maintain retaliatory tariffs currently applied to EU products and will not impose the new duties that it announced in January 2009 under its "carousel" retaliation provision (see below). The two parties also agreed that they will suspend WTO litigation (i.e., not request a compliance panel) for the first 18 months of the agreement. The USTR delayed the imposition of the additional duties on new items until September 19, 2009, and officially terminated these duties as of this date. As a result of these actions, the duties were never imposed. The adoption by the WTO Dispute Settlement Body of a panel and, if appealed, subsequent Appellate Body report finding that a U.S. law, regulation, or practice violates a WTO agreement does not give the report or reports direct legal effect in the United States. Thus, federal law is not affected until Congress or the executive branch, as the case may be, changes the law or administrative measure at issue. Procedures for executive branch compliance with adverse decisions are set out in Sections 123(g) and 129 of the Uruguay Round Agreements Act. Only the federal government may bring suit against a state or locality to declare a state or local law invalid because of inconsistency with a WTO agreement; private remedies based on WTO obligations are also precluded. Federal courts have held that WTO panel and Appellate Body reports are not binding on the judiciary and have treated determinations involving "whether, when, and how" to comply with a WTO decision as falling within the province of the executive rather than the judicial branch. Sections 301-310 of the Trade Act of 1974 (referred to collectively as Section 301) provide a mechanism for private parties to petition the United States Trade Representative (USTR) to take action regarding harmful foreign trade practices. If the USTR decides to initiate an investigation regarding a foreign measure that allegedly violates a WTO agreement, the USTR must invoke the WTO dispute process to seek resolution of the problem. Section 301 authorizes the USTR to impose retaliatory measures to remedy an uncorrected foreign practice, some of which may involve suspending a WTO obligation--for example, imposing a tariff increase on a product in excess of the rate negotiated in the WTO or the "bound" rate. The USTR may terminate a Section 301 case if the dispute is settled, but, under Section 306 of the act, the USTR must monitor foreign compliance and may take further retaliatory action if compliance measures are unsatisfactory. While Section 301 also permits the USTR to initiate an investigation on its own motion, it is not necessary for the USTR to invoke Section 301 in order to initiate a WTO dispute. Nevertheless, the authorities in Section 301 are available to the USTR if it decides to impose sanctions in a WTO dispute that it initiated earlier. If the USTR has taken action against the goods of another country for its failure to comply with a WTO decision, Section 306(b)(2)(B)-(F), of the Trade Act directs the USTR periodically to revise the list of imported products subject to retaliation, unless the USTR finds that implementation of WTO obligations is imminent or the USTR and the petitioner agree that revision is unnecessary. This authority to rotate the products subject to retaliatory action is often referred to as "carousel retaliation." The European Union filed a WTO complaint challenging the statutory provision shortly after its enactment in 2000, alleging that the statute mandates unilateral action and the taking of retaliatory action other than that which had been authorized by the WTO in violation of the DSU. Because the United States had not invoked the provision, the EU refrained from seeking a panel in the case. In December 2008, however, the United States exercised "carousel" authorities to propose modifications to the list of EU products subject to the WTO-authorized tariff surcharges that it had originally imposed in EC--Hormones , discussed earlier. A final modified list was published in January 2009. Originally applicable to all covered goods entering the United States on or after March 23, 2009, the revisions include removal of some products from the original list of covered products, the addition of new products to the list, modified coverage with regard to certain EU member states, and an increase to 300% ad valorem of duties on one product, Roquefort cheese. The EU announced on January 15, 2009, that it had decided to "start preparations" to pursue WTO dispute settlement regarding the carousel statute, stating that it "breaches the WTO requirement of equivalence between the damage caused by the sanction or ban and the retaliation proposed." As noted above, under an MOU with the EU aimed at settling the beef hormone dispute, the United States has agreed not to impose the announced tariff increases on new items and officially terminated these additional duties as of September 19, 2009. The EU filed a broader challenge to Section 301 in 1998 based on various obligations in Article 23 of the DSU, which, as noted earlier, precludes certain unilateral actions in trade disputes involving WTO agreements. Section 301 may generally be used consistently with the DSU, though some U.S. trading partners have complained that the statute allows unilateral action and forces negotiations through its threat of sanctions. In United States--Sections 301-310 of the Trade Act of 1974 (DS152), the WTO panel found that the language of Section 304, which requires the USTR to determine the legality of a foreign practice by a given date, is prima facie inconsistent with Article 23 because in some cases it mandates a USTR determination--and statutorily reserves a right for the USTR to determine that a practice is WTO-inconsistent--before DSU procedures are completed. The panel also found, however, that the serious threat of violative determinations and consequently the prima facie inconsistency was removed because of U.S. undertakings, as set forth in the Uruguay Round Statement of Administrative Action (H.Doc. 103-316), a document submitted to Congress along with the Uruguay Round agreements, and U.S. undertakings made before the panel, that the USTR would use its statutory discretion to implement Section 301 in conformity with WTO obligations. Moreover, the panel could not find that the DSU was violated by Section 306 of the Trade Act of 1974, which directs USTR to make a determination as to imposing retaliatory measures by a given date, given differing good faith interpretations of the "sequencing" ambiguities in the DSU. The panel report, which was not appealed, was adopted in January 2000. S. 239 (Klobuchar), the Innovate America Act, would, inter alia, authorize to be appropriated to the USTR $2 million for each of FY2011, FY2012, and FY2013 for the purpose of initiating any proceeding to resolve a dispute relating to market access barriers with WTO member countries. S. 708 (Brown, Ohio), the Trade Enforcement Priorities Act, would establish mechanisms under the Trade Act of 1974 to require the USTR annually to identify particularly harmful foreign trade practices and, where appropriate, to initiate WTO dispute settlement proceedings to remedy these practices. To date, no action has been taken on either of these bills.

The World Trade Organization (WTO) Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) provides a means for WTO Members to resolve disputes arising under WTO agreements. WTO Members must first attempt to settle their dispute through consultations, but if these fail the Member initiating the dispute may request that a panel examine and report on its complaint. The DSU provides for Appellate Body (AB) review of panel reports, panels to determine if a defending Member has complied with an adverse WTO decision by the established deadline in a case, and possible retaliation if the defending Member has failed to do so. Automatic establishment of panels, adoption of panel and appellate reports, and authorization of a Member's request to retaliate, along with deadlines and improved multilateral oversight of compliance, are aimed at producing a more expeditious and effective system than had existed under the General Agreement on Tariffs and Trade (GATT). To date, 450 complaints have been filed under the DSU, with nearly one-half involving the United States as a complainant or defendant. The Office of the United States Trade Representative (USTR) represents the United States in WTO disputes. Use of the DSU has revealed procedural gaps, particularly in the compliance phase of a dispute. These include a failure to coordinate DSU procedures for requesting retaliation with procedures for requesting a compliance panel and the absence of a specific procedure aimed at the removal of trade sanctions in the event the defending Member believes it has fulfilled its WTO obligations in a case. To overcome these gaps, disputing Members have entered into bilateral agreements permitting retaliation and compliance panel procedures to advance in sequence and have initiated new dispute proceedings seeking the removal of retaliatory measures believed to have outlived their legal foundation. Expressing dissatisfaction with WTO dispute settlement results involving U.S. trade remedies, Congress, in the Trade Act of 2002, directed the executive branch to address dispute settlement in WTO negotiations. WTO Members have been negotiating DSU revisions in the currently stalled Doha Development Round. Section 301 of the Trade Act of 1974 provides a mechanism for the USTR, either by petition of an "interested party" or on its own accord, to address restrictive foreign trade practices through the initiation of a WTO dispute and authorizes the USTR to take retaliatory action in the event the defending WTO Member has not complied with the resulting WTO decision. While the European Union challenged Section 301 in the WTO on the ground that it requires the USTR to act unilaterally in WTO-related disputes in violation of DSU requirements, the United States was ultimately found to be in compliance with its DSU obligations. Where a U.S. law or regulation is at issue in a WTO case, the WTO's adoption of a panel and, if appealed, AB report finding that the U.S. measure violates a WTO agreement does not give the WTO decision direct legal effect in this country. Thus, federal law is not affected until Congress or the executive branch, as the case may be, takes action to remove the offending measure. S. 239 (Klobuchar), the Innovate America Act, would, inter alia, authorize to be appropriated to the USTR $2 million for each of FY2011, FY2012, and FY2013 for the purpose of initiating any proceeding to resolve a dispute relating to market access barriers with WTO member countries. S. 708 (Brown, Ohio) would establish mechanisms under the Trade Act of 1974 to require the USTR annually to identify particularly harmful foreign trade practices and, where appropriate, to initiate WTO dispute settlement proceedings to remedy these practices.

The House and Senate passed H.R. 5325 ( P.L. 114-223 ), a continuing resolution (CR) that provides funding through December 9, 2016, for the programs and activities covered by 11 of the 12 regular appropriations bills. The legislation also included the Military Construction and Veterans Affairs Appropriations bill for all of FY2017, as well as emergency funds to combat the Zika virus and provide relief for flood victims. On September 29, 2016, the bill was signed into law by the President ( P.L. 114-223 ). Previously, each chamber had, separately, passed several of the 12 regular appropriations bills, as well as supplemental appropriations related to the Zika virus, although the chambers had not yet reached agreement on any of the bills. CBO released An Update to the Budget and Economic Outlook: 2016 to 2026 on August 23, 2016. The Office of Management and Budget (OMB) submitted the Mid-Session Review to Congress on July 15, 2016. The Congressional Budget Office (CBO) released The 2016 Long-Term Budget Outlook on July 12, 2016. Senate Budget Committee Chairman Enzi filed budgetary levels in the Congressional Record , pursuant to the Bipartisan Budget Act of 2015, that are enforceable in the Senate as if they had been included in an FY2017 budget resolution, on April 18, 2016. The House and Senate Appropriations Committees began reporting appropriations bills to their respective chambers in mid-April. CBO released Updated Budget Projections: 2016 to 2026 on March 24, 2016. The House Budget Committee voted to report H.Con.Res. 125 , a budget resolution for FY2017, on March 16, 2016. The Office of Management and Budget (OMB) submitted the President's Budget for FY2017 to Congress on February 9, 2016. CBO released The Budget and Economic Outlook : 2016 to 2026 on Monday, January 25, 2016. The House passed the Restoring Americans ' Healthcare Freedom Reconciliation Act of 2015 on January 6, 2016, which had been passed by the Senate on December 3, 2015. This budget reconciliation bill, which was subsequently vetoed by the President, was the result of the reconciliation process triggered by the FY2016 budget resolution. At the end of 2015, Congress acted on several pieces of significant budgetary legislation. FY2016 and FY2017 discretionary caps for defense and nondefense spending were modified in the Bipartisan Budget Act of 2015 ( P.L. 114-74 , enacted November 2, 2015). The Bipartisan Budget Act of 2015 also suspended the statutory debt limit until March 15, 2017. Full-year appropriations were enacted for FY2016 in the Consolidated Appropriations Act , 2016 ( P.L. 114-113 , enacted December 18, 2015). This funding expires at the end of the current fiscal year (September 30, 2016). A tax extenders package was enacted in the Protecting Americans from Tax Hikes Act of 2015 (PATH; P.L. 114-113 , enacted December 18, 2015). Section I of the PATH Act of 2015 extended or made permanent 56 tax provisions that expired at the end of tax year 2014, which had been extended several times in recent years. Each year, the Congressional Budget Office (CBO) releases a projection of budgetary and economic outcomes titled The Budget and Economic Outlook . These projections include an estimate of federal spending and receipts under current law, referred to as the baseline . The baseline covers the current fiscal year, as well as the future 10-year period. Congress uses the baseline in many ways as it makes budgetary decisions. For example, the baseline assists Congress in assessing the current budget and economic situation to develop a budget resolution for the upcoming fiscal year. In addition, the baseline provides a benchmark against which Congress can measure the budgetary impact of legislative proposals. This is used not only to weigh the merits of legislation, but also to enforce budgetary constraints. Changes in budget projections between baselines are sorted into three categories: (1) legislative changes, which are adjustments due to enacted laws since the last baseline publication; (2) economic changes, which are reflective of shifts in underlying economic conditions; and (3) technical changes, which are modeling adjustments made in an effort to improve the accuracy of projections. The Budget and Economic Outlook is generally released in January, with updates typically occurring in March (following the release of the President's Budget) and August. CBO released The Budget and Economic Outlook : 2016 to 2026 on Monday, January 25. The forecast included federal budget deficit projections of $544 billion in FY2016 and $561 billion in FY2017, equivalent to 2.9% of annual gross domestic product (GDP) in each year. Those totals represented an increase in the deficit total from FY2015, which was $439 billion (2.5% of GDP). CBO projected that budget deficits would continue to increase over the ensuing decade, rising to $1,366 billion (4.9% of GDP) in FY2026, the final year of the budget window. The outlook projected a cumulative deficit from FY2016 through FY2025 of $8.556 trillion, a 22% increase ($1.549 trillion) from projections over the same period in the August 2015 baseline. The deficit increase was primarily attributed to projected decreases in federal revenues, which accounted for 79% ($1.226 trillion) of the total change. The remaining adjustments (21%, or $0.323 trillion) were attributable to increased federal spending. CBO reported that roughly half of the adjustments were due to enactment of legislation in late 2015. More than half (57%) of the legislative adjustments resulted from reductions to federal revenues; projected increases in federal expenditures were responsible for the remaining changes (43%). Newly incorporated legislation with budgetary effects included the Bipartisan Budget Act of 2015 ( P.L. 114-74 ), the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), and the Protecting Americans from Tax Hikes Act of 2015 ( P.L. 114-113 ). As for non-legislative changes, economic revisions accounted for roughly 30% of the larger deficit projections, and about 20% of the deficit changes were attributable to technical modeling adjustments. CBO released Updated Budget Projections: 2016 to 2026 on Thursday, March 24. The forecast includes a projection of a $534 billion budget deficit in FY2016, a $10 billion decrease from the projection in the January 2016 forecast ($544 billion). The projected cumulative deficit from FY2017 to FY2026 was $9.283 trillion, which is $95 billion lower than the January 2016 projections ($9.378 trillion). That reduction is due to higher revenue projections, which increased by $79 billion, and lower outlays, which decreased by $15 billion relative to the January forecast. CBO released An Update to the Budget and Economic Outlook: 2016 to 2026 on Tuesday, August 23. That forecast projects the budget deficit to be $590 billion in FY2016, which represents a $56 billion increase from the estimate in March. That change follows from projected declines in FY2016 revenues by $87 billion and declines in FY2016 outlays by $31 billion relative to the March estimate. The cumulative deficit from FY2017 through FY2026 is projected to be $8.573 trillion, which represents a $712 billion decline from the March estimate. Changes to the economic forecast, which include revisions to projected interest rates, inflation, GDP, and the unemployment rate, represented the largest contribution to the revision. In addition to the budget and economic outlook, CBO also releases a long-term budget outlook, typically every year. This forecast uses a similar set of assumptions employed in the Budget and Economic Outlook to project federal spending and revenue levels through at least 25 years beyond the current fiscal year. Information included in the long-term budget outlook includes projections of publicly held debt and key macroeconomic indicators, as well as calculations on how federal spending goals would need to change in order to hit certain public debt benchmarks at the end of the forecast. Though the long-term outlook does not affect the budgetary impact of legislative proposals, it helps to inform Congress about the long-term trends of certain budgetary components under current law. CBO released The 2016 Long-Term Budget Outlook on July 12, 2016. The forecast includes budget and debt projections through FY2046; the 30-year span covered by the forecast is an increase from the 25-year span used in past publications. The current outlook increased its projection of long-term publicly held debt as compared with the previous forecast, as estimated publicly held debt in FY2040 (the last year estimated in each publication) rose from 107% of GDP to 122% of GDP. Reductions in projected economic output and increases in federal spending were responsible for the majority of that change. Publicly held debt is currently estimated to be 75% of GDP, well above the 50-year historical average of 39% of GDP. CBO projects that policy changes that would increase revenues or decrease noninterest spending by 1.7% of GDP in each year relative to the baseline forecast would be required for publicly held debt to equal its current level in 2046. CBO also projects that policy adjustments that would increase revenues or decrease noninterest spending by 2.9% of GDP in each year would be needed for publicly held debt to equal its 50-year historical average in 2046. The Budget and Accounting Act of 1921 (P.L. 67-13), as amended, requires the President to submit a budget request to Congress for the upcoming fiscal year. The budget is required to include (1) estimates of spending, revenues, borrowing, and debt; (2) detailed estimates of the financial operations of federal agencies and programs; (3) the President's budgetary, policy, and legislative recommendations; and (4) information supporting the President's recommendations. The budget request, which is submitted by the Office of Management and Budget (OMB), is required to be submitted on or after the first Monday in January, but no later than the first Monday in February. The President's budget has been submitted after the statutory deadline on several occasions. Following the initial submission, the President then typically sends Congress an updated request in the second half of the fiscal year, with revisions to prior estimates. The President's Budget for FY2017 was submitted to Congress on February 9, 2016. The submission included estimates of the budgetary effects of the policy and legislative recommendations set forth in the budget request. The proposed budget projected deficits of $616 billion (3.3% of GDP) in FY2016 and $503 billion (2.6% of GDP) in FY2017, which were both greater than the recorded deficit of $438 billion (2.5% of GDP) in FY2015. It projected average real deficits (measured as a share of GDP) from FY2018 through FY2026 to remain relatively level, averaging 2.6% of GDP in that period. As compared with FY2015, it projected real increases in both revenues and spending over time. It projected that real receipts would rise from 18.3% of GDP in FY2015 to 20.0% of GDP in FY2026, and projected that real outlays increase from 20.7% of GDP to 22.8% of GDP over the same period. The President's Budget also included current baseline projections, which in its view is a realistic outlook of the federal fiscal situation. Under the current budget, real deficits were projected to be higher than those in the proposed budget in each year of the budget window. Moreover, real budget deficits would increase throughout the period, rising from 3.2% of GDP in FY2017 to 5.0% of GDP in FY2026. Revenues were projected to be reduced from FY2017 through FY2026 by $3.4 trillion relative to proposed budget estimates, and outlays were projected to increase by $0.3 trillion. Since the submission of the FY2017 budget, the President, on February 22, submitted a request for emergency supplemental appropriations of approximately $1.9 billion "to address the Zika virus both domestically and internationally." On July 15, 2016, the President submitted the mid-session review to Congress. The revised budget included a projected deficit of $600 billion in FY2016. That total was $16 billion lower than the FY2016 budget OMB projected in the February forecast, due to lower outlay projections more than offsetting reduced receipt estimates. The revised forecast also includes lower combined deficits from FY2017 through FY2026 by a total of $881 billion. Much of that revision can be attributed to reduced net interest costs (by a total of $770 billion), with reduced noninterest spending (by $547 billion) offsetting reduced revenues (by $436 billion) accounting for the remainder of those changes. The Congressional Budget Act of 1974 (the Budget Act) provides for the annual adoption of a budget resolution. The budget resolution reflects an agreement between the House and Senate on a budgetary framework for the upcoming fiscal year, designed to establish parameters within which Congress will consider subsequent budgetary legislation. The budget resolution does not become law: therefore, no money is spent or collected as a result of its adoption. Instead, it is meant to assist Congress in considering an overall budget plan. Once the budget resolution has been agreed to by both chambers, certain levels contained in it are enforceable through points of order. The budget resolution is required to include a spending limit for each committee, referred to as "302(a) allocations." Each Appropriations Committee is then responsible for subdividing its 302(a) allocation among its 12 subcommittees. These allocations, referred to as 302(b) subdivisions, establish the maximum amount that each of the 12 appropriations bills can spend. The budget resolution is under the jurisdiction of the House and Senate Budget Committees, and its content, consideration, and implementation are shaped primarily by requirements in the Budget Act. While the Budget Act directs that Congress is to complete action on a budget resolution by April 15, Congress often does so later than April 15. Furthermore, since the current timetable for action on the budget resolution was established in 1985, there have been nine years when the House and Senate did not reach agreement on a budget resolution. In such years, Congress often employs alternative legislative tools to serve as a substitute for a budget resolution. These substitutes are typically referred to as "deeming resolutions," because they are deemed to serve in place of an annual budget resolution for the purposes of establishing enforceable budget levels for the upcoming fiscal year. On March 16, 2016, the House Budget Committee held a markup on a budget resolution for FY2017, and subsequently voted to report the resolution by a vote of 20-16. The committee estimated that the budget resolution, H.Con.Res. 125 , would reduce projected deficits relative to CBO's January 2016 baseline. Over the FY2017-FY2026 period, the outlays reported in H.Con.Res. 125 were $7.2 trillion lower than the projections in the latest CBO baseline, and the revenues in H.Con.Res. 125 were $0.3 trillion higher than the latest CBO budget projections. The committee-reported budget resolution also contains reconciliation instructions to 12 House committees, directing them to report legislation that would reduce the deficit over the period of FY2017 to FY2026. The directives require between $15 million and $1 billion in savings from each committee, totaling $8.315 billion in deficit reduction over the 10-year period. In addition to reconciliation instructions, the resolution includes a policy statement declaring that the House will consider legislation, early in the second session of the 114 th Congress, to achieve mandatory spending savings of not less than $30 billion over the period of FY2017 and FY2018 and $140 billion over FY2017-FY2026. No further action has been taken on the committee-reported budget resolution. As described above, Congress sometimes employs a substitute for a budget resolution, referred to as a deeming resolution. Occasionally, Congress will take steps in advance to provide for the opportunity to use a deeming resolution for an upcoming budget year, without precluding congressional action on a budget resolution for that budget year. This was the case for FY2017, as the Bipartisan Budget Act of 2015 ( P.L. 114-74 ) included a provision directing the Senate Budget Committee chair to file in the Congressional Record levels that will be enforceable in the Senate as if they had been included in a budget resolution for FY2017. No such provision was included for the House. On April 18, Senate Budget Committee Chairman Enzi filed such levels. The Senate Appropriations Committee subsequently reported 302(b) sub-allocations for each of the 12 regular appropriations measures. These sub-allocations act as an enforceable cap on each of the individual appropriations measures as they are considered on the Senate floor. The levels filed by the Senate Budget Committee are consistent with the discretionary spending limits established by the Budget Control Act ( P.L. 112-25 ) as amended by the Bipartisan Budget Act of 2015, and provide for $551.068 billion in FY2017 discretionary defense budget authority (subject to the limits) and $518.531 billion in FY2017 discretionary non-defense budget authority. These levels set the total FY2017 discretionary budget authority level as $1,069.6 billion (5.54% of GDP), which would represent a real decline in budget authority relative to FY2016 levels ($1,066.2 billion, or 5.77% of GDP). In the House, no such enforceable levels yet exist. In the absence of a budget resolution or deeming resolution, the House Appropriations Committee has adopted "interim 302(b) sub-allocations" for each individual appropriations bill. Such levels would not act as an enforceable cap on appropriations measures when they are considered on the floor. A separate order adopted by the House as a part of H.Res. 5 (114 th Congress), however, prohibits floor amendments that would increase spending in a general appropriations bill, effectively creating a cap on individual appropriations bills when they are considered on the floor. Budget reconciliation is an optional congressional process that operates as an adjunct to the budget resolution. If Congress intends to use the reconciliation process, reconciliation directives (also referred to as reconciliation instructions) must be included in the annual budget resolution. These directives trigger the second stage of the process by instructing individual committees to develop and report legislation that would change laws within their respective jurisdictions related to mandatory spending, revenue, or the debt limit. Once a specified committee develops legislation, it is eligible to be considered under expedited procedures in both the House and Senate. As with all legislation considered through reconciliation, any differences in the legislation passed by the two chambers must be resolved. Congress has not employed the reconciliation process annually. Since 1980, it has passed 24 bills through reconciliation. On January 6, 2016, the House passed the Restoring Americans ' Healthcare Freedom Reconciliation Act of 2015 , which had been passed by the Senate on December 3, 2015. This budget reconciliation bill, which was subsequently vetoed by the President, was the result of the reconciliation process triggered by the FY2016 budget resolution. This action would not preclude a budget resolution for FY2017 from triggering another reconciliation process. Appropriations legislation provides authority to agencies to obligate a specific amount of money and directs the Treasury to make the payments for such obligations. Appropriations, also known as discretionary spending, are under the jurisdiction of the House and Senate Appropriations Committees. The appropriations process contemplates annual enactment of 12 regular appropriations bills providing funding for various categories of federal programs. As described above, the budget resolution is required to include a spending limit for each committee, referred to as "302(a) allocations." Each Appropriations Committee is then responsible for subdividing its 302(a) allocation among its 12 subcommittees. These allocations, referred to as 302(b) subdivisions, establish the maximum amount that each of the 12 appropriations bills can spend, and are enforced through points of order on the House and Senate floor. Appropriations in some form must be enacted by the beginning of a new fiscal year (October 1) or a government shutdown may occur. The content and consideration of appropriations measures are shaped primarily by House and Senate rules, amounts in the budget resolution, the Budget Act, and statutory limits on annual discretionary spending. Congress regularly employs continuing resolutions (or CRs) to continue funding programs in the absence of the enactment of regular appropriations measures. Full-year appropriations were enacted for FY2016 in the Consolidated Appropriations Act of 2016 ( P.L. 114-113 , enacted December 18, 2015). This funding expired at the end of the fiscal year (September 30, 2016). On September 28, the House and Senate each passed H.R. 5325 ( P.L. 114-223 ), a continuing resolution (CR) that provides funding through December 9, 2016 for the programs and activities covered by 11 of the 12 regular appropriations bills. The legislation also includes the Military Construction and Veterans Affairs Appropriations bill for all of FY2017, as well as emergency funds to combat the Zika virus and provide relief for flood victims. On September 29, 2016, the bill was signed into law by the President ( P.L. 114-223 ). For activities funded through December 9, 2016, the continuing resolution provides for funding at a level 0.496% below FY2016 levels. The Budget Control Act of 2011 (BCA; P.L. 112-25 ) as amended allows for increases in FY2017 discretionary cap levels relative to their FY2016 values. The BCA provides for a FY2017 discretionary cap on defense budget authority of $551.068 billion, or 0.543% greater than the FY2016 value, and a FY2017 discretionary cap on nondefense budget authority of $518.531 billion or 0.008% above its FY2016 value. For more information on the FY2017 CR, see CRS Report R44653, Overview of Continuing Appropriations for FY2017 (H.R. 5325) , coordinated by James V. Saturno. Because the funding provided in the CR expires on December 9, Congress will likely take legislative action on appropriations legislation around that time, after the presidential and congressional elections of 2016. For information on past action on appropriations measures after an election, see CRS Report RL34597, The Enactment of Appropriations Measures During Lame Duck Sessions , by Megan S. Lynch. Earlier in the year, in February 2016, House and Senate Appropriations Committee subcommittees began holding hearings on FY2017 appropriations, and in March and April 2016, began reporting appropriations measures to their respective committees. In mid-April, both the House and Senate Appropriations Committees began reporting appropriations bills to their respective chambers. Each chamber passed several individual appropriations measures, although no individual measures were sent to the President. In addition, the chambers considered supplemental appropriations to address the Zika virus. While the House and Senate have not yet agreed upon an FY2017 budget resolution, the appropriations process has moved forward. In the Senate, Senate Budget Committee Chairman Enzi filed enforceable budgetary levels, pursuant to the Bipartisan Budget Act of 2015 (see section on " Deeming Resolutions " above), which included a committee spending allocation (known as a 302(a) allocation) for the Senate Appropriations Committee. The Senate Appropriations Committee subsequently reported 302(b) sub-allocations for each of the 12 regular appropriations measures. These sub-allocations act as an enforceable cap on each of the individual appropriations measures as they are considered on the Senate floor. In the House, no such enforceable levels yet exist. In the absence of a budget resolution or deeming resolution, the House Appropriations Committee has adopted "interim 302(b) sub-allocations" for some individual appropriations bills. Such levels would not act as an enforceable cap on appropriations measures when they are considered on the floor. A separate order adopted by the House as a part of H.Res. 5 (114 th Congress), however, prohibits floor amendments that would increase spending in a general appropriations bill, effectively creating a cap on individual appropriations bills when they are considered on the floor. Mandatory spending programs are generally those federal programs under which beneficiaries that meet the requirements established by law are entitled to receive payments. Such programs, also referred to as direct spending programs or entitlement programs, generally continue annually without any congressional action required. Most legislative committees have jurisdiction over some type of mandatory spending program. The content and consideration of mandatory spending legislation are shaped primarily by House and Senate rules, the budget resolution, and the Budget Act. Each year, Congress typically considers some legislation that affects mandatory spending in varying degrees. This section will be updated to reflect actions on mandatory spending legislation as they occur. Revenue legislation provides authority for the collection of taxes, fees, and tariffs to fund the federal government. Most revenue is collected by the federal government as a result of previously enacted law that continues in effect without any need for congressional action. Congress, however, routinely considers revenue legislation that repeals or modifies existing provisions, extends expiring provisions, or creates new provisions. Generally revenue is under the jurisdiction of the House Ways and Means Committee and the Senate Finance Committee. The content and consideration of revenue measures is shaped primarily by House and Senate rules and the budget resolution. Each year Congress passes legislation that affects revenue in varying degrees. Congress has extended a number of short-term tax provisions several times in recent years. In late 2015, legislation was enacted that extended 56 expiring tax provisions which had expired at the end of tax year 2014 in Section I of the Protecting Americans from Tax Hikes (PATH) Act of 2015 ( P.L. 114-113 ), with some of the provisions made permanent. All tax provisions in the PATH Act are scheduled to remain in effect through 2016. This section will be updated to reflect actions on revenue legislation as they occur. The Constitution allows Congress to restrict the amount of federal debt that may be incurred as part of its "power of the purse." Under current law Congress exercises this power through the federal debt limit. Debt subject to limit is more than 99% of total federal debt, and includes debt held by the public (which finances budget deficits and the federal loan portfolio) and intragovernmental debt (which represents money borrowed from federal trust funds and other federal accounts). When debt levels approach the statutory debt limit, Congress can choose to (1) leave the debt limit in place; (2) increase the debt limit to allow for further federal borrowing; (3) maintain the current debt limit and require the implementation of "extraordinary measures" that will postpone (but not prevent) a binding debt limit from being reached; or (4) temporarily suspend or abolish the debt limit. The House Ways and Means Committee and the Senate Finance Committee have jurisdiction over debt limit legislation generally. Consideration of debt limit legislation is shaped largely by House and Senate rules as well as the budget resolution and the Budget Act. The Bipartisan Budget Act of 2015 suspended the debt limit until March 15, 2017 ( P.L. 114-74 ). As a result, the Treasury may continue to sell U.S. debt instruments through 2016 and, therefore, no debt limit event is anticipated in 2016. Current law dictates that the debt limit be increased upon reinstatement as needed to exactly accommodate any additional federal borrowing undertaken to date. Absent legislative action, the debt limit will be reached shortly following reinstatement if (1) an increase in the debt limit is required and (2) federal debt subject to the limit is increasing. Congress may consider legislation designed to create new methods of budget enforcement or alter existing budget enforcement mechanisms. Such budgetary restrictions can take many forms. If they are to be enforced internally by the House and Senate they may be added to the House and Senate rules, included in a budget resolution, or included in a rule-making statute that becomes law. Congress has typically incorporated some type of internal budget enforcement in each recent Congress. Congress has also passed legislation that creates budgetary requirements that are enforced outside of the House and Senate. For example, in 2011 Congress passed the Budget Control Act creating discretionary spending limits, among other things. Since the enactment of the BCA, several pieces of legislation have been enacted making changes to the spending limits and the enforcement procedures. Most recently, the Bipartisan Budget Act of 2015 ( P.L. 114-74 , enacted November 2, 2015) increased discretionary spending limits for FY2016 and FY2017, among other things. Such budget enforcement legislation is primarily within the jurisdiction of the House and Senate Budget Committees and often the Judiciary and Rules Committees as well. Consideration of such legislation is shaped primarily by House and Senate Rules as well as the Budget Act. This year, the House and Senate Budget Committees have held hearings and released papers related to reforming the congressional budget process. The House Budget Committee held a number of hearings and released a series of "working papers focused on the committee's effort to overhaul the Congressional Budget Act of 1974 and reform the congressional budget process." The hearings and working papers can be accessed here: http://budget.house.gov/budgetprocessreform/ . Likewise, the Senate Budget Committee held a number of hearings, and released several "Budget Bulletins" related to budget process reform. The Budget Bulletins can be viewed here: http://www.budget.senate.gov/chairman/newsroom/budget-bulletins . Also of note, Bipartisan Budget Act of 2015 made changes to the discretionary spending caps for FY2017. In addition, it established spending targets for overseas contingency operations/global war on terrorism for FY2017 and amended the limits of adjustments allowed under the discretionary spending limits for Program Integrity Initiatives.

The Constitution grants Congress the power of the purse, but does not dictate how Congress must fulfill this constitutional duty. Congress has, therefore, developed certain types of budgetary legislation, along with rules and practices that govern its content and consideration. This set of budgetary legislation, rules, and practices is often referred to as the congressional budget process. There is no prescribed congressional budget process that must be strictly followed each year, and Congress does not always consider budgetary measures in a linear or predictable pattern. Such dissimilarity can be the result of countless factors, such as a lack of consensus, competing budgetary priorities, the economy, natural disasters, military engagements, and other circumstances creating complications, obstacles, and interruptions within the policymaking process. Since the budget process will vary significantly each year, it is better understood not as a definite set of actions that must occur annually, but instead as an array of opportunities for affecting the federal budget. This report seeks to assist in (1) anticipating what budget-related actions might occur within the upcoming year, and (2) staying abreast of budget actions that occur this year. It provides a general description of the recurrent types of budgetary actions, and reflects on current events that unfold in each category during 2016. In addition, it includes information on certain events that may affect Congress's work on the budget, such as the President's budget request and the Congressional Budget Office's budget and economic outlook. The most-recent budget actions will be noted at the beginning of the report.

On November 16, 1994, the 1982 United Nations Convention on the Law of the Sea (UNCLOS) entered into force, but not for the United States. UNCLOS was the culmination of more than 10 years of intense negotiation. However, the United States chose not to participate in UNCLOS in the early 1980s because of provisions dealing with deep seabed mineral resources beyond national jurisdiction. After a 1994 agreement amended parts of UNCLOS dealing with deep seabed mineral resources, the UNCLOS, Annexes, and Agreement package was formally submitted to the U.S. Senate on October 7, 1994, for advice and consent to accession and ratification (Senate Treaty Doc. 103-39). However, the Senate took no action. More recently, the George W. Bush Administration reiterated support for U.S. accession to UNCLOS. In the 110 th Congress, UNCLOS was reported on December 19, 2007, by the Senate Committee on Foreign Relations (S.Exec.Rept. 110-9), but the Senate did not take up the measure for ratification. In the 111 th Congress, then-Secretary of State Hillary Clinton, at her confirmation hearing before the Senate Committee on Foreign Relations on January 13, 2009, acknowledged that U.S. accession to UNCLOS would be an Obama Administration priority. Later in this confirmation hearing, then-Senator John Kerry, the committee chair, confirmed that UNCLOS would also be a committee priority. However, the Senate took no action on UNCLOS during the 111 th Congress. In the 112 th Congress, the Administration continued to encourage Senate action on UNCLOS, but again no action was taken. In the 113 th Congress, there has been little or no mention of UNCLOS and no actions have been taken to ratify the treaty. UNCLOS and a subsequent 1994 Agreement on deep seabed mining are extensive, complex documents touching on a wide range of policy issues and U.S. interests. From the perspective of the United States, some of the most significant areas addressed by the Convention deal with naval power and maritime commerce, coastal state interests, marine environment protection, marine scientific research, and international dispute settlement. A number of issues may arise during Senate consideration of UNCLOS, including the question of whether the 1994 Agreement adequately addresses the deep seabed portions of the Convention that were at the core of U.S. opposition to the original UNCLOS. Policy issues relating to areas beyond living resources that are likely to draw Senate attention are discussed more fully in CRS Report RS21890, The U.N. Law of the Sea Convention and the United States: Developments Since October 2003 , by [author name scrubbed], and include the dispute settlement process set forth in UNCLOS and the U.S. declarations on dispute settlement; the relationship between U.S. law and various parts of UNCLOS regarding use of the world's oceans; U.S. acceptance of the UNCLOS/Agreement interpretation and application of the common heritage of mankind concept; the provisional application procedures as a precedent in the U.S. treaty process; the nature of U.S. commitments undertaken by a decision of the International Seabed Authority (ISA) Council--what does a council decision commit the U.S. government to do? should Congress have a role and if so, under what circumstances; and the cost and financing of the ISA and U.S. participation therein, now and in the future. The remainder of this report focuses on the living marine resource provisions of UNCLOS. The living resources provisions of UNCLOS (i.e., those concerning fish, shellfish, sea turtles, and marine mammals) recognize international interdependence on these resources and provide a framework for their cooperative and sustainable management. These provisions, comprising Articles 61 through 73, deal specifically with: conservation (Article 61), exploitation (Article 62), transboundary and straddling stocks (Article 63), highly migratory stocks (Article 64), marine mammals (Article 65), anadromous stocks (Article 66), catadromous stocks (Article 67), sedentary species (Article 68), rights of landlocked nations (Article 69), rights of geographically disadvantaged nations (Article 70), non-applicability of Articles 69 and 70 (Article 71), restrictions on transfer of rights (Article 72), and enforcement by coastal nations (Article 73). In addition, sedentary continental shelf species are more specifically addressed in Article 77(4), living resources on the high seas are considered in Articles 116-120, and marine habitat protection is provided by Articles 192-196. As presently understood and interpreted, these provisions generally reflect current U.S. policy with respect to living marine resource management, conservation, and exploitation as reflected primarily in the Magnuson-Stevens Fishery Conservation and Management Act. However, increasingly complex ocean policy is being formulated within the UNCLOS regime, without strong U.S. participation to address U.S. concerns. In support of current U.S. maritime policy, the U.S. government, particularly the U.S. Coast Guard, currently expends considerable resources enforcing U.S. and international fishing and living resources laws in the U.S. Exclusive Economic Zone (EEZ) off both the Atlantic and Pacific coasts as well as Hawaii, Howland-Baker, Guam, Northern Marianas Islands, Puerto Rico, and other remote U.S. EEZ areas and in the high seas driftnet area of the western Pacific. Recognizing the existing level of U.S. commitment and based on current U.S. interpretation, the living resource provisions of UNCLOS are generally not seen as imposing significant new U.S. obligations, commitments, or encumbrances involving living resources and their management. UNCLOS could provide several new privileges, primarily related to participation in commissions developing international ocean policy. Some measure of increased stability in international living marine resource policy can be inferred as a beneficial aspect of U.S. participation in the UNCLOS regime. It appears that no new domestic legislation would be required to implement the living resources provisions of UNCLOS. UNCLOS recognizes the broad authority of a coastal nation over living resources within its territorial sea and exclusive economic zone (EEZ) to a maximum of 200 miles seaward from the baselines used to measure the territorial sea. In managing living resources, coastal nations are to determine allowable catches and promote optimal resource use. To this end, drafters of UNCLOS were intentionally ambiguous in their attempt to make UNCLOS acceptable to a broad range of constituents. Thus, the terms maximum sustainable yield (Article 61) and optimum utilization (Article 62) are open to broad interpretation and may require further definition to provide additional guidance on how sustainable management of living marine resources is to be attained. Except for Article 65, UNCLOS exhibits bias toward optimal exploitation of the resource, with little explicit recognition of non-consumptive management objectives which might reduce harvests to substantially less than optimal or maximum sustainable yield levels. Articles 61(2) and 61(3) do provide a mandatory obligation to ensure that living resources are not endangered by over-exploitation and that threatened species are restored to levels which can produce their maximum sustainable yield. In addition, the phrase "as qualified by relevant environmental and economic factors," appearing in Article 61(3), provides a basis for harvesting at rates both above or below the maximum sustainable yield. However, the subsequent examples of how this qualification is to be interpreted focus on ways to protect against overharvesting or other possible justifications for exceeding the maximum sustainable yield, rather than providing any explicit acknowledgment that valid reasons may exist for refraining altogether from harvesting to achieve non-consumptive goals (e.g., tourism in reef environments or biodiversity conservation) or to respond to moral/ethical concerns (e.g., beliefs that large sharks, dolphins, and whales should not be killed). Regardless, determination of allowable catch within a coastal nation's EEZ is not subject to compulsory procedures leading to binding dispute settlement. Under UNCLOS, if a coastal nation is unable to harvest the entire allowable catch, other nations must be given access to these resources, subject to appropriate terms and conditions. Resource populations are to be managed such that they can produce harvests at maximum sustainable yield levels. The U.S. Fishery Conservation and Management Act of 1976 (16 U.S.C. SSSS1801 et seq., now known as the Magnuson-Stevens Act) was crafted to parallel closely most of the draft UNCLOS's provisions for living resources. UNCLOS, in Article 61(4), encourages attention to associated or dependent species . If interpreted narrowly, this might encompass incidental bycatch concerns by calling for consideration of these associated or dependent species so that their reproduction is not seriously threatened. More broadly, however, attention to ocean ecosystems would reflect the highly complex web of biological relationships where food chain and commensal associations create intricate interdependencies. Some marine conservation regimes, such as those under the Convention on the Conservation of Antarctic Marine Living Resources, are sensitive to these concerns and attempt to manage living marine resources from an "ecosystem" approach. Straddling fish stocks (ranging between national EEZs and international waters) and transboundary stocks are to be managed cooperatively through bilateral or multilateral international agreements involving coastal nations through whose waters these fish stocks range as well as any nations fishing these stocks in international waters. The United States acted in concert with these provisions by negotiating the multilateral Convention on the Conservation and Management of Pollock Resources in the Central Bering Sea (Senate Treaty Doc. 103-27) to govern harvest and management of fish stocks migrating between international waters in the Bering Sea (the "donut hole") and adjacent waters under national jurisdiction. An example of an effective bilateral agreement on a transboundary fish stock is the 1953 Convention for the Preservation of the Halibut Fishery of the Northern Pacific Ocean and Bering Sea between the United States and Canada. Concerns remain over attempts to cooperatively manage anchovy fisheries along the United States-Mexico Pacific boundary. The 1995 Agreement for the Implementation of the Provisions of the United Nations Convention of the Law of the Sea of 10 December 1982 Relating to the Conservation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks (Senate Treaty Doc. 104-24) more specifically addresses concerns for these stocks in a manner consistent with UNCLOS. Prior to 1990, the U.S. position on certain highly migratory species was contrary to that of UNCLOS in that the United States did not claim national jurisdiction over tunas. However, the Fishery Conservation Amendments of 1990 ( P.L. 101-627 ) modified U.S. policy to be consistent with UNCLOS by amending the Magnuson-Stevens Act to extend national jurisdiction to include tunas. Annex I to UNCLOS provides a list of species designated as highly migratory. Article 64 of UNCLOS calls for cooperative management of highly migratory species to ensure their conservation and promote their optimum harvest, within and beyond the EEZ. The United States is party to agreements in both the Atlantic and Pacific consistent with the provisions of Article 64. In the Pacific, the 1950 Convention Between the United States of America and the Republic of Costa Rica for the Establishment of an Inter-American Tropical Tuna Commission serves this purpose by involving 21 member nations and 1 cooperating non-party (Cook Islands); a 2003 Convention for the Strengthening of the Inter-American Tropical Tuna Commission (Antigua Convention) has been ratified by 14 nations. The 1966 International Convention for the Conservation of Atlantic Tunas involves 48 contracting parties and 5 cooperating non-contracting entities. The 1995 Straddling Stocks Agreement more specifically addresses concerns for highly migratory stocks in a manner consistent with UNCLOS and involves 80 nations. More recently, the Convention on the Conservation and Management of Highly Migratory Fish Stocks in the Western and Central Pacific Ocean was signed by 19 nations, and entered into force on June 19, 2004; the commission implementing this convention now has 25 members as well as 11 cooperating non-members. The United States is a signatory to all these agreements and has ratified all of them except the Antigua Convention. Article 65 of UNCLOS provides that coastal nations may manage and regulate marine mammals more strictly than otherwise provided by UNCLOS. International cooperation for conservation is mandated, with specific direction that cetaceans (i.e., whales and dolphins) be conserved, managed, and studied internationally. Article 120 extends this understanding to marine mammals on the high seas. Whales and dolphins are identified in the list of highly migratory species provided in Annex I to UNCLOS. Article 65 calls for cooperation with a view to "conservation." In the case of cetaceans, nations are to work through "appropriate international organizations" for their conservation. Protection for most cetaceans is provided currently through a moratorium on commercial whaling imposed by the International Whaling Commission (IWC) under the authority of the International Convention for the Regulation of Whaling. Additional protection for most of the large whales, in the form of trade restrictions, derives from their inclusion in appendixes of the 1973 Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Sea turtles are considered indirectly under UNCLOS, because they are associated with harvested species, and because most sea turtle species are recognized internationally as being either threatened or endangered. Article 61(2)/61(4) provides some protection for threatened or endangered populations as well as species associated with harvested species. However, the "shall take into consideration" language of Article 61(4) does not mandate strong protective measures. Article 194(5) encourages habitat protection beneficial to threatened and endangered species. Regardless of UNCLOS provisions and similar to whales as discussed above, extensive protection for sea turtles, in the form of trade restrictions, derives from their inclusion in the Appendices of CITES. Anadromous species spend most of their lives in the ocean, but enter freshwater to spawn. Salmon, sturgeon, and striped bass are some of the anadromous species of interest to the United States. UNCLOS assigns primary interest in and responsibility for anadromous fish stocks to the nations in whose rivers the stocks originate. Fishing for anadromous stocks is prohibited on the high seas, except in cases where economic dislocation might result. Coastal nations through whose waters anadromous fish migrate are required to cooperate with the nations wherein the anadromous stocks originated. Enforcement of regulations concerning anadromous fish stocks beyond the EEZ is to be accomplished through negotiated agreement. The United States actively participates in a cooperative bilateral salmon agreement with Canada as well as broader regional agreements for both Atlantic and Pacific stocks. Catadromous species spend most of their lives in freshwater, but enter the ocean to spawn. American eels are the primary catadromous species of interest to the United States. UNCLOS gives the coastal nations where these species spend most of their lives the responsibility for managing them, and prohibits harvesting them on the high seas. International cooperation is required where these species migrate through more than one EEZ. Sedentary species are addressed in Article 77(4) of UNCLOS. Coastal nation jurisdiction over sedentary species may extend beyond 200 miles, to the extent of the continental shelf (as defined in Article 76). Although the meaning of sedentary is defined, no listing of exactly which species are to be considered sedentary is provided in UNCLOS. Thus, controversy may arise over access to certain species, and dispute resolution provided by UNCLOS may become necessary. Given the current differences of opinion and limited data, additional scientific research may be required to better understand the sedentary nature of certain shellfish, such as scallops. Protection for sedentary species is further promoted by Article 136, which states that the seabed, ocean floor, and subsoil beyond the limits of national jurisdiction are the common heritage of humankind. This implies an obligation to protect the seamounts and hydrothermal vents that support unique ecosystems. This view receives additional support from Article 145, on protecting the marine environment of the seabed, ocean floor, and subsoil beyond the limits of national jurisdiction and conserving the natural resources of the seabed and ocean floor to prevent damage to flora and fauna. Other concerns may arise where the continental shelf beyond 200 miles is shared between nations. For example, how might potential competing Russian and U.S. interests in developing a snail fishery in the Bering Sea's enclosed international waters (the "donut hole") be handled under the UNCLOS regime? UNCLOS preserves the freedom to fish on the high seas, subject to other treaty obligations; the rights, duties, and interests of coastal nations; and an obligation to cooperate in conserving and managing high seas living resources. UNCLOS's obligation to cooperate in the conservation and management of high seas living resources would represent a new commitment for the United States, and is subject to compulsory dispute settlement should conflict arise. The 1995 Straddling Stocks Agreement addresses specific concerns for the conservation and management of high seas stocks in a manner consistent with UNCLOS. In addition, the Senate agreed to a resolution of advice and consent to ratification for the Agreement to Promote Compliance with International Conservation and Management Measures by Fishing Vessels on the High Seas (Senate Treaty Doc. 103-24) on October 6, 1994. This agreement, developed under the leadership of the U.N. Food and Agriculture Organization, reflects the intent of UNCLOS and extends its reach by limiting the reflagging of vessels participating in high seas fisheries. This agreement entered into force on April 24, 2003, and there are currently 39 parties to the agreement. Although UNCLOS provides special access rights to surplus living marine resources within coastal nation EEZs for nearby developing nations that are landlocked or geographically disadvantaged, no nations meeting these criteria are believed to exist within the same region as the United States. Regional, subregional, or bilateral agreements would be negotiated to guide the provision of an equitable allocation to any such disadvantaged nation. Regardless, it is the coastal nation alone that determines whether any harvestable surplus exists within its EEZ, and such a decision may not be challenged through dispute settlement procedures. Article 192 states a general obligation of parties to UNCLOS to protect and preserve the marine environment, while Article 193 states that resource exploitation is to be conducted within this obligation to protect and preserve the marine environment. This becomes more specific in Article 194(5), which calls attention to measures "necessary to protect and preserve rare or fragile ecosystems as well as the habitat of depleted, threatened or endangered species and other forms of marine life." Additional protection is provided by Article 61(4), which encourages attention to bycatch and incidental catch by calling for commercial fishermen to consider associated or dependent species so that their reproduction is not seriously threatened. Preventing intentional or accidental introduction of harmful alien or exotic species by all measures necessary is directed by Article 196. In addition, Article 206 requires an environmental impact assessment where parties to UNCLOS have reasonable grounds for believing that planned activities may lead to substantial pollution or harmful changes to the marine environment. The various articles of UNCLOS that address pollution are relevant to marine habitat protection. Parties to UNCLOS are to prevent, reduce, and control pollution of the marine environment (Article 194) from land-based sources (Article 207); seabed activities under their jurisdiction (Article 208); and vessels (Article 211). The expansion of enforcement rights of port/coastal nations (Articles 218 and 220) is an important concession to nations, such as the United States, that have a small merchant fleet and a large and productive EEZ. Article 136 states that the seabed, ocean floor, and subsoil beyond the limits of national jurisdiction are the common heritage of humankind, implying an obligation to protect seamounts and hydrothermal vents that support unique ecosystems. Article 145, on protecting the marine environment of the seabed, ocean floor, and subsoil beyond the limits of national jurisdiction from pollution as well as protecting and conserving the natural resources of the seabed and ocean floor to prevent damage to flora and fauna, provides additional support for protection of these unique habitats. Article 297(3)(b) offers assurances that domestic EEZ fisheries matters cannot be forced to undergo compulsory dispute settlement proceedings leading to binding decisions under UNCLOS: the coastal State shall not be obliged to accept the submission to such settlement [compulsory procedures leading to binding decisions] of any dispute relating to its sovereign rights with respect to the living resources in the exclusive economic zone or their exercise, including its discretionary powers for determining the allowable catch, its harvesting capacity, the allocation of surpluses to other States and the terms and conditions established in its conservation and management laws and regulations. Article 297(3)(b) does provide that disputes can be submitted to conciliation when (1) a coastal nation has failed to properly conserve and manage EEZ living resources such that they become seriously endangered; (2) a coastal nation has arbitrarily refused to determine allowable catches and capacity to harvest species desired by a foreign nation; or (3) a coastal nation has arbitrarily refused to allocate a declared surplus in a living resource to any foreign nation. However, Article 297(3)(c) prohibits a conciliation commission from substituting its discretion for that of the coastal nation. Conciliation procedures are outlined in Article 7(2) of Annex V, which states that a conciliation commission's report, including its conclusions and recommendations, is not binding. The history of the International Tribunal for the Law of the Sea (ITLOS), however, merits scrutiny. Article 292, providing for the prompt release of vessels, allows for application to the ITLOS for the prompt release of any vessel flagged by one member that is detained by another member. The vast majority of the cases ITLOS has heard so far have been applications for the prompt release of fishing vessels that have been accused of unauthorized fishing in the EEZ of a member. Some observe that these cases may really represent fishery disputes in disguise. As presently understood and interpreted, the LOS provisions generally appear to reflect current U.S. policy with respect to living marine resource management, conservation, and exploitation. Based on these interpretations, the living resource provisions of UNCLOS are generally not seen as imposing significant new U.S. obligations, commitments, or encumbrances involving living resources and their management. One possible benefit of U.S. ratification would be the international community's anticipated positive response to such U.S. action. In addition, U.S. accession to UNCLOS would provide the United States the opportunity to nominate a representative to the Commission on the Limits of the Continental Shelf and to seek clarification of U.S. continental shelf boundaries, thus addressing concerns related to shared continental shelf areas such as the Bering Sea's donut hole and the Arctic waters of the Chukchi and Beaufort Seas. Furthermore, accession could benefit the United States by allowing U.S. participation in the International Seabed Authority and appointment of U.S. representatives to its various subsidiary bodies. Moreover, U.S. accession to UNCLOS would provide the United States with the opportunity to nominate national representatives as judges on the ITLOS and to fully participate in developing the practices of this important global body. As the status of the International Whaling Commission (IWC) is currently in dispute, some suggest that the United States, if ratifying UNCLOS, might offer a declaration recognizing the IWC as the "appropriate international organization" to regulate cetaceans as a means to marginalize any competing organizations that might seek to offer an alternative model of cetacean management. Such U.S. action might empower and energize the IWC, an organization that the United States has worked hard to develop as a key marine conservation body. On the other hand, some U.S. interests view U.S. ratification as potentially complicating enforcement of domestic marine regulations. These uncertainties reflect the absence of any comprehensive assessment of the social and economic impacts of UNCLOS implementation by the United States. Although early ITLOS cases do not indicate a problem, some in the United States remain concerned that UNCLOS's language concerning arbitrary refusal of access to surplus (unallocated) living resources might be a potential source of conflict. Additional concerns surround whether and to what extent the United States could regulate ballast water discharges to combat invasive species, supplemental to and in concert with international action taken by the International Maritime Organization (IMO). If UNCLOS is interpreted such that invasive species are covered under the Convention's broad definition of pollution, the United States (and other coastal nations) could be constrained as to what preventive measures could be imposed on ships operating outside our territorial sea. Proponents of UNCLOS maintain that U.S. participation in the development of policies and practices of the International Tribunal for the Law of the Sea, the Commission on the Limits of the Continental Shelf, and the International Seabed Authority could help to forestall future problems related to living marine resources. In addition, they indicate that the Senate could choose to address some of the intentional ambiguities of UNCLOS drafters with its power to make declarations and statements as provided for in Article 310. Such declarations and statements can be useful in promulgating U.S. policy and putting other nations on notice of U.S. interpretation of UNCLOS. A range of issues where U.S. interpretive statements might be helpful was discussed at a Senate Committee on Foreign Relations hearing on October 21, 2003.

The United Nations Convention on the Law of the Sea established a comprehensive international legal framework for governing activities related to the world's oceans. UNCLOS was agreed to in 1982, but the United States never became a signatory nation. This report describes provisions of UNCLOS relating to living marine resources and discusses how these provisions comport with current U.S. marine policy. As presently understood and interpreted, these provisions generally appear to reflect current U.S. policy with respect to living marine resource management, conservation, and exploitation. Based on these interpretations, they are generally seen as not imposing significant new U.S. obligations, commitments, or encumbrances, and are seen as providing several new privileges, primarily related to participation in commissions developing international ocean policy. No new domestic legislation appears to be required to implement the living resources provisions of UNCLOS. A possible benefit of U.S. ratification would be the international community's anticipated positive response to such U.S. action. In addition, early U.S. participation in the development of policies and practices of the International Tribunal for the Law of the Sea, the Commission on the Limits of the Continental Shelf, and the International Seabed Authority could help to forestall future conflicts related to living marine resources. On the other hand, some U.S. interests view U.S. ratification as potentially complicating enforcement of domestic marine regulations, and remain concerned that UNCLOS's language concerning arbitrary refusal of access to surplus (unallocated) living resources might be a potential source of conflict (in addition to concerns about other provisions of the Convention). These uncertainties reflect the absence of any comprehensive assessment of the social and economic impacts of UNCLOS implementation by the United States. The Senate may choose to address the ambiguities of UNCLOS with its power to make declarations and statements, as provided for in Article 310 of the Convention. Such declarations and statements can be useful in promulgating U.S. policy and putting other nations on notice of U.S. interpretation of UNCLOS. The Senate Committee on Foreign Relations reported UNCLOS on December 19, 2007, but no action was taken by the entire Senate. In the 111th Congress, then-Secretary of State Hillary Clinton, at her confirmation hearing before the Senate Committee on Foreign Relations on January 13, 2009, acknowledged that U.S. accession to UNCLOS would be an Obama Administration priority. Later in this confirmation hearing, then-Senator John Kerry, the committee chair, confirmed that UNCLOS would also be a committee priority. However, the Senate took no action on UNCLOS during the 111th Congress. In the 112th Congress, the Administration continued to encourage Senate action on UNCLOS, and Senator John Kerry, chairman of the Senate Committee on Foreign Relations, was guardedly optimistic, but no action was taken. In the 113th Congress, there has been little or no mention of UNCLOS and no actions have been taken to ratify the treaty.

On June 4, 1997, the Individuals with Disabilities Education Act Amendments of 1997, P.L.105-17 , were signed into law. These amendments are the most comprehensive and significantchanges made to the Individuals with Disabilities Education Act (IDEA) since its enactment in 1975.Several of the most important changes were made regarding the discipline of children withdisabilities. Congress attempted to strike "a careful balance between the LEA's duty to ensure thatschool environments are safe and conducive to learning for all children, including children withdisabilities, and the LEA's continuing obligation to ensure that children with disabilities receive afree appropriate public education." (1) Although much of the previous statute, case law, regulations and policy guidance was incorporated in the new statutory language, several provisions were added which give schoolsincreased flexibility for dealing with children with disabilities who misbehave. The IDEAAmendments of 1997 allow a school to place a child with a disability in an interim alternativeeducational setting for not more than forty-five days if the student has been involved with drugs orweapons (not just firearms as under previous law). An impartial hearing officer may order a changein placement for a child with a disability to an interim alternative educational placement for up toforty-five days if the hearing officer finds that the school has demonstrated by substantial evidencethat leaving the child in the current placement is substantially likely to result in injury to the childor others. In addition, P.L. 105-17 codifies the previous interpretation by the Department ofEducation that educational services may not cease for children with disabilities who have beensuspended or expelled. The Department of Education promulgated final regulations under P.L. 105-17 on March 12, 1999 after receiving comments from about 6,000 individuals, public agencies and organizations. (2) The regulatory provisions on discipline were controversial, especially those aspects relating to shortterm suspensions, and these provisions were changed from what the Department had put forth in itsproposed regulations. (3) Although significant changes were made in the 1997 reauthorization of IDEA, amendments have been proposed since then to further amend the discipline provisions. Several of these havepassed the House or Senate but have not become law. The 108th Congress passed H.R. 1350 in both the House and Senate but conferees have not yet been appointed. Prior to a moredetailed discussion of the 1997 statutory and regulatory changes as well as more recent proposedchanges, it is important to briefly examine the history of IDEA's discipline provisions. (4) The manner in which children with disabilities can be disciplined may seem quite complex butthe logic involved is much more apparent when IDEA's history is examined. IDEA was originallyenacted in 1975 as the Education for All Handicapped Children Act, P.L. 94-142 . The primarymotive for its enactment was the fact that children with disabilities often failed to receive aneducation or received an inappropriate education. (5) This lack of education gave rise to numerousjudicial decisions, notably PARC v. State of Pennsylvania, 343 F.Supp. 279 (E.D.Pa. 1972), and Mills v. Board of Education of the District of Columbia, 348 F.Supp. 866 (D.D.C. 1972). Thesedecisions found constitutional infirmities with the lack of education for children with disabilitieswhen the states were providing education for children without disabilities. As a result, the stateswere under considerable pressure to provide such services, and they lobbied Congress to assist them. In enacting P.L. 94-142 , Congress provided grants to the states to help pay for education for children with disabilities and also delineated specific requirements the states must follow in orderto receive these federal funds. These requirements did not contain a discipline provision per se butrather contained a requirement that if there is a dispute between the school and the parents of a childwith a disability, the child "stays put" in his or her current educational placement until the disputeis resolved using the due process procedures set forth in the statute. The concept of "stay put" wasplaced in the statute to help eliminate the then common discriminatory practice of expelling childrenwith disabilities from school. A revised "stay put" provision remains as law in the current versionof IDEA. Issues relating to children with disabilities who exhibited violent or inappropriate behavior have been raised for a number of years. In 1988, the question of whether there was an implied exceptionto the stay put rule was presented to the Supreme Court in Honig v. Doe, 484 U.S. 305 (1988). Honig involved emotionally disturbed children one of whom had choked another student withsufficient force to leave abrasions on the child's neck and who had kicked out a window while hewas being escorted to the principal's office. The other child in the Honig case had been involvedin stealing, extorting money and making lewd comments. The school had sought expulsion but theSupreme Court disagreed finding that "Congress very much meant to strip schools of the unilateral authority they had traditionally employed to exclude disabled students, particularly emotionallydisturbed students, from school." (6) However, theCourt observed that this holding did "not leaveeducators hamstrung....Where a student poses an immediate threat to the safety of others, officialsmay temporarily suspend him or her for up to 10 school days....And in those cases in which theparents of a truly dangerous child adamantly refuse to permit any change in placement, the 10-dayrespite gives school officials an opportunity to invoke the aid of the courts under section 1415(e)(2),which empowers courts to grant any appropriate relief." (7) This statement about the school's right toseek judicial relief has come to be know as a Honig injunction. The Supreme Court's interpretation of IDEA in Honig did not quell all concerns about discipline and children with disabilities. In 1994, Congress amended IDEA's stay put provision togive schools the unilateral authority to remove a child with a disability to an interim alternativeeducational setting if the child was determined to have brought a firearm to school. This provisionwas expanded upon in the IDEA Amendments of 1997 to include weapons, not just firearms, anddrugs. The Department of Education had also received numerous questions from schools about discipline and in 1995 issued a memorandum discussing numerous discipline issues including theuse of manifestation determinations. (8) If a schoolsought to suspend or expel a child with a disabilityfor more than ten days, the school must first make a "manifestation determination," a determinationconcerning whether the student's misconduct was related to his or her disability. If the behavior wasnot related to the disability, the school could suspend or expel for more than ten days but mustcontinue to provide education services. If the behavior was related to the disability, the school mustgive notice of any recommended change in placement and, if the parent objected, the parent couldinvoke the stay put provision. The Department found that Honig injunctions, court orders to changethe placement of a child with a disability, were proper when a school believed that maintaining thechild in his or her current placement was "substantially likely to result in injury to the student orothers." The concept of a manifestation determination was placed in statutory language by P.L.105-17 . Similarly, the new statutory language continues the regulatory interpretation thateducational services cannot cease for children with disabilities even if they have been suspended orexpelled. With the preceding background in mind, the specific changes made by P.L. 105-17 will nowbe examined. First, however, it should be emphasized that much of what Congress intended to dowas to codify existing law that was found in the regulations, case law, and policy guidance. Thechanges that were made were among the most contentious in a long and controversialreauthorization. The House and Senate reports described the changes in general. The committee recognizes that school safety is important to educators and parents. There has been considerable debate and concern about both ifand how those few children with disabilities who affect the school safety of peers, teachers, andthemselves may be disciplined when they engage in behavior that jeopardizes such safety. Inaddition, the committee is aware of the perception of a lack of parity when making decisions aboutdisciplining children with and without disabilities who violate the same school rule or code ofconduct. By adding a new section 615(k) to IDEA, the committee has attempted to strike a carefulbalance between the LEA's duty to ensure that school environments are safe and conducive tolearning for all children, including children with disabilities, and the LEA's continuing obligationto ensure that children with disabilities receive a free appropriate public education. Thus, drawingon testimony, experience, and common sense, the committee has placed specific and comprehensiveguidelines on the matter of disciplining children with disabilities in this section. (9) Generally, a child with a disability is not immune from disciplinary procedures; however, theseprocedures are not identical to those for children without disabilities. If child with a disabilitycommits an action that would be subject to discipline, school personnel have several options. Theseinclude a suspension for up to ten days, placement in an interim alternative education setting for up to forty five days for situations involving weapons or drugs, and asking a hearing officer to order a child be placed in an interim alternative educational setting for up to forty five days if it is demonstrated that the child is substantially likelyto injure himself or others in his current placement, conducting a manifestation determination review to determine whether there is a link between the child's disability and the misbehavior. If the child's behavior is not amanifestation of a disability, long term disciplinary action such as expulsion may occur, except thateducational services may not cease. School officials may also seek a Honig injunction as discussed previously if they are unable to reach agreement with a student's parents and they feel that the new statutory provisions are not sufficient. School personnel can order a change in placement for not more than ten days to an appropriate interim alternative educational setting, another setting or suspension to the same extent that theseoptions would be applied to children without disabilities. This new provision in P.L. 105-17 codifieswhat was existing practice. The Supreme Court in Honig v. Doe , supra, had allowedten-daysuspensions under the prior law. However, the new statutory language does not state whether the ten days are ten days for theschool year or ten consecutive days and this became a point of controversy in the proposedregulations. The final regulations responded to this criticism with a compromise. School personnelmay order the removal of a child with a disability from the child's current placement for not morethan ten consecutive school days for any violation of school rules to the extent that the same removalwould be applied to children without disabilities. (10) In addition, the school may remove a child witha disability for periods of not more than ten consecutive school days in the same school year for otherincidents of misconduct as long as these removals do not constitute a change in placement asdescribed in 300.519(b). Section 300.519(b) states that a change in placement occurs if "the childis subjected to a series of removals that constitute a pattern because they cumulate to more than 10school days in a school year, and because of factors such as the length of each removal, the totalamount of time the child is removed, and the proximity of the removals to one another." For suspensions after suspensions for the first ten days of the school year, the final regulations state that schools must provide services to the extent necessary to enable the child to appropriatelyprogress in the general curriculum and meet the child's IEP (individualized educational placement)goals. (11) If the child is removed for not more thanten consecutive days and there is not a change inplacement, the school personnel make the determination of which services are necessary. (12) If thereis a change in placement, certain obligations are triggered for the LEA. The IEP team must meet anddevelop a behavior assessment plan, (13) manifestation determinations are required, (14) andcertainservices to meet the FAPE requirement must be provided. (15) A major change made by P.L. 105-17 was the expansion of when an interim alternative educational placement can be used. Under prior law, school officials could make such a placementonly when a student carried a firearm to school or a school function. The IDEA Amendments of1997 expand upon this authority to allow schools to make such a placement not only for firearms butfor weapons (16) and drugs. P.L. 106-25 , theEducation Flexibility Partnership Act of 1999, made atechnical amendment to this provision clarifying that the schools may remove a child who haspossession of a weapon at school and is not limited to situations where a weapon is carried to school. The appropriate interim alternative education setting is to be determined by the child'sindividualized education program (IEP) team. An important addition made by P.L. 105-17 concerns behavior intervention plans. Within ten days after deciding to move a child with a disability to an interim alternative educational setting, ifthere was not already a functional behavior assessment and a behavioral intervention plan, the localeducation agency must convene an IEP meeting to develop an assessment plan. If there was alreadya behavior intervention plan, the IEP team is to review and, if necessary, modify the plan. (17) Thisrequirement is in addition to the new statutory provision providing that in developing a child's IEP,where a child's behavior impedes his or her learning or the learning of others, the IEP team shallconsider, when appropriate, strategies, including positive behavioral interventions, and supports toaddress the behavior. (18) A new situation where an interim alternative educational placement may be used was added by P.L. 105-17 . Under certain circumstances, an impartial hearing officer may order a change inplacement to an interim alternative educational setting for not more than forty-five days. The hearingofficer must: determine that the school has demonstrated by substantial evidence that maintaininga child's current placement is "substantially likely to result in injury" to the child or others; considerthe appropriateness of the child's current placement; consider whether the public agency has madereasonable efforts to minimize the risk of harm in the child's current placement; determine that theinterim alternative educational setting has been selected so as to enable the child to continue toparticipate in the general curriculum and to continue to receive those services and modifications thatwill enable the child to meet the goals set out in his or her IEP; and determine that the interimalternative educational placement shall include services and modifications designed to address thebehavior that led to the disciplinary action so that the behavior does not reoccur. (19) As was noted previously, the concept of a manifestation determination originated in policy interpretations of IDEA by the Department of Education. The theory is that when behavior, eveninappropriate behavior, is caused by a disability, the response of a school must be different that whenthe behavior is not related to the disability. P.L. 105-17 codifies this requirement by mandating thata determination regarding the relationship between a child's disability and his or her behavior mustbe made by the IEP team in certain circumstances. These circumstances, as specified in the statute,are when school personnel contemplate ordering a change in placement for disciplinary reasons toan interim alternative educational setting for not more than forty-five days; when a hearing officercontemplates ordering a change in placement for disciplinary reasons; or if a disciplinary actioninvolving a change in placement of more than ten days is contemplated for a child with a disabilitywho has engaged in any other behavior that has violated a school's rule or conduct of conduct. (20) If the child's behavior is related to his or her disability, the school may review the child's placement and, if necessary, initiate a change in the child's placement. The school also has theoption of suspending the child for ten school days or less and seeking a Honig injunction. If the child's behavior is not related to his or her disability, the relevant disciplinary procedures that are applicable to children without disabilities may be applied to the child in the same mannerin which they would be applied to children without disabilities except that a free appropriate publiceducation must be made available to the child even if he or she is expelled or suspended. Parentshave a right to request a hearing if they disagree with the determination that the child's behavior wasnot a manifestation of the child's disability or with any decision concerning placement. In thesecases, there shall be an expedited hearing. (21) In order to find that a child's behavior was not related to his or her disability, the IEP team must consider all relevant information and must make three determinations. First, the IEP team must findthat in relation to the behavior in question, the child's IEP and placement were appropriate and thespecial education services and behavior intervention strategies were provided according to the child'sIEP and placement. Second, the IEP team must find that the child's disability did not impair thechild's ability to understand the impact and consequences of the behavior subject to disciplinaryaction. Finally, the IEP team must find that the child's disability did not impair the ability of thechild to control the behavior subject to the disciplinary action. (22) If the parents request a hearing regarding a disciplinary action involving an interim alternative educational setting or manifestation determination, their child with a disability shall remain in theinterim alternative educational setting. This placement is where the child stays until the hearingofficer's decision or until the expiration of the specified time periods unless the parents and the LEAor SEA agree otherwise. (23) If the child is placedin an interim alternative educational setting for morethan ten days and the school wants to change the child's placement after the time in the interimalternative educational setting, and if the parents challenge the proposed placement, the child staysput in the placement the child was in prior to the interim alternative educational placement. (24) Ifschool personnel feel that this would be dangerous, there may be an expedited hearing. (25) The final regulations reiterate the statutory language and make clear that the expedited hearing procedure may be repeated. (26) In addition, the finalregulations note that "if the decision of a hearingofficer in a due process hearing conducted by the SEA or a State review official in an administrativeappeal agrees with the child's parents that a change of placement is appropriate, that placement mustbe treated as an agreement between the State or local agency and the parents for the purposes ofparagraph (a) of this section." (27) Paragraph (a) isthe regulatory recitation of the stay put requirement. One of the most controversial aspects of the discipline issue during the reauthorization of IDEA involved the cessation of educational services for children with disabilities. IDEA has from itsinception required that each state receiving funds have in effect a policy that assures all children withdisabilities the right to a free appropriate public education (FAPE). P.L. 105-17 added to thisrequirement, indicating that it includes "children with disabilities who have been suspended orexpelled from school." (28) The statutory addition tracked the interpretation of the law by the Department of Education's Office of Special Education Programs (OSEP) (29) which had been criticized as being beyond thescope of IDEA's statutory language. Previously, the state of Virginia refused to comply with theOSEP interpretation. This led to several judicial decisions and the Fourth Circuit Court of Appealsfound that the plain language of IDEA did not condition the receipt of IDEA funds on the continuedprovision of educational services to expelled children with disabilities and that in order for Congressto place conditions on the state's receipt of federal funds, Congress must do so clearly andunambiguously. (30) The clear signal sent toCongress by the courts was that if Congress wanted toavoid judicial controversies and impose a requirement that educational services cannot cease forchildren with disabilities, it should amend the statute to do so. Congress responded by adding thequalifying phrase to the FAPE requirement in P.L. 105-17 indicating that FAPE extends to childrenwith disabilities who have been suspended or expelled. The Department of Education's final regulations addressed the meaning of the new FAPE language when read in connection with the rule on ten day suspensions. The final regulationsinterpreted the statute as not requiring services during the first ten days a child is removed fromschool (31) but for subsequent suspensions, schoolsare required to provide certain services. (32) One of the situations Congress sought to address during the reauthorization concerned children who were the subject of a disciplinary action and who alleged after the action occurred that they weredisabled and thus entitled to the protections of IDEA. (33) P.L. 105-17 allows such a child to assert theprotections of IDEA if the local educational agency had knowledge that the child was a child witha disability before the behavior that precipitated the disciplinary action occurred. The lawspecifically states that the LEA is deemed to have such knowledge if the parent of the child has expressed concern in writing (unless the parent is illiterate or has a disability that prevents such expression) to personnel of the agency that the childis in need of special education and related services; the behavior or performance of the child demonstrates the need for such services; the parent of the child has requested an evaluation of the child; or the teachers of the child or other LEA personnel have expressed concern about the behavior or performance of the child to the special education director or to other personnel of theagency. (34) This last category caused some concern among school officials who feared that it would indicate that the LEA had knowledge that the child was a child with a disability if there were casualhallway comments. In the final regulations, the Department of Education stated that this concernhad to be expressed to the director of special education "or to other personnel in accordance with theagency's established child find or special education referral system." (35) Prior judicial decisions also gave rise to the issue of when children with disabilities could be referred to law enforcement officials. (36) P.L.105-17 specifically states that nothing in Part B of IDEAshall be construed to prohibit an agency from reporting a crime committed by a child with adisability to appropriate authorities or to prevent state law enforcement and judicial authorities fromexercising their responsibilities. (37) The IDEA Amendments of 1997 also provide for the transfer of disciplinary information on a child with a disability since it was felt that there was an increased possibility of violence when alocal school system was not adequately informed about the child's past. The Amendmentsspecifically allowed a state, at its discretion, to require a local educational agency to include astatement of any current or previous disciplinary actions that have been taken against a child witha disability, in the records of the child. The statement can include a description of the behavior thechild engaged in, a description of the disciplinary action taken, and other information that is relevantto the safety of the child and other individuals. This information can be transmitted to the sameextent that such information would be transmitted with the records of children who do not havedisabilities. (38) In the final regulations, theDepartment of Education discussed the relationship of thisprovision to the Family Educational Rights and Privacy Act (FERPA) and found that IDEA permits transmission of records only to the extent permitted by FERPA. (39) Legislation Prior to the 108th Congress. Although Congress described its 1997 changes to discipline provisions as a "careful balance," itwas not long before amendments to change the provisions surfaced. Amendments were offered to H.R. 1 , 107th Cong., and its companion bill, S. 1 . (40) Both these amendmentspassed their respective Houses but the conference committee did not include them as part of the finallegislation which became P.L. 107-110 . Representative Norwood described his amendment to H.R. 1 as allowing "special needs students to be disciplined under the same policy as nonspecial needs students in the exact samesituation." (41) Essentially the amendment wouldhave eliminated the mandated provision ofeducational services to children with disabilities who have been suspended or expelled for actionsinvolving drugs, weapons, or aggravated assault or battery in a state that does not require educationalservices in that situation for children without disabilities. The amendment offered by Senator Sessions to S. 1 , like the House amendment, would have implemented uniform disciplinary policies regarding the discipline of children withdisabilities in certain circumstances. The Senate amendment was not limited to specific disciplinarysituations like those involving weapons but would have amended IDEA by adding a new subsectionrelating to uniform policies on discipline when the behavior at issue is not a manifestation of thechild's disabilities, providing for certain procedural protections, and providing for alternativeplacements of children with disabilities in certain situations. In 1999 the Senate passed S. 254 , 106th Cong., the Violent and Repeat Juvenile Accountability and Rehabilitation Act of 1999, and the House passed H.R. 1501 , 106thCong., the Child Safety and Protection Act, both of which contained amendments to IDEA. Theseamendments would have changed section 615 of IDEA to eliminate IDEA's different disciplinaryprocedures for children with disabilities in certain situations. In the Senate the amendment appliedto children with disabilities who carry a gun or firearm while in the House the amendment wouldhave covered a weapon. These amendments were not enacted. (42) Two amendments relating to children with disabilities were offered and accepted during House Education and Workforce Committee markup of H.R. 4141 , 106th Cong., theElementary and Secondary Education Act Amendments. One amendment, offered by RepresentativeNorwood, concerned the discipline of a child with a disability who carries or possesses a weapon. The other amendment, offered by Representatives Talent, McIntosh and Tancredo, concerned thediscipline of a child with a disability who knowingly possesses or uses illegal drugs at school orcommits an aggravated assault or battery at school. These amendments were not enacted. (43) Legislation in the 108th Congress. In the 108th Congress, the IDEA reauthorization bills both included amendments that would change the current law relating to the discipline of children with disabilities. H.R. 1350 ,108th Congress, passed the House on April 30, 2003. On May 13, 2004, the Senate incorporated S. 1248 in H.R. 1350 and passed H.R. 1350 in lieu of S. 1248 . Conferees have not yet been appointed. (44) Both House and Senate bills would keep the ability of school personnel to suspend a child with a disability for up to ten school days but they differ regarding other changes in placement. The Housebill would delete many of the provisions in current law while the Senate bill would make somerevisions. The House Report states that "(t)he discipline improvements in the bill provide for auniform school discipline code and substantially reduce the confusion and complexity of the currentsystem." (45) Under H.R. 1350 (House), schoolpersonnel would be able to order a changein placement of a child with a disability who violates a code of student conduct to an appropriateinterim alternative educational setting selected so as to enable the child to continue to participate inthe general education curriculum and to progress toward IEP goals for not more than 45 school days(to the extent such alternative and such duration would be applied to children without disabilities).In addition, this action "may include consideration of unique circumstances on a case-by-case basis." H.R. 1350 (House) specifically states that this change in placement could last beyond45 school days if required by state law or regulation for the violation in question, to ensure the safetyand appropriate educational atmosphere in the schools. The Senate report describes the Senate changes regarding discipline as making the procedures "simpler, easier to administer, and more fair to all students." (46) The Senate bill would change thecurrent law relating to interim alternative educational settings by adding a provision allowing schoolpersonnel to remove a student to an interim alternative educational setting for not more thanforty-five days, regardless of whether the behavior is determined to be a manifestation of a disability,where a child with a disability has committed serious bodily injury upon another person while atschool or at a school function under the jurisdiction of a state or local educational agency. (47) H.R. 1350 (Senate) would require that the LEA notify the parents of the decision to takedisciplinary action and all the procedural safeguards available under section 615, not later than thedate on which the decision to take disciplinary action is made. Both House and Senate bills would provide that when a child with a disability is removed from his or her current placement pursuant to these authorities, the child continue to receive educationalservices so as to enable the child to continue to participate in the general educational curriculum andto progress toward meeting the IEP goals. Both the House and Senate bill also contain provisionsrelating to the receipt of behavioral intervention services. Under H.R. 1350 (Senate), a hearing may be requested by the parent of a child with a disability who disagrees with any decision regarding disciplinary action, placement or themanifestation determination under this subsection, or by a LEA that believes the maintenance of thecurrent placement of the child is substantially likely to result in injury to the child or others. Asprovided in current law, H.R. 1350 (Senate) also would allow a hearing officer to ordera change in placement for a child with a disability to an appropriate interim alternative educationalsetting for not more than forty-five school days if the hearing officer determines that maintaining thecurrent placement of the child is substantially likely to result in injury to the child or to others. One of the significant differences between the House and Senate bills concerns the use of a manifestation determination. H.R. 1350 (House) would delete the requirement in currentlaw that a determination be made concerning whether a child's action was a manifestation of his orher disability and also would delete the provision in current law that if the child's behavior was nota manifestation of the child's disability, the relevant disciplinary procedures applicable to childrenwithout disabilities may be applied to the child in the same manner in which they would be appliedto children without disabilities, except that educational services may not cease. H.R. 1350 (Senate) would keep the concept of a manifestation determination but contains revisedlanguage. Manifestation determinations do not have to be conducted prior to taking a disciplinaryaction for ten consecutive school days or less or for a removal in cases involving weapons, drugs,or serious bodily injury. In other situations, the Senate bill would require that within ten school daysof any decision to change the placement of a child with a disability because of a violation of a codeof student conduct, the IEP team shall review all relevant information in the student's file, anyinformation provided by the parents, and teacher observations to determine: (1) if the conduct inquestion was the result of the child's disability; or (2) if the conduct in question resulted from thefailure to implement the IEP or develop and implement behavioral interventions. If either of thesetwo conditions is applicable, the Senate bill provides that the conduct is determined to be amanifestation of the child's disability. One of the key provisions of IDEA concerns where a child with a disability shall be placed during the pendency of a due process proceeding. The House and Senate bills do not change thegeneral stay put provision in current law which requires that a child remain in his or her then currenteducational placement during the pendency of due process procedures; however, there are somechanges regarding stay put for placements during appeals regarding a disciplinary action, the interimalternative educational setting, or the manifestation determination. Both the House and Senate billswould make changes to the current law regarding placement of a child with a disability during theseappeals by a parent. Generally, as in current law, both bills would require that the child remain inthe interim alternative educational setting pending the decision of the hearing officer or until theexpiration of the time period provided, unless the parent and the state or local educational agencyagree otherwise. H.R. 1350 (Senate) differs from current law and provides for the childwith a disability to remain in the interim alternative education setting pending the decision of thehearing officer or the expiration of the time period in the following situations: when a parent requestsa hearing regarding disciplinary procedures described in 615(k)(1)(B) which concerns theapplication of the disciplinary procedures when the actions of the child with a disability are notdetermined to be a manifestation of the child's disability; when there is a challenge to the interimalternative educational setting (same as current law); or when there is a challenge to themanifestation determination. The Senate bill would require the State or local educational agency to arrange for an expedited hearing to occur within twenty school days of the date of the request for the hearing. The Senate billalso would delete the provision in current law regarding current placement and expedited hearings. In the House bill, the stay put requirement is applicable to a change in placement as described in 615(j)(1)(B), H.R. 1350 (House), which would allow school personnel to order achange in placement for a child with a disability who violates a code of student conduct. Undercurrent law, this exception to the general "stay put" requirement is more limited and applies tosituations involving weapons, drugs or where a hearing officer has determined that maintaining thecurrent placement is substantially likely to result in injury to the child or others. The House andSenate bills would delete the provisions in current law regarding current placement during appealsand expedited hearings. Under current law, if a child with a disability is placed in an interimalternative educational setting and school personnel propose to change the child's placement afterthe expiration of the interim alternative placement, the child is to remain in the child's placementprior to the interim alternative education setting pending the result of the proceeding. The Senatebill, but not the House bill, would add a requirement that the state or local educational agencyarrange for an expedited hearing which shall occur within twenty school days of the date the hearingis requested. Current law provides that a child who has not been determined to be eligible for special education and related services and who has engaged in behavior that violated any rule or code ofconduct of the local educational agency, may seek the protections of IDEA if the local educationalagency had knowledge that the child was a child with a disability before the behavior thatprecipitated the disciplinary action occurred. The current law sets forth certain situations where alocal educational agency shall be deemed to have knowledge that a child is a child with a disability. The House and Senate bills contain similar provisions; however, the House bill requires the teacheror school personnel to express concern in writing about the behavior or performance of the child tothe director of special education or other personnel while the Senate bill requires that the teacher orschool personnel express concern about a pattern of behavior demonstrated by the child to thedirector of special education or other administrative personnel. The Senate bill, but not the Housebill, would add a new situation where the LEA is deemed to have knowledge: where the child hasengaged in a pattern of behavior that should have alerted LEA personnel that the child may be inneed of special education and related services. In addition, the Senate bill, but not the House bill,would add an exception where the LEA is deemed not to have knowledge that the child has adisability if the parent of the child has not agreed to allow an evaluation of the child.

The 1997 Amendments to the Individuals with Disabilities Education Act are the most comprehensive and significant changes made since its original enactment. Several of the mostimportant changes were made regarding the discipline of children with disabilities. Congressattempted to strike "a careful balance between the LEA's (local educational agency's) duty to ensurethat school environments are safe and conducive to learning for all children, including children withdisabilities, and the LEA's obligation to ensure that children with disabilities receive a freeappropriate public education." Generally, the new provisions give schools increased flexibility for dealing with children with disabilities who misbehave. A school may now place a child with a disability in an interimalternative educational setting for not more than forty-five days if the student has been involved withdrugs or weapons (not just firearms as under previous law). An impartial hearing officer may ordera change in placement for a child with a disability to an interim alternative educational placementfor up to forty-five days if the hearing officer finds that the school has demonstrated by substantialevidence that leaving the child in the current placement is substantially likely to result in injury tothe child or others. In addition, P.L. 105-17 codifies the previous interpretation by the Departmentof Education that educational services may not cease for children with disabilities who have beensuspended or expelled. Final regulations, issued by the Department of Education on March 12, 1999,elaborated upon these statutory requirements. This report examines both the statutory and regulatoryprovisions relating to discipline as well as recent proposed amendments. It will be updated asnecessary.

Over the course of 2014, the U.S. government rolled out targeted economic sanctions on Russian individuals and entities in critical commercial sectors in response to that country's annexing of the Crimean region of neighboring Ukraine and its support of separatist militants in Ukraine's east. Designed to change behavior of the Russian government by putting pressure on the Russian economy, sanctions include asset freezes for specific Russian individuals and entities; restrictions on financial transactions with Russian firms operating in key sectors; restrictions on U.S. exports, services, and technology for specific Russian oil exploration or production projects; and tighter restrictions on U.S. exports of dual-use and military items to Russia. The United States coordinated its sanctions with other countries, particularly with the European Union (EU). Russia retaliated against sanctions by banning imports of certain agricultural products from countries imposing sanctions, including the United States. U.S. policymakers are debating the use of economic sanctions in U.S. foreign policy toward Russia, including whether sanctions should be kept in place or further tightened. For example, in the Senate, legislation has been introduced to impose additional sanctions in response to Russia's alleged hacking of U.S. persons and institutions, including U.S. political organizations, and other aggressive actions, including in Ukraine ( S. 94 ), and to provide congressional oversight of actions that would limit Russia sanctions ( S. 341 , H.R. 1059 ). Legislation has also been introduced in the House to tighten sanctions, for example by prohibiting certain transactions in areas controlled by Russia ( H.R. 830 ), and to prohibit U.S. recognition of Russian sovereignty over Crimea ( H.R. 463 ). Some Members of Congress have proposed codifying existing sanctions, which could make them more difficult to ease or remove. Most of the current restrictions were put in place by President Barak Obama issuing Executive Orders under emergency authorities. On February 2, 2017, U.N. Ambassador Nikki Haley opened her first public remarks by referring to a recent flare-up of violence in Ukraine, noting that "the dire situation in eastern Ukraine is one that demands clear and strong condemnation of Russian actions." She stated that "the United States continues to condemn and call for an immediate end to the Russian occupation of Crimea" and that "Crimea-related sanctions will remain in place until Russia returns control of the peninsula to Ukraine." A key question in this debate is the impact of the Ukraine-related sanctions on Russia's economy and U.S. economic interests in Russia. The subsequent discussion on recent economic trends in Russia and U.S. economic ties with Russia may provide insight. The Obama Administration first imposed sanctions relating to the events in Ukraine in March 2014, and announced additional sanctions over subsequent months, working in coordination with the EU. The Obama Administration explained that the targeted sanctions on specific individuals, firms, and sectors "aim to increase Russia's political isolation as well as the economic costs to Russia, especially in areas of importance to President Putin and those close to him." In 2014, Congress also passed, and President Obama signed into law, the Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014 ( P.L. 113-95 ; 22 U.S.C. 8901 et seq .) and the Ukraine Freedom Support Act of 2014 ( P.L. 113-272 ; 22 U.S.C. 8921 et seq .). These acts contain provisions on U.S. sanctions in response to the conflict in Ukraine. U.S. sanctions on Russia in response to the Ukraine conflict include the following: Asset freezes and prohibitions against transactions with specific Russian individuals. The U.S. government has frozen assets under U.S. jurisdiction and prohibited U.S. persons from engaging in transactions with a number of Russian individuals, including Russian officials, deputies, businesspeople, and associates with ties to the Kremlin. Asset freezes and prohibitions against transactions with specific entities. Some Russian companies are subject to U.S. asset freezes and are prohibited from engaging in economic transactions with U.S. individuals and entities. Examples include Bank Rossiya, which has been called the "personal bank of Putin"; the Volga Group, a holding company owned by a close ally of Putin; and Almaz-Antey, a state-owned defense company. Restrictions on financial transactions with Russian firms operating in key sectors. Sanctions target sectors in Russia's financial services, energy, and defense sectors. U.S. individuals and entities face restrictions on select financial transactions, such as prohibitions on extending new debt with maturities longer than 30 or 90 days (depending on the sector). Examples of Russian firms subject to these sanctions include Rosoboronexport, a state-owned arms exporter; Rosneft, a state-owned oil company and the world's largest publicly traded oil producer; Rostec, a major Russian hi-tech and defense conglomerate; and Sberbank, the largest bank in Russia. Restrictions on specific o il-related exports , services, and technology to Russia . The United States restricts U.S. individuals and entities from exporting goods, services, or technology in support of exploration or production for deepwater, Artic offshore, or shale projects that have the potential to produce oil in Russia or in the maritime area claimed by Russia. Restrictions on specific exports . The United States has tightened restrictions on U.S. exports of dual-use and military items to Russia. The United States urged other countries to impose sanctions on Russia, and coordinated sanctions with a number of other countries, particularly in the EU. In August 2014, Russia announced a retaliatory ban on the import of certain foods from the United States, the EU, and other countries imposing sanctions. In 2014, the United States and other countries also began opposing new projects in Russia at the World Bank and European Bank for Reconstruction and Development (EBRD), to put additional pressure on the Russian government in response to Russia's actions in Ukraine. Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States suspended the G-8 and instead resumed convening as the G-7, of which Russia is not a member, for the first time since the late 1990s. Russian officials still attend G-20 meetings, which include a broader group of advanced and emerging-market economies. U.S. and EU sanctions on Russian individuals, firms, and sectors in 2014 came at a time when Russia's economy was still struggling to recover from the global financial crisis of 2008-2009. In the early 2000s, Russia's economy benefited from rising oil prices. Its economy was hit hard by the global financial crisis and ensuing global economic downturn, as demand for its exports fell, particularly in Europe. Russia's economy contracted sharply, by 7.8%, in 2009. The economy rebounded the following year, growing by 4.5%, before slowing between 2010 and 2013. Economists argue that the financial crisis and weak economic performance highlighted fundamental problems in Russia's economy, including the economy's dependence on the production and export of oil and gas, as well as the need for reform in a number of areas, including governance (including the need to address corruption), regulation, privatization, competition, the banking sector, and utility pricing. It is difficult to assess whether, and to what extent, the targeted U.S. and EU sanctions in response to the conflict in Ukraine, and Russia's retaliatory measures, have impacted the Russian economy broadly over the past two to three years. Sanctions hit at the same time the price of oil, a major export and source of revenue for the Russian government, dropped dramatically, by more than 60% between the start of 2014 and the end of 2015. That said, many economists, including at the IMF, have argued that the twin shocks of multilateral sanctions and low oil prices were the major driver behind Russia's economic challenges in 2014 and 2015 ( Figure 1 ). In particular, Russia grappled with economic contraction , with growth slowing to 0.7% in 2014, before contracting sharply by 3.7% in 2015; capital flight , with net private capital outflows from Russia totaling $152 billion in 2014, compared to $61 billion in 2013; rapid depreciation of the ruble , more than 50% against the dollar over the course of 2015; a higher rate of inflation , from 6.8% in 2013 to 15.5% in 2015; budgetary pressures , with the budget deficit widening to 3.2% in 2015, up from 0.9% in 2013; tapping international reserve holdings to offset fiscal challenges, including exclusion from international capital markets, as reserves fell from almost $500 billion at the start of 2014 to $368 billion at the end of 2015; and more widespread poverty , which increased by 3.1 million to 19.2 million in 2015 (13.4% of the population). During 2016, Russia's economy largely stabilized, even as the sanctions remained in place. Russia's economy contracted at a slower rate (0.8%); net private sector capital outflows slowed, from over $150 billion in 2014 to $15 billion in 2016; inflation fell by more than half, to 7.2%; the value of the ruble stabilized; and the government successfully sold new bonds in international capital markets in May 2016 for the first time since the sanctions were imposed. Russia's economy benefited from rising oil prices in 2016, from about $30/barrel to over $50/barrel. Additionally, the IMF argued that the sanctions and oil shocks were cushioned by a flexible exchange rate regime, which allowed the ruble to depreciate and support exports; banking sector capital and liquidity injections; regulatory forbearance for the banking sector, to help banks avoid regulatory triggers due to acute ruble depreciation and volatile securities market prices; and limited fiscal stimulus, particularly tapping the reserve fund to finance deficit spending, which reached 3.7% in 2016. Unemployment has remained broadly stable, at around 5.6%, and poverty is projected around 14.6% in the first half of 2016. Although the economy is no longer in acute crisis, Russia's access to foreign capital remains limited. For countries reporting banking data to the Bank for International Settlements (BIS), foreign bank loans to Russia (including private and public sectors) have fallen by more than half between the end of 2013 and the third quarter of 2016, from $225 billion to $103 billion ( Figure 2 ). However, there is also some evidence that investor sentiment for Russia is improving. Russia's government has been able to resume bond sales in international capital markets, and net private capital outflows have slowed. Additionally, net inward FDI into Russia, which essentially came to a halt in late 2014 and early 2015, has started to resume, although it has not reached pre-2014 levels ( Figure 3 ). News reports indicate that some major Western companies, such as Ikea, Pfizer, and Mars (food products), are looking to open new stores and factories in Russia. According to the IMF, Russia's economy is projected to resume modest growth of 1.1% in 2017 and 1.2% in 2018. The IMF argues that the medium-term prospects for Russia's economy are subdued due to the impact of sanctions on productivity and investment, as well as a number of unrelated long-standing structural challenges, including slow economic diversification, weak protection of property rights, burdensome administrative procedures, state involvement in the economy, corruption, and adverse demographic dynamics (declining population and lower labor force participation). Some analysts have also noted that the low value of the ruble may hamper Russia's attempts to innovate and modernize its economy, and that the economy's continued reliance on oil makes it vulnerable to another drop in oil prices. Some analysts have used statistical models to estimate the precise impact of sanctions imposed by the United States, the EU, and other countries on Russian individuals, firms, and sectors since 2014 relative to other factors, including oil prices. In 2015, the IMF estimated that U.S. and EU Ukraine-related sanctions and Russia's retaliatory ban on agricultural imports reduced output in Russia over the short term between 1.0% and 1.5%. The IMF's models suggest that the effects on Russia over the medium term could be more substantial, reducing output by up to 9%, as lower capital accumulation and technological transfers weaken already declining productivity growth. At the start of 2016, a State Department official argued that sanctions were not designed to push Russia "over the economic cliff" in the short run, but are designed to exert long-term pressure on Russia. In November 2014, Russian Finance Minister Anton Siluanov estimated the annual cost of sanctions to the Russian economy at $40 billion (2% of GDP), compared to $90 billion to $100 billion (4% to 5% of GDP) lost due to lower oil prices. Similarly, Russian economists estimated that the financial sanctions would decrease Russia's GDP by 2.4% by 2017, but the effect would be 3.3 times lower than the effect from the oil price shock. Russian President Vladimir Putin stated in November 2016 that the sanctions are "severely harming Russia" in terms of access to international financial markets, although the impact is not as severe as the harm from the decline in energy prices. Some analysts have noted that sanctions do not prohibit the Russian government from selling government bonds to Western investors, and as the Russian government resumes bond sales in international capital markets, it may lend the money on to sanctioned entities, easing their access to financing. In December 2016, the Office of the Chief Economist at the U.S. State Department published estimates of the impact of the U.S. and EU sanctions in 2014 on a firm-level basis. The main finding is that the average sanctioned company or associated company in Russia lost about one-third of its operating revenue, over one-half of its asset value, and about one-third of its employees relative to non-sanctioned peers. Their research also suggests that sanctions had a relatively smaller impact on Russia's economy overall (Russian GDP and import demand) compared to oil prices. There is debate about the economic impact of the Ukraine-related sanctions for the United States. When the sanctions were announced, U.S. business groups, including the Chamber of Commerce and the National Association of Manufacturers, raised concerns that U.S. sanctions on Russia could disrupt the operations of U.S. firms in Russia, thereby harming American manufacturers, jeopardizing American jobs, and ceding business opportunities to firms from other countries. Other analysts argued that the targeted sanctions were designed to minimize the impact on the U.S. economy while meeting foreign policy obligations to Europe and Ukraine and advancing U.S. national security interests. They note that Russia is a relatively minor trading and investment partner for the United States as a whole. Additionally, sanctions do not prohibit all economic transactions between the United States and Russia. They target a small portion of Russian individuals and entities and, in some cases, only restrict specific types of economic transactions. Although Russia is a major player in the international economy--it is the world's 12 th -largest economy, is home to a population of more than 140 million, and is a major producer and exporter of natural gas and oil--U.S.-Russia economic ties have been historically relatively limited. Russia accounts for a small portion of overall U.S. international economic activity. Even before the Ukraine-related sanctions were imposed, the United States had little direct trade and investment with Russia. Over the past decade, Russia has accounted for less than 2% of total U.S. merchandise imports, less than 1% of total U.S. merchandise exports, less than 1% of U.S. foreign direct investment (FDI), and less than 1% of FDI in the United States. Over the past three years, U.S. commodity trade with Russia has fallen by almost half ( Figure 4 ). U.S. merchandise exports to Russia fell from $11.1 billion in 2013 to $5.8 billion in 2016. U.S. merchandise imports from Russia fell from $27.1 billion in 2013 to $14.5 billion in 2016. U.S. investment ties with Russia also continued to weaken. U.S. investment in Russia was $9.2 billion in 2015, and down from a peak of $20.8 billion in 2009. Russian investment in the United States was $4.5 billion, down from a peak of $8.4 billion in 2009. It is difficult to assess the extent to which the downward trend in U.S. trade and investment with Russia was driven by the Ukraine-related sanctions. The sanctions target specific transactions with specific Russian individuals, firms, and sectors. Many trade and investment transactions between U.S. and Russian individuals and entities are not directly impacted by sanctions. Other factors may have driven the downturn, such as the economic contraction in Russia, structural problems in Russia's economy, or an inward-looking policy shift by the Russian government. Factors in the U.S. economy could also be at play, such as strengthening in the value of the U.S. dollar. Several large U.S. companies have been actively engaged with Russia: exporting to Russia, entering joint ventures with Russian partners, and relying on Russian suppliers for inputs. A notable example is ExxonMobil, which in 2011 signed a strategic cooperation agreement with Rosneft, the Russian state-owned oil company, to drill in the Russian Arctic, among other activities now subject to sanctions. Other examples include PepsiCo, the largest food and beverage company in Russia; Ford Motor Co., which has a partnership with Sollers, a Russian car company; General Electric, which has joint ventures with Russian firms to manufacture gas turbines; Boeing, among the top U.S. exporters to Russia; Visa and MasterCard, which provide payment services to 90% of the Russian market; and United Launch Alliance, a Lockheed Martin and Boeing joint venture, which imports Russian rocket engines. Russia is also an important market for Philip Morris and Avon Products. The U.S.-Russia Business Council, a Washington-based trade association that provides services to U.S. and Russian member companies, has a membership of 170 U.S. companies conducting business in Russia. When new U.S. sanctions on Russia were implemented in 2014 in response to the conflict in Ukraine, news reports cited a number of U.S. firms whose operations were disrupted. For example, sanctions forced ExxonMobil to suspend its $700 million exploration in Russia's Kara Sea (a joint venture with Rosneft). During the first seven months of sanctions, Exxon reported losses amounting to about $1 billion from its Russian operations. Oilfield service companies, including Halliburton and National Oilwell Varco, reported that sanctions restricted their operations in Russia and expressed concern that sanctions will limit their profits. Likewise, John Deere, which makes heavy farm equipment and has two factories in Russia, attributed weaker sales to the sanctions. U.S. gun dealers also face restrictions on imports of Russian-made Kalashnikov rifles, of which they have reportedly sold tens of thousands in previous years. Additionally, U.S. financial institutions have reportedly needed to hire additional legal and technical staff to monitor accounts and review any financing arrangements with Russian entities. It is difficult to extrapolate the full impact of sanctions on U.S. firms from these examples. One reason is that Russia may not be a critical economic partner for some U.S. firms and industries affected by the sanctions. For example, in response to the sanctions, Russia announced plans to accelerate the development of its own national payments system, which would undermine MasterCard and Visa's dominance in the Russian market. Although no such system has been rolled out to date, Russia only accounts for a small portion (2%) of MasterCard's and Visa's profits. In at least one case following the new sanctions, a U.S. subsidiary of a Russian company cut ties with the parent company and relocated manufacturing to the United States. Another factor is that the implementation of sanctions in phases or "rounds" gave U.S. companies some time to prepare for disruptions in economic transactions with Russia. According to news reports, many multinational companies have developed contingency plans that would allow them to adjust to suppliers and banks outside of Russia and minimize the impact of sanctions on their operations. There is likely less press coverage of U.S. firms that have been able to minimize the impact of the sanctions on Russia or the effects of Russian retaliation. Moreover, aggregate trade and investment trends mask differences at the firm and sector level. Although trade in most sectors has declined, in some cases, ties strengthened. For example, U.S. imports of aluminum from Russia increased by $536 million (68%) between 2014 and 2016. Some U.S. agricultural producers have been adversely affected by Russia's retaliatory ban on agricultural imports. Although Russia accounted for about 1% of the United States' total food and agricultural exports at the time the ban was imposed, specific producers within the United States have been adversely affected. For example, the congressional delegation from Alaska expressed concerns about the impact on Alaska's seafood industry. Another example is Washington State apple and pear producers, who sold $23 million worth of pears and apples to Russia in 2013 and had to locate new purchasers at the start of the new harvest season. Over the longer term, however, the impact of the sanctions could be mitigated in part as alternative markets for U.S. agricultural exports are located. For example, even though Russia's ban on agricultural imports impacted the U.S. poultry sector, which exported about $300 million to Russia a year, the industry downplayed the impact of the ban, stressing that Russia had already become a less important export market. The United States, in coordination with the EU, implemented targeted sanctions on key Russian individuals, entities, and sectors in response to Russia's actions in Ukraine. U.S. sanctions include, for example, targeting officials in Putin's inner circle and placing restrictions on new debt to specific financial institutions. As Congress evaluates U.S. foreign policy toward Russia and the role that sanctions may or may not play in advancing U.S. national security interests, it may consider the impact of current economic sanctions on Russia's economy and foreign policy, in addition to their impact on U.S. foreign policy and economic interests. Russia's economy faced a number of challenges in 2014 and 2015, including capital flight, depreciation of the ruble, rising inflation, weaker growth prospects, and budgetary pressures. Many experts believe that sanctions are contributing to Russia's economic challenges. However, it is difficult to assess the impact of sanctions separate from other domestic and international factors, particularly low oil prices. The effectiveness of the sanctions in inducing a change in the behavior of the Russian government remains to be seen. Although the Russian government continues to face a number of economic challenges, many of which are unrelated to sanctions, economic forecasts suggest that the Russian economy is stabilizing and there is some evidence that investor sentiment toward Russia may be improving. Some U.S. business groups have raised concerns about the economic costs of sanctions on Russia to the United States. News reports indicate that some U.S. firms and industries have been adversely affected. Longer-term, the impact of the sanctions, if they are kept in place, may depend on a number of factors, such as the ability of U.S. firms to find alternative markets, potential spillover effects from a slowdown in Russia, and whether Russia implements additional retaliatory measures against the United States.

In response to Russia's annexation of the Crimean region of neighboring Ukraine and its support of separatist militants in Ukraine's east, the United States imposed a number of targeted economic sanctions on Russian individuals, entities, and sectors. The United States coordinated its sanctions with other countries, particularly the European Union (EU). Russia retaliated against sanctions by banning imports of certain agricultural products from countries imposing sanctions, including the United States. U.S. policymakers are debating the use of economic sanctions in U.S. foreign policy toward Russia, including whether sanctions should be kept in place or further tightened. A key question in this debate is the impact of the Ukraine-related sanctions on Russia's economy and U.S. economic interests in Russia. Economic Conditions in Russia Russia faced a number of economic challenges in 2014 and 2015, including capital flight, rapid depreciation of the ruble, exclusion from international capital markets, inflation, and domestic budgetary pressures. Growth slowed to 0.7% in 2014 before contracting sharply by 3.7% in 2015. The extent to which U.S. and EU sanctions drove the downturn is difficult to disentangle from the impact of a dramatic drop in the price of oil, a major source of export revenue for the Russian government, or economic policy decisions by the Russian government. The International Monetary Fund (IMF) estimated in 2015 that U.S. and EU sanctions in response to the conflict in Ukraine and Russia's countervailing ban on agricultural imports reduced Russian output over the short term by as much as 1.5%. Russia's economy, more recently, is showing some signs of recovery, in part due to higher oil prices, a flexible exchange rate regime, and sizeable foreign exchange reserves, among other factors. The IMF projects Russia's economy will grow by 1.1% in 2017. U.S. Economic Interests When the sanctions were announced in 2014, U.S. business groups raised concerns that sanctions harm American manufacturers, jeopardize American jobs, and cede business opportunities to firms from other countries. When the sanctions were rolled out in 2014, news reports cited a number of U.S. firms that were adversely affected by U.S. sanctions on Russia and Russia's retaliatory measures. There are questions about the overall impact of the sanctions on the U.S. economy, however. Russia accounts for a small portion of total U.S. trade and foreign investment. U.S. sanctions also target specific Russian individuals and entities and, in some cases, restrict only specific types of economic transactions.

On April 29, 2004, the Department of State released its Patterns of Global Terrorism report(hereafter referred to as Patterns 2003 ). (1) Shortly thereafter it was observed that the original numbersof terrorist attacks and casualties were understated and on June 22, 2004, an updated version wasreleased. (2) Revised data (3) show minimal change in the number of terrorist attacks worldwide in 2003over 2002 levels -- an increase from 205 attacks to 208. In 2003, the overall number of reported anti-U.S. attacks declined visibly, 60 anti-US attacks in 2003 as opposed to 77 attacks in the previousyear. The report indicates that worldwide deaths from international terrorist activity were down roughly 14% in 2003 (from 725 to 625) and the number of wounded was up roughly 81% from 2,013to 3,646. In 2003, as in 2002, both the highest number of attacks (80) and highest number ofcasualties (159 dead and 1,268 wounded) continued to occur in Asia where the number of attacksdeclined roughly by one-fifth, and the number of casualties increased roughly 11%. The reportemphasizes that most of the attacks in Iraq that occurred during Operation Iraqi Freedom do not meetthe U.S. definition of international terrorism employed by Patterns because they were directed atcombatants, that is, "American and coalition forces on duty." (4) In additional to statistical charts, Patterns includes in its Appendixes a summary chronology of significant terrorist incidents and background information on U.S. designated foreign terroristorganizations and other terrorist groups. (5) In addition to data on terrorist trends, groups, and activities worldwide, the report provides adescription as to why countries are on the U.S. list of state sponsors of terrorism that are subject toU.S. sanctions. Thus, included in Patterns are detailed data on the seven countries currently on the"terrorism list": Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria. U.S. Administrationofficials maintain that the practice of designating and reporting on the activities of the state sponsorsof terrorism list and concomitant sanctions policy has contributed significantly to a reduction in theovert -- and apparently overall -- activity level of states supporting terrorism in the past decade. Libya and Sudan are frequently cited as examples of such success. Countries designated as state sponsors of terrorism are subject to severe U.S. export controls -- particularly of dual use technology. The Anti-Terrorism and Arms Export Amendments Act of1989 ( P.L. 101-222 ) prohibits export of dual use items, as well sales of military items and foreigneconomic assistance to countries on the terrorism list. Also, the Foreign Assistance Act prohibitsproviding foreign aid to these designated countries. Section 6(j) of the 1979 Export AdministrationAct stipulates that Congress must be notified at least 30 days in advance before any licenses areissued for exporting equipment or services that could be used for terrorist or military purposes. Other sanctions include denying foreign tax credits on income earned in those countries. The degree of support for, or involvement in, terrorist activities typically varies dramatically from nation to nation. In 2003, of the seven on the U.S. terrorism list, Iran continued to becharacterized on one extreme as an active supporter of terrorism: a nation that uses terrorism as aninstrument of policy or warfare beyond its borders. Closer to the middle of the spectrum is Syria. Although not formally detected in an active role since 1986, Patterns reports that the Assad regimereportedly uses groups in Syria and Lebanon to export terror into Israel and allows groups to trainin territory under its control. On the less active end of the spectrum, one might place countriessuchas Cuba or North Korea, which at the height of the Cold War were more active, but in recent yearshave seemed to settle for a more passive role of granting ongoing safe haven to previously admittedterrorists. Also at the less active end of the spectrum, and arguably falling off it, are Libya andnotably Sudan, which reportedly has stepped up counterterrorism cooperation with U.S. lawenforcement and intelligence agencies after the attacks of September 11, 2001. Iran. Patterns 2003 again designates Iran as the"most active" state sponsor of international terrorism. The report, which incorporates data from U.S.and allied intelligence services, notes that Iran's Islamic Revolutionary Guard and Ministry ofIntelligence and Security were "involved in the planning of and support for terrorist acts andcontinued to exhort a variety of groups that use terrorism to pursue their goals." (6) Actions citedinclude (1) providing safe haven to members of Al Qaeda; (2) providing money, weapons andtraining to HAMAS, Hizballah, and Arab Palestinian rejectionist groups; and (3) helping membersof the Ansar al Islam group in Iraq transit and find safe haven in Iran. The report notes that Iranianofficials have acknowledged detaining Al Qaeda operatives during 2003, but have resisted calls totransfer them to their countries of origin. On December 19, 2003, Iran announced it will sign anagreement allowing international inspections of nuclear sites. Iran is not considered to be a likelycandidate for removal from the Department of State's Terrorism Sponsors List in the coming year. North Korea. North Korea, designated a member of the "axis of evil" by President Bush in his 2003 State of the Union Address, is not known to havesponsored any terrorist acts since 1987 according to the report. However, it continued to givesanctuary to hijackers affiliated with the Japanese Red Army. Patterns 2003 stresses that NorthKorea announced it planned to sign several antiterrorism conventions, but did not take anysubstantive steps to cooperate in efforts to combat terrorism. Although Patterns notes that NorthKorea's support for international terrorism appears limited at present, its efforts to restart its nuclearprogram and its role in proliferation of ballistic missiles and missile technology suggest that itsremoval from the terrorism list will not occur anytime soon. Iraq. Iraq, under Saddam Hussein, had been cited in the 2002 Patterns report for a longstanding policy of providing safe haven and bases for terroristgroups and as having laid the groundwork for possible attacks against civilian and military targetsin the United States and other Western nations throughout 2002. However, in the event of asubstantive regime change, a nation may be removed from the terrorism list. Under U.S. law,(Paragraph 6 (j) (4) of the Export Administration Act, the President must first report to Congress thatthe government of the country concerned: (1) does not support terrorism and (2) has providedassurances that it will not support terrorism in the future. On May 7, 2003, President Bushsuspended all sanctions against Iraq applicable to state sponsors of terrorism, which had the practicaleffect of putting Iraq on a par with non terrorist states. Iraq is expected to be removed from theterrorism list as soon as it has its own government in place that pledges not to support terrorist actsin the future, a requirement expected to be met shortly after June 30, 2004. The report notes that theline between insurgency and terrorism has become "increasingly blurred" in Iraq, as attacks oncivilian targets have become more common. By the end of 2003, coalition forces had detained morethan 300 suspected foreign fighters in Iraq (7) . Libya. In 2003 Libya reiterated assurances to the U.N. Security Council that it had renounced terrorism, had shared intelligence with Westernintelligence agencies, had taken steps to resolve matters related to its past support of terrorism, andon December 19, 2003 announced it would rid itself of weapons of mass destruction and allowinspections of its nuclear facilities. (8) The report statesthat in 2003, Libya held to its pattern in recentyears of curtailing support for international terrorists, although Tripoli continued in 2003 to maintaincontact with "some past terrorist clients." President Bush lifted sanctions against Libya on April 23,2004, after successful intelligence cooperation on WMD issues and efforts by Libya to resolvecompensation for Pam Am flight 103 survivors. Syria. Syria, according to Patterns 2003, continued to provide political and material support to Palestinian rejectionist groups and continuedto permit Iran to use Damascus as a transhipment point for resupplying Hizballah in Lebanon. Ona positive note, the report notes that Damascus has cooperated with other governments "against alQaeda, the Taliban, and other terrorist organizations and individuals," has discouraged signs ofpublic support for Al Qaeda, including in the media and mosques, and has made efforts to tightenits borders with Iraq to limit the movement of anti-Coalition foreign fighters. On May 11, 2004,President Bush imposed economic and trade sanctions against Syria under the Syrian Accountability Act, (9) but also waived some of the provisions,notably provisions applying to the export of selectitems. (10) Cuba. Cuba, a terrorism list carryover from the cold war has, according to Patterns 2003 , "remained opposed to the U.S.- led Coalition prosecutingthe global war on terrorism" (11) and continued toprovide support to designated terrorist organizations. It is considered unlikely that Cuba will be removed from the terrorism list, absent a regime change. (12) Sudan. Sudan is generally considered by observers to be a strong candidate for removal from the terrorism list. Patterns 2003 claims that thenation has "deepened its cooperation with the U.S. Government," producing significant progress incombating terrorist activity, but "areas of concern" remain, notably the active presence in Sudan ofHamas and the Palestine Islamic Jihad (PIJ). In 2004, Sudan was removed from the list of countriesdesignated by the Secretary of State as not fully cooperating with the United States in the war onterrorism. Some critics of Patterns and its designation of state sponsors of terrorism charge that the Patterns 2003 report generally, and specifically its reporting of activities of nations, is undulyinfluenced by a complex web of overlapping and sometimes competing political and economicagendas and concerns. As cases in point, they refer to activity cited in Patterns reports used tojustify retaining Cuba and North Korea on the state sponsors list. (13) Others suggest that Patterns' heavy focus on state sponsors of terror make such reports less useful in a world where terroristactivity is increasingly neither state supported nor state countenanced. Still others ask whether, andto what degree, Patterns supports a sanctions policy that is unrealistically achievable and toounilateral when imposing sanctions on nations in which U.S. and allied economic and strategicgeopolitical interests run high. However, Patterns in its current form is not intended to set policy. Thus, one potential shortcoming of the criticisms cited above is that they are either policy oriented or revolve arounddisagreement with policy issues instead of centering on disagreement with the data and analysispresented in Patterns reports. Moreover, such criticisms, they maintain, arguably place too muchemphasis on the state sponsors section of P atterns, with little or no emphasis on the plethora ofuseful data provided in the report on trends in terrorist activity and background on terroristorganizations. Another issue related to politicization not addressed in Patterns 2003 is that ofconfronting incitement to terrorism when promoted, countenanced, or facilitated by the action, orinaction, of nation states. Particularly strong have been suggestions by some that Patterns plays down undesirable levels of counterterrorism cooperation and progress in the case of nations seen as vital to the globalcampaign against terror. Patterns 2003 , in contrast to pre "9/11" report versions, is silent aboutPakistan's alleged ongoing support for Kashmiri militants and their attacks against the populationof India. Some critics argue that Patterns 2003 also falls far short of criticizing Saudi Arabia,perceived by many analysts as a slow, unwilling, or halfhearted ally in curbing or cracking downon activities which support or spawn terrorism activities outside its borders. In contrast, Patterns2003 cites Saudi Arabia as "an excellent example of a nation increasingly focusing its political willto fight terrorism." Some suggest, however, that often at play here is simply a desire to put the bestface on terrorist related relationships in the hopes of obtaining better cooperation in the future. On the flip side of the coin is an issue, yet to be resolved, of how to inform Congress and give countries credit in Patterns for cooperation in such matters as intelligence or renditions when, fordomestic political concerns, they do not want this made public. One option might be to producemore frequently a classified annex to the Patterns report which has been done in the past. A downside, however, is that preparation of a classified version is much more time consuming forthose tasked with simultaneously preparing the public document. Some also suggest that Pattern s reports could be stronger in their coverage of the ideological and economic impact of terrorism on individual nations and the global economy. One issue here,as raised by some observers, is whether Patterns places too much emphasis on quantifying andmeasuring terrorist success in terms of physical damage to persons and property when terror groupsmay increasingly be measuring mid-and long term success by economic and political criteria. Going beyond the question, raised by some, of any perceived shortcomings in data, which may or may not be found in Patterns 2003 , is the question of the quality of strategic analysis of the dataprovided. To what degree might such analysis be enhanced? Some observers suggest the issue hereis the degree to which Patterns is designed to reflect, or might be construed to reflect, a "body count"reporting mentality. (14) Would there be benefitsto Congress and the counterterrorism policycommunity if the focus of Patterns reports was less on presenting statistics and facts, and more ongaining meaning from the data? And if so, how might Congress effect such a change in policyfocus? Admittedly, overall numbers by themselves may not always present a complete picture. Forexample, each small pipeline bombing in Colombia is cited as one incident in Patterns as would bea major terrorist incident as the multiple train bombings in Madrid in March 2004. Another possibleshortcoming, some note, is that Patterns sometimes may not include, or adequately note, incidentsthat are not international in nature but which may have a major political or economic impact on thetarget nation and well beyond it. Indeed, Patterns 2003 has been subject to criticism on the issue of data completeness or accuracy, as well as on the issue of data relevance. (15) In a May 17, 2004 letter to Secretary of StateColin L. Powell, Henry A. Waxman, Ranking Minority Member of the House Committee onGovernment Reform, suggests that data in Patterns 2003 which indicate that non-significant terroristattacks have declined in the last two years is in sharp contrast to independent analysis of the samedata which concludes that significant terrorist attacks (acts causing, or reasonably expected to cause:death, serious personal injury or major property damage) actually reached a 20-year high in 2003. (16) Also questioned is completeness, if not factual accuracy, of the data relied upon in the Patterns 2003 report. The list of significant incidents in Patterns 2003, as originally disseminated , concludesabruptly on November 11, 2003, presumably therefore, not counting major multiple terrorists attacksthat occurred later in the year. (17) The statistical data which forms the basis for Patterns have traditionally been provided to the State Department by the CIA. More recently this function has been transferred to the newlyoperational Terrorist Threat Integration Center (TTIC). (18) TTIC is providing an errata sheet to correctincomplete data. (19) The final report of the 9/11 Commission, issued on June 22, 2004, recommends the creation of a National Counterterrorism Center. Subsequently on August 2, 2004, President Bush announcedsimilar plans to establish such a center. The new center is envisioned as serving as a centralknowledge bank for information about known and suspected terrorists and would be charged withcoordinating and monitoring counterterrorism plans and activities of all government agencies, andpreparing the daily terrorism report for the President and senior officials. (20) Presumably the functionof compiling the data for Patterns will be performed by the new National Counterterrorism Center, if and when it is established. In the wake of discrepancies contained in the Patterns 2003 as originally released, the Chairmenof three House Committees (International Relations, Judiciary, Government Reform) forwarded aletter to Secretary of State, Colin Powell, dated July 15, 2004. The letter cites discussions betweenState Department and other officials with committee staff and reiterates "that there will be acomprehensive review of the definitions of terrorist acts as compared to (1) the language in thestatute; and (2) the current experiences with multinational terrorist organizations that sponsor orotherwise promote terrorist acts perpetrated by 'local' terrorist organizations." Moreover, it reaffirmsan understanding that the executive branch has assigned an appropriate level of staff to provide fulltime attention to the contents of the report. The results of this executive branch internal review arerequested by October 1, 2004. It has been some fifteen years since Congress mandated the first Patterns report. At the time the report was originally conceived as a reference document, the primary threat from terrorism wasstate sponsored. Since then, the threat has evolved, with Al Qaeda affiliated groups and non-statesponsors increasingly posing a major threat. Over the years, the report has increased in length andexpanded in scope. It has been disseminated on the internet, translated into five additionallanguages, and is widely recognized as a primary resource on terrorist activities and groups. However, in view of the earlier- noted data issues, the report may be subject to increased criticismand scrutiny. In light of the high level of international attention attached to the report and theincreased complexity and danger posed by the terrorist threat, some observers have suggested thata thorough Executive/Congressional review of Patterns , its structure and content, may be timely andwarranted. Patterns of Global Terrorism Data, 2002-2003 Note: Based on revised data published in Patterns 2003. Traditionally, this data hadbeen providedto the State Department by the Central Intelligence Agency. More recently this function has beentransferred to the newly operational Terrorist Threat Integration Center (TTIC). Periodic requestsfrom analysts at the Department of State and from analysts at the Congressional Research Servicein April 2004 for quarterly access to an unclassified version of the data base of terrorist incidentshave, to date, not resulted in access to the data desired. a. Compared with 487 attacks in 1982. b. In 2003 the highest percent of targets were businesses (40%); the most common method of attackwas bombing (67%). c. Casualties include dead and wounded. d. 2002 figures include relatively high casualties in a number of anti-Russian attacks, such as theOctober 2002 Moscow theater attack. e. Note that the reason for this dramatic increase is not apparent.

This report highlights trends and data found in the State Department's annual Patterns of Global Terrorism report , (Patterns 2003) and addresses selected issues relating to its content. Thisreport will not be updated. On April 29, 2004, the Department of State released its annual Patterns of Global Terrorism report. After discrepancies were noted in reported data, the Department of State issued revisedstatistics on June 22, 2004. The newly released data showed minimal change in the number ofterrorist attacks worldwide in 2003 over 2002 levels -- an increase from 205 attacks to 208. In2003, the overall number of reported anti-U.S. attacks declined visibly, 60 anti-U.S. attacks in 2003as opposed to 77 attacks in the previous year. In 2003, the number of persons killed in internationalterrorist attacks was 625, down from 725 in 2002. In 2003, persons wounded numbered 3,646, upfrom 2,013 the previous year. In 2003, as in 2002, both the highest number of attacks (80) andhighest number of casualties (159 dead and 1,268 wounded) continued to occur in Asia. Notably,the report defines terrorist acts as incidents directed against noncombatants. Thus, attacks in Iraqon military targets are not included. Patterns , a work widely perceived as a standard, authoritative reference tool on terrorist activity, trends, and groups, has been subject to periodic criticism that it is unduly influenced bydomestic, other foreign policy, political and economic considerations. Patterns is currentlyundergoing an internal executive branch review. This year for the first time, data contained in Patterns was provided by the newly operational Terrorist Threat Integration Center (TTIC). On August 2, 2004, President Bush announced plans tocreate a National Counterterrorism Center (NCTC), an institutional change recommended by the9/11 Commission in its July 19, 2004 report. The center is envisioned as serving as a centralknowledge bank for information about known and suspected terrorists and would be charged withcoordinating and monitoring counterterrorism plans and activities of all government agencies, andpreparing the daily terrorism threat report for the President and senior officials. Presumably thefunction of compiling the data for Patterns will be performed by the new National CounterterrorismCenter, if and when it is established. It has been some fifteen years since Congress mandated the first Patterns report. When the report was originally conceived as a reference document, the primary threat from terrorism was statesponsored. Since then, the threat has evolved with Al Qaeda affiliated groups and non-state sponsorsincreasingly posing a major threat. Given the increased complexity and danger posed by the terroristthreat, one option available to Congress and the executive branch is to take a fresh look at Patterns, its structure and content.

The Environmental Quality Incentives Program (EQIP) is a voluntary program that provides technical and financial assistance to eligible agricultural producers who wish to implement soil and water conservation practices. The purpose of EQIP is to promote agriculture production, forestry management, and environmental quality as compatible goals, and to optimize environmental benefits. EQIP was originally authorized in the 1996 farm bill as an amendment to the 1985 farm bill. EQIP replaced four conservation programs repealed in the same law. These were the Great Plains Conservation Program, the Agricultural Conservation Program, the Water Quality Incentives Program, and the Colorado River Basin Salinity Control Program. EQIP is the largest agriculture conservation program for working lands. The program encourages farmers and ranchers to participate in conservation efforts by paying a portion of the cost of installing or constructing approved conservation practices. Eligible producers enter into EQIP contracts to receive payment for implementing conservation practices. Approved activities are carried out according to an EQIP plan developed in conjunction with the producer that identifies the appropriate conservation practice or practices to address resource concerns on the land. EQIP was amended and reauthorized in both the 2002 and 2008 farm bills. The U.S. Department of Agriculture's (USDA's) Natural Resources Conservation Service (NRCS) administers EQIP under an interim final rule. NRCS implemented EQIP by establishing national priorities to reflect the most pressing natural resource needs and emphasize offsite benefits to the environment. The current national priorities set by NRCS are as follows: reductions of nonpoint source pollution, such as nutrients, sediment, pesticides, or excess salinity in impaired watersheds consistent with Total Maximum Daily Loads (TMDLs), where available; the reduction of surface and groundwater contamination; reduction of contamination from agricultural point sources, such as concentrated animal feeding operations (CAFOs); conservation of ground and surface water resources; reduction of emissions, such as particulate matter, nitrogen oxides (NOX), volatile organic compounds, and ozone precursors and depleters that contribute to air quality impairment violations of National Ambient Air Quality Standards; reduction of soil erosion and sedimentation from unacceptable levels on agricultural land; and promotion of at-risk species habitat conservation. Producers with eligible land can submit an EQIP plan that describes the conservation and environmental purposes that will be achieved using one or more USDA-approved conservation practices. USDA-approved conservation practices may involve structures, vegetation, or land management. Structural practices include the establishment, construction, or installation of measures designed for specific sites, such as animal waste management facilities, livestock water developments, and capping abandoned wells. Vegetative practices involve introduction or modification of plantings, such as filter strips or trees. Land management practices require site-specific management techniques and methods, such as nutrient management, irrigation water management, or grazing management. Producers can receive technical assistance to develop an EQIP plan and, after approval, to implement the plan. Decisions about which plans to fund are made by USDA at the state level, with local input. Applications are accepted and ranked throughout the year within each state. Applications are grouped with similar crop, forestry, and livestock operation applications and evaluated within the groups. Additional funding groups may be created to rank applications based on similar resource objectives, geographic area, or type of agricultural operation. After an application is selected and approved, USDA provides payments to help the producer offset the cost of each practice, as well as income forgone relating to that practice implementation. Participants are eligible to receive payments for both constructing structures and implementing land management practices. Of the total annual EQIP spending, 60% is allocated to livestock practices. Under an EQIP contract, USDA pays up to 75% of the projected costs associated with planning, design, materials, equipment, installation, labor, management, maintenance, or training, or up to 100% of the estimated income forgone to implement certain conservation practices. This payment rate can be higher for limited-resource, socially disadvantaged, or beginning farmers and ranchers, provided this increase does not exceed 90% of practice costs. Initial payments are made in the year in which the contract is signed, but most payments are made after the practices are completed. Contracts have a term of one to ten years and payments are limited by direct attribution to individuals or entities. Total payments a person or entity can receive over any six-year period are limited to $300,000, except for projects having special environmental significance, which are limited to $450,000 over any six-year period. Individuals or entities with an average annual non-farm adjusted gross income (AGI) of $1 million or more for the three years prior to the contract period are ineligible unless they received at least two-thirds of their AGI from farming, ranching, or forestry. The 2008 farm bill created a case-by-case waiver to the AGI limitation if it is determined that environmentally sensitive land of special significance would be protected through a conservation program. The number and frequency of AGI waivers granted is not limited, is at USDA's sole discretion, and remains to be determined. The 1996 farm bill authorized EQIP funding of $130 million in FY1996 and $200 million annually from FY1997 through FY2002. The 2002 farm bill significantly increased the annual authorized funding level incrementally from $400 million in FY2002 to $1.3 billion in FY2007. EQIP funding levels were revised in Section 1203 of the Deficit Reduction Act of 2005 ( P.L. 109-171 ) to limit funding to $1.27 billion in FY2007, while extending the authorization through FY2010 and providing $1.27 billion in each of FY2008 and FY2009, and $1.3 billion in FY2010. The 2008 farm bill further increased the annual authorized funding levels incrementally from $1.34 billion in FY2009 to $1.75 billion in FY2012. Funding under EQIP is mandatory (not subject to annual appropriations), and the program receives authorized amounts each year under the borrowing authority of USDA's Commodity Credit Corporation (CCC). Congress, however, has limited EQIP funding below authorized levels in every year since FY2005, through annual appropriations bills. Figure 1 identifies the authorized and actual funding levels for EQIP. The FY2011 full-year continuing resolution (Department of Defense and Full-Year Continuing Appropriations Act of 2011, P.L. 112-10 ) limited EQIP to $1.238 billion for FY2011--a reduction of $350 million from the authorized level of $1.558 billion in the 2008 farm bill. For FY2012, the Administration has proposed a limit of $1.408 billion--a reduction of $342 million from the authorized level of $1.75 billion. Annual funding received for EQIP is allocated to the states by NRCS using a formula based on national priorities, natural resource need, efficiency and performance measures, and regional equity. The EQIP allocation formula uses 20 weighted factors based on the characteristics of agriculture and land use and resource considerations. Factors with the largest weights within the formula include irrigated cropland, non-irrigated cropland, non-federal grazing land, livestock animal units, cropland eroding above the tolerance level, and impaired rivers and streams. States that receive the largest EQIP allocations have remained consistent from year to year, with Texas, California, and Colorado receiving the highest levels of funding annually between FY2004 and FY2008 (most recent information available). States who obligate the most EQIP funding annually are similar to those who receive the largest allocations each year (see Table 1 ). One of two subprograms under EQIP is the Agricultural Water Enhancement Program (AWEP). The 2008 farm bill (Sec. 2510, P.L. 110-246 ) created AWEP to promote ground and surface water conservation and to improve water quality on agricultural lands. The program replaces two previous water conservation programs: the Ground and Surface Water Conservation Program and the Klamath Basin Program. Eligible partners or groups submit project proposals to conserve ground and surface water or improve water quality in a specified area. NRCS selects projects based on requirements established in a Federal Register notice and enters into agreements with selected partners. In FY2009, NRCS approved approximately $58 million for 63 projects in 21 states. In FY2010, NRCS approved approximately $19.8 million for 28 new projects in 10 states. An additional $40.4 million was made available in FY2010 for projects approved in FY2009. To date, only $5 million has been made available for new projects in FY2011. Once proposals for specific areas are selected, there are two methods for producers to sign up for an AWEP contract. Producers may either (1) apply directly to NRCS for approved agricultural water enhancement activities or (2) apply through the partner or group who submits applications on the producer's behalf. Funding is authorized as a separate amount from the general EQIP, at $73 million for each of FY2009 and FY2010, $74 million in FY2011, and $60 million in FY2012 and each fiscal year thereafter. The second subprogram under EQIP is the Conservation Innovation Grants (CIG) program, created in the 2002 farm bill. The program, implemented through EQIP, is intended to leverage federal investment, stimulate innovative approaches to conservation, and accelerate technology transfer in environmental protection, agricultural production, and forest management. Examples of CIG projects include developing market-based approaches in conservation, demonstrating precision agriculture, capturing nutrients through a community anaerobic digester, and establishing a tribal partnership for regional habitat conservation. The program was reauthorized in the 2008 farm bill through FY2012 at an unspecified funding level of general EQIP dollars. NRCS uses its discretion to determine the level of general EQIP funds for CIG and annually allocates approximately $15 million for a national competition and up to $5 million for a watershed competition, such as the Chesapeake Bay or the Mississippi River basin ( Table 2 ). For FY2011, NRCS announced two funding competitions: a national competition to include the Chesapeake Bay and Mississippi River basin (up to $25 million available), and a separate competition for practices that reduce greenhouse gases and sequester carbon on agricultural lands (up to $5 million available). In addition, 32 states conduct, or have conducted, a state-level CIG competition, which has awarded over $17 million since FY2005. In FY2011, Louisiana, Missouri, New Hampshire, New York, Pacific Islands, and Washington are holding state-level competitions. The 2008 farm bill made some modifications to the CIG program. Previously, grants could not exceed 50% of the project cost, with nonfederal matching funds provided by the grantee. The 2008 farm bill removed this requirement, though USDA still requires a 50% match of nonfederal funds. Also, the farm bill added an air quality component requiring that payments be made through CIG to producers to implement practices to address air quality concerns from agricultural operations and to meet federal, state, and local regulatory requirements. This air quality component is authorized at $37.5 million annually. EQIP continues to receive widespread support in the farm community and in Congress, as it remains the major source of financial and technical assistance to help producers implement conservation practices that address specific resource and environmental problems. During the 112 th Congress, several issues may attract congressional interest, including budgetary pressures, a continuing backlog of unfunded applications, program reauthorization, and measuring program accomplishments. The 2008 farm bill reauthorized EQIP through September 30, 2012, with annual authorized funding levels of $1.2 billion in FY2008, $1.34 billion in FY2009, $1.45 billion in FY2010, $1.59 billion in FY2011, and $1.75 billion in FY2012. As shown in Figure 1 , the authorized funding level has continued to increase since the 2002 farm bill; however, annual appropriations acts have reduced the actual funding levels by a total of nearly $1.8 billion from FY2005 through FY2011. With the 112 th Congress's emphasis on reducing federal spending, similar reductions to EQIP could be considered either in the appropriations process or through possible reconciliation. Another possible reduction to EQIP funding could come during farm bill reauthorization, as the authorizing committee seeks to offset funding for other farm bill programs. Most policy observers expect the next farm bill will be budget-neutral and written using only the current budget "baseline." No additional money is expected for new programs without corresponding offsets. Congress faces difficult choices about how much total support to provide agricultural conservation, and how to allocate it among competing programs. A main justification for the large funding increase in the 2002 farm bill was to respond to a large backlog of producer demand that had been documented during the farm bill debate. Despite this increase in funding, the number of pending applications continues to exceed the amount of available funding (see Table 3 ). Although this gap now constitutes a smaller portion of applications, it is still an issue for many producers who seek environmental assistance and are continuously denied funding due to budgetary constraints. Many conservation groups worry that this could deter producers from applying and enrolling in the program. This issue will likely intensify if annual appropriations continue to reduce actual funding or if funding is reduced to offset additional funding for other programs. One reason why higher funding has not resulted in the elimination of the backlog is that the average contract size has grown since the 2002 farm bill. The average cost of an EQIP contract has more than doubled from almost $7,800 per contract prior to 2002 to over $16,000 per contract since 2002. One reason for this increase could be the higher funding cap established in the 2002 farm bill that allowed large-scale livestock operations to fund waste management facilities and allowed the installation of more expensive conservation practices. According to NRCS, between 1997 and 2007, the top practice by cumulative cost-share dollars was waste storage facilities, which totaled $486 million over the ten-year period. Though the 2008 farm bill lowered the payment limitation to $300,000 over any six-year period, the average contract is still considerably less ($16,000) than the limit. This will continue to be an issue as it is widely believed that the lower payment limitation will not greatly reduce the number of unfunded applications. Section 2502 of the 2008 farm bill made certain conservation activities involving the development of plans eligible for financial assistance under EQIP. Traditionally, technical assistance provides the planning, design, and technical consultation functions, while financial assistance offers monetary support for implementation capacity. NRCS refers to these plans as conservation activity plans (CAPs). While the 2008 farm bill amendment specifically includes comprehensive nutrient management planning (CNMP), NRCS has expanded the list of eligible CAPs to include forestry management, energy management, and pollinator habitat, among others. CAPs are performed by third-party technical assistance providers, referred to as technical service providers (TSP), and must meet NRCS standards and requirements. EQIP payments are made to the EQIP participant, who then reimburses the TSP for the CAP. NRCS continues to provide the majority of technical assistance for EQIP, including development of plans eligible under CAPs; however, EQIP continues to serve as the primary program for funding third-party technical assistance activities. The use of CAPs and other third-party services could be a way to free up NRCS staff time for other EQIP activities. On the other hand, the additional administrative measures required to write CAP contracts could offset time savings devoted to technical assistance. This issue could be debated in the next farm bill as CAPs and their implementation are reviewed. From available records, NRCS can provide considerable information about EQIP contracts, including which conservation practices are being installed, and their design and maintenance standards. However, until recently, relatively little was known about what is actually being accomplished through EQIP contracts. To begin filling this void, NRCS has compiled information about various resource concerns that EQIP addresses. These data show that in 2007, the primary resource concerns addressed through EQIP spending included water quality (20%), plant condition (17%), soil erosion (16%), water quantity (13%), domestic animals (12%), soil condition (10%), wildlife and fish (7%), and air quality (5%). Little is known, however, about how enduring those conservation practices might be after the contract ends. Among the questions that NRCS is trying to address for all of its conservation activities, including EQIP, are how to (1) evaluate performance, (2) measure environmental changes, (3) evaluate cost-effectiveness, (4) determine which methods to use to identify environmental effects, and (5) determine which types of data should be collected to measure output. NRCS initiated a national review in 2003, called the Conservation Effects Assessment Project (CEAP), in an attempt to develop better answers to all these questions. CEAP was originally intended to account for the benefits from the 2002 farm bill's substantial increase in conservation program funding through the scientific understanding of the effects of conservation practices at the watershed scale. Only a few initial results are currently available based on cropland in the upper Mississippi River basin and the Chesapeake Bay watershed. Initial findings show beneficial effects from conservation practices as well as additional application needs. EQIP offers financial assistance to producers to implement many of the conservation practices analyzed in the CEAP assessment; however, the assessment does not correlate the effects and benefits of conservation practice to any one federal program.

The Environmental Quality Incentives Program (EQIP) is a voluntary program that provides farmers with financial and technical assistance to plan and implement soil and water conservation practices. EQIP is the largest agriculture conservation financial assistance program for working lands. EQIP was first authorized in 1996 and was most recently revised by Section 2501 of the Food, Conservation, and Energy Act of 2008 (P.L. 110-246, the 2008 farm bill). It is a mandatory spending program (i.e., not subject to annual appropriations) and is administered by the U.S. Department of Agriculture's (USDA's) Natural Resources Conservation Service (NRCS). Funding is currently authorized to grow to $1.75 billion in FY2012. Eligible land includes cropland, rangeland, pasture, non-industrial private forestland, and other land on which resource concerns related to agricultural production could be addressed through an EQIP contract. With the 112th Congress's emphasis on reducing federal spending, EQIP could face tighter budget constraints with a potential reduction in mandatory funding levels and a continuing backlog of unfunded applications. Congress will also likely consider reauthorization of the 2008 farm bill because much of the current law, including EQIP, expires in 2012.

Belarusian President Aleksandr Lukashenko snuffed out Belarus's modest progress toward democracy and a free market economy and created an authoritarian regime shortly after being elected as president in 1994. His regime is in rhetoric and policies a throwback to the Soviet era. Those advocating a stronger U.S. role in trying to bring democratic change to Belarus say that the country is important to the United States because Belarus is an obstacle to the U.S. goal of making Europe "whole and free." Another concern is Belarus's support for pariah regimes, including through arms sales. Relations between Belarus and the United States have been particularly poor since Lukashenko's brutal repression of the opposition after fraudulent presidential elections in December 2010. In response, the EU and United States have imposed strengthened sanctions against key Belarusian leaders, businessmen, and firms. Russia has taken advantage of this situation to increase its political and economic influence in Belarus. Lukashenko was first elected as president of Belarus in 1994 on a populist, anti-corruption platform. He dominates the Belarusian political scene, controlling the parliament, government, security services, and judiciary through a large presidential administration and substantial extra-budgetary resources. He has reduced potential threats from within his regime by frequently removing or transferring officials at all levels, often claiming they are incompetent or corrupt. Former regime figures who move into opposition are singled out for particularly harsh punishment. His tight control over an unreformed economy has kept the Belarusian business elite dependent on him. The Lukashenko regime also controls almost all of the media, which it uses to burnish Lukashenko's image and attack real and imagined adversaries. Lukashenko is known for his political unpredictability and for making rambling and rhetorically colorful public statements. Opposition groups and leaders in Belarus have so far posed little threat to the Lukashenko regime. The opposition's weakness is in part due to the regime's repression, but divisions over ideology and the conflicting personal ambitions of its leaders have also been factors. Lukashenko also appears to have succeeded in convincing some Belarusians, especially in the countryside, that his leadership has provided them with stable (if very modest) living standards and public order, in contrast to the vast disparities in wealth and rampant criminality prevalent in neighboring Russia. The State Department's Country Reports on Human Rights for 2011 said the regime harassed, arrested, and beat opposition figures. The regime forced the closure of independent media and non-governmental organizations (NGOs) dealing with political issues and human rights. The regime sharply restricted activities of independent trade unions and some religious groups. In January 2012, a law went into effect that strengthened the government's ability to control Internet use in Belarus. Belarus held presidential elections in December 2010. According to monitors from the Organization for Security and Cooperation in Europe (OSCE), the elections failed to meet international standards for free and fair elections. The observers noted a few positive trends, including limited but uncensored television airtime for opposition candidates. However, the observers also detailed serious shortcomings in the vote. The government used its administrative resources to support Lukashenko's candidacy and broadcast media (entirely state-owned) focused overwhelmingly on positive coverage of Lukashenko. The vote count was conducted in a non-transparent way, with observers assessing almost half of observed vote counts as "bad or very bad." According to the Belarusian Central Election Commission, Lukashenko was reelected with nearly 80% of the vote. His top opponent, Andrei Sannikau, purportedly won under 3%. The government responded to an election-night demonstration against electoral fraud in central Minsk with the arrest (and in several cases vicious beatings) of seven of the nine opposition candidates as well as the detention of over 700 other persons, including activists, journalists, and civil society representatives. Since early 2011, Lukashenko has released most, but not all, of the political prisoners. In April 2012, Lukashenko released Sannikau and Dzmitry Bandarenka, his chief campaign aide. In order to secure their release, Sannikau, Bandarenka, and others had to request pardons from Lukashenko and apologize for their alleged misdeeds. About a dozen persons are still held as political prisoners by the Belarusian government. Belarus held parliamentary elections in September 2012. As expected, supporters of the regime won all 110 seats in the parliament. Two opposition political parties boycotted the vote, and two others withdrew before election day, citing the unfairness of the electoral process. A team of observers led by the OSCE concluded that the elections did not meet international standards due to such issues as the imprisonment of some political leaders, the lack of impartiality of the central electoral commission, and the lack of transparency of the vote count. Belarus's economy is the most unreformed in Europe, according to most observers. Nevertheless, until the global economic crisis, Belarus's economy appeared to be doing quite well, at least on paper. Belarus's economy has been buoyed by exports to a growing Russia, and, until recently, Belarusian refineries have profited from refining cheap Russian crude oil and exporting it to Western countries. Russia has also provided Belarus with cheap natural gas. In addition, many experts doubt that Belarusian statistics are entirely accurate. Growth in industrial production is made possible by subsidies to ailing state firms. This economic system keeps official unemployment very low. Wage and pension increases are mandated by the government. Some prices are controlled. Collective farms are also propped up by subsidies, although private plots held by peasants are more productive. For much of his reign, Lukashenko's policies have provided a low but stable standard of living for many Belarusians and are a key reason for the public support that he has enjoyed, particularly among older and rurally based Belarusians. State control of most of the economy can also provide a way of pressuring potential opponents into silence. Most persons in Belarus work at state-owned enterprises on one-year labor contacts, which the government can decline to renew if an employee displeases it. The global economic crisis caused a slowdown in Belarus's economic growth. In 2008, real Gross Domestic Product (GDP) increased by a reported 10%, but growth slowed to 0.2% in 2009. Reported GDP growth surged again in 2010 to 7.6%. Belarus's foreign exchange reserves dwindled as the government tried to defend the Belarusian ruble, leading it to request and receive a $2 billion stabilization loan from Russia. Belarus received $3.5 billion in loans from the International Monetary Fund in 2009-2010. Belarus also received loans from the World Bank. Belarus suffered another economic crisis in 2011 due to rapidly dwindling foreign exchange reserves, in part as a result of government overspending prior to the December 2010 election. The government sought an IMF loan, which was refused due to Belarus's failure to agree to structural economic reforms. Instead, in October 2011, the government allowed the Belarusian ruble to float freely, which resulted in an immediate devaluation of the Belarusian currency by more than 50%. This move, plus loans from Russia and asset sales to Russian firms, helped to stabilize Belarus's external position, at least temporarily. The devaluation caused a deterioration of living standards for many Belarusians, who depend on imports, which are now more expensive, for high-quality consumer goods. It has also added to Belarus's problem with hyperinflation. Average consumer price inflation jumped from 7.8% in 2010 to an estimated 68% in 2012. Real GDP growth slowed to 5.3% in 2011 and to an estimated 2% in 2012. Some experts believe that the Belarusian economy could suffer yet another crisis in 2013, including further devaluation of the Belarusian ruble. Belarus continues to increase its external indebtedness in an effort to prop up its unreformed economy and service existing debts. In 2005, Belarus's external debt was $589 million. In January 2013, it was $12 billion. Given that it is unlikely to receive an IMF loan due to its failure to undertake comprehensive reforms, the Belarusian government has sought high-interest loans from the Eurobond market. The government has also borrowed heavily in Belarus's internal debt market. Belarus has close historical and cultural ties with Russia. The two countries also have close economic relations. Belarus is a member of the Eurasian Economic Community (also known as EurAsEC), also which includes Russia, Kazakhstan, Tajikistan, and Kyrgyzstan. Belarus is also a member of a customs union within EurAsEC, with Russian and Kazakhstan. These countries have started the process of creating a single Economic Space, or common market. Russian policy toward Belarus appears to be focused on gaining control of Belarus's key economic assets, while limiting subsidies to the country. After the collapse of the Soviet Union, Russia's state-owned natural gas firm Gazprom supplied Belarus with natural gas at Russian domestic prices, providing a large indirect subsidy to the Lukashenko regime. About 20% of Russia's natural gas exports and about half of its oil exports to Europe flow through Belarusian pipelines. In 2006, Gazprom pressured Belarus to sell to it half of the Beltransgaz natural gas firm (which controls the pipelines and other infrastructure on Belarusian territory) and other key Belarusian energy firms, or face the quadrupling of the price Belarus would pay for Russian natural gas. Belarus would face a cut-off in supplies, if it did not agree to pay the higher price. Belarus agreed to sell Gazprom a 50% majority stake in stages between 2007 and 2010. In addition to receiving cheap natural gas, Belarus has also benefitted from inexpensive and duty-free crude oil supplies that are processed at Belarusian refineries. Belarus then sold the bulk of these refined products to EU countries at a hefty profit. In 2007, Russia started reducing this subsidy to the Belarusian economy, as well. To hedge his bets, Lukashenko has tried to diversify Belarus's energy supplies through imports from such countries as Venezuela, Kazakhstan, Iran, and Azerbaijan, as well as development of coal reserves and a nuclear power plant within Belarus. Lukashenko has pointed to close military cooperation between Russia and Belarus, and Belarus's geographical position between NATO and Russia as reasons for Russia to subsidize energy supplies to Belarus. Belarus is a member of the Russian-dominated Collective Security Treaty Organization (CSTO), which Russia hopes to make into a counterweight to NATO influence. In 2009, Belarus announced that it would join the CSTO rapid reaction force. However, Belarus continues to stress that it will not deploy its forces outside its borders. Russian and Belarusian air defenses are closely integrated. Russia has supplied Belarus with up-to-date air defense equipment. A regional task force of Belarusian and Russian ground forces conducts joint military exercises. There are a small number of Russian troops in Belarus, in part to run a naval radio station and an early warning radar station. Although the Kremlin's most loyal ally, Lukashenko has shown some independence from Moscow's foreign policy. Belarus has refrained from following Russia's lead in recognizing the Georgian breakaway regions of South Ossetia and Abkhazia as independent countries, despite continuing pressure from Moscow to do so. Belarus provided asylum to former Kyrgyzstan President Kurmanbek Bakiyev, whose 2010 ouster was supported by Moscow. Lukashenko has also played host to Georgian President and Kremlin antagonist Mikheil Shaakashvili. Tensions between Moscow and Minsk increased as a result of attacks on Lukashenko in government-controlled Russian media in the second half of 2010. However, just days before the December 2010 presidential election the two sides signed an agreement on oil export duties that Minsk claimed was worth an estimated $4 billion a year to Belarus. Lukashenko agreed that Belarus would further integrate its economy with Russia's in a regional "Single Economic Space." In contrast to U.S. and EU condemnation of what was widely perceived as a fraudulent election and of an ensuing crackdown against the opposition, Russian President Medvedev congratulated Lukashenko on his "reelection." Russia has taken advantage of Minsk's international isolation since the presidential election and its foreign exchange shortfall to gain control of key Belarusian economic assets. In June 2011, Russia, through the Eurasian Economic Community, granted Belarus a $3 billion stabilization loan. Release of the loan tranches is conditioned on the privatization of Belarusian companies. In November 2011, Belarus agreed to sell its remaining portion of Beltransgaz to Gazprom, giving the Russian state-owned company a 100% share. In exchange, Belarus received a substantial reduction in the price charged by Gazprom for natural gas supplies. Russia also cut the price of oil supplies to Belarus. In addition, Belarus received a $1 billion loan from the Russian Sberbank and the Eurasian Development Bank. As collateral, Belarus had to put up 35% of the key Belarusian fertilizer company Belaruskali. Russia will likely continue to exercise substantial economic leverage over Belarus. Russia has threatened to cut crude oil supplies to Belarusian refineries in 2013 over what appeared to be a Belarusian attempt in 2012 to evade export duties on the products of its refineries by mislabeling them as solvents. Russian efforts to secure control of key Belarusian assets, such as Belaruskali and oil refineries, are likely. Belarus's cooperation with NATO has been limited in most respects. Belarus strongly opposed NATO enlargement to include neighboring central European countries. Lukashenko continues to claim that NATO represents a military threat to Belarus. However, Belarus is a member of NATO's Partnership for Peace (PFP) program, and participates in some PFP exercises. More importantly, since January 2011, Belarus has cooperated with the United States and NATO on the Northern Distribution Network, a supply line that runs from Baltic ports to rail lines in Belarus and other countries to NATO-led troops in Afghanistan. Belarus-EU ties (and to some extent U.S.-Belarus relations) have followed a familiar pattern--the Lukashenko regime conducts fraudulent elections and engages in repressive actions against opposition figures. The EU responds with sanctions against persons responsible for those actions, but refrains from sanctions against Belarus as a whole. Lukashenko, perhaps seeking international loans and feeling particularly strong pressure from Russia, liberates political prisoners, while keeping the fundamentally undemocratic nature of the regime intact. The EU responds by suspending sanctions and enhancing contacts with the government. Another cycle of repression ensues, often after the next fraudulent election, and the cycle repeats itself. The most recent thaw in EU-Belarus relations occurred in 2008-2010. This period ended after the fraudulent December 19, 2010, elections and the ensuing repression of the opposition. On January 31, 2011, European Union foreign ministers agreed to re-implement visa bans against top Belarusian leaders, which had been imposed in 2004 and 2006 and suspended in 2008. In addition, they agreed to impose visa bans and asset freezes on those responsible for the fraudulent December 2010 election and the ensuing crackdown on the opposition and civil society. The ministers said that the sanctions would be lifted only after the release and "rehabilitation" of those persons detained on political grounds. They added that in addition to this, "further reforms of the Electoral Code, the freedom of expression and of the media, the freedom of assembly and association, would pave the way for the lifting of the restrictive measures." The ministers said the EU would provide "urgent support to those repressed and detained on political grounds and their families" and strengthen other aid to civil society, "targeting in particular NGOs and students." The statement said the EU looked forward to opening talks with Belarus for "visa facilitation" to permit more ordinary Belarusians to visit the EU. In the meantime, the ministers expressed support for EU member states' waiver or reduction of visa fees for Belarusians. The EU statement stated that the EU remains committed to dialogue with the Belarusian authorities and to the Eastern Partnership program, but that "deepening" EU relations with Belarus "is conditional on progress towards respect by the Belarusian authorities for the principles of democracy, the rule of law and human rights." In 2011, it seemed that another cycle in the EU-Belarus relationship would begin as the regime liberated many of its political prisoners. However, others remained in captivity and additional arrests and persecution of the opposition took place. In addition, those imprisoned were reportedly subjected to ill-treatment and torture. In response, the EU has added names to its list of persons subject to a visa ban and asset freeze on several occasions, most recently in March 2012. The list contains not only senior Belarusian leaders responsible for repression, but also wealthy businessmen (often referred to as "oligarchs") with close connections to the regime. The EU's sanctions list contains 243 persons. In addition, 32 firms associated with the regime have had their assets frozen by the EU. In addition to Lukashenko, the list of persons includes current Belarusian Foreign Minister Vladimir Makei. Some analysts have pointed out Lukashenko has found ways to pressure the EU to not push sanctions too far. For example, press reports claimed that during talks over adding certain Belarusian oligarchs to the sanctions list in early 2012, Slovenia, Latvia, and other countries were hesitant to include some names on the list, because of the investments of the oligarchs in their countries. In addition, Belarusian officials have hinted that, if EU pressure is too intense, Belarusian border guards could focus more on holding up the transit of EU exports through Belarus, rather than intercepting asylum-seekers seeking to enter EU territory. In November 2012 Lukashenko announced that Belarus (which is landlocked) will use Russian ports for its exports rather than ports in the Baltic States, as it does now. Such a move would have a significant negative impact on the economies of Lithuania and Latvia. Lukashenko has also barred opposition figures from attending conferences in the EU, in retaliation for visa sanctions against his officials and supporters. Perhaps for the same reason, the regime has declined to agree to an accord with the EU on visa facilitation for ordinary Belarusians. But while the lack of an agreement means the EU visa process remains expensive and burdensome, in 2011 Belarusians nevertheless received far more "Schengen" visas (permitting travel to 25 countries, including most but not all EU countries) on a per capita basis than any other country in the world. Poland and Lithuania have been particularly generous in providing visas to Belarusians, some of whom visit to buy high-quality consumer goods in their countries. The EU allocated a total of 19.3 million Euro ($25.5 million) for aid for civil society and independent media in Belarus between 2011 and 2013. In March 2012, the EU launched a dialogue with Belarusian civil society and the opposition on the reforms needed to modernize Belarus and to improve EU-Belarusian cooperation. The United States recognized independent Belarus on December 25, 1991. U.S. officials hailed the removal of all nuclear weapons from Belarus in November 1996. However, U.S.-Belarus relations deteriorated as Lukashenko become increasingly authoritarian. In 1997, a State Department spokesman announced a policy of "selective engagement" with Belarus on issues of U.S. national interests and "very limited dealings" on other issues. In addition to U.S. opposition to Lukashenko's human rights violations, the United States has criticized Belarus's relations with rogue regimes, such as Iran and Venezuela. U.S. aid to Belarus has been meager. According to the FY2013 Congressional Budget Justification for Foreign Operations, in FY2011, the United States provided $13.864 million in aid for Belarus. In FY2012, Belarus was expected to receive $11 million in U.S. aid. For FY2013, the Administration requested $11 million in aid for Belarus. Over three-quarters of this aid is slated for strengthening democratic political parties, civil society, and independent media. U.S. aid funds exchange programs and education programs for Belarusian students. The U.S. assistance program also supports anti-trafficking efforts and the strengthening of small and medium-sized businesses in Belarus U.S. officials have noted that implementation of U.S. programs has been made difficult by the Lukashenko regime. The regime's harassment of NGOs, including by banning foreign aid to NGOs even remotely dealing with politics and jailing members of NGOs not registered with the authorities, has hindered the delivery of U.S. aid. The sharp reduction in the number of U.S. diplomats in Belarus forced by the Belarusian government has made monitoring and assessing program performance difficult. In concert with the EU, the United States has imposed a visa ban against Lukashenko and top Belarusian officials since 2004 for undermining democratic processes, violating human rights, and engaging in corruption. In addition, in November 2007 the United States froze the U.S. assets of the state-owned oil and petrochemicals firm Belneftekhim and prohibited U.S. persons or businesses from doing business with it. Belneftekhim makes chemical fertilizers and oil products. It accounts for 35% of Belarus's exports and over 30% of the country's industrial output. U.S. officials said the move was aimed at tightening financial sanctions against a massive conglomerate under the regime's control. However, the material impact of the sanctions was not expected to be great, given the company has only modest assets in the United States, and that the EU, the main market for Belneftekhim's products, has not imposed sanctions of its own on the firm. On March 6, 2008, the Administration issued a clarification on the Belneftekhim sanctions that said that the freezing of Belneftekhim's assets included the assets of any firms in which Belneftekhim owns a 50% or greater interest. Belarus interpreted the move as a tightening of the sanctions. Lukashenko responded by recalling Belarus's ambassador to the United States on March 7 and pressing for the removal of the U.S. Ambassador to Belarus, Karen Stewart. Ambassador Stewart left Minsk on March 12 for consultations in Washington. Belarus reduced the number of its diplomats in Washington to five persons, and demanded that the United States do the same. The United States complied with Belarus's request. The United States has not appointed a new Ambassador to Belarus. After this low point in U.S.-Belarusian ties, the United States appeared to attempt to improve relations, in line with the European Union's desire to engage Belarus by easing sanctions in exchange for small steps forward on democratization. In early September 2008, the United States suspended sanctions for six months on two Belneftekhim entities, while leaving sanctions on others. The move was a reward for the release of the last Belarusian political prisoners in August and an incentive to hold freer and fairer parliamentary elections on September 28. However, the overture to Belarus appeared to suffer a setback after Belarus's 2008 parliamentary elections, which the State Department said "fell significantly short" of international standards. It said that the United States would "maintain the dialogue" with the Belarusian government, but that better elections and a better human rights record would be needed before ties could improve "significantly." Despite Belarus's lack of significant progress on democratic reform, the United States extended the suspension of sanctions on the two Belneftekhim entities for additional six-month periods through November 2010. The U.S.-Belarus rapprochement continued in early December 2010, when Secretary of State Clinton and Belarusian Foreign Minister Sergei Martynov, meeting in Astana, Kazakhstan, announced that Belarus had agreed to eliminate its supply of highly enriched uranium (HEU) by the Nuclear Security Summit in March 2012 in Korea. In return, Belarus was to receive an invitation to that summit, as well as U.S. aid to help Belarus dispose of its HEU. The United States would continue to provide assistance for security upgrades at the Belarus Joint Institute for Power and Nuclear Research, where all of the HEU is kept. The United States also offered unspecified support for Belarus's desire to build a new civilian nuclear power plant. Finally, the two sides agreed that "enhanced respect for democracy and human rights in Belarus remains central to improving bilateral relations." Belarus's agreement to give up its HEU may have been part of an effort to secure better ties with the United States, given the importance with which the United States views nuclear proliferation. However, the positive impact of the HEU agreement on U.S.-Belarusian relations was sharply diminished by the December 19, 2010, presidential election debacle. In a statement released by the White House press secretary on December 20, the Administration said it strongly condemns the actions that the Government of Belarus has taken to undermine the democratic process and use disproportionate force against political activists, civil society representatives and journalists, and we call for the immediate release of all presidential candidates and the hundreds of protestors who were detained on December 19 and 20. The United States cannot accept as legitimate the results of the presidential election announced by the Belarusian Central Election Commission. The statement said that "the Belarusian government's actions are a clear step backwards on issues central to our relationship with Belarus." On January 31, 2011, in a move timed to coincide with a similar EU statement, the United States announced a package of measures in response to the situation in Belarus. The Administration re-imposed sanctions against Lakokraska OAO and Polotsk Steklovolokno OAO, the two key subsidiaries of Belneftekhim against which sanctions had previously been suspended. The statement also said the United States will "significantly" expand the number of Belarusian officials (and their families) subject to a visa ban to include those responsible for the fraudulent December 2010 election and the repression that followed. The United States would also increase the number of persons and entities subject to asset freezes. The statement said that the United States would increase its support to Belarusian civil society, independent media, and democratic political parties. The Administration said that the United States will review its policy based on whether Belarus takes certain actions, including "the immediate release of all detainees and the dropping of all charges associated with the crackdown; a halt to the harassment of civil society, independent media and the political opposition; and space for the free expression of political views, the development of a civil society, and freedom of the media." In August 2011, the United States imposed sanctions against four additional Belarusian state-owned enterprises: the Belshina tire factory; Grodno Azot, which manufactures fertilizer; Grodno Khimvolokno, a fiber manufacturer; and Naftan, a major oil refinery. All four companies are deemed to be controlled by Belneftekhim. In response to the U.S. announcement, Belarus suspended the elimination of its stock of highly enriched uranium, which it had undertaken as part of the December 2010 agreement with the United States. In September 2012, a State Department spokesperson said the Belarusian parliamentary elections "fell short of international standards and their conduct cannot be considered free or fair." The spokesperson added that "enhanced respect for democracy and human rights in Belarus, including the release and rehabilitation of all political prisoners, remains central to improving bilateral relations with the United States." In addition to sanctions against persons and firms for the regime's undemocratic actions, the United States has imposed sanctions on Belarusian firms on non-proliferation grounds. Most recently, in February 2013, the United States imposed sanctions on TM Services Limited and Scientific and Industrial Republic Unitary Enterprise (also known as DB Radar) for violating the Iran, North Korea, and Syria Non-Proliferation Act ( P.L. 109-353 ). The sanctions prohibit the U.S. government from working with these firms, including the sale of arms and granting of export licenses. The United States is concerned about human trafficking in Belarus. According to the State Department's 2012 Trafficking in Persons report, Belarus is a country of origin and transit for women and children trafficked for sexual exploitation. It is listed as a "Tier 2" Watch List country. This means that it does not meet minimum standards for the elimination of trafficking, and has not made significant efforts in the previous year to do so. There has been some debate among policy analysts in Belarus, the United States, and Europe about whether the current sanctions policy against Belarus is effective or even in some respects counterproductive. Supporters, including some Belarusian opposition leaders, credit them with being responsible for their liberation from prison. However, some Belarusian opposition figures also criticize the sanctions for being largely symbolic in character, given that they permit the regime to continue to do highly lucrative business in the EU and elsewhere. Some who favor increasing pressure on the Lukashenko regime call for sanctions on Belaruskali, a very large potash producer that is a mainstay of the Belarusian economy. On the other hand, experts in the United States and Europe who are concerned about Russian efforts to strengthen its sphere of influence in the region warn that by isolating Belarus, the EU and United States are playing into Moscow's hands, without achieving real gains on democratization. They call for a policy of greater engagement with Belarus. In the 112 th Congress, Members of Congress spoke out strongly against human rights abuses in Belarus in congressional hearings, floor statements, speeches, and legislation. On January 26, 2011, Representative Smith introduced H.R. 515 , the Belarus Democracy and Human Rights Act of 2011. On July 6, 2011, the House agreed to the bill by voice vote. The Senate passed an amended version of H.R. 515 on December 14. The House agreed to the Senate version by voice vote on December 20. President Obama signed the bill into law on January 3 ( P.L. 112-82 ). The law reauthorizes the Belarus Democracy Act (BDA) of 2004. It updates the provisions of the legislation to sharply condemn the fraudulent December 2010 presidential election and the ensuing crackdown. It expresses support for continuing radio, television, and Internet broadcasting to Belarus by Radio Free Europe/Radio Liberty, the Voice of America, European Radio for Belarus, and Belsat. The legislation updates the BDA by including the post-December 2010 events in the section of the earlier law that expressed support for U.S. sanctions against Belarus. These include a prohibition on U.S. financial assistance to the Belarusian government and expressing the sense of the Congress that the United States should oppose multilateral financial aid to Belarus. These conditions are to remain in place until the President determines Belarus meets specific democratic and human rights criteria. The section expresses the sense of the Congress that the President should coordinate with European countries to take similar measures against Belarus. The BDA also required the President to report within 90 days and every year thereafter on the sale of weapons or weapons-related assistance to regimes supporting terrorism, and on the personal wealth of Lukashenko and other senior Belarusian leaders. P.L. 112-82 expands that report to include weapons technology and training, as well as support from foreign governments or organizations for the surveillance or censorship of the Internet. The law also says it is the policy of the United States to call on the International Ice Hockey Federation to suspend its plan to hold the 2014 International World Ice Hockey championship in Minsk until the government of Belarus releases all political prisoners. The move would be a serious blow to Lukashenko personally, as he is known to be an avid hockey fan. On March 17, 2011, the Senate approved S.Res. 105 by unanimous consent. S.Res. 105 sharply condemned the conduct of the December 2010 presidential vote, applauded the sanctions imposed by the United States and EU on the Lukashenko regime and their commitment to provide assistance to civil society in Belarus, and called for the 2014 World Hockey Championship not to be held in Belarus unless all political prisoners are released.

Belarusian President Aleksandr Lukashenko snuffed out Belarus's modest progress toward democracy and a free market economy in the early 1990s and created an authoritarian, Soviet-style regime. Belarus has close historical and cultural ties to Russia. Russian policy toward Belarus appears to be focused on gaining control of Belarus's key economic assets while reducing the costs of subsidizing the Lukashenko regime. For many years, the United States has limited ties to the regime while providing modest support to pro-democracy organizations in Belarus. The United States and the European Union also imposed sanctions on Belarusian leaders. In March 2008, Belarus withdrew its ambassador from Washington and forced the United States to recall its ambassador from Minsk, in response to what Belarus perceived as a tightening of U.S. sanctions against Belneftekhim, the state-owned petrochemicals firm. Belarus also limited the number of U.S. diplomats in Belarus to five persons. From 2008 to 2010, the United States and European Union suspended some sanctions in exchange for very modest improvements on human rights issues. This policy suffered a setback in December 2010, when Belarus held presidential elections that observers from the OSCE viewed as falling far short of international standards. Moreover, in response to an election-night demonstration against electoral fraud in a square in central Minsk, the Lukashenko regime arrested over 700 persons, including most of his opponents in the election, as well as activists, journalists, and civil society representatives. Some of them were viciously beaten by police. In January 2011, the EU and the United States imposed enhanced visa and financial sanctions against top Belarusian officials. The United States re-imposed sanctions against two key subsidiaries of Belneftekhim. They also pledged enhanced support for Belarusian pro-democracy and civil society groups. Although Lukashenko has released most of the political prisoners, about a dozen remain imprisoned. In response, the United States and the EU have imposed sanctions against additional prominent Belarusian officials, and businessmen and firms associated with them. Congress has responded to the situation in Belarus with legislation. In January 2012, President Obama signed the Belarus Democracy and Human Rights Act. The legislation reauthorized the Belarus Democracy Act of 2004. It updated the provisions of the legislation to include the fraudulent December 2010 election and the ensuing crackdown. It also updated the report the Administration is required to file to include assistance provided by other governments or organizations to assist the Belarusian government's efforts to control the Internet. The legislation stated that it is the policy of the United States to call on the International Ice Hockey Federation to not hold the 2014 International World Ice Hockey championship in Minsk unless the government of Belarus releases all political prisoners. The move would be a serious blow to Lukashenko personally, as he is known to be an avid hockey fan.

The U.S. Department of Agriculture (USDA) administers a number of agricultural conservation programs that assist private landowners with natural resource concerns. These include working land programs, land retirement and easement programs, watershed programs, emergency programs, technical assistance, and other programs. The number and funding levels for agricultural conservation programs have steadily increased over the past 60 years. Early conservation efforts undertaken by Congress were focused on reducing high levels of soil erosion and providing water to agriculture in quantities and quality that enhanced farm production. By the early 1980s, however, concern was growing that these programs were not adequately dealing with environmental problems resulting from agricultural activities (especially off the farm). In 1985, conservation policy took a new direction when Congress passed the Food Security Act of 1985 (1985 farm bill, P.L. 99-198 ), which established the first conservation programs designed to deal with environmental issues resulting from agricultural activities. Provisions enacted in subsequent farm bills, including in 1990, 1996, 2002, 2008, and 2014, reflect a rapid evolution of the conservation agenda, including the growing influence of environmentalists and other nonagricultural interests in the formulation of conservation policy, and a recognition that agriculture was not treated like other business sectors in many environmental laws. Congress also began funding many of these new programs through mandatory spending for the first time, using the borrowing authority of USDA's Commodity Credit Corporation (CCC) as the funding mechanism instead of annual appropriations. In addition to the original soil erosion and water quality and quantity issues, the conservation agenda has continued to expand to address other natural resource concerns, such as wildlife habitat, air quality, wetlands restoration and protection, energy efficiency, and sustainable agriculture. Lead agricultural conservation agencies within USDA are the Natural Resources Conservation Service (NRCS), which provides technical assistance and administers most conservation programs, and the Farm Service Agency (FSA), which administers the Conservation Reserve Program (CRP). These agencies are supported by others in USDA that supply research and educational assistance, including the Agricultural Research Service (ARS), the Economic Research Service (ERS), the National Institute of Food and Agriculture (NIFA), and the Forest Service (FS). In addition, agricultural conservation programs involve a large array of partners, including other federal agencies, state and local governments, and private organizations, among others, who provide funds, expertise, and other forms of assistance to further agricultural conservation efforts. USDA provides technical and financial assistance to attract interest and encourage participation in conservation programs. Participation in all USDA conservation programs is voluntary. These programs protect soil, water, wildlife, and other natural resources on privately owned agricultural lands to limit environmental impacts of production activities both on and off the farm, while maintaining or improving production of food and fiber. Some of these programs center on improving or restoring resources that have been degraded, while others seek to create conditions with the objective of limiting degradation in the future. Though programs in this report are listed alphabetically, agricultural conservation programs can be grouped into the following categories based on similarities: working land programs, land retirement and easement programs, watershed programs, emergency programs, compliance, technical assistance, and other programs and overarching provisions. The majority of conservation programs are funded through USDA's Commodity Credit Corporation (CCC) as mandatory spending. Congress authorizes mandatory programs at specified funding levels (or acreage enrollment levels for CRP and CSP) for multiple years, typically through omnibus legislation such as the farm bill. Mandatory programs are funded at these levels unless Congress limits funding to a lower amount through the appropriations or legislative process (or puts a ceiling on acreage that can be enrolled). Discretionary programs are funded each year through the annual appropriations process. Despite a steady increase in mandatory funding authority, select conservation programs have been reduced or capped through annual appropriation acts since FY2003. Many of these spending reductions were at the request of the Administration. The mix of programs and amount of reductions vary from year to year. Some programs, such as the CRP, have not been reduced by appropriators in recent years, while others, such as EQIP, have been repeatedly reduced below authorized levels. Authorized mandatory funding for conservation programs has been reduced by a total of more than $4 billion over the past 10 years. FY2018 marks the first time in 15 years that an appropriations act does not reduce mandatory conservation program funding. Sequestration has also had an effect on conservation programs. Sequestration is a process of automatic, largely across-the-board reductions that permanently cancel mandatory and/or discretionary budget authority to enforce statutory budget goals. Discretionary accounts have avoided sequestration in recent years through adjustments to spending limits, although sequestration continues on mandatory accounts. Most all mandatory conservation programs were subject to sequestration in FY2014 through FY2018. Even with sequestration and appropriations act reductions, total annual mandatory funding for conservation programs has grown from a total of $3.9 billion in FY2008 to over $5 billion in FY2018. Before the 1985 farm bill, few conservation programs existed, and only two would be considered large by today's standards. In contrast, leading up to the debate on the 2014 farm bill, there were over 20 distinct conservation programs with total annual spending greater than $5 billion. The differences and number of these programs created general confusion about the purpose, participation, and policies of the programs. Discussion about simplifying or consolidating conservation programs to reduce overlap and duplication, and to generate savings, continued for a number of years. The Agricultural Act of 2014 ( P.L. 113-79 , 2014 farm bill), contained several program consolidation measures, including the repeal of 12 active and inactive programs, the creation of two new programs, and the merging of two programs into existing ones. A number of conservation programs were repealed by the 2014 farm bill or have gone unfunded by Congress in recent years. Table 1 lists these programs and the most recent congressional action taken. The tabular presentation that follows provides basic information covering each of the USDA agricultural conservation programs, including administering agency or agencies within USDA; brief program description; major amendments to the program in the Agricultural Act of 2014 ( P.L. 113-79 ), commonly referred to as the 2014 farm bill; national scope and availability, including participation levels and acres enrolled; states with the highest level of funds obligated or acres enrolled; volume of application backlog or public interest in each program; authorized funding levels, whether mandatory spending or discretionary appropriations, and any funding restrictions; FY2018 funding level in the Consolidated Appropriations Act of 2018 ( P.L. 115-124 ), or, if applicable, the authorized level in the Agricultural Act of 2014 (sequestration and carryover not included unless noted); FY2019 funding level requested by the Administration (sequestration and carryover included where known); statutory authority, recent amendments, and U.S. Code reference; expiration date of program authority unless permanently authorized; and program's website link. Information for the following tables is drawn from agency budget presentations, explanatory notes, and websites; written responses to questions published each year in hearing records of the Agriculture Appropriations Subcommittees of the House and Senate Appropriations Committees; and spending estimates from the Congressional Budget Office. Further information about these programs may be found on the NRCS website at http://www.nrcs.usda.gov and on the "conservation programs" page of the FSA website at http://www.fsa.usda.gov .

The Natural Resources Conservation Service (NRCS) and the Farm Service Agency (FSA) in the U.S. Department of Agriculture (USDA) currently administer 20 programs and subprograms that are directly or indirectly available to assist producers and landowners who wish to practice conservation on agricultural lands. The differences and number of these programs have created general confusion about the purpose, participation, and policies of the programs. While recent consolidation efforts removed some duplication, a large number of programs remain. The programs discussed in this report are as follows Agricultural Conservation Easement Program (ACEP) Agricultural Management Assistance (AMA) Conservation Operations (CO); Conservation Technical Assistance (CTA) Conservation Reserve Program (CRP) CRP--Conservation Reserve Enhancement Program (CREP) CRP--Farmable Wetland Program CRP--Grasslands Conservation Stewardship Program (CSP) Emergency Conservation Program (ECP) Emergency Forest Restoration Program (EFRP) Emergency Watershed Protection (EWP) Environmental Quality Incentives Program (EQIP) EQIP--Conservation Innovation Grants (CIG) Grassroots Source Water Protection Program Healthy Forests Reserve Program (HFRP) Regional Conservation Partnership Program (RCPP) Voluntary Public Access and Habitat Incentive Program Water Bank Program Watershed and Flood Prevention Operations Watershed Rehabilitation Program This tabular presentation provides basic information covering each of the programs. In each case, a brief program description is followed by information on major amendments in the Agricultural Act of 2014 (P.L. 113-79, 2014 farm bill), national scope and availability, states with the greatest participation, the backlog of applications or other measures of continuing interest, program funding authority, FY2018 funding, FY2019 Administration budget request, statutory authority, the authorization expiration date, and a link to the program's website.

Prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the amount that a debtor in bankruptcy could exempt as equity in a homestead was generally limited by two factors: (1) whether the domiciliary state allowed the debtor to choose between the federal and state exemptions and (2) the amount the domiciliary state allowed as an homestead exemption. A third factor was added by BAPCPA in cases in which a debtor had purchased the property within approximately three years and four months before filing a petition for bankruptcy. Additionally, BAPCPA restricts debtors' options for determining their domiciliary state and, thus, the state exemptions that will apply. Prior to BAPCPA, an individual anticipating filing for bankruptcy protection might, shortly before filing for bankruptcy, move to a state whose exemptions were more favorable than those in the state where the individual was currently living and benefit from the more favorable exemption amounts. This report discusses the federal homestead exemption, the effect BAPCPA has on a debtor's homestead exemption and, in Table 1 , provides a survey of the current homestead exemptions in the fifty states and the District of Columbia. The table also indicates whether state residents may choose between the state and federal exemptions. Section 522 of the Bankruptcy Code addresses the extent to which an individual debtor may elect to exempt equity in certain property from becoming part of the bankruptcy estate. Property exempted from the bankruptcy estate is not available to satisfy creditors. Among the exemptions explicitly provided in the Bankruptcy Code--the federal exemptions--are a homestead exemption in the amount of $21,625 and a "wildcard" exemption of $1,150 that can also be applied to the homestead if the debtor chooses so long as the federal exemptions are available to the debtor. To the extent allowed under state law, the Bankruptcy Code allows debtors to choose between using the federal exemptions or those available under applicable state law. This is an "either/or" choice--debtors are not allowed to choose to use some state exemptions and some federal exemptions. When a petition is filed jointly by husband and wife or where the individual cases of a husband and wife are ordered to be jointly administered, each spouse must choose the same set of exemptions. However, debtors in many states have no choice to make because their state law prohibits the use of the federal exemptions. These federal exemptions are available to debtors only to the extent they are not prohibited by the applicable state. Nonetheless, while the homestead exemption in many states is greater than the federal homestead exemption, provisions were introduced in BAPCPA that impose limitations on the extent to which debtors can avail themselves of a state's homestead exemption. BAPCPA established a maximum homestead exemption for all debtors in all states unless a minimum period for property ownership was met. Subsection 522(p) of the Bankruptcy Code generally prohibits exempting an equity interest in the property that was acquired by the debtor during the 1215-day period immediately preceding the bankruptcy filing to the extent that the interest exceeds $146,450 in value. This limit may also apply in some cases in which the debtor has been convicted of a felony or has a debt resulting from violations of securities laws, fraud in a fiduciary capacity, or as the result of certain acts that caused serious physical injury or death. Additionally, if any part of the debtor's value in the residence is attributable to property disposed of in the 10-year period preceding the bankruptcy, the debtor's value in the residence must be reduced if all or part of the value in the previously owned property could not have been exempted in bankruptcy if the property were still owned when the debtor filed for bankruptcy. BAPCPA also restricts debtors' options for determining their domiciliary state, which may effectively place limits on their homestead exemption. Debtors must have lived in their current state for at least two years before they are eligible for that state's exemptions. Debtors who have not lived in the same state for at least two years prior to filing for bankruptcy must look back at where they lived for the 180-day period immediately preceding that two years. If the debtor lived in more than one state during that 180-day period, the domiciliary state is the one in which the debtor lived for the greater part of that 180-day period. Thus, through the changes made to SS 522, BAPCPA limits the extent to which a debtor might plan for bankruptcy and maximize exempt assets. To effectively choose which state's exemptions will apply, a debtor must move to the chosen state approximately two years before filing for bankruptcy. To plan for a homestead exemption of more than $146,450, the debtor must acquire the interest approximately three years and four months before filing a bankruptcy petition. State laws were reviewed on both the Westlaw and LEXIS computer databases. In the table, the entry for each state first provides a brief synopsis of the homestead exemption available to debtors in bankruptcy as well as the extent to which debtors may elect to use federal rather than state exemptions. In some cases, de minimis "wildcard" exemptions that may be used for either real or personal property are noted, but the survey is not comprehensive with respect to them. They are more likely to be noted when a state has an extremely limited homestead exemption. Relevant excerpts of the state's statutory language is provided after the synopsis. Except as it is included in the excerpted statutory language, the survey does not address whether there is an exemption for proceeds after the sale of a homestead, nor does it address exemptions established by case law for homesteads held as tenancies by the entirety. Except as noted, state law provisions that constitute exceptions to the homestead exemption are not included in the survey.

When debtors file for bankruptcy protection under Title 11 of the U.S. Code, they may exempt the value of certain property; in many cases, this includes their homestead. In practical terms, to the extent that the property's value does not exceed the allowed exemption amount, the debtor may keep the property rather than its becoming part of the bankruptcy estate and thereby being available to satisfy creditors. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) introduced additional limitations on the extent to which debtors could exempt value in their residences when filing for bankruptcy protection. This report surveys the homestead exemption laws of the 50 states and the District of Columbia with an emphasis on the amount of the exemptions and the extent to which debtors may choose between federal and state exemptions. It also describes the limitations on state homestead exemptions in 11 U.S.C. SS 522(o)-(q) that were imposed by BAPCPA. The amounts states allow debtors to exempt in bankruptcy run the gamut. A few states (New Jersey, Pennsylvania, and Virginia) have no specific homestead exemption. Several jurisdictions allow debtors to exempt unlimited value in their homestead (the District of Columbia, Florida, Iowa, Kansas, Oklahoma, South Dakota, and Texas), but some states allow an unlimited homestead exemption only in specific circumstances (Kentucky, Louisiana, Nevada, and Washington). In states with a specific dollar amount that is allowed as a homestead exemption, the majority of states allow an exemption that is more than $10,000, but less than $200,000. However, more than 10% of the states with a limited homestead exemption allow no more than $10,000. Only 10% allow $200,000 or more without imposing restrictions not related to residency. In some states, the amount of the available exemption is dependent upon age or disability. In others, marital status affects the available exemption. Some allow additional exemption amounts if there are dependent children in the home. In a few states, the exemption is lower for a mobile home than for a residence that is real property. In New York, the maximum available exemption is determined by the county in which the homestead is located. Massachusetts recently changed its laws to create two classes of homestead exemption--an automatic homestead exemption and a declared homestead exemption. The declared homestead exemption requires written formalities and is of greater maximum value than is the automatic exemption. Some states appear to use their homestead exemptions to address issues not directly related to the home. West Virginia generally allows debtors to exempt up to $25,000. That amount increases to $250,000 if the debtor is a physician with malpractice insurance coverage for at least $1 million per occurrence and the bankruptcy is, at least in part, a response to a medical malpractice verdict or judgment. Washington State generally limits debtors to exempting $125,000 for their homestead; however, if another state has gotten a judgment against the debtor for income taxes due to that other state on retirement benefits that were paid to the debtor while the debtor was a resident of Washington, the homestead exemption is unlimited. This report will not be routinely updated.

This report discusses the FY2017 budget request, related congressional actions, and appropriations (discretionary budget authority) for the Bureau of Economic Analysis (BEA) and Bureau of the Census (Census Bureau). These entities make up the Economics and Statistics Administration (ESA) in the U.S. Department of Commerce, which is funded under annual appropriations for the Departments of Commerce and Justice, and science and related agencies (CJS). The report focuses primarily on the Census Bureau, whose budget justification is published separately from ESA's and whose budget is far larger. Table 1 , below, shows the FY2016-enacted and FY2017-requested amounts for ESA, BEA, and the Census Bureau, with its two major accounts. Also shown are the amounts recommended by the House and Senate Committees on Appropriations for ESA (with no separate breakouts provided for BEA) and the Census Bureau, as well as the FY2017-enacted amounts. The Economics and Statistics Administration provides policy support and, through the Commerce Department's Under Secretary for Economic Affairs, management oversight for the Bureau of Economic Analysis and Census Bureau. ESA's policy support staff conducts economic research and analyses "in direct support of the Secretary of Commerce and the Administration." ESA "monitors and interprets economic developments," together with "domestic fiscal and monetary policies," and "analyzes economic conditions and policy initiatives of major trading partners." The Bureau of Economic Analysis, like the Census Bureau, is one of 13 principal federal statistical agencies, each of whose primary mission is statistical work. According to the Administration's budget justification for ESA, "BEA's national, industry, regional, and international economic accounts present valuable information on key issues such as U.S. economic growth, regional economic development, inter-industry relationships, and the Nation's position in the world economy." The statistical measures produced by BEA include "gross domestic product (GDP), personal income and outlays, corporate profits, GDP by state and by metropolitan area, balance of payments, and GDP by industry." The Census Bureau conducts the decennial census under Title 13 of the U nited S tates Code , which also authorizes the bureau to collect and compile a great variety of other demographic, economic, housing, and governmental data. The bureau's activities include the production of Current Economic Statistics that provide wide-ranging, detailed data about the U.S. economy; Current Demographic Statistics--among which are intercensal demographic estimates, population projections, and Current Population Reports ; and, in addition to the decennial census, the American Community Survey and two quinquennial censuses, the economic census and the census of governments. The Administration's FY2017 budget request for the Economics and Statistics Administration (including BEA but not the Census Bureau) was $114.6 million, $5.6 million (5.2%) above the $109.0 million enacted for FY2016. Of the $114.6 million, $4.0 million was to fund ESA's policy support and management oversight. The request exceeded the $3.9 million FY2016 appropriation by $83,000 (2.1%). The rest of the FY2017 request, $110.7 million, was to go to BEA and would have been $5.6 million (5.3%) more than the agency's $105.1 million FY2016-enacted funding level. The FY2017 budget justification for BEA noted that the Census Bureau's "economic indicators program provides the essential data building blocks" for measures like GDP, gross domestic income, corporate profits, and GDP by industry. The two agencies proposed working together to improve the timeliness and accuracy of the key economic indicators and expand their coverage, such as by including the real estate, health care, accommodations and food services, and administrative and waste management sectors in the Census Bureau's Quarterly Financial Report. Another new initiative for FY2017 would have involved BEA's development of a "regional economic dashboard" featuring county-level GDP measures. The Administration's FY2017 budget request for the Census Bureau was $1,633.6 million, $263.6 million (19.2%) more than the FY2016-enacted amount of $1,370.0 million. As discussed later in this report, the increase was largely due to heightened preparations for the 2020 Decennial Census. Requested funding for the decennial census, by far the bureau's most costly and visible endeavor, rises steadily throughout each decade, peaks in the census year, and decreases steeply thereafter. The FY2017 request was divided between the bureau's two major accounts: Current Surveys and Programs would have received $285.3 million, a $15.3 million (5.7%) increase over the $270.0 million enacted for FY2016, and 17.5% of the total requested for the bureau; Periodic Censuses and Programs--the account that funds the decennial census--would have received $1,348.3 million, $248.3 million (22.6%) more than the $1,100.0 million approved for FY2016, and 82.5% of the bureau's total request. Of the entire budget request for ESA--$1,748.2 million if the Census Bureau is included--fully 77.1% was for Periodic Censuses and Programs; another 16.3% was for Current Surveys and Programs. The amounts for BEA and ESA's policy support and management oversight constituted relatively small proportions of the whole request, 6.3% and 0.2%, respectively. Figure 1 , below, shows the percentage allocations for all these components of ESA. The Current Surveys and Programs account consists of Current Economic Statistics and Current Demographic Statistics. The FY2017 request for Current Economic Statistics was $194.7 million, $10.5 million (5.7%) more than the $184.2 million approved for FY2016. These statistics, from the major sources noted below, provide wide-ranging, detailed data about the U.S. economy. Business statistics come from sources including current retail, wholesale, and service trade reports and "are important inputs" to BEA's estimates of gross domestic output and to "the Federal Reserve Board and Council of Economic Advisers for the formulation of monetary and fiscal policies and analysis of economic policies." The budget request for business statistics in FY2017 was $44.0 million, $1.4 million (3.4%) more than the $42.6 million enacted for FY2016. Construction statistics "provide national performance indicators for the construction sector of the economy." They are derived from data on building permits, housing starts, and "construction put in place," which refers to the estimated total dollar value of construction work done in the nation each month. The FY2017 request for construction statistics was $16.8 million, $4.0 million (31.6%) above the $12.7 million enacted for FY2016. Manufacturing statistics come from sources such as the Annual Survey of Manufactures and the Annual Capital Expenditures Survey of capital investments by private nonfarm businesses. They supplement data from the economic census and, by measuring "the overall performance of the U.S. manufacturing sector," provide a "critical economic benchmark." The $21.3 million requested for manufacturing statistics in FY2017 was $2.1 million (10.9%) more than the FY2016-enacted amount of $19.2 million. General economic statistics originate with certain administrative records of, for example, the Internal Revenue Service, as well as surveys conducted by the Census Bureau, including the Quarterly Financial Report survey on the finances of U.S. corporations. General economic statistics, according to the Administration's budget justification for the Census Bureau, "are essential to understanding the changing economic structure of the United States." The FY2017 request for general economic statistics was $64.0 million, $1.1 million (1.7%) above the $62.9 million enacted for FY2016. Foreign trade statistics , from sources such as U.S. Customs and Border Protection and Canadian agencies, "provide official monthly statistics on imports, exports, and balance of trade for all types of merchandise moving between the United States and its international trading partners." The amount requested for foreign trade statistics in FY2017 was $34.9 million, $110,000 (0.3%) more than the $34.8 million enacted for FY2016. Government statistics are compiled from surveys of state and local governments. They cover the "revenues, expenditures, debt, and financial assets" of these governments, as well as government employment. The $13.8 million FY2017 request for government statistics was $1.8 million (14.6%) above the FY2016-enacted amount of $12.0 million. For Current Demographic Statistics in FY2017, the budget request was $90.6 million, $4.8 million (5.6%) above the $85.8 million FY2016 funding level. These statistics include the following collections and analyses of demographic data. Foremost among the household surveys under Current Demographic Statistics is the monthly Current Population Survey (CPS) of about 58,000 U.S. households that the Census Bureau has conducted for the Bureau of Labor Statistics (BLS) "for more than 50 years," with about two-thirds of the funding supplied by BLS. Although the CPS's primary purpose is "to provide detailed labor force characteristics of the civilian non-institutional population and the monthly unemployment rate, a leading economic indicator," the survey also produces housing vacancy data and includes regular supplements that gather additional data. As examples, the CPS conducts the Annual Social and Economic Supplement every March, a Fertility Supplement every other June, a School Enrollment Supplement every October, and a Voting and Registration Supplement every other November. Further, "other agencies sponsor supplements to the CPS in other months." These supplements cover topics such as "child support and alimony, tobacco use, volunteers, and food security." The FY2017 request for household surveys was $57.8 million, $1.2 million (2.1%) more than the FY2016-enacted amount of $56.6 million. The bureau's population and housing analyses include the Current Population Reports on various characteristics of the U.S. population; research concerning income, poverty, and wealth in the United States; and housing statistics compiled from the Housing Vacancy Survey. To fund population and housing analyses in FY2017, the request was $10.4 million, $991,000 (10.6%) more than the $9.4 million enacted for FY2016. The bureau's intercensal demographic estimates provide, between the decennial censuses, a series of population estimates by age, sex, race, and Hispanic ethnicity for the total United States, states, and counties; estimated population totals for sub-county areas and metropolitan areas; estimates by age and sex for Puerto Rico and the municipios; and national-, state-, and county-level estimates of housing units. The FY2017 budget request proposed combining under intercensal estimates the production of population projections as well as estimates. Projections analyze administrative data and population trends to indicate the future sizes of the U.S. and state populations. The FY2017 request for intercensal demographic estimates, perhaps reflecting their proposed broader scope, was $11.9 million, $1.8 million (18.0%) above the $10.1 million FY2016-enacted amount. The bureau's demographic surveys sample redesign provides improved sampling methods, sample designs, and data processing systems "essential to maintain the relevance, accuracy, and quality" of "the major household surveys" that the bureau conducts under the sponsorship of other federal agencies. The FY2017 request for demographic surveys sample redesign was $10.5 million, $796,000 (8.2%) above the $9.7 million enacted for FY2016. Under this account--with an FY2017 budget request that, as previously mentioned, constituted 82.5% of the total for the Census Bureau and 77.1% of the entire amount for ESA--the bureau identified certain programs considered critical for creating "a data-driven government." They included the 2020 Decennial Census, American Community Survey (ACS), 2017 Economic Census, and 2017 Census of Governments. Below is a discussion of each program, followed by information about the bureau's new IT initiative, the Census Enterprise Data Collection and Processing System (CEDCaP), which will affect multiple data collections. The U.S. Constitution requires a population census every 10 years, to serve as the basis for apportioning seats in the House of Representatives. Decennial census data also are used for within-state redistricting and in certain formulas that determine the annual distribution of more than $450 billion in federal funds to states and localities. In addition, census numbers are the foundation for constructing intercensal demographic estimates and population projections. The Administration requested $778.3 million for the 2020 Decennial Census in FY2017, a $179.4 million (30.0%) increase from the $598.9 million enacted for FY2016. The 2020 census request, which was 57.7% of the total for the Periodic Censuses and Programs account and 47.6% of the total for the Census Bureau, reflected the cyclical "ramp-up" of preparations for the next census and its designation by the bureau as a major initiative for FY2017. In presenting this request, the budget justification also proposed amending the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), as amended, to "allow an adjustment to the discretionary spending limits for the cyclical increase in decennial census operations." The document noted that "without adequate funding in the decade's middle years," the bureau "is less able to test and implement cost-saving innovations; the result is an increase in any potential costs that might occur in later years from operational failures due to lack of sufficient testing." With respect to the next census, a "cap adjustment" could avoid "either a large emergency appropriation for a predictable funding need in 2020" or "trade-offs in other discretionary programs as Census needs squeeze out other spending." Such an adjustment "would begin no later than 2018." It was "not included as an adjustment to the proposed 2017 Budget caps at this time in order to present its merits first." Mandate to Control the Cost of the Census . As directed by Congress, the Census Bureau is attempting to design and conduct the 2020 census at a lower inflation-adjusted cost per housing unit than in 2010. In April 2015 congressional testimony, the Government Accountability Office (GAO) stated that the cost to enumerate each housing unit "escalated from around $16 in 1970 to around $94 in 2010, in constant 2010 dollars (an increase of over 500 percent)." At a total life-cycle cost approaching $13 billion, the 2010 census was the most expensive in U.S. history. Its cost was about 56% greater than the 2000 census total of $8.1 billion, in constant 2010 dollars. The bureau is focusing on 2020 census cost-control innovations in four major areas: Before past censuses, the bureau conducted address canvassing to try to ensure that it had the correct addresses and map locations of all U.S. residences. For the 2020 census, the bureau proposes canvassing the whole nation, as in previous censuses, but, insofar as possible, adding new addresses to the "address frame using geographic information systems and aerial imagery instead of sending Census employees to walk and physically check 11 million census blocks." The 1970 through 2010 censuses were primarily mail-out, mail-back operations. The bureau proposes replacing as much of the mail phase of the 2020 census as possible by offering the public an online response option. In past censuses, the bureau generally followed up with nonrespondents by telephoning them or visiting their homes. The bureau proposes using administrative records, "data the public has already provided to the government," as well as "information from commercial sources," to reduce the extent of nonresponse follow-up in 2020. For whatever nonresponse follow-up remains necessary, the bureau proposes "using sophisticated operational control systems" to send employees into the field and "track daily progress." The bureau estimates that these innovations could save more than $5 billion. Its current estimate of the cost to repeat the 2010 design in the 2020 census is $17.8 billion, compared with $12.5 billion for a reengineered census. FY2017 Activities in Preparation for the 2020 Census . Summarized below are activities the bureau intended to undertake in FY2017. The budget justification cautioned that insufficient funding for these activities will prevent the bureau from conducting the 2018 census end-to-end test "with planned systems and operations integration." The 2018 test will be the final one before "2020 production" begins. If--according to what the budget justification maintained--the bureau cannot prepare adequately for this test and thus cannot reduce the risk inherent in redesigning 2020 census operations, especially the technology supporting field work, it will have to opt for a less innovative, more expensive census. The bureau planned to conduct a nationwide 2016 address canvassing test early in FY2017. It was to involve procedures for both in-office and in-field canvassing and "ensure the address quality and housing unit coverage" required for a successful census. It also was to "demonstrate the feasibility of collecting address and spatial data on devices that range from laptops to smartphones," running on "multiple operating systems." The 2017 test of the decennial census was to "mirror key dates and milestones" for the 2020 census. One 2020 operation that was to undergo its first field test in FY2017 was "update enumerate," in which the bureau was to update certain addresses in the Master Address File/Topologically Integrated Geographic Encoding and Referencing System and enumerate the corresponding housing units simultaneously, and was to use the nonresponse follow-up strategy planned for 2020. Part of the 2017 test was to occur "in an urban site with representative groups" whose English-language proficiency is limited and who historically have been difficult to enumerate. The bureau was to examine as well "comprehensive data capture solutions for paper-based data collection operations" and test responses via the Internet and real-time data processing "using cloud services." The 2017 test was to focus, too, on developing systems to make field operations more efficient, including "automated enumeration instruments" on handheld computers and "dynamic case management" for streamlining field operations. More broadly, the test was to focus on integrating operations and systems, particularly with the bureau's new information technology (IT) system, CEDCaP. Because of funding uncertainties, the bureau announced on October 18, 2016, that it would scale back the 2017 test, retaining the test of census compliance with a national sample, but ceasing plans to test field operations in three Puerto Rican municipios, the Standing Rock Indian Reservation in North and South Dakota, and the Colville Indian Reservation and Off-Reservation Trust Land in Washington State. At the time, the bureau stated that it would consider including these areas in the 2018 census test. In FY2017, the bureau was to continue researching and testing various administrative records to determine their suitability for the 2020 census. This work was to include "testing the coverage and quality of the records for obtaining information from non-responding housing units." Taking another "significant" step in FY2017, as the budget justification stated, the bureau was to begin the "very long and arduous" process of leasing space for six regional centers to support 2020 census operations. In addition, the bureau was to start "planning the 2020 Census Communications and Partnership Programs" in FY2017. The 2020 paid advertising campaign will be a major part of the communications strategy, and the partnership program will seek to engage census stakeholders in communicating the importance of the enumeration to the public. Also, as required under Title 13, Section 141 (f)(1), of the United States Code , the bureau delivered the 2020 census topics to Congress on March 28, 2017. The topics include gender, age, race, Hispanic or Latino ethnicity, relationship of each household member to the person filling out the census form, and whether the housing unit is owned or rented. The American Community Survey, which the Census Bureau implemented nationwide in 2005 and 2006, is the replacement for the decennial census long form. From 1940 to 2000, the bureau used the long form to collect detailed socioeconomic and housing data from a representative sample of U.S. residents in conjunction with the once-a-decade count of the whole resident population. The ACS covers about 3.5 million households a year. It is sent monthly to small samples of the population, and the results are aggregated to produce data at regular intervals, ranging from yearly for areas with at least 65,000 people to every five years for areas with fewer than 20,000 people. The survey is conducted in every county of the 50 states, the District of Columbia, and all Puerto Rican municipios. The bureau releases more than 11 billion ACS estimates every year on more than 40 topics. For rural areas and small groups within the population, the ACS is the sole source of data on many of these topics. The Administration's FY2017 request for the ACS was $251.1 million, $20.2 million (8.7%) above the FY2016-enacted amount of $230.9 million. According to the budget justification, the Census Bureau's planned use for part of the FY2017 ACS funding was to develop or restore several operations designed to enhance data quality and secure cooperation from those selected to fill out the survey. Field representative refresher training gives ACS field workers additional classroom instruction in interacting respectfully with respondents, clarifies difficult survey concepts, and explains field procedures. The budget justification stated that the absence of this annual training since FY2012 had heightened the risk of reduced ACS data quality, schedule delays, cost increases, and respondent complaints. The bureau proposed to develop and conduct the same annual refresher training for its ACS contact center staff as it sought to reinstate for its field representatives. General performance reviews of field workers by regional office supervisors reinforce correct ACS interviewing techniques, field procedures, and conduct with respondents. The budget justification stated that "continued failure to conduct these reviews," which had been "deferred due to resource constraints," risked the same negative consequences as noted above concerning the suspension of field representative refresher training. In addition, at congressional direction, the bureau proposed to conduct new research, such as on data collection procedures, intended to reduce ACS "respondent burden" and increase "program efficiency"; and continue an ongoing "comprehensive review," of all ACS questions, which could result in alternative data sources being used for certain information or some questions being reworded. The economic census originated in the early 19 th century, when "Congress responded to a rapid increase in industrial activity" by instructing 1810 census enumerators to "'take an account of the several manufactures within their several districts, territories and divisions.'" As the budget justification stated, the modern economic census, conducted every five years, is "the primary source of facts about the structure and functioning of the U.S. economy." Data from this census "provide the foundation for other key measures of economic performance," including GDP and the Bureau of Economic Analysis's national income and product accounts. Indeed, "practically all major federal government economic statistical series are directly or indirectly dependent on the economic census." The Administration requested $127.3 million for economic census activities in FY2017, a $2.0 million (1.6%) increase over the $125.2 million enacted for FY2016. FY2017 was the third year of the six-year funding cycle for the 2017 Economic Census, which was to "collect data on over 29 million establishments." FY2017 activities, building toward the 2017 census, were to center on a test of the CEDCaP system for collecting and processing data from all sectors of the economy, together with a test of response tracking. As a cost-control measure, the bureau planned a 2017 census with "100% Internet" reporting. The bureau's plans called for using administrative records to supply information for establishments that did not respond electronically and to reduce the reporting burden on businesses. The census of governments is the Census Bureau's other major quinquennial census. It has been conducted since 1957 in conjunction with the economic census. The budget justification stated that these two censuses "cover nearly all" of GDP. The census of governments is the principal source of information about the structure and functioning of state and local governments. It provides information about government organization and intergovernmental relationships; the number of full-time and part-time government employees; and finances, including revenues, expenditures, and assets of public pension systems. In non-census years, the bureau compiles government statistics from a sample of state and local governments. The Committee on National Statistics at the National Academies of Sciences, Engineering, and Medicine has "identified Census Bureau data on state and local governments as the only comprehensive source on the fiscal welfare" of these governments, which, the budget justification noted, account for about 12% of GDP and 15% of the civilian labor force. The Administration's FY2017 request for the census of governments was $12.3 million, $3.4 million (38.1%) more than the FY2016-enacted amount of $8.9 million. The request reflected the collection and initial processing of 2017 census data. To control expenses and reduce the reporting burden on governments, the bureau proposed substituting administrative records and "central collection methods among the states" for field work, insofar as possible, and expanding the use of electronic state-level data collection. FY2017 was the third year for the Census Enterprise Data Collection and Processing initiative, funded under the Periodic Censuses and Programs account. CEDCaP is an overarching IT system, encompassing such major data collections as the decennial census, ACS, economic census, and census of governments. According to the budget justification, CEDCaP "will create an integrated and standardized system of systems that will offer shared data collection and processing across all censuses and surveys." This initiative is expected to "consolidate costs by retiring unique, survey-specific systems and redundant capabilities and bring a much greater portion of the Census Bureau's total IT expenditures under a single, integrated and centrally managed program." The bureau also will "halt the creation of program-specific systems and put in place a solution that will be mature and proven for the 2020 Census." In contrast to CEDCaP, the bureau currently has "six unique systems" to manage survey samples; "twenty unique systems to manage the different modes of data collection, data capture, and field control; and five major unique survey and census data processing systems." The Administration requested $104.0 million for CEDCaP in FY2017. The budget justification did not give the FY2016 funding level for this initiative. The bureau's FY2017 plans for CEDCaP included the delivery of several systems to support the 2017 Economic Census and the Company Organizational Survey/Annual Survey of Manufactures, as well as the 2017 test of the decennial census. In April 2015 congressional testimony, the Government Accountability Office identified CEDCaP as "an IT investment in need of attention" and "projected to cost about $548 million through 2020." Two months earlier, GAO had reported that CEDCaP consists of 14 projects, 4 of which are related to the 2020 Decennial Census Internet response option. Particular attention to this area is warranted in order to avoid repeating the mistakes of the 2010 Decennial Census, in which the bureau had to abandon its plans for the use of handheld data collection devices, due in part to fundamental weaknesses in its implementation of key IT management practices. On April 21, 2016, the Senate Appropriations Committee reported S. 2837 , the Departments of Commerce and Justice, Science, and Related Agencies Appropriations Bill, 2017, with recommended funding of $109.0 million for the Economics and Statistics Administration (showing no separate breakout for BEA). The recommendation was identical to the FY2016 funding level for ESA and $5.6 million (4.9%) below the FY2017 request of $114.6 million. As reported by the Senate Appropriations Committee, S. 2837 recommended $1,518.3 million for the Census Bureau in FY2017, $148.3 million (10.8%) above the FY2016 funding level of $1,370.0 million and $115.3 million (7.1%) below the $1,633.6 million requested for FY2017. Current Surveys and Programs would have received $270.0 million, the same as the FY2016-enacted amount and $15.3 million (5.4%) below the FY2017 request of $285.3 million. Periodic Censuses and Programs would have been funded at $1,248.3 million, $148.3 million (13.5%) more than the $1,100.0 million enacted for FY2016 and $100.0 million (7.4%) less than the $1,348.3 million FY2017 request. The bill provided that $2.6 million of the amount for Periodic Censuses and Programs was to be transferred to the Commerce Department's Office of Inspector General (OIG) for continued "oversight and audits of periodic censuses" and "independent recommendations" to improve 2020 census operations. The Senate committee directed that the bureau should "continue to work to bring down the cost of the 2020 Decennial Census to a level less than the 2010 Census, not adjusting for inflation." The committee further directed the bureau to "work with Federal, State, tribal, local, and other partners" to obtain the administrative records necessary for conducting a less expensive, "more efficient" nonresponse follow-up in 2020; maintain "cost estimates and implementation timelines" for the CEDCaP initiative; and make CEDCaP "fully secured against cyber attacks and intrusions" before putting any of it into operation. Expressing support for the ACS, the committee noted that it "is often the primary or only source of data available to States, localities, and Federal agencies that need adequate information on a wide range of topics," but directed the bureau to provide the committee with "an update" about efforts to reduce, if possible, the number of ACS questions and ensure that the survey "is conducted as efficiently and unobtrusively as possible." The House Committee on Appropriations approved the House version of the FY2017 CJS appropriations bill, H.R. 5393 , on June 7, 2016. The bill recommended $107.0 million in funding for ESA (with no separate breakout for BEA), $2.0 million (1.8%) less than the $109.0 million enacted for FY2016 and approved by the Senate Appropriations Committee for FY2017, and $7.6 million (6.7%) below the $114.6 million FY2017 request. H.R. 5393 , as reported by the House Appropriations Committee, was to fund the Census Bureau at $1,470.0 million in FY2017, $100.0 million (7.3%) above the $1,370.0 million FY2016 funding level, $163.6 million (10.0%) less than the $1,633.6 million requested for FY2017, and $48.3 million (3.2%) below the Senate committee's recommended $1,518.3 million. The $270.0 million approved for Current Surveys and Programs, which equaled the FY2016-enacted and FY2017 Senate committee-recommended amounts, was $15.3 million (5.4%) under the $285.3 million FY2017 request. Funding for Periodic Censuses and Programs was to be $1,200.0 million, $100.0 million (9.1%) above the $1,100.0 million FY2016-enacted level, $148.3 million (11.0%) less than the FY2017 request of $1,348.3 million, and $48.3 million (3.9%) below the $1,248.3 million approved by the Senate committee. The House bill, like its Senate counterpart, provided that $2.6 million of the appropriation for this account was to be transferred to the Commerce Department's OIG for Census Bureau oversight. In addition, H.R. 5393 would have withheld 50% of the funds for 2020 census IT work, including CEDCaP, until the Secretary of Commerce gave the House and Senate Appropriations Committees and GAO an expenditure plan for CEDCaP. The House committee directed the bureau to improve its estimate of the 2020 census life-cycle cost and, within 60 days of the bill's enactment, provide the committee and GAO with a report on the steps the bureau would take to meet this directive. The House committee also expressed concern about the "burdensome nature of the ACS" and directed the bureau "to focus on its core, constitutionally mandated decennial Census activities." FY2017 CJS appropriations legislation was not enacted by the end of FY2016. The Census Bureau, BEA, and rest of ESA were funded through December 9, 2016, at the FY2016 level, with a 0.496% reduction, under the Continuing Appropriations Act, 2017. The act was Division C of the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, and Zika Response and Preparedness Act, H.R. 5325 , P.L. 114-223 , which was signed into law on September 29, 2016. Division A of the Further Continuing and Security Assistance Appropriations Act, 2017, H.R. 2028 , P.L. 114-254 , enacted on December 10, 2016, provided funding at the FY2016 level, minus a 0.1901% reduction, through April 28, 2017. Under Section 152 of the legislation, however, the Census Bureau could draw on money from Periodic Censuses and Programs--an account that includes the decennial census and other major programs discussed in this report, such as the economic census, the census of governments, and intercensal demographic estimates, together with geographic and data-processing support--at the rate necessary for conducting operations to maintain the 2020 census schedule. The Consolidated Appropriations Act, 2017, H.R. 244 , P.L. 115-31 , became law on May 5, 2017. Division B of the legislation funded ESA at $107.3 million (with no separate amount shown for BEA), $1.7 million (1.6%) less than enacted for FY2016 and recommended by the Senate Appropriations Committee, $7.3 million (6.4%) below the FY2017 request, and $300,000 (0.3%) more than the House Appropriations Committee approved. The $1,470.0 million provided for the Census Bureau in the Consolidated Appropriations Act, 2017, included $270.0 million for Current Surveys and Programs and $1,200.0 million for Periodic Censuses and Programs. These amounts matched the House committee's recommendations. The act, like S. 2837 and H.R. 5393, stipulated that $2.6 million of the appropriation for Periodic Censuses and Programs would be transferred to the Commerce Department's OIG for Census Bureau oversight.

This report discusses FY2017 appropriations (discretionary budget authority) for the Bureau of Economic Analysis (BEA) and Bureau of the Census (Census Bureau), which make up the Economics and Statistics Administration (ESA) in the U.S. Department of Commerce. The report will not be updated. The Administration's FY2017 budget request for ESA (except the Census Bureau, whose budget justification is published separately from ESA's) was $114.6 million, $5.6 million (5.2%) above the $109.0 million FY2016-enacted funding level. Of the $114.6 million, the $110.7 million requested for BEA exceeded the $105.1 million FY2016-enacted amount by $5.6 million (5.3%); the $4.0 million requested to fund ESA's policy support and management oversight was $83,000 (2.1%) more than the $3.9 million approved for FY2016. The FY2017 request for the Census Bureau was $1,633.6 million, $263.6 million (19.2%) above the $1,370.0 million FY2016-enacted amount. The FY2017 request was divided between the bureau's two major accounts: $285.3 million for Current Surveys and Programs and $1,348.3 million for Periodic Censuses and Programs. Two key programs under this account are the 2020 Decennial Census, with an FY2017 request of $778.3 million, $179.4 million (30.0%) above the $598.9 million enacted for FY2016; and the American Community Survey (ACS), with a request of $251.1 million, $20.2 million (8.7%) above the $230.9 million FY2016-enacted amount. On April 21, 2016, the Senate Committee on Appropriations reported S. 2837, the Departments of Commerce and Justice, Science, and Related Agencies Appropriations Bill, 2017 (CJS), with recommended funding of $109.0 million for ESA (showing no separate breakout for BEA). The amount was identical to ESA's FY2016 appropriation and $5.6 million (4.9%) below the FY2017 request. S. 2837, as reported, recommended $1,518.3 million for the Census Bureau, $148.3 million (10.8%) above the FY2016 appropriation and $115.3 million (7.1%) below the FY2017 request. Current Surveys and Programs was to receive $270.0 million, the same as in FY2016 and $15.3 million (5.4%) below the FY2017 request. The $1,248.3 million for Periodic Censuses and Programs would have exceeded FY2016 funding by $148.3 million (13.5%) and been $100.0 million (7.4%) less than requested for FY2017. The House Committee on Appropriations approved the House FY2017 CJS appropriations bill, H.R. 5393, on June 7, 2016. Recommended funding for ESA was $107.0 million (with no separate breakout for BEA), $2.0 million (1.8%) less than enacted for FY2016 and approved by the Senate committee, and $7.6 million (6.7%) below the FY2017 request. The Census Bureau was to receive $1,470.0 million, $100.0 million (7.3%) more than in FY2016, $163.6 million (10.0%) less than requested for FY2017, and $48.3 million (3.2%) below the Senate committee's recommendation. The $270.0 million recommended for Current Surveys and Programs equaled the FY2016-enacted and FY2017 Senate-committee-recommended amounts and was $15.3 million (5.4%) less than requested. The $1,200.0 million for Periodic Censuses and Programs was $100.0 million (9.1%) above the FY2016-enacted level, $148.3 million (11.0%) less than the FY2017 request, and $48.3 million (3.9%) below what the Senate committee approved. The Consolidated Appropriations Act, 2017, H.R. 244, P.L. 115-31, became law on May 5, 2017. It provided ESA with $107.3 million (showing no separate amount for BEA), $1.7 million (1.6%) less than enacted for FY2016 and recommended by the Senate committee, $7.3 million (6.4%) below the FY2017 request, and $300,000 (0.3%) more than the House committee approved. The $1,470.0 million for the Census Bureau in FY2017, including $270.0 million for Current Surveys and Programs and $1,200.0 million for Periodic Censuses and Programs, matched the House committee's recommendations.

The Organic Foods Production Act of 1990 (OFPA) regulates the marketing of organic products by setting national standards for production and processing (handling). To be labeled or sold as "organic," an agricultural product must be produced and handled without the use of synthetic substances, such as chemical pesticides, and in accordance with an organic plan agreed to by an accredited certifying agent and the producer and handler of the product. Products meeting these standards may be labeled as "organic" and may bear a U.S. Department of Agriculture (USDA) seal. Exceptions to the OFPA's general prohibition on the use of synthetic substances in organic products appear on a National List of Allowed and Prohibited Substances. The OFPA requires the Secretary to establish a National Organic Standards Board (NOSB) to develop the National List and to recommend exemptions for otherwise prohibited substances. The OFPA contains guidelines for the inclusion of substances on the National List. The OFPA also requires the Secretary to promulgate regulations "to carry out" the Act. The Secretary published the National Organic Program Final Rule (Final Rule) in December 2000 and it became effective on October 21, 2002 (codified at 7 C.F.R. pt. 205). Among other things, the Final Rule sets forth a four-tier labeling system for organic foods. Under this system, the type of labeling permitted on a product varies according to the percentage of organic ingredients it contains. The labeling scheme distinguishes: products containing 100% organic ingredients, which may be labeled "100 percent organic"; (2) products containing 94 to 100% organic ingredients, which may be labeled "organic"; (3) products containing 70 to 94% organic ingredients, which may be labeled "made with organic (specified ingredients or food group(s))"; and (4) products containing less than 70% percent organic ingredients, which may identify each organic ingredient on the label or in the ingredient statement with the word "organic." In October 2002, Mr. Arthur Harvey filed a pro se suit against the USDA in the U.S. District Court for the District of Maine, alleging that multiple provisions of the Final Rule were inconsistent with the OFPA and the Administrative Procedures Act. The district court ruled in favor of the USDA (i.e., granted summary judgment) on all nine counts brought by Harvey. Harvey subsequently appealed the case to the First Circuit and was supported by a number of public interest groups that filed "friends of the court" or Amici Curiae briefs. The First Circuit sided with Harvey on three counts and remanded the holdings to the district court for further action. In brief, the court found that: nonorganic ingredients not commercially available in organic form but used in the production of items labeled "organic" must have individual reviews in order to be placed on the National List of Allowed and Prohibited Substances; synthetic substances are barred in the processing or handling of products labeled "organic"; and dairy herds converting to organic production are not allowed to be fed feed that is only 80% organic for the first nine months of a one-year conversion. The three holdings did not invalidate OFPA provisions, but rather, qualified or invalidated agency regulations, thereby affecting the implementation of the National Organic Program. On June 9, 2005, the district court issued an order pursuant to the circuit court's instructions that established a two-year time frame in which the Secretary of Agriculture was to create and enforce new rules for the implementation of the National Organic Program in compliance with the circuit court's ruling. Under the order, the Secretary was to issue new regulations within a year (June 9, 2006) but has an additional year to start enforcing them (June 9, 2007). The phase-in implementation was selected by the court in an effort to prevent consumer confusion, commercial disruption, and unnecessary litigation. The rulings in Harvey and subsequent requirements for new regulations, however, were superceded in part, as a result of amendments made to the OFPA by the FY2006 agriculture appropriations act ( P.L. 109-97 , SS797). On June 7, 2006, the USDA published revised final rules based on Harvey and the amended OFPA. The amendments made in the appropriations measure address many of the legal concerns (e.g., lack of authority for agency action) observed by the First Circuit. The following paragraphs examine each holding where the court determined that a provision of the Final Rule was inconsistent with the OFPA and then discuss the effect of the applicable provisions from the appropriations act. Each section ends with the USDA's latest regulatory action. Plaintiff challenged the portion 7 C.F.R. SS205.606 which permits the introduction of nonorganically produced agricultural products as ingredients in, or as substances on, processed products labeled as "organic" when the specified product is not commercially available in organic form. The regulation lists five specific products--Cornstarch, Gums, Kelp, Lecithin, and Pectin--and also allows for any other nonorganically produced agricultural product when the product is not commercially available in organic form. The OFPA, however, requires all specific exemptions to the Act's prohibition on nonorganic substances to be placed on the National List following notice and comment and periodic review. Harvey claimed that SS205.606 provided a blanket exemption to the OFPA's review requirements and allowed ad hoc decisions to be made regarding the use of synthetic substances. The USDA, on the other hand, maintained that the regulation does not establish a blanket exemption, but rather, only permits the use of the five products specifically listed in the section. The court found the USDA's interpretation plausible; however, because the district court did not clarify the regulation's meaning, the circuit court also found Harvey's interpretation potentially credible. Accordingly, the court remanded the count to the district court for entry of a declaratory judgment that would interpret the regulation in a manner consistent with the National List requirements of the OFPA. A declaratory judgment stating that SS205.606 does not establish a blanket exemption to the National List requirements in statute for nonorganic agricultural products that are not commercially available was issued on June 9, 2005. The USDA, in compliance with the order, issued a Notice in the Federal Register clarifying the meaning of the regulation on July 1, 2005. However, because of the potential for confusion, the order states that the clarified meaning of SS205.606 will not become effective and enforceable until two years from the date of the judgment (June 9, 2007). In the FY2006 agriculture appropriations act, Congress amended 7 U.S.C. SS6517(d)--titled "Procedure for Establishing a National List"--to authorize the Secretary of the USDA to develop emergency procedures for designating agricultural products that are commercially unavailable in organic form for placement on the National List for a period of no longer than 12 months. The amendment does not define what an "emergency procedure" would entail; thus, the Secretary would appear to have the authority to describe the term's parameters and to select the substances subject to it. While this amendment creates an expedited petition process for commercially unavailable organic agricultural products, it does not appear to alter the ruling described above. The new rule published on June 7, 2006, did not clarify the conditions of "emergency procedure." However, it clearly restated that the five listed substances were the only nonorganically produced products that could be used as ingredients in organic products, subject to agency restriction when that ingredient is not commercially available in organic form. Plaintiff challenged 7 C.F.R. SS205.600(b) and the portion of SS205.605(b) that permits synthetic substances as ingredients in, or as substances on, processed products labeled as "organic." Section 205.600(b) provides that synthetic substances may be used "as a processing aid or adjuvant" if they meet six criteria; SS205.605(b) lists 38 synthetic substances specifically allowed in or on processed products labeled as "organic." The court found that 7 U.S.C. SS6510(a)(1) and SS6517(c)(B)(iii) forbid the use of synthetic substances during the processing or handling of a product, unless otherwise required by law. The court noted that the OFPA contemplates the use of certain synthetic substances during the production or growing of organic products, but not during the handling or processing stages. By allowing the use of certain synthetic substances "as processing aids," the court concluded that the regulations contravened the plain language of the OFPA. The circuit court reversed the district court's grant of summary judgment and remanded the count to the district court for entry of summary judgment in Harvey's favor. On remand, the district court ordered the Secretary of the USDA to publish new rules implementing the circuit court's judgment within one year of the date of the judgment (June 9, 2006), but allowed the Secretary to exempt nonconforming products placed in commerce as "organic" for up to two years after the date of the judgment (June 9, 2007). The FY2006 agriculture appropriations act amended SS6510(a)(1) and strikes SS6517(c)(B)(iii)--provisions that the First Circuit relied upon to emphasize that synthetics were not allowed during the processing or handling of a product. Before the amendment, SS6510(a)(1) barred a person on a handling operation from adding any synthetic ingredient during the processing or postharvest handling of a covered product. The amendment added the phrase "not appearing on the National List" after "ingredient," thereby apparently allowing the use of synthetics on the National List during processing or postharvest handling of a covered product. Section 6517(c) establishes guidelines for placing substances on the National List and in subsection (B) sets forth specific requirements with regard to the types of substances that may be exempted for use in production and handling. Specifically subpart (iii) of SS6517(c)(B) states that the substance "is used in handling and is non-synthetic but is not organically produced" (emphasis added). This provision, which the court noted "specifically requires the exempted substances be nonsynthetic [sic]," was deleted by the amendment. As there no longer appears to be any general prohibition (though there are other requirements that must be met) against the placement of synthetics on the National List for use during the processing or handling of a covered product, the First Circuit's ruling in count three is likely moot. The USDA determined that there was no need to revise SS205.600(b) and SS205.605(b) because Congress sufficiently addressed the contradiction and approved the necessary legislative changes. Plaintiff challenged the Final Rule's exception to the OFPA's requirements for dairy herds being converted to organic production. Pursuant to 7 U.S.C. SS6509(e)(2), a dairy animal whose milk or milk products will be sold or labeled as organically produced must be raised and handled in accordance with the OFPA for not less than the 12-month period immediately prior to the sale of such milk or milk products. Section SS205.236(a)(2) of the Final Rule, however, allows whole dairy herds transitioning to organic production to use 80% organic feed for the first nine months and 100% organic feed for the final three months (i.e., "80-20" rule). The court found the OFPA's requirement for a single type of organic handling for twelve months and the Final Rule's bifurcated approach in direct conflict. The court determined that nothing in the OFPA's plain language permits the creation of an "'exception' permitting a more lenient phased conversion process for entire dairy herds," and consequently, found the regulation invalid. The circuit court reversed the district court's grant of summary judgment and remanded the count to the district court for entry of summary judgment in Harvey's favor. On remand, the district court ordered the USDA to promulgate regulations implementing the circuit court's decision within one year of the date of the judgment (June 9, 2006) and to start enforcement by June 9, 2007. In the FY2006 agriculture appropriations act, Congress amended 7 U.S.C. SS6509(e)(2) by adding an exception to the general feeding requirement listed in the provision (i.e., raised and handled in accordance with the OFPA for not less than the 12-month period immediately prior to sale). The new provision, titled "Transition Guideline," allows crops and forage from land included in the organic system plan of a dairy farm that is in the third year of organic management to be consumed by the dairy animals of the farm during the 12-month period immediately prior to the sale of the organic milk or milk products. Generally, crops or forage intended to be sold or labeled as "organic" can not have prohibited substances applied to them for the three years immediately preceding harvest of the crop. Accordingly, while this amendment allows feed for dairy animals to come from land that is still transitioning to "organic" status, it would not appear to allow dairy cows to be fed prohibited substances or genetically modified organisms. Congress' amendment to SS6509 likely made the court's ruling in count seven moot. The Secretary revised 7 C.F.R. SS205.236 to create two exceptions to the general rule that milk labeled as "organic" must come from cows under continuous organic management for no less than 12 months. First, animals may consume crops and forage from the producer's land that is in the third year of organic management (i.e., the transition guideline). Second, producers converting entire herds to organic production who were still using the "80-20" feed rule before the publication of the new regulation may continue to do so, provided that no milk may be labeled as "organic" by this method after June 9, 2007. This exception allows a period of transition to occur in accordance with the court's order for enforcement of new regulations by the same date.

The First Circuit's ruling in Harvey v. Veneman brought much attention and uncertainty to the U.S. Department of Agriculture's National Organic Program. In the case, Harvey alleged that multiple provisions of the National Organic Program Final Rule (Final Rule) were inconsistent with the Organic Foods Production Act of 1990 (OFPA). The First Circuit sided with Harvey on three counts, putting into question the use of synthetics and commercially unavailable organic agricultural products, as well as certain feeding practices for dairy herds converting to organic production. On remand, the district court ordered a two-year time frame for the implementation and enforcement of new rules consistent with the ruling; however, in the FY2006 agriculture appropriations act (P.L. 109-97), Congress amended the OFPA to address the holdings of the case. This report describes the OFPA, discusses those holdings where the court determined that a provision of the Final Rule was inconsistent with the OFPA, and analyzes the most recent legislative action as well as new regulations from the USDA. This report will be updated as warranted.

Postage stamps were introduced in 1847, but for a half century the designs were limited to images of Presidents and founding fathers. The first commemorative postage stamps were issued in 1893 to mark the Columbian Exposition of that year. The success of the Columbian stamp series prompted the Post Office Department to continue offering stamps to commemorate historic events and places. The commemorative stamp became a fixture of mail service, contributing to civic education and drawing millions into the hobby of philately. When USPS was established in 1971 with an expectation that it would be self-supporting, the revenue potential of commemorative issues became a more prominent consideration. Social issues such as conservation, employment of the handicapped, and higher education were added as commemorative features to the traditional mix of historical and patriotic themes. In 1993, USPS released the Elvis Presley stamp, which generated unprecedented enthusiasm among postal customers (as distinguished from collectors) and still holds the record for stamps saved--124 million with a face value of $35.9 million. The USPS has been criticized by collectors for issuing too many commemorative stamps, as well as for producing too many stamps of a particular issue. Concerns have been expressed that too many stamps diminished the value of the stamps to the hobbyist and had the potential to drive collectors away. Under Postmaster General (PMG) Marvin Runyon, a former collector himself, it became USPS policy to produce and market fewer commemorative stamps. However, in the effort to expand and appeal to a wider range of interests, USPS in the late 1990s began designing stamps not only to attract non-collectors, but also children. This expansion has increased the number of commemorative stamps produced and marketed. The number of separate commemorative stamps issued rose from 26 in 1997, to 81 in 1998, to 121 in 2002. In 2007, USPS will issue 99 commemorative stamps. Errors and subject selection in commemorative stamps have sometimes generated controversy. For example, in 1994 postal officials belatedly discovered that a stamp featuring wild west star Bill Pickett depicted the wrong man. To prevent such occurrences in the future, a historian has been hired by the USPS to authenticate all chosen stamp designs. A widely-circulated news story in 2000 pointed out that of 1,722 commemorative stamps issued since 1893, only 133 (8%) featured women or women's issues. Also, according to a widely-read stamp publication, the PMG was "stunned" by the negative reaction to the stamp issued in honor of Frida Kahlo in 2001; Ms. Kahlo, a Mexican artist and the wife of Diego Rivera, was also a communist, and the stamp was strongly criticized by Senator Jesse Helms. The Citizens' Stamp Advisory Committee (CSAC) was established by the PMG in March 1957. Before it was established, political influence often determined what stamps were issued. The committee operates under 39 U.S.C. 404(a) (4-5), and its primary purpose is to provide "philatelic, history, and artistic judgment and experience" in the selection and design of commemorative stamps. The committee consists of 15 members, none of whom is a postal employee, and whose backgrounds reflect a wide range of educational, artistic, historical, and professional knowledge. Members are appointed and serve at the pleasure of the PMG for three-year staggered terms, with no member able to serve more than four terms. Current members include Joan Mondale, actor Karl Malden, graphic designer Michael Brock, and Harvard professor Henry Louis Gates, Jr. No member may serve more than three terms. The PMG appoints one member to serve as chairperson and another member as vice chairperson, each serving two-year terms. The committee meets quarterly in Washington, DC, or at the call of the CSAC chairperson, to review the thousands of suggestions that are received by the USPS. Its meetings are not public. CSAC itself employs no staff. To expedite its work, employees of the USPS's stamp development group analyze all stamp subject suggestions upon initial receipt. Subcommittees of staff researchers are formed on special themes such as sports, medicine, transportation, black heritage, and performing arts to provide additional background and research. Occasionally, commemorative ideas require considerable research to explore an idea's merit or to devise a strong visual appeal. All supporting materials are then presented to the committee, along with any suggestions. While the primary responsibility of the committee is to review and appraise all proposals submitted for commemoration, the PMG has the exclusive and final authority to determine both the subject matter and the designs for U.S. postage stamps. Thus, for example, although the advisory committee recommended in 2003 that a stamp be commissioned for tercentenary of the birth of 18 th century theologian Jonathan Edwards, PMG John Potter refused to approve the recommendation. Members of Congress are often asked by constituents to support a particular commemorative theme or event. In doing so, a Member may choose to write the PMG expressing support for a particular stamp proposal. This usually results in a referral to the advisory committee. It is not uncommon for Members to introduce congressional resolutions encouraging the commemoration of a specific subject. In the 108 th Congress, 28 resolutions for this purpose were introduced; in the 109 th Congress, 23 resolutions were introduced. However, congressional endorsement of a proposal accords it no special status in the committee's deliberations. The House Committee on Oversight and Government Reform has discouraged Members from introducing bills endorsing the issuance of new commemorative stamps. For the 110 th Congress, the Committee's Rule 20 reads: The committee has adopted the policy that the determination of the subject matter of commemorative stamps ... is properly for consideration by the Postmaster General and that the committee will not give consideration to legislative proposals for the issuance of commemorative stamps and new semi-postal issues. It is suggested that recommendations for the issuance of commemorative stamps be submitted to the Postmaster General. Thus, in the House, when a commemorative stamp bill is introduced, it is referred the committee, which takes no further action on the bill. The Citizens' Stamp Advisory Committee receives about 50,000 nominations each year, and gives no special attention to those submitted by Congress or other legislative bodies. As a basis for its recommendation to the Postmaster General, the advisory committee uses 12 criteria when considering commemorative stamp subjects. They are: It is a general policy that U.S. postage stamps and stationery primarily will feature American or American-related subjects. No living person shall be honored by portrayal on U.S. postage. Commemorative stamps or postal stationery items honoring individuals usually will be issued on, or in conjunction with significant anniversaries of their birth, but no postal item will be issued sooner than five years after an individual's death. Events of historical significance shall be considered for commemoration only on anniversaries in multiples of 50 years. Only events and themes of widespread national appeal and significance will be considered for commemoration. Events or themes of local or regional significance may be recognized by a philatelic or special postal cancellation, which may be arranged through the local postmaster. Stamps or postal stationery items shall not be issued to honor fraternal, political, sectarian, or service/charitable organizations. Stamps or stationery shall not be issued to promote or advertise commercial enterprises or products. Commercial products or enterprises might be used to illustrate more general concepts related to American culture. Stamps or postal stationery items shall not be issued to honor cities, towns, municipalities, counties, primary or secondary schools, hospitals, libraries, or similar institutions. Due to the limitations placed on annual postal programs and the vast number of such locales, organizations, and institutions, singling out any one for commemoration would be difficult. Requests for observance of statehood anniversaries will be considered for commemorative postage stamps only at intervals of 50 years from the date of the state's entry into the Union. Requests for observance of other state-related or regional anniversaries will be considered only as subjects for postal stationery, and only at intervals of 50 years from the date of the event. Stamps or postal stationery items shall not be issued to honor religious institutions or individuals whose principal achievements are associated with religious undertakings or beliefs. Stamps with a surcharge for the benefit of a worthy cause, referred to as "semipostals," shall be issued in accordance with P.L. 106-253 . Semipostals will not be considered as part of the commemorative program and separate criteria will apply. Requests for commemoration of significant anniversaries of universities or other institutions of higher education shall be considered only for stamped cards and only in connection with the 200 th anniversaries of their founding. No stamp shall be considered for issuance if one treating the same subject has been issued in the past 50 years. The only exceptions to this rule will be those stamps issued in recognition of traditional themes such as national symbols and holidays. Other than applying these criteria, the USPS has no formal procedure or required format for submitting stamp proposals, which can be by letter, post card, or petition. After a proposal is determined not to violate the USPS criteria, each proposed subject is listed on the committee's agenda for its next meeting. In-person appeals by stamp proponents are not permitted. Proponents are not advised if a subject has been approved until a general announcement is made to the public. The USPS encourages the submission of commemorative postage stamp subjects to the committee at least three years prior to the proposed date of issuance, to allow sufficient time for consideration, design, and production. Suggestions may be addressed to the Citizens' Stamp Advisory Committee, c/o Stamp Development, U.S. Postal Service, 1735 North Lynn St., Suite 5013, Arlington, VA 22209-6432. In order to encourage stamp collecting, USPS maintains philatelic centers in more than 300 population centers in the United States and in 7 foreign countries. While it is feasible to track the gross revenues USPS gets from the sale of commemorative issues, determining how many stamps are saved (i.e., not used for postage) is difficult. This is because commemorative sales and usage are interchangeable with, and not counted separately from, other stamps and other forms of postage. In an attempt to gain some knowledge of the contribution its commemorative program makes to its bottom line, USPS has tried a number of approaches to measure the retention rate for commemorative stamps. Before 1989, clerks collected "intent to retain" data from customers on six to eight issues per year, and projected retention revenues from the responses. In the following years, USPS launched quarterly surveys of a representative sample of approximately 60,000 households, asking them to report the stamps they bought and those they intended to retain. This was an expensive approach, however, in part because 84% of the households reported that they retained no stamps and thus analysts could learn little from them about relative appeal of various types of issues. In 1999, USPS launched what it termed a more cost-effective design using 10,250 quarterly surveys, 61% of which were to go to households pre-screened (by a market research company) to be "stamp retaining households." The resulting revenue estimates are still inexact and, because of frequent methodological changes, cannot be directly compared. However, there seems to be ample evidence that the commemorative postage stamp program provides net revenues measured in the hundreds of millions of dollars for USPS. According to USPS estimates, retention revenues have been as follows: The stamps most kept by consumers are as follows:

More than 1,800 commemorative stamps have been issued since the first in 1893. In recent years they have been marketed to attract non-collectors and children. In 2007, the U.S. Postal Service (USPS) will issue 99 different commemorative stamps. In considering subjects for commemorative stamps, the USPS Citizens' Stamp Advisory Committee, guided by 12 basic criteria, reviews and appraises the approximately 50,000 proposals submitted for commemoration each year. The postmaster general (PMG) has the exclusive and final authority to determine both subject matter and design. A number of resolutions are introduced in Congress each year urging that consideration be given to a particular subject for commemoration, but few are passed, and the advisory committee accords them no special status. The commemorative stamp program contributed an estimated $225.9 million in retained revenues for the USPS in 2005.

A stable, democratic, prosperous Pakistan actively working to counter Islamist militancy is considered vital to U.S. interests. The history of democracy in Pakistan is a troubled one marked by ongoing tripartite power struggles among presidents, prime ministers, and army chiefs. Military regimes have ruled Pakistan directly for 34 of the country's 60 years in existence, and most observers agree that Pakistan has no sustained history of effective constitutionalism or parliamentary democracy. The country has had five constitutions, the most recent being ratified in 1973 (and significantly modified several times since). From the earliest days of independence, the country's armed forces have thought of themselves as "saviors of the nation," a perception that has received significant, though limited, public support. The military, usually acting in tandem with the president, has engaged in three outright seizures of power from civilian-led governments: by Gen. Ayub Khan in 1958, Gen. Zia-ul-Haq in 1977, and Gen. Pervez Musharraf in 1999. After 1970, five successive governments were voted into power, but not a single time was a government voted out of power--all five were removed by the army through explicit or implicit presidential orders. Of Pakistan's three most prominent Prime Ministers, one (Zulfikar Ali Bhutto) was executed, another (Benazir Bhutto) exiled (then later assassinated), and her husband jailed for eight years without conviction, and the last (Nawaz Sharif) suffered seven years in exile under threat of life in prison for similar abuses before his 2007 return. Such long-standing turmoil in the governance system may partially explain why, in a 2004 public opinion survey, nearly two-thirds of Pakistanis were unable to provide a meaning for the term "democracy." The year 2007 saw Pakistan buffeted by numerous and serious political crises culminating in the December 27 assassination of former Prime Minister and leading opposition figure Benazir Bhutto, who had returned to Pakistan from self-imposed exile in October. Bhutto's killing in an apparent gun and bomb attack (the circumstances remain controversial) has been called a national tragedy for Pakistan and did immense damage to already troubled efforts to democratize the country. Pakistan's security situation has deteriorated sharply: the federal government faces armed rebellions in two of the country's four provinces, as well as in the Federally Administered Tribal Areas (FATA). The country experienced about 44 suicide bomb attacks in the latter half of 2007 that killed more than 700 people. The country is scheduled to hold parliamentary elections in February 2008. Pakistan now suffers from considerable political uncertainty as the tenuous governance structure put in place by President Musharraf has come under strain. Musharraf himself was reelected to a second five-year presidential term in a controversial October 2007 vote by the country's electoral college and, under mounting domestic and international pressure, he finally resigned his military commission six weeks later. Yet popular opposition to military rule had been growing steadily with a series of political crises in 2007: a bungled attempt by Musharraf to dismiss the country's Chief Justice; Supreme Court rulings that damaged Musharraf's standing and credibility; constitutional questions about the legality of Musharraf's status as president; a return to Pakistan's political stage by two former Prime Ministers with considerable public support; and the pressures of impending parliamentary elections now set for February 18, 2008. The catastrophic removal of Benazir Bhutto from Pakistan's political equation dealt a serious blow both to the cause of Pakistani democratization and to U.S. interests. On November 3, 2007, President Musharraf had launched a "second coup" by suspending the country's constitution and assuming emergency powers in his role as both president and army chief. The move came as security circumstances deteriorated sharply across the country, but was widely viewed as being an effort by Musharraf to maintain his own power. His government dismissed uncooperative Supreme Court justices, including the Chief Justice, and jailed thousands of opposition figures and lawyers who opposed the abrogation of rule of law. It also cracked down on independent media outlets, many of which temporarily were shut down. The emergency order was lifted on December 15, but independent analysts find little evidence that the order's lifting has led to meaningful change, given what they see as repressive media curbs and a stacked judiciary. On the day before his action, Musharraf issued several decrees and made amendments to the Pakistani Constitution, some of which would ensure that his actions under emergency rule would not be challenged by any court. Pakistan's National Assembly ended its five-year term on November 15, 2007. Musharraf ally and recent Chairman of the Senate, Mohammadmian Soomro, was appointed to serve as caretaker Prime Minister during the election period. Many analysts view the caretaker cabinet as being stacked with partisan Musharraf supporters and so further damaging to hopes for credible elections. There have been numerous reports of government efforts to "pre-rig" the election. Pakistan's Chief Election Commissioner initially announced that polls would be held on January 8, 2007. About 13,500 candidates subsequently filed papers to vie for Pakistan's 272 elected National Assembly seats and 577 provincial assembly constituencies. The full National Assembly has 342 seats, with 60 reserved for women and another 10 reserved for non-Muslims. Amendments to the Pakistan Constitution and impeachment of the president require a two-thirds majority for passage. Opposition parties have been placed in the difficult position of choosing whether to participate in elections that may well be manipulated by the incumbent government or to boycott the process in protest. Following Bhutto's assassination and ensuing civil strife, the Election Commission chose to delay polls until February 18. The decision was criticized by the main opposition parties, which accuse the government of fearing a major loss, but which have chosen to participate. As Musharraf's political clout has waned, the ruling, Musharraf-allied PML-Q party faces more daunting odds in convincing a skeptical electorate that it deserves another five years in power. What follows is a review of the five leading political parties/coalitions (which accounted for 85% of the National Assembly seats won in the 2002 election) and some of their most important figures. The Muslim League is Pakistan's oldest political party and was the only major party existing at the time of independence. Long associated with the Quaid-e-Azam (Father of the Nation) Mohammed Ali Jinnah and his lieutenant, Liaquat Ali Khan (the country's first Prime Minister), the League was weakened upon their premature deaths in 1948 and 1951 (Jinnah by natural causes, Khan by assassination). With its primary goal (the creation of a homeland for the Muslims of British India) accomplished, the party struggled to find a coherent ideology. The Pakistan Muslim League (PML) was established in 1964 as a successor to the Muslim League. It was not until the 1988 elections that the PML--in coalition with Islamist parties--was again a major player on the national scene. Nawaz Sharif's faction of the PML was formed in 1993. The PML-N's electoral strength typically is found in the densely populated Punjab province and includes the cities of Lahore, Faisalabad, Rawalpindi, and Multan. The party's current election manifesto stresses its demands for "revival of genuine democracy" through a sovereign parliament, an independent judiciary, and a free and fair electoral process. Party leaders have been consistent and explicit in their criticisms of President Musharraf, calling him a "one-man calamity" who has single-handedly brought ruin to Pakistan through efforts to retain personal power. They call for restored democracy and urge the U.S. government to support the Pakistani nation rather than a single individual. Nawaz Sharif, who had been Gen. Zia's finance minister in the 1980s, led a PML-Islamist coalition to a strong second-place showing in 1988 elections and became Punjab chief minister. The scion of a wealthy Lahore industrialist family, Sharif was elected Prime Minister in 1990. Three years later, he established the offshoot PML-Nawaz (PML-N), which went on to dominate the 1997 national elections. While in office, Sharif moved to bolster the power of the Prime Minister's office. Sharif was later ousted in a bloodless coup led by his army chief, Gen. Musharraf, in 1999. He and most of his immediate family lived in exile in Saudi Arabia following his conviction on criminal charges and a brief stay in prison related to his actions on the day of the coup. His family's legal status remained unclear, but reports indicated that, after the 1999 coup, the Sharif family and the Musharraf government, in collusion with the Saudi government, concluded an "arrangement" that would bar any family member from returning to Pakistan for a period of ten years. Sharif is constitutionally barred from serving a third term as Prime Minister. His electoral plans met a major obstacle when, in December 2007, his nomination papers were rejected, making him ineligible to compete in the elections because of criminal convictions related to his 1999 ouster from power. Because he has refused to engage in any negotiations with the Musharraf government, Sharif has been able to seize a mantle as an opposition "purist," and he wields considerable political influence in the populous Punjab province. With Bhutto's demise, Sharif has stepped up as the most visible opposition figure with national credentials. A conservative with long-held ties to Pakistan's Islamist political parties, Sharif is a bitter enemy of Musharraf and is viewed with considerable wariness by many in Washington, where there are concerns that a resurgence of his party to national power could bring a diminishment of Pakistan's anti-extremism policies and be contrary to U.S. interests. Shahbaz Sharif is Nawaz's younger brother and president of the PML-N. A former Punjab Chief Minister and political heavyweight in his own right, Shahbaz also saw his election nomination papers rejected in late 2007, apparently due to pending criminal charges against him. In 2008, Shahbaz is reported to be in consultation with interlocutors from the Musharraf government, causing some observers to suggest that, despite Nawaz's sharp anti-Musharraf rhetoric, the PML-N may be amenable to power-sharing in a potential "national unity government." In the lead up to the 2002 national elections, most former (but still influential) politicians loyal to Nawaz Sharif joined the new PML-Quaid-e-Azam (PML-Q), a centrist-conservative group seen to enjoy overt support from the military. The PML-Q--also called the "king's party" due to its perceived pro-military bent--won 118 of the total 342 parliamentary seats in the flawed 2002 election, almost all of them from Punjab. This gave the pro-Musharraf parties a plurality in the National Assembly, but fell well short of the majority representation needed to control the body outright. Today the party claims be promoting "the vision of Pakistan's founding fathers," Jinnah and Mohammad Iqbal, a renowned poet whose early 20 th century Islamist writings inspired the Pakistan movement. This vision is to include democracy and respect for diversity, along with opposition to terrorism "in all its forms." Yet, while in power, the party came under fire for presenting or preserving legal and legislative obstacles to what Western countries might consider to be important human rights protections, such as those for women and religious minorities. Notable leaders are the "Chaudhrys of Gujrat," cousins from the southern Punjabi city who had been bitter political enemies of Benazir Bhutto and the PPP. In 2004, five PML factions united and named Punjabi politician and industrialist Chaudhry Shujaat Hussein as their leader. Shujaat entered politics in 1981 and has been elected to Parliament five times since, including service as Nawaz Sharif's Interior Minister from 1990-1993. As president of the PML-Q, Shujaat has been a key political ally of President Musharraf. For two months in 2004, he served as a transitional Prime Minister when Musharraf "shuffled" Prime Ministers to seat his longtime finance minister, Shaukat Aziz. Shujaat's father, also a politician, was assassinated in 1981 by a terrorist group allegedly run by Benazir Bhutto's brother, Murtaza. Chaudhry Pervez Elahi is the cousin and brother-in-law of Shujaat Hussein who served as Chief Minister of Punjab from 2002-2007. He is widely regarded as the PML-Q's prime ministerial candidate in 2008. His political vision is based upon a "relentless pursuit of modernization, innovation, confidence, and tolerance." Elahi was among four Pakistani government officials believed named by Benazir Bhutto as posing a potential threat to her life. The left-leaning Pakistan People's Party (PPP) was established in 1967 in reaction to the military dictatorship of Gen. Khan. The party slogan was and remains "Islam is our Faith, Democracy is our Polity, Socialism is our Economy." Under the leadership of Z.A. Bhutto, who had resigned his post as Khan's foreign minister, the PPP won a majority of West Pakistan's assembly seats in 1970 elections and held power from 1971 until 1977, when Bhutto's government was overthrown by his Army Chief, Gen. Zia. Bhutto, who oversaw the establishment of a parliamentary system with the 1973 Constitution and who launched Pakistan's nuclear weapons program, was executed by the military government in 1979. When Gen. Zia's ban on political parties was lifted in 1986, Bhutto's daughter, Benazir, emerged as the new PPP leader and won the Prime Ministership in 1988 and again in 1993. Following Musharraf's coup, she spent eight years in self-imposed exile in London and Dubai under threat of imprisonment should she return. In an effort to skirt legal barriers to its electoral participation in 2002 national elections, the PPP formed a separate entity, the PPP Parliamentarians (PPPP), that pledged to uphold Bhutto's political philosophy. Benazir Bhutto was assassinated in December 2007, just two months after her return to Pakistan. In the view of the longtime leader of the PPP, the ruling, Musharraf-allied PML-Q party saw its fortunes rapidly declining and could expect to lose badly in any free election. Thus, she asserted, its leaders chose to collude with allies in the intelligence agencies to have the polls postponed (she called Musharraf's electoral plans "a farce"). The PPP historically has done especially well in the southern Sindh province, including in the cities of Karachi and Hyderabad. President Musharraf and Bhutto in 2007 had negotiations on a power-sharing arrangement that could have facilitated Musharraf's continued national political role while allowing Bhutto to return to Pakistan from self-imposed exile, potentially to serve as prime minister for a third time. The Bush Administration encouraged such an arrangement as the best means of both sustaining Musharraf's role and of strengthening moderate political forces in Islamabad. Some analysts took a cynical view of Bhutto's motives in the negotiations, believing her central goal was personal power and removal of standing corruption cases against her. Bhutto insisted that she engaged Musharraf so as to facilitate "an effective and peaceful transition to democracy." When asked whether the United States still favored a Musharraf-Bhutto power-sharing agreement in the wake of the emergency decree and deteriorating relations between the president and former prime minister, U.S. officials only reiterated a belief that Pakistan's moderate forces should work together to bring constitutional, democratic rule. Yet reports continued to suggest that Washington was pushing for such an accommodation even after Bhutto's apparently full post-emergency embrace of the opposition and perhaps even after her assassination. In 2004, Asif Zardari--then husband of Benazir Bhutto and a political figure in his own right who had been imprisoned for eight years without conviction--was released on bail after a Supreme Court ruling. Zardari, who continued to face legal action in eight pending criminal cases, later received permission to leave the country to join his wife. He previously had served in the National Assembly and as Environment Minister in his wife's cabinet. As per Bhutto's will, and in perpetuation of South Asia's dynastic politics, in the wake of her assassination the PPP named her young son, Bilawal, and Zardari to succeed her as party leaders. Until Bilawal completes studies at Oxford, Zardari is to run the party. Zardari is a controversial figure in Pakistan: he has gained a reputation for corruption and other charges, including complicity in murder. His rise to leadership of Pakistan's largest opposition party could present difficulties for U.S. policy makers who had quietly urged President Musharraf to reach a power-sharing accommodation with the PPP under Benazir. Zardari (along with Sharif) had demanded that elections be held as originally scheduled on January 8, 2008. His calculation likely was rooted in expectations of a significant sympathy vote for the PPP. Zardari has been adamant in his demands for a United Nations investigation into his wife's murder. Some reports in 2008 suggest he may be open to joining a "national unity government" that could include the Musharraf-allied PML-Q. Zardari may be in negotiation with Musharraf's interlocutors as part of this potential development. The PPP Parliamentarians was headed by Amin Fahim, who served as Benazir Bhutto's deputy and party leader in Parliament during her absence from Pakistan. Fahim, who comes from a feudal Sindh background similar to that of Bhutto, led the party competently in her absence, but does not possess national standing and support anything close to that enjoyed by Bhutto herself. Aitzaz Ahsan, elected president of the Supreme Court Bar Association in 2007, was the lawyer who lead the successful effort to have former Chief Justice Iftikhar Chaudhry reseated in July. He has since been at the forefront of an effort to have the Supreme Court reconstituted by Musharraf restored to its pre-November status. His stand has made him a heroic figure in the eyes of many pro-democracy, pro-rule of law Pakistanis, many lawyers among them. Ahsan even accused the U.S. government of not seeming to care about Musharraf's crackdown on the Supreme Court and making no mention of the issue in various agency briefings. Ahsan was arrested upon the launch of the November emergency; 33 U.S. Senators later signed a letter to President Musharraf urging his immediate release. Following Bhutto's assassination, some reports named Ahsan as a potential successor, but it is generally believed that he will for the time being remain loyal to the current PPP leadership and may even take a senior party post in the future. The Muttahida Majlis-e-Amal (MMA or United Action Forum) is a loose coalition of six Islamist parties formed for the 2002 elections. Its largest constituent is the Jamaat-i-Islami (JI), founded by Maulana Maududi in 1941 and considered to be Pakistan's best-organized religious party. Another major, long-standing Islamist party is the Jamiat Ulema-i-Islam (JUI). The JUI is associated with religious schools (madrassas) that gave rise to the Afghan Taliban movement. Pakistan's Islamist parties are conservative advocates of a central role for Islam and sharia (Islamic law) in national governance. They also oppose Westernization in its socioeconomic and cultural forms. Although Pakistan's religious parties enjoy considerable "street" power and were strengthened by Gen. Zia's policies of the 1980s, their electoral showing has in the past been quite limited (they won only two parliamentary seats in the 1993 and 1997 elections, and gained about 11% of the total vote in 2002, their best national showing ever). The MMA spent the period 2002-2007 as the "dummy opposition" in Islamabad--nominally opposed to the Musharraf government at the center, but allowing for Musharraf's controversial constitutional changes in 2003 and enjoying provincial power in Pakistan's two western provinces (including in outright majority in the North West Frontier and in coalition with the nationally ruling PML-Q in Baluchistan). This allowed for what many observers called an intentional marginalization of Pakistan's non-Islamist opposition parties. In 2007, the MMA became weakened by the increasingly divergent approaches taken by its two main figures, JI chief Qazi Hussain Ahmed, a vehement critic of the military-led government, and JUI chief Fazl-ur-Rehman, who largely has accommodated the Musharraf regime. With its two major constituents holding directly opposing views on the wisdom of participating in upcoming elections, the MMA all but formally split, diminishing its prospects for holding power in Pakistan's two western provinces. Still, the JUI may find itself coveted by parties eager for parliamentary allies and its leadership may play a key role in determining the composition of both national and western provincial governments. The Jamiat Ulema-i-Islam faction headed by Fazl-ur-Rehman is an ideological party that seeks to impose Islamic law in Pakistan through peaceful, democratic means. Its Deobandi roots bring fairly rigid interpretations of Islam and the JUI oversees thousands of religious schools in western Pakistan. Its membership tends to strongly support the Taliban movement in both Afghanistan and Pakistan. Two U.S.-designated Foreign Terrorist Organizations, Harakat ul-Mujahideen and Jaish-e-Mohammed, are believed to have links with the JUI. Rehman, a native of the North West Frontier Province, served as Leader of the Opposition in the Pakistani Senate from 2004 to 2007. He previously had served three terms in the National Assembly, at one time as Chairman of the body's Foreign Affairs Committee under Prime Minister Benazir Bhutto. Despite his Islamist ideology, Rehman is widely considered to be a political pragmatist. The JUI's electoral strength is mainly found in Pakistan's two western provinces, including in the cities of Peshawar and Quetta. The Jamaat-i-Islami is another ideological party that seeks to impose Islamic law in Pakistan through peaceful, democratic means. It is largely comprised of urban, middle-class citizens across Pakistan. JI chief Qazi Hussein Ahmed, also a native of the North West Frontier Province, has served as MMA president since the coalition's 2002 formation. He is an adamant and vocal opponent of the Musharraf government who has in the past been active in such political causes the Pakistan-supported "jihad" in Indian Kashmir (the Hizbul Mujahideen, which appears on the U.S. State Department's list of "other groups of concern," is the militant wing of the JI). "The Qazi," as he is often known, served in the Pakistani Senate from 1986 to 1996, when he resigned in protest of a "corrupt system." The JI leader is considered to be uncompromising in his views and so often unamenable to political compromise. The Muttahida Quami Movement (MQM) is a Sindhi regional party mainly composed of the descendants of pre-partition, Urdu-speaking immigrants (Muhajirs) from what is now India. Its roots are found in a 1980s student movement launched to protect the rights of Muhajirs who perceived themselves to be victims of discrimination and repression following independence. The party has long faced accusations of using terrorist tactics. Although it did well in Sindh's provincial elections, the MQM collected only a small percentage of the national vote in 2002 (winning 17 national seats). Yet the party is notable for its firm grip on political power in Karachi, Pakistan's largest city and primary business hub. The current party manifesto stresses a need for provincial autonomy and cultural pluralism in Pakistan, and calls for an abolition of the feudal economic system still prevalent in Sindh. As a key parliamentary ally of the Musharraf-friendly PML-Q, the MQM appeared to take sides in a showdown between supporters and opponents of ousted Chief Justice Chaudhry, who tried to visit Karachi in May 2007. Its cadres were involved in Karachi street battles with opposition activists that left at least 40 people dead on May 12, most of them PPP members. Reports had local police and security forces standing by without intervening while the MQM attacked anti-Musharraf protesters, leading many observers to charge the government with complicity in the bloody rioting. MQM leaders denied that party activists had been involved in malicious acts. MQM chief Altaf Hussein has led the party from exile in London since 1992, when he fled Karachi ahead of military operations against the MQM. He has been accused of involvement in several violent plots, including the kidnaping of an army major, but was never convicted. Hussein was an early and vocal sympathizer with the United States following September 2001 terrorist attacks there.

A stable, democratic, prosperous Pakistan actively working to counter Islamist militancy is considered vital to U.S. interests. Pakistan is a key ally in U.S.-led counterterrorism efforts. The history of democracy in Pakistan is a troubled one marked by ongoing tripartite power struggles among presidents, prime ministers, and army chiefs. Military regimes have ruled Pakistan directly for 34 of the country's 60 years in existence, and most observers agree that Pakistan has no sustained history of effective constitutionalism or parliamentary democracy. The United States has supported the government of President Pervez Musharraf, whose credibility and popularity have decreased markedly in 2007. The country is scheduled to hold parliamentary elections in February 2008. In 1999, the elected government of then-Prime Minister Nawaz Sharif was ousted in a bloodless coup led by then-Army Chief Gen. Musharraf, who later assumed the title of president (in October 2007, Pakistan's Electoral College reelected Musharraf in a controversial vote). Supreme Court-ordered parlilamentary elections--identified as flawed by opposition parties and international observers--seated a new civilian government in 2002, but it remained weak, and Musharraf retained the position as army chief until his November 2007 retirement from that post. The United States urges restoration of full civilian rule in Islamabad, expecting the planned February 18, 2008, polls to be free, fair, and transparent. Such expectations became sharper after Musharraf's November 2007 suspension of the Constitution and imposition of emergency rule (nominally lifted six weeks later) and the December 2007 assassination of former Prime Minister and leading opposition figure Benazir Bhutto. Current political circumstances in Pakistan are extremely fluid, and the country's internal security and stability are under serious threat. Many observers urge a broad re-evaluation of U.S. policies toward Pakistan. This report provides an overview of Pakistan's political setting and current status, along with a discussion of the country's major political parties and figures. See also CRS Report RL33498, Pakistan-U.S. Relations, and CRS Report RL34240, Pakistan's Political Crises. This report will not be updated.

In recent years, state and federal laws have facilitated law enforcement's expanded use of deoxyribonucleic acid (DNA) for investigating and prosecuting crimes. Such laws authorize compulsory collection of biological matter, which local law enforcement agencies send to the Federal Bureau of Investigation (FBI) for analysis. The FBI then stores unique DNA profiles in a national distributive database, through which law enforcement officials match individuals to crime scene evidence. Early laws authorized compulsory extraction of DNA only from people convicted for violent or sex-based felonies, such as murder, kidnapping, and offenses "related to sexual abuse"--crimes associated with historically high recidivism rates and for which police were likely to find evidence at crime scenes. Since the turn of the century, new laws have greatly extended the scope of compulsory DNA collection, both by expanding the range of offenses triggering collection authority, and, more recently, by authorizing compulsory collection from people who have been arrested but not convicted. A bill passed by the House in May 2010, the Katie Sepich Enhanced DNA Collection Act of 2010 ( H.R. 4614 ), would provide grant funding incentives to states that collected DNA samples from persons who are at least 18 years old who are arrested for specified types of crimes. Litigants have challenged compulsory collection and the subsequent analysis and storage of DNA as unreasonable searches and seizures under the Fourth Amendment to the U.S. Constitution. Although they have reached their conclusions using different analytical approaches, federal and state courts have generally upheld compulsory DNA collection as non-violative of the Fourth Amendment. However, prior cases involved the collection of DNA samples from people who had been convicted of a crime. More recently, a handful of state and federal courts have addressed such collection from arrestees, with differing results. This report examines statutory authorities, constitutional principles, and case law related to compulsory DNA extraction and analyzes potential impacts of recent developments for Fourth Amendment cases. DNA is a complex molecule found in human cells and "composed of two nucleotide strands," which "are arranged differently for every individual except for identical twins." Relatively new technology enables DNA analysts to determine the arrangement of these strands, thereby creating unique DNA profiles. In the law enforcement context, DNA profiles function like "genetic fingerprints" that aid in matching perpetrators to their crimes. As with fingerprints, law enforcement officers collect DNA samples from specific classes of individuals, such as prisoners. However, compulsory DNA collection generally entails blood or saliva samples rather than finger impressions, and DNA profiles can later match any of many types of biological matter obtained from crime scenes. For these reasons, DNA matching is considered a "critical complement to," rather than merely a supplement for, fingerprint analysis in identifying criminal suspects. The FBI administers DNA storage and analysis for law enforcement agencies across the country. Typically, a law enforcement agency's phlebotomist collects a blood sample pursuant to state or federal law. Then, the agency submits the sample to the FBI, which creates a DNA profile and stores the profile in the Combined DNA Index System, a database through which law enforcement officers match suspects to DNA profiles at the local, state, and national levels. FBI analysts create DNA profiles by "decoding sequences of 'junk DNA.'" So-called "junk DNA," the name for "non-genic stretches of DNA not presently recognized as being responsible for trait coding," is "'purposefully selected'" for DNA analysis because it is not "associated with any known physical or medical characteristics," and thus theoretically poses only a minimal invasion of privacy. The categories of individuals from whom law enforcement officials may require DNA samples has expanded in recent years. The federal government and most states authorize compulsory collection of DNA samples from individuals convicted for specified criminal offenses, including all felonies in most jurisdictions and extending to misdemeanors, such as failure to register as a sex offender or crimes for which a sentence greater than six months applies, in some jurisdictions. In addition, the federal government and some states now authorize compulsory collection from people whom the government has arrested or detained but not convicted. As discussed infra , the DNA Analysis Backlog Elimination Act 2000, as amended, authorizes compulsory collection from individuals in federal custody, including those detained, arrested, or facing charges, and from individuals on release, parole, or probation in the federal criminal justice system. Under the federal law, if an individual refuses to cooperate, relevant officials "may use or authorize the use of such means as are reasonably necessary to detain, restrain, and collect a DNA sample." State laws vary, but nearly all states authorize compulsory DNA collection from people convicted for specified crimes, and a small but growing number of states also authorize compulsory collection from arrestees. At the federal level, statutory authority for compulsory DNA collection has expanded relatively rapidly. During the 1990s, a trio of federal laws created the logistical framework for DNA collection, storage, and analysis. The DNA Identification Act of 1994 provided funding to law enforcement agencies for DNA collection and created the FBI's Combined DNA Index System to facilitate the sharing of DNA information among law enforcement agencies. Next, the Antiterrorism and Effective Death Penalty Act of 1996 authorized grants to states for developing and upgrading DNA collection procedures, and the Crime Identification Technology Act of 1998 authorized additional funding for DNA analysis programs. The resulting framework centers on the Combined DNA Index System; more than 170 law enforcement agencies throughout the country participate in the system. In recent years, federal and state laws have expanded law enforcement authority for collecting DNA in at least two ways. First, laws have increased the range of offenses which trigger authority for collecting and analyzing DNA. In the federal context, the DNA Analysis Backlog Elimination Act of 2000 limited compulsory extraction of DNA to people who had been convicted of a "qualifying federal offense." Under the original act, "qualifying federal offenses" included limited but selected felonies, such as murder, kidnapping, and sexual exploitation. After September 11, 2001, the USA PATRIOT Act expanded the "qualifying federal offense" definition to include terrorism-related crimes. In 2004, the Justice for All Act further extended the definition to reach all crimes of violence, all sexual abuse crimes, and all felonies. Similarly, almost all states now authorize collection of DNA from people convicted of any felony. Second, laws have authorized compulsory DNA collection from people who have been detained or arrested but not convicted on criminal charges. The 109 th Congress authorized the Attorney General, in his discretion, to require collection from such individuals. Specifically, the DNA Fingerprinting Act of 2005 authorized collection "from individuals who are arrested or from non-U.S. persons who are detained under the authority of the United States." The Adam Walsh Child Protection and Safety Act of 2006 subsequently substituted "arrested, facing charges, or convicted" for the word "arrested" in that authority. The U.S. Department of Justice implemented the authorization in a final rule that took effect January 9, 2009. Mirroring the statutory language, it requires U.S. agencies to collect DNA samples from "individuals who are arrested, facing charges, or convicted, and from non-United States persons who are detained under authority of the United States." As mentioned, some states have likewise enacted laws authorizing collection of arrestees' DNA. As mentioned, H.R. 4614 , a bill passed by the House, would provide grant funding incentives to encourage states to establish processes for collecting DNA from persons arrested for specified state offenses. Whereas the increase in the range of triggering offenses appears to be a natural outcome of DNA's success as a forensic tool, the expansion to collection from arrestees appears to be a more legally significant step. Overall, it seems Congress's goal for the expansion to arrestees and those facing charges was to facilitate crime prevention through "the creation of a comprehensive, robust database that will make it possible to catch serial rapists and murderers before they commit more crimes." In background material for its implementing rule, the Justice Department explains that collection from arrestees will facilitate more effective law enforcement for at least two reasons: (1) it will aid in crime prevention by ensuring that the government need not wait until a crime has been committed before creating an individual's DNA profile; and (2) it will allow federal authorities to create DNA profiles for aliens detained in the United States, who might not otherwise undergo judicial proceedings in U.S. courts. Although Congress expanded statutory authority for DNA collection, it has also provided some protection for arrestees whose arrests do not result in conviction. In particular, federal law mandates expungement of DNA samples upon an arrestee's showing of discharge or acquittal. The FBI and relevant state agencies "shall promptly expunge" DNA information "from the index" upon receipt of "a final court order establishing that such charge has been dismissed or has resulted in an acquittal or that no charge was filed within the applicable time period." Officials must also expunge DNA data for convicts in cases where a conviction is overturned. These provisions apply to DNA collected by state and local law enforcement officers, in addition to DNA collected in the federal justice or detention systems. The Fourth Amendment to the U.S. Constitution provides a right "of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures." Two fundamental questions arise in every Fourth Amendment challenge. First, does the challenged action constitute a search or seizure by federal or local government and thus trigger the Fourth Amendment right? Second, if so, is the search or seizure "reasonable"? Different tests trigger the Fourth Amendment right depending on whether a litigant challenges government conduct as a seizure or as a search. Seizures involve interference with property rights; a seizure of property occurs when government action "meaningfully interferes" with possessory interests or freedom of movement. In contrast, searches interfere with personal privacy. Government action constitutes a search when it intrudes upon a person's "reasonable expectation of privacy." A reasonable expectation of privacy requires both that an "individual manifested a subjective expectation of privacy in the searched object" and that "society is willing to recognize that expectation as reasonable." In general, people have no reasonable expectation of privacy for physical characteristics they "knowingly expos[e] to the public." In evaluating whether people "knowingly expose" identifying characteristics, the Supreme Court has sometimes distinguished the drawing of blood and other internal fluids from the taking of fingerprints. At times, it has signaled that people lack a reasonable expectation of privacy in their fingerprints, but it has held that extraction of blood, urine, and other fluids implicates an intrusion upon a reasonable expectation of privacy, presumably because the former category is "knowingly exposed" to the public while the latter category generally is not. Under modern Supreme Court precedent, a further complicating factor is that reasonable expectation of privacy depends not only on the type of evidence gathered, but also on the status of the person from whom it is gathered. The inquiry is not simply a yes-or-no determination, but appears to include a continuum of privacy expectations. For example, in United States v. Knights , the Court held that the "condition" of probation "significantly diminished" a probationer's reasonable expectation of privacy. This diminished privacy expectation did not completely negate the probationer's Fourth Amendment right; however, it affected the outcome under the Court's Fourth Amendment balancing test. When government action constitutes a search or seizure, "reasonableness" is the "touchstone" of constitutionality. However, courts apply different standards, in different circumstances, to determine whether searches and seizures are reasonable. The Court's Fourth Amendment analysis falls into three general categories. The first category involves traditional law enforcement activities, such as arrests or searching of homes. To be reasonable, these activities require "probable cause," which must be formalized by a warrant unless a recognized warrant exception applies. Probable cause is "a fluid concept--turning on the assessment of probabilities in particular factual contexts--not readily, or even usefully, reduced to a neat set of legal rules," yet it is considered the most stringent Fourth Amendment standard. In the context of issuing warrants, probable cause requires an issuing magistrate to make a "common sense" determination, based on specific evidence, whether there exists a "fair probability" that, for example, an area contains contraband. The second category, introduced in the Supreme Court case Terry v. Ohio , involves situations in which a limited intrusion satisfies Fourth Amendment strictures with a reasonableness standard that is lower than probable cause. For example, in Terry , a police officer's patting of the outside of a man's clothing to search for weapons required more than "inchoate and unparticularized suspicion" but was justified by "specific reasonable inferences" that the man might have a weapon. In such situations, courts permit searches justified by "reasonable suspicion," which is a particularized suspicion prompted by somewhat less specific evidence than probable cause requires. The third category includes "exempted area," "administrative," "special needs," and other "suspicionless" searches. Examples include routine inventory searches, border searches, roadblocks, and drug testing. In these circumstances, courts apply a "general approach to the Fourth Amendment"--also called the "general balancing," "general reasonableness," or "totality-of-the-circumstances" test--to determine reasonableness "by assessing, on the one hand, the degree to which [a search or seizure] intrudes upon an individual's privacy and, on the other, the degree to which it is needed for the promotion of legitimate governmental interests." Although the Supreme Court has expanded the scope of application for this test, the approach historically applied only when a search or seizure satisfied parameters for one of several narrow categories. In particular, it applied where a routine, administrative purpose justified regular searches; where a long-recognized exception existed, such as for border searches; or where a "special nee[d], beyond the normal need for law enforcement, [made] the warrant and probable cause requirements impracticable." In the context of law enforcement's collection of DNA from prisoners, parolees, and others subject to law enforcement supervision, questions remain regarding when a special need, distinct from law enforcement interests, must exist before a court may apply a general reasonableness standard. Although the special needs test arose in the context of drug testing, the Supreme Court has held that probation and other post-conviction punishment regimes qualified as special needs with purposes distinct from law enforcement. For example, in Griffin v. Wisconsin , the Court held that a "state's operation of a probation system, like its operation of a school, government office or prison, or its supervision of a regulated industry ... presents 'special needs' beyond law enforcement." As discussed below, later Supreme Court cases seem to suggest that a defendant's post-conviction status, alone, might justify a court's direct application of a general reasonableness test to DNA collection, without any finding of a special need. Because its focus is the status of the person searched rather than the nature or justification of government action, such an approach is distinct from existing legal bases for applying a general reasonableness test to evaluate suspicionless searches. Since 2000, the Supreme Court has twice applied a general reasonableness test in Fourth Amendment cases involving people serving post-conviction punishments--specifically, in cases involving a probationer and a parolee--without first finding special needs justifying the government action. In both cases, the Court's legal basis for directly applying the general balancing approach was the reduced expectation of privacy to which each defendant was entitled by virtue of his post-conviction status. In addition to providing a justification for rejection of the special needs test, this same diminishment of defendants' privacy expectations also favored the government in the Court's application of the general balancing test. In United States v. Knights , a 2001 case, a California court had sentenced Mark Knights to probation for a drug offense. One condition of his probation was that his "person, property, place of residence," etc., were subject to search "with or without a search warrant." After finding some evidence that appeared to link him with a fire at a local telecommunications vault, a police detective searched Knights's home without a warrant. Emphasizing the curtailment of privacy rights that correspond with probation and other post-conviction punishment regimes, the Court evaluated the search under the general balancing test, without first identifying an administrative purpose or special needs justification. In addition, Knights's diminished expectation of privacy affected the outcome under the Court's general Fourth Amendment balancing test. Noting that "Knights' status as a probationer subject to a search condition informs both sides of that balance," the Court easily upheld the officer's search based on reasonable suspicion. In Samson v. California , a 2006 case, the Court extended Knight s to uphold a search of a parolee's pockets, for the first time directly applying the general reasonableness test to a search justified only on the basis of the petitioner's status as a parolee, rather than on any particularized suspicion. As in Knights , the Samson Court explicitly rejected arguments that a special needs analysis was required; instead, finding that the petitioner's post-conviction status diminished his privacy rights, the Court again directly applied a "general Fourth Amendment approach." In addition, as in Knights , the Samson court held that a parolee's diminished privacy right affected the outcome of the general balancing test. It is unclear what other categories of people might be subject to a reduced expectation of privacy by virtue of their status. It appears from Supreme Court dicta that at least a lesser reduction in privacy rights would apply to those in pre-trial detention versus people serving sentences after conviction. In Knights and Samson , the Supreme Court referred to parolees and probationers as being along a "'continuum' of state-imposed punishments." Furthermore, in Samson , the Court held that a parolee lacked "an expectation of privacy that society would recognize as legitimate," because searches were a condition of parole, which was a "'an established variation on imprisonment.'" Lower federal courts have interpreted these and other Supreme Court decisions as suggesting that prisoners' privacy expectations are the most diminished; parolees have the next lowest diminishment in privacy expectations, followed by people on supervised release and probationers. The few U.S. district court cases addressing DNA collection from persons awaiting trial, discussed infra , have reached different conclusions regarding the extent to which a person's pre-trial detention diminishes his or her reasonable expectation of privacy. Courts have uniformly held that compulsory DNA collection and analysis constitutes a search, and thus triggers Fourth Amendment rights. Although some courts have signaled that DNA collection or storage might also constitute a seizure, courts have generally not addressed that question. Thus, the question in cases brought is whether the collection of DNA satisfies the Fourth Amendment reasonableness test. Prior to the expansion of DNA collection authority to arrestees, nearly all courts that reviewed laws authorizing compulsory DNA collection upheld the laws against Fourth Amendment challenges. Although the U.S. Supreme Court has never accepted a DNA collection case, U.S. Courts of Appeals for the First, Second, Sixth, Seventh, Eight, Ninth, Tenth, and Eleventh Circuits upheld the 2004 version of the federal DNA collection law, which authorized collection and analysis of DNA from people convicted of any felony, certain sexual crimes, and crimes of violence. Likewise, federal courts of appeals have upheld several state laws authorizing post-conviction DNA collection. Courts have relied on different legal tests in these cases. While most courts have directly applied a general reasonableness approach, some courts have first evaluated government actions under the special needs test. The majority of the federal courts of appeals have interpreted Samson as affirmatively requiring courts to apply the general reasonableness test, without a special needs prerequisite, at least as applied to prisoners or other individuals with post-conviction status. For example, in Wilson v. Collins , the Court of Appeals for the Sixth Circuit interpreted Samson as requiring direct application of the general balancing test in a case involving a prisoner. Likewise, in United States v. Weikert , a case involving compulsory collection of DNA from a man on supervised release, the Court of Appeals for the First Circuit held that, under Samson , a general reasonableness test applied in DNA collections cases. In contrast, some federal courts of appeals have held that Samson did not affect their use of the special needs test in suits challenging DNA collection statutes. For example, the Court of Appeals for the Second Circuit declined to apply Samson in United States v. Amerson , a case upholding compulsory DNA collection from two individuals on probation, one for larceny and one for wire fraud. The court interpreted Samson very narrowly, as applying only in contexts involving a "highly diminished" expectation of privacy. Similarly, although it directly applied the general reasonableness test in Wilson , the Sixth Circuit suggested in that case that Samson might not apply in a case involving a person who was not a prisoner. The reading of Samson as limited to cases involving a significantly diminished expectation of privacy appears to comport with the Supreme Court's emphasis in Knights and Samson on the diminished privacy rights that stem from a petitioner's post-conviction status. In Samson , the Court framed the question in the case as "whether a condition of release can so diminish or eliminate a released prisoner's reasonable expectation of privacy that a suspicionless search by a law enforcement officer would not offend the Fourth Amendment." In evaluating post-conviction DNA collection, whether courts apply the special needs test before applying a general reasonableness test in DNA cases has had little or no practical import, because courts have consistently upheld the collection regardless of the standard they apply. Thus, courts have signaled that a change in analytic tools would not affect the ultimate determination of constitutionality in DNA collection cases involving convicted criminals. However, some courts addressing DNA collection in the post-conviction context have made clear that their holdings do not apply to such collection from arrestees. As mentioned, to date, only a handful of state and federal judicial decisions address compulsory collection of DNA from persons awaiting a criminal trial. Outcomes in the cases are mixed. Two federal district courts have issued rulings in cases challenging the federal authorities for pre-conviction DNA collection. In United States v. Pool , the U.S. District Court for the Eastern District of California upheld such collection. In United States v. Mitchell , the U.S. District Court for the Western District of Pennsylvania reached the opposite result. The U.S. Court of Appeals for the Ninth Circuit will be the first federal court of appeals to address a challenge to federal collection from an arrestee when it rules in the pending appeal in Pool . In both U.S. district court cases, the government requested a DNA sample after the defendant was arrested pursuant to a criminal indictment but before trial. Both courts applied the general balancing test to determine whether such collection was reasonable under the Fourth Amendment. Their divergent conclusions can be explained, in part, by the courts' differing characterizations of DNA collection on both sides of the general balancing test. On the privacy intrusion side, the Pool court viewed a DNA sample as no more intrusive than fingerprinting. In contrast, the Mitchell court noted that DNA has the potential to reveal a host of private genetic information and rejected the analogy to fingerprinting as "pure folly." The courts' different views of DNA's role also impacted their conclusions on the government interest side of the balancing test. The Pool court viewed the government's interest in collecting DNA as equally legitimate as fingerprinting and other identification tools, in which governments have been held to have a sufficient interest. In contrast, because it viewed DNA collection as presenting a far greater privacy intrusion than fingerprinting, the Mitchell court held that although the government has a legitimate interest in identifying suspects, that interest is one "that can be satisfied with a fingerprint and photograph" rather than with the more intrusive DNA sample. Another explanation for the different outcomes is the courts' different views of the implication of an indictment for a defendant's reasonable expectation of privacy. The Pool court viewed a grand jury's finding of probable cause at an indictment as a "watershed event," pursuant to which it is constitutional to detain a defendant or otherwise restrict a defendant's liberty. Thus, the Pool court found that a post-indictment arrestee has a substantially diminished reasonable expectation of privacy. However, it expressly limited its holding to cases in which DNA collection occurs after an indictment. Criticizing the Pool opinion, the Mitchell court stated that it is "loath to elevate a finding of probable cause"--that is, the standard which must be met for an indictment--to match the higher, "reasonable doubt" standard required for a conviction. Therefore, it "strongly disagree[d] with the court's analysis in Pool " regarding the extent to which arrest and indictment diminish a person's reasonable expectation of privacy. The Ninth Circuit heard oral arguments in Pool in December 2009. At oral argument, Pool sought to distinguish his case, in which the DNA was collected prior to conviction, from previous Ninth Circuit decisions, namely United States v. Kincade and United States v. Kriesel , upholding post-conviction DNA collection. Some lines of questioning appeared to indicate that the court might consider a narrow ruling in the case. For example, it is possible that the court would limit its holding to instances in which the DNA collection follows an indictment or other formal probable cause determination. Courts will likely wrestle with the questions raised by the divergent Pool and Marshall decisions in future cases involving pre-conviction DNA collection. Several additional issues are likely to affect courts' analyses in such cases, and might also impact the existing judicial consensus regarding the constitutionality of DNA collection from persons who have been convicted of a crime. In particular, the emerging science regarding biological purposes for junk DNA and the FBI's long-term storage of DNA profiles are likely to play a role in future analyses. Despite the "rapid pace of technological development in the area of DNA analysis," much of DNA's scientific value remains a mystery. As mentioned, FBI analysts rely on junk DNA, thought not to reveal sensitive medical or biological information. Partly for that reason, proponents of expansive DNA collection argue that any privacy intrusion resulting from DNA storage or analysis is minimal at most. For example, when he introduced the amendment that authorizes collection and analysis of DNA from arrestees in the federal system, Senator Kyl emphasized that storage of DNA samples would not intrude upon individuals' privacy rights, stating that "the sample of DNA that is kept ... is what is called 'junk DNA'--it is impossible to determine anything medically sensitive from this DNA." Likewise, courts have assumed that DNA analysis and storage involves only a minimal privacy intrusion. However, language in some opinions suggest that this assumption might change if scientists discover new uses for junk DNA. For example, the U.S. Court of Appeals for the First Circuit has suggested that "discovery of new uses for 'junk DNA' would require a reevaluation of the [Fourth Amendment] reasonableness balance." Scientific research on junk DNA is still emerging, and some research suggests that junk DNA has more biological value than previously assumed. For example, in October 2008, University of Iowa researchers released study findings showing that junk DNA has the potential to "evolve into exons, which are the building blocks for protein-coding genes." Other scientists have similarly argued that there might be "gems among the junk" in DNA. Hence, a remaining question is whether use of junk DNA will continue to offer superficial identifying information or whether it will reveal more detailed medical or biological characteristics. A final issue that might arise in future DNA cases is the constitutionality of storing convicts' DNA profiles after their sentences have ended. As mentioned, federal law requires the FBI to expunge DNA profiles for people who receive acquittals or whose convictions are overturned. However, the expungement provisions do not address storage of DNA from people who have been convicted but have successfully completed their sentences. Rather, as the Ninth Circuit Court of Appeals noted in United States v. Kriesel , "once they have [a person's] DNA, police at any level of government with a general criminal investigative interest ... can tap into that DNA without any consent, suspicion, or warrant, long after his period of supervised release ends." Defendants have generally not raised this issue, but it might become a more prevalent argument since laws have expanded collection authority to reach people convicted for relatively minor charges. Some courts have signaled that storage after sentences are completed could alter the Fourth Amendment analysis. For example, in an opinion upholding collection of DNA from a person on supervised release, the U.S. Court of Appeals for the First Circuit warned that its opinion had an "important limitation." Namely, because the petitioner was "on supervised release and will remain so until 2009, [the court did] not resolve the question of whether it is also constitutional to retain the DNA profile in the database after he is no longer on supervised release." Courts might be receptive to arguments regarding the long-term storage of DNA as an unconstitutional search, although some courts have upheld ongoing storage of fingerprints and other evidence. The resolution of that question might depend in part on whether completion of a sentence is viewed as restoring a person's reasonable expectation of privacy. Although nearly all courts that have addressed the issue have upheld the compulsory collection of DNA from persons who have been convicted, no judicial consensus has yet emerged regarding the constitutionality of such collection from persons who have been arrested or are facing charges prior to a criminal trial. The two U.S. district court cases addressing pre-conviction DNA collection pursuant to the federal law illustrate that outcomes in future cases involving arrestees may depend on courts' resolution of at least two key issues, namely: (1) what, if any, distinction exists between the reasonable expectation of privacy of an arrestee and a convict; and (2) the degree of privacy intrusion perceived as a result of a DNA sample. The latter question may turn on courts' framing of the role of DNA collection--that is, whether it is analogous to the long-upheld practice of fingerprinting or whether it represents a greater privacy intrusion. Existing expungement provisions might also become a factor in future challenges to pre-conviction DNA collection. The government might argue that requirements that DNA samples be expunged once an arrestee is discharged or acquitted offset the degree of privacy intrusion caused by such samples. To date, some federal courts have made note of the expungement provisions, but they generally have not addressed the effect of expungement requirements in Fourth Amendment analyses.

Relying on different legal standards, courts have historically upheld laws authorizing law enforcement's compulsory collection of deoxyribonucleic acid (DNA) as reasonable under the Fourth Amendment to the U.S. Constitution. However, prior cases reviewed the extraction of DNA samples from people who had been convicted on criminal charges. New state and federal laws authorize the collection of such samples from people who have been arrested or detained but not convicted. On the federal level, the U.S. Department of Justice implemented this expanded authority with a final rule that took effect January 9, 2009. The Katie Sepich Enhanced DNA Collection Act of 2010 (H.R. 4614), a bill passed by the House, would provide grant funding bonuses to states that authorized the collection of DNA from persons arrested for specified types of crimes. To date, only a few courts have reviewed the constitutionality of pre-conviction DNA collection pursuant to the new federal rule. The two federal district courts to have considered the issue applied the same Fourth Amendment test--the "general balancing" or "general reasonableness" test--but reached opposite conclusions. In United States v. Pool, the U.S. District Court for the Eastern District of California held that the government's interest in collecting a DNA sample from a person facing charges outweighed any intrusion of privacy. In United States v. Mitchell, the U.S. District Court for the Western District of Pennsylvania reached the opposite conclusion. Points of disagreement between the two district court opinions are likely to reemerge as themes in future decisions addressing pre-conviction DNA collection. One difference is whether the defendant's status as a person facing criminal charges was viewed as impacting the scope of Fourth Amendment protection. Another is the extent to which the government was seen as having a legitimate interest in obtaining a DNA sample in particular, rather than a fingerprint or another identifier. Finally, the courts disagreed regarding the degree of the privacy intrusion caused by collecting a DNA sample. The latter questions are framed by a larger debate about the nature and role of DNA in law enforcement. For example, is a DNA sample merely a means by which to identify a person, like a fingerprint? Or does it present a greater privacy intrusion? A few additional factors might complicate courts' analyses of DNA collection in future cases. For example, emerging scientific research suggests that the type of DNA used in forensic analysis might implicate a greater privacy intrusion than courts had previously assumed. In addition, most courts have yet to review the constitutionality of storing convicts' DNA profiles beyond the time of sentence completion.

Habeas corpus is the procedure under which an individual held in custody may petition a federal court for his release on the grounds that his detention is contrary to the Constitution or laws of the United States. It has been sought by state and federal prisoners convicted of criminal offenses and by the detainees in Guantanamo. The Supreme Court in Boumediene v. Bush , 553 U.S. 723 (2008), held that limitations on the judicial review of detainee status were contrary to the demands of the privilege of the writ and suspension clause. The Court has thus far declined to hold that a state prisoner sentenced to death, but armed with compelling evidence of his innocence, is entitled to habeas relief. Legislation was introduced in the 111 th Congress to deal with both issues. Moreover, the Constitution Subcommittee of the House Committee on the Judiciary has held hearings on habeas review and received recommendations for legislation on related issues. This report is a brief overview of those recommendations and legislative proposals. Federal law imposes several bars to habeas relief in the interests of finality, federalism, and judicial efficiency. One of these prohibits filing repetitious habeas petitions claiming that the petitioner's state conviction was accomplished in a constitutionally defective manner. This second or successive petition bar does not apply where newly discovered evidence establishes that but for the constitutional defect no reasonable jury would have convicted the petitioner (constitutional defect plus innocence). But suppose the new evidence merely demonstrates the petitioner's innocence, unrelated to the manner in which he was convicted? The Supreme Court has never said that habeas relief may be granted on such a freestanding claim of innocence. It has twice said, however, that assuming relief might be granted in a freestanding innocence case, the evidence on the record before it did not reach the level of persuasion necessary to grant relief. A third such case is now working its way through the federal court system. Two bills offered in the 111 th Congress would have established actual innocence as a ground upon which habeas relief might be granted, the Effective Death Penalty Appeals Act ( H.R. 3986 ) and the Justice for the Wrongfully Accused Act ( H.R. 3320 ). Representative Moore (Kansas) introduced H.R. 3320 on July 23, 2009. Representative Johnson (Georgia) introduced H.R. 3986 on November 3, 2009, for himself and Representatives Nadler, Conyers, Scott (Virginia), Weiner, Lewis (Georgia), and Jackson-Lee. The Johnson bill would have amended the statutory bar on second or successive habeas petitions filed by either state or federal convicts to permit petitions which include: A claim that an applicant was sentenced to death without consideration of newly discovered evidence which, in combination with the evidence presented at trial, could reasonably be expected to demonstrate that the applicant is probably not guilty of the underlying offense. Proposed 28 U.S.C. 2244(b)(5), 2255(h)(3). The proposal's probability standard was one favored by the Supreme Court in second or successive petition cases where the petitioner claimed he was innocent of the underlying offense. The Court favored a clear and convincing evidence standard in cases where the petitioner challenged not his conviction but claimed he was innocent of the aggravating factor that justified imposition of the death penalty. The statutory provisions, established in the Antiterrorism and Effective Death Penalty Act, now favor a clear and convincing evidence standard in the constitutional defect plus innocence exception to the second or successive petition bar. The Johnson bill would also have carried state death row inmates, who claimed innocence, over another statutory habeas bar. Under existing habeas law, federal courts are bound by state court determinations and application of federal law, unless the decisions are contrary to clearly established federal law, constitute an unreasonable application of such law to the facts, or constitute unreasonable finding of facts. Faced with evidence of the petitioner's probable innocence, the Johnson bill would have released federal habeas courts from the binding impact of such state court determinations: They would have no longer been bound by a state court decision that "resulted in, or left in force, a sentence of death that was imposed without consideration of newly discovered evidence which, in combination with the evidence presented at trial, demonstrates that the applicant is probably not guilty of the underlying offense," proposed 28 U.S.C. 2254(d)(3). The 111 th Congress adjourned without further action on the Johnson bill. The Moore bill would have focused its innocence exception to the second or successive petition bar on the evidence tending to establish innocence of state prisoners, death row or otherwise. Moreover, while it would have eased the limitation on filing a second or successive habeas petition, it would have left the standards barring such petitions in place and unchanged. Existing law requires federal courts to dismiss second or successive petitions unless they are based on retroactively applicable new law or are based on newly discovered facts that establish constitutional defect plus innocence. Such a petition, however, may be filed only with the permission of the appropriate court of appeals upon a prima facie showing that the petition meets either the new law or newly discovered evidence exception. The bill would have excused the requirement of appellate court approval "if the second or subsequent application rests solely on a claim of actual innocence arising from - (i) newly discovered evidence from forensic testing; (ii) exculpatory evidence withheld from the defense at trial; or (iii) newly discovered accounts by credible witnesses who recant prior testimony or establish improper action of State or Federal agents," proposed 28 U.S.C. 2244(b)(3)(F). It would have left unchanged the requirement that such petitions be dismissed unless they satisfy the new rule or newly discovered evidence exception. The bill would also have amended existing law to specifically permit a court to receive forensic evidence, exculpatory evidence, and evidence of official misconduct - in support of the petitioner's claim of actual innocence, proposed 18 U.S.C 2243. Testimony of witnesses who testified at trial would be limited to recantations or evidence of impermissible official action, id. Unrelated to any claim of innocence, the Moore bill also would have addressed the bar imposed for failure to exhaust state remedies. Habeas relief may not be granted state prisoners under existing law, when effective corrective state procedures remain untried. The bill would have permitted habeas relief notwithstanding the existence of such unexhausted state procedures, if "the application is based on a claim that the police or prosecution withheld exculpatory, impeachment, or other evidence favorable to the defendant," proposed 28 U.S.C. 2254(b)(4). The 111 th Congress adjourned without further action on the Moore bill. The Supreme Court's decision in Boumediene stimulated several proposals in the 111 th Congress relating to the judicial review for the Guantanamo detainees. The proposals included the: Military Commissions Habeas Corpus Restoration Act of 2009 ( H.R. 64 ), introduced by Representative Jackson-Lee (Texas); Interrogation and Detention Reform Act of 2008 ( H.R. 591 ), introduced by Representative Price (North Carolina) for himself and Representatives Holt, Hinchey, Schakowsky, Blumenauer, Miller (North Carolina), Watt, McGovern, Olver, DeLauro, and Larson (Connecticut); Enemy Combatant Detention Review Act of 2009 ( H.R. 630 ), introduced by Representative Smith (Texas) for himself and Representatives Boehner, Sensenbrenner, Franks (Arizona), Lundgren (California), Gallegly, Jordan (Ohio), Poe (Texas), Harper, Coble, and Rooney; Terrorist Detainees Procedures Act of 2009 ( H.R. 1315 ), introduced by Representative Schiff; Detainment Reform Act of 2009 ( H.R. 3728 ), introduced by Representative Hastings (Florida); and Terrorist Detention Review Reform Act ( S. 3707 ), introduced by Senator Graham. The Court in Boumediene v. Bush held that foreign nationals detained at Guantanamo were entitled to the privilege of the writ of habeas corpus. They could be denied the benefits of access to the writ only under a suspension valid under the suspension clause, U.S. Const. Art. I, SS9, cl.2, or under an adequate substitute for habeas review. Section 7 of the Military Commissions Act stripped all federal courts of habeas jurisdiction relating to foreign, enemy combatant detainees; and except as provided in the Detainee Treatment Act, it also stripped them of jurisdiction to review matters relating to such individuals and concerning their detention, treatment, transfer, trial, or conditions of detention. The Court did not feel that the Detainee Treatment Act provided an adequate substitute for detainee habeas review and consequently concluded that section 7 "effect[ed] an unconstitutional suspension of the writ." The Court found it unnecessary to discuss the extent to which habeas review might include an examination of the conditions of detention. It also made it clear that its decision did not go to the merits of the detainees' habeas petitions. Each of the bills, other than the Hastings and Graham bills, would have repealed section 7 of the Military Commissions Act, which unsuccessfully sought to strip the federal courts of jurisdiction to entertain habeas petitions from the Guantanamo detainees. The Smith, Hastings, and Graham bills would have vested the U.S. District Court for the District of Columbia with authority to review the lawfulness of the detention of enemy combatants (Smith), threatening individuals (Hastings), or unprivileged enemy belligerents (Graham). The Smith and Graham bills would have established new habeas provisions applicable to detained enemy combatants, H.R. 630 , proposed 28 U.S.C. 2256; S. 3707 , proposed 2856. The Hastings bill would have established a substitute procedure for judicial review procedure, H.R. 3728 , SSSS402, 202, 203, 103. The 111 th Congress adjourned without further action on any of these proposals. Witnesses who submitted statements for the House Judiciary Committee's recent habeas hearings criticized other aspects of federal habeas law - issues which do not appear to have been the subject of legislative proposals in this Congress. Each of the witnesses - Justice Gerald Kogan, retired Chief Justice of the Florida Supreme Court; Professor John H. Blume of Cornell University Law School; and Mr. Stephen F. Hanlon, a partner in the law firm of Holland and Knight and appearing on behalf of the American Bar Association - were critical of the impact of the one-year statute of limitations in 28 U.S.C. 2244(d). They expressed concern over the complexity of the provisions under which being tardy can be fatal. They also agree that the binding effect given state court determinations of federal law is unfortunate, generally. Two of the witnesses were critical of the "opt in" provisions under which states gain the advantage of streamlined habeas procedures in capital cases, if they satisfy the provision of counsel standards. Chief Justice Kogan would repeal the provisions, fearing that amendment would only introduce further "confusion, waste, and wheel-spinning." Mr. Hanlon urged alternatively that the role of gatekeeper - the determination of whether a state is qualified to opt in, now vested in the Attorney General - be returned to the federal courts. Professor Blume and Chief Justice Kogan also urged modification of the habeas "procedural default" bar under which a prisoner's federal habeas petition is barred because of his failure to comply with an applicable state procedural requirement for consideration of his claim at the state level. Mr. Hanlon alone recommended federal funding of capital defender organizations and suspension of "all federal executions pending a thorough data collection and analysis of racial and geographical disparities and the adequacy of legal representation in the death penalty system." Chief Justice Kogan also had concerns not mentioned in the statements of the other witnesses, i.e ., the Teague rule, harmless error, and deference to state fact finding. With two exceptions, the Teague rule denies the use of federal habeas to establish, or to retroactively claim the benefits of, a new rule, that is, an interpretation of constitutional law not recognized before the end of the period for the petitioner's direct appellate review of his state conviction and sentence. From Chief Justice Kogan's perspective, "The chief problem is deciding what counts as 'new' in these circumstances." He expressed the view that habeas treatment of harmless constitutional errors committed at the state level "warrants serious attention." Finally, he pointed to the apparent incongruity of section 2254(e)(1), which asserts that a state court's finding of facts is presumed correct, and section 2254(d)(2), which asserts that habeas must be denied with respect to a claim adjudicated in state court unless the state court's decision was based on an unreasonable determination of the facts. If the history of habeas reform debate holds true, each of the points made by the three witnesses is likely to find a counterpoint in any future debate. The 111 th Congress adjourned without further action on these matters.

Federal habeas corpus is the process under which those in official detention may petition a federal court for their release based on an assertion that they are being held in violation of the Constitution or laws of the United States. Major habeas legislative activity in the 111th Congress fell within three areas: proposals to permit state death row inmates to seek habeas relief based on evidence that they are probably innocent (H.R. 3320 and H.R. 3986); proposals to amend federal law in response to the Supreme Court's determination that the level of judicial review afforded Guantanamo detainees failed to meet constitutional expectations (H.R. 64, H.R. 591, H.R. 630, H.R. 1315, H.R. 3728, and S. 3707); and recommendations for revision of several areas of federal habeas law from witnesses appearing before recent House Judiciary Committee hearings. The 111th Congress adjourned without further action on any of these proposals or recommendations. Related CRS Reports include CRS Report R41010, Actual Innocence and Habeas Corpus: In re Troy Davis; CRS Report RL33391, Federal Habeas Corpus: A Brief Legal Overview (also available in abbreviated form as CRS Report RS22432, Federal Habeas Corpus: An Abridged Sketch); CRS Report RL33180, Enemy Combatant Detainees: Habeas Corpus Challenges in Federal Court; and CRS Report R40754, Guantanamo Detention Center: Legislative Activity in the 111th Congress.

The existence of the dual banking system and the relative insulation of federally chartered national banks from state law form the backdrop of Cuomo v. The Cle aring House Association, L.L.C. ( Clearing House Association ), in which the Supreme Court, in a five-to-four decision announced on June 29, 2009, ruled that the National Bank Act (NBA) does not preempt states from bringing judicial actions against national banks to enforce non-preempted state anti-discrimination laws, and by implication state consumer protection laws, as long as the state authorities do not encroach on the visitorial powers of the national bank regulator, the Office of the Comptroller of the Currency (OCC). The Court ruled that administrative subpoenas or other forms of administrative oversight or examination are included in visitorial powers and, thus, are not available as state enforcement tools. The Court's ruling reverses an appellate court ruling that sheltered national banks and their subsidiaries from the reach of state enforcement of fair lending laws. National banks are chartered and regulated under the terms of the NBA by OCC. They are also subject to other federal laws, including federal tax, consumer protection, securities, fair housing, anti-money laundering, and laws of general applicability. Moreover, much of their daily activity is subject to state law. The starting point for preemption analysis is the language of the federal legislation. If Congress enacts legislation under one of its delegated powers that includes an explicit statement that state law is preempted, the Supreme Court generally will give effect to that legislative intent. Where there is no language of preemption, the Court is likely to find preemption when it identifies a direct conflict between the federal law and the state law or when it concludes that the federal government has so occupied the field as to preclude enforcement of state law with respect to the subject at hand. On questions of whether, in the absence of express language of preemption in a federal statute, state laws apply to national banks, there is considerable Supreme Court precedent. The Court, in cases beginning with McCulloch v. Maryland , has stated the standard for courts to use to determine whether a state law applies to national banks when there is no express federal language of preemption and articulated that standard in various ways. Essentially, however, the Court identifies state laws which are inapplicable to national banks in terms of the degree to which they interfere with federally granted powers. In McCulloch v. Maryland , in which the question was whether a state tax could be applied to the first Bank of the United States, the Court, relying on the Supremacy Clause of the U.S. Constitution, used broad language to voice its conviction that "states have no power by taxation or otherwise to retard, impede, burden, or in any manner control, the operations of the constitutional laws enacted by Congress to carry into execution the powers vested in the general government." The most recent case in which the Supreme Court identified a standard for courts to use in deciding whether a state law may be applied against a national bank, that is, whether the state law has been preempted as being inconsistent with federal law, is Watters v. Wachovia Bank . In that case, the Court ruled that state licensing and regulation could not be applied to a real estate subsidiary of a national bank. The Court relied on the express language of the visitorial powers clause of the NBA, 12 U.S.C. SS 484(a), as indicative of congressional intent to protect the national banking system from intrusive or inconsistent state laws. The text of the visitorial powers clause is as follows: (a) No national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof or by any committee of Congress or of either House duly authorized. (b) Notwithstanding subsection (a) of this section, lawfully authorized State auditors and examiners may, at reasonable times and upon reasonable notice to a bank, review its records solely to ensure compliance with applicable State unclaimed property or escheat laws upon reasonable cause to believe that the bank has failed to comply with such laws. The Court reviewed a long line of cases, beginning with McCulloc h v. Maryland , that have held the federal bank system generally immune to state laws negatively affecting operations. It spoke of federal law as shielding national banks "from unduly burdensome and duplicative regulation" and national banks as being "subject to state laws of general application in their daily business to the extent such laws do not conflict with the letter or the general purposes of the NBA." It emphasized that the standard the Court applied to preempt state law in Barnett Bank of Marion County, N.A. v. Nelson , extends to powers of the national bank regulator, OCC, and to powers exercised under the incidental powers clause: "States are permitted to regulate the activities of national banks where doing so does not prevent or significantly interfere with the national bank's or the national bank regulator's exercise of its powers. But when state prescriptions significantly impair the exercise of authority, enumerated or incidental under the NBA, the State's regulations must give way." It, thus, appears that the standard for determining whether a state law is preempted involves the question of whether the state law "prevents[s] or significantly interfere[s] with the national bank's or the national bank regulator's exercise of its powers." The issue of whether a state agency may enforce against a national bank a state law that has not been preempted, however, has not been the subject of extensive litigation. In Waite v. Dowley , 94 U.S. 527 (1877), the U.S. Supreme Court found that a state statute not in conflict with federal law regarding the place for assessing national bank shares for tax purposes could be enforced. In First National Bank in St. Louis v. Missouri , 263 U.S. 640, 656 (1924), the Court both upheld a state law that prohibited banks, including national banks, from forming branches and permitted the state bank regulator to enforce that law. The principal reason appears to have been the fact that at that time the NBA did not permit national banks to operate branches. The Court said: "national banks are subject to the laws of a State in respect of their affairs unless such laws interfere with the purpose of their creation, tend to impair or destroy their efficiency as federal agencies or conflict with the paramount law of the United States." It examined the language and purpose of the NBA and determined "that the power sought to be exercised by the bank finds no justification in any law or authority of the United States," and found "the way ... open for the enforcement of the state statute." The Court stated: The state statute as applied to national banks is therefore valid, and the corollary that it is obligatory and enforceable necessarily result, unless some controlling reason forbid; and, since the sanction behind it is that of the state, and not that of the national government, the power of enforcement must rest with the former, and not with the latter.... The state is neither seeking to enforce a law of the United States nor endeavoring to call the bank to account for an act in excess of its charter powers. What the state is seeking to do is to vindicate and enforce its own law, and the ultimate inquiry which it propounds is whether the bank is violating that law, not whether it is complying with the charter or law of its creation. The case began when New York's Attorney General (AG), examining publicly available Home Mortgage Disclosure Act (HMDA) data, found disparities between the interest rates charged African American and Hispanic borrowers and those charged white borrowers by certain banks operating in New York State and their subsidiaries. When asked by the AG to provide non-public information on their lending policies and practices, national banks belonging to The Clearing House Association (CHA), including Wells Fargo, HS-BC, J.P. Morgan Chase, and Citigroup, refused to supply the data. They saw the AG's requests as involving "visitation," a concept which the Supreme Court defined in Guthrie v. Harkness , 199 U.S. 148, 158 (1905) as "'the act of a superior or superintending officer, who visits a corporation to examine into its manner of conducting business, and enforce an observance of its laws and regulations.'" They charged that the AG's request was incompatible with OCC's exclusive visitorial powers under the NBA. In their behalf, therefore, the CHA, joined by OCC, challenged the authority of the AG to investigate the operations of national banks and succeeded in securing rulings at the trial and appellate level enjoining the AG from investigating national banks for violations of state anti-discrimination laws. In Office of the Comptroller of the Currency v . Spitzer , the district court granted OCC's request for an injunction against the state AG's enforcement of fair lending laws. OCC's objection to the AG's investigation of national bank mortgage practices was grounded in the visitorial powers clause of the NBA and the OCC regulations interpreting that clause. The New York AG challenged OCC's regulatory interpretation of the visitorial powers clause of the NBA, which states: (a) No national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof or by any committee of Congress or of either House duly authorized. (b) Notwithstanding subjection (a) of this section, lawfully authorized State auditors and examiners may, at reasonable times and upon reasonable notice to a bank, review its records solely to ensure compliance with applicable State unclaimed property or escheat laws upon reasonable cause to believe that the bank has failed to comply with such laws. The second clause of that statute is referred to as the courts-of-justice exception. The implementing regulation is 12 C.F.R. SS 7.4000. It provides, in pertinent part, "State officials may not exercise visitorial powers with respect to national banks, such as conducting examinations, inspecting or requiring the production of books or records of national banks, or prosecuting enforcement actions, except in limited circumstances authorized by federal law." Included among the list of "visitorial powers" specified in the regulation as exclusive to OCC is "[e]nforcing compliance with any applicable federal or state laws" that concern "activities authorized or permitted pursuant to federal banking law." In The Clearing House Association, L.L.C. v. Cuomo , the U.S. Circuit Court of Appeals for the Second Circuit, with one dissenting opinion, upheld the district court determining that the OCC regulation warranted deference under the standard announced in Chevron U.S.A., Inc. v. Natural Resources Defense Council . Under Chevron , courts must defer to agency interpretations of ambiguities in federal statutes under certain conditions. Deference is to be accorded to an interpretation in a regulation issued by an agency charged by Congress with enforcing a statute if two conditions are satisfied: (1) the statute is ambiguous rather than clear on the issue; and (2) the interpretation of the agency is reasonable in light of the statutory scheme. Citing Supreme Court precedent, it rejected the AG's argument that there was a presumption against preemption because OCC's visitorial powers regulation divested states of enforcing state laws, an aspect of state sovereignty. It cited Barnett Bank of Marion County , N.A. v. Nelson as authority for the contrary standard: explicit statutory grants of authority to national banks generally preempt contrary state law. It also rejected the AG's argument that the language of the visitorial powers clause should be construed as merely limiting states from interfering with OCC's statutory grants of authority. After reviewing the statutory language and judicial constructions of the visitorial powers clause, the appellate court found that although "the precise scope of 'visitorial' powers is not entirely clear," the statute does not preclude OCC's interpretation and that, to some extent, the AG's inquiry involves visitation. The court also found that the AG's investigation did not fall within the courts-of-justice exception by comparing it with the facts of Guthrie v. Harkness, 199 U.S. 148, 158 (1905), in which the Supreme Court ruled that a court could permit a private party, a shareholder, to inspect the books of a national bank without violating the exclusive visitorial power of OCC. In a dissenting opinion, Circuit Judge Cardamone saw the result of the majority rule as an alteration of "the compact between the state and national governments" from a "co-equal relationship between two independent co-existing sovereigns" to "one more akin to parent-child or employer-employee." The Court, in an opinion written by Justice Scalia and joined by Justices Stevens, Souter, Breyer, and Ginsburg, viewed the case as raising the question of whether OCC's regulatory preemption of state enforcement could be upheld as a reasonable interpretation of the visitorial powers provision of the NBA. It concluded that neither the language of the regulation, nor OCC's interpretation of it, comported with the statute. The Court first determined that the term "visitorial powers" carries "some ambiguity and, under Chevron , "[t]he Comptroller can give authoritative meaning to the statute within the bounds of that uncertainty ... [b]ut the presence of some uncertainty does not expand Chevron deference to cover virtually any interpretation of the National Bank Act." The opinion first explored the history of the concept of visitation, including the use of prerogative writs such as mandamus, by a corporation's superintendent or superior authority, to prevent it from exceeding its powers or harming the public. Next, it distinguished visitation from sovereign authority by noting that Supreme Court "cases have always understood 'visitation' as ... [the] right to oversee corporate affairs, quite separate from the power to enforce law." It cited First National Bank in St. Louis v. Missouri both for its holding--that a state attorney general may enforce a non-preempted state law against a national bank--and for the larger principle that "if a state statute of general applicability is not substantively pre-empted, 'the power of enforcement must rest with the [State] and not with' the National Government." It distinguished Watters , which had upheld the preemptive effect of the OCC regulation with respect to a mortgage subsidiary of a national bank, as involving only "whether operating subsidiaries of national banks enjoyed the same immunity from state visitation" as do national banks. The Court buttressed this conclusion in several ways, including carefully examining and identifying inconsistencies in OCC's published interpretation of its regulation. It characterized the result of applying state laws to national banks without authorizing state enforcement as producing a result akin to permitting the "bark" without the "bite." It contrasted this with the result that distinguishing visitorial powers from state sovereign enforcement powers would produce in terms of the structure of the visitorial statute. It found that by interpreting visitation to be administrative as distinguished from a state's sovereign enforcement powers, the statutory clause preserving the powers "vested in the courts of justice" was not eviscerated since its "only conceivable purpose is to preserve normal civil and criminal lawsuits." Finally, it identified as practical differences between visitorial powers, which include ready access to books and records, and litigation, which involves an adversarial process, judicial oversight, and limitations on access. Although the Court found that "the Comptroller erred by extending the definition of 'visitorial powers' to include 'prosecuting enforcement actions' in state courts," the Court ruled that the AG had no authority to issue a subpoena for the documents he was seeking. It, therefore, affirmed the injunction with respect to the threat of subpoenas and vacated it with respect to prohibiting the AG from initiating a judicial action to enforce state anti-discrimination laws. There is an opinion written by Justice Thomas and joined by Chief Justice Roberts, Justice Kennedy, and Justice Alito, which concurs in the Court's conclusion that the AG was without authority to issue an administrative subpoena for the national bank records, but registers a dissent with respect to the issue of the validity of OCC's preemption of state enforcement power. Although the dissent takes issue with the majority's interpretation of previous cases and its reading of the structure of the visitorial powers clause, its emphasis is on the majority's Chevron analysis. Instead of agreeing with the Court that OCC's interpretation is overbroad, the dissent would rule that OCC's interpretation is reasonable and would find that the visitorial powers clause, as interpreted by OCC, precludes state enforcement of the anti-discrimination laws against national banks. The dissenting opinion stated that "[t]he statutory term 'visitorial powers' is susceptible to more than one meaning, and the agency's construction is reasonable." Unlike the majority opinion, the dissent sees no clear delineation of visitorial powers either in historical practice or in judicial treatment that precludes OCC's interpretation. It takes exception to the majority's view of the history of the concept. The dissent suggests that OCC's broad view of its visitation power is consistent with the extent to which sovereigns held visitation authority over corporations in contrast to the church's authority to visit charitable institutions. According to the dissent: "[a]t common law, all attempts by the sovereign to compel civil corporations to comply with state law--whether through administrative subpoenas or judicial actions--were visitorial in nature." Without finding support for one particular view of the reach of visitorial powers, the dissent, thus, argues that OCC's interpretation is a reasonable one, and in view of the ambiguity of the term "visitorial powers," and, therefore, permissible under Chevron . The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), P.L. 111-203 , in Subtitle D of Title X, the Consumer Financial Protection Act of 2010, contains a provision designed to codify the ruling of the Supreme Court in Cuomo by making it clear in statute that the National Bank Act's visitorial powers clause does not preclude state enforcement actions against national banks for violation of non-preempted state law. A parallel provision applies to federal savings associations and their subsidiaries. There is also a provision authorizing state attorneys general and state regulators to bring actions against individual defendants, state institutions, and national banks and federal savings associations for violations of Title X and regulations promulgated under Title X. The legislation also defines a standard and procedural requirements for OCC to follow in preempting the applicability of state consumer protection laws to national banks or federal savings associations. The provisions in Dodd-Frank follow other efforts in the 111 th Congress to deal with OCC preemption of state efforts to enforce consumer protection laws against national banks, including the following. The Consumer Financial Protection Agency Act of 2009, released on June 30, 2009, by the U.S. Treasury Department, contained provisions applying state consumer protection laws to national banks and a section specifying that no federal law is to be interpreted as precluding state enforcement of state consumer protection laws by bringing a judicial action against national banks involving potential violations of state or federal consumer protection laws. This proposal essentially proclaimed that state consumer protection laws, subject to certain standards, are applicable to national banks and federally chartered savings associations and their subsidiaries, and that state attorneys general may enforce those laws against those institutions. H.R. 4173 , the Wall Street Reform and Consumer Protection Act of 2009, which was passed by the House of Representatives on December 11, 2009, included, as its Title IV, the Consumer Financial Protection Agency Act, which had been separately reported by the House Financial Services Committee. This legislation would have transferred responsibility for administering various federal consumer protection laws addressing financial matters to a newly established Consumer Financial Protection Agency. It would have specified that a state consumer financial law is preempted only if its effect on national banks is discriminatory in comparison with its effect upon state-chartered banks; moreover, under this bill, no OCC regulation or order could have been subject to interpretation or application to preempt a provision of a state consumer protection law without a specific finding based on substantial evidence on the record that the provision "prevents, significantly interferes with, or materially impairs the ability of a national bank to engage in the business of banking." Under this bill, preemption authority would not have covered subsidiaries. The bill also provided a rule of construction applicable to the visitorial powers clause of the NBA to preclude interpreting that clause to prevent a state attorney general from bringing a judicial action to enforce against a national bank any applicable federal or non-preempted state law as authorized by such law. Senator Christopher Dodd, chairman of the Senate Committee on Banking, Housing, and Urban Affairs, presented a draft proposal, the Restoring American Financial Stability Act of 2009. It paralleled H.R. 4173 with respect to transferring consumer protection functions from the banking agencies to a single regulatory agency, also named the Consumer Financial Protection Agency. It contained a provision applying state consumer laws of general applicability to national banks unless such laws discriminate against national banks or unless the CFPA determines that they are inconsistent with federal law. The draft legislation also includes a provision precluding the interpretation of the visitorial powers clause as limiting the authority of a state's attorney general from bringing a judicial action "to require a national bank to produce records relevant to the investigation of violations of State consumer law, or federal consumer laws; ... to enforce any applicable provision of Federal or State law, as authorized by such law." H.R. 3310 , the Consumer Protection and Regulatory Enhancement Act, introduced on July 23, 2009, by Representative Spencer Bachus, would have continued the current practice of having the federal banking regulators monitor consumer protection compliance with respect to banking institutions, although it would consolidate bank regulation. It would have established a Financial Institutions Regulator (FIR) to assume the functions of the various current federal banking regulators. Within the FIR there would be an Office of Consumer Protection to be responsible for administering and enforcing consumer protection laws. It contained no provision altering current law with respect to the visitorial authority over national banks or the preemption of state consumer protection laws for the benefit of national banks. As OCC and the states begin to operate under the new rules covering preemption of state consumer protection laws and state enforcement authority over national banks, some of the matters which may draw attention from Congress include (1) how well OCC and the Consumer Financial Protection Bureau are coordinating efforts with those of the states; and (2) the extent to which the regime established in Dodd-Frank improves consumer protection without unduly burdening the financial services industry.

On June 29, 2009, the U.S. Supreme Court ruled that the National Bank Act (NBA) does not preempt states from bringing judicial actions against national banks to enforce non-preempted state anti-discrimination laws, and by implication state consumer protection laws, as long as the state authorities do not encroach on the visitorial powers of the national bank regulator, the Office of Comptroller of the Currency (OCC). The Court ruled that administrative subpoenas or other forms of administrative oversight or examination are included in visitorial powers and, thus, are not available as state enforcement tools. The case, Cuomo v. The Clearing House Association, L.L.C.,___ U.S. ___, 129 S.Ct. 2710 (2009), involves a challenge by national banks and OCC to an attempt by the New York State Attorney General (AG) to investigate possible discrimination in real estate lending by certain national banks and their subsidiaries. In response to a request that these banks provide non-public information about their real estate policies and loans in New York, a banking association to which these banks belong, The Clearing House Association, L.L.C., and OCC obtained trial and appellate court orders enjoining the state investigation and enforcement efforts. The Supreme Court decision invalidated an OCC regulation, 12 C.F.R. SS 7.4000, to the extent that it preempted state officials from "prosecuting enforcement actions" against national banks. That regulation reflected OCC's interpretation of 12 U.S.C. SS 484, a provision of the NBA which proclaims that "no national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice, or such as shall be, or have been exercised or directed by Congress." The Court's opinion analyzed the OCC regulation on the basis of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). It recognized that the term "visitorial powers" is ambiguous and that judicial deference should be accorded to a reasonable interpretation of the term by the agency charged with interpreting it, OCC. The Court, however, found that OCC's interpretation did not meet the reasonableness standard. The Court's opinion concluded that OCC had no reasonable basis for equating visitorial power delegated to OCC by the NBA and a state's sovereign power to enforce its own non-preempted state laws with respect to national banks. Dissenting on this point, Justice Thomas, joined by Chief Justice Roberts and Justices Kennedy and Alito, would have upheld the OCC regulation and the breadth of OCC's interpretation of visitorial power as a reasonable interpretation of an ambiguous statute and, therefore, falling within Chevron and worthy of judicial deference. Subtitle D of Title X, the Consumer Financial Protection Act of 2010, of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), P.L. 111-203, contains a provision designed to codify the ruling of the Supreme Court in Cuomo that federal visitorial clause provisions do not prohibit state enforcement actions. There is also a provision authorizing state attorneys general and state regulators to bring actions against national banks and federal savings associations for violations of Title X and any implementing regulations. The legislation also defines a standard and some procedural requirements for OCC to follow in preempting the applicability of state consumer protection laws to national banks or federal savings associations. These provisions in Dodd-Frank follow other efforts in the 111th Congress to deal with the issue of federal preemption of state efforts to enforce financial consumer protection laws. The 112th Congress may be presented with legislation to amend the Dodd-Frank provisions and/or opportunities to evaluate how the interaction between state and federal consumer protection laws and enforcement efforts is protecting consumers without unduly burdening nationwide banking concerns.

The National Park System is perhaps the federal land best known to the public. The National Park Service (NPS) in the Department of the Interior (DOI) manages 391 units, including units formally entitled national parks and a host of other designations. The system has more than 84 million acres. The NPS had an appropriation of about $2.39 billion for FY2008. For FY2009, the Administration requested $2.40 billion. FY2009 appropriations have not been enacted to date. The NPS estimates its level of employment at 20,739 FTEs for FY2008, and seeks funding for 21,649 FTEs for FY2009. The NPS statutory mission is multifaceted: to conserve, preserve, protect, and interpret the natural, cultural, and historic resources of the nation for the public, and to provide for their use and enjoyment by the public. The use and preservation of resources has appeared to some as contradictory and has resulted in management challenges. Attention centers on how to balance the recreational use of parklands with the preservation of park resources, and determine appropriate levels and sources of funding to maintain NPS facilities and to manage NPS programs. In general, activities that harvest or remove resources from units of the system are not allowed. The NPS also supports the preservation of natural and historic places and promotes recreation outside the system through grant and technical assistance programs. The establishment of several national parks preceded the 1916 creation of the National Park Service (NPS) as the park system management agency. Congress established the nation's first national park--Yellowstone National Park--in 1872. The park was created in the then-territories of Montana and Wyoming "for the benefit and enjoyment of the people," and placed "under the exclusive control of the Secretary of the Interior" (16 U.S.C. SSSS 21-22). In the 1890s and early 1900s, Congress created several other national parks mostly from western public domain lands, including Sequoia, Yosemite, Mount Rainier, Crater Lake, and Glacier. In addition to the desire to preserve nature, there was interest in promoting tourism. Western railroads, often recipients of vast public land grants, were advocates of many of the early parks and built grand hotels in them to support their business. There also were efforts to protect the sites and structures of early Native American cultures and other special sites. The Antiquities Act of 1906 authorized the President to proclaim national monuments on federal lands that contain "historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest" (16 U.S.C. SS 431). Most national monuments are managed by the NPS. (For more information, see CRS Report RS20902, National Monument Issues , by [author name scrubbed].) There was no system of national parks and monuments until 1916, when President Wilson signed a law creating the NPS to manage and protect the national parks and many of the monuments. That Organic Act provided that the NPS "shall promote and regulate the use of the Federal areas known as national parks, monuments, and reservations ... to conserve the scenery and the natural and historic objects and the wild life therein and to provide for the enjoyment of the same in such manner and by such means as will leave them unimpaired for the enjoyment of future generations" (16 U.S.C. SS 1). President Franklin D. Roosevelt greatly expanded the system of parks in 1933 by transferring 63 national monuments and historic military sites from the USDA Forest Service and the War Department to the NPS. The 110 th Congress is considering legislation or conducting oversight on many NPS-related topics. Several major topics are covered in this report: proposals to enhance NPS funding before the agency's 2016 centennial; the NPS maintenance backlog; science-related activities at national park units; security of NPS units and lands; and management of wild and scenic rivers, which are administered by the NPS or another land management agency. While in some cases the topics covered are relevant to other federal lands and agencies, this report does not comprehensively cover topics primarily affecting other lands/agencies. For background on federal land management generally, see CRS Report R40225, Federal Land Management Agencies: Background on Land and Resources Management, coordinated by [author name scrubbed]. Overview information on numerous natural resource issues, focused on resource use and protection, is provided in CRS Report RL33806, Natural Resources Policy: Management, Institutions, and Issues , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Information on appropriations for the NPS is included in CRS Report RL34461, Interior, Environment, and Related Agencies: FY2009 Appropriations , by [author name scrubbed] et al. Information on BLM and Forest Service lands is contained in CRS Report RL33792, Federal Lands Managed by the Bureau of Land Management (BLM) and the Forest Service (FS): Issues for the 110 th Congress , by [author name scrubbed] et al. Several other NPS-related topics are covered in other CRS reports. For example, how national park units are created and what qualities make an area eligible to be an NPS unit are of continuing interest. (For more information, see CRS Report RS20158, National Park System: Establishing New Units , by [author name scrubbed].) Legislation has been considered in recent Congresses to study, designate, and fund particular National Heritage Areas (NHAs) as well as to establish a process and criteria for designating and managing NHAs. (For more information, see CRS Report RL33462, Heritage Areas: Background, Proposals, and Current Issues , by [author name scrubbed] and [author name scrubbed].) Recent decades have witnessed increased demand for a variety of recreational opportunities on federal lands and waters. New forms of motorized recreation have gained in popularity, and the use of motorized off-highway vehicles (OHVs) has been particularly contentious. (For more information, see CRS Report RL33525, Recreation on Federal Lands , by Kori Calvert et al.) (by [author name scrubbed]) To be ready for the NPS's 100 th anniversary in 2016, the Administration and Congress have proposed multi-year initiatives to strengthen visitor services and other park programs. The National Park Centennial Initiative, first announced by President Bush in August 2006, seeks to add up to $3 billion in new funds for the parks over 10 years through a joint public/private effort. The initiative has three components: (1) a commitment to add $100.0 million annually in discretionary funds; (2) a challenge for the public to donate at least $100.0 million annually; and (3) a commitment to match the public donations with federal funds of up to $100.0 million annually. In furtherance of the first component of the initiative, for FY2009 the Administration requested additional funds within the line item "Operation of the National Park System." Specifically, the Administration is seeking a total of $2.13 billion in park operations for FY2009, an increase of $160.9 million over the FY2008 level of $1.97 billion. FY2009 appropriations for NPS programs have not been enacted to date. The Administration also had sought, and received, an increase in park operations for FY2008, the first year of the centennial initiative. For the third component of the initiative, the President proposed establishing a mandatory program with $100.0 million annually for 10 years to match private donations. Companion legislation ( H.R. 2959 and S. 1253 ) has been introduced to create a mandatory program along the lines of the President's initiative. The bills would establish the National Park Centennial Challenge Fund in the Treasury consisting of cash donations and matching appropriations from the general fund of the Treasury. The match may not exceed $100.0 million for each of 10 years beginning with FY2008. The funds are available, without further appropriation, to finance "signature projects and programs." These projects and programs will be identified by the NPS Director as helping prepare the national parks for another century of conservation, preservation, and enjoyment. Another House bill ( H.R. 3094 ) also would establish a National Park Centennial Fund in the Treasury, but would take a different approach. It would consist of $30.0 million annually over 10 years. The funds would be available beginning with FY2009, and would be available without further appropriation. The Administration is to include a list of proposals for funding in its annual budget submissions to Congress. The proposals must be consistent with certain criteria and initiatives set out in the bill. The bill specifies seven park initiatives, in the areas of education, diversity, support for park professionals, environmental leadership, natural resource protection, cultural resource protection, and health and fitness. No matching funds would be required, but the Secretary of the Interior may accept donations for centennial projects and programs. The bill also provides a $30.0 million "offset for the Centennial Fund by repealing Section 9 of the Land and Water Conservation Fund Act." That provision of law currently provides $30.0 million of annual contract authority for federal land acquisitions. In its cost estimate on the bill, the Congressional Budget Office estimates that "this provision would have no effect on direct spending because that contract authority is not presently used by the NPS, and CBO does not expect that it will be over the 2009-2018 period." A central issue of debate has been how to finance the Centennial Fund. Under H.R. 3094 as introduced, the Centennial Fund was to consist of $100.0 million annually, with the funds derived from fees for commercial activities on DOI lands. The Secretary of the Interior would have been required to promulgate regulations to establish new fees or increase existing fees for commercial activities, including leases. Another approach was proposed during the markup of the bill by the Committee on Natural Resources. An amendment was offered to "open the Arctic National Wildlife Refuge to energy production to pay for the Centennial Fund." That amendment was not agreed to. Still another financing mechanism is contained in S. 2817 , which would establish a Centennial Fund with $100.0 million annually, essentially over 10 years. Section 8 of the bill, entitled "Offsets," provides for financing the fund with certain revenues from offshore oil and gas activities in the Gulf of Mexico and from the establishment and sale of special postage stamps. Like H.R. 3094 , the bill also contains provisions requiring the Administration to submit annually a list of proposals for funding, which must be consistent with certain criteria and seven initiatives, and allows the Secretary of the Interior to accept donations for projects and programs. House and Senate committees have held hearings on these legislative proposals. One issue of discussion has been the role of philanthropic, corporate, foundation, and other private donors in raising money for the parks. Some observers believe that non-federal funding has been successful in expanding and enhancing a variety of important park programs and is necessary to supplement a shortfall in federal appropriations. Other observers are concerned that non-federal funding will lead to commercialization of national parks and excessive private influence over park operations. Related issues of debate at the hearings included whether to first seek private contributions and then provide a federal match, whether to provide federal funding without a private matching requirement, and whether to allow non-cash contributions. Other issues of discussion were how to finance the Centennial Fund; the role of the NPS and Congress in determining projects eligible for funding; and which, if any, categories of funding (e.g., natural resource protection) to specify in legislation. In furtherance of the third component of the Administration's initiative, the FY2008 appropriations law ( P.L. 110-161 ) included $24.6 million to match private donations. On April 24, 2008, the NPS released a list of 110 projects that would be eligible to receive this funding, together with $26.9 million in partnership contributions. The Appropriations Committees and the Administration have expressed that the FY2008 appropriation is interim funding to initiate the program, and an expectation that legislation will be enacted to create a ten year program. The Administration has not requested an annual appropriation for this matching program, but rather seeks $100.0 million per year in mandatory funding. The FY2009 budget resolution ( S.Con.Res. 70 ) contains a deficit-neutral reserve fund for the National Park Centennial Fund. It would allow the Chairman of the House Committee on the Budget to make adjustments to the amounts in the budget resolution to accommodate legislation establishing the Centennial Fund, so long as that legislation were deficit neutral. (by [author name scrubbed]) The NPS has maintenance responsibility for buildings, trails, recreation sites, and other infrastructure. There is debate over the levels of funds to maintain this infrastructure, whether to use funds from other programs, and how to balance the maintenance of the existing infrastructure with the acquisition of new assets. Congress continues to focus on the agency's deferred maintenance , often called the maintenance backlog --essentially maintenance that was not done when scheduled or planned. DOI estimates deferred maintenance for the NPS for FY2007, based on varying assumptions, at between $6.12 billion and $13.11 billion with a mid-range figure of $9.61 billion. Fifty-six percent of the total deferred maintenance was for roads, bridges, and trails, 19% was for buildings, and 25% was for other structures. While the other federal land management agencies--the Forest Service (FS), Bureau of Land Management (BLM), and Fish and Wildlife Service (FWS)--also have maintenance backlogs, congressional and administrative attention has centered on the NPS backlog. For FY2007, the FS estimated its backlog at $5.66 billion, while DOI estimated the FWS backlog at between $2.24 billion and $3.03 billion and the BLM backlog at between $0.38 billion and $0.46 billion. The four agencies together had a combined backlog estimated at between $14.39 billion and $22.26 billion, with a mid-range figure of $18.33 billion, according to the agencies. The NPS and other agency backlogs have been attributed to decades of funding shortfalls. The agencies assert that continuing to defer maintenance of facilities accelerates their rate of deterioration, increases their repair costs, and decreases their value. For FY2009, the Administration proposed $471.5 million for total maintenance , including cyclic (regular) and deferred maintenance. FY2009 appropriations have not been enacted to date. The request would be an increase of 10% from the $430.3 million appropriated for FY2008. The Administration's budget focused on funds for cyclic maintenance, with a request for an additional $22.8 million for this purpose. The Administration is seeking these funds as a way to prevent deterioration of facilities, which increases the maintenance backlog. However, the budget did not specify the total portions of the maintenance request for deferred maintenance and for cyclic maintenance. According to the DOI Budget Office, the Administration is seeking $189.7 million for NPS deferred maintenance for FY2009. The appropriation for FY2008 was $222.1 million, about the same level as ten years ago--$223.0 million for FY1999. Over the ten year period, the appropriation peaked in FY2002 at $364.2 million. Other funding for deferred maintenance is provided through the NPS construction appropriation, fee receipts, and the Highway Trust Fund. It is not possible to determine the total requested or appropriated for deferred maintenance for FY2009 from public documents. DOI estimates of the NPS backlog have increased from an average of $4.25 billion in FY1999 to an average of $9.61 billion in FY2007. It is unclear what portion of the change is due to the addition of maintenance work that was not done on time or the availability of more precise estimates of the backlog. Further, it is unclear how much total funding has been provided for backlogged maintenance over this period. Annual presidential budget requests and appropriations laws typically do not specify funds for backlogged maintenance, but instead combine funding for all NPS construction, facility operation, and regular and deferred maintenance. In FY2002, the Bush Administration had proposed to eliminate the NPS backlog (estimated at $4.9 billion in 2002) over five years. The NPS budget justification for FY2008 stated that there had been an "almost $5 billion federal investment in addressing the facility maintenance backlog." The figure reflected total appropriations for line items of which deferred maintenance is only a part. Specifically, according to the NPS, it consisted of appropriations for all NPS facility maintenance, NPS construction, and the NPS park roads and parkway program funded through the Federal Highway Administration. It also included fee receipts used for maintenance. The NPS has been defining and quantifying its maintenance needs. These efforts, like those of other land management agencies, include developing computerized systems for tracking and prioritizing maintenance projects and collecting comprehensive data on the condition of facilities. The first cycle of comprehensive condition assessments of NPS facilities was completed by the end of FY2006. The NPS uses two industry standard measurements of its facilities. The "Asset Priority Index" (API) is a rating of each asset's importance to the NPS mission. The "Facility Condition Index" (FCI) quantifies the condition of a facility by dividing the deferred maintenance backlog by the current replacement value of the facility. These ratings are used in part to determine the allocation of maintenance funding among NPS facilities. They also are used to determine whether to retain assets given their condition and uses. The NPS, like the other land management agencies, is identifying for disposal assets that are not critical to the agency's mission and that are in relatively poor condition, as one way to reduce the maintenance backlog. Legislation relating to the maintenance backlog of the NPS has been reintroduced in the 110 th Congress. H.R. 1731 seeks to eliminate the annual operating deficit and maintenance backlog in the National Park System by the 2016 centennial anniversary of the NPS. The bill proposes the creation of the National Park Centennial Fund in the Treasury, to be comprised of monies designated by taxpayers on their tax returns. If monies from tax returns are insufficient to meet funding levels established in the bill, they are to be supplemented by contributions to the Centennial Fund from the General Fund of the Treasury. For FY2008, there would be deposited in the Centennial Fund $200.0 million, with an increase of 15% each year though FY2016. The fund is to be available to the Secretary of the Interior, without further appropriation, as follows: 60% to eliminate the NPS maintenance backlog, 20% to protect NPS natural resources, and 20% to protect NPS cultural resources. After October 1, 2016, money in the Centennial Fund is to be used to supplement annual appropriations for park operations. The bill also would require the Government Accountability Office (GAO) to submit to Congress biennial reports on the progress of Congress in eliminating the NPS deficit in operating funds and on the funding needs of national parks compared with park appropriations, among other issues. Three bills that are on the Senate calendar also relate to the NPS maintenance backlog. S. 2807 and S. 2809 provide that the designation of a National Heritage Area shall not take effect until the President certifies that (1) the designation will not cause specific adverse impacts, and (2) the total NPS deferred maintenance backlog in the state in which the NHA is proposed is not greater than $50.0 million. S. 2807 , as well as S. 2810 , also contains provisions regarding the maintenance backlog of federal agencies generally. They seek to require that an annual report regarding the amount and cost of federally owned land be available to the public on the web. The report is to include the "estimated costs to the Federal Government of the maintenance backlog of each Federal agency," including an aggregate cost and the cost of buildings and structures. (by [author name scrubbed]) Various science-related issues pertain to park management. One involves monitoring and protecting air quality--the regional haze issue. In the 1977 amendments to the Clean Air Act, Congress established a national goal of protecting Class I areas--most then-existing national parks and wilderness areas--from future visibility impairment and remedying any existing impairment resulting from manmade air pollution. (Newly designated parks and wilderness areas can be classified as Class I only by state actions; they do not automatically become Class I areas.) One program to control this "regional haze" is the Prevention of Significant Deterioration (PSD) program. It provides that permits may not be issued to major new facilities within 100 kilometers of a Class I area if federal land managers, such as those at the NPS, assert that the emissions "may cause or contribute to a change in the air quality" in a Class I area (42 U.S.C. SS 7457). In June 2007, the U.S. Environmental Protection Agency proposed changes in the PSD rules, "to refine several aspects of the method that may be used" to determine whether air quality in Class I areas would be degraded by a proposed activity. Proponents of the change contend that current rules are excessively restrictive; opponents assert that the change would allow increased emissions from coal-fired power plants in Class I areas. The NPS monitors one or more air quality indicators at 60 park units and uses data from numerous state and local air quality monitoring stations located close to park units. From these combined sources, the NPS rated 141 park units in its 2006 performance report, covering the period 1996-2005, and concluded that 86% of the units showed stable or improving air quality trends generally, 82% met national ambient air quality standards, and 97% met visibility goals. In August 2006, the National Parks Conservation Association released a new report asserting that "air pollution is among the most serious and wide-ranging problems facing the parks today.... We've made some important advances ... but much more remains to be done." The report includes 10 recommendations to improve air quality in the National Park System. Another science-related issue is possible commercialization (bio-prospecting) of unique organisms found in some NPS units (notably Yellowstone National Park). The NPS completed a draft Environmental Impact Statement (EIS) on benefits-sharing (agreements for using the results of research on organisms in the parks) in September 2006. The preferred alternative would require researchers to enter into a benefits-sharing agreement before using research results for commercial purposes. The public comment period closed on January 29, 2007. To date, a final EIS and record of decision have not been issued. A third science-related issue is research in the parks. NPS support for natural resources includes research on air quality, cooperative ecosystem studies units, and research learning centers. Additional research is conducted in many parks, although "parks do not have specific funds allocated for research, but may choose to fund individual projects in any given year." Funding for natural resources research support has risen modestly in recent years, from $9.3 million in FY2002 to $10.2 million for FY2008. For FY2009, the Administration requested $10.3 million; FY2009 appropriations for NPS programs have not been enacted to date. The Park Service also conducts cultural resources applied research, including archaeological resource inventories; reports on cultural landscapes and on historic and prehistoric structures; museum collections; and ethnographic and historical research. Funding has risen in recent years, from $18.0 million in FY2002 to $19.9 million for FY2008. The Administration requested $20.3 million for FY2009. The completeness and adequacy of these programs and funds to address Park Service research needs and performance is unclear. Congress funds both these natural and cultural research programs as part of NPS Resource Stewardship (under Operation of the National Park System). For FY2008, a total of $373.0 million was appropriated for NPS Resource Stewardship. The Administration is seeking $410.4 million for FY2009. (by [author name scrubbed]) Since the September 11, 2001, terrorist attacks on the United States, the NPS has sought to enhance its ability to prepare for and respond to threats from terrorists and others. Activities have focused on security enhancements at national icons and along the U.S. borders, where several parks are located. According to the NPS, the United States Park Police (USPP) has sought to expand physical security assessments of monuments, memorials, and other facilities, and increase patrols and security precautions in Washington monument areas, at the Statue of Liberty, and at other potentially vulnerable icons. Other activities have included implementing additional training in terrorism response for agency personnel, and reducing the backlog of needed specialized equipment and vehicles. NPS law enforcement rangers and special agents have expanded patrols, use of electronic monitoring equipment, intelligence monitoring, and training in preemptive and response measures, according to the agency. The NPS has taken measures to increase security and protection along international borders and to curb illegal immigration and drug traffic through park borders. A February 2008 assessment of the USPP by the DOI Inspector General identified weaknesses in the management and operations of park police that adversely affect security at national icons. The report stated that USPP "officials continue to state that icon security is a top priority; however, their actions indicate otherwise." It stated that there is not a comprehensive icon security program, and recommended the hiring of a senior-level security professional to oversee security of all icons as well as other certified security professionals for each icon park. Other recommendations included development of formal asset security plans, establishment of a training program for personnel responsible for protecting icons, and an upgrade of closed circuit television surveillance camera systems as well as an increase in personnel monitoring them. Over the past several years, other entities have evaluated park police and security operations. For instance, a June 2005 GAO report examined the challenges for DOI in protecting national icons and monuments from terrorism, and actions and improvements the department has taken in response. GAO concluded that since 2001, DOI has improved security at key sites, created a central security office to coordinate security efforts, developed physical security plans, and established a uniform risk management and ranking methodology. GAO recommended that DOI link its rankings to security funding priorities at national icons and monuments and establish guiding principles to balance its core mission with security needs. Legislation pertaining to immigration reform and border security contains provisions affecting national park units along U.S. borders. For example, S. 1269 provides for the construction of a fence and other barriers along the southern border. The Secretary of Homeland Security is to create and control a border zone consisting of U.S. land within 100 yards of the border. The heads of the NPS and of other agencies that manage lands along the border are to transfer land to the Secretary of Homeland Security without reimbursement. S. 330 and S. 1348 call for a study of the construction of physical barriers along the southern border of the United States, including their effect on park units along the borders. S. 1348 , S. 1639 , and H.R. 1645 would increase customs and border protection personnel to secure park units (and other federal land) along U.S. borders; provide surveillance camera systems, sensors, and other equipment for lands on the border, with priority for NPS units (under S. 1348 and H.R. 1645 ); and require a recommendation to Congress for the NPS and other agencies to recover costs related to illegal border activity. These three bills, as well as S. 2366 , S. 2368 , and H.R. 4088 , also would require the development of a border protection strategy that protects NPS units (and other federal land areas). S. 2366 , S. 2368 , and H.R. 4088 also authorize the employment of additional law enforcement officers and special agents by DOI. In June 2007, the Senate considered S. 1348 and S. 1639 but did not vote on final passage because cloture was not invoked. The Consolidated Appropriations Act for FY2008 included provisions on fencing along the southwest border ( P.L. 110-161 , Division E, SS 564). Specifically, the law required the Secretary of Homeland Security to construct fencing along not less than 700 miles of the southwest border where it "would be most practical and effective." The law further required the Secretary to provide for additional physical barriers, roads, lighting, cameras, and sensors "to gain operational control" to enhance control along the border. Other issues of recent interest have included the damage of illegal border activities to federal lands; how to reduce harm from illegal border activities; efforts of various agencies to secure federal lands along the borders; implementation of a memorandum of understanding among the Departments of Homeland Security, Interior, and Agriculture on initiatives to improve handling of illegal border activities and their impacts on federal lands; and the demands on law enforcement personnel of the federal land management agencies. Illegal activities at issue have included drug trafficking, alien smuggling, money laundering, organized crime, and terrorism. Such activities are reported to have damaged federal lands, including by creating illegal roads, depositing large amounts of trash and human waste, increasing risk of fire from poorly tended camp fires, destroying vegetation and cultural resources, and polluting waterways. The effects on federal lands of border enforcement activities in response to illegal immigration also have been examined. Congress appropriates funds to the NPS for security efforts, and the adequacy and use of funds to protect NPS visitors and units are of continuing interest. Funds for security are appropriated through multiple line items, including those for the USPP and Law Enforcement and Protection. For FY2009, the President requested $94.4 million for the USPP, a 9% increase over FY2008 ($86.7 million). The increase would be used primarily to hire new officers. The President also requested $169.8 million for law enforcement in FY2009, a 10% increase over the $154.7 million appropriated for FY2008. A portion of the increase is to enhance law enforcement at park units along the southwest border that are addressing resource damage and safety issues resulting from illegal immigration. The increase also is intended to enhance protection of 11 historic structures and approximately 100 archaeological sites. FY2009 appropriations have not been enacted to date. (by [author name scrubbed]) The National Wild and Scenic Rivers System was authorized on October 2, 1968, by the Wild and Scenic Rivers Act (16 U.S.C. SSSS 1271-1287). The act established a policy of preserving designated free-flowing rivers for the benefit and enjoyment of present and future generations, to complement the then-current national policy of constructing dams and other structures along many rivers. The act requires that river units be classified and administered as wild, scenic, or recreational rivers, based on the condition of the river, the amount of development in the river or on the shorelines, and the degree of accessibility by road or trail at the time of designation. Typically rivers are added to the system by an act of Congress, but they also may be added by state nomination with the approval of the Secretary of the Interior. Congress initially designated 789 miles of eight rivers as part of the system. Today there are 166 river units with 11,434.2 miles in 38 states and Puerto Rico, administered by the NPS, other federal agencies, and several state agencies. The NPS manages 37 of these river units, totaling 3,043.7 miles. Congress also commonly enacts legislation to authorize the study of particular rivers for potential inclusion in the system. The NPS maintains a national registry of rivers that may be eligible for inclusion in the system--the Nationwide Rivers Inventory (NRI). Congress may consider, among other sources, these NRI rivers, which are believed to possess "outstandingly remarkable" values. The Secretaries of the Interior and Agriculture are to report to the President as to the suitability of study areas for wild and scenic designation. The President then submits recommendations regarding designation to Congress. Wild and scenic rivers designated by Congress generally are managed by one of the four federal land management agencies--NPS, FWS, BLM, and FS. Management varies with the class of the designated river and the values for which it was included in the system. Components of the system managed by the NPS become a part of the National Park System. The act requires the managing agency of each component of the system to prepare a comprehensive management plan to protect river values. The managing agency also establishes boundaries for each component of the system, within limitations. Management of lands within river corridors has been controversial in some cases, with debates over the effect of designation on private lands within the river corridors, the impact of activities within a corridor on the flow or character of the designated river segment, and the extent of local input in developing management plans. State-nominated rivers may be added to the National Wild and Scenic Rivers System only if the river is designated for protection under state law, is approved by the Secretary of the Interior, and is permanently administered by a state agency. Management of state-nominated rivers may be complicated because of the diversity of land ownership. The 110 th Congress is considering legislation to designate, study, or extend components of the Wild and Scenic Rivers System. Such measures are shown in Table 1 . The table includes bills that could involve management by the NPS or other agencies. On May 8, 2008, segments of the Eightmile River in Connecticut were designated (SS344, P.L. 110-229 ) as part of the National Wild and Scenic Rivers System. The law requires the Secretary of the Interior to administer segments of the main stem and specified tributaries of the Eightmile River, totaling about 25.3 miles, as a scenic river. The 109 th Congress enacted legislation to designate, study, or extend specific components of the Wild and Scenic Rivers System. The Upper White Salmon Wild and Scenic Rivers Act of 2005 ( P.L. 109-44 ) adds a 20-mile portion of the river to the system. The Northern California Coastal Wild Heritage Wilderness Act (CA) ( P.L. 109-362 ) designates 21 miles in three segments of the Black Butte River as wild and scenic river components. The Lower Farmington River and Salmon Brook Wild and Scenic River Study Act ( P.L. 109-370 ) directs the NPS to conduct a feasibility study to evaluate whether the 40-mile stretch of the lower Farmington River and Salmon Brook (CT) would qualify for possible inclusion in the system. Several other 109 th Congress bills passed the House or Senate but were not enacted into law.

The 110th Congress is considering legislation and conducting oversight on National Park Service (NPS) related topics. The Administration is addressing park issues through budgetary, regulatory, and other actions. This report focuses on several key topics. Centennial Initiative. President Bush's National Park Centennial Initiative seeks to add up to $3 billion for national park units over 10 years through: (1) an additional $100.0 million annually in discretionary funds; (2) public donations of least $100.0 million annually; and (3) a federal match of the public donations with up to $100.0 million annually. Legislation to establish a mandatory matching program along the lines of the President's initiative has been introduced (H.R. 2959 and S. 1253), while H.R. 3094 and S. 2817 would take a different approach. Maintenance Backlog. Attention has focused on the NPS's maintenance backlog. Estimates of the backlog have increased from an average of $4.25 billion in FY1999 to $9.61 billion in FY2007; it is unclear what portion may be attributable to better estimates or the addition of maintenance work not done on time. The NPS has been defining and quantifying its maintenance needs through comprehensive condition assessments of facilities. The results are being used in part to determine the allocation of maintenance funding and to identify assets for disposal. H.R. 1731 seeks to eliminate the NPS annual operating deficit and maintenance backlog. Science in the Parks. Various science-related activities pertain to park management. One involves monitoring and protecting air quality--the regional haze issue. Another is possible commercialization (bio-prospecting) of unique organisms found in some park units. The NPS is developing a proposal on benefits sharing--agreements for using the results of research on organisms in parks. A third science-related issue is research in the parks. The NPS receives funds for natural and cultural research programs. Security. The NPS has sought to enhance security of park units, with efforts focused on national icons and park units along international borders. Evaluations of park police and security operations have been mixed. Several bills pertaining to immigration reform and border security contain provisions to enhance security at park units along U.S. borders. The President is seeking additional funding for FY2009 for park police and law enforcement. Wild and Scenic Rivers. The Wild and Scenic Rivers System preserves free-flowing rivers, which are designated by Congress or through state nomination with approval by the Secretary of the Interior. The NPS manages 37 river units, totaling 3,043.7 miles. The NPS, and other federal agencies with management responsibility, prepare management plans to protect river values. Management of lands within river corridors is sometimes controversial, in part because of the possible effects of designation on private lands and of corridor activities on the rivers. P.L. 110-229 established the Eightmile Wild and Scenic River. Legislation has been introduced to designate, study, or extend components of the system.

The U.S. Department of Commerce's National Institute of Standards and Technology (NIST) is the "lead national laboratory for providing the measurements, calibrations, and quality assurance techniques which underpin United States commerce, technological progress, improved product reliability and manufacturing processes, and public safety." By statute, NIST is "to assist private sector initiatives to capitalize on advanced technology; to advance, through cooperative efforts among industries, universities, and government laboratories, promising research and development projects, which can be optimized by the private sector for commercial and industrial applications; and to promote shared risks, accelerated development, and pooling of skills which will be necessary to strengthen America's manufacturing industries." NIST conducts leading-edge research in its seven research laboratories located in facilities in Gaithersburg, MD, and Boulder, CO. NIST employs approximately 3,000 scientists, engineers, technicians, and support personnel, and hosts about 3,500 guest researchers and associates from academia, industry, and other government agencies, who collaborate with NIST staff and access user facilities. Research is focused on measurement, standards, test methods, and basic "infrastructural technologies" that enable development of advanced technologies. Infrastructural technologies assist industry in characterizing new materials, monitoring production processes, and ensuring the quality of new product lines. Cooperative research with industry to overcome technical barriers to commercialization of emerging technologies is a major component of NIST's work. In addition, NIST manages extramural programs such as the Hollings Manufacturing Extension Partnership (MEP) program and the Network for Manufacturing Innovation (NMI, also referred to as Manufacturing USA). Several other extramural programs previously conducted by NIST have been eliminated or integrated into other NIST activities. These programs are discussed in the next section. Unlike most federal laboratories, NIST has a mission specified by statute (15 U.S.C. 271-282a), has a separate authorization and appropriation, and is headed by a Senate-confirmed presidential appointee (the Under Secretary of Commerce for Technology and Standards). NIST was originally created by the NBS Organic Act of 1901 (P.L. 56-177) as the National Bureau of Standards (NBS), at a time when the first centralized industrial labs were being established. Under the act, NBS was charged with working on "the solution of problems which arise in connection with standards" and to engage in the "determination of physical constants and the properties of materials, when such data are of great importance to scientific or manufacturing interests and are not to be obtained of sufficient accuracy elsewhere." These objectives remain central to NIST's laboratory work today. In 1987, the Malcolm Baldrige National Quality Improvement Act of 1987 ( P.L. 100-107 ) established the Malcolm Baldrige National Quality Award under the management of NBS. The act directs the President or the Secretary of Commerce to "periodically make the award to companies and other organizations which in the judgment of the President or the Secretary have substantially benefited the economic or social well-being of the United States through improvements in the quality of their goods or services resulting from the effective practice of quality management, and which as a consequence are deserving of special recognition." The following year, amid widespread concerns about the state of U.S. industrial competitiveness, the Omnibus Trade and Competitiveness Act of 1988 ( P.L. 100-418 ) significantly expanded the role of NIST as the "lead national laboratory for providing the measurements, calibrations, and quality assurance techniques which underpin United States commerce, technological progress, improved product reliability and manufacturing processes, and public safety" by "moderniz[ing] and restructur[ing] that agency to augment its unique ability to enhance the competitiveness of American industry." The act also changed the name from NBS to the National Institute of Standards and Technology to reflect its expanded mission. In addition to its long-standing work in standards and metrology, NIST was directed to offer support to the private sector for the development of precompetitive generic technologies and the diffusion of government-developed innovation to users in all segments of the U.S. economy. Among its provisions, the act established the Advanced Technology Program (ATP), and a program now known as the Hollings Manufacturing Extension Partnership program. The MEP is a program of regional centers that assist smaller, U.S.-based manufacturing companies in identifying and adopting new technologies. Operating under the auspices of NIST, centers in all 50 states and Puerto Rico provide technical and managerial assistance to firms. Federal funding for the centers is matched by nonfederal sources. The Advanced Technology Program was designed "to serve as a focal point for cooperation between the public and private sectors in the development of industrial technology," according to the report accompanying the bill, and to help solve "problems of concern to large segments of an industry." Placed within the National Institute of Standards and Technology in recognition of the laboratory's ongoing relationship with industry, ATP provided seed funding to single companies or to industry-led consortia of universities, businesses, and/or government laboratories for development of generic (broad-based), precompetitive technologies that have many applications across industries. Awards, based on technical and business merit, were for high-risk work past the basic research stage but not yet ready for commercialization. Market potential was an important consideration in project selection. Scientific and technical review generally was performed by federal and academic experts. Business plan assessments were made by individuals from the private sector. The America COMPETES Act ( P.L. 110-69 ) and the America COMPETES Reauthorization Act of 2010 ( P.L. 111-358 ) authorized NIST appropriations and several programs and activities. In 2007, the America COMPETES Act replaced ATP with a new program, the Technology Innovation Program (TIP). While similar to ATP in the promotion of R&D expected to be of broad-based economic benefit to the nation, TIP appeared to have been structured to avoid what was seen as government funding of large firms that opponents argued did not necessarily need federal support for research. The committee report to accompany H.R. 1868 , part of which was incorporated into P.L. 110-69 , stated that TIP replaced ATP in consideration of a changing global innovation environment focusing on small and medium-sized companies. The design of the program also "acknowledges the important role universities play in the innovation cycle by allowing universities to fully participate in the program." Appropriations for TIP were provided from FY2008 to FY2011; no appropriations have been provided for TIP since FY2011. The America COMPETES Act authorized appropriations for NIST accounts for FY2008-FY2010, and the America COMPETES Reauthorization Act of 2010 authorized appropriations for NIST accounts for FY2011-FY2013. The authorization levels for NIST were part of a larger effort to double funding for selected accounts--all of the National Science Foundation, the Department of Energy Office of Science, and the NIST laboratory and construction accounts--that support physical sciences and engineering research. Congress's appropriations fell short of the authorizations in these acts, and President Obama's FY2017 request did not refer to the doubling goal. President Trump's FY2018 and FY2019 budgets do not include any reference to the doubling effort. As part of the Public Safety Trust Fund provided for in the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ), a share of spectrum auction proceeds are to be made available to NIST as part of a Wireless Innovation (WIN) Fund to help develop cutting-edge wireless technologies for public safety users. WIN funds are to be used for developing leading-edge wireless technologies for public safety users, including helping industry and public safety organizations conduct research and develop new standards, technologies, and applications to advance public safety communications in support of the initiative's efforts to build an interoperable nationwide broadband network for first responders. The spectrum auction provided NIST with approximately $285.0 million for this purpose; efforts began in FY2015 and are continuing in FY2018. In his FY2013 budget, President Obama proposed the creation of a National Network for Manufacturing Innovation (NNMI) to help accelerate innovation by investing in industrially relevant manufacturing technologies with broad applications, and to support manufacturing technology commercialization by bridging the gap between the laboratory and the market. Congress did not act on this request or a subsequent one made in President Obama's FY2014 request. President Obama renewed the request in his FY2015 budget. In December 2014, Congress enacted the Revitalize American Manufacturing and Innovation Act of 2014 (RAMI Act) as Title VII of Division B of the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ), establishing a Network for Manufacturing Innovation (NMI), largely similar to President Obama's concept for the NNMI. As specified in the act, the purpose of the NMI is to improve the competitiveness of U.S. manufacturing and to increase the production of goods manufactured predominantly within the United States; to stimulate U.S. leadership in advanced manufacturing research, innovation, and technology; to facilitate the transition of innovative technologies into scalable, cost-effective, and high-performing manufacturing capabilities; to facilitate access by manufacturing enterprises to capital-intensive infrastructure, including high-performance electronics and computing, and the supply chains that enable these technologies; to accelerate the development of an advanced manufacturing workforce; to facilitate peer exchange and the documentation of best practices in addressing advanced manufacturing challenges; to leverage nonfederal sources of support to promote a stable and sustainable business model without the need for long-term federal funding; and to create and preserve jobs. The act did not appropriate funds specifically for the NMI program but instead authorized NIST to spend up to $5.0 million of its appropriated funds each year from FY2015 to FY2024 to carry out the program. In addition, the act authorizes the Department of Energy (DOE) to transfer up to a total of $250.0 million to NIST between FY2015 and FY2024 to carry out the program. The act also allows existing manufacturing centers to be classified as centers for manufacturing innovation, making them eligible to participate in the network. President Obama initiated the establishment of several such centers prior to enactment of the RAMI Act under the general statutory authority of several agencies, including the Department of Defense and Department of Energy. While no funding has been transferred from DOE to NIST as authorized by the RAMI Act, in December 2015, the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) provided specific funding, for the first time, for the establishment and coordination of institutes under the provisions of the RAMI Act. The act provides NIST with $25.0 million for FY2016 for the NNMI, to include funding for establishment of institutes and up to $5.0 million for coordination activities. The explanatory statement accompanying the act directs NIST to "follow the direction of the Revitalize American Manufacturing and Innovation Act of 2014 in requiring open competition to select the technological focus areas of industry-driven manufacturing institutes." In September 2016, Commerce Secretary Penny Pritzker announced that "Manufacturing USA" would be the new brand name for the National Network for Manufacturing Innovation. Congress continues to use the term National Network for Manufacturing Innovation in appropriations reports. On February 19, 2016, NIST launched a competition to establish and operate one or more institutes. According to the announcement, NIST intended to provide up to a total of $70 million per institute over five to seven years, with federal funding matched by private and other nonfederal sources. On December 16, 2016, NIST awarded the National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL), led by the University of Delaware, "to advance U.S. leadership in biopharmaceutical manufacturing." The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) provided $25 million to NIST for the NNMI, to include funding for center establishment and up to $5 million for coordination activities. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) provides $15 million to NIST for the NNMI for FY2018, to include funding for center establishment and up to $5 million for coordination activities. President Trump is requesting $15.1 million for FY2019 for Manufacturing USA, including $5.1 million for coordination activities. In July 2013, NIST launched two new programs: the Advanced Manufacturing Technology Consortia (AMTech) program and the Manufacturing Technology Acceleration Centers (M-TAC) program. Originally included in President Obama's FY2013 budget request, AMTech makes planning awards to "establish industry-led consortia to identify and prioritize research projects supporting long-term industrial research needs." AMTech seeks to incentivize manufacturers to share financial and scientific resources with universities, state and local governments, and nonprofit organizations. AMTech does not have a statutory authorization; the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ) provided first-year funding of $14.5 million. In December 2015, the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) directed NIST to merge the Advanced Manufacturing Technology (AMTech) Consortia program with the NNMI. The M-TAC program was a pilot effort under MEP that sought to address "the technical and business challenges encountered by small and mid-sized U.S. manufacturers as they attempt to adopt, integrate, and execute advanced product and process technologies into their operations." The funded project work on all the MTAC projects has been completed and a final presentation was made by each awardee to MEP Center directors and staff in May 2016. Discretionary funding for NIST is generally provided through three appropriations accounts: The Scientific and Technical Research and Services (STRS) account supports NIST in-house laboratory research. The account also provided funding for the Baldrige Performance Excellence Program through FY2011. The Construction of Research Facilities (CRF, also referred to in this report as construction) account supports construction, maintenance, and repair of NIST facilities at its facilities in Gaithersburg, MD, and Boulder, CO. From FY2008 to FY2010, CRF provided funding for a competitive grant program that funded the construction of research facilities at U.S. universities and research institutions. The Industrial Technology Services (ITS) account supports NIST's extramural programs. In FY2018, the ITS account provides funding for the MEP and NNMI programs. In earlier years, ITS provided funding for the Advanced Technology Program, the Technology Innovation Program, and the AMTech program. President Trump requested a total of $629.1 million for NIST in FY2019, $569.4 million (47.5%) below the FY2018 enacted level of $1,198.5 million. The President's FY2019 request included $573.4 million for R&D, standards coordination, and related services in the STRS account, a decrease of $151.1 million (20.9%) from the FY2018 level of $724.5 million. The House Appropriations Committee-reported level for FY2019 is $985 million, $213.5 million (17.8%) below the FY2018 level and $355.9 million (56.6%) above the request. The Senate Appropriations Committee-reported level for FY2019 is $1,037.5 million, $161.0 million (13.4%) below the FY2018 level, $408.4 million (64.9%) above the request, and $52.5 million (5.3%) above the House committee-reported level. The President requested $15.1 million for the ITS account for FY2019, down $139.9 million (90.3%) from the FY2018 enacted level. The President's FY2019 request for ITS would discontinue funding for the Manufacturing Extension Partnership (MEP) program, and provide $15.1 million for the National Network for Manufacturing Innovation (NNMI)/Manufacturing USA, essentially the same as the FY2018 enacted level. The $15.1 million sought for the NNMI includes $10.0 million for continued support of the NIST-sponsored National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL) and $5.1 million to support NIST's role in coordination of the network. The House Appropriations Committee-reported level for the ITS account for FY2019 is $145.0 million, $10.0 million (6.5%) below the FY2018 level and $129.9 million (860.6%) above the request. The Senate Appropriations Committee-reported level for the ITS account for FY2019 is $155.0 million, equal to the FY2018 level, $139.9 million (926.9%) above the request, and $10.0 million (6.9%) above the House committee-reported level. Both the House and Senate committee reports would provide $140.0 million for the MEP program for FY2019; for the NNMI, the House would provide $5.0 million and the Senate would provide $15.0 million. The President requested $40.5 million for FY2019 for the NIST CRF account, down $278.5 million (87.3%) from the FY2018 enacted level. The House Appropriations Committee-reported level for the CRF account for FY2019 is $120.0 million, $199.0 million (62.4%) below the FY2018 level and $79.5 million (195.9%) above the request. The Senate Appropriations Committee-reported level for the CRF account for FY2019 is $158.0 million, $161.0 million (50.5%) below the FY2018 level, $117.5 million (289.7%) above the request, and $38.0 million (31.7%) above the House committee-reported level. In the absence of a year-long appropriation act for FY2019, NIST was funded under two continuing resolutions, first through December 7, 2018 (under P.L. 115-245 ), then through December 21, 2018 (under P.L. 115-298 ). NIST has been without appropriations since December 22, 2018. Following the start of the 116 th Congress, the House passed H.R. 21 , which would provide funding for each of the NIST accounts at the same levels as the Senate committee-passed bill from the 115 th Congress ( S. 3072 ). This section will be updated as Congress completes action on the FY2019 appropriations process. This section provides an overview of appropriations data for NIST in total and for each of its appropriations accounts, as well as for the Manufacturing Extension Partnership and the Advanced Technology Program (eliminated in 2007) and the Technology Innovation Program (last funded in 2011). Appendix A provides requested and enacted funding levels for NIST and its accounts for FY2003-FY2019. Appendix B provides requested and enacted funding levels for selected NIST programs. Figure 1 illustrates total requested and enacted NIST funding levels. Total appropriations for NIST grew from $707.5 million in FY2003 to $1,198.5 million in FY2018, a compound annual growth rate (CAGR) of 3.6%. Appropriations exceeded requests through FY2010; from FY2010 to FY2017, requests exceeded appropriations. In FY2018, appropriations once again exceeded the request. President Trump is requesting $629.1 million for NIST in FY2019, a $569.4 million (47.5%) reduction from the FY2018 appropriation level. Figure 2 illustrates requested and enacted funding levels for the NIST STRS account. This account saw a steady rise in both request and appropriations levels through FY2016. STRS funding requests declined in FY2017, FY2018, and FY2019. Appropriations for FY2017 were $10.0 million below the FY2016 level. In FY2018, Congress appropriated $724.5 million, an increase of $34.5 million (5.0%) above the FY2017 level of $690.0 million. For FY2019, President Trump is requesting $573.4 million for STRS, a $151.1 million (20.9%) reduction from the FY2018 appropriation level. Total appropriations for the STRS account grew from $357.1 million in FY2003 to $724.5 million in FY2018, a compound annual growth rate of 4.8%. Figure 3 illustrates requested and enacted funding levels for the NIST CRF account. The construction account has seen substantial fluctuations from FY2006 through FY2018. CRF funding jumped from $72.5 million in FY2006 to $173.7 million in FY2007, fell to $58.7 million in FY2008, and then rose to $532.0 million in FY2009 (of which $172.0 million was provided for in regular appropriations and $360 million provided under ARRA). In 2010, funding fell to $147.0 million, and fell again in 2011 to $69.9 million. Falling again in FY2012 to $55.4 million, appropriations remained relatively flat through FY2015, ranging from $50 million to $56 million per year. In FY2016, CRF appropriations jumped to $119.0 million; $60.0 million of the increase was designated for beginning "the design and renovation of [NIST's] outdated and unsafe radiation physics infrastructure." In FY2017, CRF appropriations were $109.0 million, of which $60.0 million was designated for design and renovation of NIST's radiation physics infrastructure. In FY2018, CRF appropriations jumped to $319 million, an increase of $210.0 million (192.7%) from the FY2017 level. President Trump is requesting $40.5 million for CRF in FY2019, a $278.5 million (87.3%) reduction from the FY2018 appropriation level. In FY2008, FY2009, and FY2010, the CRF account provided funding for the competitive construction grant program that funded the construction of research facilities at U.S. universities and research institutions. Appropriations for CRF also included funding for congressionally designated projects in some years. Figure 4 illustrates the funding levels for the NIST CRF account excluding congressionally directed projects and the competitive grant program (requested appropriations for FY2003-FY2019 and enacted appropriations for FY2003-FY2018). Figure 5 illustrates requested and enacted funding levels for the NIST ITS account. ITS requests and appropriations during this period have included the MEP, NNMI, AMTech, ATP, TIP, and Baldrige programs in some or all years. Total appropriations for the ITS account fell from $284.8 million in FY2003 to $128.4 million in FY2012, grew to $155.0 million in FY2016 and have since remained flat. President Trump is requesting $15.1 million for ITS in FY2018, a $139.9 million (90.3%) reduction from the FY2018 appropriation level. Substantial fluctuations in the levels of funding requested and provided for the MEP, ATP, and TIP programs are reflected in aggregate in Figure 5 , and illustrated and discussed in more detail on the following pages. Figure 6 illustrates requested and enacted funding levels for the NIST MEP program. FY2003 enacted appropriations of $105.9 million were cut to $38.6 million in FY2004, but returned to near the FY2003 level in FY2005 ($107.5 million) and stayed near that level through FY2007. The MEP funding dipped again in FY2008, to $89.6 million, then rose over the next several years to $140.0 million in FY2018. Requests from FY2003 to FY2009 were substantially lower than appropriations, falling to $2.0 million in FY2009. In FY2010, the Obama Administration requested $124.7 million for MEP. From FY2012 to FY2017, requests were somewhat higher than enacted appropriations. For FY2018, President Trump requested $6.0 million for the MEP program to provide "for the orderly wind down of federal funding for the program"; however, Congress appropriated $140.0 million. In FY2019, President Trump is requesting no funding for MEP, $140.0 million (100.0%) below the FY2018 appropriation level. The Advanced Technology Program saw its requests fall from $107.9 million in FY2003 to zero in FY2005, and its appropriations fall from $178.9 million in FY2003 to zero in FY2008; no funding was requested in FY2005 and subsequent years. The Technology Innovation Program, which succeeded ATP, was first funded at $65.2 million in FY2008 and rose to $69.9 million in FY2010 before falling to $45.0 million in FY2011. The TIP program received no funding in FY2012 or in subsequent years. The $69.9 million requested for TIP in FY2010 was fully funded; in FY2011 the TIP request was $79.9 million, and in FY2012 it was $75.0 million. No funding has been requested for TIP since FY2012. When NBS was renamed NIST under the provisions of the Omnibus Trade and Competitiveness Act of 1988, the laboratory was given additional missions and supporting programs. Two of the new programs--the Advanced Technology Program and the Manufacturing Extension Partnership program--were intended to improve U.S. innovation and industrial competitiveness. These programs generated criticism from some policymakers and analysts who objected to them on a variety of grounds, including whether such activities are appropriate for the federal government to undertake; whether they might result in suboptimal choices of technologies, choices better left to market forces; whether certain technologies, companies, or industries might be chosen for support based on criteria other than technical or business merit; and whether tax dollars should be awarded to already-profitable firms. In contrast, NIST's historical mission of conducting laboratory research in support of standards and metrics continued to enjoy broad support and faced little controversy. Evidence of this support can be seen in the selection of the STRS account--through which NIST laboratory work is funded--as one of the targeted accounts in the doubling efforts of former Presidents George W. Bush and Barack Obama and successive Congresses. However, even with broad support and the absence of controversy, funding for the NIST STRS account did not grow at the pace its advocates supported in presidential budget requests and successive authorizations of appropriations due to tight overall fiscal constraints on the federal budget. These issues are discussed in more detail below. In the early 2000s, many industry, academia, and policy leaders expressed growing concern that federal investments in physical sciences and engineering research were not growing fast enough to keep the United States on the leading edge of technological innovation and commercial competitiveness. In his 2006 State of the Union remarks, President Bush announced the American Competitiveness Initiative (ACI), which, among other things, sought to double funding for targeted appropriations accounts that fund physical sciences and engineering research over a 10-year period. Among the targeted accounts were the NIST STRS and construction accounts. Subsequently, Congress passed the America COMPETES Act ( P.L. 110-69 ), which set appropriations authorizations for the targeted accounts for FY2008-FY2010 that represented a compound annual growth rate (CAGR) of 10.1% that would have, if continued, resulted in a doubling over approximately seven years. In his FY2010 Plan for Science and Innovation , President Obama stated that he (like President Bush) would seek to double funding for basic research over 10 years (FY2006 to FY2016) at the ACI agencies. Actual appropriations, however, did not keep pace with the America COMPETES Act authorization levels. In his FY2011 budget request, President Obama extended the period over which he intended to double these agencies' budgets to 11 years. In 2010, Congress enacted the America COMPETES Reauthorization Act of 2010 ( P.L. 111-358 ), setting appropriations authorizations for the targeted accounts for FY2011-FY2013 at a level that effectively set an 11-year doubling pace (a 6.3% CAGR). However, as with the original act, appropriations did not keep pace with the authorization act levels. While reiterating President Obama's intention to double funding for the targeted accounts from their FY2006 levels, President Obama's FY2013 budget request did not specify the length of time over which the doubling was to take place. President Obama's FY2014 budget expressed a commitment to increasing funding for the targeted accounts, but did not commit to doubling. President Obama's FY2017 budget did not address the doubling effort. From FY2006, the base year for the doubling effort, through FY2016, funding for the NIST STRS and construction accounts grew by 42.3% in nominal terms, a compound annual growth rate of 3.6%, a rate that would result in doubling in about 20 years. President Obama's FY2017 request sought an increase in aggregate funding for these accounts of 2.0%. President Trump's FY2018 and FY2019 budget requests did/do not mention doubling. The doubling effort appears to no longer be a priority for Congress or the President. It remains to be seen how support for internal R&D at NIST will evolve. Some of NIST's external programs have faced substantial opposition over time. Beginning with the 104 th Congress, many Members expressed skepticism over a "technology policy" based on providing federal funds to industry for development of precompetitive generic technologies. This philosophical shift from previous Congresses, coupled with pressures to balance the federal budget, led to significant reductions in funding for NIST's external programs. The Advanced Technology Program and the Manufacturing Extension Partnership, which accounted for over 50% of the FY1995 NIST budget, were proposed for elimination. Although in the past strong support by the Senate led to their continued financing, funding for ATP remained controversial. Beginning in FY2000, the House-passed appropriations bills did not contain funding for ATP, and many of the budget proposals submitted by former President George W. Bush called for abolishing the program. In the 110 th Congress, the America COMPETES Act eliminated ATP and replaced it with the TIP initiative. While TIP received appropriations from FY2008 to FY2011, it has received no appropriations since. In his FY2003 budget proposal, President Bush also recommended suspension of federal support for those MEP centers in operation for more than six years; the following year, funding for the MEP program was significantly reduced. However, the FY2005 Omnibus Appropriations Act brought support for MEP back up to the level necessary to fully fund the existing centers. Since then, funding has grown from $107.5 million in FY2005 to $130.0 million in FY2016. President Obama requested $142.0 million for MEP for FY2017, an increase of $12.0 million (9.2%); Congress provided $130 million, an amount equal to its FY2016 level. For FY2017, Congress provided $140.0 million for MEP. President Trump's FY2018 budget request sought to end the MEP program, providing $6.0 million in FY2018 to provide "for the orderly wind down of federal funding for the program." President Trump's FY2019 request would provide no funding for MEP. For more information on the MEP program, see CRS Report R44308, The Manufacturing Extension Partnership Program , by John F. Sargent Jr. In his FY2013 budget, President Obama requested $1 billion in mandatory funding for the creation of a National Network for Manufacturing Innovation to help accelerate innovation by investing in industrially relevant manufacturing technologies with broad applications, and to support manufacturing technology commercialization by bridging the gap between the laboratory and the market. Congress did not act on this request or on President Obama's FY2014 request for the same amount. In FY2015, President Obama requested $2.4 billion for the NNMI as part of his Opportunity, Growth, and Security Initiative. President Obama also requested $5.0 million for coordination of manufacturing innovation institutes as part of NIST's budget request. In December 2014, Congress enacted the Revitalize American Manufacturing and Innovation (RAMI) Act of 2014 as Title VII of Division B of the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ), establishing a Network for Manufacturing Innovation (NMI). The act does not appropriate funds specifically for the NMI program but instead authorizes NIST to spend up to $5.0 million of funds appropriated to NIST's ITS account each year from FY2015 to FY2024 to carry out the program. In addition, the act authorizes the Department of Energy (DOE) to transfer up to $250.0 million to NIST for the 10-year period FY2015 to FY2024 to carry out the program. As of the date of this report, DOE has not transferred any funding to NIST for this purpose. Through the end of calendar year 2015, seven NNMI institutes sponsored by the Department of Defense (DOD) and Department of Energy had been awarded, and two additional institutes were being competed. In December 2015, Congress appropriated specific funding, for the first time, for the establishment and coordination of institutes under the provisions of the RAMI Act. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) provided NIST with $25.0 million for FY2016 for the NNMI, to include funding for establishment of institutes and up to $5.0 million for coordination activities. The explanatory statement accompanying the act directed NIST to "follow the direction of the Revitalize American Manufacturing and Innovation Act of 2014 in requiring open competition to select the technological focus areas of industry-driven manufacturing institutes." NIST subsequently announced its intention to establish two institutes. On December 16, 2016, NIST awarded the National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL), led by the University of Delaware, "to advance U.S. leadership in biopharmaceutical manufacturing." NIST did not award a second institute due to a lack of funds. P.L. 115-141 provides $15.0 million for NIST NNMI efforts in FY2018, to include funding for its center and $5.0 million for coordination activities. President Obama had requested $25.0 million in discretionary funding and $1.9 billion in mandatory funding for NIST to establish institutes and coordinate the activities of the network. As of the date of this report, 14 NNMI institutes have been established--8 by DOD, 5 by DOE, and 1 by the Department of Commerce. As Congress completes the FY2019 appropriations process, an overarching issue will be how to respond to the Trump Administration's FY2019 NIST budget request and its policy implications, how much funding to provide to NIST in aggregate, and how to allocate NIST appropriations among the core standards and measurement functions performed by its laboratories and NIST external programs, such as MEP, AMTech, and the NMI. For a broader discussion about the Network for Manufacturing Innovation and associated policy issues, see CRS Report R44371, The National Network for Manufacturing Innovation , by John F. Sargent Jr. Appendix A. Requested and Enacted Discretionary Appropriations for NIST Accounts Appendix B. Requested and Enacted Appropriations for Selected NIST Programs

The National Institute of Standards and Technology (NIST), a laboratory of the Department of Commerce, is mandated to provide technical services to facilitate the competitiveness of U.S. industry. NIST is directed to offer support to the private sector for the development of precompetitive generic technologies and the diffusion of government-developed innovation to users in all segments of the American economy. Laboratory research is to provide measurement, calibration, and quality assurance techniques that underpin U.S. commerce, technological progress, improved product reliability, manufacturing processes, and public safety. President Trump requested $725.0 million in discretionary funding for NIST in FY2018. In March 2018, the Consolidated Appropriations Act, 2018 (P.L. 115-141) was enacted, providing $1,198.5 million in funding for NIST for FY2018. President Trump requested $629.1 million in discretionary funding for NIST in FY2019, $569.4 million (47.5%) below the FY2018 enacted level. The House-reported appropriations level for FY2019 is $985.0 million; the Senate-reported level is $1,037.5 million. In the absence of a year-long appropriation act for FY2019, NIST was funded under two continuing resolutions, first through December 7, 2018 (under P.L. 115-245), then through December 21, 2018 (under P.L. 115-298). NIST has been without appropriations since December 22, 2018. Following the start of the 116th Congress, the House passed H.R. 21, which would provide funding for each of the NIST accounts at the same levels as the Senate committee-passed bill from the 115th Congress (S. 3072). Concerns about the adequacy of federal funding for physical science and engineering research led to efforts by successive Presidents and Congresses to double funding for the NIST laboratory and construction accounts, together with the National Science Foundation and the Department of Energy Office of Science. However, appropriations did not keep pace with authorization levels or presidential requests. In addition, the appropriations authorizations for the accounts targeted for doubling lapsed at the end of FY2013. Appropriations for the targeted NIST accounts increased by 42.3% from FY2006 to FY2016. Funding for NIST extramural programs directed toward increased private sector commercialization has been a topic of congressional debate. Some Members of Congress have expressed skepticism over a "technology policy" based on providing federal funds to industry for development of precompetitive generic technologies. This approach, coupled with pressures to balance the federal budget, led to significant reductions in funding for NIST. The Advanced Technology Program (ATP) and the Manufacturing Extension Partnership (MEP), which accounted for over 50% of the FY1995 NIST budget, were subsequently proposed for elimination. In 2007, ATP was terminated and replaced by the Technology Innovation Program (TIP). TIP was subsequently defunded in the FY2012 appropriations legislation. President Trump has proposed the elimination of funding for the MEP program in FY2019. In December 2014, Congress enacted the Revitalize American Manufacturing and Innovation Act of 2014 (Title VII of Division B of P.L. 113-235), establishing a Network for Manufacturing Innovation (also referred to as the National Network for Manufacturing Innovation or NNMI). The explanatory statement accompanying the Consolidated Appropriations Act, 2016 (P.L. 114-113) directed NIST to use an open competition to select the technological focus areas of industry-driven manufacturing institutes. Upon completion of its first competition, NIST announced its selection of the National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL) in December 2016. Congress appropriated $15 million in FY2018 funding for NIST to continue its support for NIIMBL and to coordinate network activities. In total, 14 NNMI institutes have been established by the Department of Defense (8), Department of Energy (5), and Department of Commerce (1).

When a Senator introduces a bill or joint resolution, the measure is usually referred to committee, pursuant to provisions of Senate Rules XIV, XVII, and XXV. When the House informs the Senate that it ha s passed a bill or joint resolution that was introduced in the House, and the Senate receives the measure, the measure is also often referred to a Senate committee. Senate Rule XIV, paragraph 2 requires that bills and joint resolutions have three readings before passage, and that they be read twice before being referred to committee. Although a Senator may demand (under paragraph 2) that the readings occur on three different legislative days, bills and joint resolutions may be read twice on the same day "for reference" (referral) if there is no objection (under paragraph 3). Most bills and joint resolutions are read twice "without any comment whatsoever from the floor" and referred to committee on the same day that they are introduced by a Senator or received from the House. Senate Rule XVII, paragraph 1 states that a measure should be referred to the committee "which has jurisdiction over the subject matter which predominates.... " Rule XXV contains the jurisdictions of the Senate's standing committees. These rules and the precedents from referral decisions based on them guide the referral of measures. There also exist agreements between committees that might govern the referral of certain bills and joint resolutions. Under Rule XVII, paragraph 1, the presiding officer formally refers bills and joint resolutions; in practice, the parliamentarian refers measures in behalf of the presiding officer. The introduction and referral of bills and joint resolutions, and the referral of House-passed bills and joint resolutions, occurs as "morning business," pursuant to Senate Rule VII, paragraph 1. The Senate may, however, use provisions of Senate Rule XIV or unanimous consent to bypass referral of a bill or joint resolution to a committee. The Senate might also hold a measure in abeyance at the desk (of the presiding officer), at least temporarily not referring it to committee or proceeding on it. The Senate might also agree by unanimous consent to truncate a committee's consideration of a measure that had been referred to it. Reasons for bypassing a committee's consideration of a bill or joint resolution include wishing to place the measure directly on the Senate's Calendar of Business, which under General Orders lists measures eligible for floor consideration, or wanting to immediately call up and consider the measure. Senators might also convert introduced bills and resolutions into an amendment form and offer their proposal as a germane, relevant, or nongermane amendment, including amendments in the nature of a substitute and managers' amendments, to a measure being considered on the Senate floor. They might also choose not to introduce a bill or resolution at all, but only seek to amend another measure. This report does not examine the use of the amendment process as a way to bypass Senate committees. This report examines alternative procedures and actions that the Senate uses to bypass committee consideration of bills and joint resolutions. It also provides examples of how the Senate uses these alternative procedures and actions to facilitate consideration and passage of some bills and joint resolutions. In the remainder of this report, bill or bills and measure or measures will be used to refer to bills and joint resolutions. Senate Rule XIV, paragraph 4, states: "... every bill and joint resolution introduced on leave, and every bill and joint resolution of the House of Representatives which shall have received a first and second reading without being referred to a committee, shall, if objection be made to further proceeding thereon, be placed on the Calendar ." ( Emphasis added .) Therefore, through objection, a bill after two readings is prevented from being referred to committee and is placed directly on the Senate's Calendar of Business. It is usually the majority leader (or a Senator acting in the majority leader's stead), acting on his own or at the request of any other Senator, who objects to "further proceeding"--committee referral--on a measure. For example, this procedure was used to place S. 1035 directly on the calendar. On April 21, 2015, the presiding officer recognized Majority Leader McConnell for this colloquy with the chair: Mr. McCONNELL. Mr. President, I understand that there is a bill at the desk, and I ask for its first reading. The PRESIDING OFFICER. The clerk will read the bill by title for the first time. The senior assistant legislative clerk read as follows: A bill ( S. 1035 ) to extend authority relating to roving surveillance, access to business records, and individual terrorists as agents of foreign powers under the Foreign Intelligence Surveillance Act of 1978 and for other purposes. Mr. McCONNELL. I now ask for a second reading and, in order to place the bill on the calendar under the provisions of rule XIV, I object to my own request. The PRESIDING OFFICER. Objection having been heard, the bill will be read for the second time on the next legislative day. In the next edition of the Senate's Calendar of Business on April 22, this action was recorded in the section Bills and Joint Resolutions Read the First Time. The measure was pending at the desk (of the presiding officer). Since objection had been heard to the second reading, the presiding officer recognized Majority Leader McConnell the next legislative day, April 22: Mr. McCONNELL. Mr. President, I understand there is a bill at the desk due for a second reading. The PRESIDING OFFICER. The clerk will read the bill by title for the second time. The legislative clerk read as follows: A bill ( S. 1035 ) to extend authority relating to roving surveillance, access to business records, and individual terrorists as agents of foreign powers under the Foreign Intelligence Surveillance Act of 1978 and for other purposes. Mr. McCONNELL. In order to place the bill on the calendar under the provisions of rule XIV, I object to further proceedings. The PRESIDENT pro tempore. Objection having been heard, the bill will be placed on the calendar. S. 1035 had received its second reading, but there was objection to further proceeding on referral of the bill to committee. The presiding officer, under Rule XIV, ordered that the bill be placed on the Senate Calendar. In the calendar beginning April 23, S. 1035 appeared as Calendar Order No. 60 in the section General Orders, with other measures eligible for floor consideration. This same procedure is followed to have House-passed bills and joint resolutions placed directly on the Senate calendar. Broadly, the two purposes of preventing referral of a bill to a committee by placing it on the Senate Calendar are (1) to facilitate the full Senate's opportunity to consider the measure; or (2) to bypass a committee's potential inaction or, to a bill's sponsor, potential hostile action. Although placing a bill directly on the calendar does not guarantee that the full Senate will ever consider it, the measure is available for floor consideration and certain procedural steps, like committee reporting or discharging a committee from a bill's consideration, and procedural requirements, like the two-day availability of a committee report, may be obviated. In the 114 th Congress, at least 82 bills were placed directly on the calendar using the Rule XIV procedure. For example, S. 1 , to approve the construction of the Keystone XL pipeline, was a priority for many Republican Senators and a group of Democratic Senators. A reason that it might have been placed directly on the calendar was that the issue had been discussed in the second session of the 113 th Congress and a related bill ( S. 2280 ) had been debated and voted on in the 113 th Congress's lame-duck session. On January 6, 2015, in the 114 th Congress, Senator John Hoeven introduced S. 1 . It was read a first time that day, and, on January 7, it was read the second time and placed on the calendar, thereby enabling the majority leader to expeditiously call up the bill in the Senate. Although no measure on the Senate Calendar is assured rapid or any consideration, the majority leader moved to proceed to the consideration of S. 1 on January 8 and immediately presented a motion to invoke cloture. The Senate on January 12 by a 63-32 vote invoked cloture on the motion to proceed. The Senate subsequently agreed to the motion to proceed on a voice vote on January 13, whereupon debate and the consideration of amendments began. Upon a second attempt to invoke cloture on the measure , cloture was invoked by a vote of 62-35 on January 29. The Senate voted 62-36 the same day to pass the bill. As mentioned, House-passed bills might also be placed directly on the calendar using the Rule XIV procedure. The Senate might choose this option when-- a related Senate measure is already on the calendar; a Senate committee is in the process of completing consideration of Senate companion legislation; an amendment to the House measure is already in discussion among interested Senators and the House-passed measure will be the Senate's legislative vehicle; Senators of the committee of jurisdiction support for the House-passed measure is stronger in the full Senate than in the committee to which it would be referred; the House-passed measure includes tax or appropriations provisions, which must originate in the House, requiring the use of a House-passed legislative vehicle; or for another reason. House-passed measures placed on the calendar in this way in the 114 th Congress included H.R. 4465 , the Federal Assets Sale and Transfer Act, where the Senate Homeland Security and Governmental Affairs committee had earlier ordered reported a companion bill, and H.R. 2666 , the No Rate Regulation of Internet Broadnet Access Act, where the Senate Commerce, Science, and Transportation Committee subsequently reported a companion bill. The procedure under Rule XIV is also used by minority-party Senators, or by a majority-party Senator with a viewpoint different on an issue from that of other Senators of his or her party, to give added visibility to specific bills and to avoid potential inaction or hostility in a Senate committee. A Democratic Senator in the 114 th Congress, for example, used this procedure to put directly on the calendar S. 3348 , a bill to require major-party presidential candidates to disclose tax return information. By unanimous consent, bills may also be read the first and second times and placed directly on the calendar. This procedure was used in the 114 th Congress for bills such as H.R. 5687 , the GAO Mandates Revision Act. The Senate companion measure, S. 2964 , had been reported earlier from the Senate Homeland Security and Governmental Affairs Committee and was pending on the Senate Calendar. Even major legislation might be placed directly on the calendar by unanimous consent. For example, in the 113 th Congress, Majority Leader Reid anticipated that the Senate would soon receive from the House H.J.Res. 59 , the fiscal year 2014 continuing appropriations resolution. To ensure that he could quickly call up the measure, the majority leader made this unanimous consent request on September 19, 2013: Mr. President, I ask unanimous consent that[,] when the Senate receives H.J.Res. 59 from the House, the measure be placed on the calendar with a motion to proceed not in order until Monday, September 23. When the majority leader obtained the Senate's unanimous consent, the House was still one day from voting to proceed to the consideration of H.J.Res. 59 . Senate floor consideration of a bill could be characterized as a two-step process. There is first debate and a decision by the Senate whether to consider a measure: a vote on, invoking cloture on, or unanimous consent to a motion to proceed to consideration of the measure. There is then debate, possible amendment, and a vote on final passage of the measure itself. On many pieces of noncontroversial legislation, Senate leaders might use one of two informal processes called clearance and hotlining to determine the feasibility of expeditious or immediate consideration of a measure. Senators are notified of pending noncontroversial bills to determine if any Senator would object to proceeding to consider and then passing a specific measure by unanimous consent--with little or no debate, no motion or amendment unless it is sought as part of clearance, and, likely, no recorded votes. The process of passing noncontroversial measures may include bypassing a Senate committee or truncating committee action, although a committee might well have played a key role in the development of the noncontroversial measure sought to be passed or in the measure's clearance. On major legislation, the majority leader also attempts through clearance to obtain unanimous consent to proceed to consideration of a measure. The majority leader might seek unanimous consent even if the measure was not referred to or reported by a committee. If successful in negotiating unanimous consent to proceed to the consideration of a measure, or perhaps to discharge a committee from further proceedings on a measure and then to proceed to its consideration, the majority leader propounds a unanimous consent request on the Senate floor to proceed to the consideration of the specified measure. This section of the report illustrates the use of unanimous consent to bypass or truncate committee consideration of legislation and, particularly for noncontroversial legislation, to expeditiously pass such bills on the Senate floor. The Senate may pass some noncontroversial bills the day they are introduced, for example, in the 113 th Congress, S. 1568 , to facilitate the replacement of a Veterans Administration medical center in Denver: Mr. GARDNER. Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of S. 1568 , introduced earlier today. The PRESIDING OFFICER. The clerk will report the bill by title. The bill clerk read as follows: A bill ( S. 1568 ) to extend the authorization to carry out the replacement of the existing medical center of the Department of Veterans Affairs in Denver, Colorado, to authorize transfers of amounts to carry out the replacement of such medical center, and for other purposes. There being no objection, the Senate proceeded to consider the bill. Mr. GARDNER. Mr. President ... I ask unanimous consent that the bill be read a third time and passed, and the motion to reconsider be laid upon the table. The PRESIDING OFFICER. Without objection, it is so ordered. The Senate may also pass some House-passed bills when they are received. For example, the Senate received a message from the House July 14, 2016, regarding H.R. 5722 , establishing the John F. Kennedy Centennial Commission, and passed the bill that day: Ms. MURKOWSKI. Mr. President, I ask unanimous consent that the Senate proceed to immediate consideration of H.R. 5722 , which was received from the House and is at the desk. The PRESIDING OFFICER. The clerk will report the bill by title. The senior assistant legislative clerk read as follows: A bill ( H.R. 5722 ) to establish the John F. Kennedy Centennial Commission. There being no objection, the Senate proceeded to consider the bill. Ms. MURKOWSKI. Mr. President, I further ask unanimous consent that the bill be read three times and passed and the motion to reconsider be considered made and laid upon the table with no intervening action or debate. The PRESIDING OFFICER. Without objection, it is so ordered. If the measure is a joint resolution rather than a bill, and the joint resolution has a preamble, the unanimous consent request on passage must encompass the preamble. So, for example, Majority Leader Reid made this request pertaining to S.J.Res. 22 (112 th Congress), to grant congressional consent to a change in a compact between the states of Missouri and Illinois: I ask unanimous consent the joint resolution be passed, the preamble be agreed to , the motion to reconsider be made and laid upon the table, there be no intervening action or debate, and any statements be printed in the Record. ( Emphasis added .) House bills might be received by the Senate, or Senate bills might be introduced, with no immediate further proceedings on them. They may be held at the desk or ordered to be held at the desk, sometimes pending a decision on referring them to committee, passing them without committee consideration, or obtaining clearance from all Senators. For example, H.R. 5936 , the West Los Angeles Leasing Act of 2016 (dealing with local Veterans Administration leases), was received in the Senate on September 13, 2016. Although several other bills received from the House that day were referred, no proceedings occurred on H.R. 5936 . On September 19, the Senate took up and passed H.R. 5936 by unanimous consent. To proceed to consideration, Majority Leader McConnell simply stated, I ask unanimous consent that the Senate proceed to the immediate consideration of H.R. 5936 , which was received from the House and is at the desk. The bill was passed without debate by voice vote. The Senate might even amend a bill that is taken from the desk and considered, as it did with H.R. 6302 , the Overtime Pay for Secret Service Agents Act of 2016. The pertinent words spoken after there was no objection to the Senate's proceeding to consider the bill were: I ask unanimous consent that the Johnson substitute amendment be agreed to; the bill, as amended, be considered read a third time and passed; the title amendment be agreed to; and the motion to reconsider be considered made and laid upon the table. H.R. 6302 , as amended, was passed by unanimous consent. The Senate might anticipate passage of a measure by the House, and agree by unanimous consent to Senate passage. For example, the Senate in the 113 th Congress anticipated House passage of a bill that would provide a short-term extension for special Iraqi immigrant visas: Mr. REID. Mr. President, I ask unanimous consent that if the Senate receives a bill from the House which is identical to S. 1566 , a bill providing a short-term extension of Iraq special immigrant visas, as passed by the Senate, then the bill be read three times and passed and the motion to reconsider be laid on the table with no intervening action or debate. The PRESIDING OFFICER. Without objection, it is so ordered. The Senate might even anticipate House action on major legislation and, in response to exigent circumstances, agree by unanimous consent to its automatic consideration and passage. This happened, for example, when Hurricane Katrina decimated the Gulf Coast during the August 2005 congressional recess. Speaker Dennis Hastert and Majority Leader Bill Frist called Congress back into session on September 1, 2005 (the Senate) and September 2 (the House). With only a handful of Members present, the House on September 2 passed H.R. 3645 , emergency supplemental appropriations to deal with the immediate consequences of Hurricane Katrina. On September 1, anticipating House action, Senator Thad Cochran, chair of the Appropriations Committee, made this unanimous consent request, which was agreed to: Mr. President, at this point, I ask unanimous consent that notwithstanding the recess or adjournment of the Senate, the Senate may receive from the House an emergency supplemental appropriations bill for relief of the victims of Hurricane Katrina, the text of which is at the desk, and that the measure be considered read three times and passed and a motion to reconsider laid on the table; provided that the text of the House bill is identical to that which is at the desk. The House and Senate passed the supplemental appropriations bill September 2 and President George W. Bush signed it into law the same day ( P.L. 109-61 ). Noncontroversial Senate bills and House-passed measures are often referred to committee. A committee might later be discharged by unanimous consent of the Senate from a measure's consideration. (If unanimous consent cannot be obtained, a motion to discharge could be made. ) For example, H.R. 1168 , an amendment to the Social Security Act to preserve access to rehabilitation innovation centers under the Medicare program, was introduced on April 30, 2015. On December 9, 2016, the measure was discharged by unanimous consent from the Senate Finance Committee. With an amendment included in the unanimous consent request on reading and passage, the Senate passed the bill: Mr. PORTMAN. Mr. President, I ask unanimous consent that the Committee on Finance be discharged from further consideration of S. 1168 and the Senate proceed to its immediate consideration. The PRESIDING OFFICER. Without objection, it is so ordered. The clerk will report the bill by title. The senior assistant legislative clerk read as follows: A bill ( S. 1168 ) to amend title XVIII of the Social Security Act to preserve access to rehabilitation innovation centers under the Medicare program. There being no objection, the Senate proceeded to consider the bill. Mr. PORTMAN. Mr. President, I ask unanimous consent that the Kirk amendment at the desk be agreed to; that the bill, as amended, be read a third time and passed; and that the motion to reconsider be considered made and laid upon the table. The PRESIDING OFFICER. Without objection, it is so ordered. Although legislation might be discharged from a committee that has taken no formal action on a measure, legislation might also be discharged following formal committee action. For example, the Veterans' Affairs Committee held hearings on S. 3021 , the Veterans Education Improvement Act of 2016. The committee was subsequently discharged from further consideration of S. 3021 . Similarly, the Veterans' Affairs Committee was discharged following committee hearings from further consideration of S. 3055 , the Department of Veterans Administration Dental Insurance Reauthorization Act of 2016. In the 112 th Congress, the Judiciary Committee was discharged from further consideration of S. 3250 , the Sexual Assault Forensic Evidence Reporting Act of 2012 (the SAFER Act), after the committee had ordered the bill to be favorably reported. Measures might also be discharged and considered en bloc.

Most bills and joint resolutions introduced in the Senate, and many House-numbered bills and joint resolutions received by the Senate after House passage, are referred to committee. Some bills and joint resolutions, however, are not referred to committee. This report examines the alternative procedures and actions that the Senate uses to bypass committee consideration of bills and joint resolutions. It also provides examples of how the Senate uses these alternative procedures and actions to facilitate consideration and passage of some bills and joint resolutions. Provisions of Senate Rule XIV and the practice of unanimous consent allow the Senate to bypass a measure's referral to committee, whether that measure might be major or noncontroversial. Rule XIV requires measures to be read twice before referral to committee. By objecting after the second reading of a measure to any further proceeding on it, a Senator, normally the majority leader, acting on his own initiative or at the request of any Senator, prevents a bill or joint resolution's referral to committee. The measure is placed directly on the Senate Calendar of Business. Alternately, unanimous consent is also used to bypass referral and place measures directly on the calendar. Although placing a measure directly on the calendar may facilitate calling it up later for consideration on the Senate floor, placement on the calendar does not guarantee floor consideration. A bill or joint resolution, in addition, might be neither referred to committee nor placed on the calendar: a measure might be held at the desk (of the presiding officer)--either simply being at the desk in the absence of any proceeding on it or after being ordered by unanimous consent to be held at the desk. This status has been applied to both major and noncontroversial measures. Unanimous consent may be used to truncate a committee's consideration of a measure referred to it: a measure might be referred to a committee but then the committee by unanimous consent of the Senate is discharged from further consideration of the measure. The Senate regularly uses unanimous consent to consider and pass noncontroversial legislation that was placed directly on the calendar, that is at the desk (neither placed on the calendar nor referred to committee), or that has been discharged from committee. One purpose of using any of the means of bypassing committee referral or truncating committee consideration of a measure is to facilitate a measure's Senate consideration. The Senate leadership might use one of two informal processes, called clearance and hotlining, to determine if any Senator would object to a specific bill or joint resolution being considered and possibly passed by unanimous consent. This report does not examine procedures applicable to concurrent and simple resolutions, treaties, or nominations. Nor does it examine the use of a germane, relevant, or nongermane amendment instead of a bill or joint resolution. This report will not be updated again in the 115th Congress unless Senate procedures change.

Illegal logging is a pervasive problem affecting countries that produce, export, and import wood and wood products. Some have estimated that between 2% and 4% of softwood lumber and plywood traded globally, and as much as 23% to 30% of hardwood lumber and plywood traded globally, could be from illegal logging activities. The World Bank estimates that illegal logging costs governments approximately $15 billion annually in lost royalties. Illegal logging is a concern to many because of its economic implications as well as its environmental, social, and political impacts. Some are concerned that U.S. demand for tropical timber from countries in Latin America and Southeast Asia may be a driver of illegal logging. The United States is the world's largest wood products consumer and one of the top importers of tropical hardwoods. For example, the United States is the largest importer of Peruvian mahogany, which some estimate to be 80% illegally logged. Some others contend that illegal logging activities devalue U.S. exports of timber. According to one study, illegal logging of roundwood and its wood products depresses world wood prices on average by 7%-16% annually. If there were no illegally logged wood in the global market, it has been projected that the value of U.S. exports of roundwood, sawnwood, and panels could increase by an average of approximately $460 million each year. (This estimate is provided by a U.S. industry trade association opposed to low-cost imports.) No internationally accepted definition of illegal logging exists, and there is considerable debate over definitions that have been presented. For example, logging without a government-approved management plan may be legal in parts of the United States, but illegal in Brazil. Definitions of illegal logging can be specific or broad. Illegal logging can be broadly defined as "large scale, destructive forest harvesting that transgresses the laws of the nation where said harvesting occurs." An example of a specific definition is provided by Conteras-Hermosilla, where 12 activities are defined as illegal logging, including the following: Logging protected species; Duplication of felling licenses; Girdling or ring-barking, to kill trees so that they can be legally logged; Contracting with local entrepreneurs to buy logs from protected areas; Logging in protected areas; Logging outside concession boundaries; Logging in prohibited areas such as steep slopes, riverbanks, and water catchments; Removing under/oversized trees from public forests; Extracting more timber than authorized; Reporting high volumes of timber extracted in forest concessions to mask the volume taken from areas outside concession boundaries; Logging without authorization; and Obtaining logging concessions through bribes. Due to the often clandestine nature of illegal logging, the variability in defining illegal logging, and the difficulty of obtaining large-scale data on illegal logging practices in many countries, estimates on the extent of illegal logging are difficult to quantify. A variety of techniques are used to determine where illegal logging is most prevalent. Examples include government records, court cases, witness accounts, interviews, and satellite imagery. Using these data and other sources, some estimate that the three countries where illegal logging is greatest (in terms of volume in 2003) are Russia, Indonesia, and Brazil. Other estimates of illegal logging activities that are derived from a variety of measures are presented from a sample of countries in Table 1 . Illegal logging exists in the United States but is primarily done by individuals or small operations. Some report that up to 10% of forest production in the U.S. is illegal. The U.S. Forest Service estimates that approximately one out of every 10 trees harvested in national forests is taken illegally. Private lumber companies estimate that nearly 3% of their cut trees are stolen, amounting to losses of approximately $350 million annually. Statistics for illegal logging on private lands are unavailable, yet are anecdotally quoted as a serious problem. Some countries allegedly contribute to illegal logging by importing illegally obtained wood products. For example, China is a major importer of timber from Gabon, Cameroon, Equatorial Guinea, and Mozambique, all of which export illegally harvested timber. Others contend that some of the illegal timber imported by China is manufactured into products that are re-exported to the United States. The European Union (EU) has also been accused of importing illegally logged wood; the World Wildlife Fund estimates that the EU is spending PS3 billion a year on illegal wood, much of it coming from the Amazon Basin, the Baltic States, the Congo Basin, east Africa, Indonesia, and Russia. Several ecological impacts can be associated with illegal logging practices. These impacts depend on how illegal logging practices are defined and where they occur. If illegal logging is characterized as large-scale destructive logging, it can potentially lead to the conversion of forests to grassland, depletion of plant species (e.g., tree species such as mahogany), and in some cases depletion of animal populations that depend on the habitats being logged. If logging illegally occurs in protected areas, important biological resources (e.g., rare plant and animal species) may become threatened. If logging is not done according to mandated management plans, it can potentially lead to collateral damage, whereby other tree species and younger trees are damaged, risk of fire is increased, and potential for sustainable harvesting of timber is lowered. In some instances in the tropics, logging has been characterized as the initial stimulus for road-building, which leads to greater access to primary forests. If illegal logging occurs in protected areas, improved access to these areas through logging roads may lead to further activities such as clear-cutting, ranching, and agricultural development in the area. Illegal logging can have economic impacts in the countries where it occurs. In several countries where illegal logging takes place, the volume of timber extracted illegally is greater than the official harvested total. Further, illegal logging and trade are connected to other illegal activities such as corruption, tax evasion, and money laundering, among other things. If illegal logging is prevalent in a country, there may be a low propensity to invest. For example, illegal logging may signal that law enforcement is lax and that corruption is prevalent. These factors may deter long-term investment in these countries and may increase costs for investors already involved in the country. One definition of illegal logging is extracting timber without reporting it to government officials. Without reporting, governments cannot assess taxes on the wood being extracted, which results in a loss of revenue for the country. For example, Indonesia estimated that its losses from illegal logging are $3 billion annually, which is equivalent to more than 45% of the total value of its legitimate exports of wood and wood products, valued at $6.5 billion annually. Illegal logging can arguably have a positive economic impact. Illegal logging can create jobs in impoverished areas, provide short-term low-cost timber, and satisfy excessive timber demands from within the country and importing countries. If local governments and citizens perceive that illegal logging is beneficial to the community, some will not seek the enforcement of laws or will attempt to legalize illegal timber to preserve revenues. Illegal logging can affect local communities in the countries where it is occurring. Local communities may depend on forests for non-timber forest products (e.g., fruits and medicines) as well as for habitat and cover for wild game and fish. Illegal logging in these areas may convert forest ecosystems to less useful ecosystems such as grasslands or savannahs. In some parts of the world, illegal logging has been termed "conflict logging," similar in meaning to conflict diamonds. For example, money earned from the illegal trade in wood has been traced to the purchase of weapons used in conflicts such as the one between Liberia and Sierra Leone. Several relevant multilateral and international agreements relate to illegal logging and illegal timber trade. These range from voluntary agreements that, for example, allow consumer countries to exchange data with producing countries, to legally binding multilateral agreements that enable signatory governments to seize illegal products and exercise financial penalties on illegally produced timber. This section reviews some of the agreements that have been implemented and some international institutions involved in addressing illegal logging. Two primary wood certification programs affect wood consumed in the United States. The Forest Stewardship Council (FSC) is an independent, international nongovernmental organization that certifies that wood comes from well-managed forests that meet an established set of criteria. One key criterion is that the "chain of custody" information is provided. This information strives to contain the names and locations of each handler of the wood from the forest it came from to the shop where the product is being sold. Approximately 220 million acres are certified under the FSC program worldwide. (Approximately 110 million acres are in North America.) A second certification program is offered by the Sustainable Forest Initiative (SFI), which was created by the American Forest and Paper Association (AF&PA) and is now independent. SFI also contains a set of guidelines and principles that must be followed to earn its certification. SFI certification is done for North American forests and does not have a "chain of custody" requirement. Approximately 107.8 million acres are certified under this program in North America. Other certification programs exist in Canada, the EU, and elsewhere. For reference, there are nearly 10 billion acres of forested land on the Earth. Some contend that certification programs, if managed and monitored consistently, could reduce illegal logging. Most certified forests are in Europe and North America; only 8% of the total certified area is in developing countries (2% in Asia and the Pacific, 3% in Latin America, and 3% in Africa). Others, however, argue that obtaining certification in developing countries is prohibitively expensive for most logging operations. Costs for managing forests to maintain certification, disorganized bureaucracy, and lax rules make certification in developing countries difficult. Some argue that certification is not worth it, because the demand for certified tropical wood is not consistent from year to year and the cost to obtain certification makes wood less competitive on the market. To increase the demand for certified wood and to stimulate interest in certification, some have suggested that importing countries require certified wood for government projects. Five countries in the European Union, including Great Britain, have implemented or are trying to implement policies that would require state-financed construction projects to use certified wood. The United Nations Forum on Forests is an intergovernmental forum that promotes the sustainable development, management, and conservation of forests. It aims to provide a multi-year program of work to develop policies regarding forests with the goal of developing a legal framework on all types of forests. The ITTO promotes sustainable forest management, including forest enforcement, among its member countries, which include the United States. The ITTO was established under the International Tropical Timber Agreement, which expired in December 2006. A successor agreement is currently being negotiated. The ITTO provides a framework for collecting data on the trade of illegal timber and investigates import and export data that represent illegal trade. The World Bank is the largest of several regional and international development banks that lend money to developing countries for projects identified by the host country. The World Bank has taken steps to assess projects for their environmental consequences, including the potential for illegal logging. In a revised Forest Strategy, the World Bank has proposed to address illegal logging through sustainable forest management and certification. In collaboration with the World Wildlife Fund, the World Bank is establishing a program for certifying sustainably managed forests. Under this program, logging operations must show progress toward sustainability to achieve their certification, as opposed to having already met all of the certification requirements. This initiative is convening legislators from the G8 (Canada, France, Germany, Italy, Japan, Russia, United Kingdom, and United States), China, India, and other timber-producing nations with industry representatives and other stakeholders to develop a plan for addressing illegal logging. The dialog began in 2006 will run until the end of the G8 meeting in 2008. The United States has no specific laws that address all aspects of illegal logging. Logging within the United States is addressed by several laws and regulations--some federal, but many state--that depend on what species is logged, and where and how it is done. Logging can be restricted or banned if it affects species listed under the Endangered Species Act (ESA; 16 U.S.C. SSSS1531-1543). ESA also regulates the import of foreign species if they are listed as threatened or endangered under the act. ESA authorizes the participation of the United States in the Convention on the International Trade in Endangered Species of Wild Flora and Fauna (CITES). CITES was established to protect plants and animals from unregulated international trade. Under the treaty, countries make a commitment that any trade in protected plant and animal species will be sustainable, and that there is a process to ensure that wildlife trade is consistent with the treaty. U.S. imports of wood and wood products from tree species listed on CITES are regulated according to their status under the treaty. Currently, 15 tree species are listed as trade-restricted under CITES. Regulating timber species listed under CITES has been controversial. For example, big leaf mahogany and ramin are listed in Appendix II of CITES, which regulates trade through export permits. Several allegations contend that mahogany and ramin have been imported in the United States without proper CITES permits and authorizations. The Tropical Forest Conservation Act ( P.L. 105-24 ; 22 U.S.C. SSSS2431 et seq.) indirectly addresses illegal logging by authorizing debt-for-nature transactions with developing countries that provide funds for conserving tropical forests. Eligible activities under this act include establishing, maintaining, and restoring parks, protected reserves, and natural areas, and training programs to increase the capacity of personnel to manage parks, among other things. Several countries have used funds generated from transactions authorized under this act to monitor logging activities and train enforcement personnel to address illegal logging activities in protected areas. Expenditures to address illegal logging are also provided in programs authorized by the Foreign Assistance Act (P.L. 87-195; 22 U.S.C.SSSS2151p-1). A portion of funds given to countries is used for activities to prevent illegal logging and enforce illegal logging laws. Some activities funded under this act are a part of the Administration's initiative against illegal logging. (See " Foreign Policy on Illegal Logging " section, below.) Some argue that the United States should enact legislation prohibiting the import of illegally logged wood and wood products, and amend the Lacey Act (16 U.S.C. SSSS3371-3378) to include foreign plant species. The Lacey Act includes enforcement mechanisms for the illegal trade of wildlife within the United States. Specifically, the Lacey Act makes it illegal to engage in the trade of fish, wildlife, or plants taken in violation of any U.S. or Indian tribal law, treaty, or regulation, as well as the trade of any of wildlife acquired through violations of foreign law or treaties (including CITES). The Lacey Act does not address plants that are traded in violation of any foreign law or treaties. A plant is not covered under the Lacey Act unless it is indigenous to a state. Amending the Lacey Act to include plants traded in violation of foreign laws would establish legal structures to prosecute parties who import and trade wood found in violation of other countries' forest laws. The 2008 farm bill ( P.L. 110-234 ) amends the Lacey Act to include plants harvested or taken illegally in areas outside the United States. This law applies to illegally harvested timber species imported into the United States. In 2003, the United States developed an initiative to help developing countries stop illegal logging. This initiative adopted several approaches to address illegal logging: addressing legal and institutional barriers that prevent on-the-ground law enforcement of illegal logging; using technology to monitor logging; encouraging good business practices, legal trade, and transparency in logging; and creating incentives to promote local communities to abolish illegal logging practices. The initiative focuses on five regions: the Congo Basin, the Amazon Basin, Central America, South Asia, and Southeast Asia. The initiative states that it will provide $15 million to address illegal logging. In the Congo Basin, the U.S. government has developed the Congo Basin Forest Partnership. This partnership is aimed at improving forest management and governance to reduce forest degradation and reduce illegal logging in the region. Earlier sanctions of illegal logging activities by the United States were directed to single countries (e.g., Cambodia, Burma, and Indonesia). Report language of some congressional appropriation acts have included provisions that indicate the intent of Congress to provide funds to stop illegal logging. Bilateral free trade agreements between the United States and other nations have sometimes been criticized for deficient environmental rules that may have implications for illegal logging. For example, some argued that a free trade agreement (FTA) with Singapore increased U.S. imports of illegally obtained timber from Singapore. Singapore acquires wood from countries such as Indonesia and Malaysia, which allegedly harvest large portions of their timber illegally, and re-exports it to the United States. The United States addressed illegal logging during negotiations with Indonesia on a pending FTA. In 2006, the United States and Indonesia signed a memorandum of understanding (MOU) to enhance bilateral efforts to combat illegal logging and associated trade. The United States committed $1 million with this agreement to fund projects that would reduce illegal logging in Indonesia, such as using remote sensing to identify illegally logged tracts of land. The MOU also sets up a working group to assist in implementing the initiative under a pending U.S.-Indonesia Trade and Investment Framework Agreement. Similarly, some contend that an FTA with Peru could lead to an increase in exports of illegal logged timber to the United States from Peru. The primary species of concern is Peruvian big leaf mahogany ( Swietenia macrophylla ). The United States is the predominant importer of Peruvian mahogany. Big leaf mahogany is currently listed under CITES as an Appendix II species. To meet CITES requirements for this species, the United States (and CITES) requires an export permit from Peru validating that mahogany entering the United States was harvested in a sustainable manner that is not detrimental to the species. Some contend that Peruvian mahogany is being harvested illegally and at rates detrimental to the species and to the Amazon rainforest in Peru. Further, they contend that export permits provided by Peru, as required by CITES, have been granted without sufficient monitoring and assessment of harvesting practices. The U.S.-Peru TPA is expected to increase protections for foreign investors engaging in business in Peru, which may lead to a larger timber industry in Peru and greater mahogany harvesting. The TPA would not alter the requirement for export and permits under CITES. These concerns may be tempered by potential positive consequences of the TPA on the illegal logging of mahogany. The TPA between Peru and the United States is expected to increase awareness of illegal logging in Peru and adds additional mechanisms that may be used to address illegal logging in Peru. The TPA requires each country to effectively enforce its own environmental laws in a manner affecting trade between the parties and establish a policy mechanism to address public complaints that a party is not effectively enforcing its environmental laws whether or not the failure is trade-related. Complaints could be filed by individuals and firms of each party to the agreement and would be addressed according to a set of procedures outlined in the TPA. A separate dispute settlement mechanism is also available for trade-related complaints by one TPA party against another. Further, the TPA stipulates that nothing in its investment chapter would prevent a party from adopting, maintaining, or enforcing any measures that would ensure that investment activity is conducted in a manner sensitive to the environment. Ongoing negotiations for TPA with Columbia do not include specific provisions related to illegal logging. However, provisions establishing an environmental committee to address complaints and requirements for enforcing multilateral environmental treaties (e.g., CITES) and domestic laws are included. Many contend that illegal logging may indirectly contribute towards climate change because it is a driver of deforestation in the tropics. Deforestation is responsible for the largest share of CO 2 released to the atmosphere from land use changes and results in approximately 20% of anthropogenic greenhouse gas emissions. Much of the deforestation responsible for CO 2 releases occurs in tropical regions, which are substantially located in developing countries such as Brazil, Indonesia, and the Democratic Republic of the Congo. Climate change mitigation programs that address deforestation might consider targeting illegal logging activities to effectively implement forest conservation plans in tropical areas.

Illegal logging is a pervasive problem throughout the world, affecting countries that produce, export, and import wood and wood products. Illegal logging is generally defined as the harvest, transport, purchase, or sale of timber in violation of national laws. In some timber-producing countries in the developing world, illegal logging represents over half of timber production and exports. The World Bank estimates that illegal logging costs governments approximately $15 billion annually in lost royalties. Illegal logging may stimulate corruption, collusion, and other crimes within governments, and has been linked to the purchase of weapons in regional conflicts in Africa. Illegal logging, however, benefits perpetrators by reducing the cost of legal and regulatory compliance of timber harvesting, sometimes resulting in higher profits. Illegal logging in protected areas can lead to degraded forest ecosystems, loss of biodiversity, and indirectly to deforestation and the spread of agrarian activity in some developing countries. Several relevant multilateral and international agreements address illegal logging and illegal timber trade. These range from voluntary agreements that, for example, allow consumer countries to exchange data with producing countries, to legally binding multilateral agreements that enable signatory governments to seize illegal products and exercise financial and criminal penalties on those who possess or transport illegally produced timber. The United States is the world's largest wood products consumer and one of the top importers of tropical hardwoods. Some are concerned that U.S. demand for tropical timber from countries in Latin America and Southeast Asia may be a driver of illegal logging. Others assert that if there were no illegally logged wood in the global market, the value of U.S. exports of timber could increase substantially. The United States has no specific domestic laws that address all aspects of illegal logging. Logging within the United States is addressed by several laws and regulations--some federal, but many state--that depend on what species is logged, and where and how it is done. In 2003, the United States developed an initiative to help developing countries stop illegal logging. This initiative aims to remove legal and institutional barriers to combating illegal logging; promote technology to improve monitoring the legal trade in logging; and create incentives to abolish illegal logging practices in rural communities. The United States also addressed illegal logging in a free trade agreement (FTA) with Peru. The agreement requires that the Peruvian government enforce its international treaty obligations and increase monitoring and enforcement of illegal logging in its country. Illegal logging is addressed by Congress in the 2008 farm bill (P.L. 110-234). A provision in the law amends the Lacey Act to include plants traded in violation of foreign laws. This was primarily intended to deter imports of illegally obtained timber from foreign countries.

Droughts raise several issues for Congress, including how to measure and predict drought, how to prepare, and how to coordinate federal agency actions responding to drought. In addition to resulting in agricultural losses, droughts also can affect the water supplies of individuals, communities, industries, species, and other services. Although many water allocation and other water management responsibilities lie largely at the state or local level, stakeholders may seek federal assistance with non-agricultural water supplies during droughts. Congress has created various programs to assist with non-agricultural water supplies for communities, households, and fish and wildlife habitat. These programs are spread across the jurisdictions of multiple agencies and congressional committees and vary widely in their use and funding. Current drought conditions, especially in western states, and exceptional and extreme drought conditions in portions of several states, including much of California, may test the effectiveness of these programs and raise questions about their role in federal drought response and policy. States, along with local governments and water providers, generally are responsible for preparing and planning for drought conditions. Often states take actions guided by state-level drought plans. Some states also have state assistance and authorities that are used to alleviate the impacts of drought conditions. For example, some states (e.g., California, Idaho, and Texas) have instituted water banks and water transfer mechanisms to deal with water supply shortages. The de facto federal policy since the 1980s has been that the U.S. Secretary of Agriculture takes the lead in responding and declaring eligibility for federal agricultural disaster assistance, including drought-related disasters. A declaration of an agricultural disaster area by the Secretary of Agriculture triggers the availability of multiple agricultural assistance programs, most notably the programs of the Farm Services Agency (FSA), and may trigger availability of other federal programs, such as the Economic Injury Disaster Loans of the Small Business Administration (SBA). Most of these programs are focused on mitigating the economic impacts of drought on agriculture or water-dependent small businesses. The federal programs authorized to assist with non-agricultural water supply emergencies are implemented largely independently from these agriculture disaster programs at FSA and SBA. The federal agencies authorized to assist with non-agricultural water supplies emergencies are: U.S. Department of Agriculture (USDA) Rural Utilities Service (RUS), through various water system loan and grant programs (FY2014 funds: $1.3 billion in loans, $374 million in grants). While most of these funds are provided for assisting with rural water and waste systems broadly, systems and households affected by drought may receive a priority. Department of the Interior's Bureau of Reclamation (Reclamation), through activation of the agency's Reclamation States Emergency Drought Relief Program assistance and contract authorities (FY20014 funds: $0.5 million). Department of Defense's U.S. Army Corps of Engineers, through its emergency drinking water and its water contract authorities (no funds specified for FY2014). Additional funds may become available through reprogramming or supplemental appropriations. Some authorized drought assistance programs have never been implemented, while others are used in limited circumstances, and others operate almost annually. For example, while Reclamation's direct assistance with well construction is regularly used (albeit limited by available appropriations), the Corps' drought emergency water assistance has been employed in more limited circumstances, primarily for tribes, due to the high thresholds for its use and nonfederal funding requirements. Figure 1 provides a summary of the RUS, Reclamation, and Corps programs and authorities and what triggers the availability of assistance. Numerous other federal programs and activities may assist in reducing long-term water use in urban, rural, agricultural, and industrial uses. These actions to promote water conservation and efficiency are beyond the scope of this report. RUS provides grants and loans for rural community and household water. Some of the programs are tailored for emergency situations, while others may prioritize loans and grants for rural communities and households facing drought-related declines in water quantity or quality. For RUS programs, rural communities are often defined as those with populations less than 10,000. The RUS programs that may assist in addressing drought-related rural water issues include: Water and Waste Disposal Grants and Loans: This RUS program provides grants and loans for rural community water systems. RUS may choose to prioritize during its competitive selection process projects for communities affected by droughts. While this is a broad program not focused on drought or emergencies, some of its funds in FY2014 may assist drought-affected communities (FY2014 funds: $1.3 billion in loans and $370 million in grants available). While most of these funds are provided for assisting with rural community water and waste systems broadly, systems affected by drought may receive a priority. Emergency Community Water Assistance Grants: This RUS program provides grants specifically to rural water systems experiencing an emergency resulting from a significant decline in quantity or quality of drinking water (FY2014 funds: $3 million reprogrammed by Administration for use in California communities, no other funds available). Household Water Well System Grants: This RUS program provides grants to nonprofit organizations for operating lending programs for the refurbishing of household water well systems in rural areas. Loans are to be made to individuals with low or moderate incomes. Some of this program's FY2014 funds may assist drought-affected households (FY2014 funds: $1 million). More information on these RUS rural water programs is available in the Appendix . Reclamation's authorities to assist with emergency water supplies and conservation stem primarily from the Reclamation States Emergency Drought Relief (RSEDR) Program (43 U.S.C. 2201, et seq.). The RSEDR program consists of a number of different authorities, including direct Reclamation water assistance and loans to reduce drought losses through temporary measures (except for certain wells), water purchases, temporary water contracts, drought planning grants, actions to facilitate water purchases and transfers, and technical assistance. 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, with the exception being that technical assistance is available nationally. 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. Not all of the authorized activities have been implemented. For example, the authority for Reclamation to provide loans for nonfederal water entities to undertake activities to reduce losses and damages from droughts has never been used. Reclamation's drought relief program received $0.5 million in appropriations for FY2014. More information on Reclamation's direct assistance is available in the Appendix . Reclamation has other authorities to address variability in hydrology that are not specific to drought or emergency response. For example, Reclamation has authorities, which are now coordinated under the Department of the Interior's WaterSMART efforts, to promote water resources management preparedness, sustainability, and water and climate variability resilience through improved knowledge and information and mitigation actions such as water and energy efficiency, conservation, and planning. These do not appear in Figure 1 , since they are not designed to function as emergency response programs and were not targeted specifically at drought or drought emergencies and disasters. WaterSMART grants typically are available for water conservation and water and energy efficiency projects, including system optimization, and advanced water treatment. To date, most grants have been used for water reuse projects (e.g., recycling of urban wastewater), irrigation districts' water efficiency improvements, water banking, and watershed basin studies and activities. These grants typically cover only a portion of project costs (25% to 50% of project costs). The Corps (USACE) has authority to assist in the provision and transport of emergency water supplies when state resources have been exceeded and there is an imminent public health threat. While USACE is authorized to assist political subdivisions, farmers, and ranchers with non-irrigation water, this authority has largely been used for assisting tribes with drinking water supplies. These activities have generally been funded through reprogramming of agency funds. The agency also has authority to participate in temporary contracts to provide limited quantities of water (if available) for municipal and industrial purposes (33 U.S.C. 708). More information on the Corps' provision and transport of emergency water supplies is available in the Appendix . Additionally, if the effects of a drought overwhelm state or local resources, the President, at the request of the state 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. However, requests by U.S. states for Stafford Act drought-related declarations and related assistance since the 1980s have been denied. The infrequency of presidential domestic drought declarations increases the uncertainty about the circumstances under which such a declaration is likely to be made. Therefore, the emergency assistance typically available to mitigate and respond to the impacts of drought on non-agricultural water supplies is primarily through the USDA's Rural Utilities Service, the Bureau of Reclamation's Emergency Drought Relief Program, and in limited circumstances the U.S. Army Corps of Engineers emergency water authorities. Since FEMA has deferred to USDA on drought declarations over the past three decades, there are no sections of the Stafford Act or regulations or policy guidance documents that address, or even appear to lend themselves to, a prolonged drought event as opposed to a disaster incident. On February 14, 2014, the President announced multiple actions to address drought conditions in California, including accelerating and reprogramming funds to assist with water conservation and irrigation using existing authorized programs; no Stafford Act declaration was made. Both the Bureau of Reclamation and the U.S. Army Corps of Engineers also alter the operations of their water resources facilities in response to droughts. Operations of federal water resource facilities, particularly reservoirs behind dams, may help meet water supply needs during droughts, yet can also be vulnerable to the effects of droughts. Federal dams, particularly in the West, were constructed in part to provide multi-year storage to help with variations in seasonal and annual precipitation. Sustained hydrological drought nonetheless affects operations of federally managed reservoirs, dams, locks, hydroelectric facilities, and other components of the nation's water infrastructure. The extent to which operational changes are authorized and can be implemented to reduce the water supply impacts of drought often is limited by the federal infrastructure's role in meeting multiple project purposes and satisfying legal requirements. Recent legislation has expanded Reclamation's authority for its drought-related operations. The Consolidated Appropriations Act of FY2014 ( P.L. 113-76 ) expanded the Secretary of the Interior's authority to participate in nonfederal groundwater banking in California, and waived certain reporting provisions for transfer of irrigation water among selected federal water contractors, while also directing Reclamation and the Fish and Wildlife Service to expedite "programmatic environmental compliance" to facilitate Central Valley Project (CA) water transfers. The same legislation also provided direction to the Corps regarding operation of its facilities during drought. The explanatory report accompanying P.L. 113-76 directed the Corps to work with communities to increase water storage in winter months, without significantly increasing flood risk, to assist those facing drought conditions. The federal government is also a significant provider of drought information. Congress enacted the National Integrated Drought Information System (NIDIS) Act of 2006 ( P.L. 109-430 ), which established NIDIS within the National Oceanic and Atmospheric Administration (NOAA) to improve drought monitoring and forecasting abilities. NIDIS coordinates the collaborative Drought Monitor and other drought forecasting information, which are used by a variety of stakeholders to plan their actions and investments. The U.S. Geological Survey also provides drought-related water information through its hydrologic monitoring network. This information is used by communities and states to plan water withdrawals and diversions, assess needs for water-use restrictions, and anticipate or respond to drought-related environmental stresses (e.g., fish kills, saltwater intrusion into aquifers, and habitat degradation from high water temperatures). During the widespread drought conditions of 2012 and early 2013, the National Disaster Response Framework was used by the Secretary of Agriculture to coordinate the federal drought response. The National Disaster Recovery Framework (NDRF) is the federal framework followed to assist disaster-affected communities to recover from a disaster. An outgrowth of that experience was the creation in November 2013 of the National Drought Resilience Partnership to align federal drought policies across the government and to facilitate access to drought assistance and information sharing across all levels of government. While the partnership was anticipated to function largely as part of the President's Climate Action Plan to help prepare for drought, the western water supply conditions in 2014 have resulted in the partnership playing a coordinating role in federal drought response. The economic and social consequences of a water supply emergency can be costly to individuals, communities, businesses, and governments. Early actions may help avoid a non-agricultural water supply emergency resulting from drought. These actions can range from rehabilitating wells to improve their reliability, to reducing leaks in conveyance and distribution systems, implementing water rationing, and other water conservation measures. Consequently, a recurrent policy issue is how to effectively and efficiently mitigate drought's water supply impacts across the local, state, and federal agencies. How well current programs help to prevent drought conditions from becoming drought emergencies and drought disasters is one policy question. Another is whether the fragmentation of existing authorizations results in duplication, waste, gaps, and perverse incentives to prepare for drought. The broader policy struggle is how to transition from drought assistance to drought risk reduction. Rural Utilities Service: Water and Waste Disposal Grants and Loans Form of Assistance, Condition of Assistance, and Eligibility Requirements The Rural Water and Waste Disposal Account, administered by RUS, supports construction and improvements to rural community water systems (i.e., drinking water, sanitary sewerage, solid waste disposal, and storm drainage facilities). The program is not exclusively a drought program; however, water systems affected by drought may receive priority during implementation. Eligible rural areas may include an area in any city or town that has a population of less than 10,000 residents and where the projects are needed to meet applicable health or sanitary standards. Applicants must be unable to obtain sufficient credit elsewhere at reasonable rates and grants are made only if needed to reduce user charges to a reasonable level given the median household income for the area. Direct loans carry interest rates of 5% or less. Required Approvals and Application and Selection Provision The program is generally available and receives regular appropriations. No specific trigger is required for eligible entities to apply for assistance. Applications for direct loans, guaranteed loans, and grants are made with state Rural Development offices. Authority and Appropriations This assistance can be provided under the authority of the Consolidated Farm and Rural Development Act of 1972 (7 U.S.C. 1926). Funding for the program is allocated to state rural development offices where state directors set priorities particular to the rural needs of their state. Loan authorization level for direct loans is $1.2 billion; loan authority for loan guarantees is $50 million and loan subsidy levels for loan guarantees are $355,000 in FY2014. FY2014 annual appropriations provided $345.5 million for water and waste disposal grants. While most of these funds are provided for assisting with rural community water and waste systems broadly, those systems affected by drought may receive a priority. Funding also may be provided through reprogramming and emergency supplemental funding. Rural Utilities Service: Emergency Community Water Assistance Grants Form of Assistance, Condition of Assistance, and Eligibility Requirements RUS administers emergency and imminent community water assistance grants. Eligible communities must face an emergency or a significant decline in quantity or quality of drinking water to apply. Grants can be made in rural areas and for cities or towns with a population of 10,000 or less, where the median household income is less than or equal to the state's non-metropolitan median household income. Eligible entities include most public bodies (e.g., state and local governmental entities), nonprofit corporations, and federally recognized Tribes serving rural areas. Privately owned wells are not eligible. Grants may cover 100% of project costs. Grants for projects where a significant decline in quantity or quality of water occurred within the last two years may not exceed $500,000 and grants for emergency repairs and replacement of facilities on existing systems may not exceed $150,000. Required Approvals and Application and Selection Provision Grants are only given for communities facing actual or imminent drinking water shortages. Applicants must submit an application, which then enters a nationally competitive process that evaluates the severity of the actual or imminent decline. The Secretary of Agriculture will act on all applications within 60 days of their submission to the extent practicable. Authority and Appropriations Assistance can be provided under the authority of Section 306A of the Consolidated Farm and Rural Development Act of 1972 (7 U.S.C. 1926a). At least 50% of funds provided annually must benefit rural communities with populations less than 3,000. The program is authorized for appropriations of $35 million annually in FY2014 through FY2018. For FY2014, the program was appropriated no funds. In February 2014, it was announced that the program would receive $3 million in reprogrammed funds in FY2013 to be made available for California's rural communities (less than 10,000 residents with a median household income less than $62,883). Additional funds often become available through reprogramming and may become available through supplemental appropriations. Rural Utilities Service: Household Water Well System Grants Form of Assistance, Condition of Assistance, and Eligibility Requirements RUS provides grants to nonprofit organizations for lending programs to refurbish household water well systems in rural areas; loans are to be made to individuals with low or moderate incomes. Eligible individuals include members of households in which members have a combined income at or below the median non-metropolitan household income for the state or territory in which the individual resides, according to the most recent United States census. Loans made with grant funds must not exceed $11,000 per water well system and must have an interest rate of 1%. Financed facilities will not be inconsistent with any development plans of the state, multi-jurisdictional area, county, or municipality in which the proposed project is located. Required Approvals and Application and Selection Provision Nonprofit organizations must demonstrate expertise in well-water systems. Grants are determined by the Secretary of Agriculture. Authority and Appropriations This assistance can be provided under the authority of Section 6012 of the 2002 farm bill ( P.L. 107-171 ) and Section 306D of the Consolidated Farm and Rural Development Act of 1972 (7 U.S.C. 1926e). For FY2014, the program has been appropriated $993,000. Bureau of Reclamation: Reclamation RSEDR Activities to Mitigate Drought Losses and Damage Form of Assistance, Conditions of Assistance, and Eligibility Requirements The Reclamation States Emergency Drought Relief (RSEDR) Act authorizes the Commissioner of the Bureau of Reclamation to undertake (or contract for) construction, management, and conservation activities that mitigate losses and damages resulting from drought conditions. Costs incurred by Reclamation are non-reimbursable (i.e., 100% federal). Construction activities are limited to temporary facilities, except certain wells to reduce losses and damages from drought can be permanent. Activities may occur within or outside of authorized Reclamation project areas. Eligible entities are water users, tribes, and local entities in the 17 Reclamation states and Hawaii. Required Approvals and Application and Selection Processes An eligible entity can apply for assistance if (1) the Secretary of the Interior has approved a request for RSEDR assistance by a governor or tribal governing body or (2) the state or tribe has a drought contingency plan that has been approved by Reclamation and transmitted to Congress. Eligible entities can request Reclamation's assistance through the area, regional, or Commissioner's Office. The Regional Office Drought Coordinators prioritize requests; Reclamation's Drought Coordinator approves or disapproves requests based on congressional direction, available funding, need, and compliance with environmental laws. The Regional Director can provide the assistance in compliance with state and federal law. Authority and Appropriations These activities are authorized under the Reclamation States Emergency Drought Relief Act of 1991, as amended (43 U.S.C. 2221). P.L. 113-76 extended the authority through September 30, 2017. The authorization of appropriations (43 U.S.C. 2241) for this assistance fell under the broader Reclamation States Emergency Drought Relief activities, which was $90 million for the period FY2006 through FY2012. As of mid-February 2014, RSEDR activities had received $0.5 million in appropriations for FY2014. Army Corps Assistance: Provision of Emergency Drinking Water Form of Assistance, Condition of Assistance, and Eligibility Requirements The U.S. Army Corps of Engineers can construct wells and transport water to provide emergency drinking water during drought conditions. Corps assistance is provided only to meet minimum public health and welfare requirements in the immediate future that cannot be met by state or local actions or through reasonable conservation measures. Transport expenses are non-reimbursable expenses (i.e., 100% federal); the purchase or acquisition of the water and the storage facility at the terminal point and permanent water facilities are reimbursable expenses. This authority cannot be used for the provision of water for livestock, irrigation, recreation, or commercial/industrial use. Eligible entities are limited to drought-distressed political subdivisions, farmers, and ranchers. Required Approvals and Application and Selection Provision A governor, his/her representative, or the governing body of a tribe must make a written request for assistance to the Army Corps of Engineers. The USACE Director of Civil Works or the Assistant Secretary of the Army (Civil Works) makes the determination that an area has an inadequate water supply causing, or is likely to cause, a substantial threat to the health and welfare of the inhabitants of the area. If an applicant submits a request directly to USACE, the submission will be referred to the State Emergency Management Agency or equivalent office. Authority and Appropriations This assistance can be provided under the authority of the Disaster Relief Act of 1974 (33 U.S.C. 701n). Funding is provided through the USACE Flood Control and Coastal Emergencies Account, which often receives some appropriations through annual Energy and Water Appropriations acts, with the majority of its funds through supplemental appropriations. The Corps has authority to reprogram its civil works funds to accomplish work under this authority. In many years, the Corps does not use this authority. The Corps most often uses this authority to assist tribes with emergency drinking water issues.

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.

On December 18, 2007, the Federal Communications Commission ("FCC" or "Commission") concluded a review of its broadcast ownership rules by relaxing the ban on cross-ownership of a newspaper and a broadcast station in certain markets. The order adopted that day ended agency proceedings that had been ongoing for five years. In 2003, the FCC had adopted a comprehensive order (in its 2002 Biennial Review) revising many of its cross-ownership rules but, as will be discussed below, the United States Court of Appeals for the Third Circuit found insufficient basis for many of the proposed changes in that order and remanded it to the FCC for reconsideration. This report discusses the 2002 Biennial Review, the decision by the Third Circuit that struck many of those rules down, and the FCC's actions upon remand. The report also addresses the current status of the rules. The Telecommunications Act of 1996 sought to create a "pro-competitive, deregulatory national policy framework designed to accelerate rapidly private sector development of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition." Among other things, the act eliminated limits on national radio ownership, raised the cap on the percentage of the national audience that a single station owner may reach, set new limits for local radio ownership, and directed the Commission to conduct a rulemaking proceeding to determine whether to retain, modify, or eliminate the local television ownership limitations. The act also directed the Commission to review its broadcast ownership rules every two years to "determine whether any of such rules are necessary in the public interest as the result of competition." The Commission initiated its 2002 Biennial Review in September of 2002 with a Notice of Proposed Rulemaking announcing that it would review four of its broadcast ownership rules: the national audience reach limit; the local television rule; the radio/television cross-ownership ("one-to-a-market") rule; and the dual network ownership rule. The Commission had previously initiated proceedings regarding the local radio ownership rule and the newspaper/broadcast cross-ownership rule. Those proceedings were incorporated into the Biennial Review. On June 2, 2003, the Commission adopted a Report and Order modifying its ownership rules. In the Order, the Commission concluded that "neither an absolute prohibition on common ownership of daily newspapers and broadcast outlets in the same market (the 'newspaper/broadcast cross-ownership rule') nor a cross-service restriction on common ownership of radio and television outlets in the same market (the 'radio-television cross-ownership rule') [remained] necessary in the public interest." The Commission found that "the ends sought can be achieved with more precision and with greater deference to First Amendment interests through [its] modified Cross Media Limits ('CML')." The Commission also revised the market definition and the way it counted stations for purposes of the local radio rule, revised the local television multiple ownership rule to permit the common ownership of up to three stations in large markets, modified the national television ownership cap to raise the national audience reach limit to 45%, and retained the dual network rule. Following the publication of the Commission's Order, several organizations filed petitions for review of the new rules. The petitions for review were consolidated and heard by the United States Court of Appeals for the Third Circuit. After an initial hearing on September 3, 2003, the court entered a stay for the effective date of the proposed rules, preventing their enforcement, and ordered that the prior ownership rules remain in effect pending resolution of the proceedings. On February 14, 2004, the court heard oral arguments and issued its opinion on June 24, 2004. As noted above, on June 2, 2003, the Commission approved a Report and Order modifying its media ownership rules to provide a "new, comprehensive framework for broadcast ownership regulation." The Commission determined that new technologies necessitated new rules and that the prior rules "inadequately [accounted] for the competitive presence of cable, [ignored] the diversity-enhancing value of the Internet, and [lacked] any sound basis for a national audience reach cap." According to the Commission, the newly adopted rules were "not blind to the world around them, but reflective of it," and "necessary in the public interest." With respect to the ownership of broadcast stations on a nationwide level, the Commission determined that while "a national TV ownership limit is necessary to promote localism by preserving the bargaining power of affiliates and ensuring their ability to select programming responsive to tastes and needs of their local communities," the evidence demonstrated that a 35% cap was not necessary to "preserve that balance" and raised the limit to 45%. Under the new rule, a single entity was prohibited from owning stations that would allow it to reach more than 45% of the national audience. The Commission also elected to retain the "UHF discount," which attributes UHF stations with only 50% of the households in their DMA, despite many cable operators now carrying UHF stations. While it modified the national television ownership cap, the Commission determined that its dual network rule, which prohibits common ownership of the top four television networks, remained necessary in the public interest and did not attempt to repeal or modify it. In the 2002 Biennial Review, the Commission either modified or repealed its local ownership rules. The cross-ownership rules prohibiting the common ownership of a full-service broadcast television station and a daily newspaper in the same community and limiting the ownership of television and radio combinations by a single entity in a given market were both repealed. The Commission determined that neither rule remained necessary in the public interest and replaced both rules with a single set of cross-media limits based on market size. In large markets, defined as those with more than eight television stations, cross-ownership was unrestricted. The Commission combined an earlier remand from the D.C. Circuit Court of Appeals of its modified "duopoly rule" with the 2002 Biennial Review and adopted a new rule that would permit common ownership of two commercial television stations in markets that have seventeen or fewer full-power commercial and noncommercial stations, and common ownership of three commercial stations in markets that have eighteen or more stations. These limitations are subject to a further restriction on the common ownership of stations that are ranked among the market's largest four stations based on audience share. The Commission also elected to repeal the "Failed Station Solicitation Rule" related to the sale of failed, failing, or unbuilt stations, which required notice of the sale to be provided to out-of-market buyers. With respect to local radio ownership, the FCC modified its prior rule by adopting a new method for determining the size of a local market, but retaining the rule's prior numerical limits on station ownership. The Commission's prior regulations defined the local market by using the "contour-overlap methodology," which the Commission abandoned in favor of the "geography-based market definition used by Arbitron, a private entity that measures local radio audiences for its customer stations." The Arbitron markets include both commercial and noncommercial stations. While it changed the definition of local market, the Commission retained its numerical limits, which allow a single entity to own as many as eight radio stations in markets of 45 or more commercial stations. An additional modification to the local radio ownership rule created a new system for the attribution of joint sales agreements (JSAs). Generally, a JSA authorizes a broker to sell advertising time for the brokered station in return for a fee paid to the licensee. The Commission noted that because the broker station normally assumes much of the market risk with respect to the station it brokers, it typically has the authority to make decisions with respect to the sale of advertising time on the station. Under the prior rules, JSAs were not attributable to the brokering entity and were not counted toward the number of stations the brokering licensee may own in a local market. The new rules made the JSAs attributable to the brokering entity for the purpose of determining the brokering entity's compliance with the local ownership limits if the brokering entity owns or has an attributable interest in one or more stations in the local market, and the joint advertising sales amount to more than 15% of the brokered station's advertising time per week. Several organizations filed petitions for review of the new rules upon their publication. The numerous petitions for review were consolidated and the case was heard by the United States Court of Appeals for the Third Circuit in Philadelphia. As noted above, after an initial hearing, the court entered a stay for the effective date of the proposed rules. On February 14, 2004, the court heard oral arguments and issued its opinion on June 24, 2004. With respect to the national ownership rules, the court did not address the Commission's decision to raise the national audience reach cap from 35% to 45% citing Congress's modification of the rule in the 2004 Consolidated Appropriations Act. Section 629 of the act directed the Commission to modify the rule by setting a 39% cap on national audience reach. The court determined that because the Commission was under "a statutory directive to modify the national television ownership cap to 39%, challenges to the Commission's decision to raise the cap to 45 were moot." Additional challenges to the UHF discount provisions in the rule were also deemed moot even though the UHF discount rules were not mentioned in the 2004 Consolidated Appropriations Act. The court determined that the UHF discount was intrinsically linked to the 39% national audience reach cap because "reducing or eliminating the discount for UHF stations audiences would effectively raise the audience reach limit." The court also noted with respect to the UHF discount that the 2004 Consolidated Appropriations Act specifically provided that the periodic review provisions set forth in the amendment did not apply to "any rules relating to the 39% national audience limitation," and as a rule "relating to" the national audience limitation, Congress intended to insulate the UHF discount from review. None of the parties bringing the Prometheus case challenged the retention of the dual network rule, so this was not addressed by the court. With respect to the Commission's local ownership rules, the court agreed with the Commission's decision to modify these rules in many respects. However, the court found fault with the numerical limits set by the FCC in each of the local ownership rules. The court stated that "[t]he Commission's derivation of new Cross-Media Limits, and its modification of the numerical limits on both television and radio station ownership in local markets, all have the same essential flaw: an unjustified assumption that media outlets of the same type make an equal contribution to diversity and competition in local markets." The court determined that the Commission's decision to repeal the ban on broadcast/newspaper cross-ownership was justified and supported by evidence in the record and found that the Commission's decision to retain some limits on common ownership was constitutional and not in violation of the Communications Act. However, the court found that the FCC failed to provide reasoned analysis to support the specific limits that it chose with respect to the new "cross-media" rules, stating that the limits "employ several irrational assumptions and inconsistencies." The court rejected the Commission's use of a "diversity index," because of what the court saw as the fallacies upon which it was based and because the Commission failed to provide adequate notice of the new methodology in the rulemaking proceedings leading up to the 2002 Order. The court remanded the cross-media limits and advised the Commission to make any "new metric for measuring diversity and competition in a market ... subject to public notice and comment before it is incorporated into a final rule." The court in Prometheus upheld the restriction on common ownership of the market's top four broadcast television stations, but remanded the numerical limits "for the Commission to harmonize certain inconsistencies and better support its assumptions and rationale." In making its decision, the court found that the Commission had presented evidence in the record to adequately support the "top-four restriction," while failing to justify the market share assumptions used as the basis for the numerical limits. The court stated that "[n]o evidence supports the Commission's equal market share assumption, and no reasonable explanation underlies its decision to disregard actual market share." The court also remanded the Commission's repeal of the Failed Station Solicitation Rule, finding that the Commission failed to consider "the effect of its decision on minority television station ownership," and thus failed "'to consider an important aspect of the problem' [amounting] to arbitrary and capricious rulemaking." In addition to upholding the Commission's restriction on common ownership of a market's top four broadcast television stations, the court upheld the Commission's new definition of local markets with respect to radio finding that the Commission's decision was "in the public interest" and that it was a "rational exercise of rulemaking authority." The court also found that the Commission justified the inclusion of noncommercial stations in the new definition. However, with respect to the numerical limits retained by the Commission, the court concluded that while the numerical limits approach was rational and in the public interest, the Commission failed to support its decision to retain these particular limits with "reasoned analysis." The court rejected the Commission's contention that five equal-sized competitors would ensure that local markets are competitive, and found that even if it were to justify the "five equal-sized competitors" benchmark, that it failed to sufficiently demonstrate that under the existing numerical limits five equal-sized competitors would actually emerge. The court remanded the numerical limits to the Commission "to develop numerical limits that are supported by a rational analysis." With respect to the new rules providing for the attribution of joint sales agreements, the court affirmed the Commission's decision, finding that the Commission changed its rules as the result of "reasoned decisionmaking," and that such a change was "necessary in the public interest" due to "the potential for brokering entities to influence the brokered stations." On September 3, 2004, the Third Circuit granted the Commission's motion requesting a partial lifting of the stay to allow those parts of the rules approved by the court in its June 24 decision to go into effect. Specifically, the stay was lifted with respect to the use of Arbitron metro markets to define local markets, the inclusion of noncommercial stations in determining the size of a market, the attribution of stations whose advertising is brokered under a Joint Sales Agreement to a brokering station's permissible ownership totals, and the imposition of a transfer restriction. The stay remained in place pending FCC action on remand with respect to all other aspects of the Biennial Review Order. On January 27, 2005, the United States Solicitor General and the FCC decided not to appeal the Third Circuit's decision. However, several media companies filed a formal appeal with the Supreme Court asking for a review of the Third Circuit's decision. On June 13, 2005, the Supreme Court denied certiorari in all relevant appeals. On July 24, 2006, the FCC issued a Further Notice of Proposed Rulemaking (FNPR) in the Broadcast Media Ownership proceedings that had been remanded to the Commission in 2003. The FNPR sought comment for new ownership rules that would comport with the Third Circuit's decision in Prometheus . Specifically, the FCC sought comment suggesting new rules that would foster "localism;" increase opportunities for ownership among minorities and women; revise the numerical limits placed on cross ownership of local television stations and local radio stations; revise the Diversity Index used to calculate the availability of outlets that contribute to diversity of viewpoints in local media markets; and other suggestions for improvement of existing and proposed rules. The FCC also commissioned multiple studies on media ownership and sought comment on these studies to determine whether and to what extent to take the studies into account in the final ownership rules. The reply comment period on the ownership studies closed November 1, 2007. On August 1, 2007, the FCC issued a Second Further Notice of Proposed Rulemaking (SFNPR) in its ongoing review of the broadcast ownership rules. The SFNPR sought comments on new initiatives specifically related to encouraging minority and female ownership of broadcast stations proposed by the Minority Media and Telecommunications Council (MMTC), as well as potential constitutional issues related to race specific classifications. Reply comments were due for the SFNPR on October 16, 2007. On November 13, 2007, following the close of all comment and reply comment periods, FCC Chairman Martin proposed that the review of broadcast ownership rules should conclude by adopting a relaxation of the ban on newspaper and broadcast cross-ownership. The proposal also indicated that no changes would be made in the local television "duopoly" rule, the local radio ownership rule, or the local radio-television cross-ownership rule already in force. The FCC adopted a revised version of Chairman Martin's proposal to ease the ban on newspaper/broadcast cross-ownership on December 18, 2007. The Report and Order in the proceeding was released on February 4, 2008. The new rule establishes the presumption that newspaper/radio broadcast station cross-ownership in the top 20 largest DMAs is in the public interest, and that newspaper/television broadcast station cross-ownership in the top 20 largest DMAs is in the public interest when the television station is not among the top four ranked stations in the market and at least eight "major media voices" would remain in the DMA post-merger. For all other DMAs, the new rule establishes the presumption that newspaper/broadcast station cross-ownership is not in the public interest, except in two circumstances (discussed below). Applicants attempting to overcome a presumption that the proposed combination is not in the public interest will have to demonstrate, through clear and convincing evidence, that the merged entity will increase the diversity of independent news outlets and increase competition among independent news sources in the relevant market. The FCC also has laid out four factors to help inform its evaluation of these proposed combinations. The new rules identify two circumstances in which the presumption that cross-ownership is not in the public interest will be reversed. The first circumstance adapts the FCC's failed or failing station waivers to newspaper/broadcast combinations. Therefore, when either the broadcast station or the newspaper involved in a proposed combination is "failed" or "failing," the FCC will presume that the proposed combination is in the public interest. The presumption that a combination is not in the public interest also will be reversed when the proposed combination will result in a new source of local news in a market, specifically defined as a combination that would initiate at least seven hours of new local news programming per week on a broadcast station that previously has not aired local news. All other cross-ownership rules and restrictions will remain unchanged. The FCC also adopted rules in December 2007 to promote diversification of broadcast ownership in a separate order from the newspaper/broadcast station cross-ownership rule. The new rules are intended to allow "eligible entities" to more easily access financing and spectrum by, for example, modifying the distress sale policy to allow a licensee whose licenses were designated for a revocation hearing to sell its station to an eligible entity prior to the commencement of the hearing, revising the FCC's equity/debt plus attribution standard to facilitate investment in eligible entities, and giving priority to any entity financing an eligible entity in certain duopoly situations. "Eligible entities" are defined as "entities that would qualify as a small business consistent with Small Business Administration standards, based on revenue." The FCC is seeking further comment on whether it can expand the definition of "eligible entity" to include other business. The relaxation of the newspaper/broadcast cross-ownership rule as well as the other ownership rules promulgated by the FCC in December 2007 have yet to go into effect. Pursuant to the Third Circuit's final order in the Prometheus case, the FCC's newest rules may not go into effect until the Third Circuit lifts its stay. On June 12, 2009, the Third Circuit decided to keep the stay in place until further order of the court and ordered the parties to file status reports regarding whether the stay should remain in place later in the year. On October 1, 2009, the FCC filed its status report with the Third Circuit. The FCC argued that the stay should remain in place, because the 2008 order no longer incorporates the views of a majority of the Commissioners and the agency is set to begin a new review of the media ownership rules that should be completed in 2010. On December 18, 2009, the Third Circuit ordered the FCC to show cause as to why the court's stay on the newspaper/broadcast cross-ownership rule changes should not be lifted. The FCC filed its brief on the issue with the court on January 7. The parties await the court's decision.

In December 2007, the Federal Communications Commission relaxed its newspaper/broadcast ownership ban (order released February 2008). The decision raised concerns in Congress about increasing media consolidation that have long been at the forefront of the debate over ownership restrictions. The Commission's order served to rekindle the discussion of media consolidation and the perceived need to take action to preserve a diversity of voices in the marketplace of ideas. The FCC rule, as this report illustrates, has a history dating back to a previous failed attempt to relax a greater number of broadcast cross-ownership restrictions, and it is worthwhile to examine this previous proceeding in order to understand the current status of the rules. On June 2, 2003, the FCC adopted a set of comprehensive rules addressing six different aspects of media ownership, including cross-ownership of broadcast and print media, local television and radio ownership, and national television ownership. On June 24, 2004, the United States Court of Appeals for the Third Circuit, in Prometheus Radio v. FCC, remanded several of these rules to the Commission for further consideration finding that the Commission failed to adequately justify the numerical limitations used in the rules. This report provides an overview of the Commission's 2002 Biennial Review from which the 2003 rules originated and the Prometheus case. The report also addresses current issues facing the actions taken by the FCC in response to the Third Circuit Court of Appeals' decision in Prometheus. On December 18, 2007, the FCC concluded its review of broadcast ownership rules by relaxing the newspaper/broadcast station cross-ownership restrictions in certain markets. All other broadcast ownership rules, however, remain unchanged. The relaxation of the newspaper/broadcast cross-ownership rule as well as the other ownership rules passed by the FCC in December 2007 have yet to go into effect. Pursuant to the Third Circuit's final order in the Prometheus case, the FCC's newest rules may not take effect until the Third Circuit lifts its stay. On June 12, 2009, the Third Circuit decided to keep the stay in place until further order of the court. On October 1, 2009, the FCC filed a status report with the Third Circuit. The FCC argued that the stay should remain in place, because the 2008 order no longer incorporates the views of a majority of the Commissioners and the agency is set to begin a new review of the media ownership rules that should be completed in 2010.

Since the mid-1980s, many decision makers and others have demonstrated serious interest in deploying ballistic missile defense (BMD) systems capable of defending the United States from ballistic missile attack. Events over the past two decades contributed to strengthen these views. The collapse of the Soviet Union in the early 1990s heightened concerns about the possibility of an accidental or unauthorized launch of ballistic missiles from the remnants of that nation. The Persian Gulf War in 1991, with Iraq's use of Scud missiles, proved to many that the growing threat posed by ballistic missiles had to be addressed. The proliferation of ballistic missile technologies, including sales from nations such as China, Russia, and North Korea to nations such as Iran, Syria, and Pakistan became more worrisome to many. Finally, many also argue that some U.S. adversaries, such as North Korea and Iran, are developing longer-range missiles that might reach the United States, or threaten U.S. military forces deployed abroad, as well as U.S. friends and allies. But interest in missile defense stretches back much further than the 1980s. In fact, efforts to counter ballistic missiles have been underway since the dawn of the missile age at the close of World War II. Numerous programs were begun, and only a very few saw completion to deployment. Technical obstacles have proven to be tenacious, and systems integration challenges have been more the norm, rather than the exception. Since 1985, the United States has spent more than $120 billion on a range of BMD efforts. In 2004, the United States deployed a small-scale national-level missile defense, which is still being tested but considered by most military leaders to be operationally effective. This short report provides a brief overview of the history of the BMD efforts undertaken to defend the United States. It begins with a brief summary of the provisions of the 1972 ABM Treaty, which shaped most of the history of the U.S. BMD effort, and includes a short review of U.S. programs leading to the current program. Negotiations with the Soviet Union on the Anti-ballistic Missile (ABM) Treaty began in November 1969. Early on the United States proposed that the treaty limit Russia to one deployment site around Moscow (which it was building) and permit the United States to deploy four sites around ICBM fields, which was the U.S. program at the time (construction had begun on a site near Grand Forks, ND). The Soviets rejected this proposal, insisting any agreement include equal limits on each nation. They had the same reaction when the United States proposed that the treaty permit either nation to deploy one site at its capital or two sites at ICBM fields. Eventually, the Nixon Administration agreed to accept parity in ABM deployments; each nation could deploy two sites, one around its capital and one around an ICBM field. This permitted the continued construction of each nation's existing ABM site. Signed in May 1972, the Anti-Ballistic Missile (ABM) Treaty prohibited the deployment of ABM systems for the defense of the nations' entire territory. It permitted each side to deploy limited ABM systems at two locations, one centered on the nation's capital and one at a location around ICBM silo launchers. When it became clear that neither nation would complete a second site, the two sides agreed in a 1974 Protocol that each would have only one ABM site, located either at the nation's capital or around an ICBM deployment area. Each ABM site could contain no more than 100 ABM launchers and 100 ABM interceptor missiles. The Treaty also specified that in the future any radars that provided early warning of strategic ballistic missile attack had to be located on the periphery of the national territory and oriented outward. The Treaty banned the development, testing, and deployment of sea-based, air-based, space-based, or mobile land-based ABM systems and ABM system components (these included interceptor missiles, launchers, and radars or other sensors that can substitute for radars). The Treaty placed no restrictions on the development, testing, or deployment of defenses against shorter range missiles. Although the United States withdrew from the ABM Treaty in 2002, the treaty profoundly shaped U.S. BMD efforts up to that point. The United States has pursued research and development in anti-ballistic missile (ABM) systems since the late 1940s. In the mid-1960s it developed the Nike-X system, which would have used ground-based, nuclear-armed interceptor missiles deployed around a number of major urban areas to protect against Soviet missile attack. Many analysts recognized that such protection would be limited, in part because the Soviet Union could probably saturate the system with offensive warheads and just a few warheads could achieve massive damage against a "soft" target like a city. In response, supporters argued that the system could provide a "thin" defense of U.S. cities against an attack by an anticipated Chinese intercontinental ballistic missile (ICBM) force. Consequently, in 1967 Defense Secretary McNamara announced the deployment of the Sentinel ABM system, based on the Nike-X system, as a defense against a future Chinese ICBM threat. In 1969, the Nixon Administration renamed the system "Safeguard," and changed its focus to defend strategic offensive (i.e., nuclear-tipped ICBMs) missile fields, rather than cities, to ensure that these missiles could survive a first strike and ensure retaliation against the Soviet Union. Many in Congress objected to the program, citing its costs, technical uncertainties, and the risk of accelerating the arms race. Congress almost stopped the program's deployment in 1969, when the Senate voted 50-50 to approve an amendment halting construction. Safeguard continued, however, when Vice President Agnew broke the tie with a vote for the program. Nevertheless, sentiment against ABM deployments and in favor of negotiated limits on ABM systems was growing. The United States completed its nuclear interceptor ABM site near Grand Forks, North Dakota. It operated from October 1975 to February 1976, then was shut down at the direction of Congress because it was viewed to be not cost-effective and had major technical problems. The facilities at that location, however, continued to count under the ABM Treaty because it had not been dismantled according to a classified post-Treaty agreement reached with the Soviet Union. Russia continues to this day to operate its ABM site around Moscow. U.S. research and development into ABM systems, especially for ICBM protection, continued, albeit at lower budget levels through the late 1970s. By the time of the Carter Administration, however, spending on BMD programs had began to rise again, primarily as a means to defend the newest generation of U.S. ICBMs--the MX missile system. The Reagan Administration continued to increase funding for defenses against ICBMs begun under the Carter Administration. But, in March 1983, President Reagan announced an expansive, new effort to develop non-nuclear BMD to protect the United States against a full-scale attack from the Soviet Union. Although the Strategic Defense Initiative (SDI) remained a research and development effort, with little testing and no immediate deployments, President Reagan and the program's supporters envisioned a global defensive system with thousands of land-, sea-, air-, and space-based sensors and interceptors. This defensive "shield" would employ both non-nuclear interceptor missiles and more exotic laser or x-ray devices in space designed to destroy incoming missiles. With these technologies, the United States would replace deterrence with defense in its effort to protect itself from Soviet attack. However, as cost estimates and technical challenges increased, the Reagan Administration scaled back its objectives for SDI. It announced that it would begin with a "Phase I" deployment of land-based and space-based sensors and interceptors. This system would not provide complete protection from Soviet attack, but would, instead, seek to disrupt the attack enough to call into question the attack's effectiveness. Phase I of SDI would, therefore, according to their arguments, enhance deterrence, while the United States continued to seek a way to replace deterrence with defense. Although Congress largely supported BMD research and development, it generally opposed plans for significant BMD deployments at that time. The Reagan Administration and the program's supporters recognized that many of the technologies pursued under SDI would not be allowed by the ABM Treaty when they entered the testing or deployment phases. Therefore, the Reagan Administration outlined a new interpretation of the ABM Treaty that it hoped would allow for the testing of space-based and exotic missile defense technologies. Many in Congress at that time objected to this re-interpretation of the ABM Treaty, with Senator Sam Nunn mounting a particularly comprehensive defense of the traditional interpretation of the Treaty. Throughout this period, Congress tendered strong support for the ABM Treaty. The Reagan Administration also opened new negotiations with the Russians, known as the Defense and Space talks, in an effort to reach agreement on modifications to or a replacement for the ABM Treaty. The first Bush Administration responded to the costs and technical challenges of Phase I and the changing international political environment with a further contraction of the goals for SDI. Instead of seeking to protect the United States against a large-scale attack, the United States would seek to deploy a defensive system that could provide Global Protection Against Limited Strikes (GPALS); a more modest version of the original SDI vision. This new focus recognized that the demise of the Soviet Union had reduced the likelihood of a large-scale attack, but also the increased likelihood of a small accidental or unauthorized attack. In addition, this type of ballistic missile defense would have sought to protect the United States, its forces, and allies against an attack by other nations who had acquired relatively small numbers of ballistic missiles. The Bush Administration envisioned a GPALS system that would have included up to 1,000 land-based interceptors and perhaps another 1,000 space-based interceptors, along with space-based sensors. The Administration recognized that this system would have exceeded the limits in the ABM Treaty. It therefore held negotiations with the Russian government in 1992 in an effort to identify a more cooperative and flexible regime to replace the ABM Treaty. The Clinton Administration suspended these negotiations in 1993, when it also scaled back U.S. objectives for a national missile defense program. Meanwhile, some in Congress, notably Senator Nunn, had argued since the late 1980s for the deployment of a more limited NMD system, that would comply with the ABM Treaty, to protect against limited or accidental attacks. The Clinton Administration restructured BMD programs to reflect the results of the 1993 Bottom Up Review, a major DOD-wide review of U.S. military plans and programs. At the time, it decided to emphasize missile defense deployment geared toward short-range missile threats, and focus national level efforts on technology development. Secretary of Defense Aspin noted at the time that these program changes reflected an assessment that the regional ballistic missile threat already existed, while a ballistic missile threat to the United States per se might emerge only in the future. This raised questions about the need for an NMD system in the near- to mid-term, particularly as compared with the need for robust theater missile defense efforts. The Department of Defense also determined that these programs would still be conducted in compliance with the 1972 ABM Treaty. Key legislation was passed during this time. The Missile Defense Act of 1995 (in P.L. 104-106 --National Defense Authorization Act for Fiscal Year 1996) declared it the policy of the United States to: (1) develop as soon as possible affordable and operationally effective theater missile defenses; (2) develop for deployment a multiple-site national missile defense system that is affordable and operationally effective against limited, accidental, and unauthorized ballistic missile attacks on the United States, and which can be augmented over time as the threat changes to provide a layered defense against limited, accidental, or unauthorized ballistic missile threats; (3) initiate negotiations with Russia as necessary to provide for the national defense systems envisioned by the act; and (4) consider, if those negotiations fail, the option of withdrawing from the ABM Treaty. The Clinton Administration adjusted its efforts and adopted a new NMD strategy. In 1996, the Clinton Administration adopted a 3+3 strategy, to guide development and potential deployment. Under this strategy, the United States would develop a national missile defense system to defend the United States against attacks from small numbers of long-range ballistic missiles launched by hostile nations, or, perhaps, from an accidental or unauthorized launch of Russian or Chinese missiles. The strategy envisioned continued development of NMD technologies during the first three years (1997-2000), followed by a deployment decision (in 2000) if the system were technologically feasible and warranted by prospective threats. If a decision to deploy an NMD system were made, the plan then was to deploy it within the second three year period (2000-2003). Development and deployment was to be conducted within the limits of the ABM Treaty. This approach was later modified to allow a longer lead time for possible deployment (possibly 2005), and according to the Pentagon at that time, to reduce the amount of program risk. Ultimately, in September 2000, President Clinton decided not to authorize deployment of an NMD system at that time. He stated that he could not conclude "that we have enough confidence in the technology, and the operational effectiveness of the entire NMD system, to move forward to deployment." President George W. Bush entered office prepared to advance long-range BMD deployment as a key national security objective. The Bush Administration substantially increased funding for BMD programs and laid the foundation for withdrawal from the 1972 ABM Treaty, which was announced in June 2002. Much of the Bush Administration's argument centered around a different strategic environment from 1972: Soviet forces no longer threatened the United States and the greater threat came from the proliferation of ballistic missiles and weapons of mass destruction from other countries, especially rogue states, and terrorists. The Russian government gave little opposition to the Administration's decision to withdraw from the treaty, and potential allied criticism in Europe was notably muted. Also in 2002, the President announced his decision to deploy a limited BMD capability against long-range missiles by the fall of 2004. A handful of ground-based interceptors was deployed in Alaska by this date. To most observers, on-going testing is demonstrating the capabilities of that deployed system. More than 20 interceptors are now deployed in Alaska and California. The Bush Administration wants to expand this capability to a third site in Europe to defend against Iranian ballistic missile threats, but Congress has put this effort on hold pending further testing of the interceptors and final agreement on deployment with Poland and the Czech Republic. Russian opposition has been strong, and European support is mixed. U.S. efforts to develop effective defenses against shorter range ballistic missile threats to U.S. forces deployed overseas grew out of the Army's formal requirement for a theater ABM system in 1949 and produced a succession of systems, including the development and maturity of the Patriot air defense system from the 1960s to the present. As Patriot developed further in the 1980s, some argued for its potential also as a theater missile defense (TMD) capability. Although the Pentagon, Army, and the SDI Organization initially were not supportive of the effort at first, Congress increasingly argued successfully for Patriot's development of an anti-tactical missile (ATM) defense. By the time of the 1991 Persian Gulf War, the Patriot ATM had experienced a remarkably successful test record. Acquisition of Patriot missiles for Desert Storm was accelerated after Iraq invaded Kuwait. On the battlefield, however, Patriot's success, or lack of it in Desert Storm, remains a subject of controversy despite most public perceptions of unequivocal success. Nonetheless, Congress and the Department of Defense determined subsequently that the Patriot concept to defend against shorter range ballistic missile threats to U.S. forces overseas warranted further support. The Patriot system had been upgraded several times by the time of the recent war against Iraq. On the battlefield, Patriot was considered more successful than in 1991, but with mixed results. Congress and the Pentagon continue to support development of other highly effective TMD systems, especially a maritime capability built around existing naval systems and infrastructure that have been deployed or in development for decades. In terms of program and testing success, most observers agree that the U.S. effort to develop and deploy effective BMD against short-range missiles has been more successful relative to the U.S. effort to develop and deploy effective BMD against long-range or strategic ballistic missiles.

For some time now, ballistic missile defense (BMD) has been a key national security priority, even though such interest has been ongoing since the end of World War II. Many current BMD technologies date their start to the 1980s, and even earlier. This effort has been challenging technically and politically controversial. For a 25-year review of the major BMD technology thrust, see CRS Report RL33240, Kinetic Energy Kill for Ballistic Missile Defense: A Status Overview , by [author name scrubbed]. More than $120 billion has been spent on a range of BMD programs since the mid-1980s; Congress appropriated $9.4 billion for FY2007 and $9.9 billion for FY2008. This report provides a brief overview of U.S. BMD efforts to date. It may be updated periodically.

T he Trade Adjustment Assistance (TAA) programs were first authorized by Congress in the Trade Expansion Act of 1962, as amended, to help workers and firms adjust to import competition and dislocation caused by trade liberalization. Although overall economic welfare can be increased by trade liberalization, TAA has long been justified on grounds that the government has an obligation to help the "losers" of policy-driven trade openings that may cause adjustment problems for firms and workers adversely affected by import competition. TAA programs that cover workers, firms, and farmers aim to "facilitate efforts by the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs." Congress continues to monitor TAA program performance and to periodically reauthorize and amend the governing legislation. This report discusses the Trade Adjustment Assistance for Firms (TAAF) program, which is administered by the Economic Development Administration (EDA) of the Department of Commerce. The TAAF program assists eligible American companies that have been harmed by increasing imports; this harm is defined by lower domestic sales and employment because of increased imports of similar goods and services. Through the TAAF program, EDA provides technical assistance, on a cost-sharing basis, to help eligible businesses create and implement business recovery plans that may allow them to remain competitive in a dynamic international economy. The TAAF program provides technical assistance through a partnership with a national network of 11 EDA-funded Trade Adjustment Assistance Centers (TAACs). Congress first authorized TAA in Title III of the Trade Expansion Act of 1962 (P.L. 87-794), but it was little used until it was updated and reauthorized under The Trade Act of 1974 ( P.L. 93-618 ), enacted in January 1975. Congress has amended TAA programs many times over the half-century of its existence. TAA includes a firm and industry assistance program that is administered by the EDA. In 2009, the 111 th Congress expanded TAA through a bipartisan agreement to reauthorize the program. The Trade and Globalization Adjustment Assistance Act of the American Recovery and Reinvestment Act (ARRA) of 2009 ( P.L. 111-5 ) expanded and extended the then-existing programs for workers, firms, and farmers, and added a fourth program for communities (later repealed). In terms of the TAAF program, the TGAAA expanded eligibility to include firms in the services sector to reflect the larger role of services in the U.S. economy; provided greater flexibility for a firm to demonstrate eligibility for assistance through an "extended look-back period," giving firms longer time frames for calculating sales or production declines due to import competition; increased annual authorized funding levels from $16 million to $50 million; established new oversight and evaluation criteria; created a new position of Director of Adjustment Assistance for Firms; and required that EDA submit a detailed annual report to Congress. When the TAA programs were set to expire on January 1, 2011, the House and Senate passed, and the President signed, the Omnibus Trade Act of 2011 ( P.L. 111-344 ) in late December 2010. While the act extended TAA programs for six weeks through mid-February, it eliminated some of the expanded provisions of the TGAAA, including eligibility for services firms and the expanded look-back periods for qualifying firms to meet eligibility requirements. The debate over passage of the proposed free trade agreements (FTAs) with Colombia, Panama, and South Korea offered the 112 th Congress another opportunity to revisit TAA reauthorization as part of the implementing legislation approval process. In October 2011, Congress passed, and the President signed into law, the Trade Adjustment Assistance Extension Act of 2011 (TAAEA) (Title II, P.L. 112-40 ; H.R. 2832 ). The TAAEA authorized the TAAF program through December 31, 2014. The prior 2011 expiration of the expanded provisions of the TAAF program limited the number of firms entering the program (as services firms were no longer eligible to participate), and eliminated the extended look-back period. These factors, combined with an improving economy, made it more difficult for firms to demonstrate their eligibility to participate. The TAAEA retroactively extended the enhanced provisions (inclusion of services firms and the extended "look-back" period) contained in the TGAAA through December 31, 2013. On January 1, 2014, the TAAF again reverted back to the more limited program that had been in effect as of February 13, 2011. Though the TAAF authorization expired on January 1, 2015, the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ), extended TAAF appropriations through September 30, 2015, allowing Trade Adjustment Assistance Centers administering the program to continue to serve existing firms and certify new firms. Six months after the TAAF authorization ended in January 2015, Congress passed, and the President signed, the Trade Preferences Extension Act of 2015 ( P.L. 114-27 ), which included Title IV, the Trade Adjustment Assistance Reauthorization Act (TAARA) of 2015. The TAARA reauthorized the TAAF program through June 30, 2021, and added back the enhanced provisions of the TAAEA, effective retroactively to January 1, 2014. TAARA also restored annual authorization levels to $16 million. Appropriations were $12.5 million in FY2015 and $13 million in FY2016 and FY2017. (See Table 1 .) If Congress does not reauthorize the program, on July 1, 2021, the TAAF program will revert to the more limited program as in 2011, and the entire program will expire on June 30, 2022. (See Figure 1 .) If the President submits an implementing bill for a trade agreement, such as the potential renegotiation of the North American Free Trade Agreement (NAFTA), the subsequent legislative debate and package may provide Congress an opportunity to further amend TAARA, whether reforming the TAA programs, changing the management structure or requirements, or adjusting the current funding level or timelines. The TAAF provides technical assistance to help trade-impacted firms make strategic adjustments that may allow them to remain competitive in a global economy. Originally, TAAF also included loans and loan guarantees, but Congress eliminated all direct financial assistance in 1986 because of federal budgetary cutbacks and concern over the program's high default rates and limited effectiveness. TAAF authorizations and appropriations for FY2005-FY2017 appear in Table 1 . Administered by the Department of Commerce Economic Development Agency (EDA), the TAAF program provides technical assistance to firms through 11 regional Trade Adjustment Assistance Centers (TAACs). TAACS, which operate under cooperative agreements with EDA, are available to assist firms in the 50 states, the District of Columbia, and the Commonwealth of Puerto Rico. The following entities may apply to operate a TAAC: (1) universities or affiliated organizations; (2) states or local governments; or (3) nonprofit organizations. They provide or contract for technical assistance to firms from the initial certification process through adjustment proposal (AP) implementation. TAACs are staffed by professionals with broad business expertise who can help firms develop recovery strategies and also identify financial resources. These professionals function as consultants who specialize in business turnaround strategies specifically designed to meet the needs of individual firms that may face adjustments in competing with lower-priced imports. TAACs apply for EDA grants to operate their programs. All appropriated funds are used to support the TAAC process; no funds or direct financial assistance may be provided to firms. There are three phases to successful completion of a trade adjustment assistance project (see Figure 2 ). In phase one , a firm must demonstrate that it is eligible to apply for assistance. The firm submits a petition for certification documenting that it is a "trade-impacted firm" by having met three conditions: 1. "A significant number or proportion of workers" in the firm have become or are threatened to become totally or partially separated; 2. Sales, or production, or both decreased absolutely, or sales, or production, or both of any article that accounted for not less than 25% of total sales or production of the firm during the 12, 24, or 36 months preceding the most recent 12 months for which data are available have decreased absolutely (the "look-back" period); and 3. Increased imports of articles like or directly competitive with articles produced by the firm have "contributed importantly" to both layoffs and the decline in sales and/or production. Certification specialists are available in the TAACs to work with firms (at no cost to the firm) to complete and submit a petition to EDA to be certified as a trade impacted firm. EDA is statutorily required to make a final determination on a petition within 40 days of accepting it. This time period has declined from an average of 45 days in FY 2009 to 16 days in FY2015. In phase two , a firm certified as eligible has two years to develop and submit a business recovery plan or a djustment p roposal ( AP ) . Approval of the AP is contingent on EDA's finding that the AP (1) is reasonably calculated "to materially contribute" to the economic adjustment of the firm; (2) gives adequate consideration to the interests of the firm's workers; and (3) demonstrates that the firm will use its own resources for adjustment. The TAACs also provide detailed assistance for the adjustment proposal, which seeks to identify business planning and practices that can be enhanced to improve firm competitiveness. EDA has another 60 days to accept or reject the adjustment proposal. In FY2015, the average processing time for APs was 12 days. Because technical assistance is provided in the preparation of the petition and adjustment proposal, there is a high formal acceptance rate. TAAC assistance ensures that submissions are completed correctly and that poor candidates are weeded out early in the process. The firm must pay at least 25% of the cost to prepare the adjustment proposal. In FY2015, 128 firms received assistance in developing APs. In phase three , firms have five years to complete project implementation based on an approved AP. EDA may provide financial assistance for project implementation, but firms must pay at least a 25% match where an AP total implementation cost is less than $30,000. For project assistance exceeding $30,000, a firm must cover at least 50% of the total cost, with the federal share capped at $75,000. Adjustment proposals may involve strategic restructuring of various aspects of business operations. Consultants with specific expertise are selected jointly between TAACs and the firm to help with implementation. Because firms must be experiencing falling sales or declining production to be eligible, TAACs often focus first on marketing or sales strategies to identify new markets, new products, promotional initiatives, and export opportunities. The core objective is to increase revenue. Second, production inefficiencies are often targeted to reduce firm costs and improve price competitiveness. Third, TAACs can develop debt restructuring strategies and act as intermediaries in finding new sources of business financing. In FY2015, 729 firms received AP assistance in implementing projects. TAAC assistance to firms to prepare petitions and to develop and implement business recovery plans (APs) amounted to $9.5 million in FY2015 and the financial contribution of firms participating in the program amounted to $5.8 million. In 2015, 39% of adjustment assistance focused on improving marketing-sales, 26% on production, 21% on enhancing management and support systems, and 4% on financial systems (see Table 2 ). Table 3 summarizes select firm trade adjustment data for FY2005-FY2015. The TAAF program targets small- and medium-sized enterprises (SMEs), which is borne out in the firm data. Firms averaged fewer than 100 employees since 2010 with average sales of over $15 million. In 2015, the federal government provided 52% of adjustment costs, for an average $52.8 thousand per firm. In FY2015, 100% of certified firms were in manufacturing. Historically, TAAF program evaluation was limited, with EDA lacking a formal evaluation process. Early efforts to analyze the program included comprehensive outside studies by the Urban Institute in 1998 and Government Accountability Office (GAO) in 2000 that addressed two critical issues: program administration and effectiveness. The 2000 GAO report was not able to conclusively assess the impact of the program on firms because of a lack of systematic data. Both reports identified specific deficiencies with the TAAF program, such as a cumbersome certification process, long approval times, and little oversight and evaluation of projects. As a small program with limited resources, the TAAF had not received the managerial input required to adequately evaluate its efforts. Congress addressed this issue in the 2009 TGAAA, which required the creation of a new Director of Adjustment Assistance for Firms, along with additional support staff. The act also required an annual report to Congress and included specific performance measures to be collected and analyzed. Congress also mandated EDA to certify petitions for assistance and adjustment proposals within specific time frames. As required by Congress, the GAO conducted a comprehensive review of the TAAF program, released in September 2012. It noted important progress in the administrative capabilities of EDA and documents the positive impact of the TAAF program on trade-affected businesses. The GAO report also discussed the positive contribution of the changes initially made by the TGAAA and reinstated by the TAAEA. GAO found that EDA's administration of the TAAF program had improved markedly as a result of changes resulting from the 2009 legislation. EDA reduced processing times, provided new performance reporting measures, and increased firm participation. GAO noted that TGAAA modifications to the TAAF program led to improvements in (1) management and staffing, (2) annual reporting, (3) eligibility for participation of services firms, and (4) expansion of the "look-back" period that permitted more firms to meet certification criteria. The report also pointed to continuing challenges in centralized data management, evaluation reporting, and assessment of the effectiveness of TAAF. One weakness identified by GAO was EDA's funding allocation formula for TAACs to ensure that the distribution of funds across TAACs provide "equivalent benefits" adequate to meet the varying needs of the 11 TAACs. The second area of concern raised by GAO was EDA's analysis of performance measures. The most recent TAAF annual reports (FY2011 through FY2014) emphasize output measures (the type or level of program activities conducted or the direct products or services delivered by a program: number of firms assisted, petitions accepted, processing times) rather than outcome measures (defined as goals and performance measures that assess the results of a program, compared with its intended purpose). In part, this appears to be a result of the measures and indicators that Congress required EDA to collect and analyze. Of the 16 performance indicators, GAO reported that 13 emphasize outputs, or measures, of the goods and services provided by the program. The TAAF annual reports have compared the performance of TAAF participants, which are, by definition, trade-impacted, troubled firms to the average performance of the U.S. manufacturing sector as a whole (using Bureau of Labor Statistics [BLS] data). GAO expressed concerns with EDA's methodology and recommended that "using program evaluation methods to rule out plausible alternative explanations for outcomes that may be influenced by a variety of external factors, such as changes in the economy, can help strengthen evaluations." GAO conducted its own analysis to evaluate the policy impact of the TAAF on firms participating in the program. The GAO report discussed the difficulties inherent in attempting to assess the "apples-to-oranges" effect of comparing TAAF-participating companies with a group of nonparticipating firms (as EDA has done). Even if a control group with characteristics similar to TAAF-participating firms could be identified, GAO noted that such an analysis would also have weaknesses. Given these limitations, GAO analyzed the performance of TAAF-participating firms, but explicitly recognized that such an approach could not determine whether TAAF firms' performance would have improved in the absence of the program. Using its own methodology, GAO found a "small and statistically significant relationship between program participation and sales." GAO estimated that TAAF assistance, on average, resulted in a 5% to 6% increase in sales, which was particularly relevant to smaller firms, and a 4% increase in productivity, albeit also highly correlated with firms operating in industries that were experiencing growth. Employment effects were not found to be statistically significant. GAO also confirmed EDA's assessment that both manufacturing and services firms faced import competition that directly affected their sales, and that these firms, by and large, benefitted from specialized attention provided by TAACs. In addition, GAO conducted a survey of firms participating in the TAAF program. The survey found that 90% of respondent firms reported that they were "very" or "generally" satisfied with the services that they received from the TAACs. The GAO report provided some of the strongest evidence to date of the benefits of the now-lapsed 2009 legislative changes, as well as EDA's much-improved administration and evaluation of the TAAF program compared to years past. Most of the public debate on trade and TAA does not distinguish between the various programs that EDA administers, including the TAAF. Some observers believe that TAA should be eliminated while others say that reform and changes are needed to the programs. Whether changes are needed to TAA programs may depend on their effectiveness in assisting workers, or firms in the case of TAAF, survive and grow despite trade liberalization. For the TAAF program, EDA is required by Congress to submit an annual report that provides findings and specified results (or performance measures). EDA has released six annual reports (FY2010 through FY2015) that identify numerous administrative and operational improvements. In addition, TAACs are now allocated funds in part based on performance measures (number of firm certifications and adjustment proposals generated) and quality measures. As part of the TAAF annual report, EDA is required to provide a comparison of sales, employment, and productivity for each firm at the time it was certified and both one and two years after the recovery plan was completed. EDA does not estimate the specific number of "jobs retained" or "jobs created." In its FY2014 report, EDA notes that, from FY2012 to FY2013, average firm sales had increased by 13.6%, average employment increased by 3.5%, and average productivity increased by 9.7%. EDA also notes that all firms completing the adjustment program were still in operation--suggesting an impressive "survival rate"--particularly given that all these firms have the additional burden of adjusting to import competition. In analyzing earlier EDA reports (FY2010 to FY2012), GAO concluded that these trends provide only a limited understanding of program effectiveness. The data on employment and productivity are derived from annual surveys conducted by the 11 TAACs. The data are then aggregated and presented as part of the congressionally required annual report. Employment effects are referred to as number of "jobs impacted," or number of jobs retained or generated at firms completing at least one technical assistance project. Declines in employment do not necessarily reflect TAAC performance. Employment can fall dramatically for firms that are hit by a surge of foreign import competition or by market disruptions that are not trade-related. In the two reporting years following firms' completion of business recovery programs, firms may continue to experience increased import competition or other negative effects (for instance, a slow economic recovery from the 2008 recession). Under these circumstances, the fact that employment losses continue after an adjustment proposal has been completed is not necessarily an unexpected or negative outcome in terms of trade adjustment assistance effectiveness. Whether the current one- and two-year post-TAAF-exit reporting periods provide enough time and data to assess the effectiveness of recovery programs, it is possible that a number of successful TAAF participants will continue to face increased competition that results in some program participants operating at levels of output or employment that existed prior to TAAC assistance. As noted in the previous section, caution is warranted when drawing conclusions on the basis of limited trend data. EDA figures reflect employment trends that could be attributable to the TAAF program. A more rigorous analysis would be needed to estimate and isolate the effects of the TAAF program from other factors that affect employment trends in TAAF-participating firms. To more accurately assess the effectiveness of the TAAF program in terms of helping firms or "saving jobs," it would be necessary to use more sophisticated methodologies and analyses (such as those employed and recommended by GAO) than Congress currently requires for the TAAF annual report. With respect to the reported high "survival rate" for firms that completed the TAAF program, they represent only about half of all firms that had their adjustment proposals approved for assistance. In FY2015, of the 176 firms that exited the TAAF program, 153 firms (87%) successfully exited the program, and another 107 (61%) completed an achievable number of projects within the five-year limit. The remaining 23 (13%) did not complete the program for various reasons, including that the firm was acquired or sold, went out of business, failed to submit the AP within two years after TAA certification or failed to implement the AP, or suffered bankruptcy. Given that TAAF focuses primarily on small- and medium-size firms that face multiple challenges, it is not entirely surprising that many firms that receive TAAF certifications are unable to complete the program. It is difficult to compare firms because they enter and exit the TAAF program in different years, and some firms participate in more than one TAAF adjustment program at the same time. Yet, reporting indicates that the TAAF program is successful in assisting a significant percentage of firms through a recovery process that can last from two to seven years, which can lead to the conclusion that the limited amount of funds available to trade-impacted firms through the TAAF program may amount to a relatively efficient policy tool. In a final section, the FY2012 through FY2015 TAAF annual reports offer anecdotes collected from the TAACs that provide success stories about participating firms from all parts of the country and in various industries that used TAAF assistance. Although these examples may identify TAAC-provided assistance to select firms, they do not demonstrate the extent to which TAAF or the TAACs provided the assistance that may have been critical to the success of any one particular firm to succeed where others do not. Whether some firms might have been able to adjust on their own cannot be determined. Economists tend to agree that in defining the rules of exchange among countries, freer trade is preferable to protectionism. Insights from trade theory point to the mutual gains for countries trading on their differences, producing those goods at which they are relatively more efficient, while trading for those at which they are relatively less so. Additional gains are realized from intra-industry trade based on efficiencies from segmented and specialized production. Firm-level evidence supports this theory. Trade appears to "enable efficient producers within an industry, and efficient industries within an economy, to expand," leading to a reallocation of resources that increases a country's productivity, output, and income. Consumers (both firms and households) also gain from a wider variety of goods and lower prices. However, increased competition from trade liberalization also creates "winners and losers," presenting adjustment problems for all countries. Some firms may grow as they expand into new overseas markets, while others may contract, merge, or fail when faced with greater foreign competition. While the adjustment process may be healthy from a macroeconomic perspective, much like market-driven adjustments that occur for reasons other than trade (e.g., technological changes, weather-related disasters), the transition can be hard on some firms and their workers. Critics of free trade agreements often highlight the adjustment costs of reducing trade barriers. To avoid business closures and layoffs, firms likely to be affected by increased trade may seek to weaken, if not defeat, trade liberalizing legislation. This makes economic sense from the perspective of the affected industries, firms, and workers, but economists argue that in the long run it can be more costly for the country as a whole. The costs of protection arise because competition is suppressed, reducing pressure on firms to innovate, operate more efficiently, and become lower-cost producers. The brunt of these costs falls to consumers, both individuals and businesses, who must pay higher prices, but the national economy is also denied forgone productivity gains. One way to balance the large and broad-based gains from freer trade with the smaller and more highly concentrated costs is to address the needs of firms negatively affected, such as through the TAA programs, including the one for firms. Supporters justify TAA policy on grounds that (1) it helps those who are hurt by trade liberalization; (2) the economic costs are lower than protectionism and can be borne by society as a whole; and (3) given rigidities in the adjustment process, it may help redeploy economic resources more quickly, thereby reducing productivity losses and related public sector costs (e.g., unemployment compensation). Others dispute these claims and have raised concerns over the effectiveness and costs of the program, arguing that it should be limited or discontinued. In debates over trade liberalization, some observers may not appreciate the full impact that globalization and digitization trends are having on trade. While trade liberalization may present greater import competition for SMEs domestically, globalization and digitization also present opportunities for growth. The emergence of global value chains (GVCs) and the Internet revolution provide possible growth opportunities for firms as foreign markets are opened through trade liberalization. TAAF programs offer one way to help SMEs to gain the knowledge and skills needed to take advantage of these global shifts. The programs can help SMEs to improve their position by integrating into a GVC or using digital platforms to reach new markets, thus offsetting losses that may occur as a result of trade liberalization. GVCs are mainly organized and coordinated by large multinational companies (MNCs) and account for more than 70% of global trade in goods and services and in capital goods. A large share of global trade takes place within GVCs in the form of imports and exports of intermediate (or unfinished) goods and services that move within, between, and among countries. According to one study, in many countries, a domestically manufactured good contains over 20% of foreign value added, and that may rise to over 50% in some countries and industries. This system of production depends on the willingness of many countries to import in order to export. The WTO's "Made in the World" initiative finds that the increased use of GVCs has led industries globally to demand greater trade liberalization and lower protectionism as these firms depend on other links in the value chain, both domestic and foreign. At the domestic level, the U.S. small- and medium-sized domestic producers that sell goods and services to multinational exporters are not counted as exporters--even though they may contribute a substantial amount of the value added in U.S. exports. The statistical data needed to measure the contribution of domestic and foreign value added at each stage of GVC production are under development, and a complete picture of the impact of GVCs may not be possible until such data become available. In one study, the Organization for Economic Co-operation and Development (OECD) states that the participation of smaller firms in GVCs is often underestimated. Smaller firms "often supply intermediates to exporting firms in their country and are as such relatively more integrated in the domestic value chains." Unlike most other major industrialized, emerging, and developing economies, the United States is less dependent on imports of foreign intermediate goods for its exports. Instead, small- and medium-size domestic firms are, in the aggregate, major suppliers of goods (parts, components, and finished products) and services to large U.S. exporters. The OECD cites studies by Matthew Slaughter and the U.S. International Trade Commission (USITC) showing that the typical U.S. MNC buys more than $3 billion in inputs [goods and services] from more than 6,000 U.S. small and medium-sized enterprises (SMEs)--or almost 25% of the total input purchased by these firms. These domestic supplies are not reflected in international trade statistics, which only count direct exports; estimates for the United States show that in 2007 the export share of SMEs increased from approximately 28% (in gross exports) to 41% (in value-added exports), when such indirect exports are taken into account. The USITC calculated that in 2007 total direct exports by U.S. SMEs amounted to $382 billion and indirect exports of SMEs amounted to $98 billion. The USITC translated these figures into an estimated 4.0 million U.S. jobs, with 1.7 million U.S. jobs supported by direct SME exporters and an additional 2.1 million jobs created by SME indirect exporters that sell intermediate inputs to direct exporters. Of the 10 million U.S. jobs that were supported by U.S. exports of goods and services, SME exports accounted for approximately 40% of all export-supported jobs in the United States. Significantly, the USITC report found that "much of the indirect value-added exports by SMEs--the intermediate goods and services produced by SMEs that are eventually shipped abroad as components embedded in other products--is concentrated in the manufacturing sector." Given that the main focus of TAAF is on troubled SMEs, the magnitude of U.S. SME-produced goods that are exported by GVCs suggests that the TAAF program could assist and encourage linkages between these troubled enterprises and the multinationals that are major exporters of their inputs. Although many SMEs have built strong ties to large U.S. exporters and MNCs, liberalized trade policies adopted by the United States or other countries, new technologies, or macroeconomic conditions could potentially erode the incumbent position and domestic advantages of U.S. SMEs. A potential question is whether the EDA, through the TAAF program and the TAACs, could assist trade-impacted firms in developing more relationships with MNCs, as well as analyzing the necessary conditions that would allow TAAF-participating firms to have a realistic chance of doing so. The high volume of trade that flows through GVCs and the predominant position of the United States as a major hub and headquarters nations (with the highest level of domestic value-added export content [89%] of any OECD country and the third highest in the Group of Twenty [G20] after Russia and Brazil) suggests the possibility that such chains could be a source of opportunity for U.S. trade-impacted firms. EDA produces an annual report for Congress on the operations of the TAAF program, but among the data requirements established by Congress in the TGAAA, as amended, there are no performance measures that document or report on TAAF-participating firms that sell goods or services to U.S. exporters (in terms of number of firms assisted and value of goods sold), or that provide data on direct exports by firms receiving TAAF assistance. Another opportunity related to GVCs is the growing demand for a skilled workforce to operate and support supply chains. A report by the U.S. Departments of Transportation, Education, and Labor titled "Strengthening Skills Training and Career Pathways across the Transportation Industry" identified high-paying, high-skilled, high-demand transportation jobs. As global trade and GVCs grow, these shortages could become more acute. Pairing a TAAF-qualified firm with MNCs or companies focused on supply chain may provide opportunities for EDA to help firms through TAAF meet growing demand. A second fundamental shift in global trade that is opening new markets for SMEs is occurring with the Internet-driven digital revolution. Digital platforms, including online communication tools and e-commerce websites, can minimize costs and enable SMEs to grow through extended reach to new customers and markets or by integrating into a GVC. As a result, many such firms that in the past might not export or seek new markets abroad are more easily able and willing to conduct business in global markets. In addition, increased digitization of customs and border control mechanisms helps simplify and speed delivery of imported goods to customers, making them more attractive to foreign buyers. As a result, digitization can enable SMEs to serve the new markets abroad that are opened by trade liberalization. For example, a study of U.S. SMEs on the e-commerce platform eBay found that 97% export; among the 50 states, the range was from 93 to 98%. According to eBay, 59% of its U.S. SMEs export to 10 or more markets. In countries as diverse as Peru and the Ukraine, a full 100% of eBay SMEs export. TAAF programs provide one channel for helping trade-impacted SMEs make the necessary shifts and gain the skills to succeed in online marketplaces and keep up with technological changes. As Congress considers trade liberalization agreements and ongoing trade negotiations, it may wish to further examine the TAAF in light of the current debate of its effectiveness and the impact of international trade on the U.S. economy. An implementing bill for a new trade agreement, such as a renegotiated NAFTA, may provide Congress an opportunity to reexamine and potentially revise the TAA programs. In addition to adjusting appropriations levels, Congress could examine changing the current program or EDA's administration of it. Potential options for Congress to consider on TAAF may include determining if current funding levels are appropriate; further refining the performance metrics to measure the employment or economic impact of TAAF programs; placing a stronger emphasis on assisting SMEs utilize technology to improve operational efficiency, expand into new markets, including through e-commerce, and take fuller advantage of an increasingly digitally-driven economy; facilitating partnerships with large multinational companies to support SME integration into GVCs; or consolidating or streamlining TAAF with other federal programs that assist troubled SMEs such as those operated by the Small Business Administration (SBA). While TAAF has traditionally focused on firms who can demonstrate they have been harmed by import competition, Congress could also explore the feasibility and possible steps that could or should be taken before firms are harmed. Congress might consider requiring EDA to conduct outreach and education on pending trade liberalization agreements. The analysis of each proposed trade agreement by the USITC may help identify industries or regions as potentially vulnerable or likely to experience a negative impact as a result of proposed trade liberalizing measures. For example, the USITC economic impact assessment report for the potential Trans-Pacific Partnership (TPP) contended that U.S. demand for business services would outstrip supply, presenting opportunities for growth, while employment could decline in certain manufacturing and transport sectors. Congress could, for example, consider requiring EDA to prepare a capacity building plan to assist those industries or regions USITC identified as potentially vulnerable or likely to experience a negative impact from implementation of a proposed trade agreement. Appendix A. Acronyms

As Congress considers potential legislation related to trade agreements, the potential impact on U.S. workers and firms is part of the debate. The Trade Adjustment Assistance (TAA) programs were first authorized by Congress in the Trade Expansion Act of 1962 to help workers and firms adapt to import competition and dislocation caused by trade liberalization. While trade liberalization may increase the overall economic welfare of all the affected trade partners, it can also cause adjustment problems for firms and workers facing import competition, and adjustment assistance has long been justified on the grounds that it is the least disruptive option for offsetting policy-driven trade liberalization. The TAA programs for workers, firms, and farmers represent an alternative to policies that would restrict imports, providing assistance while bolstering freer trade and diminishing prospects for potentially costly tension (retaliation) among trade partners. This report discusses the Trade Adjustment Assistance for Firms (TAAF) program, which is administered by the U.S. Department of Commerce Economic Development Administration (EDA), and related policy issues. Most recently, reauthorization of TAA was linked to renewal of Trade Promotion Authority (TPA). Both TPA (P.L. 114-26 ) and TAA (P.L. 114-27) were signed into law in June 2015. The renewed TAA not only extended TAAF but reinstated certain expanded provisions and authorized annual funding. TAAF provides technical assistance to help trade-impacted firms make strategic adjustments to improve their global competitiveness. Under TAAF, a firm first submits a petition to demonstrate its eligibility, then works with TAAF professionals to develop and submit, and finally implement, a business recovery plan. As required by the Trade and Globalization Adjustment Assistance Act of 2009 (TGAAA) (Title II of P.L. 111-5), EDA publishes annual reports on the performance of the TAAF program. The reports have generally shown that two years after completion of the program, on average, participating firms have increased sales, employment, and productivity. The high success rate for firms that "completed" the TAAF program represents only about half of all firms certified as eligible for assistance. The rest left the program without completing an adjustment plan and were no longer monitored. The Government Accountability Office (GAO) completed a comprehensive evaluation of the TAAF program in 2012 and found marked improvement in EDA's administration and evaluation efforts and also confirmed EDA's assessment that trade-impacted firms benefitted from the specialized attention provided by TAAF assistance. GAO also found a "small and statistically significant relationship between program participation and sales," which was particularly relevant to smaller firms, albeit also highly correlated with firms operating in high-growth industries. Employment effects were not found to be statistically significant. Since the 1990s, debates over trade liberalization have increasingly focused on the changing nature of trade in an era of globalization--especially the emergence of global value chains (GVCs) and the evolving digital economy. GVCs are organized and coordinated by multinational companies (MNCs) and now account for about 70% of global trade in goods and services and capital goods. GVCs offer the potential for small- and medium-size firms to become more integrated into international trade and produce higher-value-added products. One question is whether EDA, through the TAAF program, can help trade-impacted firms in developing stronger relationships with MNCs and GVCs. Another is how EDA can help small and medium enterprises take advantage of the digital economy to reach new markets, including those opened up by trade agreements. Congress may consider these questions as well as further reforms or amendments to TAAF as part of ongoing discussions on potential trade agreements.

Current U.S. space policy is based on a set of fundamental factors which, according to an Eisenhower presidential committee, "give importance, urgency, and inevitability to the advancement of space technology." These factors were developed fifty years ago as a direct result of the Soviet Union's (USSR) launch of the first artificial satellite, Sputnik. This launch began the "space age" and a "space race" between the United States and USSR. The four factors are the compelling need to explore and discover; national defense; prestige and confidence in the U.S. scientific, technological, industrial, and military systems; and scientific observation and experimentation to add to our knowledge and understanding of the Earth, solar system, and universe. They are still part of current policy discussions and influence the nation's civilian space policy priorities--both in terms of what actions NASA is authorized to undertake and the appropriations each activity within NASA receives. NASA has active programs that address all four factors, but many believe that it is being asked to accomplish too much for the available resources. An understanding of how policy decisions made during the Sputnik era influence U.S. space policy today may be useful as Congress considers changing that policy. The response of Congress to the fundamental question, "Why go to space?," may influence NASA's programs, such as its earth-observing satellites, human exploration of the Moon and Mars, and robotic investigation of the solar system and wider universe as well as its policies on related activities, including spinoff technological development, science and mathematics education, international relations, and commercial space transportation. This report describes Sputnik and its influence on today's U.S. civilian space policy, the actions other nations and commercial organizations are taking in space exploration, and why the nation invests in space exploration and the public's attitude toward it. The report concludes with a discussion of possible options for future U.S. civilian space policy priorities and the implication of those priorities. On October 4, 1957, the USSR launched Sputnik, the world's first artificial satellite. Sputnik (Russian for "traveling companion") was the size of a basketball and weighed 183 pounds (see Figure 1 ). Sputnik's launch and orbit still influences policy decisions 50 years later. The USSR's ability to launch a satellite ahead of the United States led to a national concern that the United States was falling behind the USSR in its science and technology capabilities and thus might be vulnerable to a nuclear missile attack. The resulting competition for scientific and technological superiority came to represent a competition between capitalism and communism. Both the 85 th Congress and President Eisenhower undertook an immediate set of policy actions in response to the launch of Sputnik. Congress established the Senate Special Committee on Space and Astronautics on February 6, 1958, and the House Select Committee on Science and Astronautics on March 5, 1958--the first time since 1892 that both the House and Senate took action to create standing committees on an entirely new subject. Each committee was chaired by the Majority Leader. The Preparedness Investigating Subcommittee of the Senate Armed Services Committee was also active in analyzing the nation's satellite and missile programs. Multiple congressional hearings were held in the three months following Sputnik, and President Eisenhower addressed the nation to assure the public that the United States was scientifically strong and able to compete in space. Within 10 months after Sputnik's launch, the Eisenhower Administration and Congress took actions that established the National Aeronautics and Space Administration (NASA) through the National Aeronautics and Space Act (P.L. 85-568), established the Defense Advanced Research Projects Agency (DARPA) within the Department of Defense through DOD Directive 5105.15 and National Security - Military Installations and Facilities (P.L. 85-325), increased its appropriation for the National Science Foundation to $134 million, nearly $100 million higher than the previous year, and reformed elementary, secondary, and postsecondary science and mathematics education (including gifted education) and provided incentives for American students to pursue science, technology, engineering, and mathematics postsecondary degrees via fellowships and loans through the National Defense Education Act (P.L. 85-864). Figure 2 provides a timeline of the some of the major policy events in the year following the Sputnik launch. When people today speak of a "Sputnik moment," they often refer to a rapid national response that quickly mobilizes major policy change as opposed to a response of inaction or incremental policy change. The term is also used to question inaction--as in whether or not the nation is prepared to respond to a challenge without an initiating Sputnik moment. The Sputnik launch captured the public's attention at a time of heightened U.S. tension regarding the threat posed by the USSR and communism. Societal focus on civil defense, including "duck and cover" drills and the establishment of some personal bomb shelters, predisposed the nation towards identifying the potential threat posed by the Sputnik launch. In this climate, many Americans became concerned that if the USSR could launch a satellite into space, it could also launch a nuclear missile capable of reaching the United States. The Sputnik launch was immediately viewed as a challenge to U.S. scientific and technological prowess. The Soviet Union launched both Sputnik and Sputnik 2 before the United States was able to attempt a satellite launch. Additionally, the Soviet launch was of a far heavier satellite than the U.S. had planned. The net result of the Sputnik launch was called a "Pearl Harbor for American Science"--a sign that the United States was falling behind the USSR in science and technology. The ensuing competition in scientific and technological skills came to represent a competition to determine the political superiority of capitalism versus communism. The Senate Majority Leader at the time, future President Lyndon B. Johnson, illustrated the concern of many Americans in his own observations of the night sky: "Now, somehow, in some new way, the sky seemed almost alien. I also remember the profound shock of realizing that it might be possible for another nation to achieve technological superiority over this great country of ours." The Sputnik launch prompted rapid development of new federal policies and programs. In particular, federal investment in NASA is still influenced by the Sputnik-era principles as illustrated in the Space Act, both in terms of what actions NASA is authorized to undertake and the extent to which each activity is funded. In 2008, NASA was reauthorized for FY2009. As Congress considers future reauthorization of NASA, the status of the nation's space policy, and the relative importance of the various objectives underlying this policy may become topics of debate. The United States faces a far different world today than 50 years ago. No Sputnik moment, Cold War, or space race exists to help policymakers clarify the goals of the nation's civilian space program. The Hubble telescope, Challenger and Columbia space shuttle disasters, and Mars exploration rovers frame the experience of current generations, in contrast to the Sputnik launch and the U.S. Moon landings that form the experience of older generations. According to an analysis conducted by the Space Foundation, the global space industry in 2007 generated $251.16 billion in revenues. (See Figure 3 .) The United States faces a possible new set of competitors or collaborators in civilian space exploration. China, India, Japan, Russia, and Europe are taking an active role in space exploration as are commercial companies. If China is the first to land humans on the Moon and establish a Moon base in the 21 st century or the European Space Agency is the first to land humans on Mars, will policymakers and the public view these activities as a loss in United States status and leadership? If so, what are the policy implications? Would such activities become this century's "Sputnik moment" that would spur further investment in U.S. space exploration activities? If not, how might this affect U.S. space policy priorities? Future spacecraft are being developed. For example, the X-Prize Foundation Google Lunar X Prize ($30 million) invites private teams from around the world to build a robotic rover capable of landing on the Moon. Virgin Galactic, currently based in California with a spaceport under construction in New Mexico, has plans for SpaceShipTwo, a six-passenger spaceliner. In Europe, EADS-Astrium is developing a four-person spacecraft to make suborbital trips. According to press reports, a number of venture capitalists are also planning to build spaceships or develop private space programs. Should these efforts prove successful, what implications might this have for U.S. space policy priorities? The Obama Administration has stated the following regarding its proposed civilian space policy: The United States must maintain and take full advantage of its technical and strategic superiority in space, which can simultaneously enhance our national security and provide crucial information about environmental and climatologic trends. The administration and OSTP will develop policies that will: * Close the gap between retirement of the Space Shuttle and launch of the next generation of space vehicles to minimize any interruption in access to low-earth orbit, and take full advantage of the research opportunities provided by the International Space Station. * Strengthen NASA's missions in space science, weather, climate research, and aeronautical research. * Help establish a robust and balanced civilian space program, and engage international partners and the private sector to amplify NASA's reach. * Re-establish the National Aeronautics and Space Council, which will report to the President and oversee and coordinate civilian, military, commercial and national security space activities. * Ensure Freedom of Space by assessing possible threats to U.S. space assets and identifying the best options, military and diplomatic, for countering them; accelerating programs to harden U.S. satellites against attack; and establishing contingency plans to ensure that U.S. forces can maintain or duplicate access to information from space assets if necessary. On May 7, 2009, John Holdren, Director of the President's Office of Science and Technology Policy (OSTP), sent a letter to the Acting NASA Administrator requesting that an independent review of planned U.S. human space flight activities. The blue-ribbon panel, chaired by Norman Augustine, the former CEO of Lockheed Martin, is to work closely with NASA and seek input from Congress, the White House, the public, industry, and international partners. According to OSTP, The review panel will assess a number of architecture options, taking into account such objectives as: 1) expediting a new U.S. capability to support use of the International Space Station; 2) supporting missions to the Moon and other destinations beyond low Earth orbit; 3) stimulating commercial space flight capabilities; and 4) fitting within the current budget profile for NASA exploration activities. Among the parameters to be considered in the course of its review are crew and mission safety, life-cycle costs, development time, national space industrial base impacts, potential to spur innovation and encourage competition, and the implications and impacts of transitioning from current human space flight systems. The review will consider the appropriate amounts of R&D and complementary robotic activity necessary to support various human space flight activities, as well as the capabilities that are likely to be enabled by each of the potential architectures under consideration. It will also explore options for extending International Space Station operations beyond 2016. The results of the review are to be completed in sufficient time so that the Administration decision may consider the results of the panel's deliberations in deciding what action to take regarding human space flight by August 2009. On May 23, 2009, President Obama nominated General Charles Bolden to be NASA Administrator and Lori Garver to be Deputy Administrator. Both positions require Senate confirmation. During the Bush Administration, a U.S. National Space Policy defined the key objectives of defense and civilian space policy. This policy incorporated key elements of the Vision for Space Exploration ("Vision"), often referred to as the Moon/Mars program. In the Vision, the President directed NASA to focus its efforts on returning humans to the Moon by 2020 and eventually sending them to Mars and "worlds beyond." The President further directed NASA to fulfill commitments made to the 13 countries that are its partners in the International Space Station (ISS). In the 2005 NASA authorization act ( P.L. 109 - 155 ), Congress directed NASA to establish a program to accomplish the goals outlined in the Vision, which are that the United States Implement a sustained and affordable human and robotic program to explore the solar system and beyond; Extend human presence across the solar system, starting with a human return to the Moon by the year 2020, in preparation for human exploration of Mars and other destinations; Develop the innovative technologies, knowledge, and infrastructures both to explore and to support decisions about the destinations for human exploration; and Promote international and commercial participation in exploration to further U.S. scientific, security, and economic interests. More specifically, the Vision included plans, via a strategy based on "long-term affordability," to return the Space Shuttle safely to flight (which has been accomplished), complete the International Space Station (ISS) by 2010 but discontinue its use by 2017, phase out the Space Shuttle when the ISS is complete by 2010, send a robotic orbiter and lander to the Moon, send a human expedition to the Moon (sometime between 2015-2020), send a robotic mission to Mars in preparation for a future human expedition, and conduct robotic exploration across the solar system. NASA is developing a new spacecraft called Orion (formerly the Crew Exploration Vehicle) and a new launch vehicle for it called Ares I (formerly the Crew Launch Vehicle). An Earth-orbit capability is planned by 2014 (although NASA now considers early 2015 more likely) with the ability to take astronauts to and from the Moon following no later than 2020. The Vision had broad implications for NASA, especially since almost all the funds to implement the initiative are expected to come from other NASA activities. Among the issues Congress is debating are the balance between NASA's exploration activities and its other programs, such as science and aeronautics research; the impact of the Vision on NASA's workforce needs; whether the space shuttle program might be ended in 2010; and if the United States might discontinue using the International Space Station. During the Bush Administration, NASA stated that its strategy is to "go as we can afford to pay," with the pace of the program set, in part, by the available funding. Affording such a program is challenging, however, with a 2006 National Research Council report finding "NASA is being asked to accomplish too much with too little." The report recommended that "both the executive and the legislative branches of the federal government need to seriously examine the mismatch between the tasks assigned to NASA and the resources that the agency has been provided to accomplish them and should identify actions that will make the agency's portfolio of responsibilities sustainable." The Table A-1 compares The National Aeronautics and Space Act of 1958 as amended ("Space Act"), the oldest and most recent Presidential commission reports (Killian and Aldridge ), the U.S. National Space Policy ("Space Policy"), and the National Aeronautics and Space Administration Authorization Act of 2008 ( P.L. 110-422 ). The analyses identify the following reasons why the United States might explore space: knowledge and understanding, discovery, economic growth--job creation and new markets, national prestige, and defense. Some also include the following reasons: international relations, and education and workforce development. Although there is broad agreement on the reasons for space exploration, there is a great deal of variation in the details. Among the chief differences in these documents are the degree to which discovery is the major reason for space exploration as opposed to meeting needs here on Earth; creation of jobs and new markets should be a major focus of NASA activities as opposed to a side effect; science and mathematics education and workforce development should be a goal of NASA in addition to other federal agencies; and relationships with other countries should be competitive or cooperative regarding space exploration. Comparing the Aldridge Commission themes, the Space Policy goals, and the Space Act objectives on the issue of the relationship of the space program to economic growth provides some insights. While the Aldridge committee has a much broader view of the industries related to space exploration, focusing on the potential role of space exploration in job generation and new market development, the Space Act and Space Policy focus on only one sector, the aeronautical and space vehicle industry. The two Presidential commissions have two key differences. One is the first theme outlined in the Sputnik-era Killian Committee report: "the compelling urge of man to explore and discover." This is quite different from the recent Aldridge Commission report, which, although indicating exploration and discovery should be among NASA goals, states that "exploration and discovery will perhaps not be sufficient drivers to sustain what will be a long, and at times risky, journey." The implication is that, today, solely responding to the challenge of going to the Moon or Mars is not sufficient to energize public support for space exploration. The second key difference is the focus of the Aldridge Commission on economic growth as a proposed space exploration theme. The Aldridge Commission identifies the ability of investments in civilian space programs to generate new jobs within current industries and spawn new markets. The contribution that federal space investments make to the nation's economy was not a key factor identified by the Killian Committee. As a result of its focus on economic growth as a key theme of space exploration, the Aldridge Commission recommended that "NASA's relationship to the private sector, its organizational structure, business culture, and management processes--all largely inherited from the Apollo era--must be decisively transformed to implement the new, multi-decadal space exploration vision." Two of its specific recommendations were that NASA recognize and implement a far larger private industry presence in space operations, with the specific goal of allowing private industry to assume the primary role of providing services to NASA, and that NASA's centers be reconfigured as Federally Funded Research and Development Centers (FFRDCs) to enable innovation, work effectively with the private sector, and stimulate economic development. FFRDCs are not-for-profit organizations which are financed on a sole-source basis, exclusively or substantially by an agency of the federal government, and not subject to Office of Personnel Management regulations. They operate as private non-profit corporations, although they are subject to certain personnel and budgetary controls imposed by Congress and/or their sponsoring agency. Each FFRDC is administered by either an industrial firm, a university, or a nonprofit institution through a contract with the sponsoring federal agency. FFRDC personnel are not considered federal employees, but rather employees of the organization that manages and operates the center. NASA has not fully adopted the Aldridge Commission recommendations. NASA has 10 centers (see Table 1 ). One, the Jet Propulsion Laboratory (JPL), is already an FFRDC and is managed by the California Institute of Technology. Some editorialists question whether investing in space exploration is relevant today. Others question if NASA has the right priorities. Would the public care if the country's investment in space exploration ended? Does the public believe it would be better to invest in social needs here on Earth rather than space exploration? Does the public support the current prioritization of the nation's space exploration activities? According to poll data, Americans do not rank space exploration as a high priority for federal government spending. For example, in an April 10, 2007 Harris poll, respondents were given a list of twelve federal government programs and asked to pick two which should be cut "if spending had to be cut." Space programs led the list (51%), followed by welfare programs (28%), defense spending (28%), and farm subsidies (24%). Space exploration was also near the bottom of a University of Chicago National Opinion Research Center survey reported in January 2007 that asked Americans about how they would prioritize federal spending. On the other hand, Americans are interested in space exploration. According to a May 2008 Gallup Poll, sponsored by the Coalition for Space Exploration, most Americans (69%) believe that the space program benefits the nation's economy by inspiring young people to consider STEM education, and believe that the benefits of space exploration outweigh the risks of human space flight (68%). The poll also found that most Americans (67%) indicated that they would not be concerned if the United States loses its leadership in space exploration to China, while almost half (47%) of the public surveyed expressed concern regarding the five-year gap between the end of the space shuttle program and the first scheduled launch of the Constellation program. Just over half (52%) of those surveyed in the Gallup Poll said they would support increasing NASA's budget from 0.6% to 1.0% of the federal budget; however, when the public was asked how willing they would be to support an increase in taxes if the money was to go to NASA to help close the budget deficit, more than half (57%) reported they would not be willing. NASA's Office of Strategic Communication funded several analyses of the public's attitude toward space exploration based on focus groups and a survey, the results of which were presented in June 2007. According to an analysis conducted for NASA, the focus group participants were ambivalent about going to the Moon and Mars and wanted to know why these missions were important. Reasons such as leadership, legacy, and public inspiration were found to be less persuasive, especially for future Moon exploration, than NASA-influenced technologies. Most participants agreed that partnership with other countries would be beneficial, but doubted whether it can be achieved realistically. In addition, one of the analysis conducted for NASA found that most survey respondents rated NASA-influenced technologies as somewhat or extremely relevant to them. Over 52% of participants said such technologies were a "very strong" reason to go to space. In contrast, the public's response to a mission to send humans to the Moon by the year 2020 was less strong with 15% of respondents very excited and 31% somewhat excited. Results for a mission to send humans to the Mars were similar to those for the Moon. The public opinion analysis has found that there are generational differences in regard to NASA's proposed activities. For example, NASA's base support came from those who encompass "The Apollo Generation" (45-64 year olds), the majority (79%) of whom support NASA's new space exploration mission, particularly the return to the Moon. By contrast, the majority (64%) of those between 18-24 years of age are uninterested or neutral about a human Moon mission. Those between 25 and 44 years of age are approximately evenly split between those who are interested/excited and those who are either uninterested or neutral. Those over 65 were more likely to be neutral or disinterested in a Moon mission, with those over 75 years of age the least interested of all age groups. Current U.S. civilian space policy is based on a set of fundamental objectives in the Space Act, based on policy discussions that occurred following the launch of Sputnik over 50 years ago. Those objectives are still part of current policy discussions and influence the nation's civilian space policy priorities--both in terms of what actions NASA is authorized to undertake and the degree of appropriations each activity within NASA receives. NASA has active programs that address all its objectives, but many believe that it is being asked to accomplish too much for the available resources. NASA was last reauthorized in 2008 for FY2009. Thus, the reauthorization of NASA for FY2010 and beyond, along with a new Presidential Administration, may provide an opportunity for Congress to rethink the nation's space policy. The goals of the nation's investment in space exploration may be a key factor in determining the focus of NASA's activities and the degree of funding appropriated for its programs. Congress and outside experts have concerns as to whether the United States can afford to implement President Bush's Vision for Space Exploration without adversely influencing NASA's other programs. Congress may need to make challenging decisions to determine how to reap the most benefit from the nation's civilian space program investment. These decisions might answer questions such as What are the priorities among the many reasons for U.S. space exploration? For example, what might be the priority ranking among the previously identified reasons as to why the United States might explore space--knowledge and understanding, discovery, economic growth, national prestige, defense, international relations, and education and workforce development? What implications would this prioritization have for NASA's current and future budgets and the balance among its programs? For example, what is the proper balance between human and robotic space activities? What influence might the timing of other countries' space exploration activities have on U.S. policy? For example, what would be the impact of the United States, China, or another country, or a commercial organization, establishing the first Moon base or landing on Mars? New objectives and priorities might help determine NASA's goals. This, in turn, might potentially help Congress determine the most appropriate balance of funding available among NASA's programs during its authorization and appropriation process. For example, if Congress believes that national prestige should be the highest priority, they may choose to emphasize NASA's human exploration activities, such as establishing a Moon base and landing a human on Mars. If they consider scientific knowledge the highest priority, Congress may emphasize unmanned missions and other science-related activities as NASA's major goal. If international relations are a high priority, Congress might encourage other nations to become equal partners in actions related to the International Space Station. If spinoff effects, including the creation of new jobs and markets and its catalytic effect on math and science education, are Congress' priorities, then they may focus NASA's activities on technological development and linking to the needs of business and industry, and expanding its role in science and mathematics education. On October 15, 2008, the NASA Authorization Act of 2008 ( P.L. 110-422 ) was signed into law. This act authorized appropriations for FY2009, and prohibited NASA from taking any steps prior to April 30, 2009, that would preclude the President and Congress from being able to continue to fly the Space Shuttle past 2010. When the law was passed, the Chair of the House Science and Technology Committee stated The [Space Shuttle] provision should not be construed as a congressional endorsement of extending the life of the Shuttle program beyond the additional flight added by this bill to deliver the AMS [Alpha Magnetic Spectrometer] to the International Space Station. Rather, it reflects our common belief that the decision of whether or not to extend the Shuttle past its planned 2010 retirement date should be left to the next President and Congress, especially since both of the Presidential candidates have asked for the flexibility to make that decision. During the 111 th Congress, policymakers may discuss another authorization bill for future years, and identify new priorities for civil space exploration.

The "space age" began on October 4, 1957, when the Soviet Union (USSR) launched Sputnik, the world's first artificial satellite. Some U.S. policymakers, concerned about the USSR's ability to launch a satellite, thought Sputnik might be an indication that the United States was trailing behind the USSR in science and technology. The Cold War also led some U.S. policymakers to perceive the Sputnik launch as a possible precursor to nuclear attack. In response to this "Sputnik moment," the U.S. government undertook several policy actions, including the establishment of the National Aeronautics and Space Administration (NASA) and the Defense Advanced Research Projects Agency (DARPA), enhancement of research funding, and reformation of science, technology, engineering and mathematics (STEM) education policy. Following the "Sputnik moment," a set of fundamental factors gave "importance, urgency, and inevitability to the advancement of space technology," according to an Eisenhower presidential committee. These four factors include the compelling need to explore and discover; national defense; prestige and confidence in the U.S. scientific, technological, industrial, and military systems; and scientific observation and experimentation to add to our knowledge and understanding of the Earth, solar system, and universe. They are still part of current policy discussions and influence the nation's civilian space policy priorities--both in terms of what actions NASA is authorized to undertake and the appropriations each activity within NASA receives. The United States faces a far different world today. No Sputnik moment, Cold War, or space race exists to help policymakers clarify the goals of the nation's civilian space program. The Hubble telescope, Challenger and Columbia space shuttle disasters, and Mars exploration rovers frame the experience of current generations, in contrast to the Sputnik launch and the U.S. Moon landings. As a result, some experts have called for new 21st century space policy objectives and priorities to replace those developed 50 years ago. The Obama Administration has stated that the U.S. must maintain and take full advantage of its technical and strategic superiority in space. Among its proposed actions are closing the gap between retirement of the Space Shuttle and launch of the next generation of space vehicles; strengthening NASA's missions in space science, weather, climate research, and aeronautical research; helping establish a robust and balanced civilian space program, and engaging international partners and the private sector to amplify NASA's reach; re-establishing the National Aeronautics and Space Council, which will report to the President and oversee and coordinate civilian, military, commercial and national security space activities; and ensuring freedom of space. In addition, the administration has decided to conduct an independent review of planned U.S. human space flight activities. The panel's report is to be completed in sufficient time so it will serve as input for Obama Administration's decisionmaking scheduled for August 2009. During the 111th Congress, policymakers may discuss a NASA authorization bill including identifying priorities for U.S. civil space exploration. This might help Congress determine the most appropriate balance of funding for NASA's programs during its authorization and appropriation process. For example, if Congress believes that national prestige should be the highest priority, they may choose to emphasize NASA's human exploration activities. If scientific knowledge is the highest priority, Congress may emphasize unmanned missions and other science-related activities. If international relations are a high priority, Congress might encourage other nations to become equal partners in actions related to the International Space Station. If spinoff effects are of interest, they may focus on technological development and linking to the needs of business and industry, and expanding its role in science and mathematics education.

Natural disasters can have varying effects on the landscape. For agricultural producers, natural disasters are part of the inherent risk of doing business. The federal role for mitigating weather risk is primarily through federal crop insurance and a suite of agricultural disaster assistance programs to address a producer's crop or livestock production loss. Other, separate U.S. Department of Agriculture (USDA) programs are designed to repair agricultural and forest land following a natural disaster and potentially mitigate future risk. These programs offer financial and technical assistance to producers to repair, restore, and mitigate damage on private land. Agricultural land assistance programs include the Emergency Conservation Program (ECP), the Emergency Forest Restoration Program (EFRP), and the Emergency Watershed Protection (EWP) program. In addition to these programs, USDA also has flexibility in administering other programs that allow for support and repair of damaged cropland in the event of an emergency. This report describes these emergency agricultural land assistance programs. It presents background on the programs--purpose, activities, authority, eligibility requirements, and authorized program funding levels--as well as current congressional issues. Agricultural land assistance programs help producers rehabilitate crop and forest land following natural disasters. These programs are described below. The Emergency Conservation Program (ECP) assists landowners in restoring land used in agricultural production when damaged by a natural disaster. This can include removing debris, restoring fences and conservation structures, and providing water for livestock in drought situations. Restoration practices are authorized by the Farm Service Agency (FSA) county committee, with approval from state FSA committees, and the FSA national office. Payments are made to individual producers based on a share of the cost of completing the practice. This can be up to 75% of the cost, or up to 90% of the cost if the producer is considered to be a limited-resources producer. Payments are made following completion and inspection of the practice. The ECP was created under Title IV of the Agricultural Credit Act of 1978 ( P.L. 95-334 ) and codified at 16 U.S.C. Sections 2201-2205. The program is permanently authorized, subject to appropriations. Authorized funding is for "such funds as may be necessary," and once appropriated, funds are typically available until expended. Land eligibility is determined by the FSA county committee except in the event of a drought, in which case the national FSA office authorizes the use of funds. Following an on-site inspection, the land may be considered eligible if it is determined that the lack of treatment would: impair or endanger the land; materially affect the productive capacity of the land; lead to damage that is unusual in character and, except for wind erosion, is not the type that would recur frequently in the same area; and be so costly to rehabilitate that future federal assistance is or would be required to return the land to productive agricultural use. Land conservation issues that existed prior to the natural disaster are not eligible for assistance. An eligible participant is defined as an agricultural producer with an interest in the land affected by the natural disaster. The applicant must be a landowner or user in the area where the disaster occurred and must be a party who will incur the expense that is the subject of the ECP cost-share application. Participants are limited to $200,000 per natural disaster. Federal agencies and states, including all agencies and political subdivisions of a state, are ineligible to participate in ECP. Funding for ECP varies widely from year to year. Most funding is authorized through supplemental appropriations acts rather than annual appropriations. Table 1 provides a funding history for ECP. Funding is generally appropriated to remain available until expended. In some instances, Congress has required that ECP funding be used for specific disasters, activities, or locations. For example, a portion of funding appropriated in FY2016 is to be used for major disasters declared pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). Since ECP does not typically require a Stafford Act declaration, this requirement limits the use of ECP funds to select locations as well as for future disasters. For further discussion, see the " Issues for Congress " section. Once funding is appropriated, the FSA national office generally allocates ECP funds to the FSA state offices. The local FSA county committees will then obligate the funds on a first-come, first-served basis. The Emergency Forest Restoration Program (EFRP) provides cost-share assistance to private forestland owners to repair and rehabilitate damage caused by natural disasters on nonindustrial private forest land. Natural disasters include wildfires, hurricanes or excessive winds, drought, ice storms or blizzards, floods, or other resource-impacting events, as determined by USDA. The program is administered by FSA. FSA may provide up to 75% of the cost of emergency measures that would restore forest health and forest-related resources following a disaster. Individual or cumulative requests for financial assistance of $50,000 or less per person (or legal entity) per disaster are approved by the FSA county committee. Financial assistance requests from $50,001 to $100,000 are approved by the FSA state committee. Financial assistance over $100,000 must be approved by the FSA national office. The EFRP was created under Section 8203 of the Food, Conservation, and Energy Act of 2008 (2008 farm bill, P.L. 110-246 ), by adding a new Section 407 to Title IV of the Agricultural Credit Act of 1978. It is codified at 16 U.S.C. Section 2206 and is permanently authorized subject to appropriations. Authorized funding is for "such funds as may be necessary," and once appropriated, funds are typically available until expended. For land to be eligible for EFRP, it must be nonindustrial private forest land and must: have existing tree cover or have had tree cover immediately before the natural disaster and be suitable for growing trees; have damage to natural resources caused by a natural disaster, which occurred on or after January 1, 2010, that, if not treated, would impair or endanger the natural resources on the land and would materially affect future use of the land; and be physically located in a county in which EFRP has been implemented. Land is ineligible if it is owned or controlled by the federal government, a state, a state agency, or a political subdivision of a state. Eligible recipients include owners of nonindustrial private forest land, defined as rural land that is owned by any nonindustrial private individual, group, association, corporation, or other private legal entity that has definitive decision making authority over the land. A payment limitation of $500,000 per person or legal entity applies per disaster. The EFRP was created in the 2008 farm bill. Congress initially appropriated $18 million to the program in an FY2010 supplemental appropriations act. Funds were not obligated, however, until FY2011, when final regulations were published. Table 2 provides a funding history for EFRP. The Emergency Watershed Protection (EWP) program assists sponsors, landowners, and operators in implementing emergency recovery measures for runoff retardation and erosion prevention to relieve imminent hazards to life and property created by natural disasters. Eligible activities may include removing debris from stream channels, road culverts, and bridges; reshaping and protecting eroded banks; correcting damaged drainage facilities; establishing cover on critically eroding lands; removing carcasses; and repairing levees and structures. EWP funds cannot be used to perform operation or maintenance for existing structures or to repair, rebuild, or maintain private or public transportation facilities or public utilities. The EWP is administered by both USDA's Natural Resources Conservation Service (NRCS) and the U.S. Forest Service (USFS). The federal contribution toward the implementation of emergency measures may not exceed 75% of the construction cost. This can be raised to 90% if the area is considered to be a limited-resource area. The EWP was created under Title IV of the Agricultural Credit Act of 1978 ( P.L. 95-334 ) and codified at 16 U.S.C. Sections 2203-2205. The program is permanently authorized, subject to appropriations. Authorized funding is for "such funds as may be necessary," and once appropriated, funds are typically available until expended. Private, state, tribal, and federal lands are eligible for EWP. EWP is administered by NRCS on state, tribal, and private lands and by USFS on National Forest System lands. EWP assistance funded by NRCS may not be provided on any federal lands if the assistance would augment the appropriations of another federal agency. All projects under EWP must have a sponsor. Sponsors must be a state or political subdivision, qualified Indian tribe or tribal organization, or unit of local government. Private entities or individuals may receive assistance only through the sponsorship of a governmental entity. Sponsors are responsible for: obtaining necessary land rights and permits to do repair work; providing the nonfederal portion of cost-share assistance; completing the installation of all emergency measures; and carrying out any operation and maintenance responsibilities that may be required. Funding for EWP varies widely from year to year ( Table 3 ). Most funding is authorized through supplemental appropriations acts rather than annual appropriations. NRCS provides assistance based upon a determination by the NRCS state conservationist that the current condition of the land or watershed impairment poses a threat to health, life, or property. Sponsors must submit a formal request to the NRCS state conservationist within 60 days of the natural disaster or 60 days from the date when access to the site becomes available. No later than 60 days from receipt of the request, the state conservationist will investigate the situation and prepare an initial cost estimate to be forwarded to the NRCS national office. Before release of any funds, the project sponsor must sign a cooperative agreement with NRCS that details the responsibilities of the sponsor (e.g., funding, operation, and maintenance). No funding is provided for activities undertaken before the cooperative agreement is signed. Approval of funding is based on the following rank order: exigency situations; sites where there is a serious (but not immediate) threat to human life; and sites where buildings, utilities, or other important infrastructure components are threatened. Floodplain easements under EWP are administered separately from the general EWP program. The easements are meant to safeguard lives and property from future floods, drought, and the consequences of erosion through the restoration and preservation of the land's natural values. USDA holds all EWP floodplain easements in perpetuity. Floodplain easements are purchased as an emergency measure and on a voluntary basis. If a landowner offers to sell a permanent conservation easement, then NRCS has the full authority to restore and enhance the floodplain's functions and values. This includes removing all structures, including buildings, within the easement boundaries and providing up to 100% of restoration costs. In exchange, the landowner receives the smallest of the three following values as an easement payment: 1. a geographic area rate established by the NRCS state conservationist; 2. the fair-market value based on an area-wide market analysis or an appraisal completed according to the Uniform Standards of Professional Appraisal Practices (USPAP); or 3. the landowner's offer. Section 382 of the Federal Agricultural Improvement and Reform Act of 1996 (1996 farm bill, P.L. 104-127 ) amended the EWP authorization to include the purchase of floodplain easements. Prior to this amendment, NRCS had been directed in a 1993 emergency supplemental appropriations act ( P.L. 103-75 ) to use EWP funds for the purchase of floodplain easements under the Wetlands Reserve Program (WRP)--a farm bill program for restoring wetlands through the voluntary purchase of long-term and permanent easements on agricultural land. This became known as the Emergency Wetlands Reserve Program, which purchased floodplain easements on cropland with a history of flooding in the 1993 and 1995 Midwest flooding events. Following the 1996 farm bill amendment, NRCS began an EWP floodplain easement pilot program in 17 states in FY1997. The Agricultural Act of 2014 (2014 farm bill, P.L. 113-79 ) amended the floodplain easement section of the EWP program to allow USDA to modify or terminate floodplain easements when the landowner agrees and the change "addresses a compelling public need for which there is no practical alternative, and is in the public interest." Modification or termination requires a compensatory arrangement determined by USDA. Similar to the general EWP program, EWP floodplain easements are authorized under Title IV of the Agricultural Credit Act of 1978 ( P.L. 95-334 ) and codified at 16 U.S.C. Sections 2203-2205. The authorization of appropriations is for "such funds as may be necessary" and does not expire. Lands are considered eligible for an EWP floodplain easement if they are: floodplain lands that were damaged by flooding at least once within the previous calendar year or have been subject to flood damage at least twice within the previous 10 years; other lands within the floodplain that would contribute to the restoration of the flood storage and flow, erosion control, or would improve the practical management of the easement; or lands that would be inundated or adversely impacted as a result of a dam breach. Land is considered ineligible if: restoration practices would be futile due to "on-site" or "off-site" conditions; the land is subject to an existing easement or deed restriction that provides sufficient protection or restoration of the floodplain's functions and values; or the purchase of an easement would not meet the purposes of the program. EWP participants must have ownership of the land. Unlike the general EWP program, EWP floodplain easements do not require a project sponsor. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) provided $290 million to Watershed and Flood Prevention Operations, of which half ($145 million) was to be used for the purchase and restoration of EWP floodplain easements. Per requirements in ARRA, the funding was obligated by FY2011. Additional funding following Hurricane Sandy resulted in two EWP floodplain easement sign ups, which funded 246 applications on over 1,000 acres of eligible land. Through the end of 2016, NRCS reported enrolling a total of 1,586 easements on 184,911 acres, as well as 1,573 closed and restored easements on 184,423 acres. Emergency disaster (EM) loans are available through the FSA when a county has been declared a disaster area by either the President or the Secretary of Agriculture. Agricultural producers in the declared county and contiguous to the county may become eligible for low-interest EM loans. EM loan funds may be used to help eligible farmers, ranchers, and aquaculture producers recover from production losses (when the producer suffers a significant loss of an annual crop) or from physical losses (such as repairing or replacing damaged or destroyed structures or equipment or replanting permanent crops such as orchards). A qualified applicant can then borrow up to 100% of actual production or physical losses (not to exceed $500,000) at low interest rates. In addition to the authorized land assistance programs, USDA uses a number of existing conservation programs to assist with rehabilitating land following natural disasters. In many cases this assistance comes through the use of waivers and flexibility provided to the Secretary of Agriculture. The following section discusses programs recently used by USDA to offer assistance. The Conservation Reserve Program (CRP) provides annual payments to agricultural producers to take highly erodible and environmentally sensitive land out of production and install resource-conserving practices for 10 or more years. In limited situations, harvesting and grazing may be conducted on CRP land in response to drought or other emergencies (except during primary nesting season for birds). In many cases environmentally sensitive land is ineligible for harvesting and grazing. Emergency harvesting and grazing is authorized by the national FSA office at the request of a county FSA committee. The Environmental Quality Incentives Program (EQIP) is a voluntary program that provides financial and technical assistance to agricultural producers to address natural resource concerns on agricultural and forest land. USDA has recently announced a special EQIP signup for farmers and ranchers in hurricane-affected areas. EQIP may also be used to proactively mitigate potential damage from natural disasters through the use of conservation practices (e.g., residue management to improve the soil's capacity to be more drought-resilient, or vegetative buffer strips along waterways to reduce erosion and crop damage in the event of a flood). Historically, the majority of emergency assistance for agriculture was funded through supplemental appropriations or as an add-on to regular annual appropriations. A supplemental appropriation provides additional budget authority during the current fiscal year either to finance activities not funded in the regular appropriation or to provide funds when the regular appropriation is deemed insufficient. Since most agricultural land assistance programs do not receive the level of attention that triggers a standalone supplemental appropriation bill, annual appropriation bills are increasingly seen as a vehicle for funding these programs. The change in funding mechanism from standalone supplemental appropriations to annual appropriations has presented a challenge for agricultural land assistance programs. The timing of annual appropriations bills may not coincide with natural disasters and the subsequent requests for assistance. This can increase the time between eligible disasters and funding availability. Disaster funds are typically provided to remain available until expended, which has allowed smaller, more localized disasters to be addressed in years without appropriations. However, despite this flexibility, the inconsistent funding has left some agricultural land assistance programs without funding during times of high request volume. Beginning in the 2008 farm bill, and continued in the 2014 farm bill, Congress authorized a series of permanent disaster assistance programs that receive mandatory funding, rather than relying on supplemental appropriations. These programs assist with crop and livestock production loss and are generally authorized at funding amounts that are "such sums as necessary" and by their mandatory nature are not subject to annual appropriations. For the three agricultural land rehabilitation programs discussed in this report, however, funding remains discretionary and is provided on an ad hoc basis. The variability of funding for agricultural land rehabilitation has led some to suggest that these programs have been left behind in favor of providing assistance for crop and livestock production loss rather than for land rehabilitation and natural resources degradation. Some have suggested that the use of permanent mandatory funding could be expanded beyond production to include land rehabilitation assistance. Others point out that permanent mandatory funding would be difficult to achieve in the current fiscal climate. The Budget Control Act of 2011 (BCA, P.L. 112-25 ) limits emergency supplemental funding for disaster relief. Under Section 251(b)(2)(D) of the BCA, funding used for disaster relief must be used for activities carried out pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act, P.L. 93-288 ) for FY2012 through FY2021. This means funds appropriated through emergency supplemental acts for disaster relief through FY2021 may apply only to activities with a Stafford Act declaration. In recent years, agricultural land rehabilitation programs have received funding through annual appropriations. However, it is still considered supplemental in nature and, in some cases, classified as disaster relief. When classified as disaster relief, the funds must be used for a major disaster declared pursuant to the Stafford Act. Since emergency agricultural land assistance programs do not normally require a federal disaster declaration from either the President or a state official, the Stafford Act requirement has become a limiting factor in the way agricultural land assistance programs work, potentially assisting fewer natural disaster events. For example, droughts are traditionally not declared as major disaster events under the Stafford Act. However, droughts are one of the eligible natural disasters for land assistance programs--primarily to assist livestock producers to provide water to animals. Since agricultural land assistance program funds are typically available until expended, the Stafford Act requirement also limits what areas may receive future assistance with any remaining funding. For example, the FY2016 appropriated levels classify only a portion of the funding provided as disaster relief and therefore subject to the requirements of the BCA and the Stafford Act. The remaining funds are not considered disaster relief for budget scoring purposes and are therefore appropriated within the regular limitations of the current budget agreement. These funds are not subject to a Stafford Act declaration and may be used according to the authorities of the program. Another contentious issue for federal land assistance programs is mitigation. Mitigation actions are steps taken to reduce risk before a natural disaster occurs. Currently only one mitigation program exists for emergency agricultural land assistance--the EWP floodplain easement program (described above). This program purchases floodplain easements on agricultural land that has a history of flooding (two of the previous 10 years). Under the program, the land is permanently taken out of production and restored to a natural function. This program has been authorized since 1997. However, prohibitions in appropriations acts have limited available funding for the program. Some have questioned the use of federal restoration funds in areas with a high risk of damage by natural disasters, arguing that it encourages poor land use decisions. While the alternative of mitigation can potentially reduce the future cost of federal assistance, the initial cost of the permanent easement and restoration is sometimes viewed as too expensive a federal cost.

The U.S. Department of Agriculture (USDA) administers several permanently authorized programs to help producers recover from natural disasters. Most of these programs offer financial assistance to producers for a loss in the production of crops or livestock. In addition to the production assistance programs, USDA also has several permanent disaster assistance programs that help producers repair damaged crop and forest land following natural disasters. These programs offer financial and technical assistance to producers to repair, restore, and mitigate damage on private land. These emergency agricultural land assistance programs include the Emergency Conservation Program (ECP), the Emergency Forest Restoration Program (EFRP), and the Emergency Watershed Protection (EWP) program. In addition to these programs, USDA also has flexibility in administering other programs that allow for support and repair of damaged cropland in the event of an emergency. Both ECP and EFRP are administered by USDA's Farm Service Agency (FSA). ECP assists landowners in restoring agricultural production damaged by natural disasters. Participants are paid a percentage of the cost to restore the land to a productive state. ECP is available only on private land, and eligibility is determined locally. EFRP was created to assist private forestland owners to address damage caused by a natural disaster on nonindustrial private forest land. The EWP program and the EWP floodplain easement program are administered by USDA's Natural Resources Conservation Service (NRCS) and the U.S. Forest Service (USFS). The EWP program assists sponsors, landowners, and operators in implementing emergency recovery measures for runoff retardation and erosion prevention to relieve imminent hazards to life and property created by a natural disaster. In some cases this can include state and federal land. The EWP floodplain easement program is a mitigation program that pays for permanent easements on private land meant to safeguard lives and property from future floods, drought, and the consequences of erosion. Funding for emergency agricultural land assistance varies greatly from year to year. Since most agricultural land assistance programs do not receive the level of attention that triggers a standalone supplemental bill, annual appropriation bills are increasingly seen as a vehicle for funding these programs. The timing of annual appropriation bills may not coincide with natural disasters, thus leaving some programs without funding during times of high request volume. This irregular funding method has led some to suggest the authorization of permanent mandatory funding similar to what was authorized in the Agricultural Act of 2014 (2014 farm bill, P.L. 113-79) for agricultural disaster assistance programs that support crop and livestock production loss. Restrictions placed on supplemental appropriations for disaster assistance have changed the way the agricultural land assistance programs allocate funding, potentially assisting fewer natural disasters. Language in the Budget Control Act of 2011 (P.L. 112-25) limits to the use of emergency supplemental funding for disaster relief. Specifically, funding used for disaster relief must be used for activities carried out pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act, P.L. 93-288) for FY2012 through FY2021. This means funds appropriated through emergency supplemental acts for disaster relief for these 10 years may apply only to activities with a Stafford Act designation (generally requiring a federal disaster declaration from either the President or a state official). Since emergency agricultural land assistance programs do not normally require a federal disaster declaration, the Stafford Act requirement has become a limiting factor in the way agricultural land assistance programs work, potentially assisting fewer natural disaster events.

Because concerns about possible identity theft resulting from data breaches are widespread, Congress spent a considerable amount of time in the 109 th Congress assessing data security practices and working on data breach legislation that would require companies to safeguard sensitive personal data and notify consumers about data security breaches. According to the Federal Trade Commission (FTC), identity theft is the most common complaint from consumers in all 50 states. In the FTC- sponsored ID-theft survey of U.S. adults, victims reported misuse of credit card and non-credit card accounts, and misuse of personal information to open new accounts or engage in other types of fraud. Victims of identity theft may incur damaged credit records, unauthorized charges on credit cards, and unauthorized withdrawals from bank accounts. In the remainder of the 110 th Congress, "The data-security legislative outlook is murky, with several conflicting bills pending in Congress, several committees involved, and little sign of imminent consensus." Although, as noted, the occurrence of data breaches has been commonplace, the solutions presented in the federal legislation to address the problems have varied. Common themes included the scope of coverage (who and what is covered); imposition of information security safeguards; breach notification requirements (when, how, triggers, frequency, and exceptions); customer access to and amendment of records; restrictions on the use of social security numbers; credit freezes on consumer reports; identity theft penalties; enforcement authorities and causes of action; and preemption. Congress will continue to grapple with the problem of establishing a legal framework to prevent and respond to improper disclosures of personally identifiable information, including how to notify the public about such security breaches. For the 110 th Congress, several high-tech companies have formed the Consumer Privacy Legislative Forum to promote a comprehensive data privacy bill to create a simplified, uniform legal framework that would set standards for what notice must be given to consumers about personal information collected on them and how it will be used, and preempt any existing state laws. Federal legislative data security proposals were modeled after, in large part, state breach notification and data security laws. The imposition of data security breach notification obligations on entities that own, possess, or license sensitive personal information is a relatively new phenomenon. California was the first jurisdiction to enact a data breach notification law in 2002. There followed the emergence of numerous federal and state bills to impose notification requirements on entities that collect sensitive personal information. S.B. 1386, the California Security Breach Notification Act, requires a state agency, or any person or business that owns or licenses computerized data that include personal information, to disclose any breach of security of the data to any resident of the state whose unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person. A "breach of the security of the system" is the "unauthorized acquisition of computerized data that compromises the security, confidentiality, or integrity of personal information maintained by the person or business." "Personal information" is defined as the first name or initial and last name of an individual, with one or more of the following: Social Security Number, driver's license number, credit card or debit card number, or a financial account number with information such as PIN numbers, passwords, or authorization codes that could gain access to the account. Exemptions are provided for encrypted information, for criminal investigations by law enforcement, and for breaches that are either immaterial or not "reasonably likely to subject the customers to unauthorized disclosure of personal information." California requires notice be given in the "most expedient time possible and without unreasonable delay," either in writing or by e-mail. If a company can show that the cost of notification will exceed $250,000, that more than 500,000 people are affected, or that the individual's contact information is unknown, then notice may be given through the media. Numerous data security breaches were subsequently disclosed in response to California's law. In the absence of a comprehensive federal data breach notification law, many states enacted laws requiring consumer notice of security breaches of personal data. The majority of states have introduced or passed bills to require companies to notify persons affected by breaches involving their personal information, and in some cases to implement information security programs to protect the security, confidentiality, and integrity of data. Many states have enacted laws requiring notice of security breaches of personal data and consumer redress. As of January 2008, 39 states enacted data security laws requiring entities to notify persons affected by security breaches and, in some cases, to implement information security programs to protect the security, confidentiality, and integrity of data. The two predominant themes are consumer notification requirements in the event of a data breach and consumer redress. Most of the statutes cover both private entities and government agencies. Some statutes also impose obligations on third-party service providers to notify the owner or licensor of the data when a breach occurs. Many of the state laws follow the basic framework of the California breach notification law. The majority of state laws apply to electronic or computerized data only. Notice provisions addressed by the states include description of triggering events, consideration of the level of harm or the risk of misuse that triggers notification, recipients of notification, timing of notice, method of notification, and content of notice. In addition, state laws may include exemptions for entities that are regulated under federal privacy laws (e.g., the Gramm-Leach-Bliley Act, the Health Insurance Portability and Accountability Act); expanded definitions of "personal information"; notice requirements to consumer reporting agencies of customers affected by security breaches; civil penalties for failure to promptly notify customers of a security breach; requirements for the implementation of information security programs; creation of a private right of action to recover actual damages from businesses for failure to notify customers of a security breach in a timely manner; the right to place a credit freeze on a consumer credit report; restrictions on the sale and use of social security numbers; and enhanced criminal penalties for identity fraud. The following discussion highlights some of the various legislative approaches proposed in the 110 th Congress, including existing laws affected by the bills; the scope of coverage (who and what information is covered); data privacy and security safeguards for sensitive personal information; requirements for security breach notification (when, how, triggers, frequency, and exceptions); restrictions on social security numbers (collection, use, and sale); credit freezes and fraud alerts on consumer reports; identity theft penalties; causes of action; and preemption (some of these bills preempt and sometimes limit recently enacted state laws). Some of the bills attempted to amend the Gramm-Leach-Bliley Act to require a financial institution to notify customers, consumer reporting agencies, and law enforcement agencies of a breach. Others would have amended the Fair Credit Reporting Act to prescribe data security standards, and others would amend the federal criminal code to prohibit intentionally accessing a computer without authorization, concealing security breaches involving personally identifiable information, and unlawfully accessing another's means of identification during a felony involving computers. Amendments to the Racketeer Influenced and Corrupt Organizations Act to cover fraud in connection with unauthorized access were also recommended, along with amendments by the U.S. Sentencing Commission to the sentencing guidelines regarding identity theft. Some of the bills are free-standing. Data brokers sell a wide array of personal information (real property, motor vehicle, health, employment, and demographic information), and are in many respects unregulated. Generally, they are not subject to the requirements imposed on credit reporting agencies under the Fair Credit Reporting Act. The federal bills varied in their scope of covered entities: agencies or persons that own, license, or possess electronic personal data; any commercial entity or charitable, educational, or nonprofit organization that acquires, maintains, or uses sensitive personal information; individual reference services providers, marketing list brokers, governmental entities, consumer reporting agencies, businesses sharing information with affiliates, entities with established business relationships with the data subject, news organizations, private investigators, and labor unions; any agency or person engaged in interstate commerce that owns or licenses electronic data containing personal information; a financial institution; or a consumer reporting agency, reporting broker, or reporting collector. The federal bills included provisions that define protected information, regulating either personal information, sensitive financial identity information, sensitive financial account information, or sensitive personally identifiable information. Some bills established limitations on the sale or transfer of sensitive personal information. The federal bills required covered entities to take reasonable steps to protect against security breaches and to prevent unauthorized access to sensitive personal information that the entity sells, maintains, collects, or transfers. Some bills prescribe data security safeguards and guidelines for joint promulgation of security regulations. Others required the Federal Trade Commission (FTC) to promulgate regulations governing the conduct of information brokers. Many of the federal bills included provisions that would have imposed mandatory security requirements for sensitive personal information, required implementation of technical security safeguards and best practices, and mandated the development of security policies governing the processing and storage of personal data. Regulations in some cases were to include requirements for financial institutions to dispose of sensitive personal financial information. An Online Information Security Working Group to develop best practices was created in one of the bills. Another theme that existed within some of the bills was application of fair information practices, similar to the Privacy Act (5 U.S.C. SS 552a) and other privacy laws, such the Health Insurance Portability and Accountability Act (HIPAA), to information brokers not currently subject to similar protection to give individuals more control over the sharing of their personal information. Fair Information Practices typically include notice of information practices; informed consent/choice as to how personal information is used beyond the use for which the information was provided (e.g., giving the individual the opportunity to either opt-in or opt-out before personal data is sold); access to one's personal information, including a reasonable opportunity to review information and to correct inaccuracies or delete information; requirements for companies to take reasonable steps to protect the security of the information they collect from consumers; and the establishment of enforcement mechanisms to ensure compliance, including independent recourse mechanisms, systems to verify the privacy practices of businesses, and obligations to remedy implementation problems. Some of the federal bills incorporated fair information practices, such as access to and correction of personal information by the subject. Some bills adopted fair information practices and provided for individual access to information held by an information broker, accounting of disclosures, and amendment of errors. The federal bills established breach notification requirements, delineated triggers for consumer notice, and specified the level of risk of harm or injury that triggers notification. Provisions regarding the timeliness of notification, the methods and content of notice, and the duty to coordinate with consumer reporting agencies were generally included. Sometimes exceptions to notification requirements were permitted for national security and law enforcement purposes, with notice to Congress when exceptions are made. The purpose of a law enforcement exception to request a hold on notification is to gather additional information pending investigation. Some bills required notice to individuals if it is determined that the breach has resulted in or poses a reasonable risk of identity theft, or if the breach is reasonably likely to result in harm or substantial inconvenience to the consumer. Some amend Gramm-Leach-Bliley to require financial institutions to provide notice when a breach occurs to the consumer, to consumer reporting agencies, to a newly created FTC information clearinghouse, and to law enforcement agencies. In some cases, entities that maintain personal information for financial institutions are required to notify the institution when a breach has occurred. Some of the proposals provided an exemption from the notice requirement when the information was encrypted. In some of the bills, covered entities were required upon discovering a breach of security to report the breach to the FTC or other appropriate federal regulator and to notify consumer reporting agencies if the breach is determined to affect the sensitive personal information of 1,000 or more individuals. Recently, Congress has sought to further limit uses of the social security number, and is likely to continue to consider such measures in the 110 th Congress, including proposals to remove social security numbers from Medicare cards, and limiting or prohibiting solicitation, display, sale, purchase, use, or access to social security numbers in the private sector. Thirty-eight states now have credit freeze laws. Some bills would have permitted a consumer to place a credit or security freeze on his or her credit report in response to a security breach. Others required consumer reporting agencies to maintain fraud alerts for consumers who have received notice of a breach of their data. A security freeze law allows a customer to block unauthorized third parties from obtaining his or her credit report or score. A consumer who places a security freeze on his or her credit report or score receives a personal identification number to gain access to credit information or to authorize the dissemination of credit information. Benefits of security freeze laws include increased consumer control over access to personal information and corresponding decreased opportunities for imposters to obtain access to credit. Critics of security freeze laws argue that security freezes may cause consumers unwanted delays when they must provide third-party institutions access to credit histories for purposes such as qualifying for loans, applying for rental property leases, and obtaining mortgage rate approval. Some bills established in the FTC an Office of Identity Theft to take civil enforcement actions. Some defined identity theft as the unauthorized assumption of another person's identity for the purpose of engaging in commercial transactions under that person's name; others defined it as the unauthorized acquisition, purchase, sale, or use by any person of a person's sensitive personal information that violates section 1028 of title 18 of the U.S. Code (fraud and related activity in connection with identification documents and information) or any provision of state law on the same subject or matter, or results in economic loss to the individual. Some of the bills expressly provided for enforcement by state attorneys general. The bills also treated violations as unfair or deceptive acts or practices under the FTC Act. In some of the bills, states were authorized to bring civil actions on behalf of residents and a private right of action was created for individuals injured by violations. Others provided a safe harbor for financial institutions that comply with the legislation. Some would require joint promulgation of regulations to shield consumer reporters from liability under state common law. The National Research Council would study securing personal information. The Comptroller General would study either social security number uses or federal agency use of data brokers or commercial databases containing personally identifiable information. The Administrator of the General Services Administration (GSA) would be required to evaluate contractor programs. For example, in considering contract awards totaling more than $500,000, GSA would be required to evaluate the data privacy and security program of a data broker, program compliance, the extent to which databases and systems have been compromised by security breaches, and data broker responses to such breaches. In some bills, the Secret Service would report to Congress on security breaches. The relationship of federal law to state data security laws, the question of federal preemption, was addressed in federal legislation. A variety of approaches was incorporated in the bills. With respect to other federal laws, such as the Fair Credit Reporting Act or the Gramm-Leach-Bliley Act, some would not preempt them. Others would have amended the Fair Credit Reporting Act to prevent states from imposing laws relating to the protection of consumer information, safeguarding of information, notification of data breaches, to misuse of information, and mitigation. Others would have amended Gramm-Leach-Bliley. Some of the bills would have preempted state laws, some would preempt only inconsistent state laws, and some would have preempted state law except to the extent that the state law provides greater protection for consumers. Others would preempt state laws relating to notification of data breaches; notification of data breaches (with the exception of California's law); information security programs and notifications of financial institutions; individual access to and correction of electronic records; liability for failure to notify an individual of a data breach or failure to maintain an information security program; requirements for consumer reporting agencies to comply with a consumer's request to prohibit release of the consumer's information; prohibitions on the solicitation or display of social security account numbers; and compliance with administrative, technical, and physical safeguards for sensitive personally identifying information. Other bills would have created a national notification standard without preempting stronger state laws, and still others would not preempt state trespass, contract, or tort law or other state laws that relate to fraud. Compliance concerns have been raised with the prospect that multiple laws requiring potentially different notification requirements will make compliance an overly complex and expensive task. Business groups and privacy advocates differ in their views of whether a federal data security law should allow stronger state laws. Industry groups and affected companies advocate a narrow notification standard that would preempt differing state laws. Privacy advocates seek a uniform national notification standard without preempting stronger state laws. The question of over-notification has been raised by industry participants. Business groups argue that the California breach notification law has prompted over-notification (companies notifying consumers of data security breaches when there is no risk of economic harm or fraud). A related question is whether breach notification should occur for all security breaches, or whether it should be limited to significant breaches. Some of the federal bills would have established a federal notice requirement when there has been a breach that raises significant risks to consumers. Federal legislation was also introduced to establish a federal floor for notification requirements that are not preemptive of state laws (an approach supported by the majority of state attorneys general). Business interests have pointed out that a federal floor approach will mean that, in practice, the law of the strictest state will become the de facto standard, and thus prefer clear federal preemption of state laws. Several bills have been introduced in the 110 th Congress to combat identity theft, address security breaches, and protect personal information. During the First Session of the 110 th Congress, three data security bills were reported favorably out of Senate committees-- S. 239 (Feinstein), a bill to require federal agencies, and persons engaged in interstate commerce, in possession of data containing sensitive personally identifiable information, to disclose any breach of such information; S. 495 (Leahy), a bill to prevent and mitigate identity theft, to ensure privacy, to provide notice of security breaches, and to enhance criminal penalties, law enforcement assistance, and other protections against security breaches, fraudulent access, and misuse of personally identifiable information; and S. 1178 (Inouye), a bill to strengthen data protection and safeguards, require data breach notification, and further prevent identity theft. On June 3, H.R. 4791 (Clay), a bill to strengthen requirements for ensuring the effectiveness of information security controls over information resources that support federal operations and assets, was passed by the House by voice vote under suspension of the rules. Summaries of the bills provided below are from the Legislative Information System http://www.congress.gov . Federal Agency Data Privacy Protection Act. This bill would establish requirements for the use of encryption for sensitive data maintained by the federal government; relating to access by agency personnel to sensitive data; and relating to government contractors and their employees involving sensitive data. Cyber-Security Enhancement and Consumer Data Protection Act of 2007. This bill would amend the federal criminal code to (1) prohibit accessing or remotely controlling a protected computer to obtain identification information; (2) revise the definition of "protected computer" to include computers affecting interstate or foreign commerce or communication; (3) expand the definition of racketeering to include computer fraud; (4) redefine the crime of computer-related extortion to include threats to access without authorization (or to exceed authorized access of) a protected computer; (5) impose criminal penalties for conspiracy to commit computer fraud; (6) impose a fine and/or five year prison term for failure to notify the U.S. Secret Service or Federal Bureau of Investigation (FBI) of a major security breach (involving a significant risk of identity theft) in a computer system, with the intent to thwart an investigation of such breach; (7) increase to 30 years the maximum term of imprisonment for computer fraud and require forfeiture of property used to commit computer fraud; and (8) impose criminal penalties for damaging 10 or more protected computers during any one-year period. The bill also directs the U.S. Sentencing Commission to review and amend its guidelines and policy statements to reflect congressional intent to increase criminal penalties for computer fraud and authorizes additional appropriations in FY2007-FY2011 to the U.S. Secret Service, the Department of Justice, and the FBI to investigate and prosecute criminal activity involving computers. Data Accountability and Trust Act. This bill would require the Federal Trade Commission (FTC) to promulgate regulations requiring each person engaged in interstate commerce that owns or possesses electronic data containing personal information to establish security policies and procedures. The bill also authorizes the FTC to require a standard method or methods for destroying obsolete nonelectronic data. The bill also requires information brokers to submit their security policies to the FTC in conjunction with a security breach notification or on FTC request, requires the FTC to conduct or require an audit of security practices when information brokers are required to provide notification of such a breach, and authorizes additional audits after a breach. Additionally, the bill requires information brokers to (1) establish procedures to verify the accuracy of information that identifies individuals; (2) provide to individuals whose personal information they maintain a means to review it; (3) place notice on the Internet instructing individuals how to request access to such information; and (4) correct inaccurate information. Furthermore, the bill directs the FTC to require information brokers to establish measures which facilitate the auditing or retracing of access to, or transmissions of, electronic data containing personal information and prohibits information brokers from obtaining or disclosing personal information by false pretenses (pretexting). Additionally, the bill prescribes procedures for notification to the FTC and affected individuals of information security breaches. The bill also sets forth special notification requirements for breaches (1) by contractors who maintain or process electronic data containing personal information; (2) involving telecommunications and computer services; and (3) of health information. H.R. 958 preempts state information security laws. Data Security Act of 2007. This bill would prescribe security procedures which an entity that maintains or communicates sensitive account or personal information must implement and enforce in order to protect the information from an unauthorized use likely to result in substantial harm or inconvenience to the consumer. The bill also grants exclusive enforcement powers to specified federal regulatory agencies with oversight of financial institutions. The bill also denies a private right of action, including a class action, regarding any act or practice regulated under this act. The bill also prohibits any civil or criminal action in state court or under state law relating to any act or practice governed under this act. The bill prescribes data security standards to be implemented by federal agencies. The bill also expresses the sense of the Congress that federal regulators shall make every effort to reconcile differences between this act and specified requirements of the Gramm-Leach-Bliley Act. The bill provides that a notice provided to any consumer under this act may be the basis for a request by the consumer for an initial fraud alert under the Fair Credit Reporting Act. H.R. 1685 preempts state law with respect to the responsibilities of any person to protect against and investigate such data security breaches and mitigate any losses or harm resulting from them. Federal Agency Data Breach Protection Act. The bill would amend federal law governing public printing and documents to instruct the Director of the Office of Management and Budget (OMB) to establish policies, procedures, and standards for agencies to follow in the event of a breach of data security involving disclosure of sensitive personal information for which harm to an individual could reasonably be expected to result. The bill would also require such policies and procedures to include (1) timely notification to individuals whose sensitive personal information could be compromised as a result of a breach; (2) guidance on determining how to provide timely notice; and (3) guidance regarding whether additional special actions are necessary and appropriate, including data breach analysis, fraud resolution services, identity theft insurance, and credit protection or monitoring services. The bill would also authorizes each agency Chief Information Officer to: (1) enforce data breach policies; and (2) develop an inventory of all personal computers, laptops, or any other hardware containing sensitive personal information. The bill would require federal agency information security programs to include data breach notification procedures to alert individuals whose sensitive personal information is compromised. H.R. 2124 would make it the duty of each agency Chief Human Capital Officer to prescribe policies and procedures for employee exit interviews, including a full accounting of all federal personal property assigned to the employee during the course of employment. Privacy and Cybercrime Enforcement Act of 2007. This bill would amend the federal criminal code provisions relating to computer fraud and unauthorized access to computers to (1) include computer fraud within the definition of racketeering activity; (2) provide criminal penalties for intentional failures to provide required notices of a security breach involving sensitive personally identifiable information; (3) expand penalties for conspiracies to commit computer fraud and extortion attempts involving threats to access computers without authorization; (4) provide for forfeiture of property used to commit computer fraud; and (5) require restitution for victims of identity theft and computer fraud. The bill would also authorize additional appropriations for investigating and prosecuting criminal activity involving computers. H.R. 4175 would require the U.S. Sentencing Commission to review and amend, if appropriate, its sentencing guidelines and policies related to identity theft and computer fraud offenses. The bill authorizes the Attorney General and state attorneys general to bring civil actions and obtain injunctive relief for violations of federal laws relating to data security. H.R. 4175 would require federal agencies as part of their rulemaking process to prepare and make available to the public privacy impact assessments that describe the impact of proposed agency rules on the privacy of individuals. The bill would also authorize the Office of Justice Programs of the Department of Justice (DOJ) to award grants to states for programs to increase enforcement efforts involving fraudulent, unauthorized, or other criminal use of personally identifiable information. In addition, the bill would also authorize the Director of the Bureau of Justice Assistance to make grants to improve the identification, investigation, and prosecution of criminal or terrorist conspiracies or activities that span jurisdictional boundaries, including terrorism, economic crime, and high-tech crime. Federal Agency Data Protection Act. Defines "personally identifiable information" as any information about an individual maintained by a federal agency, including information about the individual's education, finances, medical, criminal, or employment history, that can be used to distinguish or trace such individual's identity or that is linked or linkable to the individual. Defines "mobile digital device" as any device that can store or process information electronically and is designed to be used in a manner not limited to a fixed location. Includes the following within the information security duties of the Director of the Office of Management and Budget (OMB): (1) the establishment of minimum requirements for the protection of personally identifiable information maintained in or transmitted by mobile digital devices, including requirements for the use of technologies that render information unusable by unauthorized persons; (2) the establishment of minimum requirements for agency actions following a breach of information security; (3) notification of individuals whose personally identifiable information may have been compromised or accessed during a security breach; (4) reporting of information security breaches involving personally identifiable information that may have been compromised or accessed during a security breach to the Federal Information Security Incident Center; (5) requiring agencies to comply with minimally acceptable system configuration requirements; (6) requiring agency contractors to meet minimally acceptable system configuration requirements; and (7) ensuring compliance with information security requirements for information and information systems used or operated by a contractor of an agency or subcontractor. Requires federal agencies to (1) adopt plans and procedures for ensuring the adequacy of information security protections for systems maintaining or transmitting personally identifiable information; (2) follow policies, procedures, and standards in the event of a data security breach involving the disclosure of personally identifiable information; (3) maintain an inventory of all personal computers, laptops, or other hardware containing personally identifiable information; (4) implement policies for employee exit interview to account for all federal personal property assigned to the employee; (5) develop and implement a plan to protect the security and privacy of federal government information collected or maintained by or on behalf of the agency from the risks posed by peer-to-peer file sharing; and (6) undergo annual independent audits (currently, evaluations are required) in conformity with generally accepted government accounting standards of their information programs and practices (such audits would also include the information systems used, operated, or supported on behalf of the agency by a contractor of the agency, any subcontractor, or any other entity). Amends the E-Government Act of 2002 to require the development of best practices for agencies to follow in conducting privacy impact assessments. The House Committee on Oversight and Government reported the bill, as amended, with H.Rept. 110-664 on May 21, 2008. On June 3, 2008, H.R. 4791 was passed by the House by voice vote under suspension of the rules. Notification of Risk to Personal Data Act of 2007. This bill would require any federal agency or business entity engaged in interstate commerce that uses, accesses, transmits, stores, disposes of, or collects sensitive, personally identifiable information, following the discovery of a security breach, to notify (as specified): (1) any U.S. resident whose information may have been accessed or acquired; and (2) the owner or licensee of any such information the agency or business does not own or license. Additionally, the bill exempts (1) agencies from notification requirements for national security and law enforcement purposes and for security breaches that do not have a significant risk of resulting in harm, provided specified certification or notice is given to the U.S. Secret Service; and (2) business entities from notification requirements if the entity utilizes a security program that blocks unauthorized financial transactions and provides notice of a breach to affected individuals. The bill also requires notifications regarding security breaches under specified circumstances to the Secret Service, the Federal Bureau of Investigation, the United States Postal Inspection Service, and state attorneys general. Furthermore, the bill sets forth enforcement provisions and authorizes appropriations for costs incurred by the Secret Service to investigate and conduct risk assessments of security breaches. The Senate Committee on the Judiciary reported the bill without a written report on May 31, 2007. Personal Data Privacy and Security Act of 2007. This bill would amend the federal criminal code to (1) make fraud in connection with the unauthorized access of sensitive personally identifiable information (in electronic or digital form) a predicate for racketeering charges; and (2) prohibit concealment of security breaches involving such information. The bill also directs the U.S. Sentencing Commission to review and amend its guidelines relating to fraudulent access to, or misuse of, digitized or electronic personally identifiable information (including identify theft). Additionally, the bill requires a data broker to (1) disclose to an individual, upon request, personal electronic records pertaining to such individual maintained for disclosure to third parties; and (2) maintain procedures for correcting the accuracy of such records. The bill also establishes standards for developing and implementing safeguards to protect the security of sensitive personally identifiable information. Additionally, the bill imposes upon business entities civil penalties for violations of such standards and requires such business entities to notify (1) any individual whose information has been accessed or acquired; and (2) the U.S. Secret Service if the number of individuals involved exceeds 10,000. Furthermore, the bill authorizes the Attorney General and state attorneys general to bring civil actions against business entities for violations of this act. The bill requires the Administrator of the General Services Administration in considering contract awards totaling more than $500,000, to evaluate (1) the data privacy and security program of a data broker; (2) program compliance; (3) the extent to which databases and systems have been compromised by security breaches; and (4) data broker responses to such breaches. The bill also requires federal agencies to conduct a privacy impact assessment before purchasing personally identifiable information from a data broker. The Senate Committee on the Judiciary reported the bill with written report 110-70 on May 23, 3007. Identity Theft Prevention Act. This bill would require any commercial entity or charitable, educational, or nonprofit organization that acquires, maintains, or uses sensitive personal information (covered entity) to develop, implement, maintain, and enforce a written program, containing administrative, technical, and physical safeguards, for the security of sensitive personal information it collects, maintains, sells, transfers, or disposes of. The bill defines "sensitive personal information" as an individual's name, address, or telephone number combined with at least one of the following relating to that individual: (1) the social security number or numbers derived from that number; (2) financial account or credit or debit card numbers combined with codes or passwords that permit account access, subject to exception; or (3) a state driver's license or resident identification number. The proposed act requires a covered entity (1) to report a security breach to the Federal Trade Commission (FTC); (2) if the entity determines that the breach creates a reasonable risk of identity theft, to notify each affected individual; and (3) if the breach involves at least 1,000 individuals, to notify all consumer reporting agencies specified in the Fair Credit Reporting Act. The bill also authorizes a consumer to place a security freeze on his or her credit report by making a request to a consumer credit reporting agency, and prohibits a reporting agency, when a freeze is in effect, from releasing the consumer's report for credit review purposes without the consumer's prior express authorization. Additionally, this legislation requires (1) the establishment of the Information Security and Consumer Privacy Advisory Committee; and (2) a related crime study, including the correlation between methamphetamine use and identity theft crimes. Also, this bill treats any violation of this act as an unfair or deceptive act or practice under the Federal Trade Commission Act, requires enforcement under other specified laws, allows enforcement by state attorneys general, and preempts state laws requiring notification of affected individuals of security breaches. The Senate Committee on Commerce, Science and Transportation reported the bill with written report 110-235 on December 5, 2007. Personal Data Protection Act of 2007. This bill would require agencies and individuals who possess computerized data containing sensitive personal information to disclose security breaches that pose a significant risk of identity theft. Data Security Act of 2007. The bill would prescribe security procedures which an entity that maintains or communicates sensitive account or personal information must implement and enforce in order to protect the information from an unauthorized use likely to result in substantial harm or inconvenience to the consumer. The bill would also grant exclusive enforcement powers to specified federal regulatory agencies with oversight of financial institutions. The bill also denies a private right of action, including a class action, regarding any act or practice regulated under this act. The bill would also prohibit any civil or criminal action in state court or under state law relating to any act or practice governed under this act. The bill would prescribe data security standards to be implemented by federal agencies. S. 1260 preempts state law with respect to the responsibilities of any person to protect against and investigate such data security breaches and mitigate any losses or harm resulting from them. Federal Agency Data Breach Protection Act. The bill would amend federal law governing public printing and documents to instruct the Director of the Office of Management and Budget (OMB) to establish policies, procedures, and standards for agencies to follow in the event of a breach of data security involving disclosure of sensitive personal information for which harm to an individual could reasonably be expected to result. The bill would require such policies and procedures to include (1) timely notification to individuals whose sensitive personal information could be compromised as a result of a breach; (2) guidance on determining how to provide timely notice; and (3) guidance regarding whether additional special actions are necessary and appropriate, including data breach analysis, fraud resolution services, identity theft insurance, and credit protection or monitoring services. The bill also authorizes each agency Chief Information Officer to: (1) enforce data breach policies; and (2) develop an inventory of all personal computers, laptops, or any other hardware containing sensitive personal information. The bill would also require federal agency information security programs to include data breach notification procedures to alert individuals whose sensitive personal information is compromised. S. 1558 makes it the duty of each agency Chief Human Capital Officer to prescribe policies and procedures for employee exit interviews, including a full accounting of all federal personal property assigned to the employee during the course of employment.

During the First Session of the 110 th Congress, three data security bills were reported favorably out of Senate committees-- S. 239 (Feinstein), a bill to require federal agencies, and persons engaged in interstate commerce, in possession of data containing sensitive personally identifiable information, to disclose any breach of such information; S. 495 (Leahy), a bill to prevent and mitigate identity theft, to ensure privacy, to provide notice of security breaches, and to enhance criminal penalties, law enforcement assistance, and other protections against security breaches, fraudulent access, and misuse of personally identifiable information; and S. 1178 (Inouye), a bill to strengthen data protection and safeguards, require data breach notification, and further prevent identity theft. On June 3, 2008, H.R. 4791 (Clay), a bill to strengthen requirements for ensuring the effectiveness of information security controls over information resources that support federal operations and assets and to protect personally identifiable information of individuals that is maintained in or transmitted by federal agency information systems, was passed by the House by voice vote under suspension of the rules. Other data security bills were also introduced including S. 1202 (Sessions), S. 1260 (Carper), S. 1558 (Coleman), H.R. 516 (Davis), H.R. 836 (Smith), H.R. 958 (Rush), H.R. 1685 (Price), H.R. 2124 (Davis), and H.R. 4175 (Conyers). This report discusses the core areas addressed in federal legislation. For related reports, see CRS Report RL34120, Federal Information Security and Data Breach Notification Laws , by [author name scrubbed]. Also see the Current Legislative Issues web page for "Privacy and Data Security" available at http://apps.crs.gov/ cli/ cli.aspx?PRDS_CLI_ITEM_ID=2105 . This report will be updated as warranted.

The November 2000 elections caused the Senate to be tied with 50 Republicans and 50 Democrats. The issue was further complicated by the election of Richard B. Cheney as Vice President. When the 107 th Congress convened on January 3, 2001, the incumbent Vice President, Albert Gore Jr., presided until Vice President-elect Cheney was sworn in on January 20. Although a titular Democratic majority existed (with Vice President Gore available to break tie votes) and could have tried to organize the Senate, any such organization actions could have been revisited under Republican auspices once Vice President Cheney was in the chair to break ties. The Senate often negotiates formal and informal agreements to govern the legislative agenda and its consideration of individual measures. Similar negotiations about the organization of the Senate began informally in late November between the Democratic leader, Senator Tom Daschle (D-SD), and the Republican leader, Senator Trent Lott (R-MS). Talks continued after the Senate convened, and proposals under consideration by the two leaders were discussed at meetings of the party conferences. Senator Daschle, recognized as majority leader by Vice President Gore who was presiding, made no attempt to replace the incumbent Senate administrative officers with Democratic nominees. In an unprecedented step, the Senate agreed to S.Res. 3 , electing Senator Robert C. Byrd (D-WV) President pro tempore upon the adoption of the resolution, and simultaneously electing Senator Strom Thurmond (R-SC) President pro tempore , to be effective at noon on January 20. The Senate designated committee chairmen on opening day. As Senate committees are continuing bodies, Senators serving on panels in the 106 th Congress retained their positions and roles when the 107 th Congress convened. Several committee chairmen did not return to the 107 th Congress, however, and, for administrative reasons, it was necessary for the Senate, at a minimum, to designate acting committee chairs to replace them, pending election of the full committee slates. The Senate went further in adopting S.Res. 7 , naming Democratic committee chairs on all Senate committees to serve as such through January 20, and naming Republican chairs to assume their posts at noon that day. Two days later, on the afternoon of January 5, 2001, Senator Daschle presented to the Senate S.Res. 8 , a measure to provide the organizational basis for powersharing in the Senate when the parties were equally divided. The resolution was agreed to later that day. The key provisions of the resolution were as follows: Committees All Senate committees would have equal numbers of Republicans and Democrats; a full committee chair could discharge a subcommittee from further consideration of a measure or matter, if it was not reported because of a tie vote; and budgets and office space for all committees were equally divided, with overall committee budgets to remain within "historic levels;" Discharging Measures or Matters If a measure or nomination was not reported because of a tie vote in committee, the majority or minority leader (after consultation with committee leaders) could move to discharge the committee from further consideration of such measure or nomination; this discharge motion could be debated for four hours, equally divided and controlled by the majority and minority leaders. After the expiration (or yielding back) of time, the Senate would vote on the discharge motion, without any intervening action, motion, or debate; and if the committee were discharged by majority vote, the measure or matter would be placed on the appropriate Senate calendar to await further parliamentary actions. Agenda Control and Cloture The agreement prohibited a cloture motion from being filed on any amendable item of business during the first 12 hours in which it is debated; required both party leaders "to seek to attain an equal balance of the interests of the two parties" in scheduling and considering Senate legislative and executive business; and noted that the motion to proceed to any calendar item "shall continue to be considered the prerogative of the Majority Leader," although qualifying such statement with the observation that "Senate Rules do not prohibit the right of the Democratic Leader, or any other Senator, to move to proceed to any item." On January 8, 2001, the provisions of S.Res. 8 were further clarified and other procedures relating to the powersharing agreement were announced. Senator Harry Reid (D-NV), the assistant Democratic floor leader, received unanimous consent to enter a printed colloquy between Senators Daschle and Lott into the Congressional Record , and to direct that "the permanent ( Congressional ) Record be corrected to provide for its inclusion with the resolution when it passed the Senate last Friday." In addition to summarizing the provisions of S.Res. 8 , the colloquy covered several additional issues. In perhaps the most significant announcement, the two leaders pledged to refrain from using their preferential rights of recognition to "fill the amendment tree" in an effort to block consideration of controversial issues. Senator Lott, on behalf of both leaders, declared the policy in the written colloquy. ... (I)t is our intention that the Senate have full and vigorous debates in this 107 th Congress, and that the right of all Senators to have their amendments considered will be honored. We have therefore jointly agreed that neither leader, nor their designees in the absence of the leader, will offer consecutive amendments to fill the amendment tree so as to deprive either side of the right to offer an amendment. We both agree that nothing in this resolution or colloquy limits the majority leader's right to amend a non-relevant amendment, nor does it limit the sponsor of that nonrelevant amendment from responding with a further amendment after the majority leader's amendment or amendments are disposed of. The party leaders agreed that minority party Senators would be permitted to serve as presiding officers of the Senate. This differed from the usual Senate practice under which only majority party Senators serve as temporary presiding officers. The colloquy further specified that both parties would "have equal access" to common space in the Capitol complex for purposes of holding meetings, press conferences, and other events. This supplemented the provisions in S.Res. 8 guaranteeing the minority equal committee office space. The agreement embodied in S.Res. 8 was not comprehensive. It did not address many parliamentary issues. As Senator Lott noted in floor remarks, it covered the issues on which the party leaders were able to reach agreement. "In instance after instance, Senator Daschle and I discussed points, argued about points. When we could not come to agreement, we said we would deal with the rules as they are. So we got it down to what really matters." For example, one issue that was not resolved was conference committee composition. Although the agreement specified equal party strength on the Senate's standing, special, and joint committees, it did not specify equal party strength on conference delegations. Some Senate Republicans were insistent that a majority of Senate conferees be Republicans, reflecting the tie-breaking vote of Vice President Cheney available to approve any conference compromise. As one Republican Senator noted, "I think it's absolutely our position, and my position, that we have to control the conferences." The parliamentary stages though which the Senate passes to get to conference are usually handled by unanimous consent. This particularly includes granting authority to the presiding officer to appoint conferees, based on the recommendations of the committee and floor leaders. If objection is raised to granting this authority, Senate conferees are to be elected by amendable motion, debatable under the normal rules of the Senate. Senator Lott alluded to this possibility in the printed colloquy of January 8. With respect to the ratios of members on conferences, we both understand that under previous Senate practices, those ratios are suggested by the majority party and, if not acceptable by the minority party, their right to amend and debate is in order.... (T)he intention of this resolution is not to alter that practice and this resolution does not serve to set into motion any action that would alter that practice in any way. The Senate did not name conferees through its traditional mechanisms during the powersharing period of the 107 th Congress. During that time, the Senate agreed to send only two measures to conference committee, the budget resolution and the reconciliation bill, but it should be noted that conference procedures on these measures are governed in part by the Budget Act. In both of these cases, a majority of the conferees were Republican. On May 24, 2001, Senator James Jeffords announced his intention to leave the Republican party, to become an Independent, and to caucus with the Senate Democrats. With Senator Jeffords's announcement, the Democrats held a numerical edge in the Senate. On June 5, 2001, Senator Jeffords met with Senate Democrats at their weekly conference meeting. On June 6, the Senate convened with the Democrats as the acknowledged Senate majority party. The powersharing agreement in effect in the Senate from January to June of 2001 was an experiment. It differed from many established practices of the Senate. The agreement was not comprehensive, and new issues came before the Senate that had to be resolved by informal agreements, unanimous consent negotiations, or other means. The success of any Senate organizational settlement depends in part upon its adaptability and that of its members to changing circumstances.

The 2000 elections resulted in a Senate composed of 50 Republicans and 50 Democrats. An historic agreement, worked out by the party floor leaders, in consultation with their party colleagues, was presented to the Senate ( S.Res. 8 ) on January 5, 2001, and agreed to the same day. The agreement was expanded by a leadership colloquy on January 8, 2001. It remained in effect until June of 2001, when Senators reached a new agreement to account for the fact that a Senator had left the Republican party to become an Independent who would caucus with the Democratic party. This report describes the principal features of this and related agreements which provided for Republican chairs of all Senate committees after January 20, 2001; equal party representation on all Senate committees; equal division of committee staffs between the parties; procedures for discharging measures blocked by tie votes in committee; a restriction on the offering of cloture motions on amendable matters; restrictions on floor amendments offered by party leaders; eligibility of Senators from both parties to preside over the Senate; and general provisions seeking to reiterate the equal interest of both parties in the scheduling of Senate chamber business. Also noted is that not all aspects of Senate practice were affected by the powersharing agreement.

C ontroversies have arisen in several states over establishment of ambient water quality standards. At issue is whether states are setting standards at levels that adequately protect public health from pollutants in waterways. Some groups argue that states are adopting overly stringent standards that are unattainable and unaffordable and are being pressured to do so by the U.S. Environmental Protection Agency (EPA). Others contend that the states are failing to protect population groups that consume large amounts of fish, such as members of Indian tribes that have treaty fishing rights. The issue involves complex scientific and technical questions about cancer risk levels and fish consumption rates, among others. States where these controversies have occurred recently include Maine and several in the Pacific Northwest (Washington, Oregon, and Idaho). Similar issues could arise in other states that have large tribal populations or other populations that are exposed to toxic pollutants in streams, lakes, and other ambient waters. In many respects, water quality standards are the fundamental building blocks of the Clean Water Act (CWA; 33 U.S.C. 1253 et seq.). Established by states and approved by EPA, they define a state's water quality goals, and they result in direct requirements for dischargers because states issue enforceable discharge permits based on criteria limits in the standards. They also provide the benchmark against which states identify impaired waters and then develop plans that establish Total Maximum Daily Loads (TMDLs) to attain the standards. Water quality standards consist of narrative and numeric limits on pollutants, designated uses or goals for protection of the waterbody (such as fishing, swimming, or public water supply), and antidegradation policy to maintain and protect existing uses and high-quality waters. In support of standard setting by states, EPA develops risk-based water quality criteria that set a concentration for contaminants in water to ensure that public health and aquatic life will not be harmed. For most pollutants, EPA develops water quality criteria to protect aquatic life and separate water quality criteria to protect human health. The latter are sometimes referred to as the potable water criteria, since they are intended to protect human health from water that is consumed directly or protect human health from exposure to contaminants that may occur as a result of consuming fish. The most recent EPA update of the human health water quality criteria was issued in 2015. It included revisions to 94 existing criteria; EPA now has recommended human health criteria for 122 pollutants. The EPA criteria are recommendations to states--they do not apply automatically, they are not binding on states, nor are they enforceable. Most states use the EPA national criteria as the starting point for developing criteria as part of their water quality standards. They usually are expressed as concentration limits for a pollutant. The states' criteria must protect the designated use of a waterbody and be based on "sound scientific rationale." If a state adopts criteria that differ from EPA's recommended criteria, the state must explain its rationale for doing so, as part of developing enforceable water quality standards that are reviewed and approved by EPA. Following EPA's approval of water quality standards, states establish discharge permit limits to ensure that industrial and municipal sources will not violate criteria in the standards. If EPA disapproves state criteria or determines that revised criteria are necessary, it can issue federal criteria for the state. When that occurs, the federal criteria are the state's water quality standards until such time as EPA approves the state's revised criteria. EPA then withdraws the federally promulgated water quality standards because they are no longer necessary. EPA has not often used its CWA authority to establish federal water quality standards--for example, it promulgated toxic pollutant standards in 14 states and territories in 1992 and toxics standards for waters of the Great Lakes system in 1995 --but doing so has been controversial. An important function of ambient water quality criteria is to manage the risk associated with chemicals that are released into the environment through human activity in such a way that human health is protected. Human health criteria represent the highest concentration of a pollutant in water that is not expected to pose a significant risk to human health. They are set so that fish in a waterbody have levels of targeted pollutants low enough such that when they are consumed by people, or are consumed by people who also are drinking water from the same waterbody, they do not pose unacceptable health risks to individuals. A water quality criterion is calculated as the product of risk-specific toxicity (i.e., the type of health effect--cancer or non-cancer) times exposure. Exposure encompasses multiple factors, such as body weight of individuals, daily intake of fish and water, and bioaccumulation of the pollutant. Over time, the methodology and exposure inputs underlying EPA's national recommended human health criteria have evolved, based on better science, population data, and models. EPA's 2015 Update of Human Health Ambient Water Quality Criteria reflects several revised standard exposure inputs: (1) default body weight of 80 kilograms for adults ages 21 and older (about 176 pounds; previously, EPA's default body weight was 70 kilograms, or about 154 pounds), (2) default drinking water consumption rate of 2.4 liters per day for adults (previously, 2 liters per day), and (3) default fish consumption rate (FCR) for the general population of 22 grams per day (g/d) that is protective of 90% of adults (about 3/4 of an ounce; previously, EPA's national default rate was 17.5 g/d, or 0.6 ounce). EPA's national default subsistence FCR is 142 g/d, representing subsistence fishers whose daily consumption is greater than the general population. Fish consumption rates are among the important exposure factors in determining risk level in a criterion, because the more fish that people consume that contain toxic pollutants, the more individuals are at risk for developing cancer and other illnesses. What is considered safe for someone who eats fish once per month might be harmful to someone who eats fish every day. This is important to Indian tribes, who generally eat more fish than average consumers because fish consumption has important cultural and religious significance for tribal members. Consequently, some have long argued that water quality standards should give greater weight to considerations that include FCRs of certain subpopulations, such as Native Americans. Also important is the assumed cancer risk level in a criterion. EPA and other regulatory agencies consider that there is some risk with even the lowest exposure to carcinogens (i.e., there is no threshold exposure below which risk is zero). To establish regulatory criteria for carcinogens, the level of acceptable risk must be determined. Chronic (lifetime) exposure to carcinogenic chemicals is associated with an increased likelihood of developing cancer at some point in an individual's lifetime. This likelihood is sometimes referred to as the incremental excess lifetime cancer risk. That increased likelihood is sometimes referred to as a probability, such as one in 1,000 (expressed as 1 x 10 -3 ) risk above the "background" risk of developing cancer. EPA calculates CWA human health criteria for carcinogenic effects as pollutant concentrations corresponding to lifetime increases in the risk of developing cancer. Because exposure to surface water or other environmental media cannot be risk-free, the challenge is to find some level of risk that most people will find acceptable. For exposure to carcinogens, the risk-based point of departure for many environmental rules has been a risk management decision of selecting a threshold probability of cancer, typically an excess risk of one in 1 million, or 1 x 10 -6 . Risks at this level or lower (e.g., 10 -8 ) are regarded as acceptable, while higher risks (e.g., 10 -3 ) may or may not be considered acceptable, depending on the regulatory program involved. EPA's methodology for developing ambient water quality criteria to protect human health recommends cancer risk levels of 10 -5 (one in 100,000) or 10 -6 as generally acceptable risk management levels to protect the general population and notes that states and authorized tribes can choose a more stringent risk level, such as 10 -7 (one in 10 million), when deriving human health criteria. EPA's methodology also states that the risk to more highly exposed populations (sports fishers or subsistence fishers)--who inherently face greater risk by consuming more fish--should not exceed a 10 -4 risk level (one in 10,000). EPA believes that states have flexibility under the CWA to determine appropriate risk levels in their water quality standards, subject to EPA review and approval or disapproval, but requires that the state has identified the most highly exposed subpopulation and has demonstrated that the chosen risk level is adequately protective of that population. The CWA requires states and authorized tribes to review their water quality standards and revise them, if appropriate, at least once every three years. Increasingly, during the triennial review process, EPA has been encouraging states with populations known to consume large amounts of fish to develop criteria to protect highly exposed population groups and, in doing so, to use local or regional data on FCRs that are more representative of their target population group, in place of a default national value. In addition, the agency encourages states to adopt a cancer risk level of 10 -6 both for the general population and highly exposed groups. Recent controversies between EPA and several states have involved disputes over both the appropriate FCR and cancer risk level used by states in developing their water quality criteria, and the stringency of the resulting ambient water quality standards. Stringent water quality standards, in turn, can result in states issuing permits containing highly restrictive discharge limits that create compliance issues for industrial and municipal facilities. The challenge raised by these controversies is to develop achievable water quality criteria that are protective for the general population and for high-consuming subpopulations, whose risk will be greater, but still acceptable. In 2011, following its triennial review, Oregon adopted revisions to its water quality standards. Initially, Oregon's criteria were based on a fish consumption rate of 17.5 grams per day and 10 -6 lifetime cancer risk level. But EPA argued that information was available in the record that showed that more fish was being consumed than was accounted for in the 17.5 g/d standard. As a result, Oregon revised its criteria based on the new data and submitted its standards to include a 175 g/d FCR (about 6.2 ounces) and a lifetime cancer rate level of 10 -6 . EPA approved the revised standards in 2011. Evidence of how the state's stringent water quality standards may affect discharge permit limits is not available, because, according to available information, Oregon has issued few major permits based on the revised criteria. Washington State began work on revised water quality standards in 2013. Its then-existing human health criteria for toxic pollutants were promulgated by EPA in the 1992 National Toxics Rule (NTR), based on recommended exposure values considered appropriate at that time--including a default FCR of 6.5 g/d and a cancer risk level of 10 -6 . Washington intended to adopt criteria that EPA would approve in lieu of federal standards, reflecting both updated science and policy. The standards that the state adopted and submitted for EPA review in January 2015 were based on an FCR of 175 g/d (EPA had urged the state to adopt the same FCR as Oregon, in part to achieve regional consistency since the two states share certain waters) and a cancer risk level of 10 -5 . Washington State was attempting to develop human health criteria that would balance human health protection and achievability, but EPA indicated that it would disapprove Washington's standards, because of the less protective cancer risk level. When the state failed to adopt revised standards that EPA could approve, in September 2015 the agency proposed to promulgate federal water quality standards for Washington including more protective human health criteria that are consistent with EPA's position. This rule proposes to change the criteria that EPA promulgated for Washington in the 1992 NTR and establish new human health criteria for 14 additional chemicals for which EPA now has recommended criteria. EPA has not yet finalized its 2015 proposal (despite the 90-day requirement in CWA Section 303(c)(3)), preferring that Washington revise its standards, which the state did in August 2016. EPA is now reviewing the state's new standards. Washington's 2016 revisions incorporate criteria reflecting EPA's position regarding FCR and cancer risk level, but nevertheless reflect some differences in numeric criteria for specific pollutants. Idaho updated 167 human health criteria for 88 chemicals in 2006. In 2012, EPA disapproved the state's updated human health criteria and the use of 17.5 g/d as a fish consumption rate for calculating the criteria. This action was based on EPA's judgment that the FCR used in criteria derivation was not adequately protective of all Idahoans. Subsequently, Idaho notified EPA of its intention to initiate a negotiated rulemaking to revise the human health criteria for toxic pollutants; that rulemaking began in September 2012 and continues now. Based on a fish consumption survey of its general population and an EPA tribal survey, Idaho chose an FCR of 66.5 g/d and a 10 -5 cancer risk level to derive revised criteria for toxic pollutants. The state has not yet officially submitted its standards package to EPA for approval, but in official comments to the state, EPA indicated concern about Idaho's actions. In May 2016, EPA announced that within one year it will propose human health criteria applicable to waters under Idaho's jurisdiction. In April 2016, EPA proposed federal water quality standards containing human health criteria for 96 pollutants in certain waters in Maine, mainly waters on Indian lands in the state and waters subject to sustenance fishing rights under the Maine Implementing Act. EPA's proposal came after a federal court in 2014 had ordered EPA to act--through approval or disapproval--on a series of water quality standards that Maine had submitted to EPA for review over a period of years, but on which EPA had failed to act. In response to the court's order, EPA partially approved and partially disapproved Maine's pending standards in a series of letters early in 2015. The disapprovals were based in part on EPA's determination that the criteria do not adequately protect all designated uses, including sustenance fishing use in tribal waters. Maine believes that the standards were wrongly disapproved and has objected to revising its standards to adopt EPA's position. Maine's human health criteria are based on an FCR of 32.4 g/d, while EPA's April 2016 proposed federal criteria assume an FCR of 286 g/d. Both Maine's standards and EPA's proposed standards include a cancer risk level of 10 -6 . Within their overall water quality standards, states can incorporate a number of tools or mechanisms that can potentially provide implementation flexibility. For example, EPA rules allow states to establish a process for allowing time-limited variances and compliance schedules to allow permittees additional time to meet CWA and regulatory requirements. They also can grant intake credits or have processes that recognize naturally occurring or legacy sources of contaminants, air deposition, or pollutant releases from unregulated sources. States generally, but especially states that are developing or implementing stringent water quality criteria, view such implementation tools as necessary elements of their water quality standards. EPA's regulations acknowledge that intake credits, variances that allow more time for compliance, and other mechanisms are available to states, but the agency disapproves those that it determines do not meet requirements of the CWA. These actions, too, contribute to controversies between EPA and certain states. In all cases, EPA indicates that it prefers to work collaboratively with states and prefers that states take necessary actions to adopt or revise water quality standards to meet CWA requirements without federal intervention. At the same time, EPA argues that it has a duty under the CWA to ensure that water quality standards adequately protect designated uses of waters and are consistent with the law. Criticism of EPA's actions regarding state water quality standards has increased recently. Critics include affected states and organizations representing major dischargers that are directly affected by adoption of stringent water quality criteria. One such organization is the National Association of Clean Water Administrators (NACWA), whose members include public wastewater treatment agencies. In a December 2015 letter commenting on EPA's proposed federal water criteria for Washington State, NACWA criticized "EPA's tactics of influence and intimidation," which the organization said "are inconsistent with the CWA's cooperative federalism foundation and history that provides the states the responsibility for developing and approving water quality standards." In a separate letter concerning Idaho's development of revised water quality criteria, NACWA observed that EPA's engagement with states before formal criteria are submitted is intended to influence the content of state proposals. "Whether due to a lack of resources or political will, states have often succumbed to this 'informal' pressure from EPA and made revisions to their rules, even if the changes were counter to the state's policy and risk choice positions." Other critics contend that EPA's recommended national human health criteria are based on extreme and unrealistic assumptions, reflecting compounded conservatism, and that the agency has gone beyond the national criteria in its discussions with Maine and the Pacific Northwest states. Critics say that compounded conservatism results because the inputs used by EPA to derive human health water quality criteria assume that the concentration of a pollutant in all waters is always equal to the criteria and that everyone in the United States is of a standard weight; drinks 2.4 liters of unfiltered and untreated water from rivers, lakes, and streams every day for a lifetime; and eats 22 grams of locally caught fish every day for a lifetime, all of which are contaminated at the criteria level. Critics estimate that less than 1% of the population has these characteristics, while the compounded conservatism underlying such analysis leads to adoption of extreme values in states' criteria. EPA's recommended criteria in Maine and the Pacific Northwest are even more conservative, they say. Other stakeholders, including environmental advocates and tribal organizations, have a different view. Rather than considering human health water quality criteria as overly conservative or overprotective (i.e., by overestimating risk), these groups are more likely to argue that water quality criteria and standards are underprotective (i.e., by underestimating risk), especially in terms of protecting the health of highly exposed populations. In addition, these groups are more likely to fault EPA for what they view as not intervening in a timely manner when states do not meet the substantive and procedural requirements of the CWA, sometimes bringing legal challenges to EPA's actions. For example, when EPA failed to promulgate federal water quality standards for Washington State within 90 days after the agency's September 2015 proposal (as required by CWA Section 303(c)(3)), a coalition of environmental and fisherman associations sued EPA, asking a federal court to set deadlines for EPA to act. On August 3, 2016, the court directed EPA to promulgate revised water quality standards for Washington State no later than September 15, 2016, or, if Washington submits its own standards by September 15, 2016 (which the state did, on August 1), to either approve the state's submission or promulgate federal standards by November 15, 2016. Because EPA's mission is to protect public health and the environment, its practice is to seek to adequately protect public and environmental health by ensuring that risk is not likely to be underestimated, a position that prompts EPA to take a more "protective" stance, given the underlying uncertainty and variability of the factors and inputs that are being assessed. The agency believes that its approach to developing human health criteria is based on science and policies that have been thoroughly vetted publicly. Further, EPA believes that its responsibility is to ensure that state water quality standards meet the CWA's requirement "to protect the public health or welfare, enhance the quality of water and serve the purposes of this Act." In several of the recent controversies over water quality standards, EPA also has referenced concern over criteria that are not sufficiently protective of tribal treaty fishing rights. These issues arise because, when certain Native American tribes negotiated treaties with the U.S. government to cede or give up their lands, they insisted on maintaining their fishing rights, on and off reservation. Historically, and even today, these activities were important to Native American tribes as sources of food and trade, in addition to playing a central role in the spiritual and cultural framework of tribal life. EPA must consider tribal fishing rights because treaties between Native American tribes and the government have the same legal force as federal statutes and are defined as part of the supreme law of the land under the U.S. Constitution. EPA recognizes the importance of respecting tribal treaty rights and its obligation to do so when it takes actions such as approving water quality standards. The agency commented on this issue in the 2015 proposal for federal water quality standards in Washington State. A majority of waters under Washington's jurisdiction are covered by reserved rights, including tribal treaty-reserved rights.... In order to effectuate and harmonize these reserved rights, including treaty rights, with the CWA, EPA determined that such rights appropriately must be considered when determining which criteria are necessary to adequately protect Washington's fish and shellfish harvesting designated uses.... EPA proposes to consider the tribal population exercising their reserved fishing rights in Washington as the target general population for the purposes of deriving protective criteria that allow the tribes to harvest and consume fish consistent with their reserved rights. Tribal organizations have been among the most active and vocal supporters urging EPA to ensure that states develop water quality standards with stringent human health criteria. One analyst estimated that at least 10 states have tribes with treaties similar to those at issue in Washington State, and in total, 40 states are home to tribes with treaties, suggesting that similar water quality standards controversies could arise in other states, he said. At issue in these recent and ongoing controversies is finding the right balance in developing CWA human health criteria. One set of concerns about this balance has been expressed by industries and other regulated stakeholder groups, such as NACWA, who challenge what they view as EPA overreach of its CWA authority to oversee state water quality standards and ignoring flexibility that is provided in the agency's rules and guidance. For example, while EPA's methodology for developing water quality criteria states that a cancer risk level of either 10 -5 (one in 100,000) or 10 -6 (one in 1 million) is generally acceptable risk for the general population, the agency's strong recommendation is for states to use a 10 -6 risk level both for the general population and highly exposed groups. As described in this report, EPA argues that it has a duty under the CWA to ensure that water quality standards adequately protect designated uses of waters--including tribal treaty rights--and are consistent with the law. Environmental advocates and Native American organizations express a set of concerns that differ from those of regulated industries, favoring and encouraging more intervention by EPA, rather than less, and advocating the need to ensure that standards are protective of highly exposed subpopulations. States' interests reflect a range of concerns--desiring to ensure that public health of all populations is protected while providing flexibility for business and also preserving the appropriate role for states under the CWA. State standards must, by law and regulation, reflect the best available science, but when states are developing standards, they seek to ensure that legitimate state policy decisions are acknowledged. Congress has so far not directly addressed the recent controversies discussed in this report, but many in Congress have for some time been generally critical about perceived EPA overreach in a number of regulatory and policy areas. Although legislation intended to limit EPA's involvement in state development of water quality standards was introduced in the past ( H.R. 2018 , which the House passed, and S. 3558 in the 112 th Congress; and H.R. 1948 in the 113 th Congress), similar bills have not been introduced in the 114 th Congress.

Controversies have arisen in several states over establishment of ambient water quality standards. At issue is whether states are setting standards at levels that adequately protect public health from pollutants in waterways. Some groups argue that states are adopting overly stringent standards that are unattainable and unaffordable and are being pressured to do so by the U.S. Environmental Protection Agency (EPA). Others contend that the states are failing to protect population groups that consume large amounts of fish, such as members of Indian tribes that have treaty fishing rights. The issue involves complex scientific and technical questions about cancer risk levels and fish consumption rates, among others. States where these controversies have occurred recently include Maine and several in the Pacific Northwest (Washington, Oregon, and Idaho). Water quality standards are the fundamental building blocks of the Clean Water Act (CWA). Established by states and approved by EPA, they define a state's water quality goals, and they result in direct requirements for dischargers when states issue enforceable permits. In support of standard setting by states, EPA develops recommended risk-based water quality criteria that set a concentration for contaminants in water to ensure that public health and aquatic life will not be harmed. Most states use the EPA national criteria as the starting point for developing criteria as part of their water quality standards. Human health criteria are set so that fish in a waterbody have levels of targeted pollutants low enough such that when they are consumed by people, or are consumed by people who also are drinking water, they do not pose unacceptable health risks to individuals. Fish consumption rates are among the important exposure factors in determining human health risk level in a criterion, because the more fish that people consume that contain toxic pollutants, the more individuals are at risk for developing cancer and other illnesses. Also important is the assumed cancer risk level in a criterion. The CWA requires states and authorized tribes to review their water quality standards and revise them, if appropriate, at least once every three years. Increasingly, during the triennial review process, EPA has been encouraging states with populations known to consume large amounts of fish to develop criteria to protect highly exposed population groups and, in doing so, to use local or regional data on fish consumption rates that are more representative of their target population group, in place of a default national value. In addition, the agency encourages states to adopt a cancer risk level of 10-6 (i.e., one in 1 million incremental lifetime risk of developing cancer) both for the general population and highly exposed groups. Recent controversies have involved disputes over both the appropriate fish consumption rate and cancer risk level used by states in developing their human health water quality criteria, and the stringency of the resulting ambient water quality standards. Stringent standards, in turn, can result in states issuing permits with highly restrictive discharge limits that create compliance issues for industrial and municipal facilities. The challenge raised by these controversies is to develop achievable water quality criteria that are protective for the general population and for high-consuming subpopulations, whose risk will be greater, but still acceptable. Criticism of EPA's actions regarding state water quality standards has increased recently. Critics include affected states and organizations representing major dischargers that are directly affected by adoption of stringent water quality criteria, who challenge what they view as EPA overreach of its CWA authority to oversee state water quality standards. EPA responds that it has a duty under the CWA to ensure that water quality standards adequately protect designated uses of water and are consistent with the law. Other stakeholders, including environmental advocates and tribal organizations, have a different view from industry's. They argue that water quality criteria and standards are underprotective, especially in terms of protecting the health of highly exposed populations. States' interests reflect a range of concerns--desiring to ensure that public health of all populations is protected, while providing flexibility for business and also preserving the appropriate role for states under the CWA. Congress has so far not directly addressed the recent controversies discussed in this report, but many in Congress have for some time been generally critical about perceived EPA overreach in a number of regulatory and policy areas.

Politics in Haiti have been generally violent and authoritarian, ever since Haiti became anindependent republic in 1804, when African-descended slaves revolted against their French colonialmasters. Between the end of the rule of Toussaint Louverture (leader of the slave rebellion) in 1803,and Francois Duvalier, founder of the 30-year dictatorship that fell in 1986 -- both of whom declaredthemselves president for life -- were some 30 other despotic rulers. This legacy would appeardifficult to overcome. In addition, most of the traditional centers of power in Haiti, such as themilitary, the Catholic and Protestant churches, the business sector, and the traditional elite, finddemocratic reformist ideas threatening in the Haitian context. The government apparatus is stillstaffed principally by Duvalierist appointees, many of whom have resisted change during thenumerous post-Duvalier governments and will most likely continue to do so. Haitian history is marked by conflict between two racial groups: the mulatto elite and themajority blacks. The vast majority of Haitians are black, poor, illiterate peasants. The mulattosestablished their economic power and elite status principally by controlling the business sector. Bothgroups enjoyed periods of political dominance. Black rulers generally emphasized Haiti's Africanroots and traditions, including the African-based folk religion, voodoo. The mulatto eliteemphasized a European, Catholic tradition. Because of their education, mulattos held somegovernment positions even during black rule. Race relations have improved in recent years: the once disdained Creole dialect used by themajority is now an official language spoken by all Haitians; interracial marriages are common; andthe government is no longer as dominated by mulattoes. But recent political events have againheightened racial and class tensions within Haiti. The poor black majority's only access to powerhas been through public protests, when tolerated, and the recent elections. The mulatto elite wieldsmost of the economic and political power in Haiti, and generally resists dramatic changes toward aredistribution of wealth and privilege to improve the lot of the poor majority. For much of this century, Haitian history was marked by occupation government or theauthoritarian Duvalier regime. The United States intervened in Haiti in 1915 to stop civil strife andprevent Germany from establishing a foothold there. By mid-August, 1915, there were more than2,000 U.S. Marines in Haiti. (1) The Marines stayed until 1934, overseeing public works, taxcollection, treasury management, and the development of a native Haitian Constabulary which wasHaiti's first professional military force. Some of these contributions were welcome and muchneeded. But the U.S. presence was also deeply resented as an affront to Haitian sovereignty. ManyHaitians charged the United States with discriminating against blacks by placing mulattoes inpositions of power. By 1932, the U.S. withdrawal from Haiti was well underway during the Administration ofHerbert Hoover. Because of growing concerns about the effects of the occupation, President Hooverhad appointed a commission 1930 to study the U.S. involvement in Haiti. The commissionconcluded that while the occupation had brought about material improvements to Haiti, the U.S.occupation also excluded Haitians from positions of real authority in the government and theconstabulary. Under President Franklin Roosevelt, a disengagement agreement was signed in August1933, and the last contingent of U.S. Marines left Haiti in August 1934. (2) Francois Duvalier and his son Jean-Claude ruled Haiti for nearly 30 years, leaving behind alegacy of repression and corruption. Francois, or "Papa Doc," Duvalier became President in 1957through elections marred by numerous irregularities. Although Duvalier originally ran on a platformcalling for political liberty and social reform, within a year he had established himself as a dictator. Under his rule, arbitrary imprisonment, torture, and unexplained deaths became commonplace. TheDuvaliers' private militia, the Tontons Macoutes, carried out most of this repression. The Macoutes,Creole for "bogeymen," were loosely organized armed gangs enlisted by the Duvaliers to eliminateopposition to their rule through violence and extortion. The Macoutes also served to counterbalancethe army's power, which the Duvaliers kept in check to prevent military coups. (3) In 1964, the elder Duvalierhad the constitution amended to make himself president-for-life. In 1971, three months before hisdeath, he had it amended again so that he could name his 19-year-old son Jean-Claudepresident-for-life. In the 1980s, "Baby Doc" Duvalier's marriage to a prominent mulatto and their opulentlifestyle stirred up much resentment among the poor black majority who lived in absolute poverty. In addition, fiscal corruption was rampant and widely recognized in Jean-Claude's government. Aspopular dissatisfaction rose, his regime grew increasingly repressive. In the face of massive populardemonstrations and pressure from abroad, Jean-Claude Duvalier fled the country for France onFebruary 7, 1986. The United States encouraged and helped arrange his departure. Aristide's 1991 ouster ushered in the seventh government in the five and one-half years sincethe young Duvalier's departure. The first interim government was a 6-man, military-dominatedNational Council of Government (CNG) that disbanded the Tontons Macoutes and allowed thedrafting of a new constitution. The new constitution, which over 99 percent of Haitian votersreportedly approved in a plebiscite, guaranteed personal liberties; distributed power among apresident, a Prime Minister, and two legislative houses; and transferred the police to the departmentof justice. It also created an independent electoral council to oversee elections leading to theinauguration of a civilian government in February 1988. Members of the armed forces and anyoneclosely associated with the Duvalier family dictatorship were barred from running for office. ButDuvalierists, in collaboration with the army, thwarted the November 1987 elections by mounting aviolent campaign that culminated in the killing of dozens of voters on election day; as a result of theviolence, the elections were suspended. In January 1988, the CNG ran its own elections, widely viewed as rigged in favor of LeslieManigat, a long-exiled academic. But less than 6 months later, on June 20, 1988, Manigat wasousted in a military coup when he tried to replace officials and reform the government. Lt. GeneralHenri Namphy, CNG president and close friend of Papa Doc's, seized power. During the 31 monthsthat Namphy ran the government (February 1986 to September 1988), human rights violationsincreased, with numerous political killings. Namphy was succeeded by Lt. Gen. Prosper Avril, whopromised a transition to democracy. But under Avril's regime, human rights continued to beroutinely violated, as reported by the U.S. State Department, human rights groups, and others. Violent popular protests forced Avril to resign after 18 months. As a result, in March 1990, a civilian government was appointed with the mandate of holdingelections as soon as possible. A coalition of political and civic organizations selected ErthaPascal-Trouillot, the only woman on the Supreme Court, as provisional President. A State Councilwas established with the objective of giving policy guidance to the executive branch. The Councilsevered relations with the executive branch, however, after the executive branch failed to consult theCouncil or to take action against political violence. President Trouillot headed what was generallyconsidered a weak civilian government, unable or unwilling to effectively control the military. Sheestablished and cooperated with an independent electoral council that organized successful electionsat the end of the year. Hopes that Haiti would leave behind its authoritarian past were raised on December 16, 1990,when Haitians elected a President, national legislators, and municipal officials. Despite securityconcerns and lack of a democratic tradition, voter turnout was estimated to be 70 percent on electionday, and international observers declared the elections generally free and fair. The elections werein part the result of a strong democratic movement that had emerged in the late 1980s in support ofan elected government that would establish order in a non-repressive manner. The democraticmovement encompassed many elements of Haitian society, including political parties as well aspeasant, labor, human rights, and professional organizations. Many observers also credited thesuccess and relatively peaceful nature of the elections to the heavy presence of internationalobservers, whose presence the government of Haiti had requested, and to the economic and materialsupport provided by many nations and international organizations. Jean-Bertrand Aristide was elected President with 67.5 percent of the vote, and wasinaugurated on the fifth anniversary of the collapse of the Duvalier dictatorship. A 37-year-oldpopulist Roman Catholic priest, he was the most controversial of 11 candidates ruled eligible to runby the independent Provisional Electoral Council (CEP). To his supporters, Aristide is a martyr,willing to risk his life to defend the poor. An advocate of "liberation theology," Aristide spoke outagainst Duvalier and the military rulers who followed him. In September 1988, an armed groupattacked and burned Aristide's church, killing 13 and wounding 70; surrounded by his parishioners,Aristide escaped unharmed. To his detractors, Aristide is a potentially dangerous demagogue, whoseinflammatory oratory they say encourages the rampages, known as dechoukajes , or "uprooting" inCreole, in which suspected Tontons Macoutes are attacked or killed by angry mobs. Aristidereportedly denies that his book, 100 Verses of Dechoukaj , condones violence. Nonetheless, theSalesian religious order expelled him for preaching politics from the pulpit, including what the ordercalled "class struggle." When Aristide became a candidate, he toned down his revolutionary and anti-U.S. rhetoric. Aristide previously opposed democratic elections in Haiti, arguing that free and fair elections wereimpossible as long as Duvalierists still had a hold on economic and political power. Nonetheless,he joined the race in response to former Tontons Macoutes chief Roger Lafontant's potentialcandidacy. Lafontant was ruled ineligible to run for the presidency, and in early January 1991, he led anattempted coup against President Trouillot in an effort to prevent Aristid, whom he called an"ultra-communist," from taking office on February 7, 1991. Lafontant seized the national palace andtried to declare martial law. Instead, the army arrested Lafontant and promised to have him tried inthe civilian courts. The popular celebration that followed turned violent as crowds hunted down andlynched dozens of suspected Macoutes. Mobs also burned down the 220-year old cathedral, inapparent retaliation for a homily by the Archbishop -- whose relations with Aristide have long beentense -- that warned of a coming "regime of authoritarian politics." Many foreign diplomatscriticized Aristide for not condemning the street violence quickly or forcefully enough. President Aristide was faced with some of the most serious and persistent social, economic,and political problems in the western hemisphere. After 8 months in office, Aristide had receivedmixed reviews. He was credited with curbing crime in the capital, reducing the number ofemployees in bloated state enterprises, and taking actions to bring the military under civilian control. But some observers questioned the new government's commitment to democracy. Neither Aristidenor his Prime Minister belonged to a political party, and leaders of other political parties criticizedhim for not reaching out and establishing a spirit of cooperation among the democratic elements. Many legislators, including some from Aristide's own coalition, protested the President'sappointment of Supreme Court judges and ambassadors without consulting the Senate as requiredby the constitution. Aristide later agreed to consult the legislature, but relations between the twobranches remained strained. Aristide was also criticized for his attitude toward the judicial system. Lafontant was triedin July 1991 for his role in the failed January coup attempt. Aristide called for a life sentence --which Lafontant received -- although the constitution limited sentences to 15 years. Aristidedeclared the next day a national holiday. Many observers expressed concern over the trial, sayingit differed little from trials under the Duvaliers: it lasted for over 20 consecutive hours, importantwitnesses were not called, and the court appointed five lawyer trainees to defend Lafontant becauseeven his own lawyer felt it too dangerous to defend him. Initially criticized for not having a clear plan, the Aristide government in July 1991 presenteda macroeconomic reform and public sector investment plan to representatives of several nations andinternational lending institutions, who lauded the plan and pledged $440 million in FY1992 aid. Most of that aid was suspended because of the coup that overthrew Aristide's government onSeptember 30, 1991. Aristide's Human Rights Record. In the area ofrespect for human rights, President Aristide also had mixed reviews. He was criticized for appearingto condone mob violence, but was also credited with significantly reducing human rights violationswhile he was in office. Some observers believe that as President, Aristide helped to polarize the situation in Haitiby refusing to condemn violent acts of retribution, and holding out the threat of mob violence againstthose who disagreed with him. For example, Aristide refused to condemn the practice of "perelebrun", or burning someone to death with a "necklace" consisting of a gasoline-soaked auto tire. After the former head of the Tontons Macoutes was sentenced to life in prison, Aristide gave aspeech in which he noted that without popular pressure and the threat of "pere lebrun" in front of thecourthouse, the life sentence would not have been chosen. Moreover, in a September 27, 1991 speech, Aristide appeared to threaten former TontonsMacoutes with "pere lebrun." Aristide reportedly said, "You are watching all macoute activitiesthroughout the country. We are watching and praying. We are watching and praying. If we catchone, do not fail to give him what he deserves. What a nice tool! What a nice instrument! What anice device! It is a pretty one. It is elegant, attractive, splendorous, graceful, and dazzling. It smellsgood. Wherever you go, you feel like smelling it. It is provided for by the Constitution, which bansmacoutes from the political scene." (5) In exile Aristide condemned the practice of necklacing. (6) Observers contend that in the speech Aristide also threatened the bourgeoisie for not havinghelped his government enough. (7) Some saw the speech as another factor leading to his overthrowjust days later, and maintain that members of the bourgeoisie were financially supporting the coupleaders. In a report on the Aristide government's human rights record, Americas Watch and two otherhuman rights groups wrote: It is unfortunate but understandable thatAristide's speeches in support of Pere Lebrun have overshadowed other speeches in which headvocated lawful redress for abuse....President Aristide had a duty to refrain from any statement thatcould be understood to support Pere Lebrun, and to speak out firmly and consistently against thisbarbaric practice. His failure to fulfill this duty is a serious blemish on his human rights record. (8) The report also reflected the views of many in the international community when itrecognized President Aristide as the "sole legitimate Haitian head of state," elected with a two-thirdsmajority, an unusual mandate in the hemisphere. The report further stated: "While we recognize theneed to correct the human rights shortcomings of the Aristide government ... we believe firmly thatthese failings cannot be used to justify committing yet a further, serious human rights violation bydepriving the Haitian people of the right to elect their government." (9) Most human rights monitors credit the Aristide government with being the first Haitiangovernment to address the need to improve respect for human rights, and the needs of the poormajority. They assert that progress made during his term was undone by the military regime thatfollowed. Most sources credit Aristide with creating a much greater sense of security in Haiti thanthere had been in years. He greatly reduced common crime in the city; the removal of the "chefs desections," or sheriffs, many of whom had ruled rural Haiti through extortion and violence fordecades, brought greater security to the countryside as well. According to the State Departmenthuman rights reports for 1991 and 1992, there were no reports of disappearances during Aristide'sterm, and dozens in the months following the coup. The number of political killings also rosedramatically after Aristide was ousted. The September 1991 coup began just four days after Aristide addressed the United Nations,an event he reportedly said marked the end of Haiti's dark past of dictatorship. The State Departmentestimated coup-related deaths at 300-500, while Amnesty International estimated them to numberover 1,500. Role of the Military in the Democratic Process. Under the military-dominated interim governments, the Haitian army frequently impeded thedemocratic process. After the departure of the last military dictator in March 1990, however, someobservers believed there had been a transformation of the army to one supportive of democracy. Throughout the 1990 electoral process, the 7,000-man army proved itself capable of establishing andmaintaining order. Several factors accounted for the change, including attrition of anti-democraticelements with the downfall of the various interim governments; the army's inability to form a viablegovernment; a new generation of officers interested in reform and professionalization of the armedforces; and growing domestic and international pressure for a civilian democracy. Initially, the armyaccepted Aristide's assertion of authority, including his purge of the Haitian army high command. Brig. General Cedras, who oversaw security for the December elections, was reportedly a reluctantparticipant in the coup. But as its spokesman, he said Aristide was ousted for "meddling in armyaffairs." Some analysts argue the army does not want to relinquish control so that it can continueto profit from contraband- and narcotics-trafficking. In its attempts to implement provisions of the Haitian constitution that impose civilianauthority over the military, the Aristide government met significant army resistance. For example,the constitution calls for the separation of the police from the army, with the police under thecommand of the Ministry of Justice. The law also mandates that cases involving military abusesagainst civilians be tried in civilian courts, not by the military. The military had resisted previousefforts to execute those laws. No military personnel were prosecuted for human rights abuses underany of the interim governments. When he was overthrown, Aristide was opening an attack oncorruption, pressing reforms in the army, and creating a civilian police force. The military's trend toward improved human rights under the Aristide government wasreversed after the coup, according to the State Department's 1991 human rights report. That andother human rights reports stated that the military used violence to intimidate political opposition,popular organizations, the urban poor, and the media. (10) During the numerous interim governments as well as under Aristide's rule, many formermembers of the army and the Tontons Macoutes still had weapons and terrorized the populace. Dealing in contraband, robbery, and extortion, they profited from insecurity and chaos. None of theinterim governments prosecuted perpetrators of past human rights violations or sent consistentsignals that Macoute violence would not be tolerated. The public sometimes took matters into itsown hands, carrying out "popular justice" or summary public executions of suspected Macoutes. TheAristide government has been charged with appearing to condone such tactics, but was also creditedwith lowering the crime rate in the capital, and with detaining many "terrorists". After Aristide'souster, there was a resurgence of Tontons Macoutes activity. (11) Area: 10,714 square miles (slightly larger than Maryland); occupies the eastern halfof the island of Hispaniola Capital: Port-au-Prince Population: 6.4 million Language: French, spoken by only 10% of the population, and Creole, spoken by theentire population. Ethnic Groups: About 95% of African origin and the remaining 5% of mixedAfrican-European origin (mulatto) and European origin Religions: About 80% is Roman Catholic, but a majority of this group also practicesVoodoo. Another 16% belong to numerous Protestant groups. Gross National Product (GNP): $2.27 billion (1991) GNP Real Growth: -0.6% (1980-1991) GNP Per Capita: $370 (1991) Real GNP Per Capita Growth: -2.4% (1980-1991) Life Expectancy at Birth: 55 years (1990) Adult Literacy: 47% (1990) Infant Mortality Rate (per 1,000 live births): 94 Sources: Central Intelligence Agency. World Factbook 1993 ; World Bank. World DevelopmentReport 1993 ; World Bank. The World Bank Atlas, 1992.

The overthrow of Haiti's first democratically elected president in September 1991 propelledHaiti into its worst crisis since popular protests brought down the 29-year dictatorship of theDuvalier family in 1986. Father Jean-Bertrand Aristide was elected President of Haiti in a landslidevictory on December 16, 1990, in what was widely heralded as the first free and fair election in thecountry's 186-year history. A Catholic priest of the radical left, he was inaugurated on February 7,1991, and overthrown by the military on September 30. Politics in Haiti have been generally violent and authoritarian, ever since Haiti became anindependent republic in 1804. The legacy of despotic rulers has been difficult to overcome. The United States intervened in Haiti in 1915 to stop civil strife and prevent Germany fromestablishing a foothold. The U.S. Marines occupied Haiti until 1934, overseeing public works, taxcollection, treasury management, and the development of a native Haitian Constabulary which wasHaiti's first professional military force. While many of these contributions were welcomed and muchneeded, many Haitians deeply resented the U.S. presence as an affront to Haitian sovereignty. From 1957 through 1986, Francois Duvalier and his son Jean-Claude rule Haiti for nearly30 years, leaving behind a legacy of repression and corruption. After Duvalier's ouster in 1986, aseries of short-lived governments, most military-dominated, ruled through 1990. This report provides background information on the violent and authoritarian traditions thathave characterized Haiti's political dynamics since Haiti attained independence in 1804. It examinesHaiti's difficult path toward democracy after the fall of the Duvalier regime, from numerousshort-lived governments until the election of Aristide in December 1990. Finally, the report alsobriefly surveys Aristide's rule from February 1991 until his subsequent overthrow by the Haitianmilitary 8 months later, in September 1991.

Article 1, Section 8 of the United States Constitution provides Congress with the explicit power to collect taxes. Implicit in that power to collect revenue is also the power to spend that revenue. This clause is known as the Taxing and Spending Clause of the Constitution, and the Supreme Court has found that it grants Congress wide latitude to promote social policy that the federal government supports. One way that Congress may exercise its spending power to encourage the implementation of policies that the federal government supports is through appropriations. "Appropriations are comparable to tax exemptions and deductions which are also a matter of grace that Congress can, of course, disallow as it chooses." One common example of Congress exercising spending power to impose its will is the National Minimum Drinking Age Act of 1984. That act conditioned the receipt of a percentage of federal highway funding on states agreeing to raise the minimum drinking age to 21. While states were not required by the act to raise the drinking age, they could not receive the funds if they did not, thus creating a powerful incentive for states to adopt Congress's chosen policy on the subject of the legal drinking age. Congress has wide discretion to provide subsidies to activities that it supports without incurring the constitutional obligation to also provide a subsidy to activities that it does not necessarily encourage. However, the power to spend money only on policies that Congress supports is not without limits. Congress may not place what have come to be known as "unconstitutional conditions" on the receipt of federal benefits, even benefits Congress was not required to provide in the first place. Which conditions on the receipt of federal funds are and are not constitutional is a longstanding question with somewhat unclear answers, particularly when it comes to conditions placed upon the speech of the recipients of federal funds. Most recently, the Supreme Court heard a case challenging the constitutionality of a provision of the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 (Leadership Act). The relevant provision prohibited the government from making funds available to grant recipients that do not have a policy of opposing prostitution. The question facing the Court in this case was whether the Leadership Act's requirement that recipients affirmatively adopt a policy that applied to the entire organization, and not just to the federal funds received, violated the First Amendment. In an opinion announced on June 20, 2013, the Court held that this provision does violate the First Amendment because it requires private actors to adopt the approved opinion of the government. The decision outlines an important limitation on the ability of Congress to place conditions upon the receipt of federal funds. The Constitution grants Congress the power to subsidize some activities and speech without subsidizing all speech, or even all viewpoints on a particular topic. There is a certain amount of discrimination inherent in the choices Congress makes to provide funds or tax deductions to one organization's activities, but not to another. As noted in footnote 1 , Congress allows tax deductions for interest paid on home mortgages, but does not allow a similar deduction for those who rent their homes. Congress makes funds available to support non-commercial broadcast stations through the Corporation for Public Broadcasting, but commercial broadcast stations are ineligible to receive those funds, even though they also engage in broadcasting. In other words, Congress discriminates frequently in the types of activities it chooses to support. Congress also has a fair amount of discretion to condition the funding it provides on the recipients of those funds performing some other task ancillary to the receipt of the funds. For example, as previously discussed, in exchange for federal highway funding, states were required to raise the minimum age for the legal consumption of alcohol to 21. States were free to keep their minimum drinking age lower than the age of 21, but doing so meant they would have forfeited federal dollars. Conditions on the receipt of federal funds are, therefore, not uncommon. However, when the condition on the receipt of federal funds is an agreement to espouse, or to refrain from espousing, a particular point of view that is in line with the government's favored viewpoint, questions related to whether Congress is infringing upon the First Amendment freedoms of fund recipients may arise. While the principle that Congress may choose to subsidize whatever speech or behavior it may desire may seem simple enough; in practice, the case law has been described as complicated and contentious. Nonetheless, some core principles may be distilled from the case history. One of the first instances in which the Supreme Court addressed the question of discrimination in a tax subsidy on the basis of speech was in the case of Speiser v. Randall . The State of California had decided to deny any and all tax deductions to persons who advocated the unlawful overthrow of the United States government. In order to alleviate the administrative burdens of figuring out exactly which Californians were advocating the violent overthrow of the government, the state decided instead to require all Californian taxpayers seeking to avail themselves of tax deductions to sign a loyalty oath that affirmed that the taxpayer did not advocate the overthrow of the government by force or violence. A group of honorably discharged World War II veterans declined to sign the oath and sued claiming that the requirement violated their First Amendment rights. In this particular case, the Supreme Court did not reach the question of whether the oath violated the First Amendment because the California Supreme Court had construed the provision to apply only to speech that fell outside the First Amendment's scope. Nonetheless, the Supreme Court did make clear that "a discriminatory denial of a tax exemption for engaging in speech is a limitation on free speech" and that to deny exemptions to persons who engage in certain types of speech is tantamount to penalizing them for that speech. Therefore, discriminatory denial of tax deductions could implicate the First Amendment, depending on the nature of the discrimination. Of particular concern to the Court was whether the requirement placed on the receipt of the benefit was "aimed at the suppression of dangerous ideas." Where the suppression of an idea is the apparent object of a condition on the receipt of a benefit, the fact that a person could simply decline the benefit was not enough to overcome the concerns of the Court regarding the coercive nature of the requirement. Asserting the principle that Congress may not coerce citizens to engage in or to refrain from certain speech through the tax code, a group known as Taxation with Representation (TWR) challenged Congress's denial of certain tax deductions to organizations that engage in substantial lobbying activities as a violation of the group's core First Amendment rights. Important to this case are two federal, tax-exempt, non-profit structures: the 501(c)(3) organization and the 501(c)(4) organization. Taxpayers who donated to 501(c)(3) organizations could deduct those donations from their taxes. 501(c)(3) organizations were prohibited from engaging in substantial lobbying. Taxpayers who donated to 501(c)(4) organizations could not deduct those donations from their federal income taxes. 501(c)(4) organizations were permitted to engage in lobbying activities. TWR had been operating with a dual structure wherein its lobbying activities were accomplished via contributions to a 501(c)(4) organization and its other activities were funded through a 501(c)(3). TWR argued that the federal government was unconstitutionally discriminating against a form of fully protected speech, in this case lobbying, based solely upon its content, and that this discrimination violated the First Amendment. The Supreme Court disagreed and found that the refusal to allow a tax deduction for lobbying activities was within Congress's power to tax and spend. In short, Congress was not discriminating against lobbying. It was merely choosing not to pay for lobbying activities. The Court pointed toward "the broad discretion as to classification possessed by a legislature in the field of taxation," and found that Congress could choose not to subsidize lobbying activities without running afoul of the First Amendment, so long as adequate alternative avenues for engaging in lobbying activities remained available. The Court pointed out that TWR was not prohibited from lobbying under the statute. It was merely prohibited from lobbying with funds it received pursuant to its 501(c)(3) structure. TWR was free to continue its lobbying activities under the dual tax structure described above. The Court noted that this would be a different case if Congress had discriminated against lobbying speech in such a way as to "aim at the suppression of dangerous ideas." Finding no such circumstances in Congress's general refusal to subsidize lobbying activities, with a narrow exception for certain veterans organizations, the Court held that Congress did not have to provide a tax deduction in this circumstance. As the Court explained, "the issue in these cases is not whether TWR must be permitted to lobby, but whether Congress is required to provide it with public money with which to lobby." The Court held that it was not. This case appears to ultimately stand for the principle that as long as Congress provides other avenues for engaging in protected speech, it may constitutionally choose not to provide funds to certain classes of speech in which an organization may wish to engage. One year later, the Supreme Court considered another case in which it appeared that the federal government was refusing to subsidize a particular class of speech and refined Congress's authority to create spending conditions yet further. In FCC v. League of Women Voters , the Court examined whether Congress could constitutionally prohibit non-commercial broadcast stations that received federal funds through the Corporation for Public Broadcasting from engaging in editorializing. The government, relying on Regan v. Taxation with Representation , argued that the prohibition on editorializing was justified because Congress was simply refusing to fund the editorial activities of non-commercial broadcasters. The Court disagreed, distinguishing this case from TWR , because in TWR the organization remained free to engage in lobbying. In this case, non-commercial broadcasters were prohibited completely from editorializing if they received federal funds. A non-commercial broadcaster that received only 1% of its funding from the federal government was subject to the editorializing prohibition and could not, for example, segregate its federal funds so as to prevent the use of those funds for editorializing activities, while using its private funds to editorialize. The Court conceded, however, that if Congress were to amend the statute at issue to prohibit the use of federal funds to support editorializing activities, but allow the broadcasters to engage in such speech with private funding, the statute would then be constitutional. This case appears to stand for the proposition that, while Congress has wide discretion to control the ways in which federal funds may not be spent, its reach is more circumscribed should Congress also attempt to impose its spending conditions upon the use of private funds. The key to this case was that Congress prohibited all editorializing with whatever money the broadcasters may have possessed. The Court considered that to be too much of an imposition on First Amendment activity. Following FCC v. League of Women Voters , a few rules governing the constitutional exercise of the spending power appeared evident. First, Congress was entitled to subsidize the activities it supported, including speech activities, without being required to subsidize all activities. Congress must also allow those who might benefit from congressional largesse the freedom to express their opinions outside the bounds of the congressional subsidy. However, Congress could not prohibit speech that fund recipients might wish to engage in with non-federal dollars. Along with these principles, when designing future funding conditions, Congress was also prohibited from attempting outright to suppress dangerous ideas, because such laws, regardless of their style as a prohibition or spending prerogative, would always raise constitutional concerns. In Rust v . Sullivan , grant recipients challenged the administration of Title X of the Public Health Service Act. Title X was intended to provide federal funding to subsidize health care for women prior to the conception of a child that included counseling, preconceptive care, education, general reproductive health care, and preventive family planning. However, the regulations made clear that no federal money was to be spent to provide counseling for abortion, nor were any participants in the Title X program permitted to provide patients with a referral to an abortion provider, even when the patient may have requested such a referral. Title X programs could not advocate or lobby for abortion rights. Title X programs were also required to be kept physically and financially separate from other programs in which a grantee might be engaging in. The grantees that received Title X funds were permitted to advocate for abortions outside of the auspices of their Title X programs, however. Title X participants sued, claiming that these restrictions violated their First Amendment rights and interfered with the doctor-patient relationship. They argued that the restrictions were viewpoint discriminatory because they prohibited all discussion of abortion as a lawful option and compelled the clinic doctor or employee to espouse views that s/he might not hold (e.g., that abortion was not supported as an appropriate method of family planning). Unlike TWR , where they were permitted to lobby so long as they did not use tax-subsidized funds to do so, the plaintiffs here argued that speech about abortion was being discriminated against invidiously by Congress because Title X program participants were being forced to communicate the message of the government about abortion. The Supreme Court disagreed. The Court reasoned that Congress is entitled to subsidize the public policy message it chooses to fund without funding other opinions on the same topic. Congress was within its constitutional rights to control the message that it preferred to encourage family planning methods other than abortion with funding conditions. The Court wrote, "this is not a case of the Government suppressing a dangerous idea, but of a prohibition on a project grantee or its employees engaging in activity that was outside of the project's scope." Congress was not denying a benefit based upon the grantees' support for abortion, but was instead preventing the use of federal funds for purposes outside the intended use of the program those funds were intended to support. Important for the Court's analysis in this case was the fact that the restrictions on speech only applied to the administration and employees of the Title X program itself. The grantee, on the other hand, was free to receive funds for a variety of programs from a variety of sources and these other activities were not subject to the Title X speech restriction. As a result, Title X did not suffer from the same fatal flaw as the funding restriction in FCC v. League of Women Voters . The government had not placed a speech restriction on the recipient of the funds, as it had in League of Women Voters . Instead, the government had only restricted the types of activities for which federal funds pursuant to the Title X program could be used. Outside of that program, the organizations and doctors were free to espouse any abortion-related opinion they might choose. As in TWR , Congress had simply chosen not to fund it. Following Rust came two significant cases wherein the law of unconstitutional conditions was further refined. First, in Legal Services Corporation v. Vasquez , the Supreme Court struck down a restriction on the use of federal funds by lawyers employed by the Legal Services Corporation (LSC) to challenge existing welfare laws. In Rust , the government had used restrictions on the use of federal funds to subsidize and control the government's own message. In this case, however, the government was attempting to use restrictions on the use of federal funds to hinder private speech. In the Court's analysis, lawyers for the LSC were not speaking for the federal government or administering the federal government's message. They were representing the views and interests of their clients. The restrictions placed on LSC attorneys would have interfered with the attorney-client relationship by preventing potentially valid challenges to the welfare laws. The Court found that such restrictions unquestionably raised First Amendment questions. Because the LSC funded private expression, and not the message of the government, the Court found that Congress could not limit the types of cases that LSC attorneys could bring on behalf of their clients because such restrictions violated the First Amendment. The second case outlining some limits to Congress's ability to condition its spending was Rosenberger v. Rector and Visitors of Univ. of Va . In this case, plaintiffs challenged a University regulation that provided funds to student publications, but refused to provide funding to student publications with religious affiliations. The university claimed that it was choosing not to subsidize religious activity. The Court found the university's restriction to be unconstitutional. Where the government creates a quasi-public forum, as it had in this case by making funds generally available to all university student publications, the government could not then discriminate against students seeking to use that forum on the basis of content. Taken together these cases seem to indicate that where Congress has appropriated funds to support the government's own message, Congress has wide latitude to condition the receipt of those funds on the espousal of the government's approved message, unless that condition invidiously discriminates against the espousal of dangerous ideas. In conditioning the use of federal funds on making sure the funds are only used to support Congress's approved message, ample opportunity for the recipients of those funds to exercise their protected constitutional rights outside of the federal program in which they are participating must be preserved. However, where Congress has provided funds for private speech or created a public or quasi-public forum, the ability to restrict speech funded by that money on the basis of content is narrower. In 2003, Congress passed the United States Leadership Against HIV/AIDS, Tuberculosis and Malaria Act (Leadership Act), 22 U.S.C. 7601 et seq . The Leadership Act was intended to address Congress's finding that HIV/AIDS, Malaria, and Tuberculosis posed grave health threats around the world. Congress found that the United States had the capacity to enhance the effectiveness of the fight against these various diseases on a number of fronts including providing financial resources to various aid groups, providing needed vaccines and medical treatments, promoting research, and promoting lifestyles that would diminish the chances of spreading these diseases. Particularly in relation to HIV/AIDS, Congress found that it should be the policy of the United States to promote abstinence, marriage, and monogamy as methods of diminishing the spread of HIV/AIDS, as well as promotion of the use of condoms. In addition to advocating the promotion of monogamous lifestyles, Congress also found that "prostitution and other sexual victimization are degrading to women and children and it should be the policy of the United States to eradicate such practices." The findings went on to describe the sex industry, and sex trafficking, as an additional cause of the spread of HIV/AIDS and that eliminating or reducing prostitution and sex trafficking would reduce the spread of the virus in keeping with the goals of the act. To that end, when Congress provided funds in the Leadership Act to private entities to assist in the fight against HIV/AIDS, Congress conditioned the receipt of those funds in two important ways. First, Congress made clear that no funds received pursuant to the Leadership Act may be used to "promote or advocate the legalization or practice of prostitution or sex trafficking." Second, and more controversially, Congress also forbid any funds from being disbursed to any group or organization that did not have a policy explicitly opposing prostitution and sex trafficking. In other words, unless an organization adopted a policy explicitly opposing prostitution and sex trafficking, it could not receive funds under the Leadership Act, not even if the group remained silent as to prostitution and sex trafficking. Some organizations that wished to receive funds pursuant to the Leadership Act objected to the act's requirement that they affirmatively adopt a policy opposing prostitution. The organizations argued that they were being required to adopt and espouse the government's message on a topic that was tangential to the purpose of the act. In their view, the requirement to affirmatively speak, as opposed to simply remaining silent on the issue of prostitution and sex trafficking, was a violation of their First Amendment rights and an unconstitutional condition on the receipt of federal funds under the Leadership Act. As a result, this provision had been the subject of two circuit courts of appeal cases analyzing its constitutionality and administration, which appeared to reach opposite conclusions. In the first case, the U.S. Court of Appeals for the District of Columbia upheld the provision against a First Amendment challenge. The D.C. Circuit panel found that the federal government, through the distribution of Leadership Act funds, was essentially using private actors to deliver the government's message. Under Rust v. Sullivan , Congress has wide latitude to take measures ensuring that the agents of the government's message adhered to the government's chosen script. In this case, according to the D.C. Circuit, Congress had provided funds to combat the spread of HIV/AIDS. In Congress's estimation, one of the sources of the spread of this disease was the proliferation of prostitution and sex trafficking abroad. As a result, part of the message Congress wished to convey in its government-funded fight against the spread of the disease was an opposition to prostitution and sex trafficking. The court determined that part of Congress's prerogative in restricting the use of the federal funds was the selection of the agents for the delivery of the government's message. Under this reasoning, it appears that the D.C. Circuit believed that the government was entitled to choose vehicles for its message that explicitly agreed with its message, and could do so without running afoul of the First Amendment. In the second case, the Second Circuit Court of Appeals found that the provision likely did violate the First Amendment, and furthermore found that the guidelines issued by the United States Agency for International Development (USAID) were not sufficient to overcome the provision's constitutional deficiencies. As a result, the appeals court upheld a preliminary injunction against the provision's enforcement. The majority of the panel agreed with the plaintiffs that the funding conditions at issue in the Leadership Act fell "well beyond what the Supreme Court and [Second Circuit] have upheld as permissible." It distinguished the Leadership Act's requirement for the adoption of the policy from previous cases because it did not merely restrict expression, it pushed "considerably further and mandate[d] that recipients affirmatively say something." In the eyes of the majority of the Second Circuit panel, this requirement for affirmative adoption of the government's viewpoint was compelled speech and therefore warranted heightened scrutiny. Applying a heightened scrutiny standard to the provision, a majority of the Second Circuit panel found the policy requirement to be unconstitutional. In part to resolve this apparent circuit split, the Supreme Court agreed to hear the appeal from the Second Circuit's decision. After the Second Circuit declined to rehear the case en banc , the Supreme Court granted certiorari, and struck down the policy requirement as a violation of the First Amendment, but under different reasoning from the Second Circuit panel. The Court did not hold, as the Second Circuit did, that the policy requirement must be subjected to heightened scrutiny because it required affirmative speech on the part of grant recipients. Indeed, the Court appeared to make no distinction between compelled and prohibited speech for First Amendment purposes. Instead, the majority applied the existing precedent found in Regan , League of Women Voters , and Rust to hold that the policy requirement violated the First Amendment because "the condition by its very nature affects 'protected conduct outside the scope of the federally funded program" in contravention of the holding in Rust . The majority began its opinion, written by Chief Justice Roberts, by outlining the funding conditions for HIV/AIDS outreach in the Leadership Act. Particularly, the Court noted that there are two conditions on the receipt of federal funds under the act: the first prohibited spending any federal dollars to promote prostitution or sex trafficking, and the second required the adoption of the policy opposing prostitution. The Court pointed out that if the requirement that private persons adopt a policy opposing prostitution was directly enforced, rather than a condition on the receipt of federal funds, the requirement would be unconstitutional. However, Congress has more leeway under the Spending Clause to place restrictions, including speech restrictions, on the receipt of federal funds, and the Court reviewed the Leadership Act with that leeway in mind. To frame its opinion, the majority first distilled the relevant cases regarding unconstitutional conditions on the receipt of federal funds including Regan , League of Women Voters , and Rust . The Court pointed out that each decision turned primarily on whether the restriction at issue was cabined to control only the use of federal dollars within a federal program. If the restriction prohibited the use of funds for the delivery of a message within the scope of a federally funded program, each case upheld the restriction as constitutional. In cases in which the government had overreached, the overreach occurred when Congress attempted to regulate speech accomplished with private funds outside the federal program at issue. The Court called the distinction drawn in these cases the difference "between conditions that define the federal program and those that reach outside it" and noted that the line between the two is not always clear but it is crossed when the government seeks "to leverage funding to regulate speech outside the contours of the program itself." Turning to the Leadership Act, the majority pointed out that the government conceded that preventing the expenditure of federal funds for the promotion of prostitution, which the act does, ensures that no federal dollars would be used for any prohibited purposes. That provision, which was not challenged in this case, effectively prohibits the use of federal money to promote prostitution or sex trafficking within the federal program created by the Leadership Act. If the restriction on the expenditure of federal funds prevents the use of funds for purposes in contravention to the act, according to the Court, the added requirement for the adoption of the anti-prostitution policy "must be doing something more--and it is." Essentially, the Court found, that the policy requirement forces funding recipients to adopt the government's view as their own on an issue of public concern. "By requiring recipients to profess a specific belief, the policy requirement goes beyond defining the limits of the federally funded program to defining the recipient," and that the government cannot do. The Court went on to hold that the guidelines issued by USAID allowing funding recipients to affiliate with organizations that did not have the required policies were insufficient to save the act from being struck down. The Court explained that it has allowed speech by affiliates of funding recipients to be sufficient where an organization bound by a funding condition was thereby allowed to express its beliefs outside of the scope of the federal program. The Court held that "[a]ffiliates cannot serve that purpose when the condition is that a funding recipient espouses a specific belief as its own." Either the funding recipient is left without any avenue for expressing its true beliefs, or the recipient is forced into evident hypocrisy by espousing the government's policy in one affiliate and its own beliefs in another. In the Court's view, this is a result the First Amendment does not support. Under this decision, it is now clear that speech conditions on the receipt of federal funding are permissible insofar as they define the scope and permissible uses of funding within a federal program, and prevent undermining federal intent in appropriating and distributing the funds. The government runs afoul of this general rule when it attempts to restrict speech outside the federal program or to define the recipient of the funds rather than the program being funded. The Court found that the policy requirement at issue in the Leadership Act committed both of these errors by requiring fund recipients "to pledge allegiance to the Government's policy of eradicating prostitution." For that reason, it violated the First Amendment.

Article 1, Section 8 of the United States Constitution provides Congress with the explicit power to collect taxes. Implicit in that power to collect revenue is also the power to spend that revenue. This clause is known as the Taxing and Spending Clause of the Constitution, and the Supreme Court has found that it grants Congress wide latitude to promote social policy that the federal government supports. One way that Congress may exercise its spending power to encourage the implementation of policies that the federal government supports is through appropriations. One common example of Congress exercising spending power to impose its will is the National Minimum Drinking Age Act of 1984. That act conditioned the receipt of a percentage of federal highway funding on states agreeing to raise the minimum drinking age to 21. While states were not required by the act to raise the drinking age, they could not receive the funds if they did not. Congress has wide discretion to provide subsidies to activities that it supports without incurring the constitutional obligation to also provide a subsidy to activities that it does not necessarily encourage. However, the power to spend money only on policies that Congress supports is not without limits. Congress may not place what have come to be known as "unconstitutional conditions" on the receipt of federal funds. Which conditions on the receipt of federal funds are and are not constitutional is a longstanding question with somewhat unclear answers, particularly when it comes to conditions placed upon the speech of the recipients of federal funds. To what extent may the federal government prevent recipients of federal funds from using that money to communicate a message that may not be supported by the federal government? To what extent may the federal government require fund recipients to espouse a particular point of view as a condition upon the receipt of funds? Courts have struggled with these issues time and again. Most recently, the Supreme Court heard a case challenging the constitutionality of a provision of the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 (Leadership Act). The relevant provision prohibited the government from making funds available to grant recipients that do not have a policy of opposing prostitution. The question facing the Court in this case was whether the Leadership Act's requirement that recipients affirmatively adopt a policy that applied to the entire organization, and not just to the federal funds received, violated the First Amendment. The Supreme Court decided that the requirement is unconstitutional and struck it down in an opinion released on June 20, 2013. The case makes it clear that, while the government has wide latitude to control the message conveyed with federal dollars within a federal program, the First Amendment prohibits the government from controlling speech outside the federal program.

The President's FY2016 budget seeks new authority under the federal foster care, adoption assistance, and kinship guardianship assistance program (authorized in Title IV-E of the Social Security Act) to support services intended to prevent children's entry to foster care and ensure appropriate care and treatment for those in foster care. It also proposes additional federal support for tribes to implement Title IV-E programs, makes some policy proposals related to permanency planning for children in care and serving youth who have "aged out" of care, and again proposes a requirement that child support payments be used only in a child's best interests. These proposals, which would require congressional action (legislative authority) to implement, are proposed as part of the budget for the Children's Bureau. The Children's Bureau is the agency within the U.S. Department of Health and Human Services (HHS), Administration for Children and Families (ACF) that administers nearly all federal child welfare programs. This brief report provides information on child welfare proposals under the Title IV-E program only. Information on other child welfare proposals in the FY2016 budget, including the request for renewal of mandatory funding for Family Connection Grants (under Section 427 of the Social Security Act) and others related to programs with discretionary funding, are not discussed in this report. Under the Title IV-E program, states are entitled to open-ended reimbursement for a part of the cost of providing to eligible children foster care, adoption assistance, and (in states that choose to provide it) kinship guardianship assistance. States also receive capped entitlement funding to provide services for children and youth who have either "aged out," or who are expected to "age out," of foster care. In addition, some mandatory (capped) funding is provided each year to help tribes develop a Title IV-E program plan and, more broadly, to support technical assistance related to providing child welfare services to tribal children. Each year Congress appropriates funding (budget authority) for the Title IV-E program based on the estimated federal costs of the program as discussed in the President's budget. The FY2016 current law request for Title IV-E funding is $7.601 billion. This is $258 million more than funding expected to be used under the Title IV-E program for FY2015 ($7.343 billion). HHS/ACF expects this additional funding will be needed to meet current law needs in FY2016 because it assumes more children will be receiving Title IV-E-supported foster care, adoption assistance , and kinship guardianship assistance (in some part due to continued implementation of the Fostering Connections to Success and Increasing Adoptions Act of 2008, P.L. 110-351 ) and assumes there will be greater foster care "administrative" costs as states implement new requirements of the Preventing Sex Trafficking and Strengthening Families Act of 2014 ( P.L. 113-183 ). Table 1 shows expected FY2015 budget authority for the Title IV-E program under current law and the comparable current law request for FY2016. It also shows projected caseloads. Apart from the request for additional funds to meet current law commitments, the Administration seeks $430 million in additional FY2016 Title IV-E budget authority to support various legislative proposals. Not all of this requested funding is expected to be spent in FY2016, however. For example, the Administration seeks more than half of the additional FY2016 budget authority, $250 million, for the Title IV-E portion of its "demonstration to address over-prescription of psychotropic drugs for children in foster care." However, it does not anticipate requesting any additional Title IV-E budget authority for this proposal in later years (i.e., $250 million is both the 1-year and the 10-year cost). Figure 1 shows Title IV-E obligations or budget authority as projected by HHS/ACF for FY2014-FY2025. All of the Title IV-E proposals that would require additional budget authority are tied to the foster care component of the program. The dotted line at the top of the figure represents final or projected budget authority for foster care under the President's Title IV-E budget proposals. The solid line just below it represents final or projected budget authority for Title IV-E foster care under current law. The bottom two solid lines show final or projected budget authority for Title IV-E adoption assistance and Title IV-E kinship guardianship, separately. The FY2016 spike in proposed law budget authority is primarily related to the Administration's request for $250 million to competitively award demonstration grant funding to states to improve oversight and use of psychotropic medication for children in foster care, as well as to build capacity for states to offer alternative effective treatments. The Administration seeks the full budget authority for this competitive grants funding in the FY2016 appropriations act but estimates it would spend out those funds over 10 years (with most of the outlays occurring in FY2017-FY2022). As mentioned earlier, the Administration seeks legislative authority to implement several new policies under the Title IV-E program. The combined cost (budget authority) of the proposals included in the President's FY2016 budget is estimated by HHS/ACF to be $430 million for FY2016 and $1.358 billion over 10 years. The proposals, along with some policy proposals that do not have any associated costs, are briefly described in the remainder of this report. The Administration seeks authority to provide federal Title IV-E reimbursement for a part of the cost states incur in providing "evidence-based" or "evidence-informed" services to prevent the otherwise expected entry (or re-entry) of children into foster care. Services provided to these "candidates" for foster care (and their families) could include crisis counseling, respite care, or emergency assistance, among others. Under current law and policy, "candidates" are described as children at "imminent" or "serious" risk of entry (or re-entry) into foster care as evidenced by the Title IV-E agency making required "reasonable efforts" to prevent a child's removal from his/her home and/or its pursuit of court action to bring the child into foster care. States may now claim Title IV-E support for administrative tasks related to making these efforts on behalf of foster care candidates (provided they are expected to be Title IV-E eligible ) . However, states may not use Title IV-E funds to pay for any related services provided to the candidate or his/her family. According to HHS/ACF, states serve approximately 160,000 candidates on an average monthly basis. In FY2013 (the most recent data publicly available), states submitted Title IV-E foster care claims totaling nearly $591 million for administrative work carried out with regard to candidates for foster care, and they received federal reimbursement of 50% of those costs (more than $295 million). The Administration notes that this proposal is intended to support provision of both pre-placement and after care services, including services for kin families, if the lack of those services would effectively mean the child's entry, or re-entry, into foster care (that is, if the child meets the current law description of a candidate). Because of the nature of a candidate these services would be expected to be offered on a relatively short-term, rather than an ongoing, basis. To receive this proposed Title IV-E services funding, states would need to maintain their current level of investment in child welfare services. The Administration assumes states will need time to build capacity to provide these services (of which it says no fewer than 70% must be evidence-based or evidence-informed). It estimates this proposal, which assumed 50% federal reimbursement for provision of services to the same population of candidates, would cost $30 million in FY2016 and $587 million across 10 years. The Children's Bureau, along with others in the child welfare field, asserts that most children and youth are best served in a family setting: "Stays in congregate care should be based on the specialized behavior and mental health needs or clinical disabilities of children. It should be used only for as long as is needed to stabilize the child or youth so they can return to a family-like setting." Congregate care is any foster care setting that is not family-based, including group homes, shelters, residential treatment centers, or other institutions. A Children's Bureau analysis of state-reported data found that as many as 41% of foster children placed in congregate care had no obvious clinical indicators suggesting need for this level of care, while the remainder had a "child behavior problem" identified as a circumstance of their entry to foster care (32%), a diagnosed mental health condition (20%), or a clinical disability (7%). Additionally, this data analysis showed that while state child welfare agencies' use of congregate care has declined in the past decade, progress has been uneven across the states. Further, children with a diagnosed mental health condition or who had a "child behavior problem" tend to stay in congregate care for a longer time than those with no clinical indicators. The Children's Bureau recommends measures to both ensure appropriate use of congregate care and support family-based care for children with behavioral or mental health issues. To ensure appropriate use of congregate care, the Administration proposes a new Title IV-E eligibility requirement for any child placed in a congregate care facility. Specifically, for the child to be eligible for Title IV-E assistance the state would need to conduct an assessment to determine that a child's placement in a congregate care setting is the "least restrictive" and "most family-like" placement available for the child. Further, states would need to document this assessment in the child's case plan and secure a judicial determination (within six months of the child's placement in congregate care and every six months thereafter while the child remains in that care) to confirm that the congregate care placement remains the child's best placement option and that the child is making progress toward readiness for a family-based placement. To enable more children to be cared for in family settings--including children with mental, behavioral, or other issues--the Administration seeks authority to permit Title IV-E reimbursement for daily supervision of children needing specialized day-treatment services. It also seeks authority to provide enhanced federal Title IV-E support for costs related to specialized training and salaries to allow therapeutic foster parents to meet a child's behavioral and/or mental health challenges, and for specialized training and smaller caseloads for caseworkers assigned to work with family-based care providers and children with mental or behavioral health needs. The enhanced support would be provided in the form of a higher federal reimbursement rate--ranging from 5 percentage points to 10 percentage points above the regular reimbursement rate for such costs, depending on the type of activity. The Administration assumes that this proposal will have initial costs, but will reduce costs over time by reducing the use of congregate care (which is more expensive than family-based care). It estimated this proposal would have an initial one-year cost of $78 million in FY2016, but that across 10 years it would reduce Title IV-E spending by $69 million. As of FY2010, tribes or tribal consortia are allowed to apply for direct Title IV-E funding , provided they meet the same Title IV-E requirements (generally) that apply to states. Tribes may also apply for funds to help develop a Title IV-E plan that meets all federal requirements (these grants are supported with a part of the $3 million dollars shown in Table 1 for Tribal IV-E Plan Development and Technical Assistance). Five tribes or tribal entities have an approved Title IV-E plan (and more are working toward approval this year). As of February 2015, however, only two had been able to implement their approved Title IV-E plan. According to a Children's Bureau official, this is due to a lack of needed start-up funding, which is likely also to be an issue for tribes expecting approval. Accordingly, the Administration seeks authority under Title IV-E to permit tribal entities to apply for start-up funding at the time of the Title IV-E plan approval. Successful applicants would, for a limited time, receive a higher federal reimbursement rate for Title IV-E administrative costs, along with a temporary waiver of cost allocation requirements. The Administration estimates this proposal would cost $27 million in FY2016 and $114 million across 10 years. Nearly all children in foster care are eligible for Medicaid and are generally entitled to the same set of benefits as other children enrolled in Medicaid, including coverage for psychotropic medications (i.e., prescribed drugs that affect the brain chemicals related to mood and behavior to treat a variety of mental health conditions). Certain factors, including being of school age and living in a group setting, forecast a greater likelihood that a child in foster care takes psychotropic medications. Limited research has been conducted to show that psychotropics alone are effective and safe for children with mental health disorders. As part of 2011 child welfare legislation ( P.L. 112-34 ), Congress required state child welfare agencies to adopt specific protocols for the use of psychotropic medications for children in foster care. To address continued concerns about the "over-prescription" of psychotropic medications for these children, as well as the lack of alternative psychosocial treatments (e.g., counseling), the Administration seeks new funds (and program authority) under the Title IV-E program for capacity and infrastructure building efforts led by state child welfare agencies. At the same time, the Administration seeks additional funding (and authority) under the Medicaid program to make incentive payments to states that make measureable outcome improvements for children served by child welfare agencies. As noted, most children in foster care are eligible for Medicaid--and an overriding purpose of this joint proposal is to increase communication and collaboration between state child welfare and state Medicaid agencies to ensure timely assessments of mental health needs and ensure appropriate services. More specific goals of the proposal, which was also included in the President's FY2015 budget but not acted on by Congress last year, include ensuring appropriate prescription of psychotropic medication that adheres to best practice guidelines for children; increasing use of "trauma-informed" as well as evidence-based/evidence-informed screening, assessment, and psychosocial interventions (e.g., cognitive behavioral therapy) as first-line treatments for emotional and behavioral health needs; and making measurable improvements to the physical, social, and emotional well-being of youth along with specific child welfare outcomes (e.g., reduced disruption of adoptions). In communications with CRS, HHS/ACF explained that the $250 million in requested Title IV-E funds would be used to make competitive ("demonstration") grants to state child welfare agencies to fund efforts related to, for example, (1) providing valid and reliable mental health screening and assessment tools; (2) coordinating the case planning and management activities of child welfare agencies with provision of Medicaid services (especially the Medicaid benefits available under the Early and Periodic, Screening, Diagnosis, and Treatment (EPSDT) program); (3) enhancing the child welfare workforce and training child welfare workers, foster and adoptive parents, guardians, judges, and clinicians; (4) evaluating and monitoring services offered (to ensure fidelity to planned treatment models and identify effectiveness); and (5) providing for relevant data collection and information technology systems. The Administration is requesting $250 million in FY2016 budget authority for the Title IV-E part of this proposal. However, as the proposal does not anticipate additional funding requests after FY2016, the anticipated 10-year cost to the Title IV-E program is $250 million. Separately, the Medicaid request is for $500 million in new budget authority (to be spent across multiple years). The Administration seeks to require that all child support payments made on behalf of children in foster care are used in the best interest of the child, rather than as an offset to state and federal child welfare costs. Among other things, this proposal would end the current law requirement that states return a portion of child support collected on behalf of children in foster care (who are Title IV-E eligible) to the federal government as reimbursement for a part of the cost of providing foster care maintenance payments to the child. This proposal, which has been included in several recent budget requests, is part of a larger, related Child Support Enforcement proposal. With regard to the Title IV-E program, it is estimated to cost $45 million in FY2016 and $476 million across 10 years. The Administration proposes to eliminate APPLA as a permanency plan for any child in care. It sees this proposal as consistent with the understanding that foster care is a temporary living arrangement (made to ensure a child's safety) and with its focus on promoting family-based care for all foster children. Under current law, as a condition of Title IV-E funding, states must ensure every child in foster care has a "permanency" plan designed to allow the child to be reunited with his/her family, or to find the child a new permanent family via adoption, legal guardianship, or placement with a fit and willing relative. However, current law also provides that if a state documents for a court a "compelling reason" why none of those permanency options is in the child's best interest, a child's permanency plan may be designated as "another planned permanent living arrangement." As of September 29, 2015 (or September 29, 2017, for children under tribal authority), P.L. 113-183 will eliminate APPLA as a permanency option for children in foster care who are under the age of 16. At the same time, it requires ongoing and additional permanency efforts for any child with APPLA as his/her permanency goal. The Administration's proposal to eliminate APPLA for children of any age would require a change in the authorizing law. However, there is no estimated cost (or savings) for implementing the policy. The Administration would permit some states to use funding under the Chafee Foster Care Independence Program (CFCIP) to serve young people who were formerly in foster care up to the age of 23. (Current law limits this spending to youth under the age of 21 in most cases.) The Administration proposes this increased flexibility only for those states that have taken the current law option to extend Title IV-E assistance to youth up to 21 years of age (as of February 2015, 22 states, including the District of Columbia, offer extended Title IV-E assistance), or for any state that provides comparable extended Title IV-E foster care assistance using state or other funding. This proposal would require a change to the authorizing legislation but would not require additional funding (because the CFCIP is a capped entitlement). Table A-1 shows the final or projected budget authority as well as the final or projected outlays under the Title IV-E program by each of the program components that receive open-ended entitlement funding (foster care, adoption assistance, and kinship guardianship assistance). Roughly speaking, "outlays" represent the amount of dollars that leave the federal treasury during a fiscal year for purposes of a given program. By contrast, "budget authority" is the amount of funding Congress permits an agency to use to enter into obligations with states or other entities under that program. Budget authority that is granted by Congress but not used does not result in an outlay from the federal treasury. (Because of the way budget authority is granted under Title IV-E, HHS describes final federal budget authority as equivalent to those "obligations.") The numbers in the table reflect assumptions made by HHS about the cost of the program under current law as well as under any applicable proposed-law policies discussed in this report. Proposed-law estimates are only shown for the foster care component of the Title IV-E program because this is the only part of that program for which the President's FY2016 budget proposals are expected to result in a change in spending. The estimated effect of all proposed policies is combined. Table A-1 shows that if all of the proposals discussed in this report were enacted this year, HHS projects Title IV-E foster care outlays would increase by $182 million in FY2016 and by differing amounts across each of the following nine years (low of $77 million, high of $191 million). Although these HHS projections are instructive, it is worth noting that estimates made by the Congressional Budget Office (CBO) determine a proposal's "cost" for purposes of congressional scoring. CBO uses its own model and assumptions to project program outlays under both current law and proposed law. Further, when "scoring" the cost of a policy proposal, CBO looks at projected "outlays" rather than "budget authority." Any positive difference between outlays under proposed law compared to outlays under current law (as estimated by CBO) is scored by CBO as a cost. CBO is expected to provide its own projection of proposals included in the President's FY2016 budget in March 2015.

Under Title IV-E of the Social Security Act, states are entitled to open-ended reimbursement for the cost of providing foster care, adoption assistance, and (in states that choose to provide it) kinship guardianship assistance. Additional mandatory funding is available, on a capped basis, for services to youth who "age out" of foster care, or are expected to, and for Tribal Title IV-E plan development and technical assistance. Each year the President's budget estimates the amount of funding necessary to meet federal commitments under Title IV-E based on current law and, if included in the budget, provides estimates related to proposed changes to the law. While the current law estimate reflects funding needed to support policies that have already been placed in statute, Congress would need to make changes to the law to enable the proposed policies (and any related spending) to be implemented. For FY2016, the U.S. Department of Health and Human Services (HHS), Administration for Children and Families (ACF) estimates that, under current law, $7.601 billion will be needed to meet the costs of all Title IV-E program components (including those with open-ended funding and those with capped funding). The overall funding level is $258 million above what HHS/ACF expects to need under the program for FY2015 ($7.343 billion). The primary reasons HHS/ACF assumes a need for this additional FY2016 funding are expected growth in the number of children receiving Title IV-E foster care maintenance, adoption assistance, and guardianship assistance payments; and increased program administrative costs tied to implementation of new program requirements. The Administration also seeks legislative authority to implement several new policies under the Title IV-E program. Combined, it estimates these policies would require an additional $430 million in Title IV-E budget authority in FY2016 and a total of $1.358 billion in additional funding across 10 years (FY2016-FY2025). Specifically, it seeks budget authority of $30 million in FY2016 ($587 million across 10 years) to enable federal support for a part of the cost of providing services needed to prevent the entry or re-entry to foster care of children who are at imminent risk of this outcome; $78 million in FY2016 (but an estimated savings of $69 million across 10 years) to require states to meet new Title IV-E requirements before placing a child in a congregate care setting, while also providing enhanced Title IV-E support to expand the capacity of states to provide family-based care for children in foster care, including those with identified behavioral problems or clinical mental health concerns; $27 million in FY2016 ($114 million over 10 years) to offer enhanced Title IV-E support to enable tribes with approved Title IV-E plans to implement them; $250 million in FY2016 (total 10-year cost of $250 million) to address concerns about prescription of psychotropic medication for children in foster care (additional funding is sought under the Medicaid program as part of this same proposal); and $45 million in FY2016 ($476 million over 10 years) to ensure child support payments for children in foster care are used only in the child's best interest (and not as reimbursement to federal or state government). Finally, the Administration also proposes two policy changes that do not have an associated cost (or savings): (1) requiring states to have a permanency plan for each child in foster care that involves reunification, adoption, legal guardianship, or placement with a fit and willing relative (by eliminating entirely the permanency plan option known as "another planned permanent living arrangement," or APPLA); and (2) permitting states that offer foster care assistance to youth up to age 21 to spend Chafee Foster Care Independence (CFCIP) funds for otherwise eligible youth up to age 23 (current law limits the use of these funds to otherwise eligible youth up to age 21).

In recent years Congress has shown considerable interest in promoting the strength and international competitiveness of U.S. industry. Several recent legislative proposals have concerned the intellectual property laws, a widely recognized mechanism for promoting innovation. In the 113 th Congress, H.R. 2466 , the Private Right of Action Against Theft of Trade Secrets Act of 2013, would introduce a private cause of action for misappropriation of trade secrets under federal law. S. 1770 , the Future of American Innovation and Research Act of 2013, would establish a private cause of action against a person who misappropriates a trade secret while located outside the United States, provided that the misappropriation causes or is reasonably anticipated to cause an injury within the United States or to a U.S. person. As of the date of publication of this report, neither bill had been enacted. The term "trade secret" generally refers to secret, commercially valuable information, including such subject matter as confidential formulae, techniques for manufacturing a product, and customer lists. Trade secret protection is largely a matter of state law. Under those laws, misappropriation of a trade secret may be enjoined by a court and the defendant may also be liable for compensatory and punitive damages. One notable federal statute, the Economic Espionage Act of 1996, makes the theft or misappropriation of a trade secret a federal crime under certain circumstances. Trade secrets play a role in U.S. innovation policy. Trade secrets may establish incentives to innovate because they provide a mechanism for firms to capture the benefits of their inventions. Yet trade secrets also have proven controversial because they suppress, rather than disclose, particular innovations to the public. They also may have a significant impact upon the mobility of highly trained employees between firms. Further, because innovators often face a mutually exclusive choice between patenting their inventions or maintaining them as trade secrets, alterations to one of these regimes may alter the perceived attractiveness of the other. This report provides an overview of the law and policy of trade secrets. It discusses the role of trade secrets in U.S. innovation policy. It then reviews the sources of trade secret law and the substantive rules that they provide. The report then provides a more detailed review of existing federal legislation that pertains to trade secrets. In its next section, the report then discusses the relationship between patent law and trade secret law. The report closes with an identification of congressional issues and options within this field. Many businesses have developed proprietary information that provides a competitive advantage because it is not known to others. This category may include "high-tech" information such as chemical formulae, manufacturing techniques, product design, and technical data. But it may also include relatively "low-tech" information such as customer lists, business leads, marketing strategies, pricing schedules, and sales techniques. Potentially of additional competitive value is "negative know-how": previously attempted, but flawed techniques or "blind alleys" that did not achieve their intended results. As the United States continues its shift to a knowledge- and service-based economy, the economic strength and competitiveness of firms increasingly depend upon their know-how and intangible assets. Leonard I. Nakamura, Assistant Vice President and Economist of the Federal Reserve Bank of Philadelphia, explains that in the U.S economy over the past half-century, "mass production and tangible investment have become less important, while new products . . . and intangible investment have become more important." One recent estimate placed the value of trade secrets owned by U.S. publicly traded companies at five trillion dollars. Another way of measuring the increasing importance of intangible assets is by considering the value of the Standard & Poor's 500. The "S&P 500" consists of the marketplace value of 500 large publicly held companies. In 1975, 16.8% of the total value of the S&P 500 reportedly consisted of intangible assets. In 2005, intangible assets reportedly constituted 79.7% of the total value of these firms. According to attorney R. Mark Halligan, "the vast bulk of intangible assets are trade secret assets." Yet the rise of computer technology, the ubiquity of cell phones and the Internet, and our transition to the Information Age have increased the difficulty that firms encounter in maintaining the confidentiality of their proprietary information. Years ago, the theft of trade secrets may have involved the taking of laboratory notebooks, memoranda, or other papers from a competitor's office despite the presence of security personnel or surveillance cameras. Today, a trade secret misappropriator can download proprietary information from company computers, or take photographs of confidential documents using a cell phone camera, within moments. As attorney Victoria A. Cundiff concisely states: "The digital world is no friend to trade secrets." As U.S. firms become increasingly immersed in global competition, some observers believe that foreign firms and even foreign governments have devoted significant resources towards industrial espionage. According to the Office of the National Counterintelligence Executive, "[t]he United States remains the prime target for foreign economic collection and industrial espionage by virtue of its global technological leadership and innovation." These efforts have been linked not just to the economic competitiveness of the United States, but also to its national security. The legal concept of trade secrets addresses these circumstances. Principles of trade secret law guard against the misappropriation of information that is not generally known. In view of the increasing prominence of information, it is unsurprising that Michael Risch, a member of the law faculty of the West Virginia University College of Law, asserts that trade secrets are "arguably the most important and most heavily litigated intellectual property right." Framing the trade secret law requires a balancing of competing interests. A robust trade secret law that provides strong protection to proprietary commercial information potentially holds many advantages. It may allow firms to capture the benefits of the costs and time it takes to develop the information, without having to share the benefits of that information with others. Trade secret law therefore may be seen as providing incentives to innovate. Trade secret law may also encourage firms to invest in human capital. A firm is more likely to invest in employee development if it has some confidence that employee cannot immediately use his knowledge in the service of a competitor. Firms may also establish a trade secret easily through self-help measures. Commercially valuable information is protected once a firm makes reasonable efforts to maintain it in confidence. There is no need for formal government involvement, in contrast to patents. Trade secret law also confirms and regulates standards of commercial ethics and morality. The misappropriation doctrine applies only against wrongdoers--those who have breached a duty of confidence, engaged in espionage, or otherwise acted in bad faith. Trade secret law thus recognizes that even within a marketplace based open free competition, certain kinds of competitive behavior step beyond our social norms and should be discouraged. On the other hand, trade secret laws potentially have negative aspects. First, although trade secret law may promote advancement, it might facilitate a particular kind of innovation--the development of information that is itself amenable to being kept secret. In addition, the protection of trade secrets necessarily requires firms to conceal their new developments. But as Judge Goldberg observed 40 years ago, "for our industrial competition to remain healthy there must be breathing room for observing a competing industrialist." Thus, while some degree of information protection may be needed to promote innovation, some amount of information sharing may be essential for competition and proper functioning of the market. As well, firms must expend resources to maintain information as a trade secret. Employees must sign confidentiality agreements, locks and safes must be installed, and electronic protection measures must be in place on computer systems. These measures entail time and expense. Employers also may be encouraged to limit access to valuable information to select employees. Disclosing valuable trade secrets on a "need to know" basis to one's employees may restrict employee development and ultimately hinder the operation of the firm. Trade secret law may negatively impact employee mobility. Individuals who are unable to take their knowledge from job to job may be limited in their ability to change employers. As explained by Alan L. Durham, a member of the law faculty of the University of Alabama, an overly robust view of trade secret law potentially may "limit individual freedom, weaken employee bargaining power, and harm society through diminished competition." The various rules that together comprise the discipline of trade secret law may be fashioned in an effort to maximize the potential advantages of trade secrets while minimizing their disadvantages. This report next provides a more detailed review of the doctrines that regulate the acquisition and enforcement of trade secrets. While it has been written that an "exact definition of a trade secret is not possible," a trade secret generally consists of secret, commercially valuable information. As explained by Henry Perritt, Jr., a member of the faculty of the Chicago-Kent College of Law, "trade secret subject matter includes any of the major functions of business enterprise: production and operations, engineering and research and development, marketing, finance, purchasing, and management." Specific examples of trade secret subject matter include customer lists, manufacturing processes, marketing strategies, pricing information, product design, recipes, and sales techniques. One court has described trade secrets as follows: A trade secret is really just a piece of information (such as a customer list, or a method of production, or a secret formula for a soft drink) that the holder tries to keep secret by executing confidentiality agreements with employees and others and by hiding the information from outsiders by means of fences, safes, encryption, and other means of concealment, so that the only way the secret can be unmasked is by a breach of contract or a tort. Whether information qualifies as a "trade secret" is a question of fact that may be determined by a jury. Among the factors in assessing whether certain subject matter is a trade secret are: the extent to which the information is known outside of the company; the extent to which it is known by employees and others involved in the company; the extent of measures taken by the company to guard the secrecy of the information; the value of the information to the company and to its competitors; the amount of effort or money expended by the company in developing the information; and the ease or difficulty with which the information could be properly acquired or duplicated by others. The law protects trade secrets from misappropriation by others. Misappropriation is a tort that may occur in several distinct ways. One is when an individual acquires the trade secret through improper means, such as theft, bribery, misrepresentation, or espionage. Another is when the individual uses or discloses the trade secret through a breach of confidence. For example, an employee might switch jobs, and then disclose his previous employer's trade secrets in violation of a confidentiality agreement. Finally, a trade secret may be misappropriated if it is used or disclosed with knowledge that the trade secret had been acquired improperly or through mistake. A person who uses information that he knows to have been stolen by another is therefore also guilty of misappropriation. Misappropriation of a trade secret may be enjoined by a court and the defendant may also be liable for compensatory and punitive damages. Conversely, it is not a violation of trade secret law for another firm to discover the subject matter of a trade secret independently. "Reverse engineering" is also considered to be an appropriate means for one firm to acquire the subject matter of another's trade secret. A firm that discerns the subject matter of the trade secret by inspecting products available to the public also has not engaged in misappropriation. Trade secret protection may extend indefinitely. So long as information is not generally known to the public, confers an economic benefit to its holder, and is subject to reasonable efforts to maintain its secrecy, it may be considered a trade secret. However, the trade secret status of information may be lost if the information is accidentally or intentionally disclosed by an employee. Once a trade secret has been exposed to the public, its protected character is lost and cannot later be retrieved. However, disclosures of trade secrets to third parties for certain limited reasons do not waive trade secret protections, so long as the trade secret owner took reasonable measures to maintain its secrecy before and during disclosure, such as requiring non-disclosure or confidentiality agreements from each recipient of confidential information. The discipline of trade secrets was traditionally developed through state common law. State courts developed the essential principles of trade secret law through their decisions, which were then observed as precedent in subsequent litigation. In 1939, the American Law Institute (ALI), a group of lawyers, judges, and legal scholars, published a treatise titled the "Restatement of Torts." The Restatement of Torts included two sections dealing with the law of trade secrets. Section 757 explained the subject matter of trade secrets, while Section 758 spelled out the elements of a trade secret misappropriation cause of action. Although this treatment was succinct, many commentators believe that these definitions proved influential in the courts. Trade secrets were not addressed in the Second Restatement of Torts published in 1978. The ALI at that time concluded that trade secret law had grown "no more dependent on Tort law than it is on many other general fields of law and upon broad statutory developments," and opted not to house trade secrets there. The ALI addressed this gap in its 1993 Restatement (Third) of Unfair Competition, which deals with trade secrets in sections 39-45. In addition, the National Conference of Commissioners on Uniform State Law (NCCUSL) issued the Uniform Trade Secrets Act (UTSA) in 1979. The NCCUSL consists of a group of academics, attorneys, and judges who draft statutes addressing a variety of issues, and then propose that each state enact them. The NCCUSL lacks direct legislative authority itself. Its uniform acts become law only to the extent that state legislatures adopt them. The UTSA has arguably proven successful, as it has reportedly been enacted in 47 states, the District of Columbia, and the Virgin Islands. The three states that have reportedly not enacted the UTSA are Massachusetts, North Carolina, and New York. These states do recognize trade secrets, but provide protection through a distinct statute or the common law. It should be appreciated that many jurisdictions have enacted the UTSA after making some changes to the original text of the proposed legislation. Opinions vary on how significant these modifications have been. While some commentators view state-by-state variations as "generally minor," others have opined that "they include fundamental differences about what constitutes a trade secret, what is required to misappropriate it, and what remedies are available." As noted previously, trade secrets have traditionally been the subject of state law. Prior to 1996, arguably the most significant federal legislation on point was the Trade Secrets Act. Although broadly titled, this 1948 statute is actually of narrow application. It forbids federal government employees and government contractors from making an unauthorized disclosure of confidential government information, including trade secrets. The sanctions for violating this criminal offense are removal from office or employment, and a fine and/or imprisonment of not more than one year. The law does not apply to state or local government actors or to private sector employees. In 1996, motivated by concerns over growing international and domestic economic espionage against U.S. firms, Congress enacted new legislation pertaining to trade secrets. The Economic Espionage Act (EEA) criminalizes both "economic espionage" and the "theft of trade secrets." The "economic espionage" provision punishes those who knowingly misappropriate, or attempt or conspire to misappropriate, trade secrets with the intent or knowledge that the offense will benefit a foreign government, instrumentality or agent. The "theft of trade secrets" prohibition is of more general application. The principal elements of an EEA claim for theft of trade secrets are: (1) the intentional and/or knowing theft, appropriation, destruction, alteration, or duplication of (2) a trade secret placed in interstate commerce (3) with intent to convert the trade secret and (4) intent or knowledge that such action will injure the owner. The EEA provides for substantial fines and imprisonment penalties. For economic espionage, the maximum penalties increase to $500,000 for individuals and imprisonment of 15 years, or $10 million for corporations. Theft of trade secrets is punishable by a fine of up to $250,000 for individuals as well as imprisonment of up to 10 years. Organizations can be fined up to $5 million. The EEA also provides for criminal forfeiture of property and court orders preserving the confidentiality of trade secrets. The EEA has been subject to critical commentary. Attorney R. Mark Halligan expressed the view that the legislation was "ineffective" and observed, in 2008, that there had been fewer than 60 prosecutions in keeping with its provisions. Susan W. Brenner, a member of the law faculty of the University of Dayton, and security expert Anthony C. Crescenzi opine that the "paucity" of prosecutions under the EEA are due to a number of factors, including the complexity of the cases, the desire of the Department of Justice only to bring cases it can win, the diplomatic repercussions of bringing such a case, and the unwelcome possibility of additional disclosure of trade secrets during the litigation. Brenner and Crescenzi conclude that the "individual and combined effect of the systemic factors discussed above is to erode the EEA's effectiveness as a weapon against economic espionage." Trade secrets and patents form two distinct fields within the U.S. intellectual property system. In one sense, trade secrecy serves as the chief alternative to the patent system. Most inventors must choose one of three options: (1) maintain a technology as a trade secret, (2) seek patent protection, (3) or decline to seek intellectual property protection at all and allow the technology to enter the public domain. In view of the close relationship between trade secrets and patents, this report next provides an overview of the patent system and its interaction with trade secret law. An inventor may seek the grant of a patent by preparing and submitting an application to the U.S. Patent and Trademark Office, or USPTO. USPTO officials known as examiners then determine whether the invention disclosed in the application merits the award of a patent. The USPTO examiner will consider a number of legal requirements, including whether the submitted application fully explains and distinctly claims the invention. In particular, the application must enable persons skilled in the art to make and use the invention without undue experimentation. In addition, the application must provide the "best mode," or preferred way, that the applicant knows to practice the invention. The examiner will also determine whether the invention itself fulfills certain substantive standards set by the patent statute. To be patentable, an invention must meet four primary requirements. First, the invention must fall within at least one category of patentable subject matter. According to the Patent Act, an invention which is a "process, machine, manufacture, or composition of matter" is eligible for patenting. Second, the invention must be useful, a requirement that is satisfied if the invention is operable and provides a tangible benefit. Third, the invention must be novel, or different, from subject matter disclosed by an earlier patent, publication, or other state-of-the-art knowledge. Finally, an invention is not patentable if "the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains." This requirement of "nonobviousness" prevents the issuance of patents claiming subject matter that a skilled artisan would have been able to implement in view of the knowledge of the state of the art. If the USPTO allows the patent to issue, its owner obtains the right to exclude others from making, using, selling, offering to sell, or importing into the United States the patented invention. Inventors who do not wish to dedicate their technologies to the public domain must, as a general matter, choose between trade secret and patent protection. A number of factors inform this decision. One is whether the inventor will practically be able to keep the technology secret. A knowledgeable observer may readily be able to inspect a motor, machine, or other mechanical technology in order to learn its design, for example. On the other hand, the composition of a chemical compound may be much more difficult to discern. The costs associated with acquiring and maintaining patents are another factor. In this respect, it should be appreciated that a U.S. patent provides rights only with the United States. However, virtually anyone in the world may review a U.S. patent to learn of its contents. As a result, U.S. inventors may need to obtain patents in many foreign countries in order to secure meaningful protection. In addition, the process of acquiring a patent may take many years. A USPTO examiner in 2009 would not review a patent application until, on average, 25.8 months after it was filed. The "first action pendency" during 2000 was 13.6 months. Many observers believe that if current conditions continue, the backlog and delay are likely to grow at the USPTO in coming years. These delays may prove too lengthy for innovators in fast-moving industries, suggesting that trade secret protection is the more appropriate choice. Also, trade secrets may potentially extend indefinitely, so long as the requirements for trade secret protection are maintained. In contrast, patents expire after a set period of time, normally 20 years after the date they were filed. On the other hand, trade secret protection may be lost through a competitor's reverse engineering or independent discovery. As explained by Dan Burk, a member of the faculty of the University of California, Irvine School of Law, "the inventor's choice is an election between twenty years of certain patent protection or perpetual, but less certain, trade secret protection." It should also be appreciated that when an inventor obtains a patent on an invention, the USPTO publishes that patent in a formal document. That publication destroys the trade secret status of any previously confidential information disclosed within it. In addition, the USPTO publishes many, but not all, pending patent applications "promptly after the expiration of a period of 18 months" after they are filed. This measure also destroys the trade secret status of information contained within the published application, even if the USPTO subsequently rejects the application and no patent ever issues on that invention. The trade secret and patent systems are sometimes viewed as acting in conflicting ways. Trade secret protection is predicated upon the maintenance of the protected information in confidence. In contrast, each patented invention is the subject of a formal document, the patent instrument, which provides a complete description of the invention. As a result, while the patent system appears to promote the public disclosure of new technologies, the trade secret discourages disclosure. As described previously, it could be argued that trade secret law encourages the development of technologies that are capable of being kept secret. However, some commentators believe that patents and trade secrets generally act in a complementary manner. Mark Lemley, a member of the faculty of the Stanford Law School, has explained that trade secret law provides valuable incentives to innovate in areas where the patent law does not reach, such as customer lists and business plans. Lemley further explains that although the law requires that reasonable efforts must be made to maintain secrecy, absent trade secret law, firms might need to engage in even more physical and contractual measures to prevent disclosure. As a result, a society without trade secret law might potentially have more, rather than less secrecy. In any event, Congress modified the usual rules governing the relationship between trade secrets and patents when it established the "first inventor defense" in the American Inventors Protection Act of 1999, which in turn was replaced by the "prior commercial user defense" in the Leahy-Smith America Invents Act (AIA) in 2011. The earlier, 1999 legislation in part provided an infringement defense for an earlier inventor of a "method of doing or conducting business" that was later patented by another. The AIA subsequently expanded the range of individuals who may assert this defense in court. Even more significantly, the new legislation eliminated the restriction of the prior commercial use defense to business method patents. Under the AIA, a patent claiming any type of invention may be subject to the prior commercial user defense. The prior commercial user defense accounts for the complex relationship between the law of trade secrets and the patent system. Trade secrecy protects individuals from misappropriation of valuable information that is useful in commerce. One reason an inventor might maintain the invention as a trade secret rather than seek patent protection is that the subject matter of the invention may not be regarded as patentable. Such inventions as customer lists or data compilations have traditionally been regarded as amenable to trade secret protection but not to patenting. Inventors might also maintain trade secret protection due to ignorance of the patent system or because they believe they can keep their invention as a secret longer than the period of exclusivity granted through the patent system. The patent law does not favor trade secret holders, however. Well-established patent law provides that an inventor who makes a secret, commercial use of an invention for more than one year prior to filing a patent application at the USPTO forfeits his own right to a patent. This policy is based principally upon the desire to maintain the integrity of the statutorily prescribed patent term. The patent law grants patents a term of 20 years, commencing from the date a patent application is filed. If the trade secret holder could make commercial use of an invention for many years before choosing to file a patent application, he could disrupt this regime by delaying the expiration date of his patent. Settled patent law principles established that prior secret uses would not defeat the patents of later inventors. If an earlier inventor made secret commercial use of an invention, and another person independently invented the same technology later and obtained patent protection, then the trade secret holder could face liability for patent infringement. This policy is based upon the reasoning that once issued, published patent instruments fully inform the public about the invention, while trade secrets do not. Between a subsequent inventor who patented the invention, and thus had disclosed the invention to the public, and an earlier trade secret holder who had not, the law favored the patent holder. An example may clarify this rather complex legal situation. Suppose that Inventor A develops and makes commercial use of a new manufacturing process. Inventor A chooses not to obtain patent protection, but rather maintains that process as a trade secret. Many years later, Inventor B independently develops the same manufacturing process and promptly files a patent application claiming that invention. In such circumstances, Inventor A's earlier, trade secret use does not prevent Inventor B from procuring a patent. Furthermore, if the USPTO approves the patent application, then Inventor A faces infringement liability should Inventor B file suit against him. The American Inventors Protection Act of 1999 somewhat modified this principle. That statute in part provided an infringement defense for an earlier user of a "method of doing or conducting business" that was later patented by another. By limiting this defense to patented methods of doing business, Congress responded to the 1998 Federal Circuit opinion in State Street Bank and Trust Co. v. Signature Financial Group . That judicial opinion recognized that business methods could be subject to patenting, potentially exposing individuals who had maintained business methods as trade secrets to liability for patent infringement. Again, an example may aid understanding of the prior commercial user defense. Suppose that Inventor X develops and exploits commercially a new method of doing business. Inventor X maintains his business method as a trade secret. Many years later, Inventor Y independently develops the same business method and promptly files a patent application claiming that invention. Even following the enactment of the American Inventors Protection Act, Inventor X's earlier, trade secret use would not prevent Inventor Y from procuring a patent. However, should the USPTO approve Inventor Y's patent application, and should Inventor Y sue Inventor X for patent infringement, then Inventor X may potentially claim the benefit of the first inventor defense. If successful, Inventor X would enjoy a complete defense to infringement of Inventor Y's patent. Prior to the AIA, the prior commercial user defense could "be asserted only by the person who performed the acts necessary to establish the defense.... " The AIA also allowed the defense to be asserted by "any other entity that controls, is controlled by, or is under common control with such person.... " In addition, the AIA eliminated the restriction of the prior commercial user defense to business method patents. As a result, any type of patented invention may be subject to the prior commercial user defense. The new legislation also exempted patents held by universities from the prior commercial user defense when it stipulates that this is not available if "the claimed invention ... was made, owned or subject to an obligation of assignment to either an institution of higher education ... or a technology transfer organization whose primary purpose is to facilitate the commercialization of technologies developed by one or more such institutions of higher education." A variety of options are available for Congress with respect to trade secrets. If the current situation is deemed appropriate, then no action need be taken. Alternatively, Congress may wish to consider the adoption of a federal trade secret law. Several commentators believe that this step would promote the uniformity of trade secret law throughout the United States. As attorney David S. Almeling asserts: Trade secrets stand alone as the only major type of intellectual property governed primarily by state law. Trademarks, copyrights, and patents are each governed primarily by federal statutes. Trade secrets, by contrast, are governed by fifty state statutes and common laws. The result is that trade secret law differs from state to state. It is time to eliminate these differences--and the significant problems they cause--by enacting a Federal Trade Secrets Act ("FTSA"). According to Alemeling, general federal trade secret legislation would establish greater uniformity in substantive and procedural law than is possible in a state-based regime. Other commentators have further suggested that the current state-based trade secrets system places the United States in violation of its obligations under two international agreements: the North American Free Trade Agreement (NAFTA) and the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property (TRIPS Agreement). Both NAFTA and the TRIPS Agreement require member states to provide certain levels of trade secret protection. Because the portions of NAFTA and the TRIPS Agreement concerning trade secrets were modeled after the Uniform Trade Secrets Act (UTSA), those states that have adopted the UTSA without restrictive modifications likely comply with these international standards. But some states have not adopted the UTSA, and some states that have done so have arguably included more restrictive standards. Some commentators have asserted that these states place the United States in violation of NAFTA and the TRIPS Agreement. However, others have observed that any shortcomings of U.S. law on this point have yet to be challenged under either international agreement. Still other observers assert that no compelling case has been made to federalize trade secret law. Some believe that this step might create additional burdens and costs upon the federal judiciary. Others cite federalism concerns, believing that the states possess a strong interest in regulating local economies in view of their own, local norms. In addition, variation between the laws of the different states does not necessarily compel federalization of the field. For example, meaningful distinctions between the states exist in other areas of law, including such fundamental disciplines as contract law. Yet these disciplines remain subject to state law. A second possibility for Congress is to amend the Economic Espionage Act so as to create a private, federal cause of action for trade secret misappropriation. H.R. 2466 , the Private Right of Action Against Trade Secrets Act of 2013, would do just that. Under that proposed legislation, any person who suffers an injury from trade secret misappropriation "may maintain a civil action against the violator to obtain appropriate compensatory damages and injunctive relief or other equitable relief." H.R. 2466 does not appear wholly to federalize trade secret law--under this proposal, trade secret law would remain primarily a matter of state law. This legislation had not been enacted as of the publication of this report. S. 1770 , the Future of American Innovation and Research Act of 2013, provides another possibility for future reform efforts. This bill would establish a private cause of action against a person who misappropriates a trade secret while located outside the United States, provided that the misappropriation causes or is reasonably anticipated to cause an injury within the United States or to a U.S. person. This legislation had not been enacted as of the publication of this report. In addition, Congress may wish to remain apprised of the potential effect of continuing patent reform efforts upon trade secrets. As this report has discussed, trade secrets and patents act in complementary ways to protect innovation in the United States. Further, to some degree the two forms of intellectual property act as imperfect substitutes for each other. As a result, legislative reforms that are perceived to make patents more effective may reduce industrial reliance upon trade secrets. Conversely, amendments to the Patent Act that are believed to reduce the effectiveness of patents may increase the willingness of firms to retain information as trade secrets. Trade secrets form a significant component of the intellectual property system of the United States. The importance of trade secrets will likely increase as U.S. industry continues to participate within a knowledge-based, global economy with increasingly sophisticated competitors. Because trade secrets are currently a matter of state law, congressional influence over the system has thus far been indirect: Through the enactment of a criminal statute, the Economic Espionage Act, and through amendment to the patent law. Whether further intervention is required in the U.S. trade secret system remains a matter of congressional judgment.

Many businesses have developed proprietary information that provides a competitive advantage because it is not known to others. As the United States continues its shift to a knowledge- and service-based economy, the strength and competitiveness of domestic firms increasingly depends upon their know-how and intangible assets. Trade secrets are the form of intellectual property that protects this sort of confidential information. Trade secret law protects secret, valuable business information from misappropriation by others. Subject matter ranging from marketing data to manufacturing know-how may be protected under the trade secret laws. Trade secret status is not limited to a fixed number of years, but endures so long as the information is valuable and maintained as a secret. A trade secret is misappropriated when it has been obtained through the abuse of a confidential relationship or improper means of acquisition. A number of competing innovation policy concerns help shape the particular doctrines that comprise trade secret law. The availability of legal protection for trade secrets potentially promotes innovation, encourages firms to invest in employee development, and confirms standards of commercial ethics and morality. On the other hand, trade secret protection involves the suppression of information, which may hinder competition and the proper functioning of the marketplace. An overly robust trade secret law also could restrain employee mobility and promote investment in costly, but socially inefficient security measures. Trade secrets are primarily a matter of state law. In 1996, Congress enacted the Economic Espionage Act (EEA), a statute that criminalizes both "economic espionage" and the "theft of trade secrets." The EEA provides for substantial fines and imprisonment penalties, as well as criminal forfeiture of property and court orders preserving the confidentiality of trade secrets. Some commentators believe that few prosecutions have occurred under the EEA since its enactment and have deemed the legislation ineffective. Patents and trade secrets provide different intellectual property options for many new inventions. Inventors typically must choose (1) to maintain an invention as a trade secret, (2) to obtain a patent on the invention, or (3) to allow the invention to enter the public domain. As a result, federal legislation or other developments that are perceived to alter the effectiveness of the patent system may make the trade secret more or less attractive to industry. As of the date of publication of this report, two bills have been introduced in the 113th Congress that focus upon trade secrets. H.R. 2466, the Private Right of Action Against Theft of Trade Secrets Act of 2013, would introduce a private cause of action within the EEA. S. 1770, the Future of American Innovation and Research Act of 2013, would establish a private cause of action against a person who misappropriates a trade secret while located outside the United States, provided that the misappropriation causes or is reasonably anticipated to cause an injury within the United States or to a U.S. person. As of the date of publication of this report, neither bill had been enacted.

Historically, Germany's experience with terrorism has been predominantly with domesticgroups. Since the 1970s, Germany has demonstrated both the willingness and capability to combatdomestic sources of terrorism. After the attacks of September 11, 2001, however, it became apparentto many within and outside Germany that its traditional approaches were ill-suited to dealing withthe new threat of transnational, radical Islamic terrorism. Terrorists' use of German territory to hatchthe 9/11 plot served as a wake up call for many. Three of the hijackers lived and plotted in Hamburgand other parts of Germany for several years, (1) taking advantage of liberal asylum policies and the low levels ofsurveillance by authorities. The German response to the 9/11 terrorist attacks against the United States was immediateand unprecedented in scope for that country. Setting aside its post-World War II prohibition againstdeploying forces outside of Europe and overcoming pacifist leanings of some in the governingcoalition, Germany quickly offered military and other assistance to the United States. In his initialreaction to the attacks of 9/11, Chancellor Gerhard Schroeder declared Germany's "unlimitedsolidarity" with the United States. On September 12, 2001, the German government, along with otherU.S. allies, invoked NATO's Article V, paving the way for military assistance to the United States.The Chancellor gained approval from the German Parliament to deploy troops to Afghanistan witha call for a vote of confidence in his own government. Since then, German efforts in the fight against terrorism have expanded across a widespectrum. Germany has instituted significant policy, legislative, and organizational reforms. Bilateralcooperation with the United States has been extensive, despite differences stemming from thedistinct approaches and constraints in each country and frictions resulting from sharp disagreementover Iraq policy. The following sections examine the German domestic and international response to terrorismafter 9/11 and potential issues and problems regarding the German approach. They assess theaccomplishments of U.S.-German cooperation, as well as problems and future prospects. Germany's counterterrorism strategy shares a number of elements with that of the UnitedStates, although there are clear differences in emphasis: Key elements include: (2) Identifying terrorists and their supporters, bringing them to justice, andbreaking up their infrastructure at home and abroad. Assisting countries facing the danger of becoming failedstates. Addressing the social, economic, and cultural roots ofterrorism. Halting the proliferation of weapons of massdestruction. Seeking multilateral legitimization for any military action through the UnitedNations. Significantly, Germany now sees radical Islamic terrorism as its primary security threat anditself as a potential target of attack. (3) Although German citizens have not been directly targeted byradical Islamic terrorism to date, they frequently have been its victims. Since September 11, 2001,more German citizens have died as victims of Islamic terrorist attacks than in the entire history of domestic violence by the Red Army Faction (RAF), a German terrorist group that operated for overthirty years. (4) Germany has responded to the fact that it was a center for the planning of the attacks of 9/11. Key figures in the attacks were part of a Hamburg cell and the evidence suggests that terrorist cells,even before 9/11, saw Germany as one of the easier places in Europe from which to operate. Terrorists were able to take advantage of Germany's liberal asylum laws, as well as strong privacyprotections, and rights of religious expression which shielded activities in Islamic Mosques fromsurveillance by authorities. In its efforts to combat terrorism, Germany has emphasized the need to ensure that all of itsdomestic and international actions are consistent with the country's own laws, values and historicallessons of the Nazi era. Germany has given high priority to the protection of the civil rights andliberties of all those residing in Germany, including non-citizens. Germans stress that thislong-standing emphasis on civil rights should not be seen as a lack of political will to target terroriststoday. (5) However, someobservers are concerned that the German interpretation of its civil rights requirements could hinderthe capture and prosecution of important terror suspects. Although Germany has contributed troops to international operations, German officials donot believe that military force can serve as the principal instrument to fight terrorism and do not evenlike to use the term "war" to describe the international response to global terrorism. Germany tendsto stress "soft power" instruments such as diplomacy, development assistance, and addressing issuesthat can give rise to terrorism: "Providing support for modernization, resolving bitter regionalconflicts, rebuilding shattered structures is just as important as the work being done by the military,the police and the secret services", according to Foreign Minister Joschka Fischer. (6) Chancellor Schroeder has saidthat "the foremost task of international politics is to prevent wars" (7) and that Germany seekspeaceful resolution of international disputes as a guiding principle. Some critics, however seeGermany's stance against the use of force as unrealistic, particularly when facing hard core Islamicterrorist groups and "rogue" states. Germany also sees itself as limited in its ability to respond militarily to the threat of terrorismabroad both by its historical experience and by the fact that upon the reunification of the twoGermanies in 1990, Germany formally pledged to use its military forces only within the frameworkof the UN Charter. Although Germany supported the UN-sanctioned intervention in Afghanistan to root out theTaliban and al Qaeda, the German government strongly opposed the U.S. policy of broadening thewar against terrorism to a war against Iraq. Chancellor Schroeder argued that "those who want toresolve the crisis with military means must have an answer to the question of whether this will helpthe global alliance against terrorism, which includes about fifty Moslem states, or whether it willjeopardize this alliance, or perhaps even destroy it." (8) From Germany's perspective, the war in Iraq is intensifying theterrorist threat. (9) Despite differences over Iraq, Germany is viewed as a key partner in the global war onterrorism. In the wake of the 9/11 attacks, Germany has redefined its security strategy and foreignpolicy. (10) Today,Germany perceives threats to its domestic security that lie far beyond its own borders. The so-called"Struck-Doctrine" (11) states that Germany's security is now defended in places far removed from its borders, such as inAfghanistan. Germany's global economic position makes counterterrorism an important German foreignpolicy concern. Alongside security concerns, Germany has extensive economic interests worldwidethat it believes are now potentially threatened by terrorism. As one of the world's largest exportingnations, Germany exports nearly 50% of its goods to non-EU (European Union) countries. (12) Furthermore, Germanyimports 98% of its natural gas and oil from abroad. Germany views secure trade routes and marketsas vital to its economic security. Thus, global stability and combating terrorism are connected inGerman foreign policy. Reform Measures Implemented. The Germangovernment has taken extensive domestic measures against terrorism since 9/11, in the legal, lawenforcement, financial, and security realms. The first step taken was to identify weaknesses in thelaws that allowed some of the terrorists to live and plot in Germany largely unnoticed. After 9/11, Germany adopted two major anti-terrorism packages. The first, approved inNovember 2001, targeted loopholes in German law that permitted terrorists to live and raise moneyin Germany. Significant changes included (1) The immunity of religious groups and charities frominvestigation or surveillance by authorities was revoked, as were their special privileges under rightof assembly, allowing the government greater freedom to act against extremist groups; (2) terroristscould now be prosecuted in Germany, even if they belonged to foreign terrorist organizations actingonly abroad; (3) the ability of terrorists to enter and reside in Germany was curtailed; and 4) borderand air traffic security were strengthened. The second package was aimed at improving the effectiveness and communication ofintelligence and law enforcement agencies at the federal and state levels. Some $1.8 billion wasmade immediately available for new counterterrorism measures. In fiscal years 2002 and 2003, thebudget for relevant security and intelligence authorities was increased by about $580 million. (13) The new laws providedthe German intelligence and law enforcement agencies greater latitude to gather and evaluateinformation, as well as to communicate and share information with each other and with lawenforcement authorities at the state level. The most important intelligence authorities in Germany are the Federal Intelligence Service(BND), (14) the FederalBureau for the Protection of the Constitution (BfV), (15) and the Military Counterintelligence Service (MAD). (16) The most importantsecurity authorities are the Federal Bureau of Criminal Investigation (BKA) (17) and the Federal BorderGuard (BGS). (For a more detailed picture of the organizational structure, see Appendix A.) Since the approval of these laws, further measures have been instituted. For instance, aviationsecurity has been increased by placing armed security personnel and installing bullet- and entry-proofcockpit doors on German planes. Full inspection of all luggage is now mandatory at German airports. As elsewhere in Europe, the presence of Germany's large Muslim population also influencesanti-terror policies. Germany has a strong record of tolerance and protecting Muslim religiousfreedoms. However, the government is determined to go after Muslim extremists. Profiling isconsidered an acceptable means for identifying likely terrorists under German law. The government launched a major effort to identify and eliminate terrorist cells. Germany'srecent annual "Report on the Protection of the Constitution 2003" (18) indicated that about 31,000German residents are thought to be members of Islamic organizations with extremist ties. Shortly after the 9/11 attacks the government moved against twenty religious groups andconducted more that 200 raids. (19) Three radical Islamic organizations are now banned in Germany(i.e., Kalifatstaat, Al-Aksa e.V., and Hizb-ut-Tahrir). Currently, the German Justice Ministry isinvolved in 80 preliminary proceedings related to Islamic terrorism against 170 suspects. (20) Since February 2004, theGerman government has prosecuted members of a splinter group of the Iraqi Tawhid and Jihad(referred to as the Al Tawhid case in Germany). This terrorist group is accused of having preparedattacks against Israeli facilities in Germany; some members were caught in April 2002. Reportedly,they had connections to Abu Musab Al-Zarqawi, head of the Iraqi Tawhid and Jihad, and alsoaffiliated with Al Qaeda. With the legislative reforms giving it the authority to lead its own investigations and withincreased law enforcement capacity, the BKA has placed some 250 to 300 suspects who are thoughtto have links to international terror networks under surveillance. (21) Shortly after 9/11, Germanauthorities conducted a computer-aided search of the type that had proven successful in profiling andeventually dismantling the Red Army Faction in the 1990s. Reportedly, this effort uncovered anumber of radical Islamic "sleepers" in Germany, and a "considerable number of investigations" havebeen started. (22) In the financial area, new measures against money laundering were announced in October2001. A new office within the Ministry of Interior was charged with collecting and analyzing information contained in financial disclosures. Procedures were set up to better enforce asset seizureand forfeiture laws. (23) German authorities were given wider latitude in accessing financial data of terrorist groups. Stepswere taken to curb international money laundering and improve bank customer screening procedures.The Federal Criminal Police Office set up an independent unit responsible for the surveillance ofsuspicious financial flows. Measures to prevent money laundering now include the checking ofelectronic data processing systems to ensure that banks are properly screening their clients' businessrelationships and following the requirement to set up internal security systems. In seeking to dry up the sources of terrorist financing, new laws (24) are aimed at strengtheningGermany's own capabilities, as well as German cooperation with the broader international effort.Under the oversight of the German Federal Banking Supervisory Office, banks, financial serviceproviders and others must monitor all financial flows for illegal activity. Within the BKA, aFinancial Intelligence Unit (FIU) was established to serve as Germany's central registration officefor money laundering as well as a main contact point for foreign authorities. Germany was the firstcountry to implement an EU guideline against money laundering as well as the recommendationsof the Financial Action Task Force on Money Laundering (FATF). (25) The FATF hascharacterized Germany's anti-money laundering regulations as comprehensive and effective. (26) Additional measures are being implemented by Germany. A new aviation security law isunder consideration which would allow the military to shoot down threatening hijacked aircraft. (27) A new immigration lawmakes it easier to deport suspected foreigners and makes naturalization more difficult. (28) In early July 2004, federaland state Ministers of the Interior implemented some key organizational changes: 1) a centraldatabase will now collect and store all available information regarding Muslim radicals suspectedof terrorism; 2) a joint Coordination Center consisting of the BKA, BND, BfV and MAD will seekto cooperate more closely to prevent terrorist attacks; and 3) German federal states will be integratedinto the coordination center. Germany's approach to terrorism is influenced by its geographic position in the heart ofEurope and its membership in the European Union. Germany has two borders, its own and the EUborder within which it sees its economic and security future. EU procedures and the EU jurisdictionin certain areas affect the domestic affairs of its member states. A lot of basic anti-terrorismmeasures -- for instance EU definitions of terrorism, terrorist organizations and common penalties,border control within the Schengen System, the EU-wide arrest warrant and the EU-wide assetfreezing order -- are governed by EU legislation. Possible Issues and Problems. DespiteGermany's sweeping reforms, critics point to continuing problems hampering Germany's domesticefforts. As a result of the emphasis on guarding civil liberties, the German law enforcement andintelligence communities face more bureaucratic hurdles, stricter constraints, and closer oversightthan those in many other countries. They are required to operate with greater transparency. Privacyrights of individuals and the protection of personal data are given prominent attention. Theseprotections are extended to non-citizens residing in Germany as well. Police are prohibited fromcollecting intelligence and can only begin an investigation when there is probable cause that a crimehas been committed. Thus, no legal recourse exists against suspected "dangerous persons," until acase can be made of a felony or its planning. (29) In turn, intelligence agencies cannot make arrests andinformation collected covertly cannot be used in court. Although the ease of entry of terrorists into Germany and their movement has beensignificantly curtailed, suspects already living in Germany are able to take advantage of apparentweaknesses in German law. Academic and job training programs, as well as the granting of asylum,have allowed potential terrorists to obtain extended residency permits. (30) Some terrorists may havemarried into German citizenship. Second generation immigrants possess citizenship and serve as apotential recruitment pool. The new immigration law, which becomes effective in January 2005, isexpected to close some loopholes. (31) Authorities have arrested, interviewed, and searched the homes of a number of suspects butreleased them for lack of evidence. (32) Similarly, the number of asset seizures and forfeitures inGermany has remained relatively low because of the high burden of proof under German law. (33) Another problem relates to Germany's organizational framework for fighting terrorism. Nocentral agency or person is in charge of overseeing and coordinating all anti-terrorism andcounterterrorism efforts. (34) Opinions differ on whether greater centralization would bebeneficial or harmful. Moreover, the most important domestic security and intelligence authorities,the BKA and BfV, are divided into one federal and 16 state bureaus each. The state bureaus workindependently of each other and independently of the federal bureaus. (35) Furthermore, German lawrequires a complete organizational separation of executive agencies such as the BKA and federalstate police agencies, as well as intelligence authorities such as the BfV. (36) The fact that automaticcooperation is not possible, increases the potential for information loss. (37) Cooperation is possibleonly in selected cases after formal requests have been approved. An Information Board was recentlyestablished to facilitate such exchanges and interaction between authorities in certaininvestigations. (38) Recently, the decision was made to establish a Coordination Center to improve cooperation amongfederal and state-level authorities. Eliminating remaining weaknesses in Germany's domestic response may be difficult. Manydoubt that the German government will be able to institute significant further changes to itsinstitutional and legal structures, so long as Germany does not suffer a large-scale attack. Already,the 16 federal states are blocking proposals for tighter centralization at the federal level, not wantingto cede authority. (39) Yet, there have been indications of terrorist activities in individual states with importantinternational traffic hubs (e.g., airports, harbors) and large Muslim populations. (40) Some have suggested thatthe upcoming 2006 Soccer World Cup in Germany, a potential target for terrorist attacks, mightprovide a catalyst for officials and security experts to rethink legal and security measures and to gainsupport for further steps to counter the terrorist threat. The German international response to the 9/11 terrorist attacks also has many elements. OnSeptember 12, 2001, the German government, along with other U.S. allies, invoked NATO's ArticleV, paving the way for military assistance to the United States. Chancellor Schroeder gainedparliamentary approval to deploy troops to Afghanistan. Since then, Germany has contributed in anumber of ways to the international fight against terrorism. However, the German support hasstopped short of supporting U.S. actions in Iraq or playing a direct role there. The Germangovernment has continued to oppose the war and occupation and to reject the linkage between Iraqand the war on terrorism. Some highlights of German efforts follow. Military. Currently Germany has about 7,800troops based abroad. (41) Some forty percent of those troops are directly engaged in counterterror missions. Germany isdirectly involved in five major counterterror missions as part of the global coalition (see below).German costs for these military deployments are estimated at $3.5 billion for 2002 and 2003. (42) In order to adjust Germansecurity strategy to the new threat environment, the Ministry of Defense issued new "Defense PolicyGuidelines" (43) in May2003. In the aftermath of the September 11th attacks, German crews participated in Operation NobleEagle patrolling North American airspace in NATO's airborne early warning aircraft (AWACS).Germany contributed one third of the squadrons' personnel. This mission lasted until May 15, 2002. Since January 2002, when the first German troops were deployed there, Afghanistan has beencentral to Germany's international military involvement. Chancellor Schroeder has said he is willingto maintain this engagement indefinitely. (44) In Afghanistan, some 2,300 German soldiers participate in theInternational Security Assistance Force (ISAF) and the Provincial Reconstruction Team(PRT)missions in the region of Kunduz and Feizabad. From February until August 2003, Germany and theNetherlands had joint command of ISAF . German special forces units which participated in specialoperations in Afghanistan are now on standby in Germany. (45) German forces are part of two naval missions as well: One associated with Operation Enduring Freedom (in the region around the Horn of Africa) and the other with Active Endeavor (inthe southeastern Mediterranean Sea and Straits of Gibraltar). These multilateral missions aredesigned to gather intelligence about possible terrorist activity in these regions, cut off terroristsupply channels, and safeguard international shipping routes. Currently, some 720 German navalpersonnel participate in these two missions. From May 2002 until October 2002, Germany tookcommand of allied naval forces in the Horn of Africa. Additionally, from February 2002 until July2003, a Nuclear, Biological, and Chemical (NBC) detection unit with up to 250 soldiers wasdeployed in Kuwait as part of Enduring Freedom . However critics point out that German military efforts have been hampered by the fact that,among major U.S. allies, German forces are presently among the least quickly deployable due todelays in implementing military reforms and, specifically, addressing a lack of airlift capacity. Delays and problems were encountered in fulfilling the German force commitments in Afghanistanin part because the military did not have the necessary transport planes and had to charter Ukrainianaircraft. While Germany is implementing military reforms to make its armed forces moreexpeditionary and committed to overcoming post-Cold War deficiencies, budget shortfalls may delaythese efforts. Diplomacy. By hosting two internationalconferences on Afghanistan, Germany has been engaged in establishing global support for thatcountry's post-war reconstruction. (46) Within the United Nations, Germany supported a number of counterterror resolutions, mostnotably the UN sanctions regime targeting members or associates of Al Qaeda and the Taliban.Germany also ratified the UN International Convention for the Suppression of Terrorist Bombings. Germany has ratified all eleven UN anti-terror Conventions and is preparing legislation for theratification of the 12th Convention against terrorist financing. (47) At the European level, Germany is pressing to shorten the transition period before new EUanti-terror legislation takes effect. Germany is working with other countries to improve theSchengen-system (a system that allows passport-free travel between participating EU member states-- travel into or out of the EU-wide system still requires traditional passports and visas) withphotographs on visas and resident permits. Moreover, Germany is pushing for the use of biometricidentifiers on passports, visas and resident permits, and for international standardization of thesesystems. (48) Germanyviews itself as a driving force in European counterterrorism efforts. Germany's Interior Minister hassaid: "Maybe a few of the EU countries will have to take the lead. After all, the pace cannot be setby the slowest, but by the fastest and most determined." (49) Within the G8, a German initiative has led to the establishment of a working group onbiometrics. The U.S. has supported Germany's proposal that G8 countries develop joint standardsfor the deployment of air marshals. (50) Germany has coordinated its efforts to adopt measures againstterrorism with the United States and other G-8 member states. (51) Reconstruction and Foreign Aid. Foreignassistance and economic development are integral parts of Germany's security and foreign policy.As a member of the German Federal Security Council, the Ministry of Economic Cooperation andDevelopment takes an active part in foreign policy decision-making. The Schroeder Government unveiled a new plan for "Civil Crisis Prevention, ConflictResolution, and Peace Consolidation," (52) in May 2004. Financial resources for reconstruction and otherforeign aid are constrained, however, by spending cuts to deal with current German economicproblems. Critics have argued that the plan is underfunded. (53) Nonetheless, Germany'scontribution remains important, especially in Afghanistan. By the end of 2004, Germany will havecontributed $384 million for the reconstruction of Afghanistan. Through 2008, Germany haspromised $1.2 billion (non-monetary contributions not included). (54) Germany is coordinatingand leading efforts to build the Afghan police forces. (55) Despite its opposition to the war in Iraq, Germany hascontributed about $196 million toward the postwar effort there. Moreover, at the Paris ClubGermany has agreed to waive some fifty percent ($ 2.4 billion) of debt owed it by Iraq in threestages through 2008. (56) Total German foreign aid and reconstruction funding worldwide for 2002 and 2003 was about $13.9billion. (57) Security cooperation between the United States and Germany, which had been close evenbefore 9/11, was greatly expanded after the attacks. The BKA now has two permanent liaisonofficers at the German Embassy in Washington, DC and a liaison officer from the office of theGerman Federal Prosecutor is working in the U.S. Department of Justice. In Germany, up to 15 U.S.liaison officers are participating in the investigations of the 9/11 terrorist cells that were based inGermany. Several other measures have been taken. An agreement on bilateral cooperation for theprotection of computer systems and networks was reached in June 2003. This effort is aimed atdefending critical infrastructure such as power supplies, and transportation and telecommunicationsgrids in both the United States and Germany. Steps are being taken to extend this cooperation to theprotection of nuclear facilities. (58) Moreover, the United States and Germany reached an agreementon increased legal cooperation in criminal matters in October 2003. Bilateral cabinet-level meetingsare frequent. Germany plays an active role in the U.S. Container Security Initiative (CSI). Officials inWashington, DC and Berlin signed an agreement to improve bilateral cooperation on containersecurity with the aim of stopping terrorists from smuggling weapons of mass destruction in sea-cargocontainers. U.S. Customs agents are stationed in Germany to monitor suspicious containers beforethey leave German harbors. (59) Furthermore, Germany is an active member of the 14-countrycore group of the Proliferation Security Initiative (PSI). This initiative is aimed at preventing thespread of materials that could be used to build weapons of mass destruction. U.S. and Germanintelligence cooperation led to seizure of a ship bound for Libya in the Mediterranean Sea in October2003. Illicit nuclear material aboard was confiscated. (60) Some believe that bilateral cooperation is weaker in the field of information sharing for avariety of reasons. The United States has security concerns about sharing sensitive information.German authorities in turn fear that the United States will use sensitive shared information in waysthat might conflict with Germany's practices with regard to data protection and civil liberties. (61) Also, German critics claimthat the U.S. expectation of information sharing by others is not matched by a U.S. willingness toshare with them. A recent example of the problems created by inadequate information sharing concerned twotrials of suspects in the 9/11 attacks. Mounir el Motassadeq and Abdelghani Mzoudi were eventuallyacquitted by a German Federal Court with the explanation that the United States had not madecrucial evidence available. (62) After the Department of Justice forwarded the evidence requestedby the German government, the Motassadeq trial was reopened on August 10, 2004. What effect theinformation might have on the outcome of the new trial is unclear. U.S.-German cooperation in the area of information sharing mostly occurs on a case-by-casebasis and is not based on formal governmental agreements. Some question whether this is adequate. Given the way that transnational terrorist networks operate, some argue that it is necessary to targetthe entire terrorist infrastructure (e.g., recruitment, fund raising, logistics, and training). (63) A shared databasecontaining all available information regarding the most threatening persons might allow bothcountries to better track terrorist suspects, to harmonize surveillance activities, and to target travelby terrorists (as was recommended by the U.S. 9/11 Commission). Apparently the only databasesof such dangerous persons accessible to both governments are the lists of Islamic terroristorganizations and persons maintained by the UN and the EU. (64) Sharply different perspectives on the death penalty have also hampered bilateral cooperationin some cases. Germany, like all EU member countries, has abolished the death penalty. Germanlaw does not allow extradition of a person wanted by another country if there is a possibility that theperson might be executed if found guilty. In previous cases, Germany extradited suspects only afterit had received assurances that the death penalty would not be imposed. In 1998, Germany arrestedand extradited a key suspect in the 1998 U.S. Embassy bombings in Africa, after U.S. prosecutorsagreed to waive the death penalty. Germany has interpreted its laws to forbid even provision ofevidence relating to such a case, if that information might lead to the imposition of a death sentence. This became an issue when the United States sought to obtain documents from Germany related tothe case of Zacarias Moussaoui, the so-called 20th hijacker. The information was eventually suppliedbased on the understanding that the United States would agree not to seek the death penalty solelybased on the evidence gained from Germany. (65) Still, the death penalty issue remains a potential impediment tocooperation in specific cases. Germany and the United States also differ on the question of the status of prisoners,particularly the Al Qaeda and Taliban detainees in Guantanamo Bay. Germany's Foreign MinisterJoschka Fischer and other politicians have argued that all detainees should be granted formal statusas prisoners of war. Germans, like other Europeans, have also criticized U.S. plans to use militarytribunals to try at least some of the terrorist suspects. Such tribunals are seen as unnecessary andcounterproductive by German officials. Some question has been raised whether terrorist suspectswould be extradited by Germany and other EU countries, if they were likely to face a militarytribunal. (66) In the German view, conduct of the fight against global terrorism requires multilateralcooperation, formally sanctioned by the relevant international organizations. Germans argue thatmost unilateral measures are illegitimate and ineffective. In this context, German officials are hopingthat the second Bush Administration will place greater emphasis on multilateralism to strengtheninternational support for U.S. counterterrorism initiatives. From Germany's perspective, joint actionon counterterrorism is also tied closely to joint decision making. (67) The U.S. Administration rejects any absolute commitment to multilateralism in terms ofwaiting for UN approval for any military action. Such a policy would be seen in the United Statesas a dangerous and unacceptable recipe for paralysis. Some criticize the German approach as toowedded to process over results, especially when dealing with "rogue" states and weapons of massdestruction. While Germany has declared WMD non-proliferation a core element of its nationalsecurity strategy, the German approach has been criticized by some for relying almost exclusivelyon positive engagement and avoiding conflict, an approach that might not be very successful ininfluencing certain regimes or potential terrorists. Some observers believe that the German stancereflects the reality that the country presently lacks the military means or the political will to confrontWMD states with anything other than "soft power" instruments (such as diplomacy and economiclevers). Some see a complementarity in the differing U.S. and German approaches. The U.S. hasextensive military capabilities to deal with threats of terrorism, while Germany views its strengthsin conflict prevention and reconstruction. This could mean, for instance, that Germany might bebetter positioned to take on a greater role in long-term reconstruction efforts in countries likeAfghanistan. Some argue that with a better understanding of the potential complementary roles thetwo countries can play based on the strengths and advantages of each, new opportunities forenhanced cooperation in the global war on terrorism might be found. The final report of the U.S.9/11 Commission suggests that long-term success in the war against terrorism demands the use ofall elements of national power, including "soft power" instruments such as diplomacy, intelligence,and foreign aid. A key question is to what degree differences are likely to hamper U.S.-German cooperationagainst terrorism. It could be argued that U.S. and German security in the near and mid-term arelikely to be affected far more by what Germany does to cooperate with the United States in terms ofdomestic security and bilaterally than by Germany's stance on other international issues. Lapses inGerman domestic surveillance or other shortcomings in German domestic policy could directlythreaten U.S. security. For example, according to statements from the BND, some dozen or soIslamic militants capable of carrying out assaults may have left Germany for Iraq not too longago. (68) Therefore, manyquestion whether the United States and Germany can afford the risk of allowing international policydifferences to lead to declining cooperation within the crucial arena of domestic security. The United States and Germany may see security threats through different lenses, andresponses to those threats are shaped by different national interests, practices, and historicalexperiences. (69) Ultimately, understanding and accepting these differences (agreeing to disagree), in the minds ofsome observers, may be the best approach to enhancing future U.S.-German cooperation in theglobal war on terrorism. Close bilateral cooperation with the United States is important forGermany's own global interests. For the United States, as well, German cooperation againstterrorism is likely to remain significant in light of Germany's importance as a European and worldactor, as a key hub for the transnational flow of persons and goods especially to the United States,and as a country whose soil has been used by terrorist to target the United States. At the Information Board data is shared regarding Networks of Arab Mujaheden ("Jihadists"). The Federal Security Council is a committee of the Federal Cabinet. Its top-confidential sessions are convened and led by the Chancellor. Association/Organization Law. Before 9/11, religious associations were protectedfrom surveillance and investigation under German law. The anti-terror laws passedin late 2001 have removed this legal protection, permitting state authorities to probeand investigate groups with suspected terrorist ties. In the future, associations offoreigners that promote violent or terrorist activities will be prohibited. Penal Code Changes. In the future terrorist activities are subject to prosecution ofGerman authorities even if they occur outside Germany's borders and without directinvolvement of German citizens or organizations. Alien Act. People who present a danger to the democratic order in Germany, andwho are engaged or encourage others to engage in terrorist organizations will bedenied entry or residence permits in Germany regardless of whether the individualsare tourists, immigrants, or asylum seekers. Asylum Procedure Law. All asylum applications will be required to include a voicerecording stating the exact country of origin of applicants. Fingerprints will also becollected with applications. All records will be on file with the security authoritiesfor 10 years. Law on Central Foreigner Registry. Information filed in the Central AlienRegister (for instance) is now automated and more accessible for security authorities.Moreover the collected data includes information about visa applications anddecisions and about people already living in Germany. Security Oversight Law. Personnel working in areas of counterterrorism and othersensitive defense occupations will receive security screening. Air Traffic Law. Clarification of this law restricts the carrying and use of firearmsto air marshals. Additionally, security clearances are required for all airport and flightpersonnel, as well as others working in activities connected to airports or air traffic. Passport and Personal I.D. Law. Changes in this law will provide for an improvedcomputer-supported identification system. This will help prevent the use of bogusidentification documents. Encrypted biometric identification codes will be added tophotographs and signatures. Act on the Protection of the Constitution. The Federal Bureau for the Protectionof the Constitution (BfV) is given authority to track any activities of extremist groupsthat seek to intensify ideological or religious differences. The law calls for combiningseveral databases with civil information to make computerized searches moreeffective. Federal Bureau for Criminal Investigation. The BKA now has the right to lead itsown investigations, replacing the former system which required formal requests bythe BfV. Federal Border Guard Act. Armed officers of the Federal Border Guard (BGS) arenow deployed aboard German airplanes. Moreover, the BGS has been tasked toconduct in-depth screening of border traffic.

This report examines Germany's response to global Islamic terrorism after the September 11,2001 attacks in the United States. It looks at current German strategy, domestic efforts, andinternational responses, including possible gaps and weaknesses. It examines the state ofU.S.-German cooperation, including problems and prospects for future cooperation. This report maybe updated as needed. Although somewhat overshadowed in the public view by the strong and vocal disagreementsover Iraq policy, U.S.-German cooperation in the global fight against international terrorism hasbeen extensive. German support is particularly important because several Al Qaeda members and9/11 plotters lived there and the country is a key hub for the transnational flow of persons and goods.Domestically, Germany faces the challenge of having a sizable population of Muslims, some withextremist views, whom terrorists might seek to recruit. German counterterrorism strategy shares a number of elements with that of the United States,although there are clear differences in emphasis. Like the United States, Germany now sees radicalIslamic terrorism as its primary national security threat and itself as a potential target of attack. Today, Germany also recognizes that threats to its domestic security lie far beyond its own borders,in places such as Afghanistan. Germany has introduced a number of policy, legislative, and organizational reforms since9/11 to make the country less hospitable to potential terrorists. Despite these reforms, critics pointto continuing problems hampering Germany's domestic efforts. German law enforcement andintelligence communities face more bureaucratic hurdles, stricter constraints, and closer oversightthan those in many other countries. The German government has sent troops into combat beyond Europe for the first time sinceWorld War II. Currently Germany has about 7,800 troops based abroad of which some forty percentare directly engaged in counterterror missions. In Afghanistan, some 2,300 German soldiersparticipate in the International Security Assistance Force (ISAF). Germany's role in Afghanistan'sstabilization and reconstruction is substantial. German military efforts have been hampered to someextent by delays in implementing military reforms to make German forces more expeditionary. A key question for U.S. German relations is whether differences on issues such as Iraq policy-- shaped by different national interests, practices, and historical experiences -- will harmU.S.-German cooperation against terrorism. Some believe that understanding and accepting thesedifferences (agreeing to disagree) may be the best approach to enhancing future U.S.-Germancooperation in the global war on terrorism. Both countries have strong incentives to make thecooperation work.

The United Nations High Commissioner for Refugees (UNHCR) has helped over 3.69 million Afghan refugees return to Afghanistan since March of 2002, marking the largest assisted return operation in UNHCR's history. In addition, more than a million refugees have returned to Afghanistan without availing themselves of UNHCR's assistance (also known as "spontaneous returns") bringing the total number of returnees to 4.8 million or more. Almost all of these Afghans have returned from neighboring Iran and Pakistan, where the vast majority of Afghan refugees have lived for well over two decades (see Table 1 ). Issues of particular concern to the 110 th Congress are 1) continuing and sustaining refugee returns as part of Afghanistan's overall reconstruction; 2) developing funding strategies for the next phase of Afghanistan's remaining refugees; and 3) examining the refugee situation in light of border security issues, particularly with regard to Pakistan's recently announced plan to lay land mines and build a fence along its border with Afghanistan. In the long term, the impact of Afghan migration trends may need to be better understood in light of its potential impact on political arrangements in South Asia. Afghans began fleeing their country in April 1978, when the Marxist People's Democratic Party of Afghanistan (PDPA), overthrew the government of Muhammad Daoud (who had himself seized power from his cousin Afghan king Zahir Shah in a bloodless coup in 1973). The trickle of refugees accelerated when the Soviet Union invaded in December 1979, ostensibly to restore order to the country as the PDPA became increasingly splintered. While political infighting was certainly a problem, some observers also noted that Afghanistan's leadership had begun irking Moscow by making decisions without Soviet approval. The Soviet attempt to subjugate the Afghans was at times particularly brutal, including the alleged use of torture and collective punishment. By the beginning of 1981, some 3.7 million refugees had fled to Iran and Pakistan. Smaller numbers of refugees continued to flee Afghanistan for the next decade, as the Soviets fought an insurgency mounted by a loosely allied group of mujahideen , or holy warriors. In 1988, the Soviet Union agreed to withdraw from Afghanistan, and UNHCR and the international assistance community prepared for the massive repatriation of refugees. Large-scale returns did not begin until 1992, however, when the Soviet-installed leader Najibullah was finally forced from power. No sooner had some million and a half refugees returned, however, than Kabul descended into armed disorder as various mujahideen factions began fighting for control of the capital and the surrounding area. A new wave of people was displaced (possibly up to a million), a majority of whom remained within Afghanistan's borders as internally displaced people (IDPs). After a year-long siege, the Taliban took Kabul in 1996, and had gained control of most of the country by 1998. Although they brought a measure of peace to the areas they captured, many Afghans, especially the educated, fled the Taliban's particularly austere vision of Islamic propriety, with its severe restrictions on women's activities, education, and social and cultural life. A final wave of refugees numbering 200,000 to 300,000 left Afghanistan during the U.S.-led invasion of October 2001. With the defeat of the Taliban a month later, UNHCR led consultations with the three governments centrally involved in the Afghan refugee issues--Pakistan , Iran, and Afghanistan--and began planning for another mass repatriation. Beginning in 2002, UNHCR along with Afghanistan, established separate Tripartite Agreements with Pakistan and Iran to provide a legal and operational framework for voluntary repatriations from each country. These agreements have been renewed several times since then. The working assumption at the time was that there were approximately 2 million refugees in Pakistan and 1.5 million in Iran. Almost everyone was caught off-guard, when subsequently 2.15 million Afghans returned in 2002, and yet most of the camps in Pakistan (and to some extent the cities in Iran) continued to house large numbers of Afghan refugees. It turned out that there were far more Afghans living in Pakistan than most analysts had thought. Although the numbers of returns declined in subsequent years, it can be seen from Table 1 that through 2005 the pace remained very strong. UNHCR estimates that, as of December 2006, perhaps 2.46 million registered and unregistered Afghans are currently living in Pakistan and more than 900,000 in Iran. Who among these Afghans is a refugee and who is not is a matter of debate in each country. Still, perhaps as many as 3.5 million registered and unregistered Afghans still live in exile. In Pakistan, 80 percent of those remaining have been there for more than two decades; 50 percent were born in exile. A census was completed by UNHCR and the Government of Pakistan (GoP) in March of 2002 that provided a clear picture, for the first time in years, of the Afghan population in Pakistan. The census found 3,049,268 Afghans living in Pakistan, 42% of them in camps and 58% in urban areas. Over 81% of the Afghans were Pashtuns, with much smaller percentages of Tajiks, Uzbeks, Turkmen, and other ethnic groups (see Figure 1 ). The census revealed two related factors that could have profound implications for the future of repatriation from Pakistan. First, the vast majority of Afghan families in Pakistan arrived in the first years of the refugee crisis; over 50% arrived in 1979 and 1980 alone. Second, it appears that a very substantial number of the Afghans remaining in Pakistan were in fact born in Pakistan--not Afghanistan (see Figure 2 ). Encouraging Afghans who have been living for two and a half decades outside their country--some of whom, in fact, may never have even set foot in Afghanistan--to repatriate may be a distinct challenge in the coming months and years. Although most Afghans in Pakistan date their arrival to the early years of the Soviet occupation, agricultural and economic instability have long been a feature of life in the highlands of Afghanistan, and for centuries Afghans have migrated in response to crop failures, drought, and other problems, often across international borders, to look for temporary work. While the numbers crossing into Pakistan in 1979 and 1980 probably dwarfed any previous population flows, many of the fleeing Afghans had connections--social networks, kinship ties, economic contacts--in Pakistan that helped ease their transition. For the first decade and a half of the refugee crisis, the GoP, although it has never signed the 1951 Refugee Convention or the 1967 Protocol, was relatively tolerant in its treatment of Afghan refugees. Several dozen camps were set up beginning in 1979, most of them in the Northwest Frontier Province (NWFP) and a few in Balochistan. Although the GoP did not allow the primarily rural Afghans to own or work the land, it did permit them to freely move and work within the country. Nevertheless, it was assumed at the time that most Afghans remained in the camps, where they received food rations, along with basic health and educational services. (The subsequent realization that there were far more Afghans in Pakistan than anyone knew suggests that urbanization was far more extensive during this period.) The camps were, and are, overseen by UNHCR and the Pakistani Chief Commissionerate for Afghan Refugees (CCAR), a division of the Ministry of States and Frontier Regions (SAFRON). UNHCR and CCAR contracted with a number of international and local NGOs to provide health, education, water, and sanitation services in the camps. These have included major U.S.-based NGOs, including Mercy Corps, International Rescue Committee, Save the Children, American Refugee Committee, Church World Service, and others. In 1995, the World Food Programme (WFP) determined that Afghans were capable of providing for their own food needs, and it ceased providing rations to the camps. The GoP's position toward the refugees began to harden as the flow of international aid began to diminish, and more Afghans were driven into cities to look for work. With the cessation of food aid, the sole identity document given to Afghans, a refugee passbook, became meaningless; therefore, Afghans (until very recently) had no identification in Pakistan, a factor that doubtless contributed to the general uncertainty about their numbers. With the defeat of the Taliban, the GoP began strongly advocating that conditions were appropriate for the return of all Afghans to Afghanistan. The GoP appears to have both economic and security concerns about the Afghan population in Pakistan. On the economic level, some Pakistani politicians believe that Afghans are taking jobs that might otherwise go to Pakistanis. Additionally, Afghans are reportedly willing to work for lower wages than Pakistanis, causing some Pakistanis to believe that wage levels are being depressed. Some recent research has shown that several business sectors--particularly transport and construction--make heavy use of Afghan labor. Economic worries about the Afghan population have become more persistent in recent years, as the overall level of international funding for refugees in Pakistan has decreased. The census provided more fuel for this concern when it revealed that, despite the record repatriation, millions of Afghans still remain in Pakistan. In addition to their economic impact, some Pakistani leaders are concerned that Afghans represent a security risk for Pakistan. These fears concern lawlessness, terrorism, and anti-government activity. There is a perception among many Pakistanis, including government officials, that Afghans are responsible for a great deal of the smuggling of stolen goods, narcotics, and weaponry across Pakistan's western border. The so-called "smugglers' markets"on the outskirts of Peshawar and Quetta, for instance, where one can allegedly buy anything from counterfeit passports to heroin to Kalashnikovs, are alleged to be run by Afghans and to flourish because of their proximity to Afghanistan. Pakistani police, in justifying their sweeps through Afghan areas, have cited the imperative to crack down on crime. One of the reasons the smugglers' markets have been difficult for Islamabad to deal with is that they exist in the so-called Federally Administered Tribal Areas (FATA), where the central government's writ is weak. Although each of the FATA's seven agencies is ostensibly governed by a "political agent" appointed by the government in Islamabad, in practice the tribal areas are ruled by traditional Pashtun leaders, exercising a blend of personal decree, Islamic law ( sharia ), and traditional Pashtun legal practices known collectively as pushtunwali . Despite Islamic proscriptions against drugs and alcohol, the smugglers' markets have been an important source of revenue for some FATA leaders, who continue to permit this operation. It is not merely lost economic revenue or local law and order that concerns Pakistani government officials. Many experts and officials believe that the FATA is being used as a staging area for militant activity, some of it directed against coalition forces in neighboring Afghanistan and some against the Pakistani government. This worry has grown more acute in the wake of several assassination attempts against Pakistan's President Pervez Musharraf. In light of the difficult to verify but nevertheless oft-stated presumption that Osama bin Laden and other senior members of Al Qaeda are hiding in the mountainous tribal areas of Pakistan, perhaps with the knowledge of local leaders, the government's efforts to gain control over these areas have gained urgency. Security was considered to be one of the reasons behind the GoP's decision to close all of the remaining refugee camps in the FATA. The GoP had for at least two years declared its desire to clear out the FATA camps, but only began the operation in summer 2005 when it closed refugee camps in South Waziristan Agency. Camps in North Waziristan were next with the most recent closures occurring in Bajaur and Kurram agencies in autumn 2005. All told, close to 200,000 refugees were displaced in the closures, the majority of them electing to repatriate to Afghanistan. The GoP received some criticism during each closure operation for failing to identify suitable relocation alternatives for Afghans unable to repatriate because they lacked shelter or the means to earn a living in Afghanistan, or other reasons. According to some reports, this resulted in many Afghans crossing the border into Afghanistan without the desire to do so and without adequate preparation, support, or security on either side of the border. According to the terms of the Tripartite Agreement between the GoP, the government of Afghanistan (GoA) and UNHCR, which was signed in March 2002 (and extended several times since), all returns must be voluntary. While there have been isolated reports of forced deportations, most observers believe that the GoP has largely abided by the agreement. On January 17, 2007, Pakistan's government announced the pending closure of four Afghan refugee camps in the border areas, stating it was doing so in order to ensure security. Two camps will reportedly be closed in March 2007 with another two to follow later in the year. The camps are located in the provinces of Balochistan and North West Frontier. Some closures had been announced several years ago, but were postponed until 2007. The move could affect as many as 250,000 Afghan refugees. The United Nations and other humanitarian organizations have expressed their concerns for the wellbeing of the refugees affected. In order to gather more information on Afghans in Pakistan, and ultimately to sort out those who have legitimate protection concerns from others, the GoP conducted a census in February and March 2005 that has become the basis for the registration program developed with UNHCR and the government of Afghanistan. Registration of Afghans began on October 15, 2006, and is being conducted by Pakistan's National Database and Registration Authority (NADRA) with the support of UNHCR and the government's Commissionerate for Afghan Refugees. To encourage Afghans to come forward for the registration, those who are registered are given a new identity document entitling them to live and work in Pakistan for three years. The validity period of the documentation is still being negotiated among UNHCR, the GoP, and the government of Afghanistan. Initially, only those Afghans counted in the census (about 2.5 million) could register, but in December 2006, the list was expanded to include all Afghans who could show documented evidence as proof that they were living in Pakistan at the time the census was conducted. The idea was to provide for a transition period during which Afghans may reconnect with Afghanistan and ultimately return home. As of January 17, 2007, 1.5 million had registered. The registration was supposed to end on December 31 but has been extended twice--the first time until January 19, 2007, and then again to February 2, 2007. With each passing year, however, it may become more difficult to encourage refugees to return voluntarily to Afghanistan. According to UNHCR data, the refugees who have already returned to Afghanistan have spent, on average, less time in Pakistan than those who remain. This may suggest that those who left in the early years did so because it was easier for them: they still had connections with Afghanistan. Those who remain, by contrast, may find it especially difficult to return to a country to which they have, relatively speaking, few ties. UNHCR, the U.N. Development Program (UNDP) and the Pakistani authorities are developing a needs assessment to address these ongoing refugee issues. In contrast to Pakistan, there are almost no refugee settlements in Iran. Instead, Afghans tend to occupy urban areas, where, as long as they have official refugee status (see below) they are entitled to basic government-subsidized services such as health care and education. According to recent government statistics, and based on a registration initiative undertaken by the government in November 2005, there were approximately 920,000 registered Afghans in Iran as of May 2006. This figure includes only officially registered refugees, however. It is likely that additional hundreds of thousands (the Government of Iran (GoI) estimates perhaps close to one million) Afghans are living in Iran as undocumented workers. It is estimated that 60% of the registered Afghan refugees have been living in Iran for at least 15 years. As with Pakistan, the history of Afghan migration to Iran long predates the refugee crisis. Thousands of ethnic Turkmen, for instance, sought work in Iran in the 19 th century, and received official recognition from the Persian government. The flow continued a century later, when many Afghans sought work in Iran during the oil crisis of the 1970s, and when, because of increasing international demand and high oil prices, Iran both needed and could afford foreign workers. The cross-border flow picked up dramatically, however, after the Soviet invasion of 1979. By 1981, some 1.5 million Afghans were estimated to have fled to Iran. The number would expand to over 3 million by 1990. The status of Afghans in Iran went through several changes over the course of the refugee crisis. Although Iran is a signatory to the 1951 Refugee Convention, Afghans fleeing the Soviet invasion were initially greeted not as refugees ( panahandegan ) but as "involuntary religious migrants" ( mohajerin ). While this category, based on Islamic principles, was technically not an international legal designation, it was considered a higher-status term than "refugee" in post-revolutionary Iran. Mohajerin were given indefinite permission to reside in Iran and had access to free education and subsidized health care and food. After the Soviet withdrawal, however, the status of Afghans began to change. Although 1.4 million Afghans are estimated to have repatriated in 1992, well over a million remained in Iran. Beginning in 1993, new migrants were no longer deemed to be fleeing religious persecution and were categorized as refugees ( panahandegan ); instead of being granted indefinite residency status, they were issued with temporary registration cards. After the fall of the Taliban, Afghans once again began to return in large numbers to Afghanistan (see Table 1 ). As in Pakistan, there is ample evidence that Afghan labor migration now plays in important role in both the Afghan and Iranian economies. Remittances from Afghans working in Iran bring a good deal of revenue to their families in Afghanistan, and Afghans continue to be an important source of labor in Iran, where they are particularly prevalent in construction and agriculture. One measure of the continuing importance of Afghan labor in Iran is the fact that the GoI has recently offered to permit some 200,000 Afghans to work in Iran as guest workers. A key aspect of this offer is that the Afghan workers will be required to leave their families in Afghanistan, presumably to ensure that they will not attempt to emigrate. In fact, however, a number of recent research papers commissioned and published by the Afghanistan Research and Evaluation Unit (AREU) show that this migration pattern has already been a model for some time. Many young Afghan men travel to Iran for a period of months or even years to supplement their family income, while the women and other men remain in Afghanistan. This contrasts with many of the Afghans in Pakistan, who emigrated with their entire extended families or even whole tribal groups. Indeed, there may be something of a reverse migration of single Afghan men in Pakistan, who, leaving their families in Pakistan, return to Afghanistan in search of higher-paying seasonal work and to look after family assets. Although there has not yet been a systematic study of population movement across the Afghan-Iranian border similar to the International Organization for Migration (IOM) study of the Afghan-Pakistani border, it is clear that since 1979 the volume and frequency of Afghan migration to Iran is much less than it is into Pakistan. To begin with, traffic across the Iranian border is more tightly regulated than it is across the Pakistani border; it is not possible to simply walk from Afghanistan into Iran. Furthermore, Afghans crossing into Iran must pay for a passport and a visa. Obtaining these legally is expensive and time-consuming; obtaining them illegally is even more expensive. In addition, there is much less settlement along Afghanistan's rather arid border with Iran than there is along the border with Pakistan. Afghans wishing to work in Iran must travel fairly deeply into the country before reaching the major population centers of Tehran and Isfahan; even Iran's eastern city of Mashad is over 200 miles from Herat in Afghanistan. The cost of transportation can be prohibitive for many Afghans. For these reasons, Afghan migration to and from Iran does not happen as frequently or as casually as it does along Afghanistan's eastern border. While Afghan refugees in Pakistan have, for at least a decade, gone relatively undocumented, the GoI through the Ministry of Interior's Bureau of Aliens and Foreign Immigrant Affairs (BAFIA) has maintained a fairly detailed list of Afghans whom it has accepted as refugees. Afghans on this "Amayesh" list have been entitled to basic health and education services provided by the Iranian government. The list is updated periodically, at which time Afghans must re-register with Iranian authorities in order to remain in the country legally. Afghans who are not on the list are subject to deportation; since the beginning of the assisted repatriation program in Spring of 2002, the GoI has deported some Afghans often to protests by UNHCR and other humanitarian agencies. It has been reported that some of the deported Afghans do, in fact, have prima facie refugee status. Hundreds of deported Afghans allegedly were held in detention facilities for days where they were beaten before being sent back to Afghanistan. Although deporting Afghan refugees is contrary to the terms of the Tripartite Agreement signed with UNHCR and Afghanistan, Iran holds that the deportees are illegal immigrants, and not refugees, and that Tehran is thus legally permitted to send them back to Afghanistan. Afghans who are clearly on the Amayesh list have encountered increasing difficulties in recent years. Whereas Afghan refugees in the past have received subsidized--or even free--education, health care, and food rations, the GoI has begun implementing measures to force Afghans to pay for these resources. These efforts reached a peak in February 2004, when the GoI announced Afghans would lose their exemption to paying school fees and have to pay increased health care premiums. Additionally, the GoI announced in early 2005 that Afghans would be subject to a nominal tax. Previously, Afghans had received free education and paid the same amounts as Iranians for health care. UNHCR, which felt that the service reductions were particularly draconian considering its own budget cuts in Iran, has reported that the GoI has not been overly fastidious in enforcing the new rules. Nevertheless, Iran's position, like that of Pakistan, has generally been that it is time for Afghans to return home, and these efforts are part of an explicit effort to encourage Afghans to return to Afghanistan. In both cases, GoI and GoP argue that relative stability has returned to Afghanistan, and there are no further reasons that Afghans require protection abroad. Indeed, the GoI's Director-General of the Interior Ministry's Department for Immigrants and Foreign Nationals Amad Hoseyni recently announced in early 2006 that Iran plans to "voluntarily repatriate" all Afghans--no matter what their status is--by March 2007. There is a certain implicit contradiction in this and other such statements by both Tehran and Islamabad: if repatriation is indeed to be voluntary, many Afghans may choose to remain in countries of asylum, thus rendering somewhat questionable the government's assertion that all Afghans will leave. The GoI's announcement that it is considering extending a limited number of work visas to Afghans suggests that the GoI is remaining flexible in its planning--or that there may be some disagreement among leaders. The United States government (USG) has provided humanitarian assistance to Afghan refugees since the early 1980s. Funding for Afghan refugees declined rapidly since it peaked after the U.S.-led invasion in October 2001. Almost all assistance has been provided through the Migration and Refugee Assistance (MRA) account, and has been programmed by the Department of State's Bureau of Population, Refugees, and Migration (PRM). This funding is used not only for the protection and care of refugees in countries of asylum, but also for the reintegration of Afghan returnees in Afghanistan. Table 2 presents USG assistance to Afghan refugees and returnees since the U.S.-led invasion in October 2001. Since the majority of PRM funding is provided to regional projects, it is not possible to provide a breakdown of assistance by country. The majority of PRM's assistance for Afghans is provided to international organizations (IOs), principally UNHCR and the International Committee of the Red Cross (ICRC), both of which have been active in Afghanistan since the 1980s. In past years, some funding has also been provided to the International Federation of Red Cross and Red Crescent Societies (IFRC), IOM, the U.N. Children's Fund (UNICEF), and the U.N. Office for the Coordination of Humanitarian Affairs (OCHA). PRM also provides funding directly to non-governmental organizations (NGOs) for targeted projects. Proposals are selected by a panel of PRM experts based on the NGO's track record, the cost-effectiveness of the proposal, and the extent to which the work meets PRM's stated guidelines. USG assistance to Afghan refugees and returnees through PRM is generally intended to meet the most basic humanitarian needs, including food, shelter, protection, water and sanitation, health care, and primary education. In addition, PRM helps support the assisted repatriation of refugees back to Afghanistan. Much of this activity is carried out by PRM's principal IO partners. UNHCR, in addition to managing the massive repatriation operation, also oversees shelter construction and water and sanitation activities in Afghanistan. In Pakistan and Iran, UNHCR is responsible for refugee protection and camp management, including provision of health care, primary education, and adequate water and sanitation to refugees. Many of these activities are actually conducted by international and local NGOs with oversight and funding from UNHCR. UNHCR has also taken on a leading role in the humanitarian response to the South Asia earthquake of October 2005. Although most of the earthquake's victims were not refugees, because of its experience and assets in Pakistan, UNHCR was designated the lead agency for the camp management cluster, which officially ended on August 31, 2006. Although it has offices in Iran and Pakistan, the ICRC is more active in Afghanistan, where it supports health care, demining, water and sanitation, family reunification, promotion of international humanitarian law, and detention visits. In addition to supporting the activities of IOs, PRM directly funds NGOs to carry out humanitarian projects, such as shelter construction for returnees, refugee education, skills training for women, and refugee and returnee health care. These projects are designed to complement the activity of the IOs. In keeping with humanitarian practice, PRM does not single out refugees and returnees alone for assistance. Most PRM-funded projects also benefit host communities as well as the target population. Even after four years of exceptionally high refugee return numbers, the population of Afghan refugees in Pakistan and Iran remains the second-highest in the world. If recent returnees--also central to PRM's mandate--are added to this number, Afghans represent by far the largest population of refugees and returnees in the world. Funding for Afghan refugees has, however, diminished both overall and as a percentage of PRM's total annual budget since FY2002. The United States thus faces the challenge of maintaining its crucial assistance in this area of the world despite competing priorities. This challenge may become even more difficult in the near future, because maintaining the successful repatriation program is likely to become more, not less, expensive as time goes on. This is because the refugees remaining in Pakistan and Iran have fewer resources in and ties to Afghanistan than those who returned earlier. They have also, on average, spent far more time outside of Afghanistan than earlier returnees (see Figure 2 ). As time goes on, it becomes increasingly more difficult--and expensive--to encourage remaining refugees to voluntarily return to Afghanistan. Thus, as funding is declining, its importance may be increasing. A related issue may be whether Pakistan and Iran would be receptive to encouragement to grant citizenship to Afghans who do not want to return to Afghanistan. Another factor influencing the success of the repatriation program is the sustainability of previous returns to Afghanistan--that is, the degree to which returnees are being adequately anchored in their communities, whether they are receiving health care, education, and opportunities to make a living. Integration of returnees increasingly is examined in both studies and reports and getting the attention of policymakers. The success of the repatriation program thus depends on the success of the overall reconstruction effort in Afghanistan, including the extent to which returned refugees (and IDPs) are integrated into reconstruction efforts. There is already evidence that many Afghan returnees do not remain in Afghanistan; traffic across the Pakistani border in particular--in both directions--is heavy. To a certain extent, and as noted above, this is a historical pattern that pre-dates not only the repatriation program but the refugee crisis as well. A cause for concern may emerge, however, if it is concluded that many of the Afghans crossing back into Pakistan and Iran are doing so because they could not sustain themselves in Afghanistan. A renewed outward flow of Afghans, in addition to signaling the possible inadequacies of the reconstruction effort in Afghanistan, could increase tensions with host countries. Both the GoI and the GoP, indicate some possible flexibility on the future of Afghan migration, but have nevertheless made clear that they believe the refugee crisis in Afghanistan is over, and that there is no excuse for Afghans to remain in their countries on humanitarian grounds. Future study of the reasons for Afghan population movements is required in order to determine their reasons for migration. It remains to be seen what effect the Pakistani government's recently announced plans for controlling and securing the Afghan border, through the construction of fences and planting of landmines, will have on refugee movements. Humanitarian groups have voiced their concerns and condemned the plan. Pakistan is not a signatory to international conventions banning the use of landmines and the government says the plan is a necessary step to increase border security. President Hamid Karzai apparently also objected strongly to the announcement not only for political and humanitarian reasons, but because he does not believe the plan will be effective in preventing terrorists from crossing the border into Afghanistan. In the longer term, the governments of Afghanistan, Pakistan, and Iran may need to come to new political arrangements concerning the migration of Afghans in South Asia. New research indicates that Afghan labor migration may prove beneficial to both Afghanistan--in the form of remittances--and to countries of asylum--in the form of labor. Indeed, experts have noted that such migration is nothing new; many Afghans have for a long time migrated seasonally in search of livelihood opportunities. It remains to be seen what role the United States might take on this issue. Despite its economic advantages, establishing such a "labor migration regime" in South Asia may prove politically difficult on the Pakistani and Iranian domestic fronts. Segments of both the GoI and GoP have indicated that they believe Afghans are a net drain on the economy. Maintaining security along the border with Afghanistan is also a concern. Afghans in Pakistan are blamed for a good deal of lawlessness in the country, and there are few down sides for authorities to engage in this kind of scapegoating. Ultimately, however, Afghans will likely continue to live and work outside of Afghanistan, regardless of the legality of doing so; understanding and regulating as much of this migration as possible may be one way to ensure that it is done so in a secure, humane, and effective manner.

The United Nations High Commissioner for Refugees (UNHCR) has helped 3.69 million Afghan refugees return to Afghanistan since March 2002, marking the largest assisted return operation in its history. In addition, more than 1.11 million refugees have returned to Afghanistan without availing themselves of UNHCR's assistance, bringing the total number of returnees to at least 4.8 million. Despite the massive returns, possibly 3.5 million registered and unregistered Afghans still remain in these two countries of asylum--up to 2.46 million in Pakistan and more than 900,000 in Iran--making Afghans the second-largest refugee population in the world. These numbers are far greater than the initial working assumption in 2002 of 3.5 million refugees; in fact, the total is believed to be more than 8 million. The United States spent approximately $332.37 million between FY 2002 and FY 2005 on humanitarian assistance to Afghan refugees and returnees through the Department of State's Bureau of Population, Refugees, and Migration (PRM). It continues to provide support to refugees and returnees. The 110th Congress faces several relevant challenges. The safe and voluntary return of refugees to Afghanistan is not only a major part of the U.S. reconstruction effort in Afghanistan, but also an important indicator of its success. To the extent that refugees continue to return, it can be seen that Afghans are taking part in the future of their country. It is becoming more difficult, however, to encourage refugees to return. Those who were most capable of returning did so in the early years; those who remain have progressively less to return to--houses, livelihoods, family--in Afghanistan. Furthermore, maintaining the high pace of returns will require greater levels of reintegration assistance to anchor returnees in their homes and help them reestablish their lives in Afghanistan. Security will also be a major factor in population displacement within and across borders. The status of Afghan refugees in Pakistan and Iran has also been somewhat controversial in recent years as these governments want all Afghan refugees to return to Afghanistan. Officials in Pakistan have become concerned that the concentrations of Afghans in the country pose a security and crime risk, as individuals and goods are smuggled across the border. At the same time, however, many observers argue that Afghan labor migration may be beneficial to both Iran and Pakistan--which take advantage of cheap and effective immigrant labor--as well as Afghanistan, whose citizens benefit heavily from remittances sent in from abroad. To cut off this source of income for many poor Afghans could have disastrous consequences--not only humanitarian, but in the security sphere as well, as more than a million Afghans along the Afghan-Pakistan border are deprived of livelihoods and resort to other means to feed their families. Reportedly, many Afghans cross the border regularly, without documentation, and Islamabad does not appear to have the resources to control this flow. A future challenge will thus be to balance reasonable concerns about security with the importance of Afghanistan's labor plans in the regional economies and the forces that drive its migration patterns. It remains to be seen what effect the Pakistani government's recently announced plans for controlling and securing the Afghan border, through the construction of fences and planting of landmines, will have on refugee movements. This report will be updated.

Since 1971, the U.S. Postal Service (USPS) has been a self-supporting, wholly governmental entity. Prior to that time, the federal government provided postal services via the U.S. Post Office Department (USPOD), a federal agency that received annual appropriations from Congress. Members of Congress were involved in many aspects of the USPOD's operations, including the selection of managers (e.g., postmasters) and the pricing of postal services. In 1971, Congress enacted the Postal Reorganization Act (PRA; P.L. 91-375; 84 Stat. 725), which replaced USPOD with the USPS--an "independent establishment of the executive branch" (39 U.S.C. SS201). The PRA designed the USPS to be a marketized government agency, which is an agency that would cover its operating costs with revenues generated through the sales of postage and related products and services. Although the USPS does receive an annual appropriation, the agency does not rely on appropriations. Its appropriation is approximately $90 million per year, about 0.1% of the USPS's $65 billion operating revenue. Congress provides this appropriation to compensate the USPS for the revenue it forgoes in providing, at congressional direction, free mailing privileges to blind persons and overseas voters. The Postal Service Fund, which the USPS uses for most of its financial transactions, is off-budget, and therefore not subject to the congressional controls of the Congressional Budget and Impoundment Control Act of 1974 ( P.L. 93-344 ; 88 Stat. 297; 2 U.S.C. SS621). The USPS also has two other accounts: the Postal Service Retiree Health Benefits Fund (RHBF), which is on-budget, and the Competitive Products Fund (CPF), which is off-budget. These accounts were established by the Postal Accountability and Enhancement Act of 2006 (PAEA). The RHBF is an account into which the USPS must deposit annual prepayments towards current employees' future retirement benefits. The CPF was established to hold the revenues derived from the sale of competitive products and services and any returns earned on the investment of these funds in U.S. Treasury securities. Unlike private companies, the USPS does not have the authority to borrow money from private lenders. Rather, the USPS may borrow money from the U.S. Treasury's Federal Financing Bank. Federal statute limits the USPS's debt increases to $3 billion per year, and the USPS's total debt to $15 billion. A variety of approaches may be used to consider the financial condition of a firm. Here, the USPS's financial condition is examined by the metrics of profitability, revenues, expenses, and debt and liquidity. The USPS issues both quarterly (10-Qs) and annual financial statements (10-Ks and annual reports). The data below were drawn exclusively from these USPS sources. The financial figures have not been adjusted to reflect inflation. Profitability here is defined as operating revenues less operating expenses . Operating revenues (hereinafter, revenues ) include funds received by the USPS for the provision of products and services. Operating expenses (hereinafter, expenses ) include all costs incurred by the USPS in the provision of products and services. The USPS booked $5.4 billion in operational losses during FY2014. These losses were driven by a $5.7 billion charge for the RHBF. Between FY2005 and FY2014, the USPS had two profitable years followed by eight unprofitable years ( Figure 1 ). The USPS's deficits during those eight years amount to $51.0 billion. The USPS's losses began in FY2007, the same year the USPS began making payments into the RHBF. Between FY2006 and FY2007, the USPS's revenue rose $2.1 billion, from $72.7 billion to $74.8 billion. The agency's expenses increased $8.4 billion during this same period, from $71.7 billion to $80.1 billion. Of the $8.4 billion expense increase, nearly all of it resulted from the PAEA's RHBF funding requirements. In FY2007, the USPS had a $5.4 billion outlay to the RHBF, and an almost $3 billion one-time charge for transferring funds from a USPS escrow fund to the RHBF per P.L. 109-435 . While RHBF payments have affected the USPS's profitability, the USPS would have run deficits from FY2009 through FY2012 even if the agency did not have to make RHBF payments ( Figure 2 ). If RHBF payments are excluded, the USPS would have run modest surpluses of $800 million in FY2013 and $300 million in FY2014. The non-RHBF deficits since FY2009 total $13.6 billion, an amount nearly equal to the USPS's total borrowing authority. As Figure 3 and Figure 4 below illustrate, these cumulative deficits were produced by a sharp drop in revenues that was only partially recovered in FY2013 and FY2014. (Expenses did not fall equivalently.) Pursuant to federal statute, the USPS earns revenues through the provision of postal products and services. The PAEA separated USPS products and services into two categories--"market-dominant" (or monopoly) and "competitive." Market-dominant products include those products and services that the USPS need not compete with the private sector to provide (e.g., first-class letters). Competitive products and services are those for which a competitive market exists (e.g., overnight parcel delivery). The USPS may annually raise the rates of products in the market-dominant class by no more than the Consumer Price Index for All Urban Consumers (CPI-U). The USPS has greater freedom to price competitive products. In January 2014, the USPS raised rates by 1.7% on market-dominant products and services, and an average of 2.4% for competitive products. In addition, the Postal Regulatory Commission approved a 4.3% temporary surcharge on market-dominant products for a limited amount of time. This increase is currently being litigated in federal court following an appeal by the USPS, which believes the increase should not be limited for a specific amount of time. As a result, any rate increases for 2015 are being delayed until a decision is reached. Of the USPS's $67.8 billion in revenues in FY2014, more than $47 billion (69%) came from the sale of first-class mail, standard mail, and periodicals, which are classified as market-dominant products and services. USPS's revenues totaled $67.8 billion for FY2014. This amount is slightly higher ($500 million) than the USPS's revenues for FY2013 ($67.3 billion). Between FY2005 and FY2008, the USPS's revenue grew in each consecutive year to a high of $74.9 billion. A rapid decrease in mail volume began shortly after the US economy had officially entered a deep recession, leading to four consecutive years of revenue decline between FY2009 and FY2012. Revenue then increased again in FY2013 and FY2014 ( Figure 3 ). The USPS's FY2014 operating revenue of $67.8 billion is $2.1 billion, or 3.0%, lower than its FY2005 revenues ($69.9 billion). The USPS's revenues are derived almost entirely from postage paid for the delivery of mail. Hence, when mail volumes rise, the USPS's revenues tend to rise. Between FY2003 and FY2006, mail volume increased from 202.2 billion to 213.1 billion mail pieces. Since then, mail volume has dropped sharply--to 155.4 billion pieces in FY2014. Mail volume was 23.2% lower in FY2014 than in FY2003, and 27.1% below its FY2006 peak. Additionally, during the past decade the "mail mix" has shifted. An increasing portion of the mail handled by the USPS is advertising mail, which yields low profits. Concurrently, the annual volume of first-class mail, which is highly profitable, has been dropping steadily, at least in part because mailers are shifting to electronic communications (e.g., online bill remittances and payment). The USPS's expenses totaled $73.2 billion for FY2014. This amount is $1.1 billion, or 1.5%, higher than the USPS's expenses for FY2013 ($72.1 billion). Were the RHBF expenses removed from consideration, the USPS's FY2014 expenses would have been $950 million, or 1.3%, higher than FY2013 expenses ( Table 1 ). Despite this increase, USPS expenses (including the RHBF accrual) fell in the fourth quarter of FY2014 and were more than $300 million below the fourth quarter of FY2013. The USPS's operating expenses have increased from $68.3 billion to $73.2 billion (9.4%) in the past 10 years. Were the RHBF portion of the expenses removed, the USPS's annual expenses have decreased over the decade. Figure 4 shows that in the years prior to PAEA's establishment of the RHBF in 2007, expenses grew from $68.3 billion to $71.7 billion. Much of this increase was attributable to rising costs for compensation and benefits. After the enactment of the PAEA, the USPS's expenses (minus the RHBF, as indicated by the dotted line) declined from $74.7 billion in FY2007 to $67.5 billion in FY2014, a reduction of 9.6%. The USPS reached its $15 billion debt cap in late FY2012 and continues to have no remaining borrowing authority through the end of FY2014. The USPS was debt-free in FY2005, then began increasing debt from FY2006 until the limit was reached in FY2012 ( Figure 5 ). Factors contributing to the USPS's growing debt include falling annual revenues from FY2008 through FY2012 and the agency's $17.9 billion in payments into the RHBF. Figure 3 above shows the USPS's revenues were $7.1 billion higher in FY2007 and FY2008 than in FY2014. P ostal Service Fund balance: At the end of FY2014, the USPS had $4.9 billion in cash, which only provides enough cash to maintain operations for less than four weeks at current operating costs. This is an increase over the $2.3 billion in cash available at the end of FY2013. The USPS has stated that the increased cash balance is "largely attributable to the temporary exigent price increase on Market-Dominant services implemented in January of 2014." In addition, the agency's limited liquidity and lack of borrowing authority is constraining the USPS's ability to make capital and operational upgrades (e.g., replace its aging fleet of delivery vehicles) and would be insufficient in the event of another downturn to the U.S. economy. C ompetitive Products Fund balance: The entire balance of the CPF was transferred to the Postal Service Fund to address liquidity concerns at the conclusion of FY2012. Since that time, the U.S. Treasury's "Monthly Statement of the Public Debt" has not included an entry for the CPF. This is indicative of the CPF not having a current balance. The status of the CPF was the subject of a 2013 Commission Information Request (CIR) from the Postal Regulatory Commission. R etiree Health Benefits Fund balance: The RHBF had $48.8 billion as of November 2014. As currently calculated, the USPS's total RHBF obligation is approximately $97.7 billion. Federal law prohibits the USPS from drawing any funds from the RHBF before FY2017. The USPS's lack of borrowing authority has contributed to its self-reported "lack of liquidity." The USPS did not make its FY2011, FY2012, FY2013, or FY2014 RHBF benefit payments, leaving it $22.4 billion in default. The agency reports it does not anticipate having sufficient liquidity to make the remaining payments for FY2015 and FY2016. The USPS is scheduled to report its year-end FY2015 financial results in November 2015. Congress designed the USPS to be financially self-supporting. The agency's ability to remain financially self-sustaining over the long term is questionable. In FY2013, the USPS's revenues began to rise after falling for four consecutive years ( Figure 3 ). However, expenses have not fallen quickly enough to allow the Postal Service to meet its statutory prefunding commitments to the RHBF and place the agency on a more sustainable financial course ( Figure 5 ). Despite the revenue growth in FY2013 and FY2014, the USPS's annual revenue remained lower than its revenue 10 years earlier. Additionally, the revenue trend depicted in Figure 3 may indicate a long-term weakening of the demand for the USPS's current products and services. The weak cash position of the USPS has led the agency to take a number of actions to address their financial position. These include changes to both operations and personnel. In 2013, the Postal Service implemented a realignment of its operations to further reduce costs and strengthen its finances. These operational realignments included reductions in the number of mail processing operations, realignment of retail office hours to match demand, reductions in the number of delivery routes and consolidations of delivery offices. In June 2014, the Postal Service announced that a second phase of mail processing realignments would begin in January 2015, culminating in a consolidation impacting up to 82 more processing operations. Additionally, the Postal Service continues to leverage employee attrition, Voluntary Early Retirement (VER) and utilization of non-career employees to the maximum extent permitted by its labor contracts. In July 2014, the Postal Service offered a VER to approximately 3,000 postmasters who were impacted by reductions in retail hours at certain postal facilities which was accepted by 1,380 postmasters. Despite these organizational actions and the increase in revenue for the USPS in FY2013, the Postal Service projects that legislative change will be necessary to improve liquidity moving forward. With no further borrowing authority the USPS could find itself with insufficient funds to continue operations, leading to a need for payment prioritization and the continued deferral of capital and infrastructure expenditures. It goes beyond the scope of this report to assess which operational or policy changes could improve the USPS's financial condition sufficiently to enable it to continue as a self-funding government agency. The above financial data, however, suggest that for any reforms to be successful they would need to contend with the USPS's short-term liquidity problem; be of sufficient magnitude to make appreciable changes to the USPS's annual operating revenue (currently $67 billion) or operating costs (currently $70+ billion); enable the USPS to sufficiently fund its retiree health benefits; help the USPS reduce its debt (currently $15 billion); and place the USPS on a long-term trajectory where the agency's revenues could be expected to meet or exceed expenses.

Since 1971, the U.S. Postal Service (USPS) has been a self-supporting government agency that covers its operating costs with revenues generated through the sales of postage and related products and services. The USPS is experiencing significant financial challenges. After running modest profits from FY2003 through FY2006, the USPS lost $45.6 billion between FY2007 and FY2013. Since FY2011, the USPS has defaulted on $22.4 billion in payments to its Retiree Health Benefits Fund (RHBF). The agency reached its $15 billion borrowing limit in FY2012 and has not reduced total debt since that time. In October 2012, the USPS bolstered its liquidity by withdrawing all of the cash from its competitive products fund. This fund has not been replenished. While the revenues for the USPS increased in FY2014, expenses have also risen. Compared with FY2013, expenses for FY2014 were $1.1 billion higher while revenues have increased by $500 million. The USPS's recent financial difficulties are partially the product of reduced demand. The agency has experienced a 36.3% drop in mail volume during the past 10 years. Additionally, during the past decade the "mail mix" has shifted. A growing portion of the mail is advertising mail, which yields low profits. Concurrently, the annual volume of first-class letters, which are highly profitable, has been dropping steadily, at least in part due to mailers shifting to electronic communications. As a result, the Postal Service's revenues in FY2014 were lower than they were in FY2005. Additionally, the Postal Service's liquidity has decreased and its debt has increased since FY2006, partially as a result of the statutorily mandated payments to the RHBF that were made between FY2007 and FY2010. The USPS has not had sufficient liquidity to make the payments since FY2011. This report discusses these issues in more detail, and includes financial results through the end of FY2014. This report will be updated in the event of any significant developments.

On April 24, 2013, Rana Plaza, an eight-story building, in Dhaka, Bangladesh, collapsed, killing more than 1,100 garment workers. It brought international focus on portions of the global supply chain. It also raised the issue of what might be done to improve working conditions, especially for lower-wage workers in developing countries around the world. According to press reports, the day of the building collapse workers arrived and saw cracks in the outside of the building where five manufacturing operations were trying to meet production deadlines on apparel products for the U.S. and European Union (EU) markets. Reportedly, management assured them that the building was safe, and told workers that they would not be paid if they did not work. An hour later, the building collapsed. It has been labeled the deadliest disaster in the history of the garment industry. The Rana Plaza collapse took place five months after a December 17, 2012, fire at another Bangladesh apparel factory, Tazreen Fashions Limited; the Tazreen fire killed 112 workers. Survivors reportedly stated that their managers locked one exit route and told workers that the fire alarms were false, thereby delaying timely evacuation. The combined tragedies brought the six-month total loss of life in Bangladesh in the garment sector to at least 1,200. After the building collapse, reportedly, thousands of workers took to the streets and vandalized vehicles and shops before being dispersed by police. Soon after that, the government shut down a number of apparel factories, for safety reasons, as concerns about industrial safety across the country continued to grow. Bangladesh's major export is apparel, which, along with a small amount of textiles, accounts for more than 80% of the country's $24 billion in exports to the world in 2012, or nearly $20 billion. (See the Text Box , "Bangladesh in Brief.") As a result of the Rana Plaza building collapse, some firms, such as Disney, have indicated they may no longer source production from Bangladesh, largely due to concerns over their brand reputation. If this becomes a major trend, one consequence could be that many women, who constitute 80% of the workers in the apparel sector, could lose their jobs. These women, mostly Muslim, have found new independence and an increased standard of living for their families, and have, in many cases, become primary breadwinners. The effect on the economic structure of Bangladesh could be compounded by an ongoing struggle between a secular Bangladeshi identity and a more fundamental/religious Islamic identity. A number of factors may have led to the recent building collapse. Bangladesh's economy is labor-intensive, which attracts lower-wage and lower-skilled industries such as apparel. Bangladesh is a densely populated country, where a population half the size of the United States is crowded into a geographic area the size of Iowa. To meet increasing global demand for apparel production, primarily by the United States and Europe, certain buildings may have been converted to multi-story manufacturing operations. In many countries, apparel production is generally carried out in one- or two-story buildings because of the inherent fire hazards associated with this production. Three additional floors that reportedly were illegally constructed were added to the Rana Plaza. According to press reports, working conditions in Bangladesh were theoretically addressed, at least in part, by Bangladesh labor laws and building codes, International Labor Organization (ILO) commitments, codes of conduct held by multinational corporations, and GSP trade preferences. Since 1972, Bangladesh has been a member of the International Labor Organization (ILO). The ILO originated in 1919 as a tripartite organization comprised of workers, employers, and governments, to promote "decent work" around the world. Under the 1998 ILO Declaration on Fundamental Principles and Rights at Work , Bangladesh and all ILO members have an obligation to uphold ILO core labor principles, simply by reason of their status as ILO members, even if they have not ratified the conventions behind the principles. Bangladesh has, however, ratified seven of the eight ILO conventions backing and defining the five core labor principles. These principles are very similar to the U.S. list of internationally recognized worker rights. These rights are the following: 1. freedom of association and the effective recognition of the right to collective bargaining; 2. the elimination of all forms of forced or compulsory labor; 3. the effective abolition of child labor, including the worst forms of child labor; and 4. the elimination of discrimination in respect of employment and occupation. Whether countries do or do not uphold ILO core labor principles, the ILO has no real enforcement powers other than technical assistance, reporting requirements, publication of information, and moral suasion. An example of ILO activities to enhance worker rights is the Better Work Program, a technical support program which recently went into effect in Bangladesh. It is a joint program with the World Bank that works with government officials, factory owners, and labor groups to ensure safe and decent workplace conditions, and is discussed further below. Figure 2 , below, shows that most of the concepts of the ILO core labor principles plus the ILO occupational safety and health principle, are included in many U.S. trade and investment laws and programs, including the Generalized System of Preferences program, mentioned below, and some private sector codes of conduct. Thus, Figure 2 shows graphically the extent to which similar sets of rights extend through all three parts of the international worker rights support system. One area of congressional focus in supporting internationally recognized worker rights has been through provisions in U.S. trade preference programs. These were first introduced in the Generalized System of Preferences (GSP) program in 1985. GSP provides unilateral U.S. tariff preferences for certain products exported by developing countries, to support their economic development. Under GSP, and later introduced in other trade preference programs, the President or his designee is prohibited from designating certain countries as eligible for GSP benefits, based on different criteria, including that a country "has not taken or is not taking steps to afford internationally recognized worker rights." These worker rights are defined as 1. the right of association; 2. the right to organize and bargain collectively; 3. a prohibition on the use of any form of forced or compulsory labor; 4. a minimum wage for the employment of children; and protection against the worst forms of child labor; and 5. acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health. On the basis of these criteria, effective September 3, 2013, the Obama Administration suspended GSP status for Bangladesh, with no timeline for its possible reinstatement. However, that decision was followed by the USTR release of a "Bangladesh Action Plan 2013," outlining a basis for the eventual reinstatement of GSP status for Bangladesh. (For further discussion of the GSP suspension, and Action Plan, see the following section on "U.S. and International Responses to the Bangladesh Tragedy," under "Executive Branch.") Since the 1980s and 1990s, when globalization accelerated and various interest groups began to publicize "bad actors" on worker rights conditions in factories, corporations have increasingly adopted and publicized corporate codes of conduct. Most, if not all, large multinational corporations sourcing apparel from Bangladesh have posted such codes on their websites. These codes may describe the standards to which the business holds its employees, its suppliers under contract, and sometimes its subcontractors. These codes specify worker rights protections and structural and fire hazard standards to varying degrees. A concern raised by some groups is that corporations may contract directly with suppliers, yet have limited knowledge of the conditions under which the products are produced by subcontractors. Corporate codes of conduct are voluntary on the part of corporations. The Rana Plaza collapse has focused greater attention on the worker conditions and laws in Bangladesh, and may impact Bangladesh's continued role as a major supplier of apparel, due to corporate buyer concerns over branding and reputation. Key issues may include whether firms will continue to source apparel from Bangladesh, or whether firms will engage more proactively to improve conditions there, as well as the extent to which corporate codes of conduct have been helpful. A number of interested parties, including parties in Europe and the United States, among them President Obama, and a number of Members of Congress, are calling for U.S. and European companies and other stakeholders to work together to solve the problems. (See section below.) Response to the Bangladesh tragedy has come from Congress, the Administration, the Bangladesh government, the ILO, and the private sector, and continues to evolve. This section briefly describes recent, somewhat overlapping, developments. Congressional interest in the Rana Plaza factory collapse stems from its legislative and oversight responsibilities over trade, and key business and labor constituencies. These concerns intersect with private sector interests, including the viability of their international supply chains, and brand reputation. Soon after the Rana Plaza collapse, some Members of Congress encouraged businesses and other stakeholders to work together to improve conditions for workers in Bangladesh. On May 1, 2013, for example, Representatives Sander Levin, ranking Member of the House Ways and Means Trade Subcommittee, and George Miller, ranking Member of the House Education and the Workforce Committee, sent a letter to President Obama, urging the Administration to convene representatives of European and American retailers, the Bangladesh garment industry (including their workers and unions), the Bangladeshi government, the ILO, and nongovernmental organizations, to facilitate development of a "concrete action plan" to address the range of issues relating to working conditions and worker rights in the garment sector. In addition, a group of 8 U.S. Senators, led by Senators Harry Reid and Sherrod Brown, and a group of 10 Representatives, led by House Minority Leader Nancy Pelosi and House Minority Whip Steny Hoyer, wrote letters to major retailers encouraging them to join efforts to improve fire and building safety in Bangladesh apparel factories. Two major stakeholder efforts have resulted: the "Accord on Fire and building Safety in Bangladesh," signed predominantly by European, plus a few U.S. retailers and brands; and the "Alliance for Bangladesh Worker Safety," signed predominantly by large North American retailers and brands. (See further discussion below under " Private Sector ".) U.S. government interests in the Bangladesh tragedy relate to its oversight of trade and investment, its administration of trade agreements and trade preference programs, and a number of efforts to strengthen the capacity of Bangladesh to promote worker protections. For example, the United States has had a bilateral investment treaty with Bangladesh in place since 1989. After the Rana Plaza tragedy, it signed an additional "Trade and Investment Cooperation Forum Agreement" (TICFA), pledging closer cooperation to prevent more tragedies in the ready-made garment sector. State Department, USTR, and Labor Department Response. After the Rana Plaza collapse, on May 8, 2013, the State Department, Department of Labor, and USTR convened a conference call with U.S. corporate "buyers" (retailers and brands sourcing in Bangladesh's garment industry). In that call, they "strongly urged" these major corporations to coordinate efforts with each other, and with the government of Bangladesh, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), civil society, and labor groups to (a) help pay for independent safety and fire inspectors; (b) communicate to the Bangladeshi government their concerns about labor conditions; and (c) urge immediate passage of labor law amendments to lay the basis for the establishment of an ILO/World Bank Better Work Program for Bangladesh. On June 13, 2013, the Department of Labor's Bureau of International Labor Affairs (ILAB) announced that a competitive grant of $2.5 million would be awarded to recipient(s) who would work to (1) strengthen the Bangladesh government's ability to improve and enforce fire and building safety standards; and (2) build the capacity of worker organizations to effectively monitor violations of such standards and abate hazards in the ready-made garment sector. GSP S uspension for Bangladesh. The decision to suspend GSP status for Bangladesh, effective September 3, 2013, with no timeline for restoring, it was made after the GSP Trade Policy Staff Committee held hearings in March of 2013, in response to an AFL-CIO petition first submitted in 2007 and updated in 2012, after the Tazreen fire. Implications from the GSP suspension are yet to be determined. The GSP program excludes from eligibility most apparel and textile articles (and other import sensitive products), which constitute 92% of Bangladesh's exports to the United States. Therefore, the decision has little effect on U.S. tariffs on apparel imports, which reportedly average about 16%. On the other hand, some businesses might decide to pull out of Bangladesh for fear that their reputation could be damaged by association with a country that has lost its GSP status for reasons relating to internationally recognized worker rights. If that were to happen, some argue, it could significantly reduce Bangladesh's apparel-making labor force and adversely impact its economy. The USTR's "Bangladesh Action Plan 2013," released to the public on July 19, 2013, outlined a basis for possible eventual reinstatement of GSP status for Bangladesh. Its directives encompass Bangladesh's own "National Tripartite Plan of Action (NTPA) on Fire Safety and Structural Integrity," for the garment sector of Bangladesh (discussed further below under the "Bangladesh Government.") The USTR Action Plan for Bangladesh, among other things, set forth guidelines for government inspections, labor law reforms, the protection of unions from anti-union discrimination and reprisal, and the extension of freedom of association and collective bargaining rights to export processing zones. The Bangladesh government response after the tragedy was to work with the ILO on identifying changes needed to better protect workers. The NTPA, (mentioned in the above paragraph), is the most recent result. It is a consolidation of two earlier tripartite plans. It focuses on legislation and policy, administration, and practical activities to improve safety in apparel factories. On July 15, 2013, the Bangladesh Parliament approved some changes to its labor laws. These changes were designed to: (1) make it easier for workers to form labor unions; (2) increase severance and retirement payments for workers with longer tenures; and (3) equalize, for all workers, annual payments under a welfare fund. In addition, the government reportedly plans to add 200 factory inspectors within six months, and to complete a comprehensive safety assessment (extending to fire and structural safety) of all export-oriented garment factories. The government has also been negotiating a new minimum wage for garment workers, who have been protesting against low wages in light of recent inflation. The protesters have sought an increase in the minimum wage from the U.S. equivalent of $38 to $104 per month. Effective December 1, 2013, the Bangladeshi government raised the minimum wage for the country's garment workers by 77% to $68 per month. After initial review of the Bangladesh labor law amendments, the ILO stated that the new law "did address some of the ILO's specific concerns, while falling short of several important steps called for by the ILO supervisory system to bring the law into conformity with ratified international labor standards." For example, the ILO noted that major areas remaining to be addressed include (1) a 30% minimum membership requirement to form a union; and (2) the fact that many collective bargaining rights are not extended to workers in export processing zones, which reflect heavy foreign investment. Additionally, the ILO is participating in: (1) a three-year program on "Improving Working Conditions in the Ready-Made Garment Sector" to support implementation of the NTPA; and (2) the 2013 European Union (EU)-Bangladesh-ILO "Sustainability Compact for Continuous Improvements in Labor Rights and Factory Safety in the Ready-Made Garment and Knitwear Industry in Bangladesh." In addition, on October 22, 2013, the ILO and the World Bank's International Finance Corporation (IFC) announced the establishment of a "Better Work Program" in the ready-made garment sector in Bangladesh. The Better Work Program is a partnership with government, employers, workers, international buyers, and other relevant stakeholders to improve working conditions in the industry and support its long-term competitiveness. Private sector responses to the Bangladesh tragedy have varied. According to press reports, retailers and some apparel firms have acknowledged their links to unsafe Bangladesh factories, while others have hedged. Another private sector response has been for businesses to debate whether to leave Bangladesh and relocate to countries with fewer high-visibility labor issues, or stay and help solve them in Bangladesh. Some companies, including Disney, as previously mentioned, are considering not sourcing from Bangladesh for a number of reasons, including concerns about their business reputation. A broader response from many corporations, particularly in Europe, has been to join forces to support change in Bangladesh. After the building collapse, officials from two dozen retailers and apparel companies met with representatives from the German government to try to negotiate a plan to ensure safety at roughly 4,500 garment factories in Bangladesh. On May 13, 2013, several of the world's largest apparel companies agreed to a legally binding "Accord on Fire and Building Safety in Bangladesh" to help pay for fire safety and building improvements there. It requires a five-year commitment from participating retailers to conduct independent safety inspections of factories, and pay up to $500,000 per year toward safety improvements. More than 100 mostly European corporations have signed onto the accord, including Swedish retail giant H&M (the largest producer of apparel in Bangladesh); Inditex, headquartered in Spain; C&A, a Dutch retailer; and Primark and Tesco (British retailers). U.S. signatories include PVH, the parent company of Calvin Klein, Tommy Hilfiger, and Izod, which has signed on to the five-year plan, contributing $2.5 million; and Abercrombie and Fitch. Other U.S. companies that resisted signing, objecting primarily to the agreement's legally binding nature, have formed a separate group, the "Alliance for Bangladesh Worker Safety." The alliance was organized under the Bipartisan Policy Center (BPC), by former Senate Majority Leader George Mitchell and former Senator Olympia Snowe. Corporate members of the Alliance have pledged over $100 million in capital to support remediation of factories. In addition, $42 million raised for the Worker Safety Fund reflects a tiered fee structure for members based on exports of apparel products from Bangladesh. The group was founded by 17 North American apparel retailers and brands, including Gap, J.C. Penney, Jones, Kohl's, L.L. Bean, Macy's Nordstrom, Sears, Target, VF Corporation, and Wal-Mart. (See Appendix Table A-1 for a comparison of the two plans.) Congressional options relating to the Rana Plaza collapse may cover a range of issues, including allowing the situation to resolve itself. Broadly speaking, Congress may wish to conduct oversight and examine a comprehensive effort by the international community to support change in Bangladesh. Key questions for Congress include the following: Is the ILO/World Bank Better Work program an effective approach, and has it been implemented successfully in other countries? How soon should GSP eligibility for Bangladesh be reconsidered? Should tariff benefits for apparel be extended to Bangladesh to support it in improving the safety conditions of its workers? Are there other steps the U.S. government should take? How much progress have the Accord and the Alliance achieved so far in promoting safety workplaces in Bangladesh? Will the ILO be monitoring the implementation of changes to Bangladeshi labor law? What are its current efforts in Bangladesh? What are possible unintended consequences for Bangladeshi apparel workers if action leads to a decline in the apparel industry? Leading up to passage of the 2014 National Defense Authorization Act, the House bill contained a provision (Sec. 634) that would have required the defense commissary system and the exchange store system to: (a) comply with requirements of the Bangladesh Accord; and (b) in its purchases, give preferences to signatories of the Accord. In addition, the Department of Defense would have been required to notify Congress of garments sold in defense commissaries or exchanges that did not comply with these requirements (i.e., were manufactured by nonsignatories). The final agreement did not include these provisions. The House sponsors of the amendment noted in a joint statement that garments and documents with U.S. Marine insignia were found in the rubble in the November 2012 Bangladesh Tazreen Fire. Data indicated that the Army-Air Force Exchange, a military retailer, imported 124,000 pounds of garments from several factories in Bangladesh. The sponsors argued that "as a huge purchaser of garments, the U.S. military should not be complicit" in putting the lives of Bangladesh workers at risk. This appendix compares key provisions of the Bangladesh Accord and the Bangladesh Alliance. Both plans build on Bangladesh's "National Tripartite Action Plan on Fire Safety (NAP) for the Ready-Made Garment Sector in Bangladesh," released in July, 2013. This plan, jointly agreed to by the government of Bangladesh, employer organizations, and worker organizations, with help from the International Labor Organization (ILO), is a consolidation of two earlier tripartite plans. It focuses on legislation and policy, administration, and practical activities to improve safety in apparel factories. The Accord and the Alliance plans are similar in some regards. Both plans require health and safety committees in all Bangladesh factories that supply companies that are signatories. Both plans require inspections and remediation of hazards, and training of management and workers, in accordance with Bangladeshi law. They differ, however, in their approach to worker protections. Under the Accord, signatories are obligated to require suppliers to extend certain rights to workers, including the right to refuse work they justifiably believe to be unsafe, and the right to a continued employment relationship and income, while the factory is undergoing required safety improvements. Under the Alliance, workers are not given these rights directly. Rather, they are "empowered" to report safety hazards; and 10% of a fund contributed to by the signatories is reserved to support workers temporarily displaced because of factory remediation. Because the programs are still in their early stages of implementation, no reports have yet been issued estimating the effects of either plan. Stakeholders for the Alliance typically emphasize the similarities between the plans and emphasize their rapid development of protocols. Many stakeholders for the Accord argue that the Accord is a legally binding agreement between companies and trade unions, and includes a central role for workers and worker representatives, including direct trade union participation in factory training. They argue that the Alliance is not legally binding and has no role for trade unions, workers, and worker representatives.

The April 24, 2013, collapse of an eight-story garment factory, called Rana Plaza, in Dhaka, Bangladesh, resulted in the deaths of more than 1,100 workers. It is reportedly now considered the deadliest accident in the history of the apparel industry. Congress has had a long-standing interest in supporting internationally recognized worker rights in developing countries, and the building collapse has raised concerns about worker conditions in Bangladesh. Rana Plaza was allegedly structurally unsound and poorly maintained for apparel production. Apparel production is generally known as an industry under threat of fire, and one where workers need easy access to rapid escape routes. Issues relating to workers' inability to effectively exercise their rights to organize, bargain collectively, and work in a safe workplace may have contributed to the tragedy. For example, workers reportedly noticed cracks in the building and resisted entering, and were told that if they did not report to their jobs, they would not be paid. The factory collapse brought international focus to those parts of global supply chains that may not meet basic safety and health standards. The U.S. government supports internationally recognized worker rights through various policies and programs. These include U.S. trade preference programs, free trade agreements, foreign assistance, and Department of Labor initiatives. Congressional and U.S. efforts in this regard are part of an international worker rights support structure in place to offer technical assistance and support to countries--especially developing countries. Other major parts of this structure include international organizations, such as the International Labor Organization (ILO), founded in 1919; and corporate codes of conduct, which have arisen from a broader movement of corporate social responsibility that gained strength in the 1980s and 1990s. Early analysis of the causes of the Bangladesh tragedy raises questions about what went wrong and about what can be done to help Bangladesh to improve working conditions at factories. Efforts to make changes in Bangladesh are already underway, and developments on this issue are evolving. This report provides an overview of the recent tragedy in Bangladesh and the Bangladesh economic environment and culture. It also notes the responses to the tragedy, to date, from Congress, the Administration, the ILO, the Bangladesh government, and the private sector. Finally, it raises some possible issues for Congress.

Hyperlinking, in-line linking, caching, framing, thumbnails. Terms that describe Internet functionality pose interpretative challenges for the courts as they determine how these activities relate to a copyright holder's traditional right to control reproduction, display, and distribution of protected works. At issue is whether basic operation of the Internet, in some cases, constitutes or facilitates copyright infringement. If so, is the activity is a "fair use" protected by the Copyright Act? These issues frequently implicate search engines, which scan the web to allow users to find posted content. Both the posted content and the end-use thereof may be legitimate or infringing. In 2003, the Ninth Circuit Court of Appeals decided Kelly v. Arriba Soft Corp. , which held that a search engine's online display of protected "thumbnail" images was a fair use of copyright protected work. More recently, courts have considered an Internet search engine's caching, linking, and the display of thumbnails in a context other than that approved in Kelly. In Field v. Google , a U.S. district court found that Google's system of displaying cached images did not infringe the content owner's copyright. And in Perfect 10 v. Amazon.com Inc. , the Ninth Circuit reconsidered issues relating to a search engine's practice using thumbnail images, in-line linking, and framing, finding the uses to be noninfringing. They are discussed below. Kelly v. Arriba Soft Corp. is a significant Internet copyright case arising from the Ninth Circuit Court of Appeals. There, the court addressed the interface between the public's fair use rights and two of a copyright holder's exclusive rights--those of reproduction and public display. In Kelly , the defendant Arriba operated a "visual search engine" that allowed users to search for and retrieve images from the Internet. To provide this functionality, Arriba developed a computer program that would "crawl" the Internet searching for images to index. It would then download full-sized copies of those images onto Arriba's server and generate lower resolution thumbnails. Once the thumbnails were created, the program deleted the full-sized originals from the server. Arriba altered its display format several times. In response to a search query, the search engine produced a "Results" page, which listed of a number of reduced, "thumbnail" images. When a user would double-click these images, a full-sized version of the image would appear. From January 1999 to June 1999, the full-sized images were produced by "in-line linking," a process that retrieved the full-sized image from the original website and displayed it on the Arriba Web page. From July 1999 until sometime after August 2000, the results page contained thumbnails accompanied by a "Source" link and a "Details" link. The "Details" link produced a separate screen containing the thumbnail image and a link to the originating site. Clicking the "Source" link would produce two new windows on top of the Arriba page. The window in the forefront contained the full-sized image, imported directly from the originating website. Underneath that was another window displaying the originating Web page. This technique is known as framing, where an image from a second website is viewed within a frame that is pulled into the primary site's Web page. Currently, when a user clicks on the thumbnail, the user is sent to the originating site via an "out line" link (a link that directs the user from the linking-site to the linked-to site). Arriba's crawler copied 35 of Kelly's copyrighted photographs into the Arriba database. Kelly sued Arriba for copyright infringement, complaining of Arriba's thumbnails, as well as its in-line and framing links. The district court ruled that Arriba's use of both the thumbnails and the full-sized images was a fair use. Kelly appealed to the Ninth Circuit Court of Appeals. On appeal, the Ninth Circuit affirmed the district court's finding that the reproduction of images to create the thumbnails and their display by Arriba's search engine was a fair use. But it reversed the lower court holding that Arriba's in-line display of the larger image was a fair use as well. Thumbnails . An owner of a copyright has the exclusive right to reproduce copies of the work. To establish a claim of copyright infringement by reproduction, the plaintiff must show ownership of the copyright and copying by the defendant. There was "no dispute that Kelly owned the copyright to the images and that Arriba copied those images. Therefore," the court ruled, "Kelly established a prima facie case of copyright infringement." However, a claim of copyright infringement is subject to certain statutory exceptions, including the fair use exception. This exception "permits courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that statute is designed to foster." To determine whether Arriba's use of Kelly's images was a fair use, the court weighed four statutorily-prescribed factors: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. Applying the first factor, the court noted that the "more transformative the new work, the less important the other factors, including commercialism, become" and held that the thumbnails were transformative because they were "much smaller, lower-resolution images that served an entirely different function than Kelly's original images." Furthermore, it would be unlikely "that anyone would use Arriba's thumbnails for illustrative or aesthetic purposes because enlarging them sacrifices their clarity," the court found. Thus, the first fair use factor weighed in favor of Arriba. The court held that the second factor, the nature of the copyrighted work, weighed slightly in favor of Kelly because the photographs were creative in nature. The third factor, the amount and substantiality of the portion used, was deemed not to weigh in either party's favor, even though Arriba copied the entire image. Finally, the court held that the fourth factor, the effect of the use on the potential market for or value of the copyrighted work, weighed in favor of Arriba. The fourth factor required the court to consider "not only the extent of market harm caused by the particular actions of the alleged infringer, but also whether unrestricted and widespread conduct of the sort engaged in by the defendant ... would result in a substantially adverse impact on the potential market for the original." The court found that Arriba's creation and use of the thumbnails would not harm the market for or value of Kelly's images. Accordingly, on balance, the court found that the display of the thumbnails was a fair use. In Field v. Google , a U.S. district court considered a claim for copyright infringement against the Internet search engine, Google. Field sought statutory damages and injunctive relief against Google for permitting Internet users to access copies of images temporarily stored on its online repository, or cache. In the course of granting summary judgment for Google, the court explained the caching process: There are billions of Web pages accessible on the Internet. It would be impossible for Google to locate and index or catalog them manually. Accordingly, Google, like other search engines, uses an automated program (called the "Googlebot") to continuously crawl across the Internet, to locate and analyze available Web pages, and to catalog those Web pages into Google's searchable Web index. As part of this process, Google makes and analyzes a copy of each Web page that it finds, and stores the HTML code from those pages in a temporary repository called a cache. Once Google indexes and stores a Web page in the cache, it can include that page, as appropriate, in the search results it displays to users in response to their queries. When Google displays Web pages in its search results, the first item appearing in each result is the title of a Web page which, if clicked by the user, will take the user to the online location of that page. The title is followed by a short "snippet" from the Web page in smaller font. Following the snippet, Google typically provides the full URL for the page. Then, in the same smaller font, Google often displays another link labeled "Cached." When clicked, the "Cached" link directs an Internet user to the archival copy of a Web page stored in Google's system cache, rather than to the original Web site for that page. By clicking on the "Cached" link for a page, a user can view the "snapshot" of that page, as it appeared the last time the site was visited and analyzed by the Googlebot. The court emphasized that there are numerous, industry-wide mechanisms, such as "meta-tags," for website owners to use communicate with Internet search engines. Owners can instruct crawlers, or robots, not to analyze or display a site in its web index. Owners posting on the Internet can use a Google-specific "no-archive" meta-tag to instruct the search engine not to provide cached links to a website. In view of these well-established means for communicating with Internet search engines, the court concluded that the plaintiff "decided to manufacture a claim for copyright infringement against Google in the hopes of making money from Google's standard practice." Despite its acknowledgment of the plaintiff's rather dubious motives, the court nevertheless discussed the merits of the copyright infringement claims. Specifically, the plaintiff did not claim that Google committed infringement when the Googlebot made initial copies of Field's copyrighted Web pages and stored them in its cache. Rather, the alleged infringing activity occurred when a Google user clicked on a cached link to the Web page and downloaded a copy of those pages from Google's computers. Assuming, for the purposes of summary judgment, that Google's display of cached links to Field's work did constitute direct copyright infringement, the court considered four defenses raised by Google, and found in its favor on all counts. Implied License. First, the court found that the plaintiff had granted Google an implied, nonexclusive license to display the work because "[c]onsent to use the copyrighted work need not be manifested verbally and may be inferred based on silence where the copyright holder knows of the use and encourages it." Field's failure to use meta-tags to instruct the search engine not to cache could reasonably be interpreted as a grant of a license for that use. Estoppel. The court invoked the facts supporting its finding of an implied license to support the equitable argument that Field was precluded from asserting a copyright claim. The court reiterated that Field could have prevented the caching, did not do so, and allowed Google to detrimentally rely on the absence of meta-tags. Had Google known the defendant's objection to displaying cached versions of its website, it would not have done so. Fair Use. In a detailed analysis, the court concluded that Google's cache satisfies the statutory criteria for a fair use: Purpose and character of use. The search engine's use of the protected material is transformative. Rather than serving an artistic function, its display of the images served an archival function, allowing users to access content when the original page is inaccessible. Nature of the copyrighted works . Even assuming the copyrighted images are creative, Field published his works on the Internet, making them available to world for free; he added code to his site to ensure that all search engines would include his website in their search listings. Amount and substantiality of the use. The court found that Google's display of entire Web pages in its cached links serves multiple transformative and socially valuable purposes. It cited the U.S. Supreme Court's decision in Sony Corp. v. Universal Studios, Inc. and Kelly , supra , as examples where copying of an entire work is a fair use. The effect of the use upon the potential market for or value of the copyrighted work. Although the plaintiff distributed his images on the Internet for free, he argued that Google's activity undercut licensing fees that he could potentially develop by selling access to cached links to his website. The court found that there was no evidence of an existing or developing market for licensing search engines the right to allow access to Web pages through cached links. Good Faith . In addition to the statutory criteria of 17 U.S.C. SS 107, the court considered equitable factors and found the Google operates in good faith because it honors industry-wide protocols to refrain from caching where so instructed. Conversely, the plaintiff deliberately ignored the protocols available to him in order to establish a claim for copyright infringement. The Digital Millennium Copyright Act (DMCA). Finally, the court held that Google is protected by the safe harbor provision of the DMCA, which states that "[a] service provider shall not be liable for monetary relief ... for infringement of copyright by reason of the intermediate and temporary storage of material on a system or network controlled or operated by or for the service provider[.]" Procedural Background. More recently, in Perfect 10 v. Amazon.com , the Ninth Circuit revisited and expanded upon several of the issues that it had considered earlier in Kelly . Perfect 10, a company that markets and sells copyrighted images of nude models, filed actions to enjoin Google and Amazon.com from infringing its copyrighted photographs. Specifically, it sought to prevent Google's display of thumbnail images on its Image Search function, and to prevent both Google and Amazon from linking to third-party websites that provided full-sized, infringing versions of the images. The district court found that in-line linking and framing were permissible, non-infringing uses of protected content. Therefore, it did not enjoin Google from linking to third-party websites that display full-sized infringing versions of the images, holding that Perfect 10 was not likely to prevail on its claim that Google violated its display or distribution rights by linking to these images. But the district court did enter a preliminary injunction against Google for its creation and public display of the thumbnail versions of Perfect 10's images. In a separate action, the court declined to preliminarily enjoin Amazon.com from giving users access to similar information provided to Amazon.com by Google. The court of appeals affirmed the district court's holding with respect to the permissibility of in-line linking and framing. But it reversed the holding with respect to the use of thumbnail images, finding the use to be fair despite the potential of the thumbnails to encroach upon a potential commercial market for their use. It left open the questions of possible liability for contributory copyright infringement and/or immunity therefor under the DMCA, remanding the case to the district court for appropriate findings. These decisions are examined below. In Perfect 10 v. Google , a U.S. district court considered the issue of thumbnails in a different context from that of Kelly . Perfect 10 (P10) publishes an adult magazine and operates a subscription website that features copyrighted photographs of nude models. Its proprietary website is not available to public search. Other websites, however, display, without permission, images and content from P10. Google, in response to image search inquiries, displayed thumbnail copies of P10's photos and linked to the third-party websites, which hosted and served the full-sized, infringing images. P10 filed suit against Google, claiming, among other things, direct, contributory, and vicarious copyright infringement. As framed by the district court, the issues before it pitted IP rights against "the dazzling capacity of internet technology to assemble, organize, store, access, and display intellectual property 'content'[.] ...[The] issue, in a nutshell, is: does a search engine infringe copyrighted images when it displays them on an 'image search' function in the form of 'thumbnails' but not infringe when, through in-line linking, it displays copyrighted images served by another website?" For the reasons discussed below, the district court found that Google's in-line linking to and framing of infringing full-size images posted on third-party websites was not infringing, but that its display of thumbnail images was likely to be considered infringing. Linking and Framing. With respect to in-line linking and framing of full-size images from third-party websites, the court considered, not whether the activity was infringing, but a more preliminary question. Is linking or framing a "display" for copyright purposes? If it does not come within the ambit of the copyright holder's exclusive rights, it is not necessary to reach the question of copyright infringement. Linking is a basic function of the Internet. The term "hyperlinking" is used to describe text or images, that when clicked by a user, transport him to a different webpage. "In-line linking" is somewhat different. It refers to the process whereby a webpage incorporates by reference content stored on and served by another website. The parties before the court offered two theories for considering whether in-line linking is a display: the "server" test advocated by Google and the "incorporation" test advocated by P10. The server test defines a display as the "act of serving content over the web-- i.e., physically sending ones and zeroes over the internet to the user's browser." The "incorporation" test would adopt a visual perspective wherein a display occurs from the act of incorporating content into a webpage that is pulled up by the browser. P10 argued that the webpage that incorporates the content through in-line linking causes the "appearance" of copyrighted content and is therefore "displaying" it for copyright purposes, regardless of where it is stored. Reviewing precedent, the court acknowledged that there is substantial authority to the effect that traditional hyperlinking does not support claims of direct copyright infringement because there is no copying or display involved. But there is little discussion of in-line linking. The court adopted the "server" test and held that a site that in-line links to another does not itself "display" the content for copyright purposes. Among the reasons given for its determination is that the server test is more technologically appropriate and better reflects the reality of how content travels over the Internet. Further it viewed the server test as liability "neutral." Application of the test doesn't invite infringing activities by search engines, nor does it preclude all liability. It would, more narrowly, "preclude search engines from being held directly liable for in-line linking and/or framing infringing content stored on third-party websites." The direct infringers were the websites that "stole" P10's full-size images and posted them on the Internet. Finally, the court reasoned, that [T]he server test maintains, however uneasily, the delicate balance for which copyright law strives-- i.e. , between encouraging the creation of creative works and encouraging the dissemination of information. Merely to index the web so that users can more readily find the information they seek should not constitute direct infringement, but to host and serve infringing content may directly violate the rights of copyright holders." Thumbnail Images. Applying the server test to the thumbnail images, it was clear that Google did display them. Google acknowledged that it copied and stored them on its own servers. The issue then became, like that in Kelly , whether Google's use of P10's images as thumbnails was a fair use. Analyzing statutory fair use criteria, the court concluded that Google's use of the thumbnails was not a fair use: Purpose and character of use . Google's use of the thumbnails was a commercial use; it derived commercial benefit in the form of increased user traffic and advertising revenue. In Kelly , the court of appeals acknowledged that Arriba's use of thumbnails was commercial, yet concluded that search results were more "incidental and less exploitative" than other traditional commercial uses. Here, the commercial nature of Google's use was distinguishable because Google derived specific revenue from an ad sharing program with the third-party websites that hosted the infringing images. P10 had entered into a licensing agreement with others for the sale and distribution of its reduced-size images for download to and use on cell phones. A significant factor supporting a finding of fair use is a court's determination that the use is transformative, discussed supra . Although the court found that Google's use of thumbnails to simplify and expedite access to information was transformative, it found it to be "consumptive" as well, i.e., the use merely supersedes the object of the original instead of adding a further purpose or different character. Google's thumbnails superceded, or usurped, the market for the sale of reduced-size images, because cell phone users could download and save the images directly from Google. Nature of the copyrighted works. Use of published works, including images, are more likely to qualify as a fair use because the first appearance of the creative expression has already occurred. Amount and substantiality of the use . As in Kelly , the court found that Google used no more of the image than necessary to achieve the objective of providing effective image-search capability. The effect of the use upon the potential market for or value of the copyrighted work . While Google's use of thumbnails did not harm the market for copyrighted full-size images, it did cause harm to the potential market for sales of P10's reduced-size images to cell phone users. The court also considered and rejected P10's allegation that Google was guilty of contributory and vicarious copyright infringement liability. Linking and Framing. In tacitly adopting the "server" test and affirming the district court's finding that linking and framing did not violate the copyright holder's rights of display and reproduction, the court of appeals made several observations. It considered P10's contention that when Google frames a full-size image, it gives the "impression" that it is showing the image. The court acknowledged that linking and framing may cause some computer users to believe they are viewing a Google Web page when, in fact, Google, through HTML instructions, has directed the user's browser to the website publisher's computer that stores the image. But the Copyright Act, unlike the Trademark Act, does not protect a copyright holder against acts that may cause consumer confusion. The same logic obtains with respect to the display of cached webpages. Even if the cache copies are no longer available on the third-party's website, it is the website publisher's computer, not Google's, that stores and displays the infringing cached image. Burden of Proof in Establishing the Fair Use Defense . Before reviewing the district court's conclusion regarding Google's fair use defense, the appellate court first dealt with the question of which party bears the burden of proving an affirmative defense, such as fair use, on a motion for a preliminary injunction in a copyright infringement case. The Ninth Circuit Court of Appeals had not previously, conclusively ruled on this issue. The appellate court disagreed with the district court's holding that P10 had the burden of demonstrating its likely success in overcoming the fair use defense raised by Google. The court of appeals ruled that "[a]t trial, the defendant in an infringement action bears the burden of proving fair use." Thus, once Perfect 10 had shown a likelihood of success on the merits, the burden should have shifted to Google to show that its affirmative defense of fair use will succeed. The appellate court explained that the district court was in error for placing the burden, with respect to the fair use defense, on the party seeking a preliminary injunction in a copyright infringement case. Thumbnail Images. The district court was also in error regarding its determination that Google's display of thumbnail images was not a fair use. In reversing the lower court's decision on fair use, the court of appeals reconsidered the weight to be accorded to the statutory factors. It differed with the district court's analysis regarding character of use and market impact. Purpose and character of use . The court laid major emphasis, and weight, on the transformative nature of a search engine's display as an electronic reference tool: Although an image may have been created originally to serve an entertainment, aesthetic, or informative function, a search engine transforms the image into a pointer directing a user to a source of information. ... [A] search engine provides social benefit by incorporating an original work into a new work, namely, an electronic reference tool.... In other words, a search engine puts images "in a different context" so that they are "transformed into a new creation." The court considered the judicial rule that "parody" is a fair use, and concluded that "[i]ndeed, a search engine may be more transformative than a parody because a search engine provides an entirely new use for the original work, while a parody typically has the same entertainment purpose as the original work." The fact that Google profited from its AdSense advertising program and that P10's market for the sale of thumbnail images could be superceded by the Google display did not outweigh the public interest value of the transformative use, in the court's opinion. It noted the absence of evidence that downloads of thumbnails for mobile phone use actually occurred. Hence, the court's analysis of thumbnails from Kelly was controlling: Accordingly, we disagree with the district court's conclusion that because Google's use of the thumbnails could supersede Perfect 10's cell phone download use and because the use was more commercial than Arriba's, this fair use factor weighed "slightly" in favor of Perfect 10. Instead, we conclude that the transformative nature of Google's use is more significant than any incidental superseding use or the minor commercial aspects of Google's search engine and website. Therefore, the district court erred in determining this factor weighed in favor of Perfect 10. Effect of use on the market. Similarly, with respect to P10's market for the sale of its full-sized images, the court rejected the argument that market harm may be presumed if the intended use of an image is for commercial gain. Market harm to a copyright holder will not be "readily inferred" when an arguably infringing use is otherwise transformative. And, since the "potential harm" to the market for the sale of thumbnails was hypothetical, the court concluded that the significant transformative use outweighed the unproven use of Google's thumbnails for cell phone downloads. It vacated the district court's preliminary injunction regarding Google's use of thumbnails. Likewise, the copying function related to caching of full-sized images performed automatically is a transformative, and, ultimately, a fair use, so long as the cache copies no more than necessary to assist the Internet user and the copying has no more than a minimal effect on the owner's right, while having a considerable public benefit. Secondary Liability. The court of appeals opinion devotes considerable attention to the question of Google's possible liability for secondary copyright infringement, that is, contributory and/or vicarious infringement. It was uncontested that third-party websites were posting infringing copies of P10's images. The court rejected the assertion that Google's automatic caching of copies of full-sized images from third-party sites was direct infringement. But it reversed the district court's determination that P10 was not likely to succeed with a claim for secondary liability against Google, and remanded the case for reconsideration in light of its opinion. As defined by the Supreme Court, "[o]ne infringes contributorily by intentionally inducing or encouraging direct infringement, and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it." As applied by the Ninth Circuit, "a computer system operator can be held contributorily liable if it 'has actual knowledge that specific infringing material is available using its system,' and can 'take simple measures to prevent further damage' to copyrighted works, yet continues to provide access to infringing works." The court of appeals first considered whether Google intentionally encouraged infringement. The district court held that Google did not materially contribute to infringing conduct because it did not undertake any substantial promotional or advertising efforts to encourage visits to infringing websites, nor provide significant revenues to the infringing websites. But the court of appeals disagreed, reasoning: There is no dispute that Google substantially assists websites to distribute their infringing copies to a worldwide market and assists a worldwide audience of users to access infringing materials. We cannot discount the effect of such a service on copyright owners, even though Google's assistance is available to all websites, not just infringing ones. Applying our test, Google could be held contributorily liable if it had knowledge that infringing Perfect 10 images were available using its search engine, could take simple measures to prevent further damage to Perfect 10's copyrighted works, and failed to take such steps. With respect to vicarious infringement, a plaintiff must establish that the defendant "exercises the requisite control over the direct infringer and that the defendant derives a direct financial benefit from the direct infringement." The court found that P10 did not demonstrate that Google has the legal right to stop or limit direct infringement by third-party websites. Because the district court determined that P10 was unlikely to succeed on its contributory and vicarious liability claims, it did not reach Google's arguments that it qualified for immunity from liability under the DMCA, 17 U.S.C. SS 512. The district court was directed to consider whether Google was entitled to the limitations on liability provided by title II of the DMCA on remand. It is no coincidence that search engines are frequently-named defendants in online copyright infringement litigation. Their role in Internet connectivity is vital. The infringement liability implications of that role are arguably more complex than a preliminary determination whether an individual website is posting infringing content. In the DMCA, Congress amended the Copyright Act to create a safe harbor for the Internet service provider that operates as a "passive conduit" for transmission and exchange of third-party offerings. As the sophistication of Internet mass-offerings grow, from text and images to broader audiovisual formats, the function of the search engines is likely to increase in scope and sophistication as well. A valuable component is the actual search and indexing function which enables Internet users to post and find content. Most prominent search engines are, however, commercial, profit-making entities who benefit from traffic generated by their search capabilities. Providing search capability creates and satisfies an important market, but what impact does it have on emerging ones? As the courts apply traditional copyright principles to the Internet, they must factor in its functionality and architecture. In Kelly , the Ninth Circuit grappled with the concept of displaying thumbnail images as a search tool. It found the use to be highly transformative, socially valuable, and "fair," but reserved judgment on the questions of in-line linking and framing. In Field, the district court considered caching, finding it to be fair as well. Of great significance to the court was the fact that content owners can control the ability of search engines to search and/or cache their websites. In Perfect 10 , the Ninth Circuit considered thumbnail displays in a different context: namely, where a search engine displays thumbnails of infringing images and derives advertising revenue that is more closely linked to the posting. Although plaintiff had persuaded the lower court that the thumbnails, though transformative of the full-size images, could or would undermine a developing market for reduced-size images, the court of appeals reaffirmed the fair use analysis derived from Kelly. And, it took up where Kelly left off, holding that in-line linking and framing were not displays for copyright purposes. But the court left open the possibility that a search engine's actual conduct with respect to infringing content could be proven to be contributory infringement. Taken together, these cases indicate a willingness by the courts to acknowledge the social utility of online indexing, and factor it into fair use analysis; to adapt copyright law to the core functionality and purpose of Internet, even when that means requiring content owners to act affirmatively, such as by the use of meta-tags; and to weigh and balance conflicts between useful functions, such as online indexing and caching, against emerging, viable new markets for content owners.

Hyperlinking, in-line linking, caching, framing, thumbnails. Terms that describe Internet functionality pose interpretative challenges for the courts as they determine how these activities relate to a copyright holder's traditional right to control reproduction, display, and distribution of protected works. At issue is whether basic operation of the Internet, in some cases, constitutes or facilitates copyright infringement. If so, is the activity a "fair use" protected by the Copyright Act? These issues frequently implicate search engines, which scan the web to allow users to find content for uses, both legitimate and illegitimate. In 2003, the Ninth Circuit Court of Appeals decided Kelly v. Arriba Soft Corp. , holding that a search engine's online display of "thumbnail" images was a fair use of copyright protected work. More recently, a U.S. district court considered an Internet search engine's caching, linking, and the display of thumbnails in a context other than that approved in Kelly. In Field v. Google , the district court found that Google's system of displaying cached images did not infringe the content owner's copyright. And in Perfect 10 v. Amazon.com Inc. , the Ninth Circuit revisited and expanded upon its holding in Kelly , finding that a search engine's use of thumbnail images and practice of in-line linking, framing, and caching were not infringing. But it left open the question of possible secondary liability for contributory copyright infringement and possible immunity under the Digital Millennium Copyright Act. Taken together, these cases indicate a willingness by the courts to acknowledge the social utility of online indexing, and factor it into fair use analysis; to adapt copyright law to the core functionality and purpose of Internet, even when that means requiring content owners to affirmatively act, such as by the use of meta-tags; and to consider and balance conflicts between useful functions, such as online indexing and caching, against emerging, viable new markets for content owners.

Four major principles underlie U.S. policy on legal permanent immigration: the reunification of families, the admission of immigrants with needed skills, the protection of refugees, and the diversity of admissions by the country of origin. These principles are embodied in federal law, the Immigration and Nationality Act (INA) first codified in 1952. Congress has significantly amended the INA several times since, most recently by the Enhanced Border Security and Visa Reform Act of 2002 ( P.L. 107-173 ). An alien is "any person not a citizen or national of the United States" and is synonymous with noncitizen . It includes people who are here legally, as well as people who are here in violation of the INA. Noncitizen is generally used to describe all foreign-born persons in the United States who have not become citizens. The two basic types of legal aliens are immigrants and nonimmigrants . Immigrants are persons admitted as legal permanent residents (LPRs) of the United States. Nonimmigrants--such as tourists, foreign students, diplomats, temporary agricultural workers, exchange visitors, or intracompany business personnel--are admitted for a specific purpose and a temporary period of time. Nonimmigrants are required to leave the country when their visas expire, though certain classes of nonimmigrants may adjust to LPR status if they otherwise qualify. The conditions for the admission of immigrants are much more stringent than nonimmigrants, and many fewer immigrants than nonimmigrants are admitted. Once admitted, however, immigrants are subject to few restrictions; for example, they may accept and change employment, and may apply for U.S. citizenship through the naturalization process, generally after 5 years. Immigration admissions are subject to a complex set of numerical limits and preference categories that give priority for admission on the basis of family relationships, needed skills, and geographic diversity. These include a flexible worldwide cap of 675,000, not including refugees and asylees (discussed below), and a per-country ceiling , which changes yearly. Numbers allocated to the three preference tracks include a 226,000 minimum for family-based, 140,000 for employment-based, and 55,000 for diversity immigrants (i.e., a formula-based visa lottery aimed at countries that have low levels of immigration to the United States). The per country ceilings may be exceeded for employment-based immigrants, but the worldwide limit of 140,000 remains in effect. In addition, the immediate relatives of U.S. citizens (i.e., their spouses and unmarried minor children, and the parents of adult U.S. citizens) are admitted outside of the numerical limits of the per country ceilings and are the "flexible" component of the worldwide cap. The largest number of immigrants is admitted because of family relationship to a U.S. citizen or immigrant. Of the 1,064,318 legal immigrants in FY2001, 64% entered on the basis of family ties. Immediate relatives of U.S. citizens made up the single largest group of immigrants, as Table 1 indicates. Family preference immigrants --the spouses and children of immigrants, the adult children of U.S. citizens, and the siblings of adult U.S. citizens--were the second largest group. Additional major immigrant groups in FY2001 were employment-based preference immigrants , including spouses and children, refugees and asylees adjusting to immigrant status, and diversity immigrants . The Bureau of Citizenship and Immigration Services (BCIS) in the Department of Homeland Security (DHS) is the lead agency for immigrant admissions. Refugee admissions are governed by different criteria and numerical limits than immigrant admissions. Refugee status requires a finding of persecution or a well-founded fear of persecution in situations of "special humanitarian concern" to the United States. The total annual number of refugee admissions and the allocation of these numbers among refugee groups are determined at the start of each fiscal year by the President after consultation with the Congress. Refugees are admitted from abroad. The INA also provides for the granting of asylum on a case-by-case basis to aliens physically present in the United States who meet the statutory definition of "refugee." All aliens must satisfy State Department consular officers abroad and DHS Bureau of Customs and Border Protection inspectors upon entry to the U.S. that they are not ineligible for visas or admission under the so-called "grounds for inadmissibility" of the INA. These criteria categories are: health-related grounds; criminal history; national security and terrorist concerns; public charge (e.g., indigence); seeking to work without proper labor certification; illegal entrants and immigration law violations; lacking proper documents; ineligible for citizenship; and, aliens previously removed. Some provisions may be waived or are not applicable in the case of nonimmigrants, refugees (e.g., public charge), and other aliens. All family-based immigrants entering after December 18, 1997, must have a new binding affidavit of support signed by a U.S. sponsor in order to meet the public charge requirement. The INA also specifies the circumstances and actions that result in aliens being removed from the United States, i.e., deported. The category of criminal grounds has been of special concern in recent years, and the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 expanded and toughened the deportation consequences of criminal convictions. The category of terrorist grounds has also been broadened and tightened up by the USA Patriot Act of 2001. ( P.L. 107-77 ). The annual number of LPRs admitted or adjusted in the United States rose gradually after World War II, as Figure 1 illustrates. However, the annual admissions never again reached the peaks of the early 20 th century. The BCIS data present only those admitted as LPRs or those adjusting to LPR status. The growth in immigration after 1980 is partly attributable to the total number of admissions under the basic system, consisting of immigrants entering through a preference system as well as immediate relatives of U.S. citizens, that was augmented considerably by legalized aliens. In addition, the number of refugees admitted increased from 718,000 in the period 1966-1980 to 1.6 million during the period 1981-1995, after the enactment of the Refugee Act of 1980. The Immigration Act of 1990 increased the ceiling on employment-based preference immigration, with the provision that unused employment visas would be made available the following year for family preference immigration. There are two major statistical perspectives on trends in immigration. One uses the official BCIS admissions data and the other draws on Bureau of Census population surveys. The BCIS data present only those admitted as LPRs or those adjusting to LPR status. The census data, on the other hand, include all residents in the population counts, and the census asks people whether they were born in the United States or abroad. As a result, the census data also contain long-term temporary (nonimmigrant) residents and unauthorized residents. The percent of the population that is foreign born, depicted in Figure 2 , resembles the trend line of annual admissions data presented in Figure 1 . It indicates the proportion of foreign born residents is not as large as during earlier periods, but is approaching historic levels at the turn of the last century. Figure 2 illustrates that the sheer number--32.5 in 2002--has more than doubled from 14.1 million in 1980 and is at the highest point in U.S. history. Another tradition of immigration policy is to provide immigrants an opportunity to integrate fully into society. Under U.S. immigration law, all LPRs are potential citizens and may become so through a process known as naturalization . To naturalize, aliens must have continuously resided in the United States for 5 years as LPRs (3 years in the case of spouses of U.S. citizens), show that they have good moral character, demonstrate the ability to read, write, speak, and understand English, and pass an examination on U.S. government and history. Applicants pay fees of $310 when they file their materials and have the option of taking a standardized civics test or of having the examiner quiz them on civics as part of their interview. The language requirement is waived for those who are at least 50 years old and have lived in the United States at least 20 years or who are at least 55 years old and have lived in the United States at least 15 years. Special consideration on the civics requirement is to be given to aliens who are over 65 years old and have lived in the United States for at least 20 years. Both the language and civics requirements are waived for those who are unable to comply due to physical or developmental disabilities or mental impairment. Certain requirements are waived for those who have served in the U.S. military. For a variety of reasons, the number of LPRs petitioning to naturalize has increased in the past year but has not reached nearly the highs of the mid-1990s when over a million people sought to naturalize annually, as Figure 3 depicts. The pending caseload for naturalization remains over half a million, and it is not uncommon for some LPRs to wait 1-2 years for their petitions to be processed, depending on the caseload in the region in which the LPR lives. Illegal aliens or unauthorized aliens are those noncitizens who either entered the United States surreptitiously, i.e., entered without inspection (referred to as EWIs), or overstayed the term of their nonimmigrant visas, e.g., tourist or student visas. Many of these aliens have some type of document--either bogus or expired--and may have cases pending with BCIS. The former INS estimated that there were 7.0 million unauthorized aliens in the United States in 2000. Demographers at the Census Bureau and the Urban Institute estimated unauthorized population in 2000 at 8.7 and 8.5 million respectively, but these latter estimates included "quasi-legal" aliens who had petitions pending or relief from deportation. Noncitizens' eligibility for major federal benefit programs depends on their immigration status and whether they arrived before or after enactment of P.L. 104-193 , the 1996 welfare law (as amended by P.L. 105-33 and P.L. 105-185 ). Refugees remain eligible for Supplemental Security Income (SSI) and Medicaid for 7 years after arrival, and for other restricted programs for 5 years. Most LPRs are barred SSI until they naturalize or meet a 10-year work requirement. LPRs receiving SSI (and SSI-related Medicaid) on August 22, 1996, the enactment date of P.L. 104-193 , continue to be eligible, as do those here then whose subsequent disability makes them eligible for SSI and Medicaid. All LPRs who meet a 5-year residence test and all LPR children (regardless of date of entry or length of residence) are eligible for food stamps. LPRs entering after August 22, 1996, are barred from Temporary Assistance for Needy Families (TANF) and Medicaid for 5 years, after which their coverage becomes a state option. Also after the 5-year bar, the sponsor's income is deemed to be available to new immigrants in determining their financial eligibility for designated federal means-tested programs until they naturalize or meet the work requirement. Unauthorized aliens, i.e., illegal aliens, are ineligible for almost all federal benefits except, for example, emergency medical care. Aliens in the United States are generally subject to the same tax obligations, including Social Security (FICA) and unemployment (FUTA) as citizens of the United States, with the exception of certain nonimmigrant students and cultural exchange visitors. LPRs are treated the same as citizens for tax purposes. Other aliens, including unauthorized migrants, are held to a "substantive presence" test based upon the number of days they have been in the United States. Some countries have reciprocal tax treaties with the United States that--depending on the terms of the particular treaty--exempt citizens of their country living in the United States from certain taxes in the United States.

Congress typically considers a wide range of immigration issues and now that the number of foreign born residents of the United States--32.5 million in 2002--is at the highest point in U.S. history, the debates over immigration policies grow in importance. As a backdrop to these debates, this report provides an introduction to immigration and naturalization policy, concepts, and statistical trends. It touches on a range of topics, including numerical limits, refugees and asylees, exclusion, naturalization, illegal aliens, eligibility for federal benefits, and taxation. This report does not track legislation and will not be regularly updated.

Under the State Children's Health Insurance Program (CHIP) statute, FY2017 is the last year federal CHIP funding is provided, even though the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) child maintenance of effort (MOE) requirement is in place through FY2019. The ACA MOE provision requires states to maintain income eligibility levels for CHIP children through September 30, 2019, as a condition for receiving federal Medicaid payments (notwithstanding the lack of corresponding federal CHIP appropriations for FY2018 and FY2019). This report discusses the ACA MOE requirement for children if federal CHIP funding expires. It begins with a brief background of CHIP, including information regarding program design and financing. The report then describes the ACA child MOE requirements for CHIP Medicaid expansion programs and for separate CHIP programs and discusses potential coverage implications. CHIP is a federal-state program that provides health coverage to certain uninsured, low-income children and pregnant women in families that have annual income above Medicaid eligibility levels but do not have health insurance. CHIP is jointly financed by the federal government and the states and is administered by the states. Participation in CHIP is voluntary, and all states and the District of Columbia participate. The federal government sets basic requirements for CHIP, but states have the flexibility to design their own version of CHIP within the federal government's basic framework. As a result, there is significant variation across CHIP programs. In FY2015, CHIP enrollment totaled 5.9 million and federal and state CHIP expenditures totaled $13.7 billion. CHIP was established as part of the Balanced Budget Act of 1997 ( P.L. 105-33 ) under a new Title XXI of the Social Security Act. Since that time, other federal laws have provided additional funding and made significant changes to CHIP. Most notably, the Children's Health Insurance Program Reauthorization Act of 2009 ( P.L. 111-3 ) increased appropriation levels for CHIP, changed the formula for distributing CHIP funding among states, and altered the eligibility and benefit requirements. The ACA largely maintains the current CHIP structure through FY2019 and requires states to maintain their Medicaid and CHIP child eligibility levels through FY2019 as a condition for receiving federal Medicaid matching funds. The ACA provided federal CHIP funding for FY2014 and FY2015, then the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10 ) extended federal CHIP funding for another two years (i.e., through FY2017). States may design their CHIP programs in three ways: a CHIP Medicaid expansion, a separate CHIP program, or a combination approach in which the state operates a CHIP Medicaid expansion and one or more separate CHIP programs concurrently. CHIP benefit coverage and cost-sharing rules depend on program design. CHIP Medicaid expansions must follow the federal Medicaid rules for benefits and cost sharing, which entitle CHIP enrollees to Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) coverage (effectively eliminating any state-defined limits on the amount, duration, and scope of any benefit listed in Medicaid statute) and exempt the majority of children from any cost sharing. For separate CHIP programs, states can design benefits that look more like private health insurance and may impose cost sharing, such as premiums or co-payments, with a maximum allowable amount that is tied to annual family income. Aggregate cost sharing under CHIP may not exceed 5% of annual family income. Regardless of the choice of program design, all states must cover emergency services; well-baby and well-child care, including age-appropriate immunizations; and dental services. If offered, mental health services must meet federal mental health parity requirements. States that want to make changes to their programs beyond what Medicaid or CHIP laws allow may seek approval from the Centers for Medicare & Medicaid Services (CMS) through the use of the Section 1115 waiver authority. Eight states, the District of Columbia, and the territories had CHIP Medicaid expansions as of May 1, 2015, whereas 13 states had separate CHIP programs and 29 states used a combination approach. According to preliminary CHIP enrollment data for FY2015, almost 60% of CHIP enrollees are in CHIP Medicaid expansion programs and 40% are in separate CHIP programs. CHIP is jointly financed by the federal government and the states. The federal government reimburses states for a portion of every dollar they spend on CHIP (including both CHIP Medicaid expansions and separate CHIP programs) up to state-specific annual limits called allotments. The federal government's share of CHIP expenditures (including both services and administration) is determined by the enhanced federal medical assistance percentage (E-FMAP) rate that varies by state. The E-FMAP rate is calculated by reducing the state share under the federal medical assistance percentage (FMAP) rate (i.e., the federal matching rate for most Medicaid expenditures) by 30%, which increases the federal share of expenditures. For FY2016 through FY2019, the E-FMAP rate increases by 23 percentage points for most CHIP expenditures. With this increase, the E-FMAP ranges from 88% to 100%. Although FY2017 is the last year states are to receive CHIP allotments, federal CHIP outlays are expected in FY2018. States have two years to spend their CHIP allotment funds, so states could have access to unspent funds from their FY2017 allotments and unspent FY2016 allotments redistributed to shortfall states (if any). In a few situations, federal CHIP funding is used to finance Medicaid expenditures. For instance, certain states significantly expanded Medicaid eligibility for children prior to the enactment of CHIP in 1997. These states are allowed to use their CHIP allotment funds to finance the difference between the Medicaid and CHIP matching rates (i.e., the FMAP and E-FMAP rates, respectively) to cover the cost of children in Medicaid above 133% of the federal poverty level (FPL). In addition, states may use CHIP allotment funds and receive the higher CHIP matching rate (i.e., E-FMAP rate) for expenditures for children who had been enrolled in separate CHIP programs and were transitioned to Medicaid due to the ACA provision expanding mandatory Medicaid eligibility for children aged 6 to 18 with incomes up to 133% of FPL. States that design their CHIP programs as a CHIP Medicaid expansion or a combination program and face a shortfall after receiving Child Enrollment Contingency Fund payments and redistribution funds may receive federal Medicaid matching funds to fund the shortfall in the CHIP Medicaid expansion portion of their CHIP programs. When Medicaid funds are used to fund CHIP, the state receives the lower regular FMAP rate (i.e., the federal Medicaid matching rate) rather than the higher E-FMAP rate provided for other CHIP expenditures. However, although federal CHIP funding is capped, federal Medicaid funding is open-ended, which means there is no upper limit or cap on the amount of federal Medicaid funds a state may receive. The ACA extended and expanded the MOE provisions in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). The ACA MOE provisions contain separate requirements for Medicaid and CHIP and were designed to ensure that individuals eligible for these programs did not lose coverage between the date of enactment of the ACA (March 23, 2010) and the implementation of the health insurance exchanges (for adults) and September 30, 2019 (for children). Under the ACA MOE provisions, states are required to maintain their Medicaid programs with the same eligibility standards, methodologies, and procedures in place on the date of enactment of the ACA until January 1, 2014, for adults and through September 30, 2019, for children up to the age of 19. The ACA also requires states to maintain income eligibility levels for CHIP children through September 30, 2019, as a condition for receiving payments under Medicaid. The penalty to states for not complying with either the Medicaid or the CHIP MOE requirements would be the loss of all federal Medicaid matching funds. Together, these MOE requirements for Medicaid and CHIP impact CHIP Medicaid expansion programs and separate CHIP programs differently. For CHIP Medicaid expansion programs, the Medicaid and CHIP MOE provisions apply concurrently. For states to continue to receive federal Medicaid funds, the ACA child MOE provisions require that CHIP-eligible children in CHIP Medicaid expansion programs must continue to be eligible for Medicaid through September 30, 2019. When a state's federal CHIP funding is exhausted, the state's financing for these children switches from CHIP to Medicaid. This switch would cause the state share of covering these children to increase because the federal matching rate for Medicaid is less than the E-FMAP rate. As discussed above, states may have some Medicaid expenditures financed with federal CHIP funds. In any of these situations, when federal CHIP funding is exhausted, states would be responsible for continuing to provide Medicaid coverage to these children through September 30, 2019. However, as is the case with the CHIP Medicaid expansion programs, the financing would switch from CHIP to Medicaid, resulting in an increase in the state share of these expenditures because the federal matching rate would be lowered from the E-FMAP rate to the FMAP rate. For separate CHIP programs, only the CHIP-specific provisions of the ACA MOE requirements are applicable. These provisions contain a couple of exceptions: states may impose waiting lists or enrollment caps to limit CHIP expenditures, or after September 1, 2015, states may enroll CHIP-eligible children in qualified health plans in the health insurance exchanges that have been certified by the Secretary of Health and Human Services (HHS) to be "at least comparable" to CHIP in terms of benefits and cost sharing. In addition, in the event that a state's CHIP allotment is insufficient to fund CHIP coverage for all eligible children, a state must establish procedures to screen CHIP-eligible children for Medicaid eligibility and to enroll those who are eligible in Medicaid. For children not eligible for Medicaid, the state must establish procedures to enroll CHIP-eligible children in qualified health plans offered in the health insurance exchanges that have been certified by the Secretary of HHS to be "at least comparable" to CHIP in terms of benefits and cost sharing. The Secretary of HHS was required by statute to review the benefits and cost sharing for children under the qualified health plans in the exchanges and certify those plans that offer benefits and cost sharing at least comparable to CHIP coverage. In the review released November 25, 2015, the Secretary of HHS was not able to certify any qualified health plans as comparable to CHIP coverage because out-of-pocket costs were higher under the qualified health plans and the CHIP benefits were generally more comprehensive for child-specific services (e.g., dental, vision, and habilitation services). Under these ACA MOE requirements, states are required only to establish procedures to enroll children in qualified health plans certified by the Secretary. If there are no certified plans, the MOE requirement does not obligate states to provide coverage to these children. Even when there are certified plans, not all CHIP children may be eligible for subsidized exchange coverage due to the family glitch , among other reasons. FY2017 is the last year in which federal CHIP funding is provided in the CHIP statute. If no additional federal funding is provided for the program, once federal CHIP funding is exhausted, CHIP children in CHIP Medicaid expansion programs would continue to receive coverage under Medicaid through at least FY2019, due to the ACA MOE requirement. However, when CHIP funding is exhausted, CHIP children in separate CHIP programs could obtain coverage through the exchanges or employer-sponsored insurance, but some of the children likely would become uninsured. According to a Medicaid and CHIP Payment and Access Commission estimate of what would happen if separate CHIP coverage ended in FY2018 (which is when federal CHIP funding is expected to be exhausted under current law), 36% of the children with separate CHIP coverage would become uninsured.

The State Children's Health Insurance Program (CHIP) is a means-tested program that provides health coverage to targeted low-income children and pregnant women in families that have annual income above Medicaid eligibility levels but do not have health insurance. CHIP is jointly financed by the federal government and the states and administered by the states. The federal government sets basic requirements for CHIP, but states have the flexibility to design their own version of CHIP within the federal government's basic framework. States may design their CHIP programs in three ways: a CHIP Medicaid expansion, a separate CHIP program, or a combination approach in which the state operates a CHIP Medicaid expansion and one or more separate CHIP programs concurrently. As a result, there is significant variation across CHIP programs. In FY2015, CHIP enrollment totaled 5.9 million and federal and state CHIP expenditures totaled $13.7 billion. Under the CHIP statute, FY2017 is the last year federal CHIP funding is provided, even though the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) child maintenance of effort (MOE) requirement is in place through FY2019. The MOE provision requires states to maintain income eligibility levels for CHIP children through September 30, 2019, as a condition for receiving federal Medicaid payments (notwithstanding the lack of corresponding federal CHIP appropriations for FY2018 and FY2019). The MOE requirement impacts CHIP Medicaid expansion programs and separate CHIP programs differently. For CHIP Medicaid expansion programs, when federal CHIP funding is exhausted, the CHIP-eligible children in these programs will continue to be enrolled in Medicaid but financing will switch from CHIP to Medicaid. For separate CHIP programs, states are provided a couple of exceptions to the MOE requirement: (1) states may impose waiting lists or enrollment caps to limit CHIP expenditures, and (2) after September 1, 2015, states may enroll CHIP-eligible children in qualified health plans in the health insurance exchanges. In addition, in the event that a state's CHIP allotment is insufficient to fund CHIP coverage for all eligible children, a state must establish procedures to screen children for Medicaid eligibility and enroll those who are Medicaid eligible. For children not eligible for Medicaid, the state must establish procedures to enroll CHIP children in qualified health plans in the health insurance exchanges that have been certified by the Secretary of Health and Human Services to be "at least comparable" to CHIP in terms of benefits and cost sharing. This report discusses the ACA MOE requirement for children if federal CHIP funding expires. It begins with a brief background about CHIP, including information regarding program design and financing. The report then describes the ACA child MOE requirements for CHIP Medicaid expansion programs and for separate CHIP programs and discusses potential coverage implications.

The role of natural gas in the U.S. economy has been a major part of the energy policy debate in the 114 th Congress. Both the House and the Senate have held multiple hearings related to natural gas. Numerous bills have been introduced in both houses. This report highlights key aspects of global natural gas markets, including supply and demand, and major U.S. developments. Select statutes of U.S. law related to natural gas can be found in Appendix G . Some consider natural gas a potential bridge fuel to a lower-carbon economy, because it is cleaner burning than coal and oil. Natural gas combustion emits about one-half less carbon dioxide than coal and one-quarter less than oil when consumed in a typical electric power plant, offset somewhat by fugitive emissions. Fugitive emissions, which can be intentional (i.e., vented) or unintentional (i.e., leaked), are natural gas that is released to the atmosphere during industry operations. Natural gas combustion also emits less particulate matter, sulfur dioxide, and nitrogen oxides than coal or oil. In recent years, the United States has become the home to the shale gas revolution, as improved methods to extract natural gas from certain shale formations have significantly increased the resource profile of the United States. This has spurred other countries to try to develop shale gas, but progress is slow outside of North America. If the United States continues to and other countries can bring large new volumes of natural gas to market at a competitive price, then natural gas could play a larger role in the world's economy. In 2016, the United States started exporting liquefied natural gas (LNG) from the lower 48 states. Several key factors will determine whether significant new quantities of natural gas come to market, particularly unconventional natural gas resources. These factors include price, technical capability, environmental concerns, and political considerations. Many countries, both producing and consuming, are watching how the development of U.S. unconventional natural gas resources evolves. Natural gas is likely to play a greater role in the world energy mix given its growing resource base and its relatively low carbon emissions compared to other fossil fuels. The world used 122,442 billion cubic feet (bcf) of natural gas in 2015, of which the United States consumed over 27,463 bcf, or about 23% (the most of any country). World natural gas consumption grew by 1.7% in 2015, which was below the 10-year average of 2.3%; U.S. consumption grew by 3%. U.S. unconventional natural gas reserves and production, particularly shale gas, have grown rapidly in recent years. According to the latest data, shale gas made up 51% of proved U.S. natural gas reserves and accounts for 56% of dry natural gas production. The new shale gas resources have changed the U.S. natural gas position from a net importer to a potential net exporter. Global trade in natural gas is increasing and new players are entering on both the supply side and the import side, making the global gas market more integrated. In 2015, the world consumed about 122,442 bcf of natural gas --23.8% of total global primary energy consumption, placing it third behind oil and coal. The United States was the world's largest consumer of natural gas, accounting for 27,463 bcf, or 22.8%, of global consumption (see Figure 1 ). Russia is the second-largest consumer of natural gas, using 13,820 bcf in 2015. Natural gas accounted for 53% of Russia's total primary energy consumption, ranking it above oil and coal. However, natural gas consumption has declined overall in Russia, decreasing 8% between 2011 and 2015, due to a weak economic environment. Global consumption of natural gas grew at 1.7%, which was below the 10-year average of 2.3%. The United States was one of three countries with the largest consumption growth, at 3%, while also contributing the largest growth in absolute terms and accounting for almost 40% of the total growth. Iran and China also experienced increased natural gas consumption, at 6.2% and 4.7%, respectively. China is the most populated country in the world and has a growing economy, resulting in the country being one of the largest global energy consumers. China accounts for almost half of the world's total coal consumption, and while the use of natural gas has increased over the past 10 years it remains a small percentage of China's energy consumption, at about 5%. China continues to seek increased energy security by expanding natural gas imports through pipelines and as LNG. Iran holds the world's second-largest natural gas reserves; however, its energy sector has stagnated in the past few years due to international sanctions and a lack of foreign investment and financing. Iran has a thriving domestic energy demand that has increased 50% since 2004. The majority of Iran's natural gas production is consumed domestically, with natural gas comprising 60% of its total primary energy consumption in 2014. The lifting of international sanctions began in early 2016 following the implementation of the Joint Comprehensive Plan of Action. Major discussion points for policymakers in light of the lifting of sanctions may be Iran's capacity for natural gas production and its role in the global energy market. In 2015, the United States consumed 27,463 bcf of natural gas, making up nearly 23% of total global consumption. The United States is the largest consumer overall of natural gas, and the second-largest consumer overall of energy in the world. Electric power generation made up 35% of U.S. natural gas consumption in 2015; industrial use accounted for 27%, residential use for 17%, and commercial use for 12%. There is a noted rise in the use of natural gas for electric power generation, which can be attributed to low natural gas prices due to the abundance of domestic gas resources, and to policies that promote the use of fuels with lower emissions. Demand for natural gas for power generation has more than doubled since 2000 and is expected to grow by 40% by 2040. The U.S. industrial sector increased its consumption of natural gas by 10% between 2010 and 2015. As the United States continues to expand its growing resource base, the industrial sector will see a wider array of fuel and feedstock choices, and manufacturing industries such as bulk or primary metals could also experience further growth. Global proved natural gas reserves--natural gas that has been discovered and can be expected to be technically and economically produced--amounted to 6,599,400 bcf (or 6,599 trillion cubic feet (tcf)) in 2015, which correlates to a 53-year supply at current production levels (see Figure 2 ). New reserves are developed every year as existing reserves are consumed. Global natural gas reserves have grown about 19% since 2005, demonstrating the success of exploration and improved recovery techniques. Of the top 10 reserve holding companies all are majority owned by their respective governments (see Appendix F ). Globally, over half of the world's proven natural gas reserves are controlled by the top 10 government-owned companies, with all but one being 100% state-owned. Russia's Gazprom is majority-owned by the state and acts as an arm of the government. Iran's National Iranian Oil Company is the single largest reserve holder of natural gas. In 2015, U.S. natural gas reserves were 368,700 bcf, about 5.6% of total world reserves. The development of shale gas has been a huge driver behind the increase in U.S. natural gas resources (see Figure 3 ); in 2014, shale made up 51% of proven natural gas reserves. Global natural gas production in 2015 grew by 2.2%, which was below the 10-year average of 2.4%. Growth was below average in all regions except North America, Africa, and Asia Pacific. U.S. natural gas production accounted for 22% of total global production in 2015. Between 2005 and 2015, total natural gas production in the United States increased 50%. In 2015, the United States produced 27,086 bcf of natural gas, an increase from 25,716 bcf in 2014. The United States had the world's largest production increase, 5.4% (see Figure 4 ). The increase in natural gas production can be attributed to the development of unconventional resources, specifically in the Marcellus and Utica shale formations, which have accounted for 85% of the increase in natural gas production since 2012. Overall, U.S. natural gas production is continually rising despite low prices. Between 2005 and 2015, production increased over 65%. By 2040, shale gas production is projected to increase 73% to 19.6 tcf, leading to a 45% overall increase in total U.S. natural gas production, from 24.4 tcf to 35.5 tcf. Liquefied natural gas (LNG) is natural gas that has been cooled to a liquid state, making it 600 times smaller in volume. In its liquid form, natural gas can be shipped to global markets on tankers and received at LNG import terminals. LNG is becoming more prevalent in the global gas trade as new gas supplies are introduced to the market, further integrating regional gas markets. In 2015, LNG trade increased 1.8%, and the share of LNG in the global gas trade was 33%. In response to the increase in LNG trade, many countries are looking to expand their LNG export capacity. In 2016, Australia (in January) and the United States (in February) from the lower 48 launched their first shipments of LNG. In the past decade, the United States prepared to increase imports of LNG based on forecasts of growing consumption, and began constructing LNG import terminals. However, the rise in prices gave the industry incentives to bring more domestic gas to market, reducing the need to use import terminals. Due to the abundance of domestic natural gas, there has been a push for modification and expansion of existing LNG terminals in order to expand U.S. export capacity, which requires authorization from the Department of Energy and the Federal Energy Regulatory Commission (FERC). The U.S. natural gas market is in a period of transition. Technologies such as hydraulic fracturing and horizontal drilling have expanded the domestic natural gas supply, making possible the development of unconventional natural gas resources found in shale, coal seams, and tight lower-permeability rock formations. Improved efficiency has lowered production costs, making shale gas economically competitive at almost any price. Production has shifted away from the Gulf of Mexico to regions where sources of conventional natural gas are not traditionally found. (See Figure 5 .) For instance, the Marcellus and Utica Basins are expansive shale resources located in the East and Northeast (West Virginia, Pennsylvania, New York, and Ohio). The location of these basins impacts the transportation of natural gas, as there is a reduced need for natural gas from the Rockies or Gulf Coast. The decrease in demand for gas from these areas and an increase in production from shale plays such as Marcellus have reduced prices and the number of imports needed from Canada and elsewhere. Increased production in the future is expected from the Marcellus, Eagle Ford, Anadarko, Utica, and Haynesville Basins. Because of the development in supply, the United States has gone from being a net importer of natural gas to being a projected net exporter by 2017. The first LNG shipments from the lower-48 occurred in February 2016 from the Sabine Pass LNG Terminal in Louisiana to Brazil, India, and the United Arab Emirates. On June 26, 2016, the Panama Canal reopened for commercial business, after undergoing construction for an additional ship traffic lane. The newly expanded canal eliminates about 10 days in transit time from the U.S. Gulf of Mexico to Asian markets, thus offering a potential shipping route for U.S. LNG. However, only 10% of LNG carriers are small enough to fit the canal; no LNG transits have been scheduled through the canal. The development in supply has placed the United States in a strategic position that may prove advantageous in the global natural gas market. However, this also raises questions for policymakers regarding the effects of the export of U.S. natural gas on domestic gas prices and the overall economy. Furthermore, questions remain about the size of U.S. shale gas resources; the price level required to sustain development; and whether there are technical, environmental, or political factors that might limit development. The use and disposition of water in the industry process of hydraulic fracturing is one of the main issues facing companies and regulators. As U.S. natural gas production continues to grow, this practice has raised concerns over the quality and quantity of drinking water in areas situated near hydraulic fracturing, the competition for other water users, and the disposal of wastewater. In 2010, the Environmental Protection Agency (EPA) announced that it would undertake a study to assess any impact hydraulic fracturing might have on drinking water. A final report has not been released. There is concern over deep-well injection and human-caused earthquakes. The wastewater produced from horizontal drilling and hydraulic fracturing is typically disposed through deep-well injection, in which the wastewater is injected into deep geologic strata. The concern is that deep-well injection may be linked to human-induced earthquakes, as the number of earthquakes of magnitude 3.0 or greater has increased. Emissions from the natural gas sector and the impact on human health is also a concern; specifically, methane emissions. As the primary component of natural gas, methane is a precursor to smog and a potent greenhouse gas. While state and local authorities regulate natural gas systems, in 2012 the EPA established national minimum air standards, or New Source Performance Standards (NSPS), to reduce methane and volatile organic compound (VOC) emissions in the natural gas sector. In May 2016, the EPA updated the 2012 NSPS to include additional equipment in the gas production chain. The NSPS include natural gas well sites, natural gas processing plants, and natural gas compressor stations. Federal standards for methane emissions do not cover all sources of methane, such as offshore sources or coalbed methane production facilities. As the production of natural gas continues to expand in the United States, the issue of methane as an air pollutant may be a significant one for policymakers. Although most natural gas is consumed in the country where it is produced, global and regional markets are becoming more integrated (see Figure 6 ). About 30% of natural gas is traded internationally, mostly within regional markets, and the amount of natural gas traded is increasing. Natural gas is transported primarily in two ways: by pipeline, and as a liquid in tankers. Pipelines transport gas between two fixed points, while LNG provides flexibility in the final destination. Global LNG trade increased by 1.8% in 2015, and LNG's share of the global gas trade was 33%. Traditionally, natural gas is sold under long-term contracts indexed to oil prices, except in the United States and a few other places where natural gas prices are market-based. U.S. LNG exports have placed pressure on other countries to delink their gas exports from oil-indexed prices. Almost all natural gas that is traded internationally is under long-term contracts, usually 20 years in length, whether it is by pipeline or as LNG. This is primarily because natural gas transportation is expensive and long-term contracts are needed to finance construction of the transport facilities. Sometimes LNG consumers do not require the entire amount of natural gas in their contracts. LNG producers can sell the excess to other consumers on a one-time or short-term basis (e.g., sell it on "spot"). The spot market for natural gas is growing. Russia is the world's largest natural gas exporter, primarily through its massive pipeline network to Europe. Russia opened its first LNG export terminal in 2009, primarily targeting the Asian market, to give it flexibility in its exports. Qatar is the leading exporter of LNG, accounting for 31% of the world LNG trade in 2015, the majority of which goes to Asia and Europe. Europe is the largest importing region of natural gas, receiving most of its imports by pipeline from Russia, Norway, and Algeria; however, recent developments regarding Russia and the Ukraine have pushed the European Union to consider more secure sources of natural gas. Asia, the most import-dependent region, relies mostly on LNG; however, China has become more reliant on imported gas via pipeline, from Kazakhstan, Myanmar, and Turkmenistan. China has been Turkmenistan's primary importer of natural gas, with more than 70% of Turkmenistan's exports going to China in 2015. Currently, the United States and Canada have an extensively integrated pipeline system. Canada and Mexico are the only recipients of U.S. natural gas by pipeline. Exports are expected to increase to Mexico, from 1 tcf in 2015 to almost 1.5 tcf in 2040. Meanwhile, exports to Canada are projected to slightly rise from 0.7 tcf to 0.75 tcf, over the same time period. U.S. LNG prices are market-based, resulting in a price differential that may create an economic incentive for the United States to export domestically produced natural gas. In February 2016, the first cargo of U.S. LNG was shipped from the Sabine Pass Liquefaction export terminal in Louisiana to Brazil. The export of U.S. LNG has been the center of debate for policymakers, with questions focusing on how U.S. natural gas may affect the global market and geopolitics, as well as domestic prices. As of April 2016, there is one LNG export terminal in operation and several LNG export terminal projects under construction in the lower-48 states: Additional LNG "trains" at Sabine Pass Liquefaction in Sabine, LA; Dominion-Cove Point LNG in Cove Point, MD; Cameron LNG in Hackberry, LA; Freeport LNG Expansion/FLNG Liquefaction in Freeport, TX; and Cheniere Marketing-Corpus Christi LNG in Corpus Christi, TX. The Kenai LNG terminal, which began operations in 1969 in Alaska, continues to operate, primarily supplying LNG to Japan. Also, in February 2016, the United States began shipping quantities of LNG to Barbados from Miami, FL. The LNG was shipped to Barbados in cryogenic containers instead of a specialized tanker ship. Cryogenic containers are comparable to shipping containers and can be transported over land and loaded onto ships. The natural gas from these shipments has been sold at a higher price than the Sabine Pass exports, ranging from $10 per MBtus to almost $16 per MBtus. In 2014, a relatively small amount of LNG was shipped to Honolulu, HI, using this method, the first time to the state. Alaska has great potential to become a major source of natural gas. The United States Geological Survey (USGS) estimates that conventional natural gas resources on Alaska's North Slope may potentially exceed 200,000 bcf, more than eight times the total amount of current U.S. gas consumption. However, the majority of gas produced in Alaska is used for reinjection to boost oil production and is not brought to market. Alaskan officials have pushed for a pipeline to be constructed in order to sell natural gas internationally as LNG, but as of 2016 this is considered commercially challenging. In February 2016, the Trans-Pacific Partnership (TPP) free trade agreement (FTA) was signed between the United States and Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, Malaysia, Mexico, Canada, and Japan. The TPP may have an impact on the U.S. natural gas trade, as permits for natural gas exports to countries with which the United States has an FTA receive expedited approval under the Natural Gas Act. Thus membership in the TPP would, in effect, grant free trade status to key consumers of LNG. A trade agreement called the Transatlantic Trade and Investment Partnership (TTIP) has been proposed between the United States and the EU, with the aim of promoting trade and economic growth. The areas the TTIP addresses include market access, regulation, and rules and principles for cooperation, and it would, in effect, also give free trade status to signatories regarding natural gas. Neither TPP nor TTIP has been ratified. In December 2015, the United Nations Climate Change Conference, or COP-21, was held in Paris; the objective of the conference was to address climate change and come to a universal agreement on steps needed to mitigate it. The conference resulted in the Paris Agreement, which establishes governing measures regarding emissions mitigations, adaptation, and finance. The United States signed the agreement on April 22, 2016. It is noteworthy that U.S. infrastructure expansion, maintenance, and construction may not be able to keep up with its growing supplies; 50% of gas transmission and gathering pipelines were built in the 1950s and 1960s. It is estimated that investment in natural gas interstate pipelines may range from $2.6 billion to $3.5 billion annually between 2015 and 2030. This amount of investment may prove difficult to raise given other infrastructure demands. Other issues that may affect both the domestic and international markets will be oil prices; new infrastructure; technological development; increased interdependence between the gas and electric sectors; and climate and environmental policy. The Gas Exporting Countries Forum (GECF), also referred to as gas OPEC (Organization of the Petroleum Exporting Countries), is a nascent cartel organization based in Qatar comprising 11 natural gas producing countries ( Table 1 ). The GECF was formed in 2001, signing an organizing charter in 2008. Together, the countries account for 62% of global natural gas reserves, 57% of the LNG trade, and 39% of the pipeline gas trade. Given the U.S. resource base of natural gas, it is highly unlikely that the GECF could significantly affect U.S. natural gas consumption within the next five years or, most likely, longer. Canada, by far the largest source of imported natural gas to the United States, is not a member of the GECF. Europe is probably most vulnerable to possible cartel control, as more than half its imports come from cartel members, particularly Russia and Algeria. Nevertheless, the current structure of natural gas markets (i.e., long-term contracts and pipelines connecting individual sellers to specific buyers) is not conducive to supply or price manipulation, and significant changes would need to be made to how natural gas is brought to market and sold before the GECF could have influence. Overall, global natural gas production in 2015 grew by 2.2%, which was below the 10-year average of 2.4%. The United States surpassed Russia as the world's largest natural gas producer in 2009. The success of the United States to date and the potential for further shale gas development has initiated an evaluation by most countries of their potential natural gas resources. However, outside of Canada, whose shale gas industry is developing alongside that of the United States, it is unlikely that significant commercial production will be achieved before the end of the decade in another country. Most countries looking at shale gas currently do not have the data, technology, or equipment required to evaluate their shale gas resources, let alone successfully exploit them. The price of natural gas in the United States, Canada, and the United Kingdom is set by the market, with centers or hubs providing buyers and sellers with competitive price data (see Figure 7 ). The most well-known hub in the United States is the Henry Hub in Erath, LA, where multiple interstate and intrastate natural gas pipelines interconnect. There are various prices for natural gas in the United States depending on the category of consumer. Residential consumers pay the highest price, followed by various commercial users. By 2040, the Henry Hub natural gas spot price is projected by EIA to rise to $7.85 per million British thermal units (MBtu) due to increased domestic and international demand. This would require an increase in the number of well completions in order to meet higher production levels. EIA's projection is based on existing information and does not account for significant changes in the market, such as new technologies, regulations, or discoveries. Outside the United States, Canada, and the United Kingdom, almost all wholesale natural gas is sold under long-term contracts. The price of natural gas within these contracts is commonly determined by a formula that links the natural gas price to the price of crude oil or some oil-based product. Although in many markets natural gas no longer competes as a substitute against oil-based products, this vestige of the contracts has remained. Over the last several years, the disparity between contract prices and spot prices has raised pressure on gas producers to do away with this concept. However, the recent fall in world oil prices may suspend this debate. Nevertheless, some producers have started incorporating a spot price for natural gas into their pricing formulas. The price differences reflect the regional nature of the natural gas industry and the disparity between contract and spot prices. Asia, in particular, has been willing to pay high prices to secure its natural gas supplies. Two other contract concepts are worth highlighting: take-or-pay clauses and destination clauses. With a take-or-pay clause, a buyer of natural gas must pay the seller regardless of whether it actually receives the natural gas. Typically, in contracts, buyers must purchase at least 80% of the total volume of natural gas contracted. For example, if a contract is for 100 bcf, but the buyer only needs 80 bcf, then that is all it pays for; but if the buyer only needs 50 bcf, it still must pay for an additional 30 bcf even if it cannot use it. A destination clause allows a cargo to be redirected to a different destination and buyer. Such a clause was not common until recent years and contributes to a more efficient market. Is it time for natural gas to take center stage as the world's primary energy source? That is the main question confronting the natural gas industry over the next decade. The International Energy Agency (IEA) states that natural gas is one of the fastest growing fossil fuels, with an increase in demand of approximately 60% in 2040 over 2013; natural gas is a major alternative for a world that looks to gradually decarbonize its energy system. Most of the new demand for natural gas is projected to come from non-OECD countries, primarily China and those in the Middle East. Nonetheless, the global landscape for energy is shifting; as North America continues to produce unconventional gas, the rest of the world's exploration of unconventional resources is occurring more gradually. China is typically a driver in global energy trends. Recently, China has decided to change its economic model, shifting away from an industry-heavy economy to a services-focused one. This change will require 85% less energy to generate future Chinese growth; consequently, predictions are uncertain regarding China's future in energy consumption. India, on the other hand, is projected to be a growing contributor to global energy demand, accounting for 25% of the rise in global energy use to 2040. However, meeting India's energy demand may prove to be a huge financial commitment--nearly $2.8 trillion. Natural gas comprises about 6% of India's primary energy supply, and is projected to make up less than 10% of India's energy mix in 2040. Sectorally, the U.S. electric power industry leads the growth in natural gas demand due to several factors, including relatively low prices, lower capital costs, excess natural gas generation capacity, and competitive financing of projects. Government policies, particularly in regard to carbon dioxide emissions, will be a key factor in determining the rate of growth of natural gas usage. Globally, natural gas is projected to account for 28% of total world electricity generation in 2040, with non-OECD countries representing 61% of this. Natural gas production would likely need to increase to meet the rise in demand and keep prices from dramatically rising. Production and growth is projected in every region except Europe. Unconventional gas resources --coal bed methane, shale gas, and tight gas--account for about 60% of growth in the global gas supply. However, outside of North America unconventional resource development is slower and uneven. China does have policies that encourage production, but limited water availability, geology, and population density in resource-rich areas may hinder any attempts to fully realize its capacity. Appendix A. Global Natural Gas Consumption (2015) Appendix B. Global Natural Gas Reserves (2015) Appendix C. Global Natural Gas Production (2015) Appendix D. U.S. Natural Gas Imports and Exports Appendix E. Global Natural Gas Exporters (2015) Appendix F. Major Global Gas Companies (2014) Appendix G. Select U.S. Statutes Related to Natural Gas

The role of natural gas in the U.S. economy has been a major part of the energy policy debate in the 114th Congress. This report briefly explains key aspects of global natural gas markets, including supply and demand, and major U.S. developments. Natural gas is considered by some as a potential bridge fuel to a lower-carbon economy, because it is cleaner burning than its hydrocarbon alternatives coal and oil. Natural gas combustion emits about one-half less carbon dioxide than coal and one-quarter less than oil when consumed in a typical electric power plant, although fugitive gas emissions offset some of the advantages. Natural gas combustion also emits less particulate matter, sulfur dioxide, and nitrogen oxides than coal or oil. Additionally, improved methods to extract natural gas from shale formations have significantly increased the resource profile of the United States, which has spurred other countries to try to develop shale gas. If the United States and other countries can bring large new volumes of natural gas to market, particularly unconventional natural gas, then natural gas could play a larger role in the world's economy. Several key factors will determine whether this happens, including price, technical capability, environmental concerns, and political considerations. Many countries, both producing and consuming, are watching how the development of U.S. unconventional natural gas resources evolves. Key Points Natural gas is likely to play a greater role in the world energy mix given its growing resource base and its relatively low carbon emissions compared to other fossil fuels. The world used 122,442 billion cubic feet (bcf) of natural gas in 2015, of which the United States consumed 27,463 bcf (the most of any country). World natural gas consumption in 2015 grew by 1.7%, which was below the 10-year average of 2.3% but above the 0.6% increase in 2014; U.S. consumption grew by 3%. U.S. unconventional natural gas reserves and production, particularly shale gas, have grown rapidly in recent years. The United States accounts for 89% of global shale gas production. The new shale gas resources have changed the United States' natural gas position from a net importer to a potential net exporter. Other countries are now exploring their own shale gas resources. Global trade in natural gas is increasing and new players are entering on both the supply side and the import side, making the global gas market more integrated.

Inflation--the general rise in the prices of goods and services--is one of the differentiating characteristics of the U.S. economy in the post-World War II era. Except for 1949, 1955, and 2009, the prices of goods and services have, on average, risen each year since 1945. The cumulative effect of this inflation is staggering: the price level has risen more than 1,000% since the end of World War II. Inflation rose in the 1960s, peaked in the 1970s (it was 13.3% in 1979) and early 1980s, and has been generally low but positive since then. During the last two recessions (2001 and 2007 to 2009), policymakers have been more concerned about the threat of deflation (falling prices) than inflation. Prices fell in 2009, but have risen at a low and stable rate since. Prices did not persistently rise in the pre-World War II period. On the eve of that war, in 1941, the U.S. price level was virtually the same as in 1807. During the periods from 1846 to 1861 and 1884 to 1909, the United States experienced a near constant price level. And in the 15 years from 1865 through 1879, the price level either remained constant or declined. The principal periods of inflation between 1800 and 1941 were associated with wars and the discoveries of gold and silver both here and abroad (and with increased efficiencies in extracting both metals). Inflation can be defined as a sustained or continuous rise in the general price level or, alternatively, as a sustained or continuous fall in the value of money. Several things should be noted about this definition. First, inflation refers to the movement in the general level of prices. It does not refer to changes in one price relative to other prices. These changes are common even when the overall level of prices is stable. Second, the prices are those of goods and services, not assets. Third, the rise in the price level must be somewhat substantial and continue over a period longer than a day, week, or month. There has been practically no period in American history in which a significant change in the price level has occurred that was not simultaneously accompanied by a corresponding change in the supply of money. This has led to a widely held view that, in the long run, "inflation is always and everywhere a monetary phenomenon resulting from and accompanied by a rise in the quantity of money relative to output." Although this view is generally accepted, it is, in fact, consistent with two quite different views as to the cause of inflation--whether it is caused by "demand-side" factors influencing overall spending or "supply-side" factors influencing overall production--at any given time. In one view, inflationary pressures begin to rise when spending in the economy outpaces the economy's production. Monetary policy can be used to keep spending in line with total production, albeit imperfectly and with lags between implementation and results. Thus, a more rapid rate of money growth plays an active role in inflation and results either from mistaken policies of the Federal Reserve or because the Federal Reserve subordinates itself to the fiscal requirements of the federal government. Examples of Federal Reserve policies that are likely to produce inflation are those that fix rates of interest too low or those that support unrealistic foreign exchange values of the dollar. According to this view, the control of inflation rests with the Federal Reserve (Fed) and depends upon its willingness to limit the growth in the money supply. The relationship between changes in the money supply and changes in inflation is not stable, however. Thus, as a practical matter, economists are divided on whether inflationary trends can best be predicted by looking at the relationship between spending and production, using measures such as the output gap, or by looking at measures of monetary policy, such as growth in the money supply. Economists who are proponents of the Fed's recent use of "quantitative easing" tend to point to measures such as the large output gap to predict that deflation is a greater risk than high inflation. Some economists who are concerned that quantitative easing will lead to high inflation tend to point to the rapid growth in the portion of the money supply controlled by the Fed (called the monetary base) since 2008. To date, the overall money supply has grown more quickly than it had in recent decades, but not at a pace commensurate with the growth in the monetary base, and inflation has remained low. Nevertheless, the increase in the monetary base has the potential to be inflationary in the future, as the output gap declines. An alternative view comes in several versions. They have in common a belief that the major upward pressure on prices comes from external price shocks, which unlike overly stimulative money growth would produce a fall in real output. One candidate is the attempt by organized labor to obtain increases in real wages. Other activities include the monopolistic pricing behavior of OPEC, major crop failures, or changes in the terms of international trade produced by a decline in the foreign exchange value of the dollar. The decline in real output that these activities produce will, in general, lead to rises in unemployment. To prevent unemployment from increasing, in one version of this alternative, the Federal Reserve is seen to pump up demand by increasing the growth of money and credit. In the process it ratifies the rise in the price level. Thus, in this version, while a growth in the money supply is necessary to ratify the upward movement in the price level, it is not the cause of the rise in prices. It is interesting to speculate what would happen if the Federal Reserve refused to expand demand in the face of the rise in unemployment. Presumably, after a protracted period, the additional unemployment would lead to a fall in wages, costs, and other prices. Over the longer run, output would return to its previous level or growth path, the price level would fall back to its previous level, and only relative prices and wages would be different. Thus, while the Federal Reserve has the power to curb inflation, it is unlikely to exercise this power in the face of a large run up in unemployment. In another extreme variant, what the Federal Reserve does is really irrelevant. Should it refuse to expand what is conventionally called money to pump up demand in the presence of these developments that reduce output, money substitutes under the guise of credit will emerge that will allow demand to grow and the price increases to be ratified. This variation, interestingly, precludes excessive money growth from causing inflation, for it also holds that the Federal Reserve cannot force too much money on the economy. Inflation, then, cannot be a case in which too much money is chasing too few goods. The first two explanations for inflation find many adherents among American economists, whereas the third is more common among some British economists. In most years, inflation tends to rise when unemployment falls, and vice versa. Economic theory explains this relationship in terms of a full employment rate of unemployment, also called the natural rate of unemployment or the non-accelerating inflation rate of unemployment (NAIRU). Whenever the actual unemployment rate is above the full employment rate, total spending in the economy will fall, and the resultant slack will cause the inflation rate to fall (since there is less demand for goods and services). As the inflation rate falls, the expected rate of inflation should also fall if economic agents believe the government is sincere in its efforts to end inflation (i.e., that the government will not reverse its policy in the face of rising unemployment). As inflationary expectations fall so will wage demands, and falling wage demands will bring about a lower unemployment rate (since employers will demand more labor when labor costs fall). Ultimately, the economy will move back to full employment at a zero inflation rate or a stable price level. Thus, the important steps in the sequence are (1) convincing government policy to reduce the inflation rate to zero; (2) tolerating an above normal rate of unemployment; and (3) adjusting inflation expectations and wage demands to the lower rate of inflation. In practice, policymakers have shown a preference for stimulating the economy before inflation hits zero, so that unemployment returns to the full employment rate faster. As a result, most recessions have featured a falling but still positive inflation rate. The relationship between inflation and unemployment points to one reason that inflation can be temporarily costly in practice. Because inflationary expectations have not fallen until unemployment has risen, efforts to reduce the rate of inflation have often been associated with economic downturns. For example, the double-digit inflation of the early 1980s was reduced only through an economic downturn during which the unemployment rate rose to double digits (10.8% in late 1982) for the first time since the Great Depression of the 1930s. It is argued that a higher inflation rate in the late 1980s was a major reason why the Fed tightened monetary policy, which was also an important factor causing the recession of 1990-1991. Economists believe that expectations of future inflation play an important role in the relationship between inflation and unemployment. To illustrate why, consider the example of tightening monetary policy (raising short-term interest rates) to reduce the inflation rate. Higher interest rates reduce spending on interest-sensitive goods, such as business investment spending, consumer durables, and housing. As spending on these goods declines, so will employment in the sectors producing these goods. If inflation expectations are low, the overall decline in spending and employment will put downward pressure on prices, as discussed in the previous section. But if inflation expectations are high, prices will respond less quickly to the same decline in spending and employment. As a result, spending and employment would have to fall further and longer to produce the same decline in prices. Whether inflation expectations are high or low will depend importantly on the perceived credibility of the Fed's commitment to maintaining low inflation. If businesses and workers do not believe that the Fed will stick with a policy of tighter monetary policy when faced with higher unemployment, they may not be willing to lower their price demands and wage demands, respectively. Economists often discuss jointly the costs to an economy from unemployment and inflation because, for much of the period since the late 1950s, it was generally believed that a long-run tradeoff existed between the two. While the cost of unemployment was well articulated, the cost of inflation was relegated to "shoe leather." The high U.S.-inflation rate of the late 1960s, 1970s, and early 1980s caused economists to rethink the costs of inflation to an economy. What follows is a distillation of those efforts. Describing the costs to an economy from inflation can be confusing for several reasons. First and foremost, there is the confusion over the cost to the economy versus the cost to specific individuals. Costs to individuals may not impose a burden on the economy because they are in the nature of a redistribution of either income or wealth. What is lost by some is gained by others. Nevertheless, some of these redistributions can have real effects. Second, some of the costs of inflation are permanent in the sense that so long as the inflation continues the costs will be incurred. Others are only transitory and arise as the economy moves from one inflation rate to another or because the rate of inflation itself is variable. Third, some costs are incurred only because the inflation is unanticipated while other costs arise even when the inflation is fully anticipated. Finally, some costs occur only because of the absence for one reason or another of appropriate safeguards: for example, the absence of indexed contracts. Note that some of these costs also apply to deflation (falling prices), although they may manifest themselves in different ways. As an introduction to understanding the costs imposed on an economy by inflation, consider first an economy that is completely indexed for inflation--where every conceivable contract is adjusted for changes in the price level, including those for debt (bonds and mortgages) and wages and salaries; where taxes are imposed only on real returns to assets and tax brackets, fines, and all payments imposed by law are indexed; where the exchange rate is free to vary and there are no legal restrictions imposed on interest rates; and so on. In this economy, the distinction between anticipated and unanticipated inflation is unimportant except if the inflation rate is high and the indexed adjustments are not continuous. Then real costs can occur. However, for analytical purposes, assume that all individuals perfectly anticipated the inflation and that the indexed adjustments are continuous. In this economy, inflation can impose only two real costs: the less efficient arrangement of transactions that result from holding smaller money balances and the necessity to change posted prices more frequently (the so-called menu costs). The first of these, entailing the rearrangement of transactions due to the higher costs of holding money, is the one cost uniformly identified in the text books as "the cost of inflation." It is worth considering what is involved. Both individuals and businesses hold money balances because it allows each to arrange transactions in an optimum or least cost way (e.g., for business this involves paying employees, holding inventories, billing customers, maintaining working balances) and to provide security against an uncertain future. Holding wealth or assets in a money form, however, is not costless. A measure of the so-called opportunity cost is the expected rate of inflation, a cost that rises because wealth can be held in alternative forms whose price or value rises with inflation. When inflation occurs or when the rate of inflation rises, holding money becomes more costly. Individuals and businesses then attempt to get by with less money (for businesses this may mean billing customers more frequently, paying employees more frequently, etc.). This means that least cost transactions patterns are no longer least cost. The new patterns are less efficient--they use more time or more resources to effect a given transaction. In addition, holding smaller real money balances also reduces the security money provides against an uncertain future. The magnitude of this cost has been reduced in the United States in recent years because financial institutions can now pay interest on a variety of deposits that function as money. Thus, the primary cost of inflation on money holding applies to currency on which no interest is paid. To the extent, however, that financial institutions are slow to raise interest rates in tandem with inflation, deposit holders will economize on holding deposits and arrange transactions less efficiently, thereby imposing a short-run cost on the economy. The other cost imposed by inflation in a fully indexed economy is the so-called menu cost, which involves the extra time and resources that are used in adjusting prices more frequently in an environment where prices are rising. These additional costs are incurred mainly with goods and services that are sold in nonauction markets. It does not apply to auction markets where prices change more or less continuously in response to shifts in supply and demand. Very few economies are fully indexed, even those in which inflation is severe. In the United States, indexation is incomplete. As such, inflation can impose costs even if it is fully anticipated. A case in point involves the arrangements for levying taxes. Taxes are levied in several instances on nominal as opposed to real income. As a result, the interaction of inflation and taxation can impose real effects on an economy by altering the incentives to work, save, and invest. Several examples should suffice to explain what is involved. First, consider an individual who, in a non-inflationary period, earns a real rate of interest of 5% and who pays taxes of 30% on this income. The aftertax real rate of interest is 3.5%, that is, [5% -(30% x 5%)]. Now, assume that a 10% rate of inflation is expected over the one-year term of the loan. As a result, the market rate of interest rises to 15% (composed of a real rate of 5% and an expected inflation rate of 10%). At a tax rate of 30%, the aftertax rate of return falls to 0.5%. To the extent that saving is responsive to the real aftertax rate of return, taxing nominal yields, as is done in the United States, distorts the incentive for individuals to save. (The existing empirical evidence for the United States suggests that private sector saving is quite insensitive to the aftertax rate of return.) Second, consider what happens to the real aftertax rate of return on business capital during inflation. For tax purposes, the depreciation of business plant and equipment is based on actual or historic costs. During inflation, charging depreciation based on historic cost raises the nominal profits of businesses and the basis on which corporate profits taxes are levied. As a result, the aftertax real rate of return falls and this discourages businesses from adding to their stock of plant, equipment, and structures--the bases for future economic growth. Third, to the extent that income tax brackets are not indexed or not indexed completely, inflation in a progressive income tax system can reduce the real aftertax income for wage and salary earners over time, distorting the incentives to work. During the 1980s, the U.S. tax code was rewritten to adjust the tax brackets for inflation as well as to reduce the level and progressivity of the federal income tax. As a result, inflation has a much reduced interaction with federal taxes in reducing aftertax real income. Several private sector practices also interact with inflation to produce real economic effects. The first is the continuation of level payment nominal mortgages for financing housing. This practice front loads the real cost of a mortgage during an inflation and, as a result, it discourages the purchase of homes, especially by younger first-time buyers. Second, business firms continue to record all data in terms of the dollar even though the real purchasing power of this important unit of measure varies considerably over time. This practice has the potential for distorting the real profitability of business over time as well as the valuation of other relevant magnitudes. Because these nominal magnitudes are frequently used as the basis for borrowing and lending decisions, they have the potential for seriously distorting resource allocations. In this section, the real effects of inflation are analyzed in an environment where it is unanticipated and where the economy relies on nominal or unindexed contracts. In this situation, an important effect of inflation is to redistribute both income and wealth. It would be a mistake, however, to conclude that because gainers and losers cancel, there can be no real effects from inflation. To see one such real effect, consider what happens to the interest bearing public debt. Inflation reduces the real value of the public debt and with it the real value of the wealth of the private sector, the ultimate owners of most of that debt. Thus, inflation redistributes wealth from the private to the public sector. But who constitutes the public sector? These are the taxpayers who also happen to be the members of the private sector, some of whom own the debt. Thus, redistribution reduces the real value of the taxes needed to service this debt, and the reduction is most beneficial for the younger workers in the current population and for future generations. As a result of the fall in real tax burden, their real disposable income rises, both today and in the future. They are thus able to save more while older workers and retirees will, no doubt, have to reduce their consumption, for while they are faced with a large wealth loss, they gain very little from the reduced tax burden. Thus, the redistribution of wealth between the private and the public sectors is really redistribution between generations that could have an effect on the rate of capital formation. Perhaps the most serious effect of unanticipated inflation in a market economy is its potential to make the price system malfunction and misallocate resources. Those who live in market economies are apt to take its functioning for granted. They may fail to appreciate or understand the vital role that prices perform in such a system. As standard textbooks in economics teach, the price system determines what is produced, how it is produced, and to whom the output is distributed. For the price system to perform these functions efficiently, producers must be able to discern a change in real or relative prices from a change in nominal prices, which essentially leaves all relative prices unchanged. Only with the former will it be profitable to alter production. A similar phenomenon holds for workers. A rise in money wages may bring forth a greater quantity of labor time if workers are convinced that this is a rise in real wages, that is, money wages relative to prices. It is easier for producers and workers to discern these changes in real prices and wages if the price level is stable or if the inflation rate is constant. It is more difficult when the rate of inflation is rising or more variable. Under these circumstances market economies are apt to have "signal" problems. That is, producers and workers mistake changes in nominal prices and wages for changes in corresponding real magnitudes and act accordingly. The resulting changes in output and labor time are inefficient and would not have occurred but for the mistakes in perception. Some economists, including Fed Chairman Ben Bernanke, have argued that low and stable inflation is conducive to higher long-term economic growth. A "signal extraction" problem may not have arisen in the United States, however, since rates of inflation have been relatively low and stable. Empirical studies completed in the 1970s support the view that inflation is associated with greater uncertainty about future prices and that the degree of uncertainty rises with the rate of inflation. Rising uncertainty about future prices is believed to produce several possible "real" effects. First, individuals appear to shift from buying assets denominated in nominal terms (e.g., bonds) to so-called real assets such as residential structures, land, precious metals, art work, etc. Because some of these assets are in fairly fixed supply, the resulting capital gain produced by the shift could conceivably raise private sector wealth by a sufficient amount to cause a fall in the saving rate. Second, to compensate for the perceived greater uncertainty, lenders appear to require a greater real reward for supplying funds for investment. Third, contracts tend to be shortened. The first two developments lead to rising real interest rates, which tend to reduce the rate of investment and capital formation. The third development leads businessmen to prefer shorter lived assets. Although economic theory does not prescribe an optimal rate of inflation, many economists would support the goal of price stability, which former chairman of the Federal Reserve Alan Greenspan once defined as existing when inflation is not considered in household and business decisions. The Federal Reserve's longer-run goal of 2% inflation, announced in 2012, could be seen as consistent with that definition. A few prominent economists have broken with the mainstream view that inflation should be kept to a minimum. They have argued that moderate rates of inflation, in the 3%-5% range rather than the 1%-3% range, might be useful for smoother economic adjustment. In a downturn, economic output falls because of "price stickiness"--prices and wages cannot adjust quickly enough to maintain full employment, so total spending falls below the productive capacity of the economy. These economists argue that with a higher average rate of inflation, adjustment would happen more quickly because real wage or price cuts would be possible while avoiding nominal wage cuts. For example, a worker might resist a 2% nominal cut in his wages when inflation is zero, but accept a 3% nominal wage increase when inflation is 5%. In both cases, real wages would have adjusted downward by 2%, but the latter example would have possibly occurred more quickly. Inherent in this view is that individuals suffer from some "money illusion" at moderate rates of inflation (i.e., a 2% real wage cut is accepted because the 3% nominal increase is not seen as a cut). The existence of "money illusion" is inconsistent with anticipated inflation, and is only possible if inflation is insignificant; there is significant evidence that individuals in high inflation economies are highly sensitive to the inflation rate. Another argument made for targeting a higher (but still moderate) inflation rate is that deflation (falling prices) is a more serious problem than inflation, with Japan as an example of a country stuck in a long period of deflation and sluggish economic growth. A higher average inflation rate makes it less likely that a country would slide into deflation during a downturn. The reason that it could be hard to escape deflation is related to the "zero bound" on monetary policy. The Fed can only reduce short-term interest rates to zero when it is stimulating the economy, but sometimes, as was the case in 2008, further stimulus is needed to end a recession. With a higher average rate of inflation, average interest rates would also be expected to be higher. Higher average interest rates would be further from the zero bound on average, so that the Fed could undertake more stimulus before hitting the zero bound. This argument neglects the fact that the Fed can undertake (and has recently undertaken) unconventional monetary policy actions and expansionary fiscal policy to further stimulate the economy at the zero bound. What is the cost of inflation? It is customary in textbooks to answer this question in terms of a situation where the rate of inflation is anticipated by all market participants who can either continuously re-contract or in which everyone is protected from inflation through indexation. In this world the cost to an economy from inflation is the increased resource cost from conducting transactions with reduced holdings of money--popularly termed "shoe leather" costs. If the inflation is serious, this cost is by no means trivial. However, inflations are seldom perfectly anticipated. In this situation, perhaps the most serious real effect comes from the ability of rising prices to jam the price signals that are so important to the smooth and efficient functioning of a market economy. Evidence suggests that this may not have been a problem for the United States in the post-World War II era. In general, the cost of inflation to an economy will be larger the higher the rate of inflation, the more variable the rate, the less it is anticipated, the greater is the uncertainty it causes, and the less indexed is the economy. There is no single measurement of inflation. The rise in the general level of prices, the essence of inflation, is measured by using a price index that aggregates the price of different goods and services. Ideally, the price index used should be broad based and one in which the individual prices are weighted to indicate their importance to the economy. Many different price indexes are available in the United States that measure different types of inflation rates. For purposes of this report, two separate price indexes are used. The first is very broad based and derived from the measurement of the nation's gross domestic product (GDP), covering price changes of consumption, investment, government, and traded goods. The other is the Consumer Price Index (CPI), which prices a "market basket" of goods and services purchased by an urban family, a market basket whose individual items are weighted by how much the urban family spent on them in a base year period--currently 1982-1984. A drawback of this method is that people's consumption patterns change over time, causing the "market basket" to become outdated. Inflation rates according to the two measures are usually similar. Inflation, according to the CPI, was very low (usually below 2%) in the 1950s and early 1960s, began rising in the late 1960s, was relatively high in the 1970s and early 1980s (rising above 10% in 1974 and 1979-1981), began falling in the mid-1980s, and generally remained in the 2%-3% range in the 1990s and 2000s. Inflation tends to rise over the course of an economic expansion and decline during an economic recession, for reasons discussed above (see " The Relationship Between Inflation and Unemployment "). Current CPI data can be accessed at http://www.bls.gov/news.release/pdf/cpi.pdf . Current data for the GDP price deflator can be accessed at http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm . When comparing purchasing power over two time periods, the overall (referred to as "headline") inflation rate is the relevant measure. Comparisons over time of wages, wealth, rates of return, government transfers such as Social Security payments, and so on should all use a headline measure of inflation, because all of these concepts depend on a broad measure of inflation. Although the headline rate of inflation can provide much useful information to policymakers on the state of the economy, it can also be misleading since it responds to both systematic and random forces. The latter can be seen by reference to the food component of the CPI. An unusual cold spell in Florida in January that damages a substantial part of the fresh produce crop can send food prices and the CPI soaring. A similar effect can be produced by an unusually wet summer in the Midwest. Alternatively, an unusually good combination of rain and sunshine can produce a bountiful harvest and lower prices. Energy prices are also susceptible to such random effects associated with events such as turmoil in major oil producing nations. To minimize the confusing signals that could arise from the use of the actual rate of inflation, some economists prefer to use a price index that reflects basically only systematic forces to measure inflation. For some economists, this can be achieved by using the CPI less its food and energy components. (It should be noted that food and energy represent about 25% of the current CPI.) Others want to use a moving average either of the CPI itself or of the current CPI less its food and energy components. The use of a moving average is based on the belief that if there are random factors that influence the actual inflation rate, they have an average value of zero. Hence, the use of a moving average should minimize their influence. Others prefer a more complicated measure that trims off whatever prices have changed most in that period. Policymakers, particularly at the Federal Reserve, often refer to core inflation in their policy decisions. Some policymakers prefer to use core inflation to predict future overall inflation because food and energy price volatility makes it difficult to discern trends from the overall inflation rate. A drawback of an over-reliance on core inflation, however, is that an extended period of rapidly rising food or energy prices could cause all other prices to accelerate. A focus on core may cause policymakers to fail to react to such a rise in inflation until it is too late. This scenario may have occurred in the last decade. Since CPI less food and energy was higher than headline CPI in each year of the decade except 2002 and 2009, a focus on core inflation may have led policymakers to wait too long to tighten policy in the expansion. Furthermore, several studies have failed to find core inflation to be a good forecaster of future inflation, casting doubt on the very rationale for relying on it. Current data for the CPI less food and energy can be accessed at http://www.bls.gov/news.release/pdf/cpi.pdf . Because labor costs comprise nearly two-thirds of the value of final output, some economists believe that they are an important determinant of the rate of inflation. However, changes in the rate of growth of labor costs must be read with care. Wage increases can be driven by productivity increases, tight labor markets, inflation, or fears of inflation. One way to determine the force or forces driving wage increases is to examine what happens to per-unit labor costs. To this end, two major measures of labor cost are available, a comprehensive measure of wage and benefit costs, the employment cost index , and per-unit labor costs in the nonfarm business sector . The growth rate of both measures of labor cost generally showed a tendency to accelerate during the expansions of the 1980s and 1990s as labor markets tightened. Subsequent recessions and growing unemployment had a depressing effect on the rise in both measures. During the expansion beginning in 2002, the rate of increase in both measures was fairly comparable to the inflation rate (meaning real wage growth was low) even as the unemployment rate fell. Current data for the employment cost index can be accessed at http://www.bls.gov/news.release/pdf/eci.pdf . Current data for per unit labor costs can be accessed at http://www.bls.gov/news.release/pdf/prod2.pdf . Inflation can impose a real cost on society in terms of the efficiency with which the exchange mechanism works, by distorting the incentives to save, invest, and work, and by providing incorrect signals that needlessly alter production and work effort. Because of this, policymakers should be concerned with the ongoing rate of inflation and any tendency for it to accelerate. An additional reason for concern arises because efforts to reduce the rate of inflation have often been associated with economic downturns. For example, the double-digit inflation of the early 1980s was reduced only through an economic downturn during which the unemployment rate rose to its highest level since the Great Depression of the 1930s. Inflationary developments since the 1990 recession have been encouraging. The inflation rate has shown either no or only a modest tendency to rise as unemployment came down. Nonetheless, inflation rose modestly preceding the 2001 and 2007 recessions, illustrating that this is still an important measure to watch for evaluating the state of the economy. During the last two recessions (2001 and 2007 to 2009), policymakers have been more concerned about the threat of deflation (falling prices) than inflation, and they have pursued unconventional policies to prevent it. Prices fell in 2009, but have risen at a low and stable rate since. Given the relationship between inflation and the money supply, some economists are concerned that the rapid growth in the portion of the money supply controlled by the Fed since 2008 could cause rapid inflation. To date, those concerns have not been realized, primarily because of the large slack in the economy.

Since the end of World War II, the United States has experienced almost continuous inflation--the general rise in the price of goods and services. It would be difficult to find a similar period in American history before that war. Indeed, prior to World War II, the United States often experienced long periods of deflation. Note that the Consumer Price Index (CPI) in 1941 was virtually at the same level as in 1807. For more than two decades, the inflation rate has remained low, in contrast to the 1970s and early 1980s. This is true regardless of which of the many available official price indices is used to calculate the rate at which the price of goods and services rose. A low inflation rate is especially significant since the U.S. economy was fully employed, if not over fully employed, according to many estimates for the last three years of the 1991-2001 expansion and during 2006-2007. Yet, contrary to expectations, the inflation rate accelerated only modestly. Keeping an economy moving along a full-employment path without sparking higher inflation is a difficult policy task. During the last two recessions (2001 and 2007 to 2009), policymakers have been more concerned about the threat of deflation (falling prices) than inflation, and they have pursued unconventional policies to prevent it. Prices fell in 2009, but have risen at a low and stable rate since. Given the relationship between inflation and the money supply, some economists are concerned that the rapid growth in the portion of the money supply controlled by the Fed since 2008 could cause rapid inflation. To date, those concerns have not been realized, primarily because of the large slack in the economy. Because labor costs make up nearly two-thirds of total production costs, the rate at which they rise is often regarded as an indication of future inflation at the retail level. They tended to rise in the latter stage of the 1991-2001 expansion and to moderate during the subsequent contraction, recovery, and expansion that ended in December 2007. Rather than measure inflation by using the rate at which prices overall are rising, some economists prefer a measure that reflects primarily the systematic factors that raise prices. This yields the "underlying" or "core" rate of inflation. The overall inflation rate exceeded the core rate in eight years during the 2000s. Although economic theory does not prescribe an optimal rate of inflation, many economists would support the goal of price stability, which former chairman of the Federal Reserve Alan Greenspan once defined as existing when inflation is not considered in household and business decisions. Why should the United States be concerned about inflation? This study reports the distilled knowledge of economists on the real cost to an economy from inflation. These are remarkably more varied than the outlays for "shoe leather," long reported to be the major cost of inflation ("shoe leather" being a shorthand term for the resources that have to be expended on less efficient methods of exchanges). The costs of inflation are related to its rate, the uncertainty it engenders, whether it is anticipated, and the degree to which contracts and the tax system are indexed. A major cost is related to the inefficient utilization of resources because economic agents mistake changes in nominal variables for changes in real variables and act accordingly (the so-called signal problem). Inflation in the United States during the post-World War II era may not have been high enough for this cost to be significant.

A commercial or depository bank is typically a corporation that obtains either a federal or state charter to accept federally insured deposits and pay interest to depositors. Commercial banks also make residential and commercial mortgage loans, consumer loans, provide check cashing and clearing services, and may underwrite securities, including U.S. Treasuries, municipal bonds, Fannie Mae and Freddie Mac issuances, and commercial paper (unsecured short-term loans to cover short-term liquid ity needs). The permissible activities of depository banks are defined by statute, namely the Glass-Steagall Act. By contrast, investment banks (or brokerage firms) are not allowed to accept federally insured deposits, and they do not make loans (i.e., a debt obligation owed to a single lending source). Instead, investment banks receive commissions to facilitate corporate mergers and corporate issuances of securities, such as corporate stocks and bonds (i.e., borrowing from the public). Congressional interest in the financial conditions of depository banks, also referred to as the commercial banking system, has increased following challenging economic conditions and changes in the regulatory environment. Specifically, the recession that began in December 2007 and ended in 2009 is frequently referred to as the Great Recession in part due to the financial crisis that unfolded. Both large and small banking institutions experienced losses related to the declining asset values (of mortgage-related assets), resulting in a substantial increase in bank failures. Consequently, higher prudential requirements for U.S. banking institutions were implemented. The Basel Committee on Banking Supervision, which provides an international consensus framework to promote internationally consistent bank prudential regulatory standards, adopted the third Basel Accord that was subsequently adopted by U.S. federal banking regulators. In addition, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ( P.L. 111-203 , 124 Stat. 1376), which also contained enhanced prudential regulatory requirements for financial institutions. Hence, the challenge for the banking industry is to determine the sustainable amount of financial (lending) risk-taking while simultaneously facing higher costs associated with greater financial risk-taking (i.e., compliance with prudential regulations designed to minimize the severity of financial distress under deteriorating macroeconomic conditions). This report begins with a general overview of the banking industry. It describes how banks facilitate the financial intermediation process as well as the associated financial risks. It also explains the market structure of the banking industry, referring primarily to the asset distribution. Next, this report summarizes profitability and lending activity levels in the banking industry. Particular attention is paid to metrics related to capitalization levels, asset performance, and earnings of depository banks. Financial intermediation is the process of matching savers, who are willing to lend funds to earn a future rate of return, with borrowers, who are in need of funds to make transactions. It is expensive for savers to locate, underwrite, and monitor repayment behavior of borrowers. Similarly, it is expensive for borrowers to locate a sufficient amount of savers with funds and favorable lending terms. Hence, banks develop expertise in intermediation , or facilitating the transfer of funds from savers to borrowers. The typical intermediation transaction made by commercial banks provides loans to borrowers at higher rates than the cost to borrow the funds from savers, who provide loanable funds in the form of bank deposits. Generally speaking, banks (as well as numerous lenders or financial institution types) profit from the spread between the rates they receive from borrowers and the rates they pay to depositors. Financial intermediation, however, involves risk. Banks face the risk that borrowers will default on their loans, making it more difficult to repay depositors. In addition, banks face funding or liquidity risk stemming from more frequent movements in short-term interest rates. Banks must have access to an uninterrupted source of short-term funding (deposits) until their long-term loans are fully repaid. Consequently, greater variability in short rates may translate into variable profit spreads. Furthermore, depositors could suddenly and simultaneously decide to withdraw their deposits, perhaps due to a sudden change in economic conditions or even speculation about deteriorating economic conditions, resulting in financial distress for one bank or several banks. Hence, bank profitability and financial risk are inextricably linked. In addition to default and funding risks, financial intermediation increases borrowers' vulnerability to economic downturns. During business cycle booms, lenders may grow optimistic and increase credit availability as if the ideal economic and financial market conditions will persist. The trade-off (or costs) associated with greater lending is a greater likelihood of severe financial distress if macroeconomic conditions were to deteriorate. In other words, recessions that occur when individuals have more loan repayment obligations (or are more leveraged financially) are likely to be more arduous, in particular if these borrowers suddenly face lower income prospects (via job losses or pay cuts). Assets in the banking industry are not evenly distributed, meaning that banking firms are not identical and, for some metrics, must be analyzed separately to get a more accurate assessment of financial conditions. Using data from the Federal Deposit Insurance Corporation (FDIC), Figure 1 shows the number of U.S. banks since 2000 by size categories of bank asset holdings: less than $100 million, $100 million-$1 billion, $1 billion-$10 billion, and greater than $10 billion. Community banks have traditionally been considered institutions with total assets at or below $1 billion; however, some institutions with $10 billion in total assets may be considered community banks. At the other extreme are the large financial institutions that have $10 billion or more in assets. The number of banks with more than $10 billion in assets has remained relatively constant, ranging from 101 to 107 institutions between year-end 2000 and 2015. As of 2015, the FDIC reports that total industry assets were $15,967.92 billion. For several decades, bank assets have increased while the number of banking institutions has decreased. The smallest of the community banks, those with less than $100 million in assets, have accounted for most of the industry consolidation even prior to the 2007-2009 recession. Figure 2 shows the same bank asset categories by asset size rather than by number of institutions. Banking institutions with less than $100 million in assets collectively hold approximately 1% of all industry assets. In contrast, banks with more than $10 billion in assets collectively hold approximately 80% of all industry assets. With this in mind, it can be challenging for industry analysts to determine whether the banking industry should be viewed as one competitive industry or as numerous firms with characteristics similar to monopolists. Even though banks generally accept deposits and take loans, it is unclear the extent that small banks compete with large banks and for what types of financial services; small banks compete with each other because of their focus on specialized lending and geographical limitations; or large banks compete with each other or maintain focus on specialized financial services. Banking regulators (i.e., the Office of the Comptroller of the Currency, the Federal Reserve, the FDIC, and state banking regulators) require U.S. banking institutions that accept federally insured deposits to comply with safety and soundness regulations, which are designed to monitor and buffer against the types of financial intermediation risks that can result in financial distress for banks and the broader economy. Asset (loan) defaults are less likely to result in the inability of a bank to repay its shorter-term obligations to its creditors (and especially its insured depositors) if sufficient capital is maintained to absorb the losses. If a bank's capital falls below minimum regulatory threshold levels, it would be considered undercapitalized and faces the prospect of being shut down by its regulator, which appoints the FDIC as the receiver of the insolvent institution. Hence, compliance with regulatory capital requirements implies that capital reserves must grow proportionately with bank asset (lending) portfolios. The abatement of financial risk, however, may curb lending activity. As previously mentioned, recessions are likely to be milder when fewer loan repayment obligations are outstanding; but the trade-off may be fewer loans, translating into fewer transactions that could possibly spur more robust expansions. Consequently, determining the optimal amount of financial intermediation risk for the banking system to take while simultaneously trying not to undermine economically stimulative lending activity is often a regulatory challenge. After 2007, the banking system saw unusually high numbers of distressed institutions, with failures at rates not seen since the savings and loan crisis that began in the 1980s and lasted through the early 1990s. The number of banks that failed, or fell substantially below their minimum capital reserve requirements, increased as the financial crisis of 2008 unfolded. No banks failed in 2005 and 2006, and three bank failures occurred in 2007. In contrast, the FDIC administered 489 bank failures over the 2008-2013 period. The FDIC maintains a problem bank list, which lists banks at risk of failure because their capital reserves have fallen below regulatory minimum levels (but perhaps not yet far enough below to be shut down). The number of depository institutions on the FDIC's problem list spiked beginning in 2008 and peaked at 888 in the first quarter of 2011. Figure 3 shows the number of problem banks and the total assets of those banks relative to the total assets of the entire banking system. The chart suggests that problem banks were primarily small institutions because of the small share of total banking assets they held. The industry has returned to profitability since the recession. Return on assets (RoA) and return on equity (RoE) are commonly used metrics to gauge bank profitability. RoA is computed with net revenue (i.e., total revenue minus total expenses) in the numerator and average total assets in the denominator. The RoA measures the financial return of a bank's average assets or lending activities. Because the banking industry relies heavily upon borrowed liabilities to fund assets, the ratio's numerator would be significantly smaller than the denominator; therefore, a RoA of approximately 1% is considered profitable. RoE is computed with net income in the numerator and the total amount of common shareholder equity in the denominator. The RoE is a measure of financial return for shareholders. Unlike RoA, RoE does not have a barometer of "acceptable" performance because it can increase due to either asset profitability or depleting capital positions, making it difficult to establish a benchmark standard. Nonetheless, double-digit RoE returns such as those prior to the recession tend to be more acceptable for shareholders. The FDIC reported industry declines in both RoA and RoE during the 2007-2009 recession as the numerators of both ratios fell even faster than their denominators. The negative returns coincided with the wave of loan defaults that also occurred during the recession, which led to the deterioration of capital, increases in the number of banks on the FDIC's problem list, and increases in bank failures. The RoA and RoE measures, which are illustrated in Figure 4 , have exhibited a reversal in course since the recession. Figure 5 shows the increase in noncurrent assets (i.e., loans or bonds) and charge-offs after 2007. Non-current assets are loans or bonds that borrowers do not repay as scheduled. The allowance for loan and lease losses (ALLL) is a component of regulatory bank capital set aside for anticipated (or estimated) loan losses. Loan loss provisioning refers to increasing the amount of ALLL when loan default risks increase; decreases are referred to as charge-offs or deductions from ALLL when lenders determine that noncurrent assets will not be repaid. RoA and RoE movements are essentially related to loan and bond repayment problems. Bank regulators require banking organizations to hold capital for both anticipated and unanticipated default risks. Capital requirements pertaining to the maintenance of equity shareholder levels are designed to buffer against unanticipated losses and generally do not vary. In contrast, ALLL requirements change more frequently (quarterly) or when expected credit losses may have increased. Hence, a bank may have sufficient capital to meet unanticipated defaults, which may be associated with unforeseen events (such as a sudden increase in the unemployment rate), but it may still need to increase ALLL provisions should a borrower begin showing signs of repayment difficulties that may result in default. If banks can absorb anticipated loan losses using current income earnings, their capital will be left intact for unanticipated losses. The ratio of aggregate ALLL provisioning to total bank assets, also shown in Figure 5 , is an ALLL proxy. Loan loss provisioning matched and often exceeded the anticipated percentage of problem assets prior to 2007, which are composed of net charge-offs and noncurrent assets. The ALLL indicator suggests that the amount of loan loss provisioning since the recession covers net charge-offs. The percentage of noncurrent loans, however, must decline even more relative to the current level of ALLL provisioning (or ALLL provisioning must increase more) before the industry can fully cover its anticipated default risks. Although the ALLL indicator was constructed for illustrative purposes, the amount of loan loss allowance of noncurrent loans and leases, also referred to as the coverage ratio , is a more commonly used metric to assess the ability to absorb losses from nonperforming assets (as shown in Figure 5 ). A coverage ratio below 100% indicates that there is insufficient provisioning to cover weak loans that could go into further distress. Since the recession, regulators have required banks to increase loan-loss provisioning (as well as other components of regulatory capital) levels to better match the levels of problem loans. The asset (lending) growth rate of the banking industry is computed using two methodologies (illustrated in Figure 6 ). For both methodologies, the total assets per quarter were initially averaged for each year, arguably adjusting for seasonal movements in lending activity over the year. The asset growth rate (represented by the more volatile striped bars) is computed by simply calculating the percentage change of the average total assets from year to year. The asset growth rate (represented by the solid bars) is computed using a moving average smoothing technique that reduces short-term volatility in data. Some economists prefer analyzing smoothed data series to curtail overstating observed activity or directional change. Hence, the asset growth rate using the moving average or smoothing methodology fell below negative 2% beginning in the first quarter of 2009, which had not occurred since the 1990-1991 recession; the second and fourth quarters of 2009 also saw negative asset growth. Given the magnitude of loan repayment problems, banks grew more cautious about lending (or allowing their asset portfolios to grow) to avoid the risk of further weakening their ALLL and capital reserve positions. The bank lending rate has increased since the 2007-2009 recession. Except for the 2001 recession, the more recent growth rates are below the pre-recessionary levels. Figure 7 illustrates some of the more common types of asset holdings in the aggregate banking portfolio. Since the 2007-2009 recession, the banking system holds larger shares of cash and smaller shares of residential mortgages, which is computed in Figure 7 using 1-4 family residential mortgages and home equity lines of credit. The share of cash holdings has more than doubled since 2000 to approximately 12% of aggregate portfolio holdings. The increase in cash holdings would be consistent with the increase in regulatory capital requirements for banks as shareholders purchase bank stocks with cash. Conversely, the share of residential mortgage credit, which peaked to almost 24% in 2005, has since steadily declined (by more than 33%) to approximately 15%. The share of commercial and industrial (C&I) lending has seen a decrease of approximately 24% since 2000, but it appears to be rising since the 2007-2009 recession. As of 2015, the total asset shares represented by commercial real estate lending, consumer loans (e.g., credit cards, installment loans), and securities (e.g., state and municipal bonds, U.S. Treasury securities) approximate pre-recession levels. Lastly, a trading account holds assets that the bank would like to sell or trade. Although banks wanted to sell more assets during the recession, the share of assets for sale has returned to and has fallen below pre-recessionary levels. As previously stated, banks typically borrow funds from depositors for shorter periods of time relative to their originated loans. Banks must continuously renew their short-term borrowings until longer-term loans have been fully repaid. For example, suppose a bank originates a consumer loan that is expected to be repaid in full over two years. Over the two years that the loan is being repaid, the bank will simultaneously "fund the loan," meaning that it will treat its depositors' funds as a sequence of quarterly (for a total of eight quarters) or monthly (for a total of 24 months) short-term loans and make periodic interest payments to depositors. The spread or difference between lending long and borrowing short is known as the net interest margin . Typically, smaller banks engage in "relationship banking," meaning that they develop close familiarity with their respective customer bases and provide financial services within a circumscribed geographical area. Relationship banking allows these institutions to capture lending risks that are unique, infrequent, and localized. These institutions, which rely heavily on commercial (real estate and retail) lending and funding with deposits, typically have higher net interest margins than large banks. Funding loans with deposits is cheaper than accessing the short-term financial markets, particularly for small institutions that do not have the transaction volume or size to justify the higher costs. In contrast, large institutions typically engage in "transactional banking" or high-volume lending that employs automated underwriting methodologies that often cannot capture atypical lending risks. Large banks are not as dependent upon deposits to fund their lending activities because of their greater ability to access short-term money markets. Large banks typically have lower spreads because their large-scale activities generate large amounts of fee income from a wide range of activities, which can be used to cover the costs of borrowing in the short-term money markets. Revenues are earned by originating and selling large amounts of loans to nonbank institutions, such as government-sponsored enterprises (Fannie Mae and Freddie Mac) and non-depository institutions that hold financial assets (e.g., insurance companies, hedge funds). A large share of fees are still generated from traditional banking activities (e.g., safe deposit, payroll processing, trust services, payment services) and from facilitating daily purchase and payment transactions, in which service fees may be collected from checking, money orders, and electronic payment card (debit and credit) transactions. Hence, transactional or high-volume banking activities allow large banks to generate fee income and engage in financial transactions characterized by minimum deal size or institutional size requirements, which simultaneously act as a participation barrier for community banks. Because of the differences in the composition of bank revenue streams, the net interest margins and fee income streams are illustrated by asset size categories. Figure 8 presents the net interest margins (or spreads) by bank size. By 2009, the net interest margins had declined for small banks, but they still remained higher over time than the margins for larger banks. The net interest margins for large banks increased over the recession period as they experienced a large influx of deposits during the recession, perhaps due to uncertainty in the money market; this "flight to safety" influx resulted in a substantial drop in their funding costs. In other words, large banks were able to rely relatively less on short-term financial markets and could, instead, take advantage of cheaper funding from deposits. Although net interest margins may appear to be returning to pre-recession trends, the future performance of this spread would still be affected by a shift in the composition of asset holdings. For example, the spread may be affected by an increase in liquid asset holdings (e.g., securities backed by the U.S. federal government), perhaps due to weaker demand for more illiquid loans (e.g., mortgages, commercial loans) or lower capital requirements associated with holding more liquid loans. Banks may alter the composition of their asset portfolios, attempting to seek higher yielding lending opportunities (e.g., holding less mortgages and more credit card loans) to help maintain spreads above 3%. Bank spreads may also be affected by the amount of deposits that remain or flow out of the banking system as the economy strengthens. Hence, it has become more challenging to predict future profitability arising from more traditional lending activities. Figure 9 presents noninterest income as a percentage of assets by bank size. The overall trend of fee-generating activities has rebounded since the recession, but there appears to be more volatility in fee-income revenues of smaller institutions. Although greater reliance upon fee income as a percentage of (large) bank income suggests a reduction in exposure to credit and funding risks, it may not necessarily translate into greater stability of earnings streams. For example, banks no longer generate as much fee income by selling (mortgage) loans to private-label securitization markets, particularly those largely abandoned by investors at the beginning of the financial crisis. In other words, high-volume fee-generating transactions are still dependent upon fluctuations in investor demand for securities created from securitized (structured finance) deals, which adds variability to income. In addition, regulatory costs may reduce fee income. Recent regulation of fees that large institutions may collect from debit transactions would affect the earnings streams. Banks might respond by seeking new opportunities to provide financial services to generate new fee revenues. Hence, future fee-generating activities are still affected by financial market uncertainty. Since the 2007-2009 financial crisis, the banking industry has exhibited profitability. Net interest margins and fee income as a percentage of assets are less volatile now than when the U.S. economy was in recession, but they are still lower in comparison to 2000. The industry is still accumulating sufficient reserves to cover noncurrent assets. These factors may be influencing the asset growth rate, which has been positive since 2011, but remains below the average rate of growth observed over the past two decades. Profitability in the banking industry should not be interpreted as evidence of a return to previous lending patterns. The industry is adapting its business models to the post-recession regulatory environment in which higher overall capital requirements would be expected to increase funding costs and the choice of financial assets held in portfolios. Because large banks may be less dependent upon traditional lending activities than smaller banks, large institutions might be able to generate sufficient fee income from a wide range of other financial activities to remain profitable even if lending activity does not resemble pre-recessionary levels. Hence, profitability trends may differ for banks by size.

A commercial bank is an institution that obtains either a federal or state charter that allows it to accept federally insured deposits and pay interest to depositors. In addition, the charter allows banks to make residential and commercial mortgage loans; to provide check cashing and clearing services; to underwrite securities that include U.S. Treasuries, municipal bonds, commercial paper, and Fannie Mae and Freddie Mac issuances; and to conduct other activities as defined by statute, namely the National Banking Act. Commercial banks are limited in what they can do. For example, the Glass-Steagall Act separates commercial banking (i.e., activities that are permissible for depository institutions with a bank charter) from investment banking (i.e., activities that are permissible for brokerage firms, which do not include taking deposits or providing loans). Congressional interest in the financial conditions of depository banks, or the commercial banking industry, has increased in light of the financial crisis that unfolded in 2007-2009, which resulted in a large increase in the number of distressed institutions. Providing credit during the financial crisis was difficult for the banking system. Thus, an analysis of post-financial crisis trends that pertain to lending activity may provide some useful insights about recovery of the banking system. The financial condition of the banking industry can be examined in terms of profitability, lending activity, and capitalization levels (to buffer against the financial risks). This report focuses primarily on profitability and lending activity levels. Issues related to higher bank capitalization requirements are discussed in CRS Report R42744, U.S. Implementation of the Basel Capital Regulatory Framework, by [author name scrubbed]. The banking system generally has substantially more small banks (i.e., those with $1 billion or less in assets) relative to larger size banks. For several decades, bank assets have increased while the number of banking institutions has decreased. The banking industry continues consolidating, with more of the industry's assets held by a smaller number of institutions. Generally speaking, by most measures, the health of the banking system has improved since 2009. There are fewer problem banks since the peak in 2011, as well as fewer bank failures in comparison to the peak amount of failures in 2010. The return on assets (RoA) and return on equity (RoE) for the banking industry, expressed as percentages, have rebounded since the financial crisis. Although RoA and RoE have not returned to pre-recessionary levels, the range of percentages that should be associated with optimal performance of the banking system is subjective. The banking system currently has increased its capital reserves that have been designated to buffer against unforeseen macroeconomic and financial shocks. The banking system also has loan-loss reserves to sufficiently cover losses expected to be uncollectible. For loans that are noncurrent (delinquent) but have not yet gone into default, however, the banking system still needs to rebuild this loan-loss capacity if such loans do become uncollectible. Hence, news of industry profitability should be tempered by the news that aggregate loan-loss provisions still must increase to sufficiently buffer against noncurrent loans.

R ecently, several states have enacted legislation intended to capture use taxes on sales made by out-of-state sellers to in-state customers. These laws are commonly referred to as "Amazon laws," in reference to the Internet retailer. A use tax is the companion to a sales tax--in general, the sales tax is imposed on the sale of goods and services within the state's borders, while the use tax is imposed on purchases made by the state's residents from out-of-state (remote) sellers. The purpose of the use tax is to dissuade residents from purchasing goods and services from out-of-state merchants in order to avoid the sales tax. Two common misconceptions exist about the ability of states to impose sales and use taxes on Internet sales. The first is that the Internet Tax Freedom Act, enacted in 1998, prevents such taxation. This is not true. The act contains a moratorium only on state and local governments imposing "multiple or discriminatory taxes on electronic commerce," as well as new taxes on Internet access services. As a result of this law, a state may not, for example, impose a tax on electronic commerce that is not imposed on similar transactions made through other means (such as traditional "brick and mortar" stores). It remains permissible, however, for a state to impose a sales or use tax that is administered equally without regard to whether the sale was face-to-face, mail order, or Internet. For more information on the act, see CRS Report R43800, Taxation of Internet Sales and Access: Legal Issues , by [author name scrubbed] and CRS Report R43772, The Internet Tax Freedom Act: In Brief , by [author name scrubbed]. The second misperception is that the U.S. Constitution prohibits states from taxing Internet sales. States have the power to tax their residents who purchase goods or services on the Internet, even when the seller is located outside the state and has no real connection with it. However, if the seller does not have a constitutionally sufficient connection ("nexus") to the state, then the seller is under no enforceable obligation to collect the tax and remit it to the state. In this situation, the purchaser is still generally responsible for paying the use tax, but few comply and the tax revenue goes uncollected. As a result of this low compliance rate and the increasing amount of Internet commerce, states have been motivated to develop new ways--"Amazon laws"--to capture uncollected use taxes, while still complying with the U.S. Constitution. The report first examines the Constitution's requirements as to state laws that impose use tax collection obligations on remote sellers. It then looks at how these requirements apply to state "Amazon laws." As discussed below (" State "Amazon Laws" "), some states have enacted legislation aimed at collecting use taxes from Internet sales by imposing tax collection or notification requirements on Internet retailers. These laws potentially implicate two provisions of the U.S. Constitution: the Fourteenth Amendment's Due Process Clause and the dormant Commerce Clause. The clauses have different purposes, and a state's imposition of tax obligations on a retailer may be acceptable under one and not the other. The focus for due process is whether imposition of the obligation or liability is fair, while the concern under the dormant Commerce Clause is whether it unduly burdens interstate commerce. Together, these clauses impose two requirements relevant for analyzing state "Amazon laws": (1) each requires there be some type of nexus between the state and remote seller before the state can impose obligations on the seller; and (2) the dormant Commerce Clause prohibits states from discriminating against out-of-state sellers. One point to make at the outset is that Congress has the authority under its commerce power to authorize state action that would otherwise violate the Commerce Clause, so long as it is consistent with other provisions in the Constitution. Before a state may impose a tax liability on an out-of-state business, a constitutionally sufficient connection or "nexus" must exist between the state and business. Nexus is required by both the Due Process Clause and the dormant Commerce Clause. Due process requires there be a sufficient nexus between the state and the seller so that (1) the state has provided some benefit for which it may ask something in return and (2) the seller has fair warning that its activities may be subject to the state's jurisdiction. The dormant Commerce Clause requires a nexus in order to ensure that the state's imposition of the liability does not impermissibly burden interstate commerce. The nexus standard for sales and use tax collection liability is not the same under both clauses. In the 1992 case Quill v. North Dakota , the Supreme Court ruled that, absent congressional action, the standard required under the dormant Commerce Clause is the seller's physical presence in the state, while due process imposes a lesser standard under which the seller must have directed purposeful contact at the state's residents. The Court reasoned that physical presence was required under the dormant Commerce Clause because otherwise collecting the tax would impermissibly burden interstate commerce in light of the country's numerous taxing jurisdictions. With respect to the Fourteenth Amendment, the Court explained that while it had previously found physical presence to be necessary for due process, its jurisprudence had evolved so that physical presence was not necessary so long as the seller had directed sufficient action toward the state's residents. The Court found such purposeful contact existed in Quill since the seller had "continuous and widespread solicitation of business" within the state. As mentioned, Congress has the authority under its commerce power to authorize state action that would otherwise violate the Commerce Clause, so long as it is consistent with other provisions in the Constitution. Thus, Congress could change the "physical presence" standard, so long as the new standard complied with due process. Congress has not used this authority, although legislation has been introduced in the 114 th Congress ( S. 698 , Marketplace Fairness Act; H.R. 2775 , Remote Transactions Parity Act of 2015). For more information on the acts, see CRS Report R43800, Taxation of Internet Sales and Access: Legal Issues , by [author name scrubbed]. The Supreme Court has not revisited the issue of when states may impose use tax obligations on remote sellers since Quill . Nonetheless, several pre- Quill cases provide guidance on determining when a state may impose tax collection responsibilities on out-of-state retailers. Clearly, a state can impose such responsibilities on a company with a "brick and mortar" retail store or offices in the state. This seems to be the case even if the in-state offices and the sales giving rise to the tax liability are unrelated to one another. For example, the Court held that a state could require a company to collect use taxes on mail order sales to in-state customers when the company maintained two offices in the state that generated significant revenue, even though the offices were used to sell advertising space in the company's magazine and had nothing to do with the company's mail-order business. The Court firmly rejected the argument that there needed to be a nexus not only between the company and the state, but also between the state and the sales activity. It reasoned that there was a sufficient connection between the state and company as the two in-state offices had enjoyed the "advantage of the same municipal services" whether or not they were connected to the mail-order business. Absent some type of physical office or retail space in the state, it also seems that having in-state salespeople or agents is sufficient contact. In several cases pre-dating Quill , the Court upheld the power of the state to impose use tax collection liabilities on remote sellers when the sales were arranged by local agents or salespeople. In Scripto, Inc. v. Carson , the Court held that a state could impose use tax collection liability on an out-of-state company that had no presence in the state other than 10 "independent contractors" who solicited business for the company. These individuals had limited power and had no authority to make collections or incur debts on behalf of the company. They merely forwarded the orders they solicited to the company's out-of-state headquarters, where the decision to fill the order was made. Finding their status as independent contractors rather than employees to be constitutionally insignificant, the Court held that there was a constitutionally sufficient nexus between the company and the state because the individuals had conducted "continuous local solicitation" in the state on behalf of the company. The Court later described this case as "represent[ing] the furthest constitutional reach to date" of a state's ability to impose use tax collection duties on a remote seller. In addition to requiring nexus, the Commerce Clause prohibits state laws that discriminate against interstate commerce. A state law that "regulates even-handedly to effectuate a legitimate local public interest" and has "only incidental" effect on interstate commerce is constitutionally permissible "unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits." On the other hand, a state law that facially discriminates against out-of-state sellers is "virtually per se invalid." Traditionally, such laws have only been permissible if they meet the high standard of "advanc[ing] a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives." Thus, a state law that subjected remote sellers to tax-related burdens not imposed on in-state sellers would appear to be facially discriminatory and subject to a high level of judicial scrutiny. In light of consumers' low compliance with state use tax laws and the increasing amount of Internet commerce, some states have enacted legislation that attempts to capture uncollected use taxes from online sales. Two primary approaches have developed: "click-through nexus" and notification requirements. This section first examines these approaches by focusing on the laws in the first states to enact legislation: New York's click-through nexus statute, enacted in 2008, and Colorado's 2010 required notification law. It then examines whether these laws violate the U.S. Constitution. One approach adopted by some states is "click-through nexus." This term arises from the "click-throughs"--online referrals--that some Internet retailers solicit through programs where an individual or business (called an associate or affiliate) places a link on its website directing Internet users to an online retailer's website. The associate or affiliate receives compensation for their referral, which is typically based on the sales that occur when users click through from one of these links and purchase goods and services. "Click-through nexus" statutes require an online retailer to collect use taxes on sales to customers located in the taxing state based on the physical presence in that state of the retailer's associates or affiliates. An example of such a law is the one enacted by New York in 2008. New York requires vendors to collect sales and use taxes, with vendors defined to include any entity which "solicits business" through "employees, independent contractors, agents or other representatives." The 2008 law added a statutory presumption that sellers of taxable property and services meet this requirement "if the seller enters into an agreement with a resident of this state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet website or otherwise, to the seller." The presumption may be rebutted by proof that the resident "did not engage in any solicitation in the state on behalf of the seller that would satisfy the [Constitution's] nexus requirement" during the preceding four sales and use tax quarterly periods. Guidance issued by the state tax agency provides that the presumption is not triggered by placing an advertisement. The guidance also discusses how to rebut the presumption. The second approach requires remote retailers to provide information to the state and customers, rather than requiring the retailers to collect the use taxes themselves. This approach is illustrated by Colorado's law, which was enacted in 2010. Among other things, Colorado's law imposes three duties on any "retailer that does not collect Colorado sales tax." Retailers must (1) inform Colorado customers that a sales or use tax is owed on certain purchases and that it is the customer's responsibility to file a tax return; (2) send each Colorado customer a year-end notice of the date, amount, and category of each purchase made during the previous year, as well as a reminder that the state requires taxes be paid and returns filed for certain purchases; and (3) provide an annual statement to the Colorado department of revenue for each in-state customer showing the total amount paid for purchases during the year. Unless the retailer can show reasonable cause, each failure to notify a customer about the duty to file a state use tax return carries a $5 penalty, while each failure of the other two duties carries a $10 penalty. State "Amazon laws" potentially implicate the dormant Commerce Clause and the Fourteenth Amendment's Due Process Clause. In fact, both the New York and Colorado laws have been challenged on these grounds. As discussed below, it appears Colorado's notification law is the more constitutionally problematic approach. With respect to click-through nexus laws such as New York's, it might be argued that the law complies with Quill by targeting only Internet retailers whose affiliate programs create some degree of physical presence in the state and whose affiliates solicit (i.e., do more than merely advertise) on the retailer's behalf. Examined in this light, the law might be characterized as similar to the one at issue in Scripto , where the Court upheld the power of the state to require use tax collection by a remote seller whose sales were arranged by local independent contractors who forwarded the orders they solicited to the company's out-of-state headquarters. In that case, the Court made clear that the individuals' title was unimportant, as was the fact that they had no authority over the sales (e.g., could not approve them). Rather, the key factor in the Court's decision was that the individuals had conducted "continuous local solicitation" in the state on behalf of the company. By targeting those affiliates that solicit in the state, it seems the argument could be made that the New York law is within the Court's Scripto holding and, therefore, is constitutional with respect to affiliates with sufficient solicitation activities. On the other hand, it might be argued there is reason to question whether linking on a website is substantively similar to the "continuous local solicitation" conducted by the salespeople in Scripto . It might be argued that the Scripto salespeople's ongoing activities are distinguishable from the one-time action of placing a link on a website. A court examining whether this difference is constitutionally significant might be particularly hesitant about extending Scripto's holding since the Court later referred to it as "represent[ing] the furthest constitutional reach to date" of a state's ability to require use tax collection by a remote seller. Another question may be whether a court would find a click-through nexus law to be unconstitutionally burdensome because it requires remote sellers to potentially monitor thousands of affiliates in order to determine whether the nexus requirement has been met. In 2012, New York's highest court rejected facial challenges to the law on both Commerce Clause and Fourteenth Amendment grounds. The plaintiffs--Amazon and Overstock.com--appealed the decision to the U.S. Supreme Court, but the Court declined to hear it. Before the New York court, Overstock and Amazon asserted that the New York law was facially unconstitutional under the Commerce Clause because it applied to sellers without a physical presence in the state. In rejecting this argument, the court noted it had previously held that the physical presence required under Quill did not have to be "substantial," but rather "demonstrably more than a slightest presence" and could be met if economic activities were performed in the state on the seller's behalf. Applying that standard, the court found it was met since the law was based on "[a]ctive, in-state solicitation that produces a significant amount of revenue." The court also noted, that while not dispositive, sellers did not pay these taxes themselves, but rather "are collecting taxes that are unquestionably due, which are exceedingly difficult to collect from the individual purchasers themselves, and as to which there is no risk of multiple taxation." With respect to the Due Process Clause, the court found that "a brigade of affiliated websites compensated by commission" was clearly sufficient to meet Quill's standard of "continuous and widespread solicitation of business within a State." The court also rejected the plaintiffs' argument that the law violated due process because the presumption that retailers were required to collect use tax if they entered into an online referral agreement with a state resident was irrational and essentially irrebuttable. The court determined that the presumption (1) was reasonable because it presumed that affiliate website owners would solicit in-state acquaintances in order to increase referrals and therefore their compensation and (2) was rebuttable, as evidenced by the state tax agency guidance that discussed the methods and information needed to rebut it. While other states have adopted laws similar to New York's, it does not appear that any court has examined the constitutionality of those laws. Colorado's notification requirements appear to raise potentially significant constitutional concerns. This is because they apply only to companies that do not collect Colorado sales and use taxes, which would appear to be primarily those retailers without a substantial nexus to the state. In other words, the law applies to companies that do not have a physical presence in the state. The first question is whether this violates due process. While the law targets companies without physical presence in the state, it applies to "retailers" who, by definition, must be "doing business" in the state. This means the notification law applies only to retailers who have some type of contact with the state. However, there may be retailers for whom the "doing business" standard would not result in the requisite minimum connection with the state. Additionally, the Colorado statute raises two issues under the Commerce Clause. First, since the law applies to companies that do not have a physical presence in the state, it would appear that the notification requirements would have to be distinguishable from the use tax collection responsibilities at issue in Quill in order to be permissible. While some might attempt to distinguish between them since the notification law does not actually impose any tax collection obligation, they are arguably functionally similar since all are intended to increase use tax collection. As such, it might be argued that the notification requirements are at least as burdensome as tax collection obligations since both require similar types of recordkeeping and, unlike collection responsibilities, the notification law also involves reporting information to the consumer. A court adopting this characterization of the notification duties would likely find them to be an impermissible burden on interstate commerce. Second, by targeting remote sellers that do not have a physical presence in the state, the law imposes duties on out-of-state business that are not similarly imposed on Colorado businesses. Thus, it appears to be a facially discriminatory law. As discussed above, such laws are "virtually per se invalid" and only permissible if they meet the high standard of "advanc[ing] a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives." Whether the Colorado law would survive this strict scrutiny is open to question. While collecting use tax on purchases made to in-state customers seems an obvious legitimate government purpose, some might argue that there are other alternatives to Colorado's approach, such as collecting use tax from state residents on the state income tax form. In 2012, a federal district court struck down the law, examining both of the above arguments. The court found that the notification requirements were "inextricably related in kind and purpose" to the tax collection responsibilities at issue in Quill and therefore subject to the physical presence standard, which the law plainly did not meet. The court further found that the law only applied to, and thus discriminated against, out-of-state vendors and determined that it failed to survive strict scrutiny. While there were legitimate governmental interests involved (e.g., improving tax collection and compliance), the court determined that the state had not provided evidence to show that these interests could not be served by reasonable nondiscriminatory alternatives, such as collecting use tax on the resident income tax return and improving consumer education . However, in August 2013, the Tenth Circuit Court of Appeals dismissed the case after finding that the Tax Injunction Act (TIA) prohibits federal courts from hearing it. The act is a federal law that provides, The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State. In March 2015, the Supreme Court held that the TIA does not apply to this suit. The Court concluded that the notice and reporting requirements were not an act of "assessment, levy, or collection" within the specific meaning of those terms as used in tax law, and that the suit could not be said to "restrain" the assessment, levy, or collection of a tax if it "merely inhibits," rather than stops, those activities. While holding that the TIA did not enjoin federal courts from hearing the suit, the Court left open the possibility that it might be barred by the comity doctrine, under which federal courts refrain from interfering with state fiscal operations "in all cases where the Federal rights of the persons could otherwise be preserved unimpaired." The Court instructed the Tenth Circuit to determine if the doctrine applied to this suit. The Court's opinion was unanimous. Notably, Justice Kennedy wrote a concurrence in which he raised the possibility that Quill was wrongly decided and should be reconsidered in light of technological advances and the development of the Internet. Characterizing the Quill holding as "tenuous" and "inflicting extreme harm and unfairness on the States," he stated that "[i]t should be left in place only if a powerful showing can be made that its rationale is still correct."

As more purchases are made over the Internet, states are looking for new ways to collect taxes on online sales. There is a common misperception that the U.S. Constitution prohibits states from taxing Internet sales. This is not true. States may impose sales and use taxes on such transactions, even when the retailer is outside the state. However, if the seller does not have a constitutionally sufficient connection ("nexus") to the state, then the seller is under no enforceable obligation to collect the tax and remit it to the state. The purchaser is still generally responsible for paying the tax, but few comply and the tax revenue goes uncollected. Nexus is required by two provisions of the U.S. Constitution: the Fourteenth Amendment's Due Process Clause and the Commerce Clause. In the 1992 case Quill v. North Dakota, the Supreme Court held that the dormant Commerce Clause requires that a seller have a physical presence in a state before the state may impose tax collection obligations on it, while due process requires only that the seller have purposefully directed contact at the state's residents. Notably, under its power to regulate commerce, Congress may choose a different standard than physical presence, so long as it is consistent with other provisions of the Constitution, including due process. Congress has not used this authority to provide a different standard, although legislation has been introduced in the 114th Congress (S. 698, Marketplace Fairness Act; H.R. 2775, Remote Transactions Parity Act of 2015). In recent years, some states have enacted laws, often called "Amazon laws" in reference to the Internet retailer, to try to capture uncollected taxes on Internet sales and yet still comply with the Constitution's requirements. States have used two basic approaches. The first is enacting "click-through nexus" statutes, which impose the responsibility for collecting tax on those retailers who compensate state residents for placing links on their websites to the retailer's website (i.e., use online referrals). The other is requiring remote sellers to provide information about sales and taxes to the state and customers. New York was the first state to enact click-through nexus legislation, in 2008. In 2010, Colorado was the first to pass a notification law. "Amazon tax laws" have received significant publicity, in part due to questions about their constitutionality and whether they impermissibly impose duties on remote sellers without a sufficient nexus to the state. Both the New York and Colorado laws have been challenged on constitutional grounds. While the New York click-through nexus law was upheld by the state's highest court against facial challenges on due process and Commerce Clause grounds, Colorado's notification law was struck down by a federal district court as impermissible under the Commerce Clause for applying to sellers without a physical presence in the state and discriminating against out-of-state retailers. However, the Tenth Circuit Court of Appeals subsequently determined that federal courts do not have jurisdiction to hear the Colorado challenge due to the federal Tax Injunction Act. In March 2015, the U.S. Supreme Court held in Direct Marketing Association v. Brohl that the Tax Injunction Act did not apply to this suit. However, the Court left open the possibility that the suit might be barred under the comity doctrine and instructed the Tenth Circuit to determine if the doctrine applied. Notably, Justice Kennedy wrote a concurrence in which he suggested that Quill was wrongly decided and should be reconsidered in light of technological advances and the development of the Internet.

During the 110 th Congress, several House and Senate committees have engaged in oversight activities, including hearings and requests for expeditious production of documents and information regarding the Administration's warrantless foreign intelligence surveillance programs, as possible changes to the Foreign Intelligence Surveillance Act of 1978, as amended, were explored. In July 2007, an unclassified summary of the National Intelligence Estimate on "The Terrorist Threat to the U.S. Homeland" was released. It expressed the judgment, in part, that the U/S. Homeland will face a persistent and evolving threat over the next three years, the main threat coming from Islamic terrorist groups and cells, particularly Al Qaeda. On August 2, 2007, the Director of National Intelligence (DNI) released a statement on "Modernization of the Foreign Intelligence Surveillance Act." In his statement, Admiral McConnell viewed such modernization as necessary to respond to technological changes and to meet the Nation's current intelligence collection needs. He deemed it essential for the Intelligence Community to provide warning of threats to the United States. He perceived two critically needed changes. First, he stated that a court order should not be required for gathering foreign intelligence from foreign targets located overseas, although he did agree to court review of related procedures after commencement of the needed collection. Second, he contended that liability protection was needed for those who furnished aid to the government in carrying out its foreign intelligence collection efforts. On August 5, 2007, the Protect America Act of 2007, P.L. 110-55 , was enacted into law with a 180 day sunset provision, providing a temporary solution to concerns raised by the Director of National Intelligence. Both the House and the Senate have considered or are considering possible legislation to provide a longer-term statutory approach to these concerns. On November 15, 2007, the House of Representatives passed H.R. 3773 , the Responsible Electronic Surveillance That is Overseen, Reviewed, and Effective Act of 2007 or the RESTORE Act of 2007. On October 26, 2007, Senator Rockefeller reported S. 2248 , the Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2007 or the FISA Amendment Act of 2007, an original bill, from the Senate Select Committee on Intelligence. S. 2248 was referred to the Senate Judiciary Committee on November 1, 2007. On November 16, 2007, S. 2248 was reported out of the Senate Judiciary Committee by Senator Leahy with an amendment in the nature of a substitute. On December 14, 2007, Senator Reid made a motion to proceed with consideration of S. 2248 , and presented a cloture motion on the motion to proceed. The motion to proceed was then withdrawn. On December 17, 2007, the Senate considered the motion to proceed with the measure. Cloture on the motion to proceed was invoked by a vote of 76-10, Record Vote Number 435. After some debate in the closing hours before the Senate broke for the holidays, a decision was made to revisit the measure when the Members returned in January. Senate floor activities on S. 2248 resumed on January 23 and 24, 2008. A modified version of the Senate Judiciary Committee's amendment in the nature of a substitute to S. 2248 was tabled. Senator Reid sought unanimous consent for consideration of the House-passed bill, H.R. 3773 , but Senator McConnell objected. Senator Rockefeller, for himself and Senator Bond, proposed an amendment in the nature of a substitute to S. 2248 ( S.Amdt. 3911 ). On January 28, 2008, a cloture motion by Senator McConnell on this amendment failed to pass. A cloture motion on an amendment proposed by Senator Reid to S. 2248 to extend the sunset on the Protect America Act for an additional 30 days ( S.Amdt. 3918 ) also fell short of the required votes. Other amendments to S. 2248 have been proposed. On January 29, 2008, both the House and the Senate passed H.R. 5104 , a 15-day extension to the sunset for the Protect America Act, to allow further time to consider, pass, and go to conference on proposed legislation to amend FISA, while ensuring that the intelligence community would have the authority it needed in the intervening period. Pursuant to an agreement and order of January 31, 2008, S.Amdts. 3909, as modified; 3932, as modified; 3960, as modified; and S.Amdt. 3945 were agreed to, while other amendments were scheduled for floor debate. In the ensuing floor consideration to date, S.Amdt. 3941 was agreed to, while S.Amdts. 3913 and 3915 failed to pass on February 7, 2008. S.Amdt. 3930 fell short of the requisite 60 votes and was withdrawn on February 6, 2008. Still pending are S.Amdts. 3938, as modified, 3911, 3907, 3927, 3919, 3920, and 3910. Floor debate is anticipated to continue early next week, with additional votes expected on Tuesday, February 12, 2008. H.R. 3773 , S. 2248 and the Senate amendment in the nature of a substitute to S. 2248 , each includes amendments to the Foreign Intelligence Surveillance Act. This report provides a side by side comparison of the provisions of these three measures, using H.R. 3773 as the basis for the comparison. As title I of FISA defines a number of key terms critical to understanding the import of the bills' language, a glossary of FISA terms as defined in section 101 of FISA, 50 U.S.C. SS 1801 is attached to assist in understanding the effect of these measures. Senator Reid introduced two additional FISA bills on December 10, 2007, S. 2440 and S. 2441 , which were read twice the following day and placed on the Senate Legislative Calendar as Numbers 529 and 530, respectively. S. 2402 was introduced by Senator Specter on December 3, 2007, and referred to the Senate Judiciary Committee. In Committee markup on December 13, 2007, an amendment in the nature of a substitute to S. 2402 was adopted by unanimous consent. Then, by a vote of 5-13, the Committee rejected S. 2402 , as amended. The proposal would have permitted substitution of the government for electronic communication service providers in law suits where certain criteria were met. These bills will not be included in this side-by-side comparison. As used in title I of FISA, 50 U.S.C. SS 1801 et seq .: (a) "Foreign power" means-- (1) a foreign government or any component thereof, whether or not recognized by the United States; (2) a faction of a foreign nation or nations, not substantially composed of United States persons; (3) an entity that is openly acknowledged by a foreign government or governments to be directed and controlled by such foreign government or governments; (4) a group engaged in international terrorism or activities in preparation therefor; (5) a foreign-based political organization, not substantially composed of United States persons; or (6) an entity that is directed and controlled by a foreign government or governments. (b) "Agent of a foreign power" means-- (1) any person other than a United States person, who-- (A) acts in the United States as an officer or employee of a foreign power, or as a member of a foreign power as defined in subsection (a)(4) of this section; (B) acts for or on behalf of a foreign power which engages in clandestine intelligence activities in the United States contrary to the interests of the United States, when the circumstances of such person's presence in the United States indicate that such person may engage in such activities in the United States, or when such person knowingly aids or abets any person in the conduct of such activities or knowingly conspires with any person to engage in such activities; or (C) engages in international terrorism or activities in preparation therefore; or (2) any person who-- (A) knowingly engages in clandestine intelligence gathering activities for or on behalf of a foreign power, which activities involve or may involve a violation of the criminal statutes of the United States; (B) pursuant to the direction of an intelligence service or network of a foreign power, knowingly engages in any other clandestine intelligence activities for or on behalf of such foreign power, which activities involve or are about to involve a violation of the criminal statutes of the United States; (C) knowingly engages in sabotage or international terrorism, or activities that are in preparation therefor, for or on behalf of a foreign power; (D) knowingly enters the United States under a false or fraudulent identity for or on behalf of a foreign power or, while in the United States, knowingly assumes a false or fraudulent identity for or on behalf of a foreign power; or (E) knowingly aids or abets any person in the conduct of activities described in subparagraph (A), (B), or (C) or knowingly conspires with any person to engage in activities described in subparagraph (A), (B), or (C). (c) "International terrorism" means activities that-- (1) involve violent acts or acts dangerous to human life that are a violation of the criminal laws of the United States or of any State, or that would be a criminal violation if committed within the jurisdiction of the United States or any State; (2) appear to be intended-- (A) to intimidate or coerce a civilian population; (B) to influence the policy of a government by intimidation or coercion; or (C) to affect the conduct of a government by assassination or kidnapping; and (3) occur totally outside the United States, or transcend national boundaries in terms of the means by which they are accomplished, the persons they appear intended to coerce or intimidate, or the locale in which their perpetrators operate or seek asylum. (d) "Sabotage" means activities that involve a violation of chapter 105 of title 18, or that would involve such a violation if committed against the United States. (e) "Foreign intelligence information" means-- (1) information that relates to, and if concerning a United States person is necessary to, the ability of the United States to protect against-- (A) actual or potential attack or other grave hostile acts of a foreign power or an agent of a foreign power; (B) sabotage or international terrorism by a foreign power or an agent of a foreign power; or (C) clandestine intelligence activities by an intelligence service or network of a foreign power or by an agent of a foreign power; or (2) information with respect to a foreign power or foreign territory that relates to, and if concerning a United States person is necessary to-- (A) the national defense or the security of the United States; or (B) the conduct of the foreign affairs of the United States. (f) "Electronic surveillance" means-- (1) the acquisition by an electronic, mechanical, or other surveillance device of the contents of any wire or radio communication sent by or intended to be received by a particular, known United States person who is in the United States, if the contents are acquired by intentionally targeting that United States person, under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes; (2) the acquisition by an electronic, mechanical, or other surveillance device of the contents of any wire communication to or from a person in the United States, without the consent of any party thereto, if such acquisition occurs in the United States, but does not include the acquisition of those communications of computer trespassers that would be permissible under section 2511(2)(i) of title 18; (3) the intentional acquisition by an electronic, mechanical, or other surveillance device of the contents of any radio communication, under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes, and if both the sender and all intended recipients are located within the United States; or (4) the installation or use of an electronic, mechanical, or other surveillance device in the United States for monitoring to acquire information, other than from a wire or radio communication, under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes. (g) "Attorney General" means the Attorney General of the United States (or Acting Attorney General), the Deputy Attorney General, or, upon the designation of the Attorney General, the Assistant Attorney General designated as the Assistant Attorney General for National Security under section 507A of title 28, United States Code. (h) "Minimization procedures," with respect to electronic surveillance, means-- (1) specific procedures, which shall be adopted by the Attorney General, that are reasonably designed in light of the purpose and technique of the particular surveillance, to minimize the acquisition and retention, and prohibit the dissemination, of nonpublicly available information concerning unconsenting United States persons consistent with the need of the United States to obtain, produce, and disseminate foreign intelligence information; (2) procedures that require that nonpublicly available information, which is not foreign intelligence information, as defined in subsection (e)(1) of this section, shall not be disseminated in a manner that identifies any United States person, without such person's consent, unless such person's identity is necessary to understand foreign intelligence information or assess its importance; (3) notwithstanding paragraphs (1) and (2), procedures that allow for the retention and dissemination of information that is evidence of a crime which has been, is being, or is about to be committed and that is to be retained or disseminated for law enforcement purposes; and (4) notwithstanding paragraphs (1), (2), and (3), with respect to any electronic surveillance approved pursuant to section 1802(a) of this title, procedures that require that no contents of any communication to which a United States person is a party shall be disclosed, disseminated, or used for any purpose or retained for longer than 72 hours unless a court order under section 1805 of this title is obtained or unless the Attorney General determines that the information indicates a threat of death or serious bodily harm to any person. (i) "United States person" means a citizen of the United States, an alien lawfully admitted for permanent residence (as defined in section 1101(a)(20) of title 8), an unincorporated association a substantial number of members of which are citizens of the United States or aliens lawfully admitted for permanent residence, or a corporation which is incorporated in the United States, but does not include a corporation or an association which is a foreign power, as defined in subsection (a)(1), (2), or (3) of this section. (j) "United States," when used in a geographic sense, means all areas under the territorial sovereignty of the United States and the Trust Territory of the Pacific Islands. (k) "Aggrieved person" means a person who is the target of an electronic surveillance or any other person whose communications or activities were subject to electronic surveillance. (l) "Wire communication" means any communication while it is being carried by a wire, cable, or other like connection furnished or operated by any person engaged as a common carrier in providing or operating such facilities for the transmission of interstate or foreign communications. (m) "Person" means any individual, including any officer or employee of the federal government, or any group, entity, association, corporation, or foreign power. (n) "Contents," when used with respect to a communication, includes any information concerning the identity of the parties to such communication or the existence, substance, purport, or meaning of that communication. (o) "State" means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Trust Territory of the Pacific Islands, and any territory or possession of the United States.

On November 15, 2007, the House of Representatives passed H.R. 3773, the RESTORE Act of 2007. On October 26, 2007, Senator Rockefeller reported S. 2248, the Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2007 or the FISA Amendment Act of 2007, an original bill, from the Senate Select Committee on Intelligence. On November 16, 2007, S. 2248 was reported out of the Senate Judiciary Committee by Senator Leahy with an amendment in the nature of a substitute. On December 17, 2007, the Senate considered a motion to proceed with consideration of S. 2248. Cloture on the motion to proceed was invoked by a vote of 76-10, Record Vote Number 435. After some debate in the closing hours before the Senate broke for the holidays, a decision was made to revisit the measure when the Members returned in January. Senate floor activities on S. 2248 resumed on January 23 and 24, 2008. A modified version of the Senate Judiciary Committee's amendment in the nature of a substitute to S. 2248 was tabled. Senator Reid sought unanimous consent for consideration of the House-passed bill, H.R. 3773, but Senator McConnell objected. Senator Rockefeller, for himself and Senator Bond, proposed an amendment in the nature of a substitute to S. 2248 (S.Amdt. 3911). A cloture motion by Senator McConnell on this amendment did not pass. On January 29, 2008, both the House and the Senate passed H.R. 5104, a 15-day extension to the sunset for the Protect America Act, to allow further time to consider, pass, and go to conference on proposed legislation to amend FISA, while ensuring that the intelligence community would have the authority it needed in the intervening period. Pursuant to an agreement and order of January 31, 2008, S.Amdt. 3909, as modified, 3932, as modified, 3960, as modified, and S.Amdt. 3945 were agreed to, while other amendments were scheduled for floor debate. In the ensuing floor consideration to date, S.Amdt. 3941 was agreed to, while S.Amdts. 3913 and 3915 failed to pass on February 7, 2008. S.Amdt. 3930 fell short of the requisite 60 votes and was withdrawn on February 6, 2008. Still pending are S.Amdts. 3938, as modified, 3911, 3907, 3927, 3919, 3920, and 3910. Floor debate is anticipated to continue early next week, with additional votes expected on Tuesday, February 12, 2008. H.R. 3773, S. 2248, and the Senate Judiciary Committee's amendment in the nature of a substitute to S. 2248 each includes amendments to the Foreign Intelligence Surveillance Act. This report provides a side by side comparison of the provisions of these three measures. A glossary of FISA terms from section 101 of FISA, 50 U.S.C. SS 1801 is attached. Other FISA bills have also been introduced, such as S. 2440, S. 2441, and S. 2402. These bills are not included in this side-by-side comparison.

Social Security is financed primarily by payroll and self-employment taxes, as well as by a portion of the proceeds from the income taxation of Social Security benefits. The revenues are deposited in the U.S. Treasury. Social Security benefits and administrative expenses are also paid from the U.S. Treasury. By law, if Social Security revenues exceed expenditures, the "surplus" is credited to the Social Security trust funds in the form of U.S. government securities. The money itself, however, is used to pay for whatever other expenses the government may have at the time. There is no separate pool of money set aside for Social Security purposes. That is not to say that the trust funds are ephemeral--as long as the trust funds show a positive balance, they represent the authority and an obligation for the U.S. Treasury to issue benefit payments during periods when the program's expenditures exceed revenues. At the end of calendar year 2013, the trust funds were credited with holdings of $2.8 trillion. Section 201 of the Social Security Act provides the following guidelines for trust fund investment. 1. Funds not immediately in demand for benefits or administrative expenses are to be invested in interest-bearing obligations guaranteed as to both principal and interest by the United States. 2. Obligations are to be purchased at issue at the issue price or at the market price for outstanding obligations. 3. The Managing Trustee of the Social Security trust funds (the Secretary of the Treasury) is required to invest in special "nonmarketable" federal public-debt obligations--special issues to the trust funds that are not available to the general public--except where he or she determines that the purchase of marketable federal securities is "in the public interest." 4. Special issues shall have maturities fixed with due regard for the needs of the trust funds and will pay a rate of interest, calculated at the time of issue, equal to the average market yield on all marketable interest-bearing obligations of the United States that are not due or callable (redeemable) for at least four years. 5. Marketable federal securities purchased by the trust funds may be sold at the market price and special issue obligations may be redeemed at par plus accrued interest (without penalty for redemption before maturity). The Treasury Department has determined that the purchase of marketable federal securities (i.e., public issues) would be in the public interest only when it might serve to stabilize the market for Treasury issues. Because an "unstable market" would be characterized by falling bond prices, purchases of marketable federal securities at these times would appear to be advantageous for the trust funds. In practice, however, open market purchases have been rare. Although the trust funds have held public issues in the past, the trust funds currently hold special issues only. The interest earned on these holdings is credited to the trust funds semiannually (on June 30 and December 31); it is done by issuing additional federal securities to the trust funds. In calendar year 2013, net interest totaled $102.8 billion, representing 12% of total trust fund income. The effective annual rate of interest earned on all obligations held by the trust funds in calendar year 2013 was 3.8%. The interest rate earned on special issues purchased by the trust funds in August 2014 is 2.375%. The maturity dates of newly issued special issues are set by a standardized procedure. Revenues are invested immediately in short-term issues called certificates of indebtedness, which mature on the next June 30. On June 30 of each year, certificates of indebtedness that have not been redeemed are reinvested in longer-term special issue bonds. Generally, the maturities of these bonds range from 1 to 15 years; the goal is to have about one-fifteenth of them mature each year, depending on the needs of the trust funds. While some critics have questioned whether the current investment policy has constrained the earnings of the trust funds, over the years various advisory councils, congressional committees, and other groups generally have endorsed it. It has been justified as a way to ensure safety of principal and stability of interest, and as a way to avoid intrusion into private markets. It also has been regarded as a way to avoid the political influences that would be inherent in investing outside the U.S. government. Generally, the goal espoused has been to place the trust funds in the same position as any long-term investor seeking a safe rate of return by investing in U.S. securities, and neither advantage nor disadvantage the trust funds relative to these investors or other parts of the government. For most of the program's history, interest income to the trust funds has not been a major factor in program financing. In recent years, however, the increasing role of interest income, as well as interest by some policy makers in preventing any surplus Social Security tax revenues from being used for other government spending purposes, have focused attention on alternative investment practices. For example, there have been proposals to replace the special issues held by the trust funds with marketable federal securities, as well as proposals to allow any surplus Social Security tax revenues or a portion of trust fund reserves to be invested in assets other than U.S. government obligations, including equities.

The Social Security Act has always required surplus Social Security revenues (revenues in excess of program expenditures) to be invested in U.S. government securities (or U.S. government-backed securities). In recent years, attention has been focused on alternative investment practices in an effort to increase the interest earnings of the trust funds, among other goals. This report describes Social Security trust fund investment practices under current law.

The Paris Club is the major forum where creditor countries renegotiate official sector debts. Official sector debts are those that have been issued, insured, or guaranteed by creditor governments. A Paris Club 'treatment' refers to either a reduction and/or renegotiation of a developing country's Paris Club debts. The Paris Club includes the United States and 21 other permanent members, the major international creditor governments. Besides the United States, the permanent membership is composed of Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, Netherlands, Norway, Russia, South Korea, Spain, Sweden, Switzerland, and the United Kingdom. Other creditors are allowed to participate in negotiations on an ad-hoc basis. The entry of Brazil into the Paris Club is notable since they are the first developing country to join in two decades. By contrast, the London Club, a parallel, informal group of private firms, meets in London to renegotiate commercial bank debt. Unlike the Paris Club, there is no permanent London Club membership. At a debtor nation's request, a London Club meeting of its creditors may be formed, and the Club is subsequently dissolved after a restructuring is in place. The Paris Club does not exist as a formal institution. It is rather a set of rules and principles for debt relief that have been agreed on by its members. To facilitate Paris Club operations, the French Treasury provides a small secretariat, and a senior official of the French Treasury is appointed chairman. The current Paris Club chairman is Jean-Pierre Jouyet, Under-Secretary of the French Treasury. In addition to representatives from the creditor and debtor nations, officials from the international financial institutions (IFIs) and the regional development banks are represented at Paris Club discussions. The IFIs present their assessment of the debtor country's economic situation to the Paris Club. To date (July 2017), the Paris Club has reached 433 agreements with 90 debtor countries. The total amount of debt covered in Paris Club agreements--rescheduled or reduced--is approximately $583 billion. Since the first debt restructuring took place in 1956, the terms, rules, and principles of the Paris Club have evolved to their current shape. This evolution occurred primarily through the G7/8 Summits. Five 'principles' and four 'rules' currently govern Paris Club treatments. Any country that accepts the rules and principles may, in principle, become a member of the Paris Club. Yet since the Paris Club permanent members are the major international creditor countries, they determine its practices. The five Paris Club 'principles' stipulate the general terms of all Paris Club treatments. They are (1) Paris Club decisions are made on a case-by-case basis; (2) all decisions are reached by full consensus among creditor nations; (3) debt renegotiations are applied only for countries that clearly need debt relief, as evidenced by implementing an International Monetary Fund (IMF) program and its requisite economic policy conditionality ; (4) solidarity is required in that all creditors will implement the terms agreed in the context of the renegotiations; and (5) the Paris Club preserves the comparability of treatment between different creditors. This means that a creditor country cannot grant to a debtor country a treatment on more favorable terms than the consensus reached by Paris Club members. While Paris Club 'principles' are general in nature, its 'rules' specify the technical details of Paris Club treatments. The 'rules' detail (1) the types of debt covered - Paris Club arrangements cover only medium and long-term public sector debt and credits issued prior to a specified "cut-off" date; (2) the flow and stock treatment; (3) the payment terms resulting from Paris Club agreements; and (4) provisions for debt swaps. Since the Paris Club is an informal institution, the outcome of a Paris Club meeting is not a legal agreement between the debtor and the individual creditor countries. Creditor countries that participate in the negotiation sign a so-called 'Agreed Minute.' The Agreed Minute recommends that creditor nations collectively sign bilateral agreements with the debtor nation, giving effect to the multilateral Paris Club agreement. By recommending that the United States renegotiate or reduce debts owed to it, congressional involvement is necessary to implement any Paris Club agreement. There are four types of Paris Club treatments depending on the economic circumstances of the distressed country. They are, in increasing degree of concessionality: Classic Terms , the standard terms available to any country eligible for Paris Club relief; Houston Terms , for highly-indebted lower to middle-income countries; Naples Terms , for highly-indebted poor countries; and Cologne Terms , for countries eligible for the IMF and World Bank's Highly Indebted Poor Countries Initiative (HIPC). Classic and Houston terms offer debt rescheduling while Naples and Cologne terms provide debt reduction. Classic terms are the standard terms for countries seeking Paris Club assistance. They are the least concessional of all Paris Club terms. Debts are rescheduled at an appropriate market rate. Houston terms were created at the 1990 G-7 meeting in Houston, Texas so the Paris Club could better accommodate the needs of lower middle-income countries. Houston terms offer longer grace and repayment periods on development assistance than do Classic terms. Naples Terms, designed at the December 1994 G-7 meeting in Naples, Italy, are the Paris Club's terms for cancelling and rescheduling the debts of very poor countries. Countries may receive Naples terms treatment if they are eligible to receive loans from the World Bank's concessional facility, the International Development Agency (IDA). A country is eligible for IDA loans if it has a per-capita GDP of less than $755. According to Naples Terms, between 50% and 67% of eligible debt may be cancelled. The Paris Club offers two methods for countries to implement the debt reduction. Countries can either completely cancel the eligible amount, and reschedule the remaining debts at appropriate market rates (with up to 23-year repayment period and a six-year grace period); or they can reschedule their total eligible debt at a reduced interest rate and with longer repayment terms (33 years). Cologne terms were created at the June 1999, G-8 Summit in Cologne, Germany. Cologne terms were created for countries that are eligible for the World Bank and IMF 1996 Highly Indebted Poor Countries Initiative (HIPC). They allow for higher levels of debt cancellation than Naples Terms. Under Cologne terms, 90% of eligible debts can be cancelled. On October 8, 2003, Paris Club members announced a new approach that would allow the Paris Club to provide debt cancellation to a broader group of countries. The new approach, named the "Evian Approach" introduces a new strategy for determining Paris Club debt relief levels that is more flexible and can provide debt cancellation to a greater number of countries than was available under prior Paris Club rules. Prior to the Evian Approach's introduction, debt cancellation was restricted to countries eligible for IDA loans from the World Bank under Naples Terms or HIPC countries under Cologne terms. Many observers believe that strong U.S. support for Iraq debt relief was an impetus for the creation of the new approach. Instead of using economic indicators to determine eligibility for debt relief, all potential debt relief cases are now divided into two groups: HIPC and non-HIPC countries. HIPC countries will continue to receive assistance under Cologne terms, which sanction up to 90% debt cancellation. (The United States and several other countries routinely provide 100% bilateral debt cancellation.) Non-HIPC countries are assessed on a case-by-case basis. Non-HIPC countries seeking debt relief first undergo an IMF debt sustainability analysis. This analysis determines whether the country suffers from a liquidity problem, a debt sustainability problem, or both. If the IMF determines that the country suffers from a temporary liquidity problem, its debts are rescheduled until a later date. If the country is also determined to suffer from debt sustainability problems, where it lacks the long-term resources to meet its debt obligations and the amount of debt adversely affects its future ability to pay, the country is eligible for debt cancellation. The United States began participating in Paris Club debt forgiveness in 1994, under authority granted by Congress in 1993 (Foreign Operations Appropriations, SS570, P.L. 103-87 ). Annually reenacted since 1993, this authority allows the Administration to cancel various loans made by the United States. These can include U.S. Agency for International Development (USAID) loans, military aid loans, Export-Import Bank loans and guarantees, and agricultural credits guaranteed by the Commodity Credit Corporation. The procedure for budgeting and accounting for any U.S. debt relief is based on the method used to value U.S. loans and guarantees provided in the Federal Credit Reform Act of 1990. The act, among other things, provides for new budgetary treatment of and establishes new budgetary requirements for direct loan obligations. Since passage of the act, U.S. government agencies are required to value U.S. loans, such as bilateral debt owed to the United States, on a net present value basis rather than at their face value, and an appropriation by Congress of the estimated amount of debt relief is required in advance of any debt relief taking place. Prior to the passage of the act, neither budget authority nor appropriations were required for official debt relief and bilateral debt (and other federal commitments) were accounted for on a cash-flow basis, which credits income as it is received and expenses as they are paid. Determining the net present value is a complex calculation involving several factors, including the terms of loan (whether it is concessional or at market rates), as well as the financial solvency of the debtor and their likelihood of repayment. Following the passage of the act, a working group of executive branch agencies, the Inter-Agency Country Risk Assessment System (ICRAS), was created to maintain consistent assessments of country risk across the many U.S. agencies that make foreign loans. ICRAS operates as a working group. The Office of Management and Budget chairs ICRAS. The U.S. Export-Import Bank provides country risk assessments and risk rating recommendations, which must be agreed on by all the ICRAS agencies. OMB is then responsible for determining the expected loss rates associated with each ICRAS risk rating and maturity level. Each sovereign borrower or guarantor is rated on an 11-category scale, ranging from A to F-. Some analysts, including the Government Accountability Office (GAO), raise concerns about the official process for estimating the cost of foreign loans to the United States, and thus the cost needed to forgive U.S. debt. OMB's current methodology uses rating agency corporate default data and interest rate spreads in a model it developed to estimate default probabilities and makes assumptions about recoveries after default to estimate expected loss rates. According to GAO, the method that OMB employs may calculate lower loss rates than may be justified for the sovereign debt of emerging economies. In 2004, GAO recommended that the Director of OMB provide affected U.S. agencies and Congress with technical descriptions of its current expected loss methodology and update this information when there are changes. GAO also recommended that the OMB Director arrange for independent review of the methodology and ask U.S. international credit agencies for their most complete, reliable data on default and repayment histories, so that the validity of the data on which the methodology is based can be assessed over time. In their response, OMB made no commitment to increase transparency or engage the private sector rating community.

The Paris Club is a voluntary, informal group of creditor nations who meet approximately 10 times per year to provide debt relief to developing countries. Members of the Paris Club agree to renegotiate and/or reduce official debt owed to them on a case-by-case basis. The United States is a key Paris Club Member and Congress has an active role in both Paris Club operations and U.S. policy regarding debt relief overall. The Federal Credit Reform Act of 1990 stipulates that Congress must be involved in any official foreign country debt relief and notified of any debt reduction and debt renegotiation.

According to the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), the U.S. economy was in recession from December 2007 to June 2009. Congress passed and the President signed an economic stimulus package, the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), in February 2009. The $787 billion package included $286 billion in tax cuts to help stimulate the economy. Among the tax reductions, many were tax incentives directed to business. The estimated revenue losses of the business tax incentives are $40 billion for FY2009, $36 billion for FY2010, and $6 billion for FY2009-FY2019 (because of estimated revenue gains in the out years). The business tax incentives included a temporary expansion of the work opportunity tax credit, a temporary increase of small business expensing, a temporary extension of bonus depreciation, and a five-year carry back of 2008 net operating losses for small businesses. Many were subsequently extended by the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ). The preliminary estimate of fourth quarter real gross domestic product (GDP) growth is 5.9%; the unemployment rate, a lagging indicator, averaged 9.6% in the third quarter and 10.0% in the fourth quarter of 2009. Federal Reserve Chairman Ben Bernanke expected the economy to continue growing at a modest pace, but predicted that bank lending will remain constrained and the job market remain weak into at least 2010. To further assist unemployed workers, help business, and stimulate housing markets, Congress passed the Worker, Homeownership, and Business Assistance Act of 2009 (signed by the President on November 6, 2009, P.L. 111-92 ). Many observers have advocated further business tax incentives to spur investment and employment. Recent op-ed contributors have proposed tax credits to encourage businesses to hire. The Obama Administration has proposed tax incentives for small businesses to encourage investment and hiring. The House and Senate passed the Hiring Incentives to Restore Employment (HIRE) Act, which includes an employment tax credit. The President signed the act into law on March 18, 2010. In December 2010, P.L. 111-312 extended and expanded the business tax provisions. Some proposals would expand the reduction in payroll taxes for individuals and to extend it to employers. While a payroll tax on the individual side expands demand in the same way as other income tax cuts, the employer tax forgiveness is similar to an employer-side wage subsidy, which acts through a different mechanism. The reduction in payroll taxes for individuals expired at the end of 2012. The need for tax incentives to boost economic activity depends on the state of the economy. One measure that has tracked economic activity fairly well in the past is the Federal Reserve Board's industrial production index, which is used by NBER in its determination of the economy's turning points. Figure 1 and Figure 2 show the monthly industrial production index for the five past recessions. The index is followed from the beginning of each recession (month 0 in the figures) and for the next 36 months. Figure 1 compares the trend in the industrial production index for the previous two recessions (the 1990-1991 recession and 2001 recession) with the recently ended recession (the 2007-2009 recession--the dashed line). The first two recessions lasted for eight months according to NBER; the industrial production index in both cases started to track upward eight months after the recession started. In the 2007-2009 recession, however, the industrial production index was still declining eight months after the recession started and continued to trend downward for the next 10 months. Figure 2 compares the 2007-2009 recession with the 1973-1975 and 1981-1982 recessions. The latter recessions lasted for 16 months according to NBER, and the industrial production index bottomed out at the end of each recession. The trend in index for the 2007-2009 recession appears to approximately track the trend over the other two recessions. In the current recession, the index declined between December 2007 and June 2009, before turning up. The data on real GDP growth and industrial production suggest that economic activity (that is, output) began increasing in July 2009; NBER determined that the recession lasted for 18 months. The December 2012 industrial production index was still below the December 2007 index. The tax incentives to enhance economic activity being discussed, however, do not target output. Rather, they target investment and employment. Investment spending by firms tends to decrease in a recession. Figure 3 displays the quarterly growth rates for real nonresidential gross investment (i.e., business investment) for the quarter in which the recession started and the subsequent 10 quarters for five recessions. Each recession is different, but generally by the third quarter after the start of the recession real investment growth is negative and remains negative for the next four quarters. During the 2007-2009 recession, the decline in real investment spending was particularly severe in the fourth and fifth quarters compared with the other four recessions. Not all gross investment is used to add to the capital stock; some is used to replace worn-out capital goods (i.e., consumption of fixed capital or depreciation). In 2011, about 85% of gross investment spending replaced the value of worn-out fixed assets (this percentage has varied between 57% and 83% over the past 40 years); the other 15% increased the capital stock. The consumption of fixed assets as a percentage of gross nonresidential investment stood at 60% in 1970; it increased by 25 percentage points between 1970 and 2011. Overall, net nonresidential investment as a percentage of GDP has been trending downward--falling from 4.1% in 1970 to 3.0% in 2008 to 1.1% in 2011. Employment fell for 22 months after the start of the 2007-2009 recession in December 2007. Figure 4 and Figure 5 show employment for the first month of the recession and the subsequent 36 months for the 2007-2009 recession and four other recessions. Employment is shown as an employment index (i.e., as the percentage of employment in the first month of the recession). Employment typically lags the recovery in output by a few months in part because employers are likely to restore the hours worked by employees still on their payrolls before recalling those laid off or hiring new workers. The 2007-2009 recession is compared with the previous two recessions--the 1990-1991 and 2001 recessions--in Figure 4 . Although the previous two recessions were relatively mild and short (lasting for eight months), employment levels were either stagnant (the 1990-1991 recession) or declining (the 2001 recession) for several months after the end of the recession. For example, employment hit bottom 21 months after the 2001 recession ended. In the 2007-2009 recession, employment levels declined slightly over the first 9 months of the recession and then fell sharply over the next 12 months. Employment stood at 94% of the December 2007 employment level 25 months after the start of the recession. Employment started to turn up 8 months after the end of the recession. Figure 5 compares the employment levels during the recently ended recession with employment levels during the 1973-1975 and 1981-1982 recessions. These latter two recessions were relatively deep and prolonged--lasting for 16 months. For these two recessions, the employment level began increasing within a month or two after the end of the recession (the end of these recessions is denoted by the vertical line in the figure). In the 2007-2009 recession, employment levels began to rise eight months after the recession ended. The December 2012 employment level, however, is still below the December 2007 level. Weakness in the labor market is further indicated by the proportion of the labor force who have been unemployed for at least six months (the long-term unemployed). Figure 6 displays the monthly unemployment and long-term unemployment rates since 1948. The long-term unemployment rate has generally tracked the unemployment rate over the business cycle. Over a business cycle, the long-term unemployment rate is at its lowest point at or near the beginning of a recession and then reaches a peak a few months after the end of the recession (typically within six to eight months). Like the unemployment rate, the long-term unemployment rate is a lagging indicator--the labor market does not begin to recover from a recession until sometime after the official end of the recession. After the 1990-1991 and 2001 recessions, however, the long-term unemployment rate did not reach its peak until 15 and 19 months, respectively, after the recession ended. The long-term unemployment rate is currently higher than at any time over the past 62 years--throughout the recovery, over 3% of the labor force (about 40% of the unemployed) had been out of work for six months or more. The two most common measures to provide tax incentives for new investment are investment tax credits and accelerated deductions for depreciation. Investment tax credits provide for a credit against tax liability for a portion of the purchase price of assets and are often proposed as a counter-cyclical or economic stimulus measure. Accelerated depreciation speeds up the rate at which the cost of an investment is deducted. The investment tax credit was originally introduced in 1962 as a permanent subsidy, but it came to be used as a counter-cyclical device. It was temporarily suspended in 1966-1967 (and restored prematurely) as an anti-inflationary measure; it was repealed in 1969, also as an anti-inflationary measure. The credit was reinstated in 1971, temporarily increased in 1975, and made permanent in 1976. After that time, the credit tended to be viewed as a permanent feature of the tax system. At the same time, economists were increasingly writing about the distortions across asset types that arose from an investment credit. The Tax Reform Act of 1986 moved toward a system that was more neutral across asset types and repealed the investment tax credit while lowering tax rates. Accelerated depreciation tends not to be used for counter-cyclical purposes. At least one reason for not using accelerated depreciation for temporary, counter-cyclical purposes is because such a revision would add considerable complexity to the tax law if used in a temporary fashion, since different vintages of investment would be treated differently. An investment credit, by contrast, occurs the year the investment is made and, when repealed, only requires firms with carry-overs of unused credits to compute credits. An exception to the problem with accounting complexities associated with accelerated depreciation is partial expensing (that is, allowing a fraction of investment to be deducted up front and the remainder to be depreciated). This partial expensing approach also is neutral across all assets it applies to, but the cash flow effects are more concentrated in the present (and revenue is gained in the future). A temporary partial expensing provision, allowing 30% of investments in equipment to be expensed over the next two years, was included in H.R. 3090 in 2002 and expanded to 50% and extended through 2004 in tax legislation enacted in 2003. It expired in 2004. The Economic Stimulus Act of 2008 ( P.L. 110-185 ) included temporary bonus depreciation for 2008, which was extended for 2009 by the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). The Obama Administration recently proposed 100% expensing for qualified capital investments through the end of 2011. In December 2010, P.L. 111-312 extended and expanded the business tax provisions by allowing 100% expensing in 2011 and 50% in 2012. Bonus depreciation was extended to the end of 2013 by the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ). On September 8, 2011, the President proposed a fiscal stimulus that largely related to payroll taxes, but also proposed to increase expensing to 100% in 2012. This expensing provision was also included in H.R. 3630 , the House Republican proposal that also extended the payroll tax and made other revisions. This legislation was adopted by the House but not passed. A two-month extension of payroll tax relief was adopted and was extended to the end of 2012 by the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ). The extent to which these business tax breaks are a successful counter-cyclical stimulus hinges on the effectiveness of investment subsidies in inducing spending. It is difficult to determine the effect of a business tax cut and the timing of induced investment. A business tax cut is aimed at stimulating investment largely through changes in the cost (or price) of capital. If there is little marginal stimulus or if investment is not responsive to these price effects in the short run, then most of the cut may be saved: either used to pay down debt or paid out in dividends, although some of the latter might eventually be spent after a lag. That is, if a tax cut simply involved a cash payment to a firm, most of it might be saved, particularly in the short run. Business tax cuts (of most types) also have effects on rates of return that increase the incentive to invest, and it is generally for that reason that investment incentives have been considered as counter-cyclical devices. Investment incentives through expensing for small businesses, however, are usually phased-out. As a result, these provisions produce a disincentive to investment over the phase-out range. Consequently, the overall incentive effect is ambiguous. Despite attempts to analyze the effect of the investment tax credit, considerable uncertainty remains. Time series studies of aggregate investment using factors such as the tax credit (or other elements that affect the tax burden on capital or the "price" of capital) as explanatory variables tended to find little or no relationship. A number of criticisms could be made of this type of analysis, among them the possibility that tax subsidies and other interventions to encourage investment were made during periods of economic slowdown. A recent study using micro data found an elasticity (the percentage change in investment divided by the percentage change in the user cost of capital) for equipment of -0.25. A widely cited study by Cummins, Hassett, and Hubbard used panel data and tax reforms as "natural experiments" and found effects that suggest a price elasticity of -0.66 for equipment. Although the second estimate is higher, both are considered inelastic (less than a unitary elasticity) implying that induced spending is less than the cost. This last estimate is a higher estimate than had previously been found and reflects some important advances in statistical identification of the response. Yet, it is not at all clear that this elasticity would apply to stimulating investment in the aggregate during a downturn when firms have excess capacity. That is, firms may have a larger response on average to changes in the cost of capital during normal times or times of high growth, when they are not in excess capacity. Certainly, the response might be expected to be smaller in low growth periods. An additional problem is that the timing of the investment stimulus may be too slow to stimulate investment at the right time. If it takes an extensive period of time to actually plan and make an investment, then the stimulus will not occur very quickly compared to a cut in personal taxes that stimulates consumption immediately. Indeed, the stimulus to investment could even occur during the recovery when it is actually undesirable. Some evidence suggests that the temporary bonus depreciation enacted in 2002 had little or no effect on business investment. A study of the effect of temporary expensing by Cohen and Cummins at the Federal Reserve Board found little evidence to support for a significant effect. They suggested several potential reasons for a small effect. One possibility is that firms without taxable income could not benefit from the timing advantage. In a Treasury study, Knittel confirmed that firms did not elect bonus depreciation for about 40% of eligible investment, and speculated that the existence of losses and loss carry-overs may have made the investment subsidy ineffective for many firms, although there were clearly some firms that were profitable that did not use the provision. Cohen and Cummins also suggested that the incentive effect was quite small (largely because depreciation already occurs relatively quickly for most equipment), reducing the user cost of capital by only about 3%; that planning periods may be too long to adjust investment across time; and that adjustment costs outweighed the effect of bonus depreciation. Knittel also suggested that firms may have found the provision costly to comply with, particularly because most states did not allow bonus depreciation. A recent study by House and Shapiro found a more pronounced response to bonus depreciation, given the magnitude of the incentive, but found the overall effect on the economy was small, which in part is due to the limited category of investment affected and the small size of the incentive. Their differences with the Cohen and Cummins study reflect in part uncertainties about when expectations are formed and when the incentive effects occur. Cohen and Cummins also reported the results of several surveys of firms, where from two-thirds to over 90% of respondents indicated bonus depreciation had no effect on the timing of investment spending. Overall, bonus depreciation did not appear to be very effective in providing short-term economic stimulus. A study by Hulse and Livingstone found mixed results on the effectiveness of bonus depreciation, which they interpret as weakly supportive of an effect. There are reasons to expect that tax incentives for equipment might have limited effects in stimulating investment in the short run, primarily because of planning lags and because of the slowness of changing the technology of production. Essentially, there are two reasons that firms may increase investment. First, they may expect output to increase. This response, called the accelerator, is a result of other forces that increase aggregate demand thus requiring making more of the same type of investment (along with hiring more workers). The second reason is that the cost of investment has fallen. Part of this effect may be an output effect since the overall cost of investment is smaller, output can be sold at a lower price with an expectation that sales will rise in the future. Also part of this effect has to do with encouraging more use of capital relative to labor. This analysis suggests that a business tax subsidy may not necessarily be the best choice for fiscal stimulus, largely because of the uncertainty of its success in stimulating aggregate demand. If such subsidies are used, however, the most effective short-run policy is probably a temporary investment subsidy. Permanent investment subsidies may distort the allocation of investment in the long run. The objective of investment subsidies is to increase spending which, in turn, should lead to increased employment (first in the capital goods manufacturing sector, and then in the economy as a whole through multiplier effects). Investment subsidies could also, however, have a direct effect on employment within the firm receiving the subsidy because they change relative prices. Capital and skilled labor (i.e., more educated workers) tend to be complements, that is, they are used together in the production process. Consequently, increasing the amount of capital tends to increase the demand for skilled labor. Furthermore, capital and unskilled labor (i.e., less-educated workers) tend to be substitutes. Thus, increasing investment could reduce the demand for less-skilled labor. These labor market effects could show up in one of two ways: changes in wages or employment levels. Unfortunately, there are no studies estimating the direct impact of investment incentives on employment. One study examined the effect of investment subsidies on the prices of capital goods and wages of workers in the capital goods producing industry. Goolsbee found that benefit of investment tax incentives generally went to the producers of capital equipment through higher capital prices and somewhat higher wages for workers in the capital goods industry. Overall, it appears that investment incentives could reduce the demand of less-educated workers (a group with a relatively high unemployment rate), and increase the demand for highly educated workers (a group with a relatively low unemployment rate) and workers in capital goods producing industries. It is not clear, however, whether these effects would occur in a slack economy. Employment and wage subsidies are designed to increase employment directly by reducing a firm's wage bill. A firm's wage bill for labor includes wages and salaries paid to employees, the cost of fringe benefits (e.g., health insurance and pensions), hiring costs, and taxes paid such as the employer's share of the payroll tax. These subsidies can take many forms. For example, earnings or time spent working can be subsidized. Furthermore, the subsidies can be incremental or non-incremental--that is, new hires are subsidized or all workers are subsidized. The subsidies can be targeted to certain groups of workers such as disadvantaged individuals, or can be available for any worker. The tax system is a frequently used means for providing employment subsidies. Currently, the Work Opportunity Tax Credit (WOTC), a nonrefundable credit, is available to employers who hire individuals from 11 targeted disadvantaged groups. Another example of an employment tax credit is the New Jobs Tax Credit (NJTC) from 1977 and 1978. It was an incentive to business to hire employees in excess of a base amount. Most of the business tax incentives for hiring discussed in the 111 th Congress were modeled somewhat on the NJTC. The NJTC was an incremental jobs tax credit in that the employer had to increase the Federal Unemployment Tax Act (FUTA) wage base above at least 102% of the FUTA wage base in the previous year. The credit was 50% of the increase in the FUTA wage base (the wage base consisted of wages paid up to $4,200 per employee). The employer's income tax deduction for wages, however, was reduced by the amount of the credit. Consequently, the effective maximum credit for each new employee ($2,100 minus the additional tax due from the reduced deduction) ranged from $1,806 for taxpayers in the 14% tax bracket to $630 for taxpayers in the 70% tax bracket. Furthermore, the total credit could not exceed $100,000, which in effect limited the size of the subsidized employment expansion at any one firm to 47. The credit was nonrefundable but could be carried back for three years and forward for seven years. Employment and wage subsidies have been analyzed since at least the 1930s, but few of the analyses include empirical estimates of the effects of the subsidies. In an early theoretical analysis of a nonincremental wage subsidy, Arthur Pigou concluded that a wage subsidy could increase employment but "in practice it is probable that the application of such a system would be bungled." Nicholas Kaldor, however, in another theoretical analysis, argued that a temporary incremental wage subsidy to deal with cyclical unemployment could be very effective. In a more recent theoretical analysis, Richard Layard and Stephen Nickell also argue that a temporary incremental wage subsidy could be effective in increasing employment when unemployment is high. In the United States, employment subsidies have often been offered through the tax system. Two major tax programs to subsidize employment that have been evaluated are the NJTC and the Targeted Jobs Tax Credit (TJTC); the TJTC was a targeted hiring subsidy that was replaced by the WOTC. The NJTC was explicitly designed to be a counter-cyclical employment measure to boost employment after the 1973-1975 recession. The NJTC was enacted in May 1977 at a time when the economy had begun to recover from the recession and was already growing. The credit was incremental in that it applied only to employment greater than 102% of the previous year's employment level. For each new eligible worker hired, a firm received a tax credit of 50% of wages paid up to $4,200 (the maximum gross credit for each new employee, therefore, was $2,100). The credit had an aggregate $110,000 cap so that the majority of benefits went to small firms. Once the cap was reached, the firm received no subsidy for hiring additional workers. Thus very large firms whose employment grew substantially more than 2% may not have had a marginal incentive. In addition, the credit was allowed against income tax liability and firms without adequate tax liability were not able to use all (or in some cases, any) of the credit. The first evaluation of the NJTC used responses from a federal survey of for-profit firms. Jeffrey Perloff and Michael Wachter compared employment growth of firms that knew about the tax credit to firms that did not know about the credit. They find that employment at the firms with knowledge of the credit grew about 3% faster than at the other firms. They note, however, that only 34% of the firms knew about the tax credit and these firms were probably not randomly drawn--it is possible that the firms most likely to hire workers were also more likely to seek out tax benefits. They caution that their results may overstate the NJTC's employment effect. A second evaluation by John Bishop focused on the employment effects of the NJTC in the construction and distribution industries. Bishop's key explanatory variable is the proportion of firms in the industry that knew about the tax credit. He estimates that the NJTC was responsible for 150,000 to 670,000 of the 1,140,000 increase in employment in these industries. The estimated effect, however, varies dramatically from industry to industry and sometimes from one empirical specification to another for the same industry. The results of both Perloff and Wachter, and Bishop suggest that the NJTC may have been somewhat successful in increasing employment, but showing a relationship between knowledge of the NJTC and employment gains does not mean that one caused the other. Not all evaluations of the NJTC were positive. Robert Tannenwald analyzed data from a survey of private firms in Wisconsin and concludes that the NJTC did not live up to expectations. He estimates that the per job cost of the NJTC was greater than public service employment programs. Over half of the firms that did not expand employment in response to the tax credit said that consumer demand for their product determines the level of employment. Some firms reported they were reluctant to take advantage of the tax credit because of its complexity. Emil Sunley argues that there was a gap between the time of the hiring decision and the time eligibility for the credit was determined. He notes that because the capital stock is essentially fixed in the short run, an increase in employment will only come about because of an increase in product demand. Furthermore, it automatically favors firms that are already growing, which could increase geographic differentials in job creation. A report on the NJTC commissioned by Congress from the Department of Labor and the Department of Treasury also was skeptical of the effectiveness of the subsidy. In a mail survey, only about one-third of firms knew about the credit (although these firms covered 77% of employees). About 20% both knew about the credit and qualified for it (covering 58% of employees). However, when firms were asked, only 2.4% of firms indicated that they made a conscious effort to hire because of the subsidy. Similar effects were found in a survey of the National Federation of Independent Businesses (NFIB), which covers smaller employers. Their survey results indicated that from 1.4% to 4.1% of employers were affected by the subsidy. The Labor/Treasury study also raised questions about the studies by Perloff and Wachter, and by Bishop. They noted that the former study used data for 1977 and the credit was not enacted until May 1977. They questioned the latter author's lack of tests for significance of the wage variable. In addition, because the credit came at a time when the economy was already growing, it is possible that the credit may have shifted employment from one sector to another rather than increased aggregate employment. Evaluation of other employment tax credit programs also yield mixed results. The TJTC provided a wage subsidy to firms for hiring eligible workers (e.g., welfare recipients, economically disadvantaged youth, and ex-offenders). One study by Kevin Hollenbeck and Richard Willke found that the TJTC improved employment outcomes for nonwhite youth but not for other eligible individuals. Bishop and Mark Montgomery estimate that the TJTC induced some new employment, but at least 70% of the tax credits were claimed for hiring workers who would have been hired even in the absence of the tax credit. Dave O'Neill concludes that programs targeted to narrow socioeconomic groups are unlikely to "achieve the desired effect of significantly increasing the employment level of the target group." Taken together, the results of the various studies suggest that incremental tax credits have the potential of increasing employment, but in practice may not be as effective in increasing employment as desired. There are several reasons why this may be the case. First, jobs tax credits are often complex (so as to subsidize new jobs rather than all jobs) and many employers, especially small businesses, may not want to incur the necessary record-keeping costs. Second, since eligibility for the tax credit is determined when the firm files the annual tax return, firms do not know if they are eligible for the credit at the time hiring decisions are made. Third, many firms may not even be aware of the availability of the tax credit until it is time to file a tax return. In addition, the person making the hiring decision is often unaware of tax provisions and the tax situation of the firm. Lastly, product demand appears to be the primary determinant of hiring. The Obama Administration proposed a $5,000 business tax credit against payroll taxes for every net new employee they hire in 2010; the credit would have a $500,000 aggregate cap per firm. In addition, small businesses that increase wages or expand hours would get a credit against added payroll taxes. The proposals tried to overcome some of the limitations of the NJTC. For example, the proposal would have allowed firms to claim the credits on a quarterly rather than an annual basis. All firms would have qualified for the tax credit since it would have been allowed against payroll taxes rather than income taxes (over half of all firms were not eligible for the full 1977-1978 NJTC because of insufficient income tax liability). The credit would have also been available for nonprofits and startups would be eligible for half the credit. The Administration estimated that this proposal would cost $33 billion. Senators Baucus and Grassley (the chairman and ranking minority Member of the Senate Finance Committee, respectively) proposed the Hiring Incentives to Restore Employment (HIRE) Act on February 11, 2010. Their proposal included two tax incentives for hiring and retaining unemployed workers. This proposal was enacted in the HIRE Act ( P.L. 111-147 ), which was signed by the President on March 18, 2010. It is estimated that the tax incentives would cost $13 billion over 10 years. The first tax incentive in the HIRE Act was forgiveness of the employer's share of the 2010 payroll tax (6.2% of the worker's earnings) for qualified workers hired in 2010 after enactment of the proposal. A qualified worker is an individual who was unemployed for at least 60 days and does not replace another worker at the firm unless the replaced worker left voluntarily or for cause. Verifying that these conditions were met was difficult. Furthermore, an employer could not take advantage of both the payroll tax forgiveness and WOTC; consequently, employers may have hired the long-term unemployed rather than individuals from other disadvantaged groups. Firms with no or little income tax liability (including nonprofits) were eligible for the payroll tax forgiveness and the benefits were received on a quarterly rather than annual basis. The second tax incentive was a business credit for retention of newly hired qualified workers. Employers are allowed a $1,000 business tax credit for each qualified worker who remains employed for 52 weeks at the firm. Since this is an income tax credit, the employer does not receive the benefits of retaining workers until they file their 2011 income returns in early 2012. Furthermore, firms with little or no tax liability (including nonprofits) cannot take full advantage of this incentive since the credit is nonrefundable. Another proposal for a job creation tax credit was also modeled partially on the NJTC and, like the Administration's proposal, tried to correct some of the flaws that may have limited the effectiveness of the NJTC. The credit would have been equal to 15% of additional taxable payroll (i.e., payroll subject to Social Security taxes) in 2010 and to 10% of additions to taxable payroll in 2011. This tax credit would have been refundable so both unprofitable firms and non-profits could take advantage of the credit. Furthermore, the benefits of the credit would have been received on a quarterly basis rather than annually when the firm files an income tax return. Bartik and Bishop estimated that the tax credit could create 2.8 million jobs in 2010 and 2.3 million jobs in 2011. They further estimated that the budgetary cost would be no more than $15 billion per year. Their estimates assumed a labor demand elasticity of 0.3, which indicates that a 10% reduction in the cost of labor would increase employment by 3%. Their estimates did not rest on a study of the 1977-1978 credit, but rather predicted the effect on jobs based on a central tendency labor demand elasticity. They also estimated that if the labor demand elasticity were 0.15, then 1.4 million jobs would be created in 2010 and 1.1 million jobs in 2011. Note that this estimate is a general demand elasticity, and might not necessarily be as high during a recession, when business is slack. President Obama proposed a new set of tax cut and spending programs on September 8, 2011. The proposed package totals $447 billion, with slightly over half of the package in tax cuts and the remainder in spending increases. This package is considerably larger than the 2008 stimulus but smaller than the 2009 stimulus. At the President's request, the American Jobs Act was subsequently introduced in the House ( H.R. 12 ) and Senate ( S. 1549 ). Although most of the tax cuts ($175 billion) would provide an extension and increase in the payroll tax reduction for 2011, business investment and employment tax subsidies would also be provided. One provision cuts the employer payroll tax in half for the first $5 million in wages, a proposal targeting small business. Another provision eliminates the payroll tax for growth in employer payrolls, up to $50 million. These two provisions together would cost $65 billion, slightly under 15% of the total. An additional $5 billion would be spent on extending the 100% expensing (which allows firms to deduct the cost of equipment immediately rather than depreciating it) through 2012 (where 50% expensing is currently allowed). The bill also has a $4,000 tax credit for hiring the long-term unemployed ($8 billion) and tax credits from $5,600 to $9,600 for hiring unemployed veterans (negligible cost). There is more disagreement about the effectiveness of these types of tax incentives discussed in the following section. S. 1917 proposed payroll tax changes similar to the President's proposal, including the cut in payroll taxes and a hiring credit. This bill was defeated on the Senate floor on December 1. While a payroll tax on the individual side expands demand in the same way as other income tax cuts, the employer tax forgiveness is an employer-side wage subsidy. This type of subsidy is not incremental and it would not be subject to some of the administrative complications of other credits. At the same time, the "bang for the buck" would likely be smaller, and whether companies would hire people on a temporary basis during a time of slack demand is uncertain. Subsequent payroll tax proposals ( S. 1931 and S. 1944 ) did not contain an employer side tax benefit, although news reports indicate a proposal by Senators Collins and McCaskill would extend the 2 percentage point employee reduction and allow it on the employer side up to $10 million. Similarly, the House proposal, H.R. 3630 did not contain employer side provisions for the payroll tax cut. Ultimately the employee side payroll relief was extended for two months and then extended to the end of 2012; it was allowed to expire as scheduled. The evidence suggests that investment and employment subsidies are not as effective as desired in increasing economic activity, especially employment. Economic theory indicates that a deficit-financed fiscal stimulus designed to increase aggregate demand would have the maximum impact on employment in the short term. Such policies could include increases in federal government spending for goods and services, federal transfers to state and local governments, and tax cuts for low and middle income taxpayers. The short-term benefits of higher deficits, however, could be outweighed by the long-term costs if deficits are not reduced when unemployment falls. Additional fiscal stimulus that increases the deficit arguably should be considered in the context of 2009 and 2010 deficits that were larger relative to the size of the economy than all but a handful of previous wartime years. The 2009 and 2010 deficits are not sustainable in the long run in the sense that deficits of that size would cause the national debt to continually rise relative to output--eventually investors will refuse to continue financing it because they no longer believe that the government would be capable of servicing it.

According to the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), the U.S. economy was in recession from December 2007 to June 2009. Congress passed and the President signed an economic stimulus package, the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), in February 2009. The $787 billion package included $286 billion in tax cuts to help stimulate the economy. Among the tax reductions, many were tax incentives directed to business. The preliminary estimate of fourth quarter real gross domestic product (GDP) growth is 5.9%; the unemployment rate, a lagging indicator, averaged 9.6% in the third quarter and 10.0% in the fourth quarter of 2009. Federal Reserve Chairman Ben Bernanke expected the economy to continue growing at a modest pace, but predicted that bank lending will remain constrained and the job market will remain weak into at least 2010. To further assist unemployed workers, help business, and stimulate housing markets, Congress passed the Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92). The Obama Administration has advocated further business tax incentives to spur investment and employment, especially for small business. The House and Senate passed the Hiring Incentives to Restore Employment (HIRE) Act, which includes an employment tax credit. The President signed the act into law on March 18, 2010. In December 2010, P.L. 111-312 extended and expanded the business tax provisions, among other provisions, including a temporary reduction in the employee's portion of the payroll tax. Many of the business tax provisions were extended by the American Taxpayer Relief Act of 2012 (P.L. 112-240); the reduction in the employee's portion of the payroll tax expired at the end of 2012. While a payroll tax on the individual side expands demand in the same way as other income tax cuts, the employer tax forgiveness is similar to an employer-side wage subsidy, which acts through a different mechanism. The two most common measures to provide business tax incentives for new investment are investment tax credits and accelerated deductions for depreciation. The evidence, however, suggests that a business tax subsidy may not necessarily be the best choice for fiscal stimulus, largely because of the uncertainty of its success in stimulating aggregate demand. If such subsidies are used, however, the most effective short-run policy is probably a temporary investment subsidy. Permanent investment subsidies may distort the allocation of investment in the long run. Employment and wage subsidies are designed to increase employment directly by reducing a firm's wage bill. The tax system is a frequently used means for providing employment subsidies. Most of the business tax incentives for hiring currently under discussion are modeled partially on the New Jobs Tax Credit (NJTC) from 1977 and 1978. Evidence provided in various studies suggests that incremental tax credits have the potential of increasing employment, but in practice may not be as effective in increasing employment as desired. There are several reasons why this may be the case. First, jobs tax credits are often complex and many employers, especially small businesses, may not want to incur the necessary record-keeping costs. Second, because eligibility for the tax credit is determined when the firm files the annual tax return, firms do not know if they are eligible for the credit at the time hiring decisions are made. Third, many firms may not even be aware of the availability of the tax credit until it is time to file a tax return. Lastly, product demand appears to be the primary determinant of hiring, and this issue would affect the effectiveness of a payroll tax holiday on the employer side.

Title V of the Housing Act of 1949 authorized the Department of Agriculture (USDA) to make loans to farmers to enable them to construct, improve, repair, or replace dwellings and other farm buildings to provide decent, safe, and sanitary living conditions for themselves or their tenants, lessees, sharecroppers, and laborers. USDA was also authorized to make grants or combinations of loans and grants to those farmers who could not qualify to repay the full amount of a loan, but who needed the funds to make the dwellings sanitary or to remove health hazards to the occupants or the community. While the act was initially targeted toward farmers, over time it has been amended to enable USDA to make housing loans and grants to owners of real estate in rural areas in general. Currently, the USDA housing programs are administered by the Rural Housing Service (RHS). The housing programs are generally referred to by the section number under which they are authorized in the Housing Act of 1949, as amended. Descriptions of the rural housing programs are presented below in the order of the sections under which they are authorized in the Housing Act of 1949. Note that most of the programs involve direct loans from USDA, while others involve USDA-insured loans from private lenders. USDA is one of the few government agencies that makes direct loans to borrowers. The report concludes with a discussion of funding problems for the guaranteed home loan program. At the end of the report, tables are presented that show funding for various rural housing programs since FY1980. Section 502 of the Housing Act of 1949 gave USDA authority to make housing loans to farm owners to construct or repair farm dwellings and other buildings, for themselves or their tenants, sharecroppers, and laborers. The Housing Act of 1949 was amended in 1961 to make nonfarm properties eligible for the Section 502 loans. Amendments by the Housing and Urban Development Act of 1965 authorized the loans to be used for the purchase and repair of previously-occupied dwellings as well as the purchase of building sites. Amendments in 1968 enabled borrowers to receive interest credits to reduce the interest rate to as low as 1%. The Housing and Urban Development Act of 1970 enabled Section 502 loans to be made for homes on leased land as long as the remaining term of the lease extends beyond the repayment period of the loan. As amended, today's Section 502 program enables borrowers to obtain loans for the purchase or repair of new or existing single-family housing in rural areas. The loans can also be used to purchase new manufactured homes. In effect, there are now two Section 502 home loan programs--one in which borrowers receive direct home loans from USDA, and one in which borrowers receive USDA-guaranteed home loans from private lenders. Borrowers with income levels at or below 80% of the area median may be eligible for direct loans from USDA. The loans can be used to build, repair, renovate, or relocate homes, or to purchase and prepare building sites, including providing water and sewage facilities. Section 502 loans may also be used to refinance debts when necessary to avoid losing a home through foreclosure or when a loan of $5,000 or more is necessary for repairs to correct major deficiencies and make the dwelling safe and sanitary. In a given fiscal year, at least 40% of the funds for this program must be made available only to families or individuals with incomes below 50% of the area median. Borrowers must have the means to repay the loans but be unable to secure reasonable credit terms elsewhere. There is no downpayment requirement. In general, the loans are repayable over a 33-year period. The loan term may be extended to 38 years for borrowers with incomes below 60% of the area median, and who cannot afford the property based on the 33-year payments. The loan term is limited to 30 years on manufactured homes. Applicants must apply for and obtain Certificates of Eligibility from USDA, which indicate the USDA underwriting process has determined that they qualify for and can afford to repay Section 502 mortgages. The borrower's monthly contribution for principal, interest, property taxes, and insurance (PITI) is set at the higher of (1) 24% of the borrower's adjusted annual income; or (2) principal and interest calculated at 1% on the Section 502 loan plus property taxes and insurance. The borrower's income is verified annually, and the borrower's required payments may be increased or reduced based on changes in income. Housing financed under the Section 502 program must be modest in size, design, and cost. Each USDA Rural Development State Office can choose between two ways of setting a cost limit to define modest housing in its state: (1) a State Office can adopt the limit established by its state housing agency; or (2) a State Office can adopt a limit calculated according to USDA's regulations that takes cost and market value into account. The Housing and Community Development Act of 1987 directed USDA to carry out a three-year demonstration program under which moderate income borrowers could obtain loans from private lenders for the purchase of single-family homes in rural areas and the loans would be guaranteed by USDA under Section 502 (42 U.S.C. 1472). A permanent guaranteed loan program was authorized in 1990 by the Cranston-Gonzalez National Affordable Housing Act. Borrowers with income of up to 115% of the area median may purchase homes in rural areas with USDA-guaranteed loans from private lenders. Priority is given to first-time homebuyers, and USDA may require that borrowers complete a homeownership counseling program. USDA uses two formulas to determine a family's ability to undertake the responsibility of a mortgage: (1) the PITI must be 29% or less of gross monthly income; and (2) the total of all monthly debts (including the mortgage payment) must be 41% or less of gross monthly income. Section 502 guaranteed loans must be from lending institutions that have been approved by USDA. Loans have 30-year terms and fixed market-level interest rates. Loans may be for up to 100% of the home's appraised value or the sales price, whichever is less. The maximum loan amount is what the homeowner can afford based on the above criteria. Loans may include closing costs, legal fees, title services, the cost of establishing an escrow account, and other prepaid items as long as the appraised value is higher than the sales price. The American Homeownership and Economic Opportunity Act of 2000 authorized USDA to guarantee loans made to refinance existing Section 502 home loans. The interest rate on the new loan must be fixed and the rate may not exceed the interest rate on the loan being refinanced. The property being refinanced must be owned and occupied by the borrower as the principal residence, and the new loan may not exceed the remaining balance of the refinanced loan plus any authorized closing costs. The USDA charges the lender a one-time guarantee fee of 2% of the loan amount, and the lender may choose to pass this charge along to the borrower by adding it to the mortgage. The guarantee fee for refinance transactions is 0.5% of the loan amount. USDA guarantees the loan at 100% of the loss for the first 35% of the original loan, and the remaining 65% of the loan is guaranteed at 85% of loss. The maximum loss payable by USDA cannot exceed 90% of the original loan amount. No private mortgage insurance is required of the borrower. There are no restrictions on the size or design of homes financed with Section 502 guaranteed loans. Typical amenities, such as garages, central air conditioning, basements, and extra bathrooms, are allowed. In-ground swimming pools are permitted as long as loan funds are not used to finance the contributory value of the pool. In other words, the loan amount may not include the value that the pool adds to the appraised value of the property. Manufactured homes must be new and permanently installed. The major differences between the Section 502 direct loan and guaranteed loan programs are as follows: The lender and servicer for the direct program is USDA. The lender for Section 502 guaranteed loans is a private lender that also handles all the loan servicing. Income levels for participants in the direct program must not exceed 80% of the median income for the area. Income levels for participants in the Section 502 guaranteed program may not exceed 115% of the area median income. Borrowers in the direct loan program may receive subsidies to bring the interest rate as low as 1%. No interest rate subsidy is available to borrowers in the guaranteed loan program, so loans are at market interest rates. The size of homes may be restricted under the direct loan program, while there is no size restriction under the guaranteed loan program. Borrowers under the direct loan program must be unable to secure reasonable credit terms elsewhere, while there is no "credit elsewhere" test for borrowers under the guaranteed loan program. For farmers without sufficient income to qualify for a Section 502 loan, Section 504 of the Housing Act of 1949 (42 U.S.C. 1474) authorized loans, grants, or combinations of loans and grants to make farm dwellings safe and sanitary or to remove health hazards. Low-income nonfarm homeowners became eligible for the program in 1961. Eligibility was extended to leasehold property in 1970. The 1983 Housing Act made the program available to very low-income homeowners only. The act also eliminated congressionally mandated loan and grant limits for individual homeowners and gave USDA the authority to set those limits. Under current regulations, rural homeowners with incomes of 50% or less of the area median may qualify for USDA direct loans to repair their homes. Loans are limited to $20,000, and have a 20-year term at a 1% interest rate. Owners who are aged 62 or more may qualify for grants of up to $7,500 to pay for needed home repairs. To qualify for the grants, the elderly homeowners must lack the ability to repay the full cost of the repairs. Depending on the cost of the repairs and the income of the elderly homeowner, the owner may be eligible for a grant for the full cost of the repairs, or for some combination of a loan and a grant that covers the repair costs. The combination loan and grant may total no more than $20,000. Section 504 of the Housing and Community Development Act of 1977 added Section 509(c) to the Housing Act of 1949 (42 U.S.C. 1479). Under Section 509(c), USDA is authorized to receive and resolve complaints concerning construction of Section 502 housing by contractors. If a contractor refuses or is unable to honor a warranty, the borrower may be eligible for a grant for the cost of correcting the defects. The borrower must begin the process within 18 months of the completion of the home. Related costs, such as temporary living expenses, may be included in the grant. The Cranston-Gonzalez National Affordable Housing Act amended Section 509 by adding subsection (f) which mandates set asides of some USDA lending authority. In each fiscal year, USDA is required to designate 100 counties and communities as "targeted underserved areas" that have severe unmet housing needs. The USDA must set aside 5% of each fiscal year's lending authority under Sections 502, 504, 515, and 524, and reserve it for assistance in targeted underserved areas. Colonias, however, are given priority for assistance with the reserved funds. The USDA must also set aside sufficient Section 521 rental assistance that may be used with the Section 514 and Section 515 programs. (See " Rental Assistance and Interest Subsidy (Section 521) ," below.) Subsection (f) also created the Housing Application Packaging Grant (HAPG) program under which nonprofit organizations, community development organizations, state or local governments, or their agencies may receive grants from USDA to help low-income families and individuals prepare applications for USDA housing loans in targeted underserved areas and colonias. The Housing Act of 1961 added Section 514 to the Housing Act of 1949 (42 U.S.C. 1484). Under Section 514, loans are made to farm owners, associations of farm owners, or nonprofit organizations to provide "modest" living quarters, basic household furnishings, and related facilities for domestic farm laborers. The loans are repayable in 33 years and bear an interest rate of 1%. To be eligible for Section 514 loans, applicants must be unable to obtain financing from other sources that would enable the housing to be affordable by the target population. Individual farm owners, associations of farmers, nonprofit organizations, federally recognized Indian tribes, and agencies or political subdivisions of local or state governments may be eligible for loans from USDA to provide housing and related facilities for domestic farm labor. Applicants who own farms or who represent farm owners must show that the farming operations have a demonstrated need for farm labor housing, and the applicants must agree to own and operate the property on a nonprofit basis. Except for state and local public agencies or political subdivisions, the applicants must be unable to provide the housing from their own resources and unable to obtain the credit from other sources on terms and conditions that they could reasonably be expected to fulfill. The applicants must be unable to obtain credit on terms that would enable them to provide housing to farm workers at rental rates that would be affordable to the workers. The USDA state director may make exceptions to the "credit elsewhere" test when (1) there is a need in the area for housing for migrant farm workers and the applicant will provide such housing, and (2) there is no state or local body or nonprofit organization that, within a reasonable period of time, is willing and able to provide the housing. Applicants must have sufficient capital to pay the initial operating expenses. It must be demonstrated that, after the loan is made, income will be sufficient to pay operating expenses, make capital improvements, make payments on the loan, and accumulate reserves. In 1964, the 1949 Housing Act was amended to add Section 516 (42 U.S.C. 1486). The Section 516 program permitted qualified nonprofit organizations, Indian tribes, and public bodies to obtain grants for up to two-thirds of the development cost of farm labor housing. Applicants must demonstrate that there is a need for such housing, and that there is reasonable doubt that the housing would be built without USDA assistance. Grants may be used simultaneously with Section 514 loans if the necessary housing cannot be provided by financial assistance from other sources. The section was amended in 1970 to permit grants of up to 90% of the development cost of the housing. The 1983 Housing Act provides that in decisions on approving applications under these two sections, USDA shall consider only the needs of farm laborers and make the determination without regard to the extent or nature of other housing needs in the area. The act also requires that, in a given fiscal year, up to 10% of the funds available under Section 516 shall be made available to assist eligible nonprofit agencies in providing housing for domestic and migrant farm workers. Nonprofit organizations, Indian tribes, and local or state agencies or subdivisions may qualify for Section 516 grants to provide low-rent housing for farm labor. The organizations must be unable to provide the housing from their own resources, and be unable to secure credit (including Section 514 loans) on terms and conditions that the applicant could reasonably be expected to fulfill. Applicants must contribute at least 10% of the total development costs from their own resources or from other sources, including Section 514 loans. The housing and related facilities must fulfill a "pressing need" in the area, and there must be reasonable doubt that the housing can be provided without the grant. The Housing and Community Development Act of 1987 redefined "domestic farm labor" to include persons (and the family of such persons) who receive a substantial portion of their income from the production or handling of agricultural or aquacultural products. They must be United States citizens or legally admitted for permanent residence in the United States. The term includes retired or disabled persons who were domestic farm labor at the time of retiring or becoming disabled. In selecting occupants for vacant farm labor housing, USDA is directed to use the following order of priority: (1) active farm laborers, (2) retired or disabled farm laborers who were active at the time of retiring or becoming disabled, and (3) other retired or disabled farm laborers. Farm labor housing loans and grants to qualified applicants may be used to buy, build, or improve housing and related facilities for farm workers, and to purchase and improve the land upon which the housing will be located. The funds may be used to install streets, water supply and waste disposal systems, parking areas, and driveways, as well as for the purchase and installation of appliances such as ranges, refrigerators, and clothes washers and dryers. Related facilities may include a maintenance workshop, recreation center, small infirmary, laundry room, day care center, and office and living quarters for a resident manager. Section 514 loans are available at 1% interest for up to 33 years. Section 516 grants may not exceed the lesser of (1) 90% of the total development cost of the project, or (2) the difference between the development costs and the sum of (a) the amount the applicant can provide from its own resources, and (b) the maximum loan the applicant can repay given the maximum rent that is affordable to the target tenants. The Senior Citizens Housing Act of 1962 amended the Housing Act of 1949 by adding Section 515 (42 U.S.C. 1485). The law authorized USDA to make loans to provide rental housing for low- and moderate-income elderly families in rural areas. Amendments in 1966 removed the age restrictions and made low- and moderate-income families, in general, eligible for tenancy in Section 515 rental housing. Amendments in 1977 authorized Section 515 loans to be used for congregate housing for the elderly and handicapped. Loans under Section 515 are made to individuals, corporations, associations, trusts, partnerships, and public agencies. The loans are made at a 1% interest rate and are repayable in 50 years. Except for public agencies, all borrowers must demonstrate that financial assistance from other sources will not enable the borrower to provide the housing at terms that are affordable to low- and moderate-income borrowers. There are restrictions on the amount of rent borrowers may charge to occupants. Subject to USDA approval, borrowers set project rents based on the debt service for the loans and reasonable operating and maintenance expenses. The Housing and Community Development Act of 1987 amended the Housing Act of 1949 to state that occupancy of Section 515 housing, which has been allocated low-income housing tax credits (LIHTC), may be restricted to those families whose incomes are within the limits established for the tax credits. If, however, USDA finds that some of the units have been vacant for at least six months and that their continued vacancy will threaten the financial viability of the project, then higher-income tenants will be authorized to occupy the units. In 1968, Section 521 was added to the Housing Act of 1949 (42 U.S.C. 1490a). Section 521 established an interest subsidy program under which eligible low- and moderate-income purchasers of single-family homes (under Section 502) and nonprofit developers of rental housing (under Section 515) may obtain loans with interest rates subsidized to as low as 1%. Section 521 was amended in 1974 to authorize USDA to make rental assistance payments to owners of USDA-financed rental housing (Sections 515 or 514) on behalf of tenants unable to pay the USDA-approved rent with 25% of their income. Amendments in the 1983 Housing Act provide that rent payments by eligible families would equal the greater of (1) 30% of monthly adjusted family income, (2) 10% of monthly income, or (3) for welfare recipients, the portion of the family's welfare payment that is designated for housing costs. The rental assistance payments, which are made directly to the borrowers, make up the difference between the tenants' payments and the USDA-approved rent for the units. Borrowers must agree to operate the property on a limited profit or nonprofit basis. The term of the rental assistance agreement is 20 years for new construction projects and five years for existing projects. Agreements may be renewed for up to five years. An eligible borrower who does not participate in the program may be petitioned to participate by 20% or more of the tenants eligible for rental assistance. The Housing and Urban Development Act of 1968 added Section 523 to the Housing Act of 1949 (41 U.S.C. 1490c). Under Section 523, nonprofit organizations may obtain two-year loans to purchase and develop land that is to be subdivided into building sites for housing to be built by the mutual self-help method (groups of low-income families who are building their own homes). The interest rate is 3% for these loans. Applicants must demonstrate a need for the proposed building sites in the locality. Nonprofit sponsors may also obtain technical assistance (TA) grants to pay for all or part of the cost of developing, administering, and coordinating programs of technical and supervisory assistance to the families who are building their own homes. Each family is expected to contribute at least 700 hours of labor in building homes for each other. Participating families generally have low income and are unable to pay for homes built by the contract method. Applicants must demonstrate that (1) there is a need for self-help housing in the area, (2) the applicant has or can hire qualified people to carry out its responsibilities under the program, and (3) funds for the proposed TA project are not available from other sources. The program is generally limited to very low- and low-income families. Moderate-income families may be eligible to participate, provided they are unable to pay for homes built by contractors. TA funds may not be used to hire construction workers or to buy real estate or building materials. Private or public nonprofit corporations, however, may be eligible for two-year site loans under Section 523. The loans may be used to purchase and develop land in rural areas. The land is subdivided into building sites and sold on a nonprofit basis to low- and moderate-income families. Generally, a loan will not be made if it will not result in at least 10 sites. The sites need not be contiguous. Sites financed through Section 523 may only be sold to families who are building homes by the mutual self-help method. The homes are usually financed through the Section 502 program. In 1979, Section 524 was added to the Housing Act of 1949 (42 U.S.C. 1490d). Under Section 524, nonprofit organizations and Indian tribes may obtain direct loans from USDA to purchase and develop land that is to be subdivided into building sites for housing low- and moderate-income families. The loans are made for a two-year period. Sites financed through Section 524 have no restrictions on the methods by which the homes are financed or constructed. The interest rate on Section 524 site loans is the Treasury cost of funds. The Rural Housing Amendments of 1983 amended the Housing Act of 1949 by adding Section 533 (12 U.S.C. 1490m). This section authorizes USDA to make grants to organizations for (1) rehabilitating single-family housing in rural areas that is owned by low- and very low-income families, (2) rehabilitating rural rental properties, and (3) rehabilitating rural cooperative housing that is structured to enable the cooperatives to remain affordable to low- and very low-income occupants. Applicants must have a staff or governing body with either (1) the proven ability to perform responsibly in the field of low-income rural housing development, repair, and rehabilitation; or (2) the management or administrative experience that indicates the ability to operate a program providing financial assistance for housing repair and rehabilitation. The homes must be located in rural areas and be in need of housing preservation assistance. Assisted families must meet the income restrictions (income of 80% or less of the median income for the area), and must have occupied the property for at least one year prior to receiving assistance. Occupants of leased homes may be eligible for assistance if (1) the unexpired portion of the lease extends for five years or more, and (2) the lease permits the occupant to make modifications to the structure and precludes the owner from increasing the rent because of the modifications. USDA is authorized to provide grants to eligible public and private organizations. The grantees may in turn assist homeowners in repairing or rehabilitating their homes by providing the homeowners with direct loans, grants, or interest rate reductions on loans from private lenders. A broad range of housing preservation activities are authorized: (1) the installation and/or repair of sanitary water and waste disposal systems to meet local health department requirements; (2) the installation of energy conservation materials such as insulation and storm windows and doors; (3) the repair or replacement of heating systems; (4) the repair of electrical wiring systems; (5) the repair of structural supports and foundations; (6) the repair or replacement of the roof; (7) the repair of deteriorated siding, porches, or stoops; (8) the alteration of a home's interior to provide greater accessibility for any handicapped member of the family; and (9) the additions to the property that are necessary to alleviate overcrowding or to remove health hazards to the occupants. Repairs to manufactured homes or mobile homes are authorized if (1) the recipient owns the home and site, and has occupied the home on that site for at least one year, and (2) the home is on a permanent foundation or will be put on a permanent foundation with the funds to be received through the program. Up to 25% of the funding to any particular dwelling may be used for improvements that do not contribute to the health, safety, or well-being of the occupants; or materially contribute to the long-term preservation of the unit. These improvements may include painting, paneling, carpeting, air conditioning, landscaping, and improving closets and kitchen cabinets. USDA is also authorized to make Section 533 grants to organizations that will rehabilitate rental and cooperative housing. The Section 538 program was added in 1996 (42 U.S.C. 1490p-2). Under this program, borrowers may obtain loans from private lenders to finance multi-family housing, and USDA guarantees to pay for losses in case of borrower default. Section 538 guaranteed that loans may be used for the development costs of housing and related facilities that (1) consist of five or more adequate dwelling units, (2) are available for occupancy only by renters whose income at time of occupancy does not exceed 115% of the median income of the area, (3) would remain available to such persons for the period of the loan, and (4) are located in a rural area. Eligible lenders include the following: (1) any lender approved by the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), or the Federal Housing Administration (FHA), and currently active in their multi-family housing guaranteed lending programs; (2) state or local housing finance agencies; (3) members of the Federal Home Loan Bank System; and (4) other lenders that demonstrate to USDA that they have knowledge and experience with multi-family lending. In any case, the lenders must apply to USDA for permission to participate in the program. Eligibility must be verified every year. Eligible borrowers include public agencies, Indian tribes, individuals, general partnerships (if formed for a term at least equal to the loan term), limited partnerships, for-profit corporations, nonprofit corporations, limited liability companies, and trusts. In addition, borrowers must meet the following requirements: (1) be a creditworthy single-asset entity or have received prior written approval from USDA; (2) not be in default under any other agency housing program, or have performed well for six months in an approved workout plan; (3) be able to and intend to operate and maintain the project in accordance with program requirements; (4) be in legal and regulatory compliance with respect to any federal debt; (5) be a U.S. citizen or legal resident, a U.S.-owned corporation, or a limited liability corporation (LLC) or a partnership where the principals are U.S. citizens or permanent legal residents. Borrowers must contribute initial operating capital equal to at least 2% of the loan amount. The eligible uses of loan proceeds include new construction; moderate or substantial rehabilitation and acquisition when related to the rehabilitation; acquisition of existing buildings for special needs; acquisition and improvement of land; development of essential on- and off-site improvements; development of related facilities; on-site management and maintenance offices; appliances; parking development and landscaping; limited commercial space costs; professional and application fees; technical assistance and packaging fees to and by nonprofit entities; board of director education fees for cooperatives; interest on construction loans; relocation assistance when applicable; developers fees; and refinancing applicant debt when authorized in advance to pay for eligible purposes prior to loan closing and approved by RHS. The program may not be used for transient or migrant housing, health care facilities, or student housing. Unless granted an exception by USDA, refinancing is not an authorized use of funds. The interest rates on Section 538 loans must be fixed. The maximum allowable interest rate is as specified in each year's Notification of Funding Availability (NOFA). In order to help the Section 538 program serve low- and moderate-income tenants, however, at least 20% of Section 538 loans made each year must receive interest credit subsidy sufficient to reduce the effective interest rate to the Applicable Federal Rate (AFR) defined in Section 42(I)(2)(D) of the Internal Revenue Code. The Housing and Community Development Act of 1992 added Section 542 (42 U.S.C. 1490r) to the Housing Act of 1949. Owners of complexes financed through the USDA Section 515 program receive subsidized loans, and agree to rent only to low-income residents. The rental rates are controlled. When the mortgage is paid off, the owner has the right to raise rents to what the local economy can bear. Rural Housing Vouchers are made available to residents to cover the difference between the tenant's rent contribution and the new rental rate. Tenants may use the voucher at their current property or any other rental unit that passes Housing and Urban Development (HUD) housing quality standards, and where USDA vouchers are accepted. Use of the vouchers is prohibited at HUD Section 8 or other federally assisted public housing projects. In November 2004, USDA released a report on the Section 515 program. The purpose of the report was to assess the status of the Section 515 portfolio in terms of prepayment options and long-term rehabilitation needs. While few health and safety issues were found, the report found that no properties had adequate reserves or sufficient cash flow to do needed repairs and for adequate maintenance over time. The report concluded that the USDA portfolio of Section 515 projects represented a federal investment of nearly $12 billion; that the projects serve some of the poorest and most underserved families in rural communities; and that the location, physical condition, and tenant profile of the properties suggest that the public interest is best served by revitalizing most of the housing for long-term use by low- and moderate-income tenants. The report recommended a revitalization program for USDA multi-family housing. In response to the report, the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 2006, P.L. 109-97 , included a provision that created a demonstration program for the preservation and revitalization of multi-family rental housing properties. The program is referred to as the Multi-Family Housing Preservation and Revitalization (MPR) program. The purpose of the MPR program is to preserve Section 515 and Section 514/516 projects in order to provide safe and affordable housing for low-income residents. Expectations are that properties selected to participate will be able to be revitalized and extend affordable use without displacing or impacting tenants because of increased rents. Under MPR, the USDA has authority to use funds to restructure existing loans using such tools as reducing or eliminating interest; deferring loan payments; subordinating, reducing, or re-amortizing loan debt; and making loan advances. In its FY2011 Budget for USDA, the Administration proposed no funding for the MPR program. The Administration argues that the program has been operating since 2006, that the most cost-effective and justified repairs have been achieved, and that continued funding could be seen as over-subsidizing multi-family property owners. Instead, the Administration proposed an increase in funding for the Section 515 program to $95 million instead of the $70 million approved for FY2010. Title VIII of the Housing Preservation and Tenant Protection Act of 2010, H.R. 4868 , would authorize continuing finding for the MPR program. The bill was passed by the House Financial Services Committee but has not been considered in the full House. No companion bill was introduced in the Senate. Since no appropriations legislation was enacted before the beginning of FY2011, the 111 th Congress enacted a series of continuing resolutions (CR) to continue funding at the FY2010 level for most accounts in the federal budget (including all of the accounts in USDA's budget). The latest CR ( P.L. 111-322 ) is slated to expire at the earlier of March 4, 2011, or enactment of FY2011 appropriations legislation. Since the collapse of the mortgage market in 2007, prospective homebuyers have found that lenders typically require either a 20% downpayment or a 10% downpayment and the purchase of private mortgage insurance. This has resulted in an increased demand for loans insured or guaranteed by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the USDA, since these programs require smaller downpayments, and in the case of VA and USDA, no downpayments. The use of the Section 502 guaranteed loan program increased from 32,481 loans in FY2007 to 56,745 loans in FY2008, an increase of nearly 75%. In FY2009, there were 119,826 Section 502 guaranteed loans issued, an increase of more than 111%. The high demand for the program has continued, and on March 9, 2010, USDA sent a notice to USDA State Directors noting that the FY2010 funding for the Section 502 guaranteed loan program was expected to be exhausted by the end of April. This is not the first time that the USDA would have exhausted its loan authority prior to the end of the fiscal year. However, this year was the first time that the agency would be exhausting its funds with so much of the fiscal year remaining. On May 11, 2010, USDA provided guidance to lenders on how to proceed with loans when FY2010 funds for the Section 502 loan guarantee program were exhausted. In the guidance, USDA estimated that funds would be exhausted on May 12, 2010, or soon thereafter. Lenders could resume making Section 502 guaranteed loans but the USDA guarantee on the loans would be "subject to the availability of funds and Congressional authority to charge a 3.5% guarantee fee for purchase loans and a 2.25% guarantee fee for refinance loans." Lenders would assume all loss default risk for the loans until funds are available for USDA to obligate and USDA issues the Loan Note Guarantees to lenders. As enacted on July 29, 2010, the 2010 Supplemental Appropriations Act, P.L. 111-212 , provided additional appropriations for Section 502 guaranteed loans for the remainder of FY2010. The act also permits USDA to charge lenders a guarantee fee of up to 3.5% of the mortgage amount. In addition, lenders may be charged an annual fee of 0.5% of the mortgage balance for the life of the loan. These changes in the guarantee fees are intended to enable the Section 502 guaranteed home loan program to operate with little or no need for positive credit subsidies in FY2011 and beyond. The latest continuing resolution, P.L. 111-322 , funds the program at the FY2010 level until the earlier of March 4, 2011, or enactment of FY2011 appropriations legislation for USDA.

Title V of the Housing Act of 1949 authorized the Department of Agriculture (USDA) to make loans to farmers to enable them to construct, improve, repair, or replace dwellings and other farm buildings to provide decent, safe, and sanitary living conditions for themselves or their tenants, lessees, sharecroppers, and laborers. USDA was also authorized to make grants or combinations of loans and grants to those farmers who could not qualify to repay the full amount of a loan, but who needed the funds to make the dwellings sanitary or to remove health hazards to the occupants or the community. While the act was initially targeted toward farmers, over time the act has been amended to enable USDA to make housing loans and grants to rural residents in general. Currently, the USDA housing programs are administered by the Rural Housing Service (RHS). The housing programs are generally referred to by the section number under which they are authorized in the Housing Act of 1949, as amended. The rural housing programs include loans for the purchase, repair, or construction of single-family housing; loans and grants to remove health and safety hazards in owner-occupied homes; loans and grants for the construction and purchase of rental housing for farmworkers; loans for the purchase and construction of rental and cooperative housing for the elderly and for rural residents in general; rental assistance payments to make rental housing more affordable; interest subsidies to make homeownership loans more affordable and to enable production of rental housing that is affordable for the target population; and loans for developing building sites upon which rural housing is to be constructed. The collapse of the mortgage market in 2007 has resulted in an increased demand for home loans that are insured or guaranteed by the federal government, including the USDA Section 502 guaranteed home loans. By May 2010, the FY2010 funding for the USDA guaranteed loan program was exhausted. As enacted on July 29, 2010, the 2010 Supplemental Appropriations Act, P.L. 111-212, authorized additional appropriations for Section 502 guaranteed loans for the remainder of FY2010. The act also permits USDA to charge lenders a guarantee fee of up to 3.5% of the mortgage amount. In addition, lenders may be charged an annual fee of 0.5% of the mortgage balance for the life of the loan. These changes in the guarantee fees are intended to enable the Section 502 guaranteed home loan program to operate with little or no need for positive credit subsidies in FY2011 and beyond. Since no appropriations legislation was enacted before the beginning of FY2011, the 111th Congress enacted a series of continuing resolutions (CR) to continue funding at the FY2010 level for most accounts in the federal budget (including all of the accounts in USDA's budget). The latest CR (P.L. 111-322) is slated to expire at the earlier of March 4, 2011, or enactment of FY2011 appropriations legislation.

Unemployment Compensation (UC) is a joint federal-state program and is financed by federal taxes under the Federal Unemployment Tax Act (FUTA) and by state payroll taxes. The underlying framework of the UC system is contained in the Social Security Act: Title III authorizes grants to states for the administration of state UC laws; Title IX authorizes the various components of the federal UTF; and Title XII authorizes advances or loans to insolvent state UC programs. Among its 59 accounts, the federal UTF in the U.S. Treasury includes the Employment Security Administration Account (ESAA), the Extended Unemployment Compensation Account (EUCA), and the Federal Unemployment Account (FUA); 53 state accounts; the Federal Employees Compensation Account; and two accounts related to the Railroad Retirement Board. Federal unemployment taxes are placed in the ESAA, the EUCA, and the FUA; each state's unemployment taxes are placed in the appropriate state's account. In law, the term Reed Act refers to a part of the Employment Security Financing Act of 1954, P.L. 83-567. This legislation amended Titles IX and XII of the Social Security Act (SSA) and established the basic structure of the UTF. The amendments to Title IX, among other things, provided for the transfer of excess funds in the federal portion of the UTF to the individual state accounts under certain conditions. In practice, there have been two forms of Reed Act distributions. The first form, regular Reed Act distributions, follows the terms as set forth in the Reed Act. The second type, special Reed Act distributions, distributes some of the federal UTF funds to the states where these special distributions may follow some but not all of the conditions set by the Reed Act. The 1998-2002 Reed Act distributions were special distributions. Federal law restricts states to using Reed Act distributions only to cover the cost of state benefits, employment services (ES), labor market information, and administration of state UC and ES programs. Suggested uses by the Department of Labor included establishing revolving funds for UC and ES automation costs, UC and ES performance improvement, costs related to reducing UC fraud and abuse, and improvement in UC claims filing and payment methods. An appropriation by the state's legislature is necessary before the state's share of this distribution may be used for UC and ES administrative expenses. Funds may not be used to extend a temporary unemployment benefit such as the Emergency Unemployment Compensation (EUC08) program. Under FUTA, the federal tax on employers finances the states' administrative costs of UC and loans to states with insolvent UC programs. State UC payroll taxes finance the costs of regular UC benefits. The extended benefits program is funded 50% by the federal government and 50% by the states, but the 2009 stimulus package ( P.L. 111-5 SS2005) as amended temporarily provides for 100% federal funding of this program through March 7, 2012. Under FUTA, employers pay a federal tax of 6.0% on wages of up to $7,000 a year paid to each worker. The law, however, provides a credit against federal tax liability of up to 5.4% to employers who pay state taxes in a timely manner. Accordingly, in states meeting the specified requirements, employers pay an effective federal tax of 0.6%, or a maximum of $42 per covered worker, per year. At the end of the federal fiscal year, on September 30 th , the net balance of the ESAA is determined. If the amount in this account exceeds 40% of the prior year's appropriation by Congress, then an "excess" balance exists. This excess balance is transferred first to the EUCA. When that account reaches its statutory maximum, the remaining excess balance is transferred to the FUA. When all three accounts are at their statutory maximums , any remaining excess balance is distributed to the accounts of the states in the UTF based on each state's share of U.S. covered wages. These distributions are called Reed Act distributions. Reed Act distributions occurred in 1956 through 1958 and 1998 through 2002. Table 1 lists the distributions. The most recent Reed Act distribution that was a regular and not a special Reed Act distribution was $15.9 million and occurred in 1998. The Balanced Budget Act (BBA) of 1997, P.L. 105-33 , limited the Reed Act distributions for the 1999 to 2001 period to special distributions of $100 million each year. Any amounts in excess of the $100 million that--absent the BBA amendments--would have been transferred to the states "shall, as of the beginning of the succeeding fiscal year, accrue to the federal unemployment account, without regard" to its statutory limit. In March 2002, the Job Creation and Worker Assistance Act of 2002, P.L. 107-147 , provided for a one-time special Reed Act distribution of up to $8 billion to state accounts in the UTF, where the funds were distributed based upon the formula used for regular Reed Act distributions, using calendar year 2000 state information. The law labeled this transfer a "Reed Act" distribution although it differed from traditional Reed Act distributions, most notably because the law distributed a set dollar amount which was not determined by the statutory ceilings in the federal accounts and was distributed before the end of a fiscal year. There was no Reed Act distribution in 2003, and no regular Reed Act distribution is projected through FY2021. According to the Department of Labor, there is no projected distribution through FY2021 on account outstanding loans owed to the general fund of the U.S. Treasury. According to a General Account Office (GAO, now know as the Government Accountability Office) report, the $8 billion Reed Act distribution reduced 2003 unemployment taxes in 22 states and UC administration costs in 17 states. The Center for Employment Security Education and Research (CESER), a component of the National Association of State Workforce Agencies (NASWA), with the assistance of Booz Allen Hamilton and Decern Consulting, examined how states used the $8 billion special Reed Act Distribution of 2002. This study found that approximately half of the Reed Act distribution was used to lower state unemployment taxes in 2003 and 2004 from what they would have otherwise been. The special distribution also led to increases in spending on UC benefits, UC administration, and employment services. The American Recovery and Reinvestment Act ( P.L. 111-5 SS2003) provided for a special UTF distribution. The law provided a special transfer of UTF funds from FUA of up to a total of $7 billion to the state accounts within the UTF as "incentive payments" for changing certain state UC laws. The maximum incentive payment allowable for a state was calculated using the methods also used in Reed Act distributions. That is, funds were to be distributed to the state UTF accounts based on the state's share of estimated federal unemployment taxes (excluding reduced credit payments) made by the state's employers. In addition, the act transferred a total of $500 million from the federal ESAA to the state's accounts in the UTF.

Under the Federal Unemployment Tax Act (FUTA; P.L. 76-379), the federal unemployment tax on employers finances the states' administrative costs of Unemployment Compensation (UC) and loans to states with insolvent UC programs. The extended benefits program is funded 50% by the federal government and 50% by the states, but the 2009 stimulus package (P.L. 111-5 SS2005) as amended temporarily provides for 100% federal funding of this program through December 31, 2012. FUTA tax revenues are placed into the Unemployment Trust Fund (UTF) that--among its many accounts--contains three federal accounts and 53 individual state accounts from the states' unemployment taxes. Under certain financial conditions, excess federal tax funds in the Unemployment Trust Fund (UTF) are transferred to the individual state accounts within the UTF. The transferred funds are referred to as Reed Act distributions. The Reed Act, P.L. 83-567, set ceilings in the federal UTF accounts that trigger funds to be distributed to state accounts; Congress has changed these ceilings several times (P.L. 105-33, P.L. 102-318, and P.L. 100-203). There are other transfers in the UTF that are labeled by legislation as special Reed Act distributions. These are distributed in a manner similar to the Reed Act but do not follow all of the Reed Act provisions. The most recent regular Reed Act distribution was $15.9 million and occurred in 1998. The Balanced Budget Act (BBA) of 1997, P.L. 105-33, limited Reed Act distributions for the 1999 to 2001 period to special Reed Act distributions of $100 million each year. In March 2002, the Job Creation and Worker Assistance Act of 2002, P.L. 107-147, provided for a one-time special Reed Act distribution of up to $8 billion to state accounts. The American Recovery and Reinvestment Act (P.L. 111-5 SS2003) provided for a special UTF distribution that has some properties similar to a Reed Act distribution. The law distributes up to a total of $7.5 billion to the states through a special transfer of funds from the federal accounts within the UTF to the state accounts, using the methodology required by the Reed Act to determine the maximum state allotments. Up to $7 billion was distributed to states as incentive payments for changing certain state UC laws. Administrative funds totaling $500 million was distributed among the state accounts, regardless of whether states changed their UC laws. According to the Department of Labor, there is no projected regular Reed Act distribution through FY2021 on account outstanding loans in the UTF owed to the general fund of the U.S. Treasury. This report will be updated if legislative activity affects Reed Act distributions.

Nearly all state and local governments sell bonds to finance public projects and certain qualified private activities. The federal government subsidizes state and local bond issuances through a number of policies. The mostly widely utilized policy instrument is the tax-exempt bond, which excludes bond interest payments received from the investor's federal taxable income. In contrast, interest payments from other types of bonds, such as corporate bonds, are included in federal taxable income. Because of the difference in taxability, state and local government tax-exempt bonds--often referred to as municipal bonds--offer a lower pre-tax interest rate than corporate bonds, which reduces the interest costs owed by state and municipal governments. Tax credit bonds (TCBs) offer an alternative to municipal bonds, providing a tax credit or direct payment proportional to the bond's face value in lieu of the tax exemption. Most TCBs are designated for a specific purpose. TCBs have been used by issuers to finance public school construction and renovation; clean renewable energy projects; refinancing of outstanding government debt in regions affected by natural disasters; conservation of forest land; investment in energy conservation; and for economic development purposes. The relative appeal of TCBs and municipal bonds is dependent on issuer and investor characteristics and on economic conditions. Many recent TCBs are not eligible for new issuances under current law, due either to the expiration of issuing authority or to full subscription of the TCB issuing limit. Bonds that are no longer being issued may still be held by the public. In the 114 th Congress, multiple bills have been introduced to extend or modify certain TCB programs. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) extended the issuing authority of QZABs for the 2015 and 2016 tax years, and provided for $400 million of issuing capacity for each year. Other legislation, including H.R. 2676 and S. 1515 would extend the BAB program indefinitely. Additionally, the President's FY2017 Budget included a number of proposals related to TCBs, including the creation of a new TCB for certain infrastructure programs. There are several types of TCBs, most of which are provided for a specific purpose, location, or type of project. Issuers of Qualified Zone Academy Bonds (QZABs) are required to use the proceeds to finance public school partnership programs in economically distressed areas. Clean Renewable Energy Bonds (CREBs) are designated for clean renewable energy projects. Midwestern Disaster Bond (MWDB) proceeds were for the refinancing of outstanding government debt in regions affected by the Midwestern storms and floods in the spring and summer of 2008. Qualified Forestry Conservation Bonds (QFCBs) are intended to help non-profits or government entities purchase and conserve forest land. Qualified Energy Conservation Bonds (QECBs) are for investment in capital projects that improve energy conservation. Qualified School Construction Bonds (QSCBs) are for school construction, Build America Bonds (BABs) are for any governmental purpose, and Recovery Zone Economic Development Bonds (RZEDBs) are for economic development purposes. Table 1 summarizes the acronyms for the bonds examined in this report. TCBs offer a tax credit that may be used to directly reduce federal income tax liability. The credit available from a TCB depends on the bond principal and credit rate. The method of determining the credit rate differs across types of TCBs: the credit rate for investor and issuer credit TCBs depends on a national credit rate set by Treasury, while the credit rate for direct payment TCBs is dependent on interest rate negotiations between the issuer and investor. Unlike interest on municipal bonds, which does not create a taxable income stream, the credit amount is included in the bond holder's gross income. The credit is limited to the bondholder's current tax liability and is therefore "non-refundable." Unused tax credits may be carried over to the succeeding tax year. The credit rate for investor and issuer credit TCBs is dependent on a national credit rate set by the Secretary of the Treasury. That national credit rate is intended to allow issuers of TCBs to sell their bonds at par (face value) without additional interest expense. The rate calculation is based on its [the Treasury Department's] estimate of the yields on outstanding bonds from market sectors selected by the Treasury Department in its discretion that have an investment grade rating between A and BBB for bonds of a similar maturity for the business day immediately preceding the sale date of the tax credit bonds. The credit rate published (by the U.S. Bureau of the Fiscal Service) on the issue sale date is the bondholder's annual rate of credit. The relationship between the national credit rate set by Treasury and final credit rate applied to a bond issue is dictated by the federal tax code, and differs across types of investor and issuer TCBs. The credit on what are known as 100% credit TCBs provides for a benefit equal to the product of the national credit rate and the bond principal. For example, the annual tax credit rate for investor credit TCBs was 3.92% on September 8, 2016 (the term was 45 years). The bonds sold on that day would allow the taxpayer to claim a federal tax credit equal to 3.92% multiplied by the face value of the bond. Thus, a $100,000 bond issued on September 8, 2016, would yield an annual tax credit of $3,920 for the bondholder. However, other credit rates may be reduced for some TCBs. CREBs and QECBs allow for a credit equal to 70% of the national credit rate. Thus, for these bonds, the investor receives 70% of the annual tax credit described above, or $2,744 (70% of $3,920). The method for determining the tax credit rate for investor tax credit TCBs is generally the same for 100% and 70% credit TCBs. Unlike investor credit TCBs, the benefit claimed for issuer direct payment TCBs depends on the interest rate established between the buyer and issuer of the bond, not the Secretary of the Treasury. The issuer and investor agree on terms either as a result of a competitive bid process or through a negotiated sale. As with investor credit TCBs, the relationship of the final credit rate and the negotiated interest rate may differ across types of TCBs. BAB and RZEDB credits are 35% and 45%, respectively, of a market-determined taxable bond interest rate for the specific issuer, not the Secretary of Treasury. For example, if the negotiated taxable interest rate is 8%, on $100,000 of bond principal, then a bond with 35% credit amount would produce a credit worth $2,800 (8% times $100,000 times 35%). The issuer has the option of receiving a direct payment from the Treasury equal to the credit amount or allowing the investor to claim the credit. The issuer would choose the direct payment option if the net interest cost was less than traditional tax-exempt debt of like terms. The interest cost to the issuer choosing the direct payment is $8,000 less the $2,800, or $5,200. If the tax-exempt rate of the bond is greater than 5.20% (requiring a payment of greater than $5,200), then the direct payment is a better option for the issuer. So long as the marginal tax rate of investors in the municipal bond market is lower than the credit rate of the direct payment TCB, then municipal issuers would likely chose the direct payment option. However, as the marginal tax rate rises, the alternative to direct payment TCBs, traditional tax-exempt bonds, is relatively more attractive to issuers and investors alike. Increases in statutory marginal tax rates would likely induce such an outcome, reducing the attractiveness of direct payment TCBs relative to traditional tax-exempt bonds. The direct payment TCB, in cases where the issuer claims the direct payment, is modeled after the "taxable bond option," which was first considered in the late 1960s. In 1976, the following was posited by the then president of the Federal Reserve Bank in Boston, Frank E. Morris: The taxable bond option is a tool to improve the efficiency of our financial markets and, at the same time, to reduce substantially the element of inequity in our income tax system which stems from tax exemption [on municipal bonds]. It will reduce the interest costs on municipal borrowings, but the benefits will accrue proportionally as much to cities with strong credit ratings as to those with serious financial problems. The taxable bond option has been well received by issuers and investors. A U.S. Department of the Treasury report on BABs, a direct payment TCB, estimated that over the lifetime of the program over $181 billion in BABs were issued. The implementation of annual sequesters, as provided for by the Budget Control Act of 2011 ( P.L. 112-25 ), diminished the credit rates of certain issuer direct payment TCBs. In FY2016, sequestration reduced the credit rates for issuer direct payment BABs, QSCBs, QZABs, new CREBs, and QECBs by 6.8%. The credits on TCBs are "strippable," or separable from the underlying bond. Allowing the separation of the credit from the underlying bond improves the attractiveness and marketability of the TCBs to issuers, investors, and financial intermediaries. Generally, a financial intermediary could buy the TCB, sell the principal to an investor looking for a longer-term investment, and sell the stream of credits to another investor seeking quarterly income. For example, assume a financial intermediary buys the $100,000 TCB presented above. The intermediary sells the right to the principal portion (the $100,000) of the TCB to a pension fund for $90,000 and sells the stream of credits ($1,980 every quarter for 15 years) to another investor for $90,000. The stripping provision makes TCBs more competitive with traditional bonds. The maximum term (the number of years for which the credit will be paid) "shall be the term which the Secretary estimates will result in the present value of the obligation to repay the principal on the bond being equal to 50% of the face amount of the bond." Specifically, the maximum term of the bonds is determined by the prevailing interest rate for municipal debt with a maturity of greater than 10 years. The maximum term on TCBs issued on September 8, 2016, was set at 45 years. Midwest Disaster Bonds (MWDBs) had a maximum term of two years, and the interest rate reflected the shorter term. The Treasury publishes the credit rate and term daily. ARRA included a provision that requires some of the TCBs to abide by the labor standards as mandated under the Davis-Bacon Act of 1931. Generally, Davis-Bacon requires that contractors pay workers not less than the locally prevailing wage for comparable work. The following bonds are subject to the Davis-Bacon labor standard: new CREBs, QECBs, QZABs, QSCBs, and RZEDBs. The Treasury-determined credit rate for investor credit TCBs is set higher than the municipal bond rate to compensate for the credit's taxability noted earlier. Generally, to attract investors, the credit rate should yield a return greater than the prevailing municipal bond rate and at least equal to the after-tax rate for corporate bonds of similar maturity and risk. And for issuers, the interest cost should be less than, or at least equal to, the next best financing alternative. In almost all cases, tax-exempt bonds would be the next best alternative for governmental issuers. The following section offers a brief analysis of the tradeoff between tax credit bonds and other bonds from the prospective of investors and issuers. An investor's marginal tax rate is critical in determining the attractiveness of bond investments. Consider the following example where we assume an average 4.53% interest rate on municipal debt. Investors in the 15% income tax bracket would need a credit rate of at least 5.33% (4.53% divided by (1 - 0.15)) to choose TCBs over municipal bonds. Investors in the 35% bracket would require a credit rate on TCBs of 6.97% (4.53% divided by (1 - 0.35)). Generally, the TCB credit rate would have to exceed the after-tax return on municipal bonds and the after-tax return on taxable bonds of like term to maturity. The investor credit TCB rate is set at the higher amount to ensure the market for the bonds clears. The choice between a tax credit bond and a taxable corporate bond is not as dependent upon the bondholder's tax bracket. At comparable levels of default risk, TCBs and taxable bonds are equally attractive to purchasers that anticipate tax liability. However, an investor without tax liability that holds a tax credit bond would be allowed to claim a credit for future tax liability or carry forward the credit. For these investors, "stripping" the tax credits from the bond and selling them to an entity with tax liability would be an option. The objective of issuers is to borrow at the lowest possible interest cost. TCBs under both the investor credit model and the issuer credit model are typically lower cost than the next best alternative, tax-exempt bonds. Proposals to reduce the issuer credit rate, to 25% or 28% for example, increase the likelihood that issuers will opt for traditional tax-exempt bond finance. Direct payment TCBs provide issuers with the option of receiving payments directly from Treasury as another option to tax-exempt bonds. The relative value of direct payment TCBs increases with the interest rate of the alternative tax-exempt bond, as that rate determines the payment otherwise required from the issuer. TCB issuers may also establish a bond reserve fund (or sinking fund). A sinking fund provides for the eventual repayment of bond principal by devoting certain funds to regular payments on the bond issue. Generally, IRS rules allow reserve funds to accumulate just enough to repay the bond principal. The sinking fund provision for TCBs significantly reduces the interest cost to the issuer. On September 8, 2016, the allowable rate for the "Permitted Sinking Fund Yield" to repay the issue was 1.55%. The TCB rate was 3.92% on that day. The relative appeal of tax-exempt bonds and TCBs to investors and policymakers may vary significantly with underlying economic patterns. In normal economic conditions, tax-exempt bonds are offered at a lower interest rate than those of corporate bonds. For example, on September 2, 2016, the average high-grade taxable corporate bond rate was 3.24%, and the average high-grade municipal bond rate was 2.84% (see Figure 1 ). The municipal bond rate thus offers a considerable subsidy to the issuer, as without the tax exemption the issuer would have had to pay 40 basis points more for each dollar borrowed (3.24% is 0.40 percentage points greater than 2.84%). However, from late 2008 to early 2009 and from early 2011 to early 2015, the gap between the interest rates of municipal and corporate bonds was much lower than its historical average, and in some cases the municipal bond rates were actually higher than the taxable high-grade corporate bond rates. Turmoil in the financial markets brought about by the Great Recession may have contributed to the increase in municipal bond rates. Another contributor to the high yields on municipal bonds may have been low demand for those bonds due to concerns about potential and actual defaults by municipalities like Chicago, Detroit, and Puerto Rico. Beginning in 2015, the spread between corporate and municipal bonds returned near its historical average. This return to normal may be due to anticipated interest rate increases by the Federal Reserve, as municipal bonds are anticipated to perform better as interest rates increase. However, the recent fluctuations in the rate spread make it difficult to predict the nature of the spread moving forward. The value of the TCB credit is a function of both the interest rate of the bond and the credit rate on the TCB as set by Treasury. However, because the credit rate of the TCB is intended to be such that the bonds are not sold at a discount, the relative value of TCBs to corporate bonds is less dependent on general economic conditions than is the value of municipal bonds over corporate bonds. Therefore, TCBs may be relatively more attractive compared to municipal bonds in economic periods of low growth or great uncertainty. The authority to issue TCBs is usually capped with a national limit or with a state-by-state cap. BABs were the exception. In addition, some of the TCBs include set asides for sub-state governments or other entities. What follows is a brief overview of how and to whom each bond program allocates the authority to issue the bonds. Table 2 lists the existing TCBs and their authorization levels. A more detailed description of each type of bond is provided later in the report. Note that P.L. 110-246 , enacted in June of 2008, created Section 54A of the tax code. This section contains many parameters common to all TCBs. This revision of the tax code was intended to "standardize" some of the TCB parameters. As Table 2 shows, the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 , ARRA) included several bond provisions that use a tax credit mechanism. Specifically, ARRA created QSCBs. It also allowed issuers the option of receiving a direct payment from the U.S. Treasury instead of tax-exempt interest payments or tax credits for investors. These new bonds, BABs and RZEDBs, are also unlike other tax credit bonds in that the interest rate on the bonds is a rate agreed to by the issuer and bond investor. In short, with BABs and RZEDBs, the two parties in the transaction established the tax credit rate, not the Treasury Secretary. The resulting investor tax credit amount or issuer direct payment is equal to 35% of the interest payment for BABs and 45% for RZEDBs. Legislation has been introduced in the 114 th Congress that would modify the status of certain TCBs. This activity includes H.R. 2676 and S. 1515 , which would reauthorize and extend the issuance of BABs. Moreover, QZABs were extended for the 2015 and 2016 tax year with $400 million of capacity each year by the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). Other recent TCB legislative action was taken in the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act; P.L. 111-147 ), which expanded the direct payment option beyond BABs to include issuers of new CREBs, QECBs, QZABs, and QSCBs. The aggregate limit for QZAB debt was $400 million annually from 1998 through 2008, $1.4 billion for each of 2009 and 2010, and $400 million annually from 2011 through 2016. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) authorized an additional $400 million dollars in QZABs for both 2015 and 2016. Further limits are applied to each state, the District of Columbia, and territory based upon their portion of the U.S. population below the poverty line. States are responsible for the allocation of the available credit to the local governments or qualified zone academies. Unused credit capacity can be carried forward for up to two years. Individual public schools use QZABs, through their participating state and local governments, for school renovation (not including new construction), equipment, teacher training, and course materials. To qualify for the program, the school must also be a "Qualified Zone Academy." A "Qualified Zone Academy" is any public school (or program within a public school) that provides and develops educational programs below the postsecondary level if "such public school or program (as the case may be) is designed in cooperation with business to enhance the academic curriculum, increase graduation and employment rates, and prepare students for the rigors of college and the increasingly complex workforce." In addition, the academy must also be located in an empowerment zone or enterprise community. Alternatively, the academy also qualifies if it is reasonably expected that at least 35% of the students qualify for the free or reduced price school lunch program. At least 95% of the bond proceeds must be used for rehabilitating or repairing public school facilities, providing equipment, developing course materials, or training teachers and other school personnel. These bonds had a national limit of $11 billion in each of 2009 and 2010. An additional $200 million in each of 2009 and 2010 was allocated to Indian schools. The bonds generally are allocated to states based on the state's share of Title 1 Basic Grants (Section 1124 of the Elementary and Secondary Education Act of 1965; 20 U.S.C. 6333, BG). The District of Columbia and the possessions of the U.S. are considered states for QSCBs. The possessions other than Puerto Rico (American Samoa, Commonwealth of the Northern Mariana Islands, Guam, and U.S. Virgin Islands), however, were allocated an amount on the basis of the possession's population with income below the poverty line as a portion of the entire U.S. population with income below the poverty line. As noted above, 40% of the bond volume ($4.4 billion) is dedicated to large LEAs. A "large" LEA is defined as one of the 100 largest based on the number of "children aged 5 through 17 from families living below the poverty level." Also, one of not more than an additional 25 LEAs can be chosen by the Secretary if the LEA is "in particular need of assistance, based on a low level of resources for school construction, high level of enrollment growth, or such other factors as the Secretary deems appropriate." Each large LEA, as defined above, would receive an allocation based on the LEA's share of the total Title I basic grants directed to large LEAs. The state allocation is reduced by the amount dedicated to any large LEAs in the state. States are currently authorized to issue $5.2 billion of QZABs and were authorized to issue $22 billion of QSCBs. QZAB allocations will be made through 2016 and may be carried forward up to two years. QSCB allocations were made through 2010 but can be carried forward indefinitely. On September 8, 2016, the credit rate on QZABs and QSCBs was 3.92% and the term 45 years. As noted earlier, issuers of QZABs and QSCBs could have chosen the direct payment option before 2011. Two bills were introduced in the 113 th Congress to extend QSCBs, H.R. 1629 and S. 1523 . As of this writing, no bills have been introduced in the 114 th Congress to extend this provision. As authorized by P.L. 109-58 , the original CREBs, which could have been issued through 2009, had a national limit of $1.2 billion of which a maximum of $750 million can be granted to governmental bodies. In addition to governmental bodies, cooperative electric companies and a "clean renewable energy bond lender" can issue the bonds. A clean renewable energy bond lender is defined in the tax code as "a lender which is a cooperative which is owned by, or has outstanding loans to, 100 or more electric companies and is in existence on February 1, 2002, and shall include any affiliated entity which is controlled by such lender." The CREB lender would lend to co-ops or governmental bodies. The Secretary of the Treasury reviews applications and selects projects "as the Secretary deems appropriate." Thus, CREBs are not allocated by formula and there are no state minimums. The Internal Revenue Service, through IRS Notice 2005-98, described the allocation strategy of the Secretary. The smallest dollar amount projects are considered first and the allocations continue for ever larger dollar amount projects until the entire allocation is consumed. The term and credit rate for CREBs were determined in the same manner as the other TCBs. These original CREBs offered a 100% credit. CREBs are available to finance qualified energy production projects which include (1) wind facilities, (2) closed-loop bio-mass facilities, (3) open-loop bio-mass facilities, (4) geothermal or solar energy facilities, (5) small irrigation power facilities, (6) landfill gas facilities, (7) trash combustion facilities, (8) refined coal production facilities, and (9) certain hydropower facilities. As originally authorized in P.L. 110-343 , the new CREBs had a national limit of $2.4 billion to be issued before December 31, 2009. In contrast to the original CREBs, as noted in Table 2 , the credit rate on new CREBs is 70% of the credit rate offered on the original CREBs. Not more than one-third of new CREBs were allocated to any of the following: (1) public power providers, (2) governmental bodies, or (3) projects of cooperative electric companies. For public power providers, the Secretary determines the qualified projects which "are appropriate for receiving an allocation." Each will receive a share of the allocation based on the ratio of the projected cost of the project relative to all other qualified projects receiving an allocation. Governmental bodies and co-ops receive an allocation in an amount the "Secretary determines appropriate." As with original CREBs, there is not a state-by-state minimum or formula allocation mechanism. As noted earlier, issuers of new CREBs can choose the direct payment option. QECBs were first created under P.L. 110-343 with a national limit of $800 million. The program was expanded with an additional $2.4 billion under P.L. 111-5 for a total available authority of $3.2 billion. Similar to the new CREBs, these tax credit bonds offer a credit rate that is 70% of the credit rate offered on old CREBs and other TCBs. Though the authority to allocate QECBs does not expire, the QECB program is now fully subscribed. QECBs were allocated to states based on the state's share of total U.S. population. The District of Columbia and the possessions of the U.S. are considered states for QECBs. Large local governments, defined as any municipality or county with population of greater than 100,000, are eligible for a direct allocation. Counties that contain a large city can be eligible if its population less the large city population is still greater than 100,000. These bonds are to be used for capital expenditures for the purposes of (1) reducing energy consumption in publicly owned buildings by at least 20%; (2) implementing green community programs; (3) rural development involving the production of electricity from renewable energy resources; or (4) programs listed above for CREBs. Also included are expenditures on research facilities and research grants, to support research in (1) development of cellulosic ethanol or other nonfossil fuels; (2) technologies for the capture and sequestration of carbon dioxide produced through the use of fossil fuels; (3) increasing the efficiency of existing technologies for producing nonfossil fuels; (4) automobile battery technologies and other technologies to reduce fossil fuel consumption in transportation; and (5) technologies to reduce energy use in buildings. Energy saving mass commuting facilities and demonstration projects are also included in the list of qualified purposes. As noted earlier, issuers of QECBs could have chosen the direct payment option on debt issued through 2011. QFCBs were limited to $500 million to be allocated before May 22, 2010 (24 months after enactment of P.L. 110-246 ), in a manner "as the Secretary determines appropriate." Once the bonds are issued, the proceeds must be spent within three years. A unique feature of QFCBs is the allowance for an allocation amount to be used to offset any taxes due the federal government. Any allocation amount used to settle outstanding federal tax debts cannot be used for bond issuance. A qualified issuer is a "State or any political subdivision or instrumentality thereof or a 501(c)(3) organization." For purposes of the QFCB program, a qualified forestry conservation purpose must meet the following criteria: (1) Some portion of the land acquired must be adjacent to United States Forest Service Land. (2) At least half of the land acquired must be transferred to the United States Forest Service at no net cost to the United States and not more than half of the land acquired may either remain with or be conveyed to a State. (3) All of the land must be subject to a native fish habitat conservation plan approved by the United States Fish and Wildlife Service. (4) The amount of acreage acquired must be at least 40,000 acres. GTCBs were bonds distributed to areas affected by Hurricane Katrina, which made landfall in late August 2005. A total of $350 million was available to be issued through GTCBs, with up to $200 million available to be issued by the state of Louisiana, up to $100 million available to be issued by the state of Mississippi, and up to $50 million available to be issued by the state of Alabama. The maturity length of GTCBs was much shorter than that of many other TCBs, with a maximum allowable term of two years. GTCB credits were eligible to be claimed against regular income tax liability and alternative minimum tax liability. GTCBs were designed to assist state and local governments that were burdened with additional fiscal stress. The bonds were largely designed to help with fiscal responsibilities that pre-dated the arrival of Hurricane Katrina, as 95% of GTCB proceeds were required to be used to make bond payments (other than private activity bonds) that were outstanding as of August 28, 2005. GTCBs could be used to pay principal, interest, or premia on state or local outstanding bonds. Eligibility to authorize GTCBs expired at the end of 2006. MWDBs were designated for areas impacted by the severe storms and flooding in the Midwest that occurred between May 1, 2008, and August 1, 2008. Each affected area could have issued an amount based on the population of the affected area. States with over 2 million affected residents were authorized to issue up to $100 million and those with less than 2 million and more than 1 million could have issued $50 million. States with an affected population under 1 million were not eligible to issue MWDBs. Based on IRS guidance, Illinois, Missouri, and Nebraska could have issued up to $50 million each. Indiana, Iowa, and Wisconsin could have issued up to $100 million. These bonds were issued in calendar year 2009 only and as with GTCBs, had a maximum term of two years. The credit rate on the bonds reflected the relatively short term of the bonds. The bonds were intended for states to use to help those sub-state jurisdictions which were under fiscal stress. Specifically, the proceeds from MWDBs were to be used to pay the principal and interest on any outstanding state bonds or the bonds of any affected political subdivision within the state. The proceeds could also have been loaned to a jurisdiction for the same purpose. The provision required the issuer to issue an equal amount of general obligations for the same purpose, akin to a matching requirement. Unlike other TCBs, BABs were not targeted in their designation. The volume of BABs was not limited and the purpose was constrained only by the requirement that "the interest on such obligation would (but for this section) be excludible from gross income under section 103." Thus, BABs could have been issued for any purpose that would have been eligible for traditional tax-exempt bond financing other than private activity bonds. The bonds must have been issued before January 1, 2011. BABs are a direct payment TCB, and offer a credit amount equal to 35% of the interest rate established by the buyer and issuer of the bond. In the 114 th Congress, similar legislation has been introduced in the House and Senate to reinstate and permanently extend BABs. H.R. 2676 and S. 1515 would permanently extend issuance authority for BABs, and implement a decreasing schedule for the applicable credit rate. The credit rate would decrease from 35% for bonds issued in 2009 or 2010 to 28% for bonds issued in 2019 or later. A U.S. Department of the Treasury report on BABs estimated that through December of 2010, the bonds had saved municipal issuers roughly $20 billion in interest costs. RZEDBs are a special type of BAB. Instead of the 35% credit, RZEDBs offered a 45% credit and are targeted to economically distressed areas. Specifically, these bonds are for any area designated by the issuer (1) as having significant poverty, unemployment, rate of home foreclosures, or general distress; (2) economically distressed by reason of the closure or realignment of a military installation pursuant to the Defense Base Closure and Realignment Act of 1990; or is (3) an empowerment zone or renewal community. The purpose of the bonds is, as the name implies, economic development. Specifically, the bonds are to be used for "(1) capital expenditures paid or incurred with respect to property located in such zone [recovery zone], (2) expenditures for public infrastructure and construction of public facilities, and (3) expenditures for job training and educational programs." The volume limit for RZEDBs is $10 billion and was allocated to states (including DC and the possessions) based on their employment declines in 2008. All states that experienced an employment decline in 2008 receive an allocation that bares the same ratio as the state's share of the total employment decline in those states. However, all states and U.S. territories, regardless of employment changes, are guaranteed a minimum of 0.90% of the $10 billion. Large municipalities and counties are also guaranteed a share of the state allocations based on the jurisdiction's share of the aggregate employment decline in the state. A large jurisdiction is defined as one with a population of greater than 100,000. For counties with large municipalities receiving an allocation, the county population is reduced by the municipal population for purposes of the 100,000 threshold. Authority to issue RZEDBs expired January 1, 2011.

Nearly all state and local governments sell bonds to finance public projects and certain qualified private activities. The federal government subsidizes state and local bond issuances through a number of policies. One such policy is the Tax Credit Bond (TCB), which provides a tax credit or direct payment to the issuer or investor that is proportional to the bond's face value. TCBs represent an alternative to tax-exempt bonds, which exclude interest earnings from the investor's federal taxable income. This report explains the tax credit mechanism and describes the market for TCBs. The majority of TCBs are designated for a specific purpose, location, or project. Issuers use the proceeds for public school construction and renovation; clean renewable energy projects; refinancing of outstanding government debt in regions affected by natural disasters; conservation of forest land; investment in energy conservation; and for economic development purposes. The relative appeal of TCBs and municipal bonds is dependent on issuer and investor characteristics and on economic conditions. The first tax credit bonds, qualified zone academy bonds (QZABs), were introduced as part of the Taxpayer Relief Act of 1997 (P.L. 105-34) and first issued in 1998. Clean renewable energy bonds (CREBs) were created by the Energy Policy Act of 2005 (P.L. 109-58), and were later modified as "new" CREBs in the Emergency Economic Stabilization Act of 2008 (P.L. 110-343). Gulf tax credit bonds (GTCBs) were created by the Gulf Opportunity Zone Act of 2005 (P.L. 109-135). Qualified forestry conservation bonds (QFCBs) were created by the Food, Conservation, and Energy Act of 2008 (P.L. 110-246). Qualified energy conservation bonds (QECBs) and Midwest Disaster Bonds (MWDBs) were created by the Emergency Economic Stabilization Act of 2008 (P.L. 110-343). The American Recovery and Reinvestment Act of 2009 (P.L. 111-5, ARRA) included several bond provisions that use a tax credit or issuer direct payment. Specifically, ARRA created Qualified School Constructions Bonds (QSCBs), Build America Bonds (BABs) and Recovery Zone Economic Development Bonds (RZEDBs). Unlike other tax credit bonds, the interest rate on the BABs and RZEDBs is a rate agreed to by the issuer and investor and the issuers receive direct payments from the Treasury. In contrast, the Secretary of the Treasury sets the credit rate for the other TCBs. The credit rate differs across TCB programs. The QZAB and QSCB credit rate is set at 100% and the "new CREB" and QECB credit rate is set at 70% of the interest cost. In contrast, the BAB tax credit rate is 35%. Most of the TCBs to date have been established as temporary tax provisions. The authority to issue several TCBs, including GTCBs and CREBs, has expired in recent years. The only permanent TCB, QECBs, are currently fully subscribed. Bonds that are no longer being issued may still be held by the public. In the 114th Congress, multiple bills have been introduced to extend or modify certain TCB programs. The Consolidated Appropriations Act, 2016 (P.L. 114-113) extended the issuance authority of QZABs for the 2015 and 2016 tax years, and provided for $400 million of issuing capacity for each year. Other legislation, including H.R. 2676 and S. 1515 would extend the BAB program indefinitely. Additionally, the President's FY2017 Budget included a number of proposals related to TCBs, including the creation of a new TCB for certain infrastructure programs.

The individual states have been the primary regulators of insurance in this country for the past 150 years. The 1945 McCarran-Ferguson Act specifically authorized the states' role, and Congress has recognized state primacy in insurance regulation in more recent laws shaping the financial regulatory system, such as 1999's Gramm-Leach-Bliley Act (GLBA) and 2010's Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). Although Congress may have generally reaffirmed the state-based system in such laws, congressional interest in the operation of the insurance regulatory system has continued. Much of the congressional focus on the insurance regulatory system since 1999 has been on the efficiency of the state-based system. Organizations such as the National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL) create model laws and undertake other steps to harmonize insurance regulation and laws across the country. To be legally binding, however, any models suggested by the NAIC or NCOIL must first be adopted in a state. The states may amend models to fit local circumstances or completely reject suggestions from outside groups. Various federal proposals have been advanced to change the workings of the state-based regulatory system, ranging from creation of a broad federal charter that might replace much of the state-based system to narrower concepts using federal powers to preempt some state laws while leaving the state-based regulatory system largely in place. In the 113 th Congress, issues around licensing for insurance agents and brokers (known generally as insurance producers ) came to the fore in the form of legislation--the National Association of Registered Agents and Brokers Act, passed in different forms by both the Senate and the House. This legislation, which would mandate the creation of a National Association of Registered Agents and Brokers (NARAB), is generally referred to as "NARAB II" legislation. The 114 th Congress passed identical versions of H.R. 26 , which included NARAB II provisions as Title II. The President signed the bill, now P.L. 114-1 , on January 12, 2015. Licensing of insurance producers has long been an integral part of the insurance regulatory system. Individual states typically require insurance producers operating within their borders to obtain a license from that state, with different licenses often required for different lines of insurance. Such licensure provides a mechanism for insurance regulators to enforce standards of conduct, particularly with regard to consumer protections, as well as a revenue source to help defray the cost of the insurance regulatory system. Aspects of insurance producer licensing include specific education or knowledge requirements, such as passage of a written exam prior to licensing and continuing education afterward, and, in some states, criminal background checks. The NAIC has adopted model laws regarding licensure and a model insurance producer license form, but individual states are free to modify such models, or not adopt them at all, resulting in variability in licensing requirements across the country. The number of insurance producers potentially affected by the variability of state licensing laws appears relatively large; in one survey, 83% of producers reported having licenses in at least 2 and up to 10 states. Larger insurance agencies tend to hold a greater number of licenses, with 47% of the firms of more than 500 financial advisors having licenses in 21 or more states. Insurance producers that operate in multiple states have long sought increased uniformity and reciprocity across states to reduce their costs resulting from the multiplicity of license requirements. Insurance producers report, for example, that, on average, 3% of agency operating expenses are spent on "licensing compliance efforts," with higher figures (4.3%) at the smallest agencies. Although insurance producers consider the multiplicity of licenses to be a burden, others consider the requirements for local licenses and knowledge of specific local risks or legal requirements to be important consumer protections by others. One consumer representative has argued, for example, that "[property and casualty] insurance varies too much state to state as respects law and risk to not maintain local control of licensure." GLBA attempted to address the multiplicity of different requirements among states for insurance producer licensing. Although many states satisfied the GLBA statutory requirements for reciprocity by 2002, insurance producers continued to identify inefficiencies and costs of the state licensing system in the years following. In 2008 testimony before a House subcommittee, for example, an insurance agent representative indicated that states continued to "impose additional conditions and requirements" on nonresident agents despite the reciprocity called for in law. In 2009, the Government Accountability Office (GAO) cited issues regarding fingerprinting and background checks as particular barriers to uniformity or reciprocity in producer licensing and as potentially creating uneven insurance consumer protection in states in which full-background checks were not able to be performed. GAO also determined that differences in licensing requirements and insurance line definitions could potentially be creating inefficiencies that "could result in higher costs for insurers, which in turn could be passed on to consumer[s]." In addition to concerns about the substance of the reciprocity in place, reciprocity laws have not been adopted by every state. The NAIC ultimately certified 47 states as reciprocal, but the 3 states not certified--California, Florida, and Washington--together represented nearly 20% of the nation's population. In addition to the costs that might result from the specific aspects of the insurance licensing system, any professional licensing regime acts as a barrier to entry for those who might be interested in providing services that require a license. Economic theory suggests such barriers increase consumer costs to some degree and have the potential to be used as a protectionist measure to prevent competition, allowing license holders to extract economic rents from consumers. Whether the public benefits resulting from licensure outweigh the costs is determined by policy makers on a case-by-case basis. Some form of licensure for those in the financial services industry has been generally accepted and is required in federal law for people involved in securities transactions with the public, for example. H.R. 26 in the 114 th Congress was identical aside from technical corrections to the amended version of S. 2244 that passed the House in the 113 th Congress. Thus, it included NARAB II provisions in Title II, but did not include the Section 335 sunset language that had been included in the Senate-passed version of S. 2244 . The House and Senate passed H.R. 26 on January 7, 2015, and January 8, 2015, respectively. The President signed the bill, now P.L. 114-1 , on January 12, 2015. P.L. 114-1 , Title II creates a National Association of Registered Agents and Brokers. Key features of this association include the following: The association shall be a private, nonprofit corporation and is specifically forbidden from receiving federal funds. To gain membership, insurance producers are required to be licensed as an insurance producer in their home state, pass a criminal background check, and meet other criteria determined by the association, which shall not be "less protective of the public" than that contained in the NAIC Producer Licensing Model Act as of January 12, 2015. NARAB members will be able to operate in any other state subject only to payment of the licensing fee in that state rather than having to obtain a separate license in the additional states. Members will still be subject to each state's consumer protection and market conduct regulation, but individual state laws that treat out-of-state insurance producers differently from in-state producers are preempted. The association will be overseen by a board of eight appointees who are current or former state insurance commissioners and five appointees with demonstrated expertise in different areas of insurance. Appointments are to be made by the President with advice and consent by the Senate. The President can dissolve the board as a whole or suspend the implementation of any rule or action taken by the association. The association is to submit copies of the NARAB bylaws, standards, and an annual report, to the President through the Department of the Treasury and to the States, as well as to make these publically available on the NARAB website. S. 534 , the National Association of Registered Agents and Brokers Reform Act of 2013, was introduced by Senator Jon Tester on March 13, 2013, and referred to the Senate Committee on Banking, Housing, and Urban Affairs. The committee's Subcommittee on Securities, Insurance, and Investment held a hearing on the bill on March 19, 2013, and the full committee marked up S. 534 and ordered the amended bill be favorably reported on June 6, 2013. S. 534 as introduced would have established a NARAB. Key features of this association included the following: The association would have been a private, nonprofit corporation. To gain membership, insurance producers would have been required to be licensed as an insurance producer in their home state, pass a criminal background check, and meet other criteria determined by the association, which should not be "less protective of the public than that contained in the NAIC Producer Licensing Model Act." NARAB members would have been able to operate in any other state subject only to payment of the licensing fee in that state rather than having to obtain a separate license in the additional states, as is often the case. Members would still have been subject to each state's consumer protection and market conduct regulation, but individual state laws that treat out-of-state insurance producers differently from in-state producers would have been preempted. The association would have been overseen by a board of eight appointees who are current or former state insurance commissioners and five appointees representing the insurance industry. Appointments would have been made by the President with advice and consent by the Senate. The President could have dissolved the board as a whole or suspend the implementation of any rule or action taken by the association. The association would have submitted annual reports to the President and the NAIC. The Senate Committee on Banking, Housing, and Urban Affairs marked up S. 534 on June 6, 2013. The committee began with an amendment in the nature of a substitute offered by Senators Jon Tester and Mike Johanns. Although largely similar to the original legislation, this amendment made changes to the bill, including adding the Department of the Treasury as a conduit of information from NARAB to the President; requiring that copies of the NARAB bylaws, standards, and annual report be publically available on the NARAB website; and stipulating that the annual report be made to the President and the "States (including the State insurance regulators)" rather than the President and the NAIC (the NAIC was also removed from some, but not all, of the other reporting requirements in the bill). In addition to the substitute, two amendments were adopted by voice vote in the markup. These amendments changed the following: The board of directors would have had five appointees with "demonstrated expertise and experience" in various parts of the insurance industry rather than being "representatives of" various parts of the industry following an amendment by Senator Elizabeth Warren. The NARAB organization would have been specifically forbidden from receiving federal funds following an amendment by Senator Tom Coburn. Another amendment by Senator Coburn to provide states the ability to opt out of participation in, and the effect of, NARAB was not adopted on a vote of 18-4. The amended version of S. 534 was then ordered to be favorably reported by voice vote, and the bill was reported on July 29, 2013 ( S.Rept. 113-82 ). Representative Randy Neugebauer introduced two bills identical to S. 534 : H.R. 1064 on March 12, 2013, and H.R. 1155 on March 14, 2014. Both were referred to the House Committee on Financial Services, with H.R. 1155 being used as the legislative vehicle going forward. On September 10, 2013, Representative Neugebauer made a motion to suspend the rules and pass an amended version of H.R. 1155 . The language of the amended version of H.R. 1155 closely followed the language of S. 534 as reported by the Senate Committee on Banking, Housing, and Urban Affairs, including the amendments by Senators Warren and Coburn that were adopted in the committee markup. The two bills differed slightly in the language relating to background checks, with the House bill requiring that fingerprints be submitted to the Federal Bureau of Investigation in the course of the search of criminal history records whereas the Senate bill does not specifically mention fingerprints. In addition, the penalties for improper disclosure of background check information in the House bill were set at $50,000 per violation compared with the possibility of monetary fine plus two years imprisonment under the Senate bill. H.R. 1155 as amended passed the House of Representatives on a vote of 397-6. S. 1926 was introduced by Senator Robert Menendez on January 14, 2014. The legislation had two titles. Title I, the Homeowner Flood Insurance Affordability Act of 2014, would have delayed the implementation of certain aspects of the Biggert-Waters Flood Insurance Reform Act of 2012. Title II of S. 1926 contains language identical to S. 534 as reported by the Senate Committee on Banking, Housing, and Urban Affairs except for minor technical changes. The floor consideration of S. 1926 was focused on Title I, with several amendments to the flood insurance provisions adopted but no changes made to Title II. Senator Coburn, as he did in committee consideration, offered an amendment ( S.Amdt. 2697 ) providing states the ability to opt out of NARAB. The full Senate rejected this amendment by a vote of 24-75. S. 1926 as amended passed the Senate by a vote of 67-32 on January 30, 2014. On June 19, 2014, as part of a markup of H.R. 4871 , which would extend and amend the Terrorism Risk Insurance Act, Representative Neugebauer offered an amendment consisting of the text of H.R. 1155 as passed by the House. This amendment was accepted on a voice vote, and the overall bill was ordered to be favorably reported to the full House by a vote of 32-27 on June 20, 2014. The bill was reported ( H.Rept. 113-523 ) on July 16, 2016. On July 17, 2014, as part of floor consideration of S. 2244 , a bill to extend the Terrorism Risk Insurance Act, Senator Tester offered S.Amdt. 3552 . This amendment added a second title to the bill containing the language of H.R. 1155 as passed by the House with one additional section. This new section, Section 335, provided that the NARAB II provisions would terminate two years after the date on which the NARAB association approves its first member. S.Amdt. 3552 was adopted by voice vote, and S. 2244 as amended passed the Senate by a vote of 93-4. On December 10, 2014, the House considered S. 2244 with an amendment in the nature of a substitute. This substitute amendment included a second title containing NARAB II provisions but did not include the two-year sunset provision in Section 335 of the Senate-passed bill. The substitute amendment included numerous changes to Title I concerning the Terrorism Risk Insurance Act and added a Title III, the Business Risk Mitigation and Price Stabilization Act of 2014. Title III would amend statutory provisions originating in the Dodd-Frank Act relating to derivatives and margin requirements for end users. S. 2244 as amended passed the House by a vote of 417-7. In the 113 th Congress, the Administration expressed support, with some reservations, for NARAB II legislation. The Federal Insurance Office released a report, How t o Modernize a nd Improve t he System o f Insurance Regulation i n t he United States , in December 2013 and specifically recommended passage of NARAB II legislation, citing the inefficiencies resulting from the lack of uniformity and reciprocity as detrimental to insurance consumers. As the Senate was considering S. 1926 , the Executive Office of the President released at statement of Administration policy (SAP) on the bill. This SAP expressed support for the "policy goals" of Title II of S. 1926 , but the support was tempered by reservations on two fronts. First, the bill's process for criminal background checks was seen as inconsistent with the processes currently used by the Federal Bureau of Investigation (FBI), although the Administration believed the bill could be made consistent with these FBI processes. Secondly, the Administration raised constitutional concerns regarding the bill's requirement that the President appoint state insurance commissioners as eight of the 13 members of the NARAB board and requested an amendment to broaden the size of the appointment pool. Legislation to mandate the creation of a NARAB organization, similar to P.L. 114-1 , Title II, was first introduced into the House of Representatives in the 110 th Congress ( H.R. 5611 ), with similar legislation introduced in the 111 th Congress ( H.R. 2554 ). The House passed these bills in the respective Congresses by voice vote, and the legislation was referred to committee when received by the Senate. NARAB II legislation was introduced in the 112 th Congress ( H.R. 1112 and S. 2342 ), but, unlike in the previous Congresses, the House did not bring NARAB II legislation to the floor in the 112 th Congress. The general outlines of the various NARAB II bills have been similar. The bills would amend the NARAB sections to create a NARAB organization regardless of state actions on reciprocity and uniformity. NARAB II legislation would create an organization similar to the one originally envisioned in GLBA. It would be a nonprofit, private body whose members would be required to be state-licensed insurance producers but could operate across states without having licenses from the individual states. The specifics of the NARAB II bills have, however, differed to some degree, particularly in the makeup of the board of directors and how the board would be appointed. The initial NARAB II legislation ( H.R. 5611 , 110 th Congress) included a nine-person board of directors, four to be appointed by the NAIC and five to be appointed by the insurance industry. H.R. 2554 (111 th Congress) and H.R. 1112 (112 th Congress) changed this makeup to an 11-person board (with 6 insurance commissioners and 5 insurance industry representatives) to be appointed by the President with Senate confirmation. S. 2342 (112 th Congress) and the current legislation again changed the NARAB board to be comprised of 13 people (8 insurance commissioners and 5 insurance industry representatives) who are presidentially appointed and Senate confirmed. In addition, H.R. 5611 required a report by the NARAB association to the President, Congress, and the NAIC, whereas subsequent legislation required the report be made solely to the President and the NAIC. Legislative provisions creating a NARAB appeared as part of broad financial regulatory reform legislation in the 105 th Congress and the 106 th Congress, ultimately becoming law as part of GLBA in the 106 th Congress. GLBA sought to address insurance producer complaints about the variation in state licensing requirements through a sort of provisional federal preemption of state laws. The law called for the creation of a private, nonprofit licensing body, the NARAB, whose insurance producer members would have been authorized to operate across state lines without individual licenses from every state. Membership in NARAB would have been open only to people already holding a state insurance producer license and who fulfilled other criteria. Although established by federal authority, the NARAB to be created by the provisions in GLBA would have been entwined in the system of state regulation. The NAIC would have appointed the seven members of the NARAB board and had other oversight authorities. The NARAB I language in GLBA also offered the states the opportunity to avoid creation of the NARAB organization if a majority of them created among themselves systems of either uniformity or reciprocity in insurance producer licensing within a three-year window after passage of GLBA. The NAIC was given the authority to determine whether the states met this GLBA standard, with the possibility of federal judicial review of the determination. The individual states and the NAIC reacted relatively quickly to this opportunity with the promulgation of an NAIC model law that would provide for reciprocity. A sufficient number of states adopted laws providing for insurance producer licensing reciprocity that the NAIC determined the GLBA standards to avoid creation of the NARAB organization were met. As a result, the NARAB organization was not created. The first legislation specifically providing for the creation of a NARAB that the Congressional Research Service has been able to identify was introduced in the 102 nd Congress (Title IV of H.R. 4900 ). The bill was reintroduced in the 103 rd Congress and subcommittee hearings were held that addressed NARAB, but the bill was not acted on further. The original NARAB provisions were part of legislation that would have created a federal commission for solvency oversight of insurers. The NARAB created by this legislation would have been similar to subsequent versions in that it would have been a nonprofit association whose members would have been state-licensed insurance producers, but the preemption of state law would have been narrower than in subsequent versions. The original version of NARAB would not have permitted its members to operate with a single state license but instead would have operated to enforce uniformity though a central clearinghouse and a uniform producer application. The board of directors would have been elected by the membership, and the Federal Solvency Commission to be created by the bill would have had oversight authority over this version of NARAB.

The individual states have been the primary regulators of insurance in this country for the past 150 years. Congress specifically authorized the states' role in the 1945 McCarran-Ferguson Act (15 U.S.C. SSSS1011-1015), and state primacy in insurance regulation has been recognized in more recent laws shaping the financial regulatory system, such as the 1999 Gramm-Leach-Bliley Act (GLBA; P.L. 106-102) and the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203). The system of multiple state regulators, however, has faced criticism over the years, with frequent focus on its efficiency. One particular aspect of regulation that has been criticized by some as overly burdensome and inefficient is the licensure of insurance agents and brokers, known collectively as insurance producers. Every state requires specific licenses, sometimes with differing criteria, and insurance producers have identified the need to have multiple licenses as a significant expense. Organizations such as the National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL) create model laws and undertake other steps to harmonize insurance regulation and laws across the country, including the NAIC's promulgation of models for insurance producer licensing. The individual states, however, are sovereign entities, and any models suggested by the NAIC or NCOIL must first be enacted by state legislatures. The state authorities may amend models or completely reject suggestions from outside groups. Often this is done with the argument that laws and regulations need to be adapted to particular local circumstances or risks, such as hurricane risks along coastal areas. Federal proposals addressing multiple state insurance producer licensing requirements through the creation of a National Association of Registered Agents and Brokers (NARAB) appeared as far back as the 102nd Congress, and a version of NARAB was included in GLBA. These GLBA provisions, known generally as "NARAB I," were conditional and would not come into effect if a majority of states passed laws providing for uniformity or reciprocity in insurance producer licensing. Although a sufficient number of states met the GLBA requirements and thereby prevented the creation of NARAB, insurance producers continued to identify issues in the state licensing system. As a consequence, "NARAB II" legislation, mandating the creation of a NARAB organization, has been introduced in every Congress since the 110th. It was passed by the House in the 110th and 111th Congresses. In the 113th Congress, the National Association of Registered Agents and Brokers Act was introduced in both the Senate and the House and similar provisions were included in bills addressing flood insurance and terrorism insurance. Legislation including NARAB II provisions passed both the House and the Senate, but because they differed in some respects, no bill was sent to the President. In the 114th Congress, both the House and the Senate passed NARAB II provisions included as Title II of H.R. 26, which became P.L. 114-1. Under P.L. 114-1, membership in the NARAB organization will permit insurance producers to operate in multiple states without obtaining specific licenses from these states. To become a NARAB member, an insurance producer will be required to have a license from at least one state, pass a criminal background check, and meet other requirements. The law requires that these additional requirements be not "less protective to the public" than the NAIC model law on insurance producer licensing. The association is to be governed by a 13-member board made up of 8 current or former state insurance commissioners and 5 insurance industry experts. The President is to appoint the board, with advice and consent of the Senate, and retain the ability to remove the board and override the NARAB organization's rules or actions.

Many diplomatic and military practitioners as well as theorists have argued that successful execution of a military operation depends on how well specific actions are matched to strategic intent. It has been argued that the imposition of any no-fly zone, a particular form of military operation, should begin with a clear articulation of strategic-level goals. For any given situation, such "grand strategy" might include, in this order: a clear statement of the U.S. national interests at stake; a vision of the political endstate--the strategic-level outcomes--that would help secure those interests; a clear articulation of the major steps--the ways and means--including diplomatic, political, and economic as well as military, to be employed in order to accomplish the desired endstate, including the objectives each is designed to achieve; and a consideration of the nature and extent of political "risk" in the proposed approach--including the potential impact of proposed actions on the civilian population in the targeted country, on the region, on broader international partnerships, and on perceptions of the U.S. government both at home and abroad. The military strategy designed to support the grand strategy, it has been suggested, might be based on these considerations: the operational-level military objectives that need to be achieved, to support the overall grand strategy, and the extent to which a no-fly zone--as one set of ways and means--helps achieve those objectives. Recent operational experiences suggest that the establishment of a no-fly zone, in itself, is unlikely to achieve the full set of military objectives, such as protecting a civilian population, let alone the grand strategic objectives, such as restoring or removing a regime. In key recent "no-fly zone" cases, observers suggest that the strategic planning process may have emphasized "mid-range" operational-level concerns at the expense of higher-level strategic concerns. In Operation Odyssey Dawn, Operation Northern Watch, Operation Southern Watch, and Operation Deny Flight, the match between the application of one military approach--the no-fly zone--and broad strategic goals, many assess was at best incomplete. Operation Odyssey Dawn, a coalition operation conducted during early 2011 over Libya, was put in place to enforce United Nations Security Council Resolution 1973, which authorized force to protect civilians in Libya. Facing a popular uprising, the Libyan government under Muammar al Qadhafi had responded with attacks against population centers with armor, artillery, and air strikes. Going beyond a pure no-fly zone, Operation Odyssey Dawn prevented Libyan air forces from operating against civilians, while including attacks against pro-Qadhafi ground forces that were perceived to be threatening civilian populations. Although Odyssey Dawn included establishment and enforcement of a no-fly zone, it also included strike operations against Libyan government forces perceived to be attacking civilian populations, and the command and control and logistics networks supporting those forces. More information on Operation Odyssey Dawn can be found in CRS Report R41725, Operation Odyssey Dawn (Libya): Background and Issues for Congress . Operation Northern Watch (ONW), a combined operation involving U.S., UK, and French forces conducted from 1991 to 2003, was designed to enforce a no-fly zone in northern Iraq, north of the 36 th parallel, in order to prevent Iraqi repression of the concentrated ethnic Kurdish population living in that part of the country. The Iraqi government led by Saddam Hussein had already made use of Iraqi airspace to attack Iraqi Kurds in Halabja with chemical weapons in 1988. Acts of repression after the conclusion of the early 1991 Gulf War had displaced many Iraqi Kurds. The immediate aim of ONW was to protect the population from further attacks by the Iraqi military, and it is generally considered that ONW largely achieved this operational objective. At the strategic level, ONW took place against the backdrop of international pressure on the Iraqi government to comply with an international weapons inspection regime, in accordance with U.N. Security Council resolutions. Missing from ONW, in any explicit way, was a vision of political endstate, or a stated theory of the case linking the no-fly zone to that endstate. Similarly, Operation Southern Watch (OSW), a U.S.-led coalition operation, was designed to protect the Shi'a Arab population of southern Iraq from repression and retaliation by Iraqi government forces in the wake of the Gulf War. The Iraqi government had made use of its own airspace to conduct bombing and strafing runs targeting Shiite citizens. In terms of immediate operational objectives, OSW is generally considered not to have prevented Iraqi government repression of its southern population. At the strategic level, while some U.S. officials had reportedly considered, at one time, that in the wake of the Gulf War southern Iraqi Shiites might rise up to demand the ouster of Saddam's regime, OSW does not appear to have been guided by any explicit vision of political endstate. Operation Deny Flight (ODF) was a NATO operation that banned all flights--with some exceptions--in the airspace of Bosnia and Herzegovina from April 1993 to December 1995. The military objectives included denying the use of that airspace to Bosnian Serb aircraft, in order to protect the population and facilitate the delivery of humanitarian assistance. Observers have debated the ODF's degree of success in this regard--while humanitarian work by international relief organizations was protected to some extent, Bosnian Serb aircraft periodically defied the flight ban to stage attacks, while on the ground, for example, Bosnian Serb forces overran the U.N. safe haven in Srebrenica, in 1995, killing thousands. At the strategic level, ODF may have come closer than the no-fly zone operations in Iraq to linkage with strategic objectives. In the preamble of the 1992 U.N. Security Council resolution authorizing ODF's precursor, a no-fly zone banning military aircraft, the Council "consider[ed] that the establishment of a ban on military flights in the airspace of Bosnia and Herzegovina constitutes an essential element for the safety of the delivery of humanitarian assistance and a decisive step for the cessation of hostilities in Bosnia and Herzegovina." Some experts believe that the Bosnian no-fly zone contributed directly to the ultimate cessation of hostilities; others suggest that its contribution is difficult to separate from the roles of close air support and the ground presence of U.N. troops. There is little evidence to suggest that a clear and specific vision of the political endstate that might follow a cessation of hostilities informed the creation of the no-fly zone. Practitioners and observers have debated what constitutes international "authorization" for the establishment of a no-fly zone. Given the paucity of relevant precedents, and the dissimilarities among them, there may not exist a single, clear, agreed model. Authorization may be not only a question of approval or disapproval. It may also include parameters for the execution of the mission, and conditions under which the authorization for the no-fly zone operation will be considered discontinued. It may not be necessary to achieve all of the broad objectives of grand strategy before discontinuing the no-fly zone--the no-fly zone operation may be designed to catalyze overall progress toward those objectives. In turn, the concept of authorization is typically considered to be linked to the ideas of both "legality" and "legitimacy"--the three concepts overlap but are all distinct. The precise meaning of each of the terms is still debated. The legality of a no-fly zone operation may depend, at a minimum, on both authorization for the operation and the extent to which the manner of execution of the operation comports with relevant international law. The Charter of the United Nations, in Article 2(4), prohibits the "threat or use of force against the territorial integrity or political independence" of a member state under most circumstances, and many practitioners and observers have wondered whether the establishment of a no-fly zone would constitute a violation of this prohibition. In practice, the answer may depend on the circumstances--and in some cases there may be no general agreement about what the empirical circumstances indicate. There are at least three sets of circumstances that do--or may--constitute exceptions to this prohibition. The first basis for an exception is U.N. Security Council authorization based on the powers granted to the Council by Chapter VII of the U.N. Charter to respond to threats to international peace and security. That Chapter authorizes the Security Council to "determine the existence of any threat to the peace, breach of the peace, or act of aggression" and to "make recommendations, or decide what measures shall be taken ... to maintain or restore international peace and security." Express authorization from the Security Council provides the clearest legal basis for imposing a no-fly zone. The second basis for an exception is self-defense. Article 51 of the Charter explicitly recognizes the right of self-defense as an exception to the prohibition. The Article states, "Nothing in the present Charter shall impair the inherent right of individual or collective self-defense if an armed attack occurs against a Member of the United Nations." Some theorists and practitioners consider that there also exists a customary doctrine of self-defense outside of the U.N. Charter that permits military action to prevent a grave threat to regional peace and stability, even if that threat seems to be contained within the borders of a state. According to this view, armed intervention within a state is not a prohibited "use of force" so long as it is not aimed at taking a state's territory or subjecting its people to political control (a narrow reading of "use of force against the territorial integrity or political independence of any State"), and is not otherwise inconsistent with the intent of the U.N. Charter. If this reading is correct, then customary measures of self-help involving the use of force but falling short of war--reprisals, embargoes, boycotts, temporary occupations of foreign territory, pacific blockades, and similar measures--are not precluded by the U.N. Charter, but are acceptable means of customary self-defense preserved by Article 51. Others contend, however, that the Article 51 limitation supersedes what had been customary international law in these matters, and that the established practice of use of force by states in response to provocations other than armed attacks does not establish valid precedent, but rather, violates the Charter. Third, some have argued that emerging international human rights law provides that states are no longer free to treat their people as they see fit under the guise of sovereignty, but are instead obligated to respect their people's fundamental human rights. When a government engages in widespread abuse of the human rights of its own people, it has been asserted, that government loses a measure of its sovereignty. Other states, the argument continues, have the right or even the responsibility to intervene in order to put a stop to crimes against humanity, as an extension of the customary right of self-defense or the defense of others. This emerging doctrine of humanitarian intervention--sometimes described as the "responsibility to protect"--is not yet fully developed in international law, and there is no consensus about its application, including whether it constitutes an exception to the prohibition on the "threat or use of force." Some believe that only the U.N. Security Council has the authority to invoke this doctrine. The question of international authorization has direct implications, in turn, for the state in which a no-fly zone is imposed. If a no-fly zone is imposed against a state that has not carried out an armed attack against another state, in the absence of U.N. authorization based on Chapter VII of the U.N. Charter, and depending on the form the no-fly zone operation takes, that state might be entitled to consider the imposition of the no-fly zone itself an "armed attack." Even if the no-fly zone operations in a given state do not constitute an "armed attack"--which in itself may be a subjective judgment--that state, and other members of the international community, might consider them a violation of the prohibition of the "threat or use of force," as well as of the customary duty of non-intervention in the affairs of other sovereign states. The state targeted by the no-fly zone might, on that basis, choose to respond with military force or to seek assistance from its allies or partners to assist in its self-defense. While the legitimacy of any no-fly zone operation may draw on both authorization and legality, legitimacy is by definition a subjective question of perception--by the people of the host nation, by the U.S. population, and by other members of the international community. Issues to consider may include how the nature and extent of international authorization is likely to shape the perceived legitimacy of the no-fly zone operation; how the conduct of the operation is likely to shape that perceived legitimacy; the extent to which that perception of legitimacy, in turn, is likely to shape the support of members of the international community for the effort--ranging from political support, to the provision of basing, access, and overflight privileges, to full participation; and the extent to which perceived legitimacy is likely to affect the international community's broader perceptions of, and support for, other concurrent or future U.S. initiatives. The most germane recent no-fly zone cases do not establish a clear model for securing international authorization--they differ from one another, and in some instances they have spurred debate rather than consensus about what constitutes appropriate authorization. Both Operation Northern Watch (ONW) and Operation Southern Watch (OSW) were established in the wake of the early 1991 Gulf War in order to protect civilian populations of Iraq--ethnic Kurds living in northern Iraq, and Shi'a Arabs living in southern Iraq, respectively--from repression by the Iraqi government and its forces. In April 1991, in U.N. Security Council Resolution 688 (1991), the Council "condemn[ed] the repression of the Iraqi civilian population ... the consequences of which threaten international peace and security in the region." While that resolution strongly encouraged humanitarian action and urged member states to support it, it made no mention of military action. The previous November, the Council had laid the groundwork for military action in Iraq--the authorization for Gulf War operations--in U.N. Security Council Resolution 678 (1990), which invoked Chapter VII of the U.N. Charter. The resolution demanded that Iraq comply with previous resolutions, gave Iraq "one final opportunity" to do so, and--failing Iraqi compliance--"authorize[d] Member States ... to use all necessary means to uphold and implement [past Resolutions] and to restore international peace and security in the area." Experts and practitioners have since hotly debated the applicability of the November 1990 blanket authorization to "use all necessary means" to the two operations that followed the Gulf War proper. Operation Deny Flight, designed to protect the civilian population of Bosnia and Herzegovina, was based on a clear-cut U.N. mandate, although there may be less consensus about the basis for its precursor operation. In October 1992, in U.N. Security Council Resolution 781 (1992), the Council established a "ban on military flights in the airspace of Bosnia and Herzegovina," primarily on humanitarian grounds, to help ensure the safe delivery of humanitarian assistance. Following repeated violations of that ban, in March 1993 the Council invoked Chapter VII of the Charter, extended the ban, and "authorize[d] Member States ... acting nationally or through regional organizations or arrangements, to take ... all necessary measures in the airspace of the Republic of Bosnia and Herzegovina, in the event of further violations, to ensure compliance with the ban on flights." In addition to international authorization, debates have addressed the question of congressional authorization--whether and when there is a need for congressional approval based on the War Powers Resolution for a proposed no-fly zone. The question of whether and how congressional authorization is sought for a proposed operation could have an impact on congressional support--including policy, funding, and outreach to the American people--for the operation. On November 7, 1973, Congress passed the War Powers Resolution, P.L. 93-148 , over the veto of President Nixon. The War Powers Resolution (WPR) states that the President's powers as Commander in Chief to introduce U.S. forces into hostilities or imminent hostilities can only be exercised pursuant to (1) a declaration of war; (2) specific statutory authorization; or (3) a national emergency created by an attack on the United States or its forces. It requires the President in every possible instance to consult with Congress before introducing American Armed Forces into hostilities or imminent hostilities unless there has been a declaration of war or other specific congressional authorization. It also requires the President to report to Congress any introduction of forces into hostilities or imminent hostilities, Section 4(a)(1); into foreign territory while equipped for combat, Section 4(a)(2); or in numbers which substantially enlarge U.S. forces equipped for combat already in a foreign nation, Section 4(a)(3). Once a report is submitted "or required to be submitted" under Section 4(a)(1), Congress must authorize the use of force within 60 to 90 days or the forces must be withdrawn. Since the War Powers Resolution's enactment in 1973, every President has taken the position that this statute is an unconstitutional infringement by Congress on the President's authority as Commander in Chief. The courts have not directly addressed this question, even though lawsuits have been filed relating to the War Powers Resolution and its constitutionality. Some recent operations--in particular U.S. participation in North Atlantic Treaty Organization (NATO) military operations in Kosovo, and in U.N.-authorized operations in Bosnia and Herzegovina, in the 1990s--have raised questions concerning whether NATO operations and/or U.N.-authorized operations are exempt from the requirements of the War Powers Resolution. Regarding NATO operations, Article 11 of the North Atlantic Treaty states that its provisions are to be carried out by the parties "in accordance with their respective constitutional processes," implying that NATO Treaty commitments do not override U.S. constitutional provisions regarding the role of Congress in determining the extent of U.S. participation in NATO missions. Section 8(a) of the War Powers Resolution states specifically that authority to introduce U.S. forces into hostilities is not to be inferred from any treaty, ratified before or after 1973, unless implementing legislation specifically authorizes such introduction and says it is intended to constitute an authorization within the meaning of the War Powers Resolution. Regarding U.N.-authorized operations, for "Chapter VII" operations, undertaken in accordance with Articles 42 and 43 of the U.N. Charter, Section 6 of the U.N. Participation Act, P.L. 79-264, as amended, authorizes the President to negotiate special agreements with the U.N. Security Council, subject to the approval of Congress, providing for the numbers and types of armed forces and facilities to be made available to the Security Council. Once the agreements have been concluded, the law states, further congressional authorization is not necessary. To date, no such agreements have been concluded. Given these provisions of U.S. law, and the history of disagreements between the President and Congress over presidential authority to introduce U.S. military personnel into hostilities in the absence of prior congressional authorization for such actions, it seems likely that a presidential effort to establish a "no-fly zone" on his own authority would be controversial. Controversy would be all the more likely if the President were to undertake action "pre-emptively" or in the absence of a direct military threat to the United States. Since the War Powers Resolution gives the President the authority to launch U.S. military actions prior to receiving an authorization from Congress for 60-90 days, it is possible that the President could direct U.S. Armed Forces to take or support military actions in accordance with U.N. Security Council Resolutions, or in support of NATO operations, and then seek statutory authority for such actions from Congress. No-fly zone operations can conceivably take a number of different forms, and can themselves vary a great deal over time. Key considerations include, but are not limited to, the following factors. The sophistication of air defenses varies widely around the world, from individual, poorly coordinated anti-aircraft guns to integrated air defense networks coupled with high-performance surface-to-air missile systems and modern fighter aircraft. The characteristics of a given air defense system will indicate whether establishing a no-fly zone requires that the defenses be destroyed, suppressed (by jamming, network attack, or other means), or merely bypassed. It will also dictate in part the tactics required for the initial suppression of enemy air defenses--for example, whether it can best be done by manned aircraft, standoff weapons such as cruise missiles, and/or remotely-piloted aircraft (also known as unmanned aerial vehicles or "UAVs"). The size of the air component to be suppressed--not only the number of aircraft, but also bases--also informs the capabilities that the U.S. and partner forces would have to bring to bear. The quality of the air assets--particularly the quality and training of fighter forces, and the effectiveness of their command and control system--affects the amount of defensive assets that would have to be included in the no-fly zone force package, as well as the balance of efforts dedicated to offensive action against the enemy, and to defensive action to enhance the survival of "friendly" forces. The geographical boundaries of a no-fly zone help define both the relevant assets and the level of suppression of enemy air defenses (SEAD) required. For example, a no-fly zone focused on coastal areas could allow "friendly" naval air assets to engage more readily, and may not require the same level of SEAD as a no-fly zone that requires tactical aircraft (and especially supporting assets like tankers) to penetrate deeply into the defended airspace. Similarly, a no-fly zone that denies flight only over major urban areas, for example, reduces the resource requirements for the no-fly zone compared to denial of air activity over a whole country, as in Bosnia and Herzegovina; or major areas of a country, as in northern and southern Iraq. The proximity of allied and partner states can affect the availability of basing for land-based tactical aircraft and UAVs--the negotiation of new agreements regarding basing, access, and overflight, if required, can take time. The proximity of oceans, in turn, can provide navigable waters for carrier-based aircraft and/or cruise missile-equipped ships. Plans for resourcing a no-fly zone may be shaped by concurrent or potential competing demands, in particular for "high-demand, low-density" assets such as intelligence, surveillance, and reconnaissance (ISR). For example, U.S. ISR assets supporting the war effort in Afghanistan have been increased substantially, in part by drawing some assets away from Iraq; but the demand continues to grow. The participation of allies and partners can reduce the demands on U.S. forces for some capabilities--for example, strike--but depending on the scenario, the capabilities of partners in areas such as surveillance, and command and control, may not be sufficiently robust to provide equivalent effectiveness. Strategists generally argue that an understanding of the adversary's strategy and likely tactics should help inform the operational-level objectives of a no-fly zone operation. That understanding may be based in part on precedent--for example, the Iraqi government's use of chemical weapons against its own northern Kurdish population in 1988, and its use of fixed-wing and rotary-wing aircraft to strafe the population in southern Iraq after the Gulf War. That understanding may also be informed by current intelligence based on input from a variety of possible platforms and assets. If the adversary uses a large fixed-wing transport fleet to move troops around the country, or if it has a large concentration of fighter aircraft near a border with an ally or partner in the region and a track record of some hostility with that state, these factors may shape the priorities of the no-fly zone operations. Operational planning for a no-fly zone is likely to consider the adversary's most likely and most dangerous responses to the operation. Expectations--and intelligence--concerning possible adversary responses may shape the planned conduct of the operation, including the scope and scale of capabilities brought to bear. If denying the adversary's fixed-wing operations is sufficient to achieve the desired operational- and strategic-level effects, "air caps" can be maintained over the adversary's air bases, or standoff weapons can be used to render runways unusable, with minimal risk of civilian casualties or other loss. Minimizing the force used--for example, choosing not to destroy aircraft on the ground, hangars, or other support facilities--may allow a more rapid return to operation after the conclusion of the no-fly zone effort; this may be an important consideration, depending on the desired overall political endstate. If, on the other hand, the operational-level goals include denying adversary rotary-wing operations, a more significant no-fly zone operation would be necessary. Interdicting physical facilities--hangars, runways, ramp areas--has a much more limited effect on rotary-wing operations. Because helicopters are not tied to large bases, they are harder to locate when on the ground, requiring more assets to detect them and to monitor potential changes of location. Helicopters are also harder to detect than fixed-wing aircraft when airborne, particularly if the operators are skilled in using nap-of-the-earth flight and other techniques to minimize visibility to radar. Destruction of rotary-wing assets in the air would typically require getting within closer range of the targets than for fixed-wing platforms. Helicopters are harder to hit as well as to detect. In a scenario requiring suppression of rotary-wing activity, merely suppressing coastal or local air defenses would not be sufficient; since the helicopters could be almost anywhere in the adversary's territory, access to the adversary's full airspace would be necessary. Those imposing a no-fly zone operation may choose to limit it formally in scope, in the area of operation, in allowable weapons and tactics, or in other ways, in order to avoid civilian casualties or other loss, to incentivize defections by adversary forces, to restrict actions likely to alienate partners, or for other strategic considerations. The costs of establishing and maintaining a no-fly zone are likely to vary widely based on several key parameters: the specific military tasks that a given no-fly zone operation calls for. For example, initial costs might be relatively high if, as a first step, it were necessary to destroy the adversary's air defenses. A particularly robust surface-to-air capability, including a large number of discrete SAM sites, might prove relatively costly to suppress. the geography of the adversary's country--the surface area and type of terrain over which U.S. and partner forces would have to operate. A large surface area, as in ONW and OSW in Iraq, or mountainous terrain, as in ODF in Bosnia and Herzegovina, could both add cost, depending on the concept of operations for enforcing the no-fly zone. the duration of the no-fly zone. the extent to which the United States is joined by international partners in the effort. the extent of "mission creep"--how, if at all, the operation expands to include a broader array of activities designed to achieve the same military, and strategic, objectives. As a rough guide to the range of possible costs, Table 1 shows the costs to the U.S. government of U.S. participation in a variety of air operations in the 1990s. Of these, Operation Noble Anvil, the air war in Yugoslavia designed to address conflict in Kosovo, was the most intense. It involved initially limited and later extensive attacks to degrade air defenses throughout the Federal Republic of Yugoslavia, including all of Serbia. Those were followed by escalating air attacks initially focused on the military infrastructure and later on strategic targets. The operation lasted for two and a half months, from March 24 through June 10, 1999. The operation--including the no-fly zone and extensive additional activities--cost a total of $1.8 billion. Toward the other end of the spectrum are costs of the two no-fly zone coalition operations in Iraq. The costs to the U.S. government of Operation Southern Watch averaged somewhat more than $700 million per year, although the amounts varied substantially from year to year. The OSW mission involved constant patrols over a relatively large geographic area, punctuated by occasional strikes against Iraqi air defense sites. It imposed a considerable burden on U.S. Air Force units, mainly because of the long duration of the operation--from 1992 to 2003. CRS Report RL31133, Declarations of War and Authorizations for the Use of Military Force: Historical Background and Legal Implications , by [author name scrubbed] and [author name scrubbed]. CRS Report RS20775, Congressional Use of Funding Cutoffs Since 1970 Involving U.S. Military Forces and Overseas Deployments , by [author name scrubbed]. CRS Report RS21311, U.S. Use of Preemptive Military Force , by [author name scrubbed]. CRS Report R41725, Operation Odyssey Dawn (Libya): Background and Issues for Congress , coordinated by [author name scrubbed]

In conflicts in Kosovo, Iraq, and Libya, the United States has taken part in establishing and maintaining no-fly zones. As no-fly zones represent a significant commitment of U.S. forces, and may prove a precursor to other military actions, Congress may wish to consider issues surrounding the strategy, international authorization, congressional authorization, operations, and costs of establishing and maintaining no-fly zones. The military strategy designed to support U.S. grand strategy, it has been suggested, might be based on these considerations: the operational-level military objectives that need to be achieved, to support the overall grand strategy; and the extent to which a no-fly zone--as one set of ways and means--helps achieve those objectives. Practitioners and observers have debated what constitutes international "authorization" for the establishment of a no-fly zone. Given the paucity of relevant precedents, and the dissimilarities among them, there may not exist a single, clear, agreed model. The concept of authorization is typically considered to be linked to the ideas of both "legality" and "legitimacy"--the three concepts overlap but are all distinct. The precise meaning of each of the terms is still debated. Express authorization from the U.N. Security Council provides the clearest legal basis for imposing a no-fly zone. In addition to international authorization, debates have addressed the question of congressional authorization--whether and when there is a need for congressional approval based on the War Powers Resolution for a proposed no-fly zone. The question of whether and how congressional authorization is sought for a proposed operation could have an impact on congressional support--including policy, funding, and outreach to the American people--for the operation. Since the War Powers Resolution gives the President the authority to launch U.S. military actions prior to receiving an authorization from Congress for 60-90 days, it is possible that the President could direct U.S. Armed Forces to take or support military actions in accordance with U.N. Security Council resolutions, or in support of NATO operations, and then seek statutory authority for such actions from Congress. No-fly zone operations can conceivably take a number of different forms, and can themselves vary a great deal over time. Key considerations include, but are not limited to, the following factors: the nature, density, quantity, and quality of adversary air assets; geography; the availability of "friendly" assets; the adversary's military capabilities and responses; the U.S. military's concept of operations; and the rules of engagement. The costs of establishing and maintaining a no-fly zone are likely to vary widely based on several key parameters. They could be the specific military tasks that a given no-fly zone operation calls for, the geography of the adversary's country, the duration of the no-fly zone, the extent to which the United States is joined by international partners in the effort, and the extent of "mission creep"--how, if at all, the operation expands to include a broader array of activities designed to achieve the same military, and strategic, objectives.

Inflation, the general rise in the prices of goods and services, is important to policymakers for several reasons. First, rising inflation is unpopular with the public, in part because some households are more adversely affected by inflation than others. Second, high or rising inflation can reduce productivity by distorting price signals, so that it is hard for businesses to tell if prices are changing in relative terms, and by individuals wasting resources in order to maintain the purchasing power of their wealth. Finally, inflation plays a key role in macroeonomic stabilization policy. Changes in inflation often indicate changes in the business cycle--rising inflation is often a sign that the economy is overheating and falling inflation is a sign that the economy is sluggish. The Federal Reserve (Fed) is mandated to keep inflation low and stable, and alters interest rates in order to do so. In recent years, the Fed has focused attention on the core rate of inflation, a measure of inflation that excludes food and energy prices, in explanations of its policy decisions. For example, in July 2007, the third sentence of the 10-sentence Federal Open Market Committee statement summarizing the committee's policy decision read, "Readings on core inflation have improved modestly in recent months." In Fed Chairman Ben Bernanke's July 2007 testimony to Congress, he stated that "Food and energy prices tend to be quite volatile, so that, looking forward, core inflation...may be a better gauge than overall inflation of underlying inflation trends." When core inflation approached 3% in 2006, Chairman Bernanke said that it had "reached a level that, if sustained, would be at or above the upper end of the range that many economists, including myself, would consider consistent with price stability...." This report defines core inflation, reviews recent trends, and analyzes the advantages and drawbacks of using core inflation. No official measure of "inflation" exists. Inflation is measured as the percent change in a price index. Several indices track price changes, with each data series measuring something different. The most commonly cited measure of inflation is the percent change in the consumer price index (CPI) . This index measures the price of a basket of consumer goods and services that is representative of overall consumer purchases in urban areas. When food and energy prices are omitted from the CPI, the remaining basket is commonly referred to as the core CPI . The overall measure of CPI, which includes food and energy, is often referred to as the headline CPI . Another common measure of inflation is the percent change in the GDP (gross domestic product) price deflator , which is used to transform nominal GDP into real GDP. Since the GDP deflator is based on the prices of all goods and services in the economy, it is a broader measure of inflation than the CPI. A subset of the GDP deflator that is conceptually similar to the CPI, but includes more items and areas, is the personal consumption expenditures (PCE) price deflator ; for technical reasons, the Fed sometimes prefers this measure to the CPI in their analyses. Core measures of the GDP and PCE deflators are also available. Conceptually, core inflation could be any measure of inflation that attempts to strip out price volatility, but the most common definition of core strips out only two particularly volatile categories of goods, food and energy. The four most volatile items in the CPI are all food or energy products. The standard deviation of energy prices is estimated to be 12 times higher than overall inflation. Omitting food and energy prices from the CPI is not a trivial modification--food and beverages accounted for 15% of the headline CPI basket, and energy accounted for an additional 9% in 2006. While excluding food from core inflation has become conventional, it may no longer be warranted. The volatility of food has decreased significantly since the 1970s. Until 2007, the recent divergence between headline and core inflation was driven by energy prices. In 2007, food prices rose rapidly--it is too soon to tell whether this development marks a renewed period of persistent volatility. If food prices are no longer volatile, then policymakers may be losing useful information by omitting them. In recent years, headline inflation has typically outpaced core inflation, as seen in Figure 1 , because of the rapid rise in energy prices. In 2007, headline inflation was also driven up by a 3.9% increase in food prices. The difference between core and headline has not always been trivial--from 2003 to 2006, core inflation was 0.9 percentage points lower than headline. Considering that the Fed judges 2% inflation to be on the low side and 3% inflation on the high side, the definition used in these years would have arguably strongly colored their policy stance. The difference between core and headline inflation over this period was overwhelmingly the result of energy prices, which rose by an average of 12.8% a year as measured by the CPI. When comparing purchasing power over two time periods, headline inflation is the relevant measure. Comparisons over time of wages, wealth, rates of return, government transfers such as Social Security payments, and so on should all use a headline measure of inflation, because all of these concepts depend on a broad measure of inflation. For example, adjusting household income by core inflation would not be useful since food and energy consumption account for about one-quarter of average household expenditures. Similarly, government programs and parts of the tax code that are adjusted for inflation are based on headline inflation. Economic growth is also calculated by first adjusting GDP by headline inflation. Core inflation is used by policymakers for the reason offered by Chairman Bernanke in the introduction--policymakers are most concerned about the future path of inflation, and current core inflation data may give better information than current headline data about future headline inflation. Headline inflation often does not have good predictive power over short-time periods because food and energy prices are so volatile. For example, the monthly headline inflation rate varied between -6.3% and 7.5% in 2006 at annualized rates, whereas the core rate varied between 1.2% and 3.6%. Policymakers are concerned with future inflation because of lags between a change in policy and its effect on the economy. In essence, it is already too late for policy to influence current inflation, a policy change today can only affect future inflation. Theoretically, short-term changes in inflation can be caused by the supply-side or demand-side of the economy. When rising inflation is demand-driven, it means that spending is growing too quickly in the overall economy, and production cannot keep pace. This phenomenon is captured in the famous saying "too much money chasing too few goods." The Fed's task is to counteract this by raising interest rates in order to reduce the growth rate of interest-sensitive spending. Likewise, if spending is rising too slowly, inflation will fall, which the Fed can counteract by reducing interest rates. In the short run, the overall inflation rate can also be affected by sharp price changes of individual goods caused by supply shocks. For example, bad weather can drive up food prices or a reduction in the oil supply can drive up energy prices. Since these supply shocks are temporary, they should not have any lasting effect on inflation (holding aggregate spending constant), in which case they can be ignored by policymakers. In the long run, price shocks on the supply side should cancel each other out (since, across all goods, there will be an equal number of positive and negative surprises), and average inflation should be completely demand driven. Ideally, policymakers would like to be able to identify whether any change in inflation was demand-driven or supply-driven. Unfortunately, there is no straightforward way to do this, so they have commonly used core inflation as a proxy for demand-driven inflation, reasoning that food and energy are two sectors of the economy that are most susceptible to supply shocks. Furthermore, policymakers are particularly concerned with inflationary expectations, and a rising core rate may be a better sign than rising headline that inflationary expectations have risen. Relying on core inflation for policymaking has its drawbacks, however. There is no inherent reason that changes in food and energy prices cannot be caused by changes in aggregate demand. For example, rapid spending growth could push up energy prices if supply does not rise in response. In fact, an argument has been made that a change in aggregate demand would first show up in price changes of goods that have flexible pricing, such as commodities that are traded on financial markets where prices change continually to clear the market. Both energy and basic foodstuffs are traded on financial markets, although the CPI measures final food and energy products, not basic commodities. Furthermore, a rise in the price of any one good need not lead to a change in inflation if the prices of other goods fall to offset it. Technically, if a rise in one price leads to a rise in overall inflation, it must be because of some accommodation on the Fed's part (because it did not raise interest rates enough to induce other prices to fall). Most economists believe that some accommodation to relative price changes is desirable because it reduces the volatility of economic growth, whereas zero accommodation could lead to needless disruptions in economic activity. For example, Fed Governor Frederic Mishkin used the Fed's macro model of the U.S. economy to show that when the Fed reacts to changes in headline inflation instead of core inflation, future inflation will be slightly less volatile, but unemployment will be significantly more volatile. But if the Fed accommodates a rise in the price of one good too much, then the price of all goods could start rising. In other words, a rise in headline inflation could feed through to higher core inflation. This scenario occurred in the 1970s where rising energy prices resulted in a rise in total inflation. In scenarios like this one, a focus on core inflation could forestall a needed policy change until it is too late. Indeed, a case can be made today that more of a focus on headline inflation would have avoided the persistent upward trend in core inflation that has occurred from 2003 to 2007 and brought core inflation above the Fed's self-defined "comfort zone." The weakness with the focus on core inflation is that when energy prices rise continually for a period of several years, they no longer represent random price fluctuations that offer no useful information about future inflation. As a result, too much monetary policy accommodation may have taken place recently, causing the economy to overheat. Future events will reveal if this is the case, or if the rise in core inflation can be painlessly reversed without a recession. In the end, the question of what measure of inflation is best for policymaking is an empirical one. One study found that "no core measure does an outstanding job forecasting [headline] CPI inflation...we find no strong evidence to suggest that a selected core measure will be able to retain its usefulness as a tool to forecast inflation for any given period..." Another study did not find a statistically significant relationship between core inflation and future headline inflation, although the relationship becomes significant when limited to a more recent time period. Two other studies found that headline inflation is a better predictor of future headline inflation than core inflation. An explanation for this finding is that during the past 10 years, changes in core inflation have tended to lag behind changes in headline inflation as illustrated in Figure 1 . One study found that a core measure that excludes only energy was a better predictor of future inflation from 1983 to 2001 than a measure excluding food and energy. In fact, that study found food prices to be a better predictor of future inflation than any other measure, including core inflation. Some studies suggest that there may be more sophisticated measurements that are better gauges of underlying inflationary pressures than the standard definition of core inflation. Core inflation has the advantage from a policy perspective, however, of being transparent, whereas the more sophisticated measurements could be hard for the public to understand and open to accusations of data mining or manipulation. While this advantage may make core inflation a useful tool for communicating Fed policy to the public, the empirical evidence suggests it to be, by itself, an inadequate tool for policymaking.

Inflation measures the rate of change in all prices. Maintaining low and stable inflation is one of the primary goals of macroeconomic policy. But how should inflation be measured? Policymakers, particularly at the Federal Reserve, often refer to core inflation in their policy decisions. Core inflation is commonly defined as a measure of inflation that omits changes in food and energy prices. Some policymakers prefer to use core inflation to predict future overall inflation because food and energy price volatility makes it difficult to discern trends from the overall inflation rate. A drawback of an over-reliance on core inflation, however, is that an extended period of rapidly rising food or energy prices could cause all other prices to accelerate. A focus on core may cause policymakers to fail to react to such a rise in inflation until it is too late. This scenario may have occurred recently. Many economists are concerned that rapid increases in food and energy prices are now pushing overall inflation to uncomfortably high levels. Furthermore, several studies have failed to find core inflation to be a good forecaster of future inflation, casting doubt on the very rationale for relying on it.

During the past six decades, Congress on four occasions has approved legislation designed to regulate lobbyist contact with Members of Congress. The initial provisions, which were contained in the Legislative Reorganization Act of 1946, required that lobbyists register with the House of Representatives and the Senate and dis close certain receipts and expenditures. In 1995, Congress passed, and the President signed into law, the Lobbying Disclosure Act, which repealed the 1946 act and created a detailed system of reporting thresholds. In 1998, technical amendments to the 1995 law were passed. Finally, in 2007, Congress amended the 1995 act to further enhance disclosure and reporting requirements for lobbyists and lobbying firms. The Lobbying Disclosure Act (LDA) of 1995 provided specific thresholds and definitions of lobbyists, lobbying activities, and lobbying contacts, compared to the 1946 act. In reporting the LDA, the House Judiciary Committee summarized the need for new lobbying provisions: The Act is designed to strengthen public confidence in government by replacing the existing patchwork of lobbying disclosure laws with a single, uniform statute which covers the activities of all professional lobbyists. The Act streamlines disclosure requirements to ensure that meaningful information is provided and requires all professional lobbyists to register and file regular, semiannual reports identifying their clients, the issues on which they lobby, and the amount of their compensation. It also creates a more effective and equitable system for administering and enforcing the disclosure requirements. The technical amendments made to the LDA in 1998 clarified the definition of covered executive branch officials, more clearly defined what constitutes a lobbying contact, and provided that organizations, whose lobbying activities are limited by their Internal Revenue Code (IRC) non-profit status, could use their tax estimates to report lobbying activities. In reporting the 1998 technical amendments, the Senate Committee on Governmental Affairs explained the need for change: Once the LDA was implemented by the Clerk of the House and the Secretary of the Senate, several minor problems with the language of the statute materialized. The offices of the Clerk and the Secretary have sought to interpret the LDA with respect to these problems in accordance with the original intent of the law, but it is necessary and appropriate to conform the language of the law to intent, and that is the motivation behind the introduction of S. 758 . The most recent amendments to the LDA, the Honest Leadership and Open Government Act of 2007 (HLOGA), mandated additional and more frequent disclosures. Pursuant to the 1946 act, the 1995 LDA, as amended by the 1998 act, and the HLOGA, the Clerk of the House and the Secretary of the Senate have had joint responsibility for implementing systems to register lobbyists. Under the 1946 act, individuals, groups, and organizations involved in lobbying activities were required to keep detailed financial records and to file financial statements with the Clerk. Lobbyists also were required to register before engaging in lobbying activities and file quarterly reports with the Clerk and the Secretary. The Clerk was then required to maintain these records for two years. The 1995 act, as amended, modified the responsibilities of the Clerk and the Secretary in registering lobbyists and collecting disclosure documents. In addition to collecting registration and disclosure documents from lobbyists the Clerk and the Secretary are required to 1. provide guidance and assistance on the registration and reporting requirements of this Act and develop common standards, rules, and procedures for compliance with this Act; 2. review, and, where necessary, verify and inquire to ensure the accuracy, completeness, and timeliness of registration and reports; 3. develop filing, coding, and cross-indexing systems to carry out the purpose of this Act, including-- a. a publicly available list of all registered lobbyists, lobbying firms, and their clients; and b. computerized systems designed to minimize the burden of filing and maximize public access to materials filed under this Act; 4. make available for public inspection and copying at reasonable times the registrations and reports filed under this Act; 5. retain registrations for a period of at least 6 years after they are terminated and reports for a period of at least 6 years after they are filed; 6. compile and summarize, with respect to each semi-annual period, the information contained in registrations and reports filed with respect to such period in a clear and complete manner; 7. notify any lobbyist or lobbying firm in writing that may be in noncompliance with this Act; and 8. notify the United States Attorney for the District of Columbia that a lobbyist or lobbying firm may be in noncompliance with this Act, if the registrant has been notified in writing and has failed to provide an appropriate response within 60 days after notice was given under paragraph (7). The 2007 HLOGA further refined the role of the Clerk and the Secretary in collecting and reporting information on lobbyists under the LDA. The Clerk and the Secretary are required to electronically register lobbyists and collect quarterly and semi-annual reports; make registrations and filings available on the Internet; and review each registration and filing for accuracy, notify lobbyists of a misfiling, and refer appropriate cases to the U.S. attorney's office for the District of Columbia. Pursuant to these responsibilities, the Clerk and the Secretary have chosen to use a single electronic filing system, whereby lobbyists and lobbying firms register once and documents are automatically transmitted to both the Clerk and the Secretary. The Clerk of the House and the Secretary of the Senate are responsible for implementing lobbyist registration and disclosure provisions of the LDA, as amended by the HLOGA, for the House of Representatives and the Senate, respectively. As neither the Clerk nor the Secretary have rule-writing or regulatory authority under the LDA or its amendments, but are directed in law to provide guidance and assistance, they issue a joint guidance document to inform lobbyists and the public of how they intend to carry out their registration and disclosure duties. Under the HLOGA amendments, the first quarterly reports were required by April 21, 2008, and new registrations continued to be required no later than 45 days after the first lobbying contact is made or an individual is employed to make a lobbying contact. All lobbyists and lobbying firms filing registration and disclosure statements are required to file with the Clerk and the Secretary through a joint portal maintained at http://lobbyingdisclosure.house.gov , or http://www.senate.gov/lobby . Prior to the HLOGA amendments, the LDA did not require electronic submission of registration and reporting documents. Under the 1995 act, as amended, the Secretary of the Senate provided lobbyists and lobbying firms the means to file electronically or to use paper forms. The Clerk of the House did not provide a method of electronic filing. The HLOGA amended Section 5 of the LDA to make electronic filing mandatory, except when an individual is amending documents filed under the previous system, or in instances where electronic filing is not possible for an individual with a condition covered by the Americans with Disabilities Act. Pursuant to Section 5, as amended, the Clerk and Secretary created a single electronic registration system, using the previous Senate system's user ID and password protocols, and have developed a website that provides the necessary software applications to make all filings. The website has features for use on Microsoft Windows and Macintosh operating systems. Detailed instructions on the registration and disclosure process and a summary of filing requirements are available on both the House and Senate lobbying disclosure websites. The Clerk and the Secretary are responsible for maintaining the electronic filing system website and for providing updated information in response to lobbyist questions and congressional amendments. 2 U.S.C. SS1605(a)(7) and (8), as amended by HLOGA Section 210, requires the Clerk and the Secretary to notify lobbyists of noncompliance and to notify the U.S. attorney for the District of Columbia of a lobbyist's or lobbying firm's noncompliance, after giving 60 days' notice. The Clerk of the House's Legislative Resource Center and the Secretary of the Senate's Office of Public Records have been given responsibility for reviewing each filing to ensure accuracy and for issuing notices to those who have not complied. If a notice is issued to a registrant, the registrant has 60 days to respond, after which the Clerk and the Secretary may forward instances of noncompliance to the U.S. attorney's office for the District of Columbia. 2 U.S.C. SS1605(a) (3), (4), and (5), as amended by HLOGA Section 209, instructs the Clerk and the Secretary to make registration and disclosure information publicly available for at least six years. (3) develop filing, coding, and cross-indexing systems to carry out the purpose of this Act, including--(A) a publicly available list of all registered lobbyists, lobbying firms, and their clients; and (B) computerized systems designed to minimize the burden of filing and maximize public access to materials filed under this Act; (4) make available for public inspection and copying at reasonable times the registrations and reports filed under this Act; (5) retain registrations for a period of at least 6 years after they are terminated and reports for a period of at least 6 years after they are filed. To satisfy the requirements of Section 6 of the LDA, as amended by the HLOGA, the Clerk and the Secretary established websites for the public to inspect registration and disclosure documents on the Internet. The Lobbying Disclosure Act Guidance (in Section 10) states that the Clerk and the Secretary will use the Internet to deliver the content of the reports. The HLOGA lobbying provisions were effective as of January 1, 2008. As required by Section 6 of the LDA, the Clerk and the Secretary on December 10, 2007, issued a joint guidance document. The guidance document is updated, as needed, to reflect changes in guidance from the Clerk and the Secretary. Table 1 lists when the guidance document has been updated since it was first issued. The guidance document was most recently updated on January 31, 2017. The guidance document is posted on both the Clerk's and Secretary's lobbying websites. The guidance document is divided into 12 sections. The LDA does not provide the Clerk and the Secretary with the authority to write regulations or issue opinions on the law. The guidance document is only meant as an interpretation of the law, and is not enforceable as law. A brief summary of the 12 sections of the guidance document follows: Section 1--Introduction . Provides background information on the LDA and the responsibilities of the Clerk of the House and the Secretary of the Senate in providing guidance to the lobbying community. Section 2-- What's New? Identifies changes made to the guidance since the last update. Section 3--Definitions . Repeats terms defined in the LDA. These terms include affiliated organizations, reports of certain contributions, client, covered executive and legislative branch officials, lobbying activities, lobbying contact, lobbying firm, lobbying registration, lobbying report, lobbying, and public official, among others. Section 3 also adds the definition of "actively participates" from Section 207 of HLOGA. Section 4--Lobbying Registration . Explains the lobbying registration process, including who must register and when registrations are necessary. This section also clarifies the preparations for filing registrations, exceptions to lobbying contacts, the 20% activity threshold, the difference between a lobbying contact and lobbying activity, alternative reporting methods, and the relationship between the 20% activity and monetary thresholds. The monetary thresholds are updated periodically to reflect changes in the Consumer Price Index (CPI). For each area, the guidance document provides examples to illustrate the operation of the section for the lobbying community. In addition, this section provides guidance on when and how to report foreign entity contributions to lobbying activity. Section 5--Special Registration Circumstances . Outlines conditions that could affect the registration of lobbyists or lobbying firms under the LDA. These special circumstances include lobbying firms retained by contingent fees; registration by entities with subsidiaries or state and local affiliates; the effect of mergers and acquisitions; registration for associations, coalitions, churches, and associations of churches; registration for firms hired by churches or church associations; and the registration of professional associations of elected officials. Section 6--Quarterly Reporting of Lobbying Activities . Explains when and why quarterly reports are needed, and provides instructions on how to complete lobbying disclosure forms LD-1 and LD-2. In addition, Section 6 defines how to report firm income, indicates when it is appropriate to report income or expenses, provides examples on the type of material that should be included in a quarterly report, indicates that organizations that pay dues to other organizations must report the portion of their dues used for lobbying activities, removes previous guidance that registrants who previously filed LD-2 forms could be required to file again in the future, even if they did not meet reporting thresholds in a given quarter, reminds filers that "all expenses of lobbing activities incurred during a quarterly period are reportable," provides for a specific reporting code for lobbying on tariff bills, reminds filers that all new lobbyists must list "previous covered executive or legislative branch positions held within twenty (20) years of first acting as a lobbyist for a client," and reiterates that the "requirement to disclose a foreign interest ... is not contingent upon the entity making a contribution ... to the registrant during that particular reporting period." Section 7--Semiannual Reporting of Certain Contributions . Discusses when and why semiannual reports are needed, the basics of form LD-203; who is required to file LD-203; the required contents of the semiannual report (regardless of whether they make a reportable contribution), including examples; that third-party preparers should "retain appropriate documentation to demonstrate that they have authorization to make such filing on behalf of all filers (including lobbyist-employees of registrants) using their services, and that in-kind contributions should be reported. Section 8--Termination . Explains the procedure for the termination, for recording purposes, of a lobbyist from a lobbying firm or of a registrant's relationship with a client, including when removing a registrant is appropriate. Section 9--Relationship of LDA to Other Statutes . Briefly explains the relationship between LDA and three other statutes. These statutes are the Foreign Agents Registration Act (FARA), the Internal Revenue Code (IRC), and the False Statements Accountability Act of 1996. Section 10--Public Availability . States that the LDA requires the Clerk of the House and the Secretary of the Senate "to make all registrations and reports available for public inspection over the Internet as soon as technically practicable after the report is filed." Section 11--Review and Compliance . States that the Clerk of the House's Legislative Resource Center and the Secretary of the Senate's Office of Public Records "must review, verify, and request corrections in writing to ensure the accuracy, completeness, and timeliness of registrations and reports filed under the Act." Section 12--Penalties . Restates the civil and criminal penalties for filing incorrect or false information. Pursuant to 2 U.S.C. SS1604(e), the Clerk and the Secretary created a contributions reporting system and website that allows lobbying organizations and individual lobbyists to register electronically using their existing ID and password. The website contains a help feature to assist lobbying organizations and lobbyists navigate the new form.

On September 14, 2007, President George W. Bush signed S. 1, the Honest Leadership and Open Government Act of 2007 (P.L. 110-81), into law. The Honest Leadership and Open Government Act (HLOGA) amended the Lobbying Disclosure Act (LDA) of 1995 (P.L. 104-65, as amended) to provide, among other changes to federal law and House and Senate rules, additional and more frequent disclosures of lobbying contacts and activities. This report explains the role of the Clerk of the House of Representatives and the Secretary of the Senate in implementing lobbying registration and disclosure requirements and summarizes the guidance documents they have jointly issued. Under the HLOGA and predecessor lobbying laws, the Clerk of the House and the Secretary of the Senate manage the registration, filing, and the collection of documents submitted by the lobbyists and lobbying firms. Prior to the HLOGA, lobbyists were required to file paper documents with both the Clerk and the Secretary. These forms are now filed electronically and jointly with the Clerk and the Secretary. In addition, the Clerk and the Secretary are responsible for making documents publicly available and reporting incorrect or false filings to the U.S. Attorney for the District of Columbia. Beginning in December 2007, the Clerk of the House and the Secretary of the Senate issued joint guidance documents for HLOGA implementation. The guidance document identified eight substantive changes to the 1995 Lobbying Disclosure Act, and discussed how the Clerk and Secretary interpret and implement the HLOGA's provisions. In addition, the guidance document provided direction on successful completion of quarterly registration and disclosure documents, the new semi-annual reporting requirement, and interpretation of the Clerk and Secretary's role in referring non-compliance to the U.S. attorney. Since issuing an initial guidance document in 2007, the Clerk of the House and Secretary of the Senate, pursuant to 2 U.S.C. SS1605, have conducted periodic reviews of existing guidance and have issued multiple updates. Most recently, the document was updated on January 31, 2017, to update registration thresholds pursuant to changes in the Consumer Price Index; provide additional clarifications on identifying clients and covered officials; provide additional examples for filing by outside lobbyists; clarify that all income and expenditure reporting should be rounded to the nearest $10,000; clarify that all "sole proprietors" are required to file two LD-203 disclosure forms--one for the registrant [firm] and one for the individual lobbyist; and encourage filers to use the online public database for compliance purposes. For further analysis on the Honest Leadership and Open Government Act and the Lobbying Disclosure Act, see CRS Report R40245, Lobbying Registration and Disclosure: Before and After the Enactment of the Honest Leadership and Open Government Act of 2007, by [author name scrubbed]; and CRS Report R44292, The Lobbying Disclosure Act at 20: Analysis and Issues for Congress, by [author name scrubbed].

The Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended, 42U.S.C. SS 5121 et seq. , is designed to provide a means by which the federal government maysupplement state and local resources in major disasters or emergencies where those state and localresources have been or will be overwhelmed. The Act provides separate but similar mechanisms fordeclaration of a major disaster and for declaration of an emergency. Except to the extent that anemergency involves primarily federal interests, both declarations of major disaster and declarationsof emergency must be triggered by a request to the President from the Governor of the affected state. The pertinent provisions with respect to such declarations are set forth in Section 401 of the StaffordAct, 42 U.S.C. SS 5170, with respect to major disasters declarations and in Section 501 of the StaffordAct, 42 U.S.C. SS 5191, with respect to emergency declarations: SS 5170. Procedure fordeclaration All requests for a declaration by the President that amajor disaster exists shall be made by the Governor of the affected State. Such a request shall bebased on a finding that the disaster is of such severity and magnitude that effective response isbeyond the capabilities of the State and the affected local governments and that Federal assistanceis necessary. As part of such request, and as a prerequisite to major disaster assistance under thischapter, the Governor shall take appropriate response action under State law and direct executionof the State's emergency plan. The Governor shall furnish information on the nature and amount ofState and local resources which have been or will be committed to alleviating the results of thedisaster, and shall certify that, for the current disaster, State and local government obligations andexpenditures (of which State commitments must be a significant proportion) will comply with allapplicable cost-sharing requirements of this chapter. Based on the request of a Governor under thissection, the President may declare under this chapter that a major disaster or emergency exists. (1) SS 5191. Procedure fordeclaration (a) Request anddeclaration All requests for a declaration by the President that anemergency exists shall be made by the Governor of the affected State. Such a request shall be basedon a finding that the situation is of such severity and magnitude that effective response is beyond thecapabilities of the State and the affected local governments and that Federal assistance is necessary.As a part of such request, and as a prerequisite to emergency assistance under this chapter, theGovernor shall take appropriate action under State law and direct execution of the State's emergencyplan. The Governor shall furnish information describing the State and local efforts and resourceswhich have been or will be used to alleviate the emergency, and will define the type and extent ofFederal aid required. Based upon such Governor's request, the President may declare that anemergency exists. (b) Certain emergencies involving Federal primaryresponsibility The President mayexercise any authority vested in him by section 5192 of this title or section 5193 of this title withrespect to an emergency when he determines that an emergency exists for which the primaryresponsibility for response rests with the United States because the emergency involves a subject areafor which, under the Constitution or laws of the United States, the United States exercises exclusiveor preeminent responsibility and authority. In determining whether or not such an emergency exists,the President shall consult the Governor of any affected State, if practicable. The President'sdetermination may be made without regard to subsection (a) of this section. (2) When an incident occurs or is imminent which the state official responsible for disasteroperations determines may exceed state and local response capabilities, the state will request theFEMA Regional Director to perform a joint FEMA-state preliminary damage assessment (PDA). This provides a means to determine the impact and magnitude of damage and resulting unmet needsof individuals, businesses, the public sector, and the affected community as a whole. Informationcollected in this way is used by the state as a basis for the Governor's request for a presidentialproclamation and by FEMA to document its recommendation to the President in response to theGovernor's request. The requirement for a joint PDA may be waived for those incidents of unusualseverity and magnitude that do not require field damage assessments to determine that supplementalfederal assistance will be needed, or in other situations determined by the Regional Director inconsultation with the State. An assessment may still be needed to determine unmet needs formanagerial response purposes. (3) Once a request from the Governor of an affected state is received by the FEMA RegionalDirector whose region covers that state, the Regional Director provides a written acknowledgmentof receipt of the request. Based on the joint PDA(s) and consultation with appropriate state andfederal officials and other interested parties, the Regional Director then promptly prepares asummary of the PDA findings. An analysis of this information, including an examination of stateand local resources and capabilities and other assistance available to meet the needs associated withthe emergency or major disaster, is submitted with a recommendation to the Director of the RecoveryDivision of FEMA. (4) Based on available information, the Director of FEMA makes a recommendation on the Governor'srequest to the President. A major disaster recommendation is based upon a finding that the situationis or is not of such severity and magnitude as to be beyond the capabilities of the state and localgovernments. It also contains a determination of whether or not supplemental federal Stafford Actassistance is necessary and appropriate. (5) An emergency recommendation is based on a report indicatingwhether or not federal emergency assistance is necessary to supplement state and local efforts to savelives, protect property and public health and safety, or to lessen or avert the threat of a catastrophe. FEMA will only recommend an emergency declaration if it has been determined that all otherresources and authorities to meet the crisis are inadequate and that Stafford Act emergency assistancewould be appropriate. A modified federal emergency recommendation would be made based on areport as to whether an emergency does or does not exist for which Stafford Act emergencyassistance would be appropriate. Such a recommendation would not be forthcoming in situationswhere the authority to respond or coordinate is within the jurisdiction of one or more federalagencies without a Presidential declaration. A modified federal emergency recommendation byFEMA for an emergency declaration by the President would not be foreclosed by other federalagency involvement if there are significant unmet needs of sufficient severity and magnitude, notaddressed by other assistance, which could appropriately be addressed under the Stafford Act. (6) The President may respond to a Governor's request for a declaration of a major disaster bya declaration of an emergency, a declaration of a major disaster, or a denial of the request. Inresponse to a Governor's request for a declaration of emergency, the President's options are limitedto declaration of an emergency or denial of the request. (7) A denial of a declaration request may be appealed within 30 daysof the date of the denial letter, submitted with additional information to the President through theRegional Director. (8) Anextension of the time limit may be sought within the 30 day time frame from the Director of theRecovery Division upon written request citing the reasons for the delay. (9) Once the decision is made, the FEMA Director or his or her designee must promptly notifythe Governor. If the President has declared a major disaster or an emergency, FEMA must alsonotify other federal agencies and interested parties. Following either type of declaration, theRegional Director or Director of the Recovery Division (10) is to promptly notify the Governor of the designations ofassistance and of the areas eligible for such assistance. (11) The determinations of the types of assistance to be madeavailable and the areas eligible to receive such assistance are made by the Director of the RecoveryDivision of FEMA. (12) A denial of the types of assistance or areas eligible to receive assistance may be made in writingwithin 30 days of the date of the denial letter, accompanied with justification and/or additionalinformation to the Director, Recovery Division, through the Regional Director. (13) The Director of theRecovery Division may extend the time for filing the appeal upon written request received duringthe 30 day time frame citing reasons for the delay. (14) Once a declaration of an emergency or a major disaster is made by the President, the Directorof FEMA, or, in his absence the Deputy Director or the Director, Recovery Division, must appointa Federal Coordinating Officer (FCO) who shall immediately initiate action to assure that federalassistance is provided in accordance with the declaration, applicable laws and regulations, and theFEMA-state agreement entered into pursuant to 44 C.F.R. SS206.44. The FEMA Regional Directorwill designate a Disaster Recovery Manager to exercise all of the Regional Director's authority ina major disaster or emergency. Once a declaration is made, the Governor is to designate a StateCoordinating Officer to coordinate state and local assistance efforts with federal efforts. TheGovernor's Authorized Representative designated by the Governor in the FEMA-state agreement isto administer federal disaster assistance programs on behalf of the state and local governments andother grant or loan recipients and is also responsible for state compliance with the FEMA-stateagreement. (15) TheFCO's responsibilities following a declaration of a major disaster or emergency are to: (a) . . . (1) Make an initial appraisal of the types ofassistance most urgently needed; (2) Incoordinationwith the SCO,establish fieldoffices andDisasterApplicationCenters asnecessary tocoordinate andmonitorassistanceprograms,disseminateinformation,acceptapplications,and counselindividuals,families andbusinessesconcerningavailableassistance; (3) Coordinatetheadministrationof relief,includingactivities ofState and localgovernments,activities ofFederalagencies, andthose of theAmerican RedCross, theSalvationArmy, theMennoniteDisasterService, andother voluntaryrelieforganizationswhich agree tooperate underthe FCO'sadvice anddirection; (4) Undertakeappropriateaction to makecertain that allof the Federalagencies arecarrying outtheirappropriatedisasterassistance rolesunder theirown legislativeauthorities andoperationalpolicies; and (5) Take otheraction,consistent withthe provisionsof the StaffordAct, asnecessary toassist citizensand publicofficials inpromptlyobtainingassistance towhich they areentitled. (b) The SCOcoordinates State and local disaster assistance efforts with those of the Federal Government workingclosely with the FCO. The SCO is the principal point of contact regarding coordination of State andlocal disaster relief activities, and implementation of the State emergency plan. The functions,responsibilities, and authorities of the SCO are set forth in the State emergency plan. It is theresponsibility of the SCO to ensure that all affected local jurisdictions are informed of thedeclaration, the types of assistance authorized, and the areas eligible to receive such assistance. The FCO may activate emergency support teams of federal program and support personnel to bedeployed to the affected areas to assist the FCO in carrying out his or her Stafford Actresponsibilities. (16) If the Governor so requests, the Director of the Recovery Division of FEMA (17) may lend or advance to thestate, either for its own use or for the use of public or private nonprofit applicants for disasterassistance under the Stafford Act, the portion of assistance for which the state or other eligibledisaster assistance applicant is responsible under the cost-sharing provisions (18) in any case in which: (1) The State or other eligible disaster assistanceapplicant is unable to assume their financial responsibility under such cost sharing provisions: (i) As a resultof concurrent,multiple majordisasters in ajurisdiction, or (ii) Afterincurringextraordinarycosts as aresult of aparticulardisaster; (2) The damagescaused by such disasters or disaster are so overwhelming and severe that it is not possible for theState or other eligible disaster assistance applicant to immediately assume their financialresponsibility under the Act; and (3) The State and theother eligible disaster applicants are not delinquent in payment of any debts to FEMA incurred asa result of Presidentially declared major disasters or emergencies. Such loans must be repaid to the United States with interest, and the Governor must include arepayment schedule as part of the request for the advance. (19) Denial of a Governor'srequest for an advance of a non-federal share may be appealed in writing within 30 days of the dateof the denial letter accompanied by justification and/or additional information sent to the Directorof the Recovery Division through the Regional Director. (20) The Director of the Recovery Division may extend the time forfiling upon written request filed with reasons for the delay within the original 30 day timeperiod. (21) Eligibility for disaster assistance begins on the date of the occurrence of the event whichresults in a declaration a major disaster exists, except that reasonable expenses incurred inanticipation of and immediately preceding the event may also be eligible for federal assistance. (22) A major disasterdeclaration by the President opens the door to two types of federal disaster assistance: general federalassistance under Section 402(a) of the Stafford Act, 42 U.S.C. SS 5170a, and essential federalassistance under Section 403 of the Stafford Act, 42 U.S.C. SS 5170b. These provide: SS 5170a. General Federal assistance In any major disaster, the President may -- (1) direct any Federalagency, with or without reimbursement, to utilize its authorities and the resources granted to it underFederal law (including personnel, equipment, supplies, facilities, and managerial, technical, andadvisory services) in support of State and local assistance efforts; (2) coordinate alldisaster relief assistance (including voluntary assistance) provided by Federal agencies, privateorganizations, and State and local governments; (3) provide technicaland advisory assistance to affected State and local governments for -- (A) theperformance ofessentialcommunityservices; (B) issuance ofwarnings ofrisks andhazards; (C) public health and safety information,including dissemination of such information; (D) provisionof health andsafetymeasures; and (E)management,control, andreduction ofimmediatethreats topublic healthand safety; and (4) assist State andlocal governments in the distribution of medicine, food, and other consumable supplies, andemergency assistance. SS 5170b. Essentialassistance (a) In general Federal agencies mayon the direction of the President, provide assistance essential to meeting immediate threats to life andproperty resulting from a major disaster, as follows: (1) Federalresources,generally Utilizing, lending, or donating to State andlocal governments Federal equipment,supplies, facilities, personnel, and otherresources, other than the extension of credit,for use or distribution by such governments inaccordance with the purposes of this chapter. (2) Medicine,food, and otherconsumables Distributing orrenderingthrough Stateand localgovernments,the AmericanNational RedCross, theSalvationArmy, theMennoniteDisasterService, andother relief anddisasterassistanceorganizationsmedicine,food, and otherconsumablesupplies, andother servicesand assistanceto disastervictims. (3) Work andservices tosave lives andprotectproperty Performing onpublic orprivate lands orwaters anywork orservicesessential tosaving livesand protectingand preservingproperty orpublic healthand safety,including -- (A)debrisremoval; (B)searchandrescue,emergencymedical care,emergencymasscare,emergencyshelter,andprovision offood,water,medicine, andotheressentialneeds,includingmovement ofsupplies orpersons; (C)clearance ofroadsandconstruction oftemporarybridgesnecessary totheperformanceofemergencytasksandessentialcommunityservices; (D)provision oftemporaryfacilities forschoolsandotheressentialcommunityservices; (E)demolition ofunsafestructureswhichendanger thepublic; (F)warning offurtherrisksandhazards; (G)disseminationofpublicinformationandassistanceregardinghealthandsafetymeasures; (H)provision oftechnicaladviceto Stateandlocalgovernmentsondisastermanagementandcontrol;and (I)reduction ofimmediatethreatsto life,property, andpublichealthandsafety. (4)Contributions Making contributions to State or localgovernments or owners or operators of privatenonprofit facilities for the purpose of carryingout the provisions of this subsection. (b) Federal share The Federal shareof assistance under this section shall be not less than 75 percent of the eligible cost of suchassistance. (c) Utilization ofDOD resources (1) Generalrule During theimmediateaftermath of anincident whichmay ultimatelyqualify forassistanceunder thissubchapter orsubchapterIV-A of thischapter, theGovernor ofthe State inwhich suchincidentoccurred mayrequest thePresident todirect theSecretary ofDefense toutilize theresources ofthe Departmentof Defense forthe purpose ofperforming onpublic andprivate landsany emergencywork which ismadenecessary bysuch incidentand which isessential forthepreservation oflife andproperty. If thePresidentdetermines thatsuch work isessential forthepreservation oflife andproperty, thePresident shallgrant suchrequest to theextent thePresidentdeterminespracticable.Suchemergencywork may onlybe carried outfor a period notto exceed 10days. (2) Rulesapplicable todebris removal Any removalof debris andwreckagecarried outunder thissubsectionshall be subjectto section5173(b) of thistitle, relating tounconditionalauthorizationandindemnification for debrisremoval. (3)Expendituresout of disasterrelief funds The cost of anyassistanceprovidedpursuant to thissubsectionshall bereimbursed outof funds madeavailable tocarry out thischapter. (4) Federalshare The Federalshare ofassistanceunder thissubsectionshall be notless than 75percent. (5) Guidelines Not later than180 days afterNovember 23,1988, thePresident shallissueguidelines forcarrying outthis subsection.Suchguidelinesshall considerany likelyeffectassistanceunder thissubsection willhave on theavailability ofother forms ofassistanceunder thischapter. (6) Definitions For purposesof this section-- (A)Department ofDefense The term "Department of Defense" hasthe meaning the term "department" hasunder section 101 of Title 10. (B)Emergencywork Theterm"emergencywork"includesclearance andremoval ofdebrisandwreckage andtemporaryrestoration ofessentialpublicfacilities andservices. (23) The declaration of an emergency by the President makes federal emergency assistanceavailable. The pertinent statutory provision, Section 502 of the Stafford Act, 42 U.S.C. SS 5192,states: SS 5192. Federal emergency assistance (a) Specified In any emergency, the President may -- (1) direct anyFederalagency, with orwithoutreimbursement, to utilize itsauthorities andthe resourcesgranted to itunder Federallaw (includingpersonnel,equipment,supplies,facilities, andmanagerial,technical andadvisoryservices) insupport ofState and localemergencyassistanceefforts to savelives, protectproperty andpublic healthand safety, andlessen or avertthe threat of acatastrophe; (2) coordinateall disasterreliefassistance(includingvoluntaryassistance)provided byFederalagencies,privateorganizations,and State andlocalgovernments; (3) providetechnical andadvisoryassistance toaffected Stateand localgovernmentsfor -- (A) theperformanceofessentialcommunityservices; (B)issuance ofwarnings ofrisks orhazards; (C)publichealthandsafetyinformation,includingdisseminationof suchinformation; (D) provision of health and safetymeasures; and (E)management,control,andreduction ofimmediatethreatstopublichealthandsafety; (4) provide emergency assistance throughFederalagencies; (5) remove debris in accordance with theterms and conditions of section 5173 of thistitle; (6) provide assistance in accordance withsection 5174 of this title; and (7) assist Stateand localgovernments inthe distributionof medicine,food, and otherconsumablesupplies, andemergencyassistance. (b) General Whenever theFederal assistance provided under subsection (a) of this section with respect to an emergency isinadequate, the President may also provide assistance with respect to efforts to save lives, protectproperty and public health and safety, and lessen or avert the threat of a catastrophe. The Stafford Act includes specific provisions dealing with hazard mitigation, 42 U.S.C. SS5170c; repair, reconstruction, restoration, or replacement of United States facilities, 42 U.S.C. SS5171; repair, reconstruction, restoration, or replacement of damaged state, local, or private nonprofitfacilities, 42 U.S.C. SS 5172; debris removal, 42 U.S.C. SS 5173; federal assistance to individuals andhouseholds, 42 U.S.C. SS 5174; unemployment assistance, 42 U.S.C. SS 5177; emergency grants toassist low-income migrant and seasonal farmworkers, 42 U.S.C. SS 5177a; food coupons anddistribution, 42 U.S.C. SS 5179; food commodities, 42 U.S.C. SS 5180; relocation assistance, 42 U.S.C.SS 5181; legal services, 42 U.S.C. SS 5182; crisis counseling assistance and training, 42 U.S.C. SS 5183;community disaster loans, 42 U.S.C. SS 5184; (24) emergency communications, 42 U.S.C. SS 5185; emergency publictransportation, 42 U.S.C. SS 5186; fire management assistance, 42 U.S.C. SS 5187; and timber sharingcontracts, 42 U.S.C. SS 5188. Each of these statutory provisions specifies the circumstances to whichit applies. The Stafford Act provides for appeals of assistance decisions within 60 days after the dateon which the applicant for assistance is notified of the award or denial of award of the assistance. A decision on an appeal is to be made within 90 days of the date the official designated to administersuch appeals received notice of the appeal. (25)

The Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 93-288 , asamended, 42 U.S.C. SSSS 5121-5206, and implementing regulations in 44 C.F.R. SSSS 206.31-206.48,provide the statutory framework for a Presidential declaration of an emergency or a declaration ofa major disaster. Such declarations open the way for a wide range of federal resources to be madeavailable to assist in dealing with the emergency or major disaster involved. The Stafford Actstructure for the declaration process reflects the fact that federal resources under this act supplementstate and local resources for disaster relief and recovery. Except in the case of an emergencyinvolving a subject area that is exclusively or preeminently in the federal purview, the Governor ofan affected state, or Acting Governor if the Governor is not available, must request such adeclaration by the President. This report will review the statutory and regulatory requirementsapplicable to the affected state seeking the declaration and to the Presidential declaration, and willnote the different types of resources that may be made available in the response to the two types ofdeclarations. This report will updated as needed.

Public diplomacy is the promotion of America's interests, culture and policies by informing and influencing foreign populations. Immediately after the September 11 th terrorist attacks on the World Trade Center and the Pentagon, the Bush Administration found itself in, not only a military, but also a public diplomacy war on terrorism. An early realization of the importance of words and cultural understanding surfaced when President Bush soon after the attacks named the U.S. response "Operation Enduring Crusade," a name that was quickly changed when experts pointed out that it could be interpreted by Muslims as being inflammatory. In 1999/2000, according to the 2003 Pew survey, more than 50%, and as high as 83%, of foreign populations around the world held favorable views of the United States. Perhaps because of complacency with our position in the world and with the end of the Cold War, Congress and past administrations downplayed the importance of funding public diplomacy activities. Public diplomacy was viewed as having a lower priority than political and military functions, and received less funding, while more money went to other activities deemed more important or more popular with constituents. Funding levels for public diplomacy dropped considerably during the late 1990s, due in part to the consolidation of broadcasting entities in FY1994 and the abolishment of the U.S. Information Agency in October 1999 --signs, according to some, that public diplomacy was not highly valued. After the 2001 attacks, people around the world expressed shock and support for the U.S. government. Since then, however, negative attitudes about America have increased and become more intense, not just within Muslim populations, but worldwide. The Iraq War, begun in March 2003, exacerbated negative opinions of America in virtually every country polled--both traditional allies and non allies. Since the beginning of the Iraq War, realization emerged that strong negative public opinion about the United States could affect how helpful countries will be in the Iraq War and in the separate war on terrorism. Moreover, negative sentiment might assist terrorist groups in recruiting new members. Therefore, in recent years a sense of urgency to utilize public diplomacy to the maximum extent possible has been expressed by top level officials, think tanks, and the 9/11 Commission. The 108 th Congress weighed in on the importance of public diplomacy by including public diplomacy measures in the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) to: promote free media in Islamic countries, scholarships for Muslims to attend American-sponsored schools, public diplomacy training in the Department of State, and establish an International Youth Opportunity Fund within an existing organization such as the United Nations Educational, Science and Cultural Organization (UNESCO). These initiatives will take some time to show any impact. Whether they can generate sufficient good will to effectively counter terrorism, however, remains to be seen. The 109 th Congress has not passed any legislation authorizing any changes in public diplomacy, but has increased public diplomacy funding. (See chart below.) Meanwhile, a 2006 Pew Survey concluded that, "The war in Iraq is a continuing drag on opinions of the United States, not only in predominately Muslim countries but in Europe and Asia as well.... Favorable opinions of the United States have fallen in most of the 15 countries surveyed." The U.S. government first officially acknowledged its use of public diplomacy activities in the early years of the 20 th century when President Woodrow Wilson created the Committee on Public Information to disseminate information overseas during World War I. In 1941 when World War II broke out, President Roosevelt established the Foreign Information Service to conduct foreign intelligence and propaganda. The next year President Roosevelt created the Office of War Information (OWI) which aired the first Voice of America (VOA) program on February 24, 1942 in Europe. These activities were carried out without any authority or recognition provided by Congress. Popularly referred to as the Smith-Mundt Act, the U.S. Information and Educational Exchange Act of 1948 (P.L. 80-402) provided the first overarching legislation authorizing broadcasting and cultural activities, although they had already been going on throughout the 1940s. According to Senator Smith: This bill is an attempt to give legislative authority to certain activities that have been carried on by the State Department since the close of the war.... It is really the consolidation of the activities of the State Department's Division of Cultural Relations, the Office of Inter-American Affairs and the so-called Office of War Information. In asserting how inadequate the U.S. government had been at being understood in Europe and countering Russia's hostile information campaign against the United States after the War, Senator Smith described his intentions for the legislation: "This does not mean boastful propaganda, but simply means telling the truth." There must be a distinct set-up of the so-called informational service, on the one hand, which may conceivably have certain propaganda implications and may even become involved politically; and on the other hand, we must set apart by itself the so-called educational exchange service which, if it is to be truly effective, must be objective, nonpolitical, and, above all, have no possible propaganda implications. Over the years, several public diplomacy reorganizations and policy changes have occurred, largely for two reasons--to reduce cost or to increase effectiveness. In 1953, President Eisenhower created the U.S. Information Agency (USIA) in the Reorganization Plan No. 8, as authorized by the Smith-Mundt Act of 1948. At the time of its creation, USIA's role was primarily to administer the broadcasting and information programs (referred to by some at the time as the "propaganda activities"). The educational exchange programs remained within the Department of State to avoid any charges of propagandistic intent, as recommended by Senator Fulbright (who had already sponsored legislation on establishing cultural exchanges). At about the same time, Radio Free Europe/Radio Liberty (RFE/RL) began broadcasting in 1950 under the clandestine auspices of the Central Intelligence Agency which had been created in 1947. The Board for International Broadcasting (BIB) was created in 1973 to fund and oversee RFE/RL operations. RFE/RL thus became a private, nonprofit broadcaster receiving government grants through the BIB. The purpose of BIB was to provide a firewall between the U.S. government (the CIA) and RFE/RL's surrogate broadcasting to Eastern Europe and the former Soviet Union. The idea was that by keeping RFE/RL separate from the U.S. government, its credibility would be increased. The Reorganization Plan No. 2 of 1977 consolidated all functions of State's Bureau of Educational and Cultural Affairs and the USIA's international information and broadcasting activities into the International Communication Agency (ICA). Subsequently in 1982, Section 303(b) of P.L. 97-241 renamed ICA to be the U.S. Information Agency. In 1994 Congress removed international broadcasting from the USIA, created the independent Broadcasting Board of Governors, and authorized the phasing out of the Board of International Broadcasting. On October 1, 1999, as a result of legislation initiated by Senator Helms, Chairman of the Senate Foreign Relations Committee, to reorganize the foreign policy agencies (largely for streamlining and budget saving purposes), USIA was abolished and its remaining functions (information programs and the educational and cultural exchanges) were transferred back to the State Department, as exchanges had been prior to 1977. In an FY2004 House Commerce, Justice, State Department (CJS) Subcommittee on Appropriations hearing, Chairman Frank Wolf wondered aloud, "Maybe we made a mistake ... on the abolition of USIA.... I wonder if the reorganization ... was really a mistake and maybe somebody ought to go back.... And maybe the system we had in place that we used to defeat the Soviet Union really is not a bad system that we should have in effect now to deal with this [terrorist] issue." In 1980, the U.S. government spent $518 million on public diplomacy activities, according to the Office of Budget and Management (OMB). Funding increased over the following years and peaked in FY1994 to nearly $1.5 billion, largely due to costs associated with the consolidation of the broadcasting entities. The President's FY2007 budget request of nearly $1.6 billion, if enacted, would set the record for U.S. government public diplomacy expenditures. Significant declines in funding during the late 1990s occurred partly because of the budget savings that emanated from consolidating broadcasting in 1994 and abolishing the USIA in 1999. Actual funding levels in FY2000, FY2001, and FY2002 were higher than in 1980--$770 million, $712 million and $747 million, respectively. In constant dollars, however, funding in FY2000, FY2001, and FY2002 dropped below FY1980 levels. And in FY2006, while the estimated actual dollar amount is more than 2 1/2 times what it was in FY1980, in constant dollars the funding level is only about 15% higher. (See Figure 1 below.) Since the terrorist attacks, new funding designated for public diplomacy within State's Diplomatic and Consular Programs account has been added through both supplemental and regular appropriations. Supplemental funding has become a standard practice for funding public diplomacy activities. Between FY2002 and FY2005, public diplomacy activities received about $190 million within emergency supplemental appropriations, including about $25 million for public diplomacy funds within the Diplomatic and Consular Programs account, $15 million for the Educational and Cultural Exchange Programs account, and about $150 million for international broadcasting activities. Supplemental funds through FY2005 are included in Figure 1 . For FY2006, the Administration is seeking within emergency supplemental funding an additional $5 million for Educational and Cultural Exchanges and $50 million for international broadcasting activities both having to do with Iran. Congress provided $5 million for exchanges and $36 million for broadcasting into Iran in the FY2006 emergency supplemental package ( P.L. 109-234 , signed into law June 15, 2006). (For more detail, see CRS Report RL31370, State Department and Related Agencies: FY2006 and FY2007 Appropriations and FY2008 Request , by [author name scrubbed].) Despite the recent increases in public diplomacy funding, critics point to what they view as meager funding levels for public diplomacy as compared to military and other expenses (in the billions of dollars) to combat terrorism. Some assert that as the world gets smaller due to information technology, being vigilant about foreign populations' attitudes of America is as important and less costly, perhaps, than a buildup of military strength. Public diplomacy primarily consists of three categories of activities: (1) international information programs, (2) educational and cultural exchange programs, and (3) international nonmilitary broadcasting. The Under Secretary of State for Public Diplomacy and Public Affairs administers the Bureau for International Information Programs and the Bureau for Educational and Cultural Affairs, while the Broadcasting Board of Governors manages and oversees international broadcasting. The Office of International Information Programs (IIP) acts as a strategic communications service for the foreign affairs community. The office puts out a variety of information in a number of languages and forms, including print publications, Internet reports, and in-person or video-conferencing speaker programs. These information products and services are designed to reach key audiences such as foreign media, government officials, cultural opinion leaders, as well as the general population in more than 140 countries. Some of the products include regionally-oriented printed and Internet reports prepared by teams of writers, researchers, and translators; issue-oriented reports on topics such as economic security, global issues, U.S. society and values, and democracy/human rights; speaker programs--over one thousand speakers go abroad annually to discuss issues of importance to particular regions, as identified by U.S. embassies; and Information Resource Centers (IRC) support both embassy staff and local populations with information on U.S. policy. The Bureau for Educational and Cultural Affairs fosters mutual understanding between the United States and other countries through international educational exchanges, scholarships, and training programs. The Bureau administers programs ranging from the Fulbright Program (which provides grants for graduate students, scholars, professionals, teachers and administrators) to the Humphrey Fellowships (which brings mid-level professionals from developing countries to the United States for a year of study and professional experiences) to the International Visitor Program (which brings professionals to the United states to confer with professional counterparts) to the Office of Citizen Exchanges (which develops professional, cultural, and youth programs with non-profit American Institutions, including voluntary community organizations). International exchange programs often are viewed as low cost, low risk, and effective ways of promoting the American culture abroad. Drawbacks include the length of time and high cost to change attitudes of a significant portion of a foreign population since the program touches only a few people at a time (as opposed to broadcasting where thousands of people can be reached instantaneously). In past years some concerns that had surfaced regarding exchanges included the lack of a tracking system to prevent exchange program participants from overstaying their visas in the United States; changes in student's study focus--students who might enroll in a U.S. exchange program to study English, for example, but would change to physics or engineering (courses associated with security concerns) upon arriving in the United States; an over-concentration on exchanges with European countries rather than developing countries where a greater potential exists for participants to learn about the United States and then go back to teach others in their own country. These issues have been, or are being, addressed so that exchanges can be more effective in addressing terrorism and security issues of exchange participants while reaching Muslim and Arab participants. International broadcasting consists of general broadcasting--the Voice of America (radio, TV and Internet), numerous surrogate broadcasting entities--Radio Free Europe/Radio Liberty (RFE/RL), Cuba Broadcasting, Radio Free Asia, Radio Free Afghanistan, Radio Farda (Iran), Radio Free Iraq, and Radio Sawa, as well as the Middle East Television Network (Alhurra). The Broadcasting Board of Governors (BBG), a bipartisan board consisting of 9 members who are appointed by the President and confirmed by the Senate, supervises and administers these broadcasting entities. In recent years, the BBG has incorporated much of its broadcasting on the Internet where it can reach significant numbers of people in Asia and the Middle East. In times of crisis, such as in Kosovo in the 1990s, after the 2001 terrorist attacks, or during the war in Iraq, U.S. international broadcasting goes into "surge broadcasting" mode which may include Expanded coverage of events as they unfold and in the languages of the populations being affected; creating a new broadcast medium, such as satellite TV, in an area where the U.S. previously did not operate one; increasing interviews with U.S. government officials, Congress and experts from think-tanks giving the American perspective of the situation; and cooperating with other countries' broadcast operations to achieve a 24 hour-a-day broadcasting operation into a region being affected. The U.S. government has always targeted public diplomacy to some degree. From its earliest years, public diplomacy was targeted to reach audiences in Europe to influence the outcome of World War I and World War II. It was later used primarily in Eastern Europe and the Soviet Union to help end the Cold War. In recent years, Congress and the Administration have sought ways to use public diplomacy tools to influence Muslim and Arab populations to combat terrorism, improve coordination of public diplomacy activities throughout the government (via the Policy Coordinating Committee, or PCC), increase funding through regular and supplemental appropriations, and better evaluate current programs to gain future effectiveness. One of the most visible examples of public diplomacy soon after the September 11 th attacks was Secretary of State Colin Powell's appearance on MTV in February 2002, reaching out to, and candidly answering questions from, young people around the world about what America represents. MTV at that time reached 375 million households in 63 countries worldwide. Other public diplomacy actions over the past three years targeted toward Arab and Muslim populations occurred in all three categories of public diplomacy, specifically emphasizing such concepts as religious tolerance, ethnic diversity, the importance of an independent media, elections and educational reform. With the help of $25 million of supplemental funding designated for public diplomacy in various post 9/11 supplemental appropriations and much more designated in the regular appropriations process, IIP developed new programs in recent years to promote America's image and reach larger Muslim and Arab audiences. For example, the Bureau tripled the publishing of text in Arabic, developed an Arabic-language magazine and started a Persian language website. IIP increased to 140 the number of overseas multi-media centers called American Corners--rooms in office buildings or on campuses where students, teachers, and the general public can learn America's story through the use of books, computers, magazines and video. Another 60 American Corners are expected to be established in 2004 with an emphasis on locating them among Muslim populations. And, IIP established Strategic Information, a counter-disinformation capability to provide rapid response to inaccurate stories or misinterpretations of fact about the United States. Since September 11 th , the Department of State has targeted toward the Middle East millions of dollars for IIP-related activities. In recent years, IIP funding for Muslim-related activities totaled $8.69 million in FY2004, $9.11 million in FY2005, and $8.76 million in FY2006. After 9/11, ECA refocused its efforts toward Muslim and Arab populations. Since then, according to the Department of State, about $175 million in funding has supported exchange programs with Muslims and Arabs. Soon after the September 11 th attacks, the Department of State began working to promote exchanges between the United States and Afghanistan. For example, in November 2002, the Bureau, in cooperation with American women CEOs, brought 49 Arab women who are political activists or leaders from 15 different countries to the United States in November 2002. They met with political candidates, lobbyists, strategists, journalists and voters and followed the American election process and election night. Also in the Fall of 2002, 14 Afghani women representing 5 ministries and the Kabul Security Court in the post-September 11 th Afghanistan government came to the United States to gain computer and writing skills, as well as how to re-enter and contribute to the civil service in a reconstructed Afghanistan government. And on December 9, 2003 the ECA brought the Iraqi National Symphony to Washington, D.C. to join in a performance with the National Symphony Orchestra. Broader programs include the Partnership for Learning (P4L) which is an effort to reach youth in Arab and Muslim countries. Since 2002, about $84 million has been spent on this program to, among other things, establish for the first time a high school program with Arab and Muslim students living with American families and attending American high schools. The Youth Exchange and Study Program (YES), also referred to as the Cultural Bridges Program, grew out of the P4L concept and led to a more comprehensive approach in which the Department now addresses all levels of education, from secondary to graduate level, within its exchange programs. Soon after the 2001 attacks and military action in Afghanistan, VOA expanded its broadcasts to Afghanistan and the Middle East, featuring coverage of events in the United States, as well as in the region. Expanded broadcasts were initiated in Arabic, Dari, Farsi, Pashto and Urdu languages. VOA estimated through surveys that 80% of adult males in Afghanistan listen to VOA and give it high marks for credibility and objectivity. An emergency supplemental appropriation ( P.L. 107-38 ) provided $12.25 million to support VOA broadcasting in Arabic, Farsi, Pashto, Dari and Urdu, and RFE/RL broadcasts in Arabic, Farsi, Tajik, Turkmen, Uzbek, Kazakh, Krygyz, and Azeri. The BBG is continuing 24 hour-a-day, seven days per week broadcasting into Afghanistan. In the Middle East, the Broadcasting Board of Governors has significantly expanded news programming into Iraq through the creation of a surrogate news and entertainment radio station--Radio Sawa--and a new television--Middle East Television Network (METN), promoted as Alhurra (the free one) . Also hoping to increase its influence in Iran, the BBG expanded TV programming, as well as programming on the surrogate Persian language radio station, Radio Farda. Expenditures for broadcasting directly related to the war on terrorism amounted to $66.9 million in FY2002, $106.3 million in FY2003, $225.3 million in FY2004, $241.1 million in FY2005, and an estimated $249.1 million in FY2006. The Administration FY2007 request for international broadcasting having to do with the war on terrorism is $274.4 million. (For more information on Middle East broadcasting, see CRS Report RS21565, The Middle East Television Network: An Overview , by [author name scrubbed].) Despite all that has been accomplished in revamping U.S. public diplomacy in the last three years to better respond to the terrorism threat, the questions arise: is it worth it and is it enough? Then-National Security Council Advisor, Condoleezza Rice cited the new initiatives but conceded that more needed to be done. She recommended the creation of sister cities programs, student and professional exchanges, and language and area studies programs that focus on the Muslim world. U.S. public diplomacy has been viewed by some as overseas PR, but congressional testimony in 2004 by members of the 9/11 Commission suggest that it goes much deeper than that. Public diplomacy, they said, must now be viewed as a dialogue, not a monologue, to reach a deeper understanding between societies and build long-term relationships and trust between government officials and their societies. "If we don't have long-term relationships with Muslim populations, we cannot have trust. Without trust, public diplomacy is ineffective." The 9/11 Commission Report stated that the U.S. government must use all its tools to win the war on terrorism. Former Governor Thomas Kean testified before Congress in August 2004 that terrorism is our number one threat now and that public diplomacy is one tool among many that should be used to combat the ongoing war against terrorism. "If we favor any [tools] and neglect others, we leave ourselves vulnerable." Similarly, a former Under Secretary of State for Public Diplomacy, stated recently that "activities associated with public diplomacy need to be seriously prioritized on an equal level with an aircraft carrier. Both are equally important." Among the specific recommendations, the 9/11 Commission suggested giving the Broadcasting Board of Governors increased funding to do more broadcasting to Arab and Muslim populations. Enacted BBG total appropriations in recent years have ranged from $420 million in FY2000 to $599.6 million in FY2005. Post 9/11 emergency supplemental appropriations to date have totaled $143.7 million for BBG. The 9/11 Report recommended that, just as the United States did during the Cold War, this country should identify what it stands for and communicate that message clearly. In addition to more funding for international broadcasting, the Commission urged increased funding for more exchanges, scholarships, and libraries overseas and asserted that whenever assistance is provided, it should be clearly identified as coming from the citizens of the United States. Chairman Thomas Kean asserted in recent testimony that (excluding Iraq) Egypt is the second largest recipient of U.S. assistance, yet only 15% of Egyptians have a favorable view of Americans, according to polls. In addition to bilateral programs, the Commission recommended that the U.S. government join with other nations in generously supporting a new International Youth Opportunity Fund. The Report stated that education and literacy lead to economic opportunity and freedom; therefore, better textbooks that do not teach racism or hatred to Arab and Muslim children, and offering a choice of schools other than extremist madrassas are among the steps that may be key to eliminating Islamist terrorism. Another multilateral approach the Commission recommended is the establishment of a forum, perhaps modeled after the Organization for Security and Cooperation in Europe (OSCE), for engaging both Western and Arab and Muslim representatives to discuss each culture's needs and perspectives. An organization of this nature, said the Commission, would help create long-term relationships and understanding among all countries. Improved relationships would lead to cooperation and trust among Western and Muslim populations, which is critical for containing or eliminating global terrorism, the Report said. The Commission emphasized that the vast majority of Muslims worldwide are moderates who do not agree with violence. In contrast, the Commission stated that the Islamist terrorists hate America and all that it stands for, and violence and terror are their weapons against the United States. The Commission asserted that the United States, through public diplomacy, can find a way to drive a wedge between the two groups. We can gain the support of the moderate majority by exporting optimism and hope for a good future for their children through public diplomacy, the Commission reported. Prior to establishment of the 9/11 Commission, several organizations studied public diplomacy in order to improve international goodwill and America's image, as well as to combat terrorism. The Council on Foreign Relations, the Government Accountability Office (GAO), the Advisory Group on Public Diplomacy for the Arab and Muslim World, and the Broadcasting Board of Governors, in addition to some Members of Congress and congressional committees, offered suggestions intended to elevate public diplomacy and make it more effective. Some options follow: Create a Corporation for Public Diplomacy with tax-exempt status under Section 501(c)(3) of the U.S. tax code, that would receive private sector grants and coordinate private and public sector involvement in public diplomacy; Reconstitute USIA or some other entity that would have U.S. public diplomacy as its sole mission; Increase the emphasis on public diplomacy throughout all U.S. government agencies, with organizational changes in the White House, National Security Council, and the State Department; Require all foreign policy agencies to train key staff in public diplomacy and languages; and Measure the success of public diplomacy efforts by blending the best practices used in the public and private sectors, and improve public diplomacy program effectiveness with the knowledge attained. Public diplomacy is one of numerous tools that the United States has used since the early 20 th century to promote U.S. interests abroad. Over the decades since its formal authorization by the Smith-Mundt Act of 1948, views have fluctuated between vigorously supporting public diplomacy as a highly valuable foreign policy tool and disparaging it as a government program with no constituency and uncertain long-term benefits. After the end of the Cold War, many in Congress questioned the expense and abolished the USIA, moving public diplomacy into the Department of State where it could be more closely coordinated with other foreign policy tools. Since the terrorist attacks in 2001, many in Congress have advocated an increase in public diplomacy funding to "win the hearts and minds of Muslims" and, perhaps, help prevent future attacks. The 9/11 Commission Report agreed with significantly increasing the budget and status of public diplomacy as has been done with the military. Some foreign policy experts and Members of Congress have cautioned, however, that public diplomacy is only good if the message is credible. Recent worldwide polls show that the United States government continues to be viewed with skepticism by much of the world, not just among Arab and Muslim populations. When the message isn't consistent with what people see or experience independently, many assert, public diplomacy is not effective. Furthermore, they say, if U.S. foreign policy is the primary cause of negative foreign opinion, then public diplomacy may be less effective than lawmakers would like. America could benefit, however, if in this view, the government uses public diplomacy more proactively to clearly and truthfully explain U.S. foreign policy actions, rather than appearing indifferent to world opinion. According to the Advisory Group on Public Diplomacy for the Arab and Muslim World, "Spin and manipulative public relations and propaganda are not the answer. ...Sugar-coating and fast talking are not solutions, nor is absenting ourselves." And as Edward R. Murrow (USIA Director, 1961 - 1964) said in 1963 before a House Subcommittee regarding U.S. public diplomacy activities: American traditions and the American ethic require us to be truthful.... truth is the best propaganda and lies are the worst. To be persuasive we must be believable; to be believable we must be credible; to be credible we must be truthful. It is as simple as that. P.L. 108-458 ( S. 2845 ) Intelligence Reform and Terrorism Prevention Act of 2004. A bill to reform the intelligence community and the intelligence and intelligence-related activities of the United States Government, and for other purposes. Introduced September 23, 2004. S.Amdt. 3942 would increase in Muslim populations public diplomacy activities including through increased broadcasting, educational exchanges, and establishing the International Youth Opportunity Fund. The President signed it into law ( P.L. 108-458 ) on December 17, 2004.

While the 9/11 terrorist attacks rallied unprecedented support abroad for the United States initially, they also heightened the awareness among government officials and terrorism experts that a significant number of people, especially within Muslim populations, harbor enough hatred for America so as to become a pool for terrorists. Over time it became clear that for the global war on terrorism to succeed, sustained cooperation from around the world would be required. In the years prior to September 11th, both Congress and the various administrations downplayed the importance of funding public diplomacy activities, and in 1999 abolished the primary public diplomacy agency--the U.S. Information Agency (USIA). Public diplomacy often was viewed as less important than political and military functions and, therefore, was seen by some legislators as a pot of money that could be tapped for funding other government activities. Even prior to the 2001 attacks, a number of decisions by the Bush Administration, including refusing to sign onto the Kyoto Treaty, the International Criminal Court, the Chemical Weapons Ban, and the Anti-Ballistic Missile Treaty, damaged foreign opinion of the United States. After the decision to go to war with Iraq, foreign opinion of the United States fell sharply, not only in the Arab and Muslim world, but even among some of America's closest allies. Some foreign policy and public diplomacy experts believe that using public diplomacy to provide clear and honest explanations of why those decisions were made could have prevented some of the loss of support in the war on terrorism. Many U.S. policymakers now recognize the importance of how America and its policies are perceived abroad. A former Under Secretary of State for Public Diplomacy and both chairmen of the 9/11 Commission expressed the view that public diplomacy tools are at least as important in the war on terrorism as military tools and should be given equal status and increased funding. As a result of the 9/11 Commission recommendations, Congress passed the Intelligence Reform and Terrorism Prevention Act of 2004 (S. 2845, P.L. 108-458) which included provisions expanding public diplomacy activities in Muslim populations. At the same time, some believe that there are limits to what public diplomacy can do when the problem is not foreign misperception of America, but rather disagreements with specific U.S. foreign policies. A major expansion of U.S. public diplomacy activities and funding cannot change that, they say. This report presents the challenges that have focused renewed attention on public diplomacy, provides background on public diplomacy, actions the Administration and Congress have taken since 9/11 to make public diplomacy more effective, as well as recommendations offered by others, particularly the 9/11 Commission. It will be updated if events warrant.

RS21342 -- Immigration: Diversity Visa Lottery Updated April 26, 2004 The purpose of the diversity visa lottery is, as the name suggests, to encourage legal immigration from countries other than the majorsending countries of current immigration to the United States. The law weighs allocation of immigrant visas heavilytowards alienswith close family in the United States and, to a lesser extent, aliens who meet particular employment needs. Thediversity immigrantcategory was added to the Immigration and Nationality Act (INA) by the Immigration Act of 1990 ( P.L. 101-649 )to stimulate "newseed" immigration (i.e., to foster new, more varied, migration from other parts of the world). (1) The current diversity lottery began inFY1995 following three transitional years with temporary lotteries. (2) The diversity lottery makes 55,000 visas available annually to natives of countries from which immigrantadmissions were lower thana total of 50,000 over the preceding five years. The United States Citizenship and Immigration Services Bureau(USCIS) generatesthe formula for allocating visas according to the statutory specifications: visas are divided among six geographicregions according tothe relative populations of the regions, with their allocation weighted in favor of countries in regions that wereunder-representedamong immigrant admissions to the United States. The Act limits each country to 7%, or 3,850, of the visa limit,and provides thatNorthern Ireland be treated as a separate foreign state. Recipients of the visas become legal permanent residents(LPRs) of the UnitedStates. While the diversity lottery has not been directly amended since its enactment in 1990, the Nicaraguan Adjustment and CentralAmerican Relief Act of 1997 (NACARA) temporarily reduces the 55,000 annual ceiling by up to 5,000 visasannually. Beginning inFY1999, the diversity ceiling became 50,000 to offset immigrant visa numbers made available to certainunsuccessful asylum seekersfrom El Salvador, Guatemala, and formerly communist countries in Europe who are being granted LPR status underspecial rulesestablished by NACARA. While the offset is temporary, it is not clear how many years it will be in effect to handlethese adjustmentsof status. In FY2002, there were 42,829 persons actually admitted or adjusted as LPRs with diversity visas, according to the FY2002 USCISadmissions data. This number represents 4% of all LPRs in FY2002 and is comparable to FY2001, when 42,105diversity immigrantscomprised 3.9% of all LPRs. The top five countries in FY2002 (the latest year for which detailed data are available)were Albania,Ethiopia, Nigeria, Poland, and the Ukraine. As Table 1 details, these five countries have consistently ranked among the top diversity visa sending countries, along withBangladesh, Bulgaria, Morocco, Romania, and Russia. Citizens of Ireland, Poland, and the former Soviet Unionwon the most visasin the mid-1990s, but their participation in the lottery has fallen in recent years. Albania ranks as the top sendingcountry for thisentire period, followed by Nigeria. The numbers for Russia and Ukraine may be understated because nationals whoqualified fromsome of the post-Soviet nations reported that they were born in the Soviet Union. Table 1. Top Diversity Visa Sending Countries, FY1997-FY2002 Source: CRS analysis of USCIS admissions data, reported by DHS Office of Immigration Statistics. PDF version The sending world regions for diversity visas, as intended, differ substantially from the sending regions for family-based andemployment-based immigration. As Figure 1 illustrates, European immigrants comprised 39.4%of the diversity visa recipients incontrast to 10.4% of the family-based and employment-based immigrants in FY2002. African immigrants received38.1% of thediversity visas in contrast to 3.6% of the family-based and employment-based visas. Caribbean, Latin American,and Asianimmigrants dominated family-based and employment-based immigration, and as a result, made up much smallerpercentages of thediversity visa immigrants. (3) To be eligible for a diversity visa, the INA requires that an alien must have a high school education or the equivalent, or two yearsexperience in an occupation which requires at least two years of training or experience. (4) The alien or the alien's spouse must be anative of one of the countries listed as a foreign state qualified for the diversity visa lottery. Diversity lottery winners, like all other aliens wishing to come to the United States, must undergo reviews performed by Departmentof State consular officers abroad and DHS inspectors upon entry to the U.S. (5) These reviews are intended to ensure that they are notineligible for visas or admission under the grounds for inadmissibility spelled out in the INA. (6) These criteria for exclusion aregrouped into the following categories: health-related grounds; criminal history; security and terrorist concerns; public charge (e.g., indigence); seeking to work without proper labor certification; illegal entrants and immigration law violations; ineligible for citizenship; and, aliens previously removed. The State Department announced the FY2005 lottery on August 19, 2003. The 60-day application period began on November 1, 2003and ended on December 30, 2003. (7) For the first time,applications for the diversity lottery must have been submitted electronically. Entrants received an electronic confirmation notice upon receipt of a completed entry form. Paper forms were notaccepted. Sincethe objective of the diversity lottery is to encourage immigration from regions with lower immigration rates, nativesof countries withhigh admissions are usually ineligible. For FY2005, the ineligible countries were: Canada, China (mainland born),Columbia,Dominican Republic, El Salvador, Haiti, India, Jamaica, Mexico, Pakistan, the Philippines, Russia, South Korea,the United Kingdomand dependent territories, and Vietnam. (8) When applying for a diversity visa, petitioners had to follow the instructions issued by the State Department precisely. If there wereany mistakes or inconsistencies with the petition, it may have been disqualified by the State Department. In theFY2003 lottery, over2 million of the 8.7 million applications were disqualified for failure to comply with the instructions. (9) Aliens who submit more thanone application are supposed to be disqualified, but husbands and wives may submit separate entries even thoughspouses andunmarried children under the age of 21 qualify as derivative beneficiaries of successful applicants. Any derivativebeneficiary must belisted on the petition when it is initially filed, and the derivative beneficiary visas are counted against the 50,000visa cap. If adiversity lottery winner dies before obtaining LPR status, the visa is automatically revoked and derivativebeneficiaries are no longerentitled to diversity visa classification. (10) Once all acceptable applications were received by the visa center, the winners were selected randomly by computer. Petitioners whowere not selected were not notified by the State Department. The State Department is expected to notify the winnersof the FY2005diversity lottery by mail between May and July 2004, and their visas will be issued between October 1, 2004 andSeptember 30, 2005. Winning the first round of the FY2005 lottery does not guarantee a visa, because the State Department draws moreapplications thanthe number of visas available. Therefore, winners must be prepared to act quickly to file the necessarydocumentation demonstratingto the State Department that they are admissible as LPRs. The applications are processed on a first-come,first-served basis. Aliensmust complete this process before September 30, 2005 to receive visas. (11) In person interviews are expected to begin in October2004. Some question the continuation of the diversity visa lottery, given that family members often wait years for a visa to immigrate to theUnited States. They state a preference that the 55,000 visas be used for backlog reduction of the other visacategories. Supporters ofthe diversity visa, however, point to the immigration dominance of nationals from a handful of countries and arguethat the diversityvisa provides "new seed" immigrants for an immigration system weighted disproportionately to family-basedimmigrants. Some are arguing that the INA should be amended to prevent nationals from countries that the United States identifies as sponsors ofterrorism from participating in the diversity visa lottery. These critics maintain that the difficulties of performingbackground checksin these countries as well as broader concerns about terrorism should prompt this change. Supporters of current lawobserve thatLPRs coming to the United States in other visa categories are not restricted if they come from nations that sponsorterrorism andargue that the policy should be uniformly applied. Who should bear the costs of operating the lottery has also arisen as a issue. Those aliens who win the lottery pay a fee with their visaapplication, but some argue that a fee should be charged to enter the lottery as well. The diversity visa has beencriticized asvulnerable to fraud and misuse, but the State Department maintains that they are addressing these concerns.

The diversity visa lottery offers an opportunity for immigration to nationals of countriesthat do not have high levels of immigration. Aliens from eligible countries had until noon on December 30, 2003to submit theirapplications for the FY2005 diversity visa lottery. Aliens who are selected through the lottery, if they are otherwiseadmissible underthe Immigration and Nationality Act (INA), may become legal permanent residents of the United States. Participation in the diversityvisa lottery is limited annually to 55,000 aliens from countries that are under-represented among recent immigrantadmissions to theUnited States. In FY2001, over 8 million aliens from around the world sent in applications for the FY2003 lottery. Of the diversityvisas awarded in FY2002, European immigrants comprised 39.4% of the diversity visa recipients and Africanimmigrants received38.1%. This report does not track legislation and will not be regularly updated.

In troduction This report explains the process for filling positions to which the President makes appointments with the advice and consent of the Senate (PAS positions). It also identifies, for the 111 th Congress, all nominations to executive-level full-time positions in the 15 executive departments. It excludes appointments to regulatory boards and commissions and independent and other agencies, which are covered in other CRS reports. A profile of each agency tracks the appointments to positions within the agency, providing information on Senate activity (confirmations, rejections, returns to the President, and elapsed time between nominations and confirmation) as well as further related presidential activity (including withdrawals and recess appointments). The profiles also identify, for each agency, the executive-level positions in the agency requiring Senate confirmation, the incumbents in those positions as of the end of the 111 th Congress, and the pay levels of those officials. The Constitution (Article II, Section 2) empowers the President to nominate and, by and with the advice and consent of the Senate, to appoint the principal officers of the United States, as well as some subordinate officers. Officers of the United States are those individuals serving in high-ranking positions that have been established by Congress and "exercising significant authority pursuant to the laws of the United States" (emphasis added). Three distinct stages mark the appointment process: selection, clearance, and nomination by the President; consideration by the Senate; and appointment by the President. In the first stage, the White House selects and clears a prospective appointee before sending a formal nomination to the Senate. There are a number of steps in this stage of the process for most Senate-confirmed positions. First, with the assistance of, and preliminary vetting by, the White House Office of Presidential Personnel, the President selects a candidate for the position. Members of Congress and interest groups sometimes recommend candidates for specific PAS positions. They may offer their suggestions by letter, for example, or by contact with a White House liaison. In general, the White House is under no obligation to follow such recommendations. In the case of the Senate, however, it has been argued that Senators are constitutionally entitled, by virtue of the advice and consent clause noted above, to provide advice to the President regarding his selection; the extent of this entitlement is a matter of some debate. As a practical matter, in instances where Senators perceive insufficient pre-nomination consultation has occurred, they have sometimes exercised their procedural prerogatives to delay or even effectively block consideration of a nomination. During the clearance process, the candidate prepares and submits several forms, including the "Public Financial Disclosure Report" (Office of Government Ethics (OGE) 278), the "Questionnaire for National Security Positions" (Standard Form (SF) 86), a supplement to SF 86 ("86 Supplement"), and sometimes a White House Personal Data Statement. The vetting process often includes a background investigation conducted by the Federal Bureau of Investigation (FBI), which prepares a report that is delivered to the White House. It also includes a review of financial disclosure materials by OGE and an ethics official for the agency to which the candidate is to be nominated. If conflicts of interest are found during the background investigation, OGE and the agency ethics officer may work with the candidate to mitigate the conflicts. At the completion of the vetting process, the nomination is ready to be submitted to the Senate. The selection and clearance stage has often been the longest part of the appointment process. There have been, at times, lengthy delays, particularly when many candidates have been processed simultaneously, such as at the beginning of an Administration, or where conflicts needed to be resolved. Candidates for higher-level positions have often been accorded priority in this process. At the end of 2004, in an effort to reduce the elapsed time between a new President's inauguration and the appointment of his or her national security team, Congress enacted amendments to the Presidential Transition Act of 1963. These amendments encourage a President-elect to submit, for security clearance, potential nominees to high-level national security positions as soon as possible after the election. A separate provision of law, enacted as part of the Federal Vacancies Reform Act of 1998, lengthens, during presidential transitions, the potential duration of a temporary appointment by 90 days. For a position located within a state (e.g., U.S. attorney, U.S. marshal, and U.S. district judge), the President, by custom, frequently has nominated an individual recommended by one or both Senators from that state (if they are from the same party as the President). In instances where neither Senator is from the President's party, he usually has deferred to the recommendations of party leaders from the state. Occasionally, the President has solicited recommendations from Senators of the opposition party because of their positions in the Senate. If circumstances permit and conditions are met, the President could give the nominee a recess appointment to the position (see section entitled " Recess Appointments " below). Recess appointments have sometimes had political consequences, however, particularly where Senators perceived that such an appointment was an effort to circumvent their constitutional role. Some Senate-confirmed positions, including many of those in the executive departments, may also be temporarily filled under the Vacancies Act. A nominee has no legal authority to assume the duties and responsibilities of the position; a nominee who is hired by the agency as a consultant while awaiting confirmation may serve only in an advisory capacity. Authority to act comes once there is Senate confirmation and presidential appointment, or if another method of appointment, such as a recess appointment or a temporary appointment, is utilized. In the second stage, the Senate alone determines whether or not to confirm a nomination. The way the Senate has acted on a nomination has depended largely on the importance of the position involved, existing political circumstances, and policy implications. Generally, the Senate has shown particular interest in the nominee's views and how they are likely to affect public policy. Two other factors have sometimes affected the examination of a nominee's personal and professional qualities: whether the President's party controlled the Senate, and the degree to which the President became involved in supporting the nomination. Much of the Senate confirmation process occurs at the committee level. Administratively, nominations are received by the Senate executive clerk, who arranges for the referral of the nominations to committee, according to the Senate rules and precedents. Committee nomination activity has generally included investigation, hearing, and reporting stages. As part of investigatory work, committees have drawn on information provided by the White House, as well as information they themselves have collected. Some committees have held hearings on nearly all nominations; others have held hearings for only some. Hearings provide a public forum to discuss a nomination and any issues related to the program or agency for which the nominee would be responsible. Even where confirmation has been thought to be a virtual certainty, hearings have provided Senators and the nominee with opportunities to go on the record with particular views or commitments. Senators have used hearings to explore nominees' qualifications, articulate policy perspectives, or raise related oversight issues. A committee may decline to act on a nomination at any point--upon referral, after investigation, or after a hearing. If the committee votes to report a nomination to the full Senate, it has three options: it may report the nomination favorably, unfavorably, or without recommendation. A failure to obtain a majority on the motion to report means the nomination will not be reported to the Senate. If the committee declines to report a nomination, the Senate may, under certain circumstances, discharge the committee from further consideration of the nomination in order to bring it to the floor. The Senate historically has confirmed most, but not all, executive nominations. Rarely, however, has a vote to confirm a nomination failed on the Senate floor. Unsuccessful nominations usually do not make it past the committee stage. Failure of a nomination to make it out of committee has occurred for a variety of reasons, including opposition to the nomination, inadequate amount of time for consideration of the nomination, or factors that may not be directly related to the merits of the nomination. Senate rules provide that "nominations neither confirmed nor rejected during the session at which they are made shall not be acted upon at any succeeding session without being again made to the Senate by the President..." In practice, such pending nominations have been returned to the President at the end of the session or Congress. Pending nominations also may be returned automatically to the President at the beginning of a recess of more than 30 days, but the Senate rule providing for this return is often waived. In the final stage, the confirmed nominee is given a commission bearing the Great Seal of the United States and signed by the President and is sworn into office. The President may sign the commission at any time after confirmation, at which point the appointment becomes official. Once the appointee is given the commission and sworn in, he or she has full authority to carry out the responsibilities of the office. The Constitution also empowers the President to make limited-term appointments without Senate confirmation when the Senate is in recess, either during a session (intrasession recess appointment) or between sessions (intersession recess appointment). Such recess appointments expire at the end of the next session of the Senate. Presidents have occasionally used the recess appointment power to circumvent the confirmation process. In response, Congress has enacted provisions that restrict the pay of recess appointees under certain circumstances. Because most potential appointees to full-time positions cannot serve without a salary, the President has an incentive to use his recess appointment authority in ways that allow them to be paid. Under the provisions, if the position falls vacant while the Senate is in session and the President fills it by recess appointment, the appointee may not be paid from the Treasury until he or she is confirmed by the Senate. However, the salary prohibition does not apply (1) if the vacancy arose within 30 days before the end of the session of the Senate; (2) if, at the end of the session, a nomination for the office, other than the nomination of an individual appointed during the preceding recess of the Senate, was pending before the Senate for its advice and consent; or (3) if a nomination for the office was rejected by the Senate within 30 days before the end of the session and an individual other than the one whose nomination was rejected thereafter receives a recess appointment. A recess appointment falling under any one of these three exceptions must be followed by a nomination to the position not later than 40 days after the beginning of the next session of the Senate. For this reason, when a recess appointment is made, the President generally submits a new nomination for the nominee even when an earlier nomination is pending. Although a recess appointee whose nominations to a full term is subsequently rejected by the Senate may continue to serve until the end of his or her recess appointment, a provision of the FY2008 Financial Services and General Government Appropriations Act may prevent him or her from being paid after the rejection. From the 110 th Congress on, Congress has periodically used specific scheduling practices in an attempt to prevent the President from making recess appointments. The evolution of these practices, the President's response to them, and associated controversies are beyond the scope of this report. Detailed information may be found in other CRS reports. Notably, these practices were used only once during the 111 th Congress. Congress has provided limited statutory authority for the temporary filling of vacant positions requiring Senate confirmation. It is expected that, in general, officials holding PAS positions who have been designated as "acting" are holding their offices under this authority or other statutory authority specific to their agencies. Under the Federal Vacancies Reform Act of 1998 (FVRA), when an executive agency position requiring confirmation becomes vacant, it may be filled temporarily in one of three ways: (1) the first assistant to such a position may automatically assume the functions and duties of the office; (2) the President may direct an officer in any agency who is occupying a position requiring Senate confirmation to perform those tasks; or (3) the President may select any officer or employee of the subject agency who is occupying a position for which the rate of pay is equal to or greater than the minimum rate of pay at the GS-15 level, and who has been with the agency for at least 90 of the preceding 365 days. A temporary appointment made under the FVRA is limited to 210 days from the date of the vacancy, but the time restriction is suspended if a first or second nomination for the position is pending. In addition, during a presidential transition, the 210-day restriction period does not begin to run until either 90 days after the President assumes office, or 90 days after the vacancy occurs, if the vacancy occurs during the 90-day inauguration period. The act does not apply to positions on multi-headed regulatory boards and commissions and to certain other specific positions that may be filled temporarily under other statutory provisions. Table 1 summarizes appointment activity, during the 111 th Congress, related to full-time executive-level positions in the 15 departments. President Barack H. Obama submitted to the Senate 347 nominations to executive department full-time positions. Of these 347 nominations, 293 were confirmed; 16 were withdrawn; and 38 were returned to the President under the provisions of Senate rules. The length of time a given nomination may be pending in the Senate can vary widely. Some nominations are confirmed within a few days, others are confirmed within several months, and some are never confirmed. This report provides, for each executive department nomination that was confirmed in the 111 th Congress, the number of days between nomination and confirmation ("days to confirm"). For confirmed nominations, an average (mean) of 73.2 days elapsed between nomination and confirmation. The median number of days elapsed was 52.0. Each of the 15 executive department profiles provided in this report is organized into two parts: a table providing information, as of the end of the 111 th Congress, regarding the organization's full-time PAS positions, and a table of appointment action with regard to these positions during the 111 th Congress. Data for these tables were collected from several authoritative sources. The first of these two tables identifies, as of the end of the 111 th Congress, each full-time PAS position in the department, its incumbent, and its pay level. For most presidentially appointed positions requiring Senate confirmation, the pay levels fall under the Executive Schedule, which, as of the end of the 111 th Congress, ranged from level I ($199,700) for cabinet-level offices to level V ($145,700) for the lowest-ranked positions. An incumbent's name followed by "(A)" indicates an official who was, at that time, serving in an acting capacity. Vacancies are also noted. The appointment action table provides, in chronological order, information concerning each nomination or recess appointment. It shows the name of the nominee or recess appointee, position involved, date of nomination or appointment, date of confirmation, and number of days between receipt of a nomination and confirmation. Actions other than confirmation (i.e., nominations returned to or withdrawn by the President) are also noted. Some individuals were nominated more than once for the same position, usually because the first nomination was returned to the President. The appointment action tables that list more than one nomination also give statistics on the length of time between nomination and confirmation. Each appointment action table provides the average "days to confirm" in two ways: mean and median. Both are presented because although the mean is a more familiar measure, it can be influenced by extreme values ("outliers") in the data, while the median does not tend to be influenced by outliers. In other words, a nomination that took an extraordinarily long time might cause a significant change in the mean, but the median would be unaffected. Presenting both numbers provides a more accurate portrayal of the central tendency of the data. For a small number of positions in this report, the two tables may give slightly different titles to the same position. This is a result of the fact that the titles used in the nomination the White House submits to the Senate, the title of each position as established by statute, and the title of the position used by the department itself are not always identical. The first table in each department profile, the table listing the incumbents at the end of the 111 th Congress, relies upon data provided by the department itself in listing the positions. The second table presented, the list of Appointment Action within each department, relies primarily upon the Senate nominations database of the Legislative Information System (LIS). This information is based upon the nomination sent to the Senate by the White House, which is not always identical to the exact title of the position used by the department. However, the inconsistency only appears in a small minority of the positions listed in this report. Inconsistencies are noted in the footnotes following each appointment table. Appendix A presents a table of all nominations and recess appointments to positions in executive departments, alphabetically organized by last name, and follows a similar format to that of the department appointment action tables. It identifies the agency involved and the dates of nomination and confirmation. The table also indicates if a nomination was confirmed, withdrawn, or returned. The mean and median numbers of days taken to confirm a nomination are also provided. Appendix B provides a table with summary information on appointments and nominations, by department. For each of the 15 executive departments discussed in this report, the table provides the number of positions, nominations, individual nominees, confirmations, nominations returned, nominations withdrawn, and recess appointments. The table also provides the mean and median numbers of days to confirm a nomination. A list of department abbreviations can be found in Appendix C . Appendix A. Presidential Nominations, 111 th Congress Appendix B. Appointment Action, 111 th Congress Appendix C. Abbreviations of Departments

This report explains the process for filling positions to which the President makes appointments with the advice and consent of the Senate (also referred to as PAS positions). It also identifies, for the 111th Congress, all nominations to full-time positions requiring Senate confirmation in the 15 executive departments. It excludes appointments to regulatory boards and commissions and independent and other agencies, which are covered in other CRS reports. The appointment process for advice and consent positions consists of three main stages. The first stage is selection, clearance, and nomination by the President. This step includes preliminary vetting, background checks, and ethics checks of potential nominees. At this stage, if the position is located within a state, the President may also consult with Senators who are from his party. The second stage of the process is consideration of the nomination in the Senate, most of which takes place in committee. Finally, if a nomination is approved by the Senate, the President may then present the nominee with a signed commission, making the appointment official. During the 111th Congress, the President submitted to the Senate 347 nominations to executive department full-time positions. Of these 347 nominations, 293 were confirmed; 16 were withdrawn; and 38 were returned to him in accordance with Senate rules. For those nominations that were confirmed, an average of 73.2 days elapsed between nomination and confirmation. The median number of days elapsed was 52.0. The President made 10 recess appointments to full-time positions in executive departments during the 111th Congress. Information for this report was compiled from data from the Senate nominations database of the Legislative Information System (LIS) http://www.congress.gov/nomis/, the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents, telephone discussions with agency officials, agency websites, the United States Code, and the 2008 "Plum Book" (United States Government Policy and Supporting Positions). This report will not be updated.

During 2005 and 2006, the 109 th Congress made a number of changes to federal child welfare policy, which have recently been implemented or are set to be implemented in the near future. Most of these changes were made to the child welfare programs authorized under Title IV-E and Title IV-B of the Social Security Act. These programs primarily provide funding to state child welfare agencies to support services to families and children in their own homes (e.g. to provide services intended to keep children safely living with their parents), to provide foster care for eligible children who can no longer safely remain in their homes, and to provide adoption assistance for eligible children who are adopted out of foster care. These programs are administered by the Children's Bureau, within the Administration for Children and Families (ACF) at the U.S. Department of Health and Human Services (HHS), and the legislation amending them was primarily reported by the House Ways and Means Committee and the Senate Finance Committee. Amendments to the Court Appointed Special Advocates (CASA) program, which is authorized under Subtitle B of the Victims of Child Abuse Act, are also discussed. This program supports provision of advocates for abused or neglected children who are the subject of court proceedings. It is administered within the Office of Justice Programs (OJP) at the Department of Justice (DOJ), and legislation amending it was reported by the House and Senate Judiciary Committees. The changes enacted affect a broad spectrum of child welfare policies, which range from who is an eligible child and what are eligible costs for which states may claim reimbursement under the Title IV-E Foster Care and Adoption Assistance program to the provision of new support for services to children affected by a parent/caretaker's abuse of methamphetamine or other substances and to required collaboration between welfare agencies and courts. The recently enacted laws also added a number of specific new requirements for state child welfare agencies. With regard to children in foster care, each state must have in place new or revised policies or procedures related to (1) the quality and quantity of caseworker visits; (2) consultation with medical professionals on health treatment; (3) placement of children across state lines; (4) verification of citizenship or immigration status; and (5) background checks of prospective foster and adoptive parents. Further, states are required to have in place policies or procedures enabling them to continue providing necessary child welfare services during a disaster. These changes were enacted in seven bills, each of which is briefly discussed below in order of their enactment. The Fair Access to Foster Care Act of 2005 ( P.L. 109-113 ) permits states to claim reimbursement under Title IV-E of the Social Security Act on behalf of otherwise eligible foster children whose maintenance payments are provided to foster parents or institutional foster care providers via a for-profit foster care placement agency. Prior law stipulated that if a state sought to claim federal Title IV-E support on behalf of an otherwise eligible foster child, the child's maintenance payments could only be made by a public or non-profit agency. Noting that the use of for-profit foster care placement agencies is limited, the Congressional Budget Office (CBO) estimated this change would have an "insignificant" effect on federal foster care spending. The change was effective with the date of the law's enactment (November 22, 2005). The Violence Against Women and Department of Justice Reauthorization Act ( P.L. 109-162 ) reauthorized funding for the Court Appointed Special Advocates (CASA) program, permitted additional funding for training and technical assistance related to improving the criminal prosecution of child abuse, and authorized a new competitive grant program intended to improve services to children and youth exposed to violence. Section 112 of P.L. 109-162 amended Subtitle B of the Victims of Child Abuse Act and reauthorized funding for the Court Appointed Special Advocates (CASA) program for each of FY2007-FY2011 at the prior law annual level of $12 million. In FY2007, CASA, which is administered within the Department of Justice, received $12 million in funding ( P.L. 110-5 ). In addition to extending the program's funding authority, P.L. 109-162 clarified that CASA funding may be used to "initiate, sustain, and expand" CASA programs. (Prior law generally limited the purpose of these funds to initiating or expanding programs.) It further authorizes state and local CASA programs to request criminal background checks for prospective volunteers from the Federal Bureau of Investigation (FBI) and stipulates that any CASA program that makes such a request is required to pay the "reasonable costs" associated with the check. Finally, with regard to CASA, P.L. 109-162 prohibits use of federal funds provided under the CASA program for lobbying and requires the Inspector General of the Department of Justice to prepare a report that looks at the types of activities funded by the National CASA Association since 1993 and compares outcomes in cases where a CASA volunteer is appointed to assist a child to those where no CASA volunteer is appointed. Section 1193 of P.L. 109-162 added a new authorization of $7.5 million for each of FY2007-FY2011 for grants to the American Prosecutors Research Institute (APRI) to improve prosecution of child abuse cases. More specifically, APRI is expected to use these funds to provide technical assistance and training to attorneys and other individuals who prosecute child abuse cases in state or federal courts. Although P.L. 109-162 references program authority previously provided in statute for this kind of training and technical assistance (Section 214A of the Victims of Child Abuse Act), it did not amend that prior law, which expired with FY2005 (and had authorized annual funding of $5 million with no mention of APRI) . However, Congress has continued to provide funding for this purpose under that expired funding authority, and these funds are administered by the Department of Justice. In FY2007, just over $2 million was appropriated. Section 303 of P.L. 109-162 amended the Violence Against Women Act to add authority for four competitive grant programs related broadly to services, education, protection, and justice for young victims of violence. Just one of these grant programs is discussed in this report because it specifically requires child welfare agency involvement in administering any grant funding. Under this grant program, the Department of Health and Human Services (HHS, specifically the Family and Youth Services Bureau, FYSB) is authorized to make competitive grants to eligible entities for training and other activities intended to improve the collaborative community response to families in which both child maltreatment and domestic violence are present. To be eligible to receive this grant, an entity must be a collaborative partnership that includes a child welfare agency, an agency serving victims of domestic violence (or dating violence), and a law enforcement agency (it may also include courts and other relevant social service providers). Funding for this single grant program was authorized at $5 million for each of FY2007-FY2011. However, no specific funding was provided for this grant program in FY2007. An omnibus budget reconciliation measure, the Deficit Reduction Act (DRA, P.L. 109-171 , Title VII, Subtitle D) made legislative changes intended to clarify which children are eligible for federal foster care and adoption assistance support (under Title IV-E of the Social Security Act). It also placed certain limitations on the ability of states to make claims for federal reimbursement of the costs of administering their Title IV-E foster care programs, including limits on the length of time a child may be considered a "candidate" for foster care and new rules or restrictions on administrative claims related to foster children placed in unlicensed relative homes or other settings that are "ineligible" under the federal foster care program. Separately, the legislation raised the mandatory funding authorization for the Promoting Safe and Stable Families program (Title IV-B, Subpart 2 of the Social Security Act). It further amended both the Child Welfare Services (Title IV-B, Subpart 1) and the Court Improvement (Section 438 of the Social Security Act) programs to require both "ongoing" and "meaningful" collaboration between courts and child welfare agencies. Further, it amended the Court Improvement Program to authorize two new grants (related to data collection and training), which are intended to improve court handling of child welfare proceedings. The law appropriated $100 million ($20 million in each of FY2006-FY2010) for those grants. Finally, the DRA amended the Foster Care and Adoption Assistance plan requirements (under Title IV-E, of the Social Security Act) to assert that the program's confidentiality provisions are not intended to limit a state's flexibility in determining public access to child abuse and neglect proceedings, provided that, at a minimum, a state's policy on this issue ensured the safety and well-being of the child, parents, and family. For more detailed information on the child welfare provisions of the Deficit Reduction Act (which are included in Title VII, Subtitle D of that act), see CRS Report RL33155, Child Welfare: Foster Care and Adoption Assistance Provisions in Budget Reconciliation and CRS Report RL33350, Child Welfare: The Court Improvement Program , both by [author name scrubbed]. P.L. 109-239 amended Title IV-B and Title IV-E of the Social Security Act to encourage the expedited placement of foster children into safe and permanent homes across state lines and made several additional changes to child welfare policy under those parts of the law. The law establishes a federal 60-day deadline for completing an interstate home study (necessary to determine the suitability and safety of the home) and a 14-day deadline for a state that requests this interstate home study to act on the information in the study. (For any home study begun before October 1, 2008, states may have up to 75 days to complete the study if they can document certain circumstances beyond their control that prevented its completion within 60 days.) The new law also authorizes $10 million in each of FY2007-FY2010, for incentive payments (valued at $1,500 each) to states for every interstate home study that is completed in 30 days. No funds were appropriated for these payments in FY2007. P.L. 109-239 also prohibits states from restricting the ability of a state agency to contract with a private agency to conduct interstate home studies. Further, for children who will not be reunited with their parents, P.L. 109-239 encourages (or in some cases requires) identification and consideration of both in-state and out-of-state placement options--as part of currently required case review and planning activities for children in foster care. Separately, the bill requires courts (as a condition of receiving certain funding intended to improve their handling of child welfare proceedings) to notify any foster parent, pre-adoptive parent, or relative caregiver of a foster child of any proceedings to be held regarding the child, and emphasizes the right of these individuals to be heard at permanency planning proceedings. Finally, the law strengthens language requiring the child welfare agency to maintain and update a complete health and education record for each child in foster care and requires that youth leaving foster care custody because they have reached the age of majority (typically at 18 years of age) must be given a free copy of their health and education record. An omnibus measure, the Adam Walsh Child Protection and Safety Act of 2006 ( P.L. 109-248 ) includes additional federal requirements related to criminal background checks of prospective foster and adoptive parents and newly requires states to check child abuse and neglect registries for information about prospective foster or adoptive parents (Section 152). The law also requires the establishment of a national registry of substantiated cases of child abuse and neglect (Section 633). State procedures for criminal records checks of prospective foster and adoptive parents must now include a check of national crime databases (i.e., an FBI check), and must be done before the placement of any foster child can be finally approved with prospective foster or adoptive parents. Under prior law, the kind of criminal record check (for example, state vs. FBI vs. local) was not specified, and the federal requirement for these checks extended only to children for whom a state intended to make federal foster care or adoption assistance claims (under Title IV-E of the Social Security Act). As under prior law, (except in those states opting out of the requirements; see discussion below), if a criminal record check reveals certain felony convictions of a prospective foster or adoptive parent, a state may not claim Title IV-E foster care or adoption assistance for a child placed in his or her home. However, this does not absolutely prohibit the state child welfare agency from placing a foster child in the home of such a prospective foster or adoptive parent, if the agency nonetheless determines that the home is safe for the child. At the same time, use of this placement by the agency disqualifies the child for Title IV-E and the agency may not then seek federal reimbursement of the otherwise eligible costs it incurs on the foster or adoptive child's behalf. For most states, these criminal record check requirements became effective with the first day of FY2007. However, prior law allowed states to "opt out" of the federal criminal records check procedures, and P.L. 109-248 permits those "opt out states" to have until the first day of FY2009 to come into compliance with the prior law as well as the new requirements. These states are: Idaho, Oklahoma, Oregon, California, New York, Massachusetts, Ohio, and Arizona. (Further, any state may be granted limited additional time to meet the new requirements if HHS determines that state legislation is needed to permit the state to comply with the new federal rules.) Many child abuse and neglect cases are not the subject of criminal court proceedings, and information on the perpetrators is therefore unlikely to appear in a criminal records check. However, this data may be included in a state child abuse and neglect registry. As of the first day of FY2007, P.L. 109-248 requires all states to check any child abuse and neglect registry they maintain for information about a prospective foster or adoptive parent (and any adult living in their household). The check must be made before approving placement of a foster child in the home (and without regard to whether the state plans to claim Title IV-E support for the child). States must also request (and all states must comply with such requests) information from any other state's child abuse and neglect registry where the prospective foster or adoptive parent, or other adult, has lived in the past five years. There are no federal stipulations about how states must use the information from these registries. Finally, P.L. 109-248 requires HHS, in consultation with the Justice Department, to create a national registry of substantiated cases of child abuse or neglect. Information in this national registry is to be accessible only to a federal, state, tribal, or local government entity (or an agent of such a public entity) that needs the information "to carry out its responsibilities under law to protect children from child abuse and neglect." Separately, the law requires HHS to "conduct a study on the feasibility of establishing data collection standards for a national child abuse and neglect registry" and to make recommendations and findings on (1) the costs and benefits of such data collection standards; (2) data collection standards currently employed by states, tribes, or other political subdivisions; and (3) data collection standards that should be considered to establish a model of promising practices. The law authorized total funding of $500,000 (for FY2006 and FY2007) to carry out the study and required that a report of this study be submitted to Congress by the end of July 2007. However, no funds were appropriated under this authority. The acting head of the HHS, Administration for Children and Families (ACF), stated in a July 27, 2007, letter that "Completion of the feasibility study, and careful consideration of its conclusions, should be undertaken before establishing the National Registry." He further noted that in responding to "constituent inquiries" concerning the registry, HHS "acknowledges that work on the National Registry cannot begin because funds are not available for the feasibility study." The Child and Family Services Improvement Act of 2006 ( P.L. 109-288 ) amended and/or reauthorized the Child Welfare Services, Promoting Safe and Stable Families, Court Improvement, and Mentoring Children of Prisoners programs (all authorized under Title IV-B of the Social Security Act) and made one amendment to the section of Title IV-E of the Social Security Act that defines the case review procedures required for each child in foster care. The Promoting Safe and Stable Families program (PSSF, Title IV-B, Subpart 2 of the Social Security Act) primarily authorizes formula grants to all states for provision of family support, family preservation, time-limited reunification and adoption promotion and support services. P.L. 109-288 extended, through FY2011, the program's annual funding authorization of $545 million(Title IV-B, Subpart 2). Program funding, however, has never reached the full authorization. In FY2007, the PSSF program received $434 million. For each of FY2006-FY2011, P.L. 109-288 targets no less than $40 million of this PSSF funding for two specific purposes: to support monthly caseworker visits to children in foster care and to improve outcomes for children affected by methamphetamine or other substance abuse. From this six-year funding set-aside of $240 million, the law stipulates that a total of $95 million is to be distributed to all states, by formula, to support monthly caseworker visits with children in foster care and $145 million is to be made available as competitive grants to regional partnerships (which must in nearly all cases include a public child welfare agency) that provide services and activities to improve the outcomes of children affected by parents/caretakers' abuse of methamphetamine or other substances. In late September 2007, HHS announced 53 grantees (in 28 states) who are each expected to receive total funding under this grant program of between $1.5 million and $3.7 million (across grant periods ranging from three to five years). In addition, the law increased the funding set-aside from the PSSF program for tribal child and family services--tribal funding under this program grew from roughly $5 million in FY2006 to about $12 million in FY2007. Further, in FY2006, roughly 80 tribes had access to the PSSF funds for child and family services as compared to more than 130 tribes in FY2007. P.L. 109-288 also amended the PSSF program to require states to report on their actual use of funds under Title IV-B of the Social Security Act, and it requires HHS to annually submit a report to Congress on these state expenditures. (Under prior law, states reported planned expenditures only, and these data have not been readily available to Congress.) Finally, the law limits administrative spending under the PSSF program (both federal and state/local dollars) to no more than 10% of funds spent by the state. P.L. 109-288 made amendments to the Child Welfare Services program (CWS, Title IV-B, Subpart 1 of the Social Security Act), which authorizes formula grants to states to develop a broad range of child welfare services and activities. The CWS program was first authorized in 1935. Significant amendments had not been made to it in more than a decade. Under prior law, the CWS program had a permanent funding authorization--meaning it never needed funding reauthorization. The 2006 amendments reorganized certain provisions in the program and limited funding authority for the program to FY2007-FY2011. (This places the program on the same reauthorization cycle as the PSSF program.) P.L. 109-288 did not change the funding authority for this program, which was set at $325 million beginning with FY1990. However, funding for this program has never reached this full authorization level. In FY2007, the program received $287 million. P.L. 109-288 emphasized that CWS funds are provided to assist states in developing and expanding child and family services that use "community-based" agencies. A new "Purposes" section further adds that these services should protect and promote the welfare of all children, prevent neglect, abuse, or exploitation of children, support at-risk families (to allow children to remain safely in their own homes or to return home in a timely manner); to promote the safety, permanence, and well-being of children in foster care and adoptive families; and to provide training, professional development, and support to ensure a well-qualified child welfare workforce. With the exception of the attention to community-based agencies and the mention of staff training support, these purposes are largely in keeping with the prior law definition of "child welfare services" that previously defined how states could use funds provided under this program. P.L. 109-288 also included several new state plan requirements. States (as of September 28, 2007) are required to have procedures to respond to and maintain child welfare services in the wake of a disaster and must also describe in their state plan how they consult with medical professionals to assess the health of and provide medical treatment to children in foster care. Further, states were required to establish (as of October 1, 2007) standards for the content and frequency of caseworker visits of children in foster care. Those standards must "at a minimum, ensure that the children are visited on a monthly basis and that the caseworker visits are well-planned and focused on issues pertinent to case planning and service delivery." For any state to receive funding under the CWS program in FY2008, P.L. 109-288 specifies that it must provide data to HHS showing the percentage of children in foster care that were visited on a monthly basis (by the caseworker handling the child's placement) and the percentage of those visits that occurred where the child lived. Further, on the basis of this data, HHS and each state must develop a plan to ensure that no later than October 1, 2011, at least 90% of children in the state's foster care caseload are visited monthly and that the majority of the visits occur where the child lives. States failing to make the planned progress toward this goal will be required to spend more of their own (i.e. state or local or both) funds in order to receive their full allotment of CWS funding. P.L. 109-288 made a number of additional changes related to the use of CWS funds. Beginning with FY2008, the law limits the use of program funds (both federal and state/local) for administrative purposes to no more than 10%. Also beginning with FY2008, the law prohibits any use of federal CWS funds for adoption assistance payments or child care above the amount of federal CWS funds spent for those purposes in FY2005, and it prohibits the use of both federal and state/local CWS funds for foster care maintenance payments above the amount of those funds spent for foster care maintenance payments in FY2005. P.L. 109-288 extended for five years (FY2007-FY2011) grants to eligible state highest courts to assess and improve their handling of child welfare proceedings (under the Court Improvement Program). It reauthorized the Mentoring Children of Prisoners program for those same five years--authorizing funding of "such sums as may be necessary"--and provided new authority for HHS to support a demonstration of the effectiveness of vouchers as a way to improve the delivery of (and access to) mentoring services for children of prisoners. Finally, P.L. 109-288 amended the case review procedures included in Title IV-E of the Social Security Act to require that the court (or court-approved administrative body) conducting a required permanency hearing for a child in foster care to consult with the child in an "age-appropriate manner" regarding the proposed plan to find a permanent home for the child or to help the child transition to independent living. For more information about the changes made by P.L. 109-288 to Promoting Safe and Stable Families, Child Welfare Services, and other programs, see CRS Report RL33354, The Promoting Safe and Stable Families Program: Reauthorization in the 109 th Congress , by [author name scrubbed]. An omnibus measure, the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ), made several changes to provisions that were enacted in the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) that affect children in foster care. Specifically, Section 6036 of the DRA requires most individuals to submit certain forms of citizenship or nationality documentation in order to be eligible for Medicaid. P.L. 109-432 (Section 405(c)), however, exempts all foster children (without regard to Title IV-E eligibility) from this requirement . The change was made effective as if it was included in the DRA. Separately, P.L. 109-432 amended Title IV-E of the Social Security Act to require states to have in effect procedures for verifying the citizenship or immigration status of each child in foster care (whether or not the state claims Title IV-E support for the child). Finally, this law amended Section 1123A of the Social Security Act to specifically require that state compliance with this new federal requirement be checked as part of periodic conformity reviews (e.g. the Child and Family Services Review). These changes were effective as of June 20, 2007 (six months after the enactment of P.L. 109-432 ).

This report summarizes changes enacted in federal child welfare policy during the 109th Congress. Most federal child welfare programs are authorized in Title IV-B and Title IV-E of the Social Security Act, and the bulk of the changes enacted amended programs in those parts of the law. These programs include Child Welfare Services, Promoting Safe and Stable Families, Court Improvement, and Foster Care and Adoption Assistance. Legislation amending these programs is typically reported by the House Ways and Means and Senate Finance Committees, and the programs are administered within the U.S. Department of Health and Human Services (HHS). Changes made to the Court-Appointed Special Advocates (CASA) program (Subtitle B of the Victims of Child Abuse Act), which were included in legislation reported by the House and Senate Judiciary committees, are also discussed. That program is administered within the Department of Justice (DOJ). The changes enacted affect a broad spectrum of child welfare policies, ranging from who are eligible children and what are eligible costs for which states may claim reimbursement under the Title IV-E Foster Care and Adoption Assistance program to the provision of new support for services to children affected by a parent or caretaker's abuse of methamphetamine or other substances and to required collaboration between child welfare agencies and courts. The recently enacted laws also added a number of specific new requirements for state child welfare agencies. With regard to children in foster care, each state must have in place new or revised policies or procedures related to (1) the quality and quantity of caseworker visits; (2) consultation with medical professionals on health treatment; (3) placement of children across state lines; (4) verification of citizenship or immigration status; and (5) background checks of prospective foster and adoptive parents. Further, states are required to have in place policies or procedures enabling the agency to continue providing necessary services during a disaster. The child welfare provisions of the seven laws providing for these changes are discussed in this report in order of their enactment. These laws are the Fair Access to Foster Care Act of 2005 (P.L. 109-113), the Violence Against Women and Department of Justice Reauthorization Act of 2005 (P.L. 109-162), the Deficit Reduction Act of 2005 (P.L. 109-171), the Safe and Timely Interstate Placement Act of 2006 (P.L. 109-239), the Adam Walsh Child Protection and Safety Act of 2006 (P.L. 109-248), the Child and Family Services Improvement Act of 2006 (P.L. 109-288), and the Tax Relief and Health Care Act of 2006 (P.L. 109-432). This report will not be updated.

RS21288 -- Smallpox: Technical Background on the Disease and Its Potential Role in Terrorism Updated January 10, 2003 Viruses are essentially small pieces of genetic material in a protein coat. They cannot reproduce by themselves. To multiply, a virus must hijack the replicationmachinery in living cells by infecting another organism. Smallpox is caused by the Variola virus, which undernormal circumstances only infects human cells. There are two types of Variola viruses. Variola minor causes a relatively mild disease that has less thana 1% fatality rate. Variola major causes what isgenerally thought of as smallpox, a very severe illness with a fatality rate of approximately 30%. (1) These viruses are part of the Orthopox genus whichalsocontains the viruses responsible for vaccinia, monkeypox, cowpox, camelpox and mousepox. (2) Before the last reported case of smallpox (a result of a laboratory accident in England in 1978), smallpox was considered to be one of the worst scourges inhuman history. Smallpox is estimated to have killed between 300 and 500 million people in the twentieth centuryalone. Once infected, the victim incubates the virus for seven to seventeen days during which the victim feels and appears normal. This stage is followed by one tofour days of high fever, malaise, headache, and muscle ache, often accompanied with nausea and vomiting. Duringthis time the person looks and feels very ill,but is not yet contagious. After this stage, the characteristic sores develop; first in the mouth then over the rest ofthe body. If the victim survives, the soresscab over and turn to scars in three to four weeks. About 30% of unvaccinated victims die (some sources suggestup to 50%). Up to 80% of the survivors aredisfigured by pockmarks or limb deformities. Smallpox is contagious, but the Centers for Disease Control and Prevention (CDC) (3) considers it to spread less widely and less rapidly than chickenpox,measles, whooping cough, or influenza. The victim is most likely to infect other people when the sores in the mouthare most active. This is in the first weekof the rash when virus comes out of the sores and into the saliva where they are easily aerosolized by coughing orsneezing. Although smallpox is usuallytransmitted by face to face contact, it can also be transmitted through the air over dozens of feet and by contaminatedclothing or bedding. The vaccine works by infecting a person with vaccinia virus which is closely related to smallpox virus. (4) The vaccine triggers immunity against all closelyrelated viruses, including smallpox. This immunity decreases over time; however, people who contract smallpoxeven thirty years after vaccination are muchless likely to die than unvaccinated people. (5) Interestingly, the vaccine also helps reduce the severity of the disease if given to victims within a few days aftersmallpox exposure. This is the only known treatment for smallpox, although several antiviral drugs have shownpromise in preliminary laboratory studies. Although the vaccinia vaccine is very effective at preventing smallpox, it is not without risks. Its complication rate is higher than that associated with anyroutinely used vaccine. Based on historical experience, experts estimate that most vaccinees will experience onlymild side effects such as low-grade fever, but1 in 797 people will experience serious side effects. Table 1 describes the historical complicationrates. Table 1. Historical smallpox vaccine complication rates (cases/million vaccinations) Source: CDC, Morbidity and Mortality Weekly Report, June 22, 2001, Vol. 50, No. RR-10, p.8. Inadvertent inoculation is the spread of the usually localized vaccinia infection to other parts of the body, causing sores and scarring most commonly on theface, genitals, and rectum. Generalized vaccinia causes vaccinia sores over the entire body. Eczema vaccinatumis a sometime fatal skin infection in peoplewho have a skin disorder such as eczema or atopic dermatitis. Encephalitis is a very serious and sometimes fatalinflammation of the brain. Progressivevaccinia is an inexorable rotting away of the flesh around the vaccine site that can sometimes also be fatal. As aresult of these complications, experts project1-2 deaths per million vaccinations. Complications are not limited to people who get vaccinated. People who come into contact with those who have been vaccinated within two weeks may also beexposed to the live vaccinia virus and develop complications. Some experts estimate that up to 20% of thecomplications will occur in the unvaccinatedcontacts. Historically, for every million people vaccinated, about 65 people who were not vaccinated becameinfected and developed a serious complicationsimply by coming into contact with a vaccinee. (6) Because of the high rate of vaccine complications, in 1971, U.S. public health authorities rescinded therecommendation for universal domestic smallpox vaccination. It is likely that the numbers in Table 1 underestimate the current and future problem with the vaccine. Since these numbers were last compiled in 1968, thenumber of people predisposed to problems with the vaccine has increased. Some experts estimate that up to 25%of the population now have conditions thatwould make vaccination contraindicated. These conditions include a history of eczema or other exfoliative skindisorder, pregnancy, or any immunodeficiencywhich could be caused by AIDS, chemotherapy or anti-rejection drugs following organ transplant. Because of theserious risk of transferring the virus to ahousehold member, it is recommended that people who live with someone with one of the above conditions notreceive the vaccine. Excluding these people iscomplicated by the large number of people who are unaware that they have a disease that will produce a serious sideeffect. For example, a vaccinee could livewith one of the estimated 300,000 people in the United States that do not know they are HIV positive. The only product proven to counter some of the vaccine complications is vaccinia immunoglobulin (VIG). This is extracted from the blood of peoplevaccinated with the smallpox vaccine. It is only effective for treatment of eczema vaccinatum and certain cases ofprogressive vaccinia. Significantly, VIGprovides no benefit in the treatment of postvaccinial encephalitis. Current civilian supplies of VIG are controlledby the CDC and are estimated to be enough todeal with the complications from about 27 million vaccinations. The CDC is in the process of procuring more VIG. Because the antiviral drug cidofovir hasshown some anti-vaccinia activity in lab animals, it is available for use as an Investigational New Drug when VIGtreatment fails. Although smallpox was officially declared to have been eliminated from the wild in 1980, many countries maintained laboratory stocks of the virus obtainedduring outbreaks. By 1985, these stocks were supposed to have been destroyed or transferred to one of the officialrepositories; one in the Soviet Union and theother in the United States. Russia inherited the smallpox stewardship following the break up of the Soviet Union. Although only the United States and Russia have declared stocks ofsmallpox, some experts have stated that although very unlikely, it is possible that some other countries haveundeclared stocks. Countries that may havedeliberately or inadvertently retained smallpox virus from naturally occurring outbreaks before eradication include:China, Cuba, India, Iran, Iraq, Israel, NorthKorea, Pakistan, and Yugoslavia. (7) A November2002 CIA intelligence review added France to this list and reportedly states a "high, but not very high [levelof] confidence" that Iraq and France have live smallpox samples and a "medium" level of confidence that NorthKorea does. (8) The highest barrier to a non-state sponsored terrorist using smallpox is likely to be the difficulty in obtaining the virus in the first place. Because all countrieshave stopped smallpox vaccination programs, citizens of all countries are equally vulnerable to a spreadingepidemic. Therefore, it is in the best interest of acountry with even an undeclared smallpox stock to keep it very secure. Despite this, some fear that the Russianstocks may not be sufficiently secure due to theeconomic collapse that accompanied the break up of the Soviet Union. Other than from a government controlled stockpile, some have suggested that it may be possible to acquire the virus from the bodies of smallpox victims buriedin the Siberian permafrost in the 1800s. However, this is probably unlikely since Russian experts have been unableto acquire viable virus this way despitemultiple attempts. (9) In 2002, American scientistssuccessfully constructed infectious polio virus from mail-ordered pieces of DNA. (10) However, most expertsclaim that it would be very difficult to construct Variola virus in this manner. For more information on this topic,see CRS Report RS21369(pdf) SyntheticPoliovirus: Bioterrorism and Science Policy Implications . If a terrorist organization were able to obtain a sample of virus, it would also need the advanced technical knowledge, skill and facilities to maintain the viruswithout infecting themselves until the planned dissemination. It is considered to be quite difficult to "weaponize"smallpox. (11) However, in general,weaponization refers to developing advanced delivery systems such as missiles, artillery, or bombs to cause masscasualties. This technological barrier wouldbe much lower for a terrorist. A terrorist, who was not concerned with his own survival could potentially use hisown body as the delivery system, infectingdozens of people before succumbing to the disease. In addition to the threat posed by terrorist groups, it is possible that another nation may choose to use smallpox against the United States. Some experts suggestthat of the countries that might have undeclared stocks of smallpox virus, Iraq may pose the most danger to theUnited States. Some experts believe that it isvery unlikely that Iraq has smallpox since they did not use it during the Gulf War. However, those who feel thatIraq has the smallpox virus counter that itwould not have been used because it is not well suited for battlefield deployment since it is contagious and likelyto infect troops on both sides. Some expertsalso believe that Iraq was dissuaded from using chemical or biological weapons by what could have been interpretedas a thinly veiled threat of nuclearretaliation. (12) In the current situation of risingtensions, some experts have stated that if Iraq has the capability, Saddam Hussein may unleash smallpox as aweapon of last resort, particularly if he can deploy it covertly on United States soil. (13) In December 2002, the Administration reserved the right to use nuclearweapons to respond to the use of weapons of mass destruction against the United States or its allies. (14) Nonetheless, most experts feel that the barriers posed by acquisition and successful deployment of smallpox virus are high enough to make such an attack veryunlikely. Furthermore because of these hurdles, most experts feel that a terrorist organization would require a statesponsor in order to successfully obtain anddeploy smallpox. Although most experts deem the risk of a smallpox attack to be very low, the high consequences of a release have led the President to order the vaccination ofapproximately 500,000 people in the armed forces and to initiate a voluntary program to encourage as many as 10million medical workers and first respondersto be vaccinated. By the middle of 2003, the vaccine will be available on demand to any American adult who is notin a high-risk group for complications. However, the Administration will not recommend vaccination for members of the general public because of the highcomplication rate. (15) Scientific research may be able to further limit the threat posed by smallpox. If a safer smallpox vaccine could be produced, for instance, public health officialswould be less reluctant to recommend mass vaccination. The development of such a vaccine is stymied by severalfactors. One is that it is difficult to predictbefore making a large investment whether a new vaccine will be safer and still effective against smallpox. (16) Another factor is the uncertain market of atherapeutic agent that is designed to protect against what most experts agree is a very unlikely event. Without aguaranteed market, the commercial sector maybe reluctant to make such investments. Some experts suggest that, in general, it may be better to develop treatments rather than relying on prophylactic measures for the many potential biologicalagents that could be used to attack the United States. They suggest that the financial and societal costs of multiplemass vaccination programs may make avaccines-only approach impractical. Some scientists are working on producing antiviral drugs as a cure forsmallpox and several have shown promise inpreliminary studies. (17) However, more work needsto be done to improve animal models of smallpox so that the efficacy of new therapeutics can be tested. (18) Another potential advantage of this approach is that these drugs may be effective against other viruses and thereforemight be marketable as treatments forinfluenza or AIDS. The United States might be better equipped to defend against a smallpox attack if the status of any undeclared smallpox stocks could be determined with greatercertainty. For example, if it could be determined that Iraq does not have any smallpox then focus could be shiftedto preventing terrorist access to other sources. Unfortunately, it is possible that Iraq could successfully hide a smallpox program from any inspection regime. The United States is helping to increase the security of the former Soviet Union's biological weapon stockpiles. By focusing on the physical security of theagents and the economic security of the scientists, these programs simultaneously reduce the threat posed by all ofthe agents in the former Soviet Union'sarsenal. For a comprehensive discussion of these programs, see CRS Report RL31368(pdf) PreventingProliferation of Biological Weapons: U.S. Assistance to theFormer Soviet States .

Smallpox, which kills approximately 30% of its victims, is estimated to have killedbetween 300 and 500 millionpeople in the twentieth century before the World Health Organization's successful eradication program. Thesmallpox vaccine is effective at preventingsmallpox but has a higher complication rate than any other currently used vaccine. The terrorist attacks of 2001have increased fears that smallpox might beused as a weapon of terror. Smallpox has several properties that might make it desirable by terrorists, such ascontagiousness and high lethality. These factorsand its limited availability also make it difficult for a terrorist to use. Most experts agree that it is very unlikely thatsmallpox will be used as a weapon, but thehigh consequences of a successful attack have prompted exploration of methods to counter this threat. Also seeCRS Report RL31694 Smallpox VaccineStockpile and Vaccination Policy and CRS Report RL31368(pdf), Preventing Proliferation of BiologicalWeapons: U.S. Assistance to the Former Soviet States. This report will updated as warranted.