39–006 

109TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 109–44 

TREATMENT OF CERTAIN PAYMENTS UNDER NATIONAL 

FLOOD INSURANCE PROGRAM 

APRIL 14, 2005.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. OXLEY, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 804] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 804) to exclude from consideration as income certain payments under the national flood insurance program, having considered the same, report favorably thereon without amendment and 

recommend that the bill do pass. 

CONTENTS 

Page 

Purpose and Summary ............................................................................................ 1 

Background and Need for Legislation .................................................................... 2 

Hearings ................................................................................................................... 2 

Committee Consideration ........................................................................................ 3 

Committee Votes ...................................................................................................... 3 

Committee Oversight Findings ............................................................................... 3 

Performance Goals and Objectives ......................................................................... 3 

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 3 

Committee Cost Estimate ....................................................................................... 3 

Congressional Budget Office Estimate ................................................................... 3 

Federal Mandates Statement ................................................................................. 4 

Constitutional Authority Statement ...................................................................... 5 

Applicability to Legislative Branch ........................................................................ 5 

Section-by-Section Analysis of the Legislation ...................................................... 5 

Changes in Existing Law Made by the Bill, as Reported ..................................... 5 

PURPOSE AND SUMMARY

The purpose of the bill is to exclude from consideration as income 

certain payments under the national flood insurance program. 

2 

BACKGROUND AND NEED FOR LEGISLATION

Congress created the National Flood Insurance Program (NFIP) 

in 1968 to address the increasing costs of taxpayer-funded disaster 

relief for flood victims and the increasing amount of damage caused 

by floods. The Federal Emergency Management Agency (FEMA) 

administers the NFIP. Home and business owners are able to purchase flood insurance if their properties are located in communities 

that adopt and enforce floodplain management ordinances to reduce future flood damage. One of the objectives of the NFIP is to 

make flood insurance affordable, so full actuarial rates are not 

charged. 

The Bunning-Bereuter-Blumenauer Flood Insurance Reform Act 

of 2004 (P.L. 108–264) was signed into law on June 30, 2004. This 

legislation, sponsored by Sen. Jim Bunning (KY), Rep. Doug Bereuter (NE) and Rep. Earl Blumenauer (OR), reauthorized the NFIP 

until 2008 and established a pilot program for the mitigation of severe repetitive loss properties, which FEMA estimates cost the program $200 million annually. 

The Bunning-Bereuter-Blumenauer law primarily addresses the 

problem of repetitive loss properties through flood mitigation. The 

pilot program authorized in the legislation requires people to either 

accept mitigation assistance or face significantly higher premiums. 

Owners who refuse assistance will no longer be eligible for subsidized flood insurance far below the actuarial risk rate they should 

be paying. Over time, as mitigation grants and preventative measures change the nature of repetitive loss properties, the NFIP is expected to save a significant amount of money. 

H.R. 804, introduced on February 15, 2005, will prevent federal 

agencies that administer means-tested or income-tested benefits 

from considering NFIP mitigation grants as income. H.R. 804 is 

necessary due to an Internal Revenue Service (IRS) ruling in July 

2004 that such grants must be reported as income for tax purposes. 

This IRS ruling has caused significant uncertainty in the administration of the Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004. Anecdotal information has revealed that a significant number of homeowners have refused mitigation offers not only 

due to the fear of a potential tax liability, but also the potential for 

other unknown liabilities imposed by other federal government 

agencies. These penalties could include the loss of certain federal 

education, nutrition and health care benefits. H.R. 804 eliminates 

the potential for additional penalties by preventing federal government agencies (other than the IRS) from considering NFIP flood 

mitigation grants as income. 

The precedent for this exception is found in the Stafford Act, 

which explicitly states that any disaster or pre-disaster mitigation 

payments made to homeowners under that Act are not to be considered as income by any federal agency administering a means- or 

income-tested benefit. By incorporating this language in the National Flood Insurance Act, H.R. 804 will resolve any additional uncertainty by likewise preventing federal agencies from considering 

flood mitigation grants as income. 

HEARINGS

There were no hearings held on this legislation. 

3 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

March 16, 2005, and ordered H.R. 804 reported by a voice vote. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. No record votes were 

taken with in conjunction with the consideration of this legislation. 

No amendments were considered by the Committee. A motion by 

Mr. Oxley to report the bill to the House with a favorable recommendation was agreed to by a voice vote. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee has held hearings previously 

and made findings that are reflected in this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee establishes the following performance related goals and objectives for this legislation: 

The bill clarifies existing law to ensure that certain payments 

under the national flood insurance program are not treated as income by federal agencies administering means-tested or incometested benefit programs, thus reducing the potential for unknown 

consequences under other statutes. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee finds that this legislation 

would result in no new budget authority, entitlement authority, or 

tax expenditures or revenues. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

4 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, March 31, 2005. 

Hon. MICHAEL G. OXLEY, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 804, a bill to exclude from 

consideration as income certain payments under the national flood 

insurance program. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Kathleen FitzGerald. 

Sincerely, 

ELIZABETH M. ROBINSON

(For Douglas Holtz-Eakin). 

Enclosure. 

H.R. 804—A bill to exclude from consideration as income certain 

payments under the national flood insurance program 

If H.R. 804 were enacted, payments made under the National 

Flood Insurance Program for flood mitigation activities would not 

be counted as income or resources when determining eligibility for 

any federal means-tested program. The Federal Emergency Management Agency (FEMA) awards grants to states and communities, 

which in turn distribute funds to individuals and businesses, for 

activities that reduce the risk of repetitive flood damage to buildings. Data from FEMA show that the average approved award is 

about $53,000. 

CBO expects that enacting this bill would increase the number 

of persons eligible for Food Stamp and Medicaid benefits. Currently, flood mitigation grants are counted as income or resources 

by these programs and make some people ineligible for benefits or 

reduce the amount of their benefit. CBO estimates that spending 

for these programs together would increase by about $1 million a 

year and $10 million over the 2006–2015 period. Enacting the bill 

would not affect revenues. 

H.R. 804 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act. The increase in the number of people eligible for Medicaid benefits would 

result in additional spending by states totaling about $4 million 

over the 2006–2015 period. 

The CBO staff contacts for this estimate are Kathleen FitzGerald 

(for federal costs); Leo Lex (for the impact on state, local, and tribal 

governments); and Paige Piper/Bach (for the private-sector impact). 

This estimate was approved by Peter H. Fontaine, Deputy Assistant Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

5 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds that the Constitutional 

Authority of Congress to enact this legislation is provided by Article 1, section 8, clause 1 (relating to the general welfare of the 

United States) and clause 3 (relating to the power to regulate interstate commerce). 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Treatment of Certain Payments Under National Flood Insurance Program 

This section adds a new section to the National Flood Insurance 

Act of 1968 to provide that assistance provided under the National 

Flood Insurance Program for flood mitigation activities shall not be 

considered income or a resource of the owner (or any lessee or user) 

of the property when determining eligibility for or benefit levels 

under any income assistance or resource-tested program that is 

funded in whole or in part by an agency of the United States or 

by appropriated funds of the United States. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

SECTION 1324 OF THE NATIONAL FLOOD INSURANCE 

ACT OF 1968 

TREATMENT OF CERTAIN PAYMENTS

SEC. 1324. Assistance provided under a program under this title 

for flood mitigation activities (including any assistance provided 

under the mitigation pilot program under section 1361A, any assistance provided under the mitigation assistance program under section 1366, and any funding provided under section 1323) with respect to a property shall not be considered income or a resource of 

the owner (or any lessee or user) of the property when determining 

eligibility for or benefit levels under any income assistance or resource-tested program that is funded in whole or in part by an 

agency of the United States or by appropriated funds of the United 

States. 

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