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58–274 2011

HEROES EARNINGS ASSISTANCE 

AND RELIEF TAX ACT OF 2007 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

AND

SUBCOMMITTEE ON 

INCOME SECURITY AND FAMILY SUPPORT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

OCTOBER 17, 2007 

Serial No. 110–63 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

JIM MCCRERY, Louisiana 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

JERRY WELLER, Illinois 

KENNY C. HULSHOF, Missouri 

RON LEWIS, Kentucky 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PAT TIBERI, Ohio 

JON PORTER, Nevada 

Janice Mays, Chief Counsel and Staff Director 

Brett Loper, Minority Staff Director 

SUBCOMMITTEE ON SELECT REVENUE MEASURES

RICHARD E. NEAL, Massachusetts, Chairman 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

ALLYSON Y. SCHWARTZ, Pennsylvania 

JIM MCDERMOTT, Washington 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

PHIL ENGLISH, Pennsylvania 

THOMAS M. REYNOLDS, New York 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

PAUL RYAN, Wisconsin 

SUBCOMMITTEE ON INCOME SECURITY AND FAMILY SUPPORT

JIM MCDERMOTT, Washington, Chairman 

FORTNEY PETE STARK, California 

ARTUR DAVIS, Alabama 

JOHN LEWIS, Georgia 

MICHAEL R. MCNULTY, New York 

SHELLEY BERKLEY, Nevada 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

JERRY WELLER, Illinois 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JON PORTER, Nevada 

PHIL ENGLISH, Pennsylvania 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of October 10, 2007, announcing the hearing ........................................ 2 

WITNESSES 

The Honorable Susan A. Davis, a Representative in Congress from the State 

of California .......................................................................................................... 10 

The Honorable Nick Lampson, a Representative in Congress from the State 

of Texas ................................................................................................................. 13 

The Honorable Walter B. Jones, a Representative in Congress from the State 

of North Carolina ................................................................................................. 16 

David A. Rust, Acting Deputy Commissioner, Disability and Income Security 

Programs, Social Security Administration ......................................................... 23 

John F. Downing, President and Chief Executive Officer, United Veterans 

of America, Inc., Leeds, Massachusetts .............................................................. 36 

Victoria C. Johnson, widow of Major Alan R. Johnson, U.S. Army Reserve, 

Yakima, Washington ............................................................................................ 40 

John McAuliffe, Connecticut State Director, National Volunteer Fire Council, 

Wethersfield, Connecticut ................................................................................... 44 

Jessica Perdew, Deputy Director of Government Relations, National Military 

Family Association, Alexandria, Virginia .......................................................... 50 

Michelle D. LaRock, Deputy Director of Program Development, Division of 

Veterans’ Affairs, State of New York, Albany, New York ................................ 54 

SUBMISSIONS FOR THE RECORD 

California Department of Veterans Affairs, letter ................................................ 61 

Corporation for National and Community, statement .......................................... 62 

Jerry Patterson, Texas Land Commissioner and Chairman, Texas Veterans 

Land Board, statement ........................................................................................ 62 

Lori A. Brown, Military Spouse, statement ........................................................... 64 

Max Stier, Partnership for Public Service, statement .......................................... 65 

National Multi Housing Council and National Apartment Association, letter .. 66 

The Honorable Joe Courtney, a Representative in Congress from the State 

of Connecticut, statement .................................................................................... 68 

The Honorable Tom Davis, a Representative in Congress from the State 

of Virginia, statement .......................................................................................... 69 


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HEROES EARNINGS ASSISTANCE 

AND RELIEF TAX ACT OF 2007 

WEDNESDAY, OCTOBER 17, 2007 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON SELECT REVENUE MEASURES, 

SUBCOMMITTEE ON INCOME SECURITY AND FAMILY SUPPORT, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:02 a.m., in 

room 1100, Longworth House Office Building, Hon. Richard E. Neal 

(Chairman of the Subcommittee on Select Revenue Measures) presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–5522 

October 10, 2007 

SRM–7 

Neal and McDermott Announce a Joint Hearing on 

the ‘‘Heroes Earnings Assistance and 

Relief Tax Act of 2007’’ 

Congressman Richard Neal (D–MA), Chairman of the Subcommittee on Select 

Revenue Measures, and Congressman Jim McDermott (D–WA), Chairman of the 

Subcommittee on Income Security and Family Support, today announced a joint 

hearing on legislation soon to be introduced H.R. ll, called the ‘‘Heroes Earnings 

Assistance and Relief Tax Act of 2007.’’ The hearing will take place on Wednesday, October 17, 2007, at 10:00 a.m. in room 1100, Longworth House Office 

Building. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

The Committee has jurisdiction over certain tax and other provisions that are intended to benefit our military, volunteer firefighters, and other service volunteers. 

Some of the tax provisions are set to expire at the end of the year and must be addressed. Other provisions need to be simplified. 

The ‘‘Heroes Earnings Assistance and Relief Tax Act’’ would make the following 

changes: (1) make permanent the provision that permits active duty individuals to 

make penalty-free withdrawals from retirement plans; (2) make permanent and 

modify qualified mortgage bonds used to finance residences for veterans; (3) make 

permanent the ability to include combat pay as earned income for purposes of the 

Earned Income Tax Credit (EITC); (4) extend the limitation period for filing tax refund claims resulting from Department of Veterans Affairs (DVA) disability determinations; (5) make permanent the authority of the Social Security Administration 

to disclose tax return information to the Department of Veterans Affairs for purpose 

of determining eligibility for certain veteran programs; (6) permit recipients of military death benefit gratuities to roll over the amounts received, tax free, to a Roth 

IRA or an Education Savings Account; (7) permit an employer to make certain contributions to a qualified plan on behalf of an employee who was killed in combat; 

(8) for purposes of meeting the requirements of the Uniformed Services Employment 

and Reemployment Rights Act (USERRA), treat the day prior to the date of death 

as the date the employee returned to work for purpose of triggering payment of survivor benefits (or other beneficiary payments) under a qualified plan; (9) treat differential wage payments made by an employer to an employee who becomes active 

duty members of the uniformed services as wages for retirement plan purposes; (10) 

clarify the tax treatment for certain rebates of deductible State and local taxes for 

volunteer firefighters; (11) exclude certain reimbursed expenses that are incurred in 

the line of duty for volunteer firefighters; (12) clarify the application of the ‘‘5-year 

requirement with respect to the sale of a principal residence for Peace Corps volunteers’’; (13) provide equitable treatment of most military cash allowances, beyond 

basic pay, for purpose of determining eligibility and benefit amounts for military 

families; (14) disregard certain annuity payments paid specifically to blind veterans 

for purpose of determining Supplemental Security Income (SSI) eligibility and benefits under the SSI program; and (15) disregard any benefits or allowances paid to 

Americorps volunteers for purpose of determining eligibility and benefits under the 

SSI program. 


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In announcing the hearing, Chairman Neal stated, ‘‘We cannot forget the everyday needs of our military families and other American heroes serving 

their country honorably in Iraq and around the globe. I believe we have 

an obligation to examine the Internal Revenue Code to make certain it is 

working in an effective way for these brave individuals. This proposed legislation is another example of our commitment to the men and women who 

wear the uniform of the United States armed forces each day with dedication and distinction.’’ 

Chairman McDermott stated, ‘‘We don’t want to leave those who defend our 

country defenseless against being hit by unfair taxes or reductions in needed benefits, and we are going to serve our military heroes in this legislation by correcting inequities that are simply inconceivable.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on legislative proposals designed to help members of our 

armed forces and their families, as well as others volunteering in service to America. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘110th Congress’’ from the menu entitled, 

‘‘Hearing Archives’’ (http://waysandmeans.house.gov/Hearings.asp?congress=18). Select the hearing for which you would like to submit, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, completing all informational forms and clicking ‘‘submit’’ on the 

final page, an email will be sent to the address which you supply confirming your 

interest in providing a submission for the record. You MUST REPLY to the email 

and ATTACH your submission as a Word or WordPerfect document, in compliance 

with the formatting requirements listed below, by close of business October 31, 

2007. Finally, please note that due to the change in House mail policy, the U.S. 

Capitol Police will refuse sealed-package deliveries to all House Office Buildings. 

For questions, or if you encounter technical problems, please call (202) 225–1721. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 


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The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TDD/TTY in advance of the event (four business days’ notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

Chairman NEAL. Let me call this hearing to order. 

This country is fortunate that so many soldiers and sailors have 

been willing to sacrifice for our defense. That sacrifice often comes 

in different forms. For the Reservist or member of the National 

Guard who is called up to duty for extended periods, it can mean 

stepping off the career ladder or shuttering their own business. For 

the husband or wife of an active duty soldier, sacrifice can mean 

managing the household as a single parent. As the mother, father, 

or child of someone serving our country, sacrifice can mean losing 

a loved one. 

We have all witnessed the depth of this sacrifice as we tour local 

military hospitals, visit veterans assistance centers, or attend funerals. Just last week, another young son from Massachusetts was 

lost. Army Private Kenneth Iwasinski was killed by an IED in 

Baghdad. He was scheduled to return home earlier this year, but 

his tour was extended. Kenneth was the 78th fallen hero from my 

home State, and I extend my deepest sympathies to his parents, 

Tracy Taylor of Chickami, Massachusetts, and Dominic Iwasinski 

of Belchertown, Massachusetts. 

You do not have to look far in any city or town in America to 

find extraordinary service and sacrifice for our country. It has been 

said that in war there are no unwounded soldiers. This could probably apply to many military families as well. 

It is truly a shared sacrifice, even when only one member of the 

family has volunteered their service. The family can suffer financially as well as emotionally during extended tours. It is the responsibility of this Committee to ensure that the Tax Code and 

other income security provisions do not create problems, but rather 

solve them so that families and soldiers can heal emotionally, physically, and financially and move on with their lives. 

Today the Select Revenue Measures Subcommittee, along with 

the Income Security and Family Support Subcommittee, will hear 

from a variety of witnesses on draft legislation to extend, modify, 

and create a number of incentives to assist these families that have 

sacrificed so much for us. 

This legislation would make permanent the current provision 

waiving the 10 percent withdrawal penalty for those called up to 

active duty who need to tap into retirement accounts. We have 

Representative Lampson to thank for this one, and he will be testifying before us today. The drafts would also allow families to roll 

over amounts received as death gratuity payments in Roth IRAs or 

Education Savings Accounts, an idea from Representative Walter 

Jones, who will be before us as well. 

The draft makes a number of changes relating to Supplemental 

Security Income, or SSI, eligibility, military service, which is based 

upon suggestions from Representative Susan Davis, who joins us 

today, and Representative Tom Reynolds, a senior Member of this 

Committee. 


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Already a number of Members, including Representative Nancy 

Boyda, Representative Zach Space, Representatives Gabrielle Giffords and Bruce Braley, have filed legislation to make permanent 

the special rule treating combat pay as earned income for purposes 

of the Earned Income Tax Credit, or EITC. 

The draft bill we are discussing today includes that important 

provision, and we thank those Members for championing this issue. 

The draft bill will provide a number of changes to allow employers 

the flexibility to extend benefits to workers called up for duty, and 

will expand certain provisions that provide mortgage assistance to 

veterans through qualified bond programs. 

The draft bill also includes incentives for those who volunteer 

their service Stateside, such as firefighters and emergency responders, as has been suggested in legislation by Mr. Larson. 

As you can see, we have reviewed a number of good suggestions 

from Members of the House and this Committee, and we are still 

doing so. It is our hope that a final bill will be a bipartisan product 

that the full Committee can mark up in the next few weeks. 

To assist us today in understanding all of these provisions, we 

welcome today our first panel, Representative Davis, Representative Lampson, and Representative Jones. 

Our second panel will include Mr. David Rust, the Acting Deputy 

Commissioner for Disability and Income Security Programs at the 

Social Security Administration. Mr. Rust will discuss the SSI provisions under consideration. 

And on our third panel, we will welcome Jack Downing, President and Chief Executive Officer of the United Veterans of America, based in Leeds, Massachusetts. Mr. Downing heads an early 

intervention program to assist recently returned veterans in 

transitioning back to the workforce. 

We will also hear from Ms. Victoria Johnson of Yakima, Washington, who lost her husband earlier this year and almost lost his 

retirement savings as well. We will hear from Mr. John McAuliffe, 

the Connecticut State Director of the National Volunteer Fire 

Council from Wethersfield, Connecticut. 

And we will hear from Ms. Jessica Perdew representing the National Military Family Association in Alexandria, Virginia. From 

Albany, New York, we are pleased to be joined by Ms. Michelle 

LaRock, the Deputy Director of Program Development at the Division of Veterans’ Affairs, who will discuss the State annuity program for line veterans. 

And now I would like to recognize and turn to Chairman 

McDermott for his opening statement. Mr. McDermott. 

Mr. MCDERMOTT. Thank you very much, Mr. Chairman. 

The brave women and men serving in our armed forces deserve 

nothing less than our respect and full support for the tremendous 

sacrifices that they and their families make as they honorably defend their country. Whether they are completing their tours of duty 

or returning home with a service-related injury, they need to know 

that their government is on their side. 

The last thing they need and deserve is to be hit with unfair 

taxes and reductions in Federal benefits during their time of need. 

It is inconceivable to me that some military servicemembers and 

their families are not getting the benefits they are entitled to beVerDate Nov 24 2008 08:44 Jan 31, 2011 Jkt 058274 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\58274.XXX APPS06 PsN: 58274

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cause of disparate treatment in the Tax Code or a Federal disability program. They earn every benefit that is available to them, 

many times over. We can and should enact legislation quickly to 

ensure that military families are treated fairly. 

The purpose of this hearing, as you have heard, is to consider 

proposals that would provide greater equity in the Tax Code and 

in the Supplemental Security Income program for the men and 

women serving in the armed forces and their families, and also ensure assistance to other Americans who selflessly volunteer to 

serve communities across this Nation and the world. 

Chairman Rangel is preparing legislation he will introduce soon 

that will eliminate many of the inequities that currently exist in 

the tax law and the Supplemental Security Income program that 

create hardships for military personnel and volunteers. The proposal, which will be titled the Heroes Earnings Assistance and Relief Tax Act, or the HEART Act, would bring fair tax treatment to 

those individuals and their families in a number of ways. 

For example, the proposal would permanently extend the option 

for military families to include combat pay as earned income for 

the purposes of calculating the Earned Income Tax Credit. This option is currently scheduled to sunset at the end of the current year. 

The Earned Income Tax Credit provides financial assistance for 

vulnerable military families who experience financial hardships as 

a result of a servicemember’s deployment. 

The financial support would provide a servicemember with the 

comfort of knowing that his or her family is receiving some additional income to assist them while they are away defending their 

country. This is the least we can do for families who are sacrificing 

so much. 

The Chairman’s proposal would also make several improvements 

to the Supplemental Security Income program, commonly called 

SSI, to better assist servicemembers and their families. The SSI 

program provides critical benefits to millions of elderly and disabled Americans who have low incomes and limited resources, including military servicemembers with disabled spouses or children. 

Some military families who rely on SSI for critical financial support may lose a portion of their benefits because of the unfair treatment of certain types of military cash allowances in determining a 

disabled spouse or child’s eligibility for assistance under the program. 

Unlike civilian wages, some military payments are subject to less 

favorable treatment under the SSI program. Most allowances and 

bonuses paid to servicemembers beyond their basic pay are counted 

as unearned income under the SSI program. This treatment effectively reduces, and in some cases eliminates, SSI benefits for thousands of military families. 

To address this inequity, earlier this year I joined with Representative Susan Davis from San Diego in introducing legislation 

to eliminate the unfair treatment of military allowances when calculating SSI program eligibility and benefit amounts. The bill 

would result in higher benefit amounts and would increase access 

to the program for some servicemembers and their families. 

I am pleased that Chairman Rangel is planning to include provisions from that bill into the military package that he is preparing. 


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This change will go a long way in helping servicemembers who 

need the financial support, and the additional health coverage that 

generally comes with it, to care for a disabled member of their family. I am also pleased that our colleague, Ms. Davis, is here with 

us today to lend her support for these important provisions. 

The Chairman’s plan would also include bipartisan legislation 

that was introduced by Representative Tom Reynolds that would 

remove penalties for blind veterans who receive State annuity payments. The Act would exempt State annuities that are paid specifically to blind veterans from the tests that are used to determine 

eligibility and benefits under SSI. 

Some AmeriCorps volunteers currently have benefits under this 

program excluded from SSI eligibility rules, while others do not. 

The Chairman’s proposal would end this disparity by exempting 

payments made to all AmeriCorps volunteers when determining 

eligibility and benefits. This recommendation comes from the Social 

Security Administration and from the Corporation for National and 

Community Service. 

And last, the bill includes legislation that Mr. Van Hollen and 

I introduced to clarify the application of the 5-year requirement to 

the sale of a principal residence by a Peace Corps volunteer. The 

pending legislation is an important piece of work that will improve 

the lives of members of the armed forces and their families. It will 

also benefit those who volunteer to serve in the United States. 

And I am pleased to join my colleague, Congressman Neal from 

Massachusetts, in convening this hearing to discuss these important bipartisan proposals on behalf of the Committee. And I look 

forward to working with my colleagues on both sides to ensure that 

military personnel and other volunteers are treated equitably in 

our Tax Code and our Federal benefits. Thank you. 

Chairman NEAL. Thank you, Mr. Chairman. 

Now I would like to recognize our friend Mr. English, the Ranking Member of the Select Revenue Measures Subcommittee, for his 

opening statement. Mr. English. 

Mr. ENGLISH. I thank you, Mr. Chairman, for calling this hearing today. I think it is fair to say that we cannot express enough 

the tremendous debt of gratitude that we owe to the brave men 

and women who defend our freedoms on a daily basis. 

I have been privileged to have had the opportunity to support 

both our active duty military and the veterans who no longer wear 

the uniform. I am very grateful in this job to have been able to support legislation expanding quality of life improvements and pay increases for soldiers, as well as expansions of the VA medical care 

for veterans. 

And while many of these provisions are clearly not in the jurisdiction of this Committee, it is clear that the Tax Code does have 

an important role to play in addressing the needs of active duty 

and retired servicemembers. Today’s hearing I think is a timely attempt to explore some of the ways the tax system is helping, and 

in some cases where it is not, and perhaps some opportunities for 

us to improve tax policy in this area. 

I am looking forward to the testimony, and also to working with 

you, Mr. Chairman and others, to identify substantial solutions to 

real-life problems facing our military. 


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One of the problems I hope we will have a chance to examine is 

the shortage of on-base housing. This shortage forces the military 

to offer a housing allowance to soldiers who must find adequate 

housing off base. It is not clear to me that there is meaningful difference between these housing allowances and Section 8 vouchers 

for low-income families, which are also offered by the Federal Government. 

Yet strangely, under current law, the Tax Code perversely discriminates against military personnel attempting to find off-base 

housing. Specifically, under current law, Section 8 vouchers do not 

count as income for purposes of determining whether an individual 

meets the income limits for living in a rent-subsidized low-income 

housing tax credit facility. 

Yet, the law says that the recipients of the military housing allowance must include the value of the allowance in determining income for the low-income housing tax credit. This counterintuitive 

rule is unfair and discriminates against those who choose to serve 

their country. There is no reason to treat recipients of Section 8 

vouchers more favorably than members of our military, Mr. Chairman. 

I am grateful for those, including Mr. Moran of Kansas, who 

have gotten involved in this issue. And I hope that we will be able 

to work together in the coming days and weeks to address this serious problem. I can think of no better place to do so than in the context of this bill. 

Again, I thank you, and I thank the Committee, for moving forward in this area. And I yield back the balance of my time. 

Chairman NEAL. Thank you, Mr. English. 

And now let me recognize Mr. Weller, the Ranking Member of 

the Income Security and Family Support Subcommittee, for his 

opening statement. Mr. Weller. 

Mr. WELLER. Thank you, Mr. Chairman. I appreciate the opportunity to participate in this very important hearing. I also want to 

welcome my colleagues who are not Members of this Committee 

who are joining us today, all three friends, and welcome them for 

testifying before our two Subcommittees this morning. 

This is an important hearing, Mr. Chairman, in which we will review the tax and benefit assistance provided today to support active and retired military families, amongst others. We should always be looking for ways to ensure that families who make these 

sacrifices receive appropriate and timely support. That will provide 

more help to current veterans, as well as active duty families. 

But it will also encourage more young people to make these sort 

of sacrifices for our country in the future. We must always honor 

those who sacrifice and defend our freedoms. Those are our military men and women, as well as our veterans. 

So I thank you for calling this hearing. I look forward to our continued bipartisan work on these issues in the weeks ahead. 

At this time I would like to yield to my colleague and friend, 

Representative Tom Reynolds, who has authored numerous bills 

designed to improve the assistance provided to blind veterans in 

New York and other States. This assistance flows to the SSI program that operates under the jurisdiction of the Income Security 


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and Family Support Subcommittee. The proposal before us includes 

a modified version of Mr. Reynolds’ proposal. Mr. Reynolds. 

Mr. REYNOLDS. I thank my friend for yielding me this time. 

And I thank both Chairman Neal and Chairman McDermott, as 

well as Ranking Members English and Weller, for holding this important hearing. 

Mr. Chairman, we come together this morning not as Democrats 

or Republicans, but as Americans. We are united in our respect for 

those who wear the uniform of the United States armed forces, and 

we are united in our desire to ensure that Federal programs within 

the Committee’s jurisdiction, from Tax Code to the SSI program, 

work effectively for members of the military, veterans, and their 

families. 

I would like to highlight two specific provisions in the Committee’s draft bill that have been of particular interest to me during 

my time with Congress. The first provision, section 202, is modeled 

on legislation, the Blind Veterans Fairness Act, that I first introduced in the year 2000. 

My legislation would correct a problem in the Federal SSI rules 

that affect blind veterans in four States, New York, New Jersey, 

Pennsylvania, and Massachusetts, that provide blind veterans modest annuities in recognition for substantial sacrifices they have 

made in serving our country. We will hear more about one of those 

State annuity programs during our third panel when I introduce 

Michelle LaRock of New York’s Division of Veterans’ Affairs. 

Regrettably, under current Federal law, these State annuities actually reduce SSI payments for which blind veterans could otherwise be eligible. I do not need to remind my colleagues who serve 

on the Income Security Subcommittee that SSI beneficiaries are 

among the poorest of the poor in our country. The absolute last 

group of people the Federal Government should be barring from 

the program are veterans who gave their sight so the rest of us 

might be free. 

As in years past, the bill I have introduced in the 110th Congress, H.R. 649, has enjoyed bipartisan support among my Committee colleagues, including Chairman Neal, Mr. McNulty, and Mr. 

Porter. I would also like to thank Chairman Rangel for his cosponsorship of prior versions of this bill, and I look forward to working 

closely with him to see that this proposed legislation finally is enacted into law. I would ask unanimous consent that a letter from 

the Blinded Veterans Association endorsing H.R. 649 be entered 

into the record. 

Let me turn now to a separate provision in section 104 of the 

draft bill, which would permanently allow penalty-free withdrawals 

from IRA 401(k)s and other retirement funds for Reservists and 

National Guardsmen called to active duty. As we know, when 

Guardsmen or Reservists are called up, they often face significant 

reductions in pay compared to their civilian salaries, putting an 

economic strain on their families. 

To lessen this economic hardship, many of them choose to draw 

down on their retirement funds. Unfortunately, under prior law 

they face a 10 percent early withdrawal tax when they do so, and 

they face restrictions on making repayments to their retirement 

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tion Act provided relief from the 10 percent penalty tax and permitted unlimited repayments within 2 years after leaving active 

duty, but only for Guardsmen or Reservists called to active duty 

before December 1, 2007. 

To ensure this important relief remains available on a permanent basis going forward, I introduced H.R. 867, the Guardsmen 

and Reservist Tax Fairness Act, on February 7th of this year. This 

legislation has also attracted a bipartisan group of cosponsors, as 

well as endorsement from several leading VSOs. And I ask unanimous consent to make those endorsement letters part of the record 

as well. 

In closing, Mr. Chairman, I understand that we will be receiving 

testimony this morning from one of our colleagues, Mr. Lampson, 

about a bill he introduced on September 19th, just a few weeks 

ago, which is essentially identical to H.R. 867. I am delighted to 

see that my idea is gaining additional traction both by Democrats 

and Republicans, and I welcome support from any Member who is 

willing to help get this done. For me, this issue isn’t about who can 

claim the most credit for eliminating the early withdrawal tax. It 

is about doing what is right for Guardsmen and Reservists. 

Mr. Chairman, I hope today’s hearing will be a springboard for 

bipartisan action on these two important provisions that will find 

a way to make these changes without taxing ourselves to death 

somewhere else to pay for them. I thank the gentleman from Illinois for his courtesy in yielding me the time, and I yield back. 

Mr. WELLER. Claiming my time, and I yield back. Thank you, 

Mr. Chairman. 

Chairman NEAL. Thank you. 

I thank the gentleman from New York, and without objection, 

the letters he referred to will be part of the record. 

Mr. REYNOLDS. I thank the Chairman. 

Chairman NEAL. Without objection, any other Member wishing 

to submit an opening statement for the record may do so. And 

without objection, all written statements by witnesses will be made 

part of the record in full. 

Ms. Davis, Mr. Lampson, Mr. Jones, welcome to the Committee. 

Ms. Davis, would you please begin. 

STATEMENT OF THE HONORABLE SUSAN A. DAVIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Ms. DAVIS. Chairman Neal, Chairman McDermott, Ranking 

Member English, and Ranking Member Weller, thank you very 

much for convening today’s joint hearing on the Tax Code’s discriminatory treatment of servicemembers. I certainly appreciate 

having this opportunity to discuss how incorporating the language 

from the McDermott-Davis bill, H.R. 337, into the Heroes Earnings 

Assistance and Relief Act, the HEART Act, will help remedy one 

area of inequality. 

I would also like to thank the Members of the Committee for 

their effort to include provisions supporting Qualified Veterans 

Mortgage Bonds, or QVMB bonds, to promote homeownership for 

former servicemembers. Those loans have helped thousands of veterans in California and other eligible States purchase homes. 


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Correcting the flaw in current law that prevents veterans who 

signed up for military service after 1977 would be an enormous 

step forward. Those returning from Iraq and Afghanistan would 

have greater opportunities to purchase homes, especially in California’s high-cost real estate market. Again, I want to thank you for 

finally addressing the inequities in the QVMB program and for setting reasonable bond limits for the States that participate in this 

valuable program. 

Today’s hearing illustrates an important point, and that is that 

we have a responsibility to care for those who have chosen to serve 

their country. Just as these brave men and women are working to 

protect our Nation, we must likewise protect them and their loved 

ones through the laws and the policies that we enact. 

I want to turn to SSI eligibility and H.R. 337. The current Supplemental Security Income, SSI, regulations are causing some military families a great deal of frustration, and in some cases preventing them from obtaining benefits. As you know, SSI is a means 

tested income assistance program that also facilitates access to valuable services such as Medicaid. Without SSI, some special needs 

families would not be able to cover their medical expenses. 

However, members of the armed forces face a unique risk of losing SSI eligibility. Under the program’s rules, wages receive preferential treatment, the 50 percent disregard, as earned income, resulting in a lower countable income and, therefore, a higher SSI 

benefit. This process of income determination is generally straightforward, as Chairman McDermott pointed out, for the civilian population. 

But the intricate military pay and allowance system complicates 

the income determination process. Military members must contend 

with different treatment for items considered earned income or unearned income. Under current rules, only basic pay and continental 

United States cost of living allowance, the CONUS COLA, are considered earned income. Unfortunately, there are more than 30 

types of military pay that are treated as unearned income and result in a higher countable income. It is a bit counterintuitive as we 

look at this. But that is really what is happening to these military 

families. 

The language from the Military Families Financial Security Act, 

H.R. 337, changes how the SSA calculates income for SSI eligibility 

by treating most military compensation as earned income. This 

very simple change will help families remain eligible for SSI benefits and, overall, simplify the Administration of this program. 

In addition, the language in H.R. 337 would codify current treatment of Basic Allowance for Housing, the BAH, to the rules for inkind support and maintenance. Treating BAH this way would be 

more favorable for income determination purposes. 

I wanted to just mention a few comments that I have had from 

military families because I have heard from many of them who are 

struggling with the current SSI rules. And I think a few of their 

comments are telling. 

Lori Brown from northern San Diego has three children. Her 

husband, a 13-year Marine, is active duty. Her two boys receive 

SSI benefits. Dakota, 13, has Asperger’s syndrome, and Hunter, 

age 7, cerebral palsy and epilepsy. And she wrote the following: 


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‘‘We have had many ups and downs with SSI over the years. The 

way the military leave and earnings statement looks, everything is 

broken down and itemized for accounting purposes. But civilian 

pay stubs are looked at as earned income. This practice puts us at 

a great disadvantage. All the military families are looking for is 

equal rules for all, civilian and military, no better, no worse.’’ 

In closing, there is no doubt that the men and women who serve 

in our armed forces are everyday heroes. However, their service is 

even more inspiring when we realize many of these men and 

women are also trying to raise children and take care of their families. 

As Chair of the House Armed Services Subcommittee on Military 

Personnel and a former military spouse, the subject of military 

families has always been dear and near to my heart. The provisions from H.R. 337 and those dealing with veterans mortgage 

bonds are fair, overdue, and demonstrate our Nation’s appreciation 

for our military families and veterans. These changes will give 

servicemembers a bit more peace of mind from knowing that payment for their duties will not be jeopardizing their families’ eligibility for SSI benefits and related services. 

Thank you. 

[The prepared statement of Ms. Davis follows:] 

Prepared Statement of The Honorable Susan A. Davis, 

a Representative in Congress from the State of California 

Chairman McDermott, Chairman Neal and Distinguished Members of the Subcommittees, 

Thank you for convening today’s joint hearing on the Tax Code’s discriminatory 

treatment of servicemembers. 

I appreciate having this opportunity to discuss how incorporating the language 

from the McDermott-Davis bill, H.R. 337, into the Heroes Earnings Assistance and 

Relief Tax (HEART) Act will help remedy one area of inequality. 

Today’s hearing also illustrates an important point, that is, we have a responsibility to care for those who have chosen to serve their country—just as these brave 

men and women are working to protect our Nation, we must likewise protect them 

and their loved ones through the laws and policies we enact. 

SSI Eligibility and H.R. 337 

Current Supplemental Security Income (SSI) regulations are causing some military families a great deal of frustration and—in some cases—preventing them from 

obtaining benefits. 

As you know, SSI is a means-tested income assistance program that also facilitates access to valuable services such as Medicaid. 

Without SSI, some special-needs families would not be able to cover their medical 

expenses. However, members of the armed forces face a unique risk of losing SSI 

eligibility. 

Under the program’s rules, wages receive preferential treatment (50% disregard) 

as ‘‘earned income’’ resulting in a lower countable income and, therefore, a higher 

SSI benefit. This process of income determination is a generally straightforward one 

for the civilian population. 

The intricate military pay and allowance system complicates the income determination process. Military members must contend with different treatment for 

items considered ‘‘earned income’’ or ‘‘unearned income.’’ Under current rules, only 

basic pay and Continental United States Cost of Living Allowance (CONUS COLA) 

are considered earned income. Unfortunately, there are more than 30 types of 

military pay that are treated as ‘‘unearned income’’ and result in a higher countable 

income. 

The language from the Military Families Financial Security Act, H.R. 337, 

changes how the SSA calculates income for SSI eligibility by treating most military 

compensation as earned income. This simple change will keep families eligible for 

SSI benefits and simplify the administration of this program. 


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In addition, the language in H.R. 337 would codify current treatment of Basic Allowance for Housing (BAH) to the rules for in-kind support and maintenance. Treating BAH this way would be more favorable for income determination purposes. 

Comments from Military Families 

Chairman McDermott and Chairman Neal, I have heard from numerous families 

who are struggling with the current SSI rules and want to share a few of their comments with you. 

Lori Brown from northern San Diego has three children and her husband, a 13- 

year Marine, is active duty. Her two boys receive SSI benefits. Dakota, 13, has 

Asperger’s Syndrome and Hunter, 7, cerebral palsy and epilepsy. 

She wrote the following: 

‘‘We have had many ups and downs with SSI over the years. The way 

the military LES (Leave and Earnings Statement) looks everything is broken down and itemized for accounting purposes, but civilian’s pay stubs are 

looked at as all ‘‘earned’’ income. This practice puts us at a great disadvantage. All the military families are looking for is equal rules for all civilian 

and military, no better no worse.’’ 

Anne Hoag from Watertown, NY has a 41⁄2-year-old son, Liam, who did not qualify for SSI benefits because of the family’s income. She shared the following about 

the current income determination process. 

‘‘This system is totally unfair and unjust for my son. If we made the same 

amount of money and were civilians, he would qualify for SSI. 

Being a military family is hard. Being a family with a disabled member 

is hard. Being both is even harder, and these families, these kids are suffering due to temporary circumstances. SSI money would make a huge difference in the life of my child.’’ 

In Closing 

There is no doubt that the men and women who serve in our armed forces are 

everyday heroes. However, their service is even more inspiring when one realizes 

that many of these men and women are also trying to raise children and take care 

of their families. 

As Chair of the House Armed Services Subcommittee on Military Personnel and 

a former military spouse, the subject of military families has long been dear and 

near to my heart. 

Lee Iacocca once said, ‘‘The only rock I know that stays steady, the only institution I know that works, is the family.’’ He could have been talking about military 

families. 

The provisions from H.R. 337 are fair, overdue and demonstrate our Nation’s appreciation for our military families. These changes will give servicemembers peace 

of mind from knowing that their duties will not jeopardize their families’ eligibility 

for SSI benefits and related services. 

f 

Chairman NEAL. The gentleman from Texas, Mr. Lampson, is 

recognized for testimony. 

STATEMENT OF THE HONORABLE NICK LAMPSON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. LAMPSON. Thank you, Chairman Neal, Chairman 

McDermott, Ranking Members English and Weller, distinguished 

Members of the Committee. It is an honor to be able to come and 

offer testimony this morning, and I certainly appreciate you calling 

this important hearing. 

Two weeks ago I announced a tax package that I developed to 

benefit all of our country’s middle class, the America’s Middle Class 

Tax Relief Plan. And included in that plan was H.R. 3594, America’s Heroes Tax Relief Act, a bill that permits soldiers called to active military duty to deduct from the individual retirement accounts, their 401(k) plans or 403(b) tax-sheltered annuities, withVerDate Nov 24 2008 08:44 Jan 31, 2011 Jkt 058274 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\58274.XXX APPS06 PsN: 58274

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out having to pay the 10 percent early deduction tax the IRS levies 

on withdrawals taken before 591⁄2. The Heroes Earnings Assistance and Relief Tax Act, HEART, 

that we are discussing today includes my legislation and many 

other provisions that help our soldiers and their families. And I am 

proud to support this bill that takes into consideration the financial 

burdens placed on our men and women in uniform serving bravely 

throughout the world, and works to provide for their financial security by cutting taxes and ensuring the receipt of important benefits 

that our military families depend on. 

Southeast Texas has the largest population of veterans in the 

Nation. Their service is something that we do not take for granted. 

National Guardsmen and Reservists throughout the world serve 

the United States honorably and bravely, often while enduring personal financial hardship. This legislation is just a small way to 

show our gratitude for their service and their sacrifice while easing 

the financial strain that can be put on them and their families. 

For military Reservists and National Guard members who are 

deployed and sent away from their usual job, the strain can be 

compounded. Since the war in Iraq began, statistics have shown 

that more than a third of these soldiers experience a cut in pay 

when they are called to active duty. 

Perhaps the hardest hit of this group are small business owners 

and self-employed workers, who account for about 6 percent of the 

Reservists. Many of these individuals lose customers. They fall behind on their bills or are in some instances forced into bankruptcy. 

This is simply unacceptable, and the Heroes Earnings Assistance 

and Relief Tax Act will help. 

Veterans in my district are grateful for this legislation. Those 

who served in previous conflicts sympathize with the difficulties 

that our troops face when they return home, and are always thankful when we can make their time serving in active duty easier for 

them and for their families. 

Temporary relief from this tax was enacted through H.R. 4 in the 

109th Congress, which became public law in August 2006. But it 

didn’t go far enough. Through the Heroes Earnings Assistance and 

Relief Tax Act, penalty-free withdrawals will become permanent, 

which will enable our heroes to count on a relief of financial burden 

on their families. 

This provision will enable military families in Texas and elsewhere to permanently make withdrawals from their retirement accounts to ensure their financial security while loved ones are serving our Nation. More Reserve soldiers than ever before hold whitecollar jobs. And for many of these individuals, time away from 

home can harm relationships with customers and clients that took 

years to cultivate. 

Often, soldiers are called up to active duty and need extra funds 

to ensure their family is supported when they are sent overseas to 

protect our Nation. Our soldiers risk their lives defending our freedom and ensuring our Nation’s security. They should not be penalized by the IRS while doing it. 

Again, I want to thank you for initiating this hearing on this important legislation that will help the families of our brave National 

Guardsmen and Reservists in combat continue to live their everyVerDate Nov 24 2008 08:44 Jan 31, 2011 Jkt 058274 PO 00000 Frm 00018 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\58274.XXX APPS06 PsN: 58274

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day lives with as little added stress as possible while their loved 

ones are overseas. I thank you, Mr. Chairman, and yield back. 

[The prepared statement of Mr. Lampson follows:] 

Prepared Statement of The Honorable Nick Lampson, 

a Representative in Congress from the State of Texas 

I am pleased to offer this testimony, and I thank the Chairmen and Members of 

the Committee for calling this important hearing. 

Two weeks ago I announced a tax cut package I developed to benefit all of our 

country’s middle-class, America’s Middle-Class Tax Relief Plan. Included in my plan 

was, H.R. 3594, America’s Heroes Tax Relief Act, a bill that permits soldiers called 

to active military duty to deduct from their individual retirement accounts, their 

401(k) plans and 403(b) tax-sheltered annuities, without having to pay the 10 percent early-deduction tax the IRS levies on withdrawals taken before age 59 and a 

half. 

The ‘‘Heroes Earnings Assistance and Relief Tax Act’’ that we are discussing 

today includes my legislation and many other provisions that help our soldiers and 

their families. I am proud to support this bill that takes into consideration the financial burdens placed on our men and women in uniform serving bravely throughout the world, and works to provide for their financial security by cutting taxes and 

ensuring the receipt of important benefits that our military families depend upon. 

Southeast Texas has the largest population of veterans in the Nation. Their service is something we do not take for granted. National Guardsmen and Reservists 

throughout the world serve the United States honorably and bravely, often while 

enduring personal financial hardship. This legislation is just a small way to show 

our gratitude for their service and sacrifice while easing the financial strain that 

can be put on them and their families. 

For military Reservists and National Guard members who are deployed and sent 

away from their usual job the strain can be compounded. Since the war in Iraq 

began, statistics have shown that more than a third of these soldiers experience a 

cut in pay when they’re called to active duty. 

Perhaps the hardest hit of this group are small business owners and self-employed workers, who account for about 6 percent of reservists. Many of these individuals lose customers, fall behind on their bills or are forced to declare bankruptcy. 

This is simply unacceptable and the ‘‘Heroes Earnings Assistance and Relief Tax 

Act’’ will help. 

Veterans in my district are grateful for this legislation. Those who served in previous conflicts sympathize with the difficulties our troops face when they return 

home and are always thankful when we can make their time serving in active duty 

easier for them and their families. 

Temporary relief from this tax was enacted through H.R. 4 in the 109th Congress, 

which became public law in August 2006, but it didn’t go far enough. Through the 

‘‘Heroes Earnings Assistance and Relief Tax Act,’’ penalty-free withdrawals will become permanent which will enable our heroes to count on a relief of financial burden on their families. 

This provision will enable military families in Texas and elsewhere to permanently make withdrawals from their retirement accounts to ensure their financial 

security while loved ones are serving our Nation. 

More reserve soldiers than ever before hold white-collar jobs. For many of these 

individuals, time away from home can harm relationships with customers and clients that took years to cultivate. 

Often, soldiers called up to active duty need extra funds to ensure their family 

is supported when they are sent overseas to protect our Nation. Our soldiers risk 

their lives defending our freedom and ensuring our Nation’s security. They should 

not be penalized by the IRS while doing it. 

Again, I would like to thank you for initiating this hearing on this important legislation that will help the families of our brave National Guardsmen and Reservists 

in combat continue to live their everyday lives with as little added stress as possible 

while their loved ones are overseas. 

f 

Chairman NEAL. Thank you, Mr. Lampson. 

Now I would like to recognize our friend Mr. Jones from North 

Carolina. 


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STATEMENT OF THE HONORABLE WALTER B. JONES, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH 

CAROLINA 

Mr. JONES. Chairman Neal and Chairman McDermott, and my 

friends Ranking Members English and Weller, and the Members of 

this Committee, thank you for this opportunity. 

Mr. Chairman, our men and women in uniform serve this Nation 

with great honor and distinction and may give their lives for this 

country. It is for this reason that I introduced this legislation over 

2 years ago. H.R. 418 permits military families who receive the 

death gratuity to invest the full amount into certain tax-favored accounts. 

As you may know, a death gratuity is a $100,000 payment paid 

to survivors of servicemembers whose death resulted from combatrelated circumstances. Current tax laws limit the amounts that recipients of the death gratuity can place in tax-preferred accounts 

such as a Roth IRA or a Coverdell Education Savings Account. This 

legislation would change that to allow recipients to contribute up 

to the full amount of the gratuity payment to any one of these two 

accounts. 

As the families of our fallen heroes try to put their lives back together, they need help. They should not have to worry about saving 

the death gratuity to pay for retirement, college, or other expenses, 

and then have the government come in and tax the interest on that 

savings. This bill will help ensure that does not happen. 

The need for this legislation was brought to my attention by Captain Michael Ceres, a constituent stationed at Marine Corps Air 

Station New River. Captain Ceres, who had just returned from 

serving in Iraq, contacted my office and suggested that Congress 

institute this change to ease the burden on grieving military families. 

The Joint Committee on Taxation has scored this legislation at 

no cost, meaning that the actual cost of this proposal is less than 

$500,000 over 9 years. We owe it to our fallen military heroes to 

expand the options of families who receive the death gratuity, families who have paid the ultimate cost with the loss of their loved 

one. 

H.R. 418 has also received the endorsement of the Military Coalition, a group of prominent national military and veterans organizations that represent more than 5.5 million members, plus families. 

I thank you, Mr. Chairman, for this hearing. I am grateful that 

this Committee is putting together this comprehensive package to 

help our families and our military. And so with that, Mr. Chairman, thank you again for this opportunity, and I yield back the 

balance of my time. 

[The prepared statement of Mr. Jones follows:] 

Prepared Statement of The Honorable Walter B. Jones, 

a Representative in Congress from the State of North Carolina 

Mr. Chairman, Ranking Member, our men and women in uniform serve this Nation with great honor and distinction. Many give their lives for this country. It is 

for this reason that I introduced this legislation over 2 years ago. H.R. 418 permits 

military families who receive the death gratuity to invest the full amount into certain tax-favored accounts. 


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As you may know, a death gratuity is a $100,000 payment paid to survivors of 

servicemembers whose death resulted from combat-related circumstances. Current 

tax law limits the amount that recipients of the death gratuity can place in taxpreferred accounts such as a Roth IRA or Coverdell Education Savings Account. 

This legislation would change that to allow recipients to contribute up to the full 

amount of the gratuity payment to any one of those accounts. 

As the families of our fallen heroes try to put their lives back together, they need 

all the help they can get. They should not have to worry about saving the death 

gratuity to pay for retirement, college, or other expenses—and then have the government come in and tax the interest on that savings. This bill would help ensure 

that does not happen. 

The need for this legislation was brought to my attention by Captain Michael 

Ceres, a constituent stationed at Marine Corps Air Station New River. Captain 

Ceres, who had just returned from serving in Iraq, contacted my office and suggested that Congress institute this change to ease the burden on grieving military 

families. 

The Joint Committee on Taxation has scored this legislation at no cost, meaning 

that the actual cost of the proposal is less than $500,000 over 9 years. 

We owe it to our fallen military heroes to expand the options of families who receive the death gratuity, families who have paid the ultimate cost with the loss of 

their loved one. 

H.R. 418 has also received the endorsement of The Military Coalition, a group of 

prominent national military and veterans organizations that represents more than 

5.5 million members plus their families. 

Today, I call upon my colleagues to support H.R. 418 to expand the options of 

military families whose loved ones have given their lives in the name of freedom 

and in defense of our Nation. 

f 

Chairman NEAL. Thank you very much, Mr. Jones. 

I know that this question is going to sound very simple, but I 

think it is worthy of explanation and certainly would be helpful to 

the discussion as a whole. For any of the three panelists, you are 

cosponsoring or suggesting a manner in which it would be easier 

for people to access penalty-free retirement account withdrawals. 

Can you explain succinctly why people need, in the military, to 

tap into these retirement accounts earlier than anticipated? Any 

one of the three like to take a—— 

Mr. LAMPSON. I would like to at least make one comment on 

it. There are many areas where we are desperately in need of people with good background to be able to do it, and oftentimes those 

particular jobs to which they may go are not highly paid jobs. 

Teachers, for example, is an area where if a person is able to, 

when they leave the military, go into a teaching field and offset 

some of their costs for living with access to already-set-aside money 

without having to pay the penalty on it, it would be a significant 

boon to our communities. And I am sure that that can be doubled 

many times over. 

Chairman NEAL. Thank you. Sounds so simple, but it is so critical. 

Mr. LAMPSON. Indeed. 

Chairman NEAL. Mr. English. 

Mr. ENGLISH. Mr. Chairman, I would just like to thank these 

panelists for their contribution and for their very strong commitment to the veterans. And I have no further questions. 

Chairman NEAL. Thank you. 

Mr. McDermott. 

Mr. MCDERMOTT. I would like to hear from each of you the 

case that came to your office that made you drop in this legislation, 


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because I think sometimes people don’t understand where we get 

the ideas that we bring to Congress. 

Susan, can you tell us what happened to you? 

Ms. DAVIS. I have had an opportunity, actually, to meet with a 

number of families who have come and spoken to me. Lori Brown, 

who I mentioned in this particular story, I met with Ms. Brown 

and her son Hunter to talk about this issue. 

And I think what is so difficult about it, the predictability for 

these families is just not there because their income is changing 

from one deployment to the next. And that is what is really difficult because sometimes if they are in combat, it may be exempted. 

But if they are not in combat, it is not. 

I think the system itself just confuses families. And I had this 

wonderful family in front of me sharing how they just don’t know 

how they are going to cover these medical expenses from one year 

to the next because of the way their income is counted. 

As I said earlier and I think you mentioned, Mr. Chairman, it 

is counterintuitive. You would think that they would be getting 

more. But, in fact, because it is not counted as earned income, it 

then ends up being at a higher level, which sends the message that 

they are making a lot more money than they are actually making. 

And that is where the rub is. 

Mr. MCDERMOTT. Nick. 

Mr. LAMPSON. Mr. Chairman, I think there are probably 

two—— 

Mr. MCDERMOTT. Congressman Lampson. 

Mr. LAMPSON. Call me anything. Just don’t call me late for 

supper. 

I think for the first time that I had such an impact made to me 

about the need to address issues like this was when a veteran’s 

family came to us because they were in the process of losing their 

home, which they actually lost. I was astounded. 

I think more recently, a gentleman who is working for me in my 

office now, when he returned from Iraq, expressed concerns himself 

about needing financial assistance to be able to make ends meet, 

to make the transition, to get back into the life here. So John 

Bursler is a gentleman who served valiantly in combat, and came 

back and is now working in my office. 

And I think that the number of cases, Chairman McDermott, 

probably can go on as long as your arm, unfortunately. And there 

are some that are pretty dramatic. We have a significant number 

of people right now who I met with who have just returned. The 

149th Attack Group came back just within the last couple of weeks. 

Some of those people are already coming and talking to us about 

some of the needs that legislation like the HEART Act will be able 

to assist. And we appreciate that. 

Mr. MCDERMOTT. Mr. Jones. 

Mr. JONES. Mr. Chairman, thank you. Captain Michael Ceres 

called me 2 years ago and we talked by telephone. And he said, 

Congressman, he said, I have been to Iraq one time. I am sure that 

I will be going back soon. He said, I want to make it as easy for 

my wife. He said, we have two children. The oldest is six. And he 

said, we have talked about my death and what I would like to happen for her and my children. 


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And I really get kind of a chill telling you this conversation because over the telephone, he was such a compassionate man. And 

he just wanted to make sure that his wife would have decisions 

that would be forthcoming; in some ways, maybe he could take off 

some of the pressure. And that is how he brought this idea to me about the $100,000 

death gratuity. Give her, or any family, an option to put the full 

amount in and not have to worry about 5,000 here, 5,000 there. 

And I just felt like it made a great deal of sense. And if a family 

member is going to be sent to war and maybe not come back, then 

they could at least say to that spouse, you now have a choice that 

you can take the full amount, if you choose to do so, and put it into 

a 401 type plan. 

Mr. MCDERMOTT. Thank you. Thank you all. 

Chairman NEAL. Thank you, Mr. Chairman. 

The Chair would now like to recognize Mr. Weller. 

Mr. WELLER. Thank you, Mr. Chairman. And I want to thank 

my colleagues for being before us today. Clearly, all have proposals 

which have, I believe, strong bipartisan support. 

I particularly want to commend my friend Mr. Jones for your initiative here in giving survivors the opportunity to save the full 

death benefit. As one who has worked on the issue of catch-up contributions, IRAs and 401(k)s to help working moms and empty 

nesters make up missed contributions, I believe your proposal 

clearly has bipartisan support and I would welcome the opportunity to work with you. 

Mr. JONES. Thank you. 

Mr. WELLER. As I note, as your testimony points out, this bill 

has already been scored. And the scoring says that the actual cost 

proposal is less than $500,000 over 9 years. So it comes at a little 

cost, but it can really make a difference for families. 

So I want to commend you for your initiative, and I would very 

much like to work with you as a cosponsor of your bill, if I could 

join with you. 

Mr. JONES. Thank you. 

Mr. WELLER. Thank you, Mr. Chairman. I yield back. 

Chairman NEAL. Thank you. Are there any other questions from 

our panelists, or would it be okay—— 

Mr. DOGGETT. Mr. Chairman? 

Chairman NEAL. The Chair would recognize Mr. Doggett. 

Mr. DOGGETT. I’d like to thank each of you for the role you’ve 

played. And I believe that our objective, as Congressman Jones 

said, is to develop a comprehensive package, to take all the ideas 

that have come forward and try to bring them together to do as 

much as we possibly can. 

I know you recall the effort that we made a few years ago just 

to get the limit on the death benefit up to $100,000 because when 

this war began, it was much lower than that. And I think each of 

you have constructive proposals. 

I would like to ask Congresswoman Davis about another idea. 

The SSI benefits you mentioned are extremely important, but we 

have also been considering as a part of this comprehensive package 

the challenges that many of our returning military personnel face 

when they come back to try to find housing. 


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And you have some legislation that you have introduced—I know 

Congressman Lampson has joined with it because particularly 

Texas and California have been affected—that currently the law 

does not allow more veterans who served our country since the 

Vietnam War to participate in programs like we have in Texas. 

In Texas, it is done through our Veterans Land Board, and it has 

been really important to open financing for our vets to allow them 

to be a home buyer. And yet under the way the law is written now, 

someone who served in the Persian Gulf War, in Bosnia, in Somalia, and now in the conflicts in Afghanistan and Iraq, would not be 

eligible for a program that a Vietnam vet or someone earlier than 

that would be eligible. 

Could you elaborate a little on your efforts, Congresswoman 

Davis or Congressman Lampson? I know you care about this issue 

also. 

Ms. DAVIS. Yes. Well, thank you, Mr. Doggett. Yes. What is so 

difficult is that if you are coming back from Iraq or Afghanistan 

today, you are not eligible for that program that other vets have 

been eligible for in California and across the country. 

By including the Qualified Veterans Mortgage Bonds in this provision today in this bill, it really does make a difference. Anyone 

serving after 1977 is therefore eligible. And these are the opportunities that provide them with the best loans possible. 

And when we talk to those returning men and women, it doesn’t 

make any sense to them that they somehow would not be part of 

this. It is a quirk basically and some limits that were cast in prior 

legislation, and that is the correction that is being done today. And 

it really will make a difference by substantial amounts to these 

folks. 

Mr. DOGGETT. And Congressman Lampson, since your territory 

is not far from the area I represent in Texas, I am sure that like 

my area, it has an affordable housing problem, and that many of 

the folks who might settle there in the outskirts of Houston or in 

any of the area that you cover, that being able to get the financing, 

and now with some of the challenges especially within the mortgage industry, is really important to these returning vets. 

Mr. LAMPSON. Anyone who has ever looked into the face of anybody who lost a home, and then more importantly, a veteran— 

when I was standing and talking with three different families on 

the return of a group of Iraq veterans, all three of them were having difficulties. Only one of them at the time lost a home. 

Many of our—what is it, one-third of our homeless people are 

veterans. Those are atrocious statistics for us to consider. And like 

I started out, if you look at the face of someone like that, how can 

we not stand up to do anything we can to be of help? 

This legislation we hope will. We want to make a difference. 

There are many, many, many people who are seeking the opportunity to be homeowners. If we can help them, then I think we are 

doing the job that we were sent here to Washington, D.C. to do. 

Mr. DOGGETT. And I know, going back to your service even before coming to Congress, you are familiar with the work of the 

Texas Veterans Land Board—— 

Mr. LAMPSON. Certainly. 


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Mr. DOGGETT [continuing]. And how valuable it is to our vets 

there in Texas. And if we can open up opportunities there to more 

returning vets, we can provide more opportunity to come back and 

be full participants and homeowners in Texas. 

Mr. LAMPSON. Certainly. 

Mr. DOGGETT. Thank you, and I yield back. 

Chairman NEAL. Mr. Thompson is recognized. 

Mr. THOMPSON. Thank you, Mr. Chairman. I want to thank all 

of you for being here today and for your testimony, and for the 

great work that you are doing in this regard. 

Specifically, though, I would like to thank Ms. Davis for her work 

in her bill that she introduced regarding the Qualified Veterans 

Mortgage Bond program. I am proud to be a cosponsor of that bill, 

and had it not been for that program, I don’t think I could have 

purchased my first house. 

So I know it was important for me, and I know it is important 

for a lot of other veterans. And we need to help those folks realize 

that American dream in all ways that we possibly can. So thank 

you. 

I yield back. 

Chairman NEAL. The Chair would recognize Mr. Blumenauer. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. And I too appreciate the hard work that is evidenced by our colleagues here, 

and I identify with the comments that both my previous colleagues 

have mentioned here from the dais. 

Mr. Chairman, I guess I would just add my voice in terms of 

making sure that the Qualified Veterans Mortgage Bond program—we are in a State that has had a program here that has 

served, in Oregon, a third of a million veterans since World War 

II, being able to make some adjustments. 

We are in danger of running out of money in my State, and I 

look forward to working with my colleagues who are witnesses and 

with you, Mr. Chairman, to make sure that the adjustment—it 

looks like we have some indication from the Committee staff and 

leadership that we might be able to make an adjustment for Oregon that would be necessary to keep that program going so that 

we don’t shortchange our veterans who are returning from the field 

of battle of late. 

And I appreciate the work that all of you are doing, and look forward to making sure that that benefit extends back to my community as well. 

Chairman NEAL. Thank the gentleman. 

The gentlelady from Nevada, Ms. Berkley, is recognized. 

Ms. BERKLEY. Thank you, Mr. Chairman. I also want to thank 

and congratulate my colleagues for coming here and presenting 

their testimony regarding these pieces of legislation that are going 

to impact the lives of our veterans. 

I represent a community that has the fastest-growing veterans 

population in the United States. I have over 200,000 veterans in 

my congressional district. And as a Member of the Ways and 

Means Committee and the Veterans’ Affairs Committee, I keep in 

close contact with my veterans. 

Nellis Air Force Base is directly outside of my district. And right 

now we have 1,600 veterans who have returned home from this latVerDate Nov 24 2008 08:44 Jan 31, 2011 Jkt 058274 PO 00000 Frm 00025 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\58274.XXX APPS06 PsN: 58274

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est military action in Iraq and Afghanistan in our global war on 

terrorism. These pieces of legislation that are being proposed today 

are very important, and I fully support them. 

When I hear our colleagues and Members of the Administration 

talking about supporting our troops, I can’t think of a better way 

of supporting our troops than showing our veterans that we recognize their sacrifices and we care enough about them to make them 

as whole as possible when they return, and in the chance that they 

don’t return, to show our appreciation for the ultimate sacrifice by 

helping the families overcome this tragedy. 

So I thank you again for being here, and I appreciate your testimony. 

Chairman NEAL. Thank the gentlelady. 

Mr. Johnson, the gentleman from Texas, is recognized. 

Mr. JOHNSON. Thank you, Mr. Chairman. I appreciate it. 

You know, in Texas, and you would know that, the Qualified Veterans Mortgage Bond program in Texas has been very popular with 

older veterans. IT is a program that was grandfathered into law in 

1986 along with other private activity bond programs in four additional States. 

The program in Texas is limited to only veterans who served on 

active duty before 1977, and who apply for this housing finance assistance within 30 years after the last date of their military service. 

Frankly, there are not many veterans who fall into that category, 

but we have thousands of young Texans who are coming home from 

military service today who should be served by this program. 

Young veterans from Texas should be eligible for veteran mortgage 

bond financing for their homes, just as the young veterans in the 

States of Oregon, Alaska, and Wisconsin are now. 

Mr. Chairman, I would like to get information from the Joint 

Committee on Taxation about how many additional veterans will 

be eligible for this housing assistance if this provision is added to 

the bill. And I also would ask unanimous consent to have a statement submitted for the record from the Texas Veterans Land 

Board Chairman, Jerry Patterson. 

Chairman NEAL. Without objection, the gentleman’s request will 

be entered into the record. 

Mr. JOHNSON. Thank you. Thank you for allowing me to come 

in. 

Chairman NEAL. Thank you, Mr. Johnson. 

The gentlelady from Pennsylvania, Ms. Schwartz, is recognized. 

Ms. SCHWARTZ. Thank you, Mr. Chairman. And I too want to 

congratulate my colleagues for their really important work in supporting our troops, our armed services, and particularly recognizing 

some of the issues that they have when they return home. So 

thank you for your good work, and I know you appreciate your interest being in this draft bill, and hope to keep it that way. 

I wanted to take my moment to not ask a question, but to mention something else that is in the draft legislation that is a proposal that I have introduced and support. And it comes from—I appreciate the suggestion we are to talk about where it comes from. 

And I have a constituent who came to me about an issue. He is 

actually a full-time civilian Federal employee at a defense logistics 


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agency in my district. I want to call it—we always refer to it as 

the defense supply depot, you know. 

But he volunteered to go to Iraq to work, as he does here, on the 

same kind of issues of logistics and actually buying supplies. And 

so I didn’t get a chance to see him in my district, but I did see him 

when I was in Baghdad. We met when I was in the Green Zone. 

He was in uniform, and his name is Tim McMinn. 

And his issue was the fact that while he is serving in a combat 

zone and in harm’s way and doing work for the Department of Defense as a Federal civilian employee, he does not get the same tax 

advantages as someone who serves in the military, and had asked 

me about whether in fact we could fix that. 

He is overseas again in a combat zone in harm’s way doing work 

asked by the Department of Defense, and his family is at home. 

And he would like the same tax advantages. So Mr. Wolf, who has 

introduced this legislation referred to as the Federal Employee 

Combat Zone Tax Parity Act—and actually, Mr. Jones, you are a 

cosponsor, as is Mr. English and Van Hollen on the Committee. 

And it has been included in the underlying bill, draft bill. And 

I’m pleased about that. And, also, I know I share with you an interest in seeing that our civilian soldiers, if you want to call them 

that, are treated in the same way from a tax point of view so that 

they actually can receive the same tax benefits while they are deployed overseas. 

So I am sure some of you would want to be supportive of that. 

But I mention it and want to say that I look forward to working 

with the Chairman on this particular piece of legislation and this 

content in the bill, and look forward to working on the larger bill 

as well, and hope we can move forward so that our newest veterans 

can receive some of the kind of fairness that they need from a tax 

structure. 

So thank you, Mr. Chairman. 

Chairman NEAL. We thank the gentlelady. 

I want to also thank our panelists for their testimony today. And 

I would now like to move to the second panel, and ask Mr. Rust 

to take his position. 

The Chair would now like to recognize Mr. Rust. Would you proceed with your testimony, sir. 

STATEMENT OF DAVID A. RUST, ACTING DEPUTY COMMISSIONER, DISABILITY AND INCOME SECURITY PROGRAMS, 

SOCIAL SECURITY ADMINISTRATION 

Mr. RUST. Chairman Neal, Chairman McDermott, and Ranking 

Members Weller and English, I am pleased to be with you today. 

On behalf of Commissioner Astrue, thank you for inviting me to 

discuss the proposed changes in the SSI program. 

I am David Rust. I am the Executive Secretary of the Agency, 

and since early August, I have also been serving as the Acting Deputy Commissioner for Disability and Income Security Programs. 

My responsibilities include oversight and coordination of policy and 

operational issues for both the SSI program and the OASDI program. In this role, I have great interest in making these programs 

as effective as possible, and I am pleased that SSA views on the 


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pending SSI-related proposals in the HEART bill have been requested today. 

Over the years, Congress has pursued incremental changes in 

the SSI law, finding ways in which equity can be improved and policy streamlined within the basic structure of the program. It is in 

that context that we can best evaluate the three SSI-related provisions in the legislation, and I am pleased to say that we support 

two of these provisions, and that they have been previously proposed to the Congress by SSA. 

The first proposal would treat most military compensation as 

wages for SSI purposes and codify SSA’s policy of treating certain 

housing allowances as non-cash or in-kind income. The proposal 

would also put in the statute the current SSI policy that excludes 

any additional pay received from service in a combat zone. We believe that this legislation is critically important. 

The provision would remove the most significant inequity in the 

consideration of household income. And it is especially needed by 

disabled children of our Nation’s service men and women. It is this 

group that is most severely affected by the current policy. 

Under current SSI law, generally only basic pay is counted as 

earned income. All other allocations—housing, uniform, special 

duty pay, and so forth—are counted as unearned income. Because 

of the SSI provisions supporting beneficiary efforts to work, earnings from work are treated differently than other income in determining eligibility and benefit levels. 

When a child is disabled, we determine eligibility based on family income using the same distinction between earned and unearned income. The different treatment of different pay types has 

had the effect of disadvantaging many military personnel. 

The proposal contained in the HEART bill would result in treating most cash military compensation and civilian wages alike for 

SSI purposes, thus eliminating the present unfair treatment of 

military compensation other than basic pay. 

We also support a statutory requirement regarding the consideration of certain privatized military housing. This approach to the 

housing allowance is appropriate because in these situations, the 

full amount of the servicemember’s allowance is deducted directly 

from his or her pay and then paid directly to the landlord of the 

privatized housing. By codifying this policy into statute, Congress 

affirms the importance of eliminating inequities in the SSI program. 

Mr. Chairman, I would note that I think that Representative 

Davis’ earlier testimony clearly described the situation that many 

of these provisions were designed to address. 

Turning to the second proposal, we also support legislation that 

would exclude AmeriCorps program payments for the purposes of 

determining SSI eligibility and benefit amounts. In 1993, the creation of the Corporation for National Community Service brought 

together two formerly independent Federal agencies, the Commission for National Service and the Action Agency. 

This merger of previously separate agencies led to differences in 

how income for SSI purposes is considered. For volunteers in the 

AmeriCorps Vista program, Federal law excludes stipends paid to 


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the volunteers from income for SSI purposes. However, current law 

does not exclude similar payments to other AmeriCorps volunteers. 

Thus, we have individuals performing similar volunteer work 

and participating in similar programs who are being treated differently. SSA supports the proposed legislation. Treating income 

similarly across the AmeriCorps volunteer programs would provide 

equity for our beneficiaries and also provide for administrative simplification. 

Like all Americans, we recognize the great debt owed to members of the armed services who have made sacrifices for all of us. 

The third proposal, to exclude State annuity benefits to blind veterans from income considered for SSI benefits, serves as a means 

to recognize that sacrifice. An exclusion of State annuity payments 

for veterans who by definition are blind and also of limited resources seems reasonable and appropriate. 

In conclusion, the AmeriCorps and Military Service Income proposals correct inequities that exist in the current SSI law, and the 

State Blind Pension exclusion could provide humanitarian assistance to those who have served our country. 

I thank the Subcommittees for holding this hearing and for considering these SSI provisions. SSA looks forward to continuing to 

work with Congress in our ongoing efforts to promote sound public 

policy and improve program administration. 

Thank you, and I will be glad to answer any questions you may 

have. 

[The prepared statement of Mr. Rust follows:] 

Prepared Statement of David A. Rust, Acting Deputy Commissioner, 

Disability and Income Security Programs, Social Security Administration 

On behalf of Commissioner Astrue, thank you for inviting me to discuss proposed 

changes in the Supplemental Security Income (SSI) program. I am David Rust, and 

I serve as Executive Secretary of the Agency and, since early August, as the Acting 

Deputy Commissioner for Disability and Income Security Programs. My responsibilities include oversight and coordination of policy and operational issues for both the 

SSI and the Old Age, Survivors, and Disability Insurance (OASDI) programs. In this 

role I have an obligation to make these programs as effective as possible, and a 

great interest in proposals that would help achieve that end. So I am pleased to 

offer the Social Security Administration’s (SSA’s) views on several SSI-related proposals contained in the Chairman’s draft bill. 

Background 

Before turning to the specific proposals contained in this bill, I would like to take 

a minute to provide some helpful background information. SSA has been administering the SSI program for more than 30 years—dealing with a program in which 

eligibility and the amount of needs-based benefits is dependent upon the fluctuating 

circumstances of millions of beneficiaries. Complex income rules, designed to more 

favorably consider earned wages than unearned payments, mean that SSA must 

evaluate the source of every dollar. Resource limits, likewise, mean that a beneficiary who is eligible for payments one month may not be the next. 

If it sounds complicated, that’s because it is. Means-tested programs such as SSI 

have to balance the stewardship requirements of protecting taxpayers, while insuring fair treatment for beneficiaries, with the administrative need to design programs 

that are manageable. It is quite a challenge for SSA and the Congress, both of 

which have studied SSI simplification and equity issues for years. 

Over the years, Congress has pursued incremental changes to SSI law, finding 

ways in which equity can be improved and policy can be streamlined within the 

basic structure of the program. It is in this context that we can best evaluate the 

SSI-related provisions of this legislation, and I am pleased to say that we support 

two of the proposals without reservation, as they have in fact been previously transmitted to Congress by SSA in Administration bills. 


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Treatment of Most Military Compensation as Wages 

Turning to the first proposal, this provision would treat most military compensation as wages for SSI, and codify SSA’s policy of treating certain housing allowances 

as ‘‘in-kind’’ income. We believe this legislation is very important. 

The provision would remove a significant inequity in the consideration of household income, and is especially needed in light of those who are most often affected 

by the current policy—the disabled children of our Nation’s service men and women. 

Under current SSI law, generally only basic pay is counted as earned income. All 

other allowances—housing, uniform, special duty pay, and so on—are counted as unearned income. Because of SSI’s provisions supporting beneficiary efforts to work, 

earned income is treated differently than unearned income in determining benefit 

eligibility and payment level. Generally, all unearned income above $20 is used in these calculations. But in de- termining eligibility and calculating benefits, we do not count the first $65 of earned 

income and one-half of income above the $65 amount. When a child is disabled, we 

determine eligibility based on family income, using the same distinction between 

earned and unearned income. Current law requires us to treat all payments except 

for basic pay as unearned income. (Combat pay is disregarded altogether.) 

This distinction between consideration of military basic pay and other pay types 

has had the effect of disadvantaging military personnel compared to civilians in 

similar situations. 

Let’s look at the differences in the way income would be treated in two similarly 

situated families: 

The family of an active duty servicemember could be receiving basic pay of $1,459 per month, and a military housing allowance of $1,087—a total of $2,546. The housing allowance portion is counted as unearned income. Because of the less-favorable 

treatment of unearned income for SSI purposes, in calculating SSI eligibility for a 

disabled child, we would ‘‘count’’ $519. 

But a civilian with the same total income of $2,546 would receive all income 

through wages (earned income) and would pay rent via a portion of the wages. Thus 

we would count $141 of the civilian’s wages in determining SSI eligibility for the 

disabled child. Assuming there is no other income to either family, the disabled 

child in the civilian family would receive $502 in SSI benefits, while the disabled 

child in the military family would only receive $124. 

The proposal contained in the HEART bill would result in treating most cash military compensation and civilian wages alike (for SSI purposes), thus eliminating this 

present unfair treatment of military compensation other than basic pay. 

We also support placing into statute the current SSA policy regarding how we 

consider certain privatized military housing. In the SSI program, certain privatized 

military housing is generally considered ‘‘in-kind support and maintenance,’’ and is 

treated differently than either earned or unearned income. Since March of 2003, we 

have capped the amount of SSI benefit reduction attributable to the housing allowance to one-third of the SSI Federal benefit rate. This approach to the housing allowances is appropriate because in these situations the full amount of the servicemember’s allowance is deducted directly from his or her pay, and paid to the landlord of the privatized housing by military payroll. By codifying this policy into the 

statute, Congress affirms the importance of eliminating inequities in the SSI program. 

Exclusion of AmeriCorps Payments for SSI and DI Purposes 

Turning to the second proposal, we also support legislation that would exclude the 

AmeriCorps State and National and AmeriCorps National Civilian Community 

Corps program payments for purposes of determining SSI eligibility and benefit 

amounts. 

Stipends for AmeriCorps VISTA volunteers are currently excluded from income 

for SSI purposes under the 1973 authorization for this program, the Domestic Volunteer Service Act. However, authorizing legislation for the newer AmeriCorps programs, does not exclude stipends for SSI purposes. These payments are counted as 

earnings in the SSI program, and room and board provided under the new programs 

is counted as in-kind support and maintenance. The earnings received based on 

these newer AmeriCorps programs are also taxable, and earn Social Security 

(OASDI) quarters of coverage. All three AmeriCorps programs have similar missions, and volunteers in these programs that receive a living allowance can receive 

a separate educational award upon completion of public service. 

Thus, we currently have individuals performing similar volunteer work and participating in similar programs who are being treated differently. SSA supports the 

proposed legislation. Expanding the earning exclusions to participants in the other 

two programs would provide equity for our beneficiaries, administrative simplificaVerDate Nov 24 2008 08:44 Jan 31, 2011 Jkt 058274 PO 00000 Frm 00030 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\58274.XXX APPS06 PsN: 58274

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tion, and presumably enable AmeriCorps to enroll more participants with disabilities. 

Exclusion of Certain Annuity Payments to Blind Veterans 

Like all Americans, we recognize the great debt owed to the men and women, who 

have sacrificed for us as members of the armed services, and the third proposal to 

exclude State annuity payments to blind veterans from income consideration for SSI 

benefits, could serve as a means to recognize that sacrifice. An exclusion of State 

annuity payments for veterans who, by definition, are blind and also of limited 

means, may be reasonable and appropriate. 

Conclusion 

In conclusion, the AmeriCorp and Military Service Income proposals correct inequities that exist in current SSI and law, and the Blind Pension exclusion could 

provide humanitarian assistance to those who have served our country so well. 

We would be happy to work with the Subcommittees on these proposals, and SSA 

looks forward to continuing to work with Congress in our ongoing efforts to promote 

sound public policy and improve program administration. Thank you and I will be 

glad to answer any questions you may have. 

f 

Chairman NEAL. Thank you, Mr. Rust. 

The Chair would now like to recognize Mr. McDermott for inquiry. 

Mr. MCDERMOTT. Thank you, Mr. Rust, for coming up. I appreciate Social Security coming. Treasury was invited, but said they 

didn’t have sufficient time to prepare themselves. So I am glad you 

got your act together and got up here. 

Mr. RUST. You may have to wait until you hear my answers to 

your questions to see if we got our act together, Mr. McDermott. 

Mr. MCDERMOTT. I will take my chances. I just want to clarify 

something for our understanding how this developed. Uniform allowances, are they unearned income or earned income? 

Mr. RUST. Unearned income. 

Mr. MCDERMOTT. Basic allowance for subsistence, unearned or 

earned? 

Mr. RUST. Unearned. 

Mr. MCDERMOTT. Reenlistment bonuses? 

Mr. RUST. Unearned. 

Mr. MCDERMOTT. Foreign duty pay? 

Mr. RUST. Unearned. 

Chairman NEAL. Demolition duty pay? 

Mr. RUST. Unearned. 

Mr. MCDERMOTT. Aviation continuation pay? 

Mr. RUST. Unearned. 

Mr. MCDERMOTT. Dive pay? 

Mr. RUST. Unearned. 

Mr. MCDERMOTT. Submarines? 

Mr. RUST. Unearned. 

Mr. MCDERMOTT. Hardship duty for a location? 

Mr. RUST. Unearned. 

Mr. MCDERMOTT. Hazardous duty? 

Mr. RUST. Unearned, under current law. 

Mr. MCDERMOTT. Why was it set up so that all these were 

made unearned income? 

Mr. RUST. As a general rule—and, you know, we are an agency 

where there is always an exception to the general rule—but in the 

general rule, earned income is income against which the FICA tax 


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is applied. And if the FICA tax, the Social Security tax, is not applied, then it for the most part falls into the category of unearned 

income and is treated that way. 

What the proposals before the Committee today will do is change 

the way those particular categories are counted. It will move almost all of those from unearned to earned income for purposes of 

calculation for the SSI program. 

Mr. MCDERMOTT. For the purposes of SSI, for the calculation? 

Mr. RUST. For the purposes of SSI. 

Mr. MCDERMOTT. Now tell us what the difference is. Why is 

this better for somebody, to make it earned income for the purposes 

of SSI? 

Mr. RUST. Earned income is treated in a different way because, 

one, you have the FICA tax application, but more importantly, 

there is a preference for work, an incentive for work, in the SSI 

program. So earned income has always had essentially a higher 

status than unearned income. 

Let me give you an example that I think will probably clarify 

this a little bit. The family of an active duty servicemember could 

be receiving basic pay of $1,459 per month, and a military housing 

allowance of $1,087—a total of $2,546. The housing allowance portion is counted as unearned income. Because of the less-favorable 

treatment of unearned income for SSI purposes, in calculating SSI 

eligibility for a disabled child, we would ‘‘count’’ $499. In determining the benefit for the child, we deduct the countable income 

($499) from the Federal Benefit Rate ($623 in 2007). Thus, the disabled child in the military family would receive $124 in SSI benefits. 

But an identical civilian family with the same total income of $2,546 would receive all income through wages (earned income) 

and would pay rent via a portion of the wages. Thus, we would 

count only $121 of the civilian’s wages in determining SSI eligibility for the disabled child. Assuming there is no other income to 

either family, the disabled child in the civilian family would receive 

$502 in SSI benefits, nearly four times more than the child in the 

military family. 

Mr. MCDERMOTT. It is okay to ask one of your staff people to 

come over and whisper in your ear. 

Chairman NEAL. You would be surprised. We do it all the time. 

[Laughter.] 

Mr. RUST. Roughly, we count about one-half of an individual’s 

earned income. 

Mr. MCDERMOTT. You can have her come up and sit at the 

table with you, or one of your staff people. 

Mr. RUST. Mr. Chairman, if that would be okay? 

Mr. MCDERMOTT. Yes. Of course. We are actually trying to 

learn how it works. Okay? We are not trying to fry anybody. 

Mr. RUST. Thank you. This is the Assistant Deputy Commissioner, Marianna LaCanfora. 

Ms. LACANFORA. Good morning. To make a complex issue—— 

Mr. RUST. Complex. 

Ms. LACANFORA. Excuse me. Good morning. To make a complex issue as simple as possible, I think maybe the easiest way to 

explain it is that with earned income, wages, we only count that 


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earned income—we generally take one-half of it, and we count it 

against the benefit amount; whereas with unearned income, we actually count almost the total unearned income, dollar for dollar, 

against the benefit amount. 

So basically, we penalize a beneficiary based on the receipt of unearned income more heavily than we do earned income. And the 

genesis of that I believe has to do with the fact that we were trying 

to provide an incentive for people to return to work, so wages—in 

other words, earned income—are treated more favorably under the 

SSI program. 

This legislation will bring the treatment of income into parity for 

military families. 

Mr. MCDERMOTT. Okay. Thank you very much. I see my time 

is exhausted, so I will leave the technical questions to other Members if they wish. Thank you, Mr. Chairman. 

Chairman NEAL. Thank you, Mr. McDermott. 

The Chair would now like to recognize Mr. Weller for inquiry. 

Mr. WELLER. Thank you, Mr. Chairman. Commissioner, welcome before our Subcommittees this morning. 

Mr. Reynolds has a proposal which eliminates the offset of SSI 

benefits to reflect State blind veterans annuity. And I understand 

there are four States that currently operate such a program, New 

York, New Jersey, Pennsylvania, and Massachusetts. 

Are you aware of any other States that are considering adding 

an additional program similar to this proposal? 

Mr. RUST. We are not aware of any such States at this time. 

Mr. WELLER. Do you believe that enactment of Mr. Reynolds’ 

legislation in the law would encourage other States to start providing this type of assistance for blind veterans? 

Mr. RUST. The way the language is written in the draft we have, 

it would cover any State that would choose to enact such a program. So I think the answer probably is yes, it would, or it could. 

Mr. WELLER. So it would make it more attractive for a State 

such as mine to provide such assistance. You would believe that 

based on your experience? 

Mr. RUST. Well, I think the State would probably act because 

of its own dynamic, its own desire to serve the veterans within that 

State. But I think the more favorable treatment under SSI would 

certainly be a favorable consideration. 

Mr. WELLER. Is there any reason this special treatment should 

be solely limited to blind veterans? For example, do States operate 

State annuities for other disabled veterans? 

Mr. RUST. The disability rules under Social Security already 

have a preferential treatment for blind, both veterans and non-veterans. So it is quite dramatic in terms of the more preferential 

treatment for blind in both the SSDI program and the SSI program 

for disability. So I think there is sort of a history of showing preferential treatment to the blind. 

Mr. WELLER. And explain then for other annuities for other 

types of disabilities where there are annuities provided at the State 

level, how are they treated differently compared to for blind veterans? 

Mr. RUST. The general rule is that if the annuity or if the benefit at the State level is either State or locally funded, we exclude 


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that income, that payment, from consideration for SSI benefits. So 

it is excluded. If there is some Federal money in it, like in TANF, 

then it is counted as unearned income for the calculations. 

So as long as the State were to set up a program that was 100 

percent State or locally paid and needs-based, it would be excluded 

from SSI consideration. 

Mr. WELLER. And has your agency taken a position on Mr. Reynolds’ proposal? 

Mr. RUST. We are looking at it. We haven’t had time to cost it 

all out and do the interagency review. That is why my testimony 

I think is basically quite favorable to the provision. But we have 

not yet been able to get the Administration position on it. 

Mr. WELLER. And how quickly can you provide an Administration position for Mr. Reynolds? 

Mr. RUST. A lot of that is outside the control of the Social Security Administration because OMB would really be the one that 

would coordinate that. So I don’t know that I could give you an estimate. We will request it immediately. 

Mr. WELLER. And has the Social Security Administration made 

a recommendation to OMB on what position the Administration 

should take? 

Mr. RUST. They cleared my testimony for today with the statement that it was fair and appropriate and reasonable to look at 

this provision. 

Mr. WELLER. So you have recommended then that they support 

this proposal? 

Mr. RUST. It is our position that this is a reasonable thing to 

do, an appropriate thing to do. We would be supportive of it. 

Mr. WELLER. Thank you, Commissioner, and thank you for 

being here this morning. 

Thank you, Mr. Chairman. 

Chairman NEAL. Thank you, Mr. Weller. 

The Chair would now recognize Mr. Herger for inquiry. 

Mr. HERGER. Thank you, Mr. Chairman. 

Mr. Rust, I think it is really outstanding that we have a program 

that is working to get the disabled employed and being productive, 

and such valuable service through the AmeriCorps. And I would 

like to explore that further if I could. 

Could you tell me how many hours of work does the average 

AmeriCorps participant perform per year? 

Mr. RUST. Mr. Herger, I guess you would have to direct that 

question really to the AmeriCorps agency. I don’t know that. 

Mr. HERGER. Is there anyone on your staff that might have an 

idea? 

Mr. RUST. No. I mean, that is a different program, a different 

agency. 

Mr. HERGER. Could you tell me maybe about SSI recipients 

who—what is the typical number of hours that they work or perform—I don’t know if you know that—per year? 

Mr. RUST. You mean in terms of the ones who would be working 

in one of these—either the military or in the AmeriCorps program 

getting SSI—— 

Mr. HERGER. Yes. 


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Mr. RUST [continuing]. And being impacted by this provision? 

The number is probably very small. For one of the provisions, we 

think there are probably about 3,000 people currently receiving 

SSI, and about maybe 200 more a year who could become eligible. 

And for the other provisions, we are assuming fewer than 500. So 

we are probably talking in total of somewhere in the neighborhood 

of 3,000 to 3,500 people who could be affected by all three of these 

SSI provisions in this bill. 

Mr. HERGER. Any idea what the stipend is or other assistance 

that they receive for the service that they do, those that are involved? 

Mr. RUST. No, sir. 

Mr. HERGER. Okay. I thank you, Mr. Chairman. I yield back my 

time. 

Chairman NEAL. Thank you, Mr. Herger. 

The Chair will now recognize Mr. Reynolds to inquire. 

Mr. REYNOLDS. I thank the Chairman. 

I appreciate the Social Security Administration’s comments of 

support of the legislation that is included on the annuity payments. 

My understanding in my home State of New York, the State began 

annuities under World War I, and it was about 500 per month, and 

raised it to a thousand. 

And we find that unfortunately, just due to the current law, all 

that money goes back as the annuitant has to return that money 

because it caps. So I think we are moving in the right direction 

both on inflation, plus it is just plain the right thing to do. We have 

seen a lot of testimony on it. And I appreciate your comments, and 

will look forward to what you think the cost is. 

Also, when I originally have looked at the legislation over different periods of time since 2000, there were times where I restricted it to the four States because that is what the previous 

Chairman would have wanted, if I could have even advanced this 

legislation. And now I am pleased to see that Chairman Rangel 

and others are exploring the aspect that any State that may want 

to participate can. 

But I think we don’t want to lose sight in the testimony of inquiry from my colleague, Mr. Weller, that the States still have to 

put up the cash here. And so States will have to reflect: Do we 

want to follow the four States that are already doing this with 

some sort of an investment into an annuity program? And I think 

that is part of the checks and balance, is the State’s own participation in the program. And I appreciate you, Mr. Rust. 

And I know this is not your domain, but I was also disappointed 

on the recent decision of the Social Security Administration to use 

the Buffalo office as a pilot for closing the office early. I will be 

sending a letter to the Acting Commissioner, and I hope you will 

convey that, and will follow up on that shortly. 

We have an older population in upstate western New York, and 

seeing face-to-face solutions versus toll-free numbers I think would 

go a lot farther along. And I will make an appeal that while the 

pilot is underway, we can’t seem to make better accommodations 

to take care of people we are serving. Thank you. 

Mr. RUST. Mr. Reynolds, if I could, that is another Deputy Commissioner’s area. And I believe that Chairman Rangel is scheduling 


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a meeting for Members of the Committee and Ms. McMahon, the 

Deputy Commissioner for Operations, to discuss these issues. I 

think it is scheduled within the next week or so. I don’t remember 

the exact date, but I think that we are very interested in talking 

to the Members about the issue. 

And let me just—if I can just digress for a second, Mr. Chairman, 

I think it is helpful if you would understand that we are an agency 

under some stress right now. In January, February, and March of 

next year, we will slip under 60,000 employees for the first time 

since 1973. 

And we have the baby boomers about to retire, and other workloads. So we are feeling a lot of stress across our programs right 

now in terms of how we can maintain the kind of service the public 

expects from us with somewhat more constrained resources. 

So, I would just add that as a sort of an aside. But it is something that is very much on our minds as we try to run these programs. 

Mr. REYNOLDS. Sir, if I could reclaim my time for just a second, I would just—in the opening of my thought on this, I said I 

realize that is not your domain. But because you have taken such 

time to want to defend the Administration’s position, let me just be 

perfectly clear. 

I intend to watch the pilot program. It is an administrative decision, and I will register my displeasure with the Acting Commissioner. But nevertheless, we are taking less face time of the Social 

Security Administration dealing with both seniors and others who 

are dependent upon getting answers. And that is a concern to me 

in western New York. And I will be watching very closely as to the 

outcome of your pilot program. 

Mr. RUST. If you would want to meet directly with Ms. 

McMahon, I am sure she would be more than glad to meet with 

you on that. 

Chairman NEAL. Mr. English is recognized to inquire. 

Mr. ENGLISH. Thank you, Mr. Chairman. 

Mr. Rust, I think your point is very well taken, that your agency 

is under a great deal of pressure, And I suppose on that point, I 

would like to particularly follow up with regard to this legislation. 

The draft legislation suggests that the three SSI changes for participants will be, and I quote, ‘‘effective with respect to benefits 

payable for months beginning after 60 days after the date of enactment of this Act.’’ So in general, that would be no more than 3 

months. 

Given the fact that your agency is under stress, is that enough 

time for SSA to make sure that the correct payments are being 

made? 

Mr. RUST. We think so. 

Mr. ENGLISH. I note that the legislation does not provide for 

any additional administrative funds. And SSA has recently expressed concern about having sufficient administrative funding to 

handle current workloads. Do you see any issues on that point 

raised by this legislation? 

Mr. RUST. If the numbers are about what I quoted a little bit 

ago, probably somewhere between 3- and 4,000 people, we can hanVerDate Nov 24 2008 08:44 Jan 31, 2011 Jkt 058274 PO 00000 Frm 00036 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\58274.XXX APPS06 PsN: 58274

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dle that within our current budget situation, remembering that we 

are across the board under stress. 

Mr. ENGLISH. Very good. On a different point, I think that our 

disability system has to do everything it can to encourage disabled 

Americans to work when they are able to. From your perspective, 

is there any evidence that SSI recipients have refrained from participating in AmeriCorps as a result of the disincentives that this 

legislation addresses, essentially current law? 

Mr. RUST. I don’t think we would have any way of knowing that. 

Mr. ENGLISH. In your view, if the proposal before us is adopted, 

do you have any estimate of how many more SSI recipients might 

participate at AmeriCorps? You wouldn’t have a way of evaluating 

that? 

Mr. RUST. We wouldn’t have any way of even guessing on that. 

Mr. ENGLISH. Thank you, Mr. Rust. And thank you for your 

testimony. 

Mr. RUST. Thank you. 

Chairman NEAL. Are there any other questions? The gentlelady 

from Nevada is recognized to inquire. 

Ms. BERKLEY. Thank you, Mr. Chairman. And thank you, Mr. 

Rust, for coming and giving us your testimony. 

I am not sure that this is pertinent to what we are discussing, 

but I wanted to follow up on what Mr. Reynolds said. In addition 

to having the fastest growing veterans population in my congressional district, I have the fastest growing senior population. 

Because of the large number of complaints, and I recognize that 

this doesn’t come under your domain, but in response to an amazing number of telephone calls from my constituents and telephone 

calls from the employees of my Social Security offices in Las Vegas, 

I paid a spot visit to the newest facility. 

And I can tell you that the line was around the block when I— 

the employees are stretched beyond what they can possibly, possibly do to deliver necessary services to my constituents. And my 

constituents, many of them, especially the older women, there 

wasn’t enough seating. And this is a brand new facility. And they 

were in tears because they had spent hours in line and couldn’t 

spend another minute on their feet. 

And this is a situation that absolutely has to be corrected. It is 

horrible. And again, I just wanted to put this on the record for the 

future. And I am sure you are aware of these problems. 

Mr. RUST. We are under pressure to look for ways to make the 

program more administrable, if you want to use that term, to look 

for ways to simplify the program. 

That is one of the reasons, in the testimony today, one of the 

things we appreciate about the provisions in this bill are that they 

will help to make this program a little easier to administer because 

we have a very complicated program. It is a very complex program. 

And as I mentioned, just 5 years ago we had 66,000 employees. 

So we are down 6,000, roughly, in the last 5 years. So it is a huge 

workload with a constrained workforce. So we do the best we can, 

but we are aware of those problems. 

And again, I would suggest that you may want to bring this to 

Linda McMahon’s attention, our Deputy Commissioner for Operations, who is working with these problems day to day. 


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Ms. BERKLEY. I will, and I thank you. 

Mr. RUST. Thank you. 

Chairman NEAL. Thank the gentlelady. 

Mr. Rust, we want to thank you for your testimony. And now we 

would like to have the third panel assemble and take position. 

Mr. RUST. Mr. Chairman, I started to try to give two examples, 

which I didn’t do very artfully, of how income, unearned and 

earned, worked differently. When I correct the record, may I correct 

that example? 

Chairman NEAL. Without objection, you certainly can. 

Mr. RUST. Thank you, sir. 

Chairman NEAL. What I would like to do now is to recognize the 

Members of the Committee to introduce our guest panelists. And 

I would like to begin by recognizing Mr. Larson for an introduction. 

Mr. LARSON. Thank you, Mr. Chairman. And thank you again 

for holding this hearing on this very important legislation. 

Mr. Chairman, may I for the record seek unanimous consent to 

introduce the testimony of Chief Steven B. Westerman, the President of the International Association of Fire Chiefs, an organization that has worked very hard on this, who is not here today to 

testify? 

Chairman NEAL. Without objection. 

Mr. LARSON. And now, Mr. Chairman, I know that the legislation before us in this hearing is vitally important and compelling 

listening to the testimony of men and women who wear the uniform, and especially our veterans that are in the field. 

But it wasn’t lost on Members of Congress, and certainly not on 

John McAuliffe, the gentleman I am going to introduce, that it 

wasn’t the Army, the Navy, or the Marines, the FBI, or the CIA 

that responded at that World Trade Center, at the Pentagon, or in 

the fields of Pennsylvania. Indeed and in fact, it was our men and 

women who are the front lines of our effort here, our firefighters, 

police officers, and emergency medical teams. 

And it is my great pleasure to introduce to you today a gentleman who has been a volunteer firefighter and in that service 

since 1958. John McAuliffe served as fire chief of the Wethersfield 

Fire Department in my district from 1991 to 1996. I worked very 

closely with him as Senate President in the State of Connecticut 

on a number of issues as it relates to firefighters and volunteers 

in general. 

He is currently the Connecticut State Director of the National 

Volunteer Fire Council, as well as the Chairman of the Legislative 

Committee of the Connecticut State Firemen’s Association, and understands these issues thoroughly. 

Like most events, as Mr. McDermott indicated earlier, we learn 

of things that are of importance through our constituents. And having traveled around to several volunteer fire departments and listened to a number of them, and especially from the Chairman’s district in Massachusetts and mine, it is a great honor for me to introduce a man who is knowledgeable on all these fronts, John 

McAuliffe. 

Chairman NEAL. We thank you. 

And now the Chair would like to recognize Mr. Reynolds for an 

introduction. 


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Mr. REYNOLDS. I thank the Chairman. 

It is my pleasure to introduce Deputy Director of the New York 

State Division of Veterans’ Affairs, Michelle LaRock, who has 

served under both Governor Pataki and now Governor Spitzer. Ms. 

LaRock had dedicated more than a decade to public service in various capacities in my home State. In her current position, she 

draws on a wealth of experience and expertise gained through her 

own experience in the military as a veteran. 

She is a native of upstate New York, and has served 4 years in 

the Marines, including a tour of duty in the Middle East during the 

Persian Gulf War, as a lance corporal specializing in logistics and 

earning a Southwest Asia Service Medal. 

Appointed as Deputy Director in December 2005, Ms. LaRock 

works closely with Director George Basher and various field Deputy Directors in evaluating existing programs and recommending 

new practices and strategies to enhance the agency’s services provided to New York’s veterans community. She has considerable familiarity with New York’s State annuity for blind veterans, and she 

has seen firsthand the challenges that current Federal SSI law 

poses both for blind veterans and for her agency in the administration of this annuity program. 

On behalf of the Ways and Means Committee, welcome, and we 

look forward to your testimony. 

Chairman NEAL. Thank you, Mr. Reynolds. 

And now I would like to recognize the gentleman from North Dakota, Mr. Pomeroy, for an introduction. 

Mr. POMEROY. Thank you, Mr. Chairman, and I appreciate 

being able to sit in with the Committee in the hearing today. 

We have a law on the books which guarantees the right of returning Guard and Reserve soldiers to seamlessly resume their private pension plan participation when they return to civilian employment. But there is a gap in this law, a very important gap that 

needs to be addressed. The law does not anticipate the circumstance where our soldier cannot return to work and resume 

pension plan participation because of losing their life while under 

deployment in service to our country. 

Essentially, under many pension plans, under this circumstance 

there is no survivor’s benefit. There is just a return of moneys paid 

into the plan by the plan participant, our deceased soldier. This 

needs to be fixed, and I am very pleased to tell you that Congressman Doc Hastings and I have introduced a bill to address this. The 

bill is known as the Heroes Act. 

Testifying on it today will be Victoria ‘‘Torrie’’ Johnson. Victoria 

is the surviving spouse of Major Alan Johnson. He was born and 

raised on a farm in North Dakota and lost his life in Iraq, an IED 

attack, on January 26th of this year. 

Torrie, like her late husband, is an extraordinary person. She is 

very dedicated to service. Even while she deals with her personal 

grief, she serves as the family support volunteer coordinator for the 

Washington State Army National Guard doing her dead level best 

to help other families. 

Congressman Doc Hastings and I have been very grateful to 

Torrie for calling her situation to our attention. And we have so admired the work she has done in the State of Washington to try and 


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get that fixed at the State level. But this really requires a Federal 

fix. 

She spent her own frequent flyer miles to come here to tell you 

her story today. And we just can’t feel more gratitude for the courage and the determination of Torrie Johnson to get this situation 

fixed. 

Chairman NEAL. We thank the gentleman. 

And now let me introduce Mr. John Downing. Mr. Downing is 

unyielding in his advocacy on behalf of veterans everywhere. He is 

the President and Chief Executive Officer of United Veterans of 

America. And he has spoken for the incarcerated veteran, the mentally ill veteran, the homeless veteran, and the addicted veteran, 

as well as anybody in America. 

And with that, I would like to recognize Mr. Downing. 

STATEMENT OF JOHN F. DOWNING, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, UNITED VETERANS OF AMERICA, INC., 

LEEDS, MASSACHUSETTS 

Mr. DOWNING. Thank you, Chairman Neal, Congressman 

McDermott, Members of the Committee. On behalf of the hundreds 

of homeless veterans I serve every year, I am honored to be here 

today testifying on the Heroes Earnings Assistance and Relief Tax 

Act of 2008. 

I have the privilege of serving as President and CEO of United 

Veterans of America in Leeds, Massachusetts, with facilities serving homeless veterans also in Pittsfield, Massachusetts. We serve 

upward of 200 homeless veterans every day. Our program is based 

on a continuum of care, ranging from the treatment of trauma and 

mental health to substance abuse counseling, shelter, food, job 

training, and permanent housing. Our partners include the U.S. 

Department of Veterans Affairs, U.S. Department of Labor, HUD, 

and many State and local agencies. 

Shelter, treatment, and hope are the cornerstones of our work. 

The UVA hosts 120 men and women in transitional living on site 

at the VA Medical Center on a campus in Leeds, Massachusetts, 

a small section of Northampton, Massachusetts. Sixty more vets 

live in transitional housing in the Berkshire Veterans Residence in 

Pittsfield, Massachusetts, which opened in 2004. And there are 10 

new studio apartments, funded through the U.S. Department of 

Housing and Urban Development, which provide permanent housing for homeless veterans with a disability at the Pittsfield site. 

We serve veterans primarily from the northeast United States. 

A few are referred to us from across the country. The average age 

of our population is 54, but the mean age is trending younger as 

we see more veterans of Operation Enduring Freedom and Operation Iraqi Freedom. 

Approximately 85 percent of our veterans suffer mental health 

and substance abuse issues. Some 10 percent are elderly, and by 

elderly we mean age 70 or older. Five percent of our veterans are 

women. More than 25 percent of our veterans have been diagnosed 

with post-traumatic stress disorder, and 28 percent are on parole 

and probation, the majority of them from their addictions. Fortytwo percent of the veterans in our care on any given day are members of our minority community. 


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I could go on, but it would be easier for you to take a look at 

our website, www.unitedveterans.org, to learn more about the work 

we do and the extent of the work we do. I am supported by an intensely dedicated staff and a committed board of directors, and I 

enjoy a wonderful collaborative relationship with the Leeds VA 

Medical Center and the VA headquarters here in Washington. 

Currently, we are in the predevelopment stage of a 39-unit limited equity cooperative apartment development, to be built on our 

site in Pittsfield for formerly homeless veterans. This development 

will be owned cooperatively and managed by the formerly homeless 

veterans. The apartments will meet the highest standards of green 

building, incorporating energy efficiency, renewable energy, and alternative fuels. The housing will be sustainable in perpetuity for 

low-income veterans. 

Additionally, with reasonable support from the Federal Government, we can dedicate a portion of each veteran’s rent to an individual deposit account, thus enabling formerly homeless veterans 

to realize the American dream of home ownership and building 

wealth through equity. This changes the end of the story for homeless veterans of U.S. military service. 

I would add that at this point, the Federal role in developing this 

housing has been minimal. In fact, we understand that the IRS 

rules prohibit the use of the Low-Income Housing Tax Credits in 

building cooperatives. I would suggest that this Committee take a 

look at that rule. 

I believe that, however unintended, restrictive IRS rules governing the Low-Income Housing Tax Credit probably have prevented the creation of alternative models of supportive housing for 

people with disabilities. 

In general, to the best of my knowledge, the Federal Government 

has no program that supports exclusively the creation of permanent, affordable housing for veterans. I realize that this is a policy 

decision for consideration of the entire Congress and Administration, but I think it is something that needs to be brought to the 

forefront of our consciousness, that veterans are not a preferred 

class of people in the United States of America as we would legislate that for housing. 

Back home in the Commonwealth of Massachusetts, and under 

both Governor Romney and Governor Patrick, they are stepping up 

to the plate with State money and a willingness to support with 

Federal resources such a project such as with project-based Section 

8s and VASH subsidies and HOME funds. At this point, however, 

Federal participation has been limited to relatively small direct appropriation from HUD, procured through the good offices of Congressman John Olver and Congressman Richard Neal. The UVA 

needs to complete this project with a reasonable, minimal debt 

load, and the Federal Government must become a partner with us 

in this. 

By the way, VASH, Veterans Affairs Supportive Housing, is a 

subject of the Federal Section 8 program that hasn’t been funded 

in years. Both the House and the Senate this year are considering 

funding VASH. We emphatically endorse funding VASH, and we 

would suggest that VASH subsidies be flexible—that is, that the 


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VASH subsidies could be both tenant-based and project-based subsidies. 

I would add parenthetically that although not the purview of this 

Committee, I would ask Congress to amend the Fair Housing Act 

to include veterans of U.S. military services as a protected class. 

I mention this because if we are successful in creating permanent 

housing for veterans, we run the real risk of violating the fair 

housing laws by giving veterans priority—again, a Catch-22 situation which I am sure is unintentional, but which I am sure can be 

fixed. 

I mentioned changing the end of the story for homeless veterans, 

and I would like to go back to that just for a minute. Typically, the 

veterans in our care, both men and women, cycle from the streets 

to the shelter, back to the neighborhood, and ultimately back to the 

shelter. 

Along the way, these men and women lose everything. It is hard 

to imagine, but typically every contact with family and community 

has been lost. Jobs, houses, friends, self-respect, personal dignity, 

personal hygiene—it is all gone. The dignity is gone for the men 

and women when they walk into my facility. 

Only by creating permanent, affordable housing for veterans can 

we change this pattern. By creating permanent, affordable housing 

opportunities, whether it is rental, cooperative, or homeownership, 

and by bringing comprehensive support services to the veterans in 

this housing, we can change the end of the story once and for all. 

In the long run, permanent supportive housing is less expensive 

than shelter. And finally, our veterans deserve better than what we 

are doing today. 

The beauty of the project that we are building in Pittsfield is 

that it is replicable. With a little help from the banks, States, and 

Federal Government, this type of housing can be adapted for any 

part of the country. We are working now with the VA Medical Center in Leeds to create another limited equity cooperative on the 

grounds of the medical center. 

Across the country, VA Medical Center campuses typically enjoy 

lots of unused green space. A project like ours could be built on the 

grounds of any VA Medical Center. Working with the VA, nonprofit 

developers could lease the land at a nominal rate while taking the 

entire responsibility for building and operating the permanent 

housing on that land. No additional expense would accrue to the 

VA, and the VA Medical Center would have a new outpatient population at its doorstep. 

But the best reason for doing this is that it really serves veterans. And that is what we are talking about today, serving veterans. Now, I am not the expert in the Tax Code. But I do know 

that any portion of this Tax Code that could be changed to benefit 

veterans should be changed. Our veterans have paid the price. 

They don’t need to be nickeled and dimed by the Tax Code. If anything, we ought to be creating tax credits for military service. 

Soon, we hope, we will be welcoming home the veterans of Operation Enduring Freedom and Operation Iraqi Freedom. After all 

the celebrations, will we once again turn to other business and forget our veterans? Twenty years from now, will someone be sitting 

in this Chair testifying to the needs of homeless veterans? 


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I hope not. And I believe by the commitment that this Committee 

is making to begin to look at all the little bureaucratic chinks that 

make it difficult for people to succeed, that working together we 

will change the end of the story for all our veterans. Thank you. 

[The prepared statement of Mr. Downing follows:] 

Prepared Statement of John F. Downing, President and Chief Executive 

Officer, United Veterans of America, Inc., Leeds, Massachusetts 

Congressman Neal and Congressman McDermott, Members of the Committee: On 

behalf of the hundreds of homeless veterans served every year by United Veterans 

of America, I am honored by your invitation to be here today testifying on the ‘‘Heroes Earnings Assistance and Relief Act of 2007.’’ 

I have the privilege of serving as President and CEO of United Veterans of America, Inc. Based in Leeds, Massachusetts, with facilities serving homeless veterans 

in Pittsfield and Leeds, UVA serves upwards of 200 veterans every day. Our program is based on a continuum of care, ranging from the treatment of trauma and 

mental health issues to substance abuse counseling, shelter, food and other necessities, job training, and permanent housing. Our partners include the U.S. Department of Veterans Affairs, the U.S. Department of Labor, HUD, and many State and 

local agencies. Shelter, treatment, and hope are our cornerstones. 

UVA hosts 120 men and women in transitional living on site at the VA Medical 

Center campus in the Leeds section of Northampton, Massachusetts. Sixty more 

vets live in transitional housing at our Berkshire Veterans Residence in Pittsfield, 

Massachusetts, which opened in September 2004. Ten new studio apartments, funded through the U.S. Department of Housing and Urban Development, provide permanent housing for homeless veterans with a disability at the Pittsfield site. 

UVA serves veterans primarily from the northeast United States. A few are referred to us from across the country. The average age of our population is 54, but 

the mean age is trending younger as we see more veterans of Operation Enduring 

Freedom and Operation Iraqi Freedom. Approximately 85 percent of our vets suffer 

mental health and/or substance abuse issues. Some 10 percent are elderly, at age 

70 or older. Five percent of our vets are women. More than 25 percent of our vets 

have been diagnosed with post-traumatic stress disorder (PTSD); 28 percent are on 

parole or probation; 42 percent of UVA’s vets are minority. 

I could go on, but I would invite you to take a look at our website at www. 

unitedveterans.org to learn more about UVA. I am supported by a dedicated staff 

and a committed board of directors, and I enjoy a wonderful, collaborative relationship with our VA Medical Center and with VA Headquarters here in Washington. 

Currently we are in the pre-development stage of a 39 unit limited equity cooperative, to be built on our site in Pittsfield, Massachusetts. The development will be 

owned cooperatively and managed by formerly homeless veterans. These apartments 

will meet the highest standards of ‘‘green’’ building, incorporating energy efficiency, 

renewable energy, and alternative fuels. This housing will be sustainable in perpetuity for low-income veterans. Additionally, with reasonable support from the Federal Government, we can dedicate a portion of each veteran’s rent to an Individual 

Development Account (IDA), thus enabling formerly homeless veterans to realize the 

American dream of home ownership and building wealth through equity. This 

changes the end of the story for homeless veterans of U.S. military service. 

I would add that, at this point, the Federal role in developing this housing has 

been minimal. In fact, we understand that IRS rules prohibit the use of the Low 

Income Housing Tax Credit in building cooperatives. I would suggest that this Committee take a close look at that rule. I believe that, however unintended, restrictive 

IRS rules governing the Low Income Housing Tax Credit probably have prevented 

the creation of alternative models of supportive housing for people with disabilities. 

In general, to the best of my knowledge, the Federal Government has no program 

that supports exclusively the creation of permanent, affordable housing for veterans. 

I realize that this is a policy decision for the consideration of the entire Congress 

and the Administration. 

Back home, the Commonwealth of Massachusetts, under both Governor Romney 

and Governor Patrick, is stepping up to the plate with State money and a willingness to support the project with Federal resources, such as project-based Section 8 

subsidies, VASH subsidies, and HOME funds. At this point, however, Federal participation has been limited to a relatively small direct appropriation from HUD, procured through the good offices of Congressmen John Olver and Richard Neal. For 

UVA to complete this project with a reasonable, minimal debt load, the Federal Government must be more of a partner with us. 


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By the way, VASH—Veterans Affairs Supportive Housing—is a subset of the Federal Section 8 program that hasn’t been funded in years. Both the House and the 

Senate this year are considering funding VASH. We emphatically endorse funding 

VASH. And we would suggest that VASH subsidies be flexible, that is VASH subsidies could be both tenant-based and project-based subsidies. 

I would add, parenthetically, that, although not the purview of this Committee, 

I would ask Congress to amend the Fair Housing Act to include veterans of U.S. 

military service as a protected class. I mention this because, if we are successful 

in creating permanent housing for veterans, we run the real risk of violating Fair 

Housing laws by giving veterans priority—again, a Catch-22 situation which I’m 

sure is unintentional, and which I’m sure can be fixed. 

I mentioned changing the end of the story for homeless veterans, and I’d like to 

go back to that. Typically, the veterans in our care, both men and women, cycle from 

the streets to shelter, back to the old neighborhood and, ultimately, back to shelter. 

Along the way, these men and women lose everything. It’s hard to imagine but, typically, every contact with family and community has been lost. Jobs, houses, family 

ties, self-respect, sobriety, mental health, personal hygiene—all gone. Dignity—gone. 

At UVA our vets come to see each other as their community. Only by creating permanent, affordable housing for veterans can we change that pattern. By creating 

permanent, affordable housing opportunities, whether it’s rental, cooperative, or 

home ownership, and by bringing comprehensive support services to the veterans 

in this housing, we can change the end of that story once and for all. In the long 

run, permanent supportive housing is less expensive than shelter. And, finally, our 

veterans deserve better than what we’re doing today. 

The beauty of the project we’re building in Pittsfield is that it is replicable. With 

a little help from the banks and State and Federal Government, this type of housing 

can be adapted for any part of the country. We are working now with the VA Medical Center in Leeds, Massachusetts to create another limited equity cooperative on 

the grounds of the Medical Center. Across the country, VA Medical Center campuses 

typically enjoy lots of unused green space. A project like ours could be built on the 

grounds of any VA Medical Center. Working with the VA, nonprofit developers could 

lease the land at a nominal rate, while taking the entire responsibility for building 

and operating the permanent housing on that land. No additional expense would accrue to the VA, and the VA Medical Center would have a new outpatient population 

on its doorstep. But the best reason for doing this is that it serves veterans. And 

that’s what we’re talking about today—serving veterans. Now, I am not an expert 

in the Tax Code. But I do know that any portion of the Tax Code that could be 

changed to benefit veterans should be changed. Our veterans have paid the price. 

They don’t need to be nickeled and dimed by the Tax Code. If anything, we ought 

to be creating tax credits for military service. 

Soon, we hope, we will be welcoming home the veterans of Operation Enduring 

Freedom and Operation Iraqi Freedom. After all the celebrations, will we, once 

again, turn to other business and forget our veterans? Twenty years from now, will 

someone else be sitting in this chair testifying to the needs of homeless veterans? 

f 

Chairman NEAL. Thank you, Mr. Downing. 

Ms. Johnson, we are honored by your presence. Would you proceed? 

STATEMENT OF VICTORIA C. JOHNSON, WIDOW OF MAJOR 

ALAN R. JOHNSON, U.S. ARMY RESERVE, YAKIMA, WASHINGTON 

Ms. JOHNSON. Good morning, Chairman Neal and Chairman 

McDermott, and Ranking Members English and Weller. Thank you 

so much for allowing this opportunity to share the concerns of our 

military personnel and families. 

Again, my name is Victoria Johnson. My husband was Major 

Alan R. Johnson, who was killed January 26, 2007, in Iraq. I want 

to tell you a little bit about my husband. He has 26 years military 

service, okay, combined with National Guard and Reserve. It started in North Dakota, with the 141st Engineer Battalion. Moving to 

Washington State, he was with the 81st Brigade, 303rd Armor. 


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Just recently, before his service in Iraq, he was attached to the 

402nd Civil Affairs Battalion from New York. The men that he 

went over to Iraq with, many of them were firsthand part of 9/11. 

As a civilian, my husband was a sergeant for Yakima County Department of Corrections, so he was a public servant both ways. 

Many of the men and women that he was over there with—when 

you are talking Reservists and National Guard, whether it be Army 

Reserve, National Guard, many of them are public servants here. 

They may start out active duty military, and then they have it in 

their heart. So they are over here in our country becoming—I 

mean, they go to firemen. They go to law enforcement. They go to 

any type of a public servant field. 

So it is almost a dual purpose that they have. The experience 

that they have here in this country in their jobs, and not just law 

enforcement, not just the fire department, but financial advisors, 

everything—with the Civil Affairs, they were over there helping 

the Iraqi government build their government. They were working 

with the Iraqi people. They took what they had with their civilian 

jobs here to help over there. 

So it was very important, those skills that they had here as civilians. And I just want that recognized, that part of the strength of 

our military is the strength that we give our individuals in this 

country as civilians. It is very important. 

I was married to him for 19 out of those 26 years. And I believe 

that the strong leader that he was depended a lot on the strength 

his family had. We were a team. We worked together and we supported each other. The stronger those families are here at home, 

the stronger they can be, whether they are here or over there. So 

a lot of the focus needs to be on those families so that they can do 

the jobs that they need to do and not worry about those families. 

He had 15 years working for the county, and there was a State 

pension. Now, he was climbing that ladder with Yakima County as 

a sergeant. He planned on coming back, being promoted to chief, 

becoming administrator. In no way did he not plan on coming back. 

In no way did he not plan on moving up that ladder. 

I received a letter from the State, because it was a State pension 

plan at the county, saying that he would only be given the money 

that he put in as his contributions. There would be no matching 

contributions. My husband has always fought for what is right, and 

I wanted to continue doing so. 

And he worked hard for that pension and our future. And part 

of my connection with him is I want to continue to have the future 

that we planned together to have. And receiving that letter saying 

that I would only get what he put in was just a slap in the face 

on top of the pain. 

I cannot explain to you the pain involved when you have military 

people come to your door at night in uniform. You know, you already know—from the movies and everything else—you already 

know what they are going to tell you. The pain is unbelievable, and 

I don’t wish anybody to have to go through it. 

But then to deal with the problems afterward, what I did is with 

help from the Representatives in Washington State, we went to 

Olympia to find out that—I don’t know quote unquote or how it 

works or anything, but it sounds like he was the first State emVerDate Nov 24 2008 08:44 Jan 31, 2011 Jkt 058274 PO 00000 Frm 00045 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\58274.XXX APPS06 PsN: 58274

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ployee actually killed in action since Vietnam. And really, it is all 

things that just haven’t been changed since then. It is technicalities, wording, paperwork. They had never dealt with the situation 

before. 

He was 44 years old when he died. He did not quit his job. He 

was being treated as though he was terminated and quit. He didn’t 

do that. He was over serving our country, and was killed. 

Because the pension plan considered him voluntarily terminated, 

quit, I mean, it just, like I said, would only pay me that. But if he 

had been an active employee at that time and still considered and 

everything, the survivor benefits paid to the family would have 

been more. 

The bill would assure that the pension survivor benefits would 

be paid as if he had returned to work with Yakima County. So that 

is what I did in Olympia, is to try to have it taken care of. 

This picture here, right here, these are the men that were with 

my husband when he died. Those are Reservists, each one of those. 

And you have a paramedic from New York in the New York Fire 

Department. You have a carpenter. You have financial advisors. All 

these people are the type of people that we are talking about. 

And many of these are, again, public servants. If they had been 

killed over there, they would be dealing with exactly the same 

thing that I am dealing with. Their family would be faced with exactly the same thing. 

I urge you to make sure that they and their families can continue to rely on the survivor benefits that they have earned 

through their civilian employers’ pension plans. I ask that their 

families get the benefits that their spouses worked for before they 

were called to serve our country on active military service. 

Again, I worked with the Washington State Legislature to 

change its pension plan to recognize the sacrifices that members of 

the Guard and Reservists may be called to make for our country, 

and I urge the U.S. Congress to do the same. Our Guard and Reservists should know that the families they leave behind will be 

honored to have the future that they have worked so hard to provide. And again, their strength over there is going to be the 

strength they have here. They need to know that the country they 

are sacrificing everything for will take care of their families. 

We have a change in the type of military serving our Nation. 

Over 81,000 Reservists and National Guard members have been 

called to duty and have responded to that call. The world of being 

married to a Reservist or a member of the National Guard has 

changed in ways that they—there is no way 20 years ago that we 

would have known this. 

Today my life has changed. Oh, yes. It has been thrown upside 

down and backward. But my husband always said there was light 

in the tunnel. He always—he never gave up. It was always win/ 

win. In fact, I want you to know that this binder was the one that 

he had in Iraq with him. So it went over there, and it stays with 

me. 

And in the back of this book, there are a couple of quotes. For 

instance, one of the quotes he had in his book over there is, ‘‘The 

love of a wife is one of God’s most precious gifts to man, and your 

love for her is worth whatever it costs.’’ His love for his country 


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was also worth that. He believed in his country, and was willing 

to make that ultimate sacrifice. He also has the quote that: ‘‘The 

greatest thing a father can do for his children is to love their mother.’’ I think the greatest thing that this country can do is to love 

the families of these soldiers. 

Please, I ask you to make the changes in pension laws to support 

those families who find that their loved ones cannot come back to 

those former jobs. Please make sure that the families of veterans 

who have given their lives for their country receive the full benefits 

that their spouses have earned. And yes, there will be lots of parties for those that come back. But there are some that will not 

come back. Thank you. 

[The prepared statement of Ms. Johnson follows:] 

Prepared Statement of Victoria C. Johnson, 

Widow of Major Alan R. Johnson, U.S. Army Reserve, Yakima, Washington 

Good morning, Chairman Neal and Chairman McDermott and Ranking Members 

English and Weller. I am Victoria Johnson and I live in Yakima, Washington. 

Thank you for holding this hearing today on the situations faced by the brave men 

and women who are serving in the military and their families. 

My husband, Major Alan R. Johnson, was killed on January 26th of this year. He 

had 26 years of military experience, most of it in National Guard and Reserve. My 

husband, like many young men and women, joined the Army National Guard after 

he graduated from high school in 1981 and served as an enlisted member of the 

141st Engineer Combat Battalion out of Jamestown, North Dakota. During his 

years in the National Guard he attended OCS and after moving to Washington was 

assigned to many leadership roles in the service. He transferred to the U.S. Army 

Reserve in 2003 and was deployed to Iraq in April 2006. 

As a member of the Guard and the Reserves, my husband had a civilian job. During his 26 years of serving in the Guard, he also spent 15 years working for Yakima 

County. When he was deployed, Alan was working as a sergeant in the Corrections 

Department of Yakima County; he was a shift supervisor for one of the largest jails 

in Washington State. He gave the county 100 percent effort in what he did and 

planned to come back from serving in Iraq and move up the ladder. He would be 

looking at a chief position or possibly administrator of the county jail had he returned as he had planned. 

When he was killed in Iraq, the pension covering the employees of the Yakima 

County Department of Corrections treated him as if he was somebody who volunteered to quit his job at the age of 44. My husband did not quit his job. He left to 

serve his country. As I mentioned, Alan planned to come back after he served his 

duty but he did not get that chance. Because the pension plan considered him a voluntarily terminated employee, the plan would have only paid me, as his widow, a 

survivor benefit equal to a refund of his contributions to the county pension; the 

money paid by Yakima County into the State pension plan would be kept by the 

retirement system. 

Had Alan been an active employee of Yakima County, the survivor benefits paid 

to our family would have been more, as a full death benefit. The pension in Washington State had adopted language based on the requirements of the Uniformed 

Services Employment and Reemployment Rights Act (USERRA) but there is a gap 

in the protection under that law. USERRA requires that servicemembers return to 

their civilian employers to claim their benefits under the law. My husband could not 

meet that requirement. I am grateful that H.R. 2540, the Honoring Existing Retirement Obligations for Every Servicemember Act, which Congressmen Pomeroy and 

Hastings introduced, addresses the gap that I fell into when Alan was killed. The 

bill would assure that his pension survivor benefits would be paid as if he had returned to work with Yakima County. 

The picture that you see in front of you are the men that were with Alan when 

he died. Those are your Reservists. All of those men in the Reserve have civilian 

jobs back home in the U.S. Their civilian experience enables each of them to bring 

a unique asset to our Nation’s military. Those serving in the National Guard and 

the Reserve take the knowledge gained in their civilian occupations and bring that 

expertise with them as they serve in Iraq and across the world. They use their civilian skills to do good—supporting their missions in Iraq. It’s a great asset. 


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While Alan was here at home, he and all Reservists were building a foundation 

for their families’ future through the retirement benefits provided in their civilian 

jobs. When called to serve on active duty, they go to support our country in Iraq, 

or wherever else in the world they are needed. 

I urge you to make sure that Reservists and National Guard members can continue to rely on the survivor benefits that they have earned through their civilian 

employers pension plans. I ask that their families get the benefits that our spouses 

worked for here before they were called to serve our country on active military service. I worked with the Washington State Legislature to change its pension system 

to recognize the sacrifices that members of the Guard and Reservists may be called 

to make for our country and I urge the U.S. Congress to do the same. Our Guard 

and Reservists should know that the families they leave behind will be allowed to 

have the future that they have worked so hard to provide. 

We have a change in the type of military serving our Nation. Over 81,000 Reservists and National Guard members have been called to duty and have responded to 

that call. 

The world of being married to a Reservist or member of the National Guard has 

changed in ways that I could not know 20 years ago when Alan and I were married. 

Today, my life has changed and so have the lives of many other military families. 

I ask you to make changes in the pension laws to support those families who find 

their love ones cannot come back to their employer. Please make sure they get the 

full benefits that their spouses have earned. 

Thank you. 

f 

Chairman NEAL. Thank you very much for your testimony, Ms. 

Johnson. 

The House floor has now scheduled three votes, and the Committee Members are required to go over for those votes. So the 

Chair will declare a recess for approximately 20 minutes. 

[Recess.] 

Chairman NEAL. Let me reconvene our panel. And I would like 

to recognize Mr. McAuliffe for his testimony. 

STATEMENT OF JOHN MCAULIFFE, CONNECTICUT STATE DIRECTOR, NATIONAL VOLUNTEER FIRE COUNCIL, WETHERSFIELD, CONNECTICUT 

Mr. MCAULIFFE. I would like to thank the Chairman, Ranking 

Members, and other Members of the Subcommittees for the opportunity to be here today to express the views of the National Volunteer Fire Council on H.R. 943, the Volunteer Responder Incentive 

Protection Act. H.R. 943 would prohibit the Federal Government 

from taxing benefits provided by State and local units of government to volunteer firefighters and EMS personnel. 

Volunteer firefighters and EMS personnel are essential to our 

Nation’s safety and security. All- and mostly-all volunteer fire departments protect approximately 38 percent of the country’s population and more than 70 percent of the country’s land area. 

A 2004 study by St. Joseph’s University, in partnership with 

VFIS, which is the Volunteer Firemen’s Insurance Service, revealed 

that volunteer first responders save the American taxpayers $37.2 

billion per year. Without volunteer first responders, many communities simply would not be able to afford to provide firefighting and 

emergency medical services to all. 

According to the National Fire Protection Association, also 

known as NFPA, the number of volunteer firefighters in this country has decreased dramatically since the mid-1980s. In addition, 

NFPA statistics show that volunteer firefighters as a population 

are significantly older today than they were 20 years ago. 


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There are two tables and a more detailed explanation of the population issues facing the volunteer fire service that are included in 

the written testimony. However, I may want to point out that from 

the original printout, what happens when computers can’t talk to 

printers properly, things change around, so it may be a little confusing. So if there is a question, our office can certainly clarify that 

for you. 

To cope with the dwindling and aging population of volunteer 

emergency responders, some States and many local units of government have discovered that providing benefits to volunteer emergency responders helps boost retention and recruitment. Volunteer 

benefits come in various forms. Communities provide length of 

service award programs, sometimes known as fire pension programs or LOSAPs, for volunteer first responders; various tax and 

fee reductions; small cash payments for emergency calls responded 

to; reimbursement for expenses incurred; and a variety of others 

ranging from free gym memberships to award ceremonies. The 

types and levels of benefit vary widely by State and community. 

Some States provide benefits, or at least authorize local units of 

government to provide benefits. Connecticut, New York, and Alaska have authorized, through enabling legislation, to have local 

units of government to provide property tax credits to their volunteer first responders. Delaware, Maryland, and South Carolina 

offer their volunteers State income tax credits. 

The Federal Government does not provide volunteer first responders with any taxable benefits, but the Federal Government 

does tax the benefits provided by State and local units of government. Federal taxation of volunteer first responder benefits has 

several effects. The most obvious effect is to reduce the value of the 

benefit to the volunteer. 

H.R. 943 excludes from gross income any property tax rebate or 

other benefit provided by State or local units of government to a 

member of a qualified emergency response organization. Excluding 

property tax rebates from gross income will be most beneficial in 

States like mine, where local units of government are allowed to 

offer up to $1,000 in property tax rebates. 

The other benefits that are not enumerated in H.R. 943 would 

cover a wide range of benefits that are provided to volunteer emergency responders in every State. There are so many different types 

of incentives provided to volunteer emergency responders across 

the country that it would be nearly impossible to list them all. The 

broad language used in H.R. 943 is extremely important so that 

States and communities will have the flexibility to provide whatever type benefit they find to be most effective as a retention and 

recruitment tool. 

Federal taxation also imposes a significant administrative burden on the units of government in small rural communities, which 

rely heavily on volunteer emergency services, that have limited 

staff to process the paperwork. Many of these communities have no 

staff at all and rely on marginally compensated elected officials to 

perform all the administrative functions. 

In addition to being an administrative burden, Federal taxation 

of benefits provided to volunteer first responders can also be confusing. Many communities issue volunteers 1099 tax forms when 


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they should be issuing W–2 forms, and vice versa. Small communities with severely limited resources often find the administrative 

and legal barriers associated with providing benefits to volunteer 

emergency responders prohibitive. By eliminating the Federal taxation on these benefits, H.R. 943 would make it much easier for 

smaller communities to provide them. 

The Joint Committee on Taxation estimates that passage of H.R. 

943 would cost the Federal Government $1.58 billion over 10 years. 

Each year, the services provided by volunteers—and I say each 

year—results in a savings to the taxpayers of $37.2 billion. The tax 

savings derived from volunteer first responders compared to the average year cost incurred by passage of H.R. 943 results in a costto-savings ratio of approximately 42 cents per $100. 

NVFC supports passage of H.R. 943, either as a stand-alone bill 

or as a part of a package of multiple tax proposals in one bill. 

I would like to thank the Subcommittee for the opportunity to 

speak here today, and would be happy to take any questions at this 

time. Thank you. 

[The prepared statement of Mr. McAuliffe follows:] 

Prepared Statement of John McAuliffe, Connecticut State Director, 

National Volunteer Fire Council, Wethersfield, Connecticut 

I’d like to thank the Chairmen, Ranking Members and other Members of the Subcommittees for the opportunity to be here today to express the views of the National 

Volunteer Fire Council (NVFC) on H.R. 943, the Volunteer Responder Incentive Protection Act, which would prohibit the Federal Government from taxing benefits provided by State and local units of government to volunteer firefighters and EMS personnel. 

My name is John McAuliffe and it is an honor and a pleasure to appear before 

you today. I have been in the volunteer fire service since 1958, and served as Chief 

of the Wethersfield Fire Department from 1991–1996. I am currently the National 

Volunteer Fire Council’s Connecticut State Director as well as the Chairman of the 

Connecticut State Firemen’s Association’s (CSFA) Legislative Committee. CSFA is 

a member of the NVFC, which represents the interests of the Nation’s volunteer fire 

and emergency medical personnel who staff approximately 30,000 fire and EMS 

agencies nationwide. 

Volunteer firefighters and EMS personnel are essential to our Nation’s safety and 

security. All- and mostly-volunteer fire departments protect approximately 38 percent of the country’s population and more than 70 percent of the country’s land 

area. A 2004 study by St. Joseph’s University in partnership with VFIS revealed 

that volunteer first responders save American taxpayers $37.2 billion per year. 

Without volunteer first responders, many communities simply would not be able to 

afford to provide firefighting and emergency medical services at all. 

According to the National Fire Protection Association (NFPA) the number of volunteer firefighters in this country has decreased dramatically since the mid-1980s. 

In addition, NFPA statistics show that volunteer firefighters as a population are significantly older today than they were 20 years ago. In order to improve retention 

and recruitment, many States and communities provide benefits to their volunteer 

emergency responders. Federal taxation of these benefits reduces the incentive for 

the volunteers and creates administrative problems for local units of government. 

By eliminating Federal taxation of these benefits, H.R. 943 would be a tremendous 

boost for volunteer first responder recruitment and retention efforts in communities 

around the country. 

The number of volunteer firefighters in the country is decreasing. According to a 

National Fire Protection Association (NFPA) study, between 1983 and 1988, the 

number of volunteer firefighters in the country has decreased from close to 900,000 

to approximately 800,000. Since 1988, the number of volunteers has fluctuated up 

and down but remained close to 800,000. Over that same period of time, the number 

of volunteer firefighters per person in this country has declined steadily by 26.7 percent. 


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Table 1 

Number of Firefighters in the U.S., 1983–2005 

Year 

Total 

Number 

Rate per 

1,000 People 

Career 

Number 

Rate per 

1,000 People 

Volunteer 

Number 

Rate per 

1,000 People 

1983 1,111,200 4.75 226,600 0.97 884,600 3.78 

1984 1,129,100 4.78 231,600 0.98 897,750 3.80 

1985 1,077,950 4.52 238,500 1.00 839,450 3.52 

1986 1,045,950 4.35 237,750 0.99 808,200 3.36 

1987 1,060,000 4.36 243,200 1.00 816,800 3.36 

1988 1,040,750 4.25 252,500 1.03 788,250 3.22 

1989 1,020,700 4.12 250,600 1.01 770,100 3.11 

1990 1,025,650 4.11 253,000 1.01 772,650 3.10 

1991 1,033,600 4.09 261,800 1.04 771,800 3.05 

1992 1,058,300 4.14 253,000 0.99 805,300 3.15 

1993 1,055,050 4.09 259,650 1.01 795,400 3.08 

1994 1,073,600 4.12 265,700 1.02 807,900 3.10 

1995 1,098,850 4.18 260,850 0.99 838,000 3.19 

1996 1,081,800 4.07 266,300 1.00 815,500 3.07 

1997 1,079,050 4.03 275,700 1.03 803,350 3.00 

1998 1,082,500 4.00 278,300 1.03 804,200 2.97 

1999 1,065,150 3.90 279,900 1.03 785,250 2.87 

2000 1,064,150 3.86 286,800 1.04 777,350 2.82 

2001 1,078,300 3.85 293,600 1.05 784,700 2.81 

2002 1,108,250 3.89 291,650 1.02 816,600 2.87 

2003 1,096,900 3.77 296,850 1.02 800,050 2.75 

2004 1,100,750 3.76 305,150 1.04 795,600 2.72 

2005 1,136,650 3.82 313,300 1.05 823,350 2.77 

Source: NFPA Survey of Fire Departments for U.S. Fire Experience (1983–2005). 

Exacerbating the problems created by the decreasing number of volunteer firefighters, NFPA statistics show that volunteer firefighters as a group are aging. 

Table 2 on the next page shows three NFPA studies that measured the percentage 

of volunteer firefighters under 30, under 40, under 50 and over 50 in 1987, 1998 

and 2005 (2005 is the last year that NFPA collected age profile information for volunteer firefighters and 1987 was the first). The long term trend is that the percentage of volunteer firefighters under 30 and under 40 is decreasing while the percentage of volunteer firefighters over 40 and over 50 is increasing. This data suggests 

that departments are having difficulty recruiting new members. 


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Table 2 

Age Profile of Firefighters By Size of Community, 2005 

Size of 

Community 

Mostly Volunteer Firefighters 

Percent 

Firefighters 

under Age 30 

Percent 

Firefighters 

Age 30–39 

Percent 

Firefighters 

Age 40–49 

Percent 

Firefighters 

Age 50 and up Total 

10,000 to 24,999 28.4% 31.2% 25.1% 16.3% 100.0% 

5,000 to 9,999 31.0 29.4 22.5 17.1 100.0

2,500 to 4,999 29.5 28.4 23.1 19.0 100.0

Under 2,500 25.9 25.8 24.8 23.5 100.0

Source: NFPA Survey of Fire Departments for U.S. Fire Experience, 2005. 

Age Profile of Firefighters By Size of Community, 1998 

Size of 

Community 

Mostly Volunteer Firefighters 

Percent 

Firefighters 

under Age 30 

Percent 

Firefighters 

Age 30–39 

Percent 

Firefighters 

Age 40–49 

Percent 

Firefighters 

Age 50 and up Total 

10,000 to 24,999 31.3% 32.1% 23.8% 12.7% 100.0% 

5,000 to 9,999 33.2 30.3 22.5 14.1 100.0

2,500 to 4,999 33.5 29.4 23.4 13.7 100.0

Under 2,500 25.3 29.8 26.7 18.2 100.0

Source: NFPA Survey of Fire Departments for U.S. Fire Experience, 1998. 

Age Profile of Firefighters By Size of Community, 1987 

Size of 

Community 

Mostly Volunteer Firefighters 

Percent 

Firefighters 

under Age 30 

Percent 

Firefighters 

Age 30–39 

Percent 

Firefighters 

Age 40–49 

Percent 

Firefighters 

Age 50 and up Total 

10,000 to 24,999 33.0% 33.8% 20.6% 12.6% 100.0% 

5,000 to 9,999 35.8 32.4 19.1 12.7 100.0

2,500 to 4,999 34.6 32.5 19.3 13.6 100.0

Under 2,500 29.7 33.5 20.9 15.9 100.0

Source: NFPA Survey of Fire Departments for U.S. Fire Experience, 1987. 

To cope with the dwindling and aging population of volunteer emergency responders, some States and many local units of government have discovered that providing 

benefits to volunteer first responders helps boost retention and recruitment. Volunteer benefits come in various forms. Communities provide length of service award 

programs (LOSAPs, pension-like programs for volunteer first responders), various 

tax and fee reductions, small cash payments for emergency calls responded to, reimbursement for expenses incurred, and a variety of others ranging from free gym 

memberships to award ceremonies. The types and levels of benefit vary widely by 

community. 

Some States provide benefits, or at least authorize local units of government to 

provide benefits. Connecticut, New York and Alaska have authorized local units of 

government to provide property tax credits to their volunteer first responders. Delaware, Maryland and South Carolina offer their volunteers State income tax credits. 

A Department of Labor ruling last year capped the value of benefits a first responder can receive each year and still be considered a volunteer. The ruling stated 

that a first responder loses their volunteer status if they receive more than 20 percent of what a career first responder, working the same number of hours in the 

same community would make in their place. This ruling hasn’t affected most communities, where benefit levels don’t come close to approaching the 20 percent 

threshold. However, the ruling has set an upper limit on volunteer benefits and 


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some departments have been forced to take steps to ensure that their members are 

in compliance. 

The Federal Government does not provide volunteer first responders with any taxable benefits, but the Federal Government does tax the benefits provided by State 

and local units of government. Federal taxation of volunteer first responder benefits 

has several effects. The most obvious effect is to reduce the value of the benefit, by 

reducing the take-home income of the individual receiving the benefit, hence reducing the incentive that the benefit was intended to provide. 

H.R. 943 excludes from gross income any ‘‘property tax rebate or other benefit’’ 

provided by State or local units of government to a member of a qualified emergency 

response organization. Excluding property tax rebates from gross income will be 

particularly beneficial in States like mine, where local units of government are allowed to offer up to $1,000 in property tax rebates. This type of benefit is particularly useful in communities where rising property taxes have made living in the 

community unaffordable to the volunteers that serve it. New York and Alaska allow 

local governments to offer similar benefits to their volunteers. 

The ‘‘other benefits’’ that are not enumerated in H.R. 943 would cover a wide 

range of benefits that are provided to volunteer emergency responders in every 

State. There are so many different types of incentives provided to volunteer emergency responders across the country that it would be nearly impossible to list them 

all. The broad language used in H.R. 943 is extremely important so that communities will have the flexibility to provide whatever type of benefit they find to be 

most effective as retention and recruitment tools. 

Federal taxation also imposes a significant administrative burden on units of government in small, rural communities (which rely heavily on volunteer emergency 

services) that have limited staff to process paperwork. Many of these communities 

have no staff at all and rely on marginally compensated elected officials to perform 

all administrative functions. In communities such as these, issuing tax documents 

and maintaining tax records for every member of the volunteer fire department can 

be an overwhelming task. 

In addition to being an administrative burden, Federal taxation of benefits provided to volunteer first responders can also be confusing. Many communities issue 

volunteers 1099 tax forms when they should be issuing W–2 forms and vice versa. 

LOSAP’s place in the Federal tax structure is ambiguous at best, leading to a lack 

of portability and in some cases underfunding of programs. Small communities with 

severely limited resources often find the administrative and legal barriers associated 

with providing benefits to volunteer emergency responders prohibitive. By eliminating Federal taxation of these benefits, H.R. 943 would also make it much easier 

for small communities to provide them. 

The Joint Committee on Taxation estimates that passage of H.R. 943 would cost 

the Federal Government $1.58 billion over 10 years. This estimate does not take 

into account the value of volunteer first responders in keeping local tax rates down. 

Communities provide benefits to their volunteer first responders as a retention and 

recruitment tool. Ultimately, by providing these benefits and maintaining a viable 

volunteer emergency responder force, communities are able to maintain lower local 

tax rates. Each year, the services provided by volunteer emergency responders save 

State and local taxpayers more than $37.2 billion. The tax savings derived from volunteer first responders compared to the average year cost incurred by passage of 

H.R. 943 results in a cost to savings ratio of approximately 42 cents per $100. 

Table 3 

H.R. 943 Cost Estimate 

[Millions of Dollars] 

Fiscal Years 

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2007–12 2007–17 

–31 –126 –135 –146 –162 –172 –184 –196 –208 –221 –599 –1580 

Source: Joint Committee on Taxation Letter to Congressman John Larson dated July 16, 2007. 

The NVFC supports passage of H.R. 943, either as a stand-alone bill or as part 

of a package of multiple tax proposals in one bill. I would like to thank the Subcommittees for the opportunity to speak here today and would be happy to take any 

questions at this time. 

f 


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Chairman NEAL. Thank you, Mr. McAuliffe. 

Ms. Perdew. 

STATEMENT OF JESSICA PERDEW, DEPUTY DIRECTOR OF 

GOVERNMENT RELATIONS, NATIONAL MILITARY FAMILY ASSOCIATION, ALEXANDRIA, VIRGINIA 

Ms. PERDEW. Chairman Neal, Chairman McDermott, and distinguished Members of the Subcommittee, thank you for the opportunity to share the tax issues and concerns facing military families 

today. NMFA appreciates the concern for and commitment to families evident in the Heroes Earnings Assistance and Relief Tax Act 

of 2007. 

As you know, military compensation is very complex. Many 

servicemembers receive special and incentive pays at different 

times throughout their careers. These temporary increases in compensation may actually result in a loss of programs or benefits for 

the families who receive them. 

In other circumstances, a permanent change of station move may 

result in the loss of benefits or programs upon arrival at the new 

duty station. Perhaps the most glaring example of this problem is 

with regard to Supplemental Security Income or SSI. 

Military families that receive SSI to help care for a special needs 

or disabled child often find that a change in housing status or a 

deployment can disqualify the family for SSI. While the loss of 

these payments is certainly an issue, SSI is also the gateway to 

other programs that assist the family in caring for that disabled 

family member. 

I recently spoke with a Navy spouse who had completed a government order move. They had five children. One of the children 

was diagnosed with autism. At their former duty station, the family received SSI for the autistic child. In addition, because the family qualified for SSI, they also had access to additional support programs in the local community. 

They were unable to secure government quarters at the new duty 

station, and as a result were collecting Basic Allowance for Housing on the local economy. This increase in income resulted in their 

ineligibility for SSI, and as a result, ineligibility for Medicaid and 

other support programs. In addition, because they were now receiving BAH, the other children in the family were no longer qualified 

for reduced-price lunches. 

Military families should not be penalized for being deployed to a 

combat zone or making an ordered permanent change of station 

move. A standardized formula for the treatment of military compensation is necessary to ensure that all families are eligible for 

the same benefits regardless of their current geographic location. 

NMFA believes that BAH should be excluded from income when 

calculating eligibility for safety net programs such as SSI and reduced or free school lunches. 

Congress has heard and responded to the issue of military families who lost eligibility for the Earned Income Tax Credit as a result of nontaxable pay in a combat zone. The concern is that while 

there is no immediate end in sight to the current deployments, the 

end of the provision that allows servicemembers to count nontaxable pay as earned income for EITC purposes is clearly in sight. 


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It is imperative that this provision be protected for servicemembers repeatedly sent in harm’s way. In addition, hardship duty 

pay, imminent danger pay, and other deployment-related pays 

should be considered earned income for purposes of safety net programs. A family coping with the stresses of deployment should also 

not be faced with the loss of benefits. 

A few years ago, the Military Times newspaper ran a story about 

a Marine staff sergeant, Staff Sergeant Brown, who had actually 

requested to forfeit special pays and allowances that would be paid 

for his upcoming deployment to Kuwait. His request was denied. 

By law, he was told, he had to be paid approximately $400 a month 

in special pays for this deployment. 

Unfortunately, the additional money meant that the Browns 

would lose eligibility for SSI for their disabled child. The SSI eligibility was the gateway for a daycare program provided by MediCal. These services would have cost the Browns nearly $50,000 a 

year. In addition, Medi-Cal was covering supplies that TRICARE 

did not cover. In total, the Browns estimated that they would need 

about $8,000 in extra income every month to make up for the $400 

Staff Sergeant Brown would be receiving as a result of the deployment. 

The disabled child of a servicemember does not stop being disabled just because the servicemember deploys. As a result, the 

services these families need should not stop when the servicemember deploys. The treatment of special pays and allowances as 

unearned income is financially devastating to special needs families. 

I would also like to take the opportunity to share with you some 

additional provisions that NMFA believes would be beneficial to 

military families. 

Currently, military members are not eligible to participate in 

flexible spending accounts, nor are they permitted to use pretax 

dollars to pay health insurance premiums for TRICARE supplements or the DOD-sponsored TRICARE dental plan. NMFA advocates extending these benefits to military members. 

Finally, NMFA believes it is time for a coordinated national approach to unemployment benefits for military spouses who make a 

permanent station move with their military sponsor. While some 

States have extended unemployment benefits to military spouses, 

others have categorically denied us from the benefit. A Federal solution to this problem would ensure equitable treatment of all military spouses. 

Military families are very proud of their service. On a daily basis, 

they are shouldering the burdens of family stresses, compounded 

by a high operation tempo and limited funding. NMFA believes the 

opportunity to bring these issues to the Subcommittee on behalf of 

military families is an important one. Thank you for your continued concern and support for servicemembers and their families. 

[The prepared statement of Ms. Perdew follows:] 

Prepared Statement of Jessica Perdew, Deputy Director of Government 

Relations, National Military Family Association, Alexandria, Virginia 

The National Military Family Association (NMFA) is the only national organization whose sole focus is the military family. The Association’s goal is to influence 

the development and implementation of policies that will improve the lives of those 


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family members. Its mission is to serve the families of the seven uniformed services 

through education, information, and advocacy. 

Founded in 1969 as the National Military Wives Association, NMFA is a nonprofit 

501(c)(3) primarily volunteer organization. NMFA represents the interests of family 

members and survivors of active duty, reserve component, and retired personnel of 

the seven uniformed services: Army, Navy, Air Force, Marine Corps, Coast Guard, 

Public Health Service and the National Oceanic and Atmospheric Administration. 

NMFA Representatives in military communities worldwide provide a direct link 

between military families and NMFA staff in the Nation’s Capital. Representatives 

are the ‘‘eyes and ears’’ of NMFA, bringing shared local concerns to national attention. 

NMFA does not have or receive Federal grants or contracts. 

NMFA’s website is: http://www.nmfa.org. Jessica Perdew joined the National Military Family Association Government Relations staff in 2005 as Legislative Administrative Assistant. In January 2007 she was 

selected to serve as Deputy Director in the Government Relations Department. In 

this position, she follows issues such as pay and compensation, housing, taxes, family member employment, financial literacy, commissary, and exchange as well as 

other issues relevant to the quality of life of the families of the seven uniformed 

services. She is a regular contributor to several publications including Military 

Money and Military Spouse magazines. Mrs. Perdew serves on the Military Construction/MWR/Exchanges Committee, the Taxes/Social Security Committee and the 

Committee on Military Personnel, Compensation and Commissaries of The Military 

Coalition. In addition she represents military families on the Military Saves National Partners Committee. 

A former Marine and a Marine spouse of 14 years, Mrs. Perdew has served in 

various volunteer leadership positions in civilian and military community organizations including Key Volunteers, Navy and Marine Corps Relief Society, Volunteer 

Income Tax Assistance (VITA), and Marine Spouse Clubs. She is a graduate of the 

University of Michigan in Ann Arbor with a Bachelor of Science in Physics and is 

currently pursuing a second Bachelors degree in Accounting through the University 

of Maryland. 

In addition to her work at NMFA, Mrs. Perdew is a past President of the Marine 

Officers’ Spouses’ Club of Washington D.C. and is currently serving as the Coordinator of the Joint Armed Forces Officers Wives Luncheon Committee. She is also 

a volunteer in the youth office at St. Mark Church in Vienna, Virginia. Mrs. Perdew 

and her husband, Lieutenant Colonel Jason Perdew, reside in Vienna, Virginia with 

their four children. 

Representative Neal, Representative McDermott, and distinguished Members of 

the Subcommittees, the National Military Family Association (NMFA) would like to 

thank you for the opportunity to present testimony today on some of the issues confronting military families with regard to taxation. The package of provisions being 

discussed in the ‘‘Heroes Earnings Assistance and Relief Tax Act of 2007’’ contains 

some very exciting benefits for military members and their families. I would like 

to discuss a few specific provisions today. 

Special Tax Provisions for Active Duty Service 

Over the past 6 years of the Global War on Terror many laudable tax provisions 

targeting military members have been enacted. Unfortunately, many of these provisions were enacted with sunset dates and are due to expire at a time when servicemembers want and need them to continue. One such provision is the ability to treat 

nontaxable income earned in a combat zone as income for the purpose of Earned 

Income Tax Credit (EITC) qualification. 

A few years ago many of our junior enlisted and officer members were suffering 

a net loss in tax benefits while deployed to a combat zone despite the allowed tax 

exclusions on their income. This seeming paradox resulted from an overall decrease 

in earned income resulting in the decrease in or disqualification for the Earned Income Tax Credit. Congress recognized the importance of this credit to our military 

families and took action to ensure they did not lose eligibility due to military orders 

deploying them to a combat zone. Making this provision permanent will ensure that 

our lowest income servicemembers and their families are eligible for and can maximize the benefit of these important credits while serving in a combat zone. 

Other families are finding that the receipt of combat or hazardous duty compensation reduces or makes them ineligible for Supplemental Security Income (SSI) payments. Currently military families who rely upon SSI to meet living expenses associated with a disability are finding that a deployment can significantly impact their 


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financial stability in a multitude of ways. The receipt of Hardship Duty Location 

Pay (HDL–P), Imminent Danger Pay (IDP), or other deployment-related pays can 

disqualify otherwise qualified families for SSI. Not only does the affected family lose 

the SSI payment, they also become ineligible for other programs for which SSI is 

the gateway to qualification such as Medicaid. Classifying these pays as earned income for purpose of SSI qualification would ensure that military families in these 

circumstances aren’t arbitrarily penalized for the deployment of the servicemember. 

NMFA has heard from many families about the difficulty of balancing financial 

obligations when the servicemember is deployed. Families commit to financial obligations based upon their regular income, which may include SSI. When the servicemember is deployed, the family is still obligated to pay the mortgage, utilities, car 

payment, and college tuition even if their income decreases. Disabled family members do not suddenly lose their disability when a servicemember deploys. The child 

who requires special daycare still requires special daycare. The blind child does not 

suddenly regain his or her sight. These families are not only coping with a disabled 

child, they are also now dealing with the additional impacts of a deployment and 

suddenly becoming a single parent family until the servicemember returns. It is imperative that disability payments continue for families coping with deployment. Legislation is needed to ensure continuity of these benefits to all families. 

The call to active duty service and deployment can have catastrophic impact on 

the monthly budget of a family, especially Guard and Reserve families. Many families have used their ‘‘emergency fund’’ to cope with the additional financial demands 

of previous deployments. As a result many families are finding subsequent deployments more financially taxing. The provision that permits active duty members to 

make penalty free withdrawals from retirement plans may be the only resource remaining for some families. While withdrawing from a retirement account will obviously impact future retirement plans, such withdrawals may be the only means of 

maintaining a family’s financial solvency. 

NMFA believes there is also room for additional legislative provisions for servicemembers and families coping with deployment. NMFA suggests Congress pass legislation to: 

• Exclude all employment taxes, rather than just FICA for servicemembers in a 

qualifying combat zone. 

• Increase the standard deduction for servicemembers who received tax free pay 

as a result of service in a combat zone during the tax year. 

• Extend tax exemptions offered to servicemembers in combat zones to military 

spouses of those servicemembers. 

• Provide employers with tax incentives to continue benefit programs for families 

of Guard and Reserve servicemembers called to active duty. 

All servicemembers, regardless of deployment status, would benefit from the ability to pay health insurance premiums for TRICARE supplements or the DoD sponsored TRICARE dental plan with pre-tax dollars. Also, servicemembers are currently unable to participate in flexible spending accounts that would permit them 

to pay health care and child care expenses with pre-tax dollars. Both of these benefits are routinely offered to civilian employees and Federal civilian employees. Military spouses are called upon to regularly relocate as servicemembers are transferred 

from duty station to duty station. Yet, in many States military spouses are not eligible for unemployment compensation despite having worked at the previous duty station. Standardizing the rules for unemployment compensation for military spouses 

would ensure that they are not arbitrarily penalized for moving with their military 

sponsor. NMFA believes it is time to extend those benefits to active duty personnel 

and their families. 

NMFA appreciates the efforts of Congress to provide beneficial tax treatment due to the special circumstances surrounding military service in a 

time of conflict. We believe that it is now time to make these provisions 

permanent to ensure there is no loss of benefit as servicemembers continue 

to wage the Global War on Terror. 

Military Allowances and Safety Net Programs 

In congressional testimony since 2003, NMFA has raised a longstanding frustration for military families: The confusion involved in how and when military allowances are counted to determine eligibility for military and civilian programs. NMFA 

again reinforces the need for Members of Congress, as well as State officials, to assist in bringing a sense of order to how military allowances are counted for Federal 

and State programs. We ask you to help ensure equitable access to these safety net 

services and protect families against disruptions in benefit eligibility caused by the 

receipt of deployment pays. No family should have to face the prospect of losing valVerDate Nov 24 2008 08:44 Jan 31, 2011 Jkt 058274 PO 00000 Frm 00057 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\58274.XXX APPS06 PsN: 58274

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uable benefits for a disabled child because a servicemember has received deployment orders or because they have relocated to a new duty station. 

Families living off the installation are often there only because of the non-availability of on-base housing, yet endure higher expenses than families living on an 

installation. Ideally, therefore, NMFA believes tax free allowances such as BAH 

should not be counted under any safety net program, which is how they are now 

treated in determining eligibility for the Earned Income Tax Credit (EITC). NMFA 

understands this could increase the number of military families eligible for some of 

these programs, but believes this increase is justified given the need for equitable 

treatment of all servicemembers, as well as the loss of spouse income due to military 

relocations and high operations tempo. 

Inconsistent treatment of military allowances in determining eligibility 

for safety net programs creates confusion and can exact a financial penalty 

on military families. A start in correcting this inequity would be to adopt 

a common standard in how BAH should be counted in eligibility formulas 

and to ensure that the receipt of deployment-related allowances do not cause 

military family members to become ineligible for support services for which 

they would otherwise be eligible. 

Tax Treatment for Wounded and Surviving Families 

NMFA recognizes and appreciates the legislation that has been passed in support 

of survivors since the beginning of the Global War on Terror. One issue that has 

been previously overlooked in legislation is the ability to invest death gratuities in 

tax favored accounts. For survivors, the ability to contribute up to the entire amount 

of the death gratuity to a tax favored account allows them the opportunity to invest 

this payment until it is needed to cover higher education costs without being penalized by a significant tax expense when withdrawn. This measure is one more way 

that we can ensure that the families of those patriots who have made the ultimate 

sacrifice can achieve their dreams and goals without the threat of taxes eroding the 

value of their educational funding investments. 

Finally, those veterans who have patiently waited years for a Department of Veterans Affairs (VA) Disability Determination should be afforded the opportunity to 

amend a tax return and obtain a refund of taxes that were overpaid during the time 

that the VA was adjudicating the case. The delay in determinations is through no 

fault of the individual veteran and they should not be asked to forego refunds simply because the statute of limitations on amending a return has passed. 

NMFA appreciates your focus on and commitment to military members and their 

families. Financial readiness has a direct impact on military readiness; the tax provisions discussed here have the potential to improve financial readiness of military 

members. 

f 

Chairman NEAL. Thank you, Ms. Perdew. 

Ms. LaRock. 

STATEMENT OF MICHELLE D. LAROCK, DEPUTY DIRECTOR OF 

PROGRAM DEVELOPMENT, DIVISION OF VETERANS’ AFFAIRS, STATE OF NEW YORK, ALBANY, NEW YORK 

Ms. LAROCK. Thank you. Chairman Neal, Chairman McDermott, Ranking Members English and Weller, and Members of the 

Ways and Means Subcommittees, my name is Michelle LaRock and 

I am Deputy Director for Program Development of the New York 

State Division of Veterans’ Affairs. I am pleased to be here today 

to discuss Section 202 of the draft proposal before you, which would 

ensure that recipients of State annuities for blinded veterans are 

not penalized by the loss of their Supplemental Security Income 

benefits. 

Section 202 of this proposal is modeled on legislation, H.R. 649, 

introduced by New York Congressman Tom Reynolds, who has advocated this important change since the year 2000, and I appreciate his facilitating my appearance at this morning’s hearing. 


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New York is one of four States that currently provide a modest 

annuity to blinded veterans. The other States that offer similar annuities are Massachusetts, Pennsylvania, and New Jersey, States 

that are also well represented by Members of this Committee. Let 

me begin briefly by describing New York’s annuity program and 

then discuss why current Federal SSI rules present serious challenges both to annuitants and to the Division of Veterans’ Affairs 

in our administration of the annuity program. 

Under New York’s program, the State makes an annuity payment to blinded veterans or their un-remarried surviving spouses. 

The annuity has been in existence since shortly after World War 

I, and it is currently at a rate of $1,103.88 per year. There are approximately 3,100 veterans and 1,400 spouses currently receiving 

these benefits. 

Unfortunately, under current Federal law, SSI benefits for which 

blinded veterans may otherwise be eligible are reduced simply by 

virtue of their receiving these modest State annuities. This quirk 

in Federal law poses significant challenges both to annuitants and 

to administrators of these State programs. 

With respect to the annuitants themselves, it seems unfair that 

these modest State annuities would reduce Federal SSI payments 

to blind veterans who are struggling economically, especially given 

that our annuity program predates SSI and was never intended to 

replace Federal benefits. 

Instead of making the lives of eligible veterans a little easier, 

these annuities have often become significant hardships for them 

when offsetting their Federal benefits. This is an obvious inequity, 

and it is a welcome development to see that Congressman Reynolds’ proposal to correct this problem has been included in the 

draft bill under consideration by the Committee. 

These Federal rules governing SSI payments have also presented 

difficulties for the Division of Veterans’ Affairs in the administration of our blind annuity program. For an unknown number of 

years, our annuities have not been paid as single annual payments, 

but rather as 12 monthly payments. The rationale behind this payment schedule is the necessity to minimize the impact a lump sum 

payment would have on annuitants’ Federal benefits, such as SSI, 

that are calculated on a monthly basis. 

Unfortunately, this has resulted in the annuity being treated as 

a payroll process, except that no deductions are made and it is run 

monthly. This generates about 54,000 checks over the course of 1 

year, which is the payroll equivalent of a 2,000-person agency, all 

managed part-time by a Secretary II in the Division of Veterans’ 

Affairs and a payroll clerk in the Office of General Services. 

If State annuities to blind veterans were disregarded in calculating Federal SSI benefits, the Division of Veterans’ Affairs could 

explore ways to simplify and improve our administration of the annuity program and make it more effective for our State’s blinded 

veterans. 

In sum, the interplay between current Federal law and our State 

program has made something as simple as paying $1,103.88 per 

year to blind New York veterans or his or her surviving spouse unbelievably complicated and difficult, not only for the recipients but 

also for the State. 


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For the above-mentioned reasons, the New York State Division 

of Veterans’ Affairs enthusiastically supports the legislative change 

made in Section 202 of this proposal, and we thank Congressman 

Reynolds and other Members of this Committee for their efforts to 

address this important issue. 

I appreciate the opportunity to present the views of the Division 

of Veterans’ Affairs, and am prepared to answer any questions 

Members of the Subcommittees may have. Thank you. 

[The prepared statement of Ms. LaRock follows:] 

Prepared Statement of Michelle D. LaRock, 

Deputy Director of Program Development, Division of Veterans’ Affairs, 

State of New York, Albany, New York 

Chairman Neal, Chairman McDermott, Ranking Members English and Weller, 

and Members of the Ways and Means Committee, my name is Michelle LaRock, and 

I am Deputy Director of the New York State Division of Veterans’ Affairs. I am 

pleased to be here today to discuss Section 202 of the draft proposal before you, 

which would ensure that recipients of State annuities for blinded veterans are not 

penalized by the loss of their Federal Supplemental Security Income (SSI) benefits. 

Section 202 of this proposal is modeled on legislation, H.R. 649, introduced by New 

York Congressman Tom Reynolds, who has advocated this important change since 

the year 2000, and I appreciate his facilitating my appearance at this morning’s 

hearing. 

New York is one of four States that currently provide a modest annuity to blinded 

veterans. The other States that offer similar annuities are Massachusetts, Pennsylvania, and New Jersey, States that are also well represented by Members of this 

Committee. Let me begin by briefly describing New York’s annuity program and its 

eligibility requirements and then discuss why current Federal SSI rules present serious challenges both to annuitants and to the Division of Veterans’ Affairs in our 

administration of the annuity program. 

Description of New York State’s Blinded Veterans Annuity Program 

Under New York’s program, the State makes an annuity payment to blinded veterans or to their un-remarried surviving spouses. The annuity has been in existence 

since shortly after World War I, initially at an annualized rate of $500 and only 

for blinded veterans themselves. In 1999, the amount was increased to $1,000 per 

year, and in 2000 un-remarried surviving spouses were added as eligible annuitants. In 2004, a provision to index the amount of the annuity by the annual Federal inflation rate was added. The current annuity is $1,103.88 per year. 

Prior to 1999, there were approximately 1,100 veterans receiving the annuity. Following the increase in the amount of the annuity and the addition of many more 

surviving spouses, that number has risen to include approximately 3,100 veterans 

and 1,400 spouses. Most of these recipients are elderly—only 18 of the 4,500 recipients are under the age of 50. 

Eligibility Requirements 

In New York, eligible veterans are those who served on active duty in the armed 

forces of the United States during specified wartime periods and who were discharged or released under conditions other than dishonorable. Annuitants must 

meet the New York State standards of legal blindness and must continue to be residents of, and continuously domiciled in, New York State. In general, the veteran 

must have had 90 days of active duty service for nontraining purposes. Less than 

90 days is acceptable, however, if the veteran was discharged for a service-connected 

disability. 

Current Federal Law Reduces Annuitants’ SSI Benefits 

Unfortunately, under current Federal law, SSI benefits for which blinded veterans 

may otherwise be eligible are reduced simply by virtue of their receiving these modest State annuities. This quirk in Federal law poses significant challenges both to 

annuitants and to administrators of these State programs. 

With respect to the annuitants themselves, it seems unfair that these modest 

State annuities would reduce Federal SSI payments to blind veterans who are 

struggling economically, especially given that our annuity program predates SSI 

and was never intended to replace Federal benefits. Instead of making the lives of 

eligible veterans a little easier, these annuities have often become significant hardships for them when offsetting their Federal benefits. This is an obvious inequity, 


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and it is a welcome development to see that Congressman Reynolds’ proposal to correct this problem has been included in the draft bill under consideration by the 

Committee. 

These Federal rules governing SSI payments have also presented difficulties for 

the Division of Veterans’ Affairs in the administration of our blind annuity program. 

For an unknown number of years, our annuities have not been paid as single annual payments, but rather as 12 monthly payments. The rationale behind this payment schedule is the necessity to minimize the impact a lump sum payment would 

have on annuitants’ Federal benefits, such as SSI, that are calculated on a monthly 

basis. Unfortunately, this has resulted in the annuity being treated as a payroll 

process, except that no deductions are made and it is run monthly. This generates 

about 54,000 checks over the course of 1 year, which is the payroll equivalent of 

a 2,000-person agency—all managed part-time by a Secretary II in the Division of 

Veterans’ Affairs and a payroll clerk in the Office of General Services. If State annuities to blind veterans were disregarded in calculating Federal SSI benefits, the Division of Veterans’ Affairs could explore ways to simplify and improve our administration of the annuity program to make it more effective for our State’s blinded veterans. 

In sum, the interplay between current Federal law and our State program has 

made something as simple as paying $1,103.88 per year to a blind New York veteran or his or her surviving spouse unbelievably complicated and difficult, not only 

for the recipients but also for the State. 

Conclusion 

For the above-mentioned reasons, the New York State Division of Veterans’ Affairs enthusiastically supports the legislative change made in Section 202 of this 

proposal, and we thank Congressman Reynolds and other Members of this Committee for their efforts to address this important issue. I appreciate the opportunity 

to present the views of the Division of Veterans’ Affairs and am prepared to answer 

any questions Members of the Subcommittees may have. Thank you. 

f 

Chairman NEAL. Thank you, Ms. LaRock. 

Mr. Downing, I appreciate your comments on the need for affordable housing for veterans, and perhaps the successful low-income 

housing tax credit program could be utilized for this need as well. 

You stated that your program creates savings accounts for veterans 

so that someday they can own their own home. 

Under the current draft bill we are considering, one of the provisions would make permanent a temporary provision that waives 

the first-time homebuyer requirement for veterans under a Qualified Mortgage Bond program, providing an opportunity for veterans 

to access lower-cost financing. 

Does Massachusetts do any outreach work to veterans under the 

Qualified Mortgage Bond program? 

Mr. DOWNING. Not that I’m aware of, sir. 

Chairman NEAL. Do you want to expound on that? 

Mr. DOWNING. The issue has been that in the Massachusetts 

Department of Veterans Services, they have never had anything 

whose full-time position was just housing around the issue of housing for veterans. They are currently funding and developing a job 

position to do that, and I think as a result of that, the programs 

that might have benefited veterans have never come into existence. 

Chairman NEAL. And Ms. LaRock, do you expect an uptick in 

recipients of veterans services in your special annuity program 

with the increase in the number of veterans over the last few 

years? 

Ms. LAROCK. Once the State started allowing spouses, that increased. And once the State indexed the annuity to keep with the 


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Federal cost of living, that also increased the amount of annuitants 

in the program. 

I am not sure if they knew that the blind annuity would not be 

countable income, that that would make them come out in droves. 

I think they still come out to get their annuity. But it just makes 

it difficult for them to have their Federal benefits offset if they do 

receive SSI. 

Chairman NEAL. Thank you. I would like now to recognize Mr. 

McDermott. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 

Listening to you talk about all the health care problems reminds 

me, we are going to have a hearing in my Subcommittee on the 

gaps in SSI and how they are created because it is pretty clear to 

me that we really need a universal health care system so that people don’t drop between TRICARE and Medicaid and all the places 

where, when there are shifts in people’s lives, what happens to 

their health care. 

I am afraid to ask, Ms. Johnson: What happened to your health 

care coverage when your husband was killed? 

Ms. JOHNSON. Well, fortunately I was working at the time, so 

I had health care also for our family. And, of course, while he was 

on active duty, we had the military TRICARE. Because he was 

killed, the military will take care of the family with TRICARE. 

Mr. MCDERMOTT. So TRICARE goes from now until your 

daughter is how old? 

Ms. JOHNSON. There is a period that the family does not have 

to pay anything, and then the family does have to pay a portion. 

I have not come to that point yet to know how much that is. 

Mr. MCDERMOTT. Tell me about what happened in the State 

legislature when you went down there to try and get a fix from the 

State legislature around the pension system. 

Ms. JOHNSON. I have to let you know that everyone that I 

talked to was very supportive on a personal level. They could not 

do enough for me because they understood the situation. 

Mr. MCDERMOTT. Did they change the law? 

Ms. JOHNSON. It was the wording and how things were done. 

They would tell me their hands are tied on what happened with 

that. Again, he was being treated as though he quit, as though he 

wasn’t employed any longer, where I believe that if he had been 

killed here in the States at the time while he was employed, there 

would have been just a reduction in those benefits; where in this 

case they were removing all of the matching, where if he had been 

killed here, there still would have been the matching funds. It just 

would have been a penalty for early retirement. 

Mr. MCDERMOTT. Does anyone here on the panel know how 

many States treat a service person as terminating their employment when they go on active duty? Is that a universal thing across 

the country? Does anybody know that? 

Ms. JOHNSON. I don’t think it has happened enough, so I don’t 

think people—they haven’t looked at it. 

Ms. PERDEW. Mr. Chairman, it is not just State governments. 

Also, private employers who have pension plans, when you are a 

Guardsman or a Reservist and you activate, if you are killed in the 

line of duty during that activation, you are considered a terminated 


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employee because you never came back to the employer as an employee after your tour of duty. 

Mr. MCDERMOTT. So that you do not then participate in the 

company—in the private plans, either? 

Ms. PERDEW. Correct. They would have the same experience, 

whereas they would be given back what they had paid into the program, but not treated as a pensionholder. 

Mr. MCDERMOTT. And I hope that, Ms. Johnson, you will send 

it to us. But if anybody else has access to what the difference is 

for a—your husband was what, 40—— 

Ms. JOHNSON. Forty-four-years-old. 

Mr. MCDERMOTT. And he had been in the law enforcement system—— 

Ms. JOHNSON. Fifteen years. Fifteen years. 

Mr. MCDERMOTT [continuing]. For 15 years. So he had some 

kind of actuarial—you could have received an actuarial reduced 

pension. 

Ms. JOHNSON. Right. And even at State level, it is not where 

it really needs to be. For instance, I was not given the option to 

keep the money in there so to reduce that penalty. Do you understand what I am saying? That if I could have kept it in their until, 

you know, his age that he would have been at retirement normally, 

if you did that, there would be a reduction of that penalty. I was 

not given that choice. 

Mr. MCDERMOTT. So you were just given—— 

Ms. JOHNSON. So I had to take a full penalty, as though he retired at age 44. 

Mr. MCDERMOTT. And then were you taxed on that money as 

well? 

Ms. JOHNSON. I, of course, knowing it was a pension, I have 

rolled it over into a pension account. I guess that would be an IRA. 

Of course, I will be. 

Mr. MCDERMOTT. Ultimately. 

Ms. JOHNSON. But, I mean, that is what—I don’t believe that 

the families necessarily—I mean, some of them may need it right 

away. But it was meant to be a pension, and I had no problem 

keeping it that way. And I would have loved to have been able to 

keep it in there to reduce those penalties, but I was not given that 

opportunity. 

Mr. MCDERMOTT. Thank you very much. Thank you for coming 

and testifying here today. You did a good job. 

Ms. JOHNSON. Thank you. 

Chairman NEAL. Mr. Reynolds. 

Mr. REYNOLDS. I thank the Chairman. And I thank this panel. 

I think it has been both helpful on the legislation that our two 

Chairs and Ranking Members have hosted this hearing on, but 

also, as Chairman McDermott and I were walking to the Capitol, 

it opens up other things where your testimony helps us think about 

where we can maybe do other areas of assistance as unintended 

consequences have occurred as we are at war and we have had our 

Reserve and Guardsmen on active duty service. 

And I also saw some of that as I was on an Air Force base this 

weekend in my district, and talking to Reservists about some peculiar problems they are now experiencing that we just need to work 


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through. So I again appreciate the testimony here, and appreciate 

the opportunity with this hearing both for legislation before us, but 

where it is leading us to look at some other things. 

Chairman NEAL. Thank you, Mr. Reynolds. 

Mr. Larson is recognized. 

Mr. LARSON. Thank you, Mr. Chairman. And let me echo the 

sentiments of the Members on the Subcommittee, first and foremost to you and Mr. McDermott and the Ranking Members for 

holding this hearing, and Mr. Rangel for putting this legislation 

forward. Certainly the testimony here today has been compelling, 

if not poignant and emotional. 

And as was said by Mr. Reynolds, I think more often than not, 

when we get to listen to our constituents, we get to learn an awful 

lot more about how we can more effectively apply the laws. That 

was the case in Connecticut, which passed a law in 1999 that provided relief to volunteers and local municipalities that allowed 

them to provide a rebate to volunteers. And if we learned anything 

after the events of September 11th, it was how important and how 

valuable those volunteers are, those frontline defenders, as I said. 

I have a question for Mr. McAuliffe because I do think it is important. Is the state of volunteerism, and specifically in the case of 

firefighters, and so important, I believe, in your statement you said 

something like it saves the taxpayer $37 billion—what has caused 

this stress? Is there some—what do you attribute to the lack of volunteerism, et cetera, not only in Connecticut, but perhaps across 

the Nation in your association? 

Mr. MCAULIFFE. I think there is a broad series of events that 

have caused the diminishment of volunteers. However, I can focus 

on a couple of points. And one is that the demands of a volunteer 

have substantially changed since I went into the department years 

ago. 

We did on-the-job training. Now there are more safety features, 

more specialized training that our people have to go through to 

maintain that professional level of balance to do their job. So the 

time commitment becomes much longer than what it was years 

ago. 

The other thing I see is a diminishment in the volunteers out 

there as the demographics of communities. And if I might point out 

that Wethersfield, the town I come from, was once a suburban community. As time went along, it became an urban community. And 

those firefighters or volunteer firefighters that we had during the 

daytime who were the farmers, those farms are gone. So we have 

to find people who we can solicit or encourage to join the volunteer 

fire service to pick up that slack. 

However, I will say that in looking at the $1,000 tax deduction 

that the State has allowed, I see that there is a slowing down of 

the number of people exiting from the fire service, and I think that 

is definitely a good sign. Hopefully, it will turn around even further 

and come back to where, when I went in the department, you had 

to be put in queue to get into the department. Now, if you can capture a warm body and get them to join, you certainly do that. 

Mr. LARSON. Thank you, Mr. McAuliffe. 

Chairman NEAL. Are there any other questions of our panelists? 

[No response.] 


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Chairman NEAL. Well, I want to thank you personally as well 

as professionally. I think that you are reflective of hometown 

America and the real problems that our veterans and others have 

every single day. And I think not only is the testimony you have 

offered instructive, but I think it is testimony that you can see Republicans and Democrats both are embracing. 

And I am hopeful that the full Committee will move on with 

some of the suggestions that you have offered, and that we will get 

a product that will pass the House of Representatives. And I am 

pretty confident that in some form, that will happen. 

So let me thank you for your testimony. The record will remain 

open for a short period of time to accommodate any written followup that you might like to offer. 

Mr. MCDERMOTT. Mr. Chairman? 

Chairman NEAL. Mr. McDermott. 

Mr. MCDERMOTT. Mr. Chairman, I would like to have unanimous consent to put into the record a letter from the AmeriCorps 

program in Washington State that has part of the documentation 

of why we need to deal with AmeriCorps. 

Chairman NEAL. Without objection, that testimony will be accepted. 

If there is no further comment, the Chair will declare that this 

hearing is adjourned. 

[Whereupon, at 12:58 p.m., the Subcommittees were adjourned.] 

[Submissions for the Record follow:] 

STATE OF CALIFORNIA 

DEPARTMENT OF VETERANS AFFAIRS 

FARM AND HOME PURCHASES DIVISION 

Sacramento, California 94295–0001 

October 29, 2007 

The Honorable Charles B. Rangel 

Chairman 

House Ways and Means Committee 

1002 Longworth HOB 

Washington, DC 20515 

Dear Chairman Rangel: 

Thank you for helping California’s veterans fulfill their dreams of homeownership 

by including the mortgage bond provisions of H.R. 551 in the Heroes Earnings Assistance and Relief Tax Act of 2007. The California Department of Veterans Affairs 

strongly supports your bill, which will allow California’s recent war veterans to participate in our CalVet Home Loan program. 

The CalVet Home Loan program has helped more than 420,000 veterans experience the American dream of homeownership. Since 1922, California has offered lowinterest home loans to veterans in appreciation of their service to the Nation primarily through the sale of voter approved, tax-exempt Qualified Veterans Mortgage 

Bonds and to a smaller extent through Qualified Mortgage Bonds. The States of 

Alaska, Oregon, Texas and Wisconsin operate similar Qualified Veterans Mortgage 

Bond programs, and any State can use Qualified Mortgage Bond funds for housing 

programs. 

Over 2.2 million veterans and 200,000 servicemen and women reside in California. Enactment of the proposed bill will help meet the demand for low-cost loans 

in California’s high-cost market, and ensure that those Americans who served in the 

Persian Gulf War, Somalia, Grenada, Panama, Kosovo, Bosnia, Afghanistan and 

Iraq can enjoy the same level of benefits that have been granted to their fathers 

and grandfathers who served in World War II, Korea and Vietnam. 


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Your leadership and support of the Heroes Earnings Assistance and Relief Tax Act 

of 2007 is very much appreciated by the California Department of Veterans Affairs, 

the many veteran and industry organizations that support H.R. 551, and the veterans of California. 

Tom Johnson, FACHE 

Secretary, California Department of Veterans Affairs 

f 

Corporation for National and Community 

October 18, 2007 

The Honorable Jim McDermott 

Chairman 

Ways and Means Subcommittee on Income Security and Family Support 

United States House of Representatives 

Washington, DC 20515 

Dear Chairman McDermott: 

I am writing to thank you for your leadership in addressing the disparate treatment of AmeriCorps participant benefits for purposes of disability benefits provided 

by the Social Security Administration. 

The AmeriCorps program has three components: (1) AmeriCorps VISTA; (2) 

AmeriCorps National Civilian Community Corps; and (3) AmeriCorps State/National. All AmeriCorps participants receive a modest living allowance during service 

and a post-service education award upon completion. Under current law, payments 

to AmeriCorps VISTA participants may not affect their eligibility for any government program, including Supplemental Security Income (SSI) and Social Security 

Disability Insurance (SSDI). At the same time, payments to AmeriCorps NCCC and 

State/National participants may negatively affect their eligibility for, or benefit levels under, SSI or SSDI. 

The National and Community Service Act of 1990 calls upon the Corporation to 

promote the inclusion of individuals with disabilities in national and community 

service programs, with specific funding for outreach and placement. Individuals 

with disabilities volunteer for the same reasons that anyone else does: To give back 

to their communities; to improve their surroundings; to improve the quality of their 

lives; and to be active and engaged citizens. Some national service participants who 

have disabilities volunteer with organizations that serve other individuals with disabilities, while others focus their efforts on helping to meet a wide range of critical 

community needs. 

Through the Corporation’s National Service Inclusion Project, we work with nonprofit and community-based organizations to develop inclusive service environments 

that are accessible and welcoming and that make meaningful service experiences 

possible. 

Regarding the disparate treatment of AmeriCorps benefits, we have consistently 

heard from many of our State Commissions and grantees, as well as the larger disability community, about the difficulties they encounter recruiting individuals with 

disabilities to our programs because of the possible threat to their SSI or SSDI benefits. Some participants have been caught up in this problem after they have already enrolled. 

Thank you very much for your attention to this important issue, and for your 

many years of support of national service. Please do not hesitate to call me if I may 

provide you with additional information or contact Kathleen Ott, Director, Government Relations. 

The Office of Management and Budget advises that from the standpoint of the Administration’s program, there is no objection to the transmittal of this letter. 

Sincerely yours, 

David Eisner 

f 

Chief Executive Officer 

Statement of Jerry Patterson, 

Texas Land Commissioner and Chairman, Texas Veterans Land Board 

Chairman Neal and Chairman McDermott: 

I want to thank you both for allowing me to submit this written testimony about 

the Qualified Veteran Mortgage Bond provision contained in the ‘‘HEROES Earnings Assistance and Relief Act of 2007.’’ I also want to thank Congressman Sam 

Johnson for requesting that this testimony be included in the record. 


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Texas has always rewarded those who have fought on her behalf. Over the years, 

Texas gave land because that was all she had. The heirs of David Crockett, who 

was once a member of this body, received 1,280 acres of land for his honorable service at the Alamo. In 1946, the Texas Legislature created the Texas Veterans Land 

Board (VLB) to make loans to returning veterans so they could buy a piece of Texas 

to farm or ranch. Since then, the VLB has served more than 200,000 veterans. 

From the first land loan in 1947, the VLB has grown to provide low interest loans 

for land housing and home improvement. All of the programs are conducted at no 

cost to the taxpayer. The VLB is one of two State agencies that completely pay for 

themselves with the proceeds from the programs. In addition to the loan programs, 

the VLB also operates seven long-term, skilled nursing facilities for veterans and 

their spouses, as well as two State veterans cemeteries and is currently working on 

the location of an eighth nursing home and third cemetery. 

The inclusion of the Qualified Veteran Mortgage Bond section into the HEROES 

bill will allow California and Texas to have the same benefit to serve their veterans 

as Alaska, Oregon and Wisconsin now do. QVMB loans symbolize an important commitment to veterans. Over the past several years, we have received a number of resolutions of support from veterans groups and those in the housing industry endorsing passage of this and similar measures. 

All veterans, regardless of when they served, deserve to be treated equally. Passage of this provision will ensure that all benefits provided by the Texas Veterans 

Land Board are administered without bias to all eligible veterans. These veterans, 

who have earned this entitlement through their honorable service, will enhance 

local tax bases, stimulate economic growth and strengthen our communities as responsible homeowners and taxpayers. 

Veterans are a good credit risk. The default rate—of borrowers who cannot afford 

to keep their homes—averages less than one-half of 1 percent. That is outstanding 

compared to the rest of the market, which sees default rates in the 7 percent range 

and higher. Veterans pay their bills. 

It is also noteworthy that the Texas Veterans Land Board offers additional benefits and discounts on its already low base rate. Veteran borrowers with a disability 

rating of 50 percent or more from the U.S. Department of Veterans Affairs (VA) will 

receive an additional 0.35 percent rate reduction. We also offer our own version of 

the Servicemember Civil Relief Act of 2003, once known as the Soldiers and Sailors 

Relief Act. If borrowers in the Reserve forces of any branch of service or the National Guard are called to active duty, we suspend the interest due for the duration 

of their deployment. The only amount they or their spouses have to pay is the principal portion of the payment. Once they return home, we give them an additional 

90 days before we resume the original payment. This gives them an opportunity to 

get settled back into life as it once was. We forgive the interest that we suspended 

during their deployment. We do this because it is the right thing to do. 

It is critical to understand that this is not a refinance program, it is a home purchase program. With a recent focus on National Guard troops and Reservists, the 

program has recently grown to new heights. In 2001, the program made $230 million in loans; in 2002, $320 million; in 2003, $532 million; in 2004, $1.012 billion; 

and in 2005, $859 million. During this period, the rest of the market for loans was 

diminishing. 

In the 109th Congress, H.R. 4297 was passed granting the States of Alaska, Oregon and Wisconsin the ability to do away with the arbitrary 1977 exclusion date 

that was in section 143 of the Internal Revenue Code. Under the Internal Revenue 

Code, veterans who entered active military service after December 31, 1976, are not 

eligible for QVMB-funded home loans. These deserving American men and women 

should be provided the same benefit as those veterans in Alaska, Oregon and Wisconsin. Through the passage of H.R. 4297 in the last session, those States now have 

the ability to fund all of their veteran borrowers with QVMB funds, thereby reducing the interest rate to all veterans, not just one class. 

It is also important to understand that veteran borrowers are better served using 

Qualified Veteran Mortgage Bonds for housing loans. The issue is whether or not 

Qualified Mortgage Bonds (QMBs) are a suitable replacement for using Qualified 

Veterans Mortgage Bonds (QVMBs) to fund housing loans to Texas veterans. The 

answer is: QMBs are not a suitable replacement because of the State’s allocated Private Activity Bond program (PAB) cap and QMB lending requirements. 

The total amount of Texas’ private activity cap allocated to single-family mortgage 

revenue bond issuers (i.e., QMB issuers) is only about $559 million, and is primarily 

concentrated on lending to low-income borrowers. The Texas Veterans Land Board 

originated over $600 million in housing loans to Texas veterans in FY07. The total 

VLB housing loan demand surpasses the entire amount of Private Activity Bond 

program cap available for the whole State. 


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More specific considerations that are problematic with using QMBs instead of 

QVMBs: 

• The Internal Revenue Code, Section 143(d)(1), requires that mortgagors borrowing from the proceeds of tax-exempt QMBs should not have a present ownership interest in a principal residence at any time during the 3-year period immediately before the date of obtaining the loan. This is referred to as the ‘‘first-time 

homebuyer’’ requirement. The Veterans Housing Assistance program, administered by the VLB, is not a first-time homebuyer program. Eligible veterans may 

receive a QVMB-funded home loan with no such first-time homebuyer restriction. Using QMB proceeds to fund VLB loans would establish restrictions that 

are not consistent with the tradition of the program or the intent of the Texas 

Legislature and the VLB. 

• The purchase price of a residence must not exceed 90 percent of the average purchase price of all single-family residential sales during the last 12 months in the 

same statistical area as the financed property. In 2005, the Texas Legislature 

authorized the VLB to set housing loan limits near the maximum loan amount 

guaranteed by the USDVA (currently $325,000). By using QMB proceeds, it is 

likely that purchase price restrictions would be established that are different 

(and lower) than those already authorized for the VLB by law. 

• All of the mortgage loans financed with proceeds of QMBs must be made to persons whose family income is 115 percent or less of the applicable median family 

income. Family income and area median incomes are determined in accordance 

with Section 8 regulations under the Housing Act of 1937. Currently, the VLB 

has no income restrictions for eligible veterans. Using QMBs for home loans 

would establish income limits that conflict with the tradition of the program 

and the intent of the Texas Legislature and the VLB. 

Restrictions on loans made from the proceeds of QMBs, coupled with the very limited amount of Texas PAB cap on single-family mortgage revenue bond issuers facing loan demand from low-income borrowers, require veterans to borrow QMB 

money instead of QVMB money. This will result in a much smaller number of veterans being able to take advantage of the lower mortgage rates associated with 

loans made from the proceeds of tax-exempt bonds. 

California and Texas share a commitment to serve our veterans, especially during 

this time of war. As the 110th Congress continues its work, we are asking for your 

support to end this inequity for our two States. Our men and women who have 

served in such places as Panama, the Persian Gulf, Somalia, the Balkans, Kuwait, 

Afghanistan and Iraq deserve our thanks and gratitude for a job well done. By supporting QVMB legislation, you will be honoring their service with this small act of 

financial support. 

With the decision on BRAC 2005 realignment, Texas is now experiencing major 

growth in three key areas. El Paso County is home to Fort Bliss. With the influx 

of new units to Fort Bliss, the county’s population will grow by 18,000–20,000 in 

the next 48 months. Bell and Coryell Counties are home to the Nation’s largest military base, Fort Hood. Some 20,000 soldiers and their families are moving to the 

area. Bexar County, home to the finest burn care center in the world—Brook Army 

Medical Center, or BAMC—is also in the growth mode. The city of San Antonio and 

surrounding communities are planning for the relocation of about 25,000 soldiers 

and their families to the area. 

I want to thank the Members of the Committee again for allowing me to submit 

testimony on this important program. On behalf of all Texas veterans, we appreciate 

your favorable consideration of this important measure. 

f 

Statement of Lori A. Brown, Military Spouse 

Thank you for your continued support of the members of the military and their 

families. I would like to share with you some of my experiences with the SSI program that my son, Hunter, has received SSI for 7 years and Dakota for 3 years. 

My husband is active duty and has been in the Marine Corps for 13 years. We 

have three children. My two boys are on SSI. Dakota, age 13, is diagnosed with 

Asperger’s Syndrome and Hunter, age 7, has cerebral palsy and epilepsy. 

We have had many ups and downs with SSI over the years. The worst time was 

when my husband, Steve, went to Iraq for the start of the Iraq War and we were 

told by the local Social Security Office that Hunter would be losing his SSI and 

MediCal. We depended on the SSI payment to pay for things that his insurance just 

did not cover. We would have had to come up with about $6,000–$10,000 a month 


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to make up for losing the MediCal and SSI. We were very blessed when Congresswoman Davis took up our cause and shed light on what was going on and helped 

to get it changed. 

There are still issues with the way that military dependent’s SSI is figured. There 

are unfair ‘‘earned and unearned’’ labels put on our pays. The way the military LES 

looks, everything is broken down and itemized for accounting purposes but civilian’s 

pay stubs are looked at as all ‘‘earned’’ income. This practice puts us at a great disadvantage. All the military families are looking for is equal rules for all civilian and 

military—no better, no worse. 

Many families with special needs family members need to live close to a specific 

hospital or therapy center for their loved ones’ well-being and health. But, under 

the current law, if they do not live on base, the BAH will count as ‘‘unearned’’ income and, therefore, they lose SSI. This is an issue that needs to get resolved. 

For us personally, we have run into this situation and lost SSI for a few months 

while my husband was in Japan. I needed help in the home so I rented a house 

in town where I would be able to have my sister and family live with us to help 

me out. When we could no longer afford Hunter’s bills we had to move back on base 

where I could not have help living in my home for more than 30 days. 

Also, BAS is treated as ‘‘unearned’’ income as if it is money for the family. This 

money is not for the family, it is for the food for the servicemember. It should be 

counted as ‘‘earned’’ income. 

Military Clothing Allowance is another one that is counted as ‘‘unearned’’ income. 

It is pay to buy uniforms that wear out during the year, not for the family. This 

money is woefully inadequate for this purpose. We pay out hundreds of dollars more 

each year for Steve’s military needs above and beyond what is given as an allowance. 

Special Pays, such as flight line pay, reenlistment bonuses, hazardous duty (non 

war), or jump pay are all counted as ‘‘unearned’’ income as well. These are pays that 

are given to Marines (or other branches) in certain jobs that rate an additional pay 

based on their job. This should be counted as ‘‘earned’’ income based on the fact it 

is just an extension of their base pay. 

Any monies that are paid out for moving such as money for a DITY (Do It Yourself) move is counted as ‘‘unearned’’ income. This money is used for the servicemember to move themselves and their family to the new duty station or into housing. 

I would also like to see that the money that the military member puts into their 

Thrift Savings Plan not be used as a way to disqualify a special needs military family member from SSI. Just because families have a disabled family member 

shouldn’t mean that they can’t save for their retirement just like all the other active 

duty military members. 

Basically, I would like to see the word ‘‘UNEARNED’’ removed from the figuring 

process to qualify the disabled military dependent for SSI benefits. It is a slap in 

the face to all that serve this country and their families. The term is insulting and 

says that the Social Security Administration and those bodies of government that 

make the rules do not see that our servicemembers work for their money and this 

is just not true. The military and their families give all that is asked of them by 

this country and then they give a little more. We want equal rights and considerations in the computations for qualifying for government programs such as SSI. 

Thank you for your time and consideration in this matter. 

Lori A. Brown 

Proud wife of GySgt Steven M. Brown (newly promoted!) 

f 

Statement of Max Stier, Partnership for Public Service 

Chairmen Neal and McDermott, Representatives English and Weller, Members of 

the Subcommittees, thank you very much for the opportunity to submit this testimony in support of H.R. 2363, the bipartisan Generating Opportunity by Forgiving 

Educational Debt for Service Act (GOFEDS) introduced by Rep. Tim Bishop (D–NY). 

The language in H.R. 2363 complements many of the objectives of the Heroes Earnings Assistance and Relief Tax Act of 2007 and I believe it would be a positive addition to the legislation. 

I am Max Stier, President and CEO of the Partnership for Public Service, a nonpartisan, nonprofit organization dedicated to revitalizing the Federal Government. 

We appreciate your consideration of Representative Bishop’s bill and would like to 

share our thoughts on its impact on both military and civilian employees and the 

agencies in which they serve. We also urge the Subcommittees to consider adopting 


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language from the bill when drafting the Heroes Earnings Assistance and Relief Tax 

Act of 2007. 

The Partnership has two principal areas of focus. First, we work to inspire a new 

generation to Federal service. Second, we work with government leaders to help 

transform the business of government so that the best and brightest will enter, stay 

and succeed in meeting the challenges of our Nation. Given those objectives, identifying ways to attract new talent to Federal service is high on our list of priorities. 

We believe that H.R. 2363 has the potential to make a great impact on the government’s ability to recruit the highly-skilled individuals needed in all branches of our 

military and our Federal civil service while yielding a significant return on investment. 

Our country is facing unprecedented new challenges in a host of areas, from protecting our Nation against terrorism, to responding to catastrophic natural disasters 

like that of Hurricane Katrina. It is crucial that our armed services and Federal civilian agencies have some of our Nation’s best and brightest minds to meet these 

challenges. Yet at a time when our need for technically- and intellectually-skilled 

employees is greatest, research indicates young people view the nonprofit sector, 

rather than government, as the best place to build a meaningful public service career. Compounding this problem, Partnership research finds conclusively that student debt is a growing barrier to attracting talented young people to government 

service. Rising education costs are essentially pricing the best and the brightest out 

of public service jobs. 

According to data from the National Center for Education Statistics, more than 

half of full-time undergraduate students rely on student loans to finance their education. During the 2003–2004 academic year students took out an average of $6,200 

in loans. Over a 4-year period a student can accumulate over $20,000 in debt. Individuals who pursue graduate school have even greater debt. Those completing master’s degrees average $32,900 in debt. Individuals earning doctorates or other advanced degrees can have an average debt as high as $125,000. 

H.R. 2363 is a straightforward bill. Under the proposal, any student loan repayment made by the Federal Government on behalf of an employee will not be taxed 

as part of that employee’s income. The tax relief benefits uniformed servicemembers 

and Federal civil servants. We believe H.R. 2363 is a low-cost initiative that will 

do much to improve both the military and Federal Government’s ability to recruit 

and retain the right people with the right skills. In addition, educational or nonprofit institutions are already able to offer tax-free loan repayment benefits to graduates who pursue government or nonprofit employment. H.R. 2363 puts the Federal 

Government’s loan repayment program on equal footing with the programs offered 

by these institutions. 

Mr. Chairmen, Members of the Subcommittees, we thank you for this opportunity 

to submit our views in strong support of H.R. 2363. We encourage the Subcommittees to consider incorporating the GOFEDS language as a provision in the Heroes 

Earnings Assistance and Relief Tax Act of 2007 or consider other vehicles to help 

move this bill forward. 

f 

National Multi Housing Council 

and 

National Apartment Association 

October 31, 2007 

Jim McDermott 

Subcommittee on Income Security and Family Support 

Committee on Ways and Means 

U.S. House of Representatives 

1102 Longworth House Office Building 

Washington, D.C. 20515 

Richard E. Neal 

Subcommittee on Select Revenue Measures 

Committee on Ways and Means 

U.S. House of Representatives 

1102 Longworth House Office Building 

Washington, D.C. 20515 

Dear Chairman McDermott and Chairman Neal: 

The National Multi Housing Council (NMHC) and the National Apartment Association (NAA) are pleased to present this statement to the Subcommittee on Income 


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Security and Family Support and the Subcommittee on Select Revenue Measures 

in connection with the joint hearing held October 17, 2007, to examine the Heroes 

Earnings Assistance and Relief Tax Act of 2007 (HEART Act). NMHC and NAA represent the Nation’s leading firms participating in the apartment industry. Our combined memberships include apartment owners, developers, managers, builders and 

lenders. NMHC and NAA jointly operate a Federal legislative program and provide 

a unified voice for the private apartment industry. 

NMHC/NAA would like to thank you for your leadership in developing the 

HEART Act and for holding the joint hearing on the legislation. As the Ways and 

Means Committee continues to develop this legislation, we encourage you to consider including a provision to address the treatment of the Basic Allowance for 

Housing (BAH) that is modeled on H.R. 1481, The Military Access to Housing Act 

of 2007. 

The Military Access to Housing Act of 2007 allows BAH provided to servicemembers to be excluded from calculations of income for purposes of determining the 

servicemember’s eligibility for various Federal rental housing programs, including 

the Low Income Housing Tax Credit program (LIHTC). 

As Members of the Committee are aware, military installations do not always possess an adequate supply of military-owned housing to provide for the needs of all 

servicemembers. When the military is unable to provide military-owned housing to 

a servicemember and his or her family, the Department of Defense pays a BAH to 

the servicemember to allow him or her to acquire suitable housing in the private 

market. 

The members of NMHC/NAA are committed to working with local communities 

and the Department of Defense in order to meet this demand for private housing. 

However, in some instances, it may be difficult for servicemembers, particularly 

those with large families, to find affordable housing in the private market. This can 

especially be a problem in instances where various base and troop realignments 

have resulted in an influx of personnel to some military installations and an adequate supply of affordable housing in the nearby communities has not yet developed. 

In July 2006, the General Accountability Office (GAO) released a report examining the issue of the exclusion of servicemembers’ housing allowances from income 

determinations for various housing programs. That report concluded that excluding 

BAH from eligible income would have a significant impact on the ability of many 

servicemembers to qualify for Federal housing programs. The servicemembers most 

affected by such a change, the GAO found, would be the soldiers in the lowest pay 

grades (particularly E–1 through E–4 enlisted personnel) and those soldiers with 

the largest families. 

The GAO report also indicated that excluding BAH from income determinations 

for the LIHTC and tax-exempt multifamily housing bond programs could have the 

effect of stimulating the production of such housing. GAO cited some officials representing communities near growing installations as indicating that excluding BAH 

from eligibility determinations may make it more likely that programs such as the 

LIHTC could be used as a tool to build more affordable housing for incoming soldiers and their families. 

This change in the treatment of BAH is consistent with its status as a tax-free 

benefit and with a change being considered for inclusion in the HEART Act that 

would change the treatment of military allowances (including BAH) when calculating SSI program eligibility and benefit amounts. 

On behalf of the members of NMHC/NAA, we respectfully request your support 

for this important issue. We appreciate your work in this area and look forward to 

working with you to improve the housing for our Nation’s military personnel. 

Sincerely, 

Doug Bibby 

President 

National Multi Housing Council 

Douglas S. Culkin, CAE 

President 

f 

National Apartment Association 


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Statement of The Honorable Joe Courtney, 

a Representative in Congress from the State of Connecticut 

Chairman Neal and Chairman McDermott, thank you for the opportunity to provide my thoughts today on the Heroes Earnings Assistance and Relief Tax Act of 

2007. I applaud your Subcommittees for drafting legislation to ease the burden on 

the men and women serving in our Nation’s armed forces, and their families supporting them here at home. 

In addition, I am grateful that you are considering including critical tax assistance for volunteer firefighters, who serve selflessly each and every day to protect 

our families and our communities. 

Volunteer firefighters play one of the most critical roles in ensuring the safety of 

communities across eastern Connecticut, which I am proud to represent in Congress. In many areas across the region, they are the only responders for fire, medical and other emergencies. They serve not for financial gain, but out of a sense of 

duty and responsibility to their friends and neighbors. However, like most Americans, volunteer firefighters are finding it increasingly difficult to find not only the 

time to serve, but to make ends meet as the medical, education and energy costs 

facing our middle class working families continue to increase. 

To address this problem, the Connecticut General Assembly passed a law in 1999 

which allowed local governments to abate the property taxes of any resident who 

volunteers his or her services as a firefighter. However, as cities and towns tried 

to develop incentives to take advantage of this law, the Internal Revenue Service 

(IRS) ruled in 2002 that the amount of property tax abated for volunteers was considered income subject to Federal taxation. 

Taxing the tax breaks meant to retain and recruit volunteer firefighters clearly 

undermines the purpose of providing incentives for individuals to volunteer their 

time to keep their communities safe. Unfortunately, in light of this misguided ruling, many towns were forced to repeal their abatement incentives, or prevented from 

even considering such programs. 

I know first hand the chilling effect this ruling had on communities in Connecticut looking to implement a volunteer firefighter tax incentive program. Prior 

to being elected to Congress, I served as Town Attorney for the Town of Vernon, 

Connecticut, which has an all volunteer fire department. In 2004, the town council 

began considering a tax abatement program for their volunteer firefighters, but was 

forced to drop the plan in light of the IRS ruling. As a result, volunteer firefighters 

in Vernon, and countless other communities across eastern Connecticut, are denied 

critical assistance as they serve. 

Sometimes the best thing the Federal Government can do to support our State 

and local governments is to simply get out of their way as they find creative and 

effective solutions to critical challenges facing our Nation. This is clearly one of 

those cases, and I strongly believe that we need to change Federal law to exempt 

local tax incentives provided for service as volunteer firefighters from income taxes. 

I am proud to support the Volunteer Responder Incentive Protection Act (H.R. 943), 

introduced by my friend and colleague Representative John Larson, which would 

amend the Tax Code to not only protect local tax incentives for volunteer firefighters 

from income taxes, but also other benefits that a local or State government may provide for their services. 

For a region like eastern Connecticut, which relies primarily on the time and 

dedication of volunteers to staff its fire departments, finding ways to ease the burden on volunteer firefighters is absolutely critical. Given all that they do to safeguard our families and communities, the very least we can do is make it just a little 

easier for them to pay their bills as they continue to serve. I am proud to serve in 

the Connecticut Congressional Delegation with Representative John Larson, who 

has championed this issue on behalf of volunteers in our State, and across the Nation, since 2002. I applaud him for his dedication to this cause, and urge you to include the provisions of H.R. 943 in the draft legislation before you. 

There is never enough we can do for those who give their time, energy and devotion to protecting the lives of others. However, the ‘‘Heroes Earnings Assistance and 

Relief Tax Act of 2007’’ would help ease the financial burdens of those who serve 

our communities, States and our Nation, and I look forward to supporting it once 

introduced. 

Thank you for the opportunity to discuss this important issue with you today. 

f 


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Statement of the Honorable Tom Davis, 

a Representative in Congress from the State of Virginia 

Mr. Chairmen and Members of the Subcommittees, thank you for holding this 

joint hearing on legislative proposals designed to help those who have dedicated 

their lives to serving our country. 

The Oversight and Government Reform Committee spends considerable time and 

effort identifying ways to recruit and retain a strong Federal workforce, especially 

in light of the pending wave of retirements expected to hit the Federal Government 

in the coming years. The legislative proposals I will discuss today would help the 

Federal Government attract the best and the brightest employees this Nation has 

to offer. 

The first bill is H.R. 1110, commonly referred to as ‘‘premium conversion.’’ I have 

sponsored this legislation for many Congresses now, and it has always enjoyed 

broad bipartisan support, collecting 340 cosponsors in the 109th Congress (H.R. 

994). The Oversight and Government Reform Committee marked up H.R. 1110 in 

September, and it is now pending before this Committee. 

H.R. 1110 has widespread support for good reason. It would end a longstanding 

discrepancy by allowing Federal civilian and military retirees to pay their monthly 

health care premiums using pre-tax dollars. Also, it would allow active duty military 

members to apply a pre-tax rebate to the supplemental insurance premiums most 

purchase to cover gaps in TRICARE. This legislation would build upon a provision 

included in the Pension Protection Act of 2006 which allows Federal public safety 

officers a limited premium conversion tax advantage. 

Health care costs in the Federal Employees Health Benefits Program have gone 

up by over 9 percent a year since 1999. H.R. 1110 would alleviate these increases 

by saving retirees nearly $800 annually. To those on a fixed income, that amount 

of money can make a huge difference. 

The Federal Government has a long history of treating our active employees and 

retirees the same—providing them equal access to health care, for example. Our retirees should have the same ability to pay their premiums with pre-tax dollars as 

current Federal employees, and our military personnel should be able to do the 

same under their TRICARE programs. 

I look forward to working with the Subcommittee Chairs this Congress to try to 

get this important legislation enacted into law. 

The second piece of legislation is H.R. 2363, introduced by Rep. Tim Bishop (D– 

NY) and myself, called the Generating Opportunity by Forgiving Educational Debt 

for Service Act of 2007, better known as GOFEDS. 

GOFEDS seeks to attract and retain employees who have recently completed undergraduate or graduate-level education by allowing them to exclude their student 

loan repayments from gross income. 

The challenges we face—from homeland security to pandemic health crises to energy supplies—will require a committed and talented human capital pool. But more 

and more, young Americans are opting for employment in the private and nonprofit 

sectors, leaving the Federal Government hard-pressed to attract the right people to 

the right jobs. 

In a recent report on the need to build expertise in the Federal workforce to protect the Nation from bioterrorism, the Partnership for Public Service pointed out 

that bio-defense agencies are finding it increasingly difficult to hire employees with 

the required scientific and medical expertise. The overall demand for bio-defense talent will continue to rise for the foreseeable future—by as much as 25 percent 

through 2010—while the supply of such talent will decline unless we act. 

The GOFEDS Act would improve the effectiveness of the existing loan repayment 

program as a recruitment tool and in turn improve Federal programs. While current 

law allows Federal agencies to repay student loans on behalf of employees, up to 

$10,000 a year with a $60,000 cap, the incentive is taxed. Nonprofits and educational institutions offer loan repayments which, in contrast, are not counted as 

taxable income for the recipient. H.R. 2363 simply puts the Federal Government on 

par with nonprofits by excluding loan repayment from the employees’ taxable income. 

I look forward to working with the Ways and Means Committee and other interested Members of Congress on these important initiatives so that we can better 

meet the Federal Government’s workforce challenges, which are so critical to the 

success of the Federal Government’s core missions, today and in the future. Thank 

you. 

Æ 


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