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[Senate Report 107-234]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 542
107th Congress                                                   Report
                                 SENATE
 2nd Session                                                    107-234

======================================================================

 
             VETERANS HEARING LOSS COMPENSATION ACT OF 2002

                                _______
                                

                 August 1, 2002.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                         [To accompany S. 2237]

    The Committee on Veterans' Affairs, to which was referred 
the bill S. 2237, to amend title 38, United States Code, to 
enhance compensation for veterans with hearing loss, and for 
other purposes, having considered the same, reports favorably 
thereon with an amendment in the nature of a substitute and an 
amendment to the title, and recommends that the bill, as 
amended, do pass.

                              Introduction

    On April 24, 2002, Committee Chairman John D. Rockefeller 
IV introduced S. 2237. S. 2237, as introduced, would have 
amended provisions of title 38, United States Code, to enhance 
compensation for veterans with hearing loss.
    On June 27, 2001, S. 1113 was introduced by Ranking 
Committee Member Arlen Specter. Senator Mary Landrieu later 
cosponsored the bill. S. 1113 would have increased the amount 
of Medal of Honor Roll special pension, to provide for an 
annual adjustment in the amount of that special pension.
    On November 13, 2001, S. 1680 was introduced by Committee 
member Paul D. Wellstone. The bill was later cosponsored by 
Senators Joseph R. Biden Jr., Christopher S. Bond, Thomas R. 
Carper, Hillary Rodham Clinton, Mark Dayton, Richard J. Durbin, 
Judd Gregg, Tim Johnson, Patrick J. Leahy, Harry M. Reid, and 
Charles E. Schumer. S. 1680 would have amended the Soldiers' 
and Sailors' Civil Relief Act of 1940 to provide that duty of 
the National Guard mobilized by a State in support of Operation 
Enduring Freedom, or otherwise at the request of the President, 
would qualify as military service under that Act.
    On January 29, 2002, S. 1905 was introduced by Chairman 
Rockefeller at the request of the Administration. S. 1905 would 
have enhanced veterans' programs and the ability of the 
Department of Veterans Affairs to administer them.
    On March 8, 2002, S. 2003 was introduced by Senator Bill 
Nelson and cosponsored by Senators Jeff Bingaman, John B. 
Breaux, Kent Conrad, Tim Johnson, Mary L. Landrieu, and John 
McCain. The bill was later cosponsored by Committee members 
Larry Craig, Patty Murray, and Ben Nelson, and Senators Max 
Cleland, Durbin, Daniel K. Inouye, John F. Kerry, Carl Levin, 
Joseph I. Lieberman, and Jeff Sessions. S. 2003 would have 
clarified the applicability of the prohibition on assignment of 
veterans benefits to agreements regarding future receipt of 
compensation, pension, or dependency and indemnity 
compensation.
    On March 22, 2002, S. 2073 was introduced by Committee 
member Craig. S. 2073 would have provided for the retroactive 
entitlement of Ed W. Freemen to Medal of Honor special pension.
    On April 9, 2002, S. 2079 was introduced by Chairman 
Rockefeller. The bill was later cosponsored by Senators Kent 
Conrad and Tim Johnson. S. 2079 would have facilitated and 
enhanced judicial review of certain matters regarding veteran's 
benefits.
    On April 18, 2002, Chairman Rockefeller introduced S. 2205. 
S. 2205 would have clarified the entitlement to disability 
compensation of women veterans who have service-connected 
mastectomies, to provide permanent authority for counseling and 
treatment for sexual trauma, and for other purposes.
    On April 23, 2002, Ranking Committee Member Specter 
introduced S. 2230 with the co-sponsorship of Chairman 
Rockefeller. The bill was later cosponsored by Committee member 
Craig. S. 2230 would have made permanent the authority of the 
Secretary of Veterans Affairs to guarantee adjustable rate 
mortgages, and to authorize the guarantee of hybrid adjustable 
rate mortgages.
    On April 23, 2002, Ranking Committee Member Specter 
introduced S. 2231 with the cosponsorship of Chairman 
Rockefeller. Committee member Craig later cosponsored the bill. 
S. 2231 would have provided an incremental increase in amounts 
of educational assistance for survivors and dependents of 
veterans.
    On May 2, 2002, the Committee held a hearing, chaired by 
Senator Rockefeller, to receive testimony on S. 1113, S. 1680, 
S. 1905, S. 2003, S. 2073, S. 2079, S. 2205, S. 2230, S. 2231, 
and S. 2237.
    Testimony was heard from: The Honorable Tim McClain, 
General Counsel, Department of Veterans Affairs; Mr. James 
Fischl, Director, National Veterans Affairs and Rehabilitation 
Commission, The American Legion; Mr. Joseph Violante, National 
Legislative Director, Disabled American Veterans; Mr. David 
Tucker, Associate Legislative Director, Paralyzed Veterans of 
America; and Mr. Dennis Cullinan, Director, National 
Legislative Service, Veterans of Foreign Wars.
    After carefully reviewing the testimony from the foregoing 
hearing, the Committee met in open session on June 6, 2002, and 
voted unanimously to report favorably S. 2237, as amended to 
include provisions from S. 1680, S. 1905, S. 2003, S. 2073, S. 
2079, S. 2205, S. 2230, S. 2231, and S. 2237. Present were 
Senators Rockefeller, Jeffords, Wellstone, Murray, Miller, 
Nelson, Specter, Thurmond, Murkowski, Hutchinson and Hutchison. 
Speakers included Senators Rockefeller, Jeffords, Wellstone, 
Murray, Specter and Murkowski. The vote to pass the Committee's 
bill was unanimous.

               Summary of the Committee Bill as Reported

    S. 2237 as reported (hereinafter referred to as the 
``Committee bill'') contains various amendments to title 38 of 
the United States Code and other freestanding provisions that 
would:
          (a) clarify the entitlement to special monthly 
        compensation for women veterans who have service-
        connected mastectomies by specifying that female 
        veterans who have lost half or more of a breast's 
        tissue are eligible for compensation;
          (b) remove the ``total deafness'' requirement for the 
        non-service-connected ear for compensation for hearing 
        loss in paired organs, allowing the Department of 
        Veterans Affairs (hereinafter ``VA'') to consider 
        partial non-service-connected hearing loss when rating 
        disability;
          (c) give authority for presumption of service-
        connected hearing loss associated with particular 
        military occupational specialties and allow VA to 
        contract with an independent scientific organization to 
        review evidence of occupational hearing loss, 
        particularly that suffered during military service;
          (d) increase Medal of Honor pension from $600 to 
        $1000 per month, provide a cost of living adjustment 
        for the pension, and make retroactive lump-sum payments 
        of pension;
          (e) prohibit the assignment of monthly veteran's 
        benefits;
          (f) extend the effective date of certain Omnibus 
        Budget Reconciliation Act provisions to September 30, 
        2011;
          (g) provide for an increase in the aggregate annual 
        amount authorized for State approving agencies for 
        administrative expenses from $14,000,000 to $18,000,000 
        in the Fiscal Years 2003, 2004, and 2005;
          (h) clarify and correct various authorities relating 
        to VA;
          (i) authorize a pilot program to guarantee adjustable 
        rate mortgages and hybrid adjustable rate mortgages;
          (j) specify that duty of National Guard members 
        mobilized by States at the request of a Federal law 
        enforcement agency for homeland security activities be 
        treated as military service under the Soldiers and 
        Sailors' Civil Relief Act;
          (k) prohibit certain benefits for persons who commit 
        capital crimes;
          (l) modify the standard of review for the United 
        States Court of Appeals for Veterans Claims on findings 
        of fact by the Board of Veterans' Appeals;
          (m) authorize review by the United States Court of 
        Appeals for the Federal Circuit of certain decisions of 
        law of the United States Court of Appeals for Veterans 
        Claims;
          (n) enhance authority of the United States Court of 
        Appeals for Veterans Claims to award fees under the 
        Equal Access to Justice Act for non-attorney 
        practitioners; and
          (o) clarify the retroactive application of the ``duty 
        to assist'' provisions in the Veterans Claims 
        Assistance Act.

                             Committee Bill

 SECTION 101: ELIGIBILITY FOR SPECIAL MONTHLY COMPENSATION DUE TO LOSS 
                              OF A BREAST

Background

    VA estimates that women now comprise about 5% of enrolled 
veterans in the VA healthcare system, a percentage expected to 
double over the next two decades. Congress and VA must ensure 
that health care and compensation benefits adapt to meet this 
growing population's specific needs. The Veterans Benefits and 
Health Care Improvement Act of 2000, Public Law 106-419, 
authorized VA to provide special monthly compensation to any 
woman veteran who ``has suffered the anatomical loss of one or 
both breasts (including loss by mastectomy)'' as a result of 
military service. 38 U.S.C. Sec. 1114 (k).
    On February 14, 2002, VA published a final rule addressing 
adjudication of claims for this special monthly compensation. 
67 Fed. Reg. 6872. This rule specified that ``Anatomical loss 
of a breast exists when there is complete surgical removal of 
breast tissue (or the equivalent loss of breast tissue due to 
injury). As defined in 38 C.F.R. Sec. 4.116, radical 
mastectomy, modified radical mastectomy, and simple (or total) 
mastectomy result in anatomical loss of a breast, but wide 
local excision, with or without significant alteration of size 
or form, does not.'' This decision appears inconsistent with 
requirements for ``acquired absence'' of other creative organs 
as defined in 38 C.F.R Sec. 3.350, which describe very 
specifically how reductions in size or changes in form of male 
creative organs can be used to establish loss of use. Measuring 
loss of breast tissue should not prove more clinically 
challenging than measuring physical or functional loss of male 
creative organs.
    Although some patients do require mastectomy following a 
diagnosis of breast cancer, an increasing number of clinicians 
recommend breast-tissue conserving procedures such as wide 
local excision for specific patients. Conservation of some 
breast tissue does not obviate the need for subsequent 
reconstructive surgery, especially if the excision resulted in 
significant alteration of size or form, or for additional 
intervention with radiation therapy or chemotherapy. Even if 
restricting eligibility for compensation to those who have 
undergone mastectomy does not influence medical decisions, it 
fails to acknowledge that women who undergo significant loss of 
breast tissue contend with physical, emotional, and financial 
challenges in returning to health.

Committee Bill

    Section 101 amends 38 U.S.C. Sec. 1114(k) to specify that 
women veterans who have suffered the anatomical loss of half of 
the tissue of one or both breasts in or as a result of military 
service may be eligible for special monthly compensation. This 
provision restores the intent of the original legislation and 
makes this provision consistent with other benefits extended 
for partial loss or loss of use of an organ.
    Cost: Congressional Budget Office (hereinafter ``CBO'') 
estimates that the direct spending cost will be less than 
$300,000 a year and total about $2 million over the 2003-2012 
period.

SECTION 102: ELIMINATES THE ``TOTAL'' DEAFNESS REQUIREMENT FOR THE NON-
  SERVICE-CONNECTED EAR, ALLOWING VA TO CONSIDER PARTIAL NON-SERVICE-
  CONNECTED HEARING LOSS WHEN RATING DISABILITY

Background

    In 1962, Public Law 87-610 was enacted requiring special 
consideration for certain cases involving blindness or 
bilateral kidney dysfunction when disability of only one eye or 
kidney is service-connected. Public Law 87-610 allowed for 
compensation as if the ``blindness in both eyes or such 
bilateral kidney involvement were the result of service-
connected disability.'' Congress extended the principle of 
``paired organ'' impairment to the ears in 1965 with Public Law 
89-311. ``This [paired organ] principle recognizes the 
additional disability attendant on the non-service-connected 
loss of function of a second paired organ when service 
connection has been established for the other organ and the 
committee believes constitutes a reasonable liberalization of 
existing law.'' S. Rept. No. 89-861 (1965). The amendment 
provided for a ``veteran [that] has suffered total deafness in 
one ear as a result of service-connected disability and total 
deafness in the other ear as a result of non-service-connected 
disability . . . the Secretary shall assign and pay to the 
veteran the applicable rate of compensation under this chapter 
as if the combination of disabilities were the result of 
service-connected disability.''
    Under current 38 U.S.C. Sec. 1160, special consideration is 
extended to veterans' service-connected disabilities in 
``paired organs or extremities,'' such as eyes, kidneys, lungs, 
feet, or hands. For these paired organs or extremities, VA is 
authorized to consider any degree of damage to both organs, 
even if only one resulted from military service, when rating 
disability. Total impairment is not a requirement for eyes, 
kidneys, hands, feet, or lungs. In fact, proportional 
impairment, such as ``the loss or loss of use of one kidney as 
a result of service-connected disability and involvement of the 
other kidney as a result of non-service-connected disability,'' 
is specifically provided for in subsections (1), (2), (4), and 
(5) of section 1160(a) of title 38. However, the requirement of 
total deafness remains unchanged under current law. 38 U.S.C. 
Sec. 1160 (a)(3).
    Boyer v. West, 210 F.3d 1351 (2000), demonstrated how this 
requirement can affect veterans. Gerald Boyer applied to VA for 
service connection for bilateral hearing loss. VA granted Boyer 
service connection for the hearing loss in his left ear at 
zero-percent disability, but denied service connection for the 
hearing loss in his right ear. Under 38 U.S.C. Sec. 1160(a)(3), 
Boyer's right-ear hearing loss could not be considered in 
rating his service-connected left-ear hearing loss because the 
right-ear hearing loss was less than total. On appeal, the 
Board of Veterans' Appeals (hereinafter ``BVA'') concluded 
that, for the purposes of evaluating the left-ear hearing loss, 
Boyer's right-ear hearing had to be considered normal. As a 
result, Boyer was not entitled to a compensable rating for his 
left-ear loss.
    Boyer appealed BVA's decision to the U.S. Court of Appeals 
for Veterans Claims (hereinafter ``CAVC''). Relying on 38 
U.S.C.Sec. 1160(a) and 38 C.F.R. Sec. 4.85, CAVC affirmed BVA's 
decision on Boyer's claim for a compensable rating for his 
service-connected left-ear hearing loss. That decision, in 
turn, was affirmed by the U.S. Court of Appeals for the Federal 
Circuit, stating that 38 U.S.C. Sec. 1160(a)(3) ``plainly 
speaks to the issue and precludes any consideration of Mr. 
Boyer's right-ear hearing loss for the purposes of evaluating 
his service-connected hearing loss in his left ear.''

Committee Bill

    Section 102 of the Committee bill would eliminate the 
``total deafness'' requirement and, thus, allow VA to consider 
partial non-service-connected hearing loss when rating 
disability for veterans like Gerald Boyer. The striking of the 
word ``total'' in both clauses would allow veterans with less 
than total hearing loss in both ears to have their non-service-
connected degree of hearing loss be a factor in evaluation of 
service-connected hearing loss. This change would mirror the 
exceptions made for other ``paired'' organs and extremities in 
section 1160 and is necessary to compensate veterans whose 
hearing has been more greatly impaired by service than it would 
have been had they not served.
    Cost: CBO estimates the direct spending cost will be $2 
million in 2003, and about $53 million over the 2004-2007 
period, and $178 million over the 2003-2012 period. CBO 
estimates that spending subject to appropriations will increase 
by $2 million over the 2003-2007 period.

   SECTION 103: INDEPENDENT SCIENTIFIC STUDY ON POTENTIAL CONNECTION 
               BETWEEN MILITARY SERVICE AND HEARING LOSS

Background

    According to the February 2001 VBA Annual Benefits Report, 
more than 28,000 veterans--almost 11% of those receiving 
compensation for the first time--qualified in Fiscal Year 2000 
for service-connected disability compensation on the basis of 
hearing loss. Tinnitus, a ringing of the ears, and loss of 
auditory acuity ranked second and third, respectively, in the 
numbers of disabilities most frequently service-connected in 
newly compensated veterans. Of these, just over half were rated 
10% disabled, and more than 40% were assigned a rating of 0% 
disability. A VBA White Paper dated April 4, 2002, showed that 
a total of more than 300,000 veterans had been service-
connected for hearing loss by the end of Fiscal Year 2001, with 
about 60,000 of these receiving compensation for hearing loss 
as their major disability.
    In order to establish service connection for hearing loss 
or tinnitus, adjudicators must distinguish between noise-
induced hearing loss potentially related to in-service 
exposures and hearing disorders unrelated to service. Such 
disorders may include age-related hearing loss, one of the most 
common health complaints among Americans over the age of 65. 
Although research clearly demonstrates a relationship between 
occupational or environmental noise and hearing loss in older 
adults, establishing a link between a veteran's noise exposure 
during service and hearing loss diagnosed years after 
separation can be hampered by incomplete medical records and 
uncertain clinical evidence.
    Research has shown that sound impulses generated by gunfire 
can be statistically related to hearing threshold shift--a 
change in ability to detect sounds--in exposed recruits. A 
study of healthy Finnish military conscripts published in the 
journal Military Medicine in 1992 showed that exposure to about 
200-300 rifle shots in the course of training, absent any other 
acoustic trauma, caused hearing loss that could be measured 
clinically but not necessarily noticed subjectively. A 1995 
study of hearing loss in thousands of U.S. Army personnel 
roughly grouped into high- and low-noise specialties showed 
that, despite hearing conservation programs initiated in the 
1950's, soldiers in the armor, artillery, and infantry branches 
had greater hearing loss than their counterparts in other areas 
of service. L.W. Henselman, D. Henderson, J. Shadoan, M. 
Sumramaniam, S. Saunders, D. Ohlin. Effects of Noise Exposure, 
Race, and Years of Service on Hearing in U.S. Army Soldiers. 
Ear and Hearing 1995:16;382-391. This survey also demonstrated 
the difficulty of studying service-related hearing loss, as 
only 25% of the soldiers in the armor, artillery, and infantry 
branches--branches classified as ``high-noise''--had hearing 
tests available for evaluation through the Army's hearing 
conservation data registry.
    Evaluating service-related hearing loss in veterans whose 
separations from service occurred many years ago, especially 
during wartime, can prove even more challenging. Anecdotally, 
veterans have reported that the scarcity of audiometric 
resources in the field following World War II meant a wait of 
days or weeks, post-discharge, to receive testing prior to 
returning home, an unacceptable delay for many. The frequency 
with which veterans discharged in this era received audiometric 
evaluation--as well as the sensitivity and accuracy of such 
testing--are not easily estimated, nor are data uniformly 
available for later periods. Even more than forty years after 
initiation of military hearing conservation programs, the 
adequacy of hearing protection and post-separation testing have 
not been conclusively determined.
    This lack of a clear clinical history presents an obstacle 
to both veterans and VA claims processors in weighing whether 
individual hearing loss is service-connected. A veteran who 
incurred hearing loss during service might not notice or seek 
treatment for that hearing loss for many years. Such a delay 
may be especially prevalent given the potentially additive 
effects of service-related and age-related hearing disorders, 
and the common denial of symptoms.
    Although it is plausible to link hearing loss diagnosed 
years after separation to noise exposure or acoustic trauma 
during service, current data is insufficient to assume this 
nexus. When faced with situations of potential exposures with 
incomplete scientific evidence and clinical records previously, 
the Committee has called upon scientific experts to examine 
whether evidence supports a presumption of connection between 
in-service exposures and subsequent health effects.

Committee Bill

    Section 103 would authorize VA to create a presumption of 
service-connection for hearing loss or tinnitus in veterans who 
served in certain military occupational specialties if an 
outside scientific authority finds that evidence warrants such 
a presumption.
    The Committee bill would require VA to enter into a 
contract with the National Academy of Sciences (hereinafter 
``NAS'') or an equivalent scientific organization to review 
data related to hearing loss, tinnitus, and military service. 
NAS would be charged with reviewing relevant scientific 
publications on occupational hearing loss, and identifying 
forms of acoustic trauma (including continuously high noise 
levels) experienced by servicemembers that could contribute to 
hearing loss, hearing threshold shift, or tinnitus. NAS would 
be tasked with determining whether hearing disorders resulting 
from such exposure would occur immediately or might be noticed 
only after a delay, and whether evidence points to cumulative 
or progressive hearing problems after the initial insult. NAS 
would also be directed to identify military occupational 
specialties most likely to be associated with exposures that 
could be expected to lead to hearing loss.
    Section 103 would also direct NAS to assess whether the 
audiometric data collected by the military services are 
sufficiently complete and adequate in terms of rate of 
participation, thoroughness, and sensitivity to allow an 
objective assessment of individual exposure. This would be 
based upon a survey of hearing threshold shift records in a 
representative sample of members of all service branches during 
or after each major conflict of the past century. The 
scientific authorities would be asked to use this information 
to determine when, if ever, hearing conservation programs 
provided sufficient protection and audiometric testing to make 
adjudication of hearing loss on an individual basis practical.
    VA would be directed to review its own records on hearing 
disorders, and to report on the number of claims for disability 
compensation for hearing loss, tinnitus, or both from 1999-
2001; the number of those claims awarded, and the disability 
ratings assigned; and the total amount of compensation based on 
those claims. This report would also include an estimate of the 
total cost to VA of adjudicating those claims in full-time-
employee equivalents. Finally, VA would be required to report 
on medical care provided to veterans for hearing disorders in 
each of the report years, including the number and cost of 
hearing aids provided and the military occupational specialties 
of those veterans during service.
    Collectively, these data would be used by VA to determine 
if the evidence warrants a presumption that veterans who served 
in specific military occupational specialties during specific 
periods were exposed to sufficient noise or acoustic trauma to 
cause hearing disorders, regardless of the adequacy of the 
individual veteran's audiometric history at separation. Based 
on the recommendations of the outside authority and VA's 
report, VA would be authorized by the Committee bill to create 
a presumption of service connection for hearing loss or 
tinnitus for these veterans.
    Cost: CBO estimates the cost will be $1 million over the 
2003-2007 period in spending subject to appropriations.

 SECTION 104: INCREASES THE RATE OF THE MEDAL OF HONOR SPECIAL PENSION

Background

    Section 1562 of title 38, of the United States Code 
provides a special pension to recipients of the Medal of Honor. 
When established in 1916, this pension was meant to recognize, 
in some small measure, the extraordinary heroism of the 
recipients of our Nation's highest military honor. S. Rept. No. 
64-240 (1916). However, the Medal of Honor special pension has 
evolved into a form of supplemental income for many recipients.
    There are currently 142 living Medal of Honor recipients. 
According to testimony presented to the Committee in July 1997 
by AMVETS, the majority of Medal of Honor recipients live 
solely on Social Security benefits, supplemented by the Medal 
of Honor pension. Many recipients also travel extensively, 
often at their own expense, to speak at patriotic and 
commemorative events. These commitments present an additional 
financial strain for these gallant men that ought to be 
compensated. The Medal of Honor special pension is currently 
$600 per month.
    Periodically, the pension amount has been increased to keep 
pace with inflation and needs of its recipients. However, these 
increases have been irregular in amount and frequency. Since 
its inception more than 80 years ago, the pension amount has 
been increased on four occasions in amounts ranging from $90 to 
$200 (Public Laws 87-138, 95-479, 103-161, and 105-368) to its 
current level. For more than 5 years, the Medal of Honor 
Society, an organization comprised entirely of Medal of Honor 
recipients, has sought to increase the pension amount to $1000 
with an automatic cost-of-living adjustment thereafter.
    Eligibility to receive the Medal of Honor special pension 
is contingent upon having first been awarded the Medal of 
Honor. There has been, in some cases, a delay between the date 
of a recipient's act of gallantry for which the Medal of Honor 
is being awarded, and the date on which the Medal of Honor is 
actually awarded. This delay has created a situation which has 
resulted in some Medal of Honor recipients receiving lower 
aggregate amounts of special pension, based not on differences 
of when a recipient's act of valor occurs, but on differences 
of when official recognition of that act occurs. Congress has, 
in some cases, addressed delay of the award of the Medal of 
Honor by conferring retroactive entitlement to special pension 
on recipients or their survivors. Section 577 of the National 
Defense Authorization Act for Fiscal Year 1998, Public Law 105-
85.

Committee Bill

    Section 104 of the Committee bill would increase the Medal 
of Honor special pension from $600 to $1000. Beginning in 
January 2003, the pension amount would be adjusted annually to 
maintain the value of the pension in the face of the rising 
cost of living. The amount of this adjustment would match the 
percentage of the increase paid to Social Security recipients. 
The Committee bill would also provide for a one-time, lump-sum 
payment in the amount of pension the recipient would have 
received between the date of the act of valor and the date that 
the recipient's pension actually commenced.
    Cost: CBO estimates the cost will be $2 million in 2003, $6 
million over the 5-year period, and $8 million over 10-years.

SECTION 105: PROHIBITS ASSIGNMENT OF MONTHLY VETERANS BENEFITS AND 
  CREATES AN EDUCATION AND OUTREACH CAMPAIGN ABOUT FINANCIAL SERVICES 
  AVAILABLE TO VETERANS

Background

    Section 5301 of title 38 of the United States Code 
currently prohibits the assignment or attachment of a veteran's 
disability compensation or pension benefits. Section 5301(a) 
provides that:
          payments of benefits due or to become due under any 
        law administered by the Secretary shall not be 
        assignable except to the extent specifically authorized 
        by law, and such payments made to, or on account of, a 
        beneficiary shall be exempt from taxation, shall be 
        exempt from the claim of creditors, and shall not be 
        liable to attachment, levy, or seizure by or under any 
        legal or equitable process whatever, either before or 
        after receipt by the beneficiary.
    In recent years, private companies have offered contracts 
to veterans that exchange up-front lump sums for future 
benefits, generally valued at a mere 30% of their estimated 
future amount. VA's Office of General Counsel has determined 
that section 5301(a) provisions were circumvented by 
arrangements in which a veteran contracted to pay for services 
with future VA benefit payments. These arrangements often 
require a veteran to open a joint bank account with the 
company, or arrange to have VA benefit checks deposited into an 
account identified by the company. The company can then legally 
withdraw the money from that account. Some companies have the 
veterans arrange for their checks to be sent to a post office 
box operated by the company with, presumably, an arrangement 
with the veteran to allow the company to cash the check. Some 
companies also require the veteran to provide collateral, such 
as a home or life insurance policy, in case the veteran stops 
payment or dies.

Committee Bill

    Section 105 clarifies the applicability of the prohibition 
on assignment of veterans benefits through agreements regarding 
future receipt of compensation, pension, or dependency and 
indemnity compensation. Section 105 would prohibit companies 
from entering into agreements with veterans to turn over their 
monthly disability compensation benefits to the company in 
exchange for a reduced up-front lump sum. It would make the 
violation by the companies punishable by a fine and up to one 
year in jail. This provision would also require VA to create a 
five-year education and outreach campaign to inform veterans 
about available financial services, ensuring that those in dire 
financial straits are not left without a place to turn.
    Cost: CBO estimates that section 105 would have no effect 
on direct spending and a negligible effect on spending subject 
to appropriation.

        SECTION 106: EXTENSION OF INCOME VERIFICATION AUTHORITY

Background

    Section 106 would extend provisions which originated in 
Public Law 101-508, the Omnibus Budget Reconciliation Act of 
1990, giving the Internal Revenue Service (hereinafter ``IRS'') 
authority to furnish income information to VA from IRS records. 
The Act required IRS to disclose to VA income information so 
that VA might determine eligibility for VA needs-based pension, 
parents' dependency and indemnity compensation, and VA health-
care services.
    In 1985, Committee member Murkowski requested that the 
General Accounting Office (hereinafter ``GAO'') review the 
accuracy of self-reported beneficiary income using certain 
income tax data maintained by IRS. The study found 
discrepancies between the income data the beneficiaries 
reported to VA and that reported to IRS in nearly half of the 
sample cases. S. Rept. No. 101-134 (1989). This review provided 
the impetus for the original legislation, intended to prevent 
the payment of needs-based benefits to claimants who under-
report their income.
    This provision, codified at Internal Revenue Code 
Sec. 6103(l)(7)(D)(viii), was authorized to remain in effect 
through September 30, 1992, by Public Law 101-508. In 1992, 
Public Law 102-568 extended the authority through September 30, 
1997. Public Law 103-66 extended the authority to September 30, 
1998, and in 1997, this authority was extended again through 
September 30, 2003, by Public Law 105-33.
    Additional provisions of Public Law 101-508, codified at 38 
U.S.C. Sec. 5317, provide parallel authority for VA to use IRS 
information and require VA to notify applicants for needs-based 
benefits that income information furnished by the applicant may 
be compared with the information obtained from the Departments 
of Health and Human Services and Treasury under Internal 
Revenue Code Sec. 6103(l)(7)(D)(viii). This parallel authority 
was originally in effect through September 30, 1992, pursuant 
to Public Law 101-508. In 1992, Public Law 102-568 extended the 
authority to September 30, 1997. In 1993, Public Law 103-66 
extended it to September 30, 1998. In 1997, Public Law 105-33 
extended the authority to September 30, 2002. The VA 
Secretary's authority to use IRS income data is now scheduled 
to expire on September 30, 2008, pursuant to Public Law 106-
409.

Committee Bill

    Section 106(a) of the Committee bill would extend Internal 
Revenue Code Sec. 6103(l)(7)(D)(viii) until September 30, 2011, 
and section 106(b) would extend 38 U.S.C. Sec. 5317 until 
September 30, 2011.
    Cost: CBO estimates that this provision will result in 
savings of $7 million in 2003, $76 million over 5-years, and 
$231 million over the 2004-2012 period.

   SECTION 201: INCREASES THE AMOUNT OF FUNDING AUTHORIZED TO STATE 
                           APPROVING AGENCIES

Background

    Under chapter 36 of title 38, United States Code, State 
Approving Agencies (hereinafter ``SAAs'') assist VA in ensuring 
the quality and integrity of educational institutions and job-
training establishments where veterans, spouses and eligible 
children use VA educational benefits. Recent legislation has 
expanded the number and types of learning opportunities 
available to veterans and other beneficiaries, thereby 
increasing the workload of the SAAs.
    In 2000, Congress enacted Public Law 106-419, which allows 
veterans education benefits to be used for the payment of 
licensing and certification tests required for certain 
professions. SAAs evaluate and approve entities offering these 
tests. Public Law 107-103, enacted in 2001, expanded the 
definition of ``educational institution'' for Montgomery GI 
Bill (hereinafter ``MGIB'') payment eligibility to include 
certain private entities offering courses to advance trainees 
in high technology vocations. Public Law 107-103 also allowed 
the use of MGIB benefits to enroll in non-college degree 
programs offered by institutions of higher learning. SAAs are 
responsible for determining eligibility and approving such 
courses and programs. Under Public Law 107-103, SAAs also 
assumed greater veterans outreach responsibilities.
    The last permanent increase in authorized funding for SAAs 
was in Public Law 103-446 for Fiscal Year 1995. Section 123 of 
Public Law 106-419 specified a temporary increase until the end 
of Fiscal Year 2002. Without Congressional action, the funding 
level will revert from $14 million to $13 million. SAA funding 
does not receive cost-of-living adjustments.

Committee Bill

    Section 201 would increase the amount authorized for SAA 
funding to $18 million through Fiscal Year 2005.
    Cost: CBO estimates the cost will be $5 million in 2003, 
and $15 million over 2003-2005.

 SECTION 202: TECHNICAL CORRECTIONS TO VARIOUS AUTHORITIES RELATING TO 
                    VA EDUCATION ASSISTANCE BENEFITS

Committee Bill

    This section clarifies and makes technical amendments to 
various education authorities.
    Cost: CBO did not estimate any cost to be associated with 
section 202.

   SECTION 301: AUTHORIZES VA TO CREATE A PILOT PROGRAM TO GUARANTEE 
     ADJUSTABLE RATE AND HYBRID ADJUSTABLE RATE HOME MORTGAGE LOANS

Background

    The VA Home Mortgage Loan Guarantee program, established in 
1944 by Public Law 78-346, was meant to help veterans readjust 
to civilian life following service in World War II. As private 
mortgage lending practices have evolved, this VA guaranty 
program has not kept pace.
    For more than a decade, adjustable rate mortgages 
(hereinafter ``ARMs'') have been commonplace in the home loan 
market. These loans provide potential home buyers with greater 
flexibility by offering, in the early years of the loan, lower 
interest rates than conventional fixed-rate home mortgage 
loans. While there is a risk that interest rates may increase 
over the life of the loan, this risk is mitigated by generally 
accepted safeguards limiting the amount that the interest rate 
may increase per year and over the life of the loan.
    More recently, hybrid adjustable rate mortgages have gained 
prominence within the home mortgage industry. This type of 
mortgage provides a fixed interest rate for the first 3 to 10 
years of the loan, with annual interest rate adjustments 
thereafter. Much like conventional ARMs, hybrid ARMs offer 
lower interest rates during the early years of the loan.
    Currently, VA is the only major mortgage market participant 
without authority to guarantee ARMs and hybrid ARMs. These 
options are available under the Federal Housing 
Administration's loan insurance program. The Committee believes 
that a pilot program should be established to determine if 
these loan options would significantly benefit veterans seeking 
to purchase a home by creating greater flexibility in financing 
options.

Committee Bill

    Section 301 of the Committee bill would authorize VA to 
establish a 3-year pilot program to guarantee hybrid ARMs and 
re-authorize a 1995 pilot program to guarantee conventional 
ARMs. This authority would begin in Fiscal Year 2003 and expire 
at the end of Fiscal Year 2005.
    Cost: CBO estimates the subsidy cost of vendee loans and 
sales of vendee loans would be less than $500,000 a year over 
the 2003-2005 period and about $1 million a year over the 2006-
2012 period.

SECTION 401: EXTENDS SOLDIERS AND SAILORS CIVIL RELIEF ACT PROTECTION 
  TO NATIONAL GUARD MEMBERS CALLED TO ACTIVE DUTY UNDER TITLE 32, 
  UNITED STATES CODE

Background

    The Soldiers and Sailor's Civil Relief Act of 1940 
(hereinafter ``SSCRA''), 50 U.S.C. Sec. Sec. 501-90, applies to 
servicemembers on active service. It was enacted to promote and 
strengthen the national defense by suspending enforcement of 
certain civil liabilities of servicemembers on active duty, 
thus allowing them to devote their energies to the defense 
needs of the Nation. SSCRA provides certain rights and legal 
protections to servicemembers who have been called up for 
active duty. For example, interest on debts that preceded 
active duty, such as mortgages, is reduced to 6%. 
Servicemembers and their families cannot be evicted or have 
their home mortgages foreclosed upon during active duty and 
life insurance cannot be canceled, unless it specifically 
excludes coverage for military service. Certain legal judgments 
cannot be rendered against absent servicemembers by default, 
and property cannot be sold to pay taxes during the 
servicemember's absence.
    National Guard members may be activated under titles 10 or 
32 of the U.S. Code. Title 10 authority is used for missions of 
national defense funded by the Federal government and commanded 
by the President and the Secretary of Defense. National Guard 
members called to duty under title 32 authority fall under the 
command of their State Governor. Section 502(f) of title 32 
allows National Guard members to be called up ``to perform 
training or other duty.'' These missions are funded by the 
Federal government, but the National Guard units are under the 
command of the governor. Only National Guard members who are 
called up under title 10 are protected by SSCRA.
    Following the events of September 11, 2001, National Guard 
members were activated by States to guard airports at the 
request and expense of the Federal government. Under the 
direction of President George W. Bush, the Federal Aviation 
Administration asked the Department of Defense to coordinate 
the use of National Guard members at commercial airports 
nationwide for a period of four to six months. Clearly, these 
servicemembers were called up to serve a national mission, but 
their title 32 status prohibited them from receiving SSCRA 
protections.
    S. 2514, the National Defense Authorization Act for Fiscal 
Year 2003, would specifically authorize the Governor of a 
State, upon a request by the head of a Federal law enforcement 
agency and with the concurrence of the Secretary of Defense, to 
order National Guard members of a State to perform full-time 
duty under 502(f) of title 32 for the purpose of carrying out 
homeland security activities.

Committee Bill

    Section 401 of the Committee bill would expand SSCRA 
protections to include those National Guard members serving 
full-time, upon an order of the Governor of a State, by request 
of the head of a Federal law enforcement agency and with the 
concurrence of the Secretary of Defense, under 502(f) title 32 
for homeland security purposes. Thus, SSCRA benefits will be 
provided to National Guard members called up under the specific 
authority contemplated under the Defense Authorization Act in 
response to the Nation's current focus on homeland security.
    Cost: CBO estimates that this provision would have little 
or no net effect on federal direct spending and a negligible 
effect on State and local tax revenues. CBO was unable to 
estimate private sector costs associated with section 401.

    SECTION 402: PROHIBITS CERTAIN ADDITIONAL BENEFITS FOR PERSONS 
                       COMMITTING CAPITAL CRIMES

Background

    Under current law, veterans are eligible for a number of 
benefits by virtue of their service to the Nation. These 
benefits are generally provided without consideration of the 
veteran's conduct following his or her discharge from the Armed 
Services. However, Congress has limited VA benefits available 
to veterans who die while fleeing prosecution or after being 
convicted of a capital crime.
    Sections 6103, 6104, and 6105 of title 38, United States 
Code, state that a veteran who has been convicted of fraud, 
treason, or subversion forfeits all rights and claims to VA 
benefits or compensation. Congress extended this forfeiture of 
benefits in 1997 with the passage of Public Law 105-116. That 
statute prohibited persons who committed capital crimes from 
interment or memorialization in the National Cemetery System, 
Arlington National Cemetery, or in State cemeteries that 
receive VA grant funding. 38 U.S.C. Sec. Sec. 2411 and 2408(d). 
However, this limitation was not extended to the provision of 
Presidential Certificates of Appreciation, burial flags and VA 
grave markers.

Committee Bill

    Section 402 of the Committee bill, would prohibit the 
issuance of Presidential Certificates of Appreciation, flags, 
and memorial headstones or grave markers to veterans convicted 
or fleeing from prosecution of a State or Federal capital 
crime.
    Cost: CBO estimates that this provision would have little 
or no net effect on direct spending.

SECTION 403: MODIFIES THE PROCEDURES FOR DISQUALIFICATION OF PERSONS 
  COMMITTING CAPITAL CRIMES FOR INTERMENT OR MEMORIALIZATION IN NATIONAL 
  CEMETERIES

Background

    Section 2411 of title 38 of the United States Code 
prohibits interment or memorialization in a cemetery in the 
National Cemetery System or in Arlington National Cemetery of 
any person convicted of a capital crime. In addition, it 
prohibits interment or memorialization of persons found by the 
Secretary of Veterans Affairs or the Secretary of the Army to 
have committed capital crimes but who avoided conviction of the 
crime through flight or death preceding prosecution. 38 U.S.C. 
Sec. 2411(b). In such cases, the VA Secretary or the Secretary 
of the Army must receive notice from the Attorney General of 
the United States, or the appropriate State official, of the 
Secretary's own finding before the prohibition shall apply.
    This requirement is administratively unwieldy and 
unnecessarily redundant.

Committee Bill

    Section 403 of the Committee bill would eliminate the 
requirement that the VA Secretary or the Secretary of the Army 
be notified of a finding by the Attorney General or the 
appropriate State official, in cases of persons who are found 
to have committed capital crimes but who avoided conviction of 
the crime through flight or death preceding prosecution.
    Cost: CBO did not estimate any cost to be associated with 
section 403.

SECTION 501: STANDARD FOR REVERSAL BY COURT OF APPEALS FOR VETERANS 
  CLAIMS OF ERRONEOUS FINDING OF FACT BY BOARD OF VETERANS' APPEALS

Background

    Under 38 U.S.C. Sec. 7261(a)(4), CAVC applies a ``clearly 
erroneous'' standard of review to findings of fact made by BVA. 
The ``clearly erroneous'' standard has been defined as 
requiring CAVC to uphold BVA findings of fact if the findings 
are supported by ``a plausible basis in the record . . . even 
if [CAVC] might not have reached the same factual 
determinations.'' Wensch v. Principi, 15 Vet. App. 362, 366-68 
(2001) (affirming BVA's denial of service connection where 
appellant provided substantial medical evidence in support of 
the claim).
    The ``clearly erroneous'' standard was originally adopted 
in 1988 in the Veterans' Judicial Review Act, Public Law 100-
687, which established the current system of appellate 
adjudication for VA benefits cases. The statute was amended 
slightly by Public Law 101-237 in 1989, although the ``clearly 
erroneous'' standard of judicial review remained unchanged.
    The ``clearly erroneous'' standard emerged as part of a 
compromise agreement after Senate approval of S. 11 and the 
House of Representatives approval of H.R. 5288. S. 11 directed 
CAVC to set aside a BVA factual finding only ``when it is so 
utterly lacking in a rational evidentiary basis that a manifest 
and grievous injustice would result if the finding were not set 
aside.'' H.R. 5288 precluded any CAVC review of BVA factual 
determinations ``unless a constitutional issue is presented.'' 
The House and Senate Committees on Veterans' Affairs noted that 
the ``clearly erroneous'' standard adopted at conference is 
``markedly wider than the standard specified in the Senate 
bill.'' 134 Cong. Rec. 31772 (1988).
    More than a decade of experience with CAVC's application of 
the ``clearly erroneous'' standard suggests that CAVC is not 
consistently performing thorough reviews of BVA findings and 
that the Congressional intent for a broad standard of review 
has often been narrowed in application. In the recent U.S. 
Court of Appeals for the Federal Circuit decision of Hensley v. 
West, 212 F.3d 1255 (Fed. Cir. 2000), the Federal Circuit 
vacated a CAVC decision that BVA had not erred in finding that 
a veteran's claim was not well-grounded. The Federal Circuit 
rejected CAVC's de novo review, which it characterized as a 
``dissecting [of] the factual record in minute detail.'' Id. at 
1264. The Federal Circuit emphasized that CAVC should perform 
only limited, deferential review of BVA decisions, and stated 
that BVA fact-finding ``is entitled on review to substantial 
deference.'' Id. at 1263. The Committee is concerned with the 
high level of deference that Hensley suggests CAVC should 
employ in its review of BVA findings.
    The limited extent of CAVC's review of BVA fact-finding is 
also evident in CAVC opinions. CAVC has described its level of 
review as ``significantly deferential'' and providing only 
``very narrow bases for the Court to overturn [BVA] . . . 
determinations.'' Butts v. Brown, 5 Vet. App. 532, 544 (1993) 
(sustaining BVA's rejection of a veteran's claim of service 
connection); see also Ammons v. Gober, 2000 WL 1114147 (Vet. 
App. 2000); accord Presley v. West, 2000 WL 1114124 (Vet. App. 
2000) (describing the ``clearly erroneous'' standard as 
``deferential'' and upholding BVA's denial of service 
connection). Although Ammons and Presley are both unpublished 
memorandum decisions, they exemplify the limited extent of the 
review CAVC is performing of BVA fact-finding. This undesirable 
situation may be the result of confusion concerning the 
``clearly erroneous'' standard, which exists outside the rubric 
set forth in the Administrative Procedure Act (hereinafter 
``APA''). 5 U.S.C. Sec. 5107(2)(e).
    In their testimony at the Committee hearing on May 2, 2002, 
veterans service organizations (hereinafter ``VSOs'') voiced 
frustration with the perceived lack of searching appellate 
review of BVA decisions. These groups argued that the large 
measure of deference that CAVC affords BVA fact-finding is 
detrimental to claimants and may result in failure to consider 
the ``benefit of the doubt'' rule in 38 U.S.C. Sec. 5107(b). 
Section 5107(b) provides that VA must find for the claimant 
when, considering the evidence of record, there is an 
approximate balance of positive and negative evidence regarding 
any material issue including the ultimate merits of the claim. 
This ``benefit of the doubt'' standard is distinctly different 
from standards applicable to most adjudicatory proceedings, 
where claimants are required to produce a preponderance of 
evidence so that the weight of the evidence favoring their 
claims.
    VA also testified at the Committee hearing on May 2, 2002, 
and opined that CAVC routinely considers whether BVA has 
applied the ``benefit of the doubt'' rule. However, VA 
suggested that if the Committee believed a less restrictive 
standard than ``clear erroneous'' was warranted that the 
substantial evidence standard of the APA was appropriate.
    The Committee solicited comments from CAVC, the Federal 
Circuit, and the Administrative Office of the United States 
Courts. All declined to comment.

Committee Bill

    Section 501 amends section 7261(a)(4) of title 38 to change 
the standard of review CAVC applies to BVA findings of fact 
from ``clearly erroneous'' to ``unsupported by substantial 
evidence.'' Section 502 also cross-references section 5107(b) 
in order to emphasize that the Secretary's application of the 
``benefit of the doubt'' to an appellant's claim shall be 
considered by CAVC on appeal. The combination of these changes 
is intended to provide far more searching appellate review of 
BVA decisions, and thus give full force to the ``benefit of the 
doubt'' provision. The formula ``unsupported by substantial 
evidence of record'' is similar to the standard specified in 
the APA, and should be interpreted as such except that the 
interpretation must reflect the ``benefit of the doubt'' rule 
and thus provide a unique bias in favor of the claimant when 
the evidence is balanced.
    Change in CAVC's standard of review was first proposed in 
S. 2079. That bill would have changed the ``clearly erroneous'' 
standard by allowing CAVC reversal of BVA fact-finding whenever 
that finding was ``not reasonably supported by a preponderance 
of the evidence.'' The Committee modified this standard in 
order to provide a more familiar and judicially-recognized 
standard of appellate review. Although the ``clearly 
erroneous'' standard has been interpreted by some to require an 
incrementally more searching review than ``substantial 
evidence,'' the ``substantial evidence'' standard is within the 
APA's rubric.\1\ Under the APA's rubric for agency review, 
``substantial evidence'' review is the least deferential review 
an appellate court may apply short of ``de novo'' review. By 
including specific reference to the ``benefit of the doubt'' 
rule in the amendment made by section 501 and moving to a 
standard that is recognized to provide for searching review, 
the Committee intends for section 501 to make it clear that 
CAVC is to provide a thorough review of VA benefits claims on 
appeal.
---------------------------------------------------------------------------
    \1\ The ``substantial evidence'' formula has been judicially 
interpreted to be slightly more deferential than a traditional 
``clearly erroneous'' standard. Dickinson v. Zurko, 527 U.S. 150, 162-
163 (1999). However, the difference, if any, is slight: the Supreme 
Court stated in Dickinson: ``[T]he difference is a subtle one-so fine 
that (apart from the present case) we have failed to uncover a single 
instance in which a reviewing court conceded that use of one standard 
rather than the other would in fact have produced a different 
outcome.'' Id.
---------------------------------------------------------------------------
    The Committee intends the ``substantial evidence'' standard 
to mandate a limited degree of deference to BVA fact-finding, 
with substantial deference given to findings of fact based on 
demeanor evidence, but to provide for searching judicial review 
of VA benefits claims encompassing the ``benefit of the doubt'' 
rule. The Committee believes this formula will achieve this 
goal.
    Cost: CBO was unable to provide a cost estimate associated 
with section 501.

   SECTION 502: REVIEW BY THE U.S. COURT OF APPEALS FOR THE FEDERAL 
                  CIRCUIT OF CERTAIN DECISIONS OF LAW

Background

    In their testimony at the Committee hearing on May 2, 2002, 
VSOs expressed concerns about the perceived inability of the 
U.S. Court of Appeals for the Federal Circuit to review certain 
CAVC decisions, specifically those involving questions of law 
not ``with respect to the validity of any statute or 
regulation.'' 38 U.S.C. Sec. 7292(a). In the Independent Budget 
for Fiscal Year 2003, the veterans service organizations 
offered the ``treating physician rule'' as an example of judge-
made law that is not derived from a specific regulation or 
statute. The ``treating physician rule'' refers to an 
evidentiary rule applied in Social Security cases where greater 
weight is given to the opinion of a physician who treated the 
claimant than the opinion of a non-treating expert. The 
veterans service organizations argued that there is no valid 
reason why this particular class of legal decisions should be 
exempt from judicial review, while legal decisions that involve 
interpretation of regulations or statutes receive appellate 
review. VA responded at a Committee hearing on May 2, 2002, 
asserting that the Federal Circuit has assumed the power to 
address such questions, specifically citing Bailey v. West, 160 
F.3d 1360 (Fed. Cir. 1998) (en banc), where the Federal Circuit 
examined the validity of the ``treating physician rule,'' and 
implicitly found jurisdiction to determine the issue, but did 
not object to the provision. In sum, confusion has developed as 
to the extent of the Federal Circuit's jurisdiction to hear 
appeals of CAVC decisions that are not clearly legal 
interpretations of statutes or regulations.

Committee Bill

    Section 502 responds to the concerns raised above by 
amending sections 7292(a) and (c) of title 38 to provide for 
appellate review of a CAVC decision on any rule of law. The 
purpose of this change is to clarify the jurisdiction of the 
Federal Circuit when reviewing CAVC decisions so as to include, 
unequivocally, CAVC decisions involving rulings of law not 
derived from a statute or regulation.
    Cost: CBO was unable to provide a cost estimate associated 
with section 502.

SECTION 503: AUTHORITY OF COURT OF APPEALS FOR VETERANS CLAIMS TO AWARD 
  FEES UNDER EQUAL ACCESS TO JUSTICE ACT TO NON-ATTORNEY PRACTITIONERS

Background

    Currently, VA claimants who enlist the aid of attorneys and 
non-attorney practitioners supervised by attorneys, and who are 
successful in their claims and satisfy certain statutory 
requirements, can avail themselves of the benefits of the Equal 
Access to Justice Act (hereinafter ``EAJA''), 28 U.S.C. 
Sec. 2412(d). The EAJA shifts the burden of attorney fees from 
the citizen to the government in cases where the government's 
litigation position in not substantially justified and the 
citizen does not exceed certain income and asset criteria. In 
the case of VA claims, claimants are often represented up to 
and through CAVC by qualified non-attorney representatives from 
the VSOs.
    Based upon a long-standing limitation on paying attorney 
fees in veterans' benefits cases, there had not been an active 
veterans' bar until the enactment of the Veterans Judicial 
Review Act, Public Law 100-527. As a result, non-attorney 
volunteers and employees of veterans service organizations and 
other non-profit organizations began to represent veteran 
claimants before VA without direct supervision by an attorney. 
VA policy has never required that these representatives be 
attorneys, only that they be credentialed by a VA-recognized 
VSO. Currently, these non-attorney practitioners, who have been 
credentialed by VSOs and admitted to practice before CAVC, are 
not eligible for EAJA fees unless the EAJA application is 
signed by an attorney.

Committee Bill

    Section 503 would allow VSOs to be awarded fees under the 
EAJA for representation provided to VA claimants by their 
employee non-attorney practitioners without the requirement 
that attorney to sign the EAJA application.
    Cost: CBO estimates that this provision would have no 
effect on mandatory spending and an insignificant effect on 
discretionary spending.

SECTION 504: CLARIFICATION OF RETROACTIVE APPLICATION OF PROVISIONS OF 
                   THE VETERANS CLAIMS ASSISTANCE ACT

Background

    Public Law 106-475, the Veterans Claims Assistance Act of 
2000 (hereinafter ``VCAA''), restored and enhanced VA's duty to 
assist claimants in developing their claims for veterans 
benefits. VCAA requires VA to take very specific steps to 
assist claimants.
    Although VA was already required to notify a claimant whose 
application was incomplete, under VCAA VA must also inform a 
claimant of any medical or lay evidence necessary to 
substantiate his or her claim. VCAA also specified that this 
notice must indicate which portion of the evidence is to be 
provided by the claimant and which portion VA will attempt to 
obtain on behalf of the claimant.
    VCAA clarified VA's duty to assist claimants in developing 
evidence for their claims for benefits. Section 3 requires VA 
to make reasonable efforts to assist in obtaining evidence 
necessary to substantiate a claimant's eligibility for 
benefits, but allows VA to decide a claim without providing 
such assistance when no reasonable possibility exists that such 
assistance will aid in substantiating the claim. Relevant 
records must be obtained by VA if the claimant adequately 
identifies them to VA and authorizes them to be obtained. VA 
must inform the claimant whenever it is unable to obtain such 
records.
    In the case of a veteran's claim for disability 
compensation, section 3 also requires that VA obtain the 
claimant's relevant service medical records and, if the 
claimant has furnished sufficient information, other relevant 
service records, existing records of relevant medical treatment 
or examination at VA health care facilities, and any other 
relevant records held by a Federal department or agency. VA 
must provide a medical examination or obtain a medical opinion 
when the evidence indicates that the claimant has a current 
disability or persistent or recurrent symptoms of disability, 
which may be associated with active military service, and when 
such an examination or opinion is necessary for VA to make a 
decision on the claim.
    Two recent decisions by the U.S. Court of Appeals for the 
Federal Circuit have found that the provisions in section 3 of 
VCAA pertaining to VA's duty to assist cannot be applied 
retroactively to claims pending at the time of enactment. In 
Dyment v. Principi, 287 F.3d 1377 (Fed. Cir. 2002), the Federal 
Circuit stated: ``The Supreme Court has held that a federal 
statute will not be given retroactive effect unless Congress 
has made its contrary intention clear. There is nothing in the 
VCAA to suggest that section 3(a) was intended to applied [sic] 
retroactively.'' In Bernklau v. Principi, 291 F.3d 795, 806 
(2002), the Court again concluded: ``[S]ection 3(a) of the VCAA 
does not apply retroactively to require that proceedings that 
were complete before the Department of Veterans Affairs and 
were on appeal to the Court of Appeals for Veterans Claims or 
this court be remanded for readjudication under the new 
statute.''

Committee Bill

    Section 504 clarifies Congress' intention that section 3 of 
VCAA, be applied retroactively to cases that were ongoing 
either at the various adjudication levels within VA or pending 
at the applicable Federal courts prior to the date of VCAA's 
enactment. In order to prevent the creation of a group of VA 
claimants who would have their claims decided without the 
benefit of the additional VA assistance under VCAA, section 505 
of the Committee bill contains language that would provide for 
claims decided between the handing down of the Dyment case and 
enactment of this provision to receive the full notice, 
assistance, and protection afforded under VCAA. VCAA was 
enacted to ensure that VA assist veterans in obtaining evidence 
that is vital to their claims. This provision clarifies that 
section 3 of the VCAA applies retroactively in order to ensure 
that those VA claimants whose claims are denied or dismissed 
during the period between April 24, 2002 and the date of 
enactment of this Act, are given the higher level of VA 
assistance required.
    Cost: CBO estimates that this provision would have no 
effect on mandatory spending and an insignificant effect on 
discretionary spending.

               Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 1, 2002.
Hon. John D. Rockefeller IV,
Chairman, Committee on Veterans' Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2237, the Veterans 
Benefits Improvement Act of 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Melissa E. 
Zimmerman.
            Sincerely,
                                         Barry B. Anderson,
                                      for Dan L. Crippen, Director.

S. 2237 Veterans Benefits Improvement Act of 2002 (As ordered reported 
     by the Senate Committee on Veterans' Affairs on June 6, 2002)

                                SUMMARY

    S. 2237 would affect several veterans programs, including 
compensation, pensions, burial benefits, housing, and 
education. The bill contains provisions that would increase 
direct spending for certain veterans' compensation, housing, 
and education programs. It also contains a provision to extend 
income verification authorities that would reduce direct 
spending over the 2004-2012 period. On balance, CBO estimates 
that enacting S. 2237 would result in a net increase in direct 
spending totaling $31 million in 2003, $69 million over the 
2003-2007 period, and $49 million over the 2003-2012 period. 
The bill also contains one provision that could affect 
revenues, but we cannot estimate the amounts of any such 
effects. Because the bill would affect direct spending and 
revenues, pay-as-you-go procedures would apply.
    In addition, CBO estimates that implementing S. 2237 would 
increase spending subject to appropriation by $2 million in 
2003 and $4 million over the 2003-2007 period, assuming 
appropriation of the necessary amounts.
    While S. 2237 contains an intergovernmental mandate as 
defined in the Unfunded Mandates Reform Act (UMRA), CBO 
estimates that the costs of complying with that mandate would 
not exceed the threshold established in that act ($58 million 
in 2002, adjusted annually for inflation).
    The bill also contains a private-sector mandate as defined 
by UMRA that would extend coverage under the Soldiers and 
Sailors Civil Relief Act to certain National Guard members who 
are performing homeland security activities. While the number 
of National Guard members affected by this extension is 
currently quite small, CBO cannot estimate how many members 
might be called up to perform these duties in the future, and 
thus, we cannot determine the extent of the mandate. CBO 
expects that the cost could exceed the UMRA threshold for 
private-sector mandates ($115 million in 2002, adjusted 
annually for inflation) if, in the future, a large number of 
National Guard members were called up by the states to perform 
homeland security activities.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    The estimated budgetary impact of S. 2237 is shown in Table 
1. The costs of this legislation fall within budget functions 
700 (veterans benefits and services) and 750 (administration of 
justice).

             Table 1.--Estimated Budgetary Impact of S. 2237
                  [By Fiscal Year, in Millions Dollars]
------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007
------------------------------------------------------------------------

CHANGES IN DIRECT SPENDING a,b

Estimated Budget Authority......      31      27      25      -6      -8
Estimated Outlays...............      31      27      25      -6      -8

CHANGES IN SPENDING SUBJECT TO
 APPROPRIATION a

Estimated Authorization Level...       2      cccc
Estimated Outlays...............       2      cccc
------------------------------------------------------------------------
a In addition to the bill's impact on direct spending and discretionary
  spending, CBO estimates that S. 2237 could increase revenues into the
  Crime Victims Fund over the 2003-2012 period for settlement of court
  cases brought by the Department of Veterans Affairs (VA) against
  veterans who sign over their rights to compensation to another party.
  CBO cannot provide a specific estimate, however, given the uncertainty
  surrounding the number of cases that might be brought by VA, when any
  such cases might be resolved, or the size of any penalties that a
  court might impose.
b A provision in S. 2237 would direct VA to presume that, for veterans
  who served on active duty during certain time periods and in certain
  military occupations, hearing loss and tinnitus are service-connected
  disabilities for the purposes of compensation. CBO cannot estimate the
  cost of any increase in compensation payments that may result from
  enacting this provision because we cannot estimate the number of
  veterans who might be eligible for compensation benefits until the
  National Academy of Sciences completes a study and VA writes the
  necessary regulations. It is possible, however, that the costs of this
  provision could be significant depending on how many veterans could
  gain eligibility for compensation under the new regulations.
c Less than $500,000.

                           BASIS OF ESTIMATE

Direct Spending and Revenues

    The legislation would affect direct spending in veterans' 
programs for compensation, pensions, burial benefits, housing, 
and education. Table 2 summarizes those effects, and the 
individual provisions that would affect direct spending are 
described below.

                                Table 2.--Estimated Direct Spending Under S. 2237
                                [By Fiscal Year, Outlays in Millions of Dollars]
----------------------------------------------------------------------------------------------------------------
                                                        2002      2003      2004      2005      2006      2007
----------------------------------------------------------------------------------------------------------------

COMPENSATION, PENSIONS, AND BURIAL BENEFITS
Spending Under Current Law..........................    24,406    25,678    26,910    30,115    28,674    27,013
Proposed Changes....................................         0         4        -1        -4        -7        -9
Spending Under S. 2237..............................    24,406    25,682    26,909    30,111    28,667    27,004

HOUSING

Spending Under Current Law..........................    -1,041       299       317       326       335       341
Proposed Changes....................................         0        22        23        24         1         1
Spending Under S. 2237..............................    -1,041       321       340       350       336       342

VETERANS' READJUSTMENT BENEFITS

Spending Under Current Law..........................     1,959     2,276     2,544     2,715     2,875     3,036
Proposed Changes....................................         0         5         5         5         0         0
Spending Under S. 2237..............................     1,959     2,281     2,549     2,720     2,875     3,036
----------------------------------------------------------------------------------------------------------------

    Compensation, Pensions, and Burial Benefits. Several 
sections of the bill would affect spending for veterans' 
disability compensation, pensions, and burial benefits (see 
Table 3). Together, those provisions would increase spending by 
$4 million in 2003, but would lower spending by $17 million 
over the 2003-2007 period and by $42 million over the 2003-2012 
period.
    Compensation for Hearing Loss in Paired Organs. For 
veterans with hearing loss, current law requires that both ears 
must be diagnosed as totally deaf for hearing loss that was not 
caused by military service to be rated as service-connected for 
the purposes of disability compensation. Section 102 would 
modify this requirement so that any degree of hearing loss in 
one ear that was not caused by military service would be rated 
as service-connected if any degree of hearing loss in the other 
ear was rated as service-connected.

     Table 3. Estimated Changes in Direct Spending for Compensation,
               Pensions, and Burial Benefits Under S. 2237
            [By Fiscal Year, Outlays in Millions of Dollars]
------------------------------------------------------------------------
    Description of Provision       2003    2004    2005    2006    2007
------------------------------------------------------------------------
Compensation for Hearing Loss in       2       7      11      15      18
 Paired Organs..................
Income Verification Extension...       0      -9     -16     -23     -28
Medal of Honor Special Pension..       2       1       1       1       1
Mastectomy Benefits.............      aaaaa
Denial of Burial Benefits.......      aaaaa
Retroactive Claims Assistance...      aaaaa
                                 ---------------------------------------
    Total Changes in                   4      -1      -4      -7      -9
     Compensation, Pensions, and
     Burial Benefits b..........
------------------------------------------------------------------------
a Less than $500,000.
b A provision in S. 2237 would direct VA to presume that, for veterans
  who served on active duty during certain time periods and in certain
  military occupations, hearing loss and tinnitus are service-connected
  disabilities for the purposes of compensation. CBO cannot estimate the
  cost of any increase in compensation payments that may result from
  enacting this provision because we cannot estimate the number of
  veterans who might be eligible for compensation benefits until the
  National Academy of Sciences completes a study and VA writes the
  necessary regulations. It is possible, however, that the costs of this
  provision could be significant depending on how many veterans could
  gain eligibility for compensation under the new regulations.

    Based on data provided by the Department of Veterans 
Affairs (VA), CBO estimates that enacting this provision would 
increase the disability compensation paid to eligible veterans 
by about $100 a month on average. CBO estimates that, over the 
2003-2007 period, about 6,000 veterans who are already 
receiving disability compensation for hearing loss would apply 
for a reevaluation of their rating and receive an increase in 
their monthly disability payment. CBO also estimates that, over 
the 10-year period, about 1,500 veterans would be eligible for 
the higher payment out of the almost 33,000 veterans who would 
receive ratings for hearing loss for the first time each year.
    Considering expected mortality and new disability claims 
for hearing loss, CBO estimates that about 13,000 veterans 
would be receiving the increase in compensation in 2007 and 
about 19,000 veterans would receive it in 2012. After 
accounting for cost-of-living adjustments (COLAs) over the 
2003-2012 period, CBO estimates that section 102 would increase 
direct spending by about $2 million in 2003, $53 million over 
the 2003-2007 period, and $178 million over the 2003-2012 
period. (CBO estimates that implementing this section also 
would increase spending subject to appropriation by about $2 
million over the 2003-2007 period, assuming appropriation of 
the estimated amounts. CBO's estimate of those outlays is 
discussed below under the heading of ``Spending Subject to 
Appropriation.'')
    Income Verification Extension. Section 106 would extend 
authorities under current law that allow VA to acquire 
information on income reported to the Internal Revenue Service 
(IRS) to verify income reported by recipients of VA pension 
benefits. The authorization allowing the IRS to provide income 
information to VA will expire on September 30, 2003, while the 
authorization allowing VA to acquire the information will 
expire on September 30, 2008. Section 106 would extend these 
authorities through September 30, 2011, for both VA and the 
IRS. Because current law allows VA and the IRS to conduct 
income verification through the end of fiscal year 2003, CBO 
estimates that enacting this provision would provide no 
additional cost savings for that year.
    CBO estimates that, based on recent experience, VA will 
save (under current law) approximately $7 million in pension 
benefit overpayments from verifying veterans' incomes in 2003. 
Using that information, CBO estimates that enacting section 106 
would result in direct spending savings of $76 million over the 
2004-2007 period and $231 million over the 2004-2012 period.
    Medal of Honor Special Pension. Section 104 would increase 
the special pension paid to most Medal of Honor recipients from 
$600 to $1,000 a month and, beginning on December 1, 2003, 
increase the pension each year by the same cost-of-living 
adjustment payable to Social Security recipients. This 
provision also would direct VA to pay a lump-sum payment to 
compensate each recipient of the special pension for the time 
period between the recognized act of valor and the first 
special pension payment. The amount of the payment would be 
calculated using the rate of compensation that was in effect 
during the applicable time period. According to VA and the 
Congressional Medal of Honor Society, there are 145 Medal of 
Honor recipients that would receive the special pension 
increase and COLAs under this provision, and 139 recipients who 
would be eligible for the lump-sum payments.
    CBO estimates that this provision would cost roughly $2 
million in 2003, the year the lump-sum payments would be made. 
In each subsequent year, CBO estimates the provision would cost 
less than $1 million a year. In total, CBO estimates the 
provision would cost $8 million over the 2003-2012 period.
    Mastectomy Benefits. Veterans who have suffered certain 
service-connected anatomical losses (e.g., the loss of a hand, 
a foot, etc.) are eligible to receive a special compensation 
payment of $80 a month in addition to any other disability 
compensation they receive. Under current law, to be entitled to 
this special compensation for the loss of breast tissue caused 
by breast cancer that was diagnosed during military service, a 
woman must have lost an entire breast as the result of a 
mastectomy. Section 101 would change this standard by providing 
the special compensation to women who have lost half or more of 
the breast tissue as a result of a mastectomy for breast cancer 
that was diagnosed during military service.
    Based on data provided by VA, CBO estimates that less than 
150 women would be entitled to the special compensation in 2003 
under this provision, with about 10 new cases occurring each 
year after that. CBO estimates that the additional cost to 
provide special payments to the affected women would be less 
than $300,000 a year and total about $2 million over the 2003-
2012 period.
    Presumption of Service Connection for Hearing Loss. Section 
103 would direct VA to presume that, for veterans who served on 
active duty during certain time periods and in certain military 
occupations, hearing loss and tinnitus are service-connected 
disabilities for the purposes of compensation. VA would be 
authorized to issue regulations specifying the qualifying time 
periods and occupations, and to subsequently provide monthly 
disability compensation payments to qualifying veterans based 
on a study to be conducted by the National Academy of Sciences 
(NAS) in 2003. Because of the time needed to conduct the study 
and draft the regulations, CBO estimates that VA would not 
increase disability compensation benefits to eligible veterans 
under this provision until 2004.
    CBO cannot estimate the cost of any increase in 
compensation payments that may result from enacting this 
provision because we cannot estimate the number of veterans who 
might be eligible for compensation benefits until the NAS 
completes the study and VA writes the regulations. It is 
possible, however, that the costs of this provision could be 
significant depending on how many veterans could gain 
eligibility for compensation under the new regulations. (CBO 
estimates that implementing this section also would increase 
spending subject to appropriation by $1 million over the 2003-
2007 period, assuming appropriation of the estimated amounts. 
CBO's estimate of those outlays is discussed below under the 
heading of ``Spending Subject to Appropriation.'')
    Prohibition on Assigning Benefits. Section 105 would 
prohibit beneficiaries from signing over their rights to 
receive veterans' compensation, pension, or dependency and 
indemnity compensation benefits to another person. Any person, 
including the beneficiary, who participates in an arrangement 
to reassign benefits would be subject to a fine, imprisonment, 
or both penalties. This provision also would direct VA to 
conduct a five-year outreach program to inform veterans about 
the prohibition on assigning benefits.
    Because those prosecuted and convicted under section 105 
could be subject to criminal fines, the government might 
collect additional fines if this provision is enacted. 
Collections of such fines are recorded in the budget as 
governmental receipts (revenues), which are deposited in the 
Crime Victims Fund, and later spent. CBO cannot estimate the 
impact on receipts because we cannot determine how many alleged 
violators VA might file suit against, whether the agency would 
win such legal action, or the size of any penalties that a 
court might impose. (CBO estimates that implementing this 
section also would increase spending subject to appropriation 
by a negligible amount over the 2003-2007 period, assuming 
appropriation of the estimated amounts. CBO's estimate of those 
outlays is discussed below under the heading of ``Spending 
Subject to Appropriation.'')
    Standard of Reversal and Scope of Authority. Under current 
law, the Court of Appeals for Veterans Claims (CAVC) must 
determine that any finding of material fact in a veteran's 
appeal of a VA decision is ``clearly erroneous' to disregard it 
in reaching a decision. Section 502 would direct the CAVC to 
apply a less restrictive standard to evaluate findings of 
material fact that are adverse to the claimant. It also would 
allow the CAVC to reverse a finding under this standard.
    Based on information provided by the Board of Veterans 
Appeals, CBO expects that enacting this provision could make it 
more likely that the CAVC would set aside VA findings of fact 
that are adverse to the claimant which could result in more 
cases being remanded to VA or decided in favor of the claimant. 
CBO cannot estimate the cost of enacting this provision, 
however, because we cannot predict the outcome of such 
litigation before the CAVC.
    Review by Court of Appeals for the Federal Circuit. Section 
503 would expand the jurisdiction of the U.S. Court of Appeals 
for the Federal Circuit (CAFC) to allow the court to review a 
``rule of law.'' A rule of law is a legal issue that does not 
involve a statute, regulation, or constitutional provision, but 
that may involve judicially created legal principles. According 
to VA, enacting section 503 would likely cause more cases to 
fall under CAFC jurisdiction. Because we cannot predict the 
outcome of litigation brought before the CAFC, however, CBO 
cannot estimate any potential increase in direct spending that 
may result from a change in the number of decisions being 
reversed in favor of claimants.
    Other Provisions. CBO estimates that the following 
provisions would have an insignificant budgetary impact on 
direct spending:
           Denial of Burial Benefits. Current law 
        authorizes VA to provide a Presidential Memorial 
        Certificate, a flag to drape the casket, and a 
        headstone or grave marker for veterans who were 
        discharged or separated from active duty under 
        conditions other than dishonorable to memorialize their 
        death. Section 402 would authorize VA to deny these 
        benefits to veterans who have been convicted of a 
        capital crime and sentenced to death or life 
        imprisonment.
          CBO estimates that enacting this section would have 
        an insignificant effect on the federal budget. Using 
        data from the U.S. Bureau of Justice Statistics and the 
        Federal Bureau of Prisons, CBO estimates that the 
        prohibition would authorize VA to deny these benefits 
        to only a small number of veterans each year. Based on 
        information from the National Cemetery Administration, 
        the cost savings would be less than $150 a person, CBO 
        estimates.
           Retroactive Claims Assistance. The Veterans 
        Claims Assistance Act of 2000 (VCAA), enacted on 
        November 9, 2000, directed VA to provide assistance to 
        veterans who file claims for VA benefits. VA 
        interpreted the VCAA as being retroactive for certain 
        cases that were open on or after the VCAA was enacted; 
        however, in 2002, the CAVC ruled that the VCAA does not 
        apply retroactively for any case.
          Section 505 would amend the law to specify that the 
        VCAA applies retroactively for all cases. It also would 
        direct VA to assist the veterans whose claims were 
        affected by the court's ruling by helping them document 
        their claim for reconsideration by the department. This 
        provision would only apply to certain cases that were 
        pending before a court on November 9, 2000, and had 
        been denied after April 24, 2002. According to 
        information provided by VA, less than five cases would 
        be eligible to be reopened. While we cannot predict the 
        outcome of these appeals, CBO estimates that because of 
        the very small number of cases, the cost of enacting 
        this provision would be negligible.
    Housing. Section 301 would authorize VA to guarantee 
adjustable rate mortgages (ARMs) through 2005, including a 
relatively new mortgage product, known as a hybrid ARM. These 
mortgages carry an initial fixed interest rate for longer than 
one year and then are subject to interest rate adjustments. The 
hybrid ARMs authorized under the bill would carry an initial 
fixed interest rate for a period of not less than three years 
of the mortgage term.
    Based on information from VA and the Federal Housing 
Administration, CBO estimates that about 10,000 new ARMs worth 
roughly $1.6 billion would be guaranteed each year under this 
new authority and that these loans would be 20 percent larger 
and 20 percent more likely to enter into default than fixed-
rate mortgages. (CBO estimates that fixed-rate mortgages have a 
default rate of 10.5 percent and that these ARMs would have a 
default rate of 12.4 percent.) CBO estimates that the net 
subsidy cost, as defined by the Federal Credit Reform Act, of 
providing guarantees for these ARMs would average $23 million 
over the 2003-2005 period. That estimate reflects gross costs 
averaging about $27 million a year, offset by savings of about 
$4 million a year for having fewer guarantees of fixed-rate 
mortgages. (Under the Federal Credit Reform Act, the subsidy 
cost of a new guaranteed loan is the net present value of 
estimated costs--at the time the loan is disbursed--of expected 
payments by the government to cover defaults and delinquencies, 
and other payments, net of expected payments to the government 
including any loan fees, penalties, and recoveries.)
    When a guaranteed loan defaults and goes into foreclosure, 
VA often acquires the property and issues a new direct loan 
(called a vendee loan) when the property is sold. VA sells most 
vendee loans on the secondary mortgage market and guarantees 
their timely repayment. Based on information from VA, CBO 
estimates the subsidy cost of vendee loans and sales of vendee 
loans would be less than $500,000 a year over the 2003-2005 
period and about $1 million a year over the 2006-2012 period.
    Veterans' Readjustment Benefits. Section 201 would increase 
the amount available to state approving agencies by $5 million 
each year in 2003, 2004, and 2005. CBO expects this change 
would increase direct spending by $15 million over the 2003-
2005 period.

                   SPENDING SUBJECT TO APPROPRIATION

    CBO estimates that implementing S. 2237 would increase 
discretionary spending for VA's general operating expenses by 
$2 million in 2003 and $4 million over the 2003-2007 period, 
assuming that the necessary amounts are appropriated.
    Compensation for Hearing Loss in Paired Organs. For 
veterans with hearing loss, current law requires that both ears 
must be diagnosed as totally deaf for hearing loss that was not 
caused by military service to be rated as service-connected for 
the purposes of disability compensation. Section 102 would 
modify this requirement so that any hearing loss in one ear 
that was not caused by military service would be rated as 
service-connected if any degree of hearing loss in the other 
ear was rated as service-connected. CBO estimates that enacting 
this provision would cause certain veterans with hearing loss 
to seek a reevaluation of their rating for disability 
compensation from VA. CBO estimates that, as a result of 
implementing this provision, about 4,000 veterans would submit 
applications for a reevaluation of their rating in 2003 on top 
of VA's routine workload for rating applications. CBO also 
estimates that in 2003, under this provision, about 500 
veterans would apply for disability compensation for hearing 
loss that would otherwise not apply. Processing these 
additional applications would cost less than $1 million in 2003 
and about $2 million over the 2004-2007 period, CBO estimates.
    Presumption of Service Connection for Hearing Loss. Section 
103 would direct the Secretary of Veterans Affairs to enter 
into an agreement with the NAS or another appropriate 
scientific organization to conduct a study to determine the 
military occupations and time periods, if any, under which 
servicemembers may have been exposed to conditions likely to 
cause or contribute to hearing loss or tinnitus. Based on 
information provided by NAS, CBO estimates that it would cost 
about $1 million in 2003 to perform this study.
    Review by Court of Appeals for the Federal Circuit. Section 
503 would expand the jurisdiction of the U.S. Court of Appeals 
for the Federal Circuit to allow the court to review a ``rule 
of law.'' According to VA, enacting section 503 would likely 
increase the number of cases brought before the court. CBO 
cannot estimate the costs associated with this larger workload 
because we have no basis on which to predict the number of 
veterans that might file an appeal under this provision.
    Standard of Reversal and Scope of Authority. Section 502 
would direct the CAVC to apply a less restrictive standard to 
evaluate findings of material fact that are adverse to the 
claimant and allow the court to reverse a finding under this 
new standard. Based on information provided by the Board of 
Veterans Appeals, CBO expects that more cases could be remanded 
to VA or decided in favor of the claimant than under current 
law. Thus, CBO believes that CAVC actions could, under section 
502, increase VA's discretionary costs for processing and 
paying claims. CBO cannot estimate the likelihood or magnitude 
of such effects, however, because there is no basis to predict 
the outcome of such litigation before the CAVC.
    Other Provisions. CBO estimates that implementing the 
following provisions would cost less than $500,000 a year:
     Fees for Non-Attorney Practitioners. Current law 
authorizes the CAVC to award fees and expenses to attorneys who 
successfully represent clients before the court. Section 504 
would authorize the CAVC to award these fees and expenses to 
individuals who are not attorneys as well. According to VA, 
there are less than 35 of these practitioners who present a 
small number of cases before the court each year. Thus, CBO 
estimates that the cost of implementing this provision would be 
insignificant.
     Retroactive Requirement to Assist Claimants. 
Section 505, described above under the heading of ``Direct 
Spending,'' would increase administrative costs for the CAVC 
because it would expand the docket for that court. However, CBO 
estimates that the costs of implementing this provision would 
be negligible because the court's docket would grow by less 
than five cases.
     Prohibition on Assigning Benefits. Section 105 
would prohibit beneficiaries from signing over their rights to 
receive veterans' compensation, pension, or dependency and 
indemnity compensation benefits to another person. Any person, 
including the beneficiary, who participates in an arrangement 
to reassign benefits would be subject to a fine, imprisonment, 
or both penalties. This provision also would direct VA to 
conduct a five-year outreach program to inform veterans about 
the prohibition on assigning benefits. According to VA, the 
department would carry out this outreach program by adding 
information about the prohibition into its regular mailings to 
veterans. CBO estimates that the cost of updating these 
documents would be negligible.

                      PAY-AS-YOU-GO CONSIDERATIONS

    The Balanced Budget and Emergency Deficit Control Act sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts. The net changes in outlays that are 
subject to pay-as-you-go procedures are shown in Table 4. For 
the purposes of enforcing pay-as-you-go procedures, only the 
effects through fiscal year 2006 are counted.

                                          Table 4.--Estimated Impact of S. 2237 on Direct Spending and Receipts
                                                        [By Fiscal Year, in Millions of Dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   2002    2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays a............................................       0      31      27      25      -6      -8     -11     -13     -14     -14      32
Changes in receipts.............................................       0      bbbbbbbbbb
--------------------------------------------------------------------------------------------------------------------------------------------------------
a A provision in S. 2237 would direct the Department of Veterans Affairs to presume that, for veterans who served on active duty during certain time
  periods and in certain military occupations, hearing loss and tinnitus are service-connected disabilities for the purposes of compensation. CBO cannot
  estimate the cost of any increase in compensation payments that may result from enacting this provision because we cannot estimate the number of
  veterans who might be eligible for compensation benefits until the National Academy of Sciences completes a study and VA writes the necessary
  regulations. It is possible, however, that the costs of this provision could be significant depending on how many veterans could gain eligibility for
  compensation under the new regulations.
b CBO estimates that S. 2237 could increase revenues into the Crime Victims Fund over the 2003-2012 period for settlement of court cases brought by the
  Department of Veterans Affairs against veterans who sign over their rights to compensation to another party. CBO cannot provide a specific estimate,
  however, given the uncertainty surrounding the number of cases that might be brought by VA, when any such cases might be resolved, or the size of any
  penalties that a court might impose.

        ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

    S. 2237 contains an intergovernmental mandate as defined in 
UMRA because it would extend coverage under the Soldiers and 
Sailors Civil Relief Act (SSCRA) to National Guard members who 
are called up by the states but are performing homeland 
security activities upon the request of a federal law 
enforcement agency. This coverage would extend to those 
National Guard members certain protections including the right 
to maintain a single state of residence for purposes of state 
and local personal and income taxes, and the right to request a 
deferral in the payment of certain state and local taxes and 
fees.
    While CBO has no basis for estimating the number of 
National Guard members that would ultimately be eligible for 
such protections, based on information from the Federation of 
Tax Administrators, we expect that relatively few would take 
advantage of these protections and that the per capita cost 
would be small. We thus estimate that any lost tax revenues to 
state and local governments are unlikely to exceed the 
threshold for intergovernmental mandates ($58 million in 2002, 
adjusted annually for inflation).
    The remaining provisions of S. 2237 contain no 
intergovernmental mandates and would impose no costs on state, 
local, or tribal governments.

                 ESTIMATED IMPACT ON THE PRIVATE SECTOR

    The bill contains a private-sector mandate as defined by 
UMRA. Section 401 would extend coverage under SSCRA to National 
Guard members who are called up by the states but are 
performing homeland security activities upon the request of a 
federal agency and with the agreement of the Department of 
Defense.
    SSCRA requires creditors to reduce the interest rate on 
servicemembers' obligations to 6 percent when such obligations 
predate active-duty service, unless the creditor convinces a 
court that a member's financial situation has not been 
materially affected by reason of military service. SSCRA also 
allows the courts, when they find that active-duty service has 
adversely affected a member's financial condition, to 
temporarily stay certain civil proceedings, such as evictions, 
foreclosures, and repossessions.
    Since the number of affected personnel, while currently 
small, fluctuates, CBO cannot determine the extent of the 
mandate. The per capita mandate would be small, but the cost 
could exceed the UMRA threshold if, in the future, a large 
number of National Guard members fell into this category. 
UMRA's threshold for private-sector mandates is $115 million in 
2002 (and is adjusted annually for inflation).

                         PREVIOUS CBO ESTIMATE

    On June 10, 2002, CBO transmitted a cost estimate for H.R. 
4085, the Veterans' and Survivors' Benefits Expansion Act of 
2002, as ordered reported by the House Committee on Veterans' 
Affairs on May 9, 2002. Section 6 of H.R. 4085, which increases 
funds for state approving agencies, is effectively identical to 
section 201 of H.R. 2237. CBO estimates both sections would 
cost $15 million over the 2003-2007 period.
    Estimate prepared by: Federal Costs: (Compensation, 
Pensions, Burial Benefits, and Court of Appeals for Veterans 
Claims) Melissa E. Zimmerman; (Education Benefits) Sarah T. 
Jennings; (Housing) Sunita D'Monte. Impact on State, Local, and 
Tribal Governments: Theresa Gullo. Impact on the Private 
Sector: Sally S. Maxwell.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

    Changes in Existing Law Made by the Committee Bill, As Reported

    In compliance with rule XXVI paragraph 12 of the Standing 
Rules of the Senate, the following provides a print of the 
statute or the part or section thereof to be amended or 
replaced (existing law proposed to be omitted is enclosed in 
black brackets, new matter is printed in italic, existing law 
in which no change is proposed is shown in roman):

                     TITLE 38, UNITED STATES CODE

           *       *       *       *       *       *       *

Sec. 112. Presidential memorial certificate program

           *       *       *       *       *       *       *

  (c) A certificate may not be furnished under the program 
under subsection (a) on behalf of a deceased person described 
in section 2411(b) of this title.

           *       *       *       *       *       *       *

Sec. 1113. Presumptions rebuttable

  (a) Where there is affirmative evidence to the contrary, or 
evidence to establish that an intercurrent injury or disease 
which is a recognized cause of any of the diseases or 
disabilities within the purview of section 1112, 1116, 1117, 
[or 1118] 1118, or 1119 of this title, has been suffered 
between the date of separation from service and the onset of 
any such diseases or disabilities, or the disability is due to 
the veteran's own willful misconduct, service-connection 
pursuant to section 1112, 1116, [or 1118] 1118, or 1119 of this 
title, or payments of compensation pursuant to section 1117 of 
this title, will not be in order.
  (b) Nothing in section 1112, 1116, 1117, [or 1118] 1118, or 
1119 of this title, subsection (a) of this section, or section 
5 of Public Law 98-542 (38 U.S.C. 1154 note) shall be construed 
to prevent the granting of service-connection for any disease 
or disorder otherwise shown by sound judgment to have been 
incurred in or aggravated by active military, naval, or air 
service.

Sec. 1114. Rates of wartime disability compensation

  For the purposes of section 1110 of this title--

           *       *       *       *       *       *       *

          (k) if the veteran, as the result of service-
        connected disability, has suffered the anatomical loss 
        or loss of use of one or more creative organs, or one 
        foot, or one hand, or both buttocks, or blindness of 
        one eye, having only light perception, has suffered 
        complete organic aphonia with constant inability to 
        communicate by speech, or deafness of both ears, having 
        absence of air and bone conduction, or, in the case of 
        a woman veteran, has suffered the anatomical loss of 
        half or more of the tissue of one or both breasts 
        (including loss by mastectomy), the rate of 
        compensation therefor shall be $80 per month for each 
        such loss or loss of use independent of any other 
        compensation provided in subsections (a) through (j) or 
        subsection (s) of this section but in no event to 
        exceed $2,691 per month; and in the event the veteran 
        has suffered one or more of the disabilities heretofore 
        specified in this subsection, in addition to the 
        requirement for any of the rates specified in 
        subsections (l) through (n) of this section, the rate 
        of compensation shall be increased by $80 per month for 
        each such loss or loss of use, but in no event to 
        exceed $3,775 per month;

           *       *       *       *       *       *       *

   CHAPTER 11--COMPENSATION FOR SERVICE-CONNECTED DISABILITY OR DEATH

                          SUBCHAPTER I--GENERAL

Sec.
     * * * * * * *
1119.    Presumption of service connection for hearing loss associated 
          with particular military occupational specialties.
     * * * * * * *

Sec. 1119. Presumption of service connection for hearing loss 
                    associated with particular military occupational 
                    specialties

  (a) For purposes of section 1110 of this title, and subject 
to section 1113 of this title, hearing loss, tinnitus, or both 
of a veteran who served on active military, naval, or air 
service during a period specified by the Secretary under 
subsection (b)(1) and was assigned during the period of such 
service to a military occupational specialty or equivalent 
described in subsection (b)(2) shall be considered to have been 
incurred in or aggravated by such service, notwithstanding that 
there is no record of evidence of such hearing loss or 
tinnitus, as the case may be, during the period of such 
service.
  (b)(1) A period referred to in subsection (a) is a period, if 
any, that the Secretary determines in regulations prescribed 
under this section--
          (A) during which audiometric measures were 
        consistently not adequate to assess individual hearing 
        threshold shift; or
          (B) with respect to service in a military 
        occupational specialty or equivalent described in 
        paragraph (2), during which hearing conservation 
        measures to prevent individual hearing threshold shift 
        were unavailable or provided insufficient protection 
        for members assigned to such military occupational 
        specialty or equivalent.
  (2) A military occupational specialty or equivalent referred 
to in subsection (a) is a military occupational specialty or 
equivalent, if any, that the Secretary determines in 
regulations prescribed under this section in which individuals 
assigned to such military occupational specialty or equivalent 
in the active military, naval, or air service are or were 
likely to be exposed to a sufficiently high level of acoustic 
trauma as to result in permanent hearing loss, tinnitus, or 
both.
  (c) In making determinations for purposes of subsection (b), 
the Secretary shall take into account the report submitted to 
the Secretary by the National Academy of Sciences under section 
103(c) of the Veterans Benefits Improvement Act of 2002.
  (d)(1) Not later than 60 days after the date on which the 
Secretary receives the report referred to in subsection (c), 
the Secretary shall determine whether or not a presumption of 
service connection for hearing loss, tinnitus, or both is 
warranted for the hearing loss, tinnitus, or both, as the case 
may be, of individuals assigned to each military occupational 
specialty or equivalent, and during each period, identified by 
the National Academy of Sciences in such report as a military 
occupational specialty or equivalent in which individuals are 
or were likely to be exposed during such period to a 
sufficiently high level of acoustic trauma as to result in 
permanent hearing loss, tinnitus, or both to a degree which 
would be compensable as a service-connected disability under 
the laws administered by the Secretary.
  (2) If the Secretary determines under paragraph (1) that a 
presumption of service connection is warranted with respect to 
any military occupational specialty or equivalent described in 
that paragraph and hearing loss, tinnitus, or both, the 
Secretary shall, not later than 60 days after the date of the 
determination, issue proposed regulations setting forth the 
Secretary's determination.
  (3) If the Secretary determines under paragraph (1) that a 
presumption of service connection is not warranted with respect 
to any military occupational specialty or equivalent described 
in that paragraph and hearing loss, tinnitus, or both, the 
Secretary shall, not later than 60 days after the date of the 
determination--
          (A) publish the determination in the Federal 
        Register; and
          (B) submit to the Committees on Veterans' Affairs of 
        the Senate and the House of Representatives a report on 
        the determination, including a justification for the 
        determination.
  (e) Any regulations issued under subsection (d)(2) shall take 
effect on the date provided for in such regulations. No benefit 
may be paid under this section for any month that begins before 
that date.

           *       *       *       *       *       *       *

Sec. 1160. Special consideration for certain cases of loss of paired 
                    organs or extremities

  (a) Where a veteran has suffered--

           *       *       *       *       *       *       *

          (3) [total] deafness in one ear as a result of 
        service-connected disability and [total] deafness in 
        the other ear as the result of non-service-connected 
        disability not the result of the veteran's own willful 
        misconduct;

           *       *       *       *       *       *       *

Sec. 1562. Special provisions relating to pension

  (a) The Secretary shall pay monthly to each person whose name 
has been entered on the Army, Navy, Air Force, and Coast Guard 
Medal of Honor roll, and a copy of whose certificate has been 
delivered to the Secretary under subsection (c) of section 1561 
of this title, a special pension at the rate of [$600] $1,000, 
as adjusted from time to time under subsection (e), beginning 
as of the date of application therefor under section 1560 of 
this title.

           *       *       *       *       *       *       *

  (e) Effective as of December 1 each year, the Secretary shall 
increase the amount of monthly special pension payable under 
subsection (a) as of November 30 of such year by the same 
percentage as the percentage by which benefit amounts payable 
under title II of the Social Security Act (42 U.S.C. 401 et 
seq.) are increased effective December 1 of such year as a 
result of a determination under section 215(i) of that Act (42 
U.S.C. 415(i)).

           *       *       *       *       *       *       *

Sec. 2301. Flags

           *       *       *       *       *       *       *

  (g) A flag may not be furnished under this section on behalf 
of a deceased person described in section 2411(b) of this 
title.
  [(g)] (h)(1) The Secretary may not procure any flag for the 
purposes of this section that is not wholly produced in the 
United States.

           *       *       *       *       *       *       *

Sec. 2306. Headstones, markers, and burial receptacles

           *       *       *       *       *       *       *

  (g)(1) A headstone or marker may not be furnished under 
subsection (a) for the unmarked grave of a person described in 
section 2411(b) of this title.
  (2) A memorial headstone or marker may not be furnished under 
subsection (b) for the purpose of commemorating a person 
described in section 2411(b) of this title.
  (3) A marker may not be furnished under subsection (d) for 
the grave of a person described in section 2411(b) of this 
title.

           *       *       *       *       *       *       *

Sec. 2411. Prohibition against interment or memorialization in the 
                    National Cemetery System or Arlington National 
                    Cemetery of persons committing Federal or State 
                    capital crimes

  (a)(1) * * *

           *       *       *       *       *       *       *

  (2) [The prohibition] In the case of a person described in 
subsection (b)(1) or (b)(2), the prohibition under paragraph 
(1) shall not apply unless written notice of a conviction [or 
finding under subsection (b)] referred to in subsection (b)(1) 
or (b)(2), as the case may be, is received by the appropriate 
Federal official before such official approves an application 
for the interment or memorialization of such person. Such 
written notice shall be furnished to such official by the 
Attorney General, in the case of a Federal capital crime, or by 
an appropriate State official, in the case of a State capital 
crime.

           *       *       *       *       *       *       *

Sec. 3011. Basic educational assistance entitlement for service on 
                    active duty

  (a) Except as provided in subsection (c) of this section, 
each individual--
          (1) who--

           *       *       *       *       *       *       *

                  (C) as of December 31, 1989, was eligible for 
                educational assistance benefits under chapter 
                34 of this title and--

           *       *       *       *       *       *       *

                          (ii) reenlists or reenters on a 
                        period of active duty [on or] after 
                        October 19, 1984; and

           *       *       *       *       *       *       *

     CHAPTER 30--ALL-VOLUNTEER FORCE EDUCATIONAL ASSISTANCE PROGRAM

                   SUBCHAPTER I--PURPOSES; DEFINITIONS

Sec.
     * * * * * * *
[3014A.    Accelerated payment of basic educational assistance for 
          education leading to employment in high technology industry.]
3014A.    Accelerated payment of basic educational assistance for 
          education leading to employment in high technology occupation 
          in high technology industry.
     * * * * * * *

[Sec. 3014A. Accelerated payment of basic educational assistance for 
                    education leading to employment in high technology 
                    industry]

Sec. 3014A. Accelerated payment of basic educational assistance for 
                    education leading to employment in high technology 
                    occupation in high technology industry

           *       *       *       *       *       *       *

  (b) An individual described in this subsection is an 
individual who is--
          (1) enrolled in an approved program of education that 
        leads to [employment in a high technology industry] 
        employment in a high technology occupation in a high 
        technology industry (as determined pursuant to 
        regulations prescribed by the Secretary); and

           *       *       *       *       *       *       *

Sec. 3035. Allocation of administration and of program costs

           *       *       *       *       *       *       *

  (b)(1) Except to the extent provided in [paragraphs (2) and 
(3) of this subsection,] paragraphs (2), (3), and (4), payments 
for entitlement earned under subchapter II of this chapter 
shall be made from funds appropriated to, or otherwise 
available to, the Department of Veterans Affairs for the 
payment of readjustment benefits and from transfers from the 
Post-Vietnam Era Veterans Education Account pursuant to section 
3232(b)(2)(B) of this title.

           *       *       *       *       *       *       *

  (4) Payments attributable to the increased usage of benefits 
as a result of transfers of entitlement to basic educational 
assistance under section 3020 of this title shall be made from 
the Department of Defense Educations Benefits Fund established 
under section 2006 of title 10 or from appropriations made to 
the Department of Transportation, as appropriate.

           *       *       *       *       *       *       *

Sec. 3232. Duration; limitations

           *       *       *       *       *       *       *

  (c)(1) Subject to paragraph (3), the amount of educational 
assistance payable under this chapter for [a licensing] a 
particular licensing or certification test described in section 
3452(b) of this title is the lesser of $2,000 or the fee 
charged for the test.

           *       *       *       *       *       *       *

Sec. 3512. Periods of eligibility

  (a) * * *

           *       *       *       *       *       *       *

          (3) if the Secretary first finds that the parent from 
        whom eligibility is derived has a service-connected 
        total disability permanent in nature, or if the death 
        of the parent from whom eligibility is derived occurs, 
        after the eligible person's eighteenth birthday but 
        before the person's twenty-sixth birthday, then (unless 
        [paragraph (4)] paragraph (4) or (5) applies) such 
        period shall end 8 years after the date that is elected 
        by that person to be the beginning date of entitlement 
        under section 3511 of this title or subchapter V of 
        this chapter if--

           *       *       *       *       *       *       *

          (4) if the person otherwise eligible under paragraph 
        (3) fails to elect a beginning date of entitlement in 
        accordance with that paragraph, the beginning date of 
        the person's entitlement shall be the date of the 
        Secretary's decision that the parent has a service-
        connected total disability permanent in nature, or that 
        the parent's death was service-connected, whichever is 
        applicable;
          [(4)] (5) if the person serves on duty with the Armed 
        Forces as an eligible person after the person's 
        eighteenth birthday but before the person's twenty-
        sixth birthday, then such period shall end 8 years 
        after the person's first discharge or release from such 
        duty with the Armed Forces (excluding from such 8 years 
        all periods during which the eligible person served on 
        active duty before August 1, 1962, pursuant to (A) a 
        call or order thereto issued to the person as a Reserve 
        after July 30, 1961, or (B) an extension of enlistment, 
        appointment, or period of duty with the Armed Forces 
        pursuant to section 2 of Public Law 87-117); however, 
        in no event shall such period be extended beyond the 
        person's thirty-first birthday by reason of this 
        paragraph;
          [(5)] (6) if the person becomes eligible by reason of 
        the provisions of section 3501(a)(1)(A)(iii) of this 
        title after the person's eighteenth birthday but before 
        the person's twenty-sixth birthday, then (unless 
        [paragraph (4)] paragraph (5) applies) such period 
        shall end eight years after the date on which the 
        person becomes eligible by reason of such provisions, 
        but in no event shall such period be extended beyond 
        the person's thirty-first birthday by reason of this 
        clause;
          [(6)] (7)(A) if such person is enrolled in an 
        educational institution regularly operated on the 
        quarter or semester system and such period ends during 
        a quarter or semester, such period shall be extended to 
        the end of the quarter or semester; or

           *       *       *       *       *       *       *

          [(7)] (8) if the person is pursuing a preparatory 
        course described in section 3002(3)(B) of this title, 
        such period may begin on the date that is the first day 
        of such course pursuit, notwithstanding that such date 
        may be before the person's eighteenth birthday, except 
        that in no case may such person be afforded educational 
        assistance under this chapter for pursuit of secondary 
        schooling unless such course pursuit would otherwise be 
        authorized under this subsection.

           *       *       *       *       *       *       *

Sec. 3674. Reimbursement of expenses

  (a)(1) * * *
  (4) The total amount made available under this section for 
any fiscal year may not exceed $13,000,000 or, for each of 
[fiscal years 2001 and 2002, $14,000,000] fiscal years 2003, 
2004, and 2005, $18,000,000. For any fiscal year in which the 
total amount that would be made available under this section 
would exceed the amount applicable to that fiscal year under 
the preceding sentence except for the provisions of this 
paragraph, the Secretary shall provide that each agency shall 
receive the same percentage of the amount applicable to that 
fiscal year under the preceding sentence as the agency would 
have received of the total amount that would have been made 
available without the limitation of this paragraph.

           *       *       *       *       *       *       *

Sec. 3689. Approval requirements for licensing and certification 
                    testing

           *       *       *       *       *       *       *

  (b) Requirements for Tests.--(1) Subject to paragraph (2), a 
licensing or certification test is approved for purposes of 
this section only if--

           *       *       *       *       *       *       *

          (B) the Secretary determines that the test is 
        generally accepted, in accordance with relevant 
        government, business, or industry standards, employment 
        policies, or hiring practices, and with such other 
        standards as the Secretary may prescribe, as attesting 
        to a level of knowledge or skill required to qualify to 
        enter into, maintain, or advance in employment in a 
        predetermined and identified vocation or profession.

           *       *       *       *       *       *       *

  (c) Requirements for Organizations or Entities Offering 
Tests.--(1) Each organization or entity that is not an entity 
of the United States, a State, or political subdivision of a 
State, that offers a licensing or certification test for which 
payment may be made under chapter 30, 32, 34, or 35 of this 
title and that meets the following requirements, shall be 
approved by the Secretary to offer such test:
          (A) The organization or entity certifies to the 
        Secretary that the licensing or certification test 
        offered by the organization or entity is generally 
        accepted, in accordance with relevant government, 
        business, or industry standards, employment policies, 
        or hiring practices, and with such other standards as 
        the Secretary may prescribe, as attesting to a level of 
        knowledge or skill required to qualify to enter into, 
        maintain, or advance in employment in a predetermined 
        and identified vocation or profession.
          (B) The organization or entity is licensed, 
        chartered, or incorporated in a State and has offered 
        [the test] such test, or a test to certify or license 
        in a similar or related occupation, for a minimum of 
        two years before the date on which the organization or 
        entity first submits to the Secretary an application 
        for approval under this section.

           *       *       *       *       *       *       *

Sec. 3707. Adjustable rate mortgages

  (a) The Secretary shall carry out a demonstration project 
under this section [during fiscal years 1993, 1994, and 1995] 
through fiscal year 2005 for the purpose of guaranteeing loans 
in a manner similar to the manner in which the Secretary of 
Housing and Urban Development insures adjustable rate mortgages 
under section 251 of the National Housing Act.
  (b) [Interest rate adjustment provisions] Except as provided 
in subsection (c)(1), interest rate adjustment provisions of a 
mortgage guaranteed under this section shall--
  (c) Adjustable rate mortgages that are guaranteed under this 
section shall include adjustable rate mortgages (commonly 
referred to as ``hybrid adjustable rate mortgages'') having 
interest rate adjustment provisions that--
          (1) are not subject to subsection (b)(1);
          (2) specify an initial rate of interest that is fixed 
        for a period of not less than the first three years of 
        the mortgage term;
          (3) provide for an initial adjustment in the rate of 
        interest by the mortgagee at the end of the period 
        described in paragraph (2); and
          (4) comply in such initial adjustment, and any 
        subsequent adjustment, with paragraphs (2) through (4) 
        of subsection (b).
  [(c)] (d) The Secretary shall promulgate underwriting 
standards for loans guaranteed under this section, taking into 
account--

           *       *       *       *       *       *       *

  [(d)] (e) The Secretary shall require that the mortgagee make 
available to the mortgagor, at the time of loan application, a 
written explanation of the features of the adjustable rate 
mortgage, including a hypothetical payment schedule that 
displays the maximum potential increases in monthly payments to 
the mortgagor over the first five years of the mortgage term.

           *       *       *       *       *       *       *

Sec. 5301. Nonassignability and exempt status of benefits

  (a)(1) Payments of benefits due or to become due under any 
law administered by the Secretary shall not be assignable 
except to the extent specifically authorized by law, and such 
payments made to, or on account of, a beneficiary shall be 
exempt from taxation, shall be exempt from the claim of 
creditors, and shall not be liable to attachment, levy, or 
seizure by or under any legal or equitable process whatever, 
either before or after receipt by the beneficiary. The 
preceding sentence shall not apply to claims of the United 
States arising under such laws nor shall the exemption therein 
contained as to taxation extend to any property purchased in 
part or wholly out of such payments. The provisions of this 
section shall not be construed to prohibit the assignment of 
insurance otherwise authorized under chapter 19 of this title, 
or of servicemen's indemnity.
  (2) For the purposes of this subsection, in any case where a 
payee of an educational assistance allowance has designated the 
address of an attorney-in-fact as the payee's address for the 
purpose of receiving a benefit check and has also executed a 
power of attorney giving the attorney-in-fact authority to 
negotiate such benefit check, such action shall be deemed to be 
an assignment and is prohibited.
  (3)(A) For purposes of this subsection, in any case where a 
beneficiary entitled to compensation, pension, or dependency 
and indemnity compensation enters into an agreement with 
another person under which agreement such other person acquires 
for consideration the right to receive payment of such 
compensation, pension, or dependency and indemnity 
compensation, as the case may be, whether by payment from the 
beneficiary to such other person, deposit into an account from 
which such other person may make withdrawals, or otherwise, 
such agreement shall be deemed to be an assignment and is 
prohibited.
  (B) Any agreement or arrangement for collateral for security 
for an agreement that is prohibited under subparagraph (A) is 
also prohibited.
  (C)(i) Any person who enters into an agreement that is 
prohibited under subparagraph (A), or an agreement or 
arrangement that is prohibited under subparagraph (B), shall be 
fined under title 18, imprisoned for not more than one year, or 
both.
  (ii) This subparagraph does not apply to a beneficiary with 
respect to compensation, pension, or dependency and indemnity 
compensation to which the beneficiary is entitled under a law 
administered by the Secretary.

           *       *       *       *       *       *       *

Sec. 5317. Use of income information from other agencies: notice and 
                    verification

           *       *       *       *       *       *       *

  (g) The authority of the Secretary to obtain information from 
the Secretary of the Treasury or the Secretary of Health and 
Human Services under section 6103(l)(7)(D)(viii) of the 
Internal Revenue Code of 1986 expires on [September 30, 2008] 
September 30, 2011.

           *       *       *       *       *       *       *

Sec. 7261. Scope of review

  (a) In any action brought under [this chapter] section 
7252(a) of this title, the Court of Appeals for Veterans 
Claims, to the extent necessary to its decision and when 
presented, shall--

           *       *       *       *       *       *       *

          (4) in the case of a finding of material fact made in 
        reaching a decision in a case before the Department 
        with respect to benefits under laws administered by the 
        Secretary, hold unlawful and set aside or reverse such 
        finding [if the finding is clearly erroneous] if the 
        finding is adverse to the claimant and the Court 
        determines that the finding is unsupported by 
        substantial evidence of record, taking into account the 
        Secretary's application of section 5107(b) of this 
        title.

           *       *       *       *       *       *       *

  (e)(1) In making a determination on a finding of material 
fact under subsection (a)(4), the Court shall review the record 
of proceedings before the Secretary and the Board of Veterans' 
Appeals pursuant to section 7252(b) of this title.
  (2) A determination on a finding of material fact under 
subsection (a)(4) shall specify the evidence or material on 
which the Court relied in making such determination.

           *       *       *       *       *       *       *

Sec. 7292. Review by United States Court of Appeals for the Federal 
                    Circuit

  (a) After a decision of the United States Court of Appeals 
for Veterans Claims is entered in a case, any party to the case 
may obtain a review of the decision with respect to the 
validity of a decision of the Court on a rule of law or of any 
statute or regulation (other than a refusal to review the 
schedule of ratings for disabilities adopted under section 1155 
of this title) or any interpretation thereof (other than a 
determination as to a factual matter) that was relied on by the 
Court in making the decision. Such a review shall be obtained 
by filing a notice of appeal with the Court of Appeals for 
Veterans Claims within the time and in the manner prescribed 
for appeal to United States courts of appeals for United States 
district courts.

           *       *       *       *       *       *       *

  (c) The United States Court of Appeals for the Federal 
Circuit shall have exclusive jurisdiction to review and decide 
any challenge to the validity of a decision of the Court of 
Appeals for Veterans Claims on a rule of law or of any statute 
or regulation or any interpretation thereof brought under this 
section, and to interpret constitutional and statutory 
provisions, to the extent presented and necessary to a 
decision. The judgment of [such court] the Court of Appeals for 
the Federal Circuit shall be final subject to review by the 
Supreme Court upon certiorari, in the manner provided in 
section 1254 of title 28.

           *       *       *       *       *       *       *

            SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940

                OCT. 17, 1940, CH. 888, 54 STAT. 1178

           *       *       *       *       *       *       *

Sec. 511. Definitions

  (1) The term ``person in the military service'', the term 
``persons in military service'', and the term ``persons in the 
military service of the United States'', as used in this Act 
(sections 501 to 593 of this Appendix), shall include the 
following persons and not other: All members of the Army of the 
United States, the United States Navy, the Marine Corps, the 
Air Force, the Coast Guard, [and all] all officers of the 
Public Health Service detailed by proper authority for duty 
either with the Army or the Navy, and shall include service of 
the National Guard, pursuant to a call or order to duty by the 
Governor of a State, upon the request of a Federal law 
enforcement agency and with the concurrence of the Secretary of 
Defense, to perform full-time duty under section 502(f) of 
title 32, United States Code, for purposes of carrying out 
homeland security activities. The term ``military service'', as 
used in this Act (said sections), shall signify Federal service 
on active duty with any branch of service heretofore referred 
to or mentioned as well as training or education under the 
supervision of the United States preliminary to induction into 
the military service. The terms ``active service'' or ``active 
duty'' shall include the period during which a person in 
military service is absent from duty on account of sickness, 
wounds, leave, or other lawful cause.

           *       *       *       *       *       *       *

                      TITLE 26--UNITED STATES CODE

           *       *       *       *       *       *       *

Sec. 6103. Confidentiality and disclosure of returns and return 
                    information

           *       *       *       *       *       *       *

  (l) Disclosure of returns and return information for purposes 
other than tax administration

           *       *       *       *       *       *       *

          (7) Disclosure upon request of information relating 
        to terrorist activities, etc.--
                  (E) Termination.--No disclosure may be made 
                under this paragraph after [December 31, 2003] 
                September 30, 2011.

                                  
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