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53–801—PDF 2007

S. HRG. 110–964

OVERSIGHT OF GOVERNMENT TAX POLICY

IN FARM COUNTRY

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JULY 24, 2007

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

DEBBIE STABENOW, Michigan

MARIA CANTWELL, Washington

KEN SALAZAR, Colorado

CHUCK GRASSLEY, Iowa

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

PAT ROBERTS, Kansas

JOHN ENSIGN, Nevada

RUSSELL SULLIVAN, Staff Director

KOLAN DAVIS, Republican Staff Director and Chief Counsel

(II)

(III)

C O N T E N T S

OPENING STATEMENTS

Page

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee

on Finance ............................................................................................................ 1

Grassley, Hon. Chuck, a U.S. Senator from Iowa ................................................. 12

WITNESSES

Buis, Tom, president, National Farmers Union, Washington, DC ...................... 3

Fankhauser, Terrance R., executive committee member, National Cattlemen’s

Beef Association; and vice president, Colorado Cattlemen’s Association, Arvada, CO ............................................................................................................... 4

Siskin, Alison, Ph.D., specialist in immigration policy, Domestic Social Policy

Division, Congressional Research Service, Washington, DC ............................ 6

Shames, Lisa, Director, Natural Resources and Environment, Government

Accountability Office, Washington, DC .............................................................. 8

Keppy, Glen, Associate Administrator, Farm Programs, Department of Agriculture, Farm Service Agency, Washington, DC; accompanied by John Johnson, Deputy Administrator, Farm Programs, Department of Agriculture,

Farm Service Agency, Washington, DC ............................................................. 9

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

Opening statement ........................................................................................... 1

Buis, Tom:

Testimony .......................................................................................................... 3

Prepared statement .......................................................................................... 31

Bunning, Hon. Jim:

Prepared statement .......................................................................................... 35

Cantwell, Hon. Maria:

Prepared statement .......................................................................................... 36

Dorgan, Hon. Byron:

Prepared statement .......................................................................................... 37

Fankhauser, Terrance R.:

Testimony .......................................................................................................... 4

Prepared statement .......................................................................................... 39

Grassley, Hon. Chuck:

Opening statement ........................................................................................... 12

‘‘Farm Bill Moving to House Rules Panel After Other Committees Find

$6.5 Billion,’’ article from the Daily Report for Executives, by Derrick

Cain, July 24, 2007 ....................................................................................... 46

Keppy, Glen:

Testimony .......................................................................................................... 9

Prepared statement .......................................................................................... 48

Shames, Lisa:

Testimony .......................................................................................................... 8

Prepared statement with attachment ............................................................. 52

Siskin, Alison, Ph.D.:

Testimony .......................................................................................................... 6

Prepared statement with attachment ............................................................. 65

COMMUNICATION

American Farm Bureau Federation ....................................................................... 79

(1)

OVERSIGHT OF GOVERNMENT TAX POLICY

IN FARM COUNTRY

TUESDAY, JULY 24, 2007

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC.

The hearing was convened, pursuant to notice, at 10 a.m., in

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus

(chairman of the committee) presiding.

Present: Senators Lincoln, Stabenow, Salazar, Grassley, and Roberts.

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. The hearing will come to order.

President Eisenhower once said, ‘‘Farming looks mighty easy

when your plow is a pencil and you’re 1,000 miles away from the

cornfield.’’

President Eisenhower was responding to critics of his program to

provide price supports for struggling farmers. Having grown up in

Kansas farm country, Eisenhower appreciated the vital and difficult work that farmers do to keep food on America’s table.

Today’s hearing will look at government tax policy in farm country. Agriculture is vital to my home State’s economy and heritage.

It is a financial engine that drives Montana’s economy, and that is

why I am dedicated to ensuring that our farm policies and tax system work for our farmers and for our ranchers.

We do not have farm programs to make farmers rich, that is for

sure. We have farm programs to provide a safety net when disaster

strikes. Whether it is spring frost, a mid-summer hail storm, or the

timely rain that never arrives, all farmers suffer disasters. In agriculture it is not a matter of if, but when.

Earlier this year, Congress passed another ad hoc disaster assistance package, but for some farmers it was too little, too late. Producers still did not have any money from disasters 2 years ago. For

some producers who had a disaster in the spring of 2005, payment

may not come until early 2008. What type of a safety net kicks in

nearly 3 years after a disaster?

Today we will hear testimony about the importance of providing

permanent agriculture disaster relief. Last year in the Pensions

Protection Act, I was proud to include an enhanced deduction for

charitable contributions for conservation purposes.

Under that provision, farmers and ranchers can deduct up to 100

percent of their adjusted gross income for donations of conservation

2

easements. This year, I introduced legislation to make this enhanced deduction permanent.

This year I also co-sponsored the Endangered Species Act of

2007, along with Senators Crapo, Lincoln, Grassley, and other

members of this committee. This bill would create new tax credits

and deductions for taxpayers who take measures to aid in the recovery of species that are listed as either threatened or endangered

under the Endangered Species Act.

Conservation is important, and these bills will help farmers and

ranchers to protect America’s land and wildlife. That is why we

will also look at other popular conservation programs today, including the Conservation Reserve Program, Grassland Reserve Program, and Wetlands Reserve Program.

Through the Conservation Reserve Program, otherwise known as

CRP, farmers can receive help creating long-term resourceconserving habitats on eligible farmland. Questions have arisen

about the proper tax treatment of CR payments, so today we will

also hear testimony about this important program.

And we will also hear about Social Security payroll tax exemptions for certain visas. Currently, holders of several types of visas

can work without paying any Social Security payroll tax. Additionally, the employers of these workers do not have to pay the employer’s share of the Social Security payroll tax. The visa holders involved include temporary agricultural workers, foreign students, au

pairs, and cultural exchange visitors.

One of the fundamental principles of Social Security is that all

workers contribute throughout their careers. Over the years, Social

Security coverage has expanded to include agriculture workers,

self-employed individuals, and clergy. Social Security is stronger

when more workers contribute. Why should these particular types

of workers be exempted?

I am also concerned that some foreign workers in these visa categories may have an unfair advantage getting jobs. I want to better

understand if these exemptions are still necessary, and I want to

explore whether the current policy makes sense.

Sometimes government looks like it is more than 1,000 miles

away from the cornfield, and sometimes government policy looks as

much like common sense as a pencil looks like a plow. Today we

will dig into the facts and try to figure out what the best policy

should be.

I would now like to introduce the panel. First, to my left we have

Tom Buis, president of the National Farmers Union; next, Terry

Fankhauser of the National Cattlemen’s Beef Association. Thank

you, Mr. Fankhauser, for being here. Next, we have Alison Siskin

from the Congressional Research Service; then Lisa Shames from

the Government Accountability Office; Glen Keppy from the Department of Agriculture, Farm Service Agency; and finally, John

Johnson from the Department of Agriculture, Farm Service Agency.

He is not here to deliver a statement, but is here to answer questions. Thanks very much.

All right. I will begin with you, Mr. Buis.

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STATEMENT OF TOM BUIS, PRESIDENT,

NATIONAL FARMERS UNION, WASHINGTON, DC

Mr. BUIS. Thank you, Mr. Chairman. I commend you for your

outstanding efforts on addressing tax issues in rural America. I

also commend you for using that President Eisenhower quote, because in my experience the real answers to the challenges we face

in rural America lie with the people who work there, live there,

and raise their families there.

For that reason, this past year we conducted over 15 farm bill

listening sessions around the country. By and large, the farmers

and ranchers were pleased with the safety net of the 2002 farm

bill, except for disaster. The lack of a permanent disaster program

has affected producers all over the country numerous times, and

some areas repeatedly for several years, including many areas in

the plains States and in the mountain States.

We felt all along that, if we could make one significant improvement in this next farm bill, it would be to include a permanent disaster program. Congress has approved, since 1998, 23 ad hoc disaster bills, totaling $47 billion. But they do not occur just by magic,

as you know, because you have been an outstanding supporter in

providing that assistance.

It takes a strong enough political will in Congress before the assistance is passed. Oftentimes, producers are in a smaller area

where they suffered disaster, several counties or maybe one State,

but overall there is not the political support to pass an ad hoc disaster program, as we have experienced over the past 3 years in

how difficult it was to get losses covered for the 2005 crop year, the

2006 crop year, and the 2007 crop year, which started off with numerous weather-related disasters occurring, from blizzards to

floods. We are in a drought in many areas of the country right now.

In fact, in 2005, 80 percent of the counties nationwide were declared a Federal disaster area. In 2006, over 60 percent. As I mentioned, with the blizzards, the floods, the droughts that are ongoing

this year, one way or another we are going to have to address disaster.

To us, our highest priority is, let us set up a permanent program.

Let us set up a permanent program so we do not have to wait for

the assistance once it is forthcoming from Congress.

As you mentioned, in 2005 a producer who lost their crop may

be lucky to get any assistance until 2008, because, every time, the

Department of Agriculture has to go back and write new rules. If

we had a permanent program in place, once the assistance is available it could be delivered in a timely manner.

The second thing, and it is often mentioned, well, you have risk

management programs. Why is that not sufficient? Well, I think it

has to be put into perspective. Risk management programs only

protect a part of your risk.

I think the average amount of crop insurance purchased is a 65-

percent level, so when a disaster occurs that means a farmer or

rancher has to take a 35-percent out-of-pocket loss before they get

assistance.

Now, some would say, well, that is part of the risk of farming.

But when you consider it is an industry where your average rate

of return is 2.5 percent, that 35 percent creates a pretty big finanVerDate 11-MAY-2000 15:43 Jan 05, 2010 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 53801.000 SFIN1 PsN: SFIN1
4

cial hole that, if you get in an area where you have 3, 4, 5 years

of drought, it is almost impossible to get out of.

So we think number one would be to give more certainty to producers, number two, deliver it in a timely manner, and number

three, clean up any abuses or fraud. When you are trying to get

enough political support to get a package passed, sometimes things

get in there that later you wish probably had not. I think a permanent program addresses that.

The House farm bill, which has passed the House Agriculture

Committee and is going to be on the floor this week, does contain

authorization for a permanent disaster program, but it does not

contain any funding. And one of the problems with the funding, as

you are well aware, is we are trying to write a farm bill with a

budget baseline that is significantly less than what we had 5 years

ago in 2002.

So, there are just not available resources out of existing programs to pay for it. We would urge your support in helping America’s farmers and ranchers create a permanent program. Give them

a helping hand, not a hand-out.

The CHAIRMAN. Thank you very much, Mr. Buis.

I neglected to say that all of your statements would automatically be in the record, and I would encourage each of you to speak

about 5 minutes.

[The prepared statement of Mr. Buis appears in the appendix.]

The CHAIRMAN. All right. Mr. Fankhauser, welcome.

Mr. FANKHAUSER. Thank you.

The CHAIRMAN. You are up next.

STATEMENT OF TERRANCE R. FANKHAUSER, EXECUTIVE

COMMITTEE MEMBER, NATIONAL CATTLEMEN’S BEEF ASSOCIATION; AND VICE PRESIDENT, COLORADO CATTLEMEN’S

ASSOCIATION, ARVADA, CO

Mr. FANKHAUSER. Thank you. Good morning. My name is Terry

Fankhauser. I am the executive vice president of the Colorado

Cattlemen’s Association and a member of the executive committee

for the National Cattlemen’s Beef Association.

Thank you, Chairman Baucus and Ranking Member Grassley,

for this opportunity to testify on the importance of our Nation’s

grasslands and the need for permanent disaster programs in our

country.

America’s ranch lands have long played a role in supporting the

Nation’s scenic beauty, wildlife, habitat, and economy. They also

support, as we all know, many cattle grazing operations. They preserve water quality and quantity, and contribute significantly to

our Nation’s food supply.

It is no surprise that NCBA is a supporter of working lands, as

is the Colorado Cattlemen’s Association. We also support voluntary

conservation programs, which allow producers to meet conservation

goals, as well as the growing regulations that they face.

Many of our members have been on the land for generations and

want their children and grandchildren to have that opportunity as

well. Our ranches and grasslands keep open spaces open. Our producers, their families, and communities keep rural America rural.

Everyone in the cattle industry is striving to keep on-farm jobs on

5

the farm. As you know, that is one of the biggest issues we face

in this industry.

We need to keep our grasslands and ranch lands intact. We need

tools like the Grasslands Reserve Program and the Farm and

Ranch Protection Program to help producers on the land and in

this business. NCBA and CCA support continued funding for GRP

to help conserve our Nation’s working grasslands in the 2007 farm

bill.

NCBA is also seeking a number of programmatic changes to

make GRP more landowner-friendly. We continue to look forward

to working with the Agriculture Committee on those, such as allowing private land trusts to hold easements, using those private land

trust templates for easements, and allowing transfer of those easements to other private land trusts.

Regarding another important conservation issue, in 2006 Congress changed the tax incentive for voluntary easement donations—

donations for private land owners that require development rights

to protect significant wildlife, scenic, and historic resources. That

change enabled family farmers, ranchers, and other moderateincome landowners to get a significant tax credit for such donations, which was not possible under previous law.

Thank you, Chairman Baucus and Ranking Member Grassley,

for introducing legislation to make this 2006 incentive a permanent

part of the tax law. We look forward to seeing S. 469 moved

through the Finance Committee and be enacted permanently in

law. It is a significant tool for Colorado ranchers.

Shifting focus a bit, one issue that constantly lingers that is a

concern to all agriculture producers is the devastating blows that

Mother Nature can deal in the form of unexpected weather conditions such as hurricane, wildfire, tornado, blizzards, floods, and

even prolonged drought.

Colorado has experienced two of those, ironically, at opposite parallels in the last 8 years. Due to the nature of agricultural production, farmers and ranchers are uniquely vulnerable to these natural disasters, and over the years livestock producers have suffered

tremendous losses as a result of that.

Before getting into the issue of disaster assistance programs,

though, I would like to thank those members of the committee who

played an instrumental role in bringing about an alteration to section 1033(e), which provides for deferment of proceeds due to

weather-related sales of livestock.

Back to disaster assistance programs. Over the past several

years, Congress has moved to pass disaster assistance on an ad hoc

basis in an effort to help those impacted by these events. It has become abundantly clear to us, though, across the West, across the

United States that these touch-and-go systems for addressing disaster are no longer an effective or viable means of providing timely

aid to those in need, and I will emphasize the word ‘‘timely.’’

Member-driven policy within CCA supports pursuing adequate

funding for livestock assistance programs to aid producers adversely impacted by these conditions, and calls for the Secretary of

Agriculture to be allowed the authority to quickly obtain funding

sufficient to swiftly implement livestock disaster assistance.

6

With this in mind, cattle producers would urge the construction

of permanent disaster assistance programs that include three particular FSA programs: the Livestock Indemnity, Livestock Compensation, and Emergency Conservation Programs.

Cattle producers firmly believe that, in implementing any disaster assistance program, the distribution of those funds should be

directed to only—and I emphasize only—those producers directly

impacted by disaster conditions.

Additional eligibility criteria for all livestock assistance and compensation programs should be based on livestock and/or forage production losses, and these losses should be the foundation of funding

distribution.

Thank you again for allowing me this opportunity to share our

views on these important issues.

The CHAIRMAN. Thank you, Mr. Fankhauser, very much.

[The prepared statement of Mr. Fankhauser appears in the appendix.]

The CHAIRMAN. Dr. Siskin?

STATEMENT OF ALISON SISKIN, Ph.D., SPECIALIST IN IMMIGRATION POLICY, DOMESTIC SOCIAL POLICY DIVISION,

CONGRESSIONAL RESEARCH SERVICE, WASHINGTON, DC

Dr. SISKIN. Thank you, Chairman Baucus, Ranking Member

Grassley, and distinguished members of the committee, for the invitation to appear before you today to speak about the visa categories which are exempt from the Social Security component of

the FICA tax. I am Alison Siskin, a specialist in immigration policy

at the Congressional Research Service.

There are six non-immigrant visa categories which, by statute,

are not covered by Social Security. They are: the H–2A, temporary

agricultural workers; F–1, academic students; M–1, vocational students; J–1, exchange visitors; Q–1, cultural exchange visitors; and

Q–2, Irish peace process cultural exchange visitors.

The first category which I will discuss is the H–2A temporary agricultural visa category. The H–2A program allows for the admission of foreign workers to perform seasonal agricultural work. Employers must pay their H–2A workers the same wages as U.S.

workers and must provide workers with housing, transportation,

and other benefits.

In fiscal year 2006, approximately 37,000 H–2A visas were

issued. The H–2A program, however, remains small relative to the

total hired farm employment, which was about 1.1 million in fiscal

year 2005.

Under current law, work performed by foreign agricultural workers is not subject to FICA taxation. Prior to 1956, the FICA tax exclusion for foreign agricultural workers applied only to services performed by workers from the Bahamas, Jamaica, and other British

West Indies and to contract workers from Mexico hired in accordance with the Agricultural Act of 1949.

The FICA tax exemption for the Mexican workers was included

as part of the Agricultural Act amendments of 1951. The Senate report for this bill indicated that Congress exempted these employees

because, due to the relatively short period of time that the workers

7

would work for a single employer, very few of them would be subject to the Social Security contributions.

Interestingly, the minority view against the exemption expressed

concern that the exclusion of the Mexican workers from the insurance program could result in the hiring of such workers in preference to Americans, since their employers would have a competitive advantage of not paying Social Security contributions.

In addition, they noted that since its enactment the Social Security insurance program had covered individuals in specific types of

jobs without regard to nationality, and the social insurance systems

in a number of foreign countries did not discriminate against U.S.

nationals performing services in covered employment.

The Social Security amendments of 1956 extended the FICA tax

exclusion of agricultural workers to foreign workers admitted to

perform agricultural labor from any foreign country. According to

the Senate report for the 1956 amendments, the exemption was extended because the committee had previously recognized the undesirability of covering foreign agricultural workers who only served

temporarily in the United States.

I would now like to turn to the FICA exemption for foreign students and exchange visitor visas. Of the three visa categories used

by foreign students, the F and M visa categories are solely for foreign students, while the J visa category is more varied and includes aliens in diverse cultural exchange programs such as foreign

medical graduates, Fulbright scholars, international visitors, and

au pairs.

The Q visa categories are for specific types of cultural exchanges,

which include training and employment. In fiscal year 2006, the

Department of State issued approximately 310,000 J visas, 274,000

F visas, 7,000 M visas, and 16,000 Q visas. The Social Security Act

specifically excludes the work of F, J, and Q visa holders from covered employment.

The Mutual Educational and Cultural Exchange Act of 1961 provided the FICA exemption for F and J visa holders. The conference

report for the Act stated that the exemption for foreign students

and exchange visitors was enacted because these aliens are temporarily in the country and scarcely have any expectation of realizing

a benefit.

Notably, since 1950, the work of U.S. citizens and permanent

resident alien students employed by their schools has been exempt

from FICA taxes. The FICA tax exemption for Q visa holders was

part of the Social Security Independence and Program Improvements Act of 1994.

According to congressional records, the exemption was added so

that Q visa holders would be treated the same as J visa holders.

When the Q–2 visa category was created in 1998, it was covered

under the existing provisions exempting Q visa holders. Congressional records were silent on whether the Q–2 visa holder exemption was intentional.

I would like to conclude by discussing an estimate from the actuaries at the Social Security Administration, SSA, on the financial

effects to the Social Security trust fund of covering the earnings of

the aliens in these six visa categories.

8

The actuaries found that extending Social Security coverage to

aliens in the currently exempt visa categories would, in 2008, increase the number of covered workers by approximately 174,000,

primarily J–1 visa holders, and increase payroll tax revenue by approximately $521 million.

Over a 10-year period, SSA estimates that removing the FICA

exemption for these visa categories would increase Social Security

payroll tax revenues by $6.9 billion, as few of these workers would

qualify for Social Security benefits.

Thank you again for the opportunity to speak here today, and I

look forward to your questions.

The CHAIRMAN. Thank you very much, Dr. Siskin.

[The prepared statement of Dr. Siskin appears in the appendix.]

The CHAIRMAN. Ms. Shames?

STATEMENT OF LISA SHAMES, DIRECTOR, NATURAL RESOURCES AND ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, DC

Ms. SHAMES. Yes. Thank you. Chairman Baucus, Ranking Member Grassley, and members of the committee, I am pleased to be

here today to discuss the U.S. Department of Agriculture’s actions

to prevent improper payments to estates and deceased individuals.

Farmers receive about $20 billion annually in farm program payments. The magnitude of these payments, along with our work

showing ineffective enforcement, is why enhanced oversight is

needed.

I would like to discuss the two key findings of our just-released

reports. First, we found that USDA does not systematically determine whether an estate is eligible to receive farm program payments. As a result, USDA does not know if these estates are kept

open for the primary purpose of receiving such payments.

Second, we found that USDA paid $1.1 billion to over 172,000 deceased individuals from 1999 to 2005, the period our review covers.

USDA cannot be assured that these payments are proper because

it lacks essential management controls.

First, regarding payments to estates, USDA’s Farm Service

Agency paid over $200 million to nearly 42,000 estates. There are

many legitimate reasons for keeping an estate open, such as to distribute assets.

According to regulations, after 2 years FSA is to determine annually that an estate is still eligible to receive payments, specifically

that the heir or personal representative of the estate is actively engaged in farming, and that the estate is not being kept open for

the primary purpose of receiving payments. Farming operations are

to certify that the information they provide is accurate.

However, we found that FSA does not systematically determine

whether these estates are eligible. Over three-fourths of the estates

in our sample did not receive all of the required annual determinations. In fact, the longer an estate was kept open, the less likely

it was to receive the required determinations.

Even when FSA conducted some or all of the required determinations, we found shortcomings. FSA approved payments with limited

information. In numerous cases we found only a statement that the

9

estate was remaining open upon the advice of lawyers and accountants, with no further explanation.

Also, FSA approved payments to groups of estates without an individual review. In one case, minutes of an FSA County Committee

meeting indicated approval of a group of 107 estates. FSA officials

told us the lack of sufficient personnel and time, as well as competing priorities, explains why many determinations were either

not done, or not done thoroughly. Next, regarding payments to deceased individuals, FSA paid $1.1

billion in farm program payments to over 172,000 deceased individuals. Forty percent went to individuals who had been dead for 3

or more years, 19 percent had been dead for more than 7 years. For example, FSA provided more than $400,000 to an individual

who died in 1995. The shareholder of the farming operation with

signature authority failed to notify FSA of the individual’s death,

as required as recently as 2004. FSA recognized the potential improper payments in 2006 when the deceased individual’s children

contacted the office to obtain signature authority for themselves.

The complex nature of some farming operations can increase the

potential for improper payments. Payments to deceased individuals

through entities, mostly corporations and general partnerships, accounted for 58 percent of the $1.1 billion paid to deceased individuals. In contrast, payments to all farm program recipients through

entities accounted for 27 percent. FSA lacks essential management

controls, such as a computer matching of its databases with the Social Security Administration’s Death Master File to verify that a

farming operation has failed to report the death of a member.

USDA agreed with, and has already begun to implement, our

recommendations. For example, USDA has directed its field offices

to review its open estates and has taken steps to begin to access

the Death Master File.

In conclusion, over the 7-year period covered in our review, USDA paid nearly $130 billion in farm program payments. In light

of this Nation’s current deficit and growing long-term fiscal challenge, it is critical that farm program payments are made properly,

otherwise we have little assurance that these payments go to those

who are truly engaged in farming.

Mr. Chairman, this concludes my prepared statement, and I

would be pleased to answer any questions that you or other members of the committee may have.

The CHAIRMAN. Thank you very much, Ms. Shames.

[The prepared statement of Ms. Shames appears in the appendix.]

The CHAIRMAN. Mr. Keppy?

STATEMENT OF GLEN KEPPY, ASSOCIATE ADMINISTRATOR,

FARM PROGRAMS, DEPARTMENT OF AGRICULTURE, FARM

SERVICE AGENCY, WASHINGTON, DC; ACCOMPANIED BY

JOHN JOHNSON, DEPUTY ADMINISTRATOR, FARM PROGRAMS, DEPARTMENT OF AGRICULTURE, FARM SERVICE

AGENCY, WASHINGTON, DC

Mr. KEPPY. Mr. Chairman, Ranking Member Grassley, and committee, thank you for the opportunity to appear before you to review the Department of Agriculture’s response to the GAO audit.

10

We will provide a brief overview of our county office review procedure, an update on actions taken by FSA, and additional actions

that are in the process of being implemented.

The FSA has responsibility for the administration of multiple

commodity and conservation programs under which payments are

issued to producers. Some of these programs have limitations on

the amount of payments which may be received by a person.

A ‘‘person,’’ for payment limitation purposes, may be an individual or an entity such as a corporation, or the combination of individuals and entities. For example, a corporation and a major

stockholder can be combined as one person for payment limitation

purposes.

Also, under these programs, payments may be issued well after

the payment has been earned. For an example, counter-cyclical

payments under the Direct and Counter-cyclical Payment (DCP)

program may be issued up to 2 years and 3 months after the producer has enrolled.

During the course of farming operation, participants die and estates are formed. Often, an individual may have met all eligibility

requirements to receive a program payment, but dies before the

payment is actually issued. In such instances the payment must be

issued to the taxpayer identification number of the individual who

actually earned the payment.

Estates are legal entities and may receive program payments if

they meet eligibility requirements. FSA has a longstanding policy

of requiring a review of estates that request program benefits

which are still open 2 years from the date in which the producer

died.

The purpose of this policy is to make sure that the estate is still

in existence and not being kept open for the sole purpose of receiving program payments which could otherwise not be received.

GAO recently completed the review of program payments during

the years 1999 through 2005. GAO’s objectives were to determine

the extent to which individual decedents’ estates received farm program benefits beyond the 2-year allotment of the payment eligibility rule and the extent that these estates, as members of entities, received farm program benefits beyond the 2 years allowed.

Also reviewed was the extent to which program payments were

issued to deceased individuals.

In the audit, GAO questioned the level of documentation used to

support the determination made by county committees that an estate was not kept open for the purpose of obtaining program payments. Some county committees did more comprehensive reviews

than others. In addition, FSA did not complete the reviews of active estates as diligently as required by policy.

FSA issued over $130 billion in farm program payments and benefits for the years 1999 through 2005. GAO found that, during this

period, FSA issued a significant number of farm program payments

to deceased individuals.

I want to be clear about the fact that there are legitimate circumstances under which it is legal for payments to be issued to deceased individuals. In fact, in some cases we are required to issue

such payments.

11

It is also important to note that GAO concluded that 58 percent

of the questioned farm program payments were not made to deceased individuals at all or to their estates, but rather to entities

in which they held an interest when they were alive. In other

words, more than half of the payments went to entities which we

had no reason to believe were ineligible.

GAO noted that the complex nature of some types of farming entities makes it more difficult for FSA to determine if the producer

information is accurate. GAO also pointed out that FSA is reliant

on farmer operations to self-certify that the information provided is

accurate and that the operation will timely inform FSA of any

operational change.

FSA is working on a system that will change this reliance on

self-certification. We plan to obtain information from the Social Security Administration database.

In response to the GAO report, FSA implemented several courses

of action that followed the guidance recommended by the report. As

I referenced a moment ago, FSA directives issued to the field offices in May of 2007 required the review of all active estates in existence for more than 2 years that are not receiving 2007 payments.

These reviews will be complete by August 31. All State FSA offices must have reported this information to the national office by

September 15. These reviews will be completed prior to the

issuance of final 2007 DCP and conservation CRP payments on or

about October 1.

I mentioned our efforts to coordinate with the Social Security Administration. FSA will use a data match process similar to the

process that GAO used in the audit. Data from the Social Security

Administration’s Death Master File will be compared with FSA

producer payment history files and the Service Center Information

Management System.

This will provide a means of identifying decreased producers before the issuance of payments. FSA will not be in total reliance of

the information being provided from program participants for certain changes of entities due to death.

Mr. Chairman, while GAO has identified weaknesses, FSA has

taken steps to remedy these weaknesses and to put in place additional safeguards against improper payments. As mentioned, estates and legitimate entities may be determined eligible to receive

program payments.

FSA issued directives for a thorough review of agency records for

the completion of the required reviews of estates for the program

payment eligibility. Steps have been taken with the agency information technology personnel for the linkage of information from

the Social Security Administration Death Master File with the

agency producer file to identify deceased individuals and to determine the issuance of program payments, as appropriate.

We are committed to ensure that payments are accurately calculated and properly issued. We appreciate the interests of GAO

and this committee in holding us accountable for the payments as

we administer them.

12

Mr. Chairman, thank you for the opportunity to provide this testimony. I would be happy to respond to questions of the committee

members at that time.

The CHAIRMAN. Thank you, Mr. Keppy, very, very much.

[The prepared statement of Mr. Keppy appears in the appendix.]

The CHAIRMAN. I would now like to turn to Senator Grassley, the

senior ranking member of the committee.

OPENING STATEMENT OF HON. CHUCK GRASSLEY,

A U.S. SENATOR FROM IOWA

Senator GRASSLEY. Mr. Chairman and members of the committee, I have two other obligations this morning—that is why I

was late—one with Judiciary and one with Governmental Affairs.

I want to make clear, first of all, for everybody, and I thank

Chairman Baucus for holding this hearing, that this hearing is not

about threatening Federal farm payments or tearing apart the

farm safety net. We want people who receive payments legitimately

to continue to receive those payments.

As a farmer and an Iowan, I recognize the importance of the

family farm and know firsthand the challenges that these family

farmers face. It is very important that we provide an adequate

safety net to protect family farmers in order to guarantee the food

supply for our Nation, and one that much of the world depends on.

What this hearing is about is keeping people from collecting improper payments. All of this may sound familiar to some of us, because this committee held a hearing June 16, 2004. The title of

that hearing was ‘‘Strengthening Regulations and Oversight to Better Ensure Agriculture Financing Integrity.’’ In that hearing, we

heard GAO say, ‘‘Individuals may circumvent the farm payment

limitations because of weaknesses in FSA’s regulations.’’

The concern was that large farming operators were able to circumvent payment limitations by using means such as channeling

payments to affiliated farm operations. Despite the optimism of

that 2004 hearing, better agricultural financing integrity has clearly not occurred.

In fact, you could argue that things have gotten worse. Now we

find that deceased individuals are improperly receiving farm payments. It would be more accurate to say that individuals who are

still alive are making improper use of payments and that it seems

questionable if anything is being done to stop them.

Underneath the novelty of the deceased benefitting from government programs at the expense of the living, we find the same basic

problem in that large organizations are able to circumvent payment limitations and take more than their fair share. Slick accountants are benefitting at the expense of the family farmer whom

these payments are supposed to help.

I said before that this hearing is not about threatening farm payments, but to ensure that farm programs actually help family farmers. It has been suggested that any amounts that were overpaid

are not significant, in that overpayments are a very small share of

the total amount of farm payments that have been paid out.

This sort of thinking is absolutely inexcusable. First, the Government Accountability Office testimony seems to indicate that we do

not really know the amount of improper payments that have been

13

made. Additionally, even if the improper payments do amount to

half of one percent of farm subsidies paid between 1999 and 2005,

that would amount to $650 million. Anyone who could argue that

this is not an incredibly vast sum of money has been in Washington too long.

Despite these problems with farm payments, we are now in a

strong position to take substantive action. The Finance Committee

currently shares eight members with the Agriculture Committee.

This overlap of members gives us the opportunity, as the new

farm bill is crafted, to use the expertise of this committee to solve

existing tax problems and prevent new problems before they result

in a Government Accountability Office report 10 years from now.

As we work on these problems, we must not lose sight of the

family farmers who are intended to benefit from farm payments.

Farm payments are neither corporate welfare nor subsidies for creative accountants, but should go to the people who actually work

the land and not work the tax code.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much.

Mr. Buis, I think a lot of us here want permanent agricultural

disaster assistance. The question is just how, in what form, how

much, and how should it be paid, because the current situation is

just intolerable. I mean, farmers and ranchers who suffer disasters

have to beg Congress. They are not sure when Congress is going

to act, whether Congress is going to act.

Bankers do not know when Congress is going to act. They do not

know what credit to give to farmers who want to go to farm and

seed, and so forth. It is really a very bad situation. Even when

Congress does finally pass agricultural disaster assistance, it may

just cover 1 year and not the years when there is actually disaster.

So could you help this committee a little bit by telling us what

the agricultural disaster assistance program was prior to 1996? Because I understand in 1996, Congress repealed the program.

Frankly, it would be helpful to know what the program was prior

to 1996, the degree to which it worked, whether that can give us

any guidance.

The next question is going to be, how do you propose we fund it,

and what should the level be? Some are suggesting we take the agricultural tariffs and put them into an agricultural disaster trust

fund and use the interest off of that to pay for agricultural disaster. Maybe you have to add a little principal first. I do not know.

I think only about $1 billion a year goes in.

But your thoughts. Number one, can you give us any guidance

pre-1996, what helped, what did not help in terms of what we

should be doing here now; and second, amounts and how it is funded, how you think a good permanent agricultural disaster program

might work?

Mr. BUIS. Well, early on we had a Federal disaster program that

kicked in, and it was very similar to what we currently do in ad

hoc assistance. It was based on a percentage of the loss to help

make up for shallow losses.

Over the years, as you know, Congress has stepped in to try to

help improve the risk management programs, and there have been

14

significant improvements in it without a doubt, but it still leaves

that gaping hole between what is covered and a farmer’s expenses.

So I think our preference would be that you merge the two together. You do not have to make them competing programs, because the risk management programs are beneficial.

The CHAIRMAN. So we are talking here about the so-called shallow loss. Is that correct?

Mr. BUIS. What they call the shallow loss.

The CHAIRMAN. For those who may not know, why don’t you explain ‘‘shallow loss’’?

Mr. BUIS. Sure. Well, the shallow losses are the amount that is

not covered by risk management. I think the risk management

level of protection nationwide is 65 percent. That means that the

farmer is risking 35 percent every year that is not covered.

Most of the disaster programs, again, have been based on the old

Federal formula of helping to address that shallow loss, but it does

not make anyone whole. I mean, I think that is another thing that

needs to be pointed out, Mr. Chairman. This is not going to make

it profitable, it is just going to allow them to continue on.

As far as how we fund it, we are as open as anyone on how we

can be creative. There was a lot of discussion about shifting money

out of the current safety net in the farm bill to pay for it, but we

are writing a safety net with almost 60 percent less budget authority than we had in 2002 for the commodity title, so that is really

not fair. It is probably politically impossible to do. So, the tariff

idea makes a lot of sense.

As far as the level, if you just averaged the amount that Congress has provided in ad hoc assistance over the last several years,

I think you can probably even bring it down. But I would say in

the neighborhood of $1 billion to $1.5 billion annually, given the

fact that some years you are not going to have enough and in other

years it may be too much because we cannot control or predict the

weather. But that certainty is just so key. We know we are going

to pay, whether we pay 3 years after Congress steps in and only

covers one out of the three disasters.

But eventually the political support to do something within Congress gets there. Sometimes it is quicker. In 2004 we were getting

nowhere on disaster aid, and we had three hurricanes in a month

in the State of Florida, which happened to be a key political battleground State. And guess what? Disaster assistance suddenly appeared. So that does not help that farmer out there. He has to sit

there and think, oh, gosh, I hope everyone has a disaster.

The CHAIRMAN. That is right. That is a very good point. Sometimes a lot of farmers in my neck of the woods think, gee, nobody

cares about us. Nobody knows when we have a drought. You can

easily see a hurricane or a tornado. That is on the news and gets

everybody all excited.

But a drought is kind of a silent, stealth killer. You cannot quite

see it as graphically, dramatically, but it is just as much of a disaster. Sometimes we feel, in our neck of the woods, we have to wait

until there is some big hurricane before we can get anything and

piggy-back on agricultural disaster assistance.

Mr. BUIS. If I could add one more thing. This has been part of

this debate, and it was part of our trouble in getting this last disVerDate 11-MAY-2000 15:43 Jan 05, 2010 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 53801.000 SFIN1 PsN: SFIN1
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aster program. There are some people out there—public officials,

USDA officials, administration officials—saying farmers are doing

well, farm income is up. That is true. But farmers do not farm in

the aggregate and weather does not occur in the aggregate. Just

because I have a good crop on my farm in Indiana, it does not

mean that helps anyone in Montana.

The CHAIRMAN. It is the old tyranny of the averages.

Mr. BUIS. Right.

The CHAIRMAN. Thank you very much.

Senator Grassley?

Senator GRASSLEY. I want to be transparent with my colleagues

that Mr. Keppy is a friend of mine because of farming background,

and also because of our politics. I am not going to ask you any

questions, Glen.

I am sending a letter to the Secretary that involves some of these

issues, so those will probably be my questions on what the Department of Agriculture is going to do about this. I know you have testified to some of the things that they did.

I am going to direct my first question to Lisa Shames. In your

statement and report, you cite a number of weaknesses in the U.S.

Department of Agriculture’s procedures and practices to conduct reviews of estates’ eligibility to receive farm program payments.

USDA has said that its field offices were busy with many other

responsibilities and did not have resources to conduct reviews as

required. In your view, what does USDA need to do to remedy the

problem?

Ms. SHAMES. We made several recommendations, Senator Grassley. The first was for—and I should add, as I noted in my short

statement, USDA has already begun to act on our recommendations. The first was to review all of the estates that have been open

for more than 2 years. USDA has sent out such a directive, and

Mr. Keppy has laid out the time frame for you.

We also recommended that USDA take advantage of and put in

place certain management controls. One is what we used in our

own review, and that was to match up USDA’s databases with

SSA’s Death Master File. That provided us a cross-check in terms

of who was receiving the farm program payments.

Our last, and third recommendation, was that with further examination, if USDA were to find improper payments, that it go

ahead and recover them.

Senator GRASSLEY. All right.

Also to you, in 2004 your agency documented widespread abuse

related to the requirements that recipients of farm program payments be actively engaged in farming. GAO found that the abuse

resulted from the lack of any measurable standard to determine

whether payments are being made to actual working farmers or to

participants in sham partnerships designed to avoid payment limitations.

GAO recommended, among other things, that USDA develop and

enforce measurable requirements defining a significant contribution of active personal management. Please tell us, with the delivery of today’s report, did the concerns that GAO identified in 2004

only lead to many of the problems identified in today’s report?

16

Ms. SHAMES. Yes, they do in a general sense, in that we found

in 2004 that USDA was not conducting the oversight in a timely

manner, as was required in its regulations. We also found that

USDA was not providing or looking for substantiating information

to ensure that, in fact, the program recipients were actively engaged in farming. We found that in the file review, that USDA officials did not look for bank account records and other documents

that could help ensure that the farm program recipients were eligible for it.

Senator GRASSLEY. All right.

Since I have time left, I will go to Glen. GAO recently reported

that USDA made farm program payments to estates more than 2

years after a recipient died without first determining, as required

by regulation, whether the estates were kept open primarily to receive these payments.

For example, in 1999 through 2005, USDA did not conduct any

eligibility determinations for 73, or 40 percent, of the 181 estates

that GAO reviewed. In addition, 69 of the remaining 108 estates

did not receive annual determinations for every year of payments

received. Of the remaining 39 estates, the agency generally found

problems with determinations done, such as missing or insufficient

documentation explaining reasons for keeping the estate open.

What action does USDA plan to take to ensure that its field offices are capable—emphasis upon capable—of doing the following:

(1) complete required eligibility determinations; and (2) adequately

document the reasons for continuing payments beyond 2 years

after death?

Mr. KEPPY. Thank you, Senator Grassley. With your permission,

I would like to go to a couple of questions ago. Our agency has

taken very seriously the recommendations that came out of the

GAO report, the three recommendations that you cited and have

expressed, that we are reacting to. Our agency has taken very seriously that we do review all estates that have, for more than 2

years, descendants and the management control.

Social Security. We are working diligently to try to work with the

Social Security agency to come up with a way that we can use that

information. And if there are improper payments, we do have a

plan for recovering.

To answer the question that you asked, yes, in 2007 we have

issued a notice to our county offices. A national directive was

issued that emphasizes the longstanding policy and procedures in

regard to the required review of estates older than 2 years.

We will have to make sure that we have proper documents, and

our county committees are going to have to do a better job. Some

have done a better job, but we have to make sure that all of them

do, and make sure that they get documented evidence, make sure,

if a person is in the system for more than 2 years, there is a documented trail and evidence of why it has taken place. We take very

seriously the responsibility that is given to us to make sure that

we look after the American taxpayer and their interest in this particular program.

Senator GRASSLEY. Thank you.

The CHAIRMAN. Thank you, Senator.

Senator Salazar, you are next.

17

Senator SALAZAR. Thank you very much, Chairman Baucus. Of

all of the hearings of the Finance Committee that you and Senator

Grassley have held, with all the witnesses, on everything from energy to health care, I must admit, this is a set of witnesses that

I am most comfortable with. [Laughter.] So, thank you for putting

the spotlight on ranchers and farmers in America in our Finance

Committee.

I also want to particularly welcome Terry Fankhauser, who is a

friend and the executive director of the Colorado Cattlemen’s Association. The Colorado Cattlemen’s Association, founded in 1867, is

the Nation’s oldest State cattlemen’s association. CCA was one of

the first agricultural producer groups in the country to form a conservation land trust, and I was proud to have been a part of that

effort early on some, now, 10 years ago.

And through the efforts of the Colorado Cattlemen’s Trust as of

very recent times, we now have protected about 2,000 acres of

farmland that are under conservation easements. So, I appreciate

the leadership and example of the Colorado Cattlemen’s Association.

As many of you know, I hail from a ranch and farm in the very

rural, southern part of Colorado. That farm has been in my family’s

ownership for over 150 years, ranched by the same ancestors who

came to the San Luis Valley in about 1850.

I am a firm believer that we can, and should continue to make

sure the livelihood of farming and ranching families across America

stays strong and vibrant. I have a sign in my office that I have had

there since I was first elected to public office that says ‘‘No Farms,

No Food.’’ Tom, you, Terry, and others have been to my office and

you have often seen those signs from way, way back.

It is a simple slogan, but I try to keep it in mind as I approach

agricultural policy, because it speaks to the importance of the agricultural industry and our duty to make sure it continues to be a

profitable and gainful line of work.

It is with that duty in mind that I approach my work, both on

this committee and on the Agriculture Committee. As a member of

those committees, I have been able to put my own agricultural experience to use as an advocate for our Nation’s farmers and ranchers.

With the farm bill coming up, I hope to continue to work through

my seats on these committees to craft a bill that makes sense for

our Nation’s farmers and ranchers and for our Nation’s long-term

fiscal health and our Nation’s long-term food security.

In anticipation of that bill and its importance to farmers and

ranchers, I am interested today in the issues that we are talking

about in this hearing. I am certain there will be more discussion

concerning the GAO report that highlights the USDA’s ineptness at

following its own regulations regarding deceased participants and

the commodity safety net. I think it is important for the next farm

bill to yet again direct the USDA to run efficient programs that do

not have the same gaps that we see in the regulations, as the GAO

has found.

With regard to payments of the Conservation Reserve Program,

I am a co-sponsor of S. 1155, legislation introduced by Senators

Dorgan and Brownback, and also co-sponsored by my fellow comVerDate 11-MAY-2000 15:43 Jan 05, 2010 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 53801.000 SFIN1 PsN: SFIN1
18

mittee member, Senator Roberts, that would clarify that CRP payments are rental income payments and should not be subject to

self-employment taxes.

The CRP has been a very successful program in my home State

of Colorado, and I am hopeful that this hearing will give my fellow

committee members a chance to learn more about that particular

legislation.

Additionally, when we consider the farm bill in the coming

months, it is my sincere hope that we can include permanent disaster relief in the package. It has been over a decade since we had

in place a permanent system to help producers respond to weatherrelated disasters.

In the interim, Colorado farmers and ranchers have faced calamities ranging from droughts, to blizzards, to tornadoes, and that is

the same phenomena that we see happening in many States

around the country, as you testified about, Tom.

With the strong support of the members of this committee, I hope

that Congress can finally pass the disaster assistance package and

hopefully we can get that soon.

Let me just ask a quick question. This is to Tom. You said that

we needed a disaster relief program that would be—let me ask this

to Terry. You already responded to Max. The permanent disaster relief program, you said $1 billion to $1.5 billion, is what Tom said. So, Terry, is that the amount that

you think is needed? Would you agree with Tom, number one?

Number two, what is the funding source? Where do we get the

money from? Do you agree with tariffs, the source that Senator

Baucus spoke about, or is there another source for us to be able

to fund that need?

Mr. FANKHAUSER. Thank you, Senator Salazar. Also, thank you

for your continued support of the livestock and agriculture industries.

As we have come to look at disaster assistance, one thing we realized in Colorado very clearly, when we tried to implement a private funding source during this recent blizzard, was that we could

be much more efficient at the time of a disaster than we could in

the long term—efficiency of use of money as well as lending assistance to those producers 2 and 3 years down the road.

Senator SALAZAR. I understand the policy rationale for it.

Mr. FANKHAUSER. Yes. Yes.

Senator SALAZAR. But my question is, how much money do we

need to include in that disaster fund, and where do we get the

money from?

Mr. FANKHAUSER. Absolutely. It is hard to put a number on that.

I would tend to agree with the colleague to the right of me that

I think that number is a place to start. It would allow us to at least

then craft a program that would have some activity at the time of

disaster.

As far as funding sources, I think creativity is necessary. I know

the National Cattlemen’s Beef Association and State Cattlemen’s

Group stand ready and willing to look for and assist with that. But

once again, I guess I would concur to say that the starting points

that have been mentioned here today are probably the place for us

to begin.

19

Senator SALAZAR. All right. Thank you. Thank you very much.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator.

Senator Stabenow?

Senator STABENOW. Thank you, Mr. Chairman. I do not know if

we have the most members on Finance Committee and Agriculture,

but I would guess that we are pretty close to having the most overlap between these two committees, which I think is really important and really terrific as we look at the farm bill and what really

is a food security bill, and energy security, as there are so many

opportunities for us. I know we are all very committed to doing the

very best that we can related to the farm and food security bill.

First a comment, I guess, in agreeing about permanent disaster

relief. I could not agree more with what has been said. I particularly want to include in that, as a State that grows a lot of fruits

and vegetables, that in Michigan the tree assistance program for

orchards is absolutely critical as a part of that.

In Michigan, in the last 3 years alone we have seen everything

from apples to cherries to grapes to sugar beets, and this relates

to weather, and it also relates to disease for these crops, which is

very much a part of what happens in disasters.

Unfortunately, with specialty crops we do not have the same

safety net as program crops, so permanent disaster relief is absolutely critical to these farmers. Unfortunately, as has already been

said, we have seen too little, too late. We have farmers operating

with very small profit margins, and it makes it very difficult.

But I am wondering, Mr. Buis, when I have talked about permanent disaster relief, oftentimes I hear from people, well, why not

just beef up crop insurance? I know the answer to that, but I wonder if you might speak to why crop insurance does not address

what we are talking about in terms of a permanent disaster relief

program.

Mr. BUIS. Thank you, Senator. First, let me say I think you made

some important points about including all commodities. For a number of years we only covered the eight major commodities in disaster assistance, but that has changed over the recent history, and

should, because depending upon your crop, you still cannot control

the weather, and certainly, as you mentioned, the tree crops.

We have certainly a huge opportunity here to change it. Whether

or not we have the money is going to be the big central question.

We are not opposed to any creative idea. In fact, we even suggested

shifting some of the direct money to pay for emergency disaster assistance. But some producers do not even want to do that, and I

can understand why. But how we end up fixing this is going to be

the real key.

I think you hit the nail on the head: why not fix crop insurance?

Well, over the years that I have been in town, crop insurance has

been improved, but it is very costly. The higher levels you go to to

cover those shallow losses are very expensive. If you run it through

the private industry, it is going to be more expensive than it would

through the Federal aid, so you actually can get more coverage for

less through a Federal program.

And again, we are not advocating a disincentive for crop insurance. In fact, if you write it properly, it would be an incentive for

20

producers to buy up at higher levels to get this shallow loss coverage. So, I think the two can work together.

Senator STABENOW. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator.

Next, is Senator Lincoln.

Senator LINCOLN. Thank you, Mr. Chairman. I appreciate you

and the ranking member, Senator Grassley, for holding this hearing today. As we begin work on the 2007 farm bill in the Agriculture Committee, I am pleased that the Finance Committee has

also engaged in the discussion. There are many members that overlap.

I look forward to working with you, Mr. Chairman, and others

to develop tax policy that will be complementary to our ongoing

farm policy efforts. I think as we get more and more people engaged in agricultural programs and other issues involved in farm

policy, we are starting to realize that agricultural programs can be

just as complicated as the tax policy in this country. So, I appreciate the Finance Committee getting engaged.

I know we have a panel of witnesses here to talk about a variety

of agricultural issues. To begin with, I feel that I would like to first

take a moment to provide my perspective on the recent GAO study

that Ms. Shames has discussed.

As one who represents a leading farm State, I care deeply about

maintaining the integrity of our U.S. farm policy, and I would associate myself with the words of Senator Grassley that there is no

intent, hopefully, here that would threaten the farm safety net program that exists.

More importantly, my Arkansas farm families care deeply about

this issue, particularly the integrity of the farm programs, because

it is probably one of the oldest issues we deal with here in Congress, agricultural policy and farm policy and maintaining a safe

and abundant food and fiber supply.

My Arkansas farm families are hardworking people who do

something pretty incredible every day. As I said, they provide us

that safe, abundant, and most affordable food and fiber supply in

the world, not to mention what they do provide for the rest of the

world. Our farm policy makes this possible, and it does so with expenditures of only about one-half of 1 percent of the entire Federal

budget.

That is an investment. It is a good investment with a good return. If we think about it as Americans, that we go to the shelves

in the grocery store and we look to our farmers to provide us something that we know that they have followed the rules and the regulations that their government has set before them to produce, the

safest, most abundant food supply with respect to safety and certainly with respect to the environment.

I think that is something that we can all be proud of. I think it

would probably be safe to say that the farm program is one of the

few government-sponsored programs that has consistently come in

below expected cost since 2002.

With that said, Mr. Chairman, I know that you are just as

aware, as I am, of the challenges facing our farms today in the

world marketplace that is not free or fair. This committee deals

21

with trade. When U.S. farmers survey the world, they see an average farm tariff of 62 percent against their products.

Compare that to the 12 percent that our foreign competition sees

when they want to send something here to our country. America

has said to the world, we are ready to level the playing field for

everyone. But the response that we have gotten back from many

parts of the globe is that you must bring down your help to your

U.S. farmers and we will hang on to ours, thank you very much.

So I think it is important, again, to remember what we do

through this farm legislation in terms of making sure that these

farm families across our country can continue to provide us with

a safe food supply in an ever-changing global world. That is the

context in which we have to consider U.S. farm policy.

There are multiple things that certainly affect it, but without a

doubt, unfortunately we have become very accustomed in this country to having a safe and affordable food supply, and it is something

we should not take for granted as the global marketplaces change.

Now, do I think we ought to enforce our laws strictly and vigorously? Absolutely I do. We want to maintain the integrity and we

want to make sure, if there are abuses that exist, that we are going

to correct those abuses. I am, as I said, grateful to the chairman

and the ranking member for moving forward on this, and several

other issues.

What we are talking about today is a limited study, however,

particularly from the GAO, of 181 cases where 40 percent of the

time-appropriate USDA oversight was not taken. So, I hope we just

keep that in the context of what we are discussing. We want to

make it very clear in some, and maybe even many, of these instances the estates are legally eligible for these payments.

They should be getting these payments because it is the way that

we have structured the law in the farm programs. I am not saying

that is right or wrong. I am just saying that we need to make sure

that, if what we are going to do is criticized, then we need to make

sure of what we are looking at and perhaps how we want to change

it.

I know the title is a good headline up there, but I hope we will

try and get beyond that today in our discussion and look at how

it is that we want to address this and what we can do.

Finally, Mr. Chairman, I want to add that I am a little disappointed, too, that so much of our time is going to be devoted to

some of those discussions. I hope that we will take the opportunity

here in the Finance Committee to look at the tax issues of consequences that we want to be focusing on here in the committee,

and I think we will have a great opportunity.

I know the estate tax is one of the most obvious examples in

terms of our family-owned farms. The estate tax structure that we

have put into place in 2001 just is not workable for our family

farms and businesses and provides no certainty for their planning

and for future generations.

I would also like to hear from our farmers about the depreciable

life of their equipment. I know that is a big issue as well. The costs

associated with meeting government regulations for storing their

fertilizer, and something about, the IRS has misclassified their

22

CRP payments for tax purposes. We have heard a little bit from

Senator Salazar as well.

These are all issues that we need to be focusing on, and our

farmers are asking for solutions to those issues as well. I hope the

committee will have another hearing at some point, either the full

committee or the subcommittee level, that could deal with that.

So, thank you, Mr. Chairman. I appreciate you and the ranking

member for your strong leadership on behalf of America’s farm

families, and I hope this is just the first of many conversations in

our discussions on agricultural tax policy over the next few months.

Just a couple of questions I would throw out. Mr. Keppy, I know

my time is up, but if you could just answer for the record a couple

of things. Are you aware of any instances found in this GAO study

where an estate was being kept open solely for the purpose of obtaining program benefits? I think you have answered that, or at

least alluded to it. I would like to make sure that it is on the

record.

Also, as we discuss these issues, maybe for the record you might

expand a little bit on the staffing and technology challenges that

you do have at USDA. I know in our FSA offices, in working with

USDA, those people down in the field are working overtime, overnight. They are doing the best that they can in terms of the resources, in terms of technology, as well as staffing to be able to

meet multiple needs that farm families need their assistance on in

very complicated programs and other things.

Mr. KEPPY. Thank you, Senator Lincoln. A year and 4 months

ago, I was home planting corn—and I have farmed all my life. So

when I came to DC, one of my biggest disappointments was the IT

that the government had. I thought surely that IT issues were in

great shape in Washington, DC for the government; however, it is

a little bit like a farmer being accused of using duct tape and bailing wire to keep things going. But I am very proud of the staff at

USDA, and FSA in particular, that they have been able to keep the

machine running. They have been keeping programs going,

delivering——

The CHAIRMAN. With duct tape? [Laughter.]

Mr. KEPPY. With duct tape. Getting the needed programs out to

rural America where it does the benefits that you are talking

about.

The CHAIRMAN. All right.

Mr. KEPPY. You mentioned integrity.

The CHAIRMAN. I am going to have to ask you to wrap up. We

are way over time, Mr. Keppy.

Mr. KEPPY. Integrity is extremely important to me, and I appreciate you mentioning that comment.

The CHAIRMAN. I am going to have to ask you to wrap up. We

are way over time here.

Mr. KEPPY. All right.

The CHAIRMAN. Thank you very much.

Next, we have the former chairman of the House Agriculture

Committee, a valuable member of this committee, Senator Roberts.

Senator ROBERTS. I thank the chairman. I want to associate my

remarks with the anointed champion of production agriculture,

Senator Lincoln. I said I was at the beginning of these hearings in

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the Agriculture Committee some time ago, but she has made numerous speeches that we go back and figure out that it is the producer out there—not just the farmer and rancher, but the producer—who does produce the food for this country and a troubled

and hungry world, and I thank the Senator for this.

I have talked to her about it. I would like to get into a colloquy

with her on the Senate floor if we could ever have time to do that.

If Republicans could ever talk together with Democrats, we might

be able to get it done.

Mr. Chairman, why don’t we have IRS here? I know that is not

normally a good thing, but I think they should be here. Were they

just too busy? I know you asked them.

The CHAIRMAN. They are busy figuring out how to answer this

tax gap.

Senator ROBERTS. I see.

The CHAIRMAN. You know, $345 billion a year. They are still

working on it.

Senator ROBERTS. All right. Well, I think they ought to be here

on the CRP issue, as raised by Senator Salazar, myself, and others,

and more especially, you and Senator Grassley.

Let me say to Tom, we have 95-percent sign-up now in the crop

insurance program due to the Kerry-Roberts bill. If you are in Nebraska, it is the Kerry-Roberts bill; if you are in Kansas, it is the

Roberts-Kerry bill. [Laughter.] And it took us over a year to improve the crop insurance program. We would like to think we have

made some progress. Everybody is beating up on it now.

But we have lost our average production history due to the

drought, and, when you do not have a crop, your history goes down.

To take away from direct payments, which is all we got because of

the counter-cyclical nature of the other programs, if you do not

have a crop, obviously you do not get any payments.

I do not favor that. I just think that that is a dead-end street,

if you are taking away from direct payments to pay crop insurance

when your average production history is gone. Somehow or another

we have to work out a better situation.

As to this disaster bill fund, I call it the even-numbered disaster

fund, because every even-numbered year in my history of six farm

bills, any time you set aside a fund for disaster, and we have done

it, it is spent in an even-numbered year. I think you know what

I am talking about: out-of-condition grain, et cetera, et cetera.

So it will be spent. I think we are better off in trying to assess

disasters and then appropriating—a very difficult job—whatever

disaster bill we have. Then it is a disaster to pass and a disaster

to implement. I understand that. If you had the fund, perhaps we

could straighten that out a little bit. And since 2007 has become

2008, now we have a 2-year even-numbered program. So, I worry

about that.

Mr. Chairman, thank you for holding this hearing. Again, I want

to thank Senator Salazar for bringing up the issue of the CRP and

the tax treatment of those payments. The tax treatment of CRP

payments is an important issue to both of our States, and last year,

2006, Kansas ranked fourth in CRP grants. Montana, Mr. Chairman, ranked second in the country. I do not know about Iowa, but

they are right up there.

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I know that you, Senator Grassley, Senator Conrad, myself, Senator Salazar, and others have maintained it was not the intent of

Congress—it was not the intent of Congress—that CRP payments

should be subject to self-employment tax.

The USDA CRP contract even terms it a rental payment. How

IRS can come back and say that, I do not know, but, if finalized,

it would clarify that CRP payments, including payments made to

retired farmers, are subject to self-employment tax. That is what

the IRS has proposed in terms of the rule.

I know the committee is taking a very good look at this issue and

how we might resolve the problem. I thank you, Mr. Chairman, for

your work on this specific issue. So at any rate, while our witnesses

did not touch on this issue, I would like any thoughts in the 41 seconds that we have left.

Can you comment on how we came to be in the situation where

CRP payments are subject to self-employment tax? I know the IRS

is not here. Do you have any suggestions about how Congress could

best clarify it did not intend for CRP payments to be subject to selfemployment tax in general, as the IRS set out in its most recent

proposed rule last December.

Any comments? The answer is yes, you are for the bill. [Laughter.] Tom, go ahead. Fire away.

Mr. BUIS. Pass the legislation that you referred to. There is similar legislation in the House of Representatives, and do not allow

them to use that in the calculation.

Senator ROBERTS. Well, we have a new shotgun rider on this bill,

and that is Senator Salazar. He does not give up easy, and the

chairman does not give up easy, and Senator Grassley does not

give up easy. I know Blanche is with us. I just think, Mr. Chairman, we need to pass this. We need to get it clarified.

The CHAIRMAN. We do. In fact, I am glad you said we do not give

up easy, because I know I can speak for Senator Grassley. He does

not.

Senator ROBERTS. Well, invite the IRS down. We need a tin can

to kick around here every once in a while.

The CHAIRMAN. Yes. We do not need the IRS to get this changed.

Thank you. Thank you very much.

I would like to ask you, Dr. Siskin, a word or two about payroll

tax exemptions. Just, your sense of how far we go. Some visas are

short-term and it is basically a question of the administrative costs

of collecting a payroll tax from somebody who is just working for

a very short period of time in this country. Or, on the other hand,

maybe with up-to-date computers, that can be dealt with pretty

forthrightly and fairly efficiently.

But your sense, Doctor. Can you give us some guidance with respect to the management and administrative costs of very shortterm visas? Otherwise, I think the rules were pretty broad in their

application: if you work in America, you pay payroll taxes. But

there may be some occasion where that might not be accurate.

Your views?

Dr. SISKIN. I cannot speak to SSA’s costs, but we do know that

even certain visas where you are not subject to the FICA tax, people are getting Social Security numbers because they are authorized to work in the country, and there may be other taxes that are

25

taken out that are not FICA taxes. So in terms of Social Security’s

burden, unfortunately I cannot speak to that. But there are State

and local taxes that are taken out for these people.

The CHAIRMAN. There are some State and local taxes. Payroll

taxes? Similar to payroll taxes? Are they income taxes? What kinds

of taxes locally at the State level?

Dr. SISKIN. It would depend on whether the alien meets the definition of a resident or non-resident alien under the Internal Revenue Code and what the local tax structure is.

The CHAIRMAN. Right. I just think, basically, if someone works

in America, that he or she should pay payroll taxes.

I also thank you, Senator Roberts, for bringing up the so-called

rental provision under the CRP. I very much believe, frankly—this

is not your issue, Dr. Siskin—that that is rental income and therefore payroll taxes should not apply there, or withholding should not

apply.

I have no further questions. Senator Grassley?

Senator GRASSLEY. Yes, I do.

I wanted to make a statement, because I read something in the

BNA Daily Tax Reporter that I want to refer to. When we debated

the budget earlier this year, I raised the scarcity of revenue offsets

relative to the demands of tax writing committees and other committees. I am not going to go into those numbers.

Let me just say there is plenty to do on the tax side if we are

going to live in the strict pay-go world that we are in now. We will

probably need all of our offsets for expiring tax provisions that

need to be addressed this year.

So then I referred to the BNA Daily Tax Reporter, and I want

to quote from that tax report: ‘‘The House Agriculture Committee

was expected to file the 2007 farm bill, to the House Rules Committee late July 23 after ironing out arrangements with two other

committees that are tasked with supplying about $6.5 billion. After

the House Agriculture Committee fell about $4 billion short of its

nutrition funding goal, House Speaker Nancy Pelosi and committee

Chairman Collin Peterson convinced Ways and Means Committee

Chairman Charles Rangel to come up with the money. It remained

unclear where the committee will find the offsets for the funding.’’

So, Mr. Chairman, besides putting that in the record, I would

like to make this additional comment. The article indicates that the

Agriculture Committee is looking to revenue raises from the energy

bill. Now, we need those raisers to make sure that the energy bill

remains neutral.

[The article appears in the appendix on p 46.]

Senator GRASSLEY. I do not want to get into any business where

we used to do like with Customs fees, do double accounting for offsets, because it does not seem to me that that is intellectually honest for the pay-go regime that we are under now. So I find it a bit

ironic that today we have heard testimony about a problem in the

farm program, payments to dead farmers.

It seems to me that instead of lifting revenue raises from the tax

writing committee, the leadership ought to be looking for more savings in farm programs. Savings from curtailing subsidy payments

to dead farmers ought to be looked at quite obviously.

26

The voters did send a message in November. I heard it loud and

clear. But I do not think that voters said ‘‘keep spending foolishly

and raise taxes.’’ I do not think the American taxpayer would say

‘‘raise my taxes and keep making unintended payments to dead

farmers.’’

So I hope that we are careful in this committee with revenue

raisers that this committee has largely developed and will continue

to develop. They ought to be used for dealing with tax policy first,

and we should not become the banker for all other committees.

Today we have shown a clear abuse in farm programs. We can save

the taxpayer some money by dealing with this problem and keep

revenue raisers for tax relief bills.

So, Mr. Chairman, it seems to me that everyone wins under that

scenario, and we will be able to meet our responsibilities to the taxpayers as we consider AMT extenders, doctors’ payments, and

things of that nature.

The CHAIRMAN. Thank you.

Senator Lincoln?

Senator LINCOLN. Thank you, Mr. Chairman. I appreciate it. I

appreciate all of your patience.

Just a couple of quick questions left for me. Mr. Fankhauser, I

hear from farmers, ranchers, and small businesses back in my

home State of Arkansas all the time about the detrimental impact

of the current estate tax system and the impact it has on their dayto-day business, the decisions they have to make, planning.

I know some of my colleagues who do not support reasonable estate tax reform like to talk about how it only impacts the most

wealthy families, and that it really does not matter to most small

businesses, farmers, or ranchers.

However, I do know, working with Senator Grassley and Senator

Baucus, that they have great interest in dealing with that issue

and the impact that it does have on farmers and ranchers.

I just would like, specifically since we have a real farmer and a

real rancher here, if you could explain to the Finance Committee

how our ridiculous estate tax structure, which was completely repealed in 2010, to then pop back in at a 55-percent rate and $1 million exemption in 2011, impacts farmers and ranchers.

Mr. FANKHAUSER. Thank you, Senator, for that opportunity. You

mentioned something very specifically earlier about certainty, and

that is the world that we live in now—we actually lack certainty

related to the estate tax.

The farming and ranching community of the United States has

enough uncertainty with commodity prices and weather; their estates should not be one of those things that does not have certainty. Obviously, as the cattle industry, NCBA, Colorado Cattlemen’s, we do support a full and permanent repeal of the estate tax.

Moving in that direction, any assistance to provide for that level

of certainty would be important. The net effect in Colorado is that

the assets that we have that are valuable are our land, our livestock, and our equipment.

We are not a society that has a great deal of liquid assets. So

the net effect of the estate tax is, in our views, the halving of our

livestock operations in rural Colorado. When generational transfer

27

takes place, in order to offset that estate tax you essentially sell

half of your farm or ranch.

Senator LINCOLN. Yes. Thank you. I appreciate that, coming from

your perspective and sharing that with our colleagues here on the

Senate Finance Committee.

I would also like to associate myself with Senator Salazar’s comments about the CRP program and the IRS’s determination, or actually lack of. I had sent a letter to the IRS as well and would just

associate myself with Senator Roberts and Senator Salazar on that,

Mr. Chairman, in the hopes that we could really move something

forward. I think it certainly makes sense.

And last, Ms. Shames, in talking about your GAO report, I no- ticed that the number that you used, which was $1.1 billion over

the 1999 to 2005 period, which was the amount of dollars, correct,

going to the 172,000 deceased, was that correct?

Ms. SHAMES. Yes.

Senator LINCOLN. Right. You averaged that out as $20 billion per

year. But did you take into consideration, after the changes that

were made in the 2002 farm bill, the drop in terms of an annual,

or did you just average it out over those years?

Ms. SHAMES. Our report actually provides actual dollar figures,

breaking out the agricultural programs each year from 1999 to

2005, so we can give you an exact dollar figure for how much went

out by program.

Senator LINCOLN. Right. But in terms of averages, I think it is

important to note that we did make, and many of us worked together for compromises in terms of how we could reform and put

more integrity into these programs in the 2002 bill, and I think you

will note that, from the years 2002 or beyond 2002, that the number does fall in terms of the yearly cost in those numbers.

Ms. SHAMES. Yes.

Senator LINCOLN. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator.

Senator Salazar?

Senator SALAZAR. Thank you very much, Mr. Chairman.

I want to ask a question about energy and how it is that we

might, through this committee, be able to further incentivize what

is happening in the farm bill and what is happening with the renewable energy revolution in rural America.

Through the leadership of Senator Baucus and Senator Grassley,

we had a very robust Finance package that we did pass out of committee. Unfortunately, we were not able to get it through the Senate yet, but we hopefully will.

My question to Tom and Terry and to Mr. Keppy is, what is it

that this committee ought to be doing in terms of how we

incentivize renewable energy economic benefits into rural America?

Why do we not start with you, Tom, and if each of you could take

a minute, minute and a half.

Mr. BUIS. Thank you, Senator. I think it is absolutely critical

that you incentivize new renewable energy production. Ethanol

started out as gasohol 30 years ago. It was not economically efficient. It was not energy efficient. In fact, the truth be known, most

of the real expertise for producing it was probably from backyard

stills. But it took that public policy of the incentive on the fuel tax,

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it took public policy of investment and to encourage through grants

and co-op development of farmers.

Senator SALAZAR. So where do we go from here, Tom?

Mr. BUIS. You have to do the same for all forms of energy,

whether it is cellulosic, whether it is wind, whether it is biodiesel.

You have to give them a chance to get started.

Senator SALAZAR. Were you satisfied with the Finance package

that we passed out of this committee?

Mr. BUIS. Absolutely.

Senator SALAZAR. And what more can we do now as we get to

the farm bill, as we deal with title 9 on the farm bill?

Mr. BUIS. Well, depending upon what you ultimately do on an

energy bill or a farm bill, to us it does not matter whether it is in

the farm bill or the energy bill, but we have to move forward. If

we backslide, if we do not take these steps—you know, it takes a

lot of lead time to get to where we are, so I would encourage you

to cover yourself both ways, farm bill and the energy bill.

Senator SALAZAR. Terry?

Mr. FANKHAUSER. Thank you, Senator. I mean, the cattle industry certainly supports development of alternative energy and new

energy sources, specifically from agriculture. I guess our direct

comment would be two things. One is that R&D is very important.

Research and development is critical in properly funding that for

these new emerging markets, these new emerging fuel sources.

One thing related to incentives, as you would expect from the

cattle industry, we do not believe in unevenly disadvantaging one

segment of the industry over another in relation to those incentives, but R&D is critical.

Senator SALAZAR. All right.

Mr. Keppy?

Mr. KEPPY. I would like to yield to Deputy Administrator John

Johnson.

Senator SALAZAR. Mr. Johnson?

Mr. JOHNSON. Senator, I would just refer the committee to the

Secretary’s proposal for the 2007 farm bill. The Secretary put forth

a number of proposals in the energy area. They are not all within

the FSA’s jurisdiction, which we are familiar with, but there are

a number of things in there, promoting research, grants for

biofuels, as well as a proposal the Secretary had to prioritize cellulosic ethanol and looking at CRP, perhaps, as a feedstock source

for cellulosic ethanol as well.

Senator SALAZAR. Let me ask one question, Mr. Keppy, here with

respect to the GAO report. The $1.1 billion that has been referred

to in the newspapers and in the GAO report from 1999 to 2005,

with the implementation of the recommendations of the GAO and

you moving forward with the implementation of your policy

changes to deal with that, what kinds of savings do you think we

can actually accomplish through the right enforcement of the law

and the rules?

Mr. KEPPY. Well, thank you for the question, Senator. In all honesty, I do not think that there actually will be significant savings.

I think that, when we get down and steady, all the issues that have

been put before us, I think the loss is significant but I think it is

29

something that we are going to improve upon. In our counties,

States, and here in DC, we are going to try to adopt programs.

Senator SALAZAR. And Ms. Shames, what is your response to that

conclusion?

Ms. SHAMES. Well, USDA needs to enforce its rules and regulations better. The bottom line is, it just does not know where this

$1.1 billion went. And certainly from our examination, it appears

that the payments are improper and that they did not go to eligible

recipients.

Senator SALAZAR. All right. So would you conclude then that, if

the regulations were enforced, that you would have a savings of

$1.1 billion over the next 5 or 6 years?

Ms. SHAMES. We would have to see. We would have to see, with

the further investigation that USDA does to see if there were any

savings.

Senator SALAZAR. My time is up. Thank you very much.

Thank you, Mr. Chairman.

Senator LINCOLN. Mr. Chairman, can I just ask one more?

The CHAIRMAN. Senator Lincoln.

Senator LINCOLN. So you are saying, Ms. Shames, that you believe from your study that the $1.1 billion in payments were improperly done by USDA?

Ms. SHAMES. From our review of matching up the USDA databases with SSA’s Death Master List, it certainly appears that the

payments did not go to eligible recipients. In our minds, those payments are improper, questionable, suspicious. Yes.

Senator LINCOLN. So you are saying that, just because it went to

a deceased person, it is improper, or are you saying that you looked

at the law and how it is structured so that if that person, that

farmer who dies in April and receives a payment in that crop year,

that, as tax law goes, it was improper for that deceased person to

get that payment?

Ms. SHAMES. There are legitimate reasons for the payments to be

made to estates, and we recognized that. What we found, though,

is that USDA cannot demonstrate one way or the other if the payments were distributed appropriately and equitably.

Senator LINCOLN. So it is not your business then to review the

tax law to figure out whether or not it was proper or improper. It

is your business to just figure out whether or not USDA did the

oversight to make sure it was doing——

Ms. SHAMES. I am sorry. We did not look at the tax implications

of that. That is right, Senator Lincoln.

Senator LINCOLN. All right. Thank you.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you.

Thank you all very much for your help and your testimony.

Ms. Shames, I want to apologize to you, I did not pronounce your

name correctly at the very beginning. I want to make sure on the

record. It is Ms. Shames.

Ms. SHAMES. Thank you.

The CHAIRMAN. Thank you very much.

The hearing is adjourned.

[Whereupon, at 11:34 a.m., the hearing was concluded.]

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