Federal Issue Brief

 Veterinary Medicine Loan Repayment Program Enhancement Act, S. 518

 

Special Interest:

AVMA National Journal Ad 4.13.2011 on S.518, VMLRPEA (April 13, 2011)

PDF file View PDF version

PDF file View bill summary and status(PDF)

AVMA Ask:

Cosponsor the Veterinary Medicine Loan Repayment Program Enhancement Act

Purpose:

  • Amends IRC to make loan repayment awards disbursed under section 1415A of the National Agricultural Research, Extension, and Teaching Policy Act of 1977 (7 USC 3151a) exempt from gross income and employment taxes.
  • Tax exemption should be effective for awards beginning after December 31, 2009.

Status, Introduction, and Referral:

  • Status: Introduced March 9, referred to the Finance Committee.
  • Senate Sponsors: Tim Johnson D-SD; Mike Crapo R-ID (Lead Republican Cosponsor)
  • Cosponsors: John Barrasso R-WY, Michael Bennet D-CO, Thad Cochran R-MS, Kristen Gillibrand D-NY, Tom Harkin D-IA, Johnny Isakson R-GA, Mike Johanns R-NE, Amy Klobuchar D-MN, Mary Landrieu D-LA, Jeff Merkley D-OR, Jerry Moran R-KS; Jim Risch R-ID, Pat Roberts R-KS
  • Statement of Support for S. 518 joined by 140 organizations representing a diverse range of interests in animal agriculture, veterinary medicine and animal welfare.

Cost Estimate:

  • CBO has been requested by Senators Johnson and Crapo.
  • AVMA estimates a cost of $1.8 million annually assuming level funding of $4.8 million.

Current Status:

  • The Ag Secretary transfers funds to Treasury to pay taxes on each VMLRP award. Awards are taxed at 39%.
  • Every dollar spent on taxes is one less available for loan repayment awards.
  • When VMLRP is tax exempt, 1 additional veterinarian may be selected to practice in a shortage situation for every 3 under current law.
  • The first 62 veterinarians were selected for the program at the end of FY 2010. A total of 260 veterinarians applied for awards in 2010.
  • VMLRP provides up to $25,000/year to repay eligible student loan debt for each of the 3 years of service in a shortage area. Total cost per award + taxes for 3 years is $104,250/veterinarian ($75,000 for loan repayment and $29,250 for taxes).

Justification:

  • Veterinarians are needed in nearly every area of veterinary medicine but particularly in food supply medicine and public health to treat livestock and poultry, the eradication of threatening diseases, and the monitoring of food safety and quality.
  • Veterinarians selected for VMLRP provide a wide array of necessary veterinary services for farmers' and ranchers' livestock including beef and dairy cows, poultry, swine, goats, sheep, and farm horses. VMLRP veterinarians ensure animal health and welfare while protecting the nation's food supply. They provide veterinarian-accredited medical procedures including routine services (vaccination, castration and dehorning) and emergency services (for acute illness, trauma, dystocia or obstetrical difficulties). Other services performed include those required for interstate movement of livestock, including commuter agreements and animal health testing requirements needed to ship livestock. VMLRP veterinarians perform tuberculosis checks and accredited blood sample services for Brucellosis, Bluetongue, and Bovine Viral Diarrhea. Additionally, they may provide reproduction management consultation services and consultation in health care programs and nutrition, disease surveillance and diagnostics for state and federal disease programs and foreign animal diseases. They may also play a role in a state's veterinary emergency response team and take part in disease control and eradication programs.
  • Exempting veterinary medicine loan repayment and forgiveness program awards from federal income taxation will lead to more communities having needed veterinary services sooner than they may otherwise and will help to ensure that our nation's livestock are healthy, that our food supply is safe and secure, and our public health is protected.

Federally Designated Veterinary Shortage Situations:

  • Currently there are 187 designated veterinary shortage situations across the country (267 designations possible during 2010-2011).
  • The Agriculture Secretary specifies the maximum number of shortage nominations per state to 1) assure distribution of designated shortage areas reflective of the overall demand for food supply veterinary services in different states, 2) ensure a balance between the number of potential awardees and the available shortage situations, 3) assure the number of shortage situation nominations submitted fosters emphasis on selection by nominators and applicants of the highest priority need areas, and 4) provide practical limitations of the burden borne by State Animal Health Officials preparing shortage nominations, and NIFA review panels.
  • USDA assigns States and Federal Lands an allocation based on their quartile rank in two variables correlated with need for veterinary services: 1) Livestock and Livestock Products Total Sales (LLPTS) and 2) Approximate Land Area (LA), as reported by the National Agriculture Statistics Service (NASS).
  • The total number of allowed nominations/designations per VMLRP award cycle for a State corresponds to the sum of nominations allocated based on quartile rank of LLPTS and LA.
  • "LLPTS Total Sales ($)" variable broadly predicts veterinary service need in a State because this is a normalized (to cash value) estimate of the extent of live animal agriculture in the State.
  • "LA" variable predicts veterinary service need because there is positive correlation between State land area, percent of State area classified as rural and the percent of land devoted to actual or potential livestock production. Land area is directly correlated with the number of veterinarians needed to provide veterinary services in a State because of the practical limitations relating to the maximum radius of a standard veterinary service area; due to fuel and other cost factors, the maximum radius a veterinarian operating a mobile veterinary service can cover is approximately 60 miles, which roughly corresponds to two or three contiguous counties of average size.
  • AVMA data: There are 1,300 U.S. counties have less than 1 food animal veterinarian per 25,000 farm animals and 500 counties have 5,000+ farm animals but 0 food animal veterinarians living there to treat them.

History of the Legislation in the 111th Congress:

  • S. 3621 was introduced by Senators Tim Johnson D-SD and Mike Crapo R-ID on July 21, 2010 and was referred to the Finance Committee. The bill ended the session with 16 bipartisan cosponsors.
  • House bill: none

Precedent for Tax Exemption:

  • Congress set a precedent for tax exemption. The National Health Service Corps (NHSC) loan repayment program (counterpart program for human medicine) was exempted by "The American Jobs Creation Act of 2004" (H.R. 4520, P.L. 108-357), enacted on Oct. 22, 2004. Prior to this legislative change, NHSC loan repayment awards were treated as taxable income.

AVMA Contact:

Gina Luke, Assistant Director, AVMA Governmental Relations Division, 202/289-3204.