SECTION 1. FINDINGS.

    Congress finds the following:
            (1) In order to ensure the legitimate interests of Puerto 
        Rico and the United States, Congress should recognize Puerto 
        Rico as a sovereign nation.
            (2) Consistent with article IV, section 3 of the 
        Constitution, only Congress has the power to dispose of and 
        make all needful rules and regulations respecting Puerto Rico.
            (3) Puerto Rico's territorial condition constitutes an 
        unsustainable status of political subordination.
            (4) Annexation of Puerto Rico as a State of the Union would 
        be detrimental to both Puerto Rico and the United States.
            (5) A majority of the voters rejected the continuation of 
        territorial status in the referendum on the political status of 
        Puerto Rico held in Puerto Rico on November 6, 2012.
            (6) The people of Puerto Rico should, through participation 
        in a referendum vote on the future status of Puerto Rico, 
        choose between independence or free association.
            (7) Congress should dispose of the territory of Puerto 
        Rico, recognize its sovereign nationhood, and provide for an 
        appropriate transition process to take place under independence 
        or under a compact of free association with the United States, 
        in harmony with the results of the vote expressed by the People 
        of Puerto Rico in the referendum.

SEC. 2. REFERENDUM.

    (a) In General.--The Legislative Assembly of Puerto Rico shall 
provide for a referendum to take place in Puerto Rico, in which 
eligible voters shall express their preference between the non-
territorial options of either independence or free association, as 
herein provided.
    (b) Eligible Voters.--An individual shall be eligible to vote in 
the referendum held under this Act if that individual--
            (1) was born in Puerto Rico; or
            (2) has a parent who was born in Puerto Rico.
    (c) Independence.--
            (1) Authorization to negotiate treaty.--The President shall 
        negotiate a Treaty of Friendship and Cooperation and other 
        bilateral agreements with the government of an independent 
        Puerto Rico that will provide for equitable economic relations 
        between both nations.
            (2) Treaty of friendship and cooperation.--The Treaty of 
        Friendship and Cooperation shall establish the details of the 
        bilateral relations of Puerto Rico and the United States under 
        the guidelines set forth below:
                    (A) Citizenship.--Puerto Ricans shall become 
                citizens of the Republic of Puerto Rico. United States 
                citizenship shall be guaranteed to all Puerto Rican 
                citizens who choose to retain their United States 
                citizenship after the proclamation of Puerto Rico's 
                independence. Those born thereafter may acquire non-
                immigrant status, dual or reciprocal United States 
                citizenship as provided by law, or as otherwise agreed 
                by treaty, so that their freedom to travel to and from 
                the United States and to live and work there shall not 
                be impaired.
                    (B) Vested rights.--Veterans benefits, Federal 
                pensions, and full Social Security rights, as well as 
                any other vested rights and benefits under the laws of 
                the United States are hereby guaranteed to citizens of 
                Puerto Rico until the normal expiration of such 
                benefits; provided that all necessary agreements to 
                protect the rights of workers who acquire permanently 
                insured status during 5 years following the 
                proclamation of Puerto Rico's independence, but are not 
                yet beneficiaries under the Old-Age, Survivors, and 
                Disability Insurance Benefits program under title II of 
                the Social Security Act (42 U.S.C. 401 et seq.), shall 
                be established; further provided that all contributions 
                made by those who have not yet achieved permanently 
                insured status at the time of Puerto Rico's 
                independence shall then be transferred, with interest, 
                to the government of Puerto Rico, in order to assist in 
                the establishment of a separate system of social 
                insurance.
                    (C) Trade.--The United States shall eliminate trade 
                barriers with Puerto Rico, provided that limitations on 
                imports or exports agreed upon by both nations shall 
                ensure mutual benefits and assist each nation in 
                meeting its trade and economic development objectives.
                    (D) Public debt and economic transition.--As 
                partial indemnity for more than 118 years of political 
                and economic subordination, during which the total 
                payment of interest earnings and dividends from Puerto 
                Rico to United States corporations have far exceeded 
                net transfers of Federal assistance to both the 
                government and the residents of Puerto Rico, the United 
                States shall enter into negotiations with Puerto Rico 
                to restructure the outstanding debts and obligations of 
                the government of the Commonwealth of Puerto Rico and 
                its instrumentalities. Moreover, during a transition 
                period, an independent Puerto Rico shall receive annual 
                transfer block grants equal to the total amount of 
                grants, programs, and services currently provided by 
                the Federal Government in Puerto Rico, adjusted for 
                inflation, for a period to be negotiated to take place 
                immediately following the joint proclamation of Puerto 
                Rico's independence.
                    (E) Currency.--If so requested by Puerto Rico, both 
                nations shall make the necessary arrangements with 
                respect to the use of United States currency by the 
                Republic of Puerto Rico.
                    (F) Defense.--The United States and the Republic of 
                Puerto Rico shall enter into agreements leading to the 
                complete demilitarization of the Republic of Puerto 
                Rico, and the devolution and decontamination of any 
                real estate previously held by any branch of the Armed 
                Forces.
    (d) Free Association.--
            (1) Authorization to negotiate compact.--To provide a 
        process consonant with the laws and policies of the United 
        States and in accordance with principles of international law, 
        the President shall negotiate the terms for a Compact of Free 
        Association with the government of Puerto Rico which, prior to 
        the territory's recognition and proclamation of sovereignty, 
        shall establish the terms of the association.
            (2) Compact of free association.--The Compact of Free 
        Association between the United States and Puerto Rico shall be 
        submitted to Congress and the People of Puerto Rico for 
        ratification under the agreed guidelines set forth below:
                    (A) Puerto rico as sovereign state.--International 
                legal personality of Puerto Rico as a sovereign state.
                    (B) Self-government.--Full self-government not 
                subject to the Constitution or laws of the United 
                States, except for those specific powers delegated to 
                the United States and which are subject to revocation 
                by Puerto Rico.
                    (C) Termination of free association.--The right of 
                Puerto Rico and of the United States to unilaterally 
                put an end to the relationship of free association and 
                Puerto Rico becoming fully independent.
                    (D) United states citizenship.--The continuation of 
                United States citizenship for the citizens of Puerto 
                Rico.
                    (E) Trade relations.--The continuation of existing 
                trade relations with the United States and an agreed 
                upon level of participation by residents of Puerto Rico 
                in Federal economic and social assistance programs.
This bill requires the Legislative Assembly of Puerto Rico to provide for a referendum in Puerto Rico in which eligible voters shall express their preference between the non-territorial options of either independence or free association.  An individual shall be eligible to vote in such referendum if that individual was born in, or has a parent who was born in, Puerto Rico.  The President shall negotiate a Treaty of Friendship and Cooperation and other bilateral agreements with the government of an independent Puerto Rico that will provide for equitable economic relations. Such treaty shall establish the details of the bilateral relations of Puerto Rico and the United States under specified guidelines with respect to citizenship, vested rights, trade, public debt and economic transition, currency, and defense. The President shall negotiate the terms for a Compact of Free Association with the government of Puerto Rico, which shall be submitted to Congress and the people of Puerto Rico for ratification under specified agreed guidelines with respect to Puerto Rican sovereignty and self-government, the termination of the free association relationship when Puerto Rico becomes fully independent, the continuation of U.S. citizenship for citizens of Puerto Rico, and the continuation of trade relations with the United States.  
To recognize Puerto Rico's sovereign nationhood under either independence or free association and to provide for a transition process, and for other purposes.