In the Senate of the United States,

November 17 (legislative day, November 16), 1995.

Resolved, That the Senate recede from its amendment

to the bill from the House of Representatives (H.R. 2491)

entitled ‘‘An Act to provide for reconciliation pursuant to section 105 of the concurrent resolution on the budget for fiscal

year 1996’’, and concur to the above entitled bill with the following

AMENDMENT:

Strike out all after the enacting clause and insert:

1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Balanced Budget Act

3 of 1995’’.

4 SEC. 2. TABLE OF TITLES.

5 This Act is organized into titles as follows:

Title I—Agriculture and Related Provisions

Title II—Banking, Housing, and Related Provisions

Title III—Communication and Spectrum Allocation Provisions

Title IV—Education and Related Provisions

Title V—Energy and Natural Resources Provisions

Title VI—Federal Retirement and Related Provisions

Title VII—Medicaid

Title VIII—Medicare

Title IX—Transportation and Related Provisions

Title X—Veterans and Related Provisions

Title XI—Revenues

Title XII—Teaching hospitals and graduate medical education; asset sales; welfare; and other provisions
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1 TITLE I—AGRICULTURE AND

2 RELATED PROVISIONS

3 SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This title may be cited as the ‘‘Ag5 ricultural Reconciliation Act of 1995’’.

6 (b) TABLE OF CONTENTS.—The table of contents of this

7 title is as follows:

Sec. 1001. Short title; table of contents.

Subtitle A—Agricultural Market Transition Program

Sec. 1101. Short title.

Sec. 1102. Definitions.

Sec. 1103. Production flexibility contracts.

Sec. 1104. Nonrecourse marketing assistance loans and loan deficiency payments.

Sec. 1105. Payment limitations.

Sec. 1106. Peanut program.

Sec. 1107. Sugar program.

Sec. 1108. Administration.

Sec. 1109. Elimination of permanent price support authority.

Sec. 1110. Effect of amendments.

Subtitle B—Conservation

Sec. 1201. Conservation.

Subtitle C—Agricultural Promotion and Export Programs

Sec. 1301. Market promotion program.

Sec. 1302. Export enhancement program.

Subtitle D—Miscellaneous

Sec. 1401. Crop insurance.

Sec. 1402. Collection and use of agricultural quarantine and inspection fees.

Sec. 1403. Commodity Credit Corporation interest rate.

8 Subtitle A—Agricultural Market

9 Transition Program

10 SEC. 1101. SHORT TITLE.

11 This subtitle may be cited as the ‘‘Agricultural Market

12 Transition Act’’.
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1 SEC. 1102. DEFINITIONS.

2 In this subtitle:

3 (1) CONSIDERED PLANTED.—The term ‘‘consid4 ered planted’’ means acreage that is considered plant5 ed under title V of the Agricultural Act of 1949 (7

6 U.S.C. 1461 et seq.) (as in effect prior to the amend7 ment made by section 1109(b)(2)).

8 (2) CONTRACT.—The term ‘‘contract’’ means a

9 production flexibility contract entered into under sec10 tion 1103.

11 (3) CONTRACT ACREAGE.—The term ‘‘contract

12 acreage’’ means 1 or more crop acreage bases estab13 lished for contract commodities under title V of the

14 Agricultural Act of 1949 (as in effect prior to the

15 amendment made by section 1109(b)(2)). If a crop

16 acreage base was not enrolled in an annual program

17 for the 1995 crop in order to increase crop acreage

18 base, the contract acreage for the 1996 crop shall re19 flect the increased base acreage that would have been

20 established under title V of the Act (as so in effect).

21 (4) CONTRACT COMMODITY.—The term ‘contract

22 commodity’ means wheat, corn, grain sorghum, bar23 ley, oats, upland cotton, and rice.

24 (5) CONTRACT PAYMENT.—The term ‘‘contract

25 payment’’ means a payment made under section 1103

26 pursuant to a contract.
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1 (6) FARM PROGRAM PAYMENT YIELD.—The term

2 ‘‘farm program payment yield’’ means the farm pro3 gram payment yield established for the 1995 crop of

4 a contract commodity under title V of the Agricul5 tural Act of 1949 (as in effect prior to the amendment

6 made by section 1109(b)(2)).

7 (7) LOAN COMMODITY.—The term ‘loan commod8 ity’ means each contract commodity, extra long staple

9 cotton, and oilseeds.

10 (8) OILSEED.—The term ‘‘oilseed’’ means a crop

11 of soybeans, sunflower seed, rapeseed, canola, saf12 flower, flaxseed, mustard seed, or, if designated by the

13 Secretary, other oilseeds.

14 (9) PROGRAM.—The term ‘‘program’’ means the

15 agricultural market transition program established

16 under this subtitle.

17 (10) SECRETARY.—The term ‘‘Secretary’’ means

18 the Secretary of Agriculture.

19 SEC. 1103. PRODUCTION FLEXIBILITY CONTRACTS.

20 (a) CONTRACTS AUTHORIZED.—

21 (1) OFFER AND TERMS.—Beginning as soon as

22 practicable after the date of the enactment of this sub23 title, the Secretary shall offer to enter into a contract

24 with an eligible owner or operator described in para25 graph (2) on a farm containing eligible farmland.
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1 Under the terms of a contract, the owner or operator

2 shall agree, in exchange for annual contract pay3 ments, to comply with—

4 (A) the conservation plan for the farm pre5 pared in accordance with section 1212 of the

6 Food Security Act of 1985 (16 U.S.C. 3812);

7 (B) wetland protection requirements appli8 cable to the farm under subtitle C of title XII of

9 the Act (16 U.S.C. 3821 et seq.); and

10 (C) the planting flexibility requirements of

11 subsection (j).

12 (2) ELIGIBLE OWNERS AND OPERATORS DE13 SCRIBED.—The following persons shall be considered

14 to be an owner or operator eligible to enter into a

15 contract:

16 (A) An owner of eligible farmland who as17 sumes all of the risk of producing a crop.

18 (B) An owner of eligible farmland who

19 shares in the risk of producing a crop.

20 (C) An operator of eligible farmland with a

21 share-rent lease of the eligible farmland, regard22 less of the length of the lease, if the owner enters

23 into the same contract.

24 (D) An operator of eligible farmland who

25 cash rents the eligible farmland under a lease ex-
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1 piring on or after September 30, 2002, in which

2 case the consent of the owner is not required.

3 (E) An operator of eligible farmland who

4 cash rents the eligible farmland under a lease ex5 piring before September 30, 2002, if the owner

6 consents to the contract.

7 (F) An owner of eligible farmland who cash

8 rents the eligible farmland and the lease term ex9 pires before September 30, 2002, but only if the

10 actual operator of the farm declines to enter into

11 a contract. In the case of an owner covered by

12 this subparagraph, contract payments shall not

13 begin under a contract until the fiscal year fol14 lowing the fiscal year in which the lease held by

15 the nonparticipating operator expires.

16 (G) An owner or operator described in a

17 preceding subparagraph regardless of whether the

18 owner or operator purchased catastrophic risk

19 protection for a fall-planted 1996 crop under sec20 tion 508(b) of the Federal Crop Insurance Act (7

21 U.S.C. 1508(b)).

22 (3) TENANTS AND SHARECROPPERS.—In carry23 ing out this section, the Secretary shall provide ade24 quate safeguards to protect the interests of operators

25 who are tenants and sharecroppers.
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1 (b) ELEMENTS.—

2 (1) TIME FOR CONTRACTING.—

3 (A) DEADLINE.—Except as provided in sub4 paragraph (B), the Secretary may not enter into

5 a contract after April 15, 1996.

6 (B) CONSERVATION RESERVE LANDS.—

7 (i) IN GENERAL.—At the beginning of

8 each fiscal year, the Secretary shall allow

9 an eligible owner or operator on a farm cov10 ered by a conservation reserve contract en11 tered into under section 1231 of the Food

12 Security Act of 1985 (16 U.S.C. 3831) that

13 terminates after the date specified in sub14 paragraph (A) to enter into or expand a

15 production flexibility contract to cover the

16 contract acreage of the farm that was sub17 ject to the former conservation reserve con18 tract.

19 (ii) AMOUNT.—Contract payments

20 made for contract acreage under this sub21 paragraph shall be made at the rate and

22 amount applicable to the annual contract

23 payment level for the applicable crop.

24 (2) DURATION OF CONTRACT.—
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1 (A) BEGINNING DATE.—A contract shall

2 begin with—

3 (i) the 1996 crop of a contract com4 modity; or

5 (ii) in the case of acreage that was sub6 ject to a conservation reserve contract de7 scribed in paragraph (1)(B), the date the

8 production flexibility contract was entered

9 into or expanded to cover the acreage.

10 (B) ENDING DATE.—A contract shall extend

11 through the 2002 crop.

12 (3) ESTIMATION OF CONTRACT PAYMENTS.—At

13 the time the Secretary enters into a contract, the Sec14 retary shall provide an estimate of the minimum con15 tract payments anticipated to be made during at

16 least the first fiscal year for which contract payments

17 will be made.

18 (c) ELIGIBLE FARMLAND DESCRIBED.—Land shall be

19 considered to be farmland eligible for coverage under a con20 tract only if the land has contract acreage attributable to

21 the land and—

22 (1) for at least 1 of the 1991 through 1995 crops,

23 at least a portion of the land was enrolled in the acre24 age reduction program authorized for a crop of a con25 tract commodity under section 101B, 103B, 105B, or
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1 107B of the Agricultural Act of 1949 (as in effect

2 prior to the amendment made by section 1109(b)(2))

3 or was considered planted;

4 (2) was subject to a conservation reserve contract

5 under section 1231 of the Food Security Act of 1985

6 (16 U.S.C. 3831) whose term expired, or was volun7 tarily terminated, on or after January 1, 1995; or

8 (3) is released from coverage under a conserva9 tion reserve contract by the Secretary during the pe10 riod beginning on January 1, 1995, and ending on

11 the date specified in subsection (b)(1)(A).

12 (d) TIME FOR PAYMENT.—

13 (1) IN GENERAL.—An annual contract payment

14 shall be made not later than September 30 of each of

15 fiscal years 1996 through 2002.

16 (2) ADVANCE PAYMENTS.—

17 (A) FISCAL YEAR 1996.—At the option of the

18 owner or operator, 50 percent of the contract

19 payment for fiscal year 1996 shall be made not

20 later than 60 days after the date on which the

21 owner or operator enters into a contract.

22 (B) SUBSEQUENT FISCAL YEARS.—At the

23 option of the owner or operator for fiscal year

24 1997 and each subsequent fiscal year, 50 percent
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1 of the annual contract payment shall be made on

2 December 15.

3 (e) AMOUNTS AVAILABLE FOR CONTRACT PAYMENTS

4 FOR EACH FISCAL YEAR.—

5 (1) IN GENERAL.—The Secretary shall expend on

6 a fiscal year basis the following amounts to satisfy

7 the obligations of the Secretary under all contracts:

8 (A) For fiscal year 1996, $5,570,000,000.

9 (B) For fiscal year 1997, $5,385,000,000.

10 (C) For fiscal year 1998, $5,800,000,000.

11 (D) For fiscal year 1999, $5,603,000,000.

12 (E) For fiscal year 2000, $5,130,000,000.

13 (F) For fiscal year 2001, $4,130,000,000.

14 (G) For fiscal year 2002, $4,008,000,000.

15 (2) ALLOCATION.—The amount made available

16 for a fiscal year under paragraph (1) shall be allo17 cated as follows:

18 (A) For wheat, 26.26 percent.

19 (B) For corn, 46.22 percent.

20 (C) For grain sorghum, 5.11 percent.

21 (D) For barley, 2.16 percent.

22 (E) For oats, 0.15 percent.

23 (F) For upland cotton, 11.63 percent.

24 (G) For rice, 8.47 percent.
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1 (3) ADJUSTMENT.—The Secretary shall adjust

2 the amounts allocated for each contract commodity

3 under paragraph (2) for a particular fiscal year by—

4 (A) subtracting an amount equal to the

5 amount, if any, necessary to satisfy payment re6 quirements under sections 101B, 103B, 105B,

7 and 107B of the Agricultural Act of 1949 (as in

8 effect prior to the amendment made by section

9 1109(b)(2)) for the 1994 and 1995 crops of the

10 commodity;

11 (B) adding an amount equal to the sum of

12 all producer repayments of deficiency payments

13 received under section 114(a)(2) of the Act (as so

14 in effect) for the commodity;

15 (C) adding an amount equal to the sum of

16 all contract payments withheld by the Secretary,

17 at the request of producers, during the preceding

18 fiscal year as an offset against producer repay19 ments of deficiency payments otherwise required

20 under section 114(a)(2) of the Act (as so in ef21 fect) for the commodity; and

22 (D) adding an amount equal to the sum of

23 all refunds of contract payments received during

24 the preceding fiscal year under subsection (h) for

25 the commodity.
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1 (f) DETERMINATION OF CONTRACT PAYMENTS.—

2 (1) INDIVIDUAL PAYMENT QUANTITY OF CON3 TRACT COMMODITIES.—For each contract, the pay4 ment quantity of a contract commodity for each fiscal

5 year shall be equal to the product of—

6 (A) 85 percent of the contract acreage; and

7 (B) the farm program payment yield.

8 (2) ANNUAL PAYMENT QUANTITY OF CONTRACT

9 COMMODITIES.—The payment quantity of each con10 tract commodity covered by all contracts for each fis11 cal year shall equal the sum of the amounts calculated

12 under paragraph (1) for each individual contract.

13 (3) ANNUAL PAYMENT RATE.—The payment rate

14 for a contract commodity for each fiscal year shall be

15 equal to—

16 (A) the amount made available under sub17 section (e) for the contract commodity for the fis18 cal year; divided by

19 (B) the amount determined under para20 graph (2) for the fiscal year.

21 (4) ANNUAL PAYMENT AMOUNT.—The amount to

22 be paid under a contract in effect for each fiscal year

23 with respect to a contract commodity shall be equal

24 to the product of—
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1 (A) the payment quantity determined under

2 paragraph (1) with respect to the contract; and

3 (B) the payment rate in effect under para4 graph (3).

5 (5) ASSIGNMENT OF CONTRACT PAYMENTS.—The

6 provisions of section 8(g) of the Soil Conservation and

7 Domestic Allotment Act (16 U.S.C. 590h(g)) (relating

8 to assignment of payments) shall apply to contract

9 payments under this subsection. The owner or opera10 tor making the assignment, or the assignee, shall pro11 vide the Secretary with notice, in such manner as the

12 Secretary may require in the contract, of any assign13 ment made under this paragraph.

14 (6) SHARING OF CONTRACT PAYMENTS.—The

15 Secretary shall provide for the sharing of contract

16 payments among the owners and operators subject to

17 the contract on a fair and equitable basis.

18 (g) PAYMENT LIMITATION.—The total amount of con19 tract payments made to a person under a contract during

20 any fiscal year may not exceed the payment limitations es21 tablished under section 1105.

22 (h) EFFECT OF VIOLATION.—

23 (1) TERMINATION OF CONTRACT.—Except as pro24 vided in paragraph (2), if an owner or operator sub25 ject to a contract violates the conservation plan for
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1 the farm containing eligible farmland under the con2 tract, wetland protection requirements applicable to

3 the farm, or the planting flexibility requirements of

4 subsection (j), the Secretary shall terminate the con5 tract with respect to the owner or operator. On the

6 termination, the owner or operator shall forfeit all

7 rights to receive future contract payments and shall

8 refund to the Secretary all contract payments received

9 by the owner or operator during the period of the vio10 lation, together with interest on the contract pay11 ments as determined by the Secretary.

12 (2) REFUND OR ADJUSTMENT.—If the Secretary

13 determines that a violation does not warrant termi14 nation of the contract under paragraph (1), the Sec15 retary may require the owner or operator subject to

16 the contract—

17 (A) to refund to the Secretary that part of

18 the contract payments received by the owner or

19 operator during the period of the violation, to20 gether with interest on the contract payments as

21 determined by the Secretary; or

22 (B) to accept a reduction in the amount of

23 future contract payments that is proportionate

24 to the severity of the violation, as determined by

25 the Secretary.
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1 (3) FORECLOSURE.—An owner or operator sub2 ject to a contract may not be required to make repay3 ments to the Secretary of amounts received under the

4 contract if the contract acreage has been foreclosed on

5 and the Secretary determines that forgiving the re6 payments is appropriate in order to provide fair and

7 equitable treatment. This paragraph shall not void

8 the responsibilities of such an owner or operator

9 under the contract if the owner or operator continues

10 or resumes operation, or control, of the contract acre11 age. On the resumption of operation or control over

12 the contract acreage by the owner or operator, the

13 provisions of the contract in effect on the date of the

14 foreclosure shall apply.

15 (4) REVIEW.—A determination of the Secretary

16 under this subsection shall be considered to be an ad17 verse decision for purposes of the availability of ad18 ministrative review of the determination.

19 (i) TRANSFER OF INTEREST IN LANDS SUBJECT TO

20 CONTRACT.—

21 (1) EFFECT OF TRANSFER.—Except as provided

22 in paragraph (2), the transfer by an owner or opera23 tor subject to a contract of the right and interest of

24 the owner or operator in the contract acreage shall re25 sult in the termination of the contract with respect to
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1 the acreage, effective on the date of the transfer, unless

2 the transferee of the acreage agrees with the Secretary

3 to assume all obligations of the contract. At the re4 quest of the transferee, the Secretary may modify the

5 contract if the modifications are consistent with the

6 objectives of this section as determined by the Sec7 retary.

8 (2) EXCEPTION.—If an owner or operator who is

9 entitled to a contract payment dies, becomes incom10 petent, or is otherwise unable to receive the contract

11 payment, the Secretary shall make the payment, in

12 accordance with regulations prescribed by the Sec13 retary.

14 (j) PLANTING FLEXIBILITY.—

15 (1) PERMITTED CROPS.—Subject to paragraph

16 (2)(A), any commodity or crop may be planted on

17 contract acreage.

18 (2) LIMITATIONS.—

19 (A) IN GENERAL.—Except as provided in

20 subparagraph (B), the planting of any fruit or

21 vegetable, and unlimited haying and grazing,

22 shall be permitted on not more than 15 percent

23 of the contract acreage.

24 (B) EXCEPTION.—Subparagraph (A) shall

25 not apply to the planting of contract commod-
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1 ities, lentils, mung beans, and dry peas on con2 tract acreage.

3 (3) ALFALFA.—The planting of alfalfa on con4 tract acreage is unlimited, except that the quantity of

5 acreage on which the contract payment of the owner

6 or operator would otherwise be based shall be reduced

7 for each acre planted to alfalfa in excess of the limita8 tion in effect under paragraph (2)(A) for the contract.

9 (4) HAYING AND GRAZING.—Subject to para10 graphs (2) and (3), haying and grazing of contract

11 acreage shall be permitted, except during any consecu12 tive 5-month period that is established by the State

13 committee established under section 8(b) of the Soil

14 Conservation and Domestic Allotment Act (16 U.S.C.

15 590h(b)) for a State. The 5-month period shall be es16 tablished during the period beginning April 1, and

17 ending October 31, of a year. In the case of a natural

18 disaster, the Secretary may permit unlimited haying

19 and grazing on the contract acreage.

20 SEC. 1104. NONRECOURSE MARKETING ASSISTANCE LOANS

21 AND LOAN DEFICIENCY PAYMENTS.

22 (a) AVAILABILITY OF NONRECOURSE LOANS.—

23 (1) AVAILABILITY.—For each of the 1996 through

24 2002 crops of each loan commodity, the Secretary

25 shall make available to producers on a farm
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1 nonrecourse marketing assistance loans for loan com2 modities produced on the farm. The loans shall be

3 made under terms and conditions that are prescribed

4 by the Secretary and at the loan rate established

5 under subsection (b) for the loan commodity.

6 (2) ELIGIBLE PRODUCTION.—The following pro7 duction shall be eligible for a marketing assistance

8 loan under this section:

9 (A) In the case of a marketing assistance

10 loan for a contract commodity, any production

11 by a producer who has entered into a production

12 flexibility contract.

13 (B) In the case of a marketing assistance

14 loan for extra long staple cotton and oilseeds,

15 any production.

16 (b) LOAN RATES.—

17 (1) WHEAT.—

18 (A) LOAN RATE.—Subject to subparagraph

19 (B), the loan rate for a marketing assistance

20 loan for wheat shall be—

21 (i) not less than 85 percent of the sim22 ple average price received by producers of

23 wheat, as determined by the Secretary, dur24 ing the marketing years for the immediately

25 preceding 5 crops of wheat, excluding the
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1 year in which the average price was the

2 highest and the year in which the average

3 price was the lowest in the period; but

4 (ii) not more than $2.58 per bushel.

5 (B) STOCKS TO USE RATIO ADJUSTMENT.—

6 If the Secretary estimates for any marketing

7 year that the ratio of ending stocks of wheat to

8 total use for the marketing year will be—

9 (i) equal to or greater than 30 percent,

10 the Secretary may reduce the loan rate for

11 wheat for the corresponding crop by an

12 amount not to exceed 10 percent in any

13 year;

14 (ii) less than 30 percent but not less

15 than 15 percent, the Secretary may reduce

16 the loan rate for wheat for the correspond17 ing crop by an amount not to exceed 5 per18 cent in any year; or

19 (iii) less than 15 percent, the Secretary

20 may not reduce the loan rate for wheat for

21 the corresponding crop.

22 (C) NO EFFECT ON FUTURE YEARS.—Any

23 reduction in the loan rate for wheat under sub24 paragraph (B) shall not be considered in deter-
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1 mining the loan rate for wheat for subsequent

2 years.

3 (2) FEED GRAINS.—

4 (A) LOAN RATE FOR CORN.—Subject to sub5 paragraph (B), the loan rate for a marketing as6 sistance loan for corn shall be—

7 (i) not less than 85 percent of the sim8 ple average price received by producers of

9 corn, as determined by the Secretary, dur10 ing the marketing years for the immediately

11 preceding 5 crops of corn, excluding the

12 year in which the average price was the

13 highest and the year in which the average

14 price was the lowest in the period; but

15 (ii) not more than $1.89 per bushel.

16 (B) STOCKS TO USE RATIO ADJUSTMENT.—

17 If the Secretary estimates for any marketing

18 year that the ratio of ending stocks of corn to

19 total use for the marketing year will be—

20 (i) equal to or greater than 25 percent,

21 the Secretary may reduce the loan rate for

22 corn for the corresponding crop by an

23 amount not to exceed 10 percent in any

24 year;
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1 (ii) less than 25 percent but not less

2 than 12.5 percent, the Secretary may reduce

3 the loan rate for corn for the corresponding

4 crop by an amount not to exceed 5 percent

5 in any year; or

6 (iii) less than 12.5 percent the Sec7 retary may not reduce the loan rate for corn

8 for the corresponding crop.

9 (C) NO EFFECT ON FUTURE YEARS.—Any

10 reduction in the loan rate for corn under sub11 paragraph (B) shall not be considered in deter12 mining the loan rate for corn for subsequent

13 years.

14 (D) OTHER FEED GRAINS.—The loan rate

15 for a marketing assistance loan for grain sor16 ghum, barley, and oats, respectively, shall be es17 tablished at such level as the Secretary deter18 mines is fair and reasonable in relation to the

19 rate that loans are made available for corn, tak20 ing into consideration the feeding value of the

21 commodity in relation to corn.

22 (3) UPLAND COTTON.—

23 (A) LOAN RATE.—Subject to subparagraph

24 (B), the loan rate for a marketing assistance

25 loan for upland cotton shall be established by the
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1 Secretary at such loan rate, per pound, as will

2 reflect for the base quality of upland cotton, as

3 determined by the Secretary, at average locations

4 in the United States a rate that is not less than

5 the smaller of—

6 (i) 85 percent of the average price

7 (weighted by market and month) of the base

8 quality of cotton as quoted in the designated

9 United States spot markets during 3 years

10 of the 5-year period ending July 31 in the

11 year in which the loan rate is announced,

12 excluding the year in which the average

13 price was the highest and the year in which

14 the average price was the lowest in the pe15 riod; or

16 (ii) 90 percent of the average, for the

17 15-week period beginning July 1 of the year

18 in which the loan rate is announced, of the

19 5 lowest-priced growths of the growths

quoted for Middling 13 20 ⁄32-inch cotton C.I.F.

21 Northern Europe (adjusted downward by

22 the average difference during the period

23 April 15 through October 15 of the year in

24 which the loan is announced between the av25 erage Northern European price quotation of
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1 such quality of cotton and the market

2 quotations in the designated United States

3 spot markets for the base quality of upland

4 cotton), as determined by the Secretary.

5 (B) LIMITATIONS.—The loan rate for a

6 marketing assistance loan for upland cotton shall

7 not be less than $0.50 per pound or more than

8 $0.5192 per pound.

9 (4) EXTRA LONG STAPLE COTTON.—The loan

10 rate for a marketing assistance loan for extra long

11 staple cotton shall be—

12 (A) not less than 85 percent of the simple

13 average price received by producers of extra long

14 staple cotton, as determined by the Secretary,

15 during 3 years of the 5 previous marketing

16 years, excluding the year in which the average

17 price was the highest and the year in which the

18 average price was the lowest in the period; but

19 (B) not more than $0.7965 per pound.

20 (5) RICE.—The loan rate for a marketing assist21 ance loan for rice shall be $6.50 per hundredweight.

22 (6) OILSEEDS.—

23 (A) SOYBEANS.—The loan rate for a mar24 keting assistance loan for soybeans shall be $4.92

25 per bushel.
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1 (B) SUNFLOWER SEED, CANOLA, RAPESEED,

2 SAFFLOWER, MUSTARD SEED, AND FLAXSEED.—

3 The loan rates for a marketing assistance loan

4 for sunflower seed, canola, rapeseed, safflower,

5 mustard seed, and flaxseed, individually, shall be

6 $0.087 per pound.

7 (C) OTHER OILSEEDS.—The loan rates for

8 a marketing assistance loan for other oilseeds

9 shall be established at such level as the Secretary

10 determines is fair and reasonable in relation to

11 the loan rate available for soybeans, except in no

12 event shall the rate for the oilseeds (other than

13 cottonseed) be less than the rate established for

14 soybeans on a per-pound basis for the same crop.

15 (c) TERM OF LOAN.—In the case of each loan commod16 ity (other than upland cotton or extra long staple cotton),

17 a marketing assistance loan under subsection (a) shall have

18 a term of 9 months beginning on the first day of the first

19 month after the month in which the loan is made. A market20 ing assistance loan for upland cotton or extra long staple

21 cotton shall have a term of 10 months. The Secretary may

22 not extend the term of a marketing assistance loan for any

23 loan commodity.

24 (d) REPAYMENT.—
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1 (1) REPAYMENT RATES GENERALLY.—The Sec2 retary shall permit producers to repay a marketing

3 assistance loan under subsection (a) for a loan com4 modity (other than extra long staple cotton) at a level

5 that is the lesser of—

6 (A) the loan rate established for the com7 modity under subsection (b); or

8 (B) the prevailing world market price for

9 the commodity (adjusted to United States qual10 ity and location), as determined by the Sec11 retary.

12 (2) REPAYMENT RATES FOR EXTRA LONG STAPLE

13 COTTON.—Repayment of a marketing assistance loan

14 for extra long staple cotton shall be at the loan rate

15 established for the commodity under subsection (b).

16 (3) PREVAILING WORLD MARKET PRICE.—For

17 purposes of paragraph (1)(B) and subsection (f), the

18 Secretary shall prescribe by regulation—

19 (A) a formula to determine the prevailing

20 world market price for each loan commodity, ad21 justed to United States quality and location; and

22 (B) a mechanism by which the Secretary

23 shall announce periodically the prevailing world

24 market price for each loan commodity.
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1 (4) ADJUSTMENT OF PREVAILING WORLD MAR2 KET PRICE FOR UPLAND COTTON.—

3 (A) IN GENERAL.—During the period end4 ing July 31, 2003, the prevailing world market

5 price for upland cotton (adjusted to United

6 States quality and location) established under

7 paragraph (3) shall be further adjusted if—

8 (i) the adjusted prevailing world mar9 ket price is less than 115 percent of the loan

10 rate for upland cotton established under

11 subsection (b), as determined by the Sec12 retary; and

13 (ii) the Friday through Thursday aver14 age price quotation for the lowest-priced

15 United States growth as quoted for Middling (M) 13 16 ⁄32-inch cotton delivered C.I.F.

17 Northern Europe is greater than the Friday

18 through Thursday average price of the 5

19 lowest-priced growths of upland cotton, as

quoted for Middling (M) 13 20 ⁄32-inch cotton,

21 delivered C.I.F. Northern Europe (referred

22 to in this subsection as the ‘‘Northern Eu23 rope price’’).

24 (B) FURTHER ADJUSTMENT.—Except as

25 provided in subparagraph (C), the adjusted pre-
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1 vailing world market price for upland cotton

2 shall be further adjusted on the basis of some or

3 all of the following data, as available:

4 (i) The United States share of world

5 exports.

6 (ii) The current level of cotton export

7 sales and cotton export shipments.

8 (iii) Other data determined by the Sec9 retary to be relevant in establishing an ac10 curate prevailing world market price for

11 upland cotton (adjusted to United States

12 quality and location).

13 (C) LIMITATION ON FURTHER ADJUST14 MENT.—The adjustment under subparagraph (B)

15 may not exceed the difference between—

16 (i) the Friday through Thursday aver17 age price for the lowest-priced United States

growth as quoted for Middling 13 18 ⁄32-inch

19 cotton delivered C.I.F. Northern Europe;

20 and

21 (ii) the Northern Europe price.

22 (e) LOAN DEFICIENCY PAYMENTS.—

23 (1) AVAILABILITY.—Except as provided in para24 graph (4), the Secretary may make loan deficiency

25 payments available to producers who, although eligi-
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1 ble to obtain a marketing assistance loan under sub2 section (a) with respect to a loan commodity, agree

3 to forgo obtaining the loan for the commodity in re4 turn for payments under this subsection.

5 (2) COMPUTATION.—A loan deficiency payment

6 under this subsection shall be computed by multiply7 ing—

8 (A) the loan payment rate determined

9 under paragraph (3) for the loan commodity; by

10 (B) the quantity of the loan commodity that

11 the producers on a farm are eligible to place

12 under loan but for which the producers forgo ob13 taining the loan in return for payments under

14 this subsection.

15 (3) LOAN PAYMENT RATE.—For purposes of this

16 subsection, the loan payment rate shall be the amount

17 by which—

18 (A) the loan rate established under sub19 section (b) for the loan commodity; exceeds

20 (B) the rate at which a loan for the com21 modity may be repaid under subsection (d).

22 (4) EXCEPTION FOR EXTRA LONG STAPLE COT23 TON.—This subsection shall not apply with respect to

24 extra long staple cotton.
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1 (f) SPECIAL MARKETING LOAN PROVISIONS FOR UP2 LAND COTTON.—

3 (1) FIRST HANDLER MARKETING CERTIFI4 CATES.—

5 (A) IN GENERAL.—During the period end6 ing on July 31, 2003, if the repayment rates

7 provided in subsection (d) for upland cotton or

8 the availability of loan deficiency payments for

9 upland cotton under subsection (e) fails to make

10 United States upland cotton fully competitive in

11 world markets and the prevailing world market

12 price of upland cotton (adjusted to United States

13 quality and location) is below the current loan

14 repayment rate for upland cotton, to make Unit15 ed States upland cotton competitive in world

16 markets and to maintain and expand domestic

17 consumption and exports of upland cotton pro18 duced in the United States, the Secretary shall

19 provide for the issuance of marketing certificates

20 or cash payments in accordance with this para21 graph.

22 (B) PAYMENTS.—The Commodity Credit

23 Corporation, under such regulations as the Sec24 retary may prescribe, shall make payments,

25 through the issuance of marketing certificates or
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1 cash payments, to first handlers of upland cotton

2 (persons regularly engaged in buying or selling

3 upland cotton) who have entered into an agree4 ment with the Commodity Credit Corporation to

5 participate in the program established under this

6 paragraph. The payments shall be made in such

7 amounts and subject to such terms and condi8 tions as the Secretary determines will make up9 land cotton produced in the United States avail10 able at competitive prices, consistent with the

11 purposes of this paragraph.

12 (C) VALUE.—The value of each certificate or

13 cash payment issued under subparagraph (B)

14 shall be based on the difference between—

15 (i) the loan repayment rate for upland

16 cotton; and

17 (ii) the prevailing world market price

18 of upland cotton (adjusted to United States

19 quality and location), as determined by the

20 Secretary.

21 (D) REDEMPTION, MARKETING, OR EX22 CHANGE.—The Commodity Credit Corporation,

23 under regulations prescribed by the Secretary,

24 may assist any person receiving marketing cer25 tificates under this paragraph in the redemption
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1 of certificates for cash, or marketing or exchange

2 of the certificates for agricultural commodities or

3 products owned by the Commodity Credit Cor4 poration, at such times, in such manner, and at

5 such price levels as the Secretary determines will

6 best effectuate the purposes of the program estab7 lished under this paragraph. Any price restric8 tions that may otherwise apply to the disposition

9 of agricultural commodities by the Commodity

10 Credit Corporation shall not apply to the re11 demption of certificates under this paragraph.

12 (E) DESIGNATION OF COMMODITIES AND

13 PRODUCTS; CHARGES.—Insofar as practicable,

14 the Secretary shall permit owners of certificates

15 to designate the commodities and products, in16 cluding storage sites, the owners would prefer to

17 receive in exchange for certificates. If any certifi18 cate is not presented for redemption, marketing,

19 or exchange within a reasonable number of days

20 after the issuance of the certificate (as deter21 mined by the Secretary), reasonable costs of stor22 age and other carrying charges, as determined by

23 the Secretary, shall be deducted from the value of

24 the certificate for the period beginning after the

25 reasonable number of days and ending with the
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1 date of the presentation of the certificate to the

2 Commodity Credit Corporation.

3 (F) DISPLACEMENT.—The Secretary shall

4 take such measures as may be necessary to pre5 vent the marketing or exchange of agricultural

6 commodities and products for certificates under

7 this subsection from adversely affecting the in8 come of producers of the commodities or prod9 ucts.

10 (G) TRANSFERS.—Under regulations pre11 scribed by the Secretary, certificates issued to

12 cotton handlers under this paragraph may be

13 transferred to other handlers and persons ap14 proved by the Secretary.

15 (2) COTTON USER MARKETING CERTIFICATES.—

16 (A) ISSUANCE.—Subject to subparagraph

17 (D), during the period ending July 31, 2003, the

18 Secretary shall issue marketing certificates or

19 cash payments to domestic users and exporters

20 for documented purchases by domestic users and

21 sales for export by exporters made in the week

22 following a consecutive 4-week period in which—

23 (i) the Friday through Thursday aver24 age price quotation for the lowest-priced

25 United States growth, as quoted for Mid-
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dling (M) 13 1 ⁄32-inch cotton, delivered C.I.F.

2 Northern Europe exceeds the Northern Eu3 rope price by more than 1.25 cents per

4 pound; and

5 (ii) the prevailing world market price

6 for upland cotton (adjusted to United States

7 quality and location) does not exceed 130

8 percent of the loan rate for upland cotton

9 established under subsection (b).

10 (B) VALUE OF CERTIFICATES OR PAY11 MENTS.—The value of the marketing certificates

12 or cash payments shall be based on the amount

13 of the difference (reduced by 1.25 cents per

14 pound) in the prices during the 4th week of the

15 consecutive 4-week period multiplied by the

16 quantity of upland cotton included in the docu17 mented sales.

18 (C) ADMINISTRATION.—Subparagraphs (D)

19 through (G) of paragraph (1) shall apply to

20 marketing certificates issued under this para21 graph. Any such certificates may be transferred

22 to other persons in accordance with regulations

23 issued by the Secretary.

24 (D) EXCEPTION.—The Secretary shall not

25 issue marketing certificates or cash payments
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1 under subparagraph (A) if, for the immediately

2 preceding consecutive 10-week period, the Friday

3 through Thursday average price quotation for the

4 lowest priced United States growth, as quoted for

Middling (M) 13 5 ⁄32-inch cotton, delivered C.I.F.

6 Northern Europe, adjusted for the value of any

7 certificate issued under this paragraph, exceeds

8 the Northern Europe price by more than 1.25

9 cents per pound.

10 (E) LIMITATION ON EXPENDITURES.—Total

11 expenditures under this paragraph shall not ex12 ceed $701,000,000 during fiscal years 1996

13 through 2002.

14 (3) SPECIAL IMPORT QUOTA.—

15 (A) ESTABLISHMENT.—The President shall

16 carry out an import quota program that pro17 vides that, during the period ending July 31,

18 2003, whenever the Secretary determines and an19 nounces that for any consecutive 10-week period,

20 the Friday through Thursday average price

21 quotation for the lowest-priced United States

growth, as quoted for Middling (M) 13 22 ⁄32-inch

23 cotton, delivered C.I.F. Northern Europe, ad24 justed for the value of any certificates issued

25 under paragraph (2), exceeds the Northern Eu-
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1 rope price by more than 1.25 cents per pound,

2 there shall immediately be in effect a special im3 port quota.

4 (B) QUANTITY.—The quota shall be equal to

5 1 week’s consumption of upland cotton by domes6 tic mills at the seasonally adjusted average rate

7 of the most recent 3 months for which data are

8 available.

9 (C) APPLICATION.—The quota shall apply

10 to upland cotton purchased not later than 90

11 days after the date of the Secretary’s announce12 ment under subparagraph (A) and entered into

13 the United States not later than 180 days after

14 the date.

15 (D) OVERLAP.—A special quota period may

16 be established that overlaps any existing quota

17 period if required by subparagraph (A), except

18 that a special quota period may not be estab19 lished under this paragraph if a quota period

20 has been established under subsection (g).

21 (E) PREFERENTIAL TARIFF TREATMENT.—

22 The quantity under a special import quota shall

23 be considered to be an in-quota quantity for pur24 poses of—
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1 (i) section 213(d) of the Caribbean

2 Basin Economic Recovery Act (19 U.S.C.

3 2703(d));

4 (ii) section 204 of the Andean Trade

5 Preference Act (19 U.S.C. 3203);

6 (iii) section 503(d) of the Trade Act of

7 1974 (19 U.S.C. 2463(d)); and

8 (iv) General Note 3(a)(iv) to the Har9 monized Tariff Schedule.

10 (F) DEFINITION.—In this paragraph, the

11 term ‘‘special import quota’’ means a quantity of

12 imports that is not subject to the over-quota tar13 iff rate of a tariff-rate quota.

14 (g) LIMITED GLOBAL IMPORT QUOTA FOR UPLAND

15 COTTON.—

16 (1) IN GENERAL.—The President shall carry out

17 an import quota program that provides that whenever

18 the Secretary determines and announces that the av19 erage price of the base quality of upland cotton, as de20 termined by the Secretary, in the designated spot

21 markets for a month exceeded 130 percent of the aver22 age price of such quality of cotton in the markets for

23 the preceding 36 months, notwithstanding any other

24 provision of law, there shall immediately be in effect
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1 a limited global import quota subject to the following

2 conditions:

3 (A) QUANTITY.—The quantity of the quota

4 shall be equal to 21 days of domestic mill con5 sumption of upland cotton at the seasonally ad6 justed average rate of the most recent 3 months

7 for which data are available.

8 (B) QUANTITY IF PRIOR QUOTA.—If a quota

9 has been established under this subsection during

10 the preceding 12 months, the quantity of the

11 quota next established under this subsection shall

12 be the smaller of 21 days of domestic mill con13 sumption calculated under subparagraph (A) or

14 the quantity required to increase the supply to

15 130 percent of the demand.

16 (C) PREFERENTIAL TARIFF TREATMENT.—

17 The quantity under a limited global import

18 quota shall be considered to be an in-quota quan19 tity for purposes of—

20 (i) section 213(d) of the Caribbean

21 Basin Economic Recovery Act (19 U.S.C.

22 2703(d));

23 (ii) section 204 of the Andean Trade

24 Preference Act (19 U.S.C. 3203);
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1 (iii) section 503(d) of the Trade Act of

2 1974 (19 U.S.C. 2463(d)); and

3 (iv) General Note 3(a)(iv) to the Har4 monized Tariff Schedule.

5 (D) DEFINITIONS.—In this subsection:

6 (i) SUPPLY.—The term ‘‘supply’’

7 means, using the latest official data of the

8 Bureau of the Census, the Department of

9 Agriculture, and the Department of the

10 Treasury—

11 (I) the carry-over of upland cotton

12 at the beginning of the marketing year

13 (adjusted to 480-pound bales) in which

14 the quota is established;

15 (II) production of the current

16 crop; and

17 (III) imports to the latest date

18 available during the marketing year.

19 (ii) DEMAND.—The term ‘‘demand’’

20 means—

21 (I) the average seasonally adjusted

22 annual rate of domestic mill consump23 tion in the most recent 3 months for

24 which data are available; and

25 (II) the larger of—
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1 (aa) average exports of up2 land cotton during the preceding

3 6 marketing years; or

4 (bb) cumulative exports of

5 upland cotton plus outstanding

6 export sales for the marketing

7 year in which the quota is estab8 lished.

9 (iii) LIMITED GLOBAL IMPORT

10 QUOTA.—The term ‘‘limited global import

11 quota’’ means a quantity of imports that is

12 not subject to the over-quota tariff rate of a

13 tariff-rate quota.

14 (D) QUOTA ENTRY PERIOD.—When a quota

15 is established under this subsection, cotton may

16 be entered under the quota during the 90-day pe17 riod beginning on the date the quota is estab18 lished by the Secretary.

19 (2) NO OVERLAP.—Notwithstanding paragraph

20 (1), a quota period may not be established that over21 laps an existing quota period or a special quota pe22 riod established under subsection (f)(3).

23 SEC. 1105. PAYMENT LIMITATIONS.

24 (a) LIMITATION ON PAYMENTS UNDER PRODUCTION

25 FLEXIBILITY CONTRACTS.—The total amount of contract
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1 payments made to a person under 1 or more production

2 flexibility contracts during any fiscal year may not exceed

3 $40,000.

4 (b) LIMITATION ON MARKETING LOAN GAINS AND

5 LOAN DEFICIENCY PAYMENTS.—

6 (1) LIMITATION.—The total amount of payments

7 specified in paragraph (2) that a person shall be enti8 tled to receive under section 1104 for contract com9 modities and oilseeds during any fiscal year may not

10 exceed $75,000.

11 (2) DESCRIPTION OF PAYMENTS.—The payments

12 referred to in paragraph (1) are the following:

13 (A) Any gain realized by a producer from

14 repaying a marketing assistance loan for a crop

15 of any loan commodity at a lower level than the

16 original loan rate established for the commodity

17 under section 1104(b).

18 (B) Any loan deficiency payment received

19 for a loan commodity under section 1104(e).

20 (c) APPLICABILITY OF OTHER PROVISIONS REGARD21 ING PAYMENT LIMITATIONS.—Paragraphs (5), (6), and (7)

22 of section 1001 and sections 1001A through 1001C of the

23 Food Security Act of 1985 (7 U.S.C. 1308 et seq.) shall

24 apply with respect to the application of payment limita25 tions under this section.
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1 (d) CONFORMING AMENDMENTS.—Section 1001 of the

2 Food Security Act of 1985 (7 U.S.C. 1308) is amended by

3 striking ‘‘1997’’ each place it appears in paragraphs (1)(A),

4 (1)(B), and (2)(A) and inserting ‘‘1995’’.

5 SEC. 1106. PEANUT PROGRAM.

6 (a) QUOTA PEANUTS.—

7 (1) AVAILABILITY OF LOANS.—The Secretary

8 shall make nonrecourse loans available to producers of

9 quota peanuts.

10 (2) LOAN RATE.—The national average quota

11 loan rate for quota peanuts shall be $610 per ton.

12 (3) INSPECTION, HANDLING, OR STORAGE.—The

13 loan amount may not be reduced by the Secretary by

14 any deductions for inspection, handling, or storage.

15 (4) LOCATION AND OTHER FACTORS.—The Sec16 retary may make adjustments in the loan rate for

17 quota peanuts for location of peanuts and such other

18 factors as are authorized by section 411 of the Agri19 cultural Adjustment Act of 1938.

20 (b) ADDITIONAL PEANUTS.—

21 (1) IN GENERAL.—The Secretary shall make

22 nonrecourse loans available to producers of additional

23 peanuts at such rates as the Secretary finds appro24 priate, taking into consideration the demand for pea25 nut oil and peanut meal, expected prices of other veg-
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1 etable oils and protein meals, and the demand for

2 peanuts in foreign markets.

3 (2) ANNOUNCEMENT.—The Secretary shall an4 nounce the loan rate for additional peanuts of each

5 crop not later than February 15 preceding the mar6 keting year for the crop for which the loan rate is

7 being determined.

8 (c) AREA MARKETING ASSOCIATIONS.—

9 (1) WAREHOUSE STORAGE LOANS.—

10 (A) IN GENERAL.—In carrying out sub11 sections (a) and (b), the Secretary shall make

12 warehouse storage loans available in each of the

13 producing areas (described in section 1446.95 of

14 title 7 of the Code of Federal Regulations (Janu15 ary 1, 1989)) to a designated area marketing as16 sociation of peanut producers that is selected and

17 approved by the Secretary and that is operated

18 primarily for the purpose of conducting the loan

19 activities. The Secretary may not make ware20 house storage loans available to any cooperative

21 that is engaged in operations or activities con22 cerning peanuts other than those operations and

23 activities specified in this section and section

24 358e of the Agricultural Adjustment Act of 1938

25 (7 U.S.C. 1359a).
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1 (B) ADMINISTRATIVE AND SUPERVISORY AC2 TIVITIES.—An area marketing association shall

3 be used in administrative and supervisory ac4 tivities relating to loans and marketing activities

5 under this section and section 358e of the Agri6 cultural Adjustment Act of 1938 (7 U.S.C.

7 1359a).

8 (C) ASSOCIATION COSTS.—Loans made to

9 the association under this paragraph shall in10 clude such costs as the area marketing associa11 tion reasonably may incur in carrying out the

12 responsibilities, operations, and activities of the

13 association under this section and section 358e of

14 the Agricultural Adjustment Act of 1938 (7

15 U.S.C. 1359a).

16 (2) POOLS FOR QUOTA AND ADDITIONAL PEA17 NUTS.—

18 (A) IN GENERAL.—The Secretary shall re19 quire that each area marketing association estab20 lish pools and maintain complete and accurate

21 records by area and segregation for quota pea22 nuts handled under loan and for additional pea23 nuts placed under loan, except that separate

24 pools shall be established for Valencia peanuts

25 produced in New Mexico. Bright hull and dark
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1 hull Valencia peanuts shall be considered as sep2 arate types for the purpose of establishing the

3 pools.

4 (B) NET GAINS.—Net gains on peanuts in

5 each pool, unless otherwise approved by the Sec6 retary, shall be distributed only to producers who

7 placed peanuts in the pool and shall be distrib8 uted in proportion to the value of the peanuts

9 placed in the pool by each producer. Net gains

10 for peanuts in each pool shall consist of the fol11 lowing:

12 (i) QUOTA PEANUTS.—For quota pea13 nuts, the net gains over and above the loan

14 indebtedness and other costs or losses in15 curred on peanuts placed in the pool.

16 (ii) ADDITIONAL PEANUTS.—For addi17 tional peanuts, the net gains over and above

18 the loan indebtedness and other costs or

19 losses incurred on peanuts placed in the

20 pool for additional peanuts.

21 (d) LOSSES.—Losses in quota area pools shall be cov22 ered using the following sources in the following order of

23 priority:

24 (1) TRANSFERS FROM ADDITIONAL LOAN

25 POOLS.—The proceeds due any producer from any
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1 pool shall be reduced by the amount of any loss that

2 is incurred with respect to peanuts transferred from

3 an additional loan pool to a quota loan pool by the

4 producer under section 358–1(b)(8) of the Agricul5 tural Adjustment Act of 1938 (7 U.S.C. 1358–

6 1(b)(8)).

7 (2) OTHER PRODUCERS IN SAME POOL.—Further

8 losses in an area quota pool shall be offset by reduc9 ing the gain of any producer in the pool by the

10 amount of pool gains attributed to the same producer

11 from the sale of additional peanuts for domestic and

12 export edible use.

13 (3) USE OF MARKETING ASSESSMENTS.—The

14 Secretary shall use funds collected under subsection

15 (g) (except funds attributable to handlers) to offset

16 further losses in area quota pools. The Secretary shall

17 transfer to the Treasury those funds collected under

18 subsection (g) and available for use under this sub19 section that the Secretary determines are not required

20 to cover losses in area quota pools.

21 (4) CROSS COMPLIANCE.—Further losses in area

22 quota pools, other than losses incurred as a result of

23 transfers from additional loan pools to quota loan

24 pools under section 358–1(b)(8) of the Agricultural

25 Adjustment Act of 1938 (7 U.S.C. 1358–1(b)(8)), shall
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1 be offset by any gains or profits from quota pools in

2 other production areas (other than separate type pools

3 established under subsection (c)(2)(A) for Valencia

4 peanuts produced in New Mexico) in such manner as

5 the Secretary shall by regulation prescribe.

6 (5) INCREASED ASSESSMENTS.—If use of the au7 thorities provided in the preceding paragraphs is not

8 sufficient to cover losses in an area quota pool, the

9 Secretary shall increase the marketing assessment es10 tablished under subsection (g) by such an amount as

11 the Secretary considers necessary to cover the losses.

12 The increased assessment shall apply only to quota

13 peanuts in the production area covered by the pool.

14 Amounts collected under subsection (g) as a result of

15 the increased assessment shall be retained by the Sec16 retary to cover losses in that pool.

17 (e) DISAPPROVAL OF QUOTAS.—Notwithstanding any

18 other provision of law, no loan for quota peanuts may be

19 made available by the Secretary for any crop of peanuts

20 with respect to which poundage quotas have been dis21 approved by producers, as provided for in section 358–1(d)

22 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1358–

23 1(d)).

24 (f) QUALITY IMPROVEMENT.—
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1 (1) IN GENERAL.—With respect to peanuts under

2 loan, the Secretary shall—

3 (A) promote the crushing of peanuts at a

4 greater risk of deterioration before peanuts of a

5 lesser risk of deterioration;

6 (B) ensure that all Commodity Credit Cor7 poration inventories of peanuts sold for domestic

8 edible use must be shown to have been officially

9 inspected by licensed Department of Agriculture

10 inspectors both as farmer stock and shelled or

11 cleaned in-shell peanuts;

12 (C) continue to endeavor to operate the pea13 nut program so as to improve the quality of do14 mestic peanuts and ensure the coordination of

15 activities under the Peanut Administrative Com16 mittee established under Marketing Agreement

17 No. 146, regulating the quality of domestically

18 produced peanuts (under the Agricultural Ad19 justment Act (7 U.S.C. 601 et seq.), reenacted

20 with amendments by the Agricultural Marketing

21 Agreement Act of 1937); and

22 (D) ensure that any changes made in the

23 peanut program as a result of this subsection re24 quiring additional production or handling at the

25 farm level shall be reflected as an upward adjust-
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1 ment in the Department of Agriculture loan

2 schedule.

3 (2) EXPORTS AND OTHER PEANUTS.—The Sec4 retary shall require that all peanuts in the domestic

5 and export markets fully comply with all quality

6 standards under Marketing Agreement No. 146.

7 (g) MARKETING ASSESSMENT.—

8 (1) IN GENERAL.—The Secretary shall provide

9 for a nonrefundable marketing assessment. The assess10 ment shall be made on a per pound basis in an

11 amount equal to 1.1 percent for each of the 1994 and

12 1995 crops, 1.15 percent for the 1996 crop, and 1.2

13 percent for each of the 1997 through 2002 crops, of the

14 national average quota or additional peanut loan rate

15 for the applicable crop.

16 (2) FIRST PURCHASERS.—

17 (A) IN GENERAL.—Except as provided

18 under paragraphs (3) and (4), the first pur19 chaser of peanuts shall—

20 (i) collect from the producer a market21 ing assessment equal to the quantity of pea22 nuts acquired multiplied by—

23 (I) in the case of each of the 1994

24 and 1995 crops, .55 percent of the ap25 plicable national average loan rate;
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1 (II) in the case of the 1996 crop,

2 .6 percent of the applicable national

3 average loan rate; and

4 (III) in the case of each of the

5 1997 through 2002 crops, .65 percent

6 of the applicable national average loan

7 rate;

8 (ii) pay, in addition to the amount

9 collected under clause (i), a marketing as10 sessment in an amount equal to the quan11 tity of peanuts acquired multiplied by .55

12 percent of the applicable national average

13 loan rate; and

14 (iii) remit the amounts required under

15 clauses (i) and (ii) to the Commodity Credit

16 Corporation in a manner specified by the

17 Secretary.

18 (B) DEFINITION OF FIRST PURCHASER.—In

19 this subsection, the term ‘‘first purchaser’’ means

20 a person acquiring peanuts from a producer ex21 cept that in the case of peanuts forfeited by a

22 producer to the Commodity Credit Corporation,

23 the term means the person acquiring the peanuts

24 from the Commodity Credit Corporation.
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1 (3) OTHER PRIVATE MARKETINGS.—In the case

2 of a private marketing by a producer directly to a

3 consumer through a retail or wholesale outlet or in

4 the case of a marketing by the producer outside of the

5 continental United States, the producer shall be re6 sponsible for the full amount of the assessment and

7 shall remit the assessment by such time as is specified

8 by the Secretary.

9 (4) LOAN PEANUTS.—In the case of peanuts that

10 are pledged as collateral for a loan made under this

section, 1 11 ⁄2 of the assessment shall be deducted from

12 the proceeds of the loan. The remainder of the assess13 ment shall be paid by the first purchaser of the pea14 nuts. For purposes of computing net gains on peanuts

15 under this section, the reduction in loan proceeds

16 shall be treated as having been paid to the producer.

17 (5) PENALTIES.—If any person fails to collect or

18 remit the reduction required by this subsection or

19 fails to comply with the requirements for record20 keeping or otherwise as are required by the Secretary

21 to carry out this subsection, the person shall be liable

22 to the Secretary for a civil penalty up to an amount

23 determined by multiplying—

24 (A) the quantity of peanuts involved in the

25 violation; by
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1 (B) the national average quota peanut rate

2 for the applicable crop year.

3 (6) ENFORCEMENT.—The Secretary may enforce

4 this subsection in the courts of the United States.

5 (h) CROPS.—Subsections (a) through (f) shall be effec6 tive only for the 1996 through 2002 crops of peanuts.

7 (i) MARKETING QUOTAS.—

8 (1) IN GENERAL.—Part VI of subtitle B of title

9 III of the Agricultural Adjustment Act of 1938 is

10 amended—

11 (A) in section 358–1 (7 U.S.C. 1358–1)—

12 (i) in the section heading, by striking

13 ‘‘1991 through 1997 crops of’’;

14 (ii) in subsections (a)(1), (b)(1)(B),

15 (b)(2)(A), (b)(2)(C), and (b)(3)(A), by strik16 ing ‘‘of the 1991 through 1997 marketing

17 years’’ each place it appears and inserting

18 ‘‘marketing year’’;

19 (iii) in subsection (a)(3), by striking

20 ‘‘1990’’ and inserting ‘‘1990, for the 1991

21 through 1995 marketing years, and 1995,

22 for the 1996 through 2002 marketing

23 years’’;

24 (iv) in subsection (b)(1)(A)—
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1 (I) by striking ‘‘each of the 1991

2 through 1997 marketing years’’ and

3 inserting ‘‘each marketing year’’; and

4 (II) in clause (i), by inserting be5 fore the semicolon the following: ‘‘, in

6 the case of the 1991 through 1995 mar7 keting years, and the 1995 marketing

8 year, in the case of the 1996 through

9 2002 marketing years’’; and

10 (v) in subsection (f), by striking

11 ‘‘1997’’ and inserting ‘‘2002’’;

12 (B) in section 358b (7 U.S.C. 1358b)—

13 (i) in the section heading, by striking

14 ‘‘1991 through 1995 crops of’’; and

15 (ii) in subsection (c), by striking

16 ‘‘1995’’ and inserting ‘‘2002’’;

17 (C) in section 358c(d) (7 U.S.C. 1358c(d)),

18 by striking ‘‘1995’’ and inserting ‘‘2002’’; and

19 (D) in section 358e (7 U.S.C. 1359a)—

20 (i) in the section heading, by striking

21 ‘‘for 1991 through 1997 crops of

22 peanuts’’; and

23 (ii) in subsection (i), by striking

24 ‘‘1997’’ and inserting ‘‘2002’’.
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1 (2) ELIMINATION OF QUOTA FLOOR.—Section

2 358–1(a)(1) of the Act (7 U.S.C. 1358–1(a)(1)) is

3 amended by striking the second sentence.

4 (3) TEMPORARY QUOTA ALLOCATION.—Section

5 358–1 of the Act (7 U.S.C. 1358–1) is amended—

6 (A) in subsection (a)(1), by striking ‘‘do7 mestic edible, seed,’’ and inserting ‘‘domestic edi8 ble use’’; and

9 (B) in subsection (b)(2)—

10 (i) in subparagraph (A), by striking

11 ‘‘subparagraph (B) and subject to’’; and

12 (ii) by striking subparagraph (B) and

13 inserting the following:

14 ‘‘(B) TEMPORARY QUOTA ALLOCATION.—

15 ‘‘(i) ALLOCATION RELATED TO SEED

16 PEANUTS.—Temporary allocation of quota

17 pounds for the marketing year only in

18 which the crop is planted shall be made to

19 producers for each of the 1996 through 2002

20 marketing years as provided in this sub21 paragraph.

22 ‘‘(ii) QUANTITY.—The temporary quota

23 allocation shall be equal to the pounds of

24 seed peanuts planted on the farm, as may
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1 be adjusted under regulations prescribed by

2 the Secretary.

3 ‘‘(iii) ADDITIONAL QUOTA.—The tem4 porary allocation of quota pounds under

5 this paragraph shall be in addition to the

6 farm poundage quota otherwise established

7 under this subsection and shall be credited,

8 for the applicable marketing year only, in

9 total to the producer of the peanuts on the

10 farm in a manner prescribed by the Sec11 retary.

12 ‘‘(iv) EFFECT OF OTHER REQUIRE13 MENTS.—Nothing in this section alters or

14 changes the requirements regarding the use

15 of quota and additional peanuts established

16 by section 358e(b).’’.

17 (4) UNDERMARKETINGS.—Part VI of subtitle B

18 of title III of the Act is amended—

19 (A) in section 358–1(b) (7 U.S.C. 1358–

20 1(b))—

21 (i) in paragraph (1)(B), by striking

22 ‘‘including—’’ and clauses (i) and (ii) and

23 inserting ‘‘including any increases resulting

24 from the allocation of quotas voluntarily re25 leased for 1 year under paragraph (7).’’;
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1 (ii) in paragraph (3)(B), by striking

2 ‘‘include—’’ and clauses (i) and (ii) and

3 inserting ‘‘include any increase resulting

4 from the allocation of quotas voluntarily re5 leased for 1 year under paragraph (7).’’;

6 and

7 (iii) by striking paragraphs (8) and

8 (9); and

9 (B) in section 358b(a) (7 U.S.C.

10 1358b(a))—

11 (i) in paragraph (1), by striking ‘‘(in12 cluding any applicable under marketings)’’

13 both places it appears;

14 (ii) in paragraph (1)(A), by striking

15 ‘‘of undermarketings and’’;

16 (iii) in paragraph (2), by striking

17 ‘‘(including any applicable under market18 ings)’’; and

19 (iv) in paragraph (3), by striking

20 ‘‘(including any applicable

21 undermarketings)’’.

22 (5) DISASTER TRANSFERS.—Section 358–1(b) of

23 the Act (7 U.S.C. 1358–1(b)), as amended by para24 graph (4)(A)(iii), is further amended by adding at

25 the end the following:
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1 ‘‘(8) DISASTER TRANSFERS.—

2 ‘‘(A) IN GENERAL.—Except as provided in

3 subparagraph (B), additional peanuts produced

4 on a farm from which the quota poundage was

5 not harvested and marketed because of drought,

6 flood, or any other natural disaster, or any other

7 condition beyond the control of the producer,

8 may be transferred to the quota loan pool for

9 pricing purposes on such basis as the Secretary

10 shall by regulation provide.

11 ‘‘(B) LIMITATION.—The poundage of pea12 nuts transferred under subparagraph (A) shall

13 not exceed the difference between—

14 ‘‘(i) the total quantity of peanuts meet15 ing quality requirements for domestic edible

16 use, as determined by the Secretary, mar17 keted from the farm; and

18 ‘‘(ii) the total farm poundage quota,

19 excluding quota pounds transferred to the

20 farm in the fall.

21 ‘‘(C) SUPPORT RATE.—Peanuts transferred

22 under this paragraph shall be supported at not

23 more than 70 percent of the quota support rate

24 for the marketing years in which the transfers

25 occur. The transfers for a farm shall not exceed
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1 25 percent of the total farm quota pounds, ex2 cluding pounds transferred in the fall.’’.

3 SEC. 1107. SUGAR PROGRAM.

4 (a) SUGARCANE.—The Secretary shall make loans

5 available to processors of domestically grown sugarcane at

6 a rate equal to 18 cents per pound for raw cane sugar.

7 (b) SUGAR BEETS.—The Secretary shall make loans

8 available to processors of domestically grown sugar beets at

9 a rate equal to 22.9 cents per pound for refined beet sugar.

10 (c) TERM OF LOANS.—

11 (1) IN GENERAL.—Loans under this section dur12 ing any fiscal year shall be made available not earlier

13 than the beginning of the fiscal year and shall mature

14 at the earlier of—

15 (A) the end of 9 months; or

16 (B) the end of the fiscal year.

17 (2) SUPPLEMENTAL LOANS.—In the case of loans

18 made under this section in the last 3 months of a fis19 cal year, the processor may repledge the sugar as col20 lateral for a second loan in the subsequent fiscal year,

21 except that the second loan shall—

22 (A) be made at the loan rate in effect at the

23 time the second loan is made; and

24 (B) mature in 9 months less the quantity of

25 time that the first loan was in effect.
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1 (d) LOAN TYPE; PROCESSOR ASSURANCES.—

2 (1) RECOURSE LOANS.—Subject to paragraph

3 (2), the Secretary shall carry out this section through

4 the use of recourse loans.

5 (2) NONRECOURSE LOANS.—During any fiscal

6 year in which the tariff rate quota for imports of

7 sugar into the United States is established at, or is

8 increased to, a level in excess of 1,500,000 short tons

9 raw value, the Secretary shall carry out this section

10 by making available nonrecourse loans. Any recourse

11 loan previously made available by the Secretary

12 under this section during the fiscal year shall be

13 changed by the Secretary into a nonrecourse loan.

14 (3) PROCESSOR ASSURANCES.—If the Secretary

15 is required under paragraph (2) to make nonrecourse

16 loans available during a fiscal year or to change re17 course loans into nonrecourse loans, the Secretary

18 shall obtain from each processor that receives a loan

19 under this section such assurances as the Secretary

20 considers adequate to ensure that the processor will

21 provide payments to producers that are proportional

22 to the value of the loan received by the processor for

23 sugar beets and sugarcane delivered by producers

24 served by the processor. The Secretary may establish
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1 appropriate minimum payments for purposes of this

2 paragraph.

3 (e) MARKETING ASSESSMENT.—

4 (1) SUGARCANE.—Effective for marketings of

5 raw cane sugar during the 1996 through 2003 fiscal

6 years, the first processor of sugarcane shall remit to

7 the Commodity Credit Corporation a nonrefundable

8 marketing assessment in an amount equal to—

9 (A) in the case of marketings during fiscal

10 year 1996, 1.1 percent of the loan rate estab11 lished under subsection (a) per pound of raw

12 cane sugar, processed by the processor from do13 mestically produced sugarcane or sugarcane mo14 lasses, that has been marketed (including the

15 transfer or delivery of the sugar to a refinery for

16 further processing or marketing); and

17 (B) in the case of marketings during each

18 of fiscal years 1997 through 2003, 1.375 percent

19 of the loan rate established under subsection (a)

20 per pound of raw cane sugar, processed by the

21 processor from domestically produced sugarcane

22 or sugarcane molasses, that has been marketed

23 (including the transfer or delivery of the sugar

24 to a refinery for further processing or market25 ing).
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1 (2) SUGAR BEETS.—Effective for marketings of

2 beet sugar during the 1996 through 2003 fiscal years,

3 the first processor of sugar beets shall remit to the

4 Commodity Credit Corporation a nonrefundable mar5 keting assessment in an amount equal to—

6 (A) in the case of marketings during fiscal

7 year 1996, 1.1794 percent of the loan rate estab8 lished under subsection (a) per pound of beet

9 sugar, processed by the processor from domesti10 cally produced sugar beets or sugar beet molas11 ses, that has been marketed; and

12 (B) in the case of marketings during each

13 of fiscal years 1997 through 2003, 1.47425 per14 cent of the loan rate established under subsection

15 (a) per pound of beet sugar, processed by the

16 processor from domestically produced sugar beets

17 or sugar beet molasses, that has been marketed.

18 (3) COLLECTION.—

19 (A) TIMING.—A marketing assessment re20 quired under this subsection shall be collected on

21 a monthly basis and shall be remitted to the

22 Commodity Credit Corporation not later than 30

23 days after the end of each month. Any cane

24 sugar or beet sugar processed during a fiscal

25 year that has not been marketed by September
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1 30 of the year shall be subject to assessment on

2 that date. The sugar shall not be subject to a sec3 ond assessment at the time that it is marketed.

4 (B) MANNER.—Subject to subparagraph

5 (A), marketing assessments shall be collected

6 under this subsection in the manner prescribed

7 by the Secretary and shall be nonrefundable.

8 (4) PENALTIES.—If any person fails to remit the

9 assessment required by this subsection or fails to com10 ply with such requirements for recordkeeping or other11 wise as are required by the Secretary to carry out

12 this subsection, the person shall be liable to the Sec13 retary for a civil penalty up to an amount deter14 mined by multiplying—

15 (A) the quantity of cane sugar or beet sugar

16 involved in the violation; by

17 (B) the loan rate for the applicable crop of

18 sugarcane or sugar beets.

19 (5) ENFORCEMENT.—The Secretary may enforce

20 this subsection in a court of the United States.

21 (f) FORFEITURE PENALTY.—

22 (1) IN GENERAL.—A penalty shall be assessed on

23 the forfeiture of any sugar pledged as collateral for a

24 nonrecourse loan under this section.
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1 (2) SUGARCANE.—The penalty for sugarcane

2 shall be 1 cent per pound.

3 (3) SUGAR BEETS.—The penalty for sugar beets

4 shall bear the same relation to the penalty for sugar5 cane as the marketing assessment for sugar beets bears

6 to the marketing assessment for sugarcane.

7 (4) EFFECT OF FORFEITURE.—Any payments

8 owed producers by a processor that forfeits of any

9 sugar pledged as collateral for a nonrecourse loan

10 shall be reduced in proportion to the loan forfeiture

11 penalty incurred by the processor.

12 (g) INFORMATION REPORTING.—

13 (1) DUTY OF PROCESSORS AND REFINERS TO RE14 PORT.—A sugarcane processor, cane sugar refiner,

15 and sugar beet processor shall furnish the Secretary,

16 on a monthly basis, such information as the Secretary

17 may require to administer sugar programs, including

18 the quantity of purchases of sugarcane, sugar beets,

19 and sugar, and production, importation, distribution,

20 and stock levels of sugar.

21 (2) PENALTY.—Any person willfully failing or

22 refusing to furnish the information, or furnishing

23 willfully any false information, shall be subject to a

24 civil penalty of not more than $10,000 for each such

25 violation.
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1 (3) MONTHLY REPORTS.—Taking into consider2 ation the information received under paragraph (1),

3 the Secretary shall publish on a monthly basis com4 posite data on production, imports, distribution, and

5 stock levels of sugar.

6 (h) MARKETING ALLOTMENTS.—Part VII of subtitle B

7 of title III of the Agricultural Adjustment Act of 1938 (7

8 U.S.C. 1359aa et seq.) is repealed.

9 (i) CROPS.—This section (other than subsection (h))

10 shall be effective only for the 1996 through 2002 crops of

11 sugar beets and sugarcane.

12 SEC. 1108. ADMINISTRATION.

13 (a) COMMODITY CREDIT CORPORATION.—

14 (1) USE OF CORPORATION.—The Secretary shall

15 carry out this subtitle through the Commodity Credit

16 Corporation.

17 (2) SALARIES AND EXPENSES.—No funds of the

18 Corporation shall be used for any salary or expense

19 of any officer or employee of the Department of Agri20 culture in connection with the administration of pay21 ments or loans under this subtitle.

22 (b) ADMINISTRATION.—Title IV of the Agricultural

23 Adjustment Act of 1938 (as added by section 1109) shall

24 apply to the administration of this subtitle.
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1 (c) REGULATIONS.—The Secretary may issue such reg2 ulations as the Secretary determines necessary to carry out

3 this subtitle.

4 SEC. 1109. ELIMINATION OF PERMANENT PRICE SUPPORT

5 AUTHORITY.

6 (a) AGRICULTURAL ADJUSTMENT ACT OF 1938.—The

7 Agricultural Adjustment Act of 1938 is amended—

8 (1) in title III—

9 (A) in subtitle B—

10 (i) by striking parts II through V (7

11 U.S.C. 1326–1351); and

12 (ii) in part VI, by striking sections

13 358, 358a, and 358d (7 U.S.C. 1358, 1358a,

14 and 1359); and

15 (B) by striking subtitle D (7 U.S.C. 1379a–

16 1379j); and

17 (2) by striking title IV (7 U.S.C. 1401–1407).

18 (b) AGRICULTURAL ACT OF 1949.—

19 (1) TRANSFER OF CERTAIN SECTIONS.—The Ag20 ricultural Act of 1949 is amended—

21 (A) by transferring sections 106, 106A, and

22 106B (7 U.S.C. 1445, 1445–1, 1445–2) to appear

23 after section 314A of the Agricultural Adjust24 ment Act of 1938 (7 U.S.C. 1314–1) and redesig-
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1 nating the transferred sections as sections 315,

2 315A, and 315B, respectively;

3 (B) by transferring sections 111, 201(c),

4 and 204 (7 U.S.C. 1445f, 1446(c), 1446e) to ap5 pear after section 304 of the Agricultural Adjust6 ment Act of 1938 (7 U.S.C. 1304) and redesig7 nating the transferred sections as sections 305,

8 306, and 307, respectively;

9 (C) by transferring sections 403, 405, 407,

10 412, and 422 (7 U.S.C. 1423, 1425, 1427, 1429,

11 1431a) to appear after section 393 (7 U.S.C.

12 1393) and redesignating the transferred sections

13 as sections 411, 412, 413, 414, and 415, respec14 tively; and

15 (D) by transferring section 416 (7 U.S.C.

16 1431) to appear after section 415 of the Agricul17 tural Adjustment Act of 1938 (as transferred and

18 redesignated by subparagraph (C)).

19 (2) REPEAL.—The Agricultural Act of 1949 (7

20 U.S.C. 1421 et seq.) (as amended by paragraph (1))

21 is repealed.

22 (c) CONFORMING AMENDMENTS.—The Agricultural

23 Adjustment Act of 1938 is amended—
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1 (1) in section 306 (as transferred and redesig2 nated by subsection (b)(1)(B)), by striking ‘‘204’’ and

3 inserting ‘‘307’’; and

4 (2) by striking section 411 (as transferred and

5 redesignated by subsection (b)(1)(C)) and inserting

6 the following:

7 ‘‘TITLE IV—ADMINISTRATION OF

8 LOANS

9 ‘‘SEC. 411. ADJUSTMENTS FOR GRADE, TYPE, QUALITY, LO10 CATION, AND OTHER FACTORS.

11 ‘‘The Secretary may make such adjustments in the an12 nounced loan rate for a commodity as the Secretary consid13 ers appropriate to reflect differences in grade, type, quality,

14 location, and other factors.’’.

15 SEC. 1110. EFFECT OF AMENDMENTS.

16 (a) EFFECT ON PRIOR CROPS.—Except as otherwise

17 specifically provided and notwithstanding any other provi18 sion of law, this subtitle and the amendments made by this

19 subtitle shall not affect the authority of the Secretary to

20 carry out a price support or production adjustment pro21 gram for any of the 1991 through 1995 crops of an agricul22 tural commodity established under a provision of law in

23 effect immediately before the date of the enactment of this

24 Act.
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1 (b) LIABILITY.—A provision of this subtitle or an

2 amendment made by this subtitle shall not affect the liabil3 ity of any person under any provision of law as in effect

4 before the date of the enactment of this Act.

5 Subtitle B—Conservation

6 SEC. 1201. CONSERVATION.

7 (a) FUNDING.—Subtitle E of title XII of the Food Se8 curity Act of 1985 (16 U.S.C. 3841 et seq.) is amended to

9 read as follows:

10 ‘‘Subtitle E—Funding

11 ‘‘SEC. 1241. FUNDING.

12 ‘‘(a) MANDATORY EXPENSES.—For each of fiscal years

13 1996 through 2002, the Secretary shall use the funds of the

14 Commodity Credit Corporation to carry out the programs

15 authorized by—

16 ‘‘(1) subchapter B of chapter 1 of subtitle D (in17 cluding contracts extended by the Secretary pursuant

18 to section 1437 of the Food, Agriculture, Conserva19 tion, and Trade Act of 1990 (Public Law 101–624; 16

20 U.S.C. 3831 note));

21 ‘‘(2) subchapter C of chapter 1 of subtitle D; and

22 ‘‘(3) chapter 4 of subtitle D.

23 ‘‘(b) LIVESTOCK ENVIRONMENTAL ASSISTANCE PRO24 GRAM.—For each of fiscal years 1996 through 2002,

25 $100,000,000 of the funds of the Commodity Credit Cor-
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1 poration shall be available for providing technical assist2 ance, cost-sharing payments, and incentive payments for

3 practices relating to livestock production under the livestock

4 environmental assistance program under chapter 4 of sub5 title D.’’.

6 (b) LIVESTOCK ENVIRONMENTAL ASSISTANCE PRO7 GRAM.—To carry out the programs funded under the

8 amendment made by subsection (a), subtitle D of title XII

9 of the Food Security Act of 1985 (16 U.S.C. 3830 et seq.)

10 is amended by adding at the end the following:

11 ‘‘CHAPTER 4—LIVESTOCK

12 ENVIRONMENTAL ASSISTANCE PROGRAM

13 ‘‘SEC. 1240. DEFINITIONS.

14 ‘‘In this chapter:

15 ‘‘(1) LAND MANAGEMENT PRACTICE.—The term

16 ‘land management practice’ means a site-specific nu17 trient or manure management, irrigation manage18 ment, tillage or residue management, grazing man19 agement, or other land management practice that the

20 Secretary determines is needed to protect, in the most

21 cost effective manner, water, soil, or related resources

22 from degradation due to livestock production.

23 ‘‘(2) LARGE CONFINED LIVESTOCK OPERATION.—

24 The term ‘large confined livestock operation’ means

25 an operation that—
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1 ‘‘(A) is a confined animal feeding oper2 ation; and

3 ‘‘(B) has more than—

4 ‘‘(i) 55 mature dairy cattle;

5 ‘‘(ii) 10,000 beef cattle;

6 ‘‘(iii) 30,000 laying hens or broilers (if

7 the facility has continuous overflow water8 ing);

9 ‘‘(iv) 100,000 laying hens or broilers

10 (if the facility has a liquid manure system);

11 ‘‘(v) 55,000 turkeys;

12 ‘‘(vi) 15,000 swine; or

13 ‘‘(vii) 10,000 sheep or lambs.

14 ‘‘(3) LIVESTOCK.—The term ‘livestock’ means

15 dairy cows, beef cattle, laying hens, broilers, turkeys,

16 swine, sheep, lambs, and such other animals as deter17 mined by the Secretary.

18 ‘‘(4) OPERATOR.—The term ‘operator’ means a

19 person who is engaged in livestock production (as de20 fined by the Secretary).

21 ‘‘(5) STRUCTURAL PRACTICE.—The term ‘struc22 tural practice’ means the establishment of an animal

23 waste management facility, terrace, grassed water24 way, contour grass strip, filterstrip, or other struc25 tural practice that the Secretary determines is needed
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1 to protect, in the most cost effective manner, water,

2 soil, or related resources from degradation due to live3 stock production.

4 ‘‘SEC. 1240A. ESTABLISHMENT AND ADMINISTRATION OF

5 LIVESTOCK ENVIRONMENTAL ASSISTANCE

6 PROGRAM.

7 ‘‘(a) ESTABLISHMENT.—

8 ‘‘(1) IN GENERAL.—During the 1996 through

9 2002 fiscal years, the Secretary shall provide tech10 nical assistance, cost-sharing payments, and incentive

11 payments to operators who enter into contracts with

12 the Secretary, through a livestock environmental as13 sistance program.

14 ‘‘(2) ELIGIBLE PRACTICES.—

15 ‘‘(A) STRUCTURAL PRACTICES.—An opera16 tor who implements a structural practice shall be

17 eligible for technical assistance or cost-sharing

18 payments, or both.

19 ‘‘(B) LAND MANAGEMENT PRACTICES.—An

20 operator who performs a land management prac21 tice shall be eligible for technical assistance or

22 incentive payments, or both.

23 ‘‘(3) ELIGIBLE LAND.—Assistance under this

24 chapter may be provided with respect to land that is

25 used for livestock production and on which a serious
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1 threat to water, soil, or related resources exists, as de2 termined by the Secretary, by reason of the soil types,

3 terrain, climatic, soil, topographic, flood, or saline

4 characteristics, or other factors or natural hazards.

5 ‘‘(4) SELECTION CRITERIA.—In providing tech6 nical assistance, cost-sharing payments, and incentive

7 payments to operators in a region, watershed, or con8 servation priority area in which an agricultural op9 eration is located, the Secretary shall consider—

10 ‘‘(A) the significance of the water, soil, and

11 related natural resource problems; and

12 ‘‘(B) the maximization of environmental

13 benefits per dollar expended.

14 ‘‘(b) APPLICATION AND TERM.—

15 ‘‘(1) IN GENERAL.—A contract between an oper16 ator and the Secretary under this chapter may—

17 ‘‘(A) apply to 1 or more structural practices

18 or 1 or more land management practices, or

19 both; and

20 ‘‘(B) have a term of not less than 5, nor

21 more than 10, years, as determined appropriate

22 by the Secretary, depending on the practice or

23 practices that are the basis of the contract.

24 ‘‘(2) DUTIES OF OPERATORS AND SECRETARY.—

25 To receive cost sharing or incentive payments, or
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1 technical assistance, participating operators shall

2 comply with all terms and conditions of the contract

3 and a plan, as established by the Secretary.

4 ‘‘(c) STRUCTURAL PRACTICES.—

5 ‘‘(1) COMPETITIVE OFFER.—The Secretary shall

6 administer a competitive offer system for operators

7 proposing to receive cost-sharing payments in ex8 change for the implementation of 1 or more structural

9 practices by the operator. The competitive offer system

10 shall consist of—

11 ‘‘(A) the submission of a competitive offer

12 by the operator in such manner as the Secretary

13 may prescribe; and

14 ‘‘(B) evaluation of the offer in light of the

15 selection criteria established under subsection

16 (a)(4) and the projected cost of the proposal, as

17 determined by the Secretary.

18 ‘‘(2) CONCURRENCE OF OWNER.—If the operator

19 making an offer to implement a structural practice is

20 a tenant of the land involved in agricultural produc21 tion, for the offer to be acceptable, the operator shall

22 obtain the concurrence of the owner of the land with

23 respect to the offer.

24 ‘‘(d) LAND MANAGEMENT PRACTICES.—The Secretary

25 shall establish an application and evaluation process for
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1 awarding technical assistance or incentive payments, or

2 both, to an operator in exchange for the performance of 1

3 or more land management practices by the operator.

4 ‘‘(e) COST-SHARING, INCENTIVE PAYMENTS, AND

5 TECHNICAL ASSISTANCE.—

6 ‘‘(1) COST-SHARING PAYMENTS.—

7 ‘‘(A) IN GENERAL.—The Federal share of

8 cost-sharing payments to an operator proposing

9 to implement 1 or more structural practices shall

10 not be greater than 75 percent of the projected

11 cost of each practice, as determined by the Sec12 retary, taking into consideration any payment

13 received by the operator from a State or local

14 government.

15 ‘‘(B) LIMITATION.—An operator of a large

16 confined livestock operation shall not be eligible

17 for cost-sharing payments to construct an ani18 mal waste management facility.

19 ‘‘(C) OTHER PAYMENTS.—An operator shall

20 not be eligible for cost-sharing payments for

21 structural practices on eligible land under this

22 chapter if the operator receives cost-sharing pay23 ments or other benefits for the same land under

24 chapter 1, 2, or 3.
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1 ‘‘(2) INCENTIVE PAYMENTS.—The Secretary shall

2 make incentive payments in an amount and at a rate

3 determined by the Secretary to be necessary to encour4 age an operator to perform 1 or more land manage5 ment practices.

6 ‘‘(3) TECHNICAL ASSISTANCE.—

7 ‘‘(A) FUNDING.—The Secretary shall allo8 cate funding under this chapter for the provision

9 of technical assistance according to the purpose

10 and projected cost for which the technical assist11 ance is provided for a fiscal year. The allocated

12 amount may vary according to the type of exper13 tise required, quantity of time involved, and

14 other factors as determined appropriate by the

15 Secretary. Funding shall not exceed the projected

16 cost to the Secretary of the technical assistance

17 provided for a fiscal year.

18 ‘‘(B) OTHER AUTHORITIES.—The receipt of

19 technical assistance under this chapter shall not

20 affect the eligibility of the operator to receive

21 technical assistance under other authorities of

22 law available to the Secretary.

23 ‘‘(f) LIMITATION ON PAYMENTS.—
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1 ‘‘(1) IN GENERAL.—The total amount of cost2 sharing and incentive payments paid to a person

3 under this chapter may not exceed—

4 ‘‘(A) $10,000 for any fiscal year; or

5 ‘‘(B) $50,000 for any multiyear contract.

6 ‘‘(2) REGULATIONS.—The Secretary shall issue

7 regulations that are consistent with section 1001 for

8 the purpose of—

9 ‘‘(A) defining the term ‘person’ as used in

10 paragraph (1); and

11 ‘‘(B) prescribing such rules as the Secretary

12 determines necessary to ensure a fair and rea13 sonable application of the limitations established

14 under this subsection.

15 ‘‘(g) REGULATIONS.—Not later than 180 days after the

16 effective date of this subsection, the Secretary shall issue reg17 ulations to implement the livestock environmental assist18 ance program established under this chapter.’’.

19 (c) CONFORMING AMENDMENTS.—

20 (1) COMMODITY CREDIT CORPORATION CHARTER

21 ACT.—Section 5(g) of the Commodity Credit Corpora22 tion Charter Act (15 U.S.C. 714c(g)) is amended to

23 read as follows:

24 ‘‘(g) Carry out conservation functions and programs.’’.

25 (2) WETLANDS RESERVE PROGRAM.—
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1 (A) IN GENERAL.—Section 1237 of the Food

2 Security Act of 1985 (16 U.S.C. 3837) is amend3 ed—

4 (i) in subsection (b)(2)—

5 (I) by striking ‘‘not less’’ and in6 serting ‘‘not more’’; and

7 (II) by striking ‘‘2000’’ and in8 serting ‘‘2002’’; and

9 (ii) in subsection (c), by striking

10 ‘‘2000’’ and inserting ‘‘2002’’.

11 (B) LENGTH OF EASEMENT.—Section

12 1237A(e) of the Food Security Act of 1985 (16

13 U.S.C. 3837a(e)) is amended by striking para14 graph (2) and inserting the following:

15 ‘‘(2) shall be for 15 years, but in no case shall

16 be a permanent easement.’’.

17 (3) CONSERVATION RESERVE PROGRAM.—

18 (A) IN GENERAL.—Section 1231(d) of the

19 Food Security Act of 1985 (16 U.S.C. 3831(d))

20 is amended by striking ‘‘total of’’ and all that

21 follows through the period at the end of the sub22 section and inserting ‘‘total of 36,400,000

23 acres.’’.

24 (B) OPTIONAL CONTRACT TERMINATION BY

25 PRODUCERS.—Section 1235 of the Food Security
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1 Act of 1985 (16 U.S.C. 3835) is amended by

2 adding at the end the following:

3 ‘‘(e) TERMINATION BY OWNER OR OPERATOR.—

4 ‘‘(1) NOTICE OF TERMINATION.—An owner or

5 operator of land subject to a contract entered into

6 under this subchapter may terminate the contract by

7 submitting to the Secretary written notice of the in8 tention of the owner or operator to terminate the con9 tract.

10 ‘‘(2) EFFECTIVE DATE.—The contract termi11 nation shall take effect 60 days after the date on

12 which the owner or operator submits the written no13 tice under paragraph (1).

14 ‘‘(3) PRORATED RENTAL PAYMENT.—If a con15 tract entered into under this subchapter is terminated

16 under this subsection before the end of the fiscal year

17 for which a rental payment is due, the Secretary shall

18 provide a prorated rental payment covering the por19 tion of the fiscal year during which the contract was

20 in effect.

21 ‘‘(4) RENEWED ENROLLMENT.—The termination

22 of a contract entered into under this subchapter shall

23 not affect the ability of the owner or operator who re24 quested the termination to submit a subsequent bid to
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1 enroll the land that was subject to the contract into

2 the conservation reserve.

3 ‘‘(5) CONSERVATION REQUIREMENTS.—If land

4 that was subject to a contract is returned to produc5 tion of an agricultural commodity, the conservation

6 requirements under subtitles B and C shall apply to

7 the use of the land to the extent that the requirements

8 are similar to those requirements imposed on other

9 similar lands in the area, except that the require10 ments may not be more onerous that the requirements

11 imposed on other lands.

12 ‘‘(6) REPAYMENT OF COST SHARE.—A person

13 who terminates a contract entered into under this

14 subchapter within less than 3 years after entering

15 into the contract shall reimburse the Secretary for

16 any cost share assistance provided under the con17 tract.’’.

18 (C) LIMITATION.—Notwithstanding any

19 other provision of law, no new acres shall be en20 rolled in the conservation reserve program estab21 lished under subchapter B of chapter 1 of subtitle

22 D of title XII of the Food Security Act of 1985

23 (16 U.S.C. 3831 et seq.) in calendar year 1997.
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1 Subtitle C—Agricultural Promotion

2 and Export Programs

3 SEC. 1301. MARKET PROMOTION PROGRAM.

4 Effective October 1, 1995, section 211(c)(1) of the Agri5 cultural Trade Act of 1978 (7 U.S.C. 5641(c)(1)) is amend6 ed—

7 (1) by striking ‘‘and’’ after ‘‘1991 through

8 1993,’’; and

9 (2) by striking ‘‘through 1997,’’ and inserting

10 ‘‘through 1995, and not more than $100,000,000 for

11 each of fiscal years 1996 through 2002,’’.

12 SEC. 1302. EXPORT ENHANCEMENT PROGRAM.

13 Effective October 1, 1995, section 301(e)(1) of the Agri14 cultural Trade Act of 1978 (7 U.S.C. 5651(e)(1)) is amend15 ed to read as follows:

16 ‘‘(1) IN GENERAL.—The Commodity Credit Cor17 poration shall make available to carry out the pro18 gram established under this section not more than—

19 ‘‘(A) $350,000,000 for fiscal year 1996;

20 ‘‘(B) $350,000,000 for fiscal year 1997;

21 ‘‘(C) $500,000,000 for fiscal year 1998;

22 ‘‘(D) $550,000,000 for fiscal year 1999;

23 ‘‘(E) $579,000,000 for fiscal year 2000;

24 ‘‘(F) $478,000,000 for fiscal year 2001; and

25 ‘‘(G) $478,000,000 for fiscal year 2002.’’.
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1 Subtitle D—Miscellaneous

2 SEC. 1401. CROP INSURANCE.

3 (a) CATASTROPHIC RISK PROTECTION.—Section

4 508(b) of the Federal Crop Insurance Act (7 U.S.C.

5 1508(b)) is amended—

6 (1) in paragraph (4), by adding at the end the

7 following:

8 ‘‘(C) DELIVERY OF COVERAGE.—

9 ‘‘(i) IN GENERAL.—In full consultation

10 with approved insurance providers, the Sec11 retary may continue to offer catastrophic

12 risk protection in a State (or a portion of

13 a State) through local offices of the Depart14 ment if the Secretary determines that there

15 is an insufficient number of approved in16 surance providers operating in the State or

17 portion to adequately provide catastrophic

18 risk protection coverage to producers.

19 ‘‘(ii) COVERAGE BY APPROVED INSUR20 ANCE PROVIDERS.—To the extent that cata21 strophic risk protection coverage by ap22 proved insurance providers is sufficiently

23 available in a State as determined by the

24 Secretary, only approved insurance provid25 ers may provide the coverage in the State.
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1 ‘‘(iii) CURRENT POLICIES.—Subject to

2 clause (ii), all catastrophic risk protection

3 policies written by local offices of the De4 partment shall be transferred (including all

5 fees collected for the crop year in which the

6 approved insurance provider will assume

7 the policies) to the approved insurance pro8 vider for performance of all sales, service,

9 and loss adjustment functions.’’; and

10 (2) in paragraph (7), by striking subparagraph

11 (A) and inserting the following:

12 ‘‘(A) IN GENERAL.—Effective for the spring13 planted 1996 and subsequent crops, to be eligible

14 for any payment or loan under the Agricultural

15 Market Transition Act, the conservation reserve

16 program, or any benefit described in section 371

17 of the Consolidated Farm and Rural Develop18 ment Act (7 U.S.C. 2008f), a person shall—

19 ‘‘(i) obtain at least the catastrophic

20 level of insurance for each crop of economic

21 significance in which the person has an in22 terest; or

23 ‘‘(ii) provide a written waiver to the

24 Secretary that waives any eligibility for
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1 emergency crop loss assistance in connection

2 with the crop.’’.

3 (b) COVERAGE OF SEED CROPS.—Section

4 519(a)(2)(B) of the Act (7 U.S.C. 1519(a)(2)(B) is amended

5 by inserting ‘‘seed crops,’’ after ‘‘turfgrass sod,’’.

6 SEC. 1402. COLLECTION AND USE OF AGRICULTURAL QUAR7 ANTINE AND INSPECTION FEES.

8 Subsection (a) of section 2509 of the Food, Agriculture,

9 Conservation, and Trade Act of 1990 (21 U.S.C. 136a) is

10 amended to read as follows:

11 ‘‘(a) QUARANTINE AND INSPECTION FEES.—

12 ‘‘(1) FEES AUTHORIZED.—The Secretary of Ag13 riculture may prescribe and collect fees sufficient—

14 ‘‘(A) to cover the cost of providing agricul15 tural quarantine and inspection services in con16 nection with the arrival at a port in the customs

17 territory of the United States, or the

18 preclearance or preinspection at a site outside

19 the customs territory of the United States, of an

20 international passenger, commercial vessel, com21 mercial aircraft, commercial truck, or railroad

22 car;

23 ‘‘(B) to cover the cost of administering this

24 subsection; and
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1 ‘‘(C) through fiscal year 2002, to maintain

2 a reasonable balance in the Agricultural Quar3 antine Inspection User Fee Account established

4 under paragraph (5).

5 ‘‘(2) LIMITATION.—In setting the fees under

6 paragraph (1), the Secretary shall ensure that the

7 amount of the fees are commensurate with the costs of

8 agricultural quarantine and inspection services with

9 respect to the class of persons or entities paying the

10 fees. The costs of the services with respect to pas11 sengers as a class includes the costs of related inspec12 tions of the aircraft or other vehicle.

13 ‘‘(3) STATUS OF FEES.—Fees collected under this

14 subsection by any person on behalf of the Secretary

15 are held in trust for the United States and shall be

16 remitted to the Secretary in such manner and at such

17 times as the Secretary may prescribe.

18 ‘‘(4) LATE PAYMENT PENALTIES.—If a person

19 subject to a fee under this subsection fails to pay the

20 fee when due, the Secretary shall assess a late pay21 ment penalty, and the overdue fees shall accrue inter22 est, as required by section 3717 of title 31, United

23 States Code.

24 ‘‘(5) AGRICULTURAL QUARANTINE INSPECTION

25 USER FEE ACCOUNT.—
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1 ‘‘(A) ESTABLISHMENT.—There is estab2 lished in the Treasury of the United States a no3 year fund, to be known as the ‘Agricultural

4 Quarantine Inspection User Fee Account’, which

5 shall contain all of the fees collected under this

6 subsection and late payment penalties and inter7 est charges collected under paragraph (4)

8 through fiscal year 2002.

9 ‘‘(B) USE OF ACCOUNT.—For each of the

10 fiscal years 1996 through 2002, funds in the Ag11 ricultural Quarantine Inspection User Fee Ac12 count shall be available, in such amounts as are

13 provided in advance in appropriations Acts, to

14 cover the costs associated with the provision of

15 agricultural quarantine and inspection services

16 and the administration of this subsection.

17 Amounts made available under this subpara18 graph shall be available until expended.

19 ‘‘(C) EXCESS FEES.—Fees and other

20 amounts collected under this subsection in any of

21 the fiscal years 1996 through 2002 in excess of

22 $100,000,000 shall be available for the purposes

23 specified in subparagraph (B) until expended,

24 without further appropriation.
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1 ‘‘(6) USE OF AMOUNTS COLLECTED AFTER FIS2 CAL YEAR 2002.—After September 30, 2002, the unob3 ligated balance in the Agricultural Quarantine In4 spection User Fee Account and fees and other

5 amounts collected under this subsection shall be cred6 ited to the Department of Agriculture accounts that

7 incur the costs associated with the provision of agri8 cultural quarantine and inspection services and the

9 administration of this subsection. The fees and other

10 amounts shall remain available to the Secretary until

11 expended without fiscal year limitation.

12 ‘‘(7) STAFF YEARS.—The number of full-time

13 equivalent positions in the Department of Agriculture

14 attributable to the provision of agricultural quar15 antine and inspection services and the administration

16 of this subsection shall not be counted toward the lim17 itation on the total number of full-time equivalent po18 sitions in all agencies specified in section 5(b) of the

19 Federal Workforce Restructuring Act of 1994 (Public

20 Law 103–226; 5 U.S.C. 3101 note) or other limita21 tion on the total number of full-time equivalent posi22 tions.’’.
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1 SEC. 1403. COMMODITY CREDIT CORPORATION INTEREST

2 RATE.

3 Notwithstanding any other provision of law, the

4 monthly Commodity Credit Corporation interest rate appli5 cable to loans provided for agricultural commodities by the

6 Corporation shall be 100 basis points greater than the rate

7 determined under the applicable interest rate formula in

8 effect on October 1, 1995.

9 TITLE II—BANKING, HOUSING,

10 AND RELATED PROVISIONS

11 SEC. 2001. TABLE OF CONTENTS.

12 The table of contents for this title is as follows:

TITLE II—BANKING, HOUSING, AND RELATED PROVISIONS

Sec. 2001. Table of contents.

TITLE II—BANKING, HOUSING, AND RELATED PROVISIONS

Subtitle A—Financial Institutions

Sec. 2011. Special assessment to capitalize SAIF.

Sec. 2012. Financing Corporation assessments shared proportionally by all insured depository institutions.

Sec. 2013. Merger of BIF and SAIF.

Sec. 2014. Creation of SAIF Special Reserve.

Sec. 2015. Refund of amounts in deposit insurance fund in excess of designated

reserve amount.

Sec. 2016. Assessment rates for SAIF members may not be less than assessment

rates for BIF members.

Sec. 2017. Assessments authorized only if needed to maintain the reserve ratio of

a deposit insurance fund.

Sec. 2018. Limitation on authority of Oversight Board to continue to employ

more than 18 officers and employees.

Sec. 2019. Definitions.

Subtitle B—Housing

Sec. 2051. Annual adjustment factors for operating costs only; restraint on rent

increases.

Sec. 2052. Foreclosure avoidance and borrower assistance.
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1 TITLE II—BANKING, HOUSING,

2 AND RELATED PROVISIONS

3 Subtitle A—Financial Institutions

4 SEC. 2011. SPECIAL ASSESSMENT TO CAPITALIZE SAIF.

5 (a) IN GENERAL.—Except as provided in subsection

6 (f), the Board of Directors shall impose a special assessment

7 on the SAIF-assessable deposits of each insured depository

8 institution at a rate applicable to all such institutions that

9 the Board of Directors, in its sole discretion, determines

10 (after taking into account the adjustments described in sub11 sections (g) through (j)) will cause the Savings Association

12 Insurance Fund to achieve the designated reserve ratio on

13 the first business day of January 1996.

14 (b) FACTORS TO BE CONSIDERED.—In carrying out

15 subsection (a), the Board of Directors shall base its deter16 mination on—

17 (1) the monthly Savings Association Insurance

18 Fund balance most recently calculated;

19 (2) data on insured deposits reported in the most

20 recent reports of condition filed not later than 70

21 days before the date of enactment of this Act by in22 sured depository institutions; and

23 (3) any other factors that the Board of Directors

24 deems appropriate.
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1 (c) DATE OF DETERMINATION.—For purposes of sub2 section (a), the amount of the SAIF-assessable deposits of

3 an insured depository institution shall be determined as of

4 March 31, 1995.

5 (d) DATE PAYMENT DUE.—The special assessment im6 posed under this section shall be—

7 (1) due on the first business day of January

8 1996; and

9 (2) paid to the Corporation on the later of—

10 (A) the first business day of January 1996;

11 or

12 (B) such other date as the Corporation shall

13 prescribe, but not later than 60 days after the

14 date of enactment of this Act.

15 (e) ASSESSMENT DEPOSITED IN SAIF.—Notwith16 standing any other provision of law, the proceeds of the spe17 cial assessment imposed under this section shall be depos18 ited in the Savings Association Insurance Fund.

19 (f) EXEMPTIONS FOR CERTAIN INSTITUTIONS.—

20 (1) EXEMPTION FOR WEAK INSTITUTIONS.—The

21 Board of Directors may, by order, in its sole discre22 tion, exempt any insured depository institution that

23 the Board of Directors determines to be weak, from

24 paying the special assessment imposed under this sec25 tion if the Board of Directors determines that the ex-
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1 emption would reduce risk to the Savings Association

2 Insurance Fund.

3 (2) GUIDELINES REQUIRED.—Not later than 30

4 days after the date of enactment of this Act, the

5 Board of Directors shall prescribe guidelines setting

6 forth the criteria that the Board of Directors will use

7 in exempting institutions under paragraph (1). Such

8 guidelines shall be published in the Federal Register.

9 (3) EXEMPTION FOR CERTAIN NEWLY CHAR10 TERED AND OTHER DEFINED INSTITUTIONS.—

11 (A) IN GENERAL.—In addition to the insti12 tutions exempted from paying the special assess13 ment under paragraph (1), the Board of Direc14 tors shall exempt any insured depository institu15 tion from payment of the special assessment if

16 the institution—

17 (i) was in existence on October 1,

18 1995, and held no SAIF-assessable deposits

19 prior to January 1, 1993;

20 (ii) is a Federal savings bank which—

21 (I) was established de novo in

22 April 1994 in order to acquire the de23 posits of a savings association which

24 was in default or in danger of default;

25 and
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1 (II) received minority interim

2 capital assistance from the Resolution

3 Trust Corporation under section

4 21A(w) of the Federal Home Loan

5 Bank Act in connection with the acqui6 sition of any such savings association;

7 or

8 (iii) is a savings association, the de9 posits of which are insured by the Savings

10 Association Insurance Fund, which—

11 (I) prior to January 1, 1987, was

12 chartered as a Federal savings bank

13 insured by the Federal Savings and

14 Loan Insurance Corporation for the

15 purpose of acquiring all or substan16 tially all of the assets and assuming all

17 or substantially all of the deposit li18 abilities of a national bank in a trans19 action consummated after July 1,

20 1986; and

21 (II) as of the date of that trans22 action, had assets of less than

23 $150,000,000.

24 (B) DEFINITION.—For purposes of this

25 paragraph, an institution shall be deemed to
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1 have held SAIF-assessable deposits prior to Jan2 uary 1, 1993, if—

3 (i) it directly held SAIF-assessable in4 sured deposits prior to that date; or

5 (ii) it succeeded to, acquired, pur6 chased, or otherwise holds any SAIF-assess7 able deposits as of the date of enactment of

8 this Act that were SAIF-assessable deposits

9 prior to January 1, 1993.

10 (4) EXEMPT INSTITUTIONS REQUIRED TO PAY

11 ASSESSMENTS AT FORMER RATES.—

12 (A) PAYMENTS TO SAIF AND DIF.—Any in13 sured depository institution that the Board of

14 Directors exempts under this subsection from

15 paying the special assessment imposed under this

16 section shall pay semiannual assessments—

17 (i) during calendar years 1996 and

18 1997, into the Savings Association Insur19 ance Fund, based on SAIF-assessable depos20 its of that institution, at assessment rates

21 calculated under the schedule in effect for

22 Savings Association Insurance Fund mem23 bers on June 30, 1995; and

24 (ii) during calendar years 1998 and

25 1999—
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1 (I) into the Deposit Insurance

2 Fund, based on SAIF-assessable depos3 its of that institution as of December

4 31, 1997, at assessment rates cal5 culated under the schedule in effect for

6 Savings Association Insurance Fund

7 members on June 30, 1995; or

8 (II) in accordance with clause (i),

9 if the Bank Insurance Fund and the

10 Savings Association Insurance Fund

11 are not merged into the Deposit Insur12 ance Fund.

13 (B) OPTIONAL PRO RATA PAYMENT OF SPE14 CIAL ASSESSMENT.—This paragraph shall not

15 apply with respect to any insured depository in16 stitution (or successor insured depository institu17 tion) that has paid, during any calendar year

18 from 1997 through 1999, upon such terms as the

19 Corporation may announce, an amount equal to

20 the product of—

21 (i) 12.5 percent of the special assess22 ment that the institution would have been

23 required to pay under subsection (a), if the

24 Board of Directors had not exempted the in25 stitution; and
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1 (ii) the number of full semiannual pe2 riods remaining between the date of the

3 payment and December 31, 1999.

4 (g) SPECIAL ELECTION FOR CERTAIN INSTITUTIONS

5 FACING HARDSHIP AS A RESULT OF THE SPECIAL ASSESS6 MENT.—

7 (1) ELECTION AUTHORIZED.—If—

8 (A) an insured depository institution, or

9 any depository institution holding company

10 which, directly or indirectly, controls such insti11 tution, is subject to terms or covenants in any

12 debt obligation or preferred stock outstanding on

13 September 13, 1995; and

14 (B) the payment of the special assessment

15 under subsection (a) would pose a significant

16 risk of causing such depository institution or

17 holding company to default or violate any such

18 term or covenant,

19 the depository institution may elect, with the ap20 proval of the Corporation, to pay such special assess21 ment in accordance with paragraphs (2) and (3) in

22 lieu of paying such assessment in the manner re23 quired under subsection (a).

24 (2) 1ST ASSESSMENT.—An insured depository

25 institution which makes an election under paragraph
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1 (1) shall pay an assessment of 50 percent of the

2 amount of the special assessment that would otherwise

3 apply under subsection (a), by the date on which such

4 special assessment is otherwise due under subsection

5 (d).

6 (3) 2D ASSESSMENT.—An insured depository in7 stitution which makes an election under paragraph

8 (1) shall pay a 2d assessment, by the date established

9 by the Board of Directors in accordance with para10 graph (4), in an amount equal to the product of 51

11 percent of the rate determined by the Board of Direc12 tors under subsection (a) for determining the amount

13 of the special assessment and the SAIF-assessable de14 posits of the institution on March 31, 1996, or such

15 other date in calendar year 1996 as the Board of Di16 rectors determines to be appropriate.

17 (4) DUE DATE OF 2D ASSESSMENT.—The date es18 tablished by the Board of Directors for the payment

19 of the assessment under paragraph (3) by a deposi20 tory institution shall be the earliest practicable date

21 which the Board of Directors determines to be appro22 priate, which is at least 15 days after the date used

23 by the Board of Directors under paragraph (3).

24 (5) SUPPLEMENTAL SPECIAL ASSESSMENT.—An

25 insured depository institution which makes an elec-
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1 tion under paragraph (1) shall pay a supplemental

2 special assessment, at the same time the payment

3 under paragraph (3) is made, in an amount equal to

4 the product of—

5 (A) 50 percent of the rate determined by the

6 Board of Directors under subsection (a) for de7 termining the amount of the special assessment;

8 and

9 (B) 95 percent of the amount by which the

10 SAIF-assessable deposits used by the Board of

11 Directors for determining the amount of the 1st

12 assessment under paragraph (2) exceeds, if any,

13 the SAIF-assessable deposits used by the Board

14 for determining the amount of the 2d assessment

15 under paragraph (3).

16 (h) ADJUSTMENT OF SPECIAL ASSESSMENT FOR CER17 TAIN BANK INSURANCE FUND MEMBER BANKS.—

18 (1) IN GENERAL.—For purposes of computing

19 the special assessment imposed under this section with

20 respect to a Bank Insurance Fund member bank, the

21 amount of any deposits of any insured depository in22 stitution which section 5(d)(3) of the Federal Deposit

23 Insurance Act treats as insured by the Savings Asso24 ciation Insurance Fund shall be reduced by 20 per25 cent—
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1 (A) if the adjusted attributable deposit

2 amount of the Bank Insurance Fund member

3 bank is less than 50 percent of the total domestic

4 deposits of that member bank as of June 30,

5 1995; or

6 (B) if, as of June 30, 1995, the Bank Insur7 ance Fund member—

8 (i) had an adjusted attributable deposit

9 amount equal to less than 75 percent of the

10 total assessable deposits of that member

11 bank;

12 (ii) had total assessable deposits great13 er than $5,000,000,000; and

14 (iii) was owned or controlled by a

15 bank holding company that owned or con16 trolled insured depository institutions hav17 ing an aggregate amount of deposits insured

18 or treated as insured by the Bank Insurance

19 Fund greater than the aggregate amount of

20 deposits insured or treated as insured by the

21 Savings Association Insurance Fund.

22 (2) ADJUSTED ATTRIBUTABLE DEPOSIT

23 AMOUNT.—For purposes of this subsection, the ‘‘ad24 justed attributable deposit amount’’ shall be deter-
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1 mined in accordance with section 5(d)(3)(C) of the

2 Federal Deposit Insurance Act.

3 (i) ADJUSTMENT TO THE ADJUSTED ATTRIBUTABLE

4 DEPOSIT AMOUNT FOR CERTAIN BANK INSURANCE FUND

5 MEMBER BANKS.—Section 5(d)(3) of the Federal Deposit

6 Insurance Act (12 U.S.C. 1815(d)(3)) is amended—

7 (1) in subparagraph (C), by striking ‘‘The ad8 justed attributable deposit amount’’ and inserting

9 ‘‘Except as provided in subparagraph (K), the ad10 justed attributable deposit amount’’; and

11 (2) by adding at the end the following new sub12 paragraph:

13 ‘‘(K) ADJUSTMENT OF ADJUSTED ATTRIB14 UTABLE DEPOSIT AMOUNT.—The amount deter15 mined under subparagraph (C)(i) for deposits

16 acquired by March 31, 1995, shall be reduced by

17 20 percent for purposes of computing the ad18 justed attributable deposit amount for the pay19 ment of any assessment for any semiannual pe20 riod after December 31, 1995 (other than the spe21 cial assessment imposed under section 2011(a) of

22 the Balanced Budget Act of 1995), for a Bank

23 Insurance Fund member bank that, as of June

24 30, 1995—
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1 ‘‘(i) had an adjusted attributable de2 posit amount that was less than 50 percent

3 of the total deposits of that member bank; or

4 ‘‘(ii)(I) had an adjusted attributable

5 deposit amount equal to less than 75 per6 cent of the total assessable deposits of that

7 member bank;

8 ‘‘(II) had total assessable deposits

9 greater than $5,000,000,000; and

10 ‘‘(III) was owned or controlled by a

11 bank holding company that owned or con12 trolled insured depository institutions hav13 ing an aggregate amount of deposits insured

14 or treated as insured by the Bank Insurance

15 Fund greater than the aggregate amount of

16 deposits insured or treated as insured by the

17 Savings Association Insurance Fund.’’.

18 (j) ADJUSTMENT OF SPECIAL ASSESSMENT FOR CER19 TAIN SAVINGS ASSOCIATIONS.—

20 (1) SPECIAL ASSESSMENT REDUCTION.—For

21 purposes of computing the special assessment imposed

22 under this section, in the case of any converted asso23 ciation, the amount of any deposits of such associa24 tion which were insured by the Savings Association
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1 Insurance Fund as of March 31, 1995, shall be re2 duced by 20 percent.

3 (2) CONVERTED ASSOCIATION.—For purposes of

4 this subsection, the term ‘‘converted association’’

5 means—

6 (A) any Federal savings association—

7 (i) that is a member of the Savings As8 sociation Insurance Fund and that has de9 posits subject to assessment by that fund

10 which did not exceed $4,000,000,000, as of

11 March 31, 1995; and

12 (ii) that had been, or is a successor by

13 merger, acquisition, or otherwise to an in14 stitution that had been, a State savings

15 bank, the deposits of which were insured by

16 the Federal Deposit Insurance Corporation

17 prior to August 9, 1989, that converted to

18 a Federal savings association pursuant to

19 section 5(i) of the Home Owners’ Loan Act

20 prior to January 1, 1985;

21 (B) a State depository institution that is a

22 member of the Savings Association Insurance

23 Fund that had been a State savings bank prior

24 to October 15, 1982, and was a Federal savings

25 association on August 9, 1989;
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1 (C) an insured bank that—

2 (i) was established de novo in order to

3 acquire the deposits of a savings association

4 in default or in danger of default;

5 (ii) did not open for business before ac6 quiring the deposits of such savings associa7 tion; and

8 (iii) was a Savings Association Insur9 ance Fund member as of the date of enact10 ment of this Act; and

11 (D) an insured bank that—

12 (i) resulted from a savings association

13 before December 19, 1991, in accordance

14 with section 5(d)(2)(G) of the Federal De15 posit Insurance Act; and

16 (ii) had an increase in its capital in

17 conjunction with the conversion in an

18 amount equal to more than 75 percent of

19 the capital of the institution on the day be20 fore the date of the conversion.

21 SEC. 2012. FINANCING CORPORATION ASSESSMENTS

22 SHARED PROPORTIONALLY BY ALL INSURED

23 DEPOSITORY INSTITUTIONS.

24 (a) IN GENERAL.—Section 21 of the Federal Home

25 Loan Bank Act (12 U.S.C. 1441) is amended—
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1 (1) in subsection (f)(2)—

2 (A) in the matter immediately preceding

3 subparagraph (A)—

4 (i) by striking ‘‘Savings Association

5 Insurance Fund member’’ and inserting

6 ‘‘insured depository institution’’; and

7 (ii) by striking ‘‘members’’ and insert8 ing ‘‘institutions’’; and

9 (B) by striking ‘‘, except that—’’ and all

10 that follows through the end of the paragraph

11 and inserting ‘‘, except that—

12 ‘‘(A) the Financing Corporation shall have

13 first priority to make the assessment; and

14 ‘‘(B) no limitation under clause (i) or (iii)

15 of section 7(b)(2)(A) of the Federal Deposit In16 surance Act shall apply for purposes of this

17 paragraph.’’; and

18 (2) in subsection (k)—

19 (A) by striking ‘‘section—’’ and inserting

20 ‘‘section, the following definitions shall apply:’’;

21 (B) by striking paragraph (1);

22 (C) by redesignating paragraphs (2) and

23 (3) as paragraphs (1) and (2), respectively; and

24 (D) by adding at the end the following new

25 paragraph:
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1 ‘‘(3) INSURED DEPOSITORY INSTITUTION.—The

2 term ‘insured depository institution’ has the same

3 meaning as in section 3 of the Federal Deposit Insur4 ance Act.’’.

5 (b) CONFORMING AMENDMENT.—Section 7(b)(2) of the

6 Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)) is

7 amended by striking subparagraph (D).

8 (c) EFFECTIVE DATE.—This section and the amend9 ments made by this section shall become effective on Janu10 ary 1, 1996.

11 SEC. 2013. MERGER OF BIF AND SAIF.

12 (a) IN GENERAL.—

13 (1) MERGER.—The Bank Insurance Fund and

14 the Savings Association Insurance Fund shall be

15 merged into the Deposit Insurance Fund established

16 by section 11(a)(4) of the Federal Deposit Insurance

17 Act, as amended by this section.

18 (2) DISPOSITION OF ASSETS AND LIABILITIES.—

19 All assets and liabilities of the Bank Insurance Fund

20 and the Savings Association Insurance Fund shall be

21 transferred to the Deposit Insurance Fund.

22 (3) NO SEPARATE EXISTENCE.—The separate ex23 istence of the Bank Insurance Fund and the Savings

24 Association Insurance Fund shall cease.
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1 (b) SPECIAL RESERVE OF THE DEPOSIT INSURANCE

2 FUND.—

3 (1) IN GENERAL.—Immediately before the merger

4 of the Bank Insurance Fund and the Savings Associa5 tion Insurance Fund, if the reserve ratio of the Sav6 ings Association Insurance Fund exceeds the des7 ignated reserve ratio, the amount by which that re8 serve ratio exceeds the designated reserve ratio shall

9 be placed in the Special Reserve of the Deposit Insur10 ance Fund, established under section 11(a)(5) of the

11 Federal Deposit Insurance Act, as amended by this

12 section.

13 (2) DEFINITION.—For purposes of this sub14 section, the term ‘‘reserve ratio’’ means the ratio of

15 the net worth of the Savings Association Insurance

16 Fund to aggregate estimated insured deposits held in

17 all Savings Association Insurance Fund members.

18 (c) EFFECTIVE DATE.—This section and the amend19 ments made by this section shall become effective on Janu20 ary 1, 1998, if no insured depository institution is a sav21 ings association on that date.

22 (d) TECHNICAL AND CONFORMING AMENDMENTS.—

23 (1) DEPOSIT INSURANCE FUND.—Section

24 11(a)(4) of the Federal Deposit Insurance Act (12

25 U.S.C. 1821(a)(4)) is amended—
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1 (A) by redesignating subparagraph (B) as

2 subparagraph (C);

3 (B) by striking subparagraph (A) and in4 serting the following:

5 ‘‘(A) ESTABLISHMENT.—There is estab6 lished the Deposit Insurance Fund, which the

7 Corporation shall—

8 ‘‘(i) maintain and administer;

9 ‘‘(ii) use to carry out its insurance

10 purposes in the manner provided by this

11 subsection; and

12 ‘‘(iii) invest in accordance with section

13 13(a).

14 ‘‘(B) USES.—The Deposit Insurance Fund

15 shall be available to the Corporation for use with

16 respect to Deposit Insurance Fund members.’’;

17 and

18 (C) by striking ‘‘(4) GENERAL PROVISIONS

19 RELATING TO FUNDS.—’’ and inserting the fol20 lowing:

21 ‘‘(4) ESTABLISHMENT OF THE DEPOSIT INSUR22 ANCE FUND.—’’.

23 (2) OTHER REFERENCES.—Section 11(a)(4)(C)

24 of the Federal Deposit Insurance Act (12 U.S.C.

25 1821(a)(4)(C), as redesignated by paragraph (1) of
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1 this subsection) is amended by striking ‘‘Bank Insur2 ance Fund and the Savings Association Insurance

3 Fund’’ and inserting ‘‘Deposit Insurance Fund’’.

4 (3) DEPOSITS INTO FUND.—Section 11(a)(4) of

5 the Federal Deposit Insurance Act (12 U.S.C.

6 1821(a)(4)) is amended by adding at the end the fol7 lowing new subparagraph:

8 ‘‘(D) DEPOSITS.—All amounts assessed

9 against insured depository institutions by the

10 Corporation shall be deposited in the Deposit In11 surance Fund.’’.

12 (4) SPECIAL RESERVE OF DEPOSITS.—Section

13 11(a)(5) of the Federal Deposit Insurance Act (12

14 U.S.C. 1821(a)(5)) is amended to read as follows:

15 ‘‘(5) SPECIAL RESERVE OF DEPOSIT INSURANCE

16 FUND.—

17 ‘‘(A) ESTABLISHMENT.—

18 ‘‘(i) IN GENERAL.—There is established

19 a Special Reserve of the Deposit Insurance

20 Fund, which shall be administered by the

21 Corporation and shall be invested in ac22 cordance with section 13(a).

23 ‘‘(ii) LIMITATION.—The Corporation

24 shall not provide any assessment credit, re-
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1 fund, or other payment from any amount

2 in the Special Reserve.

3 ‘‘(B) EMERGENCY USE OF SPECIAL RE4 SERVE.—Notwithstanding subparagraph (A)(ii),

5 the Corporation may, in its sole discretion,

6 transfer amounts from the Special Reserve to the

7 Deposit Insurance Fund, for the purposes set

8 forth in paragraph (4), only if—

9 ‘‘(i) the reserve ratio of the Deposit In10 surance Fund is less than 50 percent of the

11 designated reserve ratio; and

12 ‘‘(ii) the Corporation expects the re13 serve ratio of the Deposit Insurance Fund to

14 remain at less than 50 percent of the des15 ignated reserve ratio for each of the next 4

16 calendar quarters.

17 ‘‘(C) EXCLUSION OF SPECIAL RESERVE IN

18 CALCULATING RESERVE RATIO.—Notwithstand19 ing any other provision of law, any amounts in

20 the Special Reserve shall be excluded in calculat21 ing the reserve ratio of the Deposit Insurance

22 Fund under section 7.’’.

23 (5) FEDERAL HOME LOAN BANK ACT.—Section

24 21B(f)(2)(C)(ii) of the Federal Home Loan Bank Act

25 (12 U.S.C. 1441b(f)(2)(C)(ii)) is amended—
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1 (A) in subclause (I), by striking ‘‘to Savings

2 Associations Insurance Fund members’’ and in3 serting ‘‘to insured depository institutions, and

4 their successors, which were Savings Association

5 Insurance Fund members on September 1,

6 1995’’; and

7 (B) in subclause (II), by striking ‘‘to Sav8 ings Associations Insurance Fund members’’ and

9 inserting ‘‘to insured depository institutions,

10 and their successors, which were Savings Asso11 ciation Insurance Fund members on September

12 1, 1995’’.

13 (6) REPEALS.—

14 (A) SECTION 3.—Section 3(y) of the Federal

15 Deposit Insurance Act (12 U.S.C. 1813(y)) is

16 amended to read as follows:

17 ‘‘(y) DEFINITIONS RELATING TO THE DEPOSIT INSUR18 ANCE FUND.—The term

19 ‘‘(1) DEPOSIT INSURANCE FUND.—The term ‘De20 posit Insurance Fund’ means the fund established

21 under section 11(a)(4).

22 ‘‘(2) RESERVE RATIO.—The term ‘reserve ratio’

23 means the ratio of the net worth of the Deposit Insur24 ance Fund to aggregate estimated insured deposits

25 held in all insured depository institutions.
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1 ‘‘(3) DESIGNATED RESERVE RATIO.—The des2 ignated reserve ratio of the Deposit Insurance Fund

3 for each year shall be—

4 ‘‘(A) 1.25 percent of estimated insured de5 posits; or

6 ‘‘(B) a higher percentage of estimated in7 sured deposits that the Board of Directors deter8 mines to be justified for that year by cir9 cumstances raising a significant risk of substan10 tial future losses to the fund.

11 (B) SECTION 7.—Section 7 of the Federal

12 Deposit Insurance Act (12 U.S.C. 1817) is

13 amended—

14 (i) by striking subsection (l);

15 (ii) by redesignating subsections (m)

16 and (n) as subsections (l) and (m), respec17 tively;

18 (iii) in subsection (b)(2), by striking

19 subparagraphs (B) and (F), and by redesig20 nating subparagraphs (C), (E), (G), and

21 (H) as subparagraphs (B) through (E), re22 spectively.

23 (C) SECTION 11.—Section 11(a) of the Fed24 eral Deposit Insurance Act (12 U.S.C. 1821(a))

25 is amended—
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1 (i) by striking paragraphs (6) and (7);

2 and

3 (ii) by redesignating paragraph (8) as

4 paragraph (6).

5 (7) SECTION 5136 OF THE REVISED STATUTES.—

6 Paragraph Eleventh of section 5136 of the Revised

7 Statutes (12 U.S.C. 24) is amended in the fifth sen8 tence, by striking ‘‘affected deposit insurance fund’’

9 and inserting ‘‘Deposit Insurance Fund’’.

10 (8) INVESTMENTS PROMOTING PUBLIC WELFARE;

11 LIMITATIONS ON AGGREGATE INVESTMENTS.—The 23d

12 undesignated paragraph of section 9 of the Federal

13 Reserve Act (12 U.S.C. 338a) is amended in the

14 fourth sentence, by striking ‘‘affected deposit insur15 ance fund’’ and inserting ‘‘Deposit Insurance Fund’’.

16 (9) ADVANCES TO CRITICALLY

17 UNDERCAPITALIZED DEPOSITORY INSTITUTIONS.—

18 Section 10B(b)(3)(A)(ii) of the Federal Reserve Act

19 (12 U.S.C. 347b(b)(3)(A)(ii)) is amended by striking

20 ‘‘any deposit insurance fund in’’ and inserting ‘‘the

21 Deposit Insurance Fund of’’.

22 (10) AMENDMENTS TO THE BALANCED BUDGET

23 AND EMERGENCY DEFICIT CONTROL ACT OF 1985.—

24 Section 255(g)(1)(A) of the Balanced Budget and
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1 Emergency Deficit Control Act of 1985 (2 U.S.C.

2 905(g)(1)(A)) is amended—

3 (A) by striking ‘‘Bank Insurance Fund’’

4 and inserting ‘‘Deposit Insurance Fund’’; and

5 (B) by striking ‘‘Federal Deposit Insurance

6 Corporation, Savings Association Insurance

7 Fund;’’.

8 (11) FURTHER AMENDMENTS TO THE FEDERAL

9 HOME LOAN BANK ACT.—The Federal Home Loan

10 Bank Act (12 U.S.C. 1421 et seq.) is amended—

11 (A) in section 11(k) (12 U.S.C. 1431(k))—

12 (i) in the subsection heading, by strik13 ing ‘‘SAIF’’ and inserting ‘‘THE DEPOSIT

14 INSURANCE FUND’’; and

15 (ii) by striking ‘‘Savings Association

16 Insurance Fund’’ each place such term ap17 pears and inserting ‘‘Deposit Insurance

18 Fund’’;

19 (B) in section 21A(b)(4)(B) (12 U.S.C.

20 1441a(b)(4)(B)), by striking ‘‘affected deposit in21 surance fund’’ and inserting ‘‘Deposit Insurance

22 Fund’’;

23 (C) in section 21A(b)(6)(B) (12 U.S.C.

24 1441a(b)(6)(B))—
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1 (i) in the subparagraph heading, by

2 striking ‘‘SAIF-INSURED BANKS’’ and in3 serting ‘‘CHARTER CONVERSIONS’’; and

4 (ii) by striking ‘‘Savings Association

5 Insurance Fund member’’ and inserting

6 ‘‘savings association’’;

7 (D) in section 21A(b)(10)(A)(iv)(II) (12

8 U.S.C. 1441a(b)(10)(A)(iv)(II)), by striking

9 ‘‘Savings Association Insurance Fund’’ and in10 serting ‘‘Deposit Insurance Fund’’;

11 (E) in section 21B(e) (12 U.S.C.

12 1441b(e))—

13 (i) in paragraph (5), by inserting ‘‘as

14 of the date of funding’’ after ‘‘Savings Asso15 ciation Insurance Fund members’’ each

16 place such term appears;

17 (ii) by striking paragraph (7); and

18 (iii) by redesignating paragraph (8) as

19 paragraph (7); and

20 (F) in section 21B(k) (12 U.S.C.

21 1441b(k))—

22 (i) by striking paragraph (8); and

23 (ii) by redesignating paragraphs (9)

24 and (10) as paragraphs (8) and (9), respec25 tively.
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1 (12) AMENDMENTS TO THE HOME OWNERS’ LOAN

2 ACT.—The Home Owners’ Loan Act (12 U.S.C. 1461

3 et seq.) is amended—

4 (A) in section 5 (12 U.S.C. 1464)—

5 (i) in subsection (c)(5)(A), by striking

6 ‘‘that is a member of the Bank Insurance

7 Fund’’;

8 (ii) in subsection (c)(6), by striking

9 ‘‘As used in this subsection—’’ and insert10 ing ‘‘For purposes of this subsection, the fol11 lowing definitions shall apply:’’;

12 (iii) in subsection (o)(1), by striking

13 ‘‘that is a Bank Insurance Fund member’’;

14 (iv) in subsection (o)(2)(A), by striking

15 ‘‘a Bank Insurance Fund member until

16 such time as it changes its status to a Sav17 ings Association Insurance Fund member’’

18 and inserting ‘‘insured by the Deposit In19 surance Fund’’;

20 (v) in subsection (t)(5)(D)(iii)(II), by

21 striking ‘‘affected deposit insurance fund’’

22 and inserting ‘‘Deposit Insurance Fund’’;

23 (vi) in subsection (t)(7)(C)(i)(I), by

24 striking ‘‘affected deposit insurance fund’’
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1 and inserting ‘‘Deposit Insurance Fund’’;

2 and

3 (vii) in subsection (v)(2)(A)(i), by

4 striking ‘‘, the Savings Association Insur5 ance Fund’’ and inserting ‘‘or the Deposit

6 Insurance Fund’’; and

7 (B) in section 10 (12 U.S.C. 1467a)—

8 (i) in subsection (e)(1)(A)(iii)(VII), by

9 adding ‘‘or’’ at the end;

10 (ii) in subsection (e)(1)(A)(iv), by add11 ing ‘‘and’’ at the end;

12 (iii) in subsection (e)(1)(B), by strik13 ing ‘‘Savings Association Insurance Fund

14 or Bank Insurance Fund’’ and inserting

15 ‘‘Deposit Insurance Fund’’;

16 (iv) in subsection (e)(2), by striking

17 ‘‘Savings Association Insurance Fund or

18 the Bank Insurance Fund’’ and inserting

19 ‘‘Deposit Insurance Fund’’; and

20 (v) in subsection (m)(3), by striking

21 subparagraph (E), and by redesignating

22 subparagraphs (F), (G), and (H) as sub23 paragraphs (E), (F), and (G), respectively.
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1 (13) AMENDMENTS TO THE NATIONAL HOUSING

2 ACT.—The National Housing Act (12 U.S.C. 1701 et

3 seq.) is amended—

4 (A) in section 317(b)(1)(B) (12 U.S.C.

5 1723i(b)(1)(B)), by striking ‘‘Bank Insurance

6 Fund for banks or through the Savings Associa7 tion Insurance Fund for savings associations’’

8 and inserting ‘‘Deposit Insurance Fund’’; and

9 (B) in section 526(b)(1)(B)(ii) (12 U.S.C.

10 1735f–14(b)(1)(B)(ii)), by striking ‘‘Bank Insur11 ance Fund for banks and through the Savings

12 Association Insurance Fund for savings associa13 tions’’ and inserting ‘‘Deposit Insurance Fund’’.

14 (14) FURTHER AMENDMENTS TO THE FEDERAL

15 DEPOSIT INSURANCE ACT.—The Federal Deposit In16 surance Act (12 U.S.C. 1811 et seq.) is amended—

17 (A) in section 3(a)(1) (12 U.S.C.

18 1813(a)(1)), by striking subparagraph (B) and

19 inserting the following:

20 ‘‘(B) includes any former savings associa21 tion.’’;

22 (B) in section 5(b)(5) (12 U.S.C.

23 1815(b)(5)), by striking ‘‘the Bank Insurance

24 Fund or the Savings Association Insurance
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1 Fund;’’ and inserting ‘‘Deposit Insurance

2 Fund,’’;

3 (C) in section 5(d) (12 U.S.C. 1815(d)), by

4 striking paragraphs (2) and (3);

5 (D) in section 5(d)(1) (12 U.S.C.

6 1815(d)(1))—

7 (i) in subparagraph (A), by striking

8 ‘‘reserve ratios in the Bank Insurance Fund

9 and the Savings Association Insurance

10 Fund’’ and inserting ‘‘the reserve ratio of

11 the Deposit Insurance Fund’’;

12 (ii) by striking subparagraph (B) and

13 inserting the following:

14 ‘‘(2) FEE CREDITED TO THE DEPOSIT INSUR15 ANCE FUND.—The fee paid by the depository institu16 tion under paragraph (1) shall be credited to the De17 posit Insurance Fund.’’;

18 (iii) by striking ‘‘(1) UNINSURED IN19 STITUTIONS.—’’; and

20 (iv) by redesignating subparagraphs

21 (A) and (C) as paragraphs (1) and (3), re22 spectively, and moving the margins 2 ems

23 to the left;

24 (E) in section 5(e) (12 U.S.C. 1815(e))—
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1 (i) in paragraph (5)(A), by striking

2 ‘‘Bank Insurance Fund or the Savings Asso3 ciation Insurance Fund’’ and inserting

4 ‘‘Deposit Insurance Fund’’;

5 (ii) by striking paragraph (6); and

6 (iii) by redesignating paragraphs (7),

7 (8), and (9) as paragraphs (6), (7), and (8),

8 respectively;

9 (F) in section 6(5) (12 U.S.C. 1816(5)), by

10 striking ‘‘Bank Insurance Fund or the Savings

11 Association Insurance Fund’’ and inserting ‘‘De12 posit Insurance Fund’’;

13 (G) in section 7(b) (12 U.S.C. 1817(b))—

14 (i) in paragraph (1)(D), by striking

15 ‘‘each deposit insurance fund’’ and insert16 ing ‘‘the Deposit Insurance Fund’’;

17 (ii) in clauses (i)(I) and (iv) of para18 graph (2)(A), by striking ‘‘each deposit in19 surance fund’’ each place such term appears

20 and inserting ‘‘the Deposit Insurance

21 Fund’’;

22 (iii) in paragraph (2)(A)(iii), by strik23 ing ‘‘a deposit insurance fund’’ and insert24 ing ‘‘the Deposit Insurance Fund’’;
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1 (iv) by striking clause (iv) of

2 paragagraph (2)(A);

3 (v) in paragraph (2)(C) (as redesig4 nated by paragraph (6)(B) of this sub5 section)—

6 (I) by striking ‘‘any deposit in7 surance fund’’ and inserting ‘‘the De8 posit Insurance Fund’’; and

9 (II) by striking ‘‘that fund’’ each

10 place such term appears and inserting

11 ‘‘the Deposit Insurance Fund’’;

12 (vi) in paragraph (2)(D) (as redesig13 nated by paragraph (6)(B) of this sub14 section)—

15 (I) in the subparagraph heading,

16 by striking ‘‘FUNDS ACHIEVE’’ and in17 serting ‘‘FUND ACHIEVES’’; and

18 (II) by striking ‘‘a deposit insur19 ance fund’’ and inserting ‘‘the Deposit

20 Insurance Fund’’;

21 (vii) in paragraph (3)—

22 (I) in the paragraph heading, by

23 striking ‘‘FUNDS’’ and inserting

24 ‘‘FUND’’;
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1 (II) by striking ‘‘that fund’’ each

2 place such term appears and inserting

3 ‘‘the Deposit Insurance Fund’’;

4 (III) in subparagraph (A), by

5 striking ‘‘Except as provided in para6 graph (2)(F), if’’ and inserting ‘‘If’’;

7 (IV) in subparagraph (A), by

8 striking ‘‘any deposit insurance fund’’

9 and inserting ‘‘the Deposit Insurance

10 Fund’’; and

11 (V) by striking subparagraphs (C)

12 and (D) and inserting the following:

13 ‘‘(C) AMENDING SCHEDULE.—The Corpora14 tion may, by regulation, amend a schedule pro15 mulgated under subparagraph (B).’’; and

16 (viii) in paragraph (6)—

17 (I) by striking ‘‘any such assess18 ment’’ and inserting ‘‘any such assess19 ment is necessary’’;

20 (II) by striking ‘‘(A) is nec21 essary—’’;

22 (III) by striking subparagraph

23 (B);

24 (IV) by redesignating clauses (i),

25 (ii), and (iii) as subparagraphs (A),
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1 (B), and (C), respectively, and moving

2 the margins 2 ems to the left; and

3 (V) in subparagraph (C) (as re4 designated), by striking ‘‘; and’’ and

5 inserting a period;

6 (H) in section 11(f)(1) (12 U.S.C.

7 1821(f)(1)), by striking ‘‘, except that—’’ and all

8 that follows through the end of the paragraph

9 and inserting a period;

10 (I) in section 11(i)(3) (12 U.S.C.

11 1821(i)(3))—

12 (i) by striking subparagraph (B);

13 (ii) by redesignating subparagraph (C)

14 as subparagraph (B); and

15 (iii) in subparagraph (B) (as redesig16 nated), by striking ‘‘subparagraphs (A) and

17 (B)’’ and inserting ‘‘subparagraph (A)’’;

18 (J) in section 11A(a) (12 U.S.C.

19 1821a(a))—

20 (i) in paragraph (2), by striking ‘‘LI21 ABILITIES.—’’ and all that follows through

22 ‘‘Except’’ and inserting ‘‘LIABILITIES.—Ex23 cept’’;

24 (ii) by striking paragraph (2)(B); and
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1 (iii) in paragraph (3), by striking ‘‘the

2 Bank Insurance Fund, the Savings Associa3 tion Insurance Fund,’’ and inserting ‘‘the

4 Deposit Insurance Fund’’;

5 (K) in section 11A(b) (12 U.S.C. 1821a(b)),

6 by striking paragraph (4);

7 (L) in section 11A(f) (12 U.S.C. 1821a(f)),

8 by striking ‘‘Savings Association Insurance

9 Fund’’ and inserting ‘‘Deposit Insurance Fund’’;

10 (M) in section 13 (12 U.S.C. 1823)—

11 (i) in subsection (a)(1), by striking

12 ‘‘Bank Insurance Fund, the Savings Asso13 ciation Insurance Fund,’’ and inserting

14 ‘‘Deposit Insurance Fund, the Special Re15 serve of the Deposit Insurance Fund,’’;

16 (ii) in subsection (c)(4)(E)—

17 (I) in the subparagraph heading,

18 by striking ‘‘FUNDS’’ and inserting

19 ‘‘FUND’’; and

20 (II) in clause (i), by striking

21 ‘‘any insurance fund’’ and inserting

22 ‘‘the Deposit Insurance Fund’’;

23 (iii) in subsection (c)(4)(G)(ii)—
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1 (I) by striking ‘‘appropriate in2 surance fund’’ and inserting ‘‘Deposit

3 Insurance Fund’’;

4 (II) by striking ‘‘the members of

5 the insurance fund (of which such in6 stitution is a member)’’ and inserting

7 ‘‘insured depository institutions’’;

8 (III) by striking ‘‘each member’s’’

9 and inserting ‘‘each insured depository

10 institution’s’’; and

11 (IV) by striking ‘‘the member’s’’

12 each place such term appears and in13 serting ‘‘the institution’s’’;

14 (iv) in subsection (c), by striking para15 graph (11);

16 (v) in subsection (h), by striking

17 ‘‘Bank Insurance Fund’’ and inserting ‘‘De18 posit Insurance Fund’’;

19 (vi) in subsection (k)(4)(B)(i), by

20 striking ‘‘Savings Association Insurance

21 Fund’’ and inserting ‘‘Deposit Insurance

22 Fund’’; and

23 (vii) in subsection (k)(5)(A), by strik24 ing ‘‘Savings Association Insurance Fund’’

25 and inserting ‘‘Deposit Insurance Fund’’;
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1 (N) in section 14(a) (12 U.S.C. 1824(a)) in

2 the fifth sentence—

3 (i) by striking ‘‘Bank Insurance Fund

4 or the Savings Association Insurance

5 Fund’’ and inserting ‘‘Deposit Insurance

6 Fund’’; and

7 (ii) by striking ‘‘each such fund’’ and

8 inserting ‘‘the Deposit Insurance Fund’’;

9 (O) in section 14(b) (12 U.S.C. 1824(b)), by

10 striking ‘‘Bank Insurance Fund or Savings Asso11 ciation Insurance Fund’’ and inserting ‘‘Deposit

12 Insurance Fund’’;

13 (P) in section 14(c) (12 U.S.C. 1824(c)), by

14 striking paragraph (3);

15 (Q) in section 14(d) (12 U.S.C. 1824(d))—

16 (i) by striking ‘‘BIF’’ each place such

17 term appears and inserting ‘‘DIF’’; and

18 (ii) by striking ‘‘Bank Insurance

19 Fund’’ each place such term appears and

20 inserting ‘‘Deposit Insurance Fund’’;

21 (R) in section 15(c)(5) (12 U.S.C.

22 1825(c)(5))—

23 (i) by striking ‘‘the Bank Insurance

24 Fund or Savings Association Insurance

25 Fund, respectively’’ each place such term
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1 appears and inserting ‘‘the Deposit Insur2 ance Fund’’; and

3 (ii) in subparagraph (B), by striking

4 ‘‘the Bank Insurance Fund or the Savings

5 Association Insurance Fund, respectively’’

6 and inserting ‘‘the Deposit Insurance

7 Fund’’;

8 (S) in section 17(a) (12 U.S.C. 1827(a))—

9 (i) in the subsection heading, by strik10 ing ‘‘BIF, SAIF,’’ and inserting ‘‘THE DE11 POSIT INSURANCE FUND’’; and

12 (ii) in paragraph (1), by striking ‘‘the

13 Bank Insurance Fund, the Savings Associa14 tion Insurance Fund,’’ each place such term

15 appears and inserting ‘‘the Deposit Insur16 ance Fund’’;

17 (T) in section 17(d) (12 U.S.C. 1827(d)), by

18 striking ‘‘the Bank Insurance Fund, the Savings

19 Association Insurance Fund,’’ each place such

20 term appears and inserting ‘‘the Deposit Insur21 ance Fund’’;

22 (U) in section 18(m)(3) (12 U.S.C.

23 1828(m)(3))—

24 (i) by striking ‘‘Savings Association

25 Insurance Fund’’ each place such term ap-
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1 pears and inserting ‘‘Deposit Insurance

2 Fund’’; and

3 (ii) in subparagraph (C), by striking

4 ‘‘or the Bank Insurance Fund’’;

5 (V) in section 18(p) (12 U.S.C. 1828(p)), by

6 striking ‘‘deposit insurance funds’’ and inserting

7 ‘‘Deposit Insurance Fund’’;

8 (W) in section 24 (12 U.S.C. 1831a) in sub9 sections (a)(1) and (d)(1)(A), by striking ‘‘ap10 propriate deposit insurance fund’’ each place

11 such term appears and inserting ‘‘Deposit Insur12 ance Fund’’;

13 (X) in section 28 (12 U.S.C. 1831e), by

14 striking ‘‘affected deposit insurance fund’’ each

15 place such term appears and inserting ‘‘Deposit

16 Insurance Fund’’;

17 (Y) by striking section 31 (12 U.S.C.

18 1831h);

19 (Z) in section 36(i)(3) (12 U.S.C.

20 1831m(i)(3)) by striking ‘‘affected deposit insur21 ance fund’’ and inserting ‘‘Deposit Insurance

22 Fund’’;

23 (AA) in section 38(a) (12 U.S.C. 1831o(a))

24 in the subsection heading, by striking ‘‘FUNDS’’

25 and inserting ‘‘FUND’’;
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1 (BB) in section 38(k) (12 U.S.C.

2 1831o(k))—

3 (i) in paragraph (1), by striking ‘‘a

4 deposit insurance fund’’ and inserting ‘‘the

5 Deposit Insurance Fund’’; and

6 (ii) in paragraph (2)(A)—

7 (I) by striking ‘‘A deposit insur8 ance fund’’ and inserting ‘‘The Deposit

9 Insurance Fund’’; and

10 (II) by striking ‘‘the deposit in11 surance fund’s outlays’’ and inserting

12 ‘‘the outlays of the Deposit Insurance

13 Fund’’; and

14 (CC) in section 38(o) (12 U.S.C.

15 1831o(o))—

16 (i) by striking ‘‘ASSOCIATIONS.—’’ and

17 all that follows through ‘‘Subsections (e)(2)’’

18 and inserting ‘‘ASSOCIATIONS.—Subsections

19 (e)(2)’’;

20 (ii) by redesignating subparagraphs

21 (A), (B), and (C) as paragraphs (1), (2),

22 and (3), respectively, and moving the mar23 gins 2 ems to the left; and

24 (iii) in paragraph (1) (as redesig25 nated), by redesignating clauses (i) and (ii)
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1 as subparagraphs (A) and (B), respectively,

2 and moving the margins 2 ems to the left.

3 (15) AMENDMENTS TO THE FINANCIAL INSTITU4 TIONS REFORM, RECOVERY, AND ENFORCEMENT ACT

5 OF 1989.—The Financial Institutions Reform, Recov6 ery, and Enforcement Act (Public Law 101–73; 103

7 Stat. 183) is amended—

8 (A) in section 951(b)(3)(B) (12 U.S.C.

9 1833a(b)(3)(B)), by striking ‘‘Bank Insurance

10 Fund, the Savings Association Insurance Fund,’’

11 and inserting ‘‘Deposit Insurance Fund’’; and

12 (B) in section 1112(c)(1)(B) (12 U.S.C.

13 3341(c)(1)(B)), by striking ‘‘Bank Insurance

14 Fund, the Savings Association Insurance Fund,’’

15 and inserting ‘‘Deposit Insurance Fund’’.

16 (16) AMENDMENT TO THE BANK ENTERPRISE

17 ACT OF 1991.—Section 232(a)(1) of the Bank Enter18 prise Act of 1991 (12 U.S.C. 1834(a)(1)) is amended

19 by striking ‘‘section 7(b)(2)(H)’’ and inserting ‘‘sec20 tion 7(b)(2)(G)’’.

21 (17) AMENDMENT TO THE BANK HOLDING COM22 PANY ACT.—Section 2(j)(2) of the Bank Holding

23 Company Act of 1956 (12 U.S.C. 1841(j)(2)) is

24 amended by striking ‘‘Savings Association Insurance

25 Fund’’ and inserting ‘‘Deposit Insurance Fund’’.
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1 SEC. 2014. CREATION OF SAIF SPECIAL RESERVE.

2 Section 11(a)(6) of the Federal Deposit Insurance Act

3 (12 U.S.C. 1821(a)(6)) is amended by adding at the end

4 the following new subparagraph:

5 ‘‘(L) ESTABLISHMENT OF SAIF SPECIAL RE6 SERVE.—

7 ‘‘(i) ESTABLISHMENT.—If, on January 1,

8 1998, the reserve ratio of the Savings Association

9 Insurance Fund exceeds the designated reserve

10 ratio, there is established a Special Reserve of the

11 Savings Association Insurance Fund, which shall

12 be administered by the Corporation and shall be

13 invested in accordance with section 13(a).

14 ‘‘(ii) AMOUNTS IN SPECIAL RESERVE.—If,

15 on January 1, 1998, the reserve ratio of the Sav16 ings Association Insurance Fund exceeds the des17 ignated reserve ratio, the amount by which the

18 reserve ratio exceeds the designated reserve ratio

19 shall be placed in the Special Reserve of the Sav20 ings Association Insurance Fund established by

21 clause (i).

22 ‘‘(iii) LIMITATION.—The Corporation shall

23 not provide any assessment credit, refund, or

24 other payment from any amount in the Special

25 Reserve of the Savings Association Insurance

26 Fund.
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1 ‘‘(iv) EMERGENCY USE OF SPECIAL RE2 SERVE.—Notwithstanding clause (iii), the Cor3 poration may, in its sole discretion, transfer

4 amounts from the Special Reserve of the Savings

5 Association Insurance Fund to the Savings Asso6 ciation Insurance Fund for the purposes set forth

7 in paragraph (4), only if—

8 ‘‘(I) the reserve ratio of the Savings

9 Association Insurance Fund is less than 50

10 percent of the designated reserve ratio; and

11 ‘‘(II) the Corporation expects the re12 serve ratio of the Savings Association Insur13 ance Fund to remain at less than 50 per14 cent of the designated reserve ratio for each

15 of the next 4 calendar quarters.

16 ‘‘(v) EXCLUSION OF SPECIAL RESERVE IN

17 CALCULATING RESERVE RATIO.—Notwithstand18 ing any other provision of law, any amounts in

19 the Special Reserve of the Savings Association

20 Insurance Fund shall be excluded in calculating

21 the reserve ratio of the Savings Association In22 surance Fund.’’.
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1 SEC. 2015. REFUND OF AMOUNTS IN DEPOSIT INSURANCE

2 FUND IN EXCESS OF DESIGNATED RESERVE

3 AMOUNT.

4 Subsection (e) of section 7 of the Federal Deposit In5 surance Act (12 U.S.C. 1817(e)) is amended to read as fol6 lows:

7 ‘‘(e) REFUNDS.—

8 ‘‘(1) OVERPAYMENTS.—In the case of any pay9 ment of an assessment by an insured depository insti10 tution in excess of the amount due to the Corporation,

11 the Corporation may—

12 ‘‘(A) refund the amount of the excess pay13 ment to the insured depository institution; or

14 ‘‘(B) credit such excess amount toward the

15 payment of subsequent semiannual assessments

16 until such credit is exhausted.

17 ‘‘(2) BALANCE IN INSURANCE FUND IN EXCESS

18 OF DESIGNATED RESERVE.—

19 ‘‘(A) IN GENERAL.—Subject to subpara20 graphs (B) and (C), if, as of the end of any

21 semiannual assessment period, the amount of the

22 actual reserves in—

23 ‘‘(i) the Bank Insurance Fund (until

24 the merger of such fund into the Deposit In25 surance Fund pursuant to section 2013 of

26 the Balanced Budget Act of 1995); or
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1 ‘‘(ii) the Deposit Insurance Fund

2 (after the establishment of such fund),

3 exceeds the balance required to meet the des4 ignated reserve ratio applicable with respect to

5 such fund, such excess amount shall be refunded

6 to insured depository institutions by the Cor7 poration on such basis as the Board of Directors

8 determines to be appropriate, taking into ac9 count the factors considered under the risk-based

10 assessment system.

11 ‘‘(B) REFUND NOT TO EXCEED PREVIOUS

12 SEMIANNUAL ASSESSMENT.—The amount of any

13 refund under this paragraph to any member of

14 a deposit insurance fund for any semiannual as15 sessment period may not exceed the total amount

16 of assessments paid by such member to the insur17 ance fund with respect to such period.

18 ‘‘(C) REFUND LIMITATION FOR CERTAIN IN19 STITUTIONS.—No refund may be made under

20 this paragraph with respect to the amount of

21 any assessment paid for any semiannual assess22 ment period by any insured depository institu23 tion described in clause (v) of subsection

24 (b)(2)(A).’’.
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1 SEC. 2016. ASSESSMENT RATES FOR SAIF MEMBERS MAY

2 NOT BE LESS THAN ASSESSMENT RATES FOR

3 BIF MEMBERS.

4 Section 7(b)(2)(C) of the Federal Deposit Insurance

5 Act (12 U.S.C. 1817(b)(2)(E), as redesignated by section

6 2013(d)(6) of this Act) is amended—

7 (1) by striking ‘‘and’’ at the end of clause (i);

8 (2) by striking the period at the end of clause

9 (ii) and inserting ‘‘; and’’; and

10 (3) by adding at the end the following new

11 clause:

12 ‘‘(iii) notwithstanding any other provi13 sion of this subsection, during the period be14 ginning on the date of enactment of the Bal15 anced Budget Act of 1995, and ending on

16 January 1, 1998, the assessment rate for a

17 Savings Association Insurance Fund mem18 ber may not be less than the assessment rate

19 for a Bank Insurance Fund member that

20 poses a comparable risk to the deposit in21 surance fund.’’.

22 SEC. 2017. ASSESSMENTS AUTHORIZED ONLY IF NEEDED TO

23 MAINTAIN THE RESERVE RATIO OF A DE24 POSIT INSURANCE FUND.

25 (a) IN GENERAL.—Section 7(b)(2)(A)(i) of the Federal

26 Deposit Insurance Act (12 U.S.C. 1817(b)(2)(A)(i)) is
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1 amended in the matter preceding subclause (I) by inserting

2 ‘‘when necessary, and only to the extent necessary’’ after

3 ‘‘insured depository institutions’’.

4 (b) LIMITATION ON ASSESSMENT.—Section

5 7(b)(2)(A)(iii) of the Federal Deposit Insurance Act (12

6 U.S.C. 1817(b)(2)(A)(iii)) is amended to read as follows:

7 ‘‘(iii) LIMITATION ON ASSESSMENT.—

8 Except as provided in clause (v), the Board

9 of Directors shall not set semiannual assess10 ments with respect to a deposit insurance

11 fund in excess of the amount needed—

12 ‘‘(I) to maintain the reserve ratio

13 of the fund at the designated reserve

14 ratio; or

15 ‘‘(II) if the reserve ratio is less

16 than the designated reserve ratio, to in17 crease the reserve ratio to the des18 ignated reserve ratio.’’.

19 (c) EXCEPTION TO LIMITATION ON ASSESSMENTS.—

20 Section 7(b)(2)(A) of the Federal Deposit Insurance Act (12

21 U.S.C. 1817(b)(2)(A)) is amended by adding at the end the

22 following new clause:

23 ‘‘(v) EXCEPTION TO LIMITATION ON AS24 SESSMENTS.—The Board of Directors may

25 set semiannual assessments in excess of the
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1 amount permitted under clauses (i) and

2 (iii) with respect to insured depository in3 stitutions that exhibit financial, oper4 ational, or compliance weaknesses ranging

5 from moderately severe to unsatisfactory, or

6 are not well capitalized, as that term is de7 fined in section 38.’’.

8 SEC. 2018. LIMITATION ON AUTHORITY OF OVERSIGHT

9 BOARD TO CONTINUE TO EMPLOY MORE

10 THAN 18 OFFICERS AND EMPLOYEES.

11 (a) IN GENERAL.—Section 21A(a) of the Federal

12 Home Loan Bank Act (12 U.S.C. 1441a(a)) is amended by

13 adding at the end the following new paragraph:

14 ‘‘(17) PHASED-DOWN OPERATION OF OVERSIGHT

15 BOARD FOLLOWING TERMINATION OF CORPORATION.—

16 ‘‘(A) TERMINATION OF AUTHORITY TO EM17 PLOY STAFF.—Except as provided in subpara18 graph (B), the authority of the Thrift Depositor

19 Protection Oversight Board under paragraph (5)

20 to establish officer and employee positions, to

21 compensate officers and employees of the Board,

22 and to provide other benefits for officers and em23 ployees of the Board shall terminate as of De24 cember 31, 1995.
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1 ‘‘(B) LIMITED AUTHORITY FOR EMPLOYING

2 STAFF.—The Thrift Depositor Protection Over3 sight Board may employ not more than 18 indi4 viduals, excluding any employee of any other de5 partment or agency utilized by the Board, to

6 carry out the functions of the Board during the

7 period beginning on January 1, 1996 and end8 ing on May 1, 1996, other than employees whose

9 employment is in the process of being terminated

10 in accordance with subparagraph (C).

11 ‘‘(C) TERMINATION OF EMPLOYMENT OF AD12 DITIONAL EMPLOYEES REQUIRED TO BE COM13 MENCED.—The Thrift Depositor Protection Over14 sight Board shall commence terminating, not

15 later than December 31, 1995, and in accordance

16 with title 5, United States Code, and applicable

17 regulations of the Office of Personnel Manage18 ment, the employment of any employee of the

19 Board whose continued employment by the

20 Board after such date is inconsistent with the re21 quirement of subparagraph (B).’’.

22 (b) TECHNICAL AND CONFORMING AMENDMENTS.—

23 Section 21A(a)(5) of the Federal Home Loan Bank Act (12

24 U.S.C. 1441a(a)(5)) is amended in subparagraphs (B), (C),

25 (D), and (E), by inserting ‘‘subject to paragraph (17),’’
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1 after the closing parenthesis of the subparagraph designa2 tion in each such subparagraph.

3 SEC. 2019. DEFINITIONS.

4 For purposes of this subtitle—

5 (1) the term ‘‘Bank Insurance Fund’’ means the

6 fund established pursuant to section (11)(a)(5)(A) of

7 the Federal Deposit Insurance Act, as that section ex8 isted on the day before the date of enactment of this

9 Act;

10 (2) the terms ‘‘Bank Insurance Fund member’’

11 and ‘‘Savings Association Insurance Fund member’’

12 have the same meanings as in section 7(l) of the Fed13 eral Deposit Insurance Act;

14 (3) the terms ‘‘bank’’, ‘‘Board of Directors’’,

15 ‘‘Corporation’’, ‘‘insured depository institution’’,

16 ‘‘Federal savings association’’, ‘‘savings association’’,

17 ‘‘State savings bank’’, and ‘‘State depository institu18 tion’’ have the same meanings as in section 3 of the

19 Federal Deposit Insurance Act;

20 (4) the term ‘‘Deposit Insurance Fund’’ means

21 the fund established under section 11(a)(4) of the Fed22 eral Deposit Insurance Act, as amended by section

23 2013(d) of this Act;
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1 (5) the term ‘‘depository institution holding com2 pany’’ has the same meaning as in section 3 of the

3 Federal Deposit Insurance Act;

4 (6) the term ‘‘designated reserve ratio’’ has the

5 same meaning as in section 7(b)(2)(A)(iv) of the Fed6 eral Deposit Insurance Act;

7 (7) the term ‘‘Savings Association Insurance

8 Fund’’ means the fund established pursuant to section

9 11(a)(6)(A) of the Federal Deposit Insurance Act, as

10 that section existed on the day before the date of en11 actment of this Act; and

12 (8) the term ‘‘SAIF-assessable deposit’’ means—

13 (A) a deposit that is subject to assessment

14 for purposes of the Savings Association Insur15 ance Fund under the Federal Deposit Insurance

16 Act; and

17 (B) a deposit that section 5(d)(3) of the

18 Federal Deposit Insurance Act treats as insured

19 by the Savings Association Insurance Fund.

20 Subtitle B—Housing

21 SEC. 2051. ANNUAL ADJUSTMENT FACTORS FOR OPERAT22 ING COSTS ONLY; RESTRAINT ON RENT IN23 CREASES.

24 (a) ANNUAL ADJUSTMENT FACTORS FOR OPERATING

25 COSTS ONLY.—Section 8(c)(2)(A) of the United States
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1 Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) is amend2 ed—

3 (1) by striking ‘‘(2)(A)’’ and inserting

4 ‘‘(2)(A)(i)’’;

5 (2) by striking the second sentence and all that

6 follows through the end of the subparagraph; and

7 (3) by adding at the end the following new

8 clause:

9 ‘‘(ii) Each assistance contract under this section shall

10 provide that—

11 ‘‘(I) if the maximum monthly rent for a unit in

12 a new construction or substantial rehabilitation

13 project to be adjusted using an annual adjustment

14 factor exceeds 100 percent of the fair market rent for

15 an existing dwelling unit in the market area, the Sec16 retary shall adjust the rent using an operating costs

17 factor that increases the rent to reflect increases in

18 operating costs in the market area; and

19 ‘‘(II) if the owner of a unit in a project described

20 in subclause (I) demonstrates that the adjusted rent

21 determined under subclause (I) would not exceed the

22 rent for an unassisted unit of similar quality, type,

23 and age in the same market area, as determined by

24 the Secretary, the Secretary shall use the otherwise

25 applicable annual adjustment factor.’’.
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1 (b) RESTRAINT ON SECTION 8 RENT INCREASES.—

2 Section 8(c)(2)(A) of the United States Housing Act of 1937

3 (42 U.S.C. 1437f(c)(2)(A)), as amended by subsection (a),

4 is amended by adding at the end the following new clause:

5 ‘‘(iii)(I) Subject to subclause (II), with respect to any

6 unit assisted under this section that is occupied by the same

7 family at the time of the most recent annual rental adjust8 ment, if the assistance contract provides for the adjustment

9 of the maximum monthly rent by applying an annual ad10 justment factor, and if the rent for the unit is otherwise

11 eligible for an adjustment based on the full amount of the

12 annual adjustment factor, 0.01 shall be subtracted from the

13 amount of the annual adjustment factor, except that the an14 nual adjustment factor shall not be reduced to less than 1.0.

15 ‘‘(II) With respect to any unit described in subclause

16 (I) that is assisted under the certificate program, the ad17 justed rent shall not exceed the rent for a comparable unas18 sisted unit of similar quality, type, and age in the market

19 area in which the unit is located.’’.

20 (c) EFFECTIVE DATE.—The amendments made by this

21 section shall become effective on October 1, 1995.

22 SEC. 2052. FORECLOSURE AVOIDANCE AND BORROWER AS23 SISTANCE.

24 (a) FORECLOSURE AVOIDANCE.—Except as provided

25 in subsection (e), the last sentence of section 204(a) of the
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1 National Housing Act (12 U.S.C. 1710(a)) is amended by

2 inserting before the period the following: ‘‘: And provided

3 further, That the Secretary may pay insurance benefits to

4 the mortgagee to recompense the mortgagee for its actions

5 to provide an alternative to foreclosure of a mortgage that

6 is in default, which actions may include such actions as

7 special forbearance, loan modification, and deeds in lieu of

8 foreclosure, all upon such terms and conditions as the mort9 gagee shall determine in the mortgagee’s sole discretion

10 within guidelines provided by the Secretary, but which may

11 not include assignment of a mortgage to the Secretary: And

12 provided further, That for purposes of the preceding proviso,

13 no action authorized by the Secretary and no action taken,

14 nor any failure to act, by the Secretary or the mortgagee

15 shall be subject to judicial review’’.

16 (b) AUTHORITY TO ASSIST MORTGAGORS IN DE17 FAULT.—Except as provided in subsection (e), section 230

18 of the National Housing Act (12 U.S.C. 1715u) is amended

19 to read as follows:

20 ‘‘AUTHORITY TO ASSIST MORTGAGORS IN DEFAULT

21 ‘‘SEC. 230. (a) PAYMENT OF PARTIAL CLAIM.—The

22 Secretary may establish a program for payment of a par23 tial insurance claim to a mortgagee that agrees to apply

24 the claim amount to payment of a mortgage on a 1- to

25 4-family residence that is in default. Any such payment

26 under such program to the mortgagee shall be made in the
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1 Secretary’s sole discretion and on terms and conditions ac2 ceptable to the Secretary, except that—

3 ‘‘(1) the amount of the payment shall be in an

4 amount determined by the Secretary, which shall not

5 exceed an amount equivalent to 12 monthly mortgage

6 payments and any costs related to the default that are

7 approved by the Secretary; and

8 ‘‘(2) the mortgagor shall agree to repay the

9 amount of the insurance claim to the Secretary upon

10 terms and conditions acceptable to the Secretary.

11 The Secretary may pay the mortgagee, from the appro12 priate insurance fund, in connection with any activities

13 that the mortgagee is required to undertake concerning re14 payment by the mortgagor of the amount owed to the Sec15 retary.

16 ‘‘(b) ASSIGNMENT.—

17 ‘‘(1) PROGRAM AUTHORITY.—The Secretary may

18 establish a program for assignment to the Secretary,

19 upon request of the mortgagee, of a mortgage on a 1-

20 to 4-family residence insured under this Act.

21 ‘‘(2) PROGRAM REQUIREMENTS.—The Secretary

22 may accept assignment of a mortgage under a pro23 gram under this subsection only if—

24 ‘‘(A) the mortgage was in default;
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1 ‘‘(B) the mortgagee has modified the mort2 gage to cure the default and provide for mortgage

3 payments within the reasonable ability of the

4 mortgagor to pay at interest rates not exceeding

5 current market interest rates; and

6 ‘‘(C) the Secretary arranges for servicing of

7 the assigned mortgage by a mortgagee (which

8 may include the assigning mortgagee) through

9 procedures that the Secretary has determined to

10 be in the best interests of the appropriate insur11 ance fund.

12 ‘‘(3) PAYMENT OF INSURANCE BENEFITS.—Upon

13 accepting assignment of a mortgage under the pro14 gram under this subsection, the Secretary may pay

15 insurance benefits to the mortgagee from the appro16 priate insurance fund in an amount that the Sec17 retary determines to be appropriate, but which may

18 not exceed the amount necessary to compensate the

19 mortgagee for the assignment and any losses and ex20 penses resulting from the mortgage modification.

21 ‘‘(c) PROHIBITION OF JUDICIAL REVIEW.—No decision

22 by the Secretary to exercise or forego exercising any author23 ity under this section shall be subject to judicial review.

24 ‘‘(d) SAVINGS PROVISION.—Any mortgage for which

25 the mortgagor has applied to the Secretary, before the date
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1 of the enactment of the Balanced Budget Act of 1995, for

2 assignment pursuant to subsection (b) of this section as in

3 effect before such date of enactment shall continue to be gov4 erned by the provisions of this section in effect immediately

5 before such date of enactment.

6 ‘‘(e) APPLICABILITY OF OTHER LAWS.—No provision

7 of this Act or any other law shall be construed to require

8 the Secretary to provide an alternative to foreclosure for

9 mortgagees with mortgages on 1- to 4-family residences in10 sured by the Secretary under this Act, or to accept assign11 ments of such mortgages.’’.

12 (c) APPLICABILITY OF AMENDMENTS.—Except as pro13 vided in subsection (e), the amendments made by sub14 sections (a) and (b) shall apply only with respect to mort15 gages insured under the National Housing Act that are

16 originated on or after October 1, 1995.

17 (d) REGULATIONS.—Not later than the expiration of

18 the 60-day period beginning on the date of the enactment

19 of this Act, the Secretary of Housing and Urban Develop20 ment shall issue interim regulations to implement this sec21 tion and the amendments made by this section.

22 (e) EFFECTIVENESS AND APPLICABILITY.—If this Act

23 is enacted after the date of the enactment of the Depart24 ments of Veterans Affairs and Housing and Urban Develop-
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1 ment, and Independent Agencies Appropriations Act,

2 1996—

3 (1) subsections (a), (b), (c), and (d) of this sec4 tion shall not take effect; and

5 (2) subsection (c) of the section relating to fore6 closure avoidance and borrower assistance in title II

7 of the Departments of Veterans Affairs and Housing

8 and Urban Development, and Independent Agencies

9 Appropriations Act, 1996, is amended by striking

10 ‘‘only with respect to mortgages insured under the

11 National Housing Act that are originated before Octo12 ber 1, 1995’’ and inserting ‘‘to mortgages originated

13 before, on, and after October 1, 1995’’.

14 TITLE III—COMMUNICATIONS

15 AND SPECTRUM ALLOCATION

16 PROVISIONS

17 SEC. 3001. SPECTRUM AUCTIONS.

18 (a) EXTENSION AND EXPANSION OF AUCTION AUTHOR19 ITY.—

20 (1) AMENDMENTS.—Section 309(j) of the Com21 munications Act of 1934 (47 U.S.C. 309(j)) is amend22 ed—

23 (A) by striking paragraphs (1) and (2) and

24 inserting the following:
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1 ‘‘(1) GENERAL AUTHORITY.—If, consistent with

2 the obligations described in paragraph (6)(E), mutu3 ally exclusive applications are accepted for any ini4 tial license or construction permit, then the Commis5 sion shall grant such license or permit to a qualified

6 applicant through a system of competitive bidding

7 that meets the requirements of this subsection.

8 ‘‘(2) EXEMPTIONS.—The competitive bidding au9 thority granted by this subsection shall not apply to

10 licenses or construction permits issued by the Com11 mission—

12 ‘‘(A) that, as the result of the Commission

13 carrying out the obligations described in para14 graph (6)(E), are not mutually exclusive;

15 ‘‘(B) for public safety radio services, includ16 ing non-Government uses the sole or principal

17 purpose of which is to protect the safety of life,

18 health, and property and which are not made

19 commercially available to the public; or

20 ‘‘(C) for initial licenses or construction per21 mits for new terrestrial digital television services

22 assigned by the Commission to existing terres23 trial broadcast licensees to replace their current

24 television licenses, unless—
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1 ‘‘(i) the Commission, not later than

2 180 days after the date of enactment of the

3 Balanced Budget Act of 1995, after notice

4 and public comment, submits to Congress a

5 report on the use of the authority provided

6 in this subsection for the assignment of ini7 tial licenses or construction permits for use

8 of the electromagnetic spectrum allocated

9 but not assigned as of the date of enactment

10 of that Act for television broadcast services;

11 and

12 ‘‘(ii) the Congress amends this sub13 section to authorize the use of the authority

14 provided by this subsection for such licenses

15 or permits.

16 Except as provided in this subparagraph, the

17 Commission may not assign initial licenses or

18 construction permits under this title to terres19 trial commercial television broadcast licensees to

20 replace their existing broadcast licenses before

21 November 15, 1996.’’; and

22 (B) by striking ‘‘1998’’ in paragraph (11)

23 and inserting ‘‘2002’’.

24 (2) CONFORMING AMENDMENT.—Subsection (i) of

25 section 309 of such Act is repealed.
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1 (3) EFFECTIVE DATE.—The amendment made by

2 paragraph (1)(A) shall not apply with respect to any

3 license or permit for a terrestrial radio or television

4 broadcast station for which the Federal Communica5 tions Commission has accepted mutually exclusive ap6 plications on or before the date of enactment of this

7 Act.

8 (b) COMMISSION OBLIGATION TO MAKE ADDITIONAL

9 SPECTRUM AVAILABLE BY AUCTION.—

10 (1) IN GENERAL.—The Federal Communications

11 Commission shall complete all actions necessary to

12 permit the assignment, by September 30, 2002, by

13 competitive bidding pursuant to section 309(j) of the

14 Communications Act of 1934 (47 U.S.C. 309(j)) of li15 censes for the use of bands of frequencies that—

16 (A) individually span not less than 25

17 megahertz, unless a combination of smaller

18 bands can, notwithstanding the provisions of

19 paragraph (7) of such section, reasonably be ex20 pected to produce greater receipts;

21 (B) in the aggregate span not less than 100

22 megahertz;

23 (C) are located below 3 gigahertz; and

24 (D) have not, as of the date of enactment of

25 this Act—
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1 (i) been designated by Commission reg2 ulation for assignment pursuant to such

3 section;

4 (ii) been identified by the Secretary of

5 Commerce pursuant to section 113 of the

6 National Telecommunications and Informa7 tion Administration Organization Act; or

8 (iii) been reserved for Federal Govern9 ment use pursuant to section 305 of the

10 Communications Act of 1934 (47 U.S.C.

11 305).

12 The Commission shall conduct the competitive

13 bidding for not less than one-half of such aggre14 gate spectrum by September 30, 2000.

15 (2) CRITERIA FOR REASSIGNMENT.—In making

16 available bands of frequencies for competitive bidding

17 pursuant to paragraph (1), the Commission shall—

18 (A) seek to promote the most efficient use of

19 the spectrum;

20 (B) take into account the cost to incumbent

21 licensees of relocating existing uses to other

22 bands of frequencies or other means of commu23 nication;

24 (C) take into account the needs of public

25 safety radio services;
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1 (D) comply with the requirements of inter2 national agreements concerning spectrum alloca3 tions; and

4 (E) take into account the costs to satellite

5 service providers that could result from multiple

6 auctions of like spectrum internationally for

7 global satellite systems.

8 (3) NOTIFICATION TO NTIA.—The Commission

9 shall notify the Secretary of Commerce if—

10 (A) the Commission is not able to provide

11 for the effective relocation of incumbent licensees

12 to bands of frequencies that are available to the

13 Commission for assignment; and

14 (B) the Commission has identified bands of

15 frequencies that are—

16 (i) suitable for the relocation of such li17 censees; and

18 (ii) allocated for Federal Government

19 use, but that could be reallocated pursuant

20 to part B of the National Telecommuni21 cations and Information Administration

22 Organization Act (as amended by this sec23 tion).

24 (c) IDENTIFICATION AND REALLOCATION OF FRE25 QUENCIES.—The National Telecommunications and Infor-
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1 mation Administration Organization Act (47 U.S.C. 901

2 et seq.) is amended—

3 (1) in section 113, by adding at the end the fol4 lowing new subsections:

5 ‘‘(f) ADDITIONAL REALLOCATION REPORT.—If the Sec6 retary receives a notice from the Commission pursuant to

7 section 3001(b)(3) of the Balanced Budget Act of 1995, the

8 Secretary shall prepare and submit to the President and

9 the Congress a report recommending for reallocation for use

10 other than by Federal Government stations under section

11 305 of the 1934 Act (47 U.S.C. 305), bands of frequencies

12 that are suitable for the uses identified in the Commission’s

13 notice.

14 ‘‘(g) RELOCATION OF FEDERAL GOVERNMENT STA15 TIONS.—

16 ‘‘(1) IN GENERAL.—In order to expedite the effi17 cient use of the electromagnetic spectrum and not18 withstanding section 3302(b) of title 31, United

19 States Code, any Federal entity which operates a Fed20 eral Government station may accept payment in ad21 vance or in-kind reimbursement of costs, or a com22 bination of payment in advance and in-kind reim23 bursement, from any person to defray entirely the ex24 penses of relocating the Federal entity’s operations

25 from one or more radio spectrum frequencies to an-
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1 other frequency or frequencies, including, without lim2 itation, the costs of any modification, replacement, or

3 reissuance of equipment, facilities, operating manu4 als, regulations, or other expenses incurred by that

5 entity. Any such payment shall be deposited in the

6 account of such Federal entity in the Treasury of the

7 United States. Funds deposited according to this

8 paragraph shall be available, without appropriation

9 or fiscal year limitation, only for the operations of

10 the Federal entity for which such funds were depos11 ited under this paragraph.

12 ‘‘(2) PROCESS FOR RELOCATION.—Any person

13 seeking to relocate a Federal Government station that

14 has been assigned a frequency within a band allocated

15 for mixed Federal and non-Federal use may submit

16 a petition for such relocation to NTIA. The NTIA

17 shall limit or terminate the Federal Government sta18 tion’s operating license when the following require19 ments are met:

20 ‘‘(A) the person seeking relocation of the

21 Federal Government station has guaranteed to

22 defray entirely, through payment in advance, in23 kind reimbursement of costs, or a combination

24 thereof, all relocation costs incurred by the Fed25 eral entity, including all engineering, equipment,
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1 site acquisition and construction, and regulatory

2 fee costs;

3 ‘‘(B) the person seeking relocation completes

4 all activities necessary for implementing the relo5 cation, including construction of replacement fa6 cilities (if necessary and appropriate) and iden7 tifying and obtaining on the Federal entity’s be8 half new frequencies for use by the relocated Fed9 eral Government station (where such station is

10 not relocating to spectrum reserved exclusively

11 for Federal use);

12 ‘‘(C) any necessary replacement facilities,

13 equipment modifications, or other changes have

14 been implemented and tested to ensure that the

15 Federal Government station is able to success16 fully accomplish its purposes; and

17 ‘‘(D) NTIA has determined that the pro18 posed use of the spectrum frequency band to

19 which the Federal entity will relocate its oper20 ations is—

21 ‘‘(i) consistent with obligations under22 taken by the United States in international

23 agreements and with United States national

24 security and public safety interests; and
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1 ‘‘(ii) suitable for the technical charac2 teristics of the band and consistent with

3 other uses of the band.

4 In exercising its authority under subparagraph

5 (D)(i), NTIA shall consult with the Secretary of

6 Defense, the Secretary of State, or other appro7 priate officers of the Federal Government.

8 ‘‘(3) RIGHT TO RECLAIM.—If within one year

9 after the relocation the Federal Government station

10 demonstrates to the Commission that the new facili11 ties or spectrum are not comparable to the facilities

12 or spectrum from which the Federal Government sta13 tion was relocated, the person seeking such relocation

14 must take reasonable steps to remedy any defects or

15 pay the Federal entity for the costs of returning the

16 Federal Government station to the spectrum from

17 which such station was relocated.

18 ‘‘(h) FEDERAL ACTION TO EXPEDITE SPECTRUM

19 TRANSFER.—Any Federal Government station which oper20 ates on electromagnetic spectrum that has been identified

21 for reallocation for mixed Federal and non-Federal use in

22 any reallocation report under subsection (a) shall, to the

23 maximum extent practicable through the use of the author24 ity granted under subsection (g) and any other applicable

25 provision of law, take action to relocate its spectrum use
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1 to other frequencies that are reserved for Federal use or to

2 consolidate its spectrum use with other Federal Government

3 stations in a manner that maximizes the spectrum avail4 able for non-Federal use. Subsection (c)(4) of this section

5 shall not apply to the extent that a non-Federal user seeks

6 to relocate or relocates a Federal power agency under sub7 section (g).

8 ‘‘(i) DEFINITION.—For purposes of this section, the

9 term ‘Federal entity’ means any department, agency, or

10 other instrumentality of the Federal Government that uti11 lizes a Government station license obtained under section

12 305 of the 1934 Act (47 U.S.C. 305).’’; and

13 (2) in section 114(a)(1), by striking ‘‘(a) or

14 (d)(1)’’ and inserting ‘‘(a), (d)(1), or (f)’’.

15 (d) IDENTIFICATION AND REALLOCATION OF

16 AUCTIONABLE FREQUENCIES.—The National Tele17 communications and Information Administration Organi18 zation Act (47 U.S.C. 901 et seq.) is amended—

19 (1) in section 113(b)—

20 (A) by striking the heading of paragraph

21 (1) and inserting ‘‘INITIAL REALLOCATION RE22 PORT.—’’;

23 (B) by inserting ‘‘in the first report re24 quired by subsection (a)’’ after ‘‘recommend for

25 reallocation’’ in paragraph (1);
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1 (C) by inserting ‘‘or (3)’’ after ‘‘paragraph

2 (1)’’ each place it appears in paragraph (2); and

3 (D) by inserting after paragraph (2) the fol4 lowing new paragraph:

5 ‘‘(3) SECOND REALLOCATION REPORT.—In ac6 cordance with the provisions of this section, the Sec7 retary shall recommend for reallocation in the second

8 report required by subsection (a), for use other than

9 by Federal Government stations under section 305 of

10 the 1934 Act (47 U.S.C. 305), a single frequency band

11 that spans not less than an additional 20 megahertz,

12 that is located below 3 gigahertz, and that meets the

13 criteria specified in paragraphs (1) through (5) of

14 subsection (a).’’; and

15 (2) in section 115—

16 (A) in subsection (b), by striking ‘‘the re17 port required by section 113(a)’’ and inserting

18 ‘‘the initial reallocation report required by sec19 tion 113(a)’’; and

20 (B) by adding at the end the following new

21 subsection:

22 ‘‘(c) ALLOCATION AND ASSIGNMENT OF FREQUENCIES

23 IDENTIFIED IN THE SECOND REALLOCATION REPORT.—

24 With respect to the frequencies made available for

25 reallocation pursuant to section 113(b)(3), the Commission
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1 shall, not later than 1 year after receipt of the second

2 reallocation report required by such section, prepare, sub3 mit to the President and the Congress, and implement, a

4 plan for the allocation and assignment under the 1934 Act

5 of such frequencies. Such plan shall propose the immediate

6 allocation and assignment of all such frequencies in accord7 ance with section 309(j) of the 1934 Act (47 U.S.C.

8 309(j)).’’.

9 TITLE IV—EDUCATION AND

10 RELATED PROVISIONS

11 SEC. 4000. TABLE OF CONTENTS.

12 The table of contents for this title is as follows:

TITLE IV—EDUCATION AND RELATED PROVISIONS

Sec. 4000. Table of contents.

Subtitle A—Higher Education

Sec. 4001. Short title; references; and general effective date.

Sec. 4002. Participation of institutions and administration of loan programs.

Sec. 4003. Loan terms and conditions.

Sec. 4004. Amendments affecting guaranty agencies.

Sec. 4005. Amendments affecting FFELP lenders and loan holders.

Sec. 4006. Connie Lee privatization.

Sec. 4007. Extension of program duration.

Subtitle B—Provisions Relating to the Employee Retirement Income Security

Act of 1974

Sec. 4101. Waiver of minimum period for joint and survivor annuity explanation

before annuity starting date.

13 Subtitle A—Higher Education

14 SEC. 4001. SHORT TITLE; REFERENCES; AND GENERAL EF15 FECTIVE DATE.

16 (a) SHORT TITLE.—This subtitle may be cited as the

17 ‘‘Student Loan Reform Act of 1995’’.
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1 (b) REFERENCES.—Except as otherwise expressly pro2 vided, whenever in this subtitle an amendment or repeal

3 is expressed in terms of an amendment to, or repeal of, a

4 section or other provision, the reference shall be considered

5 to be made to a section or other provision of the Higher

6 Education Act of 1965 (20 U.S.C. 1001 et seq.).

7 (c) GENERAL EFFECTIVE DATE.—Unless otherwise

8 specified in this subtitle, the amendments made by this sub9 title shall take effect on January 1, 1996.

10 SEC. 4002. PARTICIPATION OF INSTITUTIONS AND ADMINIS11 TRATION OF LOAN PROGRAMS.

12 (a) LIMITATION ON PROPORTION OF LOANS MADE

13 UNDER THE DIRECT LOAN PROGRAM.—Section 453(a) (20

14 U.S.C. 1087c(a)) is amended—

15 (1) by amending paragraph (2) to read as fol16 lows:

17 ‘‘(2) DETERMINATION OF NUMBER OF AGREE18 MENTS.—Notwithstanding any other provision of law,

19 the Secretary may enter into agreements under sub20 sections (a) and (b) of section 454 with institutions

21 for participation in the direct loan program under

22 this part, subject to the following:

23 ‘‘(A) For academic year 1994–1995, loans

24 made under this part shall represent not more
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1 than 5 percent of new student loan volume for

2 such year.

3 ‘‘(B) For academic year 1995–1996, loans

4 made under this part, including Federal Direct

5 Consolidation Loans, shall represent not more

6 than 30 percent of the new student loan volume

7 for such year, except that the Secretary shall not

8 enter into such an agreement with an eligible in9 stitution that has not applied and been accepted

10 for participation in the direct loan program

11 under this part on or before September 30, 1995.

12 ‘‘(C) For academic year 1996–1997 and for

13 each succeeding academic year, loans made

14 under this part, including Federal Direct Con15 solidation Loans, shall represent not more than

16 10 percent of the new student loan volume for

17 such year, except that only the 102 eligible insti18 tutions that participated in the direct loan pro19 gram under this part for academic year 1994–

20 1995 shall be eligible to participate in such pro21 gram for academic year 1996–1997 and for each

22 succeeding academic year.’’;

23 (2) by striking paragraph (3);

24 (3) by redesignating paragraph (4) as para25 graph (3); and
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1 (4) in the second sentence of paragraph (3) (as

2 redesignated by paragraph (3)), by striking ‘‘on the

3 most recent program data available’’ and inserting

4 ‘‘on data from the academic year preceding the aca5 demic year for which the estimate is made’’.

6 (b) ELIMINATION OF CONSCRIPTION.—Section

7 453(b)(2) (20 U.S.C. 1087c(b)(2)) is amended—

8 (1) by striking subparagraph (B); and

9 (2) in subparagraph (A)—

10 (A) in clause (ii)—

11 (i) by striking ‘‘beginning’’; and

12 (ii) by striking ‘‘clause (i); and’’ and

13 inserting ‘‘subparagraph (A).’’;

14 (B) by redesignating clause (ii) (as amend15 ed by subparagraph (A)) as subparagraph (B);

16 and

17 (C) by striking ‘‘(i) categorizing’’ and in18 serting ‘‘categorizing’’.

19 (c) CONTROL OF ADMINISTRATIVE EXPENSES.—Sec20 tion 458 (20 U.S.C. 1087h) is amended—

21 (1) by amending subsection (a) to read as fol22 lows:

23 ‘‘(a) EXPENSES.—

24 ‘‘(1) IN GENERAL.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraph (B), each fiscal year there shall be

3 available to the Secretary from funds not other4 wise appropriated, funds to be obligated for sub5 sidy costs under this part for the William D.

6 Ford Federal Direct Loan Program. There shall

7 also be available from funds not otherwise appro8 priated, funds to be obligated for indirect admin9 istrative expenses under this part and part B,

10 not to exceed (from such funds not otherwise ap11 propriated) $260,000,000 for fiscal year 1994,

12 $345,000,000 for fiscal year 1995, $85,000,000

13 (and such sums as may be necessary for admin14 istrative cost allowances for guaranty agencies

15 for costs accrued prior to January 1, 1996) for

16 fiscal year 1996, and $85,000,000 for each of the

17 fiscal years 1997 through 2002.

18 ‘‘(B) REDUCTION.—The amount authorized

19 to be made available for fiscal year 1997 under

20 subparagraph (A) shall be reduced by the

21 amount of any unobligated unexpended funds

22 available to carry out this subsection for any fis23 cal year prior to fiscal year 1996.

24 ‘‘(2) DIRECT AND INDIRECT ADMINISTRATIVE EX25 PENSES.—
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1 ‘‘(A) DIRECT ADMINISTRATIVE EXPENSES.—

2 ‘‘(i) IN GENERAL.—For purposes of

3 this subsection the term ‘direct administra4 tive expenses’ means the cost under the Wil5 liam D. Ford Federal Direct Loan Program

6 of—

7 ‘‘(I) activities related to credit ex8 tension, loan origination, loan servic9 ing, management of contractors, and

10 payments to contractors, other govern11 ment entities, and program partici12 pants, under this part;

13 ‘‘(II) collection of delinquent loans

14 under this part; and

15 ‘‘(III) write-off and closeout of

16 loans under this part.

17 ‘‘(ii) CLARIFICATION WITH RESPECT

18 TO CERTAIN EXPENSES.—Such term does

19 not include the costs to the Department of

20 personnel, training, rent, printing, or other

21 administrative costs, associated with the ac22 tivities described in subclause (I), (II), or

23 (III) of clause (i).

24 ‘‘(B) INDIRECT ADMINISTRATIVE EX25 PENSES.—For purposes of this subsection the
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1 term ‘indirect administrative expenses’ means

2 the cost of—

3 ‘‘(i) personnel engaged in developing

4 program regulations, policy and adminis5 trative guidance;

6 ‘‘(ii) audits of institutions and con7 tractors;

8 ‘‘(iii) program reviews; and

9 ‘‘(iv) other oversight of the program

10 under this part or under part B.

11 ‘‘(3) SUBSIDY COST.—The term ‘subsidy cost’

12 means the estimated long-term cost to the Federal

13 Government of direct administrative expenses cal14 culated on a net present value basis.’’; and

15 (2) by striking subsection (d).

16 (d) DEFAULT RATE LIMITATIONS ON DIRECT LEND17 ING.—

18 (1) INSTITUTIONAL ELIGIBILITY BASED ON DE19 FAULT RATES.—The first sentence of section

20 435(a)(2)(A) (20 U.S.C. 1085(a)(2)(A)) is amended

21 by inserting ‘‘or part D’’ after ‘‘under this part’’.

22 (2) COHORT DEFAULT RATE.—Section 435(m)(1)

23 (20 U.S.C. 1085(m)(1)) is amended—

24 (A) in subparagraph (A)—
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1 (i) by striking ‘‘428, 428A, or 428H’’

2 and inserting ‘‘428, 428A, 428H, or part D

3 (other than Federal Direct PLUS Loans)’’;

4 and

5 (ii) by striking ‘‘428C’’ and inserting

6 ‘‘428C or 455(g)’’;

7 (B) in subparagraph (B)—

8 (i) by striking ‘‘only’’; and

9 (ii) by inserting ‘‘and loans made

10 under part D determined by the Secretary

11 to be in default,’’ after ‘‘for insurance,’’;

12 and

13 (C) in subparagraph (C), by striking

14 ‘‘428C’’ and inserting ‘‘428C or 455(g)’’.

15 (3) DEFAULT RATES AND INCOME CONTINGENT

16 REPAYMENT.—Section 435(m) (20 U.S.C. 1085(m)) is

17 amended by adding at the end the following new

18 paragraph:

19 ‘‘(5) DEFAULT RATE AND INCOME CONTINGENT

20 REPAYMENT.—The Secretary shall prescribe regula21 tions for the calculation of default rates for loans that

22 are repaid pursuant to income contingent repayment

23 under this part, which regulations shall be com24 parable to regulations for the calculation of default
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1 rates for loans that are repaid pursuant to income

2 contingent repayment under part D.’’.

3 (4) TERMINATION OF INSTITUTIONAL PARTICIPA4 TION.—Section 455 (20 U.S.C. 1087e) is amended by

5 adding at the end the following new subsection:

6 ‘‘(l) TERMINATION OF INSTITUTIONS FOR HIGH DE7 FAULT RATES.—

8 ‘‘(1) METHODOLOGY AND CRITERIA.—The Sec9 retary shall develop—

10 ‘‘(A) a methodology for the calculation of

11 institutional default rates under the loan pro12 grams operated pursuant to this part;

13 ‘‘(B) criteria for the initiation of termi14 nation proceedings on the basis of such default

15 rates; and

16 ‘‘(C) procedures for the conduct of such ter17 mination proceedings.

18 ‘‘(2) COMPARABILITY TO PART B.—In developing

19 the methodology, criteria, and procedures required by

20 paragraph (1), the Secretary, to the maximum extent

21 possible, shall establish standards for the termination

22 of institutions from participation in loan programs

23 under this part that are comparable to the standards

24 established for the termination of institutions from

25 participation in the loan programs under part B.
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1 Such procedures shall include provisions for the ap2 peal of default rate calculations based on deficiencies

3 in the servicing of loans under this part that are com4 parable to the provisions for such appeals based on

5 deficiencies in the servicing of loans under part B.

6 ‘‘(3) PROMULGATION.—The methodology, cri7 teria, procedures and standards required by para8 graphs (1) and (2) shall be promulgated in final form

9 not later than 120 days after the date of enactment

10 of this paragraph.’’.

11 (e) ELIMINATION OF TRANSITION TO DIRECT LOANS.—

12 The Act (20 U.S.C. 1001 et seq.) is further amended—

13 (1) in section 422(c)(7) (20 U.S.C. 1072(c)(7))—

14 (A) in subparagraph (A), by striking ‘‘dur15 ing the transition’’ and all that follows through

16 ‘‘part D of this title’’; and

17 (B) in subparagraph (B), by striking ‘‘sec18 tion 428(c)(10)(F)(v)’’ and inserting ‘‘section

19 428(c)(9)(F)(v)’’;

20 (2) in section 422(g)(1) (20 U.S.C. 1072(g)(1))—

21 (A) in the first sentence, by striking ‘‘or the

22 program authorized by part D of this title’’; and

23 (B) in the second sentence, by striking ‘‘or

24 the program authorized by part D of this title’’;

25 (3) in section 428(c)(8) (20 U.S.C. 1078(c)(8))—
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1 (A) by striking subparagraph (B); and

2 (B) by striking ‘‘(A) If’’ and inserting ‘‘If’’;

3 (4) in section 428(c)(9)(F)(vii) (20 U.S.C.

4 1078(c)(9)(F)(vii))—

5 (A) by inserting ‘‘and’’ before ‘‘to avoid dis6 ruption’’; and

7 (B) by striking ‘‘, and to ensure an orderly

8 transition’’ and all that follows through the end

9 of such clause and inserting a period;

10 (5) in section 428(c)(9)(K) (20 U.S.C.

11 1078(c)(9)(K)), by striking ‘‘the progress of the tran12 sition from the loan programs under this part to’’

13 and inserting ‘‘the integrity and administration of’’;

14 (6) in section 428(e)(1)(B)(ii) (20 U.S.C.

15 1078(e)(1)(B)(ii)), by striking ‘‘during the transi16 tion’’ and all that follows through ‘‘under part D of

17 this title’’;

18 (7) in section 428(e)(3) (20 U.S.C. 1078(e)(3)),

19 by striking ‘‘costs of transition’’ and inserting ‘‘indi20 rect administrative expenses’’;

21 (8) in section 428(j)(3) (20 U.S.C. 1078(j)(3))—

22 (A) in the heading for paragraph (3), by

23 striking ‘‘DURING TRANSITION TO DIRECT LEND24 ING’’; and
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1 (B) in subparagraph (A), by striking ‘‘dur2 ing the transition’’ and all that follows through

3 ‘‘part D of this title’’;

4 (9) in the heading for paragraph (2) of section

5 453(c) (20 U.S.C. 1087c(c)), by striking ‘‘TRANSI6 TION’’ and inserting ‘‘INSTITUTIONAL’’;

7 (10) in the heading for paragraph (3) of section

8 453(c) (20 U.S.C. 1087c(c)), by striking ‘‘AFTER

9 TRANSITION’’; and

10 (11) in section 456(b) (20 U.S.C. 1087f(b))—

11 (A) in paragraph (3), by inserting ‘‘and’’

12 after the semicolon;

13 (B) by striking paragraph (4);

14 (C) by redesignating paragraph (5) as

15 paragraph (4); and

16 (D) in paragraph (4) (as redesignated by

17 subparagraph (C)), by striking ‘‘successful oper18 ation’’ and inserting ‘‘integrity and efficiency’’.

19 (f) FEES FOR ORIGINATION SERVICES.—Section 452

20 (20 U.S.C. 1087b) is amended—

21 (1) by striking subsection (b); and

22 (2) by redesignating subsections (c) and (d) as

23 subsections (b) and (c), respectively.
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1 (g) RISK SHARING.—Section 428(n) (20 U.S.C.

2 1078(n)) is amended by adding at the end the following

3 new paragraph:

4 ‘‘(5) APPLICABILITY TO PART D LOANS.—The

5 provisions of this subsection shall apply to institu6 tions of higher education participating in direct lend7 ing under part D with respect to loans made under

8 such part, and for the purposes of this paragraph,

9 paragraph (4) shall be applied by inserting ‘or part

10 D’ after ‘this part’.’’.

11 (h) TECHNICAL AMENDMENT.—Section 428(b)(1)(X)

12 (20 U.S.C. 1078(b)(1)(X)) is amended by striking ‘‘section

13 428(c)(10)’’ and inserting ‘‘section 428(c)(9)’’.

14 SEC. 4003. LOAN TERMS AND CONDITIONS.

15 (a) COMPARABILITY PROVISIONS.—

16 (1) IN GENERAL.—Paragraph (1) of section

17 455(a) (20 U.S.C. 1087e(a)) is amended to read as

18 follows:

19 ‘‘(1) PARALLEL TERMS, CONDITIONS, ELIGIBILITY

20 REQUIREMENTS, BENEFITS AND AMOUNTS.—Unless

21 otherwise specified in this part, loans made to bor22 rowers under this part shall have the same terms,

23 conditions, deferments, forbearances, eligibility re24 quirements, and benefits, be subject to the same ad25 ministrative requirements for origination, payment
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1 and processing of applications, be available in the

2 same amounts, be subject to the same interest rates

3 and same amount of fees, and have the same repay4 ment plans, as the corresponding types of loans made

5 to borrowers under sections 428, 428B, and 428H.

6 The Secretary shall promulgate regulations imple7 menting this paragraph not later than 120 days after

8 the date of enactment of the Student Loan Reform Act

9 of 1995.’’.

10 (2) CONFORMING AMENDMENTS.—Section

11 428(b)(1) (20 U.S.C. 1078(b)(1)) is amended—

12 (A) in subparagraph (D)(ii), by inserting

13 ‘‘(except pursuant to a graduated, income-sen14 sitive, or income contingent repayment sched15 ule)’’ after ‘‘10 years’’; and

16 (B) in subparagraph (E)(ii), by inserting

17 ‘‘(except pursuant to a graduated, income-sen18 sitive, or income contingent repayment sched19 ule)’’ after ‘‘10 years’’.

20 (b) ABILITY OF PART D BORROWERS TO OBTAIN FED21 ERAL STAFFORD CONSOLIDATION LOANS.—Section

22 428C(a)(4) (20 U.S.C. 1078–3(a)(4)) is amended—

23 (1) by redesignating subparagraphs (B), (C),

24 and (D) as subparagraphs (C), (D), and (E), respec25 tively; and
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1 (2) by inserting after subparagraph (A) the fol2 lowing new subparagraph:

3 ‘‘(B) made under part D of this title;’’.

4 (c) ABILITY OF PART B BORROWERS TO OBTAIN FED5 ERAL DIRECT CONSOLIDATION LOANS.—Paragraph (5) of

6 section 428C(b) (20 U.S.C. 1078–3(b)) is amended to read

7 as follows:

8 ‘‘(5) DIRECT CONSOLIDATION LOANS FOR BOR9 ROWERS IN SPECIFIED CIRCUMSTANCES.—

10 ‘‘(A) Subject to subparagraphs (B) and (C)

11 of section 453(a)(2), the Secretary may offer a

12 borrower a Federal Direct Consolidation loan if

13 such borrower is otherwise eligible for a consoli14 dation loan pursuant to this section and such

15 borrower is—

16 ‘‘(i) unable to obtain a consolidation

17 loan from a lender with an agreement

18 under subsection (a)(1) that holds one of

19 such borrower’s loans under this part; or

20 ‘‘(ii) unable to obtain a consolidation

21 loan with income contingent repayment

22 terms from a lender with an agreement

23 under subsection (a)(1).

24 ‘‘(B) The Secretary shall establish appro25 priate certification procedures to verify the eligi-
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1 bility of borrowers for consolidation loans under

2 this paragraph.

3 ‘‘(C) The Secretary shall not offer consolida4 tion loans under this paragraph if, in the Sec5 retary’s judgment, the Department does not have

6 the necessary origination and servicing arrange7 ments in place for such loans, or the projected

8 volume in such loans will be destabilizing to the

9 availability of loans otherwise available under

10 this part.’’.

11 (d) INCOME CONTINGENT REPAYMENT IN THE FED12 ERAL FAMILY EDUCATION LOAN PROGRAM.—

13 (1) INSURANCE PROGRAM AGREEMENTS.—Sec14 tion 428(b)(1)(E)(i) (20 U.S.C. 1078(b)(1)(E)(i)) is

15 amended by striking ‘‘or income-sensitive repayment

16 schedule’’ and inserting ‘‘repayment schedule or an

17 income-sensitive repayment schedule, and may, at the

18 discretion of the lender, offer the borrower the option

19 of repaying the loan in accordance with an income

20 contingent repayment schedule,’’.

21 (2) REPAYMENT SCHEDULES.—The matter pre22 ceding clause (i) of section 428C(c)(2)(A) (20 U.S.C.

23 1078–3(c)(2)(A)) is amended—

24 (A) in the first sentence, by striking ‘‘or in25 come-sensitive repayment schedules’’ and insert-
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1 ing ‘‘repayment schedules or income-sensitive re2 payment schedules, and may include, at the dis3 cretion of the lender, the establishment of income

4 contingent repayment schedules’’; and

5 (B) in the second sentence, by striking ‘‘in6 come-sensitive’’ and inserting ‘‘graduated, in7 come-sensitive, or income contingent’’.

8 (3) COMPARABLE TERMS AND CONDITIONS.—Sec9 tion 428(m) (20 U.S.C. 1078(m)) is amended by add10 ing at the end the following new paragraph:

11 ‘‘(3) INCOME CONTINGENT REPAYMENT SCHED12 ULES.—For the purpose of this part, income contin13 gent repayment schedules established pursuant to sub14 section (b)(1)(E)(i) and section 428C(c)(2)(A) shall

15 have terms and conditions comparable to the terms

16 and conditions established by the Secretary pursuant

17 to section 455(e)(4). The Secretary shall discharge or

18 cancel the indebtedness of borrowers that repay pursu19 ant to income contingent repayment under this part

20 to the same extent, and under the same circumstances,

21 as the Secretary discharges or cancels the indebtedness

22 of borrowers that repay pursuant to income contin23 gent repayment under part D.’’.

24 (e) PLUS PROGRAM REDUCTIONS.—Section 428B(b)

25 (20 U.S.C. 1078–2(b)) is amended—
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1 (1) by striking ‘‘(b) LIMITATION BASED ON

2 NEED.—’’ and inserting the following:

3 ‘‘(b) ANNUAL LIMITS.—

4 ‘‘(1) LIMITATION BASED ON NEED.—’’;

5 (2) by inserting before the last sentence thereof

6 the following:

7 ‘‘(3) LIMITATION COMPUTED ON BASIS OF AC8 TUAL PAYMENTS.—’’; and

9 (3) by inserting before paragraph (3) (as des10 ignated by the amendment made by paragraph (2) of

11 this section) the following new paragraph:

12 ‘‘(2) DOLLAR LIMITATION.—Subject to para13 graph (1), the maximum amount parents may borrow

14 for one student in any academic year or its equiva15 lent (as defined by regulations of the Secretary) is

16 $15,000.’’.

17 SEC. 4004. AMENDMENTS AFFECTING GUARANTY AGENCIES.

18 (a) USE OF RESERVE FUNDS TO PURCHASE DE19 FAULTED LOANS.—Section 422 (20 U.S.C. 1072) is amend20 ed by adding at the end the following new subsection:

21 ‘‘(h) USE OF RESERVE FUNDS TO PURCHASE DE22 FAULTED LOANS.—

23 ‘‘(1) IN GENERAL.—Except as provided in para24 graph (2), a guaranty agency shall use not less than

25 50 percent of such agency’s reserve funds to purchase
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1 and hold defaulted loans that are guaranteed by such

2 agency and for which a claim for insurance is filed

3 with such agency by an eligible lender. The amount

4 of such purchases shall be considered as reserve funds

5 under this section and used in the calculation of the

6 minimum reserve level under section 428(c)(9).

7 ‘‘(2) SPECIAL RULE.—A guaranty agency shall

8 not be required to use its reserve funds to purchase

9 and hold defaulted loans in accordance with para10 graph (1) to the extent that—

11 ‘‘(A) the dollar volume of insurance claims

12 filed with such agency does not amount to 50

13 percent of such agency’s available reserve funds;

14 ‘‘(B) such use is prohibited by State law; or

15 ‘‘(C) such use will compromise the ability of

16 the guaranty agency to pay program expenses.’’.

17 (b) EXTENSION OF PERIOD A GUARANTY AGENCY

18 MUST HOLD A DEFAULTED LOAN.—

19 (1) EXEMPTION FOR EXTENDED HOLDING PE20 RIOD.—The last sentence of section 428(c)(1)(A) (20

21 U.S.C. 1078(c)(1)(A)) is amended by striking ‘‘A

22 guaranty agency’’ and inserting ‘‘Except as provided

23 in section 428K, a guaranty agency’’.

24 (2) NEW EXTENDED HOLDING PERIOD PRO25 GRAM.—
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1 (A) AMENDMENT.—Part B of title IV (20

2 U.S.C. 1071 et seq.) is amended by inserting

3 after section 428J the following new section:

4 ‘‘SEC. 428K. GUARANTOR PURCHASE OF CLAIMS WITH RE5 SERVE FUNDS.

6 ‘‘(a) LOANS SUBJECT TO EXTENDED HOLDING PE7 RIOD.—Except as provided in subsection (b), a guaranty

8 agency shall file a claim for reimbursement with respect

9 to losses (resulting from the default of a borrower) subject

10 to reimbursement by the Secretary pursuant to section

11 428(c)(1) not less than 180 days nor more than 225 days

12 after the guaranty agency discharges such agency’s insur13 ance obligation on a loan insured under this part. Such

14 claim shall include losses on the unpaid principal and ac15 crued interest of any such loan, including interest accrued

16 from the date of such discharge to the date such agency files

17 the claim for reimbursement from the Secretary.

18 ‘‘(b) LOANS EXCLUDED FROM EXTENDED HOLDING.—

19 A guaranty agency may file a claim with respect to losses

20 subject to reimbursement by the Secretary pursuant to sec21 tion 428(c)(1) prior to 180 days after the date the guaranty

22 agency discharges such agency’s insurance obligation on a

23 loan insured under this part, if—
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1 ‘‘(1) such agency used 50 percent or more of such

2 agency’s reserve funds to purchase or hold loans in

3 accordance with section 422(h);

4 ‘‘(2) such claim is based on an inability to locate

5 the borrower and the guaranty agency certifies to the

6 Secretary that—

7 ‘‘(A) diligent attempts were made to locate

8 the borrower through the use of reasonable skip9 tracing techniques in accordance with section

10 428(c)(2)(G); and

11 ‘‘(B) such skip-tracing attempts to locate

12 the borrower were unsuccessful; or

13 ‘‘(3) the guaranty agency determines that the

14 borrower is unlikely to possess the financial resources

15 to begin repaying the loan prior to 180 days after de16 fault by the borrower.

17 ‘‘(c) GUARANTY AGENCY EFFORTS DURING EXTENDED

18 HOLDING PERIOD.—A guaranty agency shall attempt to

19 bring a loan described in subsection (a) into repayment sta20 tus during the period prior to 225 days after the date the

21 guaranty agency discharges its insurance obligation on

22 such loan, so that no claim for reimbursement by the Sec23 retary is necessary. Upon securing payments satisfactory

24 to the guaranty agency during such period, such agency

25 shall, if practicable, sell such loan to an eligible lender.
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1 Such loan shall not be sold to an eligible lender that the

2 guaranty agency determines has substantially failed to ex3 ercise the due diligence required of lenders under this part.

4 ‘‘(d) REGULATION PROHIBITED.—The Secretary shall

5 not promulgate regulations regarding the collection activity

6 of a guaranty agency with respect to a loan described in

7 subsection (a) for which reinsurance has not been paid

8 under section 428(c)(1).’’.

9 (B) EFFECTIVE DATE.—The amendment

10 made by this paragraph shall apply with respect

11 to loans for which claims for insurance are filed

12 by eligible lenders on or after January 1, 1996.

13 (c) ADMINISTRATIVE COST ALLOWANCE.—Section

14 428(f)(1) (20 U.S.C. 1078(f)(1)) is amended—

15 (1) in the matter preceding clause (i) of subpara16 graph (A), by striking ‘‘For a fiscal year prior to fis17 cal year 1994, the’’ and inserting ‘‘The’’; and

18 (2) by amending subparagraph (B) to read as

19 follows:

20 ‘‘(B)(i) The total amount of payments for any

21 fiscal year prior to fiscal year 1994 made under this

22 paragraph shall be equal to 1 percent of the total

23 principal amount of the loans upon which insurance

24 was issued under this part during such fiscal year by

25 such guaranty agency.
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1 ‘‘(ii) For the period beginning January 1, 1996

2 and ending September 30, 1996, and for each fiscal

3 year thereafter, each guaranty agency shall receive an

4 administrative cost allowance, payable quarterly, for

5 such fiscal year calculated on the basis of 0.85 percent

6 of the total principal amount of the loans upon which

7 insurance was issued under this part during such fis8 cal year by such guaranty agency.

9 ‘‘(iii) The guaranty agency shall be deemed to

10 have a contractual right against the United States to

11 receive payments according to the provisions of this

12 subparagraph. Payments shall be made promptly and

13 without administrative delay to any guaranty agency

14 submitting an accurate and complete application

15 therefor under this subparagraph.

16 ‘‘(iv) Notwithstanding clauses (ii) and (iii)—

17 ‘‘(I) for each of the fiscal years 1996

18 through 1998, the Secretary shall pay an aggre19 gate amount for such year of not more than

20 $220,000,000 to all guaranty agencies receiving

21 administrative cost allowances under this sub22 paragraph; and

23 ‘‘(II) for each of the fiscal years 1999

24 through 2002, the Secretary shall pay an aggre25 gate amount for such year of not more than
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1 $180,000,000 to all guaranty agencies receiving

2 administrative cost allowances under this sub3 paragraph.’’.

4 (d) SECRETARY’S EQUITABLE SHARE OF COLLEC5 TIONS ON CONSOLIDATED DEFAULTED LOANS.—Section

6 428(c)(6)(A) (20 U.S.C. 1078(c)(6)(A)) is amended—

7 (1) in the matter preceding clause (i)—

8 (A) by inserting ‘‘or on behalf of’’ after

9 ‘‘made by’’; and

10 (B) by inserting ‘‘, including payments

11 made to discharge loans made under this title to

12 obtain a consolidation loan pursuant to this part

13 or part D,’’ after ‘‘borrower’’; and

14 (2) in clause (ii), by inserting after ‘‘an amount

15 equal to’’ the following: ‘‘—

16 ‘‘(I) for defaulted loans consoli17 dated pursuant to this part or part D

18 on or after January 1, 1996, 18.5 per19 cent of the balance of the principal, ac20 crued interest, and collection costs, out21 standing at the time of such consolida22 tion; or

23 ‘‘(II) for all other loans,’’.

24 (e) RESERVE FUND REFORMS.—
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1 (1) STRENGTHENING AND STABILIZING GUAR2 ANTY AGENCIES.—Section 428(c) (20 U.S.C. 1078(c))

3 is amended—

4 (A) in paragraph (9)(C)(ii), by striking ‘‘80

5 percent’’ and inserting ‘‘76 percent’’; and

6 (B) in paragraph (9)(E)—

7 (i) in the matter preceding clause (i),

8 by striking ‘‘The Secretary may terminate

9 a’’ and inserting ‘‘After providing a guar10 anty agency notice and opportunity for a

11 hearing on the record, the Secretary may

12 terminate such’’;

13 (ii) in clause (iv), by inserting ‘‘or’’

14 after the semicolon;

15 (iii) by striking clause (vi); and

16 (iv) in clause (v), by striking ‘‘; or’’

17 and inserting a period.

18 (2) ADDITIONAL AMENDMENTS.—Section 422 (20

19 U.S.C. 1072) is further amended—

20 (A) in the last sentence of subsection (a)(2),

21 by striking ‘‘Except as provided in section

22 428(c)(10)(E) or (F), such’’ and inserting ‘‘Ex23 cept as provided in subparagraph (E) or (F) of

24 section 428(c)(9), such’’; and
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1 (B) in subsection (g), by amending para2 graph (4) to read as follows:

3 ‘‘(4) DISPOSITION OF FUNDS RETURNED TO OR

4 RECOVERED BY THE SECRETARY.—Any funds that

5 are returned to or otherwise recovered by the Sec6 retary pursuant to this subsection shall be returned to

7 the Treasury of the United States for purposes of re8 ducing the Federal debt and shall be deposited into

9 the special account under section 3113(d) of title 31,

10 United States Code.’’.

11 (f) ELIMINATION OF SUPPLEMENTAL PRECLAIMS AS12 SISTANCE.—

13 (1) AMENDMENT.—Section 428(l) (20 U.S.C.

14 1078(l)) is amended—

15 (A) by striking paragraph (2); and

16 (B) by striking ‘‘(l) PRECLAIMS’’ and all

17 that follows through ‘‘Upon receipt’’ and insert18 ing the following:

19 ‘‘(l) PRECLAIMS ASSISTANCE AND SUPPLEMENTAL

20 PRECLAIMS ASSISTANCE.—Upon receipt’’.

21 (2) EFFECTIVE DATE.—The amendment made by

22 this subsection shall apply to loans for which the first

23 delinquency occurs on or after January 1, 1996.

24 (g) RESERVE RATIOS.—Section 428(c)(9)(A) (20

25 U.S.C. 1078(c)(9)(A)) is amended—
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1 (1) in clause (i), by inserting ‘‘and’’ after the

2 semicolon;

3 (2) in clause (ii), by striking ‘‘; and’’ and insert4 ing a period; and

5 (3) by striking clause (iii).

6 (h) GUARANTY AGENCY REIMBURSEMENT.—

7 (1) IN GENERAL.—Section 428(c)(1) (20 U.S.C.

8 1078(c)(1)) is amended—

9 (A) in subparagraph (A), by striking ‘‘98

10 percent’’ and inserting ‘‘96 percent’’; and

11 (B) in subparagraph (B)—

12 (i) in clause (i), by striking ‘‘88 per13 cent’’ and inserting ‘‘86 percent’’; and

14 (ii) in clause (ii), by striking ‘‘78 per15 cent’’ and inserting ‘‘76 percent’’.

16 (2) EFFECTIVE DATE.—The amendments made

17 by paragraph (1) shall apply with respect to loans for

18 which the first disbursement is made on or after Jan19 uary 1, 1996.

20 SEC. 4005. AMENDMENTS AFFECTING FFELP LENDERS AND

21 LOAN HOLDERS.

22 (a) RISK SHARING BY THE LOAN HOLDERS.—

23 (1) AMENDMENT.—Section 428(b)(1)(G) (20

24 U.S.C. 1078(b)(1)(G)) is amended by striking ‘‘not

25 less than 98 percent’’ and inserting ‘‘95 percent’’.
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1 (2) EFFECTIVE DATE.—The amendment made by

2 this subsection shall apply with respect to loans for

3 which the first disbursement is made on or after Jan4 uary 1, 1996.

5 (b) LENDERS-OF-LAST-RESORT.—Section 428(j)(2)

6 (20 U.S.C. 1078(j)(2)) is amended—

7 (1) in subparagraph (A), by striking ‘‘60 days’’

8 and inserting ‘‘15 days’’; and

9 (2) in subparagraph (B), by striking ‘‘two rejec10 tions from eligible lenders’’ and inserting ‘‘one rejec11 tion from an eligible lender’’.

12 (c) EXCEPTIONAL PERFORMANCE INSURANCE REDUC13 TION.—Section 428I(b)(1) (20 U.S.C. 1078–9(b)(1)) is

14 amended—

15 (1) in the paragraph heading, by striking ‘‘100

16 PERCENT’’; and

17 (2) by striking ‘‘100 percent’’ and inserting ‘‘95

18 percent (or 100 percent in the case of a lender-of-last19 resort)’’.

20 (d) LOAN FEES FROM LENDERS.—

21 (1) AMENDMENT.—Section 438(d)(2) (20 U.S.C.

22 1087–1(d)(2)) is amended by striking ‘‘0.50 percent’’

23 and inserting ‘‘0.80 percent’’.

24 (2) EFFECTIVE DATE.—The amendment made by

25 this subsection shall apply with respect to loans for
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1 which the first disbursement is made on or after Jan2 uary 1, 1996.

3 (e) LENDER AND HOLDER REBATE.—

4 (1) AMENDMENT.—Section 438 (20 U.S.C. 1078)

5 is amended by adding at the end the following new

6 subsection:

7 ‘‘(g) SUBSIDY REBATE ON STAFFORD AND PLUS

8 LOANS.—

9 ‘‘(1) REBATE.—Each holder of a subsidized or

10 unsubsidized Federal Stafford Loan under this part,

11 or a Federal PLUS loan under section 428B, shall

12 pay to the Secretary, on June 30 and December 31

13 of each year, a subsidy rebate in an amount equal to

14 0.035 percent of the unpaid principal amount of each

15 such loan that such holder holds during the repay16 ment period described in section 428(b)(7), except

17 that, notwithstanding subparagraphs (A), (B), and

18 (C) of section 428(b)(7), such holder shall pay a sub19 sidy rebate under this paragraph with respect to such

20 loan during any period of authorized forbearance.

21 ‘‘(2) PAYMENT OF REBATE.—The subsidy rebate

22 shall be paid, to the extent possible, by subtracting

23 from amounts owed such holder under section 438(b)

24 (after deducting from such amounts any amount owed

25 by such holder under section 438(d) for the quarters
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1 ending June 30 and December 31, as appropriate) the

2 amount of subsidy rebates owed by such holder. To the

3 extent the amounts owed such holder under section

4 438(b) (after making the deduction described in the

5 preceding sentence) are insufficient to pay in full the

6 subsidy rebates due from such holder, such holder

7 shall pay the insufficiency by check or wire transfer

8 of funds, in a manner determined by the Secretary.

9 ‘‘(3) DEPOSIT.—The Secretary shall deposit all

10 subsidy rebates collected under the second sentence of

11 paragraph (2) into the insurance fund established in

12 section 431.’’.

13 (2) EFFECTIVE DATE.—The amendment made by

14 this subsection shall apply with respect to loans for

15 which the first disbursement is made on or after Jan16 uary 1, 1996.

17 (f) SMALL LENDER AUDIT EXEMPTION.—Section

18 428(b)(1)(U)(iii) (20 U.S.C. 1078(b)(1)(U)(iii)) is amend19 ed—

20 (1) by inserting ‘‘in the case of any lender that

21 originates or holds more than $5,000,000 in principal

22 on loans made under this title in any fiscal year’’ be23 fore ‘‘for (I)’’;

24 (2) in subclause (I), by inserting ‘‘such’’ before

25 ‘‘lender at least once’’;
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1 (3) in subclause (II), by inserting ‘‘such’’ before

2 ‘‘a lender that is audited’’; and

3 (4) by striking ‘‘if the lender’’ and inserting ‘‘if

4 such lender’’.

5 SEC. 4006. CONNIE LEE PRIVATIZATION.

6 (a) STATUS OF THE CORPORATION AND CORPORATE

7 POWERS; OBLIGATIONS NOT FEDERALLY GUARANTEED.—

8 (1) STATUS OF THE CORPORATION.—The Cor9 poration shall not be an agency, instrumentality, or

10 establishment of the United States Government, nor a

11 Government corporation nor a Government controlled

12 corporation as such terms are defined in section 103

13 of title 5, United States Code. No action under section

14 1491 of title 28, United States Code (commonly

15 known as the Tucker Act) shall be allowable against

16 the United States based on the actions of the Corpora17 tion.

18 (2) CORPORATE POWERS.—The Corporation

19 shall be subject to the provisions of this section, and,

20 to the extent not inconsistent with this section, to the

21 District of Columbia Business Corporation Act (or

22 the comparable law of another State, if applicable).

23 The Corporation shall have the powers conferred upon

24 a corporation by the District of Columbia Business

25 Corporation Act (or such other applicable State law)
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1 as from time to time in effect in order to conduct its

2 affairs as a private, for-profit corporation and to

3 carry out its purposes and activities incidental there4 to. The Corporation shall have the power to enter into

5 contracts, to execute instruments, to incur liabilities,

6 to provide products and services, and to do all things

7 as are necessary or incidental to the proper manage8 ment of its affairs and the efficient operation of a

9 private, for-profit business.

10 (3) LIMITATION ON OWNERSHIP OF STOCK.—

11 (A) SECRETARY OF THE TREASURY.—The

12 Secretary of the Treasury, in completing the sale

13 of stock pursuant to subsection (c), may not sell

14 or issue the stock held by the Secretary of Edu15 cation to an agency, instrumentality, or estab16 lishment of the United States Government, or to

17 a Government corporation or a Government con18 trolled corporation as such terms are defined in

19 section 103 of title 5, United States Code, or to

20 a government-sponsored enterprise as such term

21 is defined in section 622 of title 2, United States

22 Code.

23 (B) STUDENT LOAN MARKETING ASSOCIA24 TION.—The Student Loan Marketing Association

25 shall not increase its share of the ownership of
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1 the Corporation in excess of 42 percent of the

2 shares of stock of the Corporation outstanding on

3 the date of enactment of this Act. The Student

4 Loan Marketing Association shall not control the

5 operation of the Corporation, except that the

6 Student Loan Marketing Association may par7 ticipate in the election of directors as a share8 holder, and may continue to exercise its right to

9 appoint directors under section 754 of the High10 er Education Act of 1965 (20 U.S.C. 1132f–3) as

11 long as that section is in effect.

12 (C) PROHIBITION.—Until such time as the

13 Secretary of the Treasury sells the stock of the

14 Corporation owned by the Secretary of Edu15 cation pursuant to subsection (c), the Student

16 Loan Marketing Association shall not provide fi17 nancial support or guarantees to the Corpora18 tion.

19 (D) FINANCIAL SUPPORT OR GUARAN20 TEES.—After the Secretary of the Treasury sells

21 the stock of the Corporation owned by the Sec22 retary of Education pursuant to subsection (c),

23 the Student Loan Marketing Association may

24 provide financial support or guarantees to the

25 Corporation, if such support or guarantees are
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1 subject to terms and conditions that are no more

2 advantageous to the Corporation than the terms

3 and conditions the Student Loan Marketing As4 sociation provides to other entities, including,

5 where applicable, other monoline financial guar6 anty corporations in which the Student Loan

7 Marketing Association has no ownership interest.

8 (4) NO FEDERAL GUARANTEE.—

9 (A) OBLIGATIONS INSURED BY THE COR10 PORATION.—

11 (i) FULL FAITH AND CREDIT OF THE

12 UNITED STATES.—No obligation that is in13 sured, guaranteed, or otherwise backed by

14 the Corporation shall be deemed to be an ob15 ligation that is guaranteed by the full faith

16 and credit of the United States.

17 (ii) STUDENT LOAN MARKETING ASSO18 CIATION.—No obligation that is insured,

19 guaranteed, or otherwise backed by the Cor20 poration shall be deemed to be an obligation

21 that is guaranteed by the Student Loan

22 Marketing Association.

23 (iii) SPECIAL RULE.—This paragraph

24 shall not affect the determination of whether
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1 such obligation is guaranteed for purposes

2 of Federal income taxes.

3 (B) SECURITIES OFFERED BY THE COR4 PORATION.—No debt or equity securities of the

5 Corporation shall be deemed to be guaranteed by

6 the full faith and credit of the United States.

7 (5) DEFINITION.—The term ‘‘Corporation’’ as

8 used in this section means the College Construction

9 Loan Insurance Association as in existence on the

10 day before the date of enactment of this Act, and to

11 any successor corporation.

12 (b) RELATED PRIVATIZATION REQUIREMENTS.—

13 (1) NOTICE REQUIREMENTS.—

14 (A) IN GENERAL.—During the six-year pe15 riod following the date of enactment of this Act,

16 the Corporation shall include, in each of the Cor17 poration’s contracts for the insurance, guarantee,

18 or reinsurance of obligations, and in each docu19 ment offering debt or equity securities of the Cor20 poration a prominent statement providing notice

21 that—

22 (i) such obligations or such securities,

23 as the case may be, are not obligations of

24 the United States, nor are such obligations
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1 guaranteed in any way by the full faith and

2 credit of the United States; and

3 (ii) the Corporation is not an instru4 mentality of the United States.

5 (B) ADDITIONAL NOTICE.—During the five6 year period following the sale of stock pursuant

7 to subsection (c)(1), in addition to the notice re8 quirements in subparagraph (A), the Corpora9 tion shall include, in each of the contracts and

10 documents referred to in such subparagraph, a

11 prominent statement providing notice that the

12 United States is not an investor in the Corpora13 tion.

14 (2) CORPORATE CHARTER.—The Corporation’s

15 charter shall be amended as necessary and without

16 delay to conform to the requirements of this section.

17 (3) CORPORATE NAME.—The name of the Cor18 poration, or of any direct or indirect subsidiary

19 thereof, may not contain the term ‘‘College Construc20 tion Loan Insurance Association’’, or any substan21 tially similar variation thereof.

22 (4) ARTICLES OF INCORPORATION.—The Cor23 poration shall amend its articles of incorporation

24 without delay to reflect that one of the purposes of the

25 Corporation shall be to guarantee, insure, and rein-
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1 sure bonds, leases, and other evidences of debt of edu2 cational institutions, including Historically Black

3 Colleges and Universities and other academic institu4 tions which are ranked in the lower investment grade

5 category using a nationally recognized credit rating

6 system.

7 (5) REQUIREMENTS UNTIL STOCK SALE.—Not8 withstanding subsection (d), the requirements of sec9 tions 754 and 760 of the Higher Education Act of

10 1965 (20 U.S.C. 1132f–3 and 1132f–9), as such sec11 tions were in effect on the day before the date of en12 actment of this Act, shall continue to be effective until

13 the day immediately following the date of closing of

14 the purchase of the Secretary of Education’s stock (or

15 the date of closing of the final purchase, in the case

16 of multiple transactions) pursuant to subsection

17 (c)(1) of this Act.

18 (c) SALE OF FEDERALLY OWNED STOCK.—

19 (1) SALE OF STOCK REQUIRED.—The Secretary

20 of the Treasury shall sell, pursuant to section 324 of

21 title 31, United States Code, the stock of the Corpora22 tion owned by the Secretary of Education as soon as

23 possible after the date of enactment of this Act, but

24 not later than six months after such date.
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1 (2) PURCHASE BY THE CORPORATION.—In the

2 event that the Secretary of the Treasury is unable to

3 sell the stock, or any portion thereof, at a price ac4 ceptable to the Secretary of Education and the Sec5 retary of the Treasury, the Corporation shall pur6 chase, within 6 months after the date of enactment of

7 this Act, such stock at a price determined by the Sec8 retary of the Treasury and acceptable to the Corpora9 tion based on the independent appraisal of one or

10 more nationally recognized financial firms, except

11 that such price shall not exceed the value of the Sec12 retary of Education’s stock as determined by the Con13 gressional Budget Office in House Report 104–153,

14 dated June 22, 1995.

15 (3) REIMBURSEMENT OF COSTS OF SALE.—The

16 Secretary of the Treasury shall be reimbursed from

17 the proceeds of the sale of the stock under this sub18 section for all reasonable costs related to such sale, in19 cluding all reasonable expenses relating to one or

20 more independent appraisals under this subsection.

21 (4) ASSISTANCE BY THE CORPORATION.—The

22 Corporation shall provide such assistance as the Sec23 retary of the Treasury and the Secretary of Edu24 cation may require to facilitate the sale of the stock

25 under this subsection.
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1 (d) REPEAL OF STATUTORY RESTRICTIONS AND RE2 LATED PROVISIONS.—Part D of title VII of the Higher

3 Education Act of 1965 (20 U.S.C. 1001 et seq.) is repealed.

4 SEC. 4007. EXTENSION OF PROGRAM DURATION.

5 Part B of title IV (20 U.S.C. 1071 et seq.) is amend6 ed—

7 (1) in section 424(a) (20 U.S.C. 1074(a)), by

8 striking ‘‘1998’’ and inserting ‘‘2002’’;

9 (2) in section 428(a)(5) (20 U.S.C.

10 1078(a)(5))—

11 (A) by striking ‘‘1998’’ and inserting

12 ‘‘2002’’; and

13 (B) by striking ‘‘2002’’ and inserting

14 ‘‘2006’’; and

15 (3) in section 428C(e) (20 U.S.C. 1078–3(e)), by

16 amending the first sentence to read as follows: ‘‘The

17 authority to make loans under this section expires at

18 the close of September 30, 2002.’’.
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1 Subtitle B—Provisions Relating to

2 the Employee Retirement Income

3 Security Act of 1974

4 SEC. 4101. WAIVER OF MINIMUM PERIOD FOR JOINT AND

5 SURVIVOR ANNUITY EXPLANATION BEFORE

6 ANNUTIY STARTING DATE.

7 (a) GENERAL RULE.—For purposes of section

8 205(c)(3)(A) of the Employee Retirement Income Security

9 Act of 1974 (29 U.S.C. 1055(c)(3)(A)), the minimum period

10 prescribed by the Secretary of the Treasury between the date

11 that the explanation referred to in such section is provided

12 and the annuity starting date shall not apply if waived

13 by the participant and, if applicable, the participant’s

14 spouse.

15 (b) EFFECTIVE DATE.—Subsection (a) shall apply to

16 plan years beginning after December 31, 1995.

17 TITLE V—ENERGY AND NATURAL

18 RESOURCES PROVISIONS

19 Subtitle A—Nuclear Regulatory

20 Commission Annual Charges

21 SEC. 5001. NUCLEAR REGULATORY COMMISSION ANNUAL

22 CHARGES.

23 Section 6101(a)(3) of the Omnibus Budget Reconcili24 ation Act of 1990 (42 U.S.C. 2214(a)(3)) is amended by
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1 striking ‘‘September 30, 1998’’ and inserting ‘‘September

2 30, 2002’’.

3 Subtitle B—Department of Energy

4 Assets

5 CHAPTER 1—UNITED STATES

6 ENRICHMENT CORPORATION

7 SEC. 5201. SHORT TITLE.

8 This chapter may be cited as the ‘‘USEC Privatization

9 Act’’.

10 SEC. 5202. DEFINITIONS.

11 For purposes of this chapter:

12 (1) The term ‘‘AVLIS’’ means atomic vapor laser

13 isotope separation technology.

14 (2) The term ‘‘Corporation’’ means the United

15 States Enrichment Corporation and, unless the con16 text otherwise requires, includes the private corpora17 tion and any successor thereto following privatiza18 tion.

19 (3) The term ‘‘gaseous diffusion plants’’ means

20 the Paducah Gaseous Diffusion Plant at Paducah,

21 Kentucky and the Portsmouth Gaseous Diffusion

22 Plant at Piketon, Ohio.

23 (4) The term ‘‘highly enriched uranium’’ means

24 uranium enriched to 20 percent or more of the ura25 nium–235 isotope.
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1 (5) The term ‘‘low-enriched uranium’’ means

2 uranium enriched to less than 20 percent of the ura3 nium–235 isotope, including that which is derived

4 from highly enriched uranium.

5 (6) The term ‘‘low-level radioactive waste’’ has

6 the meaning given such term in section 2(9) of the

7 Low-Level Radioactive Waste Policy Act (42 U.S.C.

8 2021b(9)).

9 (7) The term ‘‘private corporation’’ means the

10 corporation established under section 5205.

11 (8) The term ‘‘privatization’’ means the transfer

12 of ownership of the Corporation to private investors.

13 (9) The term ‘‘privatization date’’ means the

14 date on which 100 percent of the ownership of the

15 Corporation has been transferred to private investors.

16 (10) The term ‘‘public offering’’ means an under17 written offering to the public of the common stock of

18 the private corporation pursuant to section 5204.

19 (11) The ‘‘Russian HEU Agreement’’ means the

20 Agreement Between the Government of the United

21 States of America and the Government of the Russian

22 Federation Concerning the Disposition of Highly En23 riched Uranium Extracted from Nuclear Weapons,

24 dated February 18, 1993.
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1 (12) The term ‘‘Secretary’’ means the Secretary

2 of Energy.

3 (13) The ‘‘Suspension Agreement’’ means the

4 Agreement to Suspend the Antidumping Investigation

5 on Uranium from the Russian Federation, as amend6 ed.

7 (14) The term ‘‘uranium enrichment’’ means the

8 separation of uranium of a given isotopic content

9 into 2 components, 1 having a higher percentage of a

10 fissile isotope and 1 having a lower percentage.

11 SEC. 5203. SALE OF THE CORPORATION.

12 (a) AUTHORIZATION.—The Board of Directors of the

13 Corporation, with the approval of the Secretary of the

14 Treasury, shall transfer the interest of the United States

15 in the United States Enrichment Corporation to the private

16 sector in a manner that provides for the long-term viability

17 of the Corporation, provides for the continuation by the

18 Corporation of the operation of the Department of Energy’s

19 gaseous diffusion plants, provides for the protection of the

20 public interest in maintaining a reliable and economical

21 domestic source of uranium mining, enrichment and con22 version services, and, to the extent not inconsistent with

23 such purposes, secures the maximum proceeds to the United

24 States.
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1 (b) PROCEEDS.—Proceeds from the sale of the United

2 States’ interest in the Corporation shall be deposited in the

3 general fund of the Treasury.

4 SEC. 5204. METHOD OF SALE.

5 (a) AUTHORIZATION.—The Board of Directors of the

6 Corporation, with the approval of the Secretary of the

7 Treasury, shall transfer ownership of the assets and obliga8 tions of the Corporation to the private corporation estab9 lished under section 5205 (which may be consummated

10 through a merger or consolidation effected in accordance

11 with, and having the effects provided under, the law of the

12 state of incorporation of the private corporation, as if the

13 Corporation were incorporated thereunder).

14 (b) BOARD DETERMINATION.—The Board, with the

15 approval of the Secretary of the Treasury, shall select the

16 method of transfer and establish terms and conditions for

17 the transfer that will provide the maximum proceeds to the

18 Treasury of the United States and will provide for the long19 term viability of the private corporation, the continued op20 eration of the gaseous diffusion plants, and the public inter21 est in maintaining reliable and economical domestic ura22 nium mining and enrichment industries.

23 (c) ADEQUATE PROCEEDS.—The Secretary of the

24 Treasury shall not allow the privatization of the Corpora25 tion unless before the sale date the Secretary of Treasury
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1 determines that the method of transfer will provide the max2 imum proceeds to the Treasury consistent with the prin3 ciples set forth in section 5203(a).

4 (d) APPLICATION OF SECURITIES LAWS.—Any offering

5 or sale of securities by the private corporation shall be sub6 ject to the Securities Act of 1933 (15 U.S.C. 77a et seq.),

7 the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),

8 and the provisions of the Constitution and laws of any

9 State, territory, or possession of the United States relating

10 to transactions in securities.

11 SEC. 5205. ESTABLISHMENT OF PRIVATE CORPORATION.

12 (a) INCORPORATION.—(1) The directors of the Cor13 poration shall establish a private for-profit corporation

14 under the laws of a State for the purpose of receiving the

15 assets and obligations of the Corporation at privatization

16 and continuing the business operations of the Corporation

17 following privatization.

18 (2) The directors of the Corporation may serve as

19 incorporators of the private corporation and shall take all

20 steps necessary to establish the private corporation, includ21 ing the filing of articles of incorporation consistent with

22 the provisions of this chapter.

23 (3) Employees and officers of the Corporation (includ24 ing members of the Board of Directors) acting in accordance

25 with this section on behalf of the private corporation shall
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1 be deemed to be acting in their official capacities as employ2 ees or officers of the Corporation for purposes of section 205

3 of title 18, United States Code.

4 (b) STATUS OF THE PRIVATE CORPORATION.—(1) The

5 private corporation shall not be an agency, instrumentality,

6 or establishment of the United States, a Government cor7 poration, or a Government-controlled corporation.

8 (2) Except as otherwise provided by this chapter, fi9 nancial obligations of the private corporation shall not be

10 obligations of, or guaranteed as to principal or interest by,

11 the Corporation or the United States, and the obligations

12 shall so plainly state.

13 (3) No action under section 1491 of title 28, United

14 States Code, shall be allowable against the United States

15 based on actions of the private corporation.

16 (c) APPLICATION OF POST-GOVERNMENT EMPLOYMENT

17 RESTRICTIONS.—Beginning on the privatization date, the

18 restrictions stated in section 207 (a), (b), (c), and (d) of

19 title 18, United States Code, shall not apply to the acts

20 of an individual done in carrying out official duties as a

21 director, officer, or employee of the private corporation, if

22 the individual was an officer or employee of the Corpora23 tion (including a director) continuously during the 45 days

24 prior to the privatization date.
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1 (d) DISSOLUTION.—In the event that the privatization

2 does not occur, the Corporation will provide for the dissolu3 tion of the private corporation within 1 year of the private

4 corporation’s incorporation unless the Secretary of the

5 Treasury or his delegate, upon the Corporation’s request,

6 agrees to delay any such dissolution for an additional year.

7 SEC. 5206. TRANSFERS TO THE PRIVATE CORPORATION.

8 Concurrent with privatization, the Corporation shall

9 transfer to the private corporation—

10 (1) the lease of the gaseous diffusion plants in

11 accordance with section 5207,

12 (2) all personal property and inventories of the

13 Corporation,

14 (3) all contracts, agreements, and leases under

15 section 5208(a),

16 (4) the Corporation’s right to purchase power

17 from the Secretary under section 5208(b),

18 (5) such funds in accounts of the Corporation

19 held by the Treasury or on deposit with any bank or

20 other financial institution as approved by the Sec21 retary of the Treasury, and

22 (6) all of the Corporation’s records, including all

23 of the papers and other documentary materials, re24 gardless of physical form or characteristics, made or

25 received by the Corporation.
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1 SEC. 5207. LEASING OF GASEOUS DIFFUSION FACILITIES.

2 (a) TRANSFER OF LEASE.—Concurrent with privat3 ization, the Corporation shall transfer to the private cor4 poration the lease of the gaseous diffusion plants and relat5 ed property for the remainder of the term of such lease in

6 accordance with the terms of such lease.

7 (b) RENEWAL.—The private corporation shall have the

8 exclusive option to lease the gaseous diffusion plants and

9 related property for additional periods following the expira10 tion of the initial term of the lease.

11 (c) EXCLUSION OF FACILITIES FOR PRODUCTION OF

12 HIGHLY ENRICHED URANIUM.—The Secretary shall not

13 lease to the private corporation any facilities necessary for

14 the production of highly enriched uranium but may, subject

15 to the requirements of the Atomic Energy Act of 1954 (42

16 U.S.C. 2011 et seq.), grant the Corporation access to such

17 facilities for purposes other than the production of highly

18 enriched uranium.

19 (d) DOE RESPONSIBILITY FOR PREEXISTING CONDI20 TIONS.—The payment of any costs of decontamination and

21 decommissioning, response actions, or corrective actions

22 with respect to conditions existing before July 1, 1993 at

23 the gaseous diffusion plants shall remain the sole respon24 sibility of the Secretary.

25 (e) ENVIRONMENTAL AUDIT.—For purposes of sub26 section (d), the conditions existing before July 1, 1993, at
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1 the gaseous diffusion plants shall be determined from the

2 environmental audit conducted pursuant to section 1403(e)

3 of the Atomic Energy Act of 1954 (42 U.S.C. 2297c–2(e)).

4 (f) TREATMENT UNDER PRICE-ANDERSON PROVI5 SIONS.—Any lease executed between the Secretary and the

6 Corporation or the private corporation, and any extension

7 or renewal thereof, under this section shall be deemed to

8 be a contract for purposes of section 170d. of the Atomic

9 Energy Act of 1954 (42 U.S.C. 2210(d)).

10 (g) WAIVER OF EIS REQUIREMENT.—The execution or

11 transfer of the lease between the Secretary and the Corpora12 tion or the private corporation, and any extension or re13 newal thereof, shall not be considered a major Federal ac14 tion significantly affecting the quality of the human envi15 ronment for purposes of section 102 of the National Envi16 ronmental Policy Act of 1969 (42 U.S.C. 4332).

17 SEC. 5208. TRANSFER OF CONTRACTS.

18 (a) TRANSFER OF CONTRACTS.—Concurrent with pri19 vatization, the Corporation shall transfer to the private cor20 poration all contracts, agreements, and leases, including all

21 uranium enrichment contracts, that were—

22 (1) transferred by the Secretary to the Corpora23 tion pursuant to section 1401(b) of the Atomic En24 ergy Act of 1954 (42 U.S.C. 2297c(b)), or
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1 (2) entered into by the Corporation before the

2 privatization date.

3 (b) NONTRANSFERABLE POWER CONTRACTS.—The

4 Corporation shall transfer to the private corporation the

5 right to purchase power from the Secretary under the power

6 purchase contracts for the gaseous diffusion plants executed

7 by the Secretary before July 1, 1993. The Secretary shall

8 continue to receive power for the gaseous diffusion plants

9 under such contracts and shall continue to resell such power

10 to the private corporation at cost during the term of such

11 contracts.

12 (c) EFFECT OF TRANSFER.—(1) Notwithstanding sub13 section (a), the United States shall remain obligated to the

14 parties to the contracts, agreements, and leases transferred

15 under subsection (a) for the performance of its obligations

16 under such contracts, agreements, or leases during their

17 terms. Performance of such obligations by the private cor18 poration shall be considered performance by the United

19 States.

20 (2) If a contract, agreement, or lease transferred under

21 subsection (a) is terminated, extended, or materially

22 amended after the privatization date—

23 (A) the private corporation shall be responsible

24 for any obligation arising under such contract, agree-
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1 ment, or lease after any extension or material amend2 ment, and

3 (B) the United States shall be responsible for

4 any obligation arising under the contract, agreement,

5 or lease before the termination, extension, or material

6 amendment.

7 (3) The private corporation shall reimburse the United

8 States for any amount paid by the United States under

9 a settlement agreement entered into with the consent of the

10 private corporation or under a judgment, if the settlement

11 or judgment—

12 (A) arises out of an obligation under a contract,

13 agreement, or lease transferred under subsection (a),

14 and

15 (B) arises out of actions of the private corpora16 tion between the privatization date and the date of a

17 termination, extension, or material amendment of

18 such contract, agreement, or lease.

19 (d) PRICING.—The Corporation may establish prices

20 for its products, materials, and services provided to cus21 tomers on a basis that will allow it to attain the normal

22 business objectives of a profit making corporation.

23 SEC. 5209. LIABILITIES.

24 (a) LIABILITY OF THE UNITED STATES.—(1) Except

25 as otherwise provided in this chapter, all liabilities arising
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1 out of the operation of the uranium enrichment enterprise

2 before July 1, 1993, shall remain the direct liabilities of

3 the Secretary.

4 (2) Except as provided in subsection (a)(3) or other5 wise provided in a memorandum of agreement entered into

6 by the Corporation and the Office of Management and

7 Budget prior to the privatization date, all liabilities arising

8 out of the operation of the Corporation between July 1,

9 1993, and the privatization date shall remain the direct

10 liabilities of the United States.

11 (3) All liabilities arising out of the disposal of depleted

12 uranium generated by the Corporation between July 1,

13 1993, and the privatization date shall become the direct li14 abilities of the Secretary.

15 (4) Any stated or implied consent for the United

16 States, or any agent or officer of the United States, to be

17 sued by any person for any legal, equitable, or other relief

18 with respect to any claim arising from any action taken

19 by any agent or officer of the United States in connection

20 with the privatization of the Corporation is hereby with21 drawn.

22 (5) To the extent that any claim against the United

23 States under this section is of the type otherwise required

24 by Federal statute or regulation to be presented to a Federal

25 agency or official for adjudication or review, such claim
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1 shall be presented to the Department of Energy in accord2 ance with procedures to be established by the Secretary.

3 Nothing in this paragraph shall be construed to impose on

4 the Department of Energy liability to pay any claim pre5 sented pursuant to this paragraph.

6 (6) The Attorney General shall represent the United

7 States in any action seeking to impose liability under this

8 subsection.

9 (b) LIABILITY OF THE CORPORATION.—Notwithstand10 ing any provision of any agreement to which the Corpora11 tion is a party, the Corporation shall not be considered in

12 breach, default, or violation of any agreement because of

13 the transfer of such agreement to the private corporation

14 under section 5208 or any other action the Corporation is

15 required to take under this chapter.

16 (c) LIABILITY OF THE PRIVATE CORPORATION.—Ex17 cept as provided in this chapter, the private corporation

18 shall be liable for any liabilities arising out of its oper19 ations after the privatization date.

20 (d) LIABILITY OF OFFICERS AND DIRECTORS.—(1) No

21 officer, director, employee, or agent of the Corporation shall

22 be liable in any civil proceeding to any party in connection

23 with any action taken in connection with the privatization

24 if, with respect to the subject matter of the action, suit, or
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1 proceeding, such person was acting within the scope of his

2 employment.

3 (2) This subsection shall not apply to claims arising

4 under the Securities Act of 1933 (15 U.S.C. 77a. et seq.),

5 the Securities Exchange Act of 1934 (15 U.S.C. 78a. et seq.),

6 or under the Constitution or laws of any State, territory,

7 or possession of the United States relating to transactions

8 in securities.

9 SEC. 5210. EMPLOYEE PROTECTIONS.

10 (a) CONTRACTOR EMPLOYEES.—(1) Privatization

11 shall not diminish the accrued, vested pension benefits of

12 employees of the Corporation’s operating contractor at the

13 two gaseous diffusion plants.

14 (2) In the event that the private corporation termi15 nates or changes the contractor at either or both of the gase16 ous diffusion plants, the plan sponsor or other appropriate

17 fiduciary of the pension plan covering employees of the

18 prior operating contractor shall arrange for the transfer of

19 all plan assets and liabilities relating to accrued pension

20 benefits of such plan’s participants and beneficiaries from

21 such plant to a pension plan sponsored by the new contrac22 tor or the private corporation or a joint-labor management

23 plan, as the case may be.

24 (3) In addition to any obligations arising under the

25 National Labor Relations Act (29 U.S.C. 151 et seq.), any
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1 employer (including the private corporation if it operates

2 a gaseous diffusion plant without a contractor or any con3 tractor of the private corporation) at a gaseous diffusion

4 plant shall—

5 (A) abide by the terms of any unexpired collec6 tive bargaining agreement covering employees in bar7 gaining units at the plant and in effect on the privat8 ization date until the stated expiration or termi9 nation date of the agreement; or

10 (B) in the event a collective bargaining agree11 ment is not in effect upon the privatization date, have

12 the same bargaining obligations under section 8(d) of

13 the National Labor Relations Act (29 U.S.C. 158(d))

14 as it had immediately before the privatization date.

15 (4) If the private corporation replaces its operating

16 contractor at a gaseous diffusion plant, the new employer

17 (including the new contractor or the private corporation if

18 it operates a gaseous diffusion plant without a contractor)

19 shall—

20 (A) offer employment to non-management em21 ployees of the predecessor contractor to the extent that

22 their jobs still exist or they are qualified for new jobs,

23 and
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1 (B) abide by the terms of the predecessor contrac2 tor’s collective bargaining agreement until the agree3 ment expires or a new agreement is signed.

4 (5) In the event of a plant closing or mass layoff (as

5 such terms are defined in section 2101(a)(2) and (3) of title

6 29, United States Code) at either of the gaseous diffusion

7 plants, the Secretary of Energy shall treat any adversely

8 affected employee of an operating contractor at either plant

9 who was an employee at such plant on July 1, 1993, as

10 a Department of Energy employee for purposes of sections

11 3161 and 3162 of the National Defense Authorization Act

12 for Fiscal Year 1993 (42 U.S.C. 7274h–7274i).

13 (6)(A) The Secretary and the private corporation shall

14 cause the post-retirement health benefits plan provider (or

15 its successor) to continue to provide benefits for eligible per16 sons, as described under subparagraph (B), employed by an

17 operating contractor at either of the gaseous diffusion

18 plants in an economically efficient manner and at substan19 tially the same level of coverage as eligible retirees are enti20 tled to receive on the privatization date.

21 (B) Persons eligible for coverage under subparagraph

22 (A) shall be limited to:

23 (i) persons who retired from active employment

24 at one of the gaseous diffusion plants on or before the

25 privatization date as vested participants in a pension
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1 plan maintained either by the Corporation’s operat2 ing contractor or by a contractor employed prior to

3 July 1, 1993, by the Department of Energy to operate

4 a gaseous diffusion plant; and

5 (ii) persons who are employed by the Corpora6 tion’s operating contractor on or before the privatiza7 tion date and are vested participants in a pension

8 plan maintained either by the Corporation’s operat9 ing contractor or by a contractor employed prior to

10 July 1, 1993, by the Department of Energy to operate

11 a gaseous diffusion plant.

12 (C) The Secretary shall fund the entire cost of post13 retirement health benefits for persons who retired from em14 ployment with an operating contractor prior to July 1,

15 1993.

16 (D) The Secretary and the Corporation shall fund the

17 cost of post-retirement health benefits for persons who retire

18 from employment with an operating contractor on or after

19 July 1, 1993, in proportion to the retired person’s years

20 and months of service at a gaseous diffusion plant under

21 their respective management.

22 (7)(A) Any suit under this subsection alleging a viola23 tion of an agreement between an employer and a labor orga24 nization shall be brought in accordance with section 301

25 of the Labor Management Relations Act (29 U.S.C. 185).
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1 (B) Any charge under this subsection alleging an un2 fair labor practice violative of section 8 of the National

3 Labor Relations Act (29 U.S.C. 158) shall be pursued in

4 accordance with section 10 of the National Labor Relations

5 Act (29 U.S.C. 160).

6 (C) Any suit alleging a violation of any provision of

7 this subsection, to the extent it does not allege a violation

8 of the National Labor Relations Act, may be brought in

9 any district court of the United States having jurisdiction

10 over the parties, without regard to the amount in con11 troversy or the citizenship of the parties.

12 (b) FORMER FEDERAL EMPLOYEES.—(1)(A) An em13 ployee of the Corporation that was subject to either the Civil

14 Service Retirement System (referred to in this section as

15 ‘‘CSRS’’) or the Federal Employees’ Retirement System (re16 ferred to in this section as ‘‘FERS’’) on the day imme17 diately preceding the privatization date shall elect—

18 (i) to retain the employee’s coverage under either

19 CSRS or FERS, as applicable, in lieu of coverage by

20 the Corporation’s retirement system, or

21 (ii) to receive a deferred annuity or lump-sum

22 benefit payable to a terminated employee under

23 CSRS or FERS, as applicable.

24 (B) An employee that makes an election under sub25 paragraph (A)(ii) shall have the option to transfer the bal-
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1 ance in the employee’s Thrift Savings Plan account to a

2 defined contribution plan under the Corporation’s retire3 ment system, consistent with applicable law and the terms

4 of the Corporation’s defined contribution plan.

5 (2) The Corporation shall pay to the Civil Service Re6 tirement and Disability Fund—

7 (A) such employee deductions and agency con8 tributions as are required by sections 8334, 8422, and

9 8423 of title 5, United States Code, for those employ10 ees who elect to retain their coverage under either

11 CSRS or FERS pursuant to paragraph (1);

12 (B) such additional agency contributions as are

13 determined necessary by the Office of Personnel Man14 agement to pay, in combination with the sums under

15 subparagraph (A), the ‘‘normal cost’’ (determined

16 using dynamic assumptions) of retirement benefits for

17 those employees who elect to retain their coverage

18 under CSRS pursuant to paragraph (1), with the

19 concept of ‘‘normal cost’’ being used consistent with

20 generally accepted actuarial standards and prin21 ciples; and

22 (C) such additional amounts, not to exceed two

23 percent of the amounts under subparagraphs (A) and

24 (B), as are determined necessary by the Office of Per25 sonnel Management to pay the cost of administering
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1 retirement benefits for employees who retire from the

2 Corporation after the privatization date under either

3 CSRS or FERS, for their survivors, and for survivors

4 of employees of the Corporation who die after the pri5 vatization date (which amounts shall be available to

6 the Office of Personnel Management as provided in

7 section 8348(a)(1)(B) of title 5, United States Code).

8 (3) The Corporation shall pay to the Thrift Savings

9 Fund such employee and agency contributions as are re10 quired by section 8432 of title 5, United States Code, for

11 those employees who elect to retain their coverage under

12 FERS pursuant to paragraph (1).

13 (4) Any employee of the Corporation who was subject

14 to the Federal Employee Health Benefits Program (referred

15 to in this section as ‘‘FEHBP’’) on the day immediately

16 preceding the privatization date and who elects to retain

17 coverage under either CSRS or FERS pursuant to para18 graph (1) shall have the option to receive health benefits

19 from a health benefit plan established by the Corporation

20 or to continue without interruption coverage under the

21 FEHBP, in lieu of coverage by the Corporation’s health

22 benefit system.

23 (5) The Corporation shall pay to the Employees Health

24 Benefits Fund—
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1 (A) such employee deductions and agency con2 tributions as are required by section 8906(a)–(f) of

3 title 5, United States Code, for those employees who

4 elect to retain their coverage under FEHBP pursuant

5 to paragraph (4); and

6 (B) such amounts as are determined necessary

7 by the Office of Personnel Management under para8 graph (6) to reimburse the Office of Personnel Man9 agement for contributions under section 8906(g)(1) of

10 title 5, United States Code, for those employees who

11 elect to retain their coverage under FEHBP pursuant

12 to paragraph (4).

13 (6) The amounts required under paragraph (5)(B)

14 shall pay the Government contributions for retired employ15 ees who retire from the Corporation after the privatization

16 date under either CSRS or FERS, for survivors of such re17 tired employees, and for survivors of employees of the Cor18 poration who die after the privatization date, with said

19 amounts prorated to reflect only that portion of the total

20 service of such employees and retired persons that was per21 formed for the Corporation after the privatization date.

22 SEC. 5211. OWNERSHIP LIMITATIONS.

23 (a) SECURITIES LIMITATIONS.—No director, officer, or

24 employee of the Corporation may acquire any securities, or

25 any rights to acquire any securities of the private corpora-
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1 tion on terms more favorable than those offered to the gen2 eral public—

3 (1) in a public offering designed to transfer own4 ership of the Corporation to private investors,

5 (2) pursuant to any agreement, arrangement, or

6 understanding entered into before the privatization

7 date, or

8 (3) before the election of the directors of the pri9 vate corporation.

10 (b) OWNERSHIP LIMITATION.—Immediately following

11 the consummation of the transaction or series of trans12 actions pursuant to which 100 percent of the ownership of

13 the Corporation is transferred to private investors, and for

14 a period of three years thereafter, no person may acquire,

15 directly or indirectly, beneficial ownership of securities rep16 resenting more than 10 percent of the total votes of all out17 standing voting securities of the Corporation. The foregoing

18 limitation shall not apply to—

19 (1) any employee stock ownership plan of the

20 Corporation,

21 (2) members of the underwriting syndicate pur22 chasing shares in stabilization transactions in con23 nection with the privatization, or
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1 (3) in the case of shares beneficially held in the

2 ordinary course of business for others, any commer3 cial bank, broker-dealer, or clearing agency.

4 SEC. 5212. URANIUM TRANSFERS AND SALES.

5 (a) TRANSFERS AND SALES BY THE SECRETARY.—The

6 Secretary shall not provide enrichment services or transfer

7 or sell any uranium (including natural uranium con8 centrates, natural uranium hexafluoride, or enriched ura9 nium in any form) to any person except as consistent with

10 this section.

11 (b) RUSSIAN HEU.—(1) On or before December 31,

12 1996, the United States Executive Agent under the Russian

13 HEU Agreement shall transfer to the Secretary without

14 charge title to an amount of uranium hexafluoride equiva15 lent to the natural uranium component of low-enriched ura16 nium derived from at least 18 metric tons of highly enriched

17 uranium purchased from the Russian Executive Agent

18 under the Russian HEU Agreement. The quantity of such

19 uranium hexafluoride delivered to the Secretary shall be

based on a tails assay of 0.30 U235 20 . Uranium hexafluoride

21 transferred to the Secretary pursuant to this paragraph

22 shall be deemed under United States law for all purposes

23 to be of Russian origin.

24 (2) Within 7 years of the date of enactment of this

25 Act, the Secretary shall sell, and receive payment for, the
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1 uranium hexafluoride transferred to the Secretary pursuant

2 to paragraph (1). Such uranium hexafluoride shall be

3 sold—

4 (A) at any time for use in the United States for

5 the purpose of overfeeding;

6 (B) at any time for end use outside the United

7 States;

8 (C) in 1995 and 1996 to the Russian Executive

9 Agent at the purchase price for use in matched sales

10 pursuant to the Suspension Agreement; or,

11 (D) in calendar year 2001 for consumption by

12 end users in the United States not prior to January

13 1, 2002, in volumes not to exceed 3,000,000 pounds

14 U3O8 equivalent per year.

15 (3) With respect to all enriched uranium delivered to

16 the United States Executive Agent under the Russian HEU

17 Agreement on or after January 1, 1997, the United States

18 Executive Agent shall, upon request of the Russian Execu19 tive Agent, enter into an agreement to deliver concurrently

20 to the Russian Executive Agent an amount of uranium

21 hexafluoride equivalent to the natural uranium component

22 of such uranium. An agreement executed pursuant to a re23 quest of the Russian Executive Agent, as contemplated in

24 this paragraph, may pertain to any deliveries due during

25 any period remaining under the Russian HEU Agreement.
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1 The quantity of such uranium hexafluoride delivered to the

2 Russian Executive Agent shall be based on a tails assay

of 0.30 U235 3 . Title to uranium hexafluoride delivered to the

4 Russian Executive Agent pursuant to this paragraph shall

5 transfer to the Russian Executive Agent upon delivery of

6 such material to the Russian Executive Agent, with such

7 delivery to take place at a North American facility des8 ignated by the Russian Executive Agent. Uranium

9 hexafluoride delivered to the Russian Executive Agent pur10 suant to this paragraph shall be deemed under U.S. law

11 for all purposes to be of Russian origin. Such uranium

12 hexafluoride may be sold to any person or entity for deliv13 ery and use in the United States only as permitted in sub14 sections (b)(5), (b)(6) and (b)(7) of this section.

15 (4) In the event that the Russian Executive Agent does

16 not exercise its right to enter into an agreement to take de17 livery of the natural uranium component of any low-en18 riched uranium, as contemplated in paragraph (3), within

19 90 days of the date such low-enriched uranium is delivered

20 to the United States Executive Agent, or upon request of

21 the Russian Executive Agent, then the United States Execu22 tive Agent shall engage an independent entity through a

23 competitive selection process to auction an amount of ura24 nium hexafluoride or U3O8 (in the event that the conversion

25 component of such hexafluoride has previously been sold)
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1 equivalent to the natural uranium component of such low2 enriched uranium. An agreement executed pursuant to a

3 request of the Russian Executive Agent, as contemplated in

4 this paragraph, may pertain to any deliveries due during

5 any period remaining under the Russian HEU Agreement.

6 Such independent entity shall sell such uranium

7 hexafluoride in one or more lots to any person or entity

8 to maximize the proceeds from such sales, for disposition

9 consistent with the limitations set forth in this subsection.

10 The independent entity shall pay to the Russian Executive

11 Agent the proceeds of any such auction less all reasonable

12 transaction and other administrative costs. The quantity

13 of such uranium hexafluoride auctioned shall be based on

14 a tails assay of 0.30 U235. Title to uranium hexafluoride

15 auctioned pursuant to this paragraph shall transfer to the

16 buyer of such material upon delivery of such material to

17 the buyer. Uranium hexafluoride auctioned pursuant to this

18 paragraph shall be deemed under United States law for all

19 purposes to be of Russian origin.

20 (5) Except as provided in paragraphs (6) and (7), ura21 nium hexafluoride delivered to the Russian Executive Agent

22 under paragraph (3) or auctioned pursuant to paragraph

23 (4), may not be delivered for consumption by end users in

24 the United States either directly or indirectly prior to Jan-
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1 uary 1, 1998, and thereafter only in accordance with the

2 following schedule:

Annual maximum deliveries to end users

Year: (millions lbs. U3O8

equivalent)

1998 ................................................................................................ 2

1999 ................................................................................................ 4

2000 ................................................................................................ 6

2001 ................................................................................................ 8

2002 ................................................................................................ 10

2003 ................................................................................................ 12

2004 ................................................................................................ 14

2005 ................................................................................................ 16

2006 ................................................................................................ 17

2007 ................................................................................................ 18

2008 ................................................................................................ 19

2009 and each year thereafter ...................................................... 20.

3 (6) Uranium hexafluoride delivered to the Russian Ex4 ecutive Agent under paragraph (3) or auctioned pursuant

5 to paragraph (4) may be sold at any time as Russian-ori6 gin natural uranium in a matched sale pursuant to the

7 Suspension Agreement, and in such case shall not be count8 ed against the annual maximum deliveries set forth in

9 paragraph (5).

10 (7) Uranium hexafluoride delivered to the Russian Ex11 ecutive Agent under paragraph (3) or auctioned pursuant

12 to paragraph (4) may be sold at any time for use in the

13 United States for the purpose of overfeeding in the oper14 ations of enrichment facilities.

15 (8) Nothing in this subsection (b) shall restrict the sale

16 of the conversion component of such uranium hexafluoride.

17 (9) The Secretary of Commerce shall have responsibil18 ity for the administration and enforcement of the limita-
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1 tions set forth in this subsection. The Secretary of Com2 merce may require any person to provide any certifications,

3 information, or take any action that may be necessary to

4 enforce these limitations. The United States Customs Serv5 ice shall maintain and provide any information required

6 by the Secretary of Commerce and shall take any action

7 requested by the Secretary of Commerce which is necessary

8 for the administration and enforcement of the uranium de9 livery limitations set forth in this section.

10 (10) The President shall monitor the actions of the

11 United States Executive Agent under the Russian HEU

12 Agreement and shall report to the Congress not later than

13 December 31 of each year on the effect the low-enriched ura14 nium delivered under the Russian HEU Agreement is hav15 ing on the domestic uranium mining, conversion, and en16 richment industries, and the operation of the gaseous diffu17 sion plants. Such report shall include a description of ac18 tions taken or proposed to be taken by the President to pre19 vent or mitigate any material adverse impact on such in20 dustries or any loss of employment at the gaseous diffusion

21 plants as a result of the Russian HEU Agreement.

22 (c) TRANSFERS TO THE CORPORATION.—(1) The Sec23 retary shall transfer to the Corporation without charge up

24 to 50 metric tons of enriched uranium and up to 7,000 met-
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1 ric tons of natural uranium from the Department of Ener2 gy’s stockpile, subject to the restrictions in subsection (c)(2).

3 (2) The Corporation shall not deliver for commercial

4 end use in the United States—

5 (A) any of the uranium transferred under this

6 subsection before January 1, 1998;

7 (B) more than 10 percent of the uranium (by

8 uranium hexafluoride equivalent content) transferred

9 under this subsection or more than 4,000,000 pounds,

10 whichever is less, in any calendar year after 1997; or

11 (C) more than 800,000 separative work units

12 contained in low-enriched uranium transferred under

13 this subsection in any calendar year.

14 (d) INVENTORY SALES.—(1) In addition to the trans15 fers authorized under subsections (c) and (e), the Secretary

16 may, from time to time, sell natural and low-enriched ura17 nium (including low-enriched uranium derived from highly

18 enriched uranium) from the Department of Energy’s stock19 pile.

20 (2) Except as provided in subsections (b), (c), and (e),

21 no sale or transfer of natural or low-enriched uranium shall

22 be made unless—

23 (A) the President determines that the material is

24 not necessary to national security needs,
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1 (B) the Secretary determines that the sale of the

2 material will not have an adverse material impact on

3 the domestic uranium mining, conversion, or enrich4 ment industry, taking into account the sales of ura5 nium under the Russian HEU Agreement and the

6 Suspension Agreement, and

7 (C) the price paid to the Secretary will not be

8 less than the fair market value of the material.

9 (e) GOVERNMENT TRANSFERS.—Notwithstanding sub10 section (d)(2), the Secretary may transfer or sell enriched

11 uranium—

12 (1) to a Federal agency if the material is trans13 ferred for the use of the receiving agency without any

14 resale or transfer to another entity and the material

15 does not meet commercial specifications;

16 (2) to any person for national security purposes,

17 as determined by the Secretary; or

18 (3) to any State or local agency or nonprofit,

19 charitable, or educational institution for use other

20 than the generation of electricity for commercial use.

21 (f) SAVINGS PROVISION.—Nothing in this chapter shall

22 be read to modify the terms of the Russian HEU Agreement.

23 SEC. 5213. LOW-LEVEL WASTE.

24 (a) RESPONSIBILITY OF DOE.—(1) The Secretary, at

25 the request of the generator, shall accept for disposal low-
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1 level radioactive waste, including depleted uranium if it

2 were ultimately determined to be low-level radioactive

3 waste, generated by the Corporation as a result of the oper4 ations of the gaseous diffusion plants or as a result of the

5 treatment of such wastes at a location other than a gaseous

6 diffusion plant. The terms and conditions for such service

7 shall be no more favorable than those the Secretary offers

8 any other generator of such wastes generated by uranium

9 enrichment plants licensed by the Nuclear Regulatory Com10 mission.

11 (2) The Secretary shall recover the cost of providing

12 the service in paragraph (1), including a pro rata share

13 of any capital costs, by charging the Corporation a fee for

14 such service in an amount equal to the price charged ura15 nium enrichment plants licensed by the Nuclear Regulatory

16 Commission, but in no event shall the Secretary charge any

17 generator more than an amount equal to that which would

18 be charged by commercial, state, regional, or interstate com19 pact entities for disposal of such waste.

20 (b) AGREEMENTS WITH OTHER PERSONS.—The Cor21 poration or any other generator may also enter into agree22 ments for the disposal of low-level radioactive waste subject

23 to subsection (a) with any person other than the Secretary

24 that is authorized by applicable laws and regulations to dis25 pose of such wastes, but shall have no authority under this
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1 or any other law to require a State or interstate compact

2 to treat, store, or dispose of such waste in a State or inter3 state compact facility without the State or compact’s con4 sent.

5 SEC. 5214. AVLIS.

6 (a) EXCLUSIVE RIGHT TO COMMERCIALIZE.—The

7 Corporation shall have the exclusive commercial right to de8 ploy and use any AVLIS patents, processes, and technical

9 information owned or controlled by the Government, upon

10 completion of a royalty agreement with the Secretary.

11 (b) TRANSFER OF RELATED PROPERTY TO CORPORA12 TION.—

13 (1) IN GENERAL.—To the extent requested by the

14 Corporation and subject to the requirements of the

15 Atomic Energy Act of 1954 (42 U.S.C. 2011 et seq.),

16 the President shall transfer without charge to the Cor17 poration all of the right, title, or interest in and to

18 property owned by the United States under control or

19 custody of the Secretary that is directly related to and

20 materially useful in the performance of the Corpora21 tion’s purposes regarding AVLIS and alternative

22 technologies for uranium enrichment, including—

23 (A) facilities, equipment, and materials for

24 research, development, and demonstration activi25 ties; and
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1 (B) all other facilities, equipment, mate2 rials, processes, patents, technical information of

3 any kind, contracts, agreements, and leases.

4 (2) EXCEPTION.—Facilities, real estate, improve5 ments, and equipment related to the gaseous diffusion,

6 and gas centrifuge, uranium enrichment programs of

7 the Secretary shall not transfer under paragraph

8 (1)(B).

9 (3) EXPIRATION OF TRANSFER AUTHORITY.—The

10 President’s authority to transfer property under this

11 subsection shall expire upon the privatization date.

12 (c) LIABILITY FOR PATENT AND RELATED CLAIMS.—

13 With respect to any right, title, or interest provided to the

14 Corporation under subsection (a) or (b), the Corporation

15 shall have sole liability for any payments made or awards

16 under section 157 b. (3) of the Atomic Energy Act of 1954

17 (42 U.S.C. 2187(b)(3)), or any settlements or judgments in18 volving claims for alleged patent infringement. Any royalty

19 agreement under subsection (a) of this section shall provide

20 for a reduction of royalty payments to the Secretary to off21 set any payments, awards, settlements, or judgments under

22 this subsection.

23 SEC. 5215. APPLICATION OF CERTAIN LAWS.

24 (a) OSHA.—(1) As of the privatization date, the pri25 vate corporation shall be subject to and comply with the
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1 Occupational Safety and Health Act of 1970 (29 U.S.C.

2 651 et seq.).

3 (2) The Nuclear Regulatory Commission and the Occu4 pational Safety and Health Administration shall, within

5 90 days after the date of enactment of this Act, enter into

6 a memorandum of agreement to govern the exercise of their

7 authority over occupational safety and health hazards at

8 the gaseous diffusion plants, including inspection, inves9 tigation, enforcement, and rulemaking relating to such haz10 ards.

11 (b) ANTITRUST LAWS.—For purposes of the antitrust

12 laws, the performance by the private corporation of a

13 ‘‘matched import’’ contract under the Suspension Agree14 ment shall be considered to have occurred prior to the pri15 vatization date, if at the time of privatization, such con16 tract had been agreed to by the parties in all material terms

17 and confirmed by the Secretary of Commerce under the Sus18 pension Agreement.

19 (c) ENERGY REORGANIZATION ACT REQUIREMENTS.—

20 (1) The private corporation and its contractors and sub21 contractors shall be subject to the provisions of section 211

22 of the Energy Reorganization Act of 1974 (42 U.S.C. 5851)

23 to the same extent as an employer subject to such section.

24 (2) With respect to the operation of the facilities leased

25 by the private corporation, section 206 of the Energy Reor-
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1 ganization Act of 1974 (42 U.S.C. 5846) shall apply to the

2 directors and officers of the private corporation.

3 SEC. 5216. AMENDMENTS TO THE ATOMIC ENERGY ACT.

4 (a) REPEAL.—(1) Chapters 22 through 26 of the Atom5 ic Energy Act of 1954 (42 U.S.C. 2297–2297e-7) are re6 pealed as of the privatization date.

7 (2) The table of contents of such Act is amended as

8 of the privatization date by striking the items referring to

9 sections repealed by paragraph (1).

10 (b) NRC LICENSING.—(1) Section 11v. of the Atomic

11 Energy Act of 1954 (42 U.S.C. 2014v.) is amended by strik12 ing ‘‘or the construction and operation of a uranium en13 richment facility using Atomic Vapor Laser Isotope Sepa14 ration technology’’.

15 (2) Section 193 of the Atomic Energy Act of 1954 (42

16 U.S.C. 2243) is amended by adding at the end the following:

17 ‘‘(f) LIMITATION.—No license or certificate of compli18 ance may be issued to the United States Enrichment Cor19 poration or its successor under this section or sections 53,

20 63, or 1701, if the Commission determines that—

21 ‘‘(1) the Corporation is owned, controlled, or

22 dominated by an alien, a foreign corporation, or a

23 foreign government; or

24 ‘‘(2) the issuance of such a license or certificate

25 of compliance would be inimical to—
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1 ‘‘(A) the common defense and security of the

2 United States; or

3 ‘‘(B) the maintenance of a reliable and eco4 nomical domestic source of enrichment services.’’.

5 (3) Section 1701(c)(2) of the Atomic Energy Act of

6 1954 (42 U.S.C. 2297f(c)(2)) is amended to read as follows:

7 ‘‘(2) PERIODIC APPLICATION FOR CERTIFICATE

8 OF COMPLIANCE.—The Corporation shall apply to the

9 Nuclear Regulatory Commission for a certificate of

10 compliance under paragraph (1) periodically, as de11 termined by the Commission, but not less than every

12 5 years. The Commission shall review any such appli13 cation and any determination made under subsection

14 (b)(2) shall be based on the results of any such re15 view.’’.

16 (4) Section 1702(a) of the Atomic Energy Act of 1954

17 (42 U.S.C. 2297f–1(a)) is amended—

18 (1) by striking ‘‘other than’’ and inserting ‘‘in19 cluding’’, and

20 (2) by striking ‘‘sections 53 and 63’’ and insert21 ing ‘‘sections 53, 63, and 193’’.

22 (c) JUDICIAL REVIEW OF NRC ACTIONS.—Section

23 189b. of the Atomic Energy Act of 1954 (42 U.S.C. 2239(b))

24 is amended to read as follows:
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1 ‘‘b. The following Commission actions shall be subject

2 to judicial review in the manner prescribed in chapter 158

3 of title 28, United States Code and chapter 7 of title 5,

4 United States Code:

5 ‘‘(1) Any final order entered in any proceeding

6 of the kind specified in subsection (a).

7 ‘‘(2) Any final order allowing or prohibiting a

8 facility to begin operating under a combined con9 struction and operating license.

10 ‘‘(3) Any final order establishing by regulation

11 standards to govern the Department of Energy’s gase12 ous diffusion uranium enrichment plants, including

13 any such facilities leased to a corporation established

14 under the USEC Privatization Act.

15 ‘‘(4) Any final determination under section

16 1701(c) relating to whether the gaseous diffusion

17 plants, including any such facilities leased to a cor18 poration established under the USEC Privatization

19 Act, are in compliance with the Commission’s stand20 ards governing the gaseous diffusion plants and all

21 applicable laws.’’.

22 (d) CIVIL PENALTIES.—Section 234 a. of the Atomic

23 Energy Act of 1954 (42 U.S.C. 2282(a)) is amended by—

24 (1) striking ‘‘any licensing provision of section

25 53, 57, 62, 63, 81, 82, 101, 103, 104, 107, or 109’’
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1 and inserting: ‘‘any licensing or certification provi2 sion of section 53, 57, 62, 63, 81, 82, 101, 103, 104,

3 107, 109, or 1701’’; and

4 (2) by striking ‘‘any license issued thereunder’’

5 and inserting: ‘‘any license or certification issued

6 thereunder’’.

7 (e) REFERENCES TO THE CORPORATION.—Following

8 the privatization date, all references in the Atomic Energy

9 Act of 1954 to the United States Enrichment Corporation

10 shall be deemed to be references to the private corporation.

11 SEC. 5217. AMENDMENTS TO OTHER LAWS.

12 (a) DEFINITION OF GOVERNMENT CORPORATION.—As

13 of the privatization date, section 9101(3) of title 31, United

14 States Code, is amended by striking subparagraph (N) as

15 added by section 902(b) of Public Law 102–486.

16 (b) DEFINITION OF THE CORPORATION.—Section

17 1018(1) of the Energy Policy Act of 1992 (42 U.S.C. 2296b–

18 7(1) is amended by inserting ‘‘or its successor’’ before the

19 period.

20 CHAPTER 2—DEPARTMENT OF ENERGY

21 SEC. 5221. SALE OF DOE ASSETS

22 (a) ASSET MANAGEMENT AND DISPOSITION PRO23 GRAM.—

24 (1) IN GENERAL.—In order to maximize the use

25 of Department of Energy assets and to reduce over-
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1 head and other costs related to asset management at

2 the Department’s facilities and laboratories, the Sec3 retary of Energy shall conduct an asset management

4 and disposition program that will result in not less

5 than $225,000,000 in receipts and savings by October

6 1, 2000.

7 (2) ITEMS TO BE INCLUDED.—The program shall

8 include an inventory of assets in the care of the De9 partment and its contractors; the recovery, reuse, and

10 stewardship of assets; and disposition of a minimum

11 of 1,139,000,000 pounds of fuel, 136,000 tons of

12 chemicals and industrial gases, 557,000 tons of scrap

13 metal, 14,000 radiation sources, 17,000 pieces of

14 major equipment, 11,000 pounds of precious metals,

15 and 91,000,000 pounds of base metals.

16 (b) FEDERAL PROPERTY AND ADMINSTRATIVE SERV17 ICES ACT.—The disposition of assets under this section is

18 not subject to section 202 or 203 of the Federal Property

19 and Administrative Services Act of 1949 (40 U.S.C. 483,

20 484) or section 13 of the Surplus Property Act of 1944 (50

21 U.S.C. App. 1622). In order to avoid market disruptions,

22 the Secretary shall consult with appropriate executive agen23 cies with respect to dispositions under this section.

24 (c) DISPOSITION OF PROCEEDS.—After deduction of

25 administrative costs of disposition under this section not
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1 to exceed $7,000,000 per year, the remainder of the proceeds

2 from dispositions under this subpart shall be returned to

3 the Treasury as miscellaneous receipts. There shall be estab4 lished a new receipt account in the Treasury for proceeds

5 of asset sales under this section.

6 SEC. 5222. SALE OF WEEKS ISLAND OIL.

7 Notwithstanding section 161 of the Energy Policy and

8 Conservation Act (42 U.S.C. 6241), the Secretary of Energy

9 shall draw down and sell 32,000,000 barrels of oil contained

10 in the Weeks Island Strategic Petroleum Reserve Facility.

11 The Secretary shall, to the greatest extent practicable, sell

12 oil from the reserve in a manner that minimizes the impact

13 of such sale upon supply levels and market forces.

14 SEC. 5223. LEASE OF EXCESS STRATEGIC PETROLEUM RE15 SERVE CAPACITY.

16 (a) AMENDMENT.—Part B of title I of the Energy Pol17 icy and Conservation Act (42 U.S.C. 6231 et seq.) is amend18 ed by adding at the end the following:

19 ‘‘USE OF UNDERUTILIZED FACILITIES

20 ‘‘SEC. 168. (a) AUTHORITY.—Notwithstanding any

21 other provision of this title, the Secretary, by lease or other22 wise, for any term and under such other conditions as the

23 Secretary considers necessary or appropriate, may store in

24 underutilized Strategic Petroleum Reserve facilities petro25 leum product owned by a foreign government or its rep26 resentative. Petroleum products stored under this section
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1 are not part of the Strategic Petroleum Reserve and may

2 be exported without license from the United States.

3 ‘‘(b) PROTECTION OF FACILITIES.—All agreements en4 tered into pursuant to subsection (a) shall contain provi5 sions providing for fees to fully compensate the United

6 States for all costs of storage and removals of petroleum

7 products, including the cost of replacement facilities neces8 sitated as a result of any withdrawals.

9 ‘‘(c) ACCESS TO STORED OIL.—The Secretary shall en10 sure that agreements to store petroleum products for foreign

11 governments or their representatives do not affect the ability

12 of the United States to withdraw, distribute, or sell petro13 leum from the Strategic Petroleum reserve in response to

14 an energy emergency or to the obligations of the United

15 States under the Agreement on an International Energy

16 Program.

17 ‘‘(d) AVAILABILITY OF FUNDS.—Beginning in fiscal

18 year 2001 and in each fiscal year thereafter except for fiscal

19 years 2003 and 2004, 50 percent of the funds resulting from

20 the leasing of Strategic Petroleum Reserve facilities author21 ized by subsection (a) shall be available to the Secretary

22 of Energy without further appropriation for the purchase

23 of oil for the Strategic Petroleum Reserve.’’.

24 (b) TABLE OF CONTENTS AMENDMENT.—The table of

25 contents of part B of title I of the Energy Policy and Con-
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1 servation Act is amended by adding at the end the follow2 ing:

‘‘Sec. 168. Use of underutilized facilities.’’.

3 Subtitle C—Natural Resources

4 CHAPTER 1—DEPARTMENT OF THE

5 INTERIOR CONVEYANCES

6 Subchapter A—California Directed Land Sale

7 SEC. 5301. CONVEYANCE OF PROPERTY.

8 All right, title and interest of the United States in the

9 property depicted on a map designated USGS 7.5 minute

10 quadrangle, west of Flattop Mtn, CA 1984, entitled ‘‘Loca11 tion Map for Ward Valley Site’’, located in San Bernardino

12 Meridian, Township 9 North, Range 19 East, and improve13 ments thereon, together with all necessary easements for

14 utilities and ingress and egress to such property, including,

15 but not limited to, the right to improve those easements,

16 are conveyed to the Department of Health Services of the

17 State of California upon the tendering of $500,100 on behalf

18 of the State of California and the release of the United

19 States by the State of California from any liability for

20 claims relating to the property described in this section and,

21 as part of the consideration paid for such property, such

22 conveyance is declared to meet and fully comply with any

23 otherwise applicable provisions of section 7 of Endangered

24 Species Act of 1973 (16 U.S.C. 1536) and the National En25 vironmental Policy Act of 1969 (42 U.S.C. 4332). The Sec-
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1 retary of the Interior shall issue evidence of title pursuant

2 to this Act notwithstanding any other provision of law.

3 Subchapter B—Helium Reserves

4 SEC. 5311. SHORT TITLE.

5 This subchapter may be cited as the ‘‘Helium Act of

6 1995’’.

7 SEC. 5312. AMENDMENT OF HELIUM ACT.

8 Except as otherwise expressly provided, whenever in

9 this chapter an amendment or repeal is expressed in terms

10 of an amendment to, or repeal of, a section or other provi11 sion, the reference shall be considered to be made to a section

12 or other provision of the Helium Act (50 U.S.C. 167 to

13 167n).

14 SEC. 5313. AUTHORITY OF SECRETARY.

15 Sections 3, 4, and 5 are amended to read as follows:

16 ‘‘SEC. 3. AUTHORITY OF SECRETARY.

17 ‘‘(a) EXTRACTION AND DISPOSAL OF HELIUM ON FED18 ERAL LANDS.—

19 ‘‘(1) IN GENERAL.—The Secretary may enter

20 into agreements with private parties for the recovery

21 and disposal of helium on Federal lands upon such

22 terms and conditions as the Secretary deems fair, rea23 sonable, and necessary.

24 ‘‘(2) LEASEHOLD RIGHTS.—The Secretary may

25 grant leasehold rights to any such helium.
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1 ‘‘(3) LIMITATION.—The Secretary may not enter

2 into any agreement by which the Secretary sells such

3 helium other than to a private party with whom the

4 Secretary has an agreement for recovery and disposal

5 of helium.

6 ‘‘(4) REGULATIONS.—Agreements under para7 graph (1) may be subject to such regulations as may

8 be prescribed by the Secretary.

9 ‘‘(5) EXISTING RIGHTS.—An agreement under

10 paragraph (1) shall be subject to any rights of any

11 affected Federal oil and gas lessee that may be in ex12 istence prior to the date of the agreement.

13 ‘‘(6) TERMS AND CONDITIONS.—An agreement

14 under paragraph (1) (and any extension or renewal

15 of an agreement) shall contain such terms and condi16 tions as the Secretary may consider appropriate.

17 ‘‘(7) PRIOR AGREEMENTS.—This subsection shall

18 not in any manner affect or diminish the rights and

19 obligations of the Secretary and private parties under

20 agreements to dispose of helium produced from Fed21 eral lands in existence on the date of enactment of the

22 Helium Act of 1995 except to the extent that such

23 agreements are renewed or extended after that date.
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1 ‘‘(b) STORAGE, TRANSPORTATION AND SALE.—The

2 Secretary may store, transport, and sell helium only in ac3 cordance with this Act.

4 ‘‘SEC. 4. STORAGE, TRANSPORTATION, AND WITHDRAWAL

5 OF CRUDE HELIUM.

6 ‘‘(a) STORAGE, TRANSPORTATION AND WITH7 DRAWAL.—The Secretary may store, transport and with8 draw crude helium and maintain and operate crude helium

9 storage facilities, in existence on the date of enactment of

10 the Helium Act of 1995 at the Bureau of Mines Cliffside

11 Field, and related helium transportation and withdrawal

12 facilities.

13 ‘‘(b) CESSATION OF PRODUCTION, REFINING, AND

14 MARKETING.—Not later than 18 months after the date of

15 enactment of the Helium Act of 1995, the Secretary shall

16 cease producing, refining, and marketing refined helium

17 and shall cease carrying out all other activities relating to

18 helium which the Secretary was authorized to carry out

19 under this Act before the date of enactment of the Helium

20 Act of 1995, except activities described in subsection (a).

21 ‘‘(c) DISPOSAL OF FACILITIES.—

22 ‘‘(1) IN GENERAL.—Subject to paragraph (5),

23 not later than 24 months after the cessation of activi24 ties referred to in section (b) of this section, the Sec25 retary shall designate as excess property and dispose
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1 of all facilities, equipment, and other real and per2 sonal property, and all interests therein, held by the

3 United States for the purpose of producing, refining

4 and marketing refined helium.

5 ‘‘(2) APPLICABLE LAW.—The disposal of such

6 property shall be in accordance with the Federal

7 Property and Administrative Services Act of 1949.

8 ‘‘(3) PROCEEDS.—All proceeds accruing to the

9 United States by reason of the sale or other disposal

10 of such property shall be treated as moneys received

11 under this chapter for purposes of section 6(f).

12 ‘‘(4) COSTS.—All costs associated with such sale

13 and disposal (including costs associated with termi14 nation of personnel) and with the cessation of activi15 ties under subsection (b) shall be paid from amounts

16 available in the helium production fund established

17 under section 6(f).

18 ‘‘(5) EXCEPTION.—Paragraph (1) shall not

19 apply to any facilities, equipment, or other real or

20 personal property, or any interest therein, necessary

21 for the storage, transportation and withdrawal of

22 crude helium or any equipment, facilities, or other

23 real or personal property, required to maintain the

24 purity, quality control, and quality assurance of

25 crude helium in the Bureau of Mines Cliffside Field.
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1 ‘‘(d) EXISTING CONTRACTS.—

2 ‘‘(1) IN GENERAL.—All contracts that were en3 tered into by any person with the Secretary for the

4 purchase by the person from the Secretary of refined

5 helium and that are in effect on the date of the enact6 ment of the Helium Act of 1995 shall remain in force

7 and effect until the date on which the refining oper8 ations cease, as described in subsection (b).

9 ‘‘(2) COSTS.—Any costs associated with the ter10 mination of contracts described in paragraph (1)

11 shall be paid from the helium production fund estab12 lished under section 6(f).

13 ‘‘SEC. 5. FEES FOR STORAGE, TRANSPORTATION AND WITH14 DRAWAL.

15 ‘‘(a) IN GENERAL.—Whenever the Secretary provides

16 helium storage withdrawal or transportation services to any

17 person, the Secretary shall impose a fee on the person to

18 reimburse the Secretary for the full costs of providing such

19 storage, transportation, and withdrawal.

20 ‘‘(b) TREATMENT.—All fees received by the Secretary

21 under subsection (a) shall be treated as moneys received

22 under this Act for purposes of section 6(f).’’.

23 SEC. 5314. SALE OF CRUDE HELIUM.

24 (a) Subsection 6(a) is amended by striking ‘‘from the

25 Secretary’’ and inserting ‘‘from persons who have entered
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1 into enforceable contracts to purchase an equivalent amount

2 of crude helium from the Secretary’’.

3 (b) Subsection 6(b) is amended—

4 (1) by inserting ‘‘crude’’ before ‘‘helium’’; and

5 (2) by adding the following at the end: ‘‘Except

6 as may be required by reason of subsection (a), sales

7 of crude helium under this section shall be in

8 amounts as the Secretary determines, in consultation

9 with the helium industry, necessary to carry out this

10 subsection with minimum market disruption.’’.

11 (c) Subsection 6(c) is amended—

12 (1) by inserting ‘‘crude’’ after ‘‘Sales of’’; and

13 (2) by striking ‘‘together with interest as pro14 vided in this subsection’’ and all that follows through

15 the end of the subsection and inserting ‘‘all funds re16 quired to be repaid to the United States as of October

17 1, 1995 under this section (referred to in this sub18 section as ‘repayable amounts’). The price at which

19 crude helium is sold by the Secretary shall not be less

20 than the amount determined by the Secretary by—

21 ‘‘(1) dividing the outstanding amount of such re22 payable amounts by the volume (in million cubic feet)

23 of crude helium owned by the United States and

24 stored in the Bureau of Mines Cliffside Field at the

25 time of the sale concerned, and
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1 ‘‘(2) adjusting the amount determined under

2 paragraph (1) by the Consumer Price Index for years

3 beginning after December 31, 1995.’’.

4 (d) Subsection 6(d) is amended to read as follows:

5 ‘‘(d) EXTRACTION OF HELIUM FROM DEPOSITS ON

6 FEDERAL LANDS.—All moneys received by the Secretary

7 from the sale or disposition of helium on Federal lands shall

8 be paid to the Treasury and credited against the amounts

9 required to be repaid to the Treasury under subsection (c).’’.

10 (e) Subsection 6(e) is repealed.

11 (f) Subsection 6(f) is amended—

12 (1) by striking ‘‘(f)’’ and inserting ‘‘(e)(1)’’; and

13 (2) by adding the following at the end:

14 ‘‘(2)(A) Within 7 days after the commencement of each

15 fiscal year after the disposal of the facilities referred to in

16 section 4(c), all amounts in such fund in excess of

17 $2,000,000 (or such lesser sum as the Secretary deems nec18 essary to carry out this Act during such fiscal year) shall

19 be paid to the Treasury and credited as provided in para20 graph (1).

21 ‘‘(B) On repayment of all amounts referred to in sub22 section (c), the fund established under this section shall be

23 terminated and all moneys received under this Act shall be

24 deposited in the general fund of the Treasury.’’.
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1 SEC. 5315. ELIMINATION OF STOCKPILE.

2 Section 8 is amended to read as follows:

3 ‘‘SEC. 8. ELIMINATION OF STOCKPILE.

4 ‘‘(a) STOCKPILE SALES.—

5 ‘‘(1) COMMENCEMENT.—Not later than January

6 1, 2005, the Secretary shall commence offering for sale

7 crude helium from helium reserves owned by the Unit8 ed States in such amounts as would be necessary to

9 dispose of all such helium reserves in excess of

10 600,000,000 cubic feet on a straight-line basis between

11 such date and January 1, 2015.

12 ‘‘(2) TIMES OF SALE.—The sales shall be at such

13 times during each year and in such lots as the Sec14 retary determines, in consultation with the helium in15 dustry, to be necessary to carry out this subsection

16 with minimum market disruption.

17 ‘‘(3) PRICE.—The price for all sales under para18 graph (1), as determined by the Secretary in con19 sultation with the helium industry, shall be such price

20 as will ensure repayment of the amounts required to

21 be repaid to the Treasury under section 6(c).

22 ‘‘(b) DISCOVERY OF ADDITIONAL RESERVES.—The dis23 covery of additional helium reserves shall not affect the duty

24 of the Secretary to make sales of helium under subsection

25 (a).’’.
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1 SEC. 5316. REPEAL OF AUTHORITY TO BORROW.

2 Sections 12 and 15 are repealed.

3 SEC. 5317. LAND CONVEYANCE IN POTTER COUNTY, TEXAS.

4 (a) IN GENERAL.—The Secretary of the Interior shall

5 transfer all right, title, and interest of the United States

6 in and to the parcel of land described in subsection (b) to

7 the Texas Plains Girl Scout Council for consideration of

8 $1, reserving to the United States such easements as may

9 be necessary for pipeline rights-of-way.

10 (b) LAND DESCRIPTION.—The parcel of land referred

11 to in subsection (a) is all those certain lots, tracts or parcels

12 of land lying and being situated in the County of Potter

13 and State of Texas, and being the East Three Hundred

14 Thirty-One (E331) acres out of Section Seventy-eight (78)

15 in Block Nine (9), B.S. & F. Survey, (some times known

16 as the G.D. Landis pasture) Potter County, Texas, located

17 by certificate No. 1/39 and evidenced by letters patents Nos.

18 411 and 412 issued by the State of Texas under date of

19 November 23, 1937, and of record in Vol. 66A of the Patent

20 Records of the State of Texas. The metes and bounds de21 scription of such lands is as follows:

22 (1) FIRST TRACT.—One Hundred Seventy-one

23 (171) acres of land known as the North part of the

24 East part of said survey Seventy-eight (78) aforesaid,

25 described by metes and bounds as follows:
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1 Beginning at a stone 20 x 12 x 3 inches marked

2 X, set by W.D. Twichell in 1905, for the Northeast

3 corner of this survey and the Northwest corner of Sec4 tion 59;

5 Thence, South 0 degrees 12 minutes East with

6 the West line of said Section 59, 999.4 varas to the

7 Northeast corner of the South 160 acres of East half

8 of Section 78;

9 Thence, North 89 degrees 47 minutes West with

10 the North line of the South 150 acres of the East half,

11 956.8 varas to a point in the East line of the West

12 half Section 78;

13 Thence, North 0 degrees 10 minutes West with

14 the East line of the West half 999.4 varas to a stone

15 18 x 14 x 3 inches in the middle of the South line

16 of Section 79;

17 Thence, South 89 degrees 47 minutes East 965

18 varas to the place of beginning.

19 (2) SECOND TRACT.—One Hundred Sixty (160)

20 acres of land known as the South part of the East

21 part of said survey No. Seventy-eight (78) described

22 by metes and bounds as follows:

23 Beginning at the Southwest corner of Section 59,

24 a stone marked X and a pile of stones; Thence, North

25 89 degrees 47 minutes West with the North line of
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1 Section 77, 966.5 varas to the Southeast corner of the

2 West half of Section 78; Thence, North 0 degrees 10

3 minutes West with the East line of the West half of

4 Section 78;

5 Thence, South 89 degrees 47 minutes East 965.8

6 varas to a point in the East line of Section 78;

7 Thence, South 0 degrees 12 minutes East 934.6

8 varas to the place of beginning.

9 Containing an area of 331 acres, more or less.

10 CHAPTER 2—ARCTIC COASTAL PLAIN

11 LEASING AND REVENUE ACT

12 SEC. 5312. SHORT TITLE.

13 This chapter may be cited as the ’Arctic Coastal Plain

14 Leasing and Revenue Act of 1995’’.

15 SEC. 5322. DEFINITIONS.

16 When used in this chapter the term—

17 (1) ‘‘Coastal Plain’’ means that area identified

18 as such in the map entitled ‘‘Arctic National Wildlife

19 Refuge’’, dated August 1980, as referenced in section

20 1002(b) of the Alaska National Interest Lands Con21 servation Act of 1980 (16 U.S.C. 3142(b)(1)) compris22 ing approximately 1, 549,000 acres; and

23 (2) ‘‘Secretary’’ except as otherwise provided,

24 means the Secretary of the Interior or the Secretary’s

25 designee.
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1 SEC. 5333. LEASING PROGRAM FOR LANDS WITHIN THE

2 COASTAL PLAIN.

3 (a) AUTHORIZATION.—The Congress hereby authorizes

4 and directs the Secretary, acting through the Bureau of

5 Land Management in consultation with the Fish and Wild6 life Service and other appropriate Federal officers and

7 agencies, to take such actions as are necessary to establish

8 and implement a competitive oil and gas leasing program

9 that will result in an environmentally sound program for

10 the exploration, development, and production of the oil and

11 gas resources of the Coastal Plain and to administer the

12 provisions of this chapter through regulations, lease terms,

13 conditions, restrictions, prohibitions, stipulations and other

14 provisions that ensure the oil and gas exploration, develop15 ment, and production activities on the Coastal Plain will

16 result in no significant adverse effect on fish and wildlife,

17 their habitat, subsistence resources, and the environment,

18 and shall require the application of the best commercially

19 available technology for oil and gas exploration, develop20 ment, and production, on all new exploration, development,

21 and production operations, and whenever practicable, on

22 existing operations, and in a manner to ensure the receipt

23 of fair market value by the public for the mineral resources

24 to be leased.

25 (b) REPEAL.—The prohibitions and limitations con26 tained in section 1003 of the Alaska National Interest
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1 Lands Conservation Act of 1980 (16 U.S.C. 3143) are here2 by repealed.

3 (c) COMPATIBILITY.—Congress hereby determines that

4 the oil and gas leasing program and activities authorized

5 by this section in the Coastal Plain are compatible with

6 the purposes for which the Arctic National Wildlife Refuge

7 was established, and that no further findings or decisions

8 are required to implement this determination.

9 (d) SOLE AUTHORITY.—This chapter shall be the sole

10 authority for leasing on the Coastal Plain. Provided, That

11 nothing in this chapter shall be deemed to expand or limit

12 state and local regulatory authority.

13 (e) FEDERAL LAND.—The Coastal Plain shall be con14 sidered ‘‘Federal land’’ for the purposes of the Federal Oil

15 and Gas Royalty Management Act of 1982 .

16 (f) SPECIAL AREAS.—The Secretary, after consultation

17 with the State of Alaska, City of Kaktovik, and the North

18 Slope Borough, is authorized to designate up to a total of

19 45,000 acres of the Coastal Plain as Special Areas and close

20 such areas to leasing if the Secretary determines that these

21 Special Areas are of such unique character and interest so

22 as to require special management and regulatory protec23 tion. The Secretary may, however, permit leasing of all or

24 portions of any Special Areas within the Coastal Plain by

25 setting lease terms that limit or condition surface use and
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1 occupancy by lessees of such lands but permit the use of

2 horizontal drilling technology from sites on leases located

3 outside the designated Special Areas.

4 (g) LIMITATION ON CLOSED AREAS.—The Secretary’s

5 sole authority to close lands within the Coastal Plain to

6 oil and gas leasing and to exploration, development, and

7 production is that set forth in this subtitle.

8 (h) CONVEYANCE.—In order to maximize federal reve9 nues by removing clouds on title of lands and clarifying

10 land ownership patterns within the Coastal Plain, the Sec11 retary, notwithstanding the provisions of section 1302(h)(2)

12 of the Alaska National Interest Lands Conservation Act (16

13 U.S.C. 3192(h)(2)), is authorized and directed to convey (1)

14 to the Kaktovik Inupiat Corporation the surface estate of

15 the lands described in paragraph 2 of Public Land Order

16 6959, to the extent necessary to fulfill the corporation’s enti17 tlement under section 12 of the Alaska Native Claims Settle18 ment Act (43 U.S.C. 1611), and (2) to the Arctic Slope Re19 gional Corporation the subsurface estate beneath such sur20 face estate pursuant to the August 9, 1983, agreement be21 tween the Arctic Slope Regional Corporation and the Unit22 ed States of America.

23 SEC. 5334. RULES AND REGULATIONS.

24 (a) PROMULGATION.—The Secretary shall prescribe

25 such rules and regulations as may be necessary to carry
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1 out the purposes and provisions of this chapter, including

2 rules and regulations relating to protection of the fish and

3 wildlife, their habitat, subsistence resources, and the envi4 ronment of the Coastal Plain. Such rules and regulations

5 shall be promulgated no later than fourteen months after

6 the date of enactment of this chapter and shall, as of their

7 effective date, apply to all operations conducted under a

8 lease issued or maintained under the provisions of this

9 chapter and all operations on the Coastal Plain related to

10 the leasing, exploration, development and production of oil

11 and gas.

12 (b) REVISION OF REGULATIONS.—The Secretary shall

13 periodically review and, if appropriate, revise the rules and

14 regulations issued under subsection (a) of this section to re15 flect any significant biological, environmental, or engineer16 ing data which come to the Secretary’s attention.

17 SEC. 5335. ADEQUACY OF THE DEPARTMENT OF THE INTE18 RIOR’S LEGISLATIVE ENVIRONMENTAL IM19 PACT STATEMENT.

20 The ‘‘Final Legislative Environmental Impact State21 ment’’ (April 1987) on the Coastal Plain prepared pursu22 ant to section 1002 of the Alaska National Interest Lands

23 Conservation Act of 1980 (16 U.S.C. 3142) and section

24 102(2)(C) of the National Environmental Policy Act of

25 1969 (42 U.S.C. 4332(2)(C)) is hereby found by the Con-
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1 gress to be adequate to satisfy the legal and procedural re2 quirements of the National Environmental Policy Act of

3 1969 with respect to actions authorized to be taken by the

4 Secretary to develop and promulgate the regulations for the

5 establishment of the leasing program authorized by this

6 chapter, to conduct the first lease sale and any subsequent

7 lease sale authorized by this chapter, and to grant rights8 of-way and easements to carry out the purposes of this

9 chapter.

10 SEC. 5336. LEASE SALES.

11 (a) LEASE SALES.—Lands may be leased pursuant to

12 the provisions of this chapter to any person qualified to ob13 tain a lease for deposits of oil and gas under the Mineral

14 Leasing Act, as amended (30 U.S.C. 181).

15 (b) PROCEDURES.—The Secretary shall, by regulation,

16 establish procedures for—

17 (1) receipt and consideration of sealed nomina18 tions for any area in the Coastal Plain for inclusion

19 in, or exclusion (as provided in subsection (c)) from,

20 a lease sale; and

21 (2) public notice of and comment on designation

22 of areas to be included in, or excluded from, a lease

23 sale.

24 (c) LEASE SALES ON COASTAL PLAIN.—The Secretary

25 shall, by regulation, provide for lease sales of lands on the
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1 Coastal Plain. When lease sales are to be held, they shall

2 occur after the nomination process provided for in sub3 section (b) of this section. For the first lease sale, the Sec4 retary shall offer for lease those acres receiving the greatest

5 number of nominations, but no less than two hundred thou6 sand acres and no more than three hundred thousand acres

7 shall be offered. If the total acreage nominated is less than

8 two hundred thousand acres, the Secretary shall include in

9 such sale any other acreage which he believes has the highest

10 resource potential, but in no event shall more than three

11 hundred thousand acres of the Coastal Plain be offered in

12 such sale. With respect to subsequent lease sales, the Sec13 retary shall offer for lease no less than two hundred thou14 sand acres of the Coastal Plain. The initial lease sale shall

15 be held within twenty months of the date of enactment of

16 this chapter. The second lease sale shall be held no later

17 than twenty-four months after the initial sale, with addi18 tional sales conducted no later than twelve months there19 after so long as sufficient interest in development exists to

20 warrant, in the Secretary’s judgment, the conduct of such

21 sales.

22 SEC. 5337. GRANT OF LEASES BY THE SECRETARY.

23 (a) IN GENERAL.—The Secretary is authorized to

24 grant to the highest responsible qualified bidder by sealed

25 competitive cash bonus bid any lands to be leased on the
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1 Coastal Plain upon payment by the lessee of such bonus

2 as may be accepted by the Secretary and of such royalty

3 as may be fixed in the lease, which shall be not less than

121 4 ⁄2 per centum in amount or value of the production re5 moved or sold from the lease.

6 (b) ANTITRUST REVIEW.—Following each notice of a

7 proposed lease sale and before the acceptance of bids and

8 the issuance of leases based on such bids, the Secretary shall

9 allow the Attorney General, in consultation with the Fed10 eral Trade Commission, thirty days to perform an antitrust

11 review of the results of such lease sale on the likely effects

12 the issuance of such leases would have on competition and

13 the Attorney General shall advise the Secretary with respect

14 to such review, including any recommendation for the

15 nonacceptance of any bid or the imposition of terms or con16 ditions on any lease, as may be appropriate to prevent any

17 situation inconsistent with the antitrust laws.

18 (c) SUBSEQUENT TRANSFERS.—No lease issued under

19 this chapter may be sold, exchanged, assigned, sublet, or oth20 erwise transferred except with the approval of the Secretary.

21 Prior to any such approval the Secretary shall consult with,

22 and give due consideration to the views of, the Attorney

23 General.

24 (d) IMMUNITY.—Nothing in this chapter shall be

25 deemed to convey to any person, association, corporation,
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1 or other business organization immunity from civil or

2 criminal liability, or to create defenses to actions, under

3 any antitrust law.

4 (e) DEFINITIONS.—As used in this section, the term—

5 (1) ‘‘antitrust review’’ shall be deemed an ‘‘anti6 trust investigation’’ for the purposes of the Antitrust

7 Civil Process Act (15 U.S.C. 1311); and

8 (2) ‘‘antitrust laws’’ means those Acts set forth

9 in section 1 of the Clayton Act (15 U.S.C. 12) as

10 amended.

11 SEC. 5338. LEASE TERMS AND CONDITIONS.

12 An oil or gas lease issued pursuant to this chapter

13 shall—

14 (1) be for a tract consisting of a compact area

15 not to exceed five thousand seven hundred sixty acres,

16 or nine surveyed or protracted sections which shall be

17 as compact in form as possible.

18 (2) be for an initial period of ten years and shall

19 be extended for so long thereafter as oil or gas is pro20 duced in paying quantities from the lease or unit

21 area to which the lease is committed or for so long as

22 drilling or reworking operations, as approved by the

23 Secretary, are conducted on the lease or unit area;

24 (3) require the payment of royalty as provided

25 for in section 5337 of this chapter;
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1 (4) require that exploration activities pursuant

2 to any lease issued or maintained under this chapter

3 shall be conducted in accordance with an exploration

4 plan or a revision of such plan approved by the Sec5 retary;

6 (5) require that all development and production

7 pursuant to a lease issued or maintained pursuant to

8 this chapter shall be conducted in accordance with de9 velopment and production plans approved by the Sec10 retary;

11 (6) require posting of bond as required by section

12 5339 of this chapter;

13 (7) provide that the Secretary may close, on a

14 seasonal basis, portions of the Coastal Plain to ex15 ploratory drilling activities as necessary to protect

16 caribou calving areas and other species of fish and

17 wildlife;

18 (8) contain such provisions relating to rental

19 and other fees as the Secretary may prescribe at the

20 time of offering the area for lease;

21 (9) provide that the Secretary may direct or as22 sent to the suspension of operations and production

23 under any lease granted under the terms of this chap24 ter in the interest of conservation of the resource or

25 where there is no available system to transport the re-
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1 source. If such a suspension is directed or assented to

2 by the Secretary, any payment of rental prescribed by

3 such lease shall be suspended during such period of

4 suspension of operations and production, and the

5 term of the lease shall be extended by adding any such

6 suspension period thereto;

7 (10) provide that whenever the owner of a

8 nonproducing lease fails to comply with any of the

9 provisions of this chapter, or of any applicable provi10 sion of Federal or State environmental law, or of the

11 lease, or of any regulation issued under this chapter,

12 such lease may be canceled by the Secretary if such

13 default continues for more than thirty days after

14 mailing of notice by registered letter to the lease

15 owner at the lease owner’s record post office address

16 of record;

17 (11) provide that whenever the owner of any pro18 ducing lease fails to comply with any of the provi19 sions of this chapter, or of any applicable provision

20 of Federal or State environmental law, or of the lease,

21 or of any regulation issued under this chapter, such

22 lease may be forfeited and canceled by any appro23 priate proceeding brought by the Secretary in any

24 United States district court having jurisdiction under

25 the provisions of this chapter;
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1 (12) provide that cancellation of a lease under

2 this chapter shall in no way release the owner of the

3 lease from the obligation to provide for reclamation of

4 the lease site;

5 (13) allow the lessee, at the discretion of the Sec6 retary, to make written relinquishment of all rights

7 under any lease issued pursuant to this chapter. The

8 Secretary shall accept such relinquishment by the les9 see of any lease issued under this chapter where there

10 has not been surface disturbance on the lands covered

11 by the lease;

12 (14) provide that for the purpose of conserving

13 the natural resources of any oil or gas pool, field, or

14 like area, or any part thereof, and in order to avoid

15 the unnecessary duplication of facilities, to protect the

16 environment of the Coastal Plain, and to protect cor17 relative rights, the Secretary shall require that, to the

18 greatest extent practicable, lessees unite with each

19 other in collectively adopting and operating under a

20 cooperative or unit plan of development for operation

21 of such pool, field, or like area, or any part thereof,

22 and the Secretary is also authorized and directed to

23 enter into such agreements as are necessary or appro24 priate for the protection of the United States against

25 drainage;
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1 (15) require that the holder of a lease or leases

2 on lands within the Coastal Plain shall be fully re3 sponsible and liable for the reclamation of lands with4 in the Coastal Plain and any other Federal lands ad5 versely affected in connection with exploration, devel6 opment, production or transportation activities on a

7 lease within the Coastal Plain by the holder of a lease

8 or as a result of activities conducted on the lease by

9 any of the leaseholder’s subcontractors or agents;

10 (16) provide that the holder of a lease may not

11 delegate or convey, by contract or otherwise, the rec12 lamation responsibility and liability to another party

13 without the express written approval of the Secretary;

14 (17) provide that the standard of reclamation for

15 lands required to be reclaimed under this chapter be,

16 as nearly as practicable, a condition capable of sup17 porting the uses which the lands were capable of sup18 porting prior to any exploration, development, or pro19 duction activities, or upon application by the lessee,

20 to a higher or better use as approved by the Secretary;

21 (18) contain the terms and conditions relating to

22 protection of fish and wildlife, their habitat, and the

23 environment, as required by section 5333(a) of this

24 chapter;
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1 (19) provide that the holder of a lease, its agents,

2 and contractors use best efforts to provide a fair

3 share, as determined by the level of obligation pre4 viously agreed to in the 1974 agreement implement5 ing Section 29 of the Federal Agreement and Grant

6 of Right of Way for the Operation of the Trans-Alas7 ka Pipeline, of employment and contracting for Alas8 ka Natives and Alaska Native Corporations from

9 throughout the State; and

10 (20) contain such other provisions as the Sec11 retary determines necessary to ensure compliance

12 with the provisions of this chapter and the regulations

13 issued under this chapter.

14 SEC. 5339. BONDING REQUIREMENTS TO ENSURE FINAN15 CIAL RESPONSIBILITY OF LESSEE AND AVOID

16 FEDERAL LIABILITY.

17 (a) REQUIREMENT.—The Secretary shall, by rule or

18 regulation, establish such standards as may be necessary

19 to ensure that an adequate bond, surety, or other financial

20 arrangement will be established prior to the commencement

21 of surface disturbing activities on any lease, to ensure the

22 complete and timely reclamation of the lease tract, and the

23 restoration of any lands or surface waters adversely affected

24 by lease operations after the abandonment or cessation of

25 oil and gas operations on the lease. Such bond, surety, or
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1 financial arrangement is in addition to, and not in lieu,

2 of any bond, surety, or financial arrangement required by

3 any other regulatory authority or required by any other

4 provision of law.

5 (b) AMOUNT.—The bond, surety, or financial arrange6 ment shall be in an amount—

7 (1) to be determined by the Secretary to provide

8 for reclamation of the lease site in accordance with an

9 approved or revised exploration or development and

10 production plan; plus

11 (2) set by the Secretary consistent with the type

12 of operations proposed, to provide the means for rapid

13 and effective cleanup, and to minimize damages re14 sulting from an oil spill, the escape of gas, refuse, do15 mestic wastewater, hazardous or toxic substances, or

16 fire caused by oil and gas activities.

17 (c) ADJUSTMENT.—In the event that an approved ex18 ploration or development and production plan is revised,

19 the Secretary may adjust the amount of the bond, surety,

20 or other financial arrangement to conform to such modified

21 plan.

22 (d) DURATION.—The responsibility and liability of the

23 lessee and its surety under the bond, surety, or other finan24 cial arrangement shall continue until such time as the Sec-
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1 retary determines that there has been compliance with the

2 terms and conditions of the lease and all applicable law.

3 (e) TERMINATION.—Within sixty days after determin4 ing that there has been compliance with the terms and con5 ditions of the lease and all applicable laws, the Secretary,

6 after consultation with affected Federal and State agencies,

7 shall notify the lessee that the period of liability under the

8 bond, surety, or other financial arrangement has been ter9 minated.

10 SEC. 5340. OIL AND GAS INFORMATION.

11 (a) IN GENERAL.—(1) Any lessee or permittee conduct12 ing any exploration for, or development or production of,

13 oil or gas pursuant to this chapter shall provide the Sec14 retary access to all data and information from any lease

15 granted pursuant to this chapter (including processed and

16 analyzed) obtained from such activity and shall provide

17 copies of such data and information as the Secretary may

18 request. Such data and information shall be provided in

19 accordance with regulations which the Secretary shall pre20 scribe.

21 (2) If processed and analyzed information provided

22 pursuant to paragraph (1) is provided in good faith by the

23 lessee or permittee, such lessee or permittee shall not be re24 sponsible for any consequence of the use or of reliance upon

25 such processed and analyzed information.
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1 (3) Whenever any data or information is provided to

2 the Secretary, pursuant to paragraph (1)—

3 (A) by a lessee or permittee, in the form

4 and manner of processing which is utilized by

5 such lessee or permittee in the normal conduct of

6 business, the Secretary shall pay the reasonable

7 cost of reproducing such data and information;

8 or

9 (B) by a lessee or permittee, in such other

10 form and manner of processing as the Secretary

11 may request, the Secretary shall pay the reason12 able cost of processing and reproducing such

13 data and information.

14 (b) REGULATIONS.—The Secretary shall prescribe reg15 ulations to: (1) assure that the confidentiality of privileged

16 or proprietary information received by the Secretary under

17 this section will be maintained; and (2) set forth the time

18 periods and conditions which shall be applicable to the re19 lease of such information.

20 SEC. 5341. EXPEDITED JUDICIAL REVIEW.

21 (a) Any complaint seeking judicial review of any pro22 vision in this chapter, or any other action of the Secretary

23 under this chapter may be filed in any appropriate district

24 court of the United States, and such complaint must be filed

25 within ninety days from the date of the action being chal-
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1 lenged, or after such date if such complaint is based solely

2 on grounds arising after such ninetieth day, in which case

3 the complaint must be filed within ninety days after the

4 complainant knew or reasonably should have known of the

5 grounds for the complaint: Provided, That any complaint

6 seeking judicial review of an action of the Secretary in pro7 mulgating any regulation under this chapter may be filed

8 only in the United States Court of Appeals for the District

9 of Columbia.

10 (b) Actions of the Secretary with respect to which re11 view could have been obtained under this section shall not

12 be subject to judicial review in any civil or criminal pro13 ceeding for enforcement.

14 SEC. 5342. RIGHTS-OF-WAY ACROSS THE COASTAL PLAIN.

15 Notwithstanding Title XI of the Alaska National Inter16 est Lands Conservation Act of 1980 (16 U.S.C. 3161 et

17 seq.), the Secretary is authorized and directed to grant, in

18 accordance with the provisions of Section 28(c) through (t)

19 and (v) through (y) of the Mineral Leasing Act of 1920 (30

20 U.S.C. 185), rights-of-way and easements across the Coastal

21 Plain for the transportation of oil and gas under such terms

22 and conditions as may be necessary so as not to result in

23 a significant adverse effect on the fish and wildlife, subsist24 ence resources, their habitat, and the environment of the

25 Coastal Plain. Such terms and conditions shall include re-
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1 quirements that facilities be sited or modified so as to avoid

2 unnecessary duplication of roads and pipelines. The regula3 tions issued as required by section 5334 of this chapter shall

4 include provisions granting rights-of-way and easements

5 across the Coastal Plain.

6 SEC. 5343. ENFORCEMENT OF SAFETY AND ENVIRON7 MENTAL REGULATIONS TO ENSURE COMPLI8 ANCE WITH TERMS AND CONDITIONS OF

9 LEASE.

10 (a) RESPONSIBILITY OF THE SECRETARY.—The Sec11 retary shall diligently enforce all regulations, lease terms,

12 conditions, restrictions, prohibitions, and stipulations pro13 mulgated pursuant to this chapter.

14 (b) RESPONSIBILITY OF HOLDERS OF LEASE.—It shall

15 be the responsibility of any holder of a lease under this

16 chapter to—

17 (1) maintain all operations within such lease

18 area in compliance with regulations intended to pro19 tect persons and property on, and fish and wildlife,

20 their habitat, subsistence resources, and the environ21 ment of, the Coastal Plain; and

22 (2) allow prompt access at the site of any oper23 ations subject to regulation under this chapter to any

24 appropriate Federal or State inspector, and to pro25 vide such documents and records which are pertinent
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1 to occupational or public health, safety, or environ2 mental protection, as may be requested.

3 (c) ON-SITE INSPECTION.—The Secretary shall pro4 mulgate regulations to provide for—

5 (1) scheduled onsite inspection by the Secretary,

6 at least twice a year, of each facility on the Coastal

7 Plain which is subject to any environmental or safety

8 regulation promulgated pursuant to this chapter or

9 conditions contained in any lease issued pursuant to

10 this chapter to assure compliance with such environ11 mental or safety regulations or conditions; and

12 (2) periodic onsite inspection by the Secretary at

13 least once a year without advance notice to the opera14 tor of such facility to assure compliance with all envi15 ronmental or safety regulations.

16 SEC. 5344. NEW REVENUES.

17 (a) DISTRIBUTION OF REVENUES.—(1) Notwithstand18 ing any other provision of law, all revenues received by the

19 Federal Government from competitive bids, sales, bonuses,

20 royalties, rents, fees, or interest derived from the leasing of

21 oil and gas within the Coastal Plain shall be deposited into

22 the Treasury of the United States, solely as provided in this

23 subsection.

24 (2) Fifty percent of all revenues referred to in para25 graph (1) shall be paid by the Secretary of the Treasury
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1 semiannually to the State of Alaska, on March 30 and Sep2 tember 30 of each year.

3 (3)(A) The Secretary of the Treasury is directed to

4 monitor the revenues deposited into the Treasury from oil

5 and gas leases issued under the authority of this chapter.

6 Except as provided in subparagraph (B), all monies depos7 ited into the Treasury from such oil and gas leases in excess

8 of $2,600,000,000 shall be distributed as follows:

9 (i) Fifty percent shall be paid to the State of

10 Alaska in the manner provided in this subsection;

11 and

12 (ii) Fifty percent shall be deposited into a spe13 cial fund established in the Treasury of the United

14 States known as the ‘‘National Park, Refuge, and

15 Fish and Wildlife Renewal and Protection Fund

16 (hereinafter in this section referred to as the ‘‘renewal

17 fund’’).

18 (B) Deposits into the renewal fund shall not exceed

19 $250,000,000 over the life of the renewal fund. Monies in

20 excess of such amount shall be deposited as miscellaneous

21 receipts in the Treasury of the United States.

22 (C) Deposits into the renewal fund shall remain avail23 able until expended. The Secretary of the Treasury is di24 rected to develop procedures for use of the renewal fund to

25 ensure accountability and demonstrated results.
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1 (b) USE OF RENEWAL FUND.—Monies from the re2 newal fund shall be made available to the Secretary of the

3 Interior, without further appropriation, at the beginning

4 of each fiscal year in which funds are available, and shall

5 be expended by the Secretary as follows:

6 (1) Twenty-five percent shall be used for infra7 structure needs at units of the National Park System,

8 including but not limited to, facility refurbishment,

9 repair and replacement, interpretive media and ex10 hibit repair and replacement, and Infrastructure

11 projects associated with park resource protection;

12 (2) Twenty-five percent shall be used for infra13 structure needs at units of the National Wildlife Ref14 uge System, including but not limited to, facility re15 furbishment, repair and replacement, interpretive

16 media and exhibit repair and replacement, and infra17 structure projects associated with refuge resource pro18 tection;

19 (3) Twenty-five percent shall be used for acquisi20 tion of important habitat lands for threatened or en21 dangered species from owners of private property.

22 Such lands shall be acquired solely on a willing seller

23 basis and shall be managed by the Secretary for the

24 conservation of such species pursuant to the terms of
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1 section 5 of the Endangered Species Act of 1973 (16

2 U.S.C. 1534); and

3 (4) Twenty-five percent shall be available for

4 wetlands projects in accordance with the applicable

5 provision of the North American Wetlands Conserva6 tion Act (16 U.S.C. 4401 et seq.).

7 (c) COMMUNITY ASSISTANCE.—There is hereby estab8 lished a Community Assistance Fund in the Treasury into

9 which shall be deposited $30,000,000 from revenues derived

10 from the federal share of the first lease sale authorized under

11 this chapter. The Secretary of the Treasury shall invest the

12 funds in the Community Assistance Fund in interest bear13 ing government securities. No more than $5,000,000 per

14 year from the Community Assistance Fund, shall be avail15 able to the Secretary for distribution, upon application and

16 without further appropriation, to organized boroughs, other

17 municipal subdivisions of the State of Alaska, and recog18 nized Indian Reorganization Act entities which are directly

19 impacted by the exploration and production of oil and gas

20 on the Coastal Plain authorized by this chapter to provide

21 public and social services and facilities required in connec22 tion with such activities.
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1 CHAPTER 3—WATER PROJECTS

2 Subchapter A—Irrigation Prepayment

3 SEC. 5351. AUTHORIZATION FOR PREPAYMENT OF CON4 STRUCTION CHARGES.

5 Subsection 213(a) of the Reclamation Reform Act of

6 1982 (96 Stat. 1269, 43 U.S.C. 390mm(a)) is amended:

7 (1) by adding at the beginning:

8 ‘‘Notwithstanding any provision of Reclamation law

9 or limitation contained in any repayment or water service

10 contract, any person or district holding such a contract or

11 receiving water under such a contract with the United

12 States may prepay the construction costs referred to in this

13 section either through accelerated or lump sum payments.

14 For the purposes of such prepayment only, the project to

15 which such contract applies is declared to be complete and

16 the Secretary shall determine the repayment obligations as17 sociated with the construction costs of the project facilities

18 so that accelerated payments or a lump sum payment may

19 be made. The amount of any prepayment shall be calculated

20 by discounting the remaining payments due under a con21 tract in accordance with the guidelines set forth in Circular

22 A-129 issued by the Office of Management and Budget: Pro23 vided, That the discount shall be adjusted by any amounts

24 necessary to compensate the Federal Government for the di25 rect or indirect loss of future tax revenues if the individual
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1 or district plans to use federally tax-exempt financing for

2 such prepayment.’’;

3 (2) by striking ‘‘lands in a district’’ and insert4 ing: ‘‘lands in a district, or lands owned or leased by

5 a person’’;

6 (3) by striking ‘‘obligation of a district’’ and in7 serting: ‘‘obligation of a district or a person’’;

8 (4) by striking ‘‘enactment of this Act.’’ and in9 serting: ‘‘enactment of this Act or as otherwise pro10 vided for in this section. Any additional capital costs

11 incurred after the date of such prepayment shall be

12 recoverable as a separate obligation and shall not be

13 considered to be a new or supplemental benefit for the

14 purposes of this act nor cause the full cost pricing

15 limitation of this Act or the ownership limitations

16 contained in any provision of federal reclamation law

17 to apply to the lands to which such capital costs

18 apply.’’.

19 SEC. 5352. CONFORMING AMENDMENT.

20 Subsection 213 (c) of the Reclamation Reform Act of

21 1982 (43 U.S.C. 390 mm (c)) is repealed.

22 Subchapter B—Hetch Hetchy

23 SEC. 5353. HETCH HETCHY DAM.

24 Section 7 of the Act of December 19, 1913 (38 Stat.

25 242, chapter 4), is amended—
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1 (1) by striking ‘‘$30,000’’ in the first sentence

2 and inserting ‘‘$2,000,000’’; and

3 (2) by amending the second and third sentences

4 to read as follows: ‘‘These funds shall be placed in a

5 separate fund by the United States and, notwith6 standing any other provision of law, shall not be

7 available for obligation or expenditure until appro8 priated by the Congress. The highest priority use of

9 the funds shall be for annual operation of Yosemite

10 National Park, with the remainder of any funds to be

11 used to fund operations of other national parks in the

12 State of California.’’.

13 Subchapter C—Collbran Project

14 SEC. 5355. COLLBRAN PROJECT.

15 (a) SHORT TITLE.—This subchapter may be cited as

16 the ‘‘Collbran Project Unit Conveyance Act’’.

17 (b) DEFINITIONS.—For purposes of this subchapter:

18 (1) DISTRICTS.—The term ‘‘Districts’’ means the

19 Ute Water Conservancy District and the Collbran

20 Conservancy District (including their successors and

21 assigns), which are political subdivisions of the State

22 of Colorado.

23 (2) FEDERAL RECLAMATION LAWS.—The term

24 ‘‘Federal reclamation laws’’ means the Act of June

25 17, 1902 and Acts amendatory thereof or supple-
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1 mentary thereto (32 Stat. 388, chapter 1093; 43

2 U.S.C. 371 et seq.) (including regulations adopted

3 pursuant to those Acts).

4 (3) PROJECT.—The term ‘‘Project’’ means the

5 Collbran Reclamation Project, as constructed and op6 erated under the Act of July 3, 1952 (66 Stat. 325,

7 chapter 565), including all property, equipment, and

8 assets of or relating to the Project that are owned by

9 the United States, including—

10 (A) Vega Dam and Reservoir (but not in11 cluding The Vega Recreation Facilities);

12 (B) Leon-Park Dams and Feeder Canal;

13 (C) Southside Canal;

14 (D) East Fork Diversion Dam and Feeder

15 Canal;

16 (E) Bonham-Cottonwood Pipeline;

17 (F) Snowcat Shed and Diesel Storage;

18 (G) Upper Molina Penstock and Power

19 Plant;

20 (H) Lower Molina Penstock and Power

21 Plant;

22 (I) the diversion structure in the tailrace of

23 the Lower Molina Power Plant;

24 (J) all substations and switchyards;
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1 (K) a non-exclusive easement for the use of

2 existing easements or rights-of-way owned by the

3 United States on or across nonfederal lands

4 which are necessary for access to Project facili5 ties;

6 (L) title to lands reasonably necessary for

7 all Project facilities except for land described in

8 subparagraph (K) or subsection (c)(1)(B) or (C);

9 (M) all permits and contract rights held by

10 the Bureau of Reclamation, including, without

11 limitation, contract or other rights relating to

12 the operation, use, maintenance, repair, or re13 placement of the water storage reservoirs located

14 on the Grand Mesa which are operated as a part

15 of the Project;

16 (N) all equipment, parts inventories, and

17 tools;

18 (O) all additions, replacements, betterments,

19 and appurtenances to any of the above; and

20 (P) a copy of all data, plans, designs, re21 ports, records, or other materials, whether in

22 writing or in any form of electronic storage re23 lating specifically to the Project.

24 (4) VEGA RECREATION FACILITIES.—The term

25 ‘‘Vega Recreation Facilities’’ includes, but is not lim-
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1 ited to, buildings, campgrounds, picnic areas, parking

2 lots, fences, boat docks and ramps, electrical lines,

3 water and sewer systems, trash and toilet facilities,

4 roads and trails, and other structures and equipment

5 used for State park purposes at and near Vega Res6 ervoir such as recreation, maintenance and daily and

7 overnight visitor use, and lands above the high water

8 level of Vega Reservoir within the area previously de9 fined by the Department of the Interior as the ‘‘Res10 ervoir Area Boundary’’ which have not historically

11 been utilized for Collbran Project water storage and

12 delivery facilities, together with an easement for pub13 lic access for recreational purposes to Vega Reservoir

14 and the water surface thereof, and construction, oper15 ation, maintenance and replacement of such recre16 ation facilities below the high water line. Such facili17 ties shall also include improvements constructed or

18 added as a result of the agreements referred to in sec19 tion (c)(6).

20 (c) CONVEYANCE OF THE COLLBRAN PROJECT.—

21 (1) IN GENERAL.—

22 (A) CONVEYANCE TO DISTRICTS.—The Sec23 retary of the Interior shall convey to the Dis24 tricts all right, title, and interest of the United

25 States in and to the Project, as described in sub-
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1 section (b)(3), by quitclaim deed and bill of sale,

2 without warranties, in the last quarter of fiscal

3 year 2000, subject only to the requirements of

4 this section. Until such conveyance occurs, the

5 Bureau of Reclamation shall continue to provide

6 for the operation, maintenance, repair, and re7 placement of Project facilities and the storage

8 reservoirs on the Grand Mesa to the extent such

9 responsibilities are the responsibility of the Bu10 reau of Reclamation and have not been delegated

11 to the Districts prior to the date of enactment of

12 this Act or are delegated or transferred to the

13 Districts by agreement thereafter, so that at the

14 time of conveyance such facilities are in the same

15 condition as, or better condition than, the condi16 tion of the facilities on the date of enactment of

17 this Act.

18 (B) EASEMENTS ON NATIONAL FOREST SYS19 TEM LANDS.—The Secretary of Agriculture shall

20 grant, in the last quarter of fiscal year 2000,

21 subject only to the requirements of this section;

22 (i) a non-exclusive easement on and across Na23 tional Forest System lands to the Districts for

24 ingress and egress on existing access routes to

25 each existing component of the Project and to the
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1 existing storage reservoirs on the Grand Mesa

2 which are operated as a part of the Project; (ii)

3 a non-exclusive easement on National Forest

4 System lands for the operation, use, mainte5 nance, repair, and replacement, but not enlarge6 ment, of the existing storage reservoirs on the

7 Grand Mesa to the owners and operators of such

8 reservoirs which are operated as a part of the

9 Project; which easement may be exercised in the

10 event that the existing land use authorizations

11 for such storage reservoirs are restricted, termi12 nated, relinquished, or abandoned, and which

13 easement shall not be subject to conditions or re14 quirements that interfere with or limit the use of

15 such reservoirs for water supply or power pur16 poses; and (iii) a non-exclusive easement to the

17 Districts for the operation, use, maintenance, re18 pair, and replacement, but not enlargement, of

19 those components of Project facilities which are

20 located on National Forest System lands, subject

21 to the requirement that the Districts shall pro22 vide reasonable notice to and the opportunity for

23 consultation with the designated representative of

24 the Secretary of Agriculture for non-routine,
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1 non-emergency activities that occur on such ease2 ments.

3 (C) EASEMENTS TO DISTRICTS FOR SOUTH4 SIDE CANAL.—The Secretary of the Interior shall

5 grant to the Districts, in the last quarter of fiscal

6 year 2000, subject only to the requirements of

7 this section, (i) a non-exclusive easement on and

8 across lands administered by agencies within the

9 Department of the Interior for ingress and egress

10 on existing access routes to and along the South11 side Canal, and (ii) a non-exclusive easement for

12 the operation, use, maintenance, repair, and re13 placement of the Southside Canal, subject to the

14 requirement that the Districts shall provide rea15 sonable notice to and the opportunity for con16 sultation with the designated representative of

17 the Secretary of the Interior for non-routine,

18 non-emergency activities that occur on such ease19 ments.

20 (2) RESERVATION.—The transfer of rights and

21 interests pursuant to paragraphs (1)(A), (B), and (C)

22 shall reserve to the United States all minerals, includ23 ing hydrocarbons, and a perpetual right of public ac24 cess over, across, under, and to the portions of the

25 Project which on the date of enactment of this Act
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1 were open to public use for fishing, boating, hunting,

2 and other outdoor recreation purposes and other pub3 lic uses such as grazing, mineral development and

4 logging: Provided, That the United States may allow

5 for continued public use and enjoyment of such por6 tions of the Project for recreational activities and

7 other public uses conducted as of the date of enact8 ment of this Act.

9 (3) CONVEYANCE TO STATE OF COLORADO.—All

10 right, title, and interest in the Vega Recreation Fa11 cilities shall remain in the United States until the

12 terms of the agreements referred to in paragraph (6)

13 have been fulfilled by the United States. At such time,

14 all right, title, and interest in the Vega Recreation

15 Facilities shall be conveyed by the Secretary of the In16 terior to the State of Colorado, Division of Parks and

17 Outdoor Recreation.

18 (4) PAYMENT.—

19 (A) IN GENERAL.—At the time of transfer,

20 the Districts shall pay to the United States

21 $12,900,000 ($12,300,000 of which represents the

22 net present value of the outstanding repayment

23 obligations for the Project), of which—
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1 (i) $12,300,000 shall be deposited in

2 the general fund of the United States Treas3 ury; and

4 (ii) $600,000 shall be deposited in a

5 special account in the United States Treas6 ury and shall be available to the United

7 States Fish and Wildlife Service, Region 6,

8 without further appropriation, for use in

9 funding Colorado operations and capital ex10 penditures associated with the Grand Valley

11 Water Management Project for the purpose

12 of recovering endangered fish in the Upper

13 Colorado River Basin, as identified in the

14 Recovery Implementation Program for En15 dangered Fish Species in the Upper Colo16 rado River Basin, or such other component

17 of the Recovery Implementation Program

18 within Colorado that is selected with the

19 concurrence of the Governor of the State of

20 Colorado.

21 (B) SOURCE OF FUNDS.—Funds for the

22 payment to the extent of the amount specified in

23 subparagraph (A) shall not be derived from the

24 issuance or sale, prior to the conveyance, of State

25 or local bonds the interest on which is exempt
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1 from taxation under section 103 of the Internal

2 Revenue Code of 1986.

3 (5) OPERATION OF PROJECT.—

4 (A) IN GENERAL.—The Project was author5 ized and constructed to place water to beneficial

6 use for authorized purposes within the State of

7 Colorado. The Project shall be operated and used

8 by the Districts for a period of 40 years after the

9 date of enactment of this Act for the purposes for

10 which the Project was authorized under the Act

11 of July 3, 1952 (66 Stat. 325, chapter 565). The

12 Districts shall attempt to the extent practicable,

13 taking into consideration historic Project oper14 ations, to notify the State of Colorado of changes

15 in historic Project operations which may ad16 versely affect State park operations.

17 (B) REQUIREMENTS.—During the 40-year

18 period described in subparagraph (A)—

19 (i) the Districts shall annually submit

20 to the Secretary of Agriculture and the Col21 orado Department of Natural Resources a

22 plan for operation of the Project, which

23 plan shall—

24 (I) report on Project operations

25 for the previous year;
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1 (II) provide a description of the

2 manner of Project operations antici3 pated for the forthcoming year, which

4 shall be prepared after consultation

5 with the designated representatives of

6 the Secretary of Agriculture, the Board

7 of County Commissioners of Mesa

8 County, Colorado, and the Colorado

9 Department of Natural Resources; and

10 (III) certify that the Districts

11 have operated and will operate and

12 maintain the Project facilities in ac13 cordance with sound engineering prac14 tices; and

15 (ii) subject to subsection (d), all elec16 tric power generated by operation of the

17 Project shall be made available to and be

18 marketed by the Western Area Power Ad19 ministration (including its successors or as20 signs).

21 (6) AGREEMENTS.—Conveyance of the Project

22 shall be subject to the agreements between the United

23 States and the State of Colorado dated August 22,

24 1994, and September 23, 1994, relating to the con25 struction and operation of recreational facilities at
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1 Vega Reservoir, which agreements shall continue to be

2 performed by the parties thereto according to the

3 terms of the agreements.

4 (d) OPERATION OF THE POWER COMPONENT.—

5 (1) CONFORMITY TO HISTORIC OPERATIONS.—

6 The power component and facilities of the Project

7 shall be operated in substantial conformity with the

8 historic operations of the power component and facili9 ties (including recent operations in a peaking mode).

10 (2) POWER MARKETING.—

11 (A) EXISTING MARKETING ARRANGE12 MENT.—The Post-1989 Marketing Criteria,

13 which provide for the marketing of power gen14 erated by the power component of the Project as

15 part of the output of the Salt Lake City Area In16 tegrated Projects, shall no longer be binding on

17 the Project upon conveyance of the Project under

18 subsection (c)(1).

19 (B) AFTER TERMINATION OF EXISTING MAR20 KETING ARRANGEMENT.—

21 (i) IN GENERAL.—After the convey22 ance, the Districts shall offer all power pro23 duced by the power component of the Project

24 to the Western Area Power Administration

25 or its successors or assigns (referred to in
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1 this section as ‘‘Western’’), which, in con2 sultation with its affected preference cus3 tomers, shall have the first right to purchase

4 such power at the rates established in ac5 cordance with clause (ii). If Western de6 clines to purchase the power after consulta7 tion with its affected preference customers,

8 such power shall then be offered at the same

9 rates first to Western’s preference customers

10 located in the Salt Lake City Area Inte11 grated Projects marketing area (referred to

12 in this section as the ‘‘SLCAIP preference

13 customers’’). Thereafter, such power may be

14 sold to any other party: Provided, however,

15 That no such sale may occur at rates less

16 than rates established in accordance with

17 clause (ii) unless such power is first offered

18 at such lesser rate first to Western and then

19 to its SLCAIP preference customers.

20 (ii) The rate for power initially offered

21 to Western and its SLCAIP preference cus22 tomers under this paragraph shall not ex23 ceed that required to produce revenues suffi24 cient to provide for
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1 (I) annual debt service and/or

2 recoupment of the cost of capital for

3 the amount specified in subsection

4 (c)(4)(A)(i) of this section, less the sum

5 of $310,000 (which is the net present

6 value of the outstanding repayment ob7 ligation of the Collbran Conservancy

8 District), and

9 (II) the cost of operation, mainte10 nance, and replacement of the power

11 component of the Project.

12 Such costs and rate shall be determined in

13 a manner consistent with the current prin14 ciples followed by the Secretary of the Inte15 rior and by Western in its annual power

16 and repayment study.

17 (e) LICENSE.—

18 (1) Prior to the conveyance of the Project to the

19 Districts, the Commission shall issue to the Districts

20 a license or licenses as appropriate under part I of

21 the Federal Power Act, as amended, (16 U.S.C. 791

22 et seq.), authorizing for a term of 40 years the contin23 ued operation and maintenance of the power compo24 nent of the Project.

25 (2) The license issued pursuant to subsection (1):
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1 (A) shall be for the purpose of operating,

2 using, maintaining, repairing, and replacing the

3 power component of the Project as authorized by

4 the Act of July 3, 1952 (66 Stat. 325, chapter

5 565);

6 (B) shall be conditioned upon the require7 ment that the power component of the project

8 continue to be operated and maintained in ac9 cordance with the authorized purposes of the

10 project;

11 (C) shall be subject only to the provisions of

12 Part I of the Federal Power Act, except the word

13 ‘‘constructed’’ in section 3(10); the four provisos

14 of section 4(e); section 6 to the extent it requires

15 the licensee’s acceptance of those terms and con16 ditions of the Act that this subsection waives;

17 section 10(e) as concerns annual charges for the

18 use and occupancy of federal lands and facilities;

19 section 10(f); section 10(j); section 18; section 19;

20 section 20; and section 22 of the Federal Power

21 Act, 16 U.S.C. 796(10), 797(e), 799, 803(e),

22 803(f), 803(j), 811, 812, 813, and 815; and shall

23 not be subject to the standard ‘‘L-Form’’ license

24 conditions, published at 54 FPC 1792-1928

25 (1975), the Federal Land Policy and Manage-
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1 ment Act (43 U.S.C. 1701 et seq.), as amended,

2 section 2402 of the Energy Policy Act of 1992

3 (16 U.S.C. 797c), the National Environmental

4 Policy Act of 1969 (42 U.S.C. 4321 et seq.), the

5 Endangered Species Act of 1973 (16 U.S.C. 1531

6 et seq.), the Wild and Scenic Rivers Act (16

7 U.S.C. 1271 et seq.), the Federal Water Pollution

8 Control Act (commonly known as the ‘‘Clean

9 Water Act’’) (33 U.S.C. 1251 et seq.), the Na10 tional Historic Preservation Act (16 U.S.C. 470

11 et seq.), the Coastal Zone Management Act of

12 1972 (16 U.S.C. 1451 et seq.), the Fish and

13 Wildlife Coordination Act (16 U.S.C. 661 et

14 seq.), or any other Act otherwise applicable to

15 the licensing of the project.

16 (3) The license issued under paragraph (1) is

17 deemed to meet the licensing standards of the Federal

18 Power Act, including section 10(a) and the last sen19 tence of section 4(e), 16 U.S.C. 797(e).

20 (4) Any power site reservation established by the

21 President, the Secretary of the Interior, or pursuant

22 to section 24 of the Federal Power Act (16 U.S.C.

23 818) or any other law, which exists on any lands,

24 whether federally or privately owned, that are in25 cluded within the boundaries of the project shall be
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1 vacated by operation of law upon issuance of the li2 cense for the project.

3 (5) All requirements of Part I of the Federal

4 Power Act and of any other Act applicable to the li5 censing of a hydroelectric project shall apply to the

6 project upon expiration of the license issued under

7 this section.

8 (6) For purposes of this section, ‘‘Commission’’

9 means the Federal Energy Regulatory Commission.

10 (7) The operation of the Project shall be subject

11 to all applicable state and federal laws subsequent to

12 the issuance of the license pursuant to paragraph (1).

13 (f) INAPPLICABILITY OF NEPA.—Neither the convey14 ance of the Project nor the issuance of easements pursuant

15 to this section constitutes a major Federal action within

16 the meaning of the National Environmental Policy Act of

17 1969 (42 U.S.C. 4321 et seq.), including any regulations

18 issued under such Act.

19 (g) INAPPLICABILITY OF PRIOR AGREEMENTS AND OF

20 FEDERAL RECLAMATION LAWS.—On conveyance of the

21 Project to the Districts—

22 (1) the Repayment Contract dated May 27,

23 1957, as amended April 12, 1962, between the

24 Collbran Conservancy District and the United States,

25 and the Contract for use of Project facilities for Di-
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1 version of Water dated January 11, 1962, as amended

2 November 10, 1977, between the Ute Water Conser3 vancy District and the United States, shall be termi4 nated and of no further force or effect; and

5 (2) the Project shall no longer be subject to or

6 governed by the Federal reclamation laws.

7 (h) DISTRICTS’ LIABILITY.—The Districts shall be lia8 ble, to the extent allowed under State law, for all acts or

9 omissions relating to the operation and use of the Project

10 by the Districts that occur subsequent to the conveyance

11 under section (c), including damages to Federal lands or

12 facilities which result from the failure of Project facilities.

13 (i) EFFECT ON STATE LAW.—Nothing in this section

14 shall be construed to impair the effectiveness of any State

15 or local law (including regulations) relating to land use.

16 (j) TREATMENT OF SALES FOR PURPOSES OF CERTAIN

17 LAWS.—The sales of assets under this subchapter shall not

18 be considered a disposal of Federal surplus property under

19 the following provisions of law:

20 (1) Section 203 of the Federal Property and Ad21 ministrative Services Act of 1949 (40 U.S.C. 484).

22 (2) Section 13 of the Surplus Property Act of

23 1944 (50 U.S.C. App. 1622).
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1 Subchapter D—Sly Park

2 SEC. 5356. SLY PARK.

3 (a) SHORT TITLE.—This subchapter may be cited as

4 the ‘‘Sly Park Unit Conveyance Act’’.

5 (b) DEFINITIONS.—For purposes of this subchapter:

6 (1) The term ‘‘El Dorado Irrigation District’’ or

7 ‘‘District’’ means a political subdivision of the State

8 of California duly organized, existing, and acting

9 pursuant to the laws thereof with its principal place

10 of business in the city of Placerville, El Dorado Coun11 ty, California.

12 (2) The term ‘‘Secretary’’ means the Secretary of

13 the Interior.

14 (3) The term ‘‘Sly Park Unit’’ means the Sly

15 Park Dam and Reservoir, Camp Creek Diversion

16 Dam and Tunnel and conduits and canals as author17 ized under the Act entitled ‘‘An Act to authorize the

18 American River Basin development, California, for

19 irrigation and reclamation, and for other purposes’’,

20 approved October 14, 1949 (63 Stat. 852 chapter

21 690), together with all other facilities owned by the

22 United States including those used to convey and

23 store water delivered from Sly Park, as well as all

24 recreation facilities associated thereto.

25 (c) SALE OF THE SLY PARK UNIT.—
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1 (1) IN GENERAL.—The Secretary shall, on or be2 fore December 31, 1997, and upon receipt of the pay3 ment for the original construction debt described in

4 paragraph (2), sell and convey to the El Dorado Irri5 gation District all right, title, and interest of the

6 United States in and to the Sly Park Unit. At the

7 time the Sly Park Unit is conveyed, the Secretary

8 shall also transfer and assign to the District the water

9 rights relating to the Sly Park Unit held in trust by

10 the Secretary for diversion and storage under Califor11 nia State permits numbered 2631, 5645A, 10473, and

12 10474.

13 (2) SALE PRICE.—The sale price for the Sly

14 Park Unit shall be $3,993,982, which is the outstand15 ing balance for the original construction of the Sly

16 Park Unit payable to the United States. Payment

17 shall be deposited as miscellaneous receipts in the

18 Treasury and credited to the Central Valley Project

19 Restoration Fund. Payment of such price shall extin20 guish all payment obligations under contract num21 bered 14-06-200-949 between the District and the Sec22 retary.

23 (d) NO ADDITIONAL ENVIRONMENTAL IMPACT.—The

24 Congress specifically finds that (A) the sale, conveyance and

25 assignment of the Sly Park Unit and water rights under
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1 this section involves the transfer of the ownership and oper2 ation of an existing ongoing water project, (B) the Sly Park

3 Unit operation, facilities, and water rights have been, and

4 after the sale and transfer will continue to be, committed

5 to maximum reasonable and beneficial use for existing serv6 ices, and (C) the sale, conveyance and assignment of the

7 Sly Park Unit and water rights does not involve any addi8 tional growth or expansion of the project or other environ9 mental impacts. Consequently, the sale, conveyance and as10 signment of the Sly Park Unit and water rights shall not

11 be subject to environmental review pursuant to the National

12 Environmental Policy Act of 1969 (42 U.S.C. 4332) or en13 dangered species review or consultation pursuant to section

14 7 of the Endangered Species Act of 1973 (16 U.S.C. 1536).

15 (e) CERTAIN CONTRACT OBLIGATIONS NOT AF16 FECTED.—The sale of the Sly Park Unit under this section

17 shall not affect the payment obligations of the District

18 under the contract between the District and the Secretary

19 numbered 14-06-200-7734, as amended by contracts num20 bered 14-06-200-4282A and 14-06-200-8536A.

21 (f) TREATMENT OF SALES FOR PURPOSES OF CERTAIN

22 LAWS.—The sales of assets under this subchapter part shall

23 not be considered a disposal of Federal surplus property

24 under the following provisions of law:
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1 (1) Section 203 of the Federal Property and Ad2 ministrative Services Act of 1949 (40 U.S.C. 484).

3 (2) Section 13 of the Surplus Property Act of

4 1944 (50 U.S.C. App. 1622).

5 Subchapter E—Central Utah Project

6 SEC. 5357. PREPAYMENT OF CERTAIN REPAYMENT CON7 TRACTS BETWEEN THE UNITED STATES AND

8 THE CENTRAL UTAH WATER CONSERVANCY

9 DISTRICT.

10 The second sentence of section 210 of the Central Utah

11 Project Completion Act (106 Stat. 4624) is amended to read

12 as follows: ‘‘The Secretary shall allow for prepayment of

13 the repayment contract between the United States and the

14 Central Utah Water Conservancy District dated December

15 28, 1965, and supplemented on November 26, 1985, provid16 ing for repayment of municipal and industrial water deliv17 ery facilities for which repayment is provided pursuant to

18 such contract, under terms and conditions similar to those

19 contained in the supplemental contract that provided for

20 the prepayment of the Jordan Aqueduct dated October 28,

21 1993. The prepayment may be provided in several install22 ments to reflect substantial completion of the delivery facili23 ties being prepaid and may not be adjusted on the basis

24 of the type of prepayment financing utilized by the District:

25 Provided That the District shall complete all payments au-
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1 thorized pursuant to this section by the end of fiscal year

2 2002.’’.

3 CHAPTER 4—FEDERAL OIL AND GAS

4 ROYALTIES

5 SEC. 5361. DEFINITIONS.

6 Section 3 of the Federal Oil and Gas Royalty Manage7 ment Act of 1982 (30 U.S.C. 1701 et seq.) is amended—

8 (1) by amending paragraph (7) to read as fol9 lows:

10 ‘‘(7) ‘lessee’ means any person to whom the Unit11 ed States issues an oil and gas lease or any person

12 to whom operating rights in a lease have been as13 signed;’’; and

14 (2) by striking ‘‘and’’ at the end of paragraph

15 (15), by striking the period at the end of paragraph

16 (16) and inserting a semicolon, and by adding at the

17 end the following:

18 ‘‘(17) ‘adjustment’ means an amendment to a

19 previously filed report on an obligation, and any ad20 ditional payment or credit, if any, applicable thereto,

21 to rectify an underpayment or overpayment on a

22 lease;

23 ‘‘(18) ‘administrative proceeding’ means any De24 partment of the Interior agency process in which a

25 demand, decision or order issued by the Secretary or
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1 a delegated State is subject to appeal or has been ap2 pealed;

3 ‘‘(19) ‘assessment’ means any fee or charge levied

4 or imposed by the Secretary or a delegated State other

5 than—

6 ‘‘(A) the principal amount of any royalty,

7 minimum royalty, rental, bonus, net profit share

8 or proceed of sale;

9 ‘‘(B) any interest; or

10 ‘‘(C) any civil or criminal penalty;

11 ‘‘(20) ‘commence’ means—

12 ‘‘(A) with respect to a judicial proceeding,

13 the service of a complaint, petition, counter14 claim, crossclaim, or other pleading seeking af15 firmative relief or seeking credit or recoupment;

16 or

17 ‘‘(B) with respect to a demand, the receipt

18 by the Secretary or a delegated State or a lessee

19 of the demand;

20 ‘‘(21) ‘credit’ means the application of an over21 payment (in whole or in part) against an obligation

22 which has become due to discharge, cancel or reduce

23 the obligation;

24 ‘‘(22) ‘delegated State’ means a State which,

25 pursuant to an agreement or agreements under sec-
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1 tion 205, performs authorities, duties, responsibilities,

2 or activities of the Secretary which may be performed

3 by a State under the Constitution of the United

4 States for all lands within the State, including, but

5 not limited to—

6 ‘‘(A) activities under sections 111 and 115;

7 ‘‘(B) collection, audit, lease and post-lease

8 management activities, and applicable enforce9 ment activities;

10 ‘‘(C) inspections (including activities de11 scribed in section 108;

12 ‘‘(D) approval of pooling, unitization, and

13 communitization agreements; and

14 ‘‘(E) investigations;

15 ‘‘(23) ‘demand’ means—

16 ‘‘(A) an order to pay issued by the Sec17 retary or the applicable delegated State that has

18 a reasonable basis to conclude that the obligation

19 in the amount of the demand is due and owing;

20 or

21 ‘‘(B) a separate written request by a lessee

22 which asserts an obligation due the lessee that

23 has a reasonable basis to conclude that the obli24 gation in the amount of the demand is due and

25 owing, but does not mean any royalty or produc-
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1 tion report, or any information contained there2 in, required by the Secretary or a delegated

3 State;

4 ‘‘(24) ‘obligation’ means—

5 ‘‘(A) any duty of the Secretary or, if appli6 cable, a delegated State—

7 ‘‘(i) to take oil or gas royalty in kind

8 at or near the lease (unless the lease ex9 pressly provides for delivery at a different

10 location); or

11 ‘‘(ii) to pay, refund, offset, or credit

12 monies including but not limited to)—

13 ‘‘(I) the principal amount of any

14 royalty, minimum royalty, rental,

15 bonus, net profit share or proceed of

16 sale; or

17 ‘‘(II) any interest;

18 ‘‘(B) any duty of a lessee—

19 ‘‘(i) to deliver oil or gas royalty in

20 kind at or near the lease (unless the lease

21 expressly provides for delivery at a different

22 location); or

23 ‘‘(ii) to pay, offset or credit monies in24 cluding but not limited to—
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1 ‘‘(I) the principal amount of any

2 royalty, minimum royalty, rental,

3 bonus, net profit share or proceed of

4 sale;

5 ‘‘(II) any interest;

6 ‘‘(III) any penalty; or

7 ‘‘(IV) any assessment, which

8 arises from or relates to any lease ad9 ministered by the Secretary for, or any

10 mineral leasing law related to, the ex11 ploration, production and development

12 of oil or gas on Federal lands or the

13 Outer Continental Shelf;

14 ‘‘(25) ‘order to pay’ means a written order is15 sued by the Secretary or the applicable delegated

16 State which—

17 ‘‘(A) asserts a specific, definite, and quan18 tified obligation claimed to be due, and

19 ‘‘(B) specifically identifies the obligation by

20 lease, production month and monetary amount

21 of such obligation claimed to be due and ordered

22 to be paid, as well as the reason or reasons such

23 obligation is claimed to be due, but such term

24 does not include any other communication or ac-
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1 tion by or on behalf of the Secretary or a dele2 gated State;

3 ‘‘(26) ‘overpayment’ means any payment by a

4 lessee in excess of an amount legally required to be

5 paid on an obligation and includes the portion of any

6 estimated payment for a production month that is in

7 excess of the royalties due for that month;

8 ‘‘(27) ‘payment’ means satisfaction, in whole or

9 in part, of an obligation;

10 ‘‘(28) ‘penalty’ means a statutorily authorized

11 civil fine levied or imposed for a violation of this Act,

12 any mineral leasing law, or a term or provision of

13 a lease administered by the Secretary;

14 ‘‘(29) ‘refund’ means the return of an overpay15 ment;

16 ‘‘(30) ‘State concerned’ means, with respect to a

17 lease, a State which receives a portion of royalties or

18 other payments under the mineral leasing laws from

19 such lease;

20 ‘‘(31) ‘underpayment’ means any payment or

21 nonpayment by a lessee that is less than the amount

22 legally required to be paid on an obligation; and

23 ‘‘(32) ‘United States’ means the United States

24 Government and any department, agency, or instru-
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1 mentality thereof, the several States, the District of

2 Columbia, and the territories of the United States.’’.

3 SEC. 5362. MAXIMIZING RECEIPTS THROUGH STATE EF4 FORTS.

5 (a) GENERAL AUTHORITY.—Section 205(a) of the Fed6 eral Oil and Gas Royalty Management Act of 1982 (30

7 U.S.C. 1735(a)) is amended to read as follows:

8 ‘‘(a) In order to provide incentives to States to maxi9 mize the amount of oil and gas receipts collected on lease

10 obligations within the six-year period of limitations, and

11 consequently to maximize the Federal share of such receipts

12 to the United States Treasury, upon written request of a

13 State, the State, pursuant to an agreement or agreements

14 and consistent with subsection (c), may perform all or part

15 of the authorities, duties, responsibilities, and activities of

16 the Secretary under this Act which may be delegated to a

17 State under the Constitution of the United States for all

18 Federal lands within the State. The delegated State shall

19 assume and perform the authorities, duties, responsibilities,

20 or activities delegated under this section. To avoid duplica21 tion of effort, any authority, duty, responsibility, or activ22 ity delegated to a State under this Act with respect to all

23 Federal lands within the State may not be carried out by

24 the Secretary. Under any such agreement, the Secretary

25 shall share oil or gas royalty management information.’’.
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1 (b) DETERMINATION.—Section 205(b) of the Federal

2 Oil and Gas Royalty Management Act of 1982 (30 U.S.C.

3 1735(b)) is amended by striking ‘‘is authorized to’’ and in4 serting ‘‘shall’’.

5 (c) FEDERAL-STATE ROYALTY COLLECTION EF6 FORTS.—Subsection (c) section 205 of the Federal Oil and

7 Gas Royalty Management Act of 1982 (30 U.S.C. 1735) is

8 amended by striking ‘‘which define’’ and all that follows

9 and inserting ‘‘within 18 months after the date of enact10 ment of section 115, under which States may perform the

11 authorities, duties, responsibilities, and activities under

12 this title which are subject to delegation, based on the rec13 ommendations of the States concerned following consulta14 tion with affected persons. If the Secretary decides not to

15 follow any recommendations supported by all States con16 cerned, the Secretary shall justify such decision within 30

17 days after making such decision. In carrying out this sec18 tion the Secretary shall provide for reasonable flexibility to

19 a State to perform any authority, duty, responsibility or

20 activity delegated hereunder in a more efficient and cost21 effective manner and provide the States concerned a direct

22 role in determining such requirements, procedures and poli23 cies. To ensure efficient and timely collections of royalties

24 pursuant to this Act, the delegated States shall provide—
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1 ‘‘(1) for the effective and efficient performance of

2 any authority, duty, responsibility or activity dele3 gated under this Act;

4 ‘‘(2) for the consistent and uniform performance

5 among the delegated States of any authority, duty, re6 sponsibility or activity delegated under this Act;

7 ‘‘(3) for valuation under the terms of the leases

8 and applicable Federal statutes; and

9 ‘‘(4) for uniform reporting form and reporting

10 requirements for all Federal lessees, unless the State

11 and all affected parties otherwise agree.’’.

12 (d) PERFORMANCE.—Subsection (d) of section 205 of

13 the Federal Oil and Gas Royalty Management Act of 1982

14 (30 U.S.C. 1735) is amended by striking ‘‘, pertaining’’ and

15 all that follows and inserting the following: ‘‘for require16 ments pertaining to records and accounts to be maintained

17 and reporting procedures to be required by delegated States

18 under this section. The records and accounts under such re19 porting procedures shall be sufficient to allow the Secretary

20 to monitor the performance of any delegated State under

21 this section. The applicable delegated State and the Sec22 retary shall agree to terms and conditions for inclusion into

23 an agreement to perform all or part of the authorities, du24 ties, responsibilities, and activities under this title consist25 ent with subsection (c).’’.
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1 (e) STATE ACTIONS.—Section 204 of the Federal Oil

2 and Gas Royalty Management Act of 1982 (30 U.S.C. 1734)

3 is amended by adding at the end the following:

4 ‘‘(d) With respect to enforcement of an obligation

5 under this Act, a State bringing an action under this sec6 tion shall enjoy no greater rights than the Secretary enjoys

7 under this Act.’’.

8 (f) SAVINGS PROVISION.—Nothing in the amendments

9 made by this section shall impair any agreement, or any

10 extension thereof, existing under section 205 as in effect on

11 the day before the date of enactment of this Act. Following

12 enactment of this Act, any State which is a party to an

13 existing agreement under such section under which the

14 State has been delegated audit or inspection responsibility,

15 may issue orders to pay, subpoenas, or notices to perform

16 restructured accounting and may continue to perform au17 dits or inspections under terms and conditions consistent

18 with the Federal Oil and Gas Royalty Management Act of

19 1982 (30 U.S.C. 1701 et seq.), as amended by this chapter.

20 (g) RECEIPTS.—Section 205(f) of the Federal Oil and

21 Gas Royalty Management Act of 1982 (30 U.S.C. 1735(f))

22 is amended by adding at the end the following: ‘‘Such costs

23 shall be allocable for the purposes of section 35(b) of the

24 Act entitled ‘‘An Act to promote the mining of coal, phos25 phate, oil, oil shale, gas, and sodium on the public domain’’,
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1 approved February 25, 1920 (commonly known as the

2 ‘‘Mineral Leasing Act’’) (30 U.S.C. 191(b)) to the adminis3 tration and enforcement of laws providing for the leasing

4 of any onshore lands or interests in land owned by the Unit5 ed States. The Secretary shall compensate any State in the

6 next succeeding fiscal year for the aggregate amount of such

7 costs incurred but not compensated due to such allocation

8 for the current fiscal year. All money received from sales,

9 bonuses, royalties, and interest, including money claimed

10 to be due and owing pursuant to a delegation under this

11 section, shall be payable and paid to the Treasury of the

12 United States.’’.

13 SEC. 5363. SECRETARIAL AND DELEGATED STATES’ AC14 TIONS AND LIMITATION PERIODS.

15 (a) IN GENERAL.—The Federal Oil and Gas Royalty

16 Management Act of 1982 (30 U.S.C. 1701 et seq.) is amend17 ed by adding after section 114 the following new section:

18 ‘‘SEC. 115. SECRETARIAL AND DELEGATED STATES’ AC19 TIONS AND LIMITATION PERIODS.

20 ‘‘(a) IN GENERAL.—All duties, responsibilities, and

21 activities with respect to a lease shall be performed by the

22 Secretary, delegated States, and lessees in a timely manner.

23 ‘‘(b) LIMITATION PERIOD.—

24 ‘‘(1) A judicial proceeding or demand which

25 arises from, or relates to an obligation, shall be com-
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1 menced within six years from the date on which the

2 obligation becomes due and if not so commenced shall

3 be barred. The Secretary, a delegated State, or a lessee

4 (A) shall not take any other or further action regard5 ing that obligation, including (but not limited to) the

6 issuance of any order, request, demand or other com7 munication seeking any document, accounting, deter8 mination, calculation, recalculation, payment, prin9 cipal, interest, assessment, or penalty or the initi10 ation, pursuit or completion of an audit with respect

11 to that obligation; and (B) shall not pursue any other

12 equitable or legal remedy, whether under statute or

13 common law, with respect to an action on or an en14 forcement of said obligation.

15 ‘‘(2) The limitations set forth in sections 2401,

16 2415, 2416, and 2462 of title 28, United States Code

17 and section 42 of the Mineral Leasing Act (30 U.S.C.

18 226-2) shall not apply to any obligation to which this

19 Act applies. Section 3716 of title 31, United States

20 Code, may be applied to an obligation the enforce21 ment of which is not barred by this Act, but may not

22 be applied to any obligation the enforcement of which

23 is barred by this Act.

24 ‘‘(c) OBLIGATION BECOMES DUE.—
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1 ‘‘(1) IN GENERAL.—For purposes of this Act, an

2 obligation becomes due when the right to enforce the

3 obligation is fixed.

4 ‘‘(2) ROYALTY OBLIGATIONS.—The right to en5 force any royalty obligation for any given production

6 month for a lease is fixed for purposes of this Act on

7 the last day of the calendar month following the

8 month in which oil or gas is produced.

9 ‘‘(d) TOLLING OF LIMITATION PERIOD.—The running

10 of the limitation period under subsection (b) shall not be

11 suspended, tolled, extended, or enlarged for any obligation

12 for any reason by any action, including an action by the

13 Secretary or a delegated State, other than the following:

14 ‘‘(1) TOLLING AGREEMENT.—A written agree15 ment executed during the limitation period between

16 the Secretary or a delegated State and a lessee which

17 tolls the limitation period for the amount of time dur18 ing which the agreement is in effect.

19 ‘‘(2) SUBPOENA.—

20 ‘‘(A) The issuance of a subpoena to a lessee

21 in accordance with the provisions of subsection

22 (B)(i) shall toll the limitation period with re23 spect to the obligation which is the subject of a

24 subpoena only for the period beginning on the

25 date the lessee receives the subpoena and ending
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1 on the date on which (i) the lessee has produced

2 such subpoenaed records for the subject obliga3 tion, (ii) the Secretary or a delegated State re4 ceives written notice that the subpoenaed records

5 for the subject obligation are not in existence or

6 are not in the lessee’s possession or control, or

7 (iii) a court has determined in a final decision

8 that such records are not required to be pro9 duced, whichever occurs first.

10 ‘‘(B)(i) A subpoena for the purposes of this

11 section which requires a lessee to produce records

12 necessary to determine the proper reporting and

13 payment of an obligation due the Secretary may

14 be issued only by an Assistant Secretary of the

15 Interior or an acting Assistant Secretary of the

16 Interior who is a schedule C employee (as de17 fined by section 213.3301 of title 5, Code of Fed18 eral Regulations) and may not be delegated to

19 any other person. If a State has been delegated

20 authority pursuant to section 205, the State, act21 ing through the highest elected State official hav22 ing ultimate authority over the collection of roy23 alties from leases on Federal lands within the

24 state, may issue such subpoena, but may not del25 egate such authority to any other person.
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1 ‘‘(ii) A subpoena described in clause (i)

2 may only be issued against a lessee during the

3 limitation period provided in this section and

4 only after the Secretary or a delegated State has

5 in writing requested the records from the lessee

6 related to the obligation which is the subject of

7 the subpoena and has determined that—

8 ‘‘(I) the lessee has failed to respond

9 within a reasonable period of time to the

10 Secretary’s or the applicable delegated

11 State’s written request for such records nec12 essary for an audit, investigation or other

13 inquiry made in accordance with the Sec14 retary’s or such delegated State’s respon15 sibilities under this Act; or

16 ‘‘(II) the lessee has in writing denied

17 the Secretary’s or the applicable delegated

18 State’s written request to produce such

19 records in the lessee’s possession or control

20 necessary for an audit, investigation or

21 other inquiry made in accordance with the

22 Secretary’s or such delegated State’s respon23 sibilities under this Act; or

24 ‘‘(III) the lessee has unreasonably de25 layed in producing records necessary for an
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1 audit, investigation or other inquiry made

2 in accordance with the Secretary’s or the

3 applicable delegated State’s responsibilities

4 under this Act after the Secretary’s or such

5 delegated State’s written request.

6 ‘‘(C) In seeking records, the Secretary or the

7 applicable delegated State shall afford the lessee

8 a reasonable period of time after a written re9 quest by the Secretary or such delegated State in

10 which to provide such records prior to the issu11 ance of any subpoena.

12 ‘‘(3) MISREPRESENTATION OR CONCEALMENT.—

13 The intentional misrepresentation or concealment of a

14 material fact for the purpose of evading the payment

15 of an obligation in which case the limitation period

16 shall be tolled for the period of such misrepresentation

17 or such concealment.

18 ‘‘(4) ORDER TO PERFORM A RESTRUCTURED AC19 COUNTING.—(A) The issuance of a notice under sub20 section (D) that the lessee has not adequately per21 formed a restructured accounting shall toll the limita22 tion period with respect to the obligation which is the

23 subject of the notice only for the period beginning on

24 the date the lessee receives the notice and ending 120

25 days after the date on which (i) the Secretary or the
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1 applicable delegated State receives written notice the

2 accounting or other requirement has been performed,

3 or (ii) a court has determined in a final decision that

4 the lessee is not required to perform the accounting,

5 whichever occurs first.

6 ‘‘(B)(i) The Secretary or the applicable del7 egated State may issue an order to perform a re8 structured accounting to a lessee when the Sec9 retary or such delegated State determines during

10 an in-depth audit of a lessee that the lessee

11 should recalculate royalty due on an obligation

12 based upon the Secretary’s or the delegated

13 State’s finding that the lessee has made identi14 fied underpayments or overpayments which are

15 demonstrated by the Secretary or the delegated

16 State to be based upon repeated, systemic report17 ing errors for a significant number of leases or

18 a single lease for a significant number of report19 ing months with the same type of error which

20 constitutes a pattern of violations and which are

21 likely to result in either significant underpay22 ments or overpayments.

23 ‘‘(ii) The power of the Secretary to issue an

24 order to perform a restructured accounting may

25 not be delegated below the most senior career
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1 professional position having responsibility for

2 the royalty management program, which posi3 tion is currently designated as the ‘Associate Di4 rector for Royalty Management’, and may not be

5 delegated to any other person. If a State has been

6 delegated authority pursuant to section 205, the

7 State, acting through the highest ranking State

8 official having ultimate authority over the collec9 tion of royalties from leases on Federal lands

10 within the state, may issue such order to per11 form, which may not be delegated to any other

12 person. An order to perform a restructured ac13 counting shall—

14 ‘‘(I) be issued within a reasonable pe15 riod of time from when the audit identifies

16 the systemic, reporting errors;

17 ‘‘(II) specify the reasons and factual

18 bases for such order; and

19 ‘‘(III) be specifically identified as an

20 ‘order to perform a restructured account21 ing’.

22 ‘‘(C) An order to perform a restructured ac23 counting shall not mean or be construed to in24 clude any other communication or action by or

25 on behalf of the Secretary or a delegated State.
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1 ‘‘(D) If a lessee fails to adequately perform

2 a restructured accounting pursuant to this sub3 section, a notice shall be issued to the lessee that

4 the restructured accounting has not been ade5 quately performed. A lessee shall be given a rea6 sonable time within which to perform the re7 structured accounting. Such notice may be issued

8 under this section only by an Assistant Secretary

9 of the Interior or an acting Assistant Secretary

10 of the Interior who is a schedule C employee (as

11 defined by section 213.3301 of title 5, Code of

12 Federal Regulations) and may not be delegated

13 to any other person. If a State has been delegated

14 authority pursuant to section 205, the State, act15 ing through the highest elected State official hav16 ing ultimate authority over the collection of roy17 alties from leases on Federal lands within the

18 state, may issue such notice, which may not be

19 delegated to any other person.

20 ‘‘(e) TERMINATION OF LIMITATIONS PERIOD.—An ac21 tion or an enforcement of an obligation by the Secretary

22 or delegated State or a lessee shall be barred under this sec23 tion prior to the running of the six-year period provided

24 in subsection (b) in the event—
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1 ‘‘(1) the Secretary or a delegated State has noti2 fied the lessee in writing that a time period is closed

3 to further audit; or

4 ‘‘(2) the Secretary or a delegated State and a les5 see have so agreed in writing.

6 ‘‘(f) RECORDS REQUIRED FOR DETERMINING COLLEC7 TIONS.—Records required pursuant to section 103 by the

8 Secretary or any delegated State for the purpose of deter9 mining obligations due and compliance with any applicable

10 mineral leasing law, lease provision, regulation or order

11 with respect to oil and gas leases from Federal lands or

12 the Outer Continental Shelf shall be maintained for the

13 same period of time during which a judicial proceeding or

14 demand may be commenced under subsection (b). If a judi15 cial proceeding or demand is timely commenced, the record

16 holder shall maintain such records until the final

17 nonappealable decision in such judicial proceeding is made,

18 or with respect to that demand is rendered, unless the Sec19 retary or the applicable delegated State authorizes in writ20 ing an earlier release of the requirement to maintain such

21 records. Notwithstanding anything herein to the contrary,

22 under no circumstance shall a record holder be required to

23 maintain or produce any record relating to an obligation

24 for any time period which is barred by the applicable limi25 tation in this section. Records required for administrative
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1 actions and investigations (including, but not limited to,

2 accounting collection and audits) under this Act involving

3 obligations shall not be duplicated pursuant to section

4 3518(c)(1)(B) of title 44, United States Code.

5 ‘‘(g) TIMELY COLLECTIONS.—In order to most effec6 tively utilize resources available to the Secretary to maxi7 mize the collection of oil and gas receipts from lease obliga8 tions to the Treasury within the six-year period of limita9 tions, and consequently to maximize the State share of such

10 receipts, the Secretary shall not perform or require account11 ing, reporting, or audit activities if the Secretary and the

12 State concerned determines that the cost of conducting or

13 requiring the activity exceeds the expected amount to be col14 lected by the activity, based on the most current 12 months

15 of activity. To the maximum extent possible, the Secretary

16 and delegated States shall reduce costs to the United States

17 Treasury and the States by discontinuing requirements for

18 unnecessary or duplicative data and other information,

19 such as separate allowances and payor information, relat20 ing to obligations due. If the Secretary and the State con21 cerned determine that collection will result sooner, the Sec22 retary or the applicable delegated State may waive or forego

23 interest in whole or in part.

24 ‘‘(h) APPEALS AND FINAL AGENCY ACTION.—
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1 ‘‘(1) 30-MONTH PERIOD.—All orders issued by

2 the Secretary or a delegated State are subject to ap3 peal to the Secretary. No State shall impose any con4 ditions which would hinder a lessee’s immediate ap5 peal of an order to the Secretary or the Secretary’s

6 designee. The Secretary shall issue a final decision in

7 any administrative proceeding, including any admin8 istrative proceedings pending on the date of enact9 ment of this section, within 30 months from the date

10 such proceeding was commenced or 30 months from

11 the date of such enactment, whichever is later. The 30-

12 month period may be extended by any period of time

13 agreed upon in writing by the Secretary and the les14 see.

15 ‘‘(2) EFFECT OF FAILURE TO ISSUE DECISION.—

16 If no such decision has been issued by the Secretary

17 within the 30-month period referred to in paragraph

18 (1)—

19 ‘‘(A) the Secretary shall be deemed to have

20 issued and granted a decision in favor of the les21 see or lessees as to any nonmonetary obligation

22 and any monetary obligation the principal

23 amount of which is less than $2,500; and

24 ‘‘(B) the Secretary shall be deemed to have

25 issued a final decision in favor of the Secretary,
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1 which decision shall be deemed to affirm those is2 sues for which the agency rendered a decision

3 prior to the end of such period, as to any mone4 tary obligation the principal amount of which is

5 $2,500 or more, and the lessee shall have a right

6 to a de novo judicial review of such deemed final

7 decision.

8 ‘‘(i) COLLECTIONS OF DISPUTED AMOUNTS DUE.—To

9 expedite collections relating to disputed obligations due

10 within the six-year period beginning on the date the obliga11 tion became due, the parties shall hold not less than one

12 settlement consultation and the Secretary and the State

13 concerned may take such action as is appropriate to com14 promise and settle a disputed obligation, including waiving

15 or reducing interest and allowing offsetting of obligations

16 among leases.

17 ‘‘(j) ENFORCEMENT OF A CLAIM FOR JUDICIAL RE18 VIEW.—In the event a demand subject to this section is

19 properly and timely issued, the obligation which is the sub20 ject of the demand may be enforced beyond the six year lim21 itations period without being barred by this statute of limi22 tations. In the event a demand subject to this section is

23 properly and timely commenced, a judicial proceeding chal24 lenging the final agency action with respect to such demand

25 shall be deemed timely so long as such judicial proceeding
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1 is commenced within 180 days from receipt of notice by

2 the lessee of the final agency action.

3 ‘‘(k) IMPLEMENTATION OF FINAL DECISION.—In the

4 event a judicial proceeding or demand subject to this section

5 is timely commenced and thereafter the limitation period

6 in this section lapses during the pendency of such proceed7 ing, any party to such proceeding shall not be barred from

8 taking such action as is required or necessary to implement

9 a final unappealable judicial or administrative decision,

10 including any action required or necessary to implement

11 such decision by the recovery or recoupment of an

12 underpayment or overpayment by means of refund or cred13 it.

14 ‘‘(l) STAY OF PAYMENT OBLIGATION PENDING RE15 VIEW.—Any party ordered by the Secretary or a delegated

16 State to pay any obligation (other than an assessment)

17 shall be entitled to a stay of such payment without bond

18 or other surety instrument pending an administrative or

19 judicial proceeding if the party periodically demonstrates

20 to the satisfaction of the Secretary that such party is finan21 cially solvent or otherwise able to pay the obligation. In

22 the event the party is not able to so demonstrate, the Sec23 retary may require a bond or other surety instrument satis24 factory to cover the obligation. Any party ordered by the

25 Secretary or a delegated State to pay an assessment shall
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1 be entitled to a stay without bond or other surety instru2 ment.’’.

3 (b) CLERICAL AMENDMENT.—The table of contents in

4 section 1 of the Federal Oil and Gas Royalty Management

5 Act of 1982 (30 U.S.C. 1701) is amended by inserting after

6 the item relating to section 114 the following new item:

‘‘Sec. 115. Limitation periods and agency actions.’’.

7 SEC. 5364. ADJUSTMENT AND REFUNDS.

8 (a) IN GENERAL.—The Federal Oil and Gas Royalty

9 Management Act of 1982 (30 U.S.C. 1701 et seq.) is amend10 ed by inserting after section 111 the following:

11 ‘‘SEC. 111A. ADJUSTMENTS AND REFUNDS.

12 ‘‘(a) ADJUSTMENTS TO ROYALTIES PAID TO THE SEC13 RETARY OR A DELEGATED STATE.—

14 ‘‘(1) If, during the adjustment period, a lessee

15 determines that an adjustment or refund request is

16 necessary to correct an underpayment or overpayment

17 of an obligation, the lessee shall make such adjustment

18 or request a refund within a reasonable period of time

19 and only during the adjustment period. The filing of

20 a royalty report which reflects the underpayment or

21 overpayment of an obligation shall constitute prior

22 written notice to the Secretary or the applicable dele23 gated State of an adjustment.

24 ‘‘(2)(A) For any adjustment, the lessee shall cal25 culate and report the interest due attributable to such
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1 adjustment at the same time the lessee adjusts the

2 principal amount of the subject obligation, except as

3 provided by subparagraph (B).

4 ‘‘(B) In the case of a lessee who determines that

5 subparagraph (A) would impose a hardship, the Sec6 retary or such delegated State shall calculate the in7 terest due and notify the lessee within a reasonable

8 time of the amount of interest due, unless such lessee

9 elects to calculate and report interest in accordance

10 with subparagraph (A).

11 ‘‘(3) An adjustment or a request for a refund for

12 an obligation may be made after the adjustment pe13 riod only upon written notice to and approval by the

14 Secretary or the applicable delegated State, as appro15 priate, during an audit of the period which includes

16 the production month for which the adjustment is

17 being made. If an overpayment is identified during

18 an audit, then the Secretary or the applicable dele19 gated State, as appropriate, shall allow a credit or re20 fund in the amount of the overpayment.

21 ‘‘(4) For purposes of this section, the adjustment

22 period for any obligation shall be the five-year period

23 following the date on which an obligation became due.

24 The adjustment period shall be suspended, tolled, ex-
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1 tended, enlarged, or terminated by the same actions

2 as the limitation period in section 115.

3 ‘‘(b) REFUNDS.—

4 ‘‘(1) IN GENERAL.—A request for refund is suffi5 cient if it—

6 ‘‘(A) is made in writing to the Secretary

7 and, for purposes of section 115, is specifically

8 identified as a demand;

9 ‘‘(B) identifies the person entitled to such

10 refund;

11 ‘‘(C) provides the Secretary information

12 that reasonably enables the Secretary to identify

13 the overpayment for which such refund is sought;

14 and

15 ‘‘(D) provides the reasons why the payment

16 was an overpayment.

17 ‘‘(2) NOTICE.—The Secretary shall promptly no18 tify each State concerned of a request for refund.

19 ‘‘(3) PAYMENT BY SECRETARY OF THE TREAS20 URY.—The Secretary shall certify the amount of the

21 refund to be paid under paragraph (1) to the Sec22 retary of the Treasury who shall make such refund.

23 Such refund shall be paid from amounts received as

24 current receipts from sales, bonuses, royalties (includ25 ing interest charges collected under this section) and
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1 rentals of the public lands and the Outer Continental

2 Shelf under the provisions of the Mineral Leasing Act

3 and the Outer Continental Shelf Lands Act, which are

4 not payable to a State or the Reclamation Fund. The

5 portion of any such refund attributable to any

6 amounts previously disbursed to a State, the Rec7 lamation Fund, or any recipient prescribed by law

8 shall be deducted from the next disbursements to that

9 recipient made under the applicable law. Such

10 amounts deducted from subsequent disbursements

11 shall be credited to miscellaneous receipts in the

12 Treasury.

13 ‘‘(4) PAYMENT PERIOD.—A refund under this

14 subsection shall be paid or denied (with an expla15 nation of the reasons for the denial) within 120 days

16 of the date on which the request for refund is received

17 by the Secretary. Such refund shall be subject to later

18 audit by the Secretary or the applicable delegated

19 State and subject to the provisions of this Act.

20 ‘‘(5) PROHIBITION AGAINST REDUCTION OF RE21 FUNDS OR CREDITS.—In no event shall the Secretary

22 or any delegated State directly or indirectly claim or

23 offset any amount or amounts against, or reduce any

24 refund or credit (or interest accrued thereon) by the
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1 amount of any obligation the enforcement of which is

2 barred by section 115.’’.

3 (b) CLERICAL AMENDMENT.—The table of contents in

4 section 1 of the Federal Oil and Gas Royalty Management

5 Act of 1982 (30 U.S.C. 1701) is amended by inserting after

6 the item relating to section 111 the following new item:

‘‘Sec. 111A. Adjustments and refunds.’’.

7 SEC. 5365. ROYALTY TERMS AND CONDITIONS, INTEREST,

8 AND PENALTIES.

9 (a) LESSEE INTEREST.—Section 111 of the Federal

10 Oil and Gas Royalty Management Act of 1982 (30 U.S.C.

11 1721) is amended by adding after subsection (g) the follow12 ing:

13 ‘‘(h) Interest shall be allowed and paid or credited on

14 any overpayment, with such interest to accrue from the date

15 such overpayment was made, at the rate obtained by apply16 ing the provisions of subparagraphs (A) and (B) of section

17 6621(a)(1) of the Internal Revenue Code of 1986, but deter18 mined without regard to the matter following subparagraph

19 (B) of section 6621(a)(1). Interest which has accrued on

20 any overpayment may be applied to reduce an

21 underpayment. This subsection applies to overpayments

22 made later than six months after the date of enactment of

23 this subsection or September 1, 1996, whichever is later.

24 Such interest shall be paid from amounts received as cur25 rent receipts from sales, bonuses, royalties (including inter-
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1 est charges collected under this section) and rentals of the

2 public lands and the Outer Continental Shelf under the pro3 visions of the Mineral Leasing Act, and the Outer Continen4 tal Shelf Lands Act, which are not payable to a State or

5 the Reclamation Fund. The portion of any such interest

6 payment attributable to any amounts previously disbursed

7 to a State, the Reclamation Fund, or any other recipient

8 designated by law shall be deducted from the next disburse9 ments to that recipient made under the applicable law.

10 Such amounts deducted from subsequent disbursements

11 shall be credited to miscellaneous receipts in the Treasury.’’.

12 (b) LIMITATION ON INTEREST.—Section 111 of the

13 Federal Oil and Gas Royalty Management Act of 1982, as

14 amended by subsection (a), is further amended by adding

15 at the end the following:

16 ‘‘(i) Upon a determination by the Secretary that an

17 excessive overpayment (based upon all obligations of a lessee

18 for a given reporting month) was made for the sole purpose

19 of receiving interest, interest shall not be paid on the exces20 sive amount of such overpayment. For purposes of this Act,

21 an ‘excessive overpayment’ shall be the amount that any

22 overpayment a lessee pays for a given reporting month (ex23 cluding payments for demands for obligations determined

24 to be due as a result of judicial or administrative proceed25 ings or agreed to be paid pursuant to settlement agree-
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1 ments) for the aggregate of all of its Federal leases exceeds

2 10 percent of the total royalties paid that month for those

3 leases.’’.

4 (c) ESTIMATED PAYMENT.—Section 111 of the Federal

5 Oil and Gas Royalty Management Act of 1982 (30 U.S.C.

6 1721), as amended by subsections (a) and (b), is further

7 amended by adding at the end the following:

8 ‘‘(j) A lessee may make a payment for the approximate

9 amount of royalties (hereinafter in this subsection ‘esti10 mated payment’) that would otherwise be due for such lease

11 to avoid underpayment or nonpayment interest charges.

12 When an estimated payment is made, actual royalties are

13 due and payable at the end of the month following the

14 month in which the estimated payment is made. If the lessee

15 makes a payment for such actual royalties, the lessee may

16 apply the estimated payment to future royalties. Any esti17 mated payment may be adjusted, recouped, or reinstated

18 at any time by the lessee.’’.

19 (d) VOLUME ALLOCATION OF OIL AND GAS PRODUC20 TION.—Section 111 of the Federal Oil and Gas Royalty

21 Management Act of 1982 (30 U.S.C. 1721), as amended by

22 subsections (a) through (c), is amended by adding at the

23 end the following:

24 ‘‘(k)(1) Except as otherwise provided by this sub25 section—
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1 ‘‘(A) a lessee of a lease in a unit or

2 communitization agreement which contains only Fed3 eral leases with the same royalty rate and funds dis4 tribution shall report and pay royalties on oil and

5 gas production for each production month based on

6 the actual volume of production sold by or on behalf

7 of that lessee;

8 ‘‘(B) a lessee of a lease in any other unit or

9 communitization agreement shall report and pay roy10 alties on oil and gas production for each production

11 month based on the volume of oil and gas produced

12 from such agreement and allocated to the lease in ac13 cordance with the terms of the agreement; and

14 ‘‘(C) a lessee of a lease that is not contained in

15 a unit or communitization agreement shall report

16 and pay royalties on oil and gas production for each

17 production month based on the actual volume of pro18 duction sold by or on behalf of that lessee.

19 ‘‘(2) This subsection applies only to requirements for

20 reporting and paying royalties. Nothing in this subsection

21 is intended to alter a lessee’s liability for royalties on oil

22 or gas production based on the share of production allocated

23 to the lease in accordance with the terms of the lease, a

24 unit or communitization agreement, or any other agree25 ment.
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1 ‘‘(3) For any unit or communitization agreement, if

2 all lessees contractually agree to an alternative method of

3 royalty reporting and payment, the lessees may submit such

4 alternative method to the Secretary or the delegated State

5 for approval and make payments in accordance with such

6 approved alternative method so long as such alternative

7 method does not reduce the amount of the royalty obliga8 tion.

9 ‘‘(4) The Secretary or the delegated State shall grant

10 an exception from the reporting and payment requirements

11 for marginal properties by allowing for any calendar year

12 or portion thereof royalties to be paid each month based

13 on the volume of production sold. Interest shall not accrue

14 on the difference for the entire calendar year or portion

15 thereof between the amount of oil and gas actually sold and

16 the share of production allocated to the lease until the begin17 ning of the month following calendar year or portion there18 of. Any additional royalties due or overpaid royalties and

19 associated interest shall be paid, refunded, or credited with20 in six months after the end of each calendar year in which

21 royalties are paid based on volumes of production sold. For

22 the purpose of this subsection, the term ’marginal property’

23 means a lease that produces on average the combined equiv24 alent of less than 15 barrels of oil per day or 90 thousand

25 cubic feet of gas per day, or a combination thereof, deter-
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1 mined by dividing the average daily production of crude

2 oil and natural gas from producing wells on such lease by

3 the number of such wells, unless the Secretary, together with

4 the State concerned, determines that a different production

5 is more appropriate.

6 ‘‘(5) Not later than two years after the date of the en7 actment of this subsection, the Secretary shall issue any ap8 propriate demand for all outstanding royalty payment dis9 putes regarding who is required to report and pay royalties

10 on production from units and communitization agreements

11 outstanding on the date of the enactment of this subsection,

12 and collect royalty amounts owed on such production.’’.

13 ‘‘(e) PRODUCTION ALLOCATION.—Section 111 of the

14 Federal Oil and Gas Royalty Management Act of 1982 (30

15 U.S.C. 1721), as amended by subsections (a) through (d),

16 is amended by adding at the end the following:

17 ‘‘(l) The Secretary or the delegated State shall issue

18 all determinations of allocations of production for units and

19 communitization agreements within 120 days of a request

20 for determination. If the Secretary or the delegated State

21 fails to issue a determination within such 120-day period,

22 the Secretary shall waive interest due on obligations subject

23 to the determination until the end of the month following

24 the month in which the determination is made.’’.
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1 (f) NEW ASSESSMENT TO ENCOURAGE PROPER ROY2 ALTY PAYMENTS.—

3 (1) IN GENERAL.—The Federal Oil and Gas

4 Royalty Management Act of 1982 (30 U.S.C. 1721),

5 as amended by this section, is further amended by

6 adding at the end the following:

7 ‘‘SEC. 116. ASSESSMENTS.

8 ‘‘Beginning eighteen months after the date of enact9 ment of this section, to encourage proper royalty payment

10 the Secretary or the delegated State shall impose assess11 ments on lessees who chronically submit erroneous reports

12 under this Act. Assessments under this Act may only be is13 sued as provided for in this section.’’.

14 (2) CLERICAL AMENDMENT.—The table of con15 tents in section 1 of such Act (30 U.S.C. 1701) is

16 amended by adding after the item relating to section

17 115 the following new item:

‘‘Sec. 116. Assessments.’’.

18 (g) LIABILITY FOR ROYALTY PAYMENTS.—Section

19 102(a) of the Federal Oil and Gas Royalty Management

20 Act of 1982 (30 U.S.C. 1712(a)) is amended to read as fol21 lows:

22 ‘‘(a) In order to increase receipts and achieve effective

23 collections of royalty and other payments, a lessee who is

24 required to make any royalty or other payment under a

25 lease or under the mineral leasing laws, shall make such
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1 payments in the time and manner as may be specified by

2 the Secretary or the applicable delegated State. A lessee may

3 designate a person to make all or part of the payments due

4 under a lease on the lessee’s behalf and shall notify the Sec5 retary or the applicable delegated State in writing of such

6 designation, in which event said designated person may,

7 in its own name, pay, offset or credit monies, make adjust8 ments, request and receive refunds and submit reports with

9 respect to payments required by the lessee. The person own10 ing operating rights in a lease shall be primarily liable for

11 its pro rata share of payment obligations under the lease.

12 If the person owning the legal record title in a lease is other

13 than the operating rights owner, the person owning the legal

14 record title shall be secondarily liable for its pro rata share

15 of such payment obligations under the lease.’’.

16 (h) CLERICAL AMENDMENT.—The heading of section

17 111 of the Federal Oil and Gas Royalty Management Act

18 of 1982 (30 U.S.C. 1721) is amended to read as follows:

19 ‘‘ROYALTY TERMS AND CONDITIONS, INTEREST, AND

20 PENALTIES’’.

21 SEC. 5366. ALTERNATIVES FOR MARGINAL PROPERTIES.

22 (a) IN GENERAL.—The Federal Oil and Gas Royalty

23 Management Act of 1982 (30 U.S.C. 1701 et seq.), as

24 amended by section 5365 of this chapter, is further amended

25 by adding at the end the following:
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1 ‘‘SEC. 117. ALTERNATIVES FOR MARGINAL PROPERTIES.

2 ‘‘(a) DETERMINATION OF BEST INTERESTS OF STATE

3 CONCERNED AND THE UNITED STATES.—The Secretary

4 and the State concerned, acting in the best interests of the

5 United States and the State concerned to promote produc6 tion, reduce administrative costs, and increase net receipts

7 to the United States and the States, shall jointly determine,

8 on a case by case basis, the amount of what marginal pro9 duction from a lease or leases or well or wells, or parts

10 thereof, shall be subject to a prepayment under subsection

11 (b) or regulatory relief under subsection (c). If the State

12 concerned does not consent, such prepayments or regulatory

13 relief shall not be made available under this section for such

14 marginal production, provided that if royalty payments

15 from a lease or leases, or well or wells is not shared with

16 any State, such determination shall be made solely by the

17 Secretary.

18 ‘‘(b) PREPAYMENT OF ROYALTY.—

19 ‘‘(1) I GENERAL.—Notwithstanding the provi20 sions of any lease to the contrary, for any lease or

21 leases or well or wells identified by the Secretary and

22 the State concerned pursuant to subsection (a), the

23 Secretary is authorized to accept a prepayment for

24 royalties in lieu of monthly royalty payments under

25 the lease for the remainder of the lease term if the af26 fected lessee so agrees. Any prepayment agreed to by
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1 the Secretary, State concerned and lessee which is less

2 than an average $500 per month in total royalties

3 shall be effectuated under this section not earlier than

4 two years after the date of enactment of this section

5 and, any prepayment which is greater than an aver6 age $500 per month in total royalties shall be effec7 tuated under this section not earlier than three years

8 after the date of enactment of this section. The Sec9 retary and the State concerned may condition their

10 acceptance of the prepayment authorized under this

11 section on the lessee’s agreeing to such terms and con12 ditions as the Secretary and the State concerned deem

13 appropriate and consistent with the purposes of this

14 Act. Such terms may—

15 ‘‘(A) provide for prepayment that does not

16 result in a loss of revenue to the United States

17 in present value terms;

18 ‘‘(B) include provisions for receiving addi19 tional prepayments or royalties for developments

20 in the lease or leases or well or wells that deviate

21 significantly from the assumptions and facts on

22 which the valuation is determined; and

23 ‘‘(C) require the lessee to provide such peri24 odic production reports as may be necessary to

25 allow the Secretary and the State concerned to
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1 monitor production for the purposes of subpara2 graph (B).

3 ‘‘(2) STATE SHARE.—A prepayment under this

4 section shall be shared by the Secretary with any

5 State or other recipient to the same extent as any

6 royalty payment for such lease.

7 ‘‘(3) SATISFACTION OF OBLIGATION.—Except as

8 may be provided in the terms and conditions estab9 lished by the Secretary under subsection (b), a lessee

10 who makes a prepayment under this section shall

11 have satisfied in full its obligation to pay royalty on

12 the production stream sold from the lease or leases or

13 well or wells.

14 ‘‘(c) ALTERNATIVE ACCOUNTING AND AUDITING RE15 QUIREMENTS.—

16 ‘‘(1) IN GENERAL.—Within one year after the

17 date of the enactment of this section, the Secretary or

18 the delegated State shall provide accounting, report19 ing, and auditing relief that will encourage lessees to

20 continue to produce and develop properties subject to

21 subsection (a); provided, that such relief will only be

22 available to lessees in a State that concurs, which

23 concurrence is not required if royalty from the lease

24 or leases or well or wells is not shared with any State.

25 Prior to granting such relief, the Secretary and, if
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1 appropriate, the State concerned shall agree that the

2 type of marginal wells and relief provided under this

3 paragraph is in the best interest of the United States

4 and, if appropriate, the State concerned.’’.

5 (b) CLERICAL AMENDMENT.—The table of contents in

6 section 1 of such Act (30 U.S.C. 1701) is amended by add7 ing after the item relating to section 115 the following new

8 item:

‘‘Sec. 117. Alternatives for marginal properties.’’.

9 SEC. 5367. REPEALS.

10 (a) FOGRMA.—As applicable to Federal lands, sec11 tions 202 and 307 of the Federal Oil and Gas Royalty Man12 agement Act of 1982 (30 U.S.C. 1732 and 1755), are re13 pealed. Such repeal shall not affect cooperative agreements

14 involving Indian tribes or Indian lands. Section 1 of such

15 Act (relating to the table of contents) is amended by striking

16 out the items relating to sections 202 and 307.

17 (b) OCSLA.—Effective on the date of the enactment

18 of this Act, section 10 of the Outer Continental Shelf Lands

19 Act (43 U.S.C. 1339) is repealed.

20 SEC. 5368. INDIAN LANDS.

21 The amendments and repeals made by this chapter

22 shall not apply with respect to Indian lands, and the provi23 sions of the Federal Oil and Gas Royalty Management Act

24 of 1982 as in effect on the day before the date of enactment
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1 of this Act shall continue to apply after such date with re2 spect to Indian lands.

3 SEC. 5369. PRIVATE LANDS.

4 This chapter shall not apply to any privately owned

5 minerals.

6 SEC. 5369A. EFFECTIVE DATE.

7 Except as provided by section 115(f), section 111(h),

8 section 111(k)(5), and section 117 of the Federal Oil and

9 Gas Royalty Management Act of 1982 (as added by this

10 chapter), this chapter, and the amendments made by this

11 chapter, shall apply with respect to the production of oil

12 and gas after the first day of the month following the date

13 of the enactment of this Act.

14 CHAPTER 5—MINING

15 SEC. 5371. SHORT TITLE.

16 This chapter may be cited as ‘‘The Mining Law Reve17 nue Act of 1995’’.

18 SEC. 5372. DEFINITIONS.

19 When used in this chapter—

20 (1) ‘‘Assessment year’’ means the annual period

21 commencing at 12 o’clock noon on the 1st day of Sep22 tember and ending at 12 o’clock noon on the 1st day

23 of September of the following year.

24 (2) ‘‘Federal lands’’ means lands and interests in

25 lands owned by the United States that are open to
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1 mineral location, or that were open to mineral loca2 tion when a mining claim or site was located and

3 which have not been patented under the general min4 ing laws.

5 (3) ‘‘General mining laws’’ means those Acts

6 which generally comprise chapters 2, 11, 12, 12A, 15,

7 and 16, and sections 161 and 162, of Title 30 of the

8 United States Code, all Acts heretofore enacted which

9 are amendatory of or supplementary to any of the

10 foregoing Acts, and the judicial and administrative

11 decisions interpreting such Acts.

12 (4) ‘‘Locatable minerals’’ means those minerals

13 owned by the United States and subject to location

14 and disposition under the general mining laws on or

15 after the effective date of this chapter, but not includ16 ing any mineral held in trust by the United States

17 for any Indian or Indian tribe, as defined in section

18 2 of the Indian Mineral Development Act of 1982 (25

19 U.S.C. 2101), or any mineral owned by any Indian

20 or Indian tribe, as defined in that section, that is

21 subject to a restriction against alienation imposed by

22 the United States, or any mineral owned by any in23 corporated Native group, village corporation, or re24 gional corporation and acquired by the group or cor-
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1 poration under the provisions of the Alaska Native

2 Claims Settlement Act (43 U.S.C. 1601 et seq.).

3 (5) ‘‘Mineral activities’’ means any activity re4 lated to, or incidental to, exploration for or develop5 ment, mining, production, beneficiation, or processing

6 of any locatable mineral or mineral that would be

7 locatable if it were subject to disposition under the

8 general mining laws, or reclamation of the impacts of

9 such activities.

10 (6) ‘‘Mining claim or site’’, except where pro11 vided otherwise, means a lode mining claim, placer

12 mining claim, mill site or tunnel site.

13 (7) ‘‘Operator’’ means any person conducting

14 mineral activities subject to this chapter.

15 (8) ‘‘Person’’ means an individual, Indian tribe,

16 partnership, association, society, joint venture, joint

17 stock company, firm, company, limited liability com18 pany, corporation, cooperative or other organization,

19 and any instrumentality of State or local govern20 ment, including any publicly owned utility or pub21 licly owned corporation of State or local government.

22 (9) ‘‘Secretary’’ means the Secretary of the Inte23 rior.
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1 SEC. 5373. RENTAL PAYMENT REQUIREMENTS.

2 (a) RENTAL PAYMENTS.—(1) After the date of enact3 ment of this Act, the owner of each unpatented mining

4 claim or site located pursuant to the general mining laws,

5 whether located before or after the enactment of this Act,

6 shall pay to the Secretary prior to September 1 of each year,

7 until a patent has been issued therefor, an annual rental

8 payment for each unpatented mining claim or site.

9 (2) LOCATION PAYMENT.—The owner of each

10 unpatented mining claim or site located after the date of

11 enactment of this Act pursuant to the general mining laws

12 shall pay to the Secretary, at the time the copy of the notice

13 or certificate of location is filed with the Bureau of Land

14 Management pursuant to section 314(b) of the Federal

15 Land Policy and Management Act of 1976 (43 U.S.C.

16 1744(b)), a $25.00 location payment, in lieu of the annual

17 rental payment of $100 per mining claim or site for the

18 assessment year which includes the date of location of such

19 mining claim or site.

20 (3) EXEMPTION AND WAIVER.—(A) The owner of any

21 mining claim or site who demonstrates to the Secretary on

22 or before the first day of any assessment year that access

23 to such mining claim or site was denied during the prior

24 assessment year by the action or inaction of any State or

25 Federal governmental officer, agency, or court, or by any

26 Indian tribal authority, shall be exempt from the annual
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1 rental payment requirements of paragraph (1) for the as2 sessment year following the filing of the certification.

3 (B) The rental payment provided for in subsection

4 5373(a) shall be waived for the owner of a mining claim

5 or site who certifies in writing to the Secretary, on or before

6 the date the payment is due, that, as of the date such pay7 ment is due, such owner and all related persons own not

8 more than ten unpatented mining claims or sites. Any

9 owner of a mining claim or site that is not required to

10 pay a rental payment under this subsection shall continue

11 to be subject to the assessment work requirements of the gen12 eral mining laws or of any other State or Federal law, sub13 ject to any suspension or deferment of annual assessment

14 work provided by law, for the assessment year following the

15 filing of the certification required by this subsection.

16 (4) AMOUNT OF ANNUAL RENTAL PAYMENT.—For each

17 assessment year the annual rental payment payable for a

18 claim or site referred to in paragraph (1) shall be in the

19 amount specified in Table 1.

20 Table 1

Assessment Year: Amount of Payment Per Site or

Claim:

1996–1998 ......................................... $100 per year

1999 and thereafter .......................... $200 per year

21 (5) EFFECT OF FORFEITURE.—No owner or co-owner

22 of a mining claim or site which has been forfeited because

23 the rental payment has not been paid and no person who
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1 is a related person of any such owner or co-owner may relo2 cate a new claim on any part of lands located within the

3 forfeited claim for a period of 12 months after the date of

4 forfeiture.

5 (b) ANNUAL LABOR.—(1) Beginning in 1999, amounts

6 expended on activities that qualify as annual labor under

7 the general mining laws may be credited on a dollar for

8 dollar basis towards up to 50 percent of the annual rental

9 payment payable under this section for the following assess10 ment year. During the assessment year in 1999, annual

11 labor performed in 1998 may be credited toward the annual

12 rental payment due in 1999.

13 (2) In order to receive credit under this subsection for

14 annual labor work, the description and value of the work

15 must be included in the statement required in subsection

16 (e) and the statement must be timely filed.

17 (3) Annual labor performed on an individual mining

18 claim or site within a group of contiguous claims may be

19 credited towards the aggregate amount of rental payments

20 due on all of the contiguous claims within that group.

21 (c) WORK QUALIFYING AS ANNUAL LABOR.—(1) Only

22 work which directly benefits or develops a mining claim or

23 facilitates the extraction of ore qualifies as annual labor

24 or other activities as determined by the Secretary. Accept-
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1 able labor and improvements include, but are not limited

2 to, any of the following:

3 (A) Drilling or excavating, including ore extrac4 tion.

5 (B) Mining costs directly associated with the

6 production of ore.

7 (C) Prospecting work which benefits the claim or

8 a contiguous claim.

9 (D) Development work toward an actual mine,

10 such as shafts, tunnels, crosscuts and drifts, settling

11 ponds and dams.

12 (E) Activities covered under section 1 of the Act

13 of September 2, 1958 (30 U.S.C. 281), as amended.

14 (F) Reclamation conducted pursuant to State or

15 Federal surface management laws or regulations.

16 (2) The following activities do not qualify as annual

17 labor:

18 (A) Work involved in maintaining the location

19 such as brushing and marking boundaries or replac20 ing corner posts and location notices.

21 (B) Transportation of workers to or from the lo22 cation.

23 (C) Prospecting or exploration work not con24 ducted within the location or a contiguous location.
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1 (d) AMENDMENTS OF PUBLIC LAW 85–876.—The Act

2 of September 2, 1958 (Public Law 85-876; 30 U.S.C. 281),

3 is amended as follows:

4 (1) Section 1 is amended by inserting ‘‘mineral

5 activities, environmental baseline monitoring, and’’

6 after ‘‘without being limited to’’ and before ‘‘geologi7 cal, geochemical and geophysical surveys’’ and by

8 striking ‘‘Such’’ at the beginning of the last sentence

9 and inserting ‘‘Airborne’’.

10 (2) Section 2(d) is amended by inserting ‘‘envi11 ronmental baseline monitoring or’’ after ‘‘experience

12 to conduct’’ and before ‘‘geological, geochemical or

13 geophysical surveys’’.

14 (3) Section 2 is amended by adding the following

15 new subsection at the end thereof:

16 ‘‘(e) The term ‘environmental baseline monitoring’

17 means activities for collecting, reviewing and analyzing in18 formation concerning soil, vegetation, wildlife, mineral, air,

19 water, cultural, historical, archaeological or other resources

20 related to planning for or complying with Federal and

21 State environmental or permitting requirements applicable

22 to potential or proposed mineral activities on the

23 claim(s).’’.

24 (e) RENTAL PAYMENT STATEMENT.—Each payment

25 under subsection (a) of this section shall be accompanied
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1 by a statement which reasonably identifies the mining

2 claim or site for which the rental payment is being paid.

3 The statement required under this subsection shall be in lieu

4 of any annual filing requirements for mining claims or

5 sites, under any other Federal law, but shall not supersede

6 any such filing requirement under applicable State law.

7 (f) ANNUAL LABOR STATEMENT.—When the value of

8 annual labor is credited towards part or all of the rental

9 payment, subject to the 50-percent limit set forth in sub10 section (b)(1), the following shall apply:

11 (1) The rental payment statement required in

12 subsection (e) must also state the dates of performance

13 of the labor, describe the character and total value of

14 the improvements made or the labor performed, and

15 the amount of labor used as a credit toward the rental

16 payment for the current year.

17 (2) The annual labor statements must include a

18 summary of the quantity, value and location of work

19 done. This includes a listing of the physical work

20 done, to include drilling, trenching, sampling and un21 derground excavation, and the location of any envi22 ronmental, geologic, geochemical, and geophysical sur23 veys. The claim holder shall maintain sufficient

24 records which document the value of the work

25 claimed.
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1 (3) All supporting material filed pursuant to

2 paragraph (2) shall remain confidential in accord3 ance with section 552 of title 5 of the United States

4 Code as long as the location is maintained and for

5 a period of one year after the location is abandoned,

6 after which all data filed shall be considered public

7 information.

8 (4) To the extent that labor credited against the

9 rental payment payable under this section is deter10 mined by a final action not to qualify as labor under

11 the general mining laws, the claimant shall pay the

12 insufficiency by making payment to the Secretary of

13 an amount equal to the amount of the rental payment

14 against which the insufficient labor was credited. If

15 such payment is made within 30 days of the claim16 ant’s receipt of a notice of a final decision making

17 such determination, the claim concerned shall not be

18 forfeited or null or void, and the rental payment ap19 plicable to such claim shall be deemed timely paid.

20 (g) CREDIT AGAINST ROYALTY.—The annual claim

21 rental payment payable in advance of the assessment year

22 for any unpatented mining claim or site, or the aggregate

23 rental payments from a group of contiguous claims or sites,

24 shall be credited against the amount of royalty obligation
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1 accruing for that year for such claims or sites under section

2 5375.

3 (h) FAILURE TO COMPLY.—The failure of the owner

4 to pay any claim rental payment for a mining claim or

5 site by the date such payment is due under this section shall

6 constitute forfeiture of the mining claim or site and such

7 mining claim or site shall be null and void, effective as of

8 the day after the date such payment is due: Provided, That

9 if such rental payment is paid on or before the 30th day

10 after such payment was due under this section, such mining

11 claim or site shall not be forfeited or null or void.

12 (i) AMENDMENT OF FLPMA FILING REQUIRE13 MENTS.—Section 314(a) of the Federal Land Policy and

14 Management Act of 1976 (43 U.S.C. 1744(a)) is hereby re15 pealed.

16 (j) RELATED PERSONS.—As used in this section, the

17 term ‘‘related persons’’ includes—

18 (1) the spouse and dependent children (as de19 fined in section 152 of the Internal Revenue Code of

20 1986) of the owner of the mining claim or site; and

21 (2) a person controlled by, controlling, or under

22 common control with the owner of the mining claim

23 or site.
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1 (k) REPEAL.—Sections 10101 through 10106 of the

2 Omnibus Budget Reconciliation Act of 1993 (107 Stat. 406;

3 30 U.S.C. 28g) are repealed.

4 SEC. 5374. PATENTS.

5 (a) IN GENERAL.—Except as provided in subsection

6 (c), any patent issued by the United States under the gen7 eral mining laws after the date of enactment of this chapter

8 shall be issued only—

9 (1) upon payment by the owner of the claim of

10 the fair market value for the interest in the land

11 owned by the United States exclusive of and without

12 regard to the mineral deposits in the land or the use

13 of the land for mineral activities; and

14 (2) subject to reservation by the United States of

15 the royalty provided in section 5375.

16 (b) RIGHT OF RE-ENTRY.—

17 (1) Except as provided in subsection 5374(c),

18 and notwithstanding any other provision of law, the

19 United States shall retain a right of re-entry in lands

20 patented under section 5374.

21 (2) Such right of re-entry of the United States

22 shall ripen if—

23 (A) the land is used by the patentee, or any

24 subsequent owners, for any purpose other than

25 conducting mineral activities in good faith;
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1 (B) such use is not discontinued within a

2 time period specified by the Secretary (but not

3 earlier than 90 days after the Secretary provides

4 the owner of the land with written notice pursu5 ant to paragraph (2) to discontinue such use);

6 and

7 (C) the Secretary elects to assert the right of

8 re-entry in accordance with paragraph (3).

9 (3) The ripened right of re-entry retained by the

10 United States pursuant to subparagraph (2) shall

11 vest and all right, title and interest in such patented

12 estate shall revert to the United States only if—

13 (A) the Secretary files a declaration of re14 entry within 6 months of the requisite occur15 rences under paragraph (2) with the Office of the

16 Bureau of Land Management in the state where

17 the land subject to such right of re-entry is situ18 ated; and

19 (B) the Secretary records such declaration

20 in the office of the county recorder of the county

21 in which the lands subject to a reversion are sit22 uated within 30 days of filing under subpara23 graph (A).

24 (4) One year after the patent holder provides

25 written notice to the Secretary that all mineral ac-
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1 tivities are completed and applicable reclamation is

2 completed, the right of re-entry held by the United

3 States and created under the subsection (b) shall ex4 pire unless within such period the Secretary notifies

5 the patent holder in writing that he is exercising the

6 right of re-entry held by the United States. At such

7 time, ownership of the patented lands shall automati8 cally revert to the United States, notwithstanding

9 subparagraphs (A), (B) and (C) of subsection (b)(2).

10 The Secretary may decline to exercise the right of re11 entry and such rights shall continue if—

12 (a) solid waste or hazardous substances re13 leased on or from the patented estate may pose

14 a threat to public safety or the environment; or

15 (b) acceptance of title would expose the

16 United States to liability for past mineral ac17 tivities on the patented estate.

18 (c) PROTECTION OF VALID EXISTING RIGHTS.—Not19 withstanding any other provision of law, the requirements

20 of this chapter (except with respect to rental payments in

21 accordance with section 5373)—

22 (1) shall not apply to the mining claims and

23 sites contained within those mineral patent applica24 tions pending at the Department as of September 30,

25 1995, which shall be processed under the general min-
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1 ing laws in effect immediately prior to the date of en2 actment of this chapter; and

3 (2) likewise shall not apply to the mining claims

4 or sites for which there is on the date of enactment

5 of this chapter a vested possessory property right

6 against the Government under the general mining

7 laws in effect immediately prior to the date of enact8 ment of this chapter.

9 SEC. 5375. ROYALTY.

10 (a) IN GENERAL.—The production and sale of

11 locatable minerals (including associated minerals) from

12 any unpatented mining claim (other than those from Fed13 eral lands to which subsection 5374(c) applies) or any min14 ing claim patented under subsection 5374(a) shall be subject

15 to a royalty of 5.0 percent on the net proceeds from such

16 production mined and sold from such claim.

17 (b) ROYALTY EXCLUSION.—

18 (1) The royalty payable under this section shall

19 be waived for any person with annual net proceeds

20 from mineral production subject to subsection (a) of

21 less than $50,000.

22 (2) The obligation to pay royalties hereunder

23 shall accrue upon the sale of locatable minerals or

24 mineral products produced from a mining claim sub-
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1 ject to such royalty, and not upon the stockpiling of

2 the same for future processing.

3 (3) Where mining operations subject to this sec4 tion are conducted in two or more places by the same

5 person, the operations shall be considered a single op6 eration the aggregate net proceeds from which shall be

7 subject to the $50,000 limitation set forth in this sub8 section.

9 (4) No royalty shall be payable under this sec10 tion with respect to minerals processed at a facility

11 by the same person or entity which extracted the min12 erals if an urban development action grant has been

13 made under section 119 of the Housing and Commu14 nity Development Act of 1974 with respect to any

15 portion of such facility.

16 (c) DEFINITIONS.—For the purposes of this chapter:

17 (1) The term ‘‘net proceeds’’ shall mean gross

18 yield, less the sum of the following deductions for costs

19 incurred prior to sale or value determination, and

20 none other:

21 (A) The actual cost of extracting the

22 locatable mineral.

23 (B) The actual cost of transporting the

24 locatable mineral from the claim to the place or
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1 places of reduction, beneficiation, refining, and

2 sale.

3 (C) The actual cost of reduction,

4 beneficiation, refining, and sale of the locatable

5 mineral.

6 (D) The actual cost of marketing and deliv7 ering the locatable mineral and the conversion of

8 the locatable mineral into money.

9 (E) The actual cost of maintenance and re10 pairs of—

11 (i) all machinery, equipment, appara12 tus, and facilities used in the mine;

13 (ii) all crushing, milling, leaching, re14 fining, smelting, and reduction works,

15 plants, and facilities; and

16 (iii) all facilities and equipment for

17 transportation.

18 (F) The actual cost for support personnel

19 and support services at the mine site, including

20 without limitation, accounting, assaying, draft21 ing and mapping, computer services, surveying,

22 housing, camp, and office expenses, safety, and

23 security.
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1 (G) The actual cost of engineering, sam2 pling, and assaying pertaining to development

3 and production.

4 (H) The actual cost of permitting, reclama5 tion, environmental compliance and monitoring.

6 (I) The actual cost of fire and other insur7 ance on the machinery, equipment, apparatus,

8 works, plants, and facilities mentioned in sub9 paragraph (E).

10 (J) Depreciation of the original capitalized

11 cost of the machinery, equipment, apparatus,

12 works, plants, and facilities listed in subpara13 graph (E). The annual depreciation charge shall

14 consist of amortization of the original cost in the

15 manner consistent with the Internal Revenue

16 Code of 1986, as amended from time to time. The

17 probable life of the property represented by the

18 original cost must be considered in computing

19 the depreciation charge.

20 (K) All money expended for premiums for

21 industrial insurance, and the owner paid cost of

22 hospital and medical attention and accident ben23 efits and group insurance for all employees en24 gaged in the production or processing of

25 locatable minerals.
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1 (L) All money paid as contributions or

2 payments under State unemployment compensa3 tion law, all money paid as contributions under

4 the Federal Social Security Act, and all money

5 paid to State government in real property taxes

6 and severance or other taxes measured or levied

7 on production, or Federal excise tax payments

8 and payments as fees or charges for use of the

9 Federal lands from which the locatable minerals

10 are produced.

11 (M) The actual cost of the developmental

12 work in or about the mine or upon a group of

13 mines when operated as a unit.

14 (2) The term ‘‘gross yield’’ shall having the fol15 lowing meaning:

16 (A) In the case of sales of gold and silver

17 ore, concentrates or bullion, or the sales of other

18 locatable minerals in the form of ore or con19 centrates, the term ‘‘gross yield’’ means the ac20 tual proceeds of sale of such ore, concentrates or

21 bullion.

22 (B) In the case of sales of beneficiated prod23 ucts from locatable minerals other than those

24 subject to subparagraph (A) (including cathode,

25 anode or copper rod or wire, or other products
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1 fabricated from the locatable minerals), the term

2 ‘‘gross yield’’ means the gross income from min3 ing derived from the first commercially market4 able product determined in the same manner as

5 under section 613 of the Internal Revenue Code

6 of 1986.

7 (C) If ore, concentrates, beneficiated or fab8 ricated products, or locatable minerals are used

9 or consumed and are not sold in an arms length

10 transaction, the term ‘‘gross yield’’ means the

11 reasonable fair market value of the ore, con12 centrates, beneficiated or fabricated products at

13 the mine or wellhead determined from the first

14 applicable of the following:

15 (i) Published or other competitive sell16 ing prices of locatable minerals of like kind

17 and grade.

18 (ii) Any proceeds of sale.

19 (iii) Value received in exchange for

20 any thing or service.

21 (iv) The value of any locatable min22 erals in kind or used or consumed in a

23 manufacturing process or in providing a

24 service.
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1 Without limiting the foregoing, the profits or

2 losses incurred in connection with forward sales,

3 futures or commodity options trading, metal

4 loans, or any other price hedging or speculative

5 activity or arrangement shall not be included in

6 gross yield.

7 (d) LIMITATIONS AND ALLOCATIONS OF NET PRO8 CEEDS, GROSS YIELD, AND ALLOWABLE DEDUCTIONS.—

9 (1) The deductions listed in subsection (c)(1) are

10 intended to allow a reasonable allowance for overhead.

11 Such deductions shall not include any expenditures

12 for salaries, or any portion of salaries, of any person

13 not actually engaged in—

14 (A) the working of the mine;

15 (B) the operating of the leach pads, ponds,

16 plants, mills, smelters, or reduction works;

17 (C) the operating of the facilities or equip18 ment for transportation; or

19 (D) superintending the management of any

20 of those operations described in subparagraphs

21 (A) through (C).

22 (2) Ores or solutions of locatable minerals subject

23 to the royalty requirements of this section may be ex24 tracted from mines comprised of mining claims and

25 lands other than mining claims and ore or solutions
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1 of locatable minerals subject to the royalty require2 ments of this section may be commingled with ores or

3 solutions from lands other than mining claims. In

4 any such case, for purposes of determining the

5 amount of royalties payable under this section—

6 (A) the operator shall first sample, weigh or

7 measure, and assay the same in accordance with

8 accepted industry standards; and

9 (B) gross yield, allowable costs and net pro10 ceeds for royalty purposes shall be allocated in

11 proportion to mineral products recovered from

12 the mining claims in accordance with accepted

13 industry standards.

14 (e) LIABILITY FOR ROYALTY PAYMENTS.—The owner

15 or co-owners of a mining claim subject to a royalty under

16 this section shall be liable for such royalty to the extent of

17 the interest in such claim owned. As used in this subsection,

18 the terms ‘‘owner’’ and ‘‘co-owner’’ mean the person or per19 sons owning the right to mine locatable minerals from such

20 claim and receiving the net proceeds of such sale. No person

21 who makes any royalty payment attributable to the interest

22 of the owner or co-owners liable therefor shall become liable

23 to the United States for such royalty as a result of making

24 such payment on behalf of such owner or co-owners.

25 (f) TIME AND MANNER OF PAYMENT.—
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1 (1) Royalty payments for production from any

2 mining claim subject to the royalty payable under

3 this section shall be due to the United States at the

4 end of the month following the end of the calendar

5 quarter in which the net proceeds from the sale of

6 such production are received by the owner or co-own7 ers. Royalty payments may be made based upon good

8 faith estimates of the gross yield, net proceeds and the

9 quantity of ore, concentrates, or other beneficiated or

10 fabricated products of locatable minerals, subject to

11 adjustment when the actual annual gross yield, net

12 proceeds and quantity are determined by the owner of

13 the mining claim or site or co-owners.

14 (2) Each royalty payment or adjustment shall be

15 accompanied by a statement containing each of the

16 following:

17 (A) The name and Bureau of Land Man18 agement serial number of the mining claim or

19 claims from which ores, concentrates, solutions

20 or beneficiated products of locatable minerals

21 subject to the royalty required in this section

22 were produced and sold for the period covered by

23 such payment or adjustment.

24 (B) The estimated (or actual, if determined)

25 quantity of such ore, concentrates, solutions or
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1 beneficiated or fabricated products produced and

2 sold from such mining claim or claims for such

3 period.

4 (C) The estimated (or actual, if determined)

5 gross yield from the production and sale of such

6 ore, concentrates, solutions or beneficiated prod7 ucts for such period.

8 (D) The estimated (or actual, if determined)

9 net proceeds from the production and sale of such

10 ores, concentrates, solutions or beneficiated prod11 ucts for such period, including an itemization of

12 the applicable deductions described in subsection

13 (c)(1).

14 (E) The estimated (or actual, if determined)

15 royalty due to the United States, or adjustment

16 due to the United States or such owner or co17 owners, for such period.

18 (3) In lieu of receiving a refund under subsection

19 (h), the owner or co-owners may elect to apply any

20 adjustment due to such owner or co-owners as an off21 set against royalties due from such owner or co-own22 ers to the United States under this Act, regardless of

23 whether such royalties are due for production and

24 sale from the same mining claim or claims.
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1 (g) RECORDKEEPING AND REPORTING REQUIRE2 MENTS.—

3 (1) An owner, operator, or other person directly

4 involved in the conduct of mineral activities, trans5 portation, purchase, or sale of locatable minerals, con6 centrates, or products derived therefrom, subject to the

7 royalty under this section, through the point of roy8 alty computation, shall establish and maintain any

9 records, make any reports, and provide any informa10 tion that the Secretary may reasonably require for the

11 purposes of implementing this section or determining

12 compliance with regulations or orders under this sec13 tion. Upon the request of the Secretary when conduct14 ing an audit or investigation pursuant to subsection

15 (i), the appropriate records, reports, or information

16 required by this subsection shall be made available for

17 inspection and duplication by the Secretary.

18 (2) Records required by the Secretary under this

19 section shall be maintained for 3 years after the

20 records are generated unless the Secretary notifies the

21 record holder that he or she has initiated an audit or

22 investigation specifically identifying and involving

23 such records and that such records must be main24 tained for a longer period. When an audit or inves25 tigation is under way, such records shall be main-
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1 tained until the earlier of the date that the Secretary

2 releases the record holder of the obligation to main3 tain such records or the date that the limitations pe4 riod applicable to such audit or investigation under

5 subsection (i) expires.

6 (h) INTEREST ASSESSMENTS.—

7 (1) If royalty payments under this section are

8 not received by the Secretary on the date that such

9 payments are due, or if such payments are less than

10 the amount due, the Secretary shall charge interest on

11 such unpaid amount. Interest under this subsection

12 shall be computed at the rate published by the De13 partment of the Treasury as the ‘‘Treasury Current

14 Value of Funds Rate.’’ In the case of an

15 underpayment or partial payment, interest shall be

16 computed and charged only on the amount of the defi17 ciency and not on the total amount, and only for the

18 number of days such payment is late. No other late

19 payment or underpayment charge or penalty shall be

20 charged with respect to royalties under this section.

21 (2) In any case in which royalty payments are

22 made in excess of the amount due, or amounts are

23 held by the Secretary pending the outcome of any ap24 peal in which the Secretary does not prevail, the Sec25 retary shall promptly refund such overpayments or
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1 pay such amounts to the person or persons entitled

2 thereto, together with interest thereon for the number

3 of days such overpayment or amounts were held by

4 the Secretary, with the addition of interest charged

5 against the United States computed at the rate pub6 lished by the Department of the Treasury as the

7 ‘‘Treasury Current Value of Funds Rate.’’

8 (i) AUDITS, PAYMENT DEMANDS AND LIMITATIONS.—

9 (1) The Secretary may conduct, after notice, any

10 audit reasonably necessary and appropriate to verify

11 the payments required under this section.

12 (2) The Secretary shall send or issue any billing

13 or demand letter for royalty due on locatable minerals

14 produced and sold from any mining claim subject to

15 royalty required by this section not later than 3 years

16 after the date such royalty was due and must specifi17 cally identify the production involved, the royalty al18 legedly due and the basis for the claim. No action,

19 proceeding or claim for royalty due on locatable min20 erals produced and sold, or relating to such produc21 tion, may be brought by the United States, including

22 but not limited to any claim for additional royalties

23 or claim of the right to offset the amount of such ad24 ditional royalties against amounts owed to any per25 son by the United States, unless judicial suit or ad-
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1 ministrative proceedings are commenced to recover

2 specific amounts claimed to be due prior to the expi3 ration of 3 years from the date such royalty is alleged

4 to have been due.

5 (j) TRANSITIONAL RULES.—Any mining claim for

6 which a patent is issued pursuant to section 5374(c) shall

7 not be subject to the obligation to pay the royalty pursuant

8 to this section. Royalty payments for any claim processed

9 under section 5374(c) shall be suspended pending final de10 termination of the right to patent. For any such claim that

11 is determined not to qualify for the issuance of a patent

12 under section 5374(c), royalties shall be payable under this

13 section on production after the date of enactment of this

14 Act, plus interest computed at the rate published by the De15 partment of the Treasury as the ‘‘Treasury Current Value

16 of Funds Rate’’ on production after such date of enactment

17 and before the date of such determination.

18 (k) PENALTIES.—Any person who withholds payment

19 or royalties under this section after a final, nonappealable

20 determination of liability may be liable for civil penalties

21 of up to $ 5,000 per day that payment is withheld after

22 becoming due.

23 (l) DISBURSEMENT OF REVENUES.—The receipts from

24 royalties collected under this section shall be disbursed as

25 follows:
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1 (1) Fifty percent of such receipts shall be paid

2 into the Treasury of the United States and deposited

3 as miscellaneous receipts.

4 (2) Forty percent of such receipts shall be paid

5 into a State Fund or Federal Fund in accordance

6 with section 5376; until termination as provided in

7 section 5379.

8 (3) Ten percent of such receipts shall be paid by

9 the Secretary of the Treasury to the State in which

10 the mining claim from which production occurred is

11 located.

12 SEC. 5376. ABANDONED LOCATABLE MINERALS MINE REC13 LAMATION FUND.

14 (a) STATE FUND.—Any State within which royalties

15 are collected pursuant to section 5375 from a mining claim

16 and which wishes to become eligible to receive such proceeds

17 allocated by paragraph 5375(l)(2) shall establish and main18 tain an interest-bearing abandoned locatable mineral mine

19 reclamation fund (hereinafter referred to in this chapter as

20 ‘‘State Fund’’) to accomplish the purposes of this chapter.

21 States with existing abandoned locatable mineral reclama22 tion programs shall qualify to receive proceeds allocated by

23 section 5375(l)(2).

24 (b) FEDERAL FUND.—There is established on the books

25 of the Treasury of the United States an interest-bearing
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1 fund to be known as the Abandoned Locatable Minerals

2 Mine Reclamation Fund (hereinafter referred to in this

3 chapter as ‘‘Federal Fund’’) which shall consist of royalty

4 proceeds allocated by paragraph 5375(l)(2) from mining

5 claims in a State where a State Fund has not been estab6 lished or maintained under subsection (a).

7 SEC. 5377. ALLOCATION AND PAYMENTS.

8 (a) STATE FUND.—Royalties collected pursuant to sec9 tion 5375 and allocated by section 5375(l)(2) shall be paid

10 by the Secretary of the Treasury to the State Fund estab11 lished pursuant to subsection 5376(a) for the State where

12 the mining claim from which the production occurred is

13 located. Payments to States under this subsection with re14 spect to any royalties received by the United States, shall

15 be made not later than the last business day of the month

16 in which such royalties are warranted by the United States

17 Treasury to the Secretary of the Interior as having been

18 received, except for any portion of such royalties which is

19 under challenge, which shall be placed in a suspense account

20 pending resolution of such challenge. Such warrants shall

21 be issued by the United States Treasury not later than 10

22 days after receipt of such royalties by the Treasury. Royal23 ties placed in a suspense account which are determined to

24 be due the United States shall be payable to a State Fund

25 not later than fifteen days after such challenge is resolved.
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1 Any such amount placed in a suspense account pending res2 olution shall bear interest until the challenge is resolved.

3 In determining the amount of payments to State Funds

4 under this section, the amount of such payments shall not

5 be reduced by any administrative or other costs incurred

6 by the United States.

7 (b) FEDERAL FUND.—Royalties collected pursuant to

8 section 5375, and allocated by paragraph 5375(l)(2), from

9 mining claims located in a State which has not established

10 or maintained a State Fund, and such royalties from min11 ing claims located in a State for which the Secretary’s au12 thority has expired under subsection 5379(a), shall be cred13 ited to the Federal Fund and distributed in accordance with

14 subsection (c).

15 (c) TRANSITION.—Prior to the time a State establishes

16 a State Fund pursuant to subsection 5376(a), any royalties

17 collected from a mining claim within such State shall be

18 deposited into the Federal Fund and allocated to such State.

19 Once a State establishes a State Fund under subsection

20 5376(a), the State allocation in the Federal Fund with ac21 crued interest shall be paid by the Secretary of the Treasury

22 to the State Fund in accordance with subsection (a). Com23 mencing three years after the date of enactment of this chap24 ter, the Secretary of the Treasury shall distribute royalty

25 proceeds then accrued or which are thereafter credited to
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1 the Federal Fund equally among all States which maintain

2 a State Fund established under subsection 5376(a), and for

3 which the Secretary of the Treasury’s authority has not ex4 pired under subsection 5379(a).

5 SEC. 5378. ELIGIBLE AREA.

6 (a) IN GENERAL.—Subject to subsection (b), lands and

7 water eligible for reclamation under this chapter shall be

8 Federal lands that—

9 (1) have been adversely affected by past mineral

10 activities on lands abandoned and left inadequately

11 reclaimed prior to the date of enactment of this chap12 ter; and

13 (2) for which the State determines there is no

14 identifiable party with a continuing reclamation re15 sponsibility under State or Federal laws.

16 (b) SPECIFIC SITES AND AREAS NOT ELIGIBLE.—The

17 following areas shall not be eligible for expenditures from

18 a State Fund:

19 (1) any area subject to a plan of operations sub20 mitted or approved prior to, on or after the date of

21 enactment of this chapter which includes remining or

22 reclamation of the area adversely affected by past

23 locatable mineral activities;

24 (2) any area affected by coal mining eligible for

25 reclamation expenditures pursuant to section 404 of
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1 the Surface Mining Control and Reclamation Act (30

2 U.S.C. 1234);

3 (3) any area designated for remedial action pur4 suant to the Uranium Mill Tailings Radiation Con5 trol Act of 1978 (42 U.S.C. 7912); and

6 (4) any area that was listed on the National Pri7 orities List pursuant to the Comprehensive Environ8 mental Response, Compensation and Liability Act of

9 1980 (42 U.S.C. 9605) prior to the date of enactment

10 of this chapter, or where the Environmental Protec11 tion Agency has initiated or caused to be initiated a

12 response action pursuant to that Act.

13 SEC. 5379. SUNSET PROVISIONS.

14 (a) TERMINATION OF AUTHORITY.—The Secretary of

15 the Treasury’s authority to allocate funds to a State Fund

16 under section 5377 shall expire on the date that the State

17 submits a report to the Congress which states that there are

18 no areas in the State eligible under subsection 5378(a)

19 which remain to be reclaimed.

20 (b) TERMINATION OF FUND.—Upon the termination of

21 authority as provided in subsection (a) with respect to all

22 State Funds, the Federal Fund shall also be terminated,

23 and all royalty proceeds thereafter remaining in the Federal

24 Fund shall be distributed to the States as provided for in

25 Section 5375(l)(3).
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1 SEC. 5380. EFFECT ON THE GENERAL MINING LAWS.

2 The provisions of this chapter shall supersede the gen3 eral mining laws only to the extent such laws conflict with

4 the requirements of this chapter. Where no such conflict ex5 ists, the general mining laws, including all judicial and

6 administrative decisions interpreting them, shall remain in

7 full force and effect.

8 SEC. 5381. SEVERABILITY.

9 If any provision of this chapter or the applicability

10 thereof to any person or circumstances is held invalid, the

11 remainder of this chapter and the application of such provi12 sion to other persons or circumstances shall not be affected

13 thereby.

14 SEC. 5382. MINERAL MATERIALS.

15 (a) DETERMINATIONS.—Section 3 of the Act of July

16 23, 1955 (30 U.S.C. 611), is amended as follows:

17 (1) Insert ‘‘(a)’’ before the first sentence.

18 (2) Add the following new subsection at the end

19 thereof:

20 (b)(1) Subject to valid existing rights, after the date

21 of enactment of this subsection, notwithstanding the ref22 erence to common varieties in subsection (a) and to the ex23 ception to such term relating to a deposit of materials with

24 some property giving it distinct and special value, all de25 posits of mineral materials referred to in such subsection,

26 including the block pumice referred to in such subsection,
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1 shall be subject to disposal only under the terms and condi2 tions of the Materials Act of 1947.

3 (2) For purposes of paragraph (1), the term ‘‘valid ex4 isting rights’’ means that a mining claim located for any

5 such mineral material had some property giving it the dis6 tinct and special value referred to in subsection (a), or as

7 the case may be, met the definition of block pumice referred

8 to in such subsection, was properly located and maintained

9 under the general mining laws prior to the date of the en10 actment of this subsection, and was supported by a discov11 ery of a valuable mineral deposit within the meaning of

12 the general mining laws as in effect immediately prior to

13 such date of enactment and that such claim continues to

14 be valid under this Act.’’.

15 (b) IDENTIFIED DEPOSITS.—The Act entitled ‘‘An Act

16 to provide for the disposal of materials on the public lands

17 of the United States’’, approved July 31, 1947 (30 U.S.C.

18 602), is amended by adding at the end the following:

19 ‘‘(b) IDENTIFIED DEPOSITS.—

20 ‘‘(1) Lands known to contain valuable deposits of

21 mineral materials subject to this Act and subsequent

22 amendments and not covered by any contract, permit,

23 or lease, for uncommon varieties of mineral materials

24 under this section or by a valid mining claim for an

25 uncommon variety of a mineral material under the
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1 general mining laws shall be subject to disposition by

2 lease under this Act by the Secretary through adver3 tisement, competitive bidding, or such other methods

4 as he may by general regulations adopt, and in such

5 reasonably compact areas as he shall fix.

6 ‘‘(2) All leases will be conditioned upon—

7 ‘‘(A) the payment by the lessee of such roy8 alty as may be fixed in the lease, not less than

9 two percent of the quantity or gross value of the

10 output of mineral materials, and

11 ‘‘(B) the payment in advance of a rental of

12 25 cents per acre for the first calendar year or

13 fraction thereof; 50 cents per acre for the second,

14 third, fourth, and fifth years, respectively; and

15 $1 per acre per annum thereafter during the

16 continuance of the lease, such rental for that

17 year being credited against royalties accruing for

18 that year.

19 ‘‘(3)(A) Any lease issued under this subsection

20 shall be for a term of 20 years and so long thereafter

21 as the lessee complies with the terms and conditions

22 of the lease and upon the further condition that at the

23 end of each 20-year period succeeding the date of the

24 lease such reasonable adjustment of the terms and

25 conditions thereof may be made therein as may be
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1 prescribed by the Secretary unless otherwise provided

2 by law at the expiration of such periods.

3 ‘‘(B) Leases shall be conditioned upon a mini4 mum annual production or the payment of a mini5 mum royalty in lieu thereof, except when production

6 is interrupted by strikes, the elements, or casualties

7 not attributable to the lessee.

8 ‘‘(C) The Secretary may permit suspension of

9 operations under any such leases when marketing

10 conditions are such that the leases cannot be operated

11 except at a loss.

12 ‘‘(D) The Secretary upon application by the les13 see prior to the expiration of any existing lease in

14 good standing shall amend such lease to provide for

15 the same tenure and to contain the same conditions,

16 including adjustment at the end of each 20-year pe17 riod succeeding the date of said lease, as provided for

18 in this subsection.

19 ‘‘(c) OTHER LANDS.—

20 ‘‘(1) The Secretary is hereby authorized, under

21 such rules and regulations as he may prescribe, to

22 grant to any qualified applicant a prospecting permit

23 which shall give the exclusive right to prospect for

24 mineral materials in lands belonging to the United

25 States which are not subject to subsection (b), and are
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1 not covered by a contract, permit, or lease under this

2 Act, except that a prospecting permit shall not exceed

3 a period of 2 years and the area to be included in

4 such a permit shall not exceed 2,560 acres of land in

5 reasonably compact form.

6 ‘‘(2) The Secretary shall reserve and may exer7 cise the authority to cancel any prospecting permit

8 upon failure by the permittee to exercise due diligence

9 in the prosecution of the prospecting work in accord10 ance with the terms and conditions stated in the per11 mit, and shall insert in every such permit issued

12 under the provisions of this Act appropriate provi13 sions for its cancellation by him.

14 ‘‘(3)(A) Upon showing to the satisfaction of the

15 Secretary that valuable deposits of one of the mineral

16 materials subject to the Materials Act of 1947 have

17 been discovered by the permittee within the area cov18 ered by his permit, and that such land is valuable

19 therefor, the permittee shall be entitled to a lease for

20 any or all of the land embraced in the prospecting

21 permit, at a royalty of not less than two percent of

22 the quantity or gross value of the output of the min23 eral materials at the point of shipment to market,

24 such lease to be taken in compact form by legal sub25 divisions of the public land surveys, or if the land be
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1 not surveyed, by survey executed at the cost of the per2 mittee in accordance with regulations prescribed by

3 the Secretary.’’.

4 ‘‘(B) ‘‘Persons holding valid mining claims for

5 uncommon varieties of mineral materials shall be en6 titled to receive a lease under this subsection.’’

7 (D) MINERAL MATERIALS DISPOSAL CLARIFICA8 TION.—Section 4 July 23, 1955 (30 U.S.C. 612), is amend9 ed as follows:

10 (1) In subsection (b) insert ‘‘and mineral mate11 rial’’ after ‘‘vegetative’’.

12 (2) In subsection (c) insert ‘‘and mineral mate13 rial’’ after ‘‘vegetative’’.

14 (e) AUTHORIZATION FOR DISPOSAL OF MINERAL MA15 TERIALS BY CONTRACT.—Section 2(a) of the Act entitled

16 ‘‘An Act to provide for the disposal of materials on the pub17 lic lands of the United States’’, approved July 31, 1947 (30

18 U.S.C. 602(a)), is amended—

19 (1) by striking the period at the end of para20 graph (3) and inserting ‘‘or, if’’; and

21 (2) by adding after paragraph (3) the following:

22 ‘‘(4) the material is a mineral material.’’.
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1 CHAPTER 6—DEPARTMENT OF THE

2 INTERIOR

3 SEC. 5391. AIRCRAFT SERVICES.

4 (a) USE OF PRIVATE CONTRACTORS.—By not later

5 than October 1, 1996, the Secretary of the Interior shall

6 contract with private entities for the provision of all air7 craft services required by the Department of the Interior,

8 other than those available from existing DOI aircraft whose

9 primary purpose is fire suppression.

10 (b) SALE OF FEDERAL AIRCRAFT.—By September 30,

11 1998, the Secretary of the Interior is authorized and di12 rected to sell all aircraft owned by the Department of the

13 Interior and all associated equipment and facilities, other

14 than those whose primary purpose is fire suppression.

15 (c) EXEMPTIONS.—The disposition of assets under this

16 section is not subject to section 202 and 203 of the Federal

17 Property and Administrative Services Act of 1949 (40

18 U.S.C. 483 and 484) or section 13 of the Surplus Property

19 Act of 1944 (50 U.S.C. App. 1622).

20 (d) DISPOSITION OF PROCEEDS.—The proceeds from

21 dispositions under this section shall be returned to the

22 Treasury as miscellaneous receipts and all savings from re23 duced overhead and other costs related to the management

24 of the assets sold shall be returned to the Treasury.
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1 CHAPTER 7—POWER MARKETING

2 ADMINISTRATIONS

3 Subchapter A—Bonneville Power

4 Administration Refinancing

5 SEC. 5401. DEFINITIONS.

6 For the purposes of this subchapter—

7 (1) ‘‘Administrator’’ means the Administrator of

8 the Bonneville Power Administration;

9 (2) ‘‘capital investment’’ means a capitalized

10 cost funded by Federal appropriations that—

11 (A) is for a project, facility, or separable

12 unit or feature of a project or facility;

13 (B) is a cost for which the Administrator is

14 required by law to establish rates to repay to the

15 United States Treasury through the sale of elec16 tric power, transmission, or other services;

17 (C) excludes a Federal irrigation invest18 ment; and

19 (D) excludes an investment financed by the

20 current revenues of the Administrator or by

21 bonds issued and sold, or authorized to be issued

22 and sold, by the Administrator under section 13

23 of the Federal Columbia River Transmission

24 System Act (16 U.S.C. 838k);
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1 (3) ‘‘new capital investment’’ means a capital

2 investment for a project, facility, or separable unit or

3 feature of a project, facility, or separable unit or fea4 ture of a project or facility, placed in service after

5 September 30, 1995;

6 (4) ‘‘old capital investment’’ means a capital in7 vestment the capitalized cost of which—

8 (A) was incurred, but not repaid, before Oc9 tober 1, 1995, and

10 (B) was for a project, facility, or separable

11 unit or feature of a project or facility, placed in

12 service before October 1, 1995;

13 (5) ‘‘repayment date’’ means the end of the pe14 riod within which the Administrator’s rates are to as15 sure the repayment of the principal amount of a cap16 ital investment; and

17 (6) ‘‘Treasury rate’’ means—

18 (A) for an old capital investment, a rate de19 termined by the Secretary of the Treasury, tak20 ing into consideration prevailing market yields,

21 during the month preceding October 1, 1995, on

22 outstanding interest-bearing obligations of the

23 United States with periods to maturity com24 parable to the period between October 1, 1995,
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1 and the repayment date for the old capital in2 vestment; and

3 (B) for a new capital investment, a rate de4 termined by the Secretary of the Treasury, tak5 ing into consideration prevailing market yields,

6 during the month preceding the beginning of the

7 fiscal year in which the related project, facility,

8 or separable unit or feature is placed in service,

9 on outstanding interest-bearing obligations of the

10 United States with periods to maturity com11 parable to the period between the beginning of

12 the fiscal year and the repayment date for the

13 new capital investment.

14 SEC. 5402. NEW PRINCIPAL AMOUNTS.

15 (a) PRINCIPAL AMOUNT.—Effective October 1, 1995,

16 an old capital investment has a new principal amount that

17 is the sum of—

18 (1) the present value of the old payment amounts

19 for the old capital investment, calculated using a dis20 count rate equal to the Treasury rate for the old cap21 ital investment; and

22 (2) an amount equal to $100,000,000 multiplied

23 by a fraction the numerator of which is the principal

24 amount of the old payment amounts for the old cap25 ital investment and the denominator of which is the
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1 sum of the principal amounts of the old payment

2 amounts for all old capital investments.

3 (b) DETERMINATION.—With the approval of the Sec4 retary of the Treasury, based solely on consistency with this

5 subchapter, the Administrator shall determine the new

6 principal amounts under this section and the assignment

7 of interest rates to the new principal amounts under section

8 5403.

9 (c) OLD PAYMENT AMOUNT.—For the purposes of this

10 section, ‘‘old payment amounts’’ means, for an old capital

11 investment, the annual interest and principal that the Ad12 ministrator would have paid to the United States Treasury

13 from October 1, 1995, if this subchapter had not been en14 acted, assuming that—

15 (1) the principal were repaid—

16 (A) on the repayment date the Adminis17 trator assigned before October 1, 1993, to the old

18 capital investment, or

19 (B) with respect to an old capital invest20 ment for which the Administrator has not as21 signed a repayment date before October 1, 1993,

22 on a repayment date the Administrator shall as23 sign to the old capital investment in accordance

24 with paragraph 10(d)(1) of the version of De-
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1 partment of Energy Order RA 6120.2 in effect

2 on October 1, 1993; and

3 (2) interest were paid—

4 (A) at the interest rate the Administrator

5 assigned before October 1, 1993, to the old cap6 ital investment, or

7 (B) with respect to an old capital invest8 ment for which the Administrator has not as9 signed an interest rate before October 1, 1993, at

10 a rate determined by the Secretary of the Treas11 ury, taking into consideration prevailing market

12 yields, during the month preceding the beginning

13 of the fiscal year in which the related project, fa14 cility, or separable unit or feature is placed in

15 service, on outstanding interest-bearing obliga16 tions of the United States with periods to matu17 rity comparable to the period between the begin18 ning of the fiscal year and the repayment date

19 for the old capital investment.

20 SEC. 5403. INTEREST RATE FOR NEW PRINCIPAL AMOUNTS.

21 As of October 1, 1995, the unpaid balance on the new

22 principal amount established for an old capital investment

23 under section 5402 bears interest annually at the Treasury

24 rate for the old capital investment until the earlier of the
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1 date that the new principal amount is repaid or the repay2 ment date for the new principal amount.

3 SEC. 5404. REPAYMENT DATES.

4 As of October 1, 1995, the repayment date for the new

5 principal amount established for an old capital investment

6 under section 5402 is no earlier than the repayment date

7 for the old capital investment assumed in section

8 5402(c)(1).

9 SEC. 5405. PREPAYMENT LIMITATIONS.

10 During the period October 1, 1995, through September

11 30, 2000, the total new principal amounts of old capital

12 investments, as established under section 5402, that the Ad13 ministrator may pay before their respective repayment

14 dates shall not exceed $100,000,000.

15 SEC. 5406. INTEREST RATES FOR NEW CAPITAL INVEST16 MENTS DURING CONSTRUCTION.

17 (a) NEW CAPITAL INVESTMENT.—The principal

18 amount of a new capital investment includes interest in

19 each fiscal year of construction of the related project, facil20 ity, or separable unit or feature at a rate equal to the one21 year rate for the fiscal year on the sum of—

22 (1) construction expenditures that were made

23 from the date construction commenced through the

24 end of the fiscal year, and

25 (2) accrued interest during construction.
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1 (b) PAYMENT.—The Administrator is not required to

2 pay, during construction of the project, facility, or sepa3 rable unit or feature, the interest calculated, accrued, and

4 capitalized under subsection (a).

5 (c) ONE-YEAR RATE.—For the purposes of this section,

6 ‘‘one-year rate’’ for a fiscal year means a rate determined

7 by the Secretary of the Treasury, taking into consideration

8 prevailing market yields, during the month preceding the

9 beginning of the fiscal year, on outstanding interest-bearing

10 obligations of the United States with periods to maturity

11 of approximately one year.

12 SEC. 5407. INTEREST RATES FOR NEW CAPITAL INVEST13 MENTS.

14 The unpaid balance on the principal amount of a new

15 capital investment bears interest at the Treasury rate for

16 the new capital investment from the date the related project,

17 facility, or separable unit or feature is placed in service

18 until the earlier of the date the new capital investment is

19 repaid or the repayment date for the new capital invest20 ment.

21 SEC. 5408. CREDITS TO ADMINISTRATOR’S PAYMENTS TO

22 THE UNITED STATES TREASURY.

23 The Confederated Tribe of the Colville Reservation

24 Grand Coulee Dam Settlement Act (Public Law 103–436;
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1 108 Stat. 4577) is amended by striking section 6 and in2 serting the following:

3 ‘‘SEC. 6. CREDITS TO ADMINISTRATOR’S PAYMENTS TO THE

4 UNITED STATES TREASURY.

5 ‘‘So long as the Administrator makes annual pay6 ments to the tribes under the settlement agreement, the Ad7 ministrator shall apply against amounts otherwise payable

8 by the Administrator to the United States Treasury a credit

9 that reduces the Administrator’s payment in the amount

10 and for each fiscal year as follows: $15,250,000 in fiscal

11 year 1996; $15,860,000 in fiscal year 1997; $16,490,000 in

12 fiscal year 1998; $17,150,000 in fiscal year 1999;

13 $17,840,000 in fiscal year 2000; and $4,100,000 in each

14 succeeding fiscal year.’’.

15 SEC. 5409. CONTRACT PROVISIONS.

16 In each contract of the Administrator that provides for

17 the Administrator to sell electric power, transmission, or

18 related services, and that is in effect after September 30,

19 1995, the Administrator shall offer to include, or as the case

20 may be, shall offer to amend to include, provisions specify21 ing that after September 30, 1995—

22 (1) the Administrator shall establish rates and

23 charges on the basis that—
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1 (A) the principal amount of an old capital

2 investment shall be no greater than the new

3 principal amount established under section 5402;

4 (B) the interest rate applicable to the un5 paid balance of the new principal amount of an

6 old capital investment shall be no greater than

7 the interest rate established under section 5403;

8 (C) any payment of principal of an old

9 capital investment shall reduce the outstanding

10 principal balance of the old capital investment

11 in the amount of the payment at the time the

12 payment is tendered; and

13 (D) any payment of interest on the unpaid

14 balance of the new principal amount of an old

15 capital investment shall be a credit against the

16 appropriate interest account in the amount of

17 the payment at the time the payment is ten18 dered;

19 (2) apart from charges necessary to repay the

20 new principal amount of an old capital investment as

21 established under section 5402 and to pay the interest

22 on the principal amount under section 5403, no

23 amount may be charged for return to the United

24 States Treasury as repayment for or return on an old
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1 capital investment, whether by way of rate, rent, lease

2 payment, assessment, user charge, or any other fee;

3 (3) amounts provided under section 1304 of title

4 31, United States Code, shall be available to pay, and

5 shall be the sole source for payment of, a judgment

6 against or settlement by the Administrator or the

7 United States on a claim for a breach of the contract

8 provisions required by this subchapter; and

9 (4) the contract provisions specified in this sub10 chapter do not—

11 (A) preclude the Administrator from recov12 ering, through rates or other means, any tax that

13 is generally imposed on electric utilities in the

14 United States, or

15 (B) affect the Administrator’s authority

16 under applicable law, including section 7(g) of

17 the Pacific Northwest Electric Power Planning

18 and Conservation Act (16 U.S.C. 839e(g)), to—

19 (i) allocate costs and benefits, includ20 ing but not limited to fish and wildlife

21 costs, to rates or resources, or

22 (ii) design rates.

23 SEC. 5410. SAVINGS PROVISIONS.

24 (a) REPAYMENT.—This subchapter does not affect the

25 obligation of the Administrator to repay the principal asso-
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1 ciated with each capital investment, and to pay interest

2 on the principal, only from the ‘‘Administrator’s net pro3 ceeds,’’ as defined in section 13(b) of the Federal Columbia

4 River Transmission System Act (16 U.S.C. 838k(b)).

5 (b) PAYMENT OF CAPITAL INVESTMENT.—Except as

6 provided in section 5405, this subchapter does not affect the

7 authority of the Administrator to pay all or a portion of

8 the principal amount associated with a capital investment

9 before the repayment date for the principal amount.

10 Subchapter B—Alaska Power

11 Marketing Administration Sale

12 SEC. 5411. SHORT TITLE.

13 This subchapter may be cited as the ‘‘Alaska Power

14 Administration Asset Sale and Termination Act’’.

15 SEC. 5412. DEFINITIONS.

16 For Purposes of this subchapter:

17 (1) The term ‘‘Eklutna’’ means Eklutna Hydro18 electric Project and related assets as described in sec19 tion 4 and Exhibit A of the Eklutna Purchase Agree20 ment.

21 (2) The term ‘‘Eklutna Purchase Agreement’’

22 means the August 2, 1989, Eklutna Purchase Agree23 ment between the Alaska Power Administration of the

24 Department of Energy and the Eklutna Purchasers,
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1 together with any amendments thereto adopted before

2 the date of enactment of this Act.

3 (3) The term ‘‘Eklutna Purchasers’’ means the

4 Municipality of Anchorage doing business as Munici5 pal Light and Power, the Chugach Electric Associa6 tion, Inc. and the Matanuska Electric Association,

7 Inc.

8 (4) The term ‘‘Snettisham’’ means the

9 Snettisham Hydroelectric Project and related assets

10 as described in section 4 and Exhibit A of the

11 Snettisham Purchase Agreement.

12 (5) The term ‘‘Snettisham Purchase Agreement’’

13 means the February 10, 1989, Snettisham Purchase

14 Agreement between the Alaska Power Administration

15 of the Department of Energy and the Alaska Power

16 Authority and its successors in interest, together with

17 any amendments thereto adopted before the date of en18 actment of this Act.

19 (6) The term ‘‘Snettisham Purchaser’’ means the

20 Alaska Industrial Development and Export Authority

21 or a successor State agency or authority.

22 SEC. 5413. SALE OF EKLUTNA AND SNETTISHAM HYDRO23 ELECTRIC PROJECTS.

24 (a) SALE OF EKLUTNA.—The Secretary of Energy is

25 authorized and directed to sell Eklutna to the Eklutna Pur-
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1 chasers in accordance with the terms of this subchapter and

2 the Eklutna Purchase Agreement.

3 (b) SALE OF SNETTISHAM.—The Secretary of Energy

4 is authorized and directed to sell Snettisham to the

5 Snettisham Purchaser in accordance with the terms of this

6 subchapter and the Snettisham Purchase Agreement.

7 (c) COOPERATION OF OTHER AGENCIES.—The heads

8 of other Federal departments, agencies, and instrumental9 ities of the United States shall assist the Secretary of En10 ergy in implementing the sales and conveyances authorized

11 and directed by this subchapter.

12 (d) PROCEEDS.—Proceeds from the sales required by

13 this subchapter shall be deposited in the Treasury of the

14 United States to the credit of miscellaneous receipts.

15 (e) PREPARATION OF EKLUTNA AND SNETTISHAM FOR

16 SALE.—The Secretary of Energy is authorized and directed

17 to use such funds from the sale of electric power by the Alas18 ka Power Administration as may be necessary to prepare,

19 survey, and acquire Eklutna and Snettisham assets for sale

20 and conveyance. Such preparations and acquisitions shall

21 provide sufficient title to ensure the beneficial use, enjoy22 ment, and occupancy by the purchaser.

23 (f) CONTRIBUTED FUNDS.—Notwithstanding any

24 other provision of law, the Alaska Power Administration

25 is authorized to receive, administer, and expend such con-
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1 tributed funds as may be provided by the Eklutna Pur2 chasers or customers or the Snettisham Purchaser or cus3 tomers for the purposes of upgrading, improving, maintain4 ing, or administering Eklutna or Snettisham. Upon the ter5 mination of the Alaska Power Administration under section

6 5414(f), the Secretary of Energy shall administer and ex7 pend any remaining balances of such contributed funds for

8 the purposes intended by the contributors.

9 SEC. 5414. EXEMPTION AND OTHER PROVISIONS.

10 (a) FEDERAL POWER ACT.—

11 (1) After the sales authorized by this subchapter

12 occur, Eklutna and Snettisham, including future

13 modifications, shall continue to be exempt from the

14 requirements of part I of the Federal Power Act (16

15 U.S.C. 791a et seq.), except as provided in subsection

16 (b).

17 (2) The exemption provided by paragraph (1)

18 shall not affect the Memorandum of Agreement en19 tered into among the State of Alaska, the Eklutna

20 Purchasers, the Alaska Energy Authority, and Fed21 eral fish and wildlife agencies regarding the protec22 tion, mitigation of, damages to, and enhancement of

23 fish and wildlife, dated August 7, 1991, which re24 mains in full force and effect.
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1 (3) Nothing in this subchapter or the Federal

2 Power Act (16 U.S.C. 791 et seq.) preempts the State

3 of Alaska from carrying out the responsibilities and

4 authorities of the Memorandum of Agreement.

5 (b) SUBSEQUENT TRANSFERS.—Except for subsequent

6 assignment of interest in Eklutna by the Eklutna Pur7 chasers to the Alaska Electric Generation and Transmission

8 Cooperative Inc. pursuant to section 19 of the Eklutna Pur9 chase Agreement, upon any subsequent sale or transfer of

10 any portion of Eklutna or Snettisham from the Eklutna

11 Purchasers or the Snettisham Purchaser to any other per12 son, the exemption set forth in paragraph (1) of subsection

13 (a) of this section shall cease to apply to such portion.

14 (c) REVIEW.—

15 (1) The United States District Court for the Dis16 trict of Alaska shall have jurisdiction to review deci17 sions made under the Memorandum of Agreement and

18 to enforce the provisions of the Memorandum of

19 Agreement, including the remedy of specific perform20 ance.

21 (2) An action seeking review of a Fish and Wild22 life Program (‘‘Program’’) of the Governor of Alaska

23 under the Memorandum of Agreement or challenging

24 actions of any of the parties to the Memorandum of

25 Agreement prior to the adoption of the Program shall
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1 be brought not later than 90 days after the date on

2 which the Program is adopted by the Governor of

3 Alaska, or be barred.

4 (3) An action seeking review of implementation

5 of the Program shall be brought not later than 90

6 days after the challenged act implementing the Pro7 gram, or be barred.

8 (d) EKLUTNA LANDS.—With respect to Eklutna lands

9 described in Exhibit A of the Eklutna Purchase Agreement:

10 (1) The Secretary of the Interior shall issue

11 rights-of-way to the Alaska Power Administration for

12 subsequent reassignment to the Eklutna Purchasers—

13 (A) at no cost to the Eklutna Purchasers;

14 (B) to remain effective for a period equal to

15 the life of Eklutna as extended by improvements,

16 repairs, renewals, or replacements; and

17 (C) sufficient for the operation of, mainte18 nance of, repair to, and replacement of, and ac19 cess to, Eklutna facilities located on military

20 lands and lands managed by the Bureau of Land

21 Management, including lands selected by the

22 State of Alaska.

23 (2) Fee title to lands at Anchorage Substation

24 shall be transferred to Eklutna Purchasers at no addi25 tional cost if the Secretary of the Interior determines
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1 that pending claims to, and selections of, those lands

2 are invalid or relinquished.

3 (3) With respect to the Eklutna lands identified

4 in paragraph 1 of Exhibit A of the Eklutna Purchase

5 Agreement, the State of Alaska may select, and the

6 Secretary of the Interior shall convey to the State, im7 proved lands under the selection entitlements in sec8 tion 6 of the Act of July 7, 1958 (commonly known

9 as the Alaska Statehood Act, Public Law 85–508; 72

10 Stat. 339), and the North Anchorage Land Agreement

11 dated January 31, 1983. This conveyance shall be

12 subject to the rights-of-way provided to the Eklutna

13 Purchasers under paragraph (1).

14 (e) SNETTISHAM LANDS.—With respect to the

15 Snettisham lands identified in paragraph 1 of Exhibit A

16 of the Snettisham Purchase Agreement and Public Land

17 Order No. 5108, the State of Alaska may select, and the

18 Secretary of the Interior shall convey to the State of Alaska,

19 improved lands under the selection entitlements in section

20 6 of the Act of July 7, 1958 (commonly known as the Alaska

21 Statehood Act, Public Law 85–508; 72 Stat. 339).

22 (f) TERMINATION OF ALASKA POWER ADMINISTRA23 TION.—Not later than one year after both of the sales au24 thorized in section 5413 have occurred, as measured by the
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1 Transaction Dates stipulated in the Purchase Agreements,

2 the Secretary of Energy shall—

3 (1) complete the business of, and close out, the

4 Alaska Power Administration;

5 (2) submit to Congress a report documenting the

6 sales; and

7 (3) return unobligated balances of funds appro8 priated for the Alaska Power Administration to the

9 Treasury of the United States.

10 (g) REPEALS.—

11 (1) The Act of July 31, 1950 (64 Stat. 382) is

12 repealed effective on the date that Eklutna is conveyed

13 to the Eklutna Purchasers.

14 (2) Section 204 of the Flood Control Act of 1962

15 (76 Stat. 1193) is repealed effective on the date that

16 Snettisham is conveyed to the Snettisham Purchaser.

17 (3) The Act of August 9, 1955, concerning water

18 resources investigation in Alaska (69 Stat. 618), is re19 pealed.

20 (h) DOE ORGANIZATION ACT.—As of the later of the

21 two dates determined in paragraphs (1) and (2) of sub22 section (g), section 302(a) of the Department of Energy Or23 ganization Act (42 U.S.C. 7152(a)) is amended—

24 (1) in paragraph (1)—

25 (A) by striking subparagraph (C); and
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1 (B) by redesignating subparagraphs (D),

2 (E), and (F) as subparagraphs (C), (D), and (E)

3 respectively; and

4 (2) in paragraph (2) by striking out ‘‘and the

5 Alaska Power Administration’’ and by inserting

6 ‘‘and’’ after ‘‘Southwestern Power Administration,’’.

7 (i) DISPOSAL.—The sales of Eklutna and Snettisham

8 under this subchapter are not considered disposal of Federal

9 surplus property under the Federal Property and Adminis10 trative Services Act of 1949 (40 U.S.C. 484) or the Act of

11 October 3, 1944, popularly known as the ‘‘Surplus Property

12 Act of 1944’’ (50 U.S.C. App. 1622).

13 SEC. 5415. OTHER FEDERAL HYDROELECTRIC PROJECTS.

14 The provisions of this subchapter regarding the sale

15 of the Alaska Power Administration’s hydroelectric projects

16 under section 5413 and the exemption of these projects from

17 part I of the Federal Power Act under section 5414 do not

18 apply to other Federal hydroelectric projects.

19 CHAPTER 8—OUTER CONTINENTAL SHELF

20 DEEP WATER ROYALTY RELIEF

21 SEC. 5421. SHORT TITLE.

22 This chapter may be referred to as the ‘‘Outer Con23 tinental Shelf Deep Water Royalty Relief Act’’.
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1 SEC. 5422. AMENDMENTS TO THE OUTER CONTINENTAL

2 SHELF LANDS ACT.

3 Section 8(a)(3) of the Outer Continental Shelf Lands

4 Act (43 U.S.C. 1337(a)(3)), is amended—

5 (1) by designating the provisions of paragraph

6 (3) as subparagraph (A) of such paragraph (3); and

7 (2) by inserting after subparagraph (A), as so

8 designated, the following:

9 ‘‘(B) In the Western and Central Planning

10 Areas of the Gulf of Mexico and the portion of

11 the Eastern Planning Area of the Gulf of Mexico

12 encompassing whole lease blocks lying west of 87

13 degrees, 30 minutes West longitude, the Secretary

14 may, in order to—

15 ‘‘(i) promote development or increased

16 production on producing or non-producing

17 leases; or

18 ‘‘(ii) encourage production of marginal

19 resources on producing or non-producing

20 leases;

21 through primary, secondary, or tertiary recovery

22 means, reduce or eliminate any royalty or net

23 profit share set forth in the lease(s). With the les24 see’s consent, the Secretary may make other

25 modifications to the royalty or net profit share
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1 terms of the lease in order to achieve these pur2 poses.

3 ‘‘(C)(i) Notwithstanding the provisions of

4 this Act other than this subparagraph, with re5 spect to any lease or unit in existence on the

6 date of enactment of the Outer Continental Shelf

7 Deep Water Royalty Relief Act meeting the re8 quirements of this subparagraph, no royalty

9 payments shall be due on new production, as de10 fined in clause (iv) of this subparagraph, from

11 any lease or unit located in water depths of 200

12 meters or greater in the Western and Central

13 Planning Areas of the Gulf of Mexico, including

14 that portion of the Eastern Planning Area of the

15 Gulf of Mexico encompassing whole lease blocks

16 lying west of 87 degrees, 30 minutes West lon17 gitude, until such volume of production as deter18 mined pursuant to clause (ii) has been produced

19 by the lessee.

20 ‘‘(ii) Upon submission of a complete appli21 cation by the lessee, the Secretary shall deter22 mine within 180 days of such application wheth23 er new production from such lease or unit would

24 be economic in the absence of the relief from the

25 requirement to pay royalties provided for by
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1 clause (i) of this subparagraph. In making such

2 determination, the Secretary shall consider the

3 increased technological and financial risk of deep

4 water development and all costs associated with

5 exploring, developing, and producing from the

6 lease. The lessee shall provide information re7 quired for a complete application to the Sec8 retary prior to such determination. The Sec9 retary shall clearly define the information re10 quired for a complete application under this sec11 tion. Such application may be made on the basis

12 of an individual lease or unit. If the Secretary

13 determines that such new production would be

14 economic in the absence of the relief from the re15 quirement to pay royalties provided for by clause

16 (i) of this subparagraph, the provisions of clause

17 (i) shall not apply to such production. If the

18 Secretary determines that such new production

19 would not be economic in the absence of the relief

20 from the requirement to pay royalties provided

21 for by clause (i), the Secretary must determine

22 the volume of production from the lease or unit

23 on which no royalties would be due in order to

24 make such new production economically viable;

25 except that for new production as defined in
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1 clause (iv)(I), in no case will that volume be less

2 than 17.5 million barrels of oil equivalent in

3 water depths of 200 to 400 meters, 52.5 million

4 barrels of oil equivalent in 400 to 800 meters of

5 water, and 87.5 million barrels of oil equivalent

6 in water depths greater than 800 meters. Rede7 termination of the applicability of clause (i)

8 shall be undertaken by the Secretary when re9 quested by the lessee prior to the commencement

10 of the new production and upon significant

11 change in the factors upon which the original de12 termination was made. The Secretary shall make

13 such redetermination within 120 days of submis14 sion of a complete application. The Secretary

15 may extend the time period for making any de16 termination or redetermination under this clause

17 for 30 days, or longer if agreed to by the appli18 cant, if circumstances so warrant. The lessee

19 shall be notified in writing of any determination

20 or redetermination and the reasons for and as21 sumptions used for such determination. Any de22 termination or redetermination under this clause

23 shall be a final agency action. The Secretary’s

24 determination or redetermination shall be judi25 cially reviewable under section 10(a) of the Ad-
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1 ministrative Procedure Act (5 U.S.C. 702), only

2 for actions filed within 30 days of the Sec3 retary’s determination or redetermination.

4 ‘‘(iii) In the event that the Secretary fails

5 to make the determination or redetermination

6 called for in clause (ii) upon application by the

7 lessee within the time period, together with any

8 extension thereof, provided for by clause (ii), no

9 royalty payments shall be due on new produc10 tion as follows:

11 ‘‘(I) For new production, as defined in

12 clause (iv) (I) of this subparagraph, no roy13 alty shall be due on such production accord14 ing to the schedule of minimum volumes

15 specified in clause (ii) of this subparagraph.

16 ‘‘(II) For new production, as defined

17 in clause (iv) (II) of this subparagraph, no

18 royalty shall be due on such production for

19 one year following the start of such produc20 tion.

21 ‘‘(iv) For purposes of this subparagraph, the

22 term ‘new production’ is—

23 ‘‘(I) any production from a lease from

24 which no royalties are due on production,

25 other than test production, prior to the date
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1 of enactment of the Outer Continental Shelf

2 Deep Water Royalty Relief Act; or

3 ‘‘(II) any production resulting from

4 lease development activities pursuant to a

5 Development Operations Coordination Doc6 ument, or supplement thereto that would ex7 pand production significantly beyond the

8 level anticipated in the Development Oper9 ations Coordination Document, approved by

10 the Secretary after the date of enactment of

11 the Outer Continental Shelf Deep Water

12 Royalty Relief Act.

13 ‘‘(v) During the production of volumes de14 termined pursuant to clauses (ii) or (iii) of this

15 subparagraph, in any year during which the

16 arithmetic average of the closing prices on the

17 New York Mercantile Exchange for light sweet

18 crude oil exceeds $28.00 per barrel, any produc19 tion of oil will be subject to royalties at the lease

20 stipulated royalty rate. Any production subject

21 to this clause shall be counted toward the produc22 tion volume determined pursuant to clause (ii)

23 or (iii). Estimated royalty payments will be

24 made if such average of the closing prices for the

25 previous year exceeds $28.00. After the end of the
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1 calendar year, when the new average price can

2 be calculated, lessees will pay any royalties due,

3 with interest but without penalty, or can apply

4 for a refund, with interest, of any overpayment.

5 ‘‘(vi) During the production of volumes de6 termined pursuant to clause (ii) or (iii) of this

7 subparagraph, in any year during which the

8 arithmetic average of the closing prices on the

9 New York Mercantile Exchange for natural gas

10 exceeds $3.50 per million British thermal units,

11 any production of natural gas will be subject to

12 royalties at the lease stipulated royalty rate. Any

13 production subject to this clause shall be counted

14 toward the production volume determined pursu15 ant to clauses (ii) or (iii). Estimated royalty

16 payments will be made if such average of the

17 closing prices for the previous year exceeds $3.50.

18 After the end of the calendar year, when the new

19 average price can be calculated, lessees will pay

20 any royalties due, with interest but without pen21 alty, or can apply for a refund, with interest, of

22 any overpayment.

23 ‘‘(vii) The prices referred to in clauses (v)

24 and (vi) of this subparagraph shall be changed

25 during any calendar year after 1994 by the per-
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1 centage, if any, by which the implicit price

2 deflator for the gross domestic product changed

3 during the preceding calendar year.’’.

4 SEC. 5423. NEW LEASES.

5 Section 8(a)(1) of the Outer Continental Shelf Lands

6 Act, as amended (43 U.S.C. 1337 (a)(1)), is amended—

7 (1) by redesignating subparagraph (H) as sub8 paragraph (I);

9 (2) by striking ‘‘or’’ at the end of subparagraph

10 (G); and

11 (3) by inserting after subparagraph (G) the fol12 lowing new subparagraph:

13 ‘‘(H) cash bonus bid with royalty at no less

14 than 12 and 1/2 per centum fixed by the Sec15 retary in amount or value of production saved,

16 removed, or sold, and with suspension of royal17 ties for a period, volume, or value of production

18 determined by the Secretary, which suspensions

19 may vary based on the price of production from

20 the lease; or’’.

21 SEC. 5424. LEASE SALES.

22 For all tracts located in water depths of 200 meters

23 or greater in the Western and Central Planning Area of

24 the Gulf of Mexico, including that portion of the Eastern

25 Planning Area of the Gulf of Mexico encompassing whole
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1 lease blocks lying west of 87 degrees, 30 minutes West lon2 gitude, any lease sale within seven years of the date of en3 actment of this chapter, shall use the bidding system author4 ized in section 8(a)(1)(H) of the Outer Continental Shelf

5 Lands Act, as amended by this chapter, except that the sus6 pension of royalties shall be set at a volume of not less than

7 the following:

8 (1) 17.5 million barrels of oil equivalent for

9 leases in water depths of 200 to 400 meters;

10 (2) 52.5 million barrels of oil equivalent for

11 leases in 400 to 800 meters of water; and

12 (3) 87.5 million barrels of oil equivalent for

13 leases in water depths greater than 800 meters.

14 SEC. 5425. REGULATIONS.

15 The Secretary shall promulgate such rules and regula16 tions as are necessary to implement the provisions of this

17 chapter within 180 days after the enactment of this Act.

18 SEC. 5426. SAVINGS CLAUSE.

19 Nothing in this chapter shall be construed to affect any

20 offshore pre-leasing, leasing, or development moratorium,

21 including any moratorium applicable to the Eastern Plan22 ning Area of the Gulf of Mexico located off the Gulf Coast

23 of Florida.
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1 CHAPTER 9—EXPORTS OF ALASKA NORTH

2 SLOPE OIL

3 SEC. 5431. EXPORTS OF ALASKAN NORTH SLOPE OIL.

4 Section 28 of the Mineral Leasing Act (30 U.S.C. 185)

5 is amended by amending subsection (s) to read as follows:

6 ‘‘EXPORTS OF ALASKAN NORTH SLOPE OIL

7 ‘‘(s)(1) Subject to paragraphs (2) through (6) of this

8 subsection and notwithstanding any other provision of this

9 Act or any other provision of law (including any regula10 tion) applicable to the export of oil transported by pipeline

11 over right-of-way granted pursuant to section 203 of the

12 Trans-Alaska Pipeline Authorization Act (43 U.S.C. 1652),

13 such oil may be exported unless the President finds that

14 exportation of this oil is not in the national interest. The

15 President shall make his national interest determination

16 within five months of the date of enactment of this sub17 section. In evaluating whether exports of this oil are in the

18 national interest, the President shall at a minimum con19 sider—

20 ‘‘(A) whether exports of this oil would di21 minish the total quantity or quality of petroleum

22 available to the United States;

23 ‘‘(B) the results of an appropriate environ24 mental review, including consideration of appro25 priate measures to mitigate any potential ad26 verse effects of exports of this oil on the environ-
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1 ment, which shall be completed within four

2 months of the date of the enactment of this sub3 section; and

4 ‘‘(C) whether exports of this oil are likely to

5 cause sustained material oil supply shortages or

6 sustained oil prices significantly above world

7 market levels that would cause sustained mate8 rial adverse employment effects in the United

9 States or that would cause substantial harm to

10 consumers, including noncontiguous States and

11 Pacific territories. If the President determines

12 that exports of this oil are in the national inter13 est, he may impose such terms and conditions

14 (other than a volume limitation) as are nec15 essary or appropriate to ensure that such exports

16 are consistent with the national interest.

17 ‘‘(2) Except in the case of oil exported to a country

18 with which the United States entered into a bilateral inter19 national oil supply agreement before November 26, 1979,

20 or to a country pursuant to the International Emergency

21 Oil Sharing Plan of the International Energy Agency, any

22 oil transported by pipeline over right-of-way granted pur23 suant to section 203 of the Trans-Alaska Pipeline Author24 ization Act (43 U.S.C. 1652) shall, when exported, be trans25 ported by a vessel documented under the laws of the United
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1 States and owned by a citizen of the United States (as de2 termined in accordance with section 2 of the Shipping Act,

3 1916 (46 U.S.C. App. 802)).

4 ‘‘(3) Nothing in this subsection shall restrict the au5 thority of the President under the Constitution, the Inter6 national Emergency Economic Powers Act (50 U.S.C. 1701

7 et seq.), the National Emergencies Act (50 U.S.C. 1601 et

8 seq.), or part B of title II of the Energy Policy and Con9 servation Act (42 U.S.C. 6271–76) to prohibit exports.

10 ‘‘(4) The Secretary of Commerce shall issue any rules

11 necessary for implementation of the President’s national in12 terest determination, including any licensing requirements

13 and conditions, within 30 days of the date of such deter14 mination by the President. The Secretary of Commerce shall

15 consult with the Secretary of Energy in administering the

16 provisions of this subsection.

17 ‘‘(5) If the Secretary of Commerce finds that exporting

18 oil under authority of this subsection has caused sustained

19 material oil supply shortages or sustained oil prices signifi20 cantly above world market levels and further finds that

21 these supply shortages or price increases have caused or are

22 likely to cause sustained material adverse employment ef23 fects in the United States, the Secretary of Commerce, in

24 consultation with the Secretary of Energy, shall rec25 ommend, and the President may take, appropriate action
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1 concerning exports of this oil, which may include modifying

2 or revoking authority to export such oil.

3 ‘‘(6) Administrative action under this subsection is not

4 subject to sections 551 and 553 through 559 of title 5, Unit5 ed States Code.’’.

6 CHAPTER 10—SKI AREA PERMIT RENTAL

7 CHARGES ON NATIONAL FOREST SYS8 TEM LANDS

9 SEC. 5441. SKI AREA PERMIT RENTAL CHARGE.

10 (a) The Secretary of Agriculture shall charge a rental

11 charge for all ski area permits issued pursuant to section

12 3 of the National Forest Ski Area Permit Act of 1986 (16

13 U.S.C. 497b), the Act of March 4, 1915 (38 Stat. 1101,

14 chapter 144; 16 U.S.C. 497), or the 9th through 20th para15 graphs under the heading ‘‘SURVEYING THE PUBLIC LANDS’’

16 under the heading ‘‘UNDER THE DEPARTMENT OF THE IN17 TERIOR’’ in the Act of June 4, 1897 (30 Stat. 34, chapter

18 2), on National Forest System lands. Permit rental charges

19 for permits issued pursuant to the National Forest Ski Area

20 Permit Act of 1986 shall be calculated as set forth in sub21 section (b). Permit rental charges for existing ski area per22 mits issued pursuant to the Act of March 4, 1915, and the

23 Act of June 4, 1897, shall be calculated in accordance with

24 those existing permits: Provided, That a permittee may, at
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1 the permittee’s option, use the calculation method set forth

2 in subsection (b).

3 (b)(1) The ski area permit rental charge (SAPRC)

4 shall be calculated by adding the permittee’s gross revenues

5 from lift ticket/year-round ski area use pass sales plus reve6 nue from ski school operations (LT+SS) and multiplying

7 such total by the slope transport feet percentage (STFP) on

8 National Forest System land. That amount shall be in9 creased by the gross year-round revenue from ancillary fa10 cilities (GRAF) physically located on national forest land,

11 including all permittee or subpermittee lodging, food serv12 ice, rental shops, parking and other ancillary operations,

13 to determine the adjusted gross revenue (AGR) subject to

14 the permit rental charge. The final rental charge shall be

15 calculated by multiplying the AGR by the following per16 centages for each revenue bracket and adding the total for

17 each revenue bracket:

18 (A) 1.5 percent of all adjusted gross revenue

19 below $3,000,000;

20 (B) 2.5 percent for adjusted gross revenue be21 tween $3,000,000 and $15,000,000;

22 (C) 2.75 percent for adjusted gross revenue be23 tween $15,000,000 and $50,000,000; and

24 (D) 4.0 percent for the amount of adjusted gross

25 revenue that exceeds $50,000,000.
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1 (2) In cases where ski areas are only partially located

2 on national forest lands, the slope transport feet percentage

3 on national forest land referred to in subsection (b) shall

4 be calculated as generally described in the Forest Service

5 Manual in effect as of January 1, 1992. Revenues from Nor6 dic ski operations shall be included or excluded from the

7 rental charge calculation according to the percentage of

8 trails physically located on national forest land.

9 (3) In order to ensure that the rental charge remains

10 fair and equitable to both the United States and ski area

11 permittees, the adjusted gross revenue figures for each reve12 nue bracket in paragraph (1) shall be adjusted annually

13 by the percent increase or decrease in the national

14 Consumer Price Index for the preceding calendar year.

15 (c) The rental charge set forth in subsection (b) shall

16 be due on June 1 of each year and shall be paid or pre17 paid by the permittee on a monthly, quarterly, annual or

18 other schedule as determined appropriate by the Secretary

19 in consultation with the permittee. Unless mutually agreed

20 otherwise by the Secretary of Agriculture and the permittee,

21 the payment or prepayment schedule shall conform to the

22 permittee’s schedule in effect prior to the date of enactment

23 of this Act. To reduce costs to the permittee and the Forest

24 Service, the Secretary shall each year provide the permittee

25 with a standardized form and worksheets (including annual
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1 rental charge calculation brackets and rates) to be used for

2 rental charge calculation and submitted with the rental

3 charge payment.

4 (d) The ski area permit rental charge set forth in this

5 section shall become effective on June 1, 1996 and cover re6 ceipts retroactive to June 1, 1995: Provided, however, That

7 if a permittee has paid rental charges for the period June

8 1, 1995, to June 1, 1996, under the graduated rate rental

9 charge system formula in effect prior to the date of enact10 ment of this Act, such rental charges shall be credited to11 ward the new rental charge due on June 1, 1996. In order

12 to ensure increasing rental charge receipt levels to the Unit13 ed States during transition from the graduated rate rental

14 charge system formula to the formula of this Act, the rental

15 charge paid by any individual permittee shall be—

16 (1) for the 1995–1996 permit year, shall be ei17 ther the rental charge paid for the preceding 1994–

18 1995 base year or the rental charge calculated pursu19 ant to this Act, whichever is higher;

20 (2) for the 1996–1997 permit year, the rental

21 charge paid shall be either the rental charge paid for

22 the 1994–1995 base year or the rental charge cal23 culated pursuant to this Act, whichever is higher; and

24 (3) for the 1997–1998 permit year, the rental

25 charge for the 1994–1995 base year or the rental
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1 charge calculated pursuant to this Act, whichever is

2 higher.

3 If an individual permittee’s adjusted gross revenue for the

4 1995–1996, 1996–1997, or 1997–1998 permit years falls

5 more than 10 percent below the 1994–1995 base year, the

6 rental charge paid shall be the rental charge calculated pur7 suant to this Act.

8 (e) Under no circumstances shall revenue, or

9 subpermittee revenue (other than lift ticket, area use pass,

10 or ski school sales) obtained from operations physically lo11 cated on non-national forest land be included in the ski

12 area permit rental charge calculation.

13 (f) To reduce administrative costs on ski area permit14 tees and the Forest Service the terms ‘‘revenue’’ and ‘‘sales’’,

15 as used in this section, shall mean actual income from sales

16 and shall not include sales of operating equipment, refunds,

17 rent paid to the permittee by sublessees, sponsor contribu18 tions to special events or any amounts attributable to em19 ployee gratuities or employee lift tickets, discounts, or other

20 goods or services (except for bartered goods and complimen21 tary lift tickets) for which the permittee does not receive

22 money.

23 (g) In cases where an area of national forest land is

24 under a ski area permit but the permittee does not have

25 revenue or sales qualifying for rental charge payment pur-
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1 suant to subsection (a), the permittee shall pay an annual

2 minimum rental charge of $2 for each national forest acre

3 under permit or a percentage of appraised land value, as

4 determined to be appropriate by the Secretary.

5 (h) Where the new rental charge provided for in sub6 section (b)(1) results in an increase in permit rental charge

7 greater than one half of one percent of the permittee’s ad8 justed gross revenue (as determined under subsection

9 (b)(1)), the new rental charge shall be phased in over a 5-

10 year period in a manner providing for increases of approxi11 mately equal increments.

12 CHAPTER 11—PARK ENTRANCE FEES

13 SEC. 5451. FEES.

14 (a) ADMISSION FEES.—Section 4(a) of the Land and

15 Water Conservation Fund Act of 1965 (16 U.S.C. 460l–

16 6a(a)) is amended—

17 (1) in the first sentence of the subsection by

18 striking ‘‘no more than 21’’;

19 (2) in the first sentence of paragraph (1)(A)(i)

20 by striking ‘‘$25’’ and inserting ‘‘$50’’;

21 (3) in the second sentence of paragraph (1)(B)

22 by striking ‘‘$15’’ and inserting ‘‘$25’’;

23 (4) in paragraph (2) by striking the fourth, fifth,

24 and sixth sentences and inserting ‘‘The fee for a sin25 gle-visit permit at any designated area shall be col-
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1 lected on a per person basis, not to exceed $6 per per2 son, including for persons entering by private, non3 commercial vehicle.’’;

4 (5) in paragraph (3)—

5 (A) in the third sentence by inserting

6 ‘‘Great’’ before ‘‘Smoky’’; and

7 (B) by striking the last sentence;

8 (6) in paragraph (4)—

9 (A) by striking the second sentence and in10 serting ‘‘Such permit shall be nontransferable,

11 shall be issued for a one-time charge, which shall

12 be set at the same rate as the fee for a Golden

13 Eagle Passport, and shall entitle the permittee to

14 free admission into any area designated pursu15 ant to this subsection.’’; and

16 (B) by striking the third sentence and in17 serting ‘‘No fees of any kind shall be collected

18 from any persons who have a right of access for

19 hunting or fishing privileges under a specific

20 provision of law or treaty or who are engaged in

21 the conduct of official Federal, State, or local

22 government business.’’;

23 (7) by striking paragraph (5) and inserting the

24 following:
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1 ‘‘(5) The Secretary of the Interior and the Sec2 retary of Agriculture shall establish procedures pro3 viding for the issuance of a lifetime admission permit

4 to any citizen of, or person legally domiciled in, the

5 United States, if such citizen or person applies for

6 such permit and is permanently disabled. Such proce7 dures shall ensure that a lifetime admission permit

8 shall be issued only to persons who have been medi9 cally determined to be permanently disabled. A life10 time admission permit shall be nontransferable, shall

11 be issued without charge, and shall entitle the permit12 tee and one accompanying individual to general ad13 mission into any area designated pursuant to this

14 subsection, notwithstanding the method of travel.’’;

15 (8) by striking paragraph (9) and by redesignat16 ing paragraph (10) as paragraph (9)’’;

17 (9) by striking all but the last sentence of para18 graph (11) and redesignating paragraph (11) as

19 paragraph (10); and

20 (10) by redesignating paragraph (12) as para21 graph (11).

22 (b) RECREATION FEES.—Section 4 of the Land and

23 Water Conservation Fund Act of 1965 (16 U.S.C. 460l–6a)

24 is amended by striking subsection (b) and inserting the fol25 lowing:
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1 ‘‘(b) RECREATION USE FEES.—Each agency develop2 ing, administering, providing, or furnishing at Federal ex3 pense services for such activities as camping, including, but

4 not limited to, back country camping under permit, guard5 ed swimming sites, boat launch facilities, managed parking

6 lots, motorized recreation use and other recreation uses, is

7 authorized, in accordance with this section to provide for

8 the collection of recreation use fees at the place of use or

9 any reasonably convenient location. The administering Sec10 retary may establish both daily and annual recreation use

11 fees.’’.

12 (c) CRITERIA, POSTING AND UNIFORMITY OF FEES.—

13 Section 4(d) of the Land and Water Conservation Fund Act

14 of 1965 (16 U.S.C. 460l–6a(d)) is amended in the first sen15 tence by striking ‘‘recreation fees charged by non-Federal

16 public agencies,’’ and inserting ‘‘fees charged by other pub17 lic and private entities,’’.

18 (d) PENALTY.—Section 4(e) of the Land and Water

19 Conservation Fund Act of 1965 (16 U.S.C. 460l–6a(e)) is

20 amended by striking ‘‘of not more than $100.’’ and insert21 ing ‘‘as provided by law.’’.

22 (e) TECHNICAL AMENDMENTS.—Section 4(h) of the

23 Land and Water Conservation Fund Act of 1965 (16 U.S.C.

24 460l–6a(h)) is amended—
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1 (1) by striking ‘‘Bureau of Outdoor Recreation’’

2 and inserting ‘‘National Park Service’’;

3 (2) by striking ‘‘Natural Resources’’ and insert4 ing ‘‘Resources’’; and

5 (3) by striking ‘‘Bureau’’ and inserting ‘‘Na6 tional Park Service’’.

7 (f) USE OF FEES.—Section 4(i) of the Land and

8 Water Conservation Fund Act of 1965 (16 U.S.C. 460l–

9 6a(i)) is amended—

10 (1) in the first sentence of paragraph (1)(B) by

11 striking ‘‘fee collection costs for that fiscal year’’ and

12 inserting ‘‘fee collection costs for the immediately pre13 ceding fiscal year’’ and by striking ‘‘section in that

14 fiscal year’’ and inserting ‘‘section in such imme15 diately preceding fiscal year’’;

16 (2) in the second sentence of subparagraph (B)

17 by striking ‘‘in that fiscal year’’; and

18 (3) by striking paragraph (4) and inserting the

19 following:

20 ‘‘(4) Amounts covered into the special account for the

21 National Park Service shall be allocated among park system

22 units in accordance with subsection (j) for obligation or ex23 penditure by the Director of the National Park Service for

24 park operations.’’.
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1 (g) TIME OF REIMBURSEMENT.—Section 4(k) of the

2 Land and Water Conservation Fund Act of 1965 (16 U.S.C.

3 460l–6a(k)) is amended by striking the last sentence.

4 (h) COMMERCIAL TOUR USE FEES.—Section 4(n) of

5 the Land and Water Conservation Fund Act of 1965 (16

6 U.S.C. 460l–6a(n)) is amended—

7 (1) by striking the first sentence of paragraph

8 (1) and inserting ‘‘In the case of each unit of the Na9 tional Park System for which an admission fee is

10 charged under this section, the Secretary of the Inte11 rior shall establish, by October 1, 1996, a commercial

12 tour use fee in lieu of a per person admission fee to

13 be imposed on each vehicle entering the unit for the

14 purpose of providing commercial tour services within

15 the unit.’’; and

16 (2) by striking the period at the end of para17 graph (3) and inserting ‘‘, with written notification

18 of such adjustments provided to commercial tour op19 erators 12 months in advance of implementation.’’.

20 (i) CONFORMING AMENDMENTS.—

21 (1) Title I of the Department of the Interior and

22 Related Agencies Appropriations Act, 1994, is amend23 ed by striking the second proviso under the heading

24 ‘‘ADMINISTRATIVE PROVISIONS’’ under the heading
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1 ‘‘NATIONAL PARK SERVICE’’ (related to recovery of

2 costs associated with special use permits).

3 (2) Section 3 of the Act entitled ‘‘An Act creat4 ing the Mount Rushmore National Memorial Commis5 sion and defining its purposes and powers’’, approved

6 February 25, 1929 (45 Stat. 1300, chapter 315), is

7 amended by striking the last sentence.

8 (3) Section 5 of Public Law 87–657 (16 U.S.C.

9 459c–5), is amended by striking subsection (e).

10 (4) Section 3 of Public Law 87–750 (16 U.S.C.

11 398e) is amended by striking subsection (b).

12 (5) Section 4(e) of Public Law 92–589 (16

13 U.S.C. 460bb–3) is amended by striking the first sen14 tence.

15 (6) Section 6 of Public Law 95–348 (16 U.S.C.

16 410dd) is amended by striking subsection (j).

17 (7) Section 207 of Public Law 96–199 (16

18 U.S.C. 410ff–6) is repealed.

19 (8) Section 106 of Public Law 96–287 (16

20 U.S.C. 410gg–5) is amended by striking the last sen21 tence.

22 (9) Section 204 of Public Law 96–287 (94 Stat.

23 601) is amended by striking the last sentence.

24 (10) Section 5 of Public Law 96–428 (94 Stat.

25 1842; 16 U.S.C. 461 note) is repealed.
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1 (11) Public Law 100–55 (101 Stat. 371; U.S.C.

2 460l–6a note) is repealed.

3 SEC. 5452. COVERING OF INCREASED FEE REVENUES INTO

4 SPECIAL ACCOUNTS.

5 Of the funds deposited in special accounts in the Treas6 ury for the National Park Service, Bureau of Land Man7 agement, and Forest Service as set forth in section 4(i) of

8 the Land and Water Conservation Fund Act of 1965 (16

9 U.S.C. 460l–6a(i)), beginning in fiscal year 1997, 80 per10 cent of all receipts earned in the previous year in excess

11 of the following amounts for each covered agency shall be

12 made available to that agency without further appropria13 tion:

14 (1) National Park System:

15 (A) $82,000,000 for fiscal year 1997.

16 (B) $85,000,000 for fiscal year 1998.

17 (C) $88,000,000 for fiscal year 1999.

18 (D) $91,000,000 for fiscal year 2000.

19 (E) $94,000,000 for fiscal year 2001.

20 (F) $97,000,000 for fiscal year 2002.

21 (G) $100,000,000 for fiscal year 2003.

22 (H) $112,000,000 for fiscal year 2004.

23 (I) $106,000,000 for fiscal year 2005.

24 (2) Bureau of Land Management:

25 (A) $4,500,000 for fiscal year 1997.
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1 (B) $5,000,000 for fiscal year 1998.

2 (C) $5,000,000 for fiscal year 1999.

3 (D) $5,000,000 for fiscal year 2000.

4 (E) $5,000,000 for fiscal year 2001.

5 (F) $5,000,000 for fiscal year 2002.

6 (G) $5,000,000 for fiscal year 2003.

7 (H) $5,000,000 for fiscal year 2004.

8 (I) $5,000,000 for fiscal year 2005.

9 (3) Forest Service:

10 (A) $20,000,000 for fiscal year 1997.

11 (B) $20,600,000 for fiscal year 1998.

12 (C) $21,200,000 for fiscal year 1999.

13 (D) $21,900,000 for fiscal year 2000.

14 (E) $22,500,000 for fiscal year 2001.

15 (F) $23,600,000 for fiscal year 2002.

16 (G) $24,300,000 for fiscal year 2003.

17 (H) $25,000,000 for fiscal year 2004.

18 (I) $25,800,000 for fiscal year 2005.

19 Beginning in fiscal year 2006, and in each fiscal year

20 thereafter, the amounts set forth in this section for each cov21 ered agency in fiscal year 2005 shall be increased by 4 per22 cent per year, and 80 percent of all receipts earned in excess

23 of such amounts for each covered agency shall be made

24 available to that agency without further appropriation.
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1 SEC. 5453. ALLOCATION AND USE OF FEES.

2 (a) ALLOCATION.—Beginning in fiscal year 1997, re3 ceipts above the amounts stated in section 5452 in each cov4 ered agency’s special account from the previous fiscal year

5 shall be allocated as follows:

6 (1) Seventy-five percent shall be allocated among

7 the units or areas of each affected agency in the same

8 proportion as fees collected pursuant to section 4 of

9 the Land and Water Conservation Fund Act of 1965

10 (16 U.S.C. 460l–6a) from a specific unit or area bear

11 to the total amount of such fees collected from all

12 units or areas of the same covered agency for each fis13 cal year.

14 (2) Twenty-five percent shall be allocated among

15 each covered agency’s units or areas on the basis of

16 need, as determined by the Secretary.

17 (b) USE.—Expenditures from the special accounts

18 shall be used solely for infrastructure related to visitor use

19 and annual operating expenses related to visitor services

20 at units or areas of the covered agencies.

21 CHAPTER 12—CONCESSION REFORM

22 SEC. 5461. SHORT TITLE.

23 This chapter may be cited as the ‘‘Visitor Facilities

24 and Services Enhancement Act of 1995’’.

25 SEC. 5462. DEFINITIONS.

26 In this chapter:
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1 (1) ‘‘adjusted gross receipts’’ means gross receipts

2 less revenue derived from goods and services provided

3 on other than Federal lands or conveyed to units of

4 Government for hunting or fishing licenses or for en5 trance or recreation fees, or from such other exclusions

6 as the Secretary concerned might apply.

7 (2) ‘‘agency head’’ means the head of an agency

8 or his or her designated representative.

9 (3) ‘‘bidder’’ means a person who has submitted,

10 or may submit, a proposal respecting the facilities or

11 services, whether or not such bidder is the current

12 concessioner.

13 (4) ‘‘concessioner’’ means a person or other en14 tity acting under a concession authorization which

15 provides public services, facilities, or activities on

16 Federal lands pursuant to a concession service agree17 ment or concession license.

18 (5) ‘‘concession authorization’’ means a conces19 sion service agreement or concession license as appli20 cable.

21 (6) ‘‘concession license’’ means a written contract

22 between the agency head and the concessioner which

23 sets forth the terms and conditions under which the

24 concessioner is authorized to provide recreation serv-
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1 ices or activities on a limited basis as well as the

2 rights and obligations of the Federal Government.

3 (7) ‘‘concession service agreement’’ means a writ4 ten contract between the agency head and the conces5 sioner which sets forth the terms and conditions under

6 which the concessioner is authorized to provide visitor

7 services, facilities, or activities as well as the rights

8 and obligations of the Federal Government.

9 (8) ‘‘Consumer Price Index’’ means the

10 Consumer Price Index-All Urban Consumers pub11 lished by the Bureau of Labor Statistics of the De12 partment of Labor, and from and after such time as

13 such index is no longer published, the Consumer Price

14 Index or other regularly-published cost-of-living index

15 chosen by the Secretary concerned which reasonably

16 approximates the Consumer Price Index specified

17 above.

18 (9) ‘‘gross receipts’’ means revenue from goods or

19 services provided by concession services, facilities, or

20 activities on Federal lands and waters.

21 (10) ‘‘performance incentive’’ means a credit

22 based on past performance toward the score awarded

23 by the Secretary concerned to an incumbent conces24 sioner’s proposal submitted in response to a solicita-
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1 tion for the reissuance of such incumbent conces2 sioner’s contract.

3 (11) ‘‘proposal’’ means the complete submission

4 for a concession service agreement offered in response

5 to the solicitation for such concession service agree6 ment.

7 (12) ‘‘prospectus’’ means a document or docu8 ments issued by the Secretary concerned and included

9 with a solicitation which sets forth the minimum re10 quirements for the award of a concession service

11 agreement.

12 (13) ‘‘Secretary concerned’’ means —

13 (A) the Secretary of the Interior with re14 spect to all concession authorizations issued by

15 the National Park Service, and all concession

16 authorizations for river runner, outfitter, or

17 guide concessions issued by the United States

18 Fish and Wildlife Service and the Bureau of

19 Land Management; and

20 (B) the Secretary of Agriculture with re21 spect to all river runner, outfitter, or guide con22 cessions issued by the Forest Service.

23 (14) ‘‘selected bidder’’ means the bidder selected

24 by the Secretary concerned for the award of a conces-
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1 sion service agreement until such bidder becomes the

2 concessioner.

3 (15) ‘‘solicitation’’ means a request by the Sec4 retary concerned for proposals in response to a pro5 spectus.

6 SEC. 5463. NATURE AND TYPES OF CONCESSION AUTHOR7 IZATIONS.

8 (a) IN GENERAL.—The Secretary concerned may enter

9 into concession authorizations as follows:

10 (1) CONCESSION SERVICE AGREEMENT.—A con11 cession service agreement shall be entered into for all

12 concessions where the Secretary concerned determines

13 that the provision of concession services is in the in14 terest of the Federal Government and issues either a

15 competitive offering for concession services, facilities

16 or activities or a noncompetitive offering for such

17 services, facilities, or activities based on a finding

18 that due to special circumstances it is not in the pub19 lic interest of the United States to award a concession

20 service agreement on a competitive basis.

21 (2) CONCESSION LICENSE.—Whenever the Sec22 retary concerned makes a determination that public

23 enjoyment of Federal lands would be enhanced

24 through the provision of concession services for one25 time, intermittent, or infrequently scheduled activities
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1 and that there exists no need to limit the number of

2 concessionaires providing such services, the Secretary

3 shall enter into a concession license with a qualified

4 concessioner. The Secretary concerned may not limit

5 the number of concession licenses issued for the same

6 types of activities in a particular geographic area.

7 (3) LANDS UNDER MULTIPLE JURISDICTIONS.—

8 In order to reduce administrative costs the Secretaries

9 of the Departments concerned shall designate an agen10 cy to be the lead agency concerning concessions which

11 conduct a single operation on lands or waters under

12 the jurisdiction of more than one agency. Unless oth13 erwise agreed to by each such Secretary concerned, the

14 lead agency shall be that agency under whose jurisdic15 tion the concessioner generates the greatest amount of

16 gross receipts. The agency so designated shall issue a

17 single concession authorization and collect a single fee

18 under paragraphs (1) and (2) for such operation.

19 SEC. 5464. COMPETITIVE SELECTION PROCESS FOR CON20 CESSION SERVICE AGREEMENTS.

21 (a) AWARD TO BEST PROPOSAL.—The Secretary con22 cerned shall enter into, and reissue, a concession service

23 agreement with the person whom the Secretary determines

24 in accordance with this section submits the best proposal

25 through a competitive process as defined in this section.
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1 (b) SOLICITATION AND PROSPECTUS.—Prior to mak2 ing a solicitation for a concession service agreement, the

3 Secretary concerned shall prepare a prospectus for such so4 licitation, shall publish notice of its availability at least

5 once in such local or national newspapers or trade publica6 tions as the Secretary determines appropriate, and shall

7 make such prospectus available upon request to all inter8 ested parties. The prospectus shall specify the minimum re9 quirements for such concession service agreement, including

10 but not limited to:

11 (1) a description of the services and facilities to

12 be provided by the concessioner.

13 (2) the level of capital investment required by the

14 concessioner (if any).

15 (3) terms and conditions of the concession service

16 agreement.

17 (4) minimum facilities and services to be pro18 vided by the Secretary concerned to the concessioner,

19 if any, including but not limited to public access,

20 utilities, buildings, and minimum public services.

21 (5) such other information related to the conces22 sion operation available to the Secretary concerned as

23 is not privileged or otherwise exempt from disclosure

24 under Federal law, as the Secretary determines is
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1 necessary to allow for the submission of competitive

2 proposals; and

3 (6) Local hiring preferences provisions, if appli4 cable, and notwithstanding any other provision of

5 law, to increase revenue to the United States by

6 avoiding additional transportation and related costs

7 associated with non-resident labor, each contract

8 awarded by the Department of the Interior for conces9 sioner or commercial use contractor-provided visitor

10 services performed in whole or in part of a State

11 which is not contiguous with another State and has

12 an unemployment rate in excess of the national aver13 age rate of unemployment, as determined by the Sec14 retary of Labor shall include a provision requiring

15 the concessioner or commercial use contractor to em16 ploy individuals who are residents of such State, and

17 who, in the case of any craft or trade, possess or

18 would be able to acquire promptly the necessary skills

19 for the purpose of performing that portion of the con20 tract in such State.

21 (7) Minimum fees to the United States.

22 (c) FACTORS AND MINIMUM STANDARDS IN DETER23 MINING BEST PROPOSAL.—The prospectus shall assign a

24 weight to each factor identified therein related to the impor25 tance of such factor in the selection process. Points shall
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1 be awarded for each such factor, based on the relative

2 strength of the proposal concerning that factor. In selecting

3 the best proposal, the Secretary concerned shall take into

4 consideration (but shall not be limited to) the following, in5 cluding whether the proposal meets the minimum require6 ments (if any) of the Secretary for each of the following:

7 (1) Responsiveness to the prospectus.

8 (2) Quality of visitor services to be provided tak9 ing into account the nature of equipment and facili10 ties to be provided.

11 (3) Experience and performance in providing the

12 same or similar accommodations, facilities, or serv13 ices. This factor shall account for not less than 20

14 percent of the maximum points available under any

15 prospectus. Where the Secretary concerned determines

16 it to be warranted to provide for a high quality visi17 tor experience, the prospectus for a concession service

18 agreement shall provide greater weight to this factor

19 based on such aspects of the concession service agree20 ment as scope or size, complexity, nature of technical

21 skills required, and site-specific knowledge of the area.

22 The similarity of the qualifying experience outlined

23 in the proposal to the nature of the services required

24 under the concession service agreement and the length
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1 of such qualifying experience shall be the basis for

2 awarding points for this factor.

3 (4) Record of resource protection (as appropriate

4 for services and activities with potential to impact

5 natural or cultural resources).

6 (5) Financial capability.

7 (6) Fees to the United States.

8 (d) SELECTION PROCESS.—The process for selecting

9 the best proposal shall consist of the following:

10 (1) First, the Secretary concerned shall identify

11 those proposals which meet the minimum standards

12 (if any) for the factors identified under subsection (c).

13 (2) Second, the Secretary concerned shall evalu14 ate all proposals identified under paragraph (1), con15 sidering all factors identified under subsection (c), as

16 well as performance incentives earned under sub17 section (e) and renewal penalties incurred under sub18 section (f).

19 (3) Third, the Secretary concerned shall offer the

20 concession service agreement to the best qualified ap21 plicant as determined by the evaluation under para22 graph (2). Prior to any such offer, the Secretary shall

23 certify that such applicant has adequate funds to pur24 chase any investment interest.

25 (e) PERFORMANCE INCENTIVES.—
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1 (1) In evaluating the proposal of an incumbent

2 concessioner when the Secretary concerned issues a

3 prospectus for the renewal of the concession service

4 agreement, such concessioner is entitled to a perform5 ance incentive of—

6 (A) one percent of the maximum points

7 available under such prospectus for each year in

8 which the concessioner’s annual performance is

9 rated as exceeding the requirements outlined in

10 the prospectus or ‘‘good’’, and

11 (B) a one-time 3-year merit term extension

12 upon a finding that a concessioner has been

13 rated as ‘‘good’’ in each annual performance

14 evaluation through the term of the concession

15 service agreement.

16 (2) A performance incentive awarded under

17 paragraph (1)(A) may not exceed 10 percent of the

18 maximum points available under such prospectus.

19 (3) The performance incentive specified under

20 paragraph (1)(A) may only be awarded to a conces21 sioner which meets the monetary definition of a small

22 business under section 3 of the Small Business Act

23 (15 U.S.C. 632). The Board of Contract Appeals

24 within each Department shall adjudicate disputes be-
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1 tween the Federal Government and concessionaires re2 garding performance evaluations.

3 (f) RENEWAL PENALTY.—In evaluating the proposal

4 of an incumbent concessioner when the Secretary concerned

5 issues a prospectus for the renewal of the concession service

6 agreement, the incumbent concessioner shall be penalized

7 one percent of the maximum points available under such

8 prospectus for each year in which the concessioner’s annual

9 performance is found to be unsatisfactory.

10 (g) INAPPLICABILITY OF NEPA TO TEMPORARY EX11 TENSIONS AND SIMILAR REISSUANCE OF CONCESSIONS

12 AGREEMENTS.—The temporary extension of a concession

13 authorization, or reissuance of a concession authorization

14 to provide concession services similar in nature and amount

15 to concession services provided under the previous author16 ization, is hereby determined not to be a major Federal ac17 tion for the purposes of the National Environmental Policy

18 Act of 1969 (42 U.S.C. 4331 et. seq.).

19 (h) PROVISION FOR ADDITIONAL RELATED SERV20 ICES.—The Secretary concerned may modify the concession

21 service agreement to allow concessionaires to provide serv22 ices closely related to such agreement only if the Secretary

23 concerned determines that such changes would enhance the

24 safety or enjoyment of visitors and would not unduly re25 strict the award of future concession service agreements.
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1 SEC. 5465. CAPITAL IMPROVEMENTS.

2 (a) IN GENERAL.—Concessionaires may construct or

3 finance construction under terms of section 5470 only such

4 public facilities on Federal lands as are to be used by the

5 concessioner under the terms of its concession service agree6 ment or facilities which are necessary for the concessioner

7 to administer such public facilities on Federal lands.

8 (b) INVESTMENT INTEREST.—

9 (1) IN GENERAL.—A concessioner that is re10 quired or authorized under a concession service agree11 ment pursuant to this subchapter to acquire or con12 struct any structure, improvement, or fixture pursu13 ant to such agreement on Federal lands shall have an

14 investment interest therein, as defined in this sub15 chapter. Any such investment interest shall consist of

16 all incidents of ownership, except legal title which

17 shall be vested in the Federal Government. Such in18 vestment interest shall not be extinguished by the ex19 piration of such agreement. Such investment interest

20 may be assigned, transferred, encumbered or relin21 quished.

22 (2) LIMITATION.—Such investment interest shall

23 not be construed to include or imply any authority,

24 privilege, or right to operate or engage in any busi25 ness or other activity, and the use of any improve26 ment in which the concessioner has an investment in-
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1 terest shall be wholly subject to the applicable provi2 sions of the concession service agreement and of laws

3 and regulations relating to the area.

4 (3) FEDERAL PROPERTY.—Notwithstanding

5 paragraph (1), a concession service agreement may

6 specify that certain new structures, improvements, or

7 fixtures required to be constructed under terms of the

8 concession service agreement shall be property of the

9 Federal Government subject only to the right of the

10 concessioner to use such improvements during the

11 term of such agreement and that the concessioner

12 shall not be accorded an investment interest therein.

13 Concession service agreements shall not, to the extent

14 practicable, provide for a concessioner to obtain an

15 investment interest in any building or facilities whol16 ly owned by the Federal Government.

17 (c) SALE OF ASSETS.—If the existing concessioner is

18 not the selected bidder at the time of reissuance of a conces19 sion service agreement, the Secretary concerned shall re20 quire the new concessioner to buy the investment interest

21 of the existing concession. In the event that the successor

22 concessioner is unable to fully pay such investment interest,

23 any deficiency shall be paid by the Federal Government.

24 (d) CLOSURE OF CONCESSIONER FACILITIES.—If the

25 Secretary concerned determines that the public interest, by
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1 reason of public and safety considerations or for other rea2 sons beyond the control of the concessioner, requires the dis3 continuation or closure of facilities in which the conces4 sioner has an investment interest, the Federal Government

5 shall compensate the concessioner in the amount equal to

6 the value of the investment interest.

7 (e) DETERMINATION OF VALUE OF INVESTMENT IN8 TEREST.—For purposes of this subchapter, the investment

9 interest of any capital improvement at the end of the con10 cession service agreement period shall be an amount equal

11 to the actual cost of construction or purchase of such invest12 ment interest or such capital improvement adjusted from

13 the time of completion of such construction by changes in

14 the Consumer Price Index less depreciation evidenced by the

15 condition and prospective serviceability in comparison with

16 a new unit of like kind. The Secretary concerned shall in17 clude the value to be paid by the selected bidder for any

18 existing investment interest in the prospectus for the related

19 concession service agreement.

20 SEC. 5466. DURATION OF CONCESSION AUTHORIZATION.

21 (a) CONCESSION SERVICE AGREEMENT.—The stand22 ard term of a concession service agreement shall be 10 years.

23 The Secretary concerned may issue a concession service

24 agreement for less than 10 years if the Secretary determines

25 that the average annual gross receipts over the life of the
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1 concession service agreement would be less than $100,000.

2 The Secretary concerned may not issue a concession service

3 agreement for less than 5 years. The Secretary concerned

4 shall issue a concession service agreement for longer than

5 10 years if the Secretary determines that such longer term

6 is in the public interest or necessary due to the extent of

7 investment and associated financing requirements and to

8 meet the obligations assumed. The term for a concession

9 service agreement may not exceed 30 years.

10 (b) CONCESSION LICENSE.—The term for a concession

11 license may not exceed 2 years.

12 (c) TEMPORARY EXTENSION.—The Secretary con13 cerned may agree to temporary extensions of concession

14 service agreements for up to 2 years on a noncompetitive

15 basis to avoid interruption of services to the public.

16 SEC. 5467. RATES AND CHARGES TO THE PUBLIC.

17 In general, rates and charges to the public shall be set

18 by the concessioner. For concession service agreements only,

19 a concessioner’s rates and charges to the public shall be sub20 ject to the approval of the Secretary concerned in those in21 stances where the Secretary determines that sufficient com22 petition for such facilities and services does not exist within

23 or in close proximity to the area in which the concessioner

24 operates. In those instances, the concession service agree25 ment shall state that the reasonableness of the concessioner’s
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1 rates and charges to the public shall be reviewed and ap2 proved by the Secretary concerned primarily by comparison

3 with those rates and charges for facilities and services of

4 comparable character under similar conditions, with due

5 consideration for length of season, seasonal variations, aver6 age percentage of occupancy, accessibility, availability and

7 costs of labor and materials, type of patronage, and other

8 factors deemed significant by the Secretary concerned. Such

9 review shall be completed within 90 days of receipt of all

10 necessary information, or the requirement for the Sec11 retary’s approval shall be waived and such rates and

12 charges as proposed by the concessioner considered to be ap13 proved for immediate use.

14 SEC. 5468. TRANSFERABILITY OF CONCESSION AUTHORIZA15 TIONS.

16 (a) CONCESSION SERVICE AGREEMENTS.—

17 (1) APPROVAL REQUIRED.—A concession service

18 agreement is transferable or assignable only with the

19 approval of the Secretary concerned, which approval

20 may not be unreasonably withheld or delayed. The

21 Secretary may not approve any such transfer or as22 signment if the Secretary determines that the prospec23 tive concessioner is or is likely to be unable to com24 pletely satisfy all of the material requirements, term,

25 and conditions of the agreement or that the terms of
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1 the transfer or assignment would preclude providing

2 appropriate facilities or services to the public at rea3 sonable rates.

4 (2) CONSIDERATION PERIOD.—If the Secretary

5 concerned fails to approve or disapprove a transfer or

6 assignment under paragraph (1) within 90 days after

7 the date on which the Secretary receives all necessary

8 information requested by the Secretary with respect to

9 such transfer, the transfer or assignment shall be

10 deemed to have been approved.

11 (3) NO MODIFICATION OF TERMS AND CONDI12 TIONS.—The terms and conditions of the concessions

13 service agreement shall not be subject to modification

14 by reason of any transfer or assignment under this

15 section.

16 (b) CONCESSION LICENSE.—A concession license may

17 not be transferred.

18 SEC. 5469. FEES CHARGED BY THE UNITED STATES FOR

19 CONCESSION AUTHORIZATIONS.

20 (a) IN GENERAL.—The Secretary concerned shall

21 charge a fee for the privilege of providing concession services

22 pursuant to this subchapter. The fee for any concession serv23 ice agreement may include any of the following:

24 (1) An annual cash payment for the privilege of

25 providing concession services.
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1 (2) The amount required for capital improve2 ments required pursuant to section 5465 (a).

3 (3) Fees for rental or lease of Government-owned

4 facilities or lands occupied by the concessioner.

5 (4) Expenditures for maintenance of or improve6 ments to Government-owned facilities occupied by the

7 concessioner.

8 (b) ESTABLISHMENT OF AMOUNT.—

9 (1) MINIMUM ACCEPTABLE FEE.—The Secretary

10 concerned shall establish a minimum fee for each ap11 plicable category specified in paragraphs (1) through

12 (4) of subsection (a) which is acceptable to the Sec13 retary under this section and shall include the mini14 mum fee in the prospectus under section 5464. This

15 fee shall be based on historical data, where available,

16 as well as industry-specific and other market data

17 available to the Secretary concerned.

18 (2) FINAL FEE.—Except as provided in para19 graph (3), the final fee shall be the amount bid by the

20 selected applicant under section 5464.

21 (3) SUBSTANTIALLY SIMILAR SERVICES IN A SPE22 CIFIC GEOGRAPHIC AREA.—When the Secretary con23 cerned simultaneously offers authorizations for more

24 than one river runner, outfitter, or guide concession

25 operation to provide substantially similar services in
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1 a defined geographic area, the concession fee for all

2 such concessionaires shall be specified by the Sec3 retary concerned in the prospectus. The Secretary

4 concerned shall base the fee on historical data, where

5 available, as well as on industry-specific and other

6 market data available to the Secretary concerned or

7 may establish a charge per user day.

8 (c) ADJUSTMENT OF FEES.—The amount of any fee

9 for the term of the concession service agreement shall be set

10 at the beginning of the concession authorization and may

11 only be modified if stated in the contract on the basis of

12 inflation, when the annual payment is not determined by

13 a percentage of adjusted gross receipts (as measured by

14 changes in the Consumer Price Index), to reflect substantial

15 changes from the conditions specified in the prospectus, or

16 in the event of an unforseen disaster.

17 (d) CONCESSION LICENSE FEE.—The fee for a conces18 sion license shall at least cover the program administrative

19 costs and may not be changed over the term of the license.

20 SEC. 5470. DISPOSITION OF FEES.

21 (a) CONCESSION IMPROVEMENT ACCOUNT.—

22 (1) IN GENERAL.—The Secretary concerned shall,

23 whenever the concession service agreement requires or

24 authorizes the concessioner to perform maintenance or

25 make improvements to Government-owned facilities
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1 occupied by the concessioner, require the concessioner

2 to establish a concession improvement account. The

3 concessioner shall deposit into this account all funds

4 for maintenance of or improvements to Government5 owned facilities occupied by the concessioner;

6 (2) TERMS AND CONDITIONS.—The account shall

7 be maintained by the concessioner in an interest bear8 ing account in a Federally insured financial institu9 tion. The concessioner shall maintain the account sep10 arately from any other funds or accounts and shall

11 not commingle the money in the account with any

12 other money.

13 (3) DISBURSEMENTS.—The concessioner shall

14 make disbursements from the account for improve15 ments and other activities, only for capital improve16 ments or maintenance of improvements to Govern17 ment-owned facilities occupied by the concessioner as

18 specified in the concession service agreement.

19 (4) TRANSFER OF REMAINING BALANCE.—On the

20 termination of a concession authorization, or on the

21 transfer of a concession service agreement, any re22 maining balance in the account shall be transferred

23 by the concessioner to the successor concessioner, to be

24 used solely as set forth in this subsection. In the event

25 there is no successor concessioner, the account balance
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1 shall be deposited in the Treasury as miscellaneous

2 receipts.

3 (b) When the concessioner is required to make capital

4 improvements to other than Government-owned facilities oc5 cupied by the concessioner in accordance with a concession

6 service agreement, the concessioner shall have the option to

7 control and expend such funds directly.

8 (c) AMOUNTS RECEIVED RELATING TO PRIVILEGE OF

9 PROVIDING CONCESSION SERVICES AND RENTAL OF GOV10 ERNMENT-OWNED FACILITIES.—

11 (1) DEPOSIT INTO TREASURY.—The Secretary

12 concerned shall deposit in the Treasury of the United

13 States as miscellaneous receipts all funds not depos14 ited in concession improvement accounts or funds for

15 capital improvements specified in (b) above, includ16 ing specifically amounts received for a fiscal year for

17 the privilege of providing concession services and the

18 rental of Government-owned facilities, except that of

19 the amount of fees paid by vessel operators for the

20 privilege of entering into Glacier Bay, Alaska, 50 per21 cent of such fees for the 5-year period beginning on

22 the first full fiscal year following the date of enact23 ment of this subchapter shall be deposited into a spe24 cial account and that such funds shall be available

25 without further appropriation and may only be used
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1 to conduct research to quantify any effect of such ves2 sel activity on wildlife and other natural resource val3 ues of Glacier Bay National Park. For the National

4 Park Service such deposits into the Treasury shall

5 total not less than the amounts specified in the table

6 in paragraph (2). For the other agencies covered

7 under this subchapter, the Secretary concerned shall

8 develop a schedule of anticipated receipts to be depos9 ited to the Treasury and submit such schedule to the

10 appropriate Congressional committees not later than

11 18 months after the date of enactment of this Act.

12 Nothing in this chapter shall be construed to modify

13 any provision of law relating to sharing of Federal

14 receipts with any other level of Government.

15 (2) DEPOSIT INTO CONCESSION IMPROVEMENT

16 ACCOUNTS.—The table referred to in paragraph (1),

17 expressed by fiscal year, is as follows:

18 National Park Service

‘‘Fiscal year: Amount:

1997 ......................................................................................... $15,800,000

1998 ......................................................................................... $21,100,000

1999 ......................................................................................... $26,700,000

2000 ......................................................................................... $32,300,000

2001 ......................................................................................... $38,200,000

2002 ......................................................................................... $44,400,000.

19 (d) Beginning in fiscal year 1998, the Inspector Gen20 eral of the Department concerned shall conduct a biennial

21 audit of concession fees generated pursuant to this chapter.

22 The Inspector General shall make a determination as to
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1 whether concession fees are being collected and expended in

2 accordance with this chapter and shall submit copies of each

3 audit to the Committee on Resources of the House of Rep4 resentatives and the Committee on Energy and Natural Re5 sources of the Senate.

6 SEC. 5471. REGULATIONS.

7 The Secretary concerned shall promulgate regulations

8 to implement this chapter no later than 2 years after the

9 date of enactment of this Act. Subsequent to the date of en10 actment of this chapter, no new concession authorization

11 may be issued, nor may any existing concession authoriza12 tion be amended or extended, unless such authorization,

13 amendment, or extension is fully consistent with sections

14 5465, 5469(c), and 5470.

15 SEC. 5472. RELATIONSHIP TO OTHER LAWS.

16 (a) REPEALS.—

17 (1) The Act entitled ‘‘An Act relating to the es18 tablishment of concession policies in the areas admin19 istered by the National Park Service and for other

20 purposes’’ (16 U.S.C. 20–20g) approved October 9,

21 1965, is repealed.

22 (b) SAVINGS.—

23 (1) IN GENERAL.—The repeal of any provision,

24 the superseding of any provision, and the amendment

25 of any provision, of an Act referred to in subsection
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1 (a) shall not affect the validity of any authorizations

2 entered into under any such Act. The provisions of

3 this chapter shall apply to any such authorizations,

4 except to the extent such provisions are inconsistent

5 with the express terms and conditions of such author6 izations.

7 (2) RIGHT OF RENEWAL.—The right of renewal

8 explicitly provided for by any concession contract

9 under any such provision shall be preserved for a sin10 gle renewal of a contract following the enactment of,

11 or concession authorization under, this chapter.

12 (3) VALUE OF CAPITAL IMPROVEMENTS OR

13 POSSESSORY INTEREST.—Nothing in this chapter

14 shall be construed to change the value as of the date

15 of enactment of this chapter for existing capital im16 provements or possessory interest as identified in con17 cession contracts entered into before the date of enact18 ment of this Act. Subsequent to enactment of this

19 chapter, the increase in value for any possessory in20 terest established under any concession contract in ef21 fect on the date of enactment of this chapter shall be

22 as provided for in this chapter unless otherwise spe23 cifically provided in the contract.

24 (4) ANILCA.—Nothing in this chapter shall be

25 construed to amend, supersede or otherwise affect any
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1 provision of the Alaska National Interest Lands Con2 servation Act (16 U.S.C. 3101 et seq.) relating to rev3 enue-producing visitor services.

4 (5) PROCEDURES FOR CONSIDERING EXISTING

5 CONCESSIONAIRES IN REISSUANCE OF CONTRACTS.—

6 In the case of a concession contract which has expired

7 prior to the date of the enactment of this Act, or with8 in 5 years after the date of the enactment of this Act,

9 an incumbent concessioner shall be entitled to a one10 time bonus of five percent of the maximum points

11 available in the reissuance of a previous concession

12 authorization. For any concession contract entered

13 into prior to the date of enactment of this Act, which

14 is projected to terminate 5 years or later after the

15 date of enactment of this Act, any concessioner shall

16 be entitled to a performance incentive in accordance

17 with this chapter. The concessioner shall be entitled to

18 an evaluation of ‘‘good’’ for each year in which the

19 Secretary concerned does not complete an evaluation

20 as provided for in this chapter.
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1 TITLE VI—FEDERAL RETIRE2 MENT AND RELATED PROVI3 SIONS

4 Subtitle A—Civil Service and Postal

5 Service Provisions

6 SEC. 6001. EXTENSION OF DELAY IN COST-OF-LIVING AD7 JUSTMENTS IN FEDERAL EMPLOYEE RETIRE8 MENT BENEFITS THROUGH FISCAL YEAR 2002.

9 Section 11001(a) of the Omnibus Budget Reconcili10 ation Act of 1993 (Public Law 103–66; 107 Stat. 408) is

11 amended in the matter preceding paragraph (1) by striking

12 out ‘‘or 1996,’’ and inserting in lieu thereof ‘‘1996, 1997,

13 1998, 1999, 2000, 2001, or 2002,’’.

14 SEC. 6002. INCREASED CONTRIBUTIONS TO FEDERAL CIVIL15 IAN RETIREMENT SYSTEMS.

16 (a) CIVIL SERVICE RETIREMENT SYSTEM.—

17 (1) DEDUCTIONS.—The first sentence of section

18 8334(a)(1) of title 5, United States Code, is amended

19 to read as follows: ‘‘The employing agency shall de20 duct and withhold from the basic pay of an employee,

21 Member, Congressional employee, law enforcement of22 ficer, firefighter, bankruptcy judge, judge of the Unit23 ed States Court of Appeals for the Armed Forces,

24 United States magistrate, or Claims Court judge, as
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1 the case may be, the percentage of basic pay applica2 ble under subsection (c).’’.

3 (2) AGENCY CONTRIBUTIONS.—

4 (A) INCREASE IN AGENCY CONTRIBUTIONS

5 DURING CALENDAR YEARS 1996 THROUGH 2002.—

6 Section 8334(a)(1) of title 5, United States Code

7 (as amended by this section) is further amend8 ed—

9 (i) by inserting ‘‘(A)’’ after ‘‘(1)’’; and

10 (ii) by adding at the end thereof the

11 following new subparagraph:

12 ‘‘(B)(i) Notwithstanding subparagraph (A),

13 the agency contribution under the second sen14 tence of such subparagraph, during the period

15 beginning on January 1, 1996, through Decem16 ber 31, 2002—

17 ‘‘(I) for each employing agency (other

18 than the United States Postal Service or the

19 Washington Metropolitan Airport Author20 ity) shall be 8.51 percent of the basic pay

21 of an employee, Congressional employee,

22 and a Member of Congress, 9.01 percent of

23 the basic pay of a law enforcement officer,

24 a member of the Capitol Police, and a fire25 fighter, and 8.51 percent of the basic pay of
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1 a Claims Court judge, a United States mag2 istrate, a judge of the United States Court

3 of Appeals for the Armed Services, and a

4 bankruptcy judge, as the case may be; and

5 ‘‘(II) for the United States Postal Serv6 ice and the Washington Metropolitan Air7 port Authority shall be 7 percent of the

8 basic pay of an employee and 7.5 percent of

9 the basic pay of a law enforcement officer or

10 firefighter.’’.

11 (B) NO REDUCTION IN AGENCY CONTRIBU12 TIONS BY THE POSTAL SERVICE.—Agency con13 tributions by the United States Postal Service

14 under section 8348(h) of title 5, United States

15 Code—

16 (i) shall not be reduced as a result of

17 the amendments made under paragraph (3)

18 of this subsection; and

19 (ii) shall be computed as though such

20 amendments had not been enacted.

21 (3) INDIVIDUAL DEDUCTIONS, WITHHOLDINGS,

22 AND DEPOSITS.—The table under section 8334(c) of

23 title 5, United States Code, is amended—

24 (A) in the matter relating to an employee

25 by striking out
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‘‘7 ........ After December 31,

1969.’’

1 and inserting in lieu thereof the following:

‘‘7 ........ January 1, 1970, to December 31, 1995.

7.25 ... January 1, 1996, to December 31, 1996.

7.4 ..... January 1, 1997, to December 31, 1997.

7.5 ..... January 1, 1998, to December 31, 2002.

7 ........ After December 31,

2002.’’;

2 (B) in the matter relating to a Member or

3 employee for Congressional employee service by

4 striking out

‘‘71⁄2 .... After December 31,

1969.’’

5 and inserting in lieu thereof the following:

‘‘7.5 ..... January 1, 1970, to December 31, 1995.

7.25 ... January 1, 1996, to December 31, 1996.

7.4 ..... January 1, 1997, to December 31, 1997.

7.5 ..... January 1, 1998, to December 31, 2002.

7 ........ After December 31,

2002.’’;

6 (C) in the matter relating to a Member for

7 Member service by striking out

‘‘8 ........ After December 31,

1969.’’

8 and inserting in lieu thereof the following:

‘‘8 ........ January 1, 1970, to December 31, 1995.

7.25 ... January 1, 1996, to December 31, 1996.

7.4 ..... January 1, 1997, to December 31, 1997.

7.5 ..... January 1, 1998, to December 31, 2002.

7 ........ After December 31,

2002.’’;
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1 (D) in the matter relating to a law enforce2 ment officer for law enforcement service and fire3 fighter for firefighter service by striking out

‘‘71⁄2 .... After December 31,

1974.’’

4 and inserting in lieu thereof the following:

‘‘7.5 ..... January 1, 1975, to December 31, 1995.

7.75 ... January 1, 1996, to December 31, 1996.

7.9 ..... January 1, 1997, to December 31, 1997.

8 ........ January 1, 1998, to December 31, 2002.

7.5 ..... After December 31,

2002.’’;

5 (E) in the matter relating to a bankruptcy

6 judge by striking out

‘‘8 ........ After December 31,

1983.’’

7 and inserting in lieu thereof the following:

‘‘8 ........ January 1, 1984, to December 31, 1995.

7.25 ... January 1, 1996, to December 31, 1996.

7.4 ..... January 1, 1997, to December 31, 1997.

7.5 ..... January 1, 1998, to December 31, 2002.

7 ........ After December 31,

2002.’’;

8 (F) in the matter relating to a judge of the

9 United States Court of Appeals for the Armed

10 Forces for service as a judge of that court by

11 striking out

‘‘8 ........ On and after the date of

the enactment of the

Department of Defense Authorization

Act, 1984.’’

12 and inserting in lieu thereof the following:
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‘‘8 ........ The date of the enactment of the Department of Defense Authorization Act, 1984,

to December 31, 1995.

7.25 ... January 1, 1996, to December 31, 1996.

7.4 ..... January 1, 1997, to December 31, 1997.

7.5 ..... January 1, 1998, to December 31, 2002.

7 ........ After December 31,

2002.’’;

1 (G) in the matter relating to a United

2 States magistrate by striking out

‘‘8 ........ After September 30,

1987.’’

3 and inserting in lieu thereof the following:

‘‘8 ........ October 1, 1987, to December 31, 1995.

7.25 ... January 1, 1996, to December 31, 1996.

7.4 ..... January 1, 1997, to December 31, 1997.

7.5 ..... January 1, 1998, to December 31, 2002.

7 ........ After December 31,

2002.’’;

4 (H) in the matter relating to a Claims

5 Court judge by striking out

‘‘8 ........ After September 30,

1988.’’

6 and inserting in lieu thereof the following:

‘‘8 ........ October 1, 1988, to December 31, 1995.

7.25 ... January 1, 1996, to December 31, 1996.

7.4 ..... January 1, 1997, to December 31, 1997.

7.5 ..... January 1, 1998, to December 31, 2002.

7 ........ After December 31,

2002.’’;

7 and

8 (I) by inserting after the matter relating to

9 a Claims Court judge the following:

‘‘Member of the Capitol Police .................................................................................. 2.5 ....... August 1, 1920, to June

30, 1926.

3.5 ....... July 1, 1926, to June

30, 1942.
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5 .......... July 1, 1942, to June

30, 1948.

6 .......... July 1, 1948, to October

31, 1956.

6.5 ....... November 1, 1956, to

December 31, 1969.

7.5 ....... January 1, 1970, to December 31, 1995.

7.75 ..... January 1, 1996, to December 31, 1996.

7.9 ....... January 1, 1997, to December 31, 1997.

8 .......... January 1, 1998, to December 31, 2002.

7.5 ....... After December 31,

2002.’’.

1 (4) OTHER SERVICE.—

2 (A) MILITARY SERVICE.—Section 8334(j) of

3 title 5, United States Code, is amended—

4 (i) in paragraph (1)(A) by inserting

5 ‘‘and subject to paragraph (5),’’ after ‘‘Ex6 cept as provided in subparagraph (B),’’;

7 and

8 (ii) by adding at the end thereof the

9 following new paragraph:

10 ‘‘(5) Effective with respect to any period of military

11 service after December 31, 1995, the percentage of basic pay

12 under section 204 of title 37 payable under paragraph (1)

13 shall be equal to the same percentage as would be applicable

14 under section 8334(c) for that same period for service as

15 an employee, subject to paragraph (1)(B).’’.

16 (B) VOLUNTEER SERVICE.—Section 8334(l)

17 of title 5, United States Code, is amended—

18 (i) in paragraph (1) by adding at the

19 end thereof the following: ‘‘This paragraph

20 shall be subject to paragraph (4).’’; and
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1 (ii) by adding at the end thereof the

2 following new paragraph:

3 ‘‘(4) Effective with respect to any period of service

4 after December 31, 1995, the percentage of the readjustment

5 allowance or stipend (as the case may be) payable under

6 paragraph (1) shall be equal to the same percentage as

7 would be applicable under section 8334(c) for that same pe8 riod for service as an employee.’’.

9 (b) FEDERAL EMPLOYEES RETIREMENT SYSTEM.—

10 (1) INDIVIDUAL DEDUCTIONS AND

11 WITHHOLDINGS.—

12 (A) IN GENERAL.—Section 8422(a) of title

13 5, United States Code, is amended by striking

14 out paragraph (2) and inserting in lieu thereof

15 the following:

16 ‘‘(2) The percentage to be deducted and withheld from

17 basic pay for any pay period shall be equal to—

18 ‘‘(A) the applicable percentage under paragraph

19 (3), minus

20 ‘‘(B) the percentage then in effect under section

21 3101(a) of the Internal Revenue Code of 1986 (relat22 ing to rate of tax for old-age, survivors, and disability

23 insurance).

24 ‘‘(3) The applicable percentage under this paragraph,

25 for civilian service shall be as follows:

Employee ..................................................................................................................... 7 .......... Before January 1, 1996.
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7.25 ..... January 1, 1996, to December 31, 1996.

7.4 ....... January 1, 1997, to December 31, 1997.

7.5 ....... January 1, 1998, to December 31, 2002.

7 .......... After December 31,

2002.

Congressional employee ............................................................................................ 7.5 ....... Before January 1, 1996.

7.25 ..... January 1, 1996, to December 31, 1996.

7.4 ....... January 1, 1997, to December 31, 1997.

7.5 ....... January 1, 1998, to December 31, 2002.

7 .......... After December 31,

2002.

Member ...................................................................................................................... 7.5 ....... Before January 1, 1996.

7.25 ..... January 1, 1996, to December 31, 1996.

7.4 ....... January 1, 1997, to December 31, 1997.

7.5 ....... January 1, 1998, to December 31, 2002.

7 .......... After December 31,

2002.

Law enforcement officer, firefighter, member of the Capitol Police, or air traffic controller.7.5 ....... Before January 1, 1996.

7.75 ..... January 1, 1996, to December 31, 1996.

7.9 ....... January 1, 1997, to December 31, 1997.

8 .......... January 1, 1998, to December 31, 2002.

7.5 ....... After December 31,

2002.

1 (B) MILITARY SERVICE.—Section 8422(e) of

2 title 5, United States Code, is amended—

3 (i) in paragraph (1)(A) by inserting

4 ‘‘and subject to paragraph (6),’’ after ‘‘Ex5 cept as provided in subparagraph (B),’’;

6 and

7 (ii) by adding at the end thereof the

8 following:

9 ‘‘(6) The percentage of basic pay under section

10 204 of title 37 payable under paragraph (1), with re11 spect to any period of military service performed dur12 ing—

13 ‘‘(A) January 1, 1996, through December

14 31, 1996, shall be 3.25 percent;
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1 ‘‘(B) January 1, 1997, through December

2 31, 1997, shall be 3.4 percent; and

3 ‘‘(C) January 1, 1998, through December

4 31, 2002, shall be 3.5 percent.’’.

5 (C) VOLUNTEER SERVICE.—Section 8422(f)

6 of title 5, United States Code, is amended—

7 (i) in paragraph (1) by adding at the

8 end thereof the following: ‘‘This paragraph

9 shall be subject to paragraph (4).’’; and

10 (ii) by adding at the end the following:

11 ‘‘(4) The percentage of the readjustment allow12 ance or stipend (as the case may be) payable under

13 paragraph (1), with respect to any period of volunteer

14 service performed during—

15 ‘‘(A) January 1, 1996, through December

16 31, 1996, shall be 3.25 percent;

17 ‘‘(B) January 1, 1997, through December

18 31, 1997, shall be 3.4 percent; and

19 ‘‘(C) January 1, 1998, through December

20 31, 2002, shall be 3.5 percent.’’.

21 (2) NO REDUCTION IN AGENCY CONTRIBU22 TIONS.—Agency contributions under section 8423 (a)

23 and (b) of title 5, United States Code , shall not be

24 reduced as a result of the amendments made under

25 paragraph (1) of this subsection.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall take effect on the first day of the first applica3 ble pay period beginning on or after January 1, 1996.

4 SEC. 6003. FEDERAL RETIREMENT PROVISIONS RELATING

5 TO MEMBERS OF CONGRESS AND CONGRES6 SIONAL EMPLOYEES.

7 (a) RELATING TO THE YEARS OF SERVICE AS A MEM8 BER OF CONGRESS AND CONGRESSIONAL EMPLOYEES FOR

9 PURPOSES OF COMPUTING AN ANNUITY.—

10 (1) CSRS.—Section 8339 of title 5, United

11 States Code, is amended—

12 (A) in subsection (a) by inserting ‘‘or Mem13 ber’’ after ‘‘employee’’; and

14 (B) by striking out subsections (b) and (c).

15 (2) FERS.—Section 8415 of title 5, United

16 States Code, is amended—

17 (A) by striking out subsections (b) and (c);

18 (B) in subsections (a) and (g) by inserting

19 ‘‘or Member’’ after ‘‘employee’’ each place it ap20 pears; and

21 (C) in subsection (g)(2) by striking out

22 ‘‘Congressional employee’’.

23 (b) ACCRUAL RATE FOR MEMBER AND CONGRES24 SIONAL EMPLOYEE SERVICE PERFORMED BUT NOT VESTED

25 BEFORE EFFECTIVE DATE.—
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1 (1) APPLICATION.—This subsection shall apply

2 to an individual who—

3 (A) is a Member of Congress or Congres4 sional employee on December 31, 1995;

5 (B) has performed less than 5 years of serv6 ice as a Member of Congress or Congressional

7 employee on December 31, 1995; and

8 (C) after December 31, 1995, completes 5

9 years of service as a Member of Congress or Con10 gressional employee, that includes a period of

11 service performed as a Member of Congress or

12 Congressional employee before January 1, 1996.

13 (2) COMPUTATION OF ANNUITY.— In computing

14 the annuity of an individual described under para15 graph (1)—

16 (A) any period of service as a Member of

17 Congress or Congressional employee performed

18 before January 1, 1996, shall be computed under

19 section 8339 or 8415 of title 5, United States

20 Code (as though the amendments under sub21 section (a) of this section were not enacted); and

22 (B) the 5 year service requirement under

23 subsections (b) and (c) of section 8339 or 8415

24 of such title (as in effect before the date of enact25 ment of this Act) shall be deemed fulfilled.
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1 (c) CAPITOL POLICE.—Section 8339(q) of title 5, Unit2 ed States Code, is amended by striking out ‘‘with subsection

3 (b), except that, in the case of a member who retires under

4 section 8335(d) or 8336(m), and who meets the require5 ments of subsection (b)(2),’’ and inserting in lieu thereof

6 ‘‘with subsection (a), except that in the case of a member

7 who retires under section 8335(d) or 8336(m), and who has

8 deductions withheld from his pay or has made deposit cov9 ering his last 5 years of civilian service,’’.

10 (d) ADMINISTRATIVE REGULATIONS.—The Office of

11 Personnel Management, in consultation with the Secretary

12 of the Senate and the Clerk of the House of Representatives,

13 may prescribe regulations to carry out the provisions of this

14 section and the amendments made by this section for appli15 cable employees and Members of Congress.

16 (e) EFFECTIVE DATES.—

17 (1) YEARS OF SERVICE; ANNUITY COMPUTA18 TION.—

19 (A) SERVICE AFTER EFFECTIVE DATE.—The

20 amendments made by subsection (a) shall take

21 effect on January 1, 1996, and shall apply only

22 with respect to the computation of an annuity

23 relating to—

24 (i) the service of a Member of Congress

25 as a Member or as a Congressional em-
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1 ployee performed on or after January 1,

2 1996; and

3 (ii) the service of a Congressional em4 ployee as a Congressional employee per5 formed on or after January 1, 1996.

6 (B) SERVICE BEFORE EFFECTIVE DATE.—

7 An annuity shall be computed as though the

8 amendments made under subsection (a) had not

9 been enacted with respect to—

10 (i) the service of a Member of Congress

11 as a Member or a Congressional employee

12 or military service performed before Janu13 ary 1, 1996; and

14 (ii) the service of a Congressional em15 ployee as a Congressional employee or mili16 tary service performed before January 1,

17 1996.

18 (C) ALTERNATIVE EFFECTIVE DATE RELAT19 ING TO MEMBERS OF CONGRESS.—If a court of

20 competent jurisdiction makes a final determina21 tion that a provision of this paragraph violates

22 the 27th amendment of the United States Con23 stitution, the effective date and application dates

24 relating to Members of Congress shall be Janu25 ary 1, 1997.
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1 (2) ADMINISTRATIVE PROVISIONS.—The provi2 sions of subsections (b), (c), and (d) shall take effect

3 on the date of the enactment of this Act.

4 SEC. 6004. ACCRUAL RATES RELATING TO CERTAIN JUDGES

5 WITH SIMILAR TREATMENT AS CONGRES6 SIONAL SERVICE.

7 (a) JUDGE OF THE UNITED STATES COURT OF MILI8 TARY APPEALS.—Section 8339(d)(7) of title 5, United

9 States Code, is amended by striking out ‘‘service.’’ and in10 serting in lieu thereof ‘‘service performed before January

11 1, 1996.’’.

12 (b) CLAIMS COURT JUDGE, BANKRUPTCY JUDGE,

13 UNITED STATES MAGISTRATE.—Section 8339(n) of title 5,

14 United States Code, is amended by striking out ‘‘service.’’

15 and inserting in lieu thereof ‘‘service performed before Jan16 uary 1, 1996. The annuity of any such employee is, with

17 respect to any service referred to in the preceding sentence

18 that is performed on or after January 1, 1996, computed

19 under subsection (a).’’.

20 SEC. 6005. REPEAL OF AUTHORIZATION OF TRANSITIONAL

21 APPROPRIATIONS FOR THE UNITED STATES

22 POSTAL SERVICE.

23 (a) REPEAL.—

24 (1) IN GENERAL.—Section 2004 of title 39, Unit25 ed States Code, is repealed.
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1 (2) TECHNICAL AND CONFORMING AMEND2 MENTS.—

3 (A) The table of sections for chapter 20 of

4 such title is amended by repealing the item relat5 ing to section 2004.

6 (B) Section 2003(e)(2) of such title is

7 amended by striking ‘‘sections 2401 and 2004’’

8 each place it appears and inserting ‘‘section

9 2401’’.

10 (b) CLARIFICATION THAT LIABILITIES FORMERLY

11 PAID PURSUANT TO SECTION 2004 REMAIN LIABILITIES

12 PAYABLE BY THE POSTAL SERVICE.—Section 2003 of title

13 39, United States Code, is amended by adding at the end

14 the following:

15 ‘‘(h) Liabilities of the former Post Office Department

16 to the Employees’ Compensation Fund (appropriations for

17 which were authorized by former section 2004, as in effect

18 before the effective date of this subsection) shall be liabilities

19 of the Postal Service payable out of the Fund.’’.

20 (c) EFFECTIVE DATE.—

21 (1) IN GENERAL.—This section and the amend22 ments made by this section shall be effective as of Oc23 tober 1, 1995.

24 (2) PROVISIONS RELATING TO PAYMENTS FOR

25 FISCAL YEAR 1996.—
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1 (A) AMOUNTS NOT YET PAID.—No payment

2 may be made to the Postal Service Fund, on or

3 after the date of the enactment of this Act, pur4 suant to any appropriation for fiscal year 1996

5 authorized by section 2004 of title 39, United

6 States Code (as in effect before the effective date

7 of this section).

8 (B) AMOUNTS PAID.—If any payment to the

9 Postal Service Fund is or has been made pursu10 ant to an appropriation for fiscal year 1996 au11 thorized by such section 2004, then an amount

12 equal to the amount of such payment shall be

13 paid from such Fund into the Treasury as mis14 cellaneous receipts.

15 Subtitle B—Patent and Trademark

16 Fees

17 SEC. 6011. PATENT AND TRADEMARK FEES.

18 Section 10101 of the Omnibus Budget Reconciliation

19 Act of 1990 (35 U.S.C. 41 note) is amended—

20 (1) in subsection (a) by striking ‘‘1998’’ and in21 serting ‘‘2002’’;

22 (2) in subsection (b)(2) by striking ‘‘1998’’ and

23 inserting ‘‘2002’’; and

24 (3) in subsection (c)—
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1 (A) by striking ‘‘through 1998’’ and insert2 ing ‘‘through 2002’’; and

3 (B) by adding at the end the following:

4 ‘‘(9) $119,000,000 in fiscal year 1999.

5 ‘‘(10) $119,000,000 in fiscal year 2000.

6 ‘‘(11) $119,000,000 in fiscal year 2001.

7 ‘‘(12) $119,000,000 in fiscal year 2002.’’.

8 Subtitle C—GSA Property Sales

9 SEC. 6021. SALE OF GOVERNORS ISLAND, NEW YORK.

10 (a) IN GENERAL.—Notwithstanding any other provi11 sion of law, the Administrator of General Services shall dis12 pose of by sale at fair market value all rights, title, and

13 interests of the United States in and to the land of, and

14 improvements to, Governors Island, New York.

15 (b) RIGHT OF FIRST REFUSAL.—Before a sale is made

16 under subsection (a) to any other parties, the State of New

17 York and the city of New York shall be given the right of

18 first refusal to purchase all or part of Governors Island.

19 Such right may be exercised by either the State of New York

20 or the city of New York or by both parties acting jointly.

21 (c) PROCEEDS.—Proceeds from the disposal of Gov22 ernors Island under subsection (a) shall be deposited in the

23 general fund of the Treasury and credited as miscellaneous

24 receipts.
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1 SEC. 6022. SALE OF AIR RIGHTS.

2 (a) IN GENERAL.—Notwithstanding any other provi3 sion of law, the Administrator of General Services shall sell,

4 at fair market value and in a manner to be determined

5 by the Administrator, the air rights adjacent to Washington

6 Union Station described in subsection (b), including air

7 rights conveyed to the Administrator under subsection (d).

8 The Administrator shall complete the sale by such date as

9 is necessary to ensure that the proceeds from the sale will

10 be deposited in accordance with subsection (c).

11 (b) DESCRIPTION.—The air rights referred to in sub12 section (a) total approximately 16.5 acres and are depicted

13 on the plat map of the District of Columbia as follows:

14 (1) Part of lot 172, square 720.

15 (2) Part of lots 172 and 823, square 720.

16 (3) Part of lot 811, square 717.

17 (c) PROCEEDS.—Before September 30, 1996, proceeds

18 from the sale of air rights under subsection (a) shall be de19 posited in the general fund of the Treasury and credited

20 as miscellaneous receipts.

21 (d) CONVEYANCE OF AMTRAK AIR RIGHTS.—

22 (1) GENERAL RULE.—As a condition of future

23 Federal financial assistance, Amtrak shall convey to

24 the Administrator of General Services on or before

25 December 31, 1995, at no charge, all of the air rights

26 of Amtrak described in subsection (b).
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1 (2) FAILURE TO COMPLY.—If Amtrak does not

2 meet the condition established by paragraph (1), Am3 trak shall be prohibited from obligating Federal funds

4 after March 1, 1996.

5 SEC. 6023. AVAILABILITY OF SURPLUS PROPERTY FOR

6 HOMELESS ASSISTANCE.

7 (a) REPEAL.—(1) Title V of the Stewart B. McKinney

8 Homeless Assistance Act (42 U.S.C. 11411 et seq.) is re9 pealed.

10 (2) The table of contents in section 101(b) of that Act

11 is amended by striking the items relating to title V.

12 (3) This subsection shall be effective October 1, 1995.

13 (b) AUTHORITY TO TRANSFER SURPLUS REAL PROP14 ERTY FOR HOUSING USE.—Section 203 of the Federal

15 Property and Administrative Services Act of 1949 (40

16 U.S.C. 484) is amended by adding at the end the following:

17 ‘‘(r) Under such regulations as the Administrator may

18 prescribe, and in consultation with appropriate local gov19 ernmental authorities, the Administrator may transfer to

20 any nonprofit organization which exists for the primary

21 purpose of providing housing or housing assistance for

22 homeless individuals or families, such surplus real prop23 erty, including buildings, fixtures, and equipment situated

24 thereon, as is needed for housing use.
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1 ‘‘(s)(1) Under such regulations as the Administrator

2 may prescribe, and in consultation with appropriate local

3 governmental authorities, the Administrator may transfer

4 to any non-profit organization which exists for the primary

5 purpose of providing housing or housing assistance for low6 income individuals or families such surplus real property,

7 including buildings, fixtures, and equipment situated there8 on, as is needed for housing use.

9 ‘‘(2) In making transfers under this subsection, the Ad10 ministrator shall take such actions, which may include

11 grant agreements with an organization receiving a grant,

12 as may be necessary to ensure that—

13 ‘‘(A) assistance provided under this subsection is

14 used to facilitate and encourage homeownership op15 portunities through the construction of self-help hous16 ing, under terms which require that the person receiv17 ing the assistance contribute a significant amount of

18 labor toward the construction; and

19 ‘‘(B) the dwellings constructed with property

20 transferred under this subsection shall be quality

21 dwellings that comply with local building and safety

22 codes and standards and shall be available at prices

23 below the prevailing market prices.’’.
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1 TITLE VII—TRANSFORMATION

2 OF THE MEDICAID PROGRAM

3 SEC. 7000. SHORT TITLE OF TITLE; TABLE OF CONTENTS OF

4 TITLE.

5 (a) SHORT TITLE OF TITLE.—This title may be cited

6 as the ‘‘Medicaid Transformation Act of 1995’’.

7 (b) TABLE OF CONTENTS OF TITLE.—The table of con8 tents of this title is as follows:

Sec. 7000. Short title of title; table of contents of title.

Sec. 7001. Transformation of medicaid program.

Sec. 7002. Termination of current program and transition.

Sec. 7003. Medicare/MediGrant integration demonstration project.

9 SEC. 7001. TRANSFORMATION OF MEDICAID PROGRAM.

10 The Social Security Act is amended by adding at the

11 end the following new title:

12 ‘‘TITLE XXI—MEDIGRANT PROGRAM FOR LOW13 INCOME INDIVIDUALS AND FAMILIES

14 ‘‘TABLE OF CONTENTS OF TITLE

‘‘Sec. 2100. Purpose; State MediGrant plans.

‘‘PART A—OBJECTIVES, GOALS, AND PERFORMANCE UNDER STATE PLANS

‘‘Sec. 2101. Description of strategic objectives and performance goals.

‘‘Sec. 2102. Annual reports.

‘‘Sec. 2103. Periodic, independent evaluations.

‘‘Sec. 2104. Description of process for MediGrant plan development.

‘‘Sec. 2105. Consultation in MediGrant plan development.

‘‘PART B—ELIGIBILITY, BENEFITS, AND SET-ASIDES

‘‘Sec. 2111. Eligibility and benefits.

‘‘Sec. 2112. Set-asides of funds.

‘‘Sec. 2113. Premiums and cost-sharing.

‘‘Sec. 2114. Description of process for developing capitation payment rates.

‘‘Sec. 2115. Preventing spousal impoverishment.

‘‘Sec. 2116. State flexibility.

‘‘PART C—PAYMENTS TO STATES

‘‘Sec. 2121. Allotment of funds among States.
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‘‘Sec. 2122. Payments to States.

‘‘Sec. 2123. Limitation on use of funds; disallowance.

‘‘PART D—PROGRAM INTEGRITY AND QUALITY

‘‘Sec. 2131. Use of audits to achieve fiscal integrity.

‘‘Sec. 2132. Fraud prevention program.

‘‘Sec. 2133. Information concerning sanctions taken by State licensing authorities

against health care practitioners and providers.

‘‘Sec. 2134. State MediGrant fraud control units.

‘‘Sec. 2135. Recoveries from third parties and others.

‘‘Sec. 2136. Assignment of rights of payment.

‘‘Sec. 2137. Quality assurance requirements for nursing facilities.

‘‘Sec. 2138. Other provisions promoting program integrity.

‘‘PART E—ESTABLISHMENT AND AMENDMENT OF MEDIGRANT PLANS

‘‘Sec. 2151. Submittal and approval of MediGrant plans.

‘‘Sec. 2152. Submittal and approval of plan amendments.

‘‘Sec. 2153. Process for State withdrawal from program.

‘‘Sec. 2154. Sanctions for noncompliance.

‘‘Sec. 2155. Secretarial authority.

‘‘PART F—GENERAL PROVISIONS

‘‘Sec. 2171. Definitions.

‘‘Sec. 2172. Treatment of territories.

‘‘Sec. 2173. Description of treatment of Indian Health Service facilities.

‘‘Sec. 2174. Application of certain general provisions.

‘‘Sec. 2175. MediGrant master drug rebate agreements.

1 ‘‘SEC. 2100. PURPOSE; STATE MEDIGRANT PLANS.

2 ‘‘(a) PURPOSE.—The purpose of this title is to provide

3 block grants to States to enable them to provide medical

4 assistance to low-income individuals and families in a more

5 effective, efficient, and responsive manner.

6 ‘‘(b) STATE PLAN REQUIRED.—A State is not eligible

7 for payment under section 2122 of this title unless the State

8 has submitted to the Secretary under part E a plan (in

9 this title referred to as a ‘MediGrant plan’) that—

10 ‘‘(1) sets forth how the State intends to use the

11 funds provided under this title to provide medical as-
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1 sistance to needy individuals and families consistent

2 with the provisions of this title, and

3 ‘‘(2) is approved under such part.

4 ‘‘(c) CONTINUED APPROVAL.—An approved

5 MediGrant plan shall continue in effect unless and until—

6 ‘‘(1) the State amends the plan under section

7 2152,

8 ‘‘(2) the State terminates participation under

9 this title under section 2153, or

10 ‘‘(3) the Secretary finds substantial noncompli11 ance of the plan with the requirements of this title

12 under section 2154.

13 ‘‘(d) STATE ENTITLEMENT.—This title constitutes

14 budget authority in advance of appropriations Acts, and

15 represents the obligation of the Federal Government to pro16 vide for the payment to States of amounts provided under

17 part C.

18 ‘‘PART A—OBJECTIVES, GOALS, AND PERFORMANCE

19 UNDER STATE PLANS

20 ‘‘SEC. 2101. DESCRIPTION OF STRATEGIC OBJECTIVES AND

21 PERFORMANCE GOALS.

22 ‘‘(a) DESCRIPTION.—A MediGrant plan shall include

23 a description of the strategic objectives and performance

24 goals the State has established for providing health care

25 services to low-income populations under this title, includ-
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1 ing a general description of the manner in which the plan

2 is designed to meet these objectives and goals.

3 ‘‘(b) CERTAIN OBJECTIVES AND GOALS REQUIRED.—

4 A MediGrant plan shall include strategic objectives and

5 performance goals relating to rates of childhood immuniza6 tions and reductions in infant mortality and morbidity.

7 ‘‘(c) CONSIDERATIONS.—In specifying these objectives

8 and goals the State may consider factors such as the follow9 ing:

10 ‘‘(1) The State’s priorities with respect to pro11 viding assistance to low-income populations.

12 ‘‘(2) The State’s priorities with respect to the

13 general public health and the health status of individ14 uals eligible for assistance under the MediGrant plan.

15 ‘‘(3) The State’s financial resources, the particu16 lar economic conditions in the State, and relative

17 adequacy of the health care infrastructure in different

18 regions of the State.

19 ‘‘(d) PERFORMANCE MEASURES.—To the extent prac20 ticable—

21 ‘‘(1) one or more performance goals shall be es22 tablished by the State for each strategic objective iden23 tified in the MediGrant plan; and

24 ‘‘(2) the MediGrant plan shall describe, how pro25 gram performance will be—
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1 ‘‘(A) measured through objective, independ2 ently verifiable means, and

3 ‘‘(B) compared against performance goals,

4 in order to determine the State’s performance

5 under this title.

6 ‘‘(e) PERIOD COVERED.—

7 ‘‘(1) STRATEGIC OBJECTIVES.—The strategic ob8 jectives shall cover a period of not less than 5 years

9 and shall be updated and revised at least every 3

10 years.

11 ‘‘(2) PERFORMANCE GOALS.—The performance

12 goals shall be established for dates that are not more

13 than 3 years apart.

14 ‘‘SEC. 2102. ANNUAL REPORTS.

15 ‘‘(a) IN GENERAL.—In the case of a State with a

16 MediGrant plan that is in effect for part or all of a fiscal

17 year, no later than March 31 following such fiscal year (or

18 March 31, 1998, in the case of fiscal year 1996) the State

19 shall prepare and submit to the Secretary and the Congress

20 a report on program activities and performance under this

21 title for such fiscal year.

22 ‘‘(b) CONTENTS.—Each annual report under this sec23 tion for a fiscal year shall include the following:

24 ‘‘(1) EXPENDITURE AND BENEFICIARY SUM25 MARY.—
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1 ‘‘(A) INITIAL SUMMARY.—For the report for

2 fiscal year 1997 (and, if applicable, fiscal year

3 1996), a summary of all expenditures under the

4 MediGrant plan during the fiscal year (and dur5 ing any portions of fiscal year 1996 during

6 which the MediGrant plan was in effect under

7 this title) as follows:

8 ‘‘(i) Aggregate medical assistance ex9 penditures, disaggregated to the extent re10 quired to determine compliance with the

11 set-aside requirements of subsections (a)

12 through (d) of section 2112 and to compute

13 the case mix index under section

14 2121(d)(3).

15 ‘‘(ii) For each general category of eligi16 ble individuals (specified in subsection

17 (c)(1), aggregate medical assistance expend18 itures and the total and average number of

19 eligible individuals under the MediGrant

20 plan.

21 ‘‘(iii) By each general category of eligi22 ble individuals, total expenditures for each

23 of the categories of health care items and

24 services (specified in subsection (c)(2))
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1 which are covered under the MediGrant

2 plan and provided on a fee-for-service basis.

3 ‘‘(iv) By each general category of eligi4 ble individuals, total expenditures for pay5 ments to capitated health care organizations

6 (as defined in section 2114(c)(1)).

7 ‘‘(v) Total administrative expenditures.

8 ‘‘(B) SUBSEQUENT SUMMARIES.—For re9 ports for each succeeding fiscal year, a summary

10 of—

11 ‘‘(i) all expenditures under the

12 MediGrant plan, and

13 ‘‘(ii) the total and average number of

14 eligible individuals under the MediGrant

15 plan for each general category of eligible in16 dividuals.

17 ‘‘(2) UTILIZATION SUMMARY.—

18 ‘‘(A) INITIAL SUMMARY.—For the report for

19 fiscal year 1997 (and, if applicable, fiscal year

20 1996), summary statistics on the utilization of

21 health care services under the MediGrant plan

22 during the year (and during any portions of fis23 cal year 1996 during which the MediGrant plan

24 was in effect under this title) as follows:
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1 ‘‘(i) For each general category of eligi2 ble individuals and for each of the cat3 egories of health care items and services

4 which are covered under the MediGrant

5 plan and provided on a fee-for-service basis,

6 the number and percentage of persons who

7 received such a type of service or item dur8 ing the period covered by the report.

9 ‘‘(ii) Summary of health care utiliza10 tion data reported to the State by capitated

11 health care organizations.

12 ‘‘(B) SUBSEQUENT SUMMARIES.—For re13 ports for each succeeding fiscal year, summary

14 statistics on the utilization of health care services

15 under the MediGrant plan.

16 ‘‘(3) ACHIEVEMENT OF PERFORMANCE GOALS.—

17 With respect to each performance goal established

18 under section 2101 and applicable to the year in19 volved—

20 ‘‘(A) a brief description of the goal;

21 ‘‘(B) a description of the methods to be used

22 to measure the attainment of such goal;

23 ‘‘(C) data on the actual performance with

24 respect to the goal;
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1 ‘‘(D) a review of the extent to which the

2 goal was achieved, based on such data; and

3 ‘‘(E) if a performance goal has not been

4 met—

5 ‘‘(i) why the goal was not met, and

6 ‘‘(ii) actions to be taken in response to

7 such performance, including adjustments in

8 performance goals or program activities for

9 subsequent years.

10 ‘‘(4) PROGRAM EVALUATIONS.—A summary of

11 the findings of evaluations under section 2103 com12 pleted during the fiscal year covered by the report.

13 ‘‘(5) FRAUD AND ABUSE AND QUALITY CONTROL

14 ACTIVITIES.—A general description of the State’s ac15 tivities under part D to detect and deter fraud and

16 abuse and to assure quality of services provided under

17 the program.

18 ‘‘(6) PLAN ADMINISTRATION.—

19 ‘‘(A) A description of the administrative

20 roles and responsibilities of entities in the State

21 responsible for administration of this title.

22 ‘‘(B) Organizational charts for each entity

23 in the State primarily responsible for activities

24 under this title.
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1 ‘‘(C) A brief description of each interstate

2 compact (if any) the State has entered into with

3 other States with respect to activities under this

4 title.

5 ‘‘(D) General citations to the State statutes

6 and administrative rules governing the State’s

7 activities under this title.

8 ‘‘(c) DESCRIPTION OF CATEGORIES.—In this section:

9 ‘‘(1) GENERAL CATEGORIES OF ELIGIBLE INDI10 VIDUALS.—Each of the following is a general category

11 of eligible individuals:

12 ‘‘(A) Pregnant women.

13 ‘‘(B) Children.

14 ‘‘(C) Blind or disabled adults who are not

15 elderly individuals.

16 ‘‘(D) Elderly individuals.

17 ‘‘(E) Other adults.

18 ‘‘(2) CATEGORIES OF HEALTH CARE ITEMS AND

19 SERVICES.—The health care items and services de20 scribed in each paragraph of section 2171(a) shall be

21 considered a separate category of health care items

22 and services.

23 ‘‘SEC. 2103. PERIODIC, INDEPENDENT EVALUATIONS.

24 ‘‘(a) IN GENERAL.—During fiscal year 1998 and every

25 third fiscal year thereafter, each State shall provide for an
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1 evaluation of the operation of its MediGrant plan under

2 this title.

3 ‘‘(b) INDEPENDENT.—Each such evaluation with re4 spect to an activity under the MediGrant plan shall be con5 ducted by an entity that is neither responsible under State

6 law for the submission of the State MediGrant plan (or part

7 thereof) nor responsible for administering (or supervising

8 the administration of) the activity. If consistent with the

9 previous sentence, such an entity may be a college or uni10 versity, a State agency, a legislative branch agency in a

11 State, or an independent contractor.

12 ‘‘(c) RESEARCH DESIGN.—Each such evaluation shall

13 be conducted in accordance with a research design that is

14 based on generally accepted models of survey design and

15 sampling and statistical analysis.

16 ‘‘SEC. 2104. DESCRIPTION OF PROCESS FOR MEDIGRANT

17 PLAN DEVELOPMENT.

18 ‘‘Each MediGrant plan shall include a description of

19 the process under which the plan shall be developed and

20 implemented in the State (consistent with section 2105).

21 ‘‘SEC. 2105. CONSULTATION IN MEDIGRANT PLAN DEVELOP22 MENT.

23 ‘‘(a) PUBLIC NOTICE PROCESS.—Before submitting a

24 MediGrant plan or a plan amendment described in sub-
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1 section (c) to the Secretary under part E, a State shall pro2 vide—

3 ‘‘(1) public notice respecting the submittal of the

4 proposed plan or amendment, including a general de5 scription of the plan or amendment,

6 ‘‘(2) a means for the public to inspect or obtain

7 a copy (at reasonable charge) of the proposed plan or

8 amendment,

9 ‘‘(3) an opportunity for submittal and consider10 ation of public comments on the proposed plan or

11 amendment, and

12 ‘‘(4) for consultation with one or more advisory

13 committees established and maintained by the State.

14 The previous sentence shall not apply to a revision of a

15 MediGrant plan (or revision of an amendment to a plan)

16 made by a State under section 2154(c)(1) or to a plan

17 amendment withdrawal described in section 2154(c)(4).

18 ‘‘(b) CONTENTS OF NOTICE.—A notice under sub19 section (a)(1) for a proposed plan or amendment shall in20 clude a description of—

21 ‘‘(1) the general purpose of the proposed plan or

22 amendment (including applicable effective dates),

23 ‘‘(2) where the public may inspect the proposed

24 plan or amendment,
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1 ‘‘(3) how the public may obtain a copy of the

2 proposed plan or amendment and the applicable

3 charge (if any) for the copy, and

4 ‘‘(4) how the public may submit comments on

5 the proposed plan or amendment, including any

6 deadlines applicable to consideration of such com7 ments.

8 ‘‘(c) AMENDMENTS DESCRIBED.—An amendment to a

9 MediGrant plan described in this subsection is an amend10 ment which makes a material and substantial change in

11 eligibility under the MediGrant plan or the benefits pro12 vided under the plan.

13 ‘‘(d) PUBLICATION.—Notices under this section may be

14 published (as selected by the State) in one or more daily

15 newspapers of general circulation in the State or in any

16 publication used by the State to publish State statutes or

17 rules.

18 ‘‘(e) COMPARABLE PROCESS.—A separate notice, or

19 notices, shall not be required under this section for a State

20 if notice of the MediGrant plan or an amendment to the

21 plan will be provided under a process specified in State

22 law that is substantially equivalent to the notice process

23 specified in this section.
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1 ‘‘PART B—ELIGIBILITY, BENEFITS, AND SET-ASIDES

2 ‘‘SEC. 2111. ELIGIBILITY AND BENEFITS.

3 ‘‘(a) DESCRIPTION OF GENERAL ELIGIBILITY AND

4 BENEFITS.—Each MediGrant plan shall include a descrip5 tion (consistent with this title) of the following:

6 ‘‘(1) GENERAL ELIGIBILITY STANDARDS.—The

7 general eligibility standards of the plan for eligible

8 low-income individuals (including individuals de9 scribed in subsection (b)), including—

10 ‘‘(A) any limitations as to the duration of

11 eligibility,

12 ‘‘(B) any eligibility standards relating to

13 age, income and resources (including any stand14 ards relating to spenddowns and disposition of

15 resources), residency, disability status, immigra16 tion status, or employment status of individuals,

17 ‘‘(C) methods of establishing and continuing

18 eligibility and enrollment, including the meth19 odology for computing family income,

20 ‘‘(D) the eligibility standards in the plan

21 that protect the income and resources of a mar22 ried individual who is living in the community

23 and whose spouse is residing in an institution in

24 order to prevent the impoverishment of the com25 munity spouse, and
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1 ‘‘(E) any other standards relating to eligi2 bility for medical assistance under the plan.

3 ‘‘(2) SCOPE OF ASSISTANCE.—The amount, du4 ration, and scope of health care services and items

5 covered under the plan, including differences among

6 different eligible population groups.

7 ‘‘(3) DELIVERY METHOD.—The State’s approach

8 to delivery of medical assistance, including a general

9 description of—

10 ‘‘(A) the use (or intended use) of vouchers,

11 fee-for-service, or managed care arrangements

12 (such as capitated health care plans, case man13 agement, and case coordination); and

14 ‘‘(B) utilization control systems.

15 ‘‘(4) FEE-FOR-SERVICE BENEFITS.—To the ex16 tent that medical assistance is furnished on a fee-for17 service basis—

18 ‘‘(A) how the State determines the qualifica19 tions of health care providers eligible to provide

20 such assistance; and

21 ‘‘(B) how the State determines rates of re22 imbursement for providing such assistance.

23 ‘‘(5) COST-SHARING.—Beneficiary cost-sharing

24 (if any), including variations in such cost-sharing by

25 population group or type of service and financial re-
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1 sponsibilities of parents of recipients who are children

2 and the spouses of recipients.

3 ‘‘(6) UTILIZATION INCENTIVES.—Incentives or

4 requirements (if any) to encourage the appropriate

5 utilization of services.

6 ‘‘(7) SUPPORT FOR CERTAIN HOSPITALS.—

7 ‘‘(A) IN GENERAL.—With respect to hos8 pitals described in subparagraph (B) located in

9 the State, a description of the extent to which

10 provisions are made for expenditures for items

11 and services furnished by such hospitals and cov12 ered under the MediGrant plan.

13 ‘‘(B) HOSPITALS DESCRIBED.—A hospital

14 described in this subparagraph is a short-term

15 acute care general hospital or a children’s hos16 pital, the low-income utilization rate of which

17 exceeds the lesser of—

18 ‘‘(i) 1 standard deviation above the

19 mean low-income utilization rate for hos20 pitals receiving payments under a

21 MediGrant plan in the State in which such

22 hospital is located, or

‘‘(ii) 11 23 ⁄4 standard deviations above the

24 mean low-income utilization rate for hos-
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1 pitals receiving such payments in the 50

2 States and the District of Columbia.

3 ‘‘(C) LOW-INCOME UTILIZATION RATE.—For

4 purposes of subparagraph (B), the term ‘low-in5 come utilization rate’ means, for a hospital, a

6 fraction (expressed as a percentage), the numera7 tor of which is the hospital’s number of patient

8 days attributable to patients who (for such days)

9 were eligible for medical assistance under a

10 MediGrant plan or were uninsured in a period,

11 and the denominator of which is the total num12 ber of the hospital’s patient days in that period.

13 ‘‘(D) PATIENT DAYS.—For purposes of sub14 paragraph (C), the term ‘patient day’ includes

15 each day in which—

16 ‘‘(i) an individual, including a new17 born, is an inpatient in the hospital, wheth18 er or not the individual is in a specialized

19 ward and whether or not the individual re20 mains in the hospital for lack of suitable

21 placement elsewhere; or

22 ‘‘(ii) an individual makes one or more

23 outpatient visits to the hospital.

24 ‘‘(b) MANDATORY COVERAGE.—Each MediGrant plan

25 shall provide for making medical assistance available (sub-
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1 ject to the eligibility standards described under the plan

2 pursuant to subsection (a)(1) and State flexibility of bene3 fits under section 2116) to—

4 ‘‘(1) any pregnant woman or child under the age

5 of 13 whose family income does not exceed the poverty

6 line applicable to a family of the size involved, and

7 ‘‘(2) any individual who is disabled, as defined

8 by the State.

9 ‘‘(c) IMMUNIZATIONS FOR CHILDREN.—The

10 MediGrant plan shall provide medical assistance for immu11 nizations for children eligible for any medical assistance

12 under the MediGrant plan, in accordance with a schedule

13 for immunizations established by the Health Department

14 of the State in consultation with the individuals and enti15 ties in the State responsible for the administration of the

16 plan.

17 ‘‘(d) FAMILY PLANNING SERVICES.—The MediGrant

18 plan shall provide prepregnancy planning services and sup19 plies as specified by the State.

20 ‘‘(e) PREEXISTING CONDITION EXCLUSIONS.—Not21 withstanding any other provision of this title—

22 ‘‘(1) a MediGrant plan may not deny or exclude

23 coverage of any item or service for an eligible individ24 ual for benefits under the MediGrant plan for such
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1 item or service on the basis of a preexisting condition;

2 and

3 ‘‘(2) if a State contracts or makes other arrange4 ments (through the eligible individual or through an5 other entity) with a capitated health care organiza6 tion, insurer, or other entity, for the provision of

7 items or services to eligible individuals under the

8 MediGrant plan and the State permits such organiza9 tion, insurer, or other entity to exclude coverage of a

10 covered item or service on the basis of a preexisting

11 condition, the State shall provide, through its

12 MediGrant plan, for such coverage (through direct

13 payment or otherwise) for any such covered item or

14 service denied or excluded on the basis of a preexist15 ing condition.

16 ‘‘(f) FAMILY RESPONSIBILITY.—A MediGrant plan

17 may not require an adult child with a family income below

18 the State median income (as determined by the State) ap19 plicable to a family of the size involved to contribute to the

20 cost of covered nursing facility services and other long-term

21 care services for the child’s parent under the plan.

22 ‘‘(g) SOLVENCY STANDARDS FOR CAPITATED HEALTH

23 CARE ORGANIZATIONS.—

24 ‘‘(1) IN GENERAL.—A State may not contract

25 with a capitated health care organization, as defined
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1 in section 2114(c)(1), for the provision of medical as2 sistance under a MediGrant plan under which the or3 ganization is—

4 ‘‘(A) at full financial risk, as defined by the

5 State, unless the organization meets solvency

6 standards established by the State for private

7 health maintenance organizations, or

8 ‘‘(B) is not at such risk, unless the organi9 zation meets solvency standards that are estab10 lished under the MediGrant plan.

11 ‘‘(2) TREATMENT OF PUBLIC ENTITIES.—Para12 graph (1) shall not apply to an organization that is

13 a public entity or if the solvency of such organization

14 is guaranteed by the State.

15 ‘‘(3) TRANSITION.—In the case of a capitated

16 health care organization that as of the date of the en17 actment of this title has entered into a contract with

18 a State for the provision of medical assistance under

19 title XIX under which the organization assumes full

20 financial risk and is receiving capitation payments,

21 paragraph (1) shall not apply to such organization

22 until 3 years after the date of the enactment of this

23 title.

24 ‘‘SEC. 2112. SET-ASIDES OF FUNDS.

25 ‘‘(a) FOR TARGETED LOW-INCOME FAMILIES.—
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1 ‘‘(1) IN GENERAL.—Subject to subsection (f), a

2 MediGrant plan shall provide that the amount of

3 funds expended under the plan for medical assistance

4 for targeted low-income families (as defined in para5 graph (3)) for a fiscal year shall be not less than the

6 minimum low-income-family percentage specified in

7 paragraph (2) of the total funds expended under the

8 plan for all medical assistance for the fiscal year.

9 ‘‘(2) MINIMUM LOW-INCOME-FAMILY PERCENT10 AGE.—The minimum low-income-family percentage

11 specified in this paragraph for a State is equal to 85

12 percent of the average percentage of the expenditures

13 under title XIX for medical assistance in the State

14 during Federal fiscal years 1992 through 1994 which

15 were attributable to expenditures for medical assist16 ance for mandated benefits (as defined in subsection

17 (h)) furnished to individuals—

18 ‘‘(A) who (at the time of furnishing the as19 sistance) were under 65 years of age;

20 ‘‘(B) whose coverage (at such time) under a

21 State plan under title XIX was required under

22 Federal law; and

23 ‘‘(C) whose eligibility for such coverage (at

24 such time) was not on a basis directly related to

25 disability status, including being blind.
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1 ‘‘(3) TARGETED LOW-INCOME FAMILY DE2 FINED.—In this subsection, the term ‘targeted low-in3 come family’ means a family (which may be an indi4 vidual)—

5 ‘‘(A) which includes a child or a pregnant

6 woman; and

7 ‘‘(B) the income of which does not exceed

8 185 percent of the poverty line applicable to a

9 family of the size involved.

10 ‘‘(b) FOR LOW-INCOME ELDERLY.—

11 ‘‘(1) SET-ASIDES.—Subject to subsection (f)—

12 ‘‘(A) GENERAL SET-ASIDE.—A MediGrant

13 plan shall provide that the amount of funds ex14 pended under the plan for medical assistance for

15 eligible low-income elderly individuals for a fis16 cal year shall be not less than the minimum low17 income-elderly percentage specified in paragraph

18 (2)(A) of the total funds expended under the plan

19 for all medical assistance for the fiscal year.

20 ‘‘(B) SET-ASIDE FOR MEDICARE PREMIUM

21 ASSISTANCE.—A MediGrant plan shall provide

22 that the amount of funds expended under the

23 plan for medical assistance for medicare cost24 sharing described in section 2171(c)(1) for a fis25 cal year shall be not less than the minimum
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1 medicare premium assistance percentage speci2 fied in paragraph (2)(B) of the total funds ex3 pended under the plan for all medical assistance

4 for the fiscal year. The MediGrant plan shall

5 provide priority for such making such assistance

6 available for targeted low-income elderly individ7 uals (as defined in paragraph (3)).

8 ‘‘(2) MINIMUM PERCENTAGES.—

9 ‘‘(A) FOR GENERAL SET-ASIDE.—The mini10 mum low-income-elderly percentage specified in

11 this subparagraph for a State is equal to 85 per12 cent of the average percentage of the expenditures

13 under title XIX for medical assistance in the

14 State during Federal fiscal years 1992 through

15 1994 which was attributable to expenditures for

16 medical assistance for mandated benefits fur17 nished to individuals—

18 ‘‘(i) whose eligibility for such assist19 ance was based on their being 65 years of

20 age or older; and

21 ‘‘(ii)(I) whose coverage (at such time)

22 under a State plan under title XIX was re23 quired under Federal law, or (II) who (at

24 such time) were residents of a nursing facil25 ity.
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1 ‘‘(B) FOR SET-ASIDE FOR MEDICARE PRE2 MIUM ASSISTANCE.—The minimum medicare

3 premium assistance percentage specified in this

4 subparagraph for a State is equal to 90 percent

5 of the average percentage of the expenditures

6 under title XIX for medical assistance in the

7 State during Federal fiscal years 1993 through

8 1995 which was attributable to expenditures for

9 medical assistance for medicare premiums de10 scribed in section 1905(p)(3)(A) for individuals

11 whose coverage (at such time) for such assistance

12 for such premiums under a State plan under

13 title XIX was required under Federal law.

14 ‘‘(3) TARGETED LOW-INCOME ELDERLY INDIVID15 UAL DEFINED.—In this subsection, the term ‘targeted

16 low-income elderly individual’ means an elderly indi17 vidual whose family income does not exceed 100 per18 cent of the poverty line applicable to a family of the

19 size involved.

20 ‘‘(c) FOR LOW-INCOME DISABLED PERSONS.—

21 ‘‘(1) IN GENERAL.—Subject to subsection (f), a

22 MediGrant plan shall provide that the percentage of

23 funds expended under the plan for medical assistance

24 for eligible low-income individuals who are not elder25 ly individuals and who are eligible for such assistance
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1 on the basis of a disability, including being blind, for

2 a fiscal year is not less than the minimum low-in3 come-disabled percentage specified in paragraph (2)

4 of the total funds expended under the plan for medical

5 assistance for the fiscal year.

6 ‘‘(2) MINIMUM LOW-INCOME-DISABLED PERCENT7 AGE.—The minimum low-income-disabled percentage

8 specified in this paragraph for a State is equal to 85

9 percent of the average percentage of the expenditures

10 under title XIX for medical assistance in the State

11 during Federal fiscal years 1992 through 1994 which

12 was attributable to expenditures for medical assist13 ance for mandated benefits furnished to individuals—

14 ‘‘(A) whose coverage (at such time) under a

15 State plan under title XIX was required under

16 Federal law; and

17 ‘‘(B) whose coverage (at such time) was on

18 a basis directly related to disability status, in19 cluding being blind.

20 ‘‘(d) FOR SERVICES PROVIDED AT FEDERALLY QUALI21 FIED HEALTH CENTERS AND RURAL HEALTH CLINICS.—

22 Subject to subsection (f), a MediGrant plan shall provide

23 that the amount of funds expended under the plan for medi24 cal assistance for services provided at rural health clinics

25 (as defined in section 1861(aa)(2)) and Federally-qualified
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1 health centers (as defined in section 1861(aa)(4)), for eligi2 ble low-income individuals for a fiscal year is not less than

3 85 percent of the average annual expenditures under title

4 XIX for medical assistance in the State during Federal fis5 cal years 1992 through 1994 which were attributable to ex6 penditures for medical assistance for rural health clinic

7 services and Federally-qualified health center services (as

8 defined in section 1905(l)).

9 ‘‘(e) USE OF RESIDUAL FUNDS.—

10 ‘‘(1) IN GENERAL.—Subject to limitations on

11 payment under section 2123, any funds not required

12 to be expended under the set-asides under the previous

13 subsections may be expended under the MediGrant

14 plan for any of the following:

15 ‘‘(A) ADDITIONAL MEDICAL ASSISTANCE.—

16 Medical assistance for eligible low-income indi17 viduals (as defined in section 2171(b)), in addi18 tion to any medical assistance made available

19 under a previous subsection.

20 ‘‘(B) MEDICALLY-RELATED SERVICES.—

21 Payment for medically-related services (as de22 fined in paragraph (2)).

23 ‘‘(C) ADMINISTRATION.—Payment for the

24 administration of the MediGrant plan.
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1 ‘‘(2) MEDICALLY-RELATED SERVICES DEFINED.—

2 In this title, the term ‘medically-related services’

3 means services reasonably related to, or in direct sup4 port of, the State’s attainment of one or more of the

5 strategic objectives and performance goals established

6 under section 2101, but does not include items and

7 services included on the list under section 2171(a) (re8 lating to the definition of medical assistance).

9 ‘‘(f) EXCEPTIONS TO MINIMUM SET-ASIDES.—

10 ‘‘(1) ALTERNATIVE MINIMUM SET-ASIDES.—

11 ‘‘(A) IN GENERAL.—A State may provide in

12 its MediGrant plan (through an amendment to

13 the plan) for a lower percentage of expenditures

14 than the minimum percentages specified in any

15 (or all) of paragraphs (2) of subsections (a), (b),

16 (c), and (d) if the State determines (and certifies

17 to the Secretary) that—

18 ‘‘(i) the health care needs of the low-in19 come populations described in paragraph

20 (1) of the subsections (a), (b), (c), or (d)

21 who are eligible for medical assistance

22 under the plan during the previous fiscal

23 year (or medicare premium assistance needs

24 described in subsection (b)(1)(B)) can be

25 reasonably met without the expenditure of
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1 the percentages otherwise required to be ex2 pended,

3 ‘‘(ii) the performance goals established

4 under section 2101 relating to the respective

5 population can reasonably be met with the

6 expenditure of such lower percentage of

7 funds, and

8 ‘‘(iii) in the case of subsection (d) with

9 respect to rural health clinic services and

10 Federally-qualified health center services,

11 the health care needs of eligible low-income

12 individuals residing in medically under13 served rural areas can reasonably be met

14 without the level of expenditure for such

15 services otherwise required and the perform16 ance goals established under section 2101

17 relating to such individuals can reasonably

18 be met with such lower level of expenditures.

19 ‘‘(B) PERIOD OF APPLICATION.—The deter20 mination and certification under subparagraph

21 (A) shall be made for such period as a State may

22 request, but may not be made for a period of

23 more than 3 consecutive Federal fiscal years (be24 ginning with the first fiscal year for which the

25 lower percentage is sought). A new determination
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1 and certification must be made under such

2 clause for any subsequent period.

3 ‘‘(C) NO EXCEPTION PERMITTED BEFORE

4 FISCAL YEAR 1998.—This paragraph may not

5 apply with respect to the percentages described

6 in paragraphs (2) of subsections (a), (b), and (c)

7 for a fiscal year before fiscal year 1998.

8 ‘‘(2) INDEPENDENT CERTIFICATION OF COMPLI9 ANCE WITH GOALS.—

10 ‘‘(A) IN GENERAL.—For purposes of section

11 2151(c), a MediGrant plan shall not be consid12 ered to be in substantial violation of the require13 ments of this section if the amount of actual

14 State expenditures specified in any (or all) of

15 paragraphs (1) of subsections (a), (b), (c), and

16 (d) is lower than the minimum percentages spec17 ified in any (or all) of paragraphs (2) of such

18 subsections if an independent actuary determines

19 and certifies to the State that the MediGrant

20 plan is reasonably designed to result in a level

21 of expenditures which is consistent with the re22 quirements of such subsections.

23 ‘‘(B) LIMIT ON VARIATION.—Subparagraph

24 (A) shall not apply in the case of a MediGrant

25 plan for which the actual State expenditures de-
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1 scribed in any (or all) of paragraphs (1) of sub2 sections (a), (b), (c), and (d) are less than 95

3 percent of the expenditures which would be made

4 if the amount of State expenditures specified in

5 any (or all) of such paragraphs was equal to the

6 applicable minimum percentage specified in any

7 (or all) of paragraphs (2) of such subsections.

8 ‘‘(g) COMPUTATIONS.—States shall calculate the mini9 mum percentages under paragraphs (2) of subsections (a),

10 (b), (c), and (d) in a reasonable manner consistent with

11 reports submitted to the Secretary for the fiscal years in12 volved and medical assistance attributable to the exception

13 provided under section 1903(v)(2) shall not be considered

14 to be expenditures for medical assistance.

15 ‘‘(h) BENEFITS INCLUDED FOR PURPOSES OF COM16 PUTING SET-ASIDES.—In this section, the term ‘mandated

17 benefits’—

18 ‘‘(1) means medical assistance for items and

19 services described in section 1905(a) to the extent such

20 assistance with respect to such items and services was

21 required to be provided under title XIX,

22 ‘‘(2) includes medical assistance for medicare

23 cost-sharing only to the extent such assistance was re24 quired to be provided under section 1902(a)(10)(E),

25 and
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1 ‘‘(3) does not include medical assistance attrib2 utable to disproportionate share payment adjustments

3 described in section 1923.

4 ‘‘SEC. 2113. PREMIUMS AND COST-SHARING.

5 ‘‘(a) IN GENERAL.—Subject to subsection (b), if any

6 charges are imposed under the MediGrant plan for cost7 sharing (as defined in subsection (d)), such cost-sharing

8 shall be pursuant to a public cost-sharing schedule.

9 ‘‘(b) LIMITATION ON PREMIUM AND CERTAIN COST10 SHARING FOR LOW-INCOME FAMILIES INCLUDING CHIL11 DREN OR PREGNANT WOMEN.—

12 ‘‘(1) IN GENERAL.—In the case of a pregnant

13 woman or a child who is a member of a family de14 scribed in paragraph (2)—

15 ‘‘(A) the plan shall not impose any pre16 mium, and

17 ‘‘(B) the plan shall not (except as provided

18 in subsection (c)(1)) impose any cost-sharing

19 with respect to primary and preventive care

20 services (as defined by the State) covered under

21 the MediGrant plan for children or pregnant

22 women unless such cost-sharing is nominal in

23 nature.
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1 ‘‘(2) FAMILY DESCRIBED.—A family described in

2 this paragraph is a family (which may be an indi3 vidual) which—

4 ‘‘(A) includes a child or a pregnant woman,

5 ‘‘(B) is made eligible for medical assistance

6 under the MediGrant plan, and

7 ‘‘(C) the income of which does not exceed

8 100 percent of the poverty line applicable to a

9 family of the size involved.

10 ‘‘(c) CERTAIN COST-SHARING PERMITTED.—Nothing

11 in this section shall be construed as preventing a MediGrant

12 plan (consistent with subsection (b))—

13 ‘‘(1) from imposing cost-sharing to discourage

14 the inappropriate use of emergency medical services

15 delivered through a hospital emergency room, a medi16 cal transportation provider, or otherwise,

17 ‘‘(2) from imposing premiums and cost-sharing

18 differentially in order to encourage the use of primary

19 and preventive care and discourage unnecessary or

20 less economical care,

21 ‘‘(3) from scaling cost-sharing in a manner that

22 reflects economic factors, employment status, and

23 family size,
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1 ‘‘(4) from scaling cost-sharing based on the

2 availability to the individual or family of other

3 health insurance coverage, or

4 ‘‘(5) from scaling cost-sharing based on partici5 pation in employment training programs, drug or al6 cohol abuse treatment, counseling programs, or other

7 programs promoting personal responsibility.

8 ‘‘(d) COST-SHARING DEFINED.—In this section, the

9 term ‘cost-sharing’ includes copayments, deductibles, coin10 surance, and other charges for the provision of health care

11 services.

12 ‘‘SEC. 2114. DESCRIPTION OF PROCESS FOR DEVELOPING

13 CAPITATION PAYMENT RATES.

14 ‘‘(a) IN GENERAL.—If a State contracts (or intends

15 to contract) with a capitated health care organization (as

16 defined in subsection (c)(1)) under which the State makes

17 a capitation payment (as defined in subsection (c)(2)) to

18 the organization for providing or arranging for the provi19 sion of medical assistance under the MediGrant plan for

20 a group of services, including at least inpatient hospital

21 services and physicians’ services, the plan shall include a

22 description of the following:

23 ‘‘(1) USE OF ACTUARIAL SCIENCE.—The extent

24 and manner in which the State uses actuarial

25 science—
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1 ‘‘(A) to analyze and project health care ex2 penditures and utilization for individuals en3 rolled (or to be enrolled) in such an organization

4 under the MediGrant plan, and

5 ‘‘(B) to develop capitation payment rates,

6 including a brief description of the general meth7 odologies used by actuaries.

8 ‘‘(2) QUALIFICATIONS OF ORGANIZATIONS.—The

9 general qualifications, including any accreditation,

10 State licensure or certification, or provider network

11 standards, required by the State for participation of

12 capitated health care organizations under the

13 MediGrant plan.

14 ‘‘(3) DISSEMINATION PROCESS.—The process

15 used by the State under subsection (b) and otherwise

16 to disseminate, before entering into contracts with

17 capitated health care organizations, actuarial infor18 mation to such organizations on the historical fee-for19 service costs (or, if not available, other recent finan20 cial data associated with providing covered services)

21 and utilization associated with individuals described

22 in paragraph (1)(A).

23 ‘‘(b) PUBLIC NOTICE AND COMMENT.—Under the

24 MediGrant plan the State shall provide a process for pro25 viding, before the beginning of each contract year—
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1 ‘‘(1) public notice of—

2 ‘‘(A) the amounts of the capitation pay3 ments (if any) made under the plan for the con4 tract year preceding the public notice, and

5 ‘‘(B)(i) the information described under

6 subsection (a)(1) with respect to capitation pay7 ments for the contract year involved, or (ii)

8 amounts of the capitation payments the State ex9 pects to make for the contract year involved,

10 unless such information is designated as proprietary

11 and not subject to public disclosure under State law,

12 and

13 ‘‘(2) an opportunity for receiving public com14 ment on the amounts and information for which no15 tice is provided under paragraph (1).

16 ‘‘(c) DEFINITIONS.—In this title:

17 ‘‘(1) CAPITATED HEALTH CARE ORGANIZA18 TION.—The term ‘capitated health care organization’

19 means a health maintenance organization or any

20 other entity (including a health insuring organiza21 tion, managed care organization, prepaid health

22 plan, integrated service network, or similar entity)

23 which under State law is permitted to accept capita24 tion payments for providing (or arranging for the

25 provision of) a group of items and services including
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1 at least inpatient hospital services and physicians’

2 services.

3 ‘‘(2) CAPITATION PAYMENT.—The term ‘capita4 tion payment’ means, with respect to payment, pay5 ment on a prepaid capitation basis or any other risk

6 basis to an entity for the entity’s provision (or ar7 ranging for the provision) of a group of items and

8 services, including at least inpatient hospital services

9 and physicians’ services.

10 ‘‘SEC. 2115. PREVENTING SPOUSAL IMPOVERISHMENT.

11 ‘‘(a) SPECIAL TREATMENT FOR INSTITUTIONALIZED

12 SPOUSES.—

13 ‘‘(1) SUPERSEDES OTHER PROVISIONS.—In de14 termining the eligibility for medical assistance of an

15 institutionalized spouse (as defined in subsection

16 (h)(1)), the provisions of this section supersede any

17 other provision of this title which is inconsistent with

18 them.

19 ‘‘(2) DOES NOT AFFECT CERTAIN DETERMINA20 TIONS.—Except as this section specifically provides,

21 this section does not apply to—

22 ‘‘(A) the determination of what constitutes

23 income or resources, or

24 ‘‘(B) the methodology and standards for de25 termining and evaluating income and resources.
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1 ‘‘(3) NO APPLICATION IN COMMONWEALTHS AND

2 TERRITORIES.—This section shall only apply to a

3 State that is one of the 50 States or the District of

4 Columbia.

5 ‘‘(b) RULES FOR TREATMENT OF INCOME.—

6 ‘‘(1) SEPARATE TREATMENT OF INCOME.—Dur7 ing any month in which an institutionalized spouse

8 is in the institution, except as provided in paragraph

9 (2), no income of the community spouse shall be

10 deemed available to the institutionalized spouse.

11 ‘‘(2) ATTRIBUTION OF INCOME.—In determining

12 the income of an institutionalized spouse or commu13 nity spouse for purposes of the post-eligibility income

14 determination described in subsection (d), except as

15 otherwise provided in this section and regardless of

16 any State laws relating to community property or the

17 division of marital property, the following rules

18 apply:

19 ‘‘(A) NON-TRUST PROPERTY.—Subject to

20 subparagraphs (C) and (D), in the case of in21 come not from a trust, unless the instrument

22 providing the income otherwise specifically pro23 vides—

24 ‘‘(i) if payment of income is made sole25 ly in the name of the institutionalized
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1 spouse or the community spouse, the income

2 shall be considered available only to that re3 spective spouse,

4 ‘‘(ii) if payment of income is made in

5 the names of the institutionalized spouse

and the community spouse, 1 6 ⁄2 of the income

7 shall be considered available to each of

8 them, and

9 ‘‘(iii) if payment of income is made in

10 the names of the institutionalized spouse or

11 the community spouse, or both, and to an12 other person or persons, the income shall be

13 considered available to each spouse in pro14 portion to the spouse’s interest (or, if pay15 ment is made with respect to both spouses

and no such interest is specified, 1 16 ⁄2 of the

17 joint interest shall be considered available to

18 each spouse).

19 ‘‘(B) TRUST PROPERTY.—In the case of a

20 trust—

21 ‘‘(i) except as provided in clause (ii),

22 income shall be attributed in accordance

23 with the provisions of this title; and

24 ‘‘(ii) income shall be considered avail25 able to each spouse as provided in the trust,
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1 or, in the absence of a specific provision in

2 the trust—

3 ‘‘(I) if payment of income is made

4 solely to the institutionalized spouse or

5 the community spouse, the income shall

6 be considered available only to that re7 spective spouse,

8 ‘‘(II) if payment of income is

9 made to both the institutionalized

spouse and the community spouse, 1 10 ⁄2

11 of the income shall be considered avail12 able to each of them, and

13 ‘‘(III) if payment of income is

14 made to the institutionalized spouse or

15 the community spouse, or both, and to

16 another person or persons, the income

17 shall be considered available to each

18 spouse in proportion to the spouse’s in19 terest (or, if payment is made with re20 spect to both spouses and no such interest is specified, 1 21 ⁄2 of the joint inter22 est shall be considered available to each

23 spouse).

24 ‘‘(C) PROPERTY WITH NO INSTRUMENT.—In

25 the case of income not from a trust in which
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1 there is no instrument establishing ownership,

subject to subparagraph (D), 1 2 ⁄2 of the income

3 shall be considered to be available to the institutionalized spouse and 1 4 ⁄2 to the community

5 spouse.

6 ‘‘(D) REBUTTING OWNERSHIP.—The rules of

7 subparagraphs (A) and (C) are superseded to the

8 extent that an institutionalized spouse can estab9 lish, by a preponderance of the evidence, that the

10 ownership interests in income are other than as

11 provided under such subparagraphs.

12 ‘‘(c) RULES FOR TREATMENT OF RESOURCES.—

13 ‘‘(1) COMPUTATION OF SPOUSAL SHARE AT TIME

14 OF INSTITUTIONALIZATION.—

15 ‘‘(A) TOTAL JOINT RESOURCES.—There

16 shall be computed (as of the beginning of the first

17 continuous period of institutionalization of the

18 institutionalized spouse)—

19 ‘‘(i) the total value of the resources to

20 the extent either the institutionalized spouse

21 or the community spouse has an ownership

22 interest, and

23 ‘‘(ii) a spousal share which is equal to

1 24 ⁄2 of such total value.
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1 ‘‘(B) ASSESSMENT.—At the request of an

2 institutionalized spouse or community spouse, at

3 the beginning of the first continuous period of

4 institutionalization of the institutionalized

5 spouse and upon the receipt of relevant docu6 mentation of resources, the State shall promptly

7 assess and document the total value described in

8 subparagraph (A)(i) and shall provide a copy of

9 such assessment and documentation to each

10 spouse and shall retain a copy of the assessment

11 for use under this section. If the request is not

12 part of an application for medical assistance

13 under this title, the State may, at its option as

14 a condition of providing the assessment, require

15 payment of a fee not exceeding the reasonable ex16 penses of providing and documenting the assess17 ment. At the time of providing the copy of the

18 assessment, the State shall include a notice indi19 cating that the spouse will have a right to a fair

20 hearing under subsection (e)(2).

21 ‘‘(2) ATTRIBUTION OF RESOURCES AT TIME OF

22 INITIAL ELIGIBILITY DETERMINATION.—In determin23 ing the resources of an institutionalized spouse at the

24 time of application for medical assistance under this
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1 title, regardless of any State laws relating to commu2 nity property or the division of marital property—

3 ‘‘(A) except as provided in subparagraph

4 (B), all the resources held by either the institu5 tionalized spouse, community spouse, or both,

6 shall be considered to be available to the institu7 tionalized spouse, and

8 ‘‘(B) resources shall be considered to be

9 available to an institutionalized spouse, but only

10 to the extent that the amount of such resources

11 exceeds the amount computed under subsection

12 (f)(2)(A) (as of the time of application for medi13 cal assistance).

14 ‘‘(3) ASSIGNMENT OF SUPPORT RIGHTS.—The

15 institutionalized spouse shall not be ineligible by rea16 son of resources determined under paragraph (2) to be

17 available for the cost of care where—

18 ‘‘(A) the institutionalized spouse has as19 signed to the State any rights to support from

20 the community spouse,

21 ‘‘(B) the institutionalized spouse lacks the

22 ability to execute an assignment due to physical

23 or mental impairment but the State has the

24 right to bring a support proceeding against a

25 community spouse without such assignment, or
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1 ‘‘(C) the State determines that denial of eli2 gibility would work an undue hardship.

3 ‘‘(4) SEPARATE TREATMENT OF RESOURCES

4 AFTER ELIGIBILITY FOR MEDICAL ASSISTANCE ESTAB5 LISHED.—During the continuous period in which an

6 institutionalized spouse is in an institution and after

7 the month in which an institutionalized spouse is de8 termined to be eligible for medical assistance under

9 this title, no resources of the community spouse shall

10 be deemed available to the institutionalized spouse.

11 ‘‘(5) RESOURCES DEFINED.—In this section, the

12 term ‘resources’ does not include—

13 ‘‘(A) resources excluded under subsection (a)

14 or (d) of section 1613, and

15 ‘‘(B) resources that would be excluded under

16 section 1613(a)(2)(A) but for the limitation on

17 total value described in such section.

18 ‘‘(d) PROTECTING INCOME FOR COMMUNITY

19 SPOUSE.—

20 ‘‘(1) ALLOWANCES TO BE OFFSET FROM INCOME

21 OF INSTITUTIONALIZED SPOUSE.—After an institu22 tionalized spouse is determined or redetermined to be

23 eligible for medical assistance, in determining the

24 amount of the spouse’s income that is to be applied

25 monthly to payment for the costs of care in the insti-
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1 tution, there shall be deducted from the spouse’s

2 monthly income the following amounts in the follow3 ing order:

4 ‘‘(A) A personal needs allowance (described

5 in paragraph (2)(A)), in an amount not less

6 than the amount specified in paragraph (2)(C).

7 ‘‘(B) A community spouse monthly income

8 allowance (as defined in paragraph (3)), but

9 only to the extent income of the institutionalized

10 spouse is made available to (or for the benefit of)

11 the community spouse.

12 ‘‘(C) A family allowance, for each family

member, equal to at least 1 13 ⁄3 of the amount by

14 which the amount described in paragraph

15 (4)(A)(i) exceeds the amount of the monthly in16 come of that family member.

17 ‘‘(D) Amounts for incurred expenses for

18 medical or remedial care for the institutionalized

19 spouse as provided under paragraph (6).

20 In subparagraph (C), the term ‘family member’ only

21 includes minor or dependent children, dependent par22 ents, or dependent siblings of the institutionalized or

23 community spouse who are residing with the commu24 nity spouse.

25 ‘‘(2) PERSONAL NEEDS ALLOWANCE.—
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1 ‘‘(A) IN GENERAL.—The MediGrant plan

2 must provide that, in the case of an institu3 tionalized individual or couple described in sub4 paragraph (B), in determining the amount of the

5 individual’s or couple’s income to be applied

6 monthly to payment for the cost of care in an in7 stitution, there shall be deducted from the month8 ly income (in addition to other allowances other9 wise provided under the plan) a monthly per10 sonal needs allowance—

11 ‘‘(i) which is reasonable in amount for

12 clothing and other personal needs of the in13 dividual (or couple) while in an institution,

14 and

15 ‘‘(ii) which is not less (and may be

16 greater) than the minimum monthly per17 sonal needs allowance described in subpara18 graph (C).

19 ‘‘(B) INSTITUTIONALIZED INDIVIDUAL OR

20 COUPLE DEFINED.—In this paragraph, the term

21 ‘institutionalized individual or couple’ means an

22 individual or married couple—

23 ‘‘(i) who is an inpatient (or who are

24 inpatients) in a medical institution or

25 nursing facility for which payments are
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1 made under this title throughout a month,

2 and

3 ‘‘(ii) who is or are determined to be el4 igible for medical assistance under the State

5 MediGrant plan.

6 ‘‘(C) MINIMUM ALLOWANCE.—The mini7 mum monthly personal needs allowance de8 scribed in this subparagraph is $40 for an insti9 tutionalized individual and $80 for an institu10 tionalized couple (if both are aged, blind, or dis11 abled, and their incomes are considered available

12 to each other in determining eligibility).

13 ‘‘(3) COMMUNITY SPOUSE MONTHLY INCOME AL14 LOWANCE DEFINED.—

15 ‘‘(A) IN GENERAL.—In this section (except

16 as provided in subparagraph (B)), the commu17 nity spouse monthly income allowance for a

18 community spouse is an amount by which—

19 ‘‘(i) except as provided in subsection

20 (e), the minimum monthly maintenance

21 needs allowance (established under and in

22 accordance with paragraph (4)) for the

23 spouse, exceeds

24 ‘‘(ii) the amount of monthly income

25 otherwise available to the community spouse
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1 (determined without regard to such an al2 lowance).

3 ‘‘(B) COURT ORDERED SUPPORT.—If a

4 court has entered an order against an institu5 tionalized spouse for monthly income for the sup6 port of the community spouse, the community

7 spouse monthly income allowance for the spouse

8 shall be not less than the amount of the monthly

9 income so ordered.

10 ‘‘(4) ESTABLISHMENT OF MINIMUM MONTHLY

11 MAINTENANCE NEEDS ALLOWANCE.—

12 ‘‘(A) IN GENERAL.—Each State shall estab13 lish a minimum monthly maintenance needs al14 lowance for each community spouse which, sub15 ject to subparagraph (B), is equal to or ex16 ceeds—

‘‘(i) 150 percent of 1 17 ⁄12 of the poverty

18 line applicable to a family unit of 2 mem19 bers, plus

20 ‘‘(ii) an excess shelter allowance (as de21 fined in paragraph (4)).

22 A revision of the poverty line referred to in

23 clause (i) shall apply to medical assistance fur24 nished during and after the second calendar
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1 quarter that begins after the date of publication

2 of the revision.

3 ‘‘(B) CAP ON MINIMUM MONTHLY MAINTE4 NANCE NEEDS ALLOWANCE.—The minimum

5 monthly maintenance needs allowance estab6 lished under subparagraph (A) may not exceed

7 $1,500 (subject to adjustment under subsections

8 (e) and (g)).

9 ‘‘(5) EXCESS SHELTER ALLOWANCE DEFINED.—

10 In paragraph (4)(A)(ii), the term ‘excess shelter al11 lowance’ means, for a community spouse, the amount

12 by which the sum of—

13 ‘‘(A) the spouse’s expenses for rent or mort14 gage payment (including principal and interest),

15 taxes and insurance and, in the case of a con16 dominium or cooperative, required maintenance

17 charge, for the community spouse’s principal res18 idence, and

19 ‘‘(B) the standard utility allowance (used

20 by the State under section 5(e) of the Food

21 Stamp Act of 1977) or, if the State does not use

22 such an allowance, the spouse’s actual utility ex23 penses,

24 exceeds 30 percent of the amount described in para25 graph (4)(A)(i), except that, in the case of a con-
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1 dominium or cooperative, for which a maintenance

2 charge is included under subparagraph (A), any al3 lowance under subparagraph (B) shall be reduced to

4 the extent the maintenance charge includes utility ex5 penses.

6 ‘‘(6) TREATMENT OF INCURRED EXPENSES.—

7 With respect to the post-eligibility treatment of in8 come under this section, there shall be disregarded

9 reparation payments made by the Federal Republic of

10 Germany and, there shall be taken into account

11 amounts for incurred expenses for medical or reme12 dial care that are not subject to payment by a third

13 party, including—

14 ‘‘(A) medicare and other health insurance

15 premiums, deductibles, or coinsurance, and

16 ‘‘(B) necessary medical or remedial care

17 recognized under State law but not covered

18 under the State MediGrant plan under this title,

19 subject to reasonable limits the State may estab20 lish on the amount of these expenses.

21 ‘‘(e) NOTICE AND HEARING.—

22 ‘‘(1) NOTICE.—Upon—

23 ‘‘(A) a determination of eligibility for medi24 cal assistance of an institutionalized spouse, or
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1 ‘‘(B) a request by either the institutional2 ized spouse, or the community spouse, or a rep3 resentative acting on behalf of either spouse,

4 each State shall notify both spouses (in the case de5 scribed in subparagraph (A)) or the spouse making

6 the request (in the case described in subparagraph

7 (B)) of the amount of the community spouse monthly

8 income allowance (described in subsection (d)(1)(B)),

9 of the amount of any family allowances (described in

10 subsection (d)(1)(C)), of the method for computing the

11 amount of the community spouse resources allowance

12 permitted under subsection (f), and of the spouse’s

13 right to a hearing under the MediGrant plan respect14 ing ownership or availability of income or resources,

15 and the determination of the community spouse

16 monthly income or resource allowance.

17 ‘‘(2) RESULTS OF HEARING.—

18 ‘‘(A) REVISION OF MINIMUM MONTHLY

19 MAINTENANCE NEEDS ALLOWANCE.—If either

20 such spouse establishes in a hearing under this

21 subsection that the community spouse needs in22 come, above the level otherwise provided by the

23 minimum monthly maintenance needs allow24 ance, due to exceptional circumstances resulting

25 in significant financial duress, there shall be
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1 substituted, for the minimum monthly mainte2 nance needs allowance in subsection (d)(2)(A),

3 an amount adequate to provide such additional

4 income as is necessary.

5 ‘‘(B) REVISION OF COMMUNITY SPOUSE RE6 SOURCE ALLOWANCE.—If either such spouse es7 tablishes in such a hearing that the community

8 spouse resource allowance (in relation to the

9 amount of income generated by such an allow10 ance) is inadequate to raise the community

11 spouse’s income to the minimum monthly main12 tenance needs allowance, there shall be sub13 stituted, for the community spouse resource al14 lowance under subsection (f)(2), an amount ade15 quate to provide such a minimum monthly

16 maintenance needs allowance.

17 ‘‘(f) PERMITTING TRANSFER OF RESOURCES TO COM18 MUNITY SPOUSE.—

19 ‘‘(1) IN GENERAL.—An institutionalized spouse

20 may, without regard to any other provision of the

21 MediGrant plan to the contrary, transfer an amount

22 equal to the community spouse resource allowance (as

23 defined in paragraph (2)), but only to the extent the

24 resources of the institutionalized spouse are trans25 ferred to, or for the sole benefit of, the community
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1 spouse. The transfer under the preceding sentence

2 shall be made as soon as practicable after the date of

3 the initial determination of eligibility, taking into ac4 count such time as may be necessary to obtain a court

5 order under paragraph (3).

6 ‘‘(2) COMMUNITY SPOUSE RESOURCE ALLOWANCE

7 DEFINED.—In paragraph (1), the ‘community spouse

8 resource allowance’ for a community spouse is an

9 amount (if any) by which—

10 ‘‘(A) the greatest of—

11 ‘‘(i) $12,000 (subject to adjustment

12 under subsection (g)), or, if greater (but not

13 to exceed the amount specified in clause

14 (ii)(II)) an amount specified under the

15 State MediGrant plan,

16 ‘‘(ii) the lesser of (I) the spousal share

17 computed under subsection (c)(1), or (II)

18 $60,000 (subject to adjustment under sub19 section (g)), or

20 ‘‘(iii) the amount established under

21 subsection (e)(2);

22 exceeds

23 ‘‘(B) the amount of the resources otherwise

24 available to the community spouse (determined

25 without regard to such an allowance).
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1 ‘‘(g) INDEXING DOLLAR AMOUNTS.—For services fur2 nished during a calendar year after 1989, the dollar

3 amounts specified in subsections (d)(3)(C), (f)(2)(A)(i), and

4 (f)(2)(A)(ii)(II) shall be increased by the same percentage

5 as the percentage increase in the consumer price index for

6 all urban consumers (all items; U.S. city average) between

7 September 1988 and the September before the calendar year

8 involved.

9 ‘‘(h) DEFINITIONS.—In this section:

10 ‘‘(1) INSTITUTIONALIZED SPOUSE.—The term

11 ‘institutionalized spouse’ means an individual—

12 ‘‘(A)(i) who is in a medical institution or

13 nursing facility, or

14 ‘‘(ii) at the option of the State (I) who

15 would be eligible under the MediGrant plan

16 under this title if such individual was in a med17 ical institution, (II) with respect to whom there

18 has been a determination that but for the provi19 sion of home or community-based services such

20 individual would require the level of care pro21 vided in a hospital, nursing facility or inter22 mediate care facility for the mentally retarded

23 the cost of which could be reimbursed under the

24 plan, and (III) who will receive home or commu25 nity-based services pursuant the plan; and
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1 ‘‘(B) is married to a spouse who is not in

2 a medical institution or nursing facility;

3 but does not include any such individual who is not

4 likely to meet the requirements of subparagraph (A)

5 for at least 30 consecutive days.

6 ‘‘(2) COMMUNITY SPOUSE.—The term ‘commu7 nity spouse’ means the spouse of an institutionalized

8 spouse.

9 ‘‘SEC. 2116. STATE FLEXIBILITY.

10 ‘‘(a) STATE FLEXIBILITY IN BENEFITS, PROVIDER

11 PAYMENTS, GEOGRAPHICAL COVERAGE AREA, AND SELEC12 TION OF PROVIDERS.—Nothing in this title (other than sub13 sections (c) and (d) of section 2111) shall be construed as

14 requiring a State—

15 ‘‘(1) to provide medical assistance for any par16 ticular items or services,

17 ‘‘(2) to provide for any payments with respect to

18 any specific health care providers or any level of pay19 ments for any services,

20 ‘‘(3) to provide for the same medical assistance

21 in all geographical areas or political subdivisions of

22 the State, so long as medical assistance is made avail23 able in all such areas or subdivisions,

24 ‘‘(4) to provide that the medical assistance made

25 available to any individual eligible for medical assist-
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1 ance must not be less in amount, duration, or scope

2 than the medical assistance made available to any

3 other such individual, or

4 ‘‘(5) to provide that any individual eligible for

5 medical assistance with respect to an item or service

6 may choose to obtain such assistance from any insti7 tution, agency, or person qualified to provide the item

8 or service.

9 ‘‘(b) STATE FLEXIBILITY WITH RESPECT TO MAN10 AGED CARE.—Nothing in this title shall be construed—

11 ‘‘(1) to limit a State’s ability to contract with,

12 on a capitated basis or otherwise, health care plans

13 or individual health care providers for the provision

14 or arrangement of medical assistance,

15 ‘‘(2) to limit a State’s ability to contract with

16 health care plans or other entities for case manage17 ment services or for coordination of medical assist18 ance, or

19 ‘‘(3) to restrict a State from establishing capita20 tion rates on the basis of competition among health

21 care plans or negotiations between the State and one

22 or more health care plans.

23 ‘‘PART C—PAYMENTS TO STATES

24 ‘‘SEC. 2121. ALLOTMENT OF FUNDS AMONG STATES.

25 ‘‘(a) ALLOTMENTS.—
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1 ‘‘(1) COMPUTATION.—The Secretary shall pro2 vide for the computation of State obligation and out3 lay allotments in accordance with this section for

4 each fiscal year beginning with fiscal year 1996.

5 ‘‘(2) LIMITATION ON OBLIGATIONS.—

6 ‘‘(A) IN GENERAL.—Subject to subpara7 graph (B), the Secretary shall not enter into ob8 ligations with any State under this title for a

9 fiscal year in excess of the obligation allotment

10 for that State for the fiscal year under para11 graph (4). The sum of such obligation allotments

12 for all States in any fiscal year (excluding

13 amounts carried over under subparagraph (B)

14 and excluding changes in allotments effected

15 under paragraph (4)(D)) shall not exceed the ag16 gregate limit on new obligation authority speci17 fied in paragraph (3) for that fiscal year.

18 ‘‘(B) ADJUSTMENTS.—

19 ‘‘(i) CARRYOVER OF ALLOTMENT PER20 MITTED.—If the amount of obligations en21 tered into under this part with a State for

22 quarters in a fiscal year is less than the

23 amount of the obligation allotment under

24 this section to the State for the fiscal year,

25 the amount of the difference shall be added
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1 to the amount of the State obligation allot2 ment otherwise provided under this section

3 for the succeeding fiscal year. This clause

4 shall be applied separately with respect to

5 the portion of the obligation allotment that

6 is attributable to the supplemental outlay

7 allotment under subsection (f).

8 ‘‘(ii) REDUCTION FOR POST-ENACT9 MENT NEW OBLIGATIONS UNDER TITLE XIX

10 IN FISCAL YEAR 1996.—The amount of the

11 obligation allotment otherwise provided

12 under this section for fiscal year 1996 for a

13 State shall be reduced by the amount of the

14 obligations entered into with respect to the

15 State under section 1903(a) after the date of

16 the enactment of this title.

17 ‘‘(C) NO EFFECT ON PRIOR YEAR OBLIGA18 TIONS.—Subparagraph (A) shall not apply to or

19 affect obligations for a fiscal year prior to fiscal

20 year 1996.

21 ‘‘(D) OBLIGATION.—For purposes of this

22 section, the Secretary’s establishment of an esti23 mate under section 2123(b) of the amount a

24 State is entitled to receive for a quarter (taking

25 into account any adjustments described in such
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1 subsection) shall be treated as the obligation of

2 such amount for the State as of the first day of

3 the quarter.

4 ‘‘(3) AGGREGATE LIMIT ON NEW OBLIGATION AU5 THORITY.—

6 ‘‘(A) IN GENERAL.—For purposes of this

7 subsection, subject to subparagraph (C), the ‘ag8 gregate limit on new obligation authority’, for a

9 fiscal year, is the pool amount under subsection

10 (b) for the fiscal year, divided by the payout ad11 justment factor (described in subparagraph (B))

12 for the fiscal year.

13 ‘‘(B) PAYOUT ADJUSTMENT FACTOR.—For

14 purposes of this subsection, the ‘payout adjust15 ment factor’—

16 ‘‘(i) for fiscal year 1996 is 0.950,

17 ‘‘(ii) for fiscal year 1997 is 0.986, and

18 ‘‘(iii) for a subsequent fiscal year is

19 0.998.

20 ‘‘(C) TRANSITIONAL ADJUSTMENT FOR PRE21 ENACTMENT-OBLIGATION OUTLAYS.—In order to

22 account for pre-enactment-obligation outlays de23 scribed in paragraph (4)(C)(iv), in determining

24 the aggregate limit on new obligation authority
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1 under subparagraph (A) for fiscal year 1996, the

2 pool amount for such fiscal year is equal to—

3 ‘‘(i) the pool amount for such year, re4 duced by

5 ‘‘(ii) $24,624,000,000.

6 ‘‘(4) OBLIGATION ALLOTMENTS.—

7 ‘‘(A) GENERAL RULE FOR 50 STATES AND

8 THE DISTRICT OF COLUMBIA.—Except as pro9 vided in this paragraph, the ‘obligation allot10 ment’ for any of the 50 States or the District of

11 Columbia for a fiscal year (beginning with fiscal

12 year 1997) is an amount that bears the same

13 ratio to the outlay allotment under subsection

14 (c)(2) for such State or District (not taking into

15 account any adjustment due to an election under

16 paragraph (4)) for the fiscal year as the ratio

17 of—

18 ‘‘(i) the aggregate limit on new obliga19 tion authority (less the total of the obliga20 tion allotments under subparagraph (B))

21 for the fiscal year, to

22 ‘‘(ii) the pool amount (less the sum of

23 the outlay allotments for the territories) for

24 such fiscal year.
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1 ‘‘(B) TERRITORIES.—The obligation allot2 ment for each of the Commonwealths and terri3 tories for a fiscal year is the outlay allotment for

4 such Commonwealth or territory (as determined

5 under subsection (c)(5)) for the fiscal year di6 vided by the payout adjustment factor for the fis7 cal year (as defined in paragraph (3)(B)).

8 ‘‘(C) TRANSITIONAL RULE FOR FISCAL YEAR

9 1996.—

10 ‘‘(i) IN GENERAL.—The obligation

11 amount for fiscal year 1996 for any State

12 (including the District of Columbia, a Com13 monwealth, or territory) is determined ac14 cording to the formula: A=(B-C)/D,

15 where—

16 ‘‘(I) ‘A’ is the obligation amount

17 for such State,

18 ‘‘(II) ‘B’ is the outlay allotment of

19 such State for fiscal year 1996, as de20 termined under subsection (c),

21 ‘‘(III) ‘C’ is the amount of the

22 pre-enactment-obligation outlays (as

23 established for such State under clause

24 (ii)), and
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1 ‘‘(IV) ‘D’ is the payout adjust2 ment factor for such fiscal year (as de3 fined in paragraph (3)(B)).

4 ‘‘(ii) PRE-ENACTMENT-OBLIGATION

5 OUTLAY AMOUNTS.—Within 30 days after

6 the date of the enactment of this title, the

7 Secretary shall estimate (based on the best

8 data available) and publish in the Federal

9 Register the amount of the pre-enactment10 obligation outlays (as defined in clause (iv))

11 for each State (including the District of Co12 lumbia, Commonwealths, and territories).

13 The total of such amounts shall equal the

14 dollar amount specified in paragraph

15 (3)(C)(ii).

16 ‘‘(iii) AGREEMENT.—The submission of

17 a MediGrant plan by a State under this

18 title is deemed to constitute the State’s ac19 ceptance of the obligation allotment limita20 tions under this subsection, including the

21 formula for computing the amount of such

22 obligation allotment.

23 ‘‘(iv) PRE-ENACTMENT-OBLIGATION

24 OUTLAYS DEFINED.—In this subsection, the

25 term ‘pre-enactment-obligation outlays’
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1 means, for a State, the outlays of the Fed2 eral Government that result from obliga3 tions that have been incurred under title

4 XIX with respect to the State before the date

5 of the enactment of this title, but for which

6 payments to States have not been made as

7 of such date of enactment.

8 ‘‘(D) ADJUSTMENT TO REFLECT ADOPTION

9 OF ALTERNATIVE GROWTH FORMULA.—Any State

10 that has elected an alternative growth formula

11 under subsection (c)(4) which increases or de12 creases the dollar amount of an outlay allotment

13 for a fiscal year is deemed to have increased or

14 decreased, respectively, its obligation amount for

15 such fiscal year by the amount of such increase

16 or decrease.

17 ‘‘(E) TRANSITIONAL CORRECTION FOR FIS18 CAL YEAR 1997.—

19 ‘‘(i) IN GENERAL.—The obligation

20 amount for fiscal year 1997 for any State

21 described in clause (ii) shall be increased by

22 90 percent of the amount by which 90 per23 cent of the amount described in clause

24 (ii)(I) exceeds the amount described in

25 clause (ii)(II), divided by the payout ad-
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1 justment factor specified in paragraph

2 (3)(B) for fiscal year 1996. The increase

3 under this clause shall be paid to a State in

4 the first quarter of fiscal year 1997.

5 ‘‘(ii) STATES DESCRIBED.—A State de6 scribed in this clause is a State for which—

7 ‘‘(I) the amount of the pre-enact8 ment-obligation outlays (as established

9 for such State under subparagraph

10 (C)(ii)), exceeded

11 ‘‘(II) the outlays of the Federal

12 Government during fiscal year 1996

13 that are attributable to obligations that

14 were incurred under title XIX with re15 spect to the State before the date of the

16 enactment of this title, but for which

17 payments to States had not been made

18 as of such date of enactment,

19 by at least 10 percent of the amount de20 scribed in subclause (I).

21 ‘‘(b) POOL OF AVAILABLE FUNDS.—

22 ‘‘(1) IN GENERAL.—For purposes of this section,

23 the ‘pool amount’ under this subsection for—

24 ‘‘(A) fiscal year 1996 is $96,386,037,894,

25 ‘‘(B) fiscal year 1997 is $103,233,603,164,
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1 ‘‘(C) fiscal year 1998 is $107,907,625,827,

2 ‘‘(D) fiscal year 1999 is $112,644,040,408,

3 ‘‘(E) fiscal year 2000 is $117,359,685,046,

4 ‘‘(F) fiscal year 2001 is $122,284,072,525,

5 ‘‘(G) fiscal year 2002 is $127,418,239,580,

6 and

7 ‘‘(H) each subsequent fiscal year is the pool

8 amount under this paragraph for the previous

9 fiscal year increased by the lesser of 4.2 percent

10 or the annual percentage increase in the gross

11 domestic product for the 12-month period ending

12 in June before the beginning of that subsequent

13 fiscal year.

14 ‘‘(2) NATIONAL MEDIGRANT GROWTH PERCENT15 AGE.—For purposes of this section for a fiscal year

16 (beginning with fiscal year 1997), the ‘national

17 MediGrant growth percentage’ is the percentage by

18 which—

19 ‘‘(A) the pool amount under paragraph (1)

20 for the fiscal year, exceeds

21 ‘‘(B) such pool amount for the previous fis22 cal year.

23 ‘‘(c) STATE OUTLAY ALLOTMENTS.—

24 ‘‘(1) FISCAL YEAR 1996.—
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1 ‘‘(A) IN GENERAL.—For each of the 50

2 States and the District of Columbia, the amount

3 of the State outlay allotment under this sub4 section for fiscal year 1996 is, subject to para5 graph (4), determined in accordance with the fol6 lowing table:

‘‘State or District: Outlay allotment (in dollars):

Alabama .................................................................................. 1,517,652,207

Alaska ...................................................................................... 204,933,213

Arizona .................................................................................... 1,370,781,297

Arkansas .................................................................................. 1,011,457,933

California ................................................................................ 8,946,838,461

Colorado .................................................................................. 757,492,679

Connecticut ............................................................................. 1,463,011,635

Delaware ................................................................................. 212,327,763

District of Columbia .............................................................. 501,412,091

Florida .................................................................................... 3,715,624,180

Georgia .................................................................................... 2,426,320,602

Hawaii .................................................................................... 323,124,375

Idaho ....................................................................................... 278,329,686

Illinois ..................................................................................... 3,467,274,342

Indiana ................................................................................... 1,952,467,267

Iowa ......................................................................................... 835,235,895

Kansas ..................................................................................... 713,700,869

Kentucky ................................................................................. 1,577,828,832

Louisiana ................................................................................ 2,622,000,000

Maine ...................................................................................... 694,220,790

Maryland ................................................................................ 1,369,699,847

Massachusetts .......................................................................... 2,870,346,862

Michigan ................................................................................. 3,465,182,886

Minnesota ................................................................................ 1,793,776,356

Mississippi .............................................................................. 1,261,781,330

Missouri .................................................................................. 1,849,248,945

Montana .................................................................................. 312,212,472

Nebraska .................................................................................. 463,900,417

Nevada ..................................................................................... 257,896,453

New Hampshire ...................................................................... 360,000,000

New Jersey .............................................................................. 2,854,621,241

New Mexico ............................................................................. 634,756,945

New York ................................................................................. 12,901,793,038

North Carolina ....................................................................... 2,587,883,809

North Dakota .......................................................................... 241,168,563

Ohio ......................................................................................... 4,034,049,690

Oklahoma ................................................................................ 911,198,775

Oregon ..................................................................................... 1,088,670,440

Pennsylvania .......................................................................... 4,454,423,400

Rhode Island ........................................................................... 545,686,262

South Carolina ....................................................................... 1,621,021,815
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‘‘State or District: Outlay allotment (in dollars):

South Dakota .......................................................................... 262,804,959

Tennessee ................................................................................. 2,519,934,251

Texas ....................................................................................... 6,351,909,343

Utah ......................................................................................... 484,274,254

Vermont ................................................................................... 248,158,729

Virginia ................................................................................... 1,144,962,509

Washington ............................................................................. 1,763,460,996

West Virginia .......................................................................... 1,156,813,157

Wisconsin ................................................................................ 1,709,500,642

Wyoming ................................................................................. 132,925,390.

1 ‘‘(2) COMPUTATION OF STATE OUTLAY ALLOT2 MENTS.—

3 ‘‘(A) IN GENERAL.—Subject to the succeed4 ing provisions of this subsection, the amount of

5 the State outlay allotment under this subsection

6 for one of the 50 States and the District of Co7 lumbia for a fiscal year (beginning with fiscal

8 year 1997) is equal to the product of—

9 ‘‘(i) the needs-based amount deter10 mined under subparagraph (B) for such

11 State or District for the fiscal year, and

12 ‘‘(ii) the scalar factor described in sub13 paragraph (C) for the fiscal year.

14 ‘‘(B) NEEDS-BASED AMOUNT.—The needs15 based amount under this subparagraph for a

16 State or the District of Columbia for a fiscal

17 year is equal to the product of—

18 ‘‘(i) the State’s or District’s aggregate

19 expenditure need for the fiscal year (as de20 termined under subsection (d)), and
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1 ‘‘(ii) the State’s or District’s old Fed2 eral medical assistance percentage (as de3 fined in section 2122(d)) for the fiscal year

4 (or, in the case of fiscal year 1997, the Fed5 eral medical assistance percentage deter6 mined under section 1905(b) for fiscal year

7 1996).

8 ‘‘(C) SCALAR FACTOR.—The scalar factor

9 under this subparagraph for a fiscal year is such

10 proportion so that, when it is applied under sub11 paragraph (A)(ii) for the fiscal year (taking into

12 account the floors and ceilings under paragraph

13 (3)), the total of the outlay allotments under this

14 subsection for all the 50 States and the District

15 of Columbia for the fiscal year (not taking into

16 account any increase in an outlay allotment for

17 a fiscal year attributable to the election of an al18 ternative growth formula under paragraph (4))

19 is equal to the amount by which (i) the pool

20 amount for the fiscal year (as determined under

21 subsection (b)), exceeds (ii) the sum of the outlay

22 allotments provided under paragraph (5) for the

23 Commonwealths and territories for the fiscal

24 year.

25 ‘‘(3) FLOORS AND CEILINGS.—
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1 ‘‘(A) FLOORS.—Subject to the ceiling estab2 lished under subparagraph (B), in no case shall

3 the amount of the State outlay allotment under

4 paragraph (2) for a fiscal year be less than the

5 greatest of the following:

6 ‘‘(i) IN GENERAL.—Beginning with fis7 cal year 1998, 0.24 percent of the pool

8 amount for the fiscal year.

9 ‘‘(ii) FLOOR BASED ON PREVIOUS

10 YEAR’S OUTLAY ALLOTMENT.—Subject to

11 clause (iii)—

12 ‘‘(I) FISCAL YEAR 1997.—For fis13 cal year 1997, 103.5 percent of the

14 amount of the State outlay allotment

15 under this subsection for fiscal year

16 1996.

17 ‘‘(II) FISCAL YEAR 1998.—For fis18 cal year 1998, 103 percent of the

19 amount of the State outlay allotment

20 under this subsection for fiscal year

21 1997.

22 ‘‘(III) SUBSEQUENT FISCAL

23 YEARS.—For a fiscal year after 1998,

24 102 percent of the amount of the State
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1 outlay allotment under this subsection

2 for the previous fiscal year.

3 ‘‘(iii) FLOOR BASED ON OUTLAY AL4 LOTMENT GROWTH RATE IN FIRST YEAR.—

5 Beginning with fiscal year 1998, in the case

6 of a State for which the outlay allotment

7 under this subsection for fiscal year 1997

8 exceeded its outlay allotment under this sub9 section for the previous fiscal year by more

10 than the national MediGrant growth per11 centage for fiscal year 1997, 104 percent of

12 the amount of the State outlay allotment

13 under this subsection for the previous fiscal

14 year (or, if less, beginning with fiscal year

15 2003, 95 percent of the national MediGrant

16 growth percentage for the year).

17 ‘‘(B) CEILINGS.—

18 ‘‘(i) IN GENERAL.—Subject to clause

19 (ii), in no case shall the amount of the

20 State outlay allotment under paragraph (2)

21 for a fiscal year be greater than the product

22 of—

23 ‘‘(I) the State outlay allotment

24 under this subsection for the State for

25 the preceding fiscal year, and
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1 ‘‘(II) the applicable percent (spec2 ified in clause (ii) or (iii)) for the fis3 cal year involved.

4 ‘‘(ii) GENERAL RULE FOR APPLICABLE

5 PERCENT.—For purposes of clause (i), sub6 ject to clause (iii), the ‘applicable percent’—

7 ‘‘(I) for fiscal year 1997 is 109

8 percent, and

9 ‘‘(II) for a subsequent fiscal year

10 is 105.33 percent.

11 ‘‘(iii) SPECIAL RULE.—For a fiscal

12 year after fiscal year 1997, in the case of a

13 State (among the 50 States and the District

14 of Columbia) that is one of the 10 States

15 with the lowest Federal MediGrant spending

16 per resident-in-poverty rates (as determined

17 under clause (iv)) for the fiscal year, the

18 ‘applicable percent’ is 107 percent.

19 ‘‘(iv) DETERMINATION OF FEDERAL

20 MEDIGRANT SPENDING PER RESIDENT-IN21 POVERTY RATE.—For purposes of clause

22 (iii), the ‘Federal MediGrant spending per

23 resident-in-poverty rate’ for a State for a

24 fiscal year is equal to—
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1 ‘‘(I) the State’s outlay allotment

2 under this subsection for the previous

3 fiscal year (determined without regard

4 to paragraph (4)), divided by

5 ‘‘(II) the average annual number

6 of residents of the State in poverty (as

7 defined in subsection (d)(2)) with re8 spect to the fiscal year.

9 ‘‘(C) SPECIAL RULE.—

10 ‘‘(i) IN GENERAL.—Notwithstanding

11 the preceding subparagraphs of this para12 graph, the State outlay allotment for—

13 ‘‘(I) New Hampshire for each of

14 the fiscal years 1997 through 2000, is

15 $360,000,000,

16 ‘‘(II) Louisiana, subject to

17 subclause (III), for each of the fiscal

18 years 1997 through 2000, is

19 $2,622,000,000, and

20 ‘‘(III) Louisiana and Nebraska

21 for fiscal year 1997, as otherwise deter22 mined, shall be increased by

23 $37,048,207 and $106,132,408, respec24 tively.
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1 ‘‘(IV) Nevada for each of fiscal

2 years 1996, 1997, and 1998, as other3 wise determined, shall be increased by

4 $90,000,000.

5 ‘‘(ii) EXCEPTION.—A State described

6 in subclause (I) or (II) of clause (i) may

7 apply to the Secretary for use of the State

8 outlay allotment otherwise determined

9 under this subsection for any fiscal year, if

10 such State notifies the Secretary not later

11 than March 1 preceding such fiscal year

12 that such State will be able to expend suffi13 cient State funds in such fiscal year to

14 qualify for such allotment.

15 ‘‘(iii) TREATMENT OF INCREASE AS

16 SUPPLEMENTAL ALLOTMENT.—Any increase

17 in an outlay allotment under clause (i)(III)

18 or (i)(IV) shall not be taken into account

19 for purposes of determining the scalar factor

20 under paragraph (2) for fiscal year 1997,

21 any State outlay allotment for a fiscal year

22 after fiscal year 1997, the pool amount for

23 a fiscal year after fiscal year 1997, or deter24 mination of the national MediGrant growth

25 percentage for any fiscal year.
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1 ‘‘(4) ELECTION OF ALTERNATIVE GROWTH FOR2 MULA.—

3 ‘‘(A) ELECTION.—In order to reduce vari4 ations in increases in outlay allotments over

5 time, any of the 50 States or the District of Co6 lumbia may elect (by notice provided to the Sec7 retary by not later than April 1, 1996) to adopt

8 an alternative growth rate formula under this

9 paragraph for the determination of the State’s

10 outlay allotment in fiscal year 1996 and for the

11 increase in the amount of such allotment in sub12 sequent fiscal years.

13 ‘‘(B) FORMULA.—The alternative growth

14 formula under this paragraph may be any for15 mula under which a portion of the State outlay

16 allotment for fiscal year 1996 under paragraph

17 (1) is deferred and applied to increase the

18 amount of its outlay allotment for one or more

19 subsequent fiscal years, so long as the total

20 amount of such increases for all such subsequent

21 fiscal years does not exceed the amount of the

22 outlay allotment deferred from fiscal year 1996.

23 ‘‘(5) COMMONWEALTHS AND TERRITORIES.—

24 ‘‘(A) IN GENERAL.—The outlay allotment

25 for each of the Commonwealths and territories
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1 for a fiscal year is the maximum amount that

2 could have been certified under section 1108(c)

3 (as in effect on the day before the date of the en4 actment of this title) with respect to the Com5 monwealth or territory for the fiscal year with

6 respect to title XIX, if the national MediGrant

7 growth percentage (as determined under sub8 section (b)(2)) for the fiscal year had been sub9 stituted (beginning with fiscal year 1997) for the

10 percentage increase referred to in section

11 1108(c)(1)(B) (as so in effect).

12 ‘‘(B) DISREGARD OF ROUNDING REQUIRE13 MENTS.—For purposes of subparagraph (A), the

14 rounding requirements under section 1108(c)

15 shall not apply.

16 ‘‘(C) LIMITATION ON TOTAL AMOUNT FOR

17 FISCAL YEAR 1996.—Notwithstanding the provi18 sions of subparagraph (A), the total amount of

19 the outlay allotments for the Commonwealths

20 and territories for fiscal year 1996 may not ex21 ceed $139,950,000.

22 ‘‘(d) STATE AGGREGATE EXPENDITURE NEED DETER23 MINED.—

24 ‘‘(1) IN GENERAL.—For purposes of subsection

25 (c), the ‘State aggregate expenditure need’ for a State
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1 or the District of Columbia for a fiscal year is equal

2 to the product of the following 4 factors:

3 ‘‘(A) RESIDENTS IN POVERTY.—The average

4 annual number of residents in poverty of such

5 State or District with respect to the fiscal year

6 (as determined under paragraph (2)).

7 ‘‘(B) CASE MIX INDEX.—The case mix index

8 for such State or District (as determined under

9 paragraph (3)) for the most recent fiscal year for

10 which data are available, but in no case less

11 than 0.9 or greater than 1.15.

12 ‘‘(C) INPUT COST INDEX.—The input cost

13 index for the State (as determined under para14 graph (4)) for the most recent fiscal year for

15 which data are available.

16 ‘‘(D) NATIONAL AVERAGE SPENDING PER

17 RESIDENT IN POVERTY.—The national average

18 spending per resident in poverty (as determined

19 under paragraph (5)).

20 ‘‘(2) RESIDENTS IN POVERTY.—In this section—

21 ‘‘(A) IN GENERAL.—The term ‘average an22 nual number of residents in poverty’ means,

23 with respect to a State or the District of Colum24 bia and a fiscal year, the average annual num25 ber of residents in poverty (as defined in sub-
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1 paragraph (B)) in such State or District (based

2 on data made generally available by the Bureau

3 of the Census from the Current Population Sur4 vey) for the most recent 3-calendar-year period

5 (ending before the fiscal year) for which such

6 data are available.

7 ‘‘(B) RESIDENT IN POVERTY DEFINED.—The

8 term ‘resident in poverty’ means an individual

9 whose family income does not exceed the poverty

10 threshold (as such terms are defined by the Office

11 of Management and Budget and are generally

12 interpreted and applied by the Bureau of the

13 Census for the year involved).

14 ‘‘(3) CASE MIX INDEX.—

15 ‘‘(A) IN GENERAL.—In this subsection, the

16 ‘case mix index’ for a State or the District of Co17 lumbia for a fiscal year is equal to—

18 ‘‘(i) the sum of—

19 ‘‘(I) the projected per recipient ex20 penditures with respect to elderly indi21 viduals in such State or District for

22 the fiscal year (determined under sub23 paragraph (B)),

24 ‘‘(II) the projected per recipient

25 expenditures with respect to the blind
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1 and disabled individuals in such State

2 or District for the fiscal year (deter3 mined under subparagraph (C)), and

4 ‘‘(III) the projected per recipient

5 expenditures with respect to other indi6 viduals in such State or District (de7 termined under subparagraph (D));

8 divided by—

9 ‘‘(ii) the national average spending per

10 recipient determined under subparagraph

11 (E) for the fiscal year involved.

12 ‘‘(B) PROJECTED PER RECIPIENT EXPENDI13 TURES FOR THE ELDERLY.—For purposes of sub14 paragraph (A)(i)(I), the ‘projected per recipient

15 expenditures with respect to elderly individuals’

16 in a State or the District of Columbia for a fis17 cal year is equal to the product of—

18 ‘‘(i) the national average per recipient

19 expenditures under this title in the 50

20 States and the District of Columbia for the

21 most recent fiscal year for which data are

22 available for elderly individuals, and

23 ‘‘(ii) the proportion, of all individuals

24 who received medical assistance under this

25 title in such State or District in the most
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1 recent fiscal year referred to in clause (i),

2 that were individuals described in such

3 clause.

4 ‘‘(C) PROJECTED PER RECIPIENT EXPENDI5 TURES FOR THE BLIND AND DISABLED.—For

6 purposes of subparagraph (A)(i)(II), the ‘pro7 jected per recipient expenditures with respect to

8 blind and disabled individuals’ in a State or the

9 District of Columbia for a fiscal year is equal to

10 the product of—

11 ‘‘(i) the national average per recipient

12 expenditures under this title in the 50

13 States and the District of Columbia for the

14 most recent fiscal year for which data are

15 available for individuals who are eligible for

16 medical assistance because such individuals

17 are blind or disabled and are not elderly in18 dividuals, and

19 ‘‘(ii) the proportion, of all individuals

20 who received medical assistance under this

21 title in the State in the most recent fiscal

22 year referred to in clause (i), that were in23 dividuals described in such clause.

24 ‘‘(D) PROJECTED PER RECIPIENT EXPENDI25 TURES FOR OTHER INDIVIDUALS.—For purposes
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1 of subparagraph (A)(i)(III), the ‘projected per

2 recipient expenditures with respect to other indi3 viduals’ in a State or the District of Columbia

4 for a fiscal year is equal to the product of—

5 ‘‘(i) the national average per recipient

6 expenditures under this title in the 50

7 States and the District of Columbia for the

8 most recent fiscal year for which data are

9 available for individuals who are not de10 scribed in subparagraph (B)(i) or (C)(i),

11 and

12 ‘‘(ii) the proportion, of all individuals

13 who received medical assistance under this

14 title in such State or District in the most

15 recent fiscal year referred to in clause (i),

16 that were individuals described in such

17 clause.

18 ‘‘(E) NATIONAL AVERAGE SPENDING PER

19 RECIPIENT.—For purposes of this paragraph, the

20 ‘national average expenditures per recipient’ for

21 a fiscal year is equal to the sum of—

22 ‘‘(i) the product of (I) the national av23 erage described in subparagraph (B)(i), and

24 (II) the proportion, of all individuals who

25 received medical assistance under this title
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1 in any of the 50 States or the District of

2 Columbia in the fiscal year referred to in

3 such subparagraph, who are described in

4 such subparagraph,

5 ‘‘(ii) the product of (I) the national av6 erage described in subparagraph (C)(i), and

7 (II) the proportion, of all individuals who

8 received medical assistance under this title

9 in any of the 50 States or the District of

10 Columbia in the fiscal year referred to in

11 such subparagraph, who are described in

12 such subparagraph, and

13 ‘‘(iii) the product of (I) the national

14 average described in subparagraph (D)(i),

15 and (II) the proportion, of all individuals

16 who received medical assistance under this

17 title in any of the 50 States or the District

18 of Columbia in the fiscal year referred to in

19 such subparagraph, who are described in

20 such subparagraph.

21 ‘‘(F) DETERMINATION OF NATIONAL AVER22 AGES AND PROPORTIONS.—

23 ‘‘(i) IN GENERAL.—The national aver24 ages per recipient and the proportions re25 ferred to in clauses (i) and (ii), respectively,
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1 of subparagraphs (B), (C), and (D) and

2 subparagraph (E) shall be determined by

3 the Secretary using the most recent data

4 available.

5 ‘‘(ii) USE OF MEDICAID DATA.—If for

6 a fiscal year there is inadequate data to

7 compute such averages and proportions

8 based on expenditures and numbers of indi9 viduals receiving medical assistance under

10 this title, the Secretary may compute such

11 averages based on expenditures and num12 bers of such individuals under title XIX for

13 the most recent fiscal year for which data

14 are available and, for this purpose—

15 ‘‘(I) any reference in subpara16 graph (B)(i) to ‘elderly individuals’ is

17 deemed a reference to ‘individuals

18 whose eligibility for medical assistance

19 is based on being 65 years of age or

20 older’,

21 ‘‘(II) the reference in subpara22 graph (C)(i) to ‘and are not elderly in23 dividuals’ shall be considered to be de24 leted, and
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1 ‘‘(III) individuals whose basis for

2 eligibility for medical assistance was

3 reported as unknown shall not be

4 counted as individuals under subpara5 graph (D)(i).

6 ‘‘(iii) EXPENDITURE DEFINED.—For

7 purposes of this paragraph, the term ‘ex8 penditure’ means medical vendor payments

9 by basis of eligibility as reported by HCFA

10 Form 2082.

11 ‘‘(4) INPUT COST INDEX.—

12 ‘‘(A) IN GENERAL.—In this section, the

13 ‘input cost index’ for a State or the District of

14 Columbia for a fiscal year is the sum of—

15 ‘‘(i) 0.15, and

16 ‘‘(ii) 0.85 multiplied by the ratio of (I)

17 the annual average wages for hospital em18 ployees in such State or District for the fis19 cal year (as determined under subpara20 graph (B)), to (II) the annual average

21 wages for hospital employees in the 50

22 States and the District of Columbia for such

23 year (as determined under such subpara24 graph).
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1 ‘‘(B) DETERMINATION OF ANNUAL AVERAGE

2 WAGES OF HOSPITAL EMPLOYEES.—The Sec3 retary shall provide for the determination of an4 nual average wages for hospital employees in a

5 State or the District of Columbia and, collec6 tively, in the 50 States and the District of Co7 lumbia for a fiscal year based on the area wage

8 data applicable to hospitals under section

9 1886(d)(2)(E) (or, if such data no longer exists,

10 comparable data of hospital wages) for dis11 charges occurring during the fiscal year involved.

12 ‘‘(5) NATIONAL AVERAGE SPENDING PER RESI13 DENT IN POVERTY.—For purposes of this subsection,

14 the ‘national average spending per resident in pov15 erty’—

16 ‘‘(A) for fiscal year 1997 is equal to—

17 ‘‘(i) the sum (for each of the 50 States

18 and the District of Columbia) of the total of

19 the Federal and State expenditures under

20 title XIX for calendar quarters in fiscal

21 year 1994, increased by the percentage by

22 which (I) the pool amount for fiscal year

23 1997, exceeds (II) $83,213,431,458 (which

24 represents Federal medicaid expenditures
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1 for such States and District for fiscal year

2 1994); divided by

3 ‘‘(ii) the sum of the number of resi4 dents in poverty (as defined in paragraph

5 (2)(A)) for all of the 50 States and the Dis6 trict of Columbia for fiscal year 1994; and

7 ‘‘(B) for a succeeding fiscal year is equal to

8 the national average spending per resident in

9 poverty under this paragraph for the preceding

10 fiscal year increased by the national MediGrant

11 growth percentage (as defined in subsection

12 (b)(2)) for the fiscal year involved.

13 ‘‘(e) PUBLICATION OF OBLIGATION AND OUTLAY AL14 LOTMENTS.—

15 ‘‘(1) NOTICE OF PRELIMINARY ALLOTMENTS.—

16 Not later than April 1 before the beginning of each

17 fiscal year (beginning with fiscal year 1997), the Sec18 retary shall initially compute, after consultation with

19 the Comptroller General, and publish in the Federal

20 Register notice of the proposed obligation and outlay

21 allotments for each State under this section (not tak22 ing into account subsection (a)(2)(B)) for the fiscal

23 year. The Secretary shall include in the notice a de24 scription of the methodology and data used in deriv25 ing such allotments for the year.
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1 ‘‘(2) REVIEW BY GAO.—The Comptroller General

2 shall submit to Congress by not later than May 15 of

3 each such fiscal year, a report analyzing such allot4 ments and the extent to which they comply with the

5 precise requirements of this section.

6 ‘‘(3) NOTICE OF FINAL ALLOTMENTS.—Not later

7 than July 1 before the beginning of each such fiscal

8 year, the Secretary, taking into consideration the

9 analysis contained in the report of the Comptroller

10 General under paragraph (2), shall compute and pub11 lish in the Federal Register notice of the final allot12 ments under this section (both taking into account

13 and not taking into account subsection (a)(2)(B)) for

14 the fiscal year. The Secretary shall include in the no15 tice a description of any changes in such allotments

16 from the initial allotments published under para17 graph (1) for the fiscal year and the reasons for such

18 changes. Once published under this paragraph, the

19 Secretary is not authorized to change such allotments.

20 ‘‘(4) GAO REPORT ON FINAL ALLOTMENTS.—The

21 Comptroller General shall submit to Congress by not

22 later than August 1 of each such fiscal year, a report

23 analyzing the final allotments under paragraph (3)

24 and the extent to which they comply with the precise

25 requirements of this section.
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1 ‘‘(f) SUPPLEMENTAL ALLOTMENT FOR EMERGENCY

2 HEALTH CARE SERVICES TO CERTAIN ALIENS.—

3 ‘‘(1) IN GENERAL.—Notwithstanding the pre4 vious provisions of this section, the amount of the

5 State outlay allotment for each of fiscal years 1996

6 through 2000 for each supplemental allotment eligible

7 State shall be increased by the amount of the supple8 mental outlay allotment provided under paragraph

9 (2) for the State for that year. The amount of such

10 increased allotment may only be used for the purpose

11 of providing medical assistance for care and services

12 for aliens described in paragraph (1) of section

13 2123(e) and for which the exception described in

14 paragraph (2) of such section applies. Section

15 2122(f)(3) shall apply to such assistance in the same

16 manner as it applies to medical assistance described

17 in such section.

18 ‘‘(2) SUPPLEMENTAL OUTLAY ALLOTMENT.—

19 ‘‘(A) IN GENERAL.—For purposes of para20 graph (1), the amount of the supplemental out21 lay allotment for a supplemental allotment eligi22 ble State for a fiscal year is equal to the supple23 mental allotment ratio (as defined in subpara24 graph (C)) multiplied by the supplemental pool
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1 amount (specified in subparagraph (D)) for the

2 fiscal year.

3 ‘‘(B) SUPPLEMENTAL ALLOTMENT ELIGIBLE

4 STATE.—In this subsection, the term ‘supple5 mental allotment eligible State’ means one of the

6 15 States with the highest number of undocu7 mented alien residents of all the States.

8 ‘‘(C) SUPPLEMENTAL ALLOTMENT RATIO.—

9 In this paragraph, the ‘supplemental allotment

10 ratio’ for a State is the ratio of—

11 ‘‘(i) the number of undocumented

12 aliens residing in the State, to

13 ‘‘(ii) the sum of such numbers for all

14 supplemental allotment eligible States.

15 ‘‘(D) SUPPLEMENTAL POOL AMOUNT.—In

16 this paragraph, the ‘supplemental pool

17 amount’—

18 ‘‘(i) for fiscal year 1996 is

19 $627,325,551,

20 ‘‘(ii) for fiscal year 1997 is

21 $673,388,855,

22 ‘‘(iii) for fiscal year 1998 is

23 $702,313,450,

24 ‘‘(iv) for fiscal year 1999 is

25 $733,140,258, and
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1 ‘‘(v) for fiscal year 2000 is

2 $763,831,886.

3 ‘‘(E) DETERMINATION OF NUMBER.—

4 ‘‘(i) IN GENERAL.—The number of un5 documented aliens residing in a State

6 under this paragraph—

7 ‘‘(I) for fiscal year 1996 shall be

8 determined based on estimates of the

9 resident illegal alien population resid10 ing in each State prepared by the Sta11 tistics Division of the Immigration

12 and Naturalization Service as of Octo13 ber 1992, and

14 ‘‘(II) for a subsequent fiscal year

15 shall be determined based on the most

16 recent updated estimate made under

17 clause (ii).

18 ‘‘(ii) UPDATING ESTIMATE.—For each

19 fiscal year beginning with fiscal year 1997,

20 the Secretary, in consultation with the

21 Commission of the Immigration and Natu22 ralization Service, States, and outside ex23 perts, shall estimate the number of undocu24 mented aliens residing in each of the 50

25 States and the District of Columbia.
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1 ‘‘(3) TREATMENT FOR OBLIGATION PURPOSES.—

2 For purposes of computing obligation allotments

3 under subsection (a)—

4 ‘‘(A) the amount of the supplemental pool

5 amount for a fiscal year shall be added to the

6 pool amount under subsection (b) for that fiscal

7 year, and

8 ‘‘(B) the amount of the supplemental allot9 ment to a State provided under paragraph (1)

10 shall be added to the outlay allotment of the

11 State for that fiscal year.

12 ‘‘(4) SEQUENCE OF OBLIGATIONS.—For purposes

13 of carrying out this title, payments to a supplemental

14 allotment eligible State under section 2122 that are

15 attributable to expenditures for medical assistance de16 scribed in the second sentence of paragraph (1) shall

17 first be counted toward the supplemental outlay allot18 ment provided under this subsection, rather than to19 ward the outlay allotment otherwise provided under

20 this section.

21 ‘‘SEC. 2122. PAYMENTS TO STATES.

22 ‘‘(a) AMOUNT OF PAYMENT.—From the allotment of a

23 State under section 2121 for a fiscal year, subject to the

24 succeeding provisions of this title, the Secretary shall pay
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1 to each State which has a MediGrant plan approved under

2 part E, for each quarter in the fiscal year—

3 ‘‘(1) an amount equal to the applicable Federal

4 medical assistance percentage (as defined in sub5 section (c)) of the total amount expended during such

6 quarter as medical assistance under the plan; plus

7 ‘‘(2) an amount equal to the applicable Federal

8 medical assistance percentage of the total amount ex9 pended during such quarter for medically-related

10 services (as defined in section 2112(e)(2)); plus

11 ‘‘(3) subject to section 2123(c)—

12 ‘‘(A) an amount equal to 90 percent of the

13 amounts expended during such quarter for the

14 design, development, and installation of informa15 tion systems and for providing incentives to pro16 mote the enforcement of medical support orders,

17 plus

18 ‘‘(B) an amount equal to 75 percent of the

19 amounts expended during such quarter for medi20 cal personnel, administrative support of medical

21 personnel, operation and maintenance of infor22 mation systems, modification of information sys23 tems, quality assurance activities, utilization re24 view, medical and peer review, anti-fraud activi25 ties, independent evaluations, coordination of
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1 benefits, and meeting reporting requirements

2 under this title, plus

3 ‘‘(C) an amount equal to 50 percent of so

4 much of the remainder of the amounts expended

5 during such quarter as are expended by the State

6 in the administration of the State MediGrant

7 plan.

8 ‘‘(b) PAYMENT PROCESS.—

9 ‘‘(1) QUARTERLY ESTIMATES.—Prior to the be10 ginning of each quarter, the Secretary shall estimate

11 the amount to which a State will be entitled under

12 subsection (a) for such quarter, such estimates to be

13 based on (A) a report filed by the State containing

14 its estimate of the total sum to be expended in such

15 quarter in accordance with the provisions of such sub16 sections, and stating the amount appropriated or

17 made available by the State and its political subdivi18 sions for such expenditures in such quarter, and if

19 such amount is less than the State’s proportionate

20 share of the total sum of such estimated expenditures,

21 the source or sources from which the difference is ex22 pected to be derived, and (B) such other investigation

23 as the Secretary may find necessary.

24 ‘‘(2) PAYMENT.—
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1 ‘‘(A) IN GENERAL.—The Secretary shall

2 then pay to the State, in such installments as the

3 Secretary may determine and in accordance

4 with section 6503(a) of title 31, United States

5 Code, the amount so estimated, reduced or in6 creased to the extent of any overpayment or

7 underpayment which the Secretary determines

8 was made under this section (or section 1903) to

9 such State for any prior quarter and with re10 spect to which adjustment has not already been

11 made under this subsection (or under section

12 1903(d)).

13 ‘‘(B) TREATMENT AS OVERPAYMENTS.—Ex14 penditures for which payments were made to the

15 State under subsection (a) shall be treated as an

16 overpayment to the extent that the State or local

17 agency administering such plan has been reim18 bursed for such expenditures by a third party

19 pursuant to the provisions of its plan in compli20 ance with section 2135.

21 ‘‘(C) RECOVERY OF OVERPAYMENTS.—For

22 purposes of this subsection, when an overpay23 ment is discovered, which was made by a State

24 to a person or other entity, the State shall have

25 a period of 60 days in which to recover or at-
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1 tempt to recover such overpayment before adjust2 ment is made in the Federal payment to such

3 State on account of such overpayment. Except as

4 otherwise provided in subparagraph (D), the ad5 justment in the Federal payment shall be made

6 at the end of the 60 days, whether or not recov7 ery was made.

8 ‘‘(D) NO ADJUSTMENT FOR

9 UNCOLLECTABLES.—In any case where the State

10 is unable to recover a debt which represents an

11 overpayment (or any portion thereof) made to a

12 person or other entity on account of such debt

13 having been discharged in bankruptcy or other14 wise being uncollectable, no adjustment shall be

15 made in the Federal payment to such State on

16 account of such overpayment (or portion thereof).

17 ‘‘(3) FEDERAL SHARE OF RECOVERIES.—The pro

18 rata share to which the United States is equitably en19 titled, as determined by the Secretary, of the net

20 amount recovered during any quarter by the State or

21 any political subdivision thereof with respect to medi22 cal assistance furnished under the State MediGrant

23 plan shall be considered an overpayment to be ad24 justed under this subsection.
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1 ‘‘(4) TIMING OF OBLIGATION OF FUNDS.—Upon

2 the making of any estimate by the Secretary under

3 this subsection, any appropriations available for pay4 ments under this section shall be deemed obligated.

5 ‘‘(5) DISALLOWANCES.—In any case in which

6 the Secretary estimates that there has been an over7 payment under this section to a State on the basis of

8 a claim by such State that has been disallowed by the

9 Secretary under section 1116(d), and such State dis10 putes such disallowance, the amount of the Federal

11 payment in controversy shall, at the option of the

12 State, be retained by such State or recovered by the

13 Secretary pending a final determination with respect

14 to such payment amount. If such final determination

15 is to the effect that any amount was properly dis16 allowed, and the State chose to retain payment of the

17 amount in controversy, the Secretary shall offset, from

18 any subsequent payments made to such State under

19 this title, an amount equal to the proper amount of

20 the disallowance plus interest on such amount dis21 allowed for the period beginning on the date such

22 amount was disallowed and ending on the date of

23 such final determination at a rate (determined by the

24 Secretary) based on the average of the bond equivalent
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1 of the weekly 90-day treasury bill auction rates dur2 ing such period.

3 ‘‘(c) APPLICABLE FEDERAL MEDICAL ASSISTANCE

4 PERCENTAGE DEFINED.—In this section, except as pro5 vided in subsection (f), the term ‘applicable Federal medical

6 assistance percentage’ means, with respect to one of the 50

7 States or the District of Columbia, at the State’s or Dis8 trict’s option—

9 ‘‘(1) the old Federal medical assistance percent10 age (as determined in subsection (d));

11 ‘‘(2) the lesser of—

12 ‘‘(A) new Federal medical assistance per13 centage (as determined under subsection (e)) or

14 ‘‘(B) the old Federal medical assistance per15 centage plus 10 percentage points; or

16 ‘‘(3) 60 percent.

17 ‘‘(d) OLD FEDERAL MEDICAL ASSISTANCE PERCENT18 AGE.—

19 ‘‘(1) IN GENERAL.—Except as provided in para20 graph (2) and subsection (f), the term ‘old Federal

21 medical assistance percentage’ for any State is 100

22 percent less the State percentage; and the State per23 centage is that percentage which bears the same ratio

24 to 45 percent as the square of the per capita income

25 of such State bears to the square of the per capita in-
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1 come of the continental United States (including

2 Alaska) and Hawaii.

3 ‘‘(2) LIMITATION ON RANGE.—In no case shall

4 the old Federal medical assistance percentage be less

5 than 50 percent or more than 83 percent.

6 ‘‘(3) PROMULGATION.—The old Federal medical

7 assistance percentage for any State shall be deter8 mined and promulgated in accordance with the provi9 sions of section 1101(a)(8)(B).

10 ‘‘(e) NEW FEDERAL MEDICAL ASSISTANCE PERCENT11 AGE DEFINED.—

12 ‘‘(1) IN GENERAL.—

13 ‘‘(A) TERM DEFINED.—Except as provided

14 in paragraph (3) and subsection (f), the term

15 ‘new Federal medical assistance percentage’

16 means, for each of the 50 States and the District

17 of Columbia, 100 percent reduced by the product

18 0.39 and the ratio of—

19 ‘‘(i)(I) for each of the 50 States, the

20 total taxable resources (TTR) ratio of the

21 State specified in subparagraph (B), or

22 ‘‘(II) for the District of Columbia, the

23 per capita income ratio specified in sub24 paragraph (C),

25 to—
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1 ‘‘(ii) the aggregate expenditure need

2 ratio of the State or District, as described

3 in subparagraph (D).

4 ‘‘(B) TOTAL TAXABLE RESOURCES (TTR)

5 RATIO.—For purposes of subparagraph (A)(i)(I),

6 the total taxable resources (TTR) ratio for each

7 of the 50 States is—

8 ‘‘(i) an amount equal to the most re9 cent 3-year average of the total taxable re10 sources (TTR) of the State, as determined

11 by the Secretary of the Treasury, divided by

12 ‘‘(ii) an amount equal to the sum of

13 the 3-year averages determined under clause

14 (i) for each of the 50 States.

15 ‘‘(C) PER CAPITA INCOME RATIO.—For pur16 poses of subparagraph (A)(i)(II), the per capita

17 income ratio of the District of Columbia is—

18 ‘‘(i) an amount equal to the most re19 cent 3-year average of the total personal in20 come of the District of Columbia, as deter21 mined in accordance with the provisions of

22 section 1101(a)(8)(B), divided by

23 ‘‘(ii) an amount equal to the total per24 sonal income of the continental United
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1 States (including Alaska) and Hawaii, as

2 determined under section 1101(a)(8)(B).

3 ‘‘(D) AGGREGATE EXPENDITURE NEED

4 RATIO.—For purposes of subparagraph (A), with

5 respect to each of the 50 States and the District

6 of Columbia for a fiscal year, the aggregate ex7 penditure need ratio is—

8 ‘‘(i) the State aggregate expenditure

9 need (as defined in section 2121(d)) for the

10 State for the fiscal year, divided by

11 ‘‘(ii) the such of such State aggregate

12 expenditure needs for the 50 States and the

13 District of Columbia for the fiscal year.

14 ‘‘(2) LIMITATION ON RANGE.—Except as pro15 vided in subsection (f), the new Federal medical as16 sistance percentage shall in no case be less than 40

17 percent or greater than 83 percent.

18 ‘‘(3) PROMULGATION.—The new Federal medical

19 assistance percentage for any State shall be promul20 gated in a timely manner consistent with the promul21 gation of the old Federal medical assistance percent22 age under section 1101(a)(8)(B).

23 ‘‘(f) SPECIAL RULES.—For purposes of this title—

24 ‘‘(1) COMMONWEALTHS AND TERRITORIES.—In

25 the case of Puerto Rico, the Virgin Islands, Guam, the
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1 Northern Mariana Islands, and American Samoa, the

2 old and new Federal medical assistance percentages

3 are 50 percent.

4 ‘‘(2) ALASKA.—In the case of Alaska, the old

5 Federal medical assistance percentage is that percent6 age which bears the same ratio to 45 percent as the

7 square of the adjusted per capita income of such State

8 bears to the square of the per capita income of the

9 continental United States. For purposes of the preced10 ing sentence, the adjusted per capita income for Alas11 ka shall be determined by dividing the State’s most

12 recent 3-year average per capita by the input cost

13 index for such State (as determined under section

14 2121(d)(4)).

15 ‘‘(3) INDIAN HEALTH SERVICE FACILITIES.—

16 ‘‘(A) IN GENERAL.—The old and new Fed17 eral medical assistance percentages shall be 100

18 percent with respect to the amounts expended as

19 medical assistance for services which are received

20 through a facility described in subparagraph (B)

21 of an Indian tribe or tribal organization or

22 through an Indian Health Service facility wheth23 er operated by the Indian Health Service or by

24 an Indian tribe or tribal organization (as de-
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1 fined in section 4 of the Indian Health Care Im2 provement Act).

3 ‘‘(B) FACILITY DESCRIBED.—For purposes

4 of subparagraph (A), a facility described in this

5 subparagraph is a facility of an Indian tribe

6 if—

7 ‘‘(i) the facility is located in a State

8 which, as of the date of the enactment of

9 this title, was not operating its State plan

10 under title XIX pursuant to a Statewide

11 waiver approved under section 1115,

12 ‘‘(ii) the facility is not an Indian

13 Health Service facility,

14 ‘‘(iii) the tribe owns at least 2 such fa15 cilities, and

16 ‘‘(iv) the tribe has at least 50,000

17 members (as of the date of the enactment of

18 this title).

19 ‘‘(4) NO STATE MATCHING REQUIRED FOR CER20 TAIN EXPENDITURES.—In applying subsection (a)(1)

21 with respect to medical assistance provided to unlaw22 ful aliens pursuant to the exception specified in sec23 tion 2123(f)(2), payment shall be made for the

24 amount of such assistance without regard to any need

25 for a State match.
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1 ‘‘(5) SPECIAL TRANSITIONAL RULE.—

2 ‘‘(A) IN GENERAL.—Notwithstanding sub3 sections (a) and (f), in order to receive the full

4 State outlay allotment described in section

5 2121(c)(3)(C)(i), a State described in subpara6 graph (C) shall expend State funds in a fiscal

7 year (before fiscal year 2000) under a

8 MediGrant plan under this title in an amount

9 not less than the adjusted base year State ex10 penditures, plus the applicable percentage of the

11 difference between such expenditures and the

12 amount necessary to qualify for the full State

13 outlay allotment so described in such fiscal year

14 as determined under this section without regard

15 to this paragraph.

16 ‘‘(B) REDUCTION IN ALLOTMENT IF EX17 PENDITURE NOT MET.—In the event a State de18 scribed in subparagraph (C) fails to expend

19 State funds in an amount required by subpara20 graph (A) for a fiscal year, the outlay allotment

21 described in section 2121(c)(3)(C)(i) for such

22 year for such State shall be reduced by an

23 amount which bears the same ratio to such out24 lay allotment as the State funds expended in
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1 such fiscal year bears to the amount required by

2 subparagraph (A).

3 ‘‘(C) ADJUSTED BASE YEAR STATE EXPEND4 ITURES.—For purposes of this paragraph, the

5 term ‘adjusted base year State expenditures’

6 means—

7 ‘‘(i) for New Hampshire, $203,000,000,

8 and

9 ‘‘(ii) for Louisiana, $355,000,000.

10 ‘‘(D) APPLICABLE PERCENTAGE.—For pur11 poses of this paragraph, the applicable percent12 age for a fiscal year is specified in the following

13 table:

Applicable

‘‘Fiscal year: Percentage:

1996 ................................................................................................ 20

1997 ................................................................................................ 40

1998 ................................................................................................ 60

1999 ................................................................................................ 80.

14 ‘‘(g) STATE FINANCIAL PARTICIPATION.—Each

15 MediGrant plan shall provide for financial participation

16 by the State equal to not less than 40 percent of the non17 Federal share of the expenditures under the plan with re18 spect to which payments may be made under this section.
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1 ‘‘SEC. 2123. LIMITATION ON USE OF FUNDS; DISALLOW2 ANCE.

3 ‘‘(a) IN GENERAL.—Funds provided to a State under

4 this title shall only be used to carry out the purposes of

5 this title.

6 ‘‘(b) DISALLOWANCES FOR EXCLUDED PROVIDERS.—

7 ‘‘(1) IN GENERAL.—Payment shall not be made

8 to a State under this part for expenditures for items

9 and services furnished—

10 ‘‘(A) by a provider who was excluded from

11 participation under title V, XVIII, or XX or

12 under this title pursuant to section 1128, 1128A,

13 1156, or 1842(j)(2), or

14 ‘‘(B) under the medical direction or on the

15 prescription of a physician who was so excluded,

16 if the provider of the services knew or had reason

17 to know of the exclusion.

18 ‘‘(2) EXCEPTION FOR EMERGENCY SERVICES.—

19 Paragraph (1) shall not apply to emergency items or

20 services, not including hospital emergency room serv21 ices.

22 ‘‘(c) LIMITATIONS.—

23 ‘‘(1) IN GENERAL.—No Federal financial assist24 ance is available for expenditures under the

25 MediGrant plan for—
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1 ‘‘(A) medically-related services for a quarter

2 to the extent such expenditures exceed 5 percent

3 of the total expenditures under the plan for the

4 quarter, or

5 ‘‘(B) total administrative expenses (other

6 than expenses described in paragraph (2) during

7 the first 8 quarters in which the plan is in effect

8 under this title) for quarters in a fiscal year to

9 the extent such expenditures exceed the sum of

10 $20,000,000 plus 10 percent of the total expendi11 tures under the plan for the year.

12 ‘‘(2) ADMINISTRATIVE EXPENSES NOT SUBJECT

13 TO LIMITATION.—The administrative expenses re14 ferred to in this paragraph are expenditures under

15 the MediGrant plan for the following activities:

16 ‘‘(A) Quality assurance.

17 ‘‘(B) The development and operation of the

18 certification program for nursing facilities and

19 intermediate care facilities for the mentally re20 tarded under section 2137.

21 ‘‘(C) Utilization review activities, including

22 medical activities and activities of peer review

23 organizations.

24 ‘‘(D) Inspection and oversight of providers

25 and capitated health care organizations.
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1 ‘‘(E) Anti-fraud activities.

2 ‘‘(F) Independent evaluations.

3 ‘‘(G) Activities required to meet reporting

4 requirements under this title.

5 ‘‘(d) TREATMENT OF THIRD PARTY LIABILITY.—No

6 payment shall be made to a State under this part for ex7 penditures for medical assistance provided for an individ8 ual under its MediGrant plan to the extent that a private

9 insurer (as defined by the Secretary by regulation and in10 cluding a group health plan (as defined in section 607(1)

11 of the Employee Retirement Income Security Act of 1974),

12 a service benefit plan, and a health maintenance organiza13 tion) would have been obligated to provide such assistance

14 but for a provision of its insurance contract which has the

15 effect of limiting or excluding such obligation because the

16 individual is eligible for or is provided medical assistance

17 under the plan.

18 ‘‘(e) MEDIGRANT AS SECONDARY PAYER.—Except as

19 otherwise provided by law, no payment shall be made to

20 a State under this part for expenditures for medical assist21 ance provided for an individual under its MediGrant plan

22 to the extent that payment has been made or can reasonably

23 be expected to be made promptly (as determined in accord24 ance with regulations) under any other federally operated

25 or financed health care program, other than a program op-
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1 erated or financed by the Indian Health Service, as identi2 fied by the Secretary. For purposes of this subsection, rules

3 similar to the rules for overpayments under section 2122(b)

4 shall apply.

5 ‘‘(f) LIMITATION ON PAYMENTS TO EMERGENCY SERV6 ICES FOR NONLAWFUL ALIENS.—

7 ‘‘(1) IN GENERAL.—Notwithstanding the preced8 ing provisions of this section, except as provided in

9 paragraph (2), no payment may be made to a State

10 under this part for medical assistance furnished to an

11 alien who is not lawfully admitted for permanent res12 idence or otherwise permanently residing in the Unit13 ed States under color of law.

14 ‘‘(2) EXCEPTION FOR EMERGENCY SERVICES.—

15 Payment may be made under this section for care

16 and services that are furnished to an alien described

17 in paragraph (1) only if—

18 ‘‘(A) such care and services are necessary

19 for the treatment of an emergency medical condi20 tion of the alien,

21 ‘‘(B) such alien otherwise meets the eligi22 bility requirements for medical assistance under

23 the MediGrant plan (other than a requirement of

24 the receipt of aid or assistance under title IV,
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1 supplemental security income benefits under title

2 XVI, or a State supplementary payment), and

3 ‘‘(C) such care and services are not related

4 to an organ transplant procedure.

5 ‘‘(3) EMERGENCY MEDICAL CONDITION DE6 FINED.—For purposes of this subsection, the term

7 ‘emergency medical condition’ means a medical con8 dition (including emergency labor and delivery)

9 manifesting itself by acute symptoms of sufficient se10 verity (including severe pain) such that the absence of

11 immediate medical attention could reasonably be ex12 pected to result in—

13 ‘‘(A) placing the patient’s health in serious

14 jeopardy,

15 ‘‘(B) serious impairment to bodily func16 tions, or

17 ‘‘(C) serious dysfunction of any bodily

18 organ or part.

19 ‘‘(g) LIMITATION ON PAYMENT FOR CERTAIN OUT20 PATIENT PRESCRIPTION DRUGS.—

21 ‘‘(1) IN GENERAL.—No payment may be made to

22 a State under this part for medical assistance for cov23 ered outpatient drugs (as defined in section

24 2175(i)(2)) of a manufacturer provided under the
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1 MediGrant plan unless the manufacturer (as defined

2 in section 2175(i)(4)) of the drug—

3 ‘‘(A) has entered into a MediGrant master

4 rebate agreement with the Secretary under sec5 tion 2175,

6 ‘‘(B) is otherwise complying with the provi7 sions of such section,

8 ‘‘(C) is complying with the provisions of

9 section 8126 of title 38, United States Code, in10 cluding the requirement of entering into a mas11 ter agreement with the Secretary of Veterans Af12 fairs under such section, and

13 ‘‘(D) subject to paragraph (4), is complying

14 with the provisions of section 340B of the Public

15 Health Service Act, including the requirement of

16 entering into an agreement with the Secretary

17 under such section.

18 ‘‘(2) CONSTRUCTION.—Nothing in this subsection

19 shall be construed as requiring a State to participate

20 in the MediGrant master rebate agreement under sec21 tion 2175.

22 ‘‘(3) EFFECT OF SUBSEQUENT AMENDMENTS.—

23 For purposes of subparagraphs (C) and (D), in deter24 mining whether a manufacturer is in compliance

25 with the requirements of section 8126 of title 38,
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1 United States Code, or section 340B of the Public

2 Health Service Act—

3 ‘‘(A) the Secretary shall not take into ac4 count any amendments to such sections that are

5 enacted after the enactment of title VI of the Vet6 erans Health Care Act of 1992, and

7 ‘‘(B) a manufacturer is deemed to meet such

8 requirements if the manufacturer establishes to

9 the satisfaction of the Secretary that the manu10 facturer would comply (and has offered to com11 ply) with the provisions of such sections (as in

12 effect immediately after the enactment of the Vet13 erans Health Care Act of 1992) and would have

14 entered into an agreement under such section (as

15 such section was in effect at such time), but for

16 a legislative change in such section after the date

17 of the enactment of the Veterans Health Care Act

18 of 1992.

19 ‘‘(4) EFFECT OF ESTABLISHMENT OF ALTER20 NATIVE MECHANISM UNDER PUBLIC HEALTH SERVICE

21 ACT.—If the Secretary does not establish a mechanism

22 to ensure against duplicate discounts or rebates under

23 section 340B(a)(5)(A) of the Public Health Service

24 Act within 12 months of the date of the enactment of

25 such section, the following requirements shall apply:
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1 ‘‘(A) Each covered entity under such section

2 shall inform the State when it is seeking reim3 bursement from the MediGrant plan for medical

4 assistance with respect to a unit of any covered

5 outpatient drug which is subject to an agreement

6 under section 340B(a) of such Act.

7 ‘‘(B) Each such State shall provide a means

8 by which such an entity shall indicate on any

9 drug reimbursement claims form (or format,

10 where electronic claims management is used)

11 that a unit of the drug that is the subject of the

12 form is subject to an agreement under section

13 340B of such Act, and not submit to any manu14 facturer a claim for a rebate payment with re15 spect to such a drug.

16 ‘‘PART D—PROGRAM INTEGRITY AND QUALITY

17 ‘‘SEC. 2131. USE OF AUDITS TO ACHIEVE FISCAL INTEGRITY.

18 ‘‘(a) FINANCIAL AUDITS OF PROGRAM.—

19 ‘‘(1) IN GENERAL.—Each MediGrant plan shall

20 provide for an annual audit of the State’s expendi21 tures from amounts received under this title, in com22 pliance with chapter 75 of title 31, United States

23 Code.

24 ‘‘(2) VERIFICATION AUDITS.—If, after consulta25 tion with the State and the Comptroller General and
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1 after a fair hearing, the Secretary determines that a

2 State’s audit under paragraph (1) was performed in

3 substantial violation of chapter 75 of title 31, United

4 States Code, the Secretary may—

5 ‘‘(A) require that the State provide for a

6 verification audit in compliance with such chap7 ter, or

8 ‘‘(B) conduct such a verification audit.

9 ‘‘(3) AVAILABILITY OF AUDIT REPORTS.—Within

10 30 days after completion of each audit or verification

11 audit under this subsection, the State shall—

12 ‘‘(A) provide the Secretary with a copy of

13 the audit report, including the State’s response

14 to any recommendations of the auditor, and

15 ‘‘(B) make the audit report available for

16 public inspection in the same manner as pro17 posed MediGrant plan amendments are made

18 available under section 2105.

19 ‘‘(b) FISCAL CONTROLS.—

20 ‘‘(1) IN GENERAL.—With respect to the account21 ing and expenditure of funds under this title, each

22 State shall adopt and maintain such fiscal controls,

23 accounting procedures, and data processing safe24 guards as the State deems reasonably necessary to as-
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1 sure the fiscal integrity of the State’s activities under

2 this title.

3 ‘‘(2) CONSISTENCY WITH GENERALLY ACCEPTED

4 ACCOUNTING PRINCIPLES.—Such controls and proce5 dures shall be generally consistent with generally ac6 cepted accounting principles as recognized by the

7 Governmental Accounting Standards Board or the

8 Comptroller General.

9 ‘‘(c) AUDITS OF PROVIDERS.—Each MediGrant plan

10 shall provide that the records of any entity providing items

11 or services for which payment may be made under the plan

12 may be audited as necessary to ensure that proper pay13 ments are made under the plan.

14 ‘‘SEC. 2132. FRAUD PREVENTION PROGRAM.

15 ‘‘(a) ESTABLISHMENT.—Each MediGrant plan shall

16 provide for the establishment and maintenance of an effec17 tive program for the detection and prevention of fraud and

18 abuse by beneficiaries, providers, and others in connection

19 with the operation of the program.

20 ‘‘(b) PROGRAM REQUIREMENTS.—The program estab21 lished pursuant to subsection (a) shall include at least the

22 following requirements:

23 ‘‘(1) DISCLOSURE OF INFORMATION.—Any dis24 closing entity (as defined in section 1124(a)) receiv-
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1 ing payments under the MediGrant plan shall comply

2 with the requirements of section 1124.

3 ‘‘(2) SUPPLY OF INFORMATION.—An entity

4 (other than an individual practitioner or a group of

5 practitioners) that furnishes, or arranges for the fur6 nishing of, an item or service under the MediGrant

7 plan shall supply upon request specifically addressed

8 to the entity by the Secretary or the State agency the

9 information described in section 1128(b)(9).

10 ‘‘(3) EXCLUSION.—

11 ‘‘(A) IN GENERAL.—The MediGrant plan

12 shall exclude any specified individual or entity

13 from participation in the plan for the period

14 specified by the Secretary when required by the

15 Secretary to do so pursuant to section 1128 or

16 section 1128A, and provide that no payment

17 may be made under the plan with respect to any

18 item or service furnished by such individual or

19 entity during such period.

20 ‘‘(B) AUTHORITY.—In addition to any

21 other authority, a State may exclude any indi22 vidual or entity for purposes of participating

23 under the MediGrant plan for any reason for

24 which the Secretary could exclude the individual

25 or entity from participation in a program under
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1 title XVIII or under section 1128, 1128A, or

2 1866(b)(2).

3 ‘‘(4) NOTICE.—The MediGrant plan shall pro4 vide that whenever a provider of services or any other

5 person is terminated, suspended, or otherwise sanc6 tioned or prohibited from participating under the

7 plan, the State agency responsible for administering

8 the plan shall promptly notify the Secretary and, in

9 the case of a physician, the State medical licensing

10 board of such action.

11 ‘‘(5) ACCESS TO INFORMATION.—The MediGrant

12 plan shall provide that the State will provide infor13 mation and access to certain information respecting

14 sanctions taken against health care practitioners and

15 providers by State licensing authorities in accordance

16 with section 2133.

17 ‘‘SEC. 2133. INFORMATION CONCERNING SANCTIONS TAKEN

18 BY STATE LICENSING AUTHORITIES AGAINST

19 HEALTH CARE PRACTITIONERS AND PROVID20 ERS.

21 ‘‘(a) INFORMATION REPORTING REQUIREMENT.—The

22 requirement referred to in section 2132(b)(5) is that the

23 State must provide for the following:

24 ‘‘(1) INFORMATION REPORTING SYSTEM.—The

25 State must have in effect a system of reporting the
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1 following information with respect to formal proceed2 ings (as defined by the Secretary in regulations) con3 cluded against a health care practitioner or entity by

4 any authority of the State (or of a political subdivi5 sion thereof) responsible for the licensing of health

6 care practitioners (or any peer review organization or

7 private accreditation entity reviewing the services

8 provided by health care practitioners) or entities:

9 ‘‘(A) Any adverse action taken by such li10 censing authority as a result of the proceeding,

11 including any revocation or suspension of a li12 cense (and the length of any such suspension),

13 reprimand, censure, or probation.

14 ‘‘(B) Any dismissal or closure of the pro15 ceedings by reason of the practitioner or entity

16 surrendering the license or leaving the State or

17 jurisdiction.

18 ‘‘(C) Any other loss of the license of the

19 practitioner or entity, whether by operation of

20 law, voluntary surrender, or otherwise.

21 ‘‘(D) Any negative action or finding by

22 such authority, organization, or entity regarding

23 the practitioner or entity.

24 ‘‘(2) ACCESS TO DOCUMENTS.—The State must

25 provide the Secretary (or an entity designated by the
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1 Secretary) with access to such documents of the au2 thority described in paragraph (1) as may be nec3 essary for the Secretary to determine the facts and

4 circumstances concerning the actions and determina5 tions described in such paragraph for the purpose of

6 carrying out this Act.

7 ‘‘(b) FORM OF INFORMATION.—The information de8 scribed in subsection (a)(1) shall be provided to the Sec9 retary (or to an appropriate private or public agency,

10 under suitable arrangements made by the Secretary with

11 respect to receipt, storage, protection of confidentiality, and

12 dissemination of information) in such a form and manner

13 as the Secretary determines to be appropriate in order to

14 provide for activities of the Secretary under this Act and

15 in order to provide, directly or through suitable arrange16 ments made by the Secretary, information—

17 ‘‘(1) to agencies administering Federal health

18 care programs, including private entities administer19 ing such programs under contract,

20 ‘‘(2) to licensing authorities described in sub21 section (a)(1),

22 ‘‘(3) to State agencies administering or super23 vising the administration of State health care pro24 grams (as defined in section 1128(h)),
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1 ‘‘(4) to utilization and quality control peer re2 view organizations described in part B of title XI and

3 to appropriate entities with contracts under section

4 1154(a)(4)(C) with respect to eligible organizations

5 reviewed under the contracts,

6 ‘‘(5) to State MediGrant fraud control units (as

7 defined in section 2134),

8 ‘‘(6) to hospitals and other health care entities

9 (as defined in section 431 of the Health Care Quality

10 Improvement Act of 1986), with respect to physicians

11 or other licensed health care practitioners that have

12 entered (or may be entering) into an employment or

13 affiliation relationship with, or have applied for clin14 ical privileges or appointments to the medical staff of,

15 such hospitals or other health care entities (and such

16 information shall be deemed to be disclosed pursuant

17 to section 427 of, and be subject to the provisions of,

18 that Act),

19 ‘‘(7) to the Attorney General and such other law

20 enforcement officials as the Secretary deems appro21 priate, and

22 ‘‘(8) upon request, to the Comptroller General,

23 in order for such authorities to determine the fitness

24 of individuals to provide health care services, to pro25 tect the health and safety of individuals receiving
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1 health care through such programs, and to protect the

2 fiscal integrity of such programs.

3 ‘‘(c) CONFIDENTIALITY OF INFORMATION PROVIDED.—

4 The Secretary shall provide for suitable safeguards for the

5 confidentiality of the information furnished under sub6 section (a). Nothing in this subsection shall prevent the dis7 closure of such information by a party which is otherwise

8 authorized, under applicable State law, to make such disclo9 sure.

10 ‘‘(d) APPROPRIATE COORDINATION.—The Secretary

11 shall provide for the maximum appropriate coordination

12 in the implementation of subsection (a) of this section and

13 section 422 of the Health Care Quality Improvement Act

14 of 1986 and section 1128E.

15 ‘‘SEC. 2134. STATE MEDIGRANT FRAUD CONTROL UNITS.

16 ‘‘(a) IN GENERAL.—Each MediGrant plan shall pro17 vide for a State MediGrant fraud control unit described in

18 subsection (b) that effectively carries out the functions and

19 requirements described in such subsection, unless the State

20 demonstrates to the satisfaction of the Secretary that the

21 effective operation of such a unit in the State would not

22 be cost-effective because minimal fraud exists in connection

23 with the provision of covered services to eligible individuals

24 under the plan, and that beneficiaries under the plan will

25 be protected from abuse and neglect in connection with the
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1 provision of medical assistance under the plan without the

2 existence of such a unit.

3 ‘‘(b) UNITS DESCRIBED.—For purposes of this section,

4 the term ‘State MediGrant fraud control unit’ means a sin5 gle identifiable entity of the State government which meets

6 the following requirements:

7 ‘‘(1) ORGANIZATION.—The entity—

8 ‘‘(A) is a unit of the office of the State At9 torney General or of another department of State

10 government which possesses statewide authority

11 to prosecute individuals for criminal violations;

12 ‘‘(B) is in a State the constitution of which

13 does not provide for the criminal prosecution of

14 individuals by a statewide authority and has

15 formal procedures that—

16 ‘‘(i) assure its referral of suspected

17 criminal violations relating to the program

18 under this title to the appropriate authority

19 or authorities in the State for prosecution,

20 and

21 ‘‘(ii) assure its assistance of, and co22 ordination with, such authority or authori23 ties in such prosecutions; or

24 ‘‘(C) has a formal working relationship

25 with the office of the State Attorney General and
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1 has formal procedures (including procedures for

2 its referral of suspected criminal violations to

3 such office) which provide effective coordination

4 of activities between the entity and such office

5 with respect to the detection, investigation, and

6 prosecution of suspected criminal violations re7 lating to the program under this title.

8 ‘‘(2) INDEPENDENCE.—The entity is separate

9 and distinct from any State agency that has prin10 cipal responsibilities for administering or supervising

11 the administration of the MediGrant plan.

12 ‘‘(3) FUNCTION.—The entity’s function is con13 ducting a statewide program for the investigation and

14 prosecution of violations of all applicable State laws

15 regarding any and all aspects of fraud in connection

16 with any aspect of the provision of medical assistance

17 and the activities of providers of such assistance

18 under the MediGrant plan.

19 ‘‘(4) REVIEW OF COMPLAINTS.—The entity has

20 procedures for reviewing complaints of the abuse and

21 neglect of patients of health care facilities which re22 ceive payments under the MediGrant plan under this

23 title, and, where appropriate, for acting upon such

24 complaints under the criminal laws of the State or

25 for referring them to other State agencies for action.
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1 ‘‘(5) OVERPAYMENTS.—

2 ‘‘(A) IN GENERAL.—The entity provides for

3 the collection, or referral for collection to a single

4 State agency, of overpayments that are made

5 under the MediGrant plan to health care provid6 ers and that are discovered by the entity in car7 rying out its activities.

8 ‘‘(B) TREATMENT OF CERTAIN OVERPAY9 MENTS.—If an overpayment is the direct result

10 of the failure of the provider (or the provider’s

11 billing agent) to adhere to a change in the

12 State’s billing instructions, the entity may re13 cover the overpayment only if the entity dem14 onstrates that the provider (or the provider’s bill15 ing agent) received prior written or electronic

16 notice of the change in the billing instructions

17 before the submission of the claims on which the

18 overpayment is based.

19 ‘‘(6) PERSONNEL.—The entity employs such

20 auditors, attorneys, investigators, and other necessary

21 personnel and is organized in such a manner as is

22 necessary to promote the effective and efficient con23 duct of the entity’s activities.
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1 ‘‘SEC. 2135. RECOVERIES FROM THIRD PARTIES AND OTH2 ERS.

3 ‘‘(a) THIRD PARTY LIABILITY.—Each MediGrant plan

4 shall provide for reasonable steps—

5 ‘‘(1) to ascertain the legal liability of third par6 ties to pay for care and services available under the

7 plan, including the collection of sufficient information

8 to enable States to pursue claims against third par9 ties, and

10 ‘‘(2) to seek reimbursement for medical assist11 ance provided to the extent legal liability is estab12 lished where the amount expected to be recovered ex13 ceeds the costs of the recovery.

14 ‘‘(b) BENEFICIARY PROTECTION.—

15 ‘‘(1) IN GENERAL.—Each MediGrant plan shall

16 provide that in the case of a person furnishing serv17 ices under the plan for which a third party may be

18 liable for payment—

19 ‘‘(A) the person may not seek to collect from

20 the individual (or financially responsible rel21 ative) payment of an amount for the service

22 more than could be collected under the plan in

23 the absence of such third party liability, and

24 ‘‘(B) may not refuse to furnish services to

25 such an individual because of a third party’s po26 tential liability for payment for the service.
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1 ‘‘(2) PENALTY.—A MediGrant plan may provide

2 for a reduction of any payment amount otherwise due

3 with respect to a person who furnishes services under

4 the plan in an amount equal to up to 3 times the

5 amount of any payment sought to be collected by that

6 person in violation of paragraph (1)(A).

7 ‘‘(c) GENERAL LIABILITY.—The State shall prohibit

8 any health insurer, including a group health plan as de9 fined in section 607 of the Employee Retirement Income

10 Security Act of 1974, a service benefit plan, or a health

11 maintenance organization, in enrolling an individual or in

12 making any payments for benefits to the individual or on

13 the individual’s behalf, from taking into account that the

14 individual is eligible for or is provided medical assistance

15 under a MediGrant plan for any State.

16 ‘‘(d) ACQUISITION OF RIGHTS OF BENEFICIARIES.—

17 To the extent that payment has been made under a

18 MediGrant plan in any case where a third party has a

19 legal liability to make payment for such assistance, the

20 State shall have in effect laws under which, to the extent

21 that payment has been made under the plan for health care

22 items or services furnished to an individual, the State is

23 considered to have acquired the rights of such individual

24 to payment by any other party for such health care items

25 or services.
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1 ‘‘(e) ASSIGNMENT OF MEDICAL SUPPORT RIGHTS.—

2 The MediGrant plan shall provide for mandatory assign3 ment of rights of payment for medical support and other

4 medical care owed to recipients in accordance with section

5 2136.

6 ‘‘(f) REQUIRED LAWS RELATING TO MEDICAL CHILD

7 SUPPORT.—

8 ‘‘(1) IN GENERAL.—Each State with a

9 MediGrant plan shall have in effect the following

10 laws:

11 ‘‘(A) A law that prohibits an insurer from

12 denying enrollment of a child under the health

13 coverage of the child’s parent on the ground

14 that—

15 ‘‘(i) the child was born out of wedlock,

16 ‘‘(ii) the child is not claimed as a de17 pendent on the parent’s Federal income tax

18 return, or

19 ‘‘(iii) the child does not reside with the

20 parent or in the insurer’s service area.

21 ‘‘(B) In any case in which a parent is re22 quired by a court or administrative order to pro23 vide health coverage for a child and the parent

24 is eligible for family health coverage through an

25 insurer, a law that requires such insurer—
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1 ‘‘(i) to permit such parent to enroll

2 under such family coverage any such child

3 who is otherwise eligible for such coverage

4 (without regard to any enrollment season

5 restrictions);

6 ‘‘(ii) if such a parent is enrolled but

7 fails to make application to obtain coverage

8 of such child, to enroll such child under

9 such family coverage upon application by

10 the child’s other parent or by the State

11 agency administering the program under

12 this title or part D of title IV; and

13 ‘‘(iii) not to disenroll, or eliminate cov14 erage of, such a child unless the insurer is

15 provided satisfactory written evidence

16 that—

17 ‘‘(I) such court or administrative

18 order is no longer in effect, or

19 ‘‘(II) the child is or will be en20 rolled in comparable health coverage

21 through another insurer which will

22 take effect not later than the effective

23 date of such disenrollment.

24 ‘‘(C) In any case in which a parent is re25 quired by a court or administrative order to pro-
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1 vide health coverage for a child and the parent

2 is eligible for family health coverage through an

3 employer doing business in the State, a law that

4 requires such employer—

5 ‘‘(i) to permit such parent to enroll

6 under such family coverage any such child

7 who is otherwise eligible for such coverage

8 (without regard to any enrollment season

9 restrictions);

10 ‘‘(ii) if such a parent is enrolled but

11 fails to make application to obtain coverage

12 of such child, to enroll such child under

13 such family coverage upon application by

14 the child’s other parent or by the State

15 agency administering the program under

16 this title or part D of title IV; and

17 ‘‘(iii) not to disenroll (or eliminate

18 coverage of) any such child unless—

19 ‘‘(I) the employer is provided sat20 isfactory written evidence that such

21 court or administrative order is no

22 longer in effect, or the child is or will

23 be enrolled in comparable health cov24 erage which will take effect not later
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1 than the effective date of such

2 disenrollment, or

3 ‘‘(II) the employer has eliminated

4 family health coverage for all of its em5 ployees; and

6 ‘‘(iv) to withhold from such employee’s

7 compensation the employee’s share (if any)

8 of premiums for health coverage (except that

9 the amount so withheld may not exceed the

10 maximum amount permitted to be withheld

11 under section 303(b) of the Consumer Credit

12 Protection Act), and to pay such share of

13 premiums to the insurer, except that the

14 Secretary may provide by regulation for ap15 propriate circumstances under which an

16 employer may withhold less than such em17 ployee’s share of such premiums.

18 ‘‘(D) A law that prohibits an insurer from

19 imposing requirements on a State agency, which

20 has been assigned the rights of an individual eli21 gible for medical assistance under this title and

22 covered for health benefits from the insurer, that

23 are different from requirements applicable to an

24 agent or assignee of any other individual so cov25 ered.
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1 ‘‘(E) A law that requires an insurer, in any

2 case in which a child has health coverage through

3 the insurer of a noncustodial parent—

4 ‘‘(i) to provide such information to the

5 custodial parent as may be necessary for the

6 child to obtain benefits through such cov7 erage,

8 ‘‘(ii) to permit the custodial parent (or

9 provider, with the custodial parent’s ap10 proval) to submit claims for covered services

11 without the approval of the noncustodial

12 parent, and

13 ‘‘(iii) to make payment on claims sub14 mitted in accordance with clause (ii) di15 rectly to such custodial parent, the provider,

16 or the State agency.

17 ‘‘(F) A law that permits the State agency

18 under this title to garnish the wages, salary, or

19 other employment income of, and requires with20 holding amounts from State tax refunds to, any

21 person who—

22 ‘‘(i) is required by court or adminis23 trative order to provide coverage of the costs

24 of health services to a child who is eligible

25 for medical assistance under this title,
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1 ‘‘(ii) has received payment from a

2 third party for the costs of such services to

3 such child, but

4 ‘‘(iii) has not used such payments to

5 reimburse, as appropriate, either the other

6 parent or guardian of such child or the pro7 vider of such services,

8 to the extent necessary to reimburse the State

9 agency for expenditures for such costs under its

10 plan under this title, but any claims for current

11 or past-due child support shall take priority over

12 any such claims for the costs of such services.

13 ‘‘(2) DEFINITION.—For purposes of this sub14 section, the term ‘insurer’ includes a group health

15 plan, as defined in section 607(1) of the Employee

16 Retirement Income Security Act of 1974, a health

17 maintenance organization, and an entity offering a

18 service benefit plan.

19 ‘‘(g) ESTATE RECOVERIES AND LIENS PERMITTED.—

20 A State may take such actions as it considers appropriate

21 to adjust or recover from the individual or the individual’s

22 estate any amounts paid as medical assistance to or on be23 half of the individual under the MediGrant plan, including

24 through the imposition of liens against the property or es25 tate of the individual.
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1 ‘‘SEC. 2136. ASSIGNMENT OF RIGHTS OF PAYMENT.

2 ‘‘(a) IN GENERAL.—For the purpose of assisting in the

3 collection of medical support payments and other payments

4 for medical care owed to recipients of medical assistance

5 under the MediGrant plan, each MediGrant plan shall—

6 ‘‘(1) provide that, as a condition of eligibility for

7 medical assistance under the plan to an individual

8 who has the legal capacity to execute an assignment

9 for himself, the individual is required—

10 ‘‘(A) to assign the State any rights, of the

11 individual or of any other person who is eligible

12 for medical assistance under the plan and on

13 whose behalf the individual has the legal author14 ity to execute an assignment of such rights, to

15 support (specified as support for the purpose of

16 medical care by a court or administrative order)

17 and to payment for medical care from any third

18 party,

19 ‘‘(B) to cooperate with the State (i) in es20 tablishing the paternity of such person (referred

21 to in subparagraph (A)) if the person is a child

22 born out of wedlock, and (ii) in obtaining sup23 port and payments (described in subparagraph

24 (A)) for himself and for such person, unless (in

25 either case) the individual is a pregnant woman

26 or the individual is found to have good cause for
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1 refusing to cooperate as determined by the State,

2 and

3 ‘‘(C) to cooperate with the State in identify4 ing, and providing information to assist the

5 State in pursuing, any third party who may be

6 liable to pay for care and services available

7 under the plan, unless such individual has good

8 cause for refusing to cooperate as determined by

9 the State; and

10 ‘‘(2) provide for entering into cooperative ar11 rangements, including financial arrangements, with

12 any appropriate agency of any State (including, with

13 respect to the enforcement and collection of rights of

14 payment for medical care by or through a parent,

15 with a State’s agency established or designated under

16 section 454(3)) and with appropriate courts and law

17 enforcement officials, to assist the agency or agencies

18 administering the plan with respect to—

19 ‘‘(A) the enforcement and collection of rights

20 to support or payment assigned under this sec21 tion, and

22 ‘‘(B) any other matters of common concern.

23 ‘‘(b) USE OF AMOUNTS COLLECTED.—Such part of

24 any amount collected by the State under an assignment

25 made under the provisions of this section shall be retained
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1 by the State as is necessary to reimburse it for medical as2 sistance payments made on behalf of an individual with

3 respect to whom such assignment was executed (with appro4 priate reimbursement of the Federal Government to the ex5 tent of its participation in the financing of such medical

6 assistance), and the remainder of such amount collected

7 shall be paid to such individual.

8 ‘‘SEC. 2137. QUALITY ASSURANCE REQUIREMENTS FOR

9 NURSING FACILITIES.

10 ‘‘(a) NURSING FACILITY DEFINED.—In this title, the

11 term ‘nursing facility’ means an institution (or a distinct

12 part of an institution) which—

13 ‘‘(1) is primarily engaged in providing to resi14 dents—

15 ‘‘(A) skilled nursing care and related serv16 ices for residents who require medical or nursing

17 care,

18 ‘‘(B) rehabilitation services for the rehabili19 tation of injured, disabled, or sick persons, or

20 ‘‘(C) on a regular basis, health-related care

21 and services to individuals who because of their

22 mental or physical condition require care and

23 services (above the level of room and board)

24 which can be made available to them only

25 through institutional facilities,
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1 and is not primarily for the care and treatment of

2 mental diseases;

3 ‘‘(2) has in effect a transfer agreement (meeting

4 the requirements of section 1861(l)) with one or more

5 hospitals having agreements in effect under section

6 1866; and

7 ‘‘(3) meets the requirements for a nursing facil8 ity described in subsections (b), (c), and (d) of this

9 section.

10 Such term also includes any facility which is located in

11 a State on an Indian reservation and is certified by the

12 Secretary as meeting the requirements of paragraph (1) and

13 subsections (b), (c), and (d).

14 ‘‘(b) REQUIREMENTS RELATING TO PROVISION OF

15 SERVICES.—

16 ‘‘(1) QUALITY OF LIFE.—

17 ‘‘(A) IN GENERAL.—A nursing facility must

18 care for its residents in such a manner and in

19 such an environment as will reasonably promote

20 maintenance or enhancement of the quality of

21 life of each resident.

22 ‘‘(B) QUALITY ASSESSMENT AND ASSUR23 ANCE.—A nursing facility must maintain a

24 quality assessment and assurance committee,

25 consisting of the director of nursing services, a
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1 physician designated by the facility, and at least

2 3 other members of the facility’s staff, which (i)

3 meets at least quarterly to identify issues with

4 respect to which quality assessment and assur5 ance activities are necessary and (ii) develops

6 and implements appropriate plans of action to

7 correct identified quality deficiencies. A State or

8 the Secretary may not require disclosure of the

9 records of such committee except insofar as such

10 disclosure is related to the compliance of such

11 committee with the requirements of this subpara12 graph.

13 ‘‘(2) SCOPE OF SERVICES AND ACTIVITIES UNDER

14 PLAN OF CARE.—A nursing facility must provide

15 services and activities in accordance with a written

16 plan of care which—

17 ‘‘(A) describes the medical, nursing, and

18 psychosocial needs of the resident and how such

19 needs will be met;

20 ‘‘(B) is initially prepared, with the partici21 pation to the extent practicable of the resident or

22 the resident’s family or legal representative, by a

23 team which includes the resident’s attending

24 physician and a registered professional nurse

25 with responsibility for the resident; and
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1 ‘‘(C) is periodically reviewed and revised by

2 such team after each assessment under para3 graph (3).

4 ‘‘(3) RESIDENTS’ ASSESSMENT.—

5 ‘‘(A) REQUIREMENT.—A nursing facility

6 must conduct a comprehensive, accurate, stand7 ardized, reproducible assessment of each resi8 dent’s functional capacity, which assessment—

9 ‘‘(i) describes the resident’s capability

10 to perform daily life functions and signifi11 cant impairments in functional capacity;

12 ‘‘(ii) uses an instrument which is spec13 ified by the State under subsection (e)(5);

14 and

15 ‘‘(iii) includes the identification of

16 medical problems.

17 ‘‘(B) CERTIFICATION.—

18 ‘‘(i) IN GENERAL.—Each such assess19 ment must be conducted or coordinated

20 (with the appropriate participation of

21 health professionals) by a registered profes22 sional nurse who signs and certifies the

23 completion of the assessment. Each individ24 ual who completes a portion of such an as-
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1 sessment shall sign and certify as to the ac2 curacy of that portion of the assessment.

3 ‘‘(ii) PENALTY FOR FALSIFICATION.—

4 ‘‘(I) An individual who willfully

5 and knowingly certifies under clause

6 (i) a material and false statement in a

7 resident assessment is subject to a civil

8 money penalty of not more than

9 $1,000 with respect to each assessment.

10 ‘‘(II) An individual who willfully

11 and knowingly causes another individ12 ual to certify under clause (i) a mate13 rial and false statement in a resident

14 assessment is subject to a civil money

15 penalty of not more than $5,000 with

16 respect to each assessment.

17 ‘‘(III) The provisions of section

18 1128A (other than subsections (a) and

19 (b)) shall apply to a civil money pen20 alty under this clause in the same

21 manner as such provisions apply to a

22 penalty or proceeding under section

23 1128A(a).

24 ‘‘(iii) USE OF INDEPENDENT ASSES25 SORS.—If a State determines, under a sur-
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1 vey under subsection (g) or otherwise, that

2 there has been a knowing and willful certifi3 cation of false assessments under this para4 graph, the State may require (for a period

5 specified by the State) that resident assess6 ments under this paragraph be conducted

7 and certified by individuals who are inde8 pendent of the facility and who are ap9 proved by the State.

10 ‘‘(C) FREQUENCY.—

11 ‘‘(i) IN GENERAL.—Such an assessment

12 must be conducted—

13 ‘‘(I) promptly upon (but no later

14 than 14 days after the date of) admis15 sion for each individual admitted;

16 ‘‘(II) promptly after a significant

17 change in the resident’s physical or

18 mental condition; and

19 ‘‘(III) in no case less often than

20 once every 12 months.

21 ‘‘(ii) RESIDENT REVIEW.—The nursing

22 facility must examine each resident no less

23 frequently than once every 3 months and, as

24 appropriate, revise the resident’s assessment
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1 to assure the continuing accuracy of the as2 sessment.

3 ‘‘(D) USE.—The results of such an assess4 ment shall be used in developing, reviewing, and

5 revising the resident’s plan of care under para6 graph (2).

7 ‘‘(E) COORDINATION.—Such assessments

8 shall be coordinated with any State-required

9 preadmission screening program to the maxi10 mum extent practicable in order to avoid dupli11 cative testing and effort. In addition, a nursing

12 facility shall notify the State mental health au13 thority or State mental retardation or devel14 opmental disability authority, as applicable,

15 promptly after a significant change in the phys16 ical or mental condition of a resident who is

17 mentally ill or mentally retarded.

18 ‘‘(4) PROVISION OF SERVICES AND ACTIVITIES.—

19 ‘‘(A) IN GENERAL.—To the extent needed to

20 fulfill all plans of care described in paragraph

21 (2), a nursing facility must provide (or arrange

22 for the provision of)—

23 ‘‘(i) nursing and related services and

24 specialized rehabilitative services;
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1 ‘‘(ii) medically-related social services

2 to attain or maintain the highest prac3 ticable physical, mental, and psychosocial

4 well-being of residents;

5 ‘‘(iii) pharmaceutical services (includ6 ing procedures that assure the accurate ac7 quiring, receiving, dispensing, and admin8 istering of all drugs and biologicals) to meet

9 the needs of residents;

10 ‘‘(iv) dietary services that assure that

11 the meals meet the daily nutritional and

12 special dietary needs of residents;

13 ‘‘(v) an on-going program, directed by

14 a qualified professional, of activities de15 signed to meet the interests and the phys16 ical, mental, and psychosocial well-being of

17 residents; and

18 ‘‘(vi) routine dental services (to the ex19 tent covered under the State MediGrant

20 plan) and emergency dental services to meet

21 the needs of residents.

22 The services provided or arranged by the facility

23 must meet professional standards of quality.

24 ‘‘(B) QUALIFIED PERSONS PROVIDING SERV25 ICES.—Services described in clauses (i), (ii),
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1 (iii), (iv), and (vi) of subparagraph (A) must be

2 provided by qualified persons in accordance with

3 each resident’s written plan of care.

4 ‘‘(C) REQUIRED NURSING CARE; FACILITY

5 WAIVERS.—

6 ‘‘(i) GENERAL REQUIREMENTS.—A

7 nursing facility—

8 ‘‘(I) except as provided in clause

9 (ii), must provide 24-hour licensed

10 nursing services which are sufficient to

11 meet the nursing needs of its residents,

12 and

13 ‘‘(II) except as provided in clause

14 (ii), must use the services of a reg15 istered professional nurse for at least 8

16 consecutive hours a day, 7 days a

17 week.

18 ‘‘(ii) WAIVER BY STATE.—To the extent

19 that a facility is unable to meet the require20 ments of clause (i), a State may waive such

21 requirements with respect to the facility

22 if—

23 ‘‘(I) the facility demonstrates to

24 the satisfaction of the State that the fa25 cility has been unable, despite diligent
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1 efforts (including offering wages at the

2 community prevailing rate for nursing

3 facilities), to recruit appropriate per4 sonnel,

5 ‘‘(II) the State determines that a

6 waiver of the requirement will not en7 danger the health or safety of individ8 uals staying in the facility,

9 ‘‘(III) the State finds that, for

10 any such periods in which licensed

11 nursing services are not available, a

12 registered professional nurse or a phy13 sician is obligated to respond imme14 diately to telephone calls from the fa15 cility,

16 ‘‘(IV) the State agency granting a

17 waiver of such requirements provides

18 notice of the waiver to the State long19 term care ombudsman (established

20 under section 307(a)(12) of the Older

21 Americans Act of 1965) and the protec22 tion and advocacy system in the State

23 for the mentally ill and the mentally

24 retarded, and
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1 ‘‘(V) the nursing facility that is

2 granted such a waiver by a State noti3 fies residents of the facility (or, where

4 appropriate, the guardians or legal

5 representatives of such residents) and

6 members of their immediate families of

7 the waiver.

8 A waiver under this clause shall be subject

9 to annual review and to the review of the

10 Secretary and subject to clause (iii) shall be

11 accepted by the Secretary for purposes of

12 this title to the same extent as is the State’s

13 certification of the facility. In granting or

14 renewing a waiver, a State may require the

15 facility to use other qualified, licensed per16 sonnel.

17 ‘‘(iii) ASSUMPTION OF WAIVER AU18 THORITY BY SECRETARY.—If the Secretary

19 determines that a State has shown a clear

20 pattern and practice of allowing waivers in

21 the absence of diligent efforts by facilities to

22 meet the staffing requirements, the Sec23 retary shall assume and exercise the author24 ity of the State to grant waivers.

25 ‘‘(5) REQUIRED TRAINING OF NURSE AIDES.—
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1 ‘‘(A) IN GENERAL.—(i) Except as provided

2 in clause (ii), a nursing facility must not use on

3 a full-time basis any individual as a nurse aide

4 in the facility, for more than 4 months unless the

5 individual—

6 ‘‘(I) has completed a training and

7 competency evaluation program, or a com8 petency evaluation program, approved by

9 the State under subsection (e)(1)(A), and

10 ‘‘(II) is competent to provide nursing

11 or nursing-related services.

12 ‘‘(ii) A nursing facility must not use on a

13 temporary, per diem, leased, or on any other

14 basis other than as a permanent employee any

15 individual as a nurse aide in the facility, unless

16 the individual meets the requirements described

17 in clause (i).

18 ‘‘(B) OFFERING COMPETENCY EVALUATION

19 PROGRAMS FOR CURRENT EMPLOYEES.—A nurs20 ing facility must provide, for individuals used as

21 a nurse aide by the facility, for a competency

22 evaluation program approved by the State under

23 subsection (e)(1) and such preparation as may

24 be necessary for the individual to complete such

25 a program.
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1 ‘‘(C) COMPETENCY.—The nursing facility

2 must not permit an individual, other than in a

3 training and competency evaluation program

4 approved by the State, to serve as a nurse aide

5 or provide services of a type for which the indi6 vidual has not demonstrated competency and

7 must not use such an individual as a nurse aide

8 unless the facility has inquired of any State reg9 istry established under subsection (e)(2)(A) that

10 the facility believes will include information con11 cerning the individual.

12 ‘‘(D) RE-TRAINING REQUIRED.—For pur13 poses of subparagraph (A), if, since an individ14 ual’s most recent completion of a training and

15 competency evaluation program, there has been a

16 continuous period of 24 consecutive months dur17 ing none of which the individual performed

18 nursing or nursing-related services for monetary

19 compensation, such individual shall complete a

20 new training and competency evaluation pro21 gram, or a new competency evaluation program.

22 ‘‘(E) REGULAR IN-SERVICE EDUCATION.—

23 The nursing facility must provide such regular

24 performance review and regular in-service edu25 cation as assures that individuals used as nurse
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1 aides are competent to perform services as nurse

2 aides, including training for individuals provid3 ing nursing and nursing-related services to resi4 dents with cognitive impairments.

5 ‘‘(F) NURSE AIDE DEFINED.—In this para6 graph, the term ‘nurse aide’ means any individ7 ual providing nursing or nursing-related services

8 to residents in a nursing facility, but does not

9 include an individual—

10 ‘‘(i) who is a licensed health profes11 sional (as defined in subparagraph (G)) or

12 a registered dietician,

13 ‘‘(ii) who volunteers to provide such

14 services without monetary compensation, or

15 ‘‘(iii) who is trained, whether com16 pensated or not, to perform a task-specific

17 function which assists residents in their

18 daily activities.

19 ‘‘(G) LICENSED HEALTH PROFESSIONAL DE20 FINED.—In this paragraph, the term ‘licensed

21 health professional’ means a physician, physi22 cian assistant, nurse practitioner, physical,

23 speech, or occupational therapist, physical or oc24 cupational therapy assistant, registered profes-
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1 sional nurse, licensed practical nurse, or licensed

2 or certified social worker.

3 ‘‘(6) PHYSICIAN SUPERVISION AND CLINICAL

4 RECORDS.—A nursing facility must—

5 ‘‘(A) require that the health care of every

6 resident be provided under the supervision of a

7 physician (or, at the option of a State, under the

8 supervision of a nurse practitioner, clinical

9 nurse specialist, or physician assistant who is

10 not an employee of the facility but who is work11 ing in collaboration with a physician);

12 ‘‘(B) provide for having a physician avail13 able to furnish necessary medical care in case of

14 emergency; and

15 ‘‘(C) maintain clinical records on all resi16 dents, which records include the plans of care

17 (described in paragraph (2)) and the residents’

18 assessments (described in paragraph (3)).

19 ‘‘(c) REQUIREMENTS RELATING TO RESIDENTS’

20 RIGHTS.—

21 ‘‘(1) GENERAL RIGHTS.—

22 ‘‘(A) SPECIFIED RIGHTS.—A nursing facil23 ity must protect and promote the rights of each

24 resident, including each of the following rights:
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1 ‘‘(i) FREE CHOICE.—The right to

2 choose a personal attending physician, to be

3 fully informed in advance about care and

4 treatment, to be fully informed in advance

5 of any changes in care or treatment that

6 may affect the resident’s well-being, and

7 (except with respect to a resident adjudged

8 incompetent) to participate in planning

9 care and treatment or changes in care and

10 treatment.

11 ‘‘(ii) FREE FROM RESTRAINTS.—The

12 right to be free from physical or mental

13 abuse, corporal punishment, involuntary se14 clusion, and any physical or chemical re15 straints imposed for purposes of discipline

16 or convenience and not required to treat the

17 resident’s medical symptoms. Restraints

18 may only be imposed—

19 ‘‘(I) to ensure the physical safety

20 of the resident or other residents, and

21 ‘‘(II) only upon the written order

22 of a physician that specifies the dura23 tion and circumstances under which

24 the restraints are to be used (except in

25 emergency circumstances specified by
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1 the Secretary until such an order could

2 reasonably be obtained).

3 ‘‘(iii) PRIVACY.—The right to privacy

4 with regard to accommodations, medical

5 treatment, written and telephonic commu6 nications, visits, and meetings of family

7 and of resident groups.

8 ‘‘(iv) CONFIDENTIALITY.—The right to

9 confidentiality of personal and clinical

10 records and to access to current clinical

11 records of the resident upon request by the

12 resident or the resident’s legal representa13 tive, within 24 hours (excluding hours oc14 curring during a weekend or holiday) after

15 making such a request.

16 ‘‘(v) ACCOMMODATION OF NEEDS.—The

17 right—

18 ‘‘(I) to reside and receive services

19 with reasonable accommodation of in20 dividual needs and preferences, except

21 where the health or safety of the indi22 vidual or other residents would be en23 dangered, and

24 ‘‘(II) to receive notice before the

25 room or roommate of the resident in
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1 the facility is changed unless a delay

2 in changing the room or roommate

3 while notice is given would endanger

4 the resident or others.

5 ‘‘(vi) GRIEVANCES.—The right to voice

6 grievances with respect to treatment or care

7 that is (or fails to be) furnished, without

8 discrimination or reprisal for voicing the

9 grievances and the right to prompt efforts

10 by the facility to resolve grievances the resi11 dent may have, including those with respect

12 to the behavior of other residents.

13 ‘‘(vii) PARTICIPATION IN RESIDENT

14 AND FAMILY GROUPS.—The right of the resi15 dent to organize and participate in resident

16 groups in the facility and the right of the

17 resident’s family to meet in the facility with

18 the families of other residents in the facil19 ity.

20 ‘‘(viii) PARTICIPATION IN OTHER AC21 TIVITIES.—The right of the resident to par22 ticipate in social, religious, and community

23 activities that do not interfere with the

24 rights of other residents in the facility.
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1 ‘‘(ix) EXAMINATION OF SURVEY RE2 SULTS.—The right to examine, upon rea3 sonable request, the results of the most re4 cent survey of the facility conducted by the

5 Secretary or a State with respect to the fa6 cility and any plan of correction in effect

7 with respect to the facility.

8 ‘‘(x) OTHER RIGHTS.—Any other right

9 established by the Secretary.

10 Clause (iii) shall not be construed as requiring

11 the provision of a private room.

12 ‘‘(B) NOTICE OF RIGHTS.—A nursing facil13 ity must—

14 ‘‘(i) inform each resident, orally and

15 in writing at the time of admission to the

16 facility, of the resident’s legal rights during

17 the stay at the facility and of the require18 ments and procedures for establishing eligi19 bility for medical assistance under this title,

20 including the right to request an assessment

21 under section 2115(c)(1)(B);

22 ‘‘(ii) make available to each resident,

23 upon reasonable request, a written state24 ment of such rights (which statement is up25 dated upon changes in such rights) includ-
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1 ing the notice (if any) of the State developed

2 under subsection (e)(6);

3 ‘‘(iii) inform each resident who is enti4 tled to medical assistance under this title—

5 ‘‘(I) at the time of admission to

6 the facility or, if later, at the time the

7 resident becomes eligible for such as8 sistance, of the items and services that

9 are included in nursing facility serv10 ices under the State MediGrant plan

11 and for which the resident may not be

12 charged, and of those other items and

13 services that the facility offers and for

14 which the resident may be charged and

15 the amount of the charges for such

16 items and services, and

17 ‘‘(II) of changes in the items and

18 services described in subclause (I) and

19 of changes in the charges imposed for

20 items and services described in that

21 subclause; and

22 ‘‘(iv) inform each other resident, in

23 writing before or at the time of admission

24 and periodically during the resident’s stay,

25 of services available in the facility and of
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1 related charges for such services, including

2 any charges for services not covered under

3 title XVIII or by the facility’s basic per

4 diem charge.

5 The written description of legal rights under this

6 subparagraph shall include a description of the

7 protection of personal funds under paragraph (6)

8 and a statement that a resident may file a com9 plaint with a State survey and certification

10 agency respecting resident abuse and neglect and

11 misappropriation of resident property in the fa12 cility.

13 ‘‘(C) RIGHTS OF INCOMPETENT RESI14 DENTS.—In the case of a resident adjudged in15 competent under the laws of a State, the rights

16 of the resident under this title shall devolve upon,

17 and, to the extent judged necessary by a court of

18 competent jurisdiction, be exercised by, the per19 son appointed under State law to act on the resi20 dent’s behalf.

21 ‘‘(D) USE OF PSYCHOPHARMACOLOGIC

22 DRUGS.—Psychopharmacologic drugs may be ad23 ministered only on the orders of a physician and

24 only as part of a plan (included in the written

25 plan of care described in paragraph (2)) de-
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1 signed to eliminate or modify the symptoms for

2 which the drugs are prescribed and only if, at

3 least annually an independent, external consult4 ant reviews the appropriateness of the drug plan

5 of each resident receiving such drugs.

6 ‘‘(2) TRANSFER AND DISCHARGE RIGHTS.—

7 ‘‘(A) IN GENERAL.—A nursing facility must

8 permit each resident to remain in the facility

9 and must not transfer or discharge the resident

10 from the facility unless—

11 ‘‘(i) the transfer or discharge is nec12 essary to meet the resident’s welfare and the

13 resident’s welfare cannot be met in the facil14 ity;

15 ‘‘(ii) the transfer or discharge is ap16 propriate because the resident’s health has

17 improved sufficiently so the resident no

18 longer needs the services provided by the fa19 cility;

20 ‘‘(iii) the safety of individuals in the

21 facility is endangered;

22 ‘‘(iv) the health of individuals in the

23 facility would otherwise be endangered;

24 ‘‘(v) the resident has failed, after rea25 sonable and appropriate notice, to pay (or
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1 to have paid under this title or title XVIII

2 on the resident’s behalf) for a stay at the fa3 cility; or

4 ‘‘(vi) the facility ceases to operate.

5 In each of the cases described in clauses (i)

6 through (iv), the basis for the transfer or dis7 charge must be documented in the resident’s clin8 ical record. In the cases described in clauses (i)

9 and (ii), the documentation must be made by the

10 resident’s physician, and in the case described in

11 clause (iv) the documentation must be made by

12 a physician. For purposes of clause (v), in the

13 case of a resident who becomes eligible for assist14 ance under this title after admission to the facil15 ity, only charges which may be imposed under

16 this title shall be considered to be allowable.

17 ‘‘(B) PRE-TRANSFER AND PRE-DISCHARGE

18 NOTICE.—

19 ‘‘(i) IN GENERAL.—Before effecting a

20 transfer or discharge of a resident, a nurs21 ing facility must—

22 ‘‘(I) notify the resident (and, if

23 known, an immediate family member

24 of the resident or legal representative)
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1 of the transfer or discharge and the

2 reasons therefor,

3 ‘‘(II) record the reasons in the

4 resident’s clinical record (including

5 any documentation required under

6 subparagraph (A)), and

7 ‘‘(III) include in the notice the

8 items described in clause (iii).

9 ‘‘(ii) TIMING OF NOTICE.—The notice

10 under clause (i)(I) must be made at least 30

11 days in advance of the resident’s transfer or

12 discharge except—

13 ‘‘(I) in a case described in clause

14 (iii) or (iv) of subparagraph (A);

15 ‘‘(II) in a case described in clause

16 (ii) of subparagraph (A), where the

17 resident’s health improves sufficiently

18 to allow a more immediate transfer or

19 discharge;

20 ‘‘(III) in a case described in

21 clause (i) of subparagraph (A), where a

22 more immediate transfer or discharge

23 is necessitated by the resident’s urgent

24 medical needs;
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1 ‘‘(IV) in a case where a resident

2 has not resided in the facility for 30

3 days; or

4 ‘‘(V) in a case where the provision

5 of a 30-day notice would be impossible

6 or impracticable.

7 In the case of such exceptions, notice must

8 be given as many days before the date of the

9 transfer or discharge as is practicable.

10 ‘‘(iii) ITEMS INCLUDED IN NOTICE.—

11 Each notice under clause (i) must include—

12 ‘‘(I) notice of the resident’s right

13 to appeal the transfer or discharge

14 under the State process established

15 under subsection (e)(3);

16 ‘‘(II) the name, mailing address,

17 and telephone number of the State

18 long-term care ombudsman (established

19 under title III or VII of the Older

20 Americans Act of 1965);

21 ‘‘(III) in the case of residents with

22 developmental disabilities, the mailing

23 address and telephone number of the

24 agency responsible for the protection

25 and advocacy system for developmen-
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1 tally disabled individuals established

2 under part C of the Developmental

3 Disabilities Assistance and Bill of

4 Rights Act; and

5 ‘‘(IV) in the case of mentally ill

6 residents (as defined in subsection

7 (e)(7)(G)(i)), the mailing address and

8 telephone number of the agency respon9 sible for the protection and advocacy

10 system for mentally ill individuals es11 tablished under the Protection and Ad12 vocacy for Mentally Ill Individuals

13 Act.

14 ‘‘(iv) EXCEPTION.—This subparagraph

15 shall not apply to a voluntary transfer or

16 discharge or a transfer or discharge neces17 sitated by a medical emergency.

18 ‘‘(C) ORIENTATION.—A nursing facility

19 must provide reasonable preparation and ori20 entation to residents to promote safe and orderly

21 transfer or discharge from the facility.

22 ‘‘(D) NOTICE ON BED-HOLD POLICY AND RE23 ADMISSION.—

24 ‘‘(i) NOTICE BEFORE TRANSFER.—Be25 fore a resident of a nursing facility is
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1 transferred for hospitalization or thera2 peutic leave, a nursing facility must pro3 vide written information to the resident and

4 an immediate family member or legal rep5 resentative concerning—

6 ‘‘(I) the provisions of the State

7 MediGrant plan under this title re8 garding the period (if any) during

9 which the resident will be permitted

10 under the State MediGrant plan to re11 turn and resume residence in the facil12 ity, and

13 ‘‘(II) the policies of the facility re14 garding such a period, which policies

15 must be consistent with clause (iii).

16 ‘‘(ii) NOTICE UPON TRANSFER.—At the

17 time of transfer of a resident to a hospital

18 or for therapeutic leave, a nursing facility

19 must provide written notice to the resident

20 and an immediate family member or legal

21 representative of the duration of any period

22 described in clause (i).

23 ‘‘(iii) PERMITTING RESIDENT TO RE24 TURN.—A nursing facility must establish
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1 and follow a written policy under which a

2 resident—

3 ‘‘(I) who is eligible for medical as4 sistance for nursing facility services

5 under a State MediGrant plan,

6 ‘‘(II) who is transferred from the

7 facility for hospitalization or thera8 peutic leave, and

9 ‘‘(III) whose hospitalization or

10 therapeutic leave exceeds a period paid

11 for under the State MediGrant plan for

12 the holding of a bed in the facility for

13 the resident,

14 will be permitted to be readmitted to the fa15 cility immediately upon the first availabil16 ity of a bed in a room (not including a pri17 vate room) in the facility if, at the time of

18 readmission, the resident requires the serv19 ices provided by the facility.

20 ‘‘(3) ACCESS AND VISITATION RIGHTS.—A nurs21 ing facility must—

22 ‘‘(A) permit immediate access to any resi23 dent by any representative of the Secretary, by

24 any representative of the State, by an ombuds25 man or agency described in subclause (II), (III),
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1 or (IV) of paragraph (2)(B)(iii), or by the resi2 dent’s individual physician;

3 ‘‘(B) permit immediate access to a resident,

4 subject to the resident’s right to deny or with5 draw consent at any time, by immediate family

6 or other relatives of the resident;

7 ‘‘(C) permit immediate access to a resident,

8 subject to reasonable restrictions and the resi9 dent’s right to deny or withdraw consent at any

10 time, by others who are visiting with the consent

11 of the resident, unless such access would endan12 ger the health or safety of the resident or others

13 in the facility;

14 ‘‘(D) permit reasonable access to a resident

15 by any entity or individual that provides health,

16 social, legal, or other services to the resident, sub17 ject to the resident’s right to deny or withdraw

18 consent at any time; and

19 ‘‘(E) permit representatives of the State om20 budsman (described in paragraph

21 (2)(B)(iii)(II)), with the permission of the resi22 dent (or the resident’s legal representative) and

23 consistent with State law, to examine a resi24 dent’s clinical records.

25 ‘‘(4) EQUAL ACCESS TO QUALITY CARE.—
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1 ‘‘(A) IN GENERAL.—A nursing facility must

2 establish and maintain identical policies and

3 practices regarding transfer, discharge, and the

4 provision of services required under the State

5 MediGrant plan for all individuals regardless of

6 source of payment.

7 ‘‘(B) CONSTRUCTION.—

8 ‘‘(i) NOTHING PROHIBITING ANY

9 CHARGES FOR NON-MEDIGRANT PATIENTS.—

10 Subparagraph (A) shall not be construed as

11 prohibiting a nursing facility from charg12 ing any amount for services furnished, con13 sistent with the notice in paragraph (1)(B)

14 describing such charges.

15 ‘‘(ii) NO ADDITIONAL SERVICES RE16 QUIRED.—Subparagraph (A) shall not be

17 construed as requiring a State to offer addi18 tional services on behalf of a resident than

19 are otherwise provided under the State

20 MediGrant plan.

21 ‘‘(5) PROTECTION OF RESIDENT FUNDS.—

22 ‘‘(A) IN GENERAL.—The nursing facility—

23 ‘‘(i) may not require residents to de24 posit their personal funds with the facility,

25 and
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1 ‘‘(ii) upon the written authorization of

2 the resident, must hold, safeguard, and ac3 count for such personal funds under a sys4 tem established and maintained by the fa5 cility in accordance with this paragraph.

6 ‘‘(B) MANAGEMENT OF PERSONAL FUNDS.—

7 Upon written authorization of a resident under

8 subparagraph (A)(ii), the facility must manage

9 and account for the personal funds of the resi10 dent deposited with the facility as follows:

11 ‘‘(i) DEPOSIT.—The facility must de12 posit any amount of personal funds in ex13 cess of $250 with respect to a resident in an

14 interest bearing account (or accounts) that

15 is separate from any of the facility’s operat16 ing accounts and credits all interest earned

17 on such separate account to such account.

18 With respect to any other personal funds,

19 the facility must maintain such funds in a

20 non-interest bearing account or petty cash

21 fund.

22 ‘‘(ii) ACCOUNTING AND RECORDS.—The

23 facility must assure a full and complete ac24 counting of each such resident’s personal

25 funds, maintain a written record of all fi-
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1 nancial transactions involving the personal

2 funds of a resident deposited with the facil3 ity, and afford the resident (or a legal rep4 resentative of the resident) reasonable access

5 to such record.

6 ‘‘(iii) CONVEYANCE UPON DEATH.—

7 Upon the death of a resident with such an

8 account, the facility must convey promptly

9 the resident’s personal funds (and a final

10 accounting of such funds) to the individual

11 administering the resident’s estate. All other

12 personal property, including medical

13 records, shall be considered part of the resi14 dent’s estate and shall only be released to

15 the administrator of the estate.

16 ‘‘(C) ASSURANCE OF FINANCIAL SECU17 RITY.—The facility must purchase a surety bond,

18 or otherwise provide assurance satisfactory to the

19 State, to assure the security of all personal funds

20 of residents deposited with the facility.

21 ‘‘(D) LIMITATION ON CHARGES TO PER22 SONAL FUNDS.—The facility may not impose a

23 charge against the personal funds of a resident

24 for any item or service for which payment is

25 made under this title or title XVIII.
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1 ‘‘(6) LIMITATION ON CHARGES IN CASE OF

2 MEDIGRANT-ELIGIBLE INDIVIDUALS.—A nursing facil3 ity may not impose charges, for certain MediGrant4 eligible individuals for nursing facility services cov5 ered by the State under its plan under this title, that

6 exceed the payment amounts established by the State

7 for such services under this title.

8 ‘‘(7) POSTING OF SURVEY RESULTS.—A nursing

9 facility must post in a place readily accessible to resi10 dents, and family members and legal representatives

11 of residents, the results of the most recent survey of

12 the facility conducted under subsection (g).

13 ‘‘(d) REQUIREMENTS RELATING TO ADMINISTRATION

14 AND OTHER MATTERS.—

15 ‘‘(1) ADMINISTRATION.—

16 ‘‘(A) IN GENERAL.—A nursing facility must

17 be administered in a manner that enables it to

18 use its resources effectively and efficiently to at19 tain or maintain the highest practicable phys20 ical, mental, and psychosocial well-being of each

21 resident (consistent with requirements established

22 under subsection (f)(5)).

23 ‘‘(B) REQUIRED NOTICES.—If a change oc24 curs in—
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1 ‘‘(i) the persons with an ownership or

2 control interest (as defined in section

3 1124(a)(3)) in the facility,

4 ‘‘(ii) the persons who are officers, di5 rectors, agents, or managing employees (as

6 defined in section 1126(b)) of the facility,

7 ‘‘(iii) the corporation, association, or

8 other company responsible for the manage9 ment of the facility, or

10 ‘‘(iv) the individual who is the admin11 istrator or director of nursing of the facil12 ity,

13 the nursing facility must provide notice to the

14 State agency responsible for the licensing of the

15 facility, at the time of the change, of the change

16 and of the identity of each new person, company,

17 or individual described in the respective clause.

18 ‘‘(C) NURSING FACILITY ADMINISTRATOR.—

19 The administrator of a nursing facility, whether

20 freestanding or hospital-based, must meet such

21 standards as are established by the Secretary.

22 ‘‘(2) LICENSING AND LIFE SAFETY CODE.—

23 ‘‘(A) LICENSING.—A nursing facility must

24 be licensed under applicable State and local law.
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1 ‘‘(B) LIFE SAFETY CODE.—A nursing facil2 ity must meet such provisions of such edition (as

3 specified by the Secretary in regulation) of the

4 Life Safety Code of the National Fire Protection

5 Association as are applicable to nursing homes;

6 except that—

7 ‘‘(i) the Secretary may waive, for such

8 periods as he deems appropriate, specific

9 provisions of such Code which if rigidly ap10 plied would result in unreasonable hardship

11 upon a facility, but only if such waiver

12 would not adversely affect the health and

13 safety of residents or personnel, and

14 ‘‘(ii) the provisions of such Code shall

15 not apply in any State if the Secretary

16 finds that in such State there is in effect a

17 fire and safety code, imposed by State law,

18 which adequately protects residents of and

19 personnel in nursing facilities.

20 ‘‘(3) SANITARY AND INFECTION CONTROL AND

21 PHYSICAL ENVIRONMENT.—A nursing facility must—

22 ‘‘(A) establish and maintain an infection

23 control program designed to provide a safe, sani24 tary, and comfortable environment in which resi-
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1 dents reside and to help prevent the development

2 and transmission of disease and infection, and

3 ‘‘(B) be designed, constructed, equipped, and

4 maintained in a manner to protect the health

5 and safety of residents, personnel, and the gen6 eral public.

7 ‘‘(4) MISCELLANEOUS.—

8 ‘‘(A) COMPLIANCE WITH FEDERAL, STATE,

9 AND LOCAL LAWS AND PROFESSIONAL STAND10 ARDS.—A nursing facility, whether freestanding

11 or hospital-based, must operate and provide serv12 ices in compliance with all applicable Federal,

13 State, and local laws and regulations (including

14 the requirements of section 1124) and with ac15 cepted professional standards and principles

16 which apply to professionals providing services

17 in such a facility.

18 ‘‘(B) OTHER.—A nursing facility must

19 meet such other requirements relating to the

20 health and safety of residents or relating to the

21 physical facilities thereof as the Secretary may

22 find necessary.

23 ‘‘(e) STATE REQUIREMENTS RELATING TO NURSING

24 FACILITY REQUIREMENTS.—A State with a MediGrant

25 plan shall provide for the following:
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1 ‘‘(1) SPECIFICATION AND REVIEW OF NURSE

2 AIDE TRAINING AND COMPETENCY EVALUATION PRO3 GRAMS AND OF NURSE AIDE COMPETENCY EVALUA4 TION PROGRAMS.—The State must—

5 ‘‘(A) specify those training and competency

6 evaluation programs, and those competency eval7 uation programs, that the State approves for

8 purposes of subsection (b)(5) and that meet the

9 requirements established under subsection (f)(2),

10 and

11 ‘‘(B) provide for the review and reapproval

12 of such programs, at a frequency and using a

13 methodology consistent with the requirements es14 tablished under subsection (f)(2)(A)(iii).

15 ‘‘(2) NURSE AIDE REGISTRY.—

16 ‘‘(A) IN GENERAL.—The State shall estab17 lish and maintain a registry of all individuals

18 who have satisfactorily completed a nurse aide

19 training and competency evaluation program, or

20 a nurse aide competency evaluation program,

21 approved under paragraph (1) in the State, or

22 any individual described in subsection

23 (f)(2)(B)(ii) or in subparagraph (B), (C), or (D)

24 of section 6901(b)(4) of the Omnibus Budget Rec25 onciliation Act of 1989.
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1 ‘‘(B) INFORMATION IN REGISTRY.—The reg2 istry under subparagraph (A) shall provide for

3 the inclusion of specific documented findings by

4 a State under subsection (g)(1)(C) of resident ne5 glect or abuse or misappropriation of resident

6 property involving an individual listed in the

7 registry, as well as any brief statement of the in8 dividual disputing the findings. The State shall

9 make available to the public information in the

10 registry. In the case of inquiries to the registry

11 concerning an individual listed in the registry,

12 any information disclosed concerning such a

13 finding shall also include disclosure of any such

14 statement in the registry relating to the finding

15 or a clear and accurate summary of such a state16 ment.

17 ‘‘(C) PROHIBITION AGAINST CHARGES.—A

18 State may not impose any charges on a nurse

19 aide relating to the registry established and

20 maintained under subparagraph (A).

21 ‘‘(3) STATE APPEALS PROCESS FOR TRANSFERS

22 AND DISCHARGES.—The State must provide for a fair

23 mechanism, meeting the guidelines established under

24 subsection (f)(3), for hearing appeals on transfers and

25 discharges of residents of such facilities.
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1 ‘‘(4) NURSING FACILITY ADMINISTRATOR STAND2 ARDS.—The State must implement and enforce the

3 nursing facility administrator standards developed

4 under subsection (f)(4) respecting the qualification of

5 administrators of nursing facilities. Any such stand6 ards promulgated shall apply to administrators of

7 hospital-based facilities as well as administrators of

8 freestanding facilities.

9 ‘‘(5) SPECIFICATION OF RESIDENT ASSESSMENT

10 INSTRUMENT.—The State shall specify the instrument

11 to be used by nursing facilities in the State in com12 plying with the requirement of subsection

13 (b)(3)(A)(iii).

14 ‘‘(6) NOTICE OF MEDIGRANT RIGHTS.—Each

15 State shall develop (and periodically update) a writ16 ten notice of the rights and obligations of residents of

17 nursing facilities (and spouses of such residents)

18 under this title.

19 ‘‘(7) STATE REQUIREMENTS FOR PREADMISSION

20 SCREENING AND RESIDENT REVIEW.—

21 ‘‘(A) PREADMISSION SCREENING.—

22 ‘‘(i) IN GENERAL.—The State must

23 have in effect a preadmission screening pro24 gram, for identifying mentally ill and men25 tally retarded individuals (as defined in
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1 subparagraph (B)) who are admitted to

2 nursing facilities.

3 ‘‘(ii) STATE REQUIREMENT FOR RESI4 DENT REVIEW.—The State shall notify the

5 State mental health authority or the State

6 mental retardation or developmental dis7 ability authority, as appropriate, of the in8 dividuals so identified.

9 ‘‘(B) DEFINITIONS.—In this paragraph:

10 ‘‘(i) An individual is considered to be

11 ‘mentally ill’ if the individual has a serious

12 mental illness (as defined by the Secretary

13 in consultation with the National Institute

14 of Mental Health) and does not have a pri15 mary diagnosis of dementia (including Alz16 heimer’s disease or a related disorder) or a

17 diagnosis (other than a primary diagnosis)

18 of dementia and a primary diagnosis that

19 is not a serious mental illness.

20 ‘‘(ii) An individual is considered to be

21 ‘mentally retarded’ if the individual is men22 tally retarded or a person with a related

23 condition.

24 ‘‘(f) RESPONSIBILITIES RELATING TO NURSING FACIL25 ITY REQUIREMENTS.—
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1 ‘‘(1) GENERAL RESPONSIBILITY.—It is the duty

2 and responsibility of a State with a MediGrant plan

3 under this title to assure that requirements which gov4 ern the provision of care in nursing facilities under

5 the plan, and the enforcement of such requirements,

6 are adequate to protect the health, safety, welfare, and

7 rights of residents and to promote the effective and ef8 ficient use of public moneys.

9 ‘‘(2) REQUIREMENTS FOR NURSE AIDE TRAINING

10 AND COMPETENCY EVALUATION PROGRAMS AND FOR

11 NURSE AIDE COMPETENCY EVALUATION PROGRAMS.—

12 For purposes of subsections (b)(5) and (e)(1)(A), the

13 State shall establish—

14 ‘‘(A) requirements for the approval of nurse

15 aide training and competency evaluation pro16 grams, including requirements relating to (i) the

17 areas to be covered in such a program (including

18 at least basic nursing skills, personal care skills,

19 recognition of mental health and social service

20 needs, care of cognitively impaired residents,

21 basic restorative services, and residents’ rights)

22 and content of the curriculum, (ii) minimum

23 hours of initial and ongoing training and re24 training, (iii) qualifications of instructors, and

25 (iv) procedures for determination of competency;
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1 ‘‘(B) requirements for the approval of nurse

2 aide competency evaluation programs, including

3 requirement relating to the areas to be covered in

4 such a program, including at least basic nursing

5 skills, personal care skills, recognition of mental

6 health and social service needs, care of cog7 nitively impaired residents, basic restorative

8 services, and residents’ rights, and procedures for

9 determination of competency;

10 ‘‘(C) requirements respecting the minimum

11 frequency and methodology to be used by a State

12 in reviewing such programs’ compliance with the

13 requirements for such programs; and

14 ‘‘(D) requirements, under both such pro15 grams, that—

16 ‘‘(i) provide procedures for determining

17 competency that permit a nurse aide, at the

18 nurse aide’s option, to establish competency

19 through procedures or methods other than

20 the passing of a written examination and to

21 have the competency evaluation conducted

22 at the nursing facility at which the aide is

23 (or will be) employed, and

24 ‘‘(ii) prohibit the imposition on a

25 nurse aide who is employed by (or who has
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1 received an offer of employment from) a fa2 cility on the date on which the aide begins

3 either such program of any charges (includ4 ing any charges for textbooks and other re5 quired course materials and any charges for

6 the competency evaluation) for either such

7 program.

8 ‘‘(3) QUALIFICATION OF ADMINISTRATORS.—For

9 purposes of subsections (d)(1)(C) and (e)(4), the State

10 shall develop standards to be applied in assuring the

11 qualifications of administrators of nursing facilities.

12 Any such standards must apply to administrators of

13 hospital-based facilities as well as administrators of

14 freestanding facilities.

15 ‘‘(g) SURVEY AND CERTIFICATION PROCESS.—

16 ‘‘(1) STATE AND FEDERAL RESPONSIBILITY.—

17 ‘‘(A) IN GENERAL.—Under each State

18 MediGrant plan under this title, the State shall

19 be responsible for certifying, in accordance with

20 surveys conducted under paragraph (2), the com21 pliance of nursing facilities with the require22 ments of subsections (b), (c), and (d). The Sec23 retary shall be responsible for certifying, in ac24 cordance with surveys conducted under para-
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1 graph (2), the compliance of State nursing facili2 ties with the requirements of such subsections.

3 ‘‘(B) INVESTIGATION OF ALLEGATIONS OF

4 RESIDENT NEGLECT AND ABUSE AND MISAPPRO5 PRIATION OF RESIDENT PROPERTY.—The State

6 shall provide, through the agency responsible for

7 surveys and certification of nursing facilities

8 under this subsection, for a process for the re9 ceipt and timely review and investigation of al10 legations of neglect and abuse and misappropria11 tion of resident property by a nurse aide of a

12 resident in a nursing facility or by another indi13 vidual used by the facility in providing services

14 to such a resident. The State shall, after notice

15 to the individual involved and a reasonable op16 portunity for a hearing for the individual to

17 rebut allegations, make a finding as to the accu18 racy of the allegations. If the State finds that a

19 nurse aide has neglected or abused a resident or

20 misappropriated resident property in a facility,

21 the State shall notify the nurse aide and the reg22 istry of such finding. If the State finds that any

23 other individual used by the facility has ne24 glected or abused a resident or misappropriated

25 resident property in a facility, the State shall
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1 notify the appropriate licensure authority. A

2 State shall not make a finding that an individ3 ual has neglected a resident if the individual

4 demonstrates that such neglect was caused by

5 factors beyond the control of the individual.

6 ‘‘(2) SURVEYS.—

7 ‘‘(A) ANNUAL STANDARD SURVEY.—

8 ‘‘(i) IN GENERAL.—Each nursing facil9 ity shall be subject to a standard survey, to

10 be conducted without any prior notice to the

11 facility. Any individual who notifies (or

12 causes to be notified) a nursing facility of

13 the time or date on which such a survey is

14 scheduled to be conducted is subject to a

15 civil money penalty of not to exceed $2,000.

16 The provisions of section 1128A (other than

17 subsections (a) and (b)) shall apply to a

18 civil money penalty under the previous sen19 tence in the same manner as such provi20 sions apply to a penalty or proceeding

21 under section 1128A(a). The State shall

22 take all reasonable steps to avoid giving no23 tice of such a survey through the scheduling

24 procedures and the conduct of the surveys

25 themselves.
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1 ‘‘(ii) CONTENTS.—Each standard sur2 vey shall include, for a case-mix stratified

3 sample of residents—

4 ‘‘(I) a survey of the quality of

5 care furnished, as measured by indica6 tors of medical, nursing, and rehabili7 tative care, dietary and nutrition serv8 ices, activities and social participa9 tion, and sanitation, infection control,

10 and the physical environment,

11 ‘‘(II) written plans of care pro12 vided under subsection (b)(2) and an

13 audit of the residents’ assessments

14 under subsection (b)(3) to determine

15 the accuracy of such assessments and

16 the adequacy of such plans of care, and

17 ‘‘(III) a review of compliance

18 with residents’ rights under subsection

19 (c).

20 ‘‘(iii) FREQUENCY.—

21 ‘‘(I) IN GENERAL.—Each nursing

22 facility shall be subject to a standard

23 survey not later than 24 months after

24 the date of the previous standard sur25 vey conducted under this subpara-
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1 graph, except that in the case of a fa2 cility which has been subjected to an

3 extended survey under subparagraph

4 (B), a standard survey shall be con5 ducted not later than 12 months after

6 the date of the preceding extended sur7 vey.

8 ‘‘(II) SPECIAL SURVEYS.—If not

9 otherwise conducted under subclause

10 (I), a standard survey (or an abbre11 viated standard survey) may be con12 ducted within 4 months of any change

13 of ownership, administration, manage14 ment of a nursing facility, or director

15 of nursing in order to determine

16 whether the change has resulted in any

17 decline in the quality of care furnished

18 in the facility.

19 ‘‘(B) EXTENDED SURVEYS.—

20 ‘‘(i) IN GENERAL.—Each nursing facil21 ity which is found, under a standard sur22 vey, to have provided substandard quality

23 of care shall be subject to an extended sur24 vey. Any other facility may, at the State’s
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1 discretion, be subject to such an extended

2 survey (or a partial extended survey).

3 ‘‘(ii) TIMING.—The extended survey

4 shall be conducted immediately after the

5 standard survey (or, if not practicable, not

6 later than 2 weeks after the date of comple7 tion of the standard survey).

8 ‘‘(iii) CONTENTS.—In such an ex9 tended survey, the survey team shall review

10 and identify the policies and procedures

11 which produced such substandard quality of

12 care and shall determine whether the facil13 ity has complied with all the requirements

14 described in subsections (b), (c), and (d).

15 Such review shall include an expansion of

16 the size of the sample of residents’ assess17 ments reviewed and a review of the staffing,

18 of in-service training, and, if appropriate,

19 of contracts with consultants.

20 ‘‘(iv) CONSTRUCTION.—Nothing in this

21 paragraph shall be construed as requiring

22 an extended or partial extended survey as a

23 prerequisite to imposing a sanction against

24 a facility under subsection (h) on the basis

25 of findings in a standard survey.
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1 ‘‘(C) SURVEY PROTOCOL.—Standard and

2 extended surveys shall be conducted—

3 ‘‘(i) based upon the protocol which the

4 Secretary has developed, tested, and vali5 dated, as of the date of the enactment of this

6 title, and

7 ‘‘(ii) by individuals, of a survey team,

8 who meet such minimum qualifications as

9 the State establishes.

10 ‘‘(D) CONSISTENCY OF SURVEYS.—Each

11 State shall implement programs to measure and

12 reduce inconsistency in the application of survey

13 results among surveyors.

14 ‘‘(E) SURVEY TEAMS.—

15 ‘‘(i) IN GENERAL.—Surveys under this

16 subsection shall be conducted by a multi17 disciplinary team of professionals (includ18 ing a registered professional nurse).

19 ‘‘(ii) PROHIBITION OF CONFLICTS OF

20 INTEREST.—A State may not use as a

21 member of a survey team under this sub22 section an individual who is serving (or has

23 served within the previous 2 years) as a

24 member of the staff of, or as a consultant to,

25 the facility surveyed respecting compliance
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1 with the requirements of subsections (b), (c),

2 and (d), or who has a personal or familial

3 financial interest in the facility being sur4 veyed.

5 ‘‘(3) VALIDATION SURVEYS.—

6 ‘‘(A) IN GENERAL.—The Secretary shall

7 conduct onsite surveys of a representative sample

8 of nursing facilities in each State, within 4

9 months of the date of surveys conducted under

10 paragraph (2) by the State, in a sufficient num11 ber to allow inferences about the adequacies of

12 each State’s surveys conducted under paragraph

13 (2). In conducting such surveys, the Secretary

14 shall use the same survey protocols as the State

15 is required to use under paragraph (2). If the

16 State has determined that an individual nursing

17 facility meets the requirements of subsections (b),

18 (c), and (d), but the Secretary determines that

19 the facility does not meet such requirements, the

20 Secretary’s determination as to the facility’s

21 noncompliance with such requirements is bind22 ing and supersedes that of the State survey.

23 ‘‘(B) SCOPE.—With respect to each State,

24 the Secretary shall conduct surveys under sub25 paragraph (A) at least every third year with re-
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1 spect to at least 5 percent of the number of nurs2 ing facilities surveyed by the State in the year,

3 but in no case less than 5 nursing facilities in

4 the State.

5 ‘‘(C) SPECIAL SURVEYS OF COMPLIANCE.—

6 Where the Secretary has found substantial evi7 dence of a pattern of noncompliance by a nurs8 ing facility with any of the requirements of sub9 sections (b), (c), and (d), the Secretary may con10 duct a survey of the facility and, on the basis of

11 that survey, make determinations concerning the

12 extent to which the nursing facility meets such

13 requirements.

14 ‘‘(4) INVESTIGATION OF COMPLAINTS AND MON15 ITORING NURSING FACILITY COMPLIANCE.—Each

16 State shall maintain procedures and adequate staff

17 to—

18 ‘‘(A) investigate complaints of violations of

19 requirements by nursing facilities, and

20 ‘‘(B) monitor, on-site, on a regular, as need21 ed basis, a nursing facility’s compliance with the

22 requirements of subsections (b), (c), and (d), if—

23 ‘‘(i) the facility has been found not to

24 be in compliance with such requirements
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1 and is in the process of correcting defi2 ciencies to achieve such compliance;

3 ‘‘(ii) the facility was previously found

4 not to be in compliance with such require5 ments, has corrected deficiencies to achieve

6 such compliance, and verification of contin7 ued compliance is indicated; or

8 ‘‘(iii) the State has reason to question

9 the compliance of the facility with such re10 quirements.

11 ‘‘(5) DISCLOSURE OF RESULTS OF INSPECTIONS

12 AND ACTIVITIES.—

13 ‘‘(A) PUBLIC INFORMATION.—Each State,

14 and the Secretary, shall make available to the

15 public—

16 ‘‘(i) information respecting all surveys

17 and certifications made respecting nursing

18 facilities, including statements of defi19 ciencies, within a reasonable time after such

20 information is made available to those fa21 cilities, and approved plans of correction,

22 ‘‘(ii) copies of cost reports of such fa23 cilities filed under this title or under title

24 XVIII,
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1 ‘‘(iii) copies of statements of ownership

2 under section 1124, and

3 ‘‘(iv) information disclosed under sec4 tion 1126.

5 ‘‘(B) NOTICE TO OMBUDSMAN.—Each State

6 shall notify the State long-term care ombudsman

7 (established under title III or VII of the Older

8 Americans Act of 1965 in accordance with sec9 tion 712 of the Act) of the State’s findings of

10 noncompliance with any of the requirements of

11 subsections (b), (c), and (d), or of any adverse

12 action taken against a nursing facility under

13 paragraphs (1), (2), or (3) of subsection (h), with

14 respect to a nursing facility in the State.

15 ‘‘(C) NOTICE TO PHYSICIANS AND NURSING

16 FACILITY ADMINISTRATOR LICENSING BOARD.—If

17 a State finds that a nursing facility has pro18 vided substandard quality of care, the State shall

19 notify—

20 ‘‘(i) the attending physician of each

21 resident with respect to which such finding

22 is made, and

23 ‘‘(ii) any State board responsible for

24 the licensing of the nursing facility admin25 istrator of the facility.
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1 ‘‘(D) ACCESS TO FRAUD CONTROL UNITS.—

2 Each State shall provide its State MediGrant

3 fraud and abuse control unit (established under

4 section 2134) with access to all information of

5 the State agency responsible for surveys and cer6 tifications under this subsection.

7 ‘‘(h) ENFORCEMENT PROCESS.—

8 ‘‘(1) IN GENERAL.—If a State finds, on the basis

9 of a standard, extended, or partial extended survey

10 under subsection (g)(2) or otherwise, that a nursing

11 facility no longer meets a requirement of subsection

12 (b), (c), or (d)—

13 ‘‘(A) the State shall require the facility to

14 correct the deficiency involved;

15 ‘‘(B) if the State finds that the facility’s de16 ficiencies immediately jeopardize the health or

17 safety of its residents, the State shall take imme18 diate action to remove the jeopardy and correct

19 the deficiencies through the remedy specified in

20 paragraph (2)(A)(iii), or terminate the facility’s

21 participation under the State MediGrant plan

22 and may provide, in addition, for one or more

23 of the other remedies described in paragraph (2);

24 and
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1 ‘‘(C) if the State finds that the facility’s de2 ficiencies do not immediately jeopardize the

3 health or safety of its residents, the State may—

4 ‘‘(i) terminate the facility’s participa5 tion under the State MediGrant plan,

6 ‘‘(ii) provide for one or more of the

7 remedies described in paragraph (2), or

8 ‘‘(iii) do both.

9 ‘‘(2) SPECIFIED REMEDIES.—

10 ‘‘(A) LISTING.—Except as provided in sub11 paragraph (B), each State shall establish by law

12 (whether statute or regulation) at least the fol13 lowing remedies:

14 ‘‘(i) Denial of payment under the State

15 MediGrant plan with respect to any indi16 vidual admitted to the nursing facility in17 volved after such notice to the public and to

18 the facility as may be provided for by the

19 State.

20 ‘‘(ii) A civil money penalty assessed

21 and collected, with interest, for each day in

22 which the facility is or was out of compli23 ance with a requirement of subsection (b),

24 (c), or (d).
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1 ‘‘(iii) The appointment of temporary

2 management to oversee the operation of the

3 facility and to assure the health and safety

4 of the facility’s residents, where there is a

5 need for temporary management while—

6 ‘‘(I) there is an orderly closure of

7 the facility, or

8 ‘‘(II) improvements are made in

9 order to bring the facility into compli10 ance with all the requirements of sub11 sections (b), (c), and (d).

12 The temporary management under this

13 clause shall not be terminated under

14 subclause (II) until the State has deter15 mined that the facility has the management

16 capability to ensure continued compliance

17 with all the requirements of subsections (b),

18 (c), and (d).

19 ‘‘(iv) The authority, in the case of an

20 emergency, to close the facility, to transfer

21 residents in that facility to other facilities,

22 or both.

23 The State also shall specify criteria, as to when

24 and how each of such remedies is to be applied,

25 the amounts of any fines, and the severity of
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1 each of these remedies, to be used in the imposi2 tion of such remedies.

3 ‘‘(B) ALTERNATIVE REMEDIES.—A State

4 may establish alternative remedies to the rem5 edies described in subparagraph (A), if the State

6 demonstrates to the Secretary’s satisfaction that

7 the alternative remedies are as effective in deter8 ring noncompliance and correcting deficiencies

9 as those described in such subparagraph.

10 ‘‘(C) ASSURING PROMPT COMPLIANCE.—If a

11 nursing facility has not complied with any of the

12 requirements of subsections (b), (c), and (d),

13 within 3 months after the date the facility is

14 found to be out of compliance with such require15 ments, the State may impose the remedy de16 scribed in subparagraph (A)(i) for all individ17 uals who are admitted to the facility after such

18 date.

19 ‘‘(D) REPEATED NONCOMPLIANCE.—In the

20 case of a nursing facility which, on 3 consecutive

21 standard surveys conducted under subsection

22 (g)(2), has been found to have provided sub23 standard quality of care, the State shall (regard24 less of what other remedies are provided)—
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1 ‘‘(i) impose the remedy described in

2 subparagraph (A)(i), and

3 ‘‘(ii) monitor the facility under sub4 section (g)(4)(B),

5 until the facility has demonstrated, to the satis6 faction of the State, that it is in compliance with

7 the requirements of subsections (b), (c), and (d),

8 and that it will remain in compliance with such

9 requirements.

10 ‘‘(3) SECRETARIAL AUTHORITY.—

11 ‘‘(A) FOR STATE NURSING FACILITIES.—

12 With respect to a State nursing facility, the Sec13 retary shall have the authority and duties of a

14 State under this subsection. Nothing in this sub15 paragraph shall be construed as restricting the

16 remedies available to the Secretary to remedy a

17 nursing facility’s deficiencies.

18 ‘‘(B) OTHER NURSING FACILITIES.—With

19 respect to any other nursing facility in a State,

20 if the Secretary finds that a nursing facility no

21 longer meets a requirement of subsection (b), (c),

22 or (d), the Secretary shall notify the State of

23 such deficiency. If, after a reasonable period of

24 time after such notification is given, the Sec25 retary finds that the State has failed to carry
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1 out the requirements of paragraph (1)(A) or

2 paragraph (1)(B) (if appropriate) with respect

3 to the deficiency involved, or that the deficiency

4 remains uncorrected—

5 ‘‘(i) the Secretary shall require the fa6 cility to correct the deficiency involved;

7 ‘‘(ii) if the Secretary finds that the de8 ficiency involved immediately jeopardizes

9 the health or safety of its residents, the Sec10 retary shall, in consultation with the State,

11 take action to remove the jeopardy and cor12 rect the deficiencies through the remedy

13 specified in subparagraph (C)(iii), or ter14 minate the facility’s participation under the

15 State MediGrant plan and may provide, in

16 addition, for one or more of the other rem17 edies described in subparagraph (C); and

18 ‘‘(iii) in the case of a deficiency that

19 remains uncorrected, if the Secretary finds

20 that the deficiency involved does not imme21 diately jeopardize the health or safety of its

22 residents, the Secretary may impose any of

23 the remedies described in subparagraph (C).

24 ‘‘(C) SPECIFIED REMEDIES.—The remedies

25 specified in this subparagraph are as follows:
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1 ‘‘(i) DENIAL OF PAYMENT.—Denial of

2 any further payments to the State in ac3 cordance with section 2154(f) for medical

4 assistance furnished by the facility to all in5 dividuals in the facility or to individuals

6 admitted to the facility after the effective

7 date of the finding.

8 ‘‘(ii) AUTHORITY WITH RESPECT TO

9 CIVIL MONEY PENALTIES.—Imposition of a

10 civil money penalty against the facility in

11 an amount not to exceed $5,000 for each

12 day of noncompliance. The provisions of

13 section 1128A (other than subsections (a)

14 and (b)) shall apply to a civil money pen15 alty under the previous sentence in the same

16 manner as such provisions apply to a pen17 alty or proceeding under section 1128A(a).

18 ‘‘(iii) APPOINTMENT OF TEMPORARY

19 MANAGEMENT.—Appointment of temporary

20 management (in consultation with the

21 State) to oversee the operation of the facility

22 and to assure the health and safety of the

23 facility’s residents, where there is a need for

24 temporary management while—
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1 ‘‘(I) there is an orderly closure of

2 the facility, or

3 ‘‘(II) improvements are made in

4 order to bring the facility into compli5 ance with all the requirements of sub6 sections (b), (c), and (d).

7 The temporary management under this

8 clause shall not be terminated under

9 subclause (II) until the Secretary has deter10 mined that the facility has the management

11 capability to ensure continued compliance

12 with all the requirements of subsections (b),

13 (c), and (d).

14 The Secretary shall specify criteria, as to when

15 and how each of such remedies is to be applied,

16 the amounts of any fines, and the severity of

17 each of these remedies, to be used in the imposi18 tion of such remedies.

19 ‘‘(4) SPECIAL RULES REGARDING PAYMENTS TO

20 FACILITIES.—

21 ‘‘(A) CONTINUATION OF PAYMENTS PENDING

22 REMEDIATION.—The State or the Secretary, as

23 appropriate, may continue payments, over a pe24 riod of not longer than 6 months after the effec25 tive date of the findings, under this title with re-
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1 spect to a nursing facility not in compliance

2 with a requirement of subsection (b), (c), or (d).

3 ‘‘(B) EFFECTIVE PERIOD OF DENIAL OF

4 PAYMENT.—A finding to deny payment under

5 this subsection shall terminate when the State or

6 Secretary (as the case may be) finds that the fa7 cility is in substantial compliance with all the

8 requirements of subsections (b), (c), and (d).

9 ‘‘(5) CONSTRUCTION.—The remedies provided

10 under this subsection are in addition to those other11 wise available under Federal or State law and shall

12 not be construed as limiting such other remedies, in13 cluding any remedy available to an individual at

14 common law. The provisions of this subsection shall

15 apply to a nursing facility (or portion thereof) not16 withstanding that the facility (or portion thereof) also

17 is a skilled nursing facility for purposes of title XVIII

18 or is accredited by an entity pursuant to subsection

19 (i)(2).

20 ‘‘(6) SHARING OF INFORMATION.—Notwithstand21 ing any other provision of law, all information con22 cerning nursing facilities required by this section to

23 be filed with the Secretary or a State agency shall be

24 made available by such facilities to Federal or State

25 employees for purposes consistent with the effective
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1 administration of programs established under this

2 title and title XVIII, including investigations by

3 State MediGrant fraud control units.

4 ‘‘(i) CONSTRUCTION.—

5 ‘‘(1) MEDICARE REQUIREMENTS.—Where re6 quirements or obligations under this section are iden7 tical to those provided under section 1819 of this Act,

8 the fulfillment of those requirements or obligations

9 under section 1819 shall be considered to be the fulfill10 ment of the corresponding requirements or obligations

11 under this section.

12 ‘‘(2) EFFECT OF ACCREDITATION.—

13 ‘‘(A) IN GENERAL.—At the option of a

14 State, or the Secretary, as appropriate, if a

15 nursing facility in the State is accredited by a

16 national accrediting entity meeting such stand17 ards as the State or the Secretary may impose,

18 such facility shall be deemed to have met the re19 quirements of this section and the State shall be

20 deemed to have met the survey and certification

21 requirements under subsection (g).

22 ‘‘(B) REQUIREMENT FOR ACCREDITING EN23 TITY.—A State or the Secretary, as appropriate,

24 may not find that an accrediting entity meets

25 standards under subparagraph (A) unless such
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1 entity applies standards for accreditation for fa2 cilities that meet or exceed the requirements of

3 this section.

4 ‘‘SEC. 2138. OTHER PROVISIONS PROMOTING PROGRAM IN5 TEGRITY.

6 ‘‘(a) PUBLIC ACCESS TO SURVEY RESULTS.—Each

7 MediGrant plan shall provide that upon completion of a

8 survey of any health care facility or organization by a State

9 agency to carry out the plan, the agency shall make public

10 in readily available form and place the pertinent findings

11 of the survey relating to the compliance of the facility or

12 organization with requirements of law.

13 ‘‘(b) RECORD KEEPING.—Each MediGrant plan shall

14 provide for agreements with persons or institutions provid15 ing services under the plan under which the person or insti16 tution agrees—

17 ‘‘(1) to keep such records, including ledgers,

18 books, and original evidence of costs, as are necessary

19 to fully disclose the extent of the services provided to

20 individuals receiving assistance under the plan, and

21 ‘‘(2) to furnish the State agency with such infor22 mation regarding any payments claimed by such per23 son or institution for providing services under the

24 plan, as the State agency may from time to time re25 quest.
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1 ‘‘(c) QUALITY ASSURANCE.—Each MediGrant plan

2 shall provide a program to assure the quality of services

3 provided under the plan, including such services provided

4 to individuals with chronic mental or physical illness.

5 ‘‘PART E—ESTABLISHMENT AND AMENDMENT OF

6 MEDIGRANT PLANS

7 ‘‘SEC. 2151. SUBMITTAL AND APPROVAL OF MEDIGRANT

8 PLANS.

9 ‘‘(a) SUBMITTAL.—As a condition of receiving funding

10 under part C, each State shall submit to the Secretary a

11 MediGrant plan that meets the applicable requirements of

12 this title.

13 ‘‘(b) APPROVAL.—Except as the Secretary may provide

14 under section 2154, a MediGrant plan submitted under sub15 section (a)—

16 ‘‘(1) shall be approved for purposes of this title,

17 and

18 ‘‘(2) shall be effective beginning with a calendar

19 quarter that is specified in the plan, but in no case

20 earlier than the first calendar quarter that begins at

21 least 60 days after the date the plan is submitted.

22 ‘‘SEC. 2152. SUBMITTAL AND APPROVAL OF PLAN AMEND23 MENTS.

24 ‘‘(a) SUBMITTAL OF AMENDMENTS.—A State may

25 amend, in whole or in part, its MediGrant plan at any
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1 time through transmittal of a plan amendment under this

2 section.

3 ‘‘(b) APPROVAL.—Except as the Secretary may provide

4 under section 2154, an amendment to a MediGrant plan

5 submitted under subsection (a)—

6 ‘‘(1) shall be approved for purposes of this title,

7 and

8 ‘‘(2) shall be effective as provided in subsection

9 (c).

10 ‘‘(c) EFFECTIVE DATES FOR AMENDMENTS.—

11 ‘‘(1) IN GENERAL.—Subject to the succeeding

12 provisions of this subsection, an amendment to a

13 MediGrant plan shall take effect on one or more effec14 tive dates specified in the amendment.

15 ‘‘(2) AMENDMENTS RELATING TO ELIGIBILITY OR

16 BENEFITS.—Except as provided in paragraph (4)—

17 ‘‘(A) NOTICE REQUIREMENT.—Any plan

18 amendment that eliminates or restricts eligibility

19 or benefits under the plan may not take effect

20 unless the State certifies that it has provided

21 prior or contemporaneous public notice of the

22 change, in a form and manner provided under

23 applicable State law.

24 ‘‘(B) TIMELY TRANSMITTAL.—Any plan

25 amendment that eliminates or restricts eligibility
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1 or benefits under the plan shall not be effective

2 for longer than a 60 day period unless the

3 amendment has been transmitted to the Sec4 retary before the end of such period.

5 ‘‘(3) OTHER AMENDMENTS.—Subject to para6 graph (4), any plan amendment that is not described

7 in paragraph (2) becomes effective in a State fiscal

8 year may not remain in effect after the end of such

9 fiscal year (or, if later, the end of the 90-day period

10 on which it becomes effective) unless the amendment

11 has been transmitted to the Secretary.

12 ‘‘(4) EXCEPTION.—The requirements of para13 graphs (2) and (3) shall not apply to a plan amend14 ment that is submitted on a timely basis pursuant to

15 a court order or an order of the Secretary.

16 ‘‘SEC. 2153. PROCESS FOR STATE WITHDRAWAL FROM PRO17 GRAM.

18 ‘‘(a) IN GENERAL.—A State may rescind its

19 MediGrant plan and discontinue participation in the pro20 gram under this title at any time after providing—

21 ‘‘(1) the public with 90 days prior notice in a

22 publication in one or more daily newspapers of gen23 eral circulation in the State or in any publication

24 used by the State to publish State statutes or rules,

25 and
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1 ‘‘(2) the Secretary with 90 days prior written

2 notice.

3 ‘‘(b) EFFECTIVE DATE.—Such discontinuation shall

4 not apply to payments under part C for expenditures made

5 for items and services furnished under the MediGrant plan

6 before the effective date of the discontinuation.

7 ‘‘(c) PRORATION OF ALLOTMENTS.—In the case of any

8 withdrawal under this section other than at the end of a

9 Federal fiscal year, notwithstanding any provision of sec10 tion 2121 to the contrary, the Secretary shall provide for

11 such appropriate proration of the application of allotments

12 under section 2121 as is appropriate.

13 ‘‘SEC. 2154. SANCTIONS FOR NONCOMPLIANCE.

14 ‘‘(a) PROMPT REVIEW OF PLAN SUBMITTALS.—The

15 Secretary shall promptly review MediGrant plans and plan

16 amendments submitted under this part to determine if they

17 substantially comply with the requirements of this title.

18 ‘‘(b) DETERMINATIONS OF SUBSTANTIAL NONCOMPLI19 ANCE.—

20 ‘‘(1) AT TIME OF PLAN OR AMENDMENT SUBMIT21 TAL.—

22 ‘‘(A) IN GENERAL.—If the Secretary, during

23 the 30-day period beginning on the date of sub24 mittal of a MediGrant plan or plan amend25 ment—
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1 ‘‘(i) determines that the plan or

2 amendment substantially violates (within

3 the meaning of subsection (c)) a require4 ment of this title, and

5 ‘‘(ii) provides written notice of such

6 determination to the State,

7 the Secretary shall issue an order specifying that

8 the plan or amendment, insofar as it is in sub9 stantial violation of such a requirement, shall

10 not be effective, except as provided in subsection

11 (c), beginning at the end of a period of not less

12 than 30 days (or 120 days in the case of the ini13 tial submission of the MediGrant plan) specified

14 in the order beginning on the date of the notice

15 of the determination.

16 ‘‘(B) EXTENSION OF TIME PERIODS.—The

17 time periods specified in subparagraph (A) may

18 be extended by written agreement of the Sec19 retary and the State involved.

20 ‘‘(2) VIOLATIONS IN ADMINISTRATION OF

21 PLAN.—

22 ‘‘(A) IN GENERAL.—If the Secretary deter23 mines, after reasonable notice and opportunity

24 for a hearing for the State, that in the adminis25 tration of a MediGrant plan there is a substan-
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1 tial violation of a requirement of this title, the

2 Secretary shall provide the State with written

3 notice of the determination and with an order to

4 remedy such violation. Such an order shall be5 come effective prospectively, as specified in the

6 order, after the date of receipt of such written

7 notice. Such an order may include the withhold8 ing of funds, consistent with subsection (f), for

9 parts of the MediGrant plan affected by such vio10 lation, until the Secretary is satisfied that the

11 violation has been corrected.

12 ‘‘(B) EFFECTIVENESS.—If the Secretary is13 sues an order under paragraph (1), the order

14 shall become effective, except as provided in sub15 section (c), beginning at the end of a period (of

16 not less than 30 days) specified in the order be17 ginning on the date of the notice of the deter18 mination to the State.

19 ‘‘(C) TIMELINESS OF DETERMINATIONS RE20 LATING TO REPORT-BASED COMPLIANCE.—The

21 Secretary shall make determinations under this

22 paragraph respecting violations relating to infor23 mation contained in an annual report under sec24 tion 2102, an independent evaluation under sec25 tion 2103, or an audit report under section 2131
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1 not later than 30 days after the date of transmit2 tal of the report or evaluation to the Secretary.

3 ‘‘(3) CONSULTATION WITH STATE.—Before mak4 ing a determination adverse to a State under this sec5 tion, the Secretary shall (within any time periods

6 provided under this section)—

7 ‘‘(A) reasonably consult with the State in8 volved,

9 ‘‘(B) offer the State a reasonable oppor10 tunity to clarify the submission and submit fur11 ther information to substantiate compliance with

12 the requirements of this title, and

13 ‘‘(C) reasonably consider any such clarifica14 tions and information submitted.

15 ‘‘(4) JUSTIFICATION OF ANY INCONSISTENCIES IN

16 DETERMINATIONS.—If the Secretary makes a deter17 mination under this section that is, in whole or in

18 part, inconsistent with any previous determination

19 issued by the Secretary under this title, the Secretary

20 shall include in the determination a detailed expla21 nation and justification for any such difference.

22 ‘‘(5) SUBSTANTIAL VIOLATION DEFINED.—For

23 purposes of this title, a MediGrant plan (or amend24 ment to such a plan) or the administration of the

25 MediGrant plan is considered to ‘substantially vio-
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1 late’ a requirement of this title if a provision of the

2 plan or amendment (or an omission from the plan or

3 amendment) or the administration of the plan—

4 ‘‘(A) is material and substantial in nature

5 and effect, and

6 ‘‘(B) is inconsistent with an express re7 quirement of this title.

8 A failure to meet a strategic objective or performance

9 goal (as described in section 2101) shall not be con10 sidered to substantially violate a requirement of this

11 title.

12 ‘‘(c) STATE RESPONSE TO ORDERS.—

13 ‘‘(1) STATE RESPONSE BY REVISING PLAN.—

14 ‘‘(A) IN GENERAL.—Insofar as an order

15 under subsection (b)(1) relates to a substantial

16 violation by a MediGrant plan or plan amend17 ment, a State may respond (before the date the

18 order becomes effective) to such an order by sub19 mitting a written revision of the MediGrant

20 plan or plan amendment to substantially comply

21 with the requirements of this part.

22 ‘‘(B) REVIEW OF REVISION.—In the case of

23 submission of such a revision, the Secretary shall

24 promptly review the submission and shall with-
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1 hold any action on the order during the period

2 of such review.

3 ‘‘(C) SECRETARIAL RESPONSE.—The revi4 sion shall be considered to have corrected the de5 ficiency (and the order rescinded insofar as it re6 lates to such deficiency) unless the Secretary de7 termines and notifies the State in writing, with8 in 15 days after the date the Secretary receives

9 the revision, that the MediGrant plan or amend10 ment, as proposed to be revised, still substan11 tially violates a requirement of this title. In such

12 case the State may respond by seeking reconsid13 eration or a hearing under paragraph (2).

14 ‘‘(D) REVISION RETROACTIVE.—If the revi15 sion provides for substantial compliance, the re16 vision may be treated, at the option of the State,

17 as being effective either as of the effective date of

18 the provision to which it relates or such later

19 date as the State and Secretary may agree.

20 ‘‘(2) STATE RESPONSE BY SEEKING RECONSIDER21 ATION OR AN ADMINISTRATIVE HEARING.—A State

22 may respond to an order under subsection (b) by fil23 ing a request with the Secretary for—

24 ‘‘(A) a reconsideration of the determination,

25 pursuant to subsection (d)(1), or
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1 ‘‘(B) a review of the determination through

2 an administrative hearing, pursuant to sub3 section (d)(2).

4 In such case, the order shall not take effect before the

5 completion of the reconsideration or hearing.

6 ‘‘(3) STATE RESPONSE BY CORRECTIVE ACTION

7 PLAN.—

8 ‘‘(A) IN GENERAL.—In the case of an order

9 described in subsection (b)(2) that relates to a

10 substantial violation in the administration of the

11 MediGrant plan, a State may respond to such

12 an order by submitting a corrective action plan

13 with the Secretary to correct deficiencies in the

14 administration of the plan which are the subject

15 of the order.

16 ‘‘(B) REVIEW OF CORRECTIVE ACTION

17 PLAN.—In such case, the Secretary shall with18 hold any action on the order for a period (not

19 to exceed 30 days) during which the Secretary

20 reviews the corrective action plan.

21 ‘‘(C) SECRETARIAL RESPONSE.—The correc22 tive action plan shall be considered to have cor23 rected the deficiency (and the order rescinded in24 sofar as it relates to such deficiency) unless the

25 Secretary determines and notifies the State in
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1 writing, within 15 days after the date the Sec2 retary receives the corrective action plan, that

3 the State’s administration of the MediGrant

4 plan, as proposed to be corrected in the plan,

5 will still substantially violate a requirement of

6 this title. In such case the State may respond by

7 seeking reconsideration or a hearing under para8 graph (2).

9 ‘‘(4) STATE RESPONSE BY WITHDRAWAL OF PLAN

10 AMENDMENT; FAILURE TO RESPOND.—Insofar as an

11 order relates to a substantial violation in a plan

12 amendment submitted, a State may respond to such

13 an order by withdrawing the plan amendment and

14 the MediGrant plan shall be treated as though the

15 amendment had not been made.

16 ‘‘(d) ADMINISTRATIVE REVIEW AND HEARING.—

17 ‘‘(1) RECONSIDERATION.—Within 30 days after

18 the date of receipt of a request under subsection

19 (b)(2)(A), the Secretary shall notify the State of the

20 time and place at which a hearing will be held for

21 the purpose of reconsidering the Secretary’s deter22 mination. The hearing shall be held not less than 20

23 days nor more than 60 days after the date notice of

24 the hearing is furnished to the State, unless the Sec25 retary and the State agree in writing to holding the
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1 hearing at another time. The Secretary shall affirm,

2 modify, or reverse the original determination within

3 60 days of the conclusion of the hearing.

4 ‘‘(2) ADMINISTRATIVE HEARING.—Within 30

5 days after the date of receipt of a request under sub6 section (b)(2)(B), an administrative law judge shall

7 schedule a hearing for the purpose of reviewing the

8 Secretary’s determination. The hearing shall be held

9 not less than 20 days nor more than 60 days after the

10 date notice of the hearing is furnished to the State,

11 unless the Secretary and the State agree in writing

12 to holding the hearing at another time. The adminis13 trative law judge shall affirm, modify, or reverse the

14 determination within 60 days of the conclusion of the

15 hearing.

16 ‘‘(e) JUDICIAL REVIEW.—

17 ‘‘(1) IN GENERAL.—A State which is dissatisfied

18 with a final determination made by the Secretary

19 under subsection (d)(1) or a final determination of an

20 administrative law judge under subsection (d)(2)

21 may, within 60 days after it has been notified of such

22 determination, file with the United States court of

23 appeals for the circuit in which the State is located

24 a petition for review of such determination. A copy

25 of the petition shall be forthwith transmitted by the
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1 clerk of the court to the Secretary and, in the case of

2 a determination under subsection (d)(2), to the ad3 ministrative law judge involved. The Secretary (or

4 judge involved) thereupon shall file in the court the

5 record of the proceedings on which the final deter6 mination was based, as provided in section 2112 of

7 title 28, United States Code. Only the Secretary, in

8 accordance with this title, may compel a State under

9 Federal law to comply with the provisions of this title

10 or a MediGrant plan, or otherwise enforce a provision

11 of this title against a State, and no action may be

12 filed under Federal law against a State in relation to

13 the State’s compliance, or failure to comply, with the

14 provisions of this title or of a MediGrant plan except

15 by the Secretary as provided under this subsection.

16 ‘‘(2) STANDARD FOR REVIEW.—The findings of

17 fact by the Secretary or administrative law judge, if

18 supported by substantial evidence, shall be conclusive,

19 but the court, for good cause shown, may remand the

20 case to the Secretary or judge to take further evidence,

21 and the Secretary or judge may thereupon make new

22 or modified findings of fact and may modify a pre23 vious determination, and shall certify to the court the

24 transcript and record of the further proceedings. Such
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1 new or modified findings of fact shall likewise be con2 clusive if supported by substantial evidence.

3 ‘‘(3) JURISDICTION OF APPELLATE COURT.—The

4 court shall have jurisdiction to affirm the action of

5 the Secretary or judge or to set it aside, in whole or

6 in part. The judgment of the court shall be subject to

7 review by the Supreme Court of the United States

8 upon certiorari or certification as provided in section

9 1254 of title 28, United States Code.

10 ‘‘(f) WITHHOLDING OF FUNDS.—

11 ‘‘(1) IN GENERAL.—Any order under this section

12 relating to the withholding of funds shall be effective

13 not earlier than the effective date of the order and

14 shall only relate to the portions of a MediGrant plan

15 or administration thereof which substantially violate

16 a requirement of this title. In the case of a failure to

17 meet a set-aside requirement under section 2112, any

18 withholding shall only apply to the extent of such

19 failure.

20 ‘‘(2) SUSPENSION OF WITHHOLDING.—The Sec21 retary may suspend withholding of funds under para22 graph (1) during the period reconsideration or ad23 ministrative and judicial review is pending under

24 subsection (d) or (e).
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1 ‘‘(3) RESTORATION OF FUNDS.—Any funds with2 held under this subsection under an order shall be im3 mediately restored to a State—

4 ‘‘(A) to the extent and at the time the order

5 is—

6 ‘‘(i) modified or withdrawn by the Sec7 retary upon reconsideration,

8 ‘‘(ii) modified or reversed by an ad9 ministrative law judge, or

10 ‘‘(iii) set aside (in whole or in part) by

11 an appellate court; or

12 ‘‘(B) when the Secretary determines that the

13 deficiency which was the basis for the order is

14 corrected;

15 ‘‘(C) when the Secretary determines that

16 violation which was the basis for the order is re17 solved or the amendment which was the basis for

18 the order is withdrawn; or

19 ‘‘(D) at any time upon the initiative of the

20 Secretary.

21 ‘‘(g) INDIVIDUAL COMPLAINT PROCESS.—The Sec22 retary shall provide for a process under which an individ23 ual may notify the Secretary concerning a State’s failure

24 to provide medical assistance as required under the State

25 MediGrant plan or otherwise comply with the requirements
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1 of this title or such plan. If the Secretary finds that there

2 is a pattern of complaints with respect to a State or that

3 a particular failure or finding of noncompliance is egre4 gious, the Secretary shall notify the chief executive officer

5 of the State of such finding and shall notify the Congress

6 if the State fails to respond to such notification within a

7 reasonable period of time.

8 ‘‘SEC. 2155. SECRETARIAL AUTHORITY.

9 ‘‘(a) NEGOTIATED AGREEMENT AND DISPUTE RESO10 LUTION.—

11 ‘‘(1) NEGOTIATIONS.—Nothing in this part shall

12 be construed as preventing the Secretary and a State

13 from at any time negotiating a satisfactory resolution

14 to any dispute concerning the approval of a

15 MediGrant plan (or amendments to a MediGrant

16 plan) or the compliance of a MediGrant plan (includ17 ing its administration) with requirements of this

18 title.

19 ‘‘(2) COOPERATION.—The Secretary shall act in

20 a cooperative manner with the States in carrying out

21 this title. In the event of a dispute between a State

22 and the Secretary, the Secretary shall, whenever prac23 ticable, engage in informal dispute resolution activi24 ties in lieu of formal enforcement or sanctions under

25 section 2154.
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1 ‘‘(b) LIMITATIONS ON DELEGATION OF DECISION-MAK2 ING AUTHORITY.—The Secretary may not delegate (other

3 than to the Administrator of the Health Care Financing

4 Administration) the authority to make determinations or

5 reconsiderations respecting the approval of MediGrant

6 plans (or amendments to such plans) or the compliance of

7 a MediGrant plan (including its administration) with re8 quirements of this title. Such Administrator may not fur9 ther delegate such authority to any individual, including

10 any regional official of such Administration.

11 ‘‘(c) REQUIRING FORMAL RULEMAKING FOR CHANGES

12 IN SECRETARIAL ADMINISTRATION.—The Secretary shall

13 carry out the administration of the program under this title

14 only through a prospective formal rulemaking process, in15 cluding issuing notices of proposed rulemaking, publishing

16 proposed rules or modifications to rules in the Federal Reg17 ister, and soliciting public comment.

18 ‘‘PART F—GENERAL PROVISIONS

19 ‘‘SEC. 2171. DEFINITIONS.

20 ‘‘(a) MEDICAL ASSISTANCE.—For purposes of this

21 title, the term ‘medical assistance’ means payment of part

22 or all of the cost of any of the following, or assistance in

23 the purchase, in whole or in part, of health benefit coverage

24 that includes any of the following, for eligible low-income
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1 individuals (as defined in subsection (b)) as specified under

2 the MediGrant plan:

3 ‘‘(1) Inpatient hospital services.

4 ‘‘(2) Outpatient hospital services.

5 ‘‘(3) Physician services.

6 ‘‘(4) Surgical services.

7 ‘‘(5) Clinic services and other ambulatory health

8 care services.

9 ‘‘(6) Nursing facility services.

10 ‘‘(7) Intermediate care facility services for the

11 mentally retarded.

12 ‘‘(8) Prescription drugs and biologicals and the

13 administration of such drugs and biologicals, only if

14 such drugs and biologicals are not furnished for the

15 purpose of causing, or assisting in causing, the death,

16 suicide, euthanasia, or mercy killing of a person.

17 ‘‘(9) Over-the-counter medications.

18 ‘‘(10) Laboratory and radiological services.

19 ‘‘(11) Family planning services and supplies.

20 ‘‘(12) Inpatient mental health services, including

21 services furnished in a State-operated mental hospital

22 and including residential or other 24-hour therapeuti23 cally planned structured services in the case of a

24 child.
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1 ‘‘(13) Outpatient mental health services, includ2 ing services furnished in a State-operated mental hos3 pital and including community-based services in the

4 case of a child.

5 ‘‘(14) Durable medical equipment and other

6 medically-related or remedial devices (such as pros7 thetic devices, implants, eyeglasses, hearing aids, den8 tal devices, and adaptive devices).

9 ‘‘(15) Disposable medical supplies.

10 ‘‘(16) Home and community-based health care

11 services and related supportive services (such as home

12 health nursing services, home health aide services,

13 personal care, assistance with activities of daily liv14 ing, chore services, day care services, respite care serv15 ices, training for family members, and minor modi16 fications to the home).

17 ‘‘(17) Community supported living arrange18 ments.

19 ‘‘(18) Nursing care services (such as nurse prac20 titioner services, nurse midwife services, advanced

21 practice nurse services, private duty nursing care, pe22 diatric nurse services, and respiratory care services)

23 in a home, school, or other setting.
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1 ‘‘(19) Abortion only if necessary to save the life

2 of the mother or if the pregnancy is the result of an

3 act of rape or incest.

4 ‘‘(20) Dental services.

5 ‘‘(21) Inpatient substance abuse treatment serv6 ices and residential substance abuse treatment serv7 ices.

8 ‘‘(22) Outpatient substance abuse treatment serv9 ices.

10 ‘‘(23) Case management services.

11 ‘‘(24) Care coordination services.

12 ‘‘(25) Physical therapy, occupational therapy,

13 and services for individuals with speech, hearing, and

14 language disorders.

15 ‘‘(26) Hospice care.

16 ‘‘(27) Any other medical, diagnostic, screening,

17 preventive, restorative, remedial, therapeutic, or reha18 bilitative services (whether in a facility, home, school,

19 or other setting) if recognized by State law and only

20 if the service is—

21 ‘‘(A) prescribed by or furnished by a physi22 cian or other licensed or registered practitioner

23 within the scope of practice as defined by State

24 law,
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1 ‘‘(B) performed under the general super2 vision or at the direction of a physician, or

3 ‘‘(C) furnished by a health care facility that

4 is operated by a State or local government or is

5 licensed under State law and operating within

6 the scope of the license.

7 ‘‘(28) Premiums for private health care insur8 ance coverage, including private long-term care insur9 ance coverage.

10 ‘‘(29) Medical transportation.

11 ‘‘(30) Medicare cost-sharing (as defined in sub12 section (c)).

13 ‘‘(31) Enabling services (such as transportation,

14 translation, and outreach services) only if designed to

15 increase the accessibility of primary and preventive

16 health care services for eligible low-income individ17 uals.

18 ‘‘(32) Any other health care services or items

19 specified by the Secretary and not excluded under this

20 section.

21 ‘‘(b) ELIGIBLE LOW-INCOME INDIVIDUAL.—

22 ‘‘(1) IN GENERAL.—The term ‘eligible low-in23 come individual’ means an individual—

24 ‘‘(A) who has been determined eligible by

25 the State for medical assistance under the
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1 MediGrant plan and is not an inmate of a pub2 lic institution (except as a patient in a State

3 psychiatric hospital), and

4 ‘‘(B) whose family income (as determined

5 under the plan) does not exceed a percentage

6 (specified in the MediGrant plan and not to ex7 ceed 275 percent) of the poverty line for a family

8 of the size involved.

9 ‘‘(2) AMOUNT OF INCOME.—In determining the

10 amount of income under paragraph (1)(B), a State

11 may exclude costs incurred for medical care or other

12 types of remedial care recognized by the State.

13 ‘‘(c) MEDICARE COST-SHARING.—For purposes of this

14 title, the term ‘medicare cost-sharing’ means any of the fol15 lowing:

16 ‘‘(1)(A) Premiums under section 1839.

17 ‘‘(B) Premiums under section 1818 or 1818A.

18 ‘‘(2) Coinsurance under title XVIII (including

19 coinsurance described in section 1813).

20 ‘‘(3) Deductibles established under title XVIII

21 (including those described in sections 1813 and

22 1833(b)).

23 ‘‘(4) The difference between the amount that is

24 paid under section 1833(a) and the amount that

25 would be paid under such section if any reference to
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1 ‘80 percent’ therein were deemed a reference to ‘100

2 percent’.

3 ‘‘(5) Premiums for enrollment of an individual

4 with an eligible organization under section 1876 or

5 with a MedicarePlus organization under part C of

6 title XVIII.

7 ‘‘(d) ADDITIONAL DEFINITIONS.—For purposes of this

8 title:

9 ‘‘(1) CHILD.—The term ‘child’ means an indi10 vidual under 19 years of age.

11 ‘‘(2) ELDERLY INDIVIDUAL.—The term ‘elderly

12 individual’ means an individual who has attained re13 tirement age, as defined under section 216(l)(1).

14 ‘‘(3) POVERTY LINE DEFINED.—The term ‘pov15 erty line’ has the meaning given such term in section

16 673(2) of the Community Services Block Grant Act

17 (42 U.S.C. 9902(2)), including any revision required

18 by such section).

19 ‘‘(4) PREGNANT WOMAN.—The term ‘pregnant

20 woman’ includes a woman during the 60-day period

21 beginning on the last day of the pregnancy.

22 ‘‘SEC. 2172. TREATMENT OF TERRITORIES.

23 ‘‘Notwithstanding any other requirement of this title,

24 the Secretary may waive or modify any requirement of this

25 title with respect to the medical assistance program for a
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1 State other than the 50 States and the District of Columbia,

2 other than a waiver of—

3 ‘‘(1) the applicable Federal medical assistance

4 percentage,

5 ‘‘(2) the limitation on total payments in a fiscal

6 year to the amount of the allotment under section

7 2121(c), or

8 ‘‘(3) the requirement that payment may be made

9 for medical assistance only with respect to amounts

10 expended by the State for care and services described

11 in section 2171(a) and medically-related services (as

12 defined in section 2112(e)(2)).

13 ‘‘SEC. 2173. DESCRIPTION OF TREATMENT OF INDIAN

14 HEALTH SERVICE FACILITIES.

15 ‘‘In the case of a State in which one or more facilities

16 of the Indian Health Service are located, the MediGrant

17 plan shall include a description of—

18 ‘‘(1) what provision (if any) has been made for

19 payment for items and services furnished by such fa20 cilities, and

21 ‘‘(2) the manner in which medical assistance for

22 low-income eligible individuals who are Indians will

23 be provided, as determined by the State in consulta24 tion with the appropriate Indian tribes and tribal or25 ganizations.
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1 ‘‘SEC. 2174. APPLICATION OF CERTAIN GENERAL PROVI2 SIONS.

3 ‘‘The following sections in part A of title XI shall

4 apply to States under this title in the same manner as they

5 applied to a State under title XIX:

6 ‘‘(1) Section 1101(a)(1) (relating to definition of

7 State).

8 ‘‘(2) Section 1116 (relating to administrative

9 and judicial review), but only insofar as consistent

10 with the provisions of part C.

11 ‘‘(3) Section 1124 (relating to disclosure of own12 ership and related information).

13 ‘‘(4) Section 1126 (relating to disclosure of infor14 mation about certain convicted individuals).

15 ‘‘(5) Section 1128B(d) (relating to criminal pen16 alties for certain additional charges).

17 ‘‘(6) Section 1132 (relating to periods within

18 which claims must be filed).

19 ‘‘SEC. 2175. MEDIGRANT MASTER DRUG REBATE AGREE20 MENTS.

21 ‘‘(a) REQUIREMENT FOR MANUFACTURER TO ENTER

22 INTO AGREEMENT.—

23 ‘‘(1) IN GENERAL.—Pursuant to section 2123(f),

24 in order for payment to be made to a State under

25 part C for medical assistance for covered outpatient

26 drugs of a manufacturer, the manufacturer shall enter
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1 into and have in effect a MediGrant master rebate

2 agreement described in subsection (b) with the Sec3 retary on behalf of States electing to participate in

4 the agreement.

5 ‘‘(2) COVERAGE OF DRUGS NOT COVERED UNDER

6 REBATE AGREEMENTS.—Nothing in this section shall

7 be construed to prohibit a State in its discretion from

8 providing coverage under its MediGrant plan of a

9 covered outpatient drug for which no rebate agree10 ment is in effect under this section.

11 ‘‘(3) EFFECT ON EXISTING AGREEMENTS.—If a

12 State has a rebate agreement in effect with a manu13 facturer on the date of the enactment of this section

14 which provides for a minimum aggregate rebate equal

15 to or greater than the minimum aggregate rebate

16 which would otherwise be paid under the MediGrant

17 master agreement under this section, at the option of

18 the State—

19 ‘‘(A) such agreement shall be considered to

20 meet the requirements of the MediGrant master

21 rebate agreement, and

22 ‘‘(B) the State shall be considered to have

23 elected to participate in the MediGrant master

24 rebate agreement.
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1 ‘‘(4) LIMITATION ON PRICES OF DRUGS PUR2 CHASED BY COVERED ENTITIES.—

3 ‘‘(A) AGREEMENT WITH SECRETARY.—A

4 manufacturer meets the requirements of this

5 paragraph if the manufacturer has entered into

6 an agreement with the Secretary that meets the

7 requirements of section 340B of the Public

8 Health Service Act with respect to covered out9 patient drugs purchased by a covered entity on

10 or after the first day of the first month that be11 gins after the date of the enactment of title VI

12 of the Veterans Health Care Act of 1992.

13 ‘‘(B) COVERED ENTITY DEFINED.—In this

14 subsection, the term ‘covered entity’ means an

15 entity described in section 340B(a)(4) of the

16 Public Health Service Act provided that—

17 ‘‘(i) an entity is licensed by the State

18 to purchase and take possession of covered

19 outpatient drugs and furnishes the drugs to

20 patients at a cost no greater than acquisi21 tion plus such dispensing fee as may be al22 lowable under a State pharmaceutical as23 sistance program, and

24 ‘‘(ii) such entity is certified pursuant

25 to section 340B(a)(7) of such Act.
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1 ‘‘(C) ESTABLISHMENT OF ALTERNATIVE

2 MECHANISM TO ENSURE AGAINST DUPLICATE

3 DISCOUNTS OR REBATES.—If the Secretary does

4 not establish a mechanism under section

5 340B(a)(5)(A) of the Public Health Service Act

6 within 12 months of the date of the enactment of

7 such section, the following requirements shall

8 apply:

9 ‘‘(i) Each covered entity shall inform

10 the single State agency under this title

11 when it is seeking reimbursement from the

12 medicaid plan for medical assistance with

13 respect to a unit of any covered outpatient

14 drug which is subject to an agreement under

15 section 340B(a) of such Act.

16 ‘‘(ii) Each such single State agency

17 shall provide a means by which a covered

18 entity shall indicate on any drug reim19 bursement claims form (or format, where

20 electronic claims management is used) that

21 a unit of the drug that is the subject of the

22 form is subject to an agreement under sec23 tion 340B of such Act, and not submit to

24 any manufacturer a claim for a rebate pay-
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1 ment under subsection (b) with respect to

2 such a drug.

3 ‘‘(D) EFFECT OF SUBSEQUENT AMEND4 MENTS.—In determining whether an agreement

5 under subparagraph (A) meets the requirements

6 of section 340B of the Public Health Service Act,

7 the Secretary shall not take into account any

8 amendments to such section that are enacted

9 after the enactment of title VI of the Veterans

10 Health Care Act of 1992.

11 ‘‘(E) DETERMINATION OF COMPLIANCE.—A

12 manufacturer is deemed to meet the requirements

13 of this paragraph if the manufacturer establishes

14 to the satisfaction of the Secretary that the man15 ufacturer would comply (and has offered to com16 ply) with the provisions of section 340B of the

17 Public Health Service Act (as in effect imme18 diately after the enactment title VI of the Veter19 ans Health Care Act of 1992, and would have

20 entered into an agreement under such section (as

21 such section was in effect at such time), but for

22 a legislative change in such section after such en23 actment.

24 ‘‘(b) TERMS OF REBATE AGREEMENT.—
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1 ‘‘(1) PERIODIC REBATES.—The MediGrant mas2 ter rebate agreement under this section shall require

3 the manufacturer to provide, to the MediGrant plan

4 of each State participating in the agreement, a rebate

5 for a rebate period in an amount specified in sub6 section (c) for covered outpatient drugs of the manu7 facturer dispensed after the effective date of the agree8 ment, for which payment was made under the plan

9 for such period. Such rebate shall be paid by the man10 ufacturer not later than 30 days after the date of re11 ceipt of the information described in paragraph (2)

12 for the period involved.

13 ‘‘(2) STATE PROVISION OF INFORMATION.—

14 ‘‘(A) STATE RESPONSIBILITY.—Each State

15 participating in the MediGrant master rebate

16 agreement shall report to each manufacturer not

17 later than 60 days after the end of each rebate

18 period and in a form consistent with a standard

19 reporting format established by the Secretary, in20 formation on the total number of units of each

21 dosage form and strength and package size of

22 each covered outpatient drug, for which payment

23 was made under the MediGrant plan for the pe24 riod, and shall promptly transmit a copy of such

25 report to the Secretary.
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1 ‘‘(B) AUDITS.—A manufacturer may audit

2 the information provided (or required to be pro3 vided) under subparagraph (A). Adjustments to

4 rebates shall be made to the extent that informa5 tion indicates that utilization was greater or less

6 than the amount previously specified.

7 ‘‘(3) MANUFACTURER PROVISION OF PRICE IN8 FORMATION.—

9 ‘‘(A) IN GENERAL.—Each manufacturer

10 which is subject to the MediGrant master rebate

11 agreement under this section shall report to the

12 Secretary—

13 ‘‘(i) not later than 30 days after the

14 last day of each rebate period under the

15 agreement, on the average manufacturer

16 price (as defined in subsection (i)(1)) and,

17 for single source drugs and innovator mul18 tiple source drugs, the manufacturer’s best

19 price (as defined in subsection (c)(1)(C)) for

20 each covered outpatient drug for the rebate

21 period under the agreement, and

22 ‘‘(ii) not later than 30 days after the

23 date of entering into an agreement under

24 this section, on the average manufacturer

25 price (as defined in subsection (i)(1)) as of
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1 October 1, 1990, for each of the manufactur2 er’s covered outpatient drugs.

3 ‘‘(B) VERIFICATION SURVEYS OF AVERAGE

4 MANUFACTURER PRICE.—The Secretary may

5 survey wholesalers and manufacturers that di6 rectly distribute their covered outpatient drugs,

7 when necessary, to verify manufacturer prices re8 ported under subparagraph (A). The Secretary

9 may impose a civil monetary penalty in an

10 amount not to exceed $10,000 on a wholesaler,

11 manufacturer, or direct seller, if the wholesaler,

12 manufacturer, or direct seller of a covered out13 patient drug refuses a request for information by

14 the Secretary in connection with a survey under

15 this subparagraph. The provisions of section

16 1128A (other than subsections (a) (with respect

17 to amounts of penalties or additional assess18 ments) and (b)) shall apply to a civil money

19 penalty under this subparagraph in the same

20 manner as such provisions apply to a penalty or

21 proceeding under section 1128A(a).

22 ‘‘(C) PENALTIES.—

23 ‘‘(i) FAILURE TO PROVIDE TIMELY IN24 FORMATION.—In the case of a manufacturer

25 which is subject to the MediGrant master
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1 rebate agreement that fails to provide infor2 mation required under subparagraph (A)

3 on a timely basis, the amount of the penalty

4 shall be $10,000 for each day in which such

5 information has not been provided and such

6 amount shall be paid to the Treasury. If

7 such information is not reported within 90

8 days of the deadline imposed, the agreement

9 shall be suspended for services furnished

10 after the end of such 90-day period and

11 until the date such information is reported

12 (but in no case shall such suspension be for

13 a period of less than 30 days).

14 ‘‘(ii) FALSE INFORMATION.—Any man15 ufacturer which is subject to the MediGrant

16 master rebate agreement, or a wholesaler or

17 direct seller, that knowingly provides false

18 information under subparagraph (A) or (B)

19 is subject to a civil money penalty in an

20 amount not to exceed $100,000 for each

21 item of false information. Any such civil

22 money penalty shall be in addition to other

23 penalties as may be prescribed by law. The

24 provisions of section 1128A (other than sub25 sections (a) and (b)) shall apply to a civil
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1 money penalty under this subparagraph in

2 the same manner as such provisions apply

3 to a penalty or proceeding under section

4 1128A(a).

5 ‘‘(D) CONFIDENTIALITY OF INFORMATION.—

6 Notwithstanding any other provision of law, in7 formation disclosed by manufacturers or whole8 salers under this paragraph or under an agree9 ment with the Secretary of Veterans Affairs de10 scribed in section 2123(f) is confidential and

11 shall not be disclosed by the Secretary or the Sec12 retary of Veterans Affairs or a State agency (or

13 contractor therewith) in a form which discloses

14 the identity of a specific manufacturer or whole15 saler or the prices charged for drugs by such

16 manufacturer or wholesaler, except—

17 ‘‘(i) as the Secretary determines to be

18 necessary to carry out this section,

19 ‘‘(ii) to permit the Comptroller General

20 to review the information provided, and

21 ‘‘(iii) to permit the Director of the

22 Congressional Budget Office to review the

23 information provided.

24 ‘‘(4) LENGTH OF AGREEMENT.—
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1 ‘‘(A) IN GENERAL.—The MediGrant master

2 rebate agreement under this section shall be effec3 tive for an initial period of not less than 1 year

4 and shall be automatically renewed for a period

5 of not less than one year unless terminated under

6 subparagraph (B).

7 ‘‘(B) TERMINATION.—

8 ‘‘(i) BY THE SECRETARY.—The Sec9 retary may provide for termination of the

10 MediGrant master rebate agreement with

11 respect to a manufacturer for violation of

12 the requirements of the agreement or other

13 good cause shown. Such termination shall

14 not be effective earlier than 60 days after

15 the date of notice of such termination. The

16 Secretary shall provide, upon request, a

17 manufacturer with a hearing concerning

18 such a termination, but such hearing shall

19 not delay the effective date of the termi20 nation. Failure of a State to provide any

21 advance notice of such a termination as re22 quired by regulation shall not affect the

23 State’s right to terminate coverage of the

24 drugs affected by such termination as of the

25 effective date of such termination.
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1 ‘‘(ii) BY A MANUFACTURER.—A manu2 facturer may terminate its participation in

3 the MediGrant master rebate agreement

4 under this section for any reason. Any such

5 termination shall not be effective until the

6 calendar quarter beginning at least 60 days

7 after the date the manufacturer provides no8 tice to the Secretary.

9 ‘‘(iii) EFFECTIVENESS OF TERMI10 NATION.—Any termination under this sub11 paragraph shall not affect rebates due under

12 the agreement before the effective date of its

13 termination.

14 ‘‘(iv) NOTICE TO STATES.—In the case

15 of a termination under this subparagraph,

16 the Secretary shall provide notice of such

17 termination to the States within not less

18 than 30 days before the effective date of such

19 termination.

20 ‘‘(v) APPLICATION TO TERMINATIONS

21 OF OTHER AGREEMENTS.—The provisions of

22 this subparagraph shall apply to the termi23 nations of master agreements described in

24 section 8126(a) of title 38, United States

25 Code.
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1 ‘‘(C) DELAY BEFORE REENTRY.—In the case

2 of any rebate agreement with a manufacturer

3 under this section which is terminated, another

4 such agreement with the manufacturer (or a suc5 cessor manufacturer) may not be entered into

6 until a period of 1 calendar quarter has elapsed

7 since the date of the termination, unless the Sec8 retary finds good cause for an earlier reinstate9 ment of such an agreement.

10 ‘‘(5) SETTLEMENT OF DISPUTES.—

11 ‘‘(A) SECRETARY.—The Secretary shall

12 have the authority to resolve, settle, and com13 promise disputes regarding the amounts of re14 bates owed under this section and section 1927.

15 ‘‘(B) STATE.—Each State, with respect to

16 covered outpatient drugs paid for under the

17 State’s MediGrant plan, shall have authority,

18 independent of the Secretary’ authority under

19 subparagraph (A), to resolve, settle, and com20 promise disputes regarding the amounts of re21 bates owed under this section. Any such action

22 shall be deemed to comply with the requirements

23 of this title, and such covered outpatient drugs

24 shall be eligible for payment under the

25 MediGrant plan under this title.
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1 ‘‘(C) AMOUNT OF REBATE.—The Secretary

2 shall limit the amount of the rebate payable in

3 any case in which the Secretary determines that,

4 because of unusual circumstances or questionable

5 data, the provisions of subsection (c) result in a

6 rebate amount that is inequitable or otherwise

7 inconsistent with the purposes of this section.

8 ‘‘(c) DETERMINATION OF AMOUNT OF REBATE.—

9 ‘‘(1) BASIC REBATE FOR SINGLE SOURCE DRUGS

10 AND INNOVATOR MULTIPLE SOURCE DRUGS.—

11 ‘‘(A) IN GENERAL.—Except as provided in

12 paragraph (2), the amount of the rebate specified

13 in this subsection with respect to a State partici14 pating in the MediGrant master rebate agree15 ment for a rebate period (as defined in sub16 section (i)(7)) with respect to each dosage form

17 and strength of a single source drug or an inno18 vator multiple source drug shall be equal to the

19 product of—

20 ‘‘(i) the total number of units of each

21 dosage form and strength paid for under the

22 State MediGrant plan in the rebate period

23 (as reported by the State); and

24 ‘‘(ii) the greater of—
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1 ‘‘(I) the difference between the av2 erage manufacturer price and the best

3 price (as defined in subparagraph (C))

4 for the dosage form and strength of the

5 drug, or

6 ‘‘(II) the minimum rebate per7 centage (specified in subparagraph

8 (B)) of such average manufacturer

9 price,

10 for the rebate period.

11 ‘‘(B) MINIMUM REBATE PERCENTAGE.—For

12 purposes of subparagraph (A)(ii)(II), the ‘mini13 mum rebate percentage’ is 15 percent.

14 ‘‘(C) BEST PRICE DEFINED.—For purposes

15 of this section—

16 ‘‘(i) IN GENERAL.—The term ‘best

17 price’ means, with respect to a single source

18 drug or innovator multiple source drug of a

19 manufacturer, the lowest price available

20 from the manufacturer during the rebate pe21 riod to any wholesaler, retailer, provider,

22 health maintenance organization, nonprofit

23 entity, or governmental entity within the

24 United States, excluding—
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1 ‘‘(I) any prices charged on or

2 after October 1, 1992, to the Indian

3 Health Service, the Department of Vet4 erans Affairs, a State home receiving

5 funds under section 1741 of title 38,

6 United States Code, the Department of

7 Defense, the Public Health Service, or

8 a covered entity described in section

9 340B(a)(4) of the Public Health Serv10 ice Act,

11 ‘‘(II) any prices charged under

12 the Federal Supply Schedule of the

13 General Services Administration,

14 ‘‘(III) any prices used under a

15 State pharmaceutical assistance pro16 gram, and

17 ‘‘(IV) any depot prices and single

18 award contract prices, as defined by

19 the Secretary, of any agency of the

20 Federal Government.

21 ‘‘(ii) SPECIAL RULES.—The term ‘best

22 price’—

23 ‘‘(I) shall be inclusive of cash dis24 counts, free goods that are contingent

25 on any purchase requirement, volume
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1 discounts, and rebates (other than re2 bates under this section),

3 ‘‘(II) shall be determined without

4 regard to special packaging, labeling,

5 or identifiers on the dosage form or

6 product or package,

7 ‘‘(III) shall not take into account

8 prices that are merely nominal in

9 amount, and

10 ‘‘(IV) shall exclude rebates paid

11 under this section or any other rebates

12 paid to a State participating in the

13 MediGrant master rebate agreement.

14 ‘‘(2) ADDITIONAL REBATE FOR SINGLE SOURCE

15 AND INNOVATOR MULTIPLE SOURCE DRUGS.—

16 ‘‘(A) IN GENERAL.—The amount of the re17 bate specified in this subsection with respect to

18 a State participating in the MediGrant master

19 rebate agreement for a rebate period, with re20 spect to each dosage form and strength of a sin21 gle source drug or an innovator multiple source

22 drug, shall be increased by an amount equal to

23 the product of—

24 ‘‘(i) the total number of units of such

25 dosage form and strength dispensed after
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1 December 31, 1990, for which payment was

2 made under the MediGrant plan for the re3 bate period; and

4 ‘‘(ii) the amount (if any) by which—

5 ‘‘(I) the average manufacturer

6 price for the dosage form and strength

7 of the drug for the period, exceeds

8 ‘‘(II) the average manufacturer

9 price for such dosage form and strength

10 for the calendar quarter beginning

11 July 1, 1990 (without regard to wheth12 er or not the drug has been sold or

13 transferred to an entity, including a

14 division or subsidiary of the manufac15 turer, after the first day of such quar16 ter), increased by the percentage by

17 which the Consumer Price Index for

18 All Urban Consumers (United States

19 city average) for the month before the

20 month in which the rebate period be21 gins exceeds such index for September

22 1990.

23 ‘‘(B) TREATMENT OF SUBSEQUENTLY AP24 PROVED DRUGS.—In the case of a covered out25 patient drug approved by the Food and Drug
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1 Administration after October 1, 1990, clause

2 (ii)(II) of subparagraph (A) shall be applied by

3 substituting ‘the first full calendar quarter after

4 the day on which the drug was first marketed’

5 for ‘the calendar quarter beginning July 1, 1990’

6 and ‘the month prior to the first month of the

7 first full calendar quarter after the day on which

8 the drug was first marketed’ for ‘September

9 1990’.

10 ‘‘(3) REBATE FOR OTHER DRUGS.—

11 ‘‘(A) IN GENERAL.—The amount of the re12 bate paid to a State participating in the

13 MediGrant master rebate agreement for a rebate

14 period with respect to each dosage form and

15 strength of covered outpatient drugs (other than

16 single source drugs and innovator multiple

17 source drugs) shall be equal to the product of—

18 ‘‘(i) the applicable percentage (as de19 scribed in subparagraph (B)) of the average

20 manufacturer price for the dosage form and

21 strength for the rebate period, and

22 ‘‘(ii) the total number of units of such

23 dosage form and strength dispensed after

24 December 31, 1990, for which payment was
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1 made under the MediGrant plan for the re2 bate period.

3 ‘‘(B) APPLICABLE PERCENTAGE DEFINED.—

4 For purposes of subparagraph (A)(i), the ‘appli5 cable percentage’ is 11 percent.

6 ‘‘(4) LIMITATION ON AMOUNT OF REBATE TO

7 AMOUNTS PAID FOR CERTAIN DRUGS.—

8 ‘‘(A) IN GENERAL.—Upon request of the

9 manufacturer of a covered outpatient drug, the

10 Secretary shall limit, in accordance with sub11 paragraph (B), the amount of the rebate under

12 this subsection with respect to a dosage form and

13 strength of such drug if the majority of the esti14 mated number of units of such dosage form and

15 strength that are subject to rebates under this

16 section were dispensed to inpatients of nursing

17 facilities.

18 ‘‘(B) AMOUNT OF REBATE.—In the case of

19 a covered outpatient drug subject to subpara20 graph (A), the amount of the rebate specified in

21 this subsection for a rebate period, with respect

22 to each dosage form and strength of such drug,

23 shall not exceed the amount paid under the

24 MediGrant plan with respect to such dosage form

25 and strength of the drug in the rebate period
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1 (without consideration of any dispensing fees

2 paid).

3 ‘‘(5) SUPPLEMENTAL REBATES PROHIBITED.—

4 No rebates shall be required to be paid by manufac5 turers with respect to covered outpatient drugs fur6 nished to individuals in any State that provides for

7 the collection of such rebates in excess of the rebate

8 amount payable under this section.

9 ‘‘(d) LIMITATIONS ON COVERAGE OF DRUGS BY

10 STATES PARTICIPATING IN MASTER AGREEMENT.—

11 ‘‘(1) PERMISSIBLE RESTRICTIONS.—A State par12 ticipating in the MediGrant master rebate agreement

13 under this section may—

14 ‘‘(A) subject to prior authorization under its

15 MediGrant plan any covered outpatient drug so

16 long as any such prior authorization program

17 complies with the requirements of paragraph (5);

18 and

19 ‘‘(B) exclude or otherwise restrict coverage

20 under its plan of a covered outpatient drug if—

21 ‘‘(i) the drug is contained in the list

22 referred to in paragraph (2);

23 ‘‘(ii) the drug is subject to such restric24 tions pursuant to the MediGrant master re-
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1 bate agreement or any agreement described

2 in subsection (a)(4); or

3 ‘‘(iii) the State has excluded coverage

4 of the drug from its formulary established

5 in accordance with paragraph (4).

6 ‘‘(2) LIST OF DRUGS SUBJECT TO RESTRIC7 TION.—The following drugs or classes of drugs, or

8 their medical uses, may be excluded from coverage or

9 otherwise restricted by a State participating in the

10 MediGrant master rebate agreement:

11 ‘‘(A) Agents when used for anorexia, weight

12 loss, or weight gain.

13 ‘‘(B) Agents when used to promote fertility.

14 ‘‘(C) Agents when used for cosmetic pur15 poses or hair growth.

16 ‘‘(D) Agents when used for the symptomatic

17 relief of cough and colds.

18 ‘‘(E) Agents when used to promote smoking

19 cessation.

20 ‘‘(F) Prescription vitamins and mineral

21 products, except prenatal vitamins and fluoride

22 preparations.

23 ‘‘(G) Nonprescription drugs.

24 ‘‘(H) Covered outpatient drugs which the

25 manufacturer seeks to require as a condition of
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1 sale that associated tests or monitoring services

2 be purchased exclusively from the manufacturer

3 or its designee.

4 ‘‘(I) Barbiturates.

5 ‘‘(J) Benzodiazepines.

6 ‘‘(3) ADDITIONS TO DRUG LISTINGS.—The Sec7 retary shall, by regulation, periodically update the

8 list of drugs or classes of drugs described in para9 graph (2), or their medical uses, which the Secretary

10 has determined to be subject to clinical abuse or inap11 propriate use.

12 ‘‘(4) REQUIREMENTS FOR FORMULARIES.—A

13 State participating in the MediGrant master rebate

14 agreement may establish a formulary if the formulary

15 meets the following requirements:

16 ‘‘(A) The formulary is developed by a com17 mittee consisting of physicians, pharmacists, and

18 other appropriate individuals appointed by the

19 Governor of the State.

20 ‘‘(B) Except as provided in subparagraph

21 (C), the formulary includes the covered out22 patient drugs of any manufacturer which has en23 tered into and complies with the agreement

24 under subsection (a) (other than any drug ex-
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1 cluded from coverage or otherwise restricted

2 under paragraph (2)).

3 ‘‘(C) A covered outpatient drug may be ex4 cluded with respect to the treatment of a specific

5 disease or condition for an identified population

6 (if any) only if, based on the drug’s labeling (or,

7 in the case of a drug the prescribed use of which

8 is not approved under the Federal Food, Drug,

9 and Cosmetic Act but is a medically accepted in10 dication, based on information from the appro11 priate compendia described in subsection (i)(5)),

12 the excluded drug does not have a significant,

13 clinically meaningful therapeutic advantage in

14 terms of safety, effectiveness, or clinical outcome

15 of such treatment for such population over other

16 drugs included in the formulary and there is a

17 written explanation (available to the public) of

18 the basis for the exclusion.

19 ‘‘(D) The State MediGrant plan permits

20 coverage of a drug excluded from the formulary

21 (other than any drug excluded from coverage or

22 otherwise restricted under paragraph (2)) pursu23 ant to a prior authorization program that is

24 consistent with paragraph (5).
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1 ‘‘(E) The formulary meets such other re2 quirements as the Secretary may impose in

3 order to achieve program savings consistent with

4 protecting the health of program beneficiaries.

5 A prior authorization program established by a State

6 under paragraph (5) is not a formulary subject to the

7 requirements of this paragraph.

8 ‘‘(5) REQUIREMENTS OF PRIOR AUTHORIZATION

9 PROGRAMS.—The MediGrant plan of a State partici10 pating in the MediGrant master rebate agreement

11 may require, as a condition of coverage or payment

12 for a covered outpatient drug for which Federal fi13 nancial participation is available in accordance with

14 this section, the approval of the drug before its dis15 pensing for any medically accepted indication (as de16 fined in subsection (i)(5)) only if the system provid17 ing for such approval—

18 ‘‘(A) provides response by telephone or other

19 telecommunication device within 24 hours of a

20 request for prior authorization, and

21 ‘‘(B) except with respect to the drugs on the

22 list referred to in paragraph (2), provides for the

23 dispensing of at least a 72-hour supply of a cov24 ered outpatient prescription drug in an emer25 gency situation (as defined by the Secretary).
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1 ‘‘(6) OTHER PERMISSIBLE RESTRICTIONS.—A

2 State participating in the MediGrant master rebate

3 agreement may impose limitations, with respect to all

4 such drugs in a therapeutic class, on the minimum or

5 maximum quantities per prescription or on the num6 ber of refills, if such limitations are necessary to dis7 courage waste, and may address instances of fraud or

8 abuse by individuals in any manner authorized

9 under this Act.

10 ‘‘(e) DRUG USE REVIEW.—

11 ‘‘(1) IN GENERAL.—A State participating in the

12 MediGrant master rebate agreement may provide for

13 a drug use review program to educate physicians and

14 pharmacists to identify and reduce the frequency of

15 patterns of fraud, abuse, gross overuse, or inappropri16 ate or medically unnecessary care, among physicians,

17 pharmacists, and patients, or associated with specific

18 drugs or groups of drugs, as well as potential and ac19 tual severe adverse reactions to drugs.

20 ‘‘(2) APPLICATION OF STATE STANDARDS.—Ex21 cept as provided in subparagraph (B), a State with

22 a drug use review program under this subsection shall

23 establish and operate the program under such stand24 ards as it may establish.
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1 ‘‘(f) ELECTRONIC CLAIMS MANAGEMENT.—In accord2 ance with chapter 35 of title 44, United States Code (relat3 ing to coordination of Federal information policy), the Sec4 retary shall encourage each State to establish, as its prin5 cipal means of processing claims for covered outpatient

6 drugs under its MediGrant plan, a point-of-sale electronic

7 claims management system, for the purpose of performing

8 on-line, real time eligibility verifications, claims data cap9 ture, adjudication of claims, and assisting pharmacists

10 (and other authorized persons) in applying for and receiv11 ing payment.

12 ‘‘(g) ANNUAL REPORT.—

13 ‘‘(1) IN GENERAL.—Not later than May 1 of each

14 year, the Secretary shall transmit to the Committee

15 on Finance of the Senate, and the Committee on

16 Commerce of the House of Representatives, a report

17 on the operation of this section in the preceding fiscal

18 year.

19 ‘‘(2) DETAILS.—Each report shall include infor20 mation on—

21 ‘‘(A) ingredient costs paid under this title

22 for single source drugs, multiple source drugs,

23 and nonprescription covered outpatient drugs,

24 ‘‘(B) the total value of rebates received and

25 number of manufacturers providing such rebates,
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1 ‘‘(C) the effect of inflation on the value of

2 rebates required under this section,

3 ‘‘(D) trends in prices paid under this title

4 for covered outpatient drugs, and

5 ‘‘(E) Federal and State administrative costs

6 associated with compliance with the provisions

7 of this title.

8 ‘‘(h) EXEMPTION FOR CAPITATED HEALTH CARE OR9 GANIZATIONS, HOSPITALS, AND NURSING FACILITIES.—

10 ‘‘(1) IN GENERAL.—Except as provided in para11 graph (2), the requirements of the MediGrant master

12 rebate agreement under this section shall not apply

13 with respect to covered outpatient drugs dispensed by

14 or through—

15 ‘‘(A) a capitated health care organization

16 (as defined in section 2114(c)(1)), or

17 ‘‘(B) a hospital or nursing facility that dis18 penses covered outpatient drugs using a drug for19 mulary system and bills the State no more than

20 the hospital’s or facility’s purchasing costs for

21 covered outpatient drugs.

22 ‘‘(2) CONSTRUCTION IN DETERMINING BEST

23 PRICE.—Nothing in paragraph (1) shall be construed

24 as excluding amounts paid by the entities described

25 in such paragraph for covered outpatient drugs from
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1 the determination of the best price (as defined in sub2 section (c)(1)(C)) for such drugs.

3 ‘‘(i) DEFINITIONS.—In the section—

4 ‘‘(1) AVERAGE MANUFACTURER PRICE.—The

5 term ‘average manufacturer price’ means, with re6 spect to a covered outpatient drug of a manufacturer

7 for a rebate period, the average price paid to the

8 manufacturer for the drug in the United States by

9 wholesalers for drugs distributed to the retail phar10 macy class of trade, after deducting customary

11 prompt pay discounts.

12 ‘‘(2) COVERED OUTPATIENT DRUG.—Subject to

13 the exceptions in paragraph (3), the term ‘covered

14 outpatient drug’ means—

15 ‘‘(A) of those drugs which are treated as

16 prescribed drugs for purposes of section

17 2171(a)(8), a drug which may be dispensed only

18 upon prescription (except as provided in sub19 paragraph (D)), and—

20 ‘‘(i) which is approved as a prescrip21 tion drug under section 505 or 507 of the

22 Federal Food, Drug, and Cosmetic Act;

23 ‘‘(ii)(I) which was commercially used

24 or sold in the United States before the date

25 of the enactment of the Drug Amendments
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1 of 1962 or which is identical, similar, or re2 lated (within the meaning of section

3 310.6(b)(1) of title 21 of the Code of Federal

4 Regulations) to such a drug, and (II) which

5 has not been the subject of a final deter6 mination by the Secretary that it is a ‘new

7 drug’ (within the meaning of section 201(p)

8 of the Federal Food, Drug, and Cosmetic

9 Act) or an action brought by the Secretary

10 under section 301, 302(a), or 304(a) of such

11 Act to enforce section 502(f) or 505(a) of

12 such Act; or

13 ‘‘(iii)(I) which is described in section

14 107(c)(3) of the Drug Amendments of 1962

15 and for which the Secretary has determined

16 there is a compelling justification for its

17 medical need, or is identical, similar, or re18 lated (within the meaning of section

19 310.6(b)(1) of title 21 of the Code of Federal

20 Regulations) to such a drug, and (II) for

21 which the Secretary has not issued a notice

22 of an opportunity for a hearing under sec23 tion 505(e) of the Federal Food, Drug, and

24 Cosmetic Act on a proposed order of the

25 Secretary to withdraw approval of an ap-
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1 plication for such drug under such section

2 because the Secretary has determined that

3 the drug is less than effective for some or all

4 conditions of use prescribed, recommended,

5 or suggested in its labeling;

6 ‘‘(B) a biological product, other than a vac7 cine which—

8 ‘‘(i) may only be dispensed upon pre9 scription,

10 ‘‘(ii) is licensed under section 351 of

11 the Public Health Service Act, and

12 ‘‘(iii) is produced at an establishment

13 licensed under such section to produce such

14 product;

15 ‘‘(C) insulin certified under section 506 of

16 the Federal Food, Drug, and Cosmetic Act; and

17 ‘‘(D) a drug which may be sold without a

18 prescription (commonly referred to as an ‘over19 the-counter drug’), if the drug is prescribed by a

20 physician (or other person authorized to pre21 scribe under State law).

22 ‘‘(3) LIMITING DEFINITION.—The term ‘covered

23 outpatient drug’ does not include any drug, biological

24 product, or insulin provided as part of, or as incident

25 to and in the same setting as, any of the following
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1 (and for which payment may be made under a

2 MediGrant plan as part of payment for the following

3 and not as direct reimbursement for the drug):

4 ‘‘(A) Inpatient hospital services.

5 ‘‘(B) Hospice services.

6 ‘‘(C) Dental services, except that drugs for

7 which the MediGrant plan authorizes direct re8 imbursement to the dispensing dentist are cov9 ered outpatient drugs.

10 ‘‘(D) Physicians’ services.

11 ‘‘(E) Outpatient hospital services.

12 ‘‘(F) Nursing facility services and services

13 provided by an intermediate care facility for the

14 mentally retarded.

15 ‘‘(G) Other laboratory and x-ray services.

16 ‘‘(H) Renal dialysis services.

17 Such term also does not include any such drug or

18 product for which a National Drug Code number is

19 not required by the Food and Drug Administration or

20 a drug or biological used for a medical indication

21 which is not a medically accepted indication. Any

22 drug, biological product, or insulin excluded from the

23 definition of such term as a result of this paragraph

24 shall be treated as a covered outpatient drug for pur25 poses of determining the best price (as defined in sub-
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1 section (c)(1)(C)) for such drug, biological product, or

2 insulin.

3 ‘‘(4) MANUFACTURER.—The term ‘manufacturer’

4 means, with respect to a covered outpatient drug, the

5 entity holding legal title to or possession of the Na6 tional Drug Code number for such drug.

7 ‘‘(5) MEDICALLY ACCEPTED INDICATION.—The

8 term ‘medically accepted indication’ means any use

9 for a covered outpatient drug which is approved

10 under the Federal Food, Drug, and Cosmetic Act, or

11 the use of which is supported by one or more citations

12 included or approved for inclusion in any of the fol13 lowing compendia:

14 ‘‘(A) American Hospital Formulary Service

15 Drug Information.

16 ‘‘(B) United States Pharmacopeia-Drug In17 formation.

18 ‘‘(C) American Medical Association Drug

19 Evaluations.

20 ‘‘(D) The DRUGDEX Information System.

21 ‘‘(E) The peer-reviewed medical literature.

22 ‘‘(6) MULTIPLE SOURCE DRUG; INNOVATOR MUL23 TIPLE SOURCE DRUG; NONINNOVATOR MULTIPLE

24 SOURCE DRUG; SINGLE SOURCE DRUG.—

25 ‘‘(A) DEFINED.—
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1 ‘‘(i) MULTIPLE SOURCE DRUG.—The

2 term ‘multiple source drug’ means, with re3 spect to a rebate period, a covered out4 patient drug (not including any drug de5 scribed in paragraph (2)(D)) for which

6 there are 2 or more drug products which—

7 ‘‘(I) are rated as therapeutically

8 equivalent (under the Food and Drug

9 Administration’s most recent publica10 tion of ‘Approved Drug Products with

11 Therapeutic Equivalence Evaluations’),

12 ‘‘(II) except as provided in sub13 paragraph (B), are pharmaceutically

14 equivalent and bioequivalent, as de15 fined in subparagraph (C) and as de16 termined by the Food and Drug Ad17 ministration, and

18 ‘‘(III) are sold or marketed in the

19 State during the period.

20 ‘‘(ii) INNOVATOR MULTIPLE SOURCE

21 DRUG.—The term ‘innovator multiple

22 source drug’ means a multiple source drug

23 that was originally marketed under an

24 original new drug application or product
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1 licensing application approved by the Food

2 and Drug Administration.

3 ‘‘(iii) NONINNOVATOR MULTIPLE

4 SOURCE DRUG.—The term ‘noninnovator

5 multiple source drug’ means a multiple

6 source drug that is not an innovator mul7 tiple source drug.

8 ‘‘(iv) SINGLE SOURCE DRUG.—The

9 term ‘single source drug’ means a covered

10 outpatient drug which is produced or dis11 tributed under an original new drug appli12 cation approved by the Food and Drug Ad13 ministration, including a drug product

14 marketed by any cross-licensed producers or

15 distributors operating under the new drug

16 application or product licensing applica17 tion.

18 ‘‘(B) EXCEPTION.—Subparagraph (A)(i)(II)

19 shall not apply if the Food and Drug Adminis20 tration changes by regulation the requirement

21 that, for purposes of the publication described in

22 subparagraph (A)(i)(I), in order for drug prod23 ucts to be rated as therapeutically equivalent,

24 they must be pharmaceutically equivalent and

25 bioequivalent, as defined in subparagraph (C).
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1 ‘‘(C) DEFINITIONS.—For purposes of this

2 paragraph—

3 ‘‘(i) drug products are pharmaceuti4 cally equivalent if the products contain

5 identical amounts of the same active drug

6 ingredient in the same dosage form and

7 meet compendial or other applicable stand8 ards of strength, quality, purity, and iden9 tity,

10 ‘‘(ii) drugs are bioequivalent if they do

11 not present a known or potential

12 bioequivalence problem, or, if they do

13 present such a problem, they are shown to

14 meet an appropriate standard of

15 bioequivalence, and

16 ‘‘(iii) a drug product is considered to

17 be sold or marketed in a State if it appears

18 in a published national listing of average

19 wholesale prices selected by the Secretary, if

20 the listed product is generally available to

21 the public through retail pharmacies in that

22 State.

23 ‘‘(7) REBATE PERIOD.—The term ‘rebate period’

24 means, with respect to an agreement under subsection

25 (a), a calendar quarter or other period specified by
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1 the Secretary with respect to the payment of rebates

2 under such agreement.’’.

3 SEC. 7002. TERMINATION OF CURRENT PROGRAM AND

4 TRANSITION.

5 (a) TERMINATION OF CURRENT PROGRAM; LIMITATION

6 ON MEDICAID PAYMENTS IN FISCAL YEAR 1996.—

7 (1) REPEAL OF TITLE.—Title XIX of the Social

8 Security Act is repealed effective October 1, 1996, ex9 cept that the repeal of section 1928 of such Act is ef10 fective on the date of the enactment of this Act and

11 the succeeding two sections of such title shall be effec12 tive during fiscal year 1996 in the same manner and

13 to the same extent as such sections were effective dur14 ing fiscal year 1995.

15 (2) LIMITATION ON OBLIGATION AUTHORITY.—

16 Notwithstanding any other provision of such title—

17 (A) POST-ENACTMENT, PRE-MEDIGRANT.—

18 Subject to subparagraph (B), the Secretary of

19 Health and Human Services (in this section re20 ferred to as the ‘‘Secretary’’) may enter into obli21 gations under such title with any State (as de22 fined for purposes of such title) for expenses in23 curred after the date of the enactment of this Act

24 and during fiscal year 1996, but not in excess of

25 the obligation allotment for that State for fiscal
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1 year 1996 under section 2121(a)(4) of the Social

2 Security Act (as added by section 7001).

3 (B) NONE AFTER MEDIGRANT.—The Sec4 retary is not authorized to enter into any obliga5 tion with any State under title XIX of such Act

6 for expenses incurred on or after the earlier of—

7 (i) October 1, 1996, or

8 (ii) the first day of the first quarter on

9 which the State MediGrant plan under title

10 XXI of such Act (as added by section 7001)

11 is first effective.

12 (C) AGREEMENT.—A State’s submission of

13 claims for payment under section 1903 of such

14 Act after the date of the enactment of this Act

15 with respect to which the limitation described in

16 subparagraph (A) applies is deemed to constitute

17 the State’s acceptance of the obligation limita18 tion under such subparagraph (including the for19 mula for computing the amount of such obliga20 tion limitation).

21 (D) EFFECT ON MEDICAL ASSISTANCE.—Ef22 fective on the date of the enactment of this sec23 tion—

24 (i) except as provided in this para25 graph, the Federal Government has no obli-
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1 gation to provide payment with respect to

2 items and services provided under title XIX

3 of the Social Security Act, and

4 (ii) such title and title XXI of such Act

5 shall not be construed as providing for an

6 entitlement, under Federal law in relation

7 to the Federal Government, in an individ8 ual or person (including any provider) at

9 the time of provision or receipt of services.

10 (3) REQUIREMENT FOR TIMELY SUBMITTAL OF

11 CLAIMS.—No payment shall be made to a State under

12 title XIX of such Act with respect to an obligation in13 curred before the date of the enactment of this Act,

14 unless the State has submitted to the Secretary, by

15 not later than June 30, 1996, a claim for Federal fi16 nancial participation for expenses paid by the State

17 with respect to such obligations. Nothing in para18 graph (2) shall be construed as affecting the obliga19 tion of the Federal Government to pay claims de20 scribed in the previous sentence.

21 (b) MEDICAID-TO-MEDIGRANT TRANSITION PROVI22 SIONS.—

23 (1) Notwithstanding any provision of law, in the

24 case where payment has been made under section

25 1903(a) of the Social Security Act to a State before
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1 October 1, 1995, and for which a disallowance has not

2 been taken as of such date (or, if so taken, has not

3 been completed, including judicial review, by such

4 date), the Secretary of Health and Human Services

5 shall discontinue the disallowance proceeding and, if

6 such disallowance has been taken as of the date of the

7 enactment of this Act, any payment reductions ef8 fected shall be rescinded and the payments returned

9 to the State.

10 (2) The repeal under subsection (a)(1) of section

11 1928 of the Social Security Act shall not affect the

12 distribution of vaccines purchased and delivered to

13 the States before the date of the enactment of this Act.

14 No vaccine may be purchased after such date by the

15 Federal Government or any State under any contract

16 under section 1928(d) of the Social Security Act.

17 (3) No judicial or administrative decision ren18 dered regarding requirements imposed under title

19 XIX of the Social Security Act with respect to a State

20 shall have any application to the MediGrant plan of

21 the State title under XXI of such Act. A State may,

22 pursuant to the previous sentence, seek the abrogation

23 or modification of any such decision after the date of

24 termination of the State plan under title XIX of such

25 Act.
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1 (4) No cause of action under title XIX of the So2 cial Security Act which seeks to require a State to es3 tablish or maintain minimum payment rates under

4 such title or claim which seeks reimbursement for any

5 period before the date of the enactment of this Act

6 based on the alleged failure of the State to comply

7 with such title and which has not become final as of

8 such date shall be brought or continued.

9 (5) Section 6408(a)(3) of the Omnibus Budget

10 Reconciliation Act of 1989 (as amended by section

11 13642 of the Omnibus Budget Reconciliation Act of

12 1993) and section 2 of Public Law 102–276 (as

13 amended by section 13644 of the Omnibus Budget

14 Reconciliation Act of 1993) are each amended by

15 striking ‘‘December 31, 1995’’ and inserting ‘‘October

16 1, 1996’’.

17 (c) ANTI-FRAUD PROVISIONS.—Section 1128(h)(1) of

18 the Social Security Act (42 U.S.C. 1320a–7(h)(1)) is

19 amended by inserting ‘‘or a MediGrant plan under title

20 XXI’’ after ‘‘title XIX’’.

21 (d) TECHNICAL AND CONFORMING AMENDMENTS.—

22 (1) SECRETARIAL SUBMISSION OF LEGISLATIVE

23 PROPOSAL.—Not later than 90 days after the date of

24 the enactment of this Act, the Secretary of Health and

25 Human Services, in consultation, as appropriate,
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1 with heads of other Federal agencies and the States

2 (as defined in section 1101(a)(8) of the Social Secu3 rity Act for purposes of title XIX of such Act), shall

4 submit to the appropriate committees of Congress a

5 legislative proposal providing for such technical and

6 conforming amendments in the law as are required by

7 the provisions of, and amendments made by, this title.

8 (2) TRANSITIONAL RULE.—Any reference in any

9 provision of law to title XIX of the Social Security

10 Act or any provision thereof shall be deemed to be a

11 reference to such title or provision as in effect on the

12 day before the date of the enactment of this Act.

13 SEC. 7003. MEDICARE/MEDIGRANT INTEGRATION DEM14 ONSTRATION PROJECT.

15 (a) DESCRIPTION OF PROJECTS.—

16 (1) IN GENERAL.—The Secretary of Health and

17 Human Services (in this section referred to as the

18 ‘‘Secretary’’) shall conduct demonstration projects

19 under this section to demonstrate the manner in

20 which States may use funds from the medicare pro21 gram under title XVIII of the Social Security Act

22 and the MediGrant program under title XXI of such

23 Act (in this section referred to as the ‘‘medicare and

24 MediGrant programs’’) for the purpose of providing a

25 more cost-effective full continuum of care for deliver-
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1 ing services to meet the needs of chronically-ill elderly

2 and disabled beneficiaries who are eligible for items

3 and services under such programs, through integrated

4 systems of care, with an emphasis on case manage5 ment, prevention, and interventions designed to avoid

6 institutionalization whenever possible. The Secretary

7 shall use funds from the amounts appropriated for the

8 medicare and MediGrant programs to make the pay9 ments required under subsection (d)(1).

10 (2) OPTION TO PARTICIPATE.—A State may not

11 require an individual eligible to receive items and

12 services under the medicare and MediGrant programs

13 to participate in a demonstration project under this

14 section.

15 (b) ESTABLISHMENT.—The Secretary shall make pay16 ments in accordance with subsection (d) for the conduct of

17 demonstration projects that provide for integrated systems

18 of care in accordance with subsection (a). Not more than

19 10 demonstration projects shall be conducted under this sec20 tion.

21 (c) APPLICATIONS.—Each State, or a coalition of

22 States, desiring to conduct a demonstration project under

23 this section shall prepare and submit to the Secretary an

24 application at such time, in such manner, and containing

25 such information as the Secretary may require, including
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1 an explanation of a plan for evaluating the project. The

2 Secretary shall approve or deny an application not later

3 than 90 days after the receipt of such application.

4 (d) PAYMENTS.—

5 (1) IN GENERAL.—For each calendar quarter oc6 curring during a demonstration project conducted

7 under this section, the Secretary shall pay to each en8 tity designated under paragraph (3) an amount equal

9 to the Federal capitated payment rate determined

10 under paragraph (2).

11 (2) FEDERAL CAPITATED PAYMENT RATE.—The

12 Secretary shall determine the Federal capitated pay13 ment rate for purposes of this section based on the an14 ticipated Federal quarterly cost of providing care to

15 chronically-ill elderly and disabled beneficiaries who

16 are eligible for items and services under the medicare

17 and MediGrant programs and who have elected to

18 participate in a demonstration project under this sec19 tion.

20 (3) DESIGNATION OF ENTITY.—

21 (A) IN GENERAL.—Each State, or coalition

22 of States, shall designate entities to directly re23 ceive the payments described in paragraph (1).

24 (B) REQUIREMENT.—A State, or a coalition

25 of States, may not designate an entity under
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1 subparagraph (A) unless such entity meets the

2 quality, solvency, and coverage standards appli3 cable to providers of items and services under the

4 medicare and MediGrant programs.

5 (4) STATE PAYMENTS.—Each State conducting,

6 or in the case of a coalition of States, participating

7 in a demonstration project under this section shall

8 pay to the entities designated under paragraph (3) an

9 amount equal to the product of (A) 100 percent minus

10 the applicable Federal medical assistance percentage

11 (as defined in section 2122(e) of the Social Security

12 Act) for the State, and (B) the expenditures under the

13 project attributable to the MediGrant program for

14 items and services provided to chronically-ill elderly

15 and disabled beneficiaries who have elected to partici16 pate in the demonstration.

17 (5) BUDGET NEUTRALITY.—The aggregate

18 amount of Federal payments to entities designated by

19 a State, or coalition of States, under paragraph (3)

20 for a fiscal year shall not exceed the aggregate amount

21 of such payments that would otherwise have been

22 made under the medicare and MediGrant programs

23 for such fiscal year for items and services provided to

24 beneficiaries under such programs but for the election
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1 of such beneficiaries to participate in a demonstra2 tion project under this section.

3 (e) DURATION.—

4 (1) IN GENERAL.—The demonstration projects

5 conducted under this section shall be conducted for a

6 5-year period, subject to annual review and approval

7 by the Secretary.

8 (2) TERMINATION.—The Secretary may, with 90

9 days’ notice, terminate any demonstration project

10 conducted under this section that is not in substantial

11 compliance with the terms of the application ap12 proved by the Secretary under this section.

13 (f) OVERSIGHT.—The Secretary shall establish quality

14 standards for evaluating and monitoring the demonstration

15 projects conducted under this section. Such quality stand16 ards shall include reporting requirements which contain the

17 following:

18 (1) A description of the demonstration project.

19 (2) An analysis of beneficiary satisfaction under

20 such project.

21 (3) An analysis of the quality of the services de22 livered under the project.

23 (4) A description of the savings to the

24 MediGrant and medicare programs as a result of the

25 demonstration project.
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1 TITLE VIII—MEDICARE

2 SEC. 8000. SHORT TITLE OF TITLE; AMENDMENTS AND REF3 ERENCES TO OBRA; TABLE OF CONTENTS OF

4 TITLE.

5 (a) SHORT TITLE.—This title may be cited as the

6 ‘‘Medicare Preservation Act of 1995’’.

7 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Except

8 as otherwise specifically provided, whenever in this title an

9 amendment is expressed in terms of an amendment to or

10 repeal of a section or other provision, the reference shall

11 be considered to be made to that section or other provision

12 of the Social Security Act.

13 (c) REFERENCES TO OBRA.—In this title, the terms

14 ‘‘OBRA–1986’’, ‘‘OBRA–1987’’, ‘‘OBRA–1989’’, ‘‘OBRA–

15 1990’’, and ‘‘OBRA–1993’’ refer to the Omnibus Budget

16 Reconciliation Act of 1986 (Public Law 99–509), the Omni17 bus Budget Reconciliation Act of 1987 (Public Law 100–

18 203), the Omnibus Budget Reconciliation Act of 1989 (Pub19 lic Law 101–239), the Omnibus Budget Reconciliation Act

20 of 1990 (Public Law 101–508), and the Omnibus Budget

21 Reconciliation Act of 1993 (Public Law 103–66), respec22 tively.

23 (d) TABLE OF CONTENTS OF TITLE.—The table of con24 tents of this title is as follows:

Sec. 8000. Short title of title; amendments and references to OBRA; table of contents of title.
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Subtitle A—MedicarePlus Program

‘‘PART C—MEDICAREPLUS PROGRAM

CHAPTER 1—MEDICAREPLUS PROGRAM

Sec. 8001. Establishment of MedicarePlus program.

‘‘PART C—MEDICAREPLUS PROGRAM

‘‘Sec. 1851. Eligibility, election, and enrollment.

‘‘Sec. 1852. Benefits and beneficiary protections.

‘‘Sec. 1853. Organizational and financial requirements for MedicarePlus organizations; provider-sponsored organizations.

‘‘Sec. 1854. Payments to MedicarePlus organizations.

‘‘Sec. 1855. Premiums and rebates.

‘‘Sec. 1856. Establishment of standards; certification of organizations and

plans.

‘‘Sec. 1857. Contracts with MedicarePlus organizations.

‘‘Sec. 1858. Standards for MedicarePlus and medicare information transactions and data elements.

‘‘Sec. 1859. Definitions; miscellaneous provisions.

Sec. 8002. Duplication and coordination of medicare-related plans.

Sec. 8003. Transitional rules for current medicare HMO program.

CHAPTER 2—SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS

ACCOUNTS

Sec. 8011. MedicarePlus MSA.

Sec. 8012. Certain rebates excluded from gross income.

CHAPTER 3—MEDICARE PAYMENT REVIEW COMMISSION

Sec. 8021. Medicare Payment Review Commission.

CHAPTER 4—TREATMENT OF HOSPITALS WHICH PARTICIPATE IN PROVIDERSPONSORED ORGANIZATIONS

Sec. 8031. Treatment of hospitals which participate in provider-sponsored organizations.

Subtitle B—Health Care Fraud and Abuse Prevention

CHAPTER 1—FRAUD AND ABUSE CONTROL PROGRAM

Sec. 8101. Fraud and abuse control program.

Sec. 8102. Medicare integrity program.

Sec. 8103. Beneficiary incentive programs.

Sec. 8104. Application of certain health anti-fraud and abuse sanctions to fraud

and abuse against Federal health care programs.

Sec. 8105. Guidance regarding application of health care fraud and abuse sanctions.

CHAPTER 2—REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

Sec. 8111. Mandatory exclusion from participation in medicare and State health

care programs.
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Sec. 8112. Establishment of minimum period of exclusion for certain individuals

and entities subject to permissive exclusion from medicare and

State health care programs.

Sec. 8113. Permissive exclusion of individuals with ownership or control interest

in sanctioned entities.

Sec. 8114. Sanctions against practitioners and persons for failure to comply with

statutory obligations.

Sec. 8115. Intermediate sanctions for medicare health maintenance organizations.

Sec. 8116. Additional exception to anti-kickback penalties for discounting and

managed care arrangements.

Sec. 8117. Penalties for the fraudulent conversion of assets in order to obtain

State health care program benefits.

Sec. 8118. Effective date.

CHAPTER 3—ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

Sec. 8121. Establishment of the health care fraud and abuse data collection program.

CHAPTER 4—CIVIL MONETARY PENALTIES

Sec. 8131. Social Security Act civil monetary penalties.

Sec. 8132. Clarification of level of intent required for imposition of sanctions.

Sec. 8133. Penalty for false certification for home health services.

CHAPTER 5—AMENDMENTS TO CRIMINAL LAW

Sec. 8141. Health care fraud.

Sec. 8142. Forfeitures for Federal health care offenses.

Sec. 8143. Injunctive relief relating to Federal health care offenses.

Sec. 8144. False Statements.

Sec. 8145. Obstruction of criminal investigations of Federal health care offenses.

Sec. 8146. Theft or embezzlement.

Sec. 8147. Laundering of monetary instruments.

Sec. 8148. Authorized investigative demand procedures.

CHAPTER 6—STATE HEALTH CARE FRAUD CONTROL UNITS

Sec. 8151. State health care fraud control units.

Subtitle C—Regulatory Relief

Sec. 8201. Repeal of physician ownership referral prohibitions based on compensation arrangements.

Sec. 8202. Revision of designated health services subject to ownership referral prohibition.

Sec. 8203. Delay in implementation of 1993 ownership referral changes until promulgation of regulations.

Sec. 8204. Exceptions to ownership referral prohibitions.

Sec. 8205. Effective date.

Subtitle D—Modification in Payment Policies Regarding Graduate Medical

Education

Sec. 8301. Indirect medical education payments.

Sec. 8302. Direct graduate medical education.
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Subtitle E—Provisions Relating to Part A

CHAPTER 1—GENERAL PROVISIONS RELATING TO PART A

Sec. 8401. PPS hospital payment update.

Sec. 8402. PPS-exempt hospital payments.

Sec. 8403. Reductions in disproportionate share payment adjustments.

Sec. 8404. Capital payments for PPS hospitals.

Sec. 8405. Reduction in payments to hospitals for enrollees’ bad debts.

Sec. 8406. Increase in update for certain hospitals with a high proportion of

medicare patients.

CHAPTER 2—PAYMENTS TO SKILLED NURSING FACILITIES

SUBCHAPTER A—PROSPECTIVE PAYMENT SYSTEM

Sec. 8410. Prospective payment system for skilled nursing facilities.

SUBCHAPTER B—INTERIM PAYMENT SYSTEM

Sec. 8411. Payments for routine service costs.

Sec. 8412. Cost-effective management of covered non-routine services.

Sec. 8413. Payments for routine service costs.

Sec. 8414. Reductions in payment for capital-related costs.

Sec. 8415. Treatment of items and services paid for under part B.

Sec. 8416. Medical review process.

Sec. 8417. Report by medicare payment review commission.

Sec. 8418. Effective date.

CHAPTER 3—OTHER PROVISIONS RELATING TO PART A

Sec. 8421. Payments for hospice services.

Sec. 8422. Permanent extension of hemophilia pass-through.

Subtitle F—Provisions Relating to Part B

CHAPTER 1—PAYMENT REFORMS

Sec. 8501. Payments for physicians’ services.

Sec. 8502. Elimination of formula-driven overpayments for certain outpatient

hospital services.

Sec. 8503. Extension of reductions in payments for costs of hospital outpatient

services.

Sec. 8504. Reduction in updates to payment amounts for clinical diagnostic laboratory tests.

Sec. 8505. Payments for durable medical equipment.

Sec. 8506. Updates for ambulatory surgical services.

Sec. 8507. Payments for ambulance services.

Sec. 8508. Ensuring payment for physician and nurse for jointly furnished anesthesia services.

CHAPTER 2—PART B PREMIUM

Sec. 8511. Promoting solvency of part a trust fund through part b premium.

Sec. 8512. Income-related reduction in medicare subsidy.
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Subtitle G—Provisions Relating to Parts A and B

CHAPTER 1—PAYMENTS FOR HOME HEALTH SERVICES

Sec. 8601. Payment for home health services.

Sec. 8602. Maintaining savings resulting from temporary freeze on payment increases for home health services.

Sec. 8603. Extension of waiver of presumption of lack of knowledge of exclusion

from coverage for home health agencies.

Sec. 8604. Extension of period of home health agency certification.

PART 2—MEDICARE SECONDARY PAYER IMPROVEMENTS

Sec. 8611. Extension and expansion of existing requirements.

Sec. 8612. Improvements in recovery of payments.

CHAPTER 3—OTHER ITEMS AND SERVICES UNDER PARTS A AND B

Sec. 8621. Medicare coverage of certain anti-cancer drug treatments.

Sec. 8622. Administrative provisions.

CHAPTER 4—FAILSAFE

Sec. 8631. Failsafe budget mechanism.

Subtitle H—Rural Areas

Sec. 8701. Medicare-dependent, small, rural hospital payment extension.

Sec. 8702. Medicare rural hospital flexibility program.

Sec. 8703. Establishment of rural emergency access care hospitals.

Sec. 8704. Classification of rural referral centers.

Sec. 8705. Floor on area wage index.

Sec. 8706. Additional payments for physicians’ services furnished in shortage

areas.

Sec. 8707. Payments to physician assistants and nurse practitioners for services

furnished in outpatient or home settings.

Sec. 8708. Expanding access to nurse aide training in underserved areas.

1 Subtitle A—MedicarePlus Program

2 CHAPTER 1—MEDICAREPLUS PROGRAM

3 SEC. 8001. ESTABLISHMENT OF MEDICAREPLUS PROGRAM.

4 (a) IN GENERAL.—Title XVIII is amended by redesig5 nating part C as part D and by inserting after part B

6 the following new part:
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1 ‘‘PART C—MEDICAREPLUS PROGRAM

2 ‘‘ELIGIBILITY, ELECTION, AND ENROLLMENT

3 ‘‘SEC. 1851. (a) CHOICE OF MEDICARE BENEFITS

4 THROUGH MEDICAREPLUS PLANS.—

5 ‘‘(1) IN GENERAL.—Subject to the provisions of

6 this section, every MedicarePlus eligible individual

7 (as defined in paragraph (3)) is entitled to elect to re8 ceive benefits under this title—

9 ‘‘(A) through the Medicare fee-for-service

10 program under parts A and B, or

11 ‘‘(B) through enrollment in a MedicarePlus

12 plan under this part.

13 ‘‘(2) TYPES OF MEDICAREPLUS PLANS THAT MAY

14 BE AVAILABLE.—A MedicarePlus plan may be any of

15 the following types of plans of health insurance:

16 ‘‘(A) COORDINATED CARE PLANS.—Private

17 coordinated care plans which provide health care

18 services, including health maintenance organiza19 tion plans and preferred provider organization

20 plans.

21 ‘‘(B) COMBINATION OF HIGH DEDUCTIBLE

22 PLAN AND CONTRIBUTIONS TO HIGH DEDUCTIBLE

23 MEDICARE MSA.—A high deductible plan, as de24 fined in section 1859(b)(2), and a contribution
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1 into a High Deductible MedicarePlus medical

2 savings account (MSA).

3 ‘‘(C) PLANS OFFERED BY PROVIDER-SPON4 SORED ORGANIZATION.—A MedicarePlus plan of5 fered by a provider-sponsored organization, as

6 defined in section 1853(i).

7 ‘‘(D) UNION, TAFT-HARTLEY, AND ASSOCIA8 TION PLANS.—A MedicarePlus organization plan

9 offered by a MedicarePlus organization that is a

10 union sponsor, Taft-Hartley sponsor, or qualified

11 association sponsor, as defined in section

12 1859(a).

13 ‘‘(E) FEE-FOR-SERVICE PLANS.—Plans that

14 reimburse hospitals, physicians, and other pro15 viders on the basis of a privately determined fee

16 schedule or other basis.

17 ‘‘(F) OTHER HEALTH CARE PLANS.—Any

18 other private plan for the delivery of health care

19 items and services that is not described in a pre20 vious subparagraph.

21 ‘‘(3) MEDICAREPLUS ELIGIBLE INDIVIDUAL.—

22 ‘‘(A) IN GENERAL.—In this title, subject to

23 subparagraph (B), the term ‘MedicarePlus eligi24 ble individual’ means an individual who is enti-
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1 tled to benefits under part A and enrolled under

2 part B.

3 ‘‘(B) SPECIAL RULE FOR END-STAGE RENAL

4 DISEASE.—Such term shall not include an indi5 vidual medically determined to have end-stage

6 renal disease, except that an individual who de7 velops end-stage renal disease while enrolled in a

8 MedicarePlus plan may continue to be enrolled

9 in that plan.

10 ‘‘(b) SPECIAL RULES.—

11 ‘‘(1) RESIDENCE REQUIREMENT.—

12 ‘‘(A) IN GENERAL.—Except as the Secretary

13 may otherwise provide, an individual is eligible

14 to elect a MedicarePlus plan offered by a

15 MedicarePlus organization only if the organiza16 tion serves the geographic area in which the in17 dividual resides under the plan.

18 ‘‘(B) CONTINUATION OF ENROLLMENT PER19 MITTED.—Pursuant to rules specified by the Sec20 retary, the Secretary shall provide that an indi21 vidual may continue enrollment in a plan, not22 withstanding that the individual no longer re23 sides in the service area of the plan, so long as

24 the plan provides benefits for providers located

25 in the area in which the individual resides.
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1 ‘‘(2) AFFILIATION REQUIREMENTS FOR CERTAIN

2 PLANS.—

3 ‘‘(A) IN GENERAL.—Subject to subpara4 graph (B), an individual is eligible to elect a

5 MedicarePlus plan offered by—

6 ‘‘(i) a union sponsor only if (I) the in7 dividual is a member of the sponsor and af8 filiated with the sponsor through an em9 ployment relationship with any employer or

10 is the spouse of such a member, and (II) the

11 individual elected under this section a

12 MedicarePlus plan offered by the sponsor

13 during the first enrollment period in which

14 the individual was eligible to make such

15 election with respect to such sponsor;

16 ‘‘(ii) a Taft-Hartley sponsor only if (I)

17 the individual is entitled to obtain benefits

18 through such plans under the terms of an

19 applicable collective bargaining agreement,

20 and (II) the individual elected under this

21 section a MedicarePlus plan offered by the

22 sponsor during the first enrollment period

23 in which the individual was eligible to

24 make such election with respect to such

25 sponsor; and
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1 ‘‘(iii) a qualified association sponsor

2 only if the individual is a member of the as3 sociation (or is a spouse of such a member).

4 ‘‘(B) LIMITATION ON ENROLLMENT.—Sub5 ject to subparagraph (C)—

6 ‘‘(i) a union sponsor may not enroll an

7 individual under this part unless the indi8 vidual is described in subparagraph

9 (A)(i)(I),

10 ‘‘(ii) a Taft-Hartley sponsor may not

11 enroll an individual under this part unless

12 the individual is described in subparagraph

13 (A)(ii)(I), and

14 ‘‘(iii) a qualified association sponsor

15 may not enroll an individual under this

16 part unless the individual is described in

17 subparagraph (A)(iii).

18 ‘‘(C) LIMITATION ON TERMINATION OF COV19 ERAGE.—A qualified association sponsor offering

20 a MedicarePlus plan to an individual may not

21 terminate coverage of the individual on the basis

22 that the individual is no longer a member of the

23 association except pursuant to a change of elec24 tion during an open election period occurring on
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1 or after the date of the termination of member2 ship.

3 ‘‘(3) SPECIAL RULES FOR UNION, TAFT-HARTLEY,

4 AND QUALIFIED ASSOCIATION SPONSORS.—

5 ‘‘(A) UNIONS.—Subject to subparagraph

6 (D), a union sponsor (as defined in section

7 1859(a)(5)) shall limit eligibility of enrollees

8 under this part for MedicarePlus plans it offers

9 to individuals who are members of the sponsor

10 and affiliated with the sponsor through an em11 ployment relationship with any employer or are

12 the spouses of such members.

13 ‘‘(B) TAFT-HARTLEY SPONSORS.—Subject to

14 subparagraph (D), a MedicarePlus organization

15 that is a Taft-Hartley sponsor (as defined in sec16 tion 1859(a)(4)) shall limit eligibility of enroll17 ees under this part for MedicarePlus plans it of18 fers to individuals who are entitled to obtain

19 benefits through such plans under the terms of

20 an applicable collective bargaining agreement.

21 ‘‘(C) QUALIFIED ASSOCIATION SPONSORS.—

22 ‘‘(i) IN GENERAL.—Subject to subpara23 graph (D), a MedicarePlus organization

24 that is a qualified association sponsor (as

25 defined in section 1859(a)(3)) shall limit
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1 eligibility of individuals under this part for

2 plans it offers to individuals who are mem3 bers of the association (or who are spouses

4 of such individuals).

5 ‘‘(ii) LIMITATION ON TERMINATION OF

6 COVERAGE.—Such a qualifying association

7 sponsor offering a MedicarePlus plan to an

8 individual may not terminate coverage of

9 the individual on the basis that the individ10 ual is no longer a member of the association

11 except pursuant to a change of election dur12 ing an open election period occurring on or

13 after the date of the termination of member14 ship.

15 ‘‘(D) LIMITATION.—Rules of eligibility to

16 carry out the previous subparagraphs of this

17 paragraph shall not have the effect of denying

18 eligibility to individuals on the basis of health

19 status, claims experience, receipt of health care,

20 medical history, or lack of evidence of insurabil21 ity.

22 ‘‘(E) NO REELECTION AFTER

23 DISENROLLMENT FOR CERTAIN PLANS.—An indi24 vidual is not eligible to elect a MedicarePlus

25 plan offered by a MedicarePlus organization that
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1 is a union sponsor or a Taft-Hartley sponsor if

2 the individual previously had elected a

3 MedicarePlus plan offered by the organization

4 and had subsequently discontinued election of

5 such a plan offered by the organization.

6 ‘‘(4) SPECIAL RULE FOR CERTAIN INDIVIDUALS

7 COVERED UNDER FEHBP.—An individual who is en8 rolled in a health benefit plan under chapter 89 of

9 title 5, United States Code, is not eligible to enroll in

10 a high deductible plan until such time as the Director

11 of the Office of Management and Budget certifies to

12 the Secretary that the Office of Personnel Manage13 ment has adopted policies which will ensure that the

14 enrollment of such individuals in such plans will not

15 result in increased expenditures for the Federal Gov16 ernment for health benefit plans under such chapter.

17 ‘‘(c) PROCESS FOR EXERCISING CHOICE.—

18 ‘‘(1) IN GENERAL.—The Secretary shall establish

19 a process through which elections described in sub20 section (a) are made and changed, including the form

21 and manner in which such elections are made and

22 changed. Such elections shall be made or changed only

23 during coverage election periods specified under sub24 section (e) and shall become effective as provided in

25 subsection (f).
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1 ‘‘(2) EXPEDITED IMPLEMENTATION.—The Sec2 retary shall establish the process of electing coverage

3 under this section during the transition period (as de4 fined in subsection (e)(1)(B)) in such an expedited

5 manner as will permit such an election for

6 MedicarePlus plans in an area as soon as such plans

7 become available in that area.

8 ‘‘(3) COORDINATION THROUGH MEDICAREPLUS

9 ORGANIZATIONS.—

10 ‘‘(A) ENROLLMENT.—Such process shall

11 permit an individual who wishes to elect a

12 MedicarePlus plan offered by a MedicarePlus or13 ganization to make such election through the fil14 ing of an appropriate election form with the or15 ganization.

16 ‘‘(B) DISENROLLMENT.—Such process shall

17 permit an individual, who has elected a

18 MedicarePlus plan offered by a MedicarePlus or19 ganization and who wishes to terminate such

20 election, to terminate such election through the

21 filing of an appropriate election form with the

22 organization.

23 ‘‘(4) DEFAULT.—

24 ‘‘(A) INITIAL ELECTION.—
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1 ‘‘(i) IN GENERAL.—Subject to clause

2 (ii), an individual who fails to make an

3 election during an initial election period

4 under subsection (e)(1) is deemed to have

5 chosen the Medicare fee-for-service program

6 option.

7 ‘‘(ii) SEAMLESS CONTINUATION OF

8 COVERAGE.—The Secretary shall establish

9 procedures under which individuals who are

10 enrolled with a MedicarePlus organization

11 at the time of the initial election period and

12 who fail to elect to receive coverage other

13 than through the organization are deemed

14 to have elected the MedicarePlus plan of15 fered by the organization (or, if the organi16 zation offers more than one such plan, the

17 MedicarePlus plan offered by the organiza18 tion with the lowest net monthly premium).

19 ‘‘(B) CONTINUING PERIODS.—An individual

20 who has made (or is deemed to have made) an

21 election under this section is considered to have

22 continued to make such election until such time

23 as—

24 ‘‘(i) the individual changes the election

25 under this section, or
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1 ‘‘(ii) a MedicarePlus plan is discon2 tinued, if the individual had elected such

3 plan at the time of the discontinuation.

4 ‘‘(d) PROVIDING INFORMATION TO PROMOTE IN5 FORMED CHOICE.—

6 ‘‘(1) IN GENERAL.—The Secretary shall provide

7 for activities under this subsection to broadly dissemi8 nate information to medicare beneficiaries (and pro9 spective medicare beneficiaries) on the coverage op10 tions provided under this section in order to promote

11 an active, informed selection among such options.

12 ‘‘(2) PROVISION OF NOTICE.—

13 ‘‘(A) OPEN SEASON NOTIFICATION.—At least

14 15 days before the beginning of each annual, co15 ordinated election period, the Secretary shall

16 mail to each MedicarePlus eligible individual re17 siding in an area the following:

18 ‘‘(i) GENERAL ELECTION INFORMATION

19 AND INFORMATION ABOUT MEDICARE FEE20 FOR-SERVICE PROGRAM.—The general infor21 mation regarding election, benefits coverage,

22 and procedures described in paragraph (3).

23 ‘‘(ii) LIST OF PLANS AND COMPARISON

24 OF PLAN OPTIONS.—A list identifying the

25 MedicarePlus plans that are (or will be)
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1 available to residents of the area (and their

2 service areas) and information, described in

3 paragraph (4) and in comparative form,

4 concerning such plans.

5 ‘‘(iii) MEDICAREPLUS MONTHLY CAPI6 TATION RATE.—The amount of the monthly

7 MedicarePlus capitation rate for the area.

8 ‘‘(iv) ADDITIONAL INFORMATION.—Any

9 other information that the Secretary deter10 mines will assist the individual in making

11 the election under this section.

12 The mailing of such information shall be coordi13 nated with the mailing of any annual notice

14 under section 1804.

15 ‘‘(B) NOTIFICATION TO NEWLY

16 MEDICAREPLUS ELIGIBLE INDIVIDUALS.—To the

17 extent practicable, the Secretary shall, not later

18 than 2 months before the beginning of the initial

19 MedicarePlus enrollment period for an individ20 ual described in subsection (e)(1)(A), mail to the

21 individual the information described in subpara22 graph (A).

23 ‘‘(C) FORM.—The information disseminated

24 under this paragraph shall be written and
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1 formatted in the most easily understandable

2 manner possible.

3 ‘‘(D) PERIODIC UPDATING.—The informa4 tion described in subparagraph (A) shall be up5 dated on at least an annual basis to reflect

6 changes in the availability of MedicarePlus

7 plans and the benefits and monthly premiums

8 (and net monthly premiums) for such plans.

9 ‘‘(3) GENERAL ELECTION INFORMATION AND IN10 FORMATION ABOUT MEDICARE FEE-FOR-SERVICE PRO11 GRAM.—General information under this paragraph,

12 with respect to coverage under this part during a

13 year, shall include the following:

14 ‘‘(A) BENEFITS.—A general description of

15 the benefits covered (and not covered) under the

16 medicare fee-for-service program under parts A

17 and B, including—

18 ‘‘(i) covered items and services, and

19 ‘‘(ii) beneficiary cost sharing, such as

20 deductibles, coinsurance, and copayment

21 amounts, and the beneficiary liability for

22 balance billing.

23 ‘‘(B) PART B PREMIUM.—The part B pre24 mium rates that will be charged for part B cov25 erage.
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1 ‘‘(C) ELECTION PROCEDURES.—Information

2 and instructions on how to exercise election op3 tions under this section.

4 ‘‘(D) PROCEDURAL RIGHTS.—The general

5 description of procedural rights (including griev6 ance procedures) of beneficiaries under the medi7 care fee-for-service program and the

8 MedicarePlus program.

9 ‘‘(E) RIGHT OF ORGANIZATION TO TERMI10 NATE CONTRACT.—The right of each

11 MedicarePlus organization by law to terminate

12 or refuse to renew its contract and the effect the

13 termination or nonrenewal of its contract may

14 have on individuals enrolled with the

15 MedicarePlus plan under this part.

16 ‘‘(F) USE OF 911 EMERGENCY NUMBER.—A

17 statement that the use of the 911 emergency tele18 phone number is appropriate in emergency situ19 ations and an explanation of what constitutes an

20 emergency situation.

21 ‘‘(4) INFORMATION COMPARING PLAN OPTIONS.—

22 Information under this paragraph, with respect to a

23 MedicarePlus plan for a year, shall include the fol24 lowing:
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1 ‘‘(A) BENEFITS.—The benefits covered

2 under the plan, including covered items and

3 services beyond those provided under the medi4 care fee-for-service program, any reductions in

5 beneficiary cost sharing, and any maximum lim6 itations on out-of-pocket losses.

7 ‘‘(B) PREMIUMS.—The monthly premium

8 (and net monthly premium, including any re9 bate) for the plan.

10 ‘‘(C) QUALITY.—(i) To the extent available,

11 quality indicators for the benefits under the plan

12 (in comparison with quality indicators under

13 the Medicare fee-for-service program under parts

14 A and B in the area involved), including—

15 ‘‘(I) disenrollment rates for medicare

16 enrollees electing to receive benefits through

17 the plan for the previous 2 years (excluding

18 disenrollment due to death or moving out19 side the plan’s service area),

20 ‘‘(II) information on medicare enrollee

21 satisfaction and health outcomes, and

22 ‘‘(III) whether the plan is out of com23 pliance with any requirements of this part

24 (as determined by the Secretary).
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1 ‘‘(D) SUPPLEMENTAL COVERAGE OP2 TIONS.—Whether the organization offering the

3 plan offers optional supplemental coverage.

4 ‘‘(5) MAINTAINING A TOLL-FREE NUMBER.—The

5 Secretary shall maintain a toll-free number for in6 quiries regarding MedicarePlus options and the oper7 ation of part C in all areas in which MedicarePlus

8 plans are offered.

9 ‘‘(6) USE OF NONFEDERAL ENTITIES.—The Sec10 retary shall, to the maximum extent feasible, enter

11 into contracts with appropriate non-Federal entities

12 to carry out activities under this subsection.

13 ‘‘(7) PROVISION OF INFORMATION.—A

14 MedicarePlus organization shall provide the Secretary

15 with such information on the organization and each

16 MedicarePlus plan it offers as may be required for the

17 preparation of the information referred to in para18 graph (2)(A).

19 ‘‘(e) COVERAGE ELECTION PERIODS.—

20 ‘‘(1) INITIAL CHOICE UPON ELIGIBILITY TO MAKE

21 ELECTION.—

22 ‘‘(A) IN GENERAL.—In the case of an indi23 vidual who first becomes entitled to benefits

24 under part A and enrolled under part B after

25 the beginning of the transition period (as defined
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1 in subparagraph (B)), the individual shall make

2 the election under this section during a period

3 (of a duration and beginning at a time specified

4 by the Secretary) at the first time the individual

5 both is entitled to benefits under part A and en6 rolled under part B. Such period shall be speci7 fied in a manner so that, in the case of an indi8 vidual who elects a MedicarePlus plan during

9 the period, coverage under the plan becomes effec10 tive as of the first date on which the individual

11 may receive such coverage.

12 ‘‘(B) TRANSITION PERIOD DEFINED.—In

13 this subsection, the term ‘transition period’

14 means, with respect to an individual in an area,

15 the period beginning on the first day of the first

16 month in which a MedicarePlus plan is first

17 made available to individuals in the area and

18 ending with the month preceding the beginning

19 of the first annual, coordinated election period

20 under paragraph (3).

21 ‘‘(2) DURING TRANSITION PERIOD.—Subject to

22 paragraph (6)—

23 ‘‘(A) CONTINUOUS OPEN ENROLLMENT INTO

24 A MEDICAREPLUS OPTION.—During the transi25 tion period, a MedicarePlus eligible individual
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1 who has elected the Medicare fee-for-service pro2 gram option described in subsection (a)(1)(A)

3 may change such election to a MedicarePlus op4 tion described in subsection (a)(1)(B) at any

5 time.

6 ‘‘(B) OPEN DISENROLLMENT BEFORE END

7 OF TRANSITION PERIOD.—

8 ‘‘(i) IN GENERAL.—During the transi9 tion period, an individual who has elected

10 a MedicarePlus option described in sub11 section (a)(1)(B) for a MedicarePlus plan

12 may change such election to another

13 MedicarePlus plan or to the Medicare fee14 for-service program option described in sub15 section (a)(1)(A).

16 ‘‘(ii) SPECIAL RULE.—During the

17 transition period, an individual who has

18 elected a high deductible plan may not

19 change such election to a MedicarePlus plan

20 that is not a high deductible plan unless the

21 individual has had such election in effect

22 for 12 consecutive months.

23 ‘‘(3) ANNUAL, COORDINATED ELECTION PE24 RIOD.—
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1 ‘‘(A) IN GENERAL.—Subject to paragraph

2 (5), each individual who is eligible to make an

3 election under this section may change such elec4 tion during an annual, coordinated election pe5 riod.

6 ‘‘(B) ANNUAL, COORDINATED ELECTION PE7 RIOD.—For purposes of this section, the term

8 ‘annual, coordinated election period’ means, with

9 respect to a calendar year (beginning with

10 1998), the month of October before such year.

11 ‘‘(C) MEDICAREPLUS HEALTH FAIR DURING

12 OCTOBER, 1996.—In the month of October, 1996,

13 the Secretary shall provide for a nationally co14 ordinated educational and publicity campaign to

15 inform MedicarePlus eligible individuals about

16 such plans and the election process provided

17 under this section (including the annual, coordi18 nated election periods that occur in subsequent

19 years).

20 ‘‘(4) SPECIAL 90-DAY DISENROLLMENT OPTION.—

21 ‘‘(A) IN GENERAL.—In the case of the first

22 time an individual elects any MedicarePlus plan

23 (other than a high deductible plan) offered by a

24 particular MedicarePlus organization under this

25 section, the individual may change such election
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1 through the filing of an appropriate notice dur2 ing the 90-day period beginning on the first day

3 on which the individual’s coverage under the

4 MedicarePlus plan under such option becomes ef5 fective.

6 ‘‘(B) LIMITATION.—Subparagraph (A)—

7 ‘‘(i) shall only apply once for an indi8 vidual with respect to any particular orga9 nization, and

10 ‘‘(ii) may not apply more than twice

11 for any individual in a calendar year.

12 ‘‘(C) EFFECT OF DISCONTINUATION OF

13 ELECTION.—An individual who discontinues an

14 election under subparagraph (A) may, during

15 the period specified by the Secretary, make a

16 new election under this subsection (a) (or, in the

17 absence of such an election, is deemed at the time

18 of such discontinuation to have elected the Medi19 care fee-for-service program option described in

20 subsection (a)(1)(A)).

21 ‘‘(5) SPECIAL ELECTION PERIODS.—An individ22 ual may discontinue an election of a MedicarePlus

23 plan offered by a MedicarePlus organization other

24 than during an annual, coordinated election period

25 and make a new election under this section if—
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1 ‘‘(A) the organization’s or plan’s certifi2 cation under part C has been terminated or the

3 organization has terminated or otherwise discon4 tinued providing the plan;

5 ‘‘(B) the individual is no longer eligible to

6 elect the plan because of a change in the individ7 ual’s place of residence or other change in cir8 cumstances (specified by the Secretary, but not

9 including termination of membership in a quali10 fied association in the case of a plan offered by

11 a qualified association sponsor or termination of

12 the individual’s enrollment on the basis described

13 in clause (i) or (ii) section 1851(g)(3)(B));

14 ‘‘(C) the individual demonstrates (in ac15 cordance with guidelines established by the Sec16 retary) that—

17 ‘‘(i) the organization offering the plan

18 substantially violated a material provision

19 of the organization’s contract under part C

20 in relation to the individual and the plan;

21 or

22 ‘‘(ii) the organization (or an agent or

23 other entity acting on the organization’s be24 half) materially misrepresented the plan’s
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1 provisions in marketing the plan to the in2 dividual; or

3 ‘‘(D) the individual meets such other condi4 tions as the Secretary may provide.

5 ‘‘(6) SPECIAL RULE FOR HIGH DEDUCTIBLE

6 PLANS.—Notwithstanding the previous provisions of

7 this subsection, an individual may elect a high de8 ductible plan only during an annual, coordinated

9 election period described in paragraph (3)(B) or dur10 ing the month of October, 1996.

11 ‘‘(f) EFFECTIVENESS OF ELECTIONS.—

12 ‘‘(1) DURING INITIAL COVERAGE ELECTION PE13 RIOD.—An election of coverage made during the ini14 tial coverage election period under subsection

15 (e)(1)(A) shall take effect upon the date the individual

16 becomes entitled to benefits under part A and enrolled

17 under part B, except as the Secretary may provide

18 (consistent with section 1838) in order to prevent ret19 roactive coverage.

20 ‘‘(2) DURING TRANSITION; 90-DAY

21 DISENROLLMENT OPTION.—An election of coverage

22 made under subsection (e)(2) and an election to dis23 continue a MedicarePlus option under subsection

24 (e)(4) at any time shall take effect with the first cal-
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1 endar month following the date on which the election

2 is made.

3 ‘‘(3) ANNUAL, COORDINATED ELECTION PERIOD

4 AND HIGH DEDUCTIBLE PLAN ELECTION.—An election

5 of coverage made during an annual, coordinated elec6 tion period (as defined in subsection (e)(3)(B)) in a

7 year or for a high deductible plan shall take effect as

8 of the first day of the following year.

9 ‘‘(4) OTHER PERIODS.—An election of coverage

10 made during any other period under subsection (e)(5)

11 shall take effect in such manner as the Secretary pro12 vides in a manner consistent (to the extent prac13 ticable) with protecting continuity of health benefit

14 coverage.

15 ‘‘(g) GUARANTEED ISSUE AND RENEWAL.—

16 ‘‘(1) IN GENERAL.—Except as provided in this

17 subsection, a MedicarePlus organization shall provide

18 that at any time during which elections are accepted

19 under this section with respect to a MedicarePlus

20 plan offered by the organization, the organization will

21 accept without restrictions individuals who are eligi22 ble to make such election.

23 ‘‘(2) PRIORITY.—If the Secretary determines that

24 a MedicarePlus organization, in relation to a

25 MedicarePlus plan it offers, has a capacity limit and
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1 the number of MedicarePlus eligible individuals who

2 elect the plan under this section exceeds the capacity

3 limit, the organization may limit the election of indi4 viduals of the plan under this section but only if pri5 ority in election is provided—

6 ‘‘(A) first to such individuals as have elect7 ed the plan at the time of the determination, and

8 ‘‘(B) then to other such individuals in such

9 a manner that does not discriminate among the

10 individuals (who seek to elect the plan) on a

11 basis described in section 1852(b).

12 The preceding sentence shall not apply if it would re13 sult in the enrollment of enrollees substantially

14 nonrepresentative, as determined in accordance with

15 regulations of the Secretary, of the medicare popu16 lation in the service area of the plan.

17 ‘‘(3) LIMITATION ON TERMINATION OF ELEC18 TION.—

19 ‘‘(A) IN GENERAL.—Subject to subpara20 graph (B), a MedicarePlus organization may not

21 for any reason terminate the election of any in22 dividual under this section for a MedicarePlus

23 plan it offers.

24 ‘‘(B) BASIS FOR TERMINATION OF ELEC25 TION.—A MedicarePlus organization may termi-
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1 nate an individual’s election under this section

2 with respect to a MedicarePlus plan it offers if—

3 ‘‘(i) any net monthly premiums re4 quired with respect to such plan are not

5 paid on a timely basis (consistent with

6 standards under section 1856 that provide

7 for a grace period for late payment of net

8 monthly premiums),

9 ‘‘(ii) the individual has engaged in

10 disruptive behavior (as specified in such

11 standards), or

12 ‘‘(iii) the plan is terminated with re13 spect to all individuals under this part.

14 Any individual whose election is so terminated is

15 deemed to have elected the Medicare fee-for-serv16 ice program option described in subsection

17 (a)(1)(A).

18 ‘‘(C) LIMITATION ON TERMINATION OF COV19 ERAGE.—A qualified association sponsor offering

20 a MedicarePlus plan to an individual may not

21 terminate coverage of the individual on the basis

22 that the individual is no longer a member of the

23 association except pursuant to a change of elec24 tion during an open election period occurring on
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1 or after the date of the termination of member2 ship.

3 ‘‘(D) ORGANIZATION OBLIGATION WITH RE4 SPECT TO ELECTION FORMS.—Pursuant to a

5 contract under section 1857, each MedicarePlus

6 organization receiving an election form under

7 subsection (c)(3) shall transmit to the Secretary

8 (at such time and in such manner as the Sec9 retary may specify) a copy of such form or such

10 other information respecting the election as the

11 Secretary may specify.

12 ‘‘(h) APPROVAL OF MARKETING MATERIALS.—

13 ‘‘(1) SUBMISSION.—No marketing materials may

14 be distributed by a MedicarePlus organization to (or

15 for the use of) MedicarePlus eligible individuals un16 less—

17 ‘‘(A) at least 45 days before the date of dis18 tribution the organization has submitted the ma19 terial to the Secretary for review, and

20 ‘‘(B) the Secretary has not disapproved the

21 distribution of such material.

22 ‘‘(2) REVIEW.—The standards established under

23 section 1856 shall include guidelines for the review of

24 all such material submitted and under such guide25 lines the Secretary shall disapprove such material if
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1 the material is materially inaccurate or misleading

2 or otherwise makes a material misrepresentation.

3 ‘‘(3) DEEMED APPROVAL (1-STOP SHOPPING).—

4 In the case of material that is submitted under para5 graph (1)(A) to the Secretary or a regional office of

6 the Department of Health and Human Services and

7 the Secretary or the office has not disapproved the

8 distribution of marketing materials under paragraph

9 (1)(B) with respect to a MedicarePlus plan in an

10 area, the Secretary is deemed not to have disapproved

11 such distribution in all other areas covered by the

12 plan and organization.

13 ‘‘(4) PROHIBITION OF CERTAIN MARKETING

14 PRACTICES.—Each MedicarePlus organization shall

15 conform to fair marketing standards in relation to

16 MedicarePlus plans offered under this part, included

17 in the standards established under section 1856. Such

18 standards shall include a prohibition against an or19 ganization (or agent of such an organization) com20 pleting any portion of any election form used to carry

21 out elections under this section on behalf of any indi22 vidual.

23 ‘‘(i) EFFECT OF ELECTION OF MEDICAREPLUS PLAN

24 OPTION.—Subject to section 1852(a)(5)—
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1 ‘‘(1) payments under a contract with a

2 MedicarePlus organization under section 1854(a)

3 with respect to an individual electing a MedicarePlus

4 plan offered by the organization shall be instead of

5 the amounts which (in the absence of the contract)

6 would otherwise be payable under parts A and B for

7 items and services furnished to the individual, and

8 ‘‘(2) subject to subsections (e) and (f) of section

9 1854, only the MedicarePlus organization shall be en10 titled to receive payments from the Secretary under

11 this title for services furnished to the individual.

12 ‘‘(j) ADMINISTRATION.—

13 ‘‘(1) IN GENERAL.—This part and section 1876

14 shall be administered through an operating division

15 (A) that is established or identified by the Secretary

16 and is in the Department of Health and Human

17 Services, (B) that is separate from the Health Care

18 Financing Administration, and (C) the primary

19 function of which is the administration of this part

20 and such section. The director of such division shall

21 be of equal pay and rank to that of the individual re22 sponsible for overall administration of parts A and B.

23 ‘‘(2) TRANSFER AUTHORITY.—The Secretary

24 shall transfer such personnel, administrative support

25 systems, assets, records, funds, and other resources in
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1 the Health Care Financing Administration to the op2 erating division referred to in paragraph (1) as are

3 used in the administration of section 1876 and as

4 may be required to implement the provisions of this

5 part promptly and efficiently.

6 ‘‘BENEFITS AND BENEFICIARY PROTECTIONS

7 ‘‘SEC. 1852. (a) BASIC BENEFITS.—

8 ‘‘(1) IN GENERAL.—Except as provided in sec9 tion 1859(b)(2) for high deductible plans, each

10 MedicarePlus plan shall provide to members enrolled

11 under this part, through providers and other persons

12 that meet the applicable requirements of this title and

13 part A of title XI—

14 ‘‘(A) those items and services for which ben15 efits are available under parts A and B to indi16 viduals residing in the area served by the plan,

17 and

18 ‘‘(B) additional health services as the Sec19 retary may approve.

20 The Secretary shall approve any such additional

21 health care services which the plan proposes to offer

22 to such members, unless the Secretary determines that

23 including such additional services will substantially

24 discourage enrollment by MedicarePlus eligible indi25 viduals with the plan.
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1 ‘‘(2) SATISFACTION OF REQUIREMENT.—A

2 MedicarePlus plan (other than a high deductible

3 plan) offered by a MedicarePlus organization satisfies

4 paragraph (1)(A) with respect to benefits for items

5 and services if the following requirements are met:

6 ‘‘(A) FEE FOR SERVICE PROVIDERS.—In the

7 case of benefits furnished through a provider that

8 does not have a contract with the organization,

9 the plan provides for at least the dollar amount

10 of payment for such items and services as would

11 otherwise be provided under parts A and B.

12 ‘‘(B) PARTICIPATING PROVIDERS.—In the

13 case of benefits furnished through a provider that

14 has such a contract, the individual’s liability for

15 payment for such items and services does not ex16 ceed (after taking into account any deductible,

17 which does not exceed any deductible under parts

18 A and B) the lesser of the following:

19 ‘‘(i) INDIVIDUAL’S LIABILITY UNDER

20 MEDICARE FEE-FOR-SERVICE PROGRAM.—

21 The amount of the liability that the indi22 vidual would have had (based on the pro23 vider being a participating provider) if the

24 individual had not elected coverage under a

25 MedicarePlus plan.
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1 ‘‘(ii) MEDICARE COINSURANCE AP2 PLIED TO PLAN PAYMENT RATES.—The ap3 plicable coinsurance or copayment rate

4 (that would have applied under the Medi5 care fee-for-service program option described

6 in section 1851(a)(1)(A)) of the payment

7 rate provided under the contract.

8 ‘‘(3) SUPPLEMENTAL OPTIONAL BENEFITS.—

9 Each MedicarePlus organization may offer under a

10 MedicarePlus plan optional supplemental benefits to

11 each individual enrolled in the plan under this part

12 for an additional premium amount. If the supple13 mental benefits are offered only to individuals en14 rolled in the sponsor’s plan under this part, the addi15 tional premium amount shall be the same for all en16 rolled individuals in the MedicarePlus payment area.

17 Such benefits may be marketed and sold by the

18 MedicarePlus organization outside of the enrollment

19 process described in section 1851(c).

20 ‘‘(4) ORGANIZATION AS SECONDARY PAYER.—

21 Notwithstanding any other provision of law, a

22 MedicarePlus organization may (in the case of the

23 provision of items and services to an individual

24 under a MedicarePlus plan under circumstances in

25 which payment under this title is made secondary
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1 pursuant to section 1862(b)(2)) charge or authorize

2 the provider of such services to charge, in accordance

3 with the charges allowed under such a law, plan, or

4 policy—

5 ‘‘(A) the insurance carrier, employer, or

6 other entity which under such law, plan, or pol7 icy is to pay for the provision of such services,

8 or

9 ‘‘(B) such individual to the extent that the

10 individual has been paid under such law, plan,

11 or policy for such services.

12 ‘‘(5) NATIONAL COVERAGE DETERMINATIONS.—If

13 there is a national coverage determination made in

14 the period beginning on the date of an announcement

15 under section 1854(b) and ending on the date of the

16 next announcement under such section and the Sec17 retary projects that the determination will result in

18 a significant change in the costs to a MedicarePlus

19 organization of providing the benefits that are the

20 subject of such national coverage determination and

21 that such change in costs was not incorporated in the

22 determination of the annual MedicarePlus capitation

23 rate under section 1854 included in the announce24 ment made at the beginning of such period—
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1 ‘‘(A) such determination shall not apply to

2 contracts under this part until the first contract

3 year that begins after the end of such period, and

4 ‘‘(B) if such coverage determination pro5 vides for coverage of additional benefits or cov6 erage under additional circumstances, section

7 1851(i) shall not apply to payment for such ad8 ditional benefits or benefits provided under such

9 additional circumstances until the first contract

10 year that begins after the end of such period,

11 unless otherwise required by law.

12 ‘‘(b) ANTIDISCRIMINATION.—A MedicarePlus organi13 zation may not deny, limit, or condition the coverage or

14 provision of benefits under this part based on the health

15 status, claims experience, receipt of health care, medical his16 tory, or lack of evidence of insurability, of an individual.

17 A MedicarePlus organization shall notify each enrollee

18 under this part of provisions of this subsection at the time

19 of the individual’s enrollment.

20 ‘‘(c) DETAILED DESCRIPTION OF PLAN PROVISIONS.—

21 A MedicarePlus organization shall disclose, in clear, accu22 rate, and standardized form to each enrollee with a

23 MedicarePlus plan offered by the organization under this

24 part at the time of enrollment and at least annually there25 after, the following information regarding such plan:
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1 ‘‘(1) SERVICE AREA.—The plan’s service area.

2 ‘‘(2) BENEFITS.—Benefits under the plan offered,

3 including information described in section

4 1851(d)(3)(A) and exclusions from coverage and, if it

5 is a high deductible plan, a comparison of benefits

6 under such a plan with benefits under other

7 MedicarePlus plans.

8 ‘‘(3) ACCESS.—The number, mix, and distribu9 tion of participating providers.

10 ‘‘(4) OUT-OF-AREA COVERAGE.— Out-of-area

11 coverage provided by the plan.

12 ‘‘(5) EMERGENCY COVERAGE.—Coverage of emer13 gency services and urgently needed care.

14 ‘‘(6) OPTIONAL SUPPLEMENTAL COVERAGE.—

15 Optional supplemental coverage available from the or16 ganization offering the plan, including—

17 ‘‘(A) supplemental items and services cov18 ered, and

19 ‘‘(B) the premium price for the optional

20 supplemental benefits.

21 ‘‘(7) PRIOR AUTHORIZATION RULES.—Rules re22 garding prior authorization or other review require23 ments that could result in nonpayment.
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1 ‘‘(8) PLAN GRIEVANCE PROCEDURES.— Any

2 plan-specific appeal or grievance rights and proce3 dures.

4 ‘‘(9) QUALITY ASSURANCE PROGRAM.—A descrip5 tion of the organization’s quality assurance program

6 under subsection (e).

7 ‘‘(d) ACCESS TO SERVICES.—

8 ‘‘(1) IN GENERAL.—A MedicarePlus organization

9 offering a MedicarePlus plan may restrict the provid10 ers from whom the benefits under the plan are pro11 vided so long as—

12 ‘‘(A) the organization makes such benefits

13 available and accessible to each individual elect14 ing the plan within the plan service area with

15 reasonable promptness and in a manner which

16 assures continuity in the provision of benefits;

17 ‘‘(B) when medically necessary the organi18 zation makes such benefits available and acces19 sible 24 hours a day and 7 days a week;

20 ‘‘(C) the plan provides for reimbursement

21 with respect to services which are covered under

22 subparagraphs (A) and (B) and which are pro23 vided to such an individual other than through

24 the organization, if—
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1 ‘‘(i) the services were medically nec2 essary and immediately required because of

3 an unforeseen illness, injury, or condition,

4 and

5 ‘‘(ii) it was not reasonable given the

6 circumstances to obtain the services through

7 the organization;

8 ‘‘(D) the organization provides access to ap9 propriate providers, including credentialed spe10 cialists, for medically necessary treatment and

11 services, and

12 ‘‘(E) coverage is provided for emergency

13 services (as defined in paragraph (3)) without

14 regard to prior authorization or the emergency

15 care provider’s contractual relationship with the

16 organization.

17 ‘‘(2) PROTECTION OF ENROLLEES FOR CERTAIN

18 EMERGENCY SERVICES.—

19 ‘‘(A) PARTICIPATING PROVIDERS.—In the

20 case of emergency services described in subpara21 graph (C) which are furnished by a participat22 ing physician or provider of services to an indi23 vidual enrolled with a MedicarePlus organiza24 tion under this section, the applicable participa25 tion agreement is deemed to provide that the
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1 physician or provider of services will accept as

2 payment in full from the organization for such

3 emergency services described in subparagraph

4 (C) the amount that would be payable to the

5 physician or provider of services under part B

6 and from the individual under such part, if the

7 individual were not enrolled with such an orga8 nization under this part.

9 ‘‘(B) NONPARTICIPATING PROVIDERS.—In

10 the case of emergency services described in sub11 paragraph (C) which are furnished by a

12 nonparticipating physician, the limitations on

13 actual charges for such services otherwise appli14 cable under part B (to services furnished by in15 dividuals not enrolled with a MedicarePlus orga16 nization under this section) shall apply in the

17 same manner as such limitations apply to serv18 ices furnished to individuals not enrolled with

19 such an organization.

20 ‘‘(C) EMERGENCY SERVICES DESCRIBED.—

21 The emergency services described in this sub22 paragraph are emergency services which are fur23 nished to an enrollee of a MedicarePlus organi24 zation under this part by a physician or pro-
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1 vider of services that is not under a contract

2 with the organization.

3 ‘‘(D) EXCEPTION FOR UNRESTRICTED FEE4 FOR-SERVICE PLANS.—The previous provisions of

5 this paragraph shall not apply in the case of a

6 MedicarePlus organization in relation to a

7 MedicarePlus unrestricted fee-for-service plan (as

8 defined in section 1859(b)(3)).

9 ‘‘(3) DEFINITION OF EMERGENCY SERVICES.—In

10 this subsection, the term ‘emergency services’ means,

11 with respect to an individual enrolled with an orga12 nization, covered inpatient and outpatient services

13 that—

14 ‘‘(A) are furnished by an appropriate

15 source other than the organization,

16 ‘‘(B) are needed immediately because of an

17 injury or sudden illness, and

18 ‘‘(C) are needed because the time required to

19 reach the organization’s providers or suppliers

20 would have meant risk of serious damage to the

21 patient’s health.

22 ‘‘(e) QUALITY ASSURANCE PROGRAM.—

23 ‘‘(1) IN GENERAL.—Each MedicarePlus organi24 zation must have arrangements, established in accord25 ance with regulations of the Secretary, for an ongoing
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1 quality assurance program for health care services it

2 provides to individuals enrolled with MedicarePlus

3 plans of the organization.

4 ‘‘(2) ELEMENTS OF PROGRAM.—The quality as5 surance program shall—

6 ‘‘(A) stress health outcomes;

7 ‘‘(B) provide for the establishment of writ8 ten protocols for utilization review, based on cur9 rent standards of medical practice;

10 ‘‘(C) provide review by physicians and

11 other health care professionals of the process fol12 lowed in the provision of such health care serv13 ices;

14 ‘‘(D) monitor and evaluate high volume and

15 high risk services and the care of acute and

16 chronic conditions;

17 ‘‘(E) evaluate the continuity and coordina18 tion of care that enrollees receive;

19 ‘‘(F) have mechanisms to detect both under20 utilization and overutilization of services;

21 ‘‘(G) after identifying areas for improve22 ment, establish or alter practice parameters;

23 ‘‘(H) take action to improve quality and as24 sesses the effectiveness of such action through sys25 tematic follow-up;
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1 ‘‘(I) make available information on quality

2 and outcomes measures to facilitate beneficiary

3 comparison and choice of health coverage options

4 (in such form and on such quality and outcomes

5 measures as the Secretary determines to be ap6 propriate); and

7 ‘‘(J) be evaluated on an ongoing basis as to

8 its effectiveness.

9 ‘‘(3) EXTERNAL REVIEW.—Each MedicarePlus

10 organization shall, for each MedicarePlus plan it op11 erates, have an agreement with an independent qual12 ity review and improvement organization approved

13 by the Secretary.

14 ‘‘(4) EXCEPTION FOR UNRESTRICTED FEE-FOR15 SERVICE PLANS.—Paragraphs (1) and (3) and sub16 section (h)(2) (relating to maintaining medical

17 records) shall not apply in the case of a MedicarePlus

18 organization in relation to a MedicarePlus unre19 stricted fee-for-service plan.

20 ‘‘(5) TREATMENT OF ACCREDITATION.—The Sec21 retary shall provide that a MedicarePlus organization

22 is deemed to meet the requirements of paragraphs (1)

23 through (3) of this subsection and subsection (h) (re24 lating to confidentiality and accuracy of medical

25 records) if the organization is accredited (and peri-
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1 odically reaccredited) by a private organization under

2 a process that the Secretary has determined assures

3 that the organization meets standards that are no less

4 stringent than the standards established under section

5 1856 to carry out this subsection and such subsection.

6 ‘‘(f) COVERAGE DETERMINATIONS.—

7 ‘‘(1) DECISIONS ON NONEMERGENCY CARE.—A

8 MedicarePlus organization shall make determinations

9 regarding authorization requests for nonemergency

10 care on a timely basis, depending on the urgency of

11 the situation.

12 ‘‘(2) APPEALS.—

13 ‘‘(A) IN GENERAL.—Appeals from a deter14 mination of an organization denying coverage

15 shall be decided within 30 days of the date of re16 ceipt of medical information, but not later than

17 60 days after the date of the decision.

18 ‘‘(B) PHYSICIAN DECISION ON CERTAIN AP19 PEALS.—Appeal decisions relating to a deter20 mination to deny coverage based on a lack of

21 medical necessity shall be made only by a physi22 cian.

23 ‘‘(C) EMERGENCY CASES.—Appeals from

24 such a determination involving a life-threatening
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1 or emergency situation shall be decided on an ex2 pedited asis.

3 ‘‘(g) GRIEVANCES AND APPEALS.—

4 ‘‘(1) GRIEVANCE MECHANISM.—Each

5 MedicarePlus organization must provide meaningful

6 procedures for hearing and resolving grievances be7 tween the organization (including any entity or indi8 vidual through which the organization provides health

9 care services) and enrollees with MedicarePlus plans

10 of the organization under this part.

11 ‘‘(2) APPEALS.—An enrollee with a

12 MedicarePlus plan of a MedicarePlus organization

13 under this part who is dissatisfied by reason of the

14 enrollee’s failure to receive any health service to which

15 the enrollee believes the enrollee is entitled and at no

16 greater charge than the enrollee believes the enrollee is

17 required to pay is entitled, if the amount in con18 troversy is $100 or more, to a hearing before the Sec19 retary to the same extent as is provided in section

20 205(b), and in any such hearing the Secretary shall

21 make the organization a party. If the amount in con22 troversy is $1,000 or more, the individual or organi23 zation shall, upon notifying the other party, be enti24 tled to judicial review of the Secretary’s final decision

25 as provided in section 205(g), and both the individual
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1 and the organization shall be entitled to be parties to

2 that judicial review. In applying sections 205(b) and

3 205(g) as provided in this subparagraph, and in ap4 plying section 205(l) thereto, any reference therein to

5 the Commissioner of Social Security or the Social Se6 curity Administration shall be considered a reference

7 to the Secretary or the Department of Health and

8 Human Services, respectively.

9 ‘‘(3) INDEPENDENT REVIEW OF CERTAIN COV10 ERAGE DENIALS.—The Secretary shall contract with

11 an independent, outside entity to review and resolve

12 appeals of denials of coverage related to urgent or

13 emergency services with respect to MedicarePlus

14 plans.

15 ‘‘(4) COORDINATION WITH SECRETARY OF

16 LABOR.—The Secretary shall consult with the Sec17 retary of Labor so as to ensure that the requirements

18 of this subsection, as they apply in the case of griev19 ances referred to in paragraph (1) to which section

20 503 of the Employee Retirement Income Security Act

21 of 1974 applies, are applied in a manner consistent

22 with the requirements of such section 503, so long as

23 such requirements provide at least as much protection

24 for beneficiaries as would apply if this paragraph did

25 not apply.
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1 ‘‘(h) CONFIDENTIALITY AND ACCURACY OF ENROLLEE

2 RECORDS.—Each MedicarePlus organization shall establish

3 procedures—

4 ‘‘(1) to safeguard the privacy of individually

5 identifiable enrollee information, and

6 ‘‘(2) to maintain accurate and timely medical

7 records for enrollees.

8 ‘‘(i) INFORMATION ON ADVANCE DIRECTIVES.—Each

9 MedicarePlus organization shall meet the requirement of

10 section 1866(f) (relating to maintaining written policies

11 and procedures respecting advance directives).

12 ‘‘(j) RULES REGARDING PHYSICIAN PARTICIPATION.—

13 ‘‘(1) PROCEDURES.—Each MedicarePlus organi14 zation shall establish reasonable procedures relating to

15 the participation (under an agreement etween a phy16 sician and the organization) of physicians under

17 MedicarePlus plans offered by the organization under

18 this part. Such procedures shall include—

19 ‘‘(A) providing notice of the rules regarding

20 participation,

21 ‘‘(B) providing written notice of participa22 tion decisions that are adverse to physicians,

23 and

24 ‘‘(C) providing a process within the organi25 zation for appealing adverse decisions, including
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1 the presentation of information and views of the

2 physician regarding such decision.

3 ‘‘(2) CONSULTATION IN MEDICAL POLICIES.—A

4 MedicarePlus organization shall consult with physi5 cians who have entered into participation agreements

6 with the organization regarding the organization’s

7 medical policy, quality, and medical management

8 procedures.

9 ‘‘(3) LIMITATIONS ON PHYSICIAN INCENTIVE

10 PLANS.—

11 ‘‘(A) IN GENERAL.—No MedicarePlus orga12 nization may operate any physician incentive

13 plan (as defined in subparagraph (B)) unless the

14 following requirements are met:

15 ‘‘(i) No specific payment is made di16 rectly or indirectly under the plan to a phy17 sician or physician group as an inducement

18 to reduce or limit medically necessary serv19 ices provided with respect to a specific indi20 vidual enrolled with the organization.

21 ‘‘(ii) If the plan places a physician or

22 physician group at substantial financial

23 risk (as determined by the Secretary) for

24 services not provided by the physician or

25 physician group, the organization—
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1 ‘‘(I) provides stop-loss protection

2 for the physician or group that is ade3 quate and appropriate, based on stand4 ards developed by the Secretary that

5 take into account the number of physi6 cians placed at such substantial finan7 cial risk in the group or under the

8 plan and the number of individuals

9 enrolled with the organization who re10 ceive services from the physician or the

11 physician group, and

12 ‘‘(II) conducts periodic surveys of

13 both individuals enrolled and individ14 uals previously enrolled with the orga15 nization to determine the degree of ac16 cess of such individuals to services pro17 vided by the organization and satisfac18 tion with the quality of such services.

19 ‘‘(iii) The organization provides the

20 Secretary with descriptive information re21 garding the plan, sufficient to permit the

22 Secretary to determine whether the plan is

23 in compliance with the requirements of this

24 subparagraph.
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1 ‘‘(B) PHYSICIAN INCENTIVE PLAN DE2 FINED.—In this paragraph, the term ‘physician

3 incentive plan’ means any compensation ar4 rangement between a MedicarePlus organization

5 and a physician or physician group that may

6 directly or indirectly have the effect of reducing

7 or limiting services provided with respect to in8 dividuals enrolled with the organization under

9 this part.

10 ‘‘(4) LIMITATION ON PROVIDER INDEMNIFICA11 TION.—A MedicarePlus organization may not provide

12 (directly or indirectly) for a provider (or group of

13 providers) to indemnify the organization against any

14 liability resulting from a civil action brought by or

15 on behalf of an enrollee under this part for any dam16 age caused to an enrollee with a MedicarePlus plan

17 of the organization by the organization’s denial of

18 medically necessary care.

19 ‘‘(5) EXCEPTION FOR UNRESTRICTED FEE-FOR20 SERVICE PLANS.—The previous provisions of this sub21 section shall not apply in the case of a MedicarePlus

22 organization in relation to a MedicarePlus unre23 stricted fee-for-service plan.
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1 ‘‘ORGANIZATIONAL AND FINANCIAL REQUIREMENTS FOR

2 MEDICAREPLUS ORGANIZATIONS; PROVIDER-SPON3 SORED ORGANIZATIONS

4 ‘‘SEC. 1853. (a) ORGANIZED AND LICENSED UNDER

5 STATE LAW.—

6 ‘‘(1) IN GENERAL.—A MedicarePlus organization

7 shall be organized and licensed under State law as a

8 risk-bearing entity eligible to offer health insurance or

9 health benefits coverage in each State in which it of10 fers a MedicarePlus plan.

11 ‘‘(2) EXCEPTION FOR CERTAIN UNION SPONSORS

12 AND TAFT-HARTLEY SPONSORS.—Paragraph (1) shall

13 not apply to a MedicarePlus organization that is a

14 union sponsor or Taft-Hartley sponsor.

15 ‘‘(3) EXCEPTION FOR QUALIFIED ASSOCIATIONS

16 SPONSOR.—Paragraph (1) shall not apply to a

17 MedicarePlus organization that is a qualified associa18 tion sponsor.

19 ‘‘(4) SPECIAL RULES FOR PROVIDER-SPONSORED

20 ORGANIZATIONS.—

21 ‘‘(A) IN GENERAL.—A provider-sponsored

22 organization that seeks to offer a MedicarePlus

23 plan in a State may apply for a waiver of the

24 requirement of paragraph (1) for that organiza25 tion operating in that State.
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1 ‘‘(B) STANDARD.—The Secretary shall act

2 on such an application within 60 days after the

3 date it is filed and shall grant such a waiver for

4 an organization with respect to a State if the

5 Secretary determines that—

6 ‘‘(i) the State has failed to complete ac7 tion on a licensing application of the orga8 nization within 90 days of the date of the

9 State’s receipt of the completed application;

10 or

11 ‘‘(ii) the State denied such a licensing

12 application and—

13 ‘‘(I) the State’s licensing stand14 ards or review process imposes any re15 quirements, procedures, or other stand16 ards to such organizations that are not

17 generally applicable to any other enti18 ties engaged in substantially similar

19 business,

20 ‘‘(II) such standards or review

21 process applies solvency standards for

22 the organization and the State is not

23 approved under subsection (e)(2)(B), or

24 ‘‘(III) the State has used solvency

25 standards to deny or discriminate
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1 against such an organization that has

2 been provided a certificate of solvency

3 under subsection (e)(2).

4 No period before the date of the enactment of this

5 section shall be included in determining the 90-

6 day period described in clause (i).

7 ‘‘(C) TREATMENT OF WAIVER.—In the case

8 of a waiver granted under this paragraph for a

9 provider-sponsored organization—

10 ‘‘(i) the waiver shall be effective for a

11 36-month period, except it may be renewed

12 based on a subsequent application filed dur13 ing the last 6 months of such period,

14 ‘‘(ii) the waiver is conditioned upon

15 the pendency of the licensure application

16 during the period the waiver is in effect,

17 and

18 ‘‘(iii) any provisions of State law

19 which relate to the licensing of the organiza20 tion and which prohibit the organization

21 from providing coverage pursuant to a con22 tract under this part shall be superseded.

23 Nothing in this subparagraph shall be construed

24 as limiting the number of times such a waiver

25 may be renewed.
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1 ‘‘(D) CONSTRUCTION.—Nothing in this

2 paragraph shall be construed as affecting the op3 eration of section 514 of the Employee Retire4 ment Income Security Act of 1974.

5 ‘‘(5) EXCEPTION IF REQUIRED TO OFFER MORE

6 THAN MEDICAREPLUS PLANS.—Paragraph (1) shall

7 not apply to a MedicarePlus organization in a State

8 if the State requires the organization, as a condition

9 of licensure, to offer any product or plan other than

10 a MedicarePlus plan.

11 ‘‘(6) EXCEPTION IN CASES OF UNREASONABLE

12 BARRIERS TO MARKET ENTRY.—

13 ‘‘(A) IN GENERAL.—A MedicarePlus organi14 zation that seeks to offer a MedicarePlus plan in

15 a State may apply for a waiver of the require16 ment of paragraph (1) for that organization op17 erating in that State.

18 ‘‘(B) STANDARD.—The Secretary shall act

19 on such an application within 60 days after the

20 date it is filed and shall grant such a waiver for

21 an organization with respect to a State if the

22 Secretary determines that—

23 ‘‘(i) the State (I) denied such a licens24 ing application or (II) unreasonably de25 layed in acting upon the application, and
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1 ‘‘(ii) the State’s licensing standards or

2 review process imposes unreasonable bar3 riers to market entry, including through the

4 imposition of any requirements, procedures,

5 or other standards to such organizations

6 that are not generally applicable to any

7 other entities engaged in substantially simi8 lar business.

9 ‘‘(C) APPLICATION OF CERTAIN RULES.—

10 The provisions of subparagraphs (C) and (D) of

11 paragraph (4) shall apply to this paragraph in

12 the same manner as they apply under such

13 paragraph, except that for this purpose any ref14 erence in paragraph (4)(C)(i) to 36-month pe15 riod is deemed a reference to a 24-month period.

16 ‘‘(b) PREPAID PAYMENT.—A MedicarePlus organiza17 tion shall be compensated (except for deductibles, coinsur18 ance, and copayments) for the provision of health care serv19 ices to enrolled members by a payment which is paid on

20 a periodic basis without regard to the date the health care

21 services are provided and which is fixed without regard to

22 the frequency, extent, or kind of health care service actually

23 provided to a member.

24 ‘‘(c) ASSUMPTION OF FULL FINANCIAL RISK.—The

25 MedicarePlus organization shall assume full financial risk
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1 on a prospective basis for the provision of the health care

2 services (except, at the election of the organization, hospice

3 care) for which benefits are required to be provided under

4 section 1852(a)(1), except that the organization—

5 ‘‘(1) may obtain insurance or make other ar6 rangements for the cost of providing to any enrolled

7 member such services the aggregate value of which ex8 ceeds $5,000 in any year,

9 ‘‘(2) may obtain insurance or make other ar10 rangements for the cost of such services provided to its

11 enrolled members other than through the organization

12 because medical necessity required their provision be13 fore they could be secured through the organization,

14 ‘‘(3) may obtain insurance or make other ar15 rangements for not more than 90 percent of the

16 amount by which its costs for any of its fiscal years

17 exceed 115 percent of its income for such fiscal year,

18 and

19 ‘‘(4) may make arrangements with physicians or

20 other health professionals, health care institutions, or

21 any combination of such individuals or institutions

22 to assume all or part of the financial risk on a pro23 spective basis for the provision of basic health services

24 by the physicians or other health professionals or

25 through the institutions.
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1 In the case of a MedicarePlus organization that is a union

2 sponsor, Taft-Hartley sponsor, or a qualified association

3 sponsor, this subsection shall not apply with respect to

4 MedicarePlus plans offered by such organization and issued

5 by an organization to which subsection (b)(1) applies or

6 by a provider-sponsored organization (as defined in section

7 1854(a)).

8 ‘‘(d) PROVISION AGAINST RISK OF INSOLVENCY.—

9 ‘‘(1) IN GENERAL.—Each MedicarePlus organi10 zation shall meet standards under section 1856 relat11 ing to the financial solvency and capital adequacy of

12 the organization and including provision to prevent

13 enrollees from being held liable to any person or en14 tity for the plan sponsor’s debts in the event of the

15 plan sponsor’s insolvency. Such standards shall take

16 into account the nature and type of MedicarePlus

17 plans offered by the organization.

18 ‘‘(2) TREATMENT OF PROVIDER-SPONSORED OR19 GANIZATIONS.—

20 ‘‘(A) IN GENERAL.—In the case of an entity

21 that is a provider-sponsored organization that is

22 operating—

23 ‘‘(i) in a State approved under sub24 paragraph (B), the organization shall meet
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1 the standards described in paragraph (1)

2 through licensure by the State, or

3 ‘‘(ii) in a State that is not so ap4 proved, the organization shall meet the

5 standards described in paragraph (1)

6 through application and certification licen7 sure by the Secretary.

8 ‘‘(B) APPROVED STATES.—

9 ‘‘(i) APPLICATION PROCESS.—For pur10 poses of subparagraph (A), the Secretary

11 shall establish a process under which a

12 State may apply to the Secretary for a de13 termination that the State is applying to

14 provider-sponsored organizations, through

15 its process for licensing provider-sponsored

16 organizations, solvency standards that are

17 identical with the solvency standards estab18 lished under section 1856(c) for such orga19 nizations.

20 ‘‘(ii) DETERMINATION.—The Secretary

21 shall approve such a State if the Secretary

22 determines that the State is so applying

23 such standards. If the Secretary denies such

24 an approval, the State may reapply for

25 such a determination.
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1 ‘‘(iii) PUBLICATION.—The Secretary

2 shall publish a list of States that are ap3 proved under this subparagraph.

4 ‘‘(3) TREATMENT OF UNION AND TAFT-HARTLEY

5 SPONSORS.—An entity that is a union sponsor or a

6 Taft-Hartley sponsor is deemed to meet the require7 ment of paragraph (1).

8 ‘‘(4) TREATMENT OF CERTAIN QUALIFIED ASSO9 CIATION SPONSORS.—An entity that is a qualified as10 sociation sponsor is deemed to meet the requirement

11 of paragraph (1) with respect to MedicarePlus plans

12 offered by such association and issued by an organi13 zation to which subsection (b)(1) applies or by a pro14 vider-sponsored organization.

15 ‘‘(e) PROVIDER-SPONSORED ORGANIZATION DE16 FINED.—

17 ‘‘(1) IN GENERAL.—In this part, the term ‘pro18 vider-sponsored organization’ means a public or pri19 vate entity—

20 ‘‘(A) that is established or organized by a

21 health care provider, or group of affiliated health

22 care providers,

23 ‘‘(B) that provides a substantial proportion

24 (as defined by the Secretary) of the health care

25 items and services under the contract under this
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1 part directly through the provider or affiliated

2 group of providers, and

3 ‘‘(C) with respect to which those affiliated

4 providers that share, directly or indirectly, sub5 stantial financial risk with respect to the provi6 sion of such items and services have at least a

7 majority financial interest in the entity.

8 ‘‘(2) SUBSTANTIAL PROPORTION.—In defining

9 what is a ‘substantial proportion’ for purposes of

10 paragraph (1)(A), the Secretary—

11 ‘‘(A) shall take into account the need for

12 such an organization to assume responsibility for

13 a substantial proportion of services in order to

14 assure financial stability and the practical dif15 ficulties in such an organization integrating a

16 very wide range of service providers; and

17 ‘‘(B) may vary such proportion based upon

18 relevant differences among organizations, such as

19 their location in an urban or rural area.

20 ‘‘(3) AFFILIATION.—For purposes of this sub21 section, a provider is ‘affiliated’ with another pro22 vider if, through contract, ownership, or otherwise—

23 ‘‘(A) one provider, directly or indirectly,

24 controls, is controlled by, or is under common

25 control with the other,
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1 ‘‘(B) both providers are part of a controlled

2 group of corporations under section 1563 of the

3 Internal Revenue Code of 1986, or

4 ‘‘(C) both providers are part of an affiliated

5 service group under section 414 of such Code.

6 ‘‘(4) CONTROL.—For purposes of paragraph (3),

7 control is presumed to exist if one party, directly or

8 indirectly, owns, controls, or holds the power to vote,

9 or proxies for, not less than 51 percent of the voting

10 rights or governance rights of another.

11 ‘‘(5) HEALTH CARE PROVIDER DEFINED.—In

12 this subsection and subsection (f), the term ‘health

13 care provider’ means—

14 ‘‘(A) any individual who is engaged in the

15 delivery of health care services in a State and

16 who is required by State law or regulation to be

17 licensed or certified by the State to engage in the

18 delivery of such services in the State, and

19 ‘‘(B) any entity that is engaged in the de20 livery of health care services in a State and that,

21 if it is required by State law or regulation to be

22 licensed or certified by the State to engage in the

23 delivery of such services in the State, is so li24 censed.
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1 ‘‘(6) REGULATIONS.—The Secretary shall issue

2 regulations to carry out this subsection.

3 ‘‘(f) ORGANIZATIONS TREATED AS MEDICAREPLUS

4 ORGANIZATIONS DURING TRANSITION.—Any of the follow5 ing organizations shall be considered to qualify as a

6 MedicarePlus organization for contract years beginning be7 fore January 1, 1998:

8 ‘‘(1) HEALTH MAINTENANCE ORGANIZATIONS.—

9 An organization that is organized under the laws of

10 any State and that is a qualified health maintenance

11 organization (as defined in section 1310(d) of the

12 Public Health Service Act), an organization recog13 nized under State law as a health maintenance orga14 nization, or a similar organization regulated under

15 State law for solvency in the same manner and to the

16 same extent as such a health maintenance organiza17 tion.

18 ‘‘(2) LICENSED INSURERS.—An organization

19 that is organized under the laws of any State and—

20 ‘‘(A) is licensed by a State agency as an in21 surer for the offering of health benefit coverage,

22 or

23 ‘‘(B) is licensed by a State agency as a

24 service benefit plan,
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1 but only for individuals residing in an area in which

2 the organization is licensed to offer health insurance

3 coverage.

4 ‘‘(3) CURRENT RISK-CONTRACTORS.—An organi5 zation that is an eligible organization (as defined in

6 section 1876(b)) and that has a risk-sharing contract

7 in effect under section 1876 as of the date of the en8 actment of this section.

9 ‘‘PAYMENTS TO MEDICAREPLUS ORGANIZATIONS

10 ‘‘SEC. 1854. (a) PAYMENTS TO ORGANIZATIONS.—

11 ‘‘(1) MONTHLY PAYMENTS.—

12 ‘‘(A) IN GENERAL.—Under a contract under

13 section 1857 and subject to subsections (e) and

14 (f), the Secretary shall make monthly payments

15 under this section in advance to each

16 MedicarePlus organization, with respect to cov17 erage of an individual under this part in a

18 MedicarePlus payment area for a month, in an

amount equal to 1 19 ⁄12 of the annual MedicarePlus

20 capitation rate (as calculated under subsection

21 (c)) with respect to that individual for that area,

22 adjusted for such risk factors as age, disability

23 status, gender, institutional status, and such

24 other factors as the Secretary determines to be

25 appropriate, so as to ensure actuarial equiva26 lence. The Secretary may add to, modify, or sub-
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1 stitute for such factors, if such changes will im2 prove the determination of actuarial equivalence.

3 ‘‘(B) SPECIAL RULE FOR END-STAGE RENAL

4 DISEASE.—The Secretary shall establish a sepa5 rate rate of payment to a MedicarePlus organi6 zation with respect to any individual determined

7 to have end-stage renal disease and enrolled in

8 a MedicarePlus plan of the organization. Such

9 rate of payment shall be actuarially equivalent

10 to rates paid to other enrollees in the

11 MedicarePlus payment area (or such other area

12 as specified by the Secretary).

13 ‘‘(2) ADJUSTMENT TO REFLECT NUMBER OF EN14 ROLLEES.—

15 ‘‘(A) IN GENERAL.—The amount of pay16 ment under this subsection may be retroactively

17 adjusted to take into account any difference be18 tween the actual number of individuals enrolled

19 with an organization under this part and the

20 number of such individuals estimated to be so

21 enrolled in determining the amount of the ad22 vance payment.

23 ‘‘(B) SPECIAL RULE FOR CERTAIN ENROLL24 EES.—
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1 ‘‘(i) IN GENERAL.—Subject to clause

2 (ii), the Secretary may make retroactive ad3 justments under subparagraph (A) to take

4 into account individuals enrolled during the

5 period beginning on the date on which the

6 individual enrolls with a MedicarePlus or7 ganization under a plan operated, spon8 sored, or contributed to by the individual’s

9 employer or former employer (or the em10 ployer or former employer of the individ11 ual’s spouse) and ending on the date on

12 which the individual is enrolled in the orga13 nization under this part, except that for

14 purposes of making such retroactive adjust15 ments under this subparagraph, such period

16 may not exceed 90 days.

17 ‘‘(ii) EXCEPTION.—No adjustment may

18 be made under clause (i) with respect to

19 any individual who does not certify that the

20 organization provided the individual with

21 the disclosure statement described in section

22 1852(c) at the time the individual enrolled

23 with the organization.

24 ‘‘(b) ANNUAL ANNOUNCEMENT OF PAYMENT RATES.—
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1 ‘‘(1) ANNUAL ANNOUNCEMENT.—The Secretary

2 shall annually determine, and shall announce (in a

3 manner intended to provide notice to interested par4 ties) not later than August 1 before the calendar year

5 concerned—

6 ‘‘(A) the annual MedicarePlus capitation

7 rate for each MedicarePlus payment area for the

8 year, and

9 ‘‘(B) the risk and other factors to be used in

10 adjusting such rates under subsection (a)(1)(A)

11 for payments for months in that year.

12 ‘‘(2) ADVANCE NOTICE OF METHODOLOGICAL

13 CHANGES.—At least 45 days before making the an14 nouncement under paragraph (2) for a year, the Sec15 retary shall provide for notice to MedicarePlus orga16 nizations of proposed changes to be made in the meth17 odology from the methodology and assumptions used

18 in the previous announcement and shall provide such

19 organizations an opportunity to comment on such

20 proposed changes.

21 ‘‘(3) EXPLANATION OF ASSUMPTIONS.—In each

22 announcement made under paragraph (1) for a year,

23 the Secretary shall include an explanation of the as24 sumptions and changes in methodology used in the

25 announcement in sufficient detail so that
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1 MedicarePlus organizations can compute monthly ad2 justed MedicarePlus capitation rates for individuals

3 in each MedicarePlus payment area which is in whole

4 or in part within the service area of such an organi5 zation.

6 ‘‘(c) CALCULATION OF ANNUAL MEDICAREPLUS CAPI7 TATION RATES.—

8 ‘‘(1) IN GENERAL.—For purposes of this part,

9 the annual MedicarePlus capitation rate, for a

10 MedicarePlus payment area for a contract year con11 sisting of a calendar year, is equal to the greatest of

12 the following:

13 ‘‘(A) BLENDED CAPITATION RATE.—The

14 sum of—

15 ‘‘(i) area-specific percentage for the

16 year (as specified under paragraph (2) for

17 the year) of the annual area-specific

18 MedicarePlus capitation rate for the year

19 for the MedicarePlus payment area, as de20 termined under paragraph (3), and

21 ‘‘(ii) national percentage (as specified

22 under paragraph (2) for the year) of the

23 input-price-adjusted annual national

24 MedicarePlus capitation rate for the year,

25 as determined under paragraph (4),
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1 multiplied by a budget neutrality adjustment

2 factor determined under paragraph (5).

3 ‘‘(B) MINIMUM AMOUNT.—

4 ‘‘(i) For 1996, $300.

5 ‘‘(ii) For 1997, $350.

6 ‘‘(iii) For a succeeding year, is the

7 minimum amount specified in this sub8 paragraph for the preceding year increased

9 by national average per capita growth per10 centage, specified under paragraph (6) for

11 that succeeding year.

12 ‘‘(C) MINIMUM INCREASE OF 2 PERCENT

13 OVER PREVIOUS YEAR’S RATE.—

14 ‘‘(i) For 1996, 102 percent of the an15 nual per capita rate of payment for 1995

16 determined under section 1876(a)(1)(C) for

17 the MedicarePlus payment area.

18 ‘‘(ii) For a subsequent year, 102 per19 cent of the annual MedicarePlus capitation

20 rate under this subsection for the area for

21 the previous year.

22 ‘‘(2) AREA-SPECIFIC AND NATIONAL PERCENT23 AGES.—For purposes of paragraph (1)(A)—
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1 ‘‘(A) for 1996 and 1997, the ‘area-specific

2 percentage’ is 90 percent and the ‘national per3 centage’ is 10 percent,

4 ‘‘(B) for 1998, the ‘area-specific percentage’

5 is 85 percent and the ‘national percentage’ is 15

6 percent,

7 ‘‘(C) for 1999, the ‘area-specific percentage’

8 is 80 percent and the ‘national percentage’ is 20

9 percent,

10 ‘‘(D) for 2000, the ‘area-specific percentage’

11 is 75 percent and the ‘national percentage’ is 25

12 percent, and

13 ‘‘(E) for a year after 2000, the ‘area-specific

14 percentage’ is 70 percent and the ‘national per15 centage’ is 30 percent.

16 ‘‘(3) ANNUAL AREA-SPECIFIC MEDICAREPLUS

17 CAPITATION RATE.—For purposes of paragraph

18 (1)(A), the annual area-specific MedicarePlus capita19 tion rate for a MedicarePlus payment area—

20 ‘‘(A) for 1996 is the annual per capita rate

21 of payment for 1995 determined under section

22 1876(a)(1)(C) for the MedicarePlus payment

23 area, increased by the national average per cap24 ita growth percentage for 1996 (as defined in

25 paragraph (6)); or
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1 ‘‘(B) for a subsequent year is the annual

2 area-specific MedicarePlus capitation rate for

3 the previous year determined under this para4 graph for the MedicarePlus payment area, in5 creased by the national average per capita

6 growth percentage for such subsequent year.

7 ‘‘(4) INPUT-PRICE-ADJUSTED ANNUAL NATIONAL

8 MEDICAREPLUS CAPITATION RATE.—

9 ‘‘(A) IN GENERAL.—For purposes of para10 graph (1)(A), the input-price-adjusted annual

11 national MedicarePlus capitation rate for a

12 MedicarePlus payment area for a year is equal

13 to the sum, for all the types of medicare services

14 (as classified by the Secretary), of the plan (for

15 each such type) of—

16 ‘‘(i) the national standardized annual

17 MedicarePlus capitation rate (determined

18 under subparagraph (B)) for the year,

19 ‘‘(ii) the proportion of such rate for the

20 year which is attributable to such type of

21 services, and

22 ‘‘(iii) an index that reflects (for that

23 year and that type of services) the relative

24 input price of such services in the area com-
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1 pared to the national average input price of

2 such services.

3 In applying clause (iii), the Secretary shall, sub4 ject to subparagraph (C), apply those indices

5 under this title that are used in applying (or up6 dating) national payment rates for specific areas

7 and localities.

8 ‘‘(B) NATIONAL STANDARDIZED ANNUAL

9 MEDICAREPLUS CAPITATION RATE.—In subpara10 graph (A)(i), the ‘national standardized annual

11 MedicarePlus capitation rate’ for a year is equal

12 to—

13 ‘‘(i) the sum (for all MedicarePlus pay14 ment areas) of the product of (I) the annual

15 area-specific MedicarePlus capitation rate

16 for that year for the area under paragraph

17 (3), and (II) the average number of medi18 care beneficiaries residing in that area in

19 the year; divided by

20 ‘‘(ii) the total average number of medi21 care beneficiaries residing in all the

22 MedicarePlus payment areas for that year.

23 ‘‘(C) SPECIAL RULES FOR 1996.—In apply24 ing this paragraph for 1996—
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1 ‘‘(i) medicare services shall be divided

2 into 2 types of services: part A services and

3 part B services;

4 ‘‘(ii) the proportions described in sub5 paragraph (A)(ii) for such types of services

6 shall be—

7 ‘‘(I) for part A services, the ratio

8 (expressed as a percentage) of the aver9 age annual per capita rate of payment

10 for the area for part A for 1995 to the

11 total average annual per capita rate of

12 payment for the area for parts A and

13 B for 1995, and

14 ‘‘(II) for part B services, 100 per15 cent minus the ratio described in

16 subclause (I);

17 ‘‘(iii) for the part A services, 70 per18 cent of payments attributable to such serv19 ices shall be adjusted by the index used

20 under section 1886(d)(3)(E) to adjust pay21 ment rates for relative hospital wage levels

22 for hospitals located in the payment area

23 involved;

24 ‘‘(iv) for part B services—
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1 ‘‘(I) 66 percent of payments at2 tributable to such services shall be ad3 justed by the index of the geographic

4 area factors under section 1848(e) used

5 to adjust payment rates for physicians’

6 services furnished in the payment area,

7 and

8 ‘‘(II) of the remaining 34 percent

9 of the amount of such payments, 70

10 percent shall be adjusted by the index

11 described in clause (iii);

12 ‘‘(v) the index values shall be computed

13 based only on the beneficiary population

14 who are 65 years of age or older who are

15 not determined to have end stage renal dis16 ease.

17 The Secretary may continue to apply the rules

18 described in this subparagraph (or similar rules)

19 for 1997.

20 ‘‘(5) BUDGET NEUTRALITY ADJUSTMENT FAC21 TOR.—For each year, the Secretary shall compute a

22 budget neutrality adjustment factor so that the aggre23 gate of the payments under this part shall not exceed

24 the aggregate payments that would have been made

25 under this part if the area-specific percentage for the
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1 year had been 100 percent and the national percent2 age had been 0 percent.

3 ‘‘(6) NATIONAL AVERAGE PER CAPITA GROWTH

4 PERCENTAGE DEFINED.—In this part, the ‘national

5 average per capita growth percentage’ for—

6 ‘‘(A) 1996 is 8.0 percent,

7 ‘‘(B) 1997 is 3.8 percent,

8 ‘‘(C) 1998 is 4.6 percent,

9 ‘‘(D) 1999 is 4.3 percent,

10 ‘‘(E) 2000 is 3.8 percent,

11 ‘‘(F) 2001 is 5.5 percent,

12 ‘‘(G) 2002 is 5.6 percent, and

13 ‘‘(H) each subsequent year is 5.0 percent.

14 ‘‘(d) MEDICAREPLUS PAYMENT AREA DEFINED.—

15 ‘‘(1) IN GENERAL.—In this part, except as pro16 vided in paragraph (3), the term ‘MedicarePlus pay17 ment area’ means a county, or equivalent area speci18 fied by the Secretary.

19 ‘‘(2) RULE FOR ESRD BENEFICIARIES.—In the

20 case of individuals who are determined to have end

21 stage renal disease, the MedicarePlus payment area

22 shall be each State.

23 ‘‘(3) GEOGRAPHIC ADJUSTMENT.—

24 ‘‘(A) IN GENERAL.—Upon request of a State

25 for a contract year (beginning after 1996) made
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1 at least 7 months before the beginning of the

2 year, the Secretary shall make a geographic ad3 justment to a MedicarePlus payment areas in

4 the State otherwise determined under paragraph

5 (1)—

6 ‘‘(i) to a single statewide MedicarePlus

7 payment area,

8 ‘‘(ii) to the metropolitan based system

9 described in subparagraph (C), or

10 ‘‘(iii) to consolidating into a single

11 MedicarePlus payment area noncontinuous

12 counties (or equivalent areas described in

13 paragraph (1)) within a State.

14 Such adjustment shall be effective for payments

15 for months beginning with January of the year

16 following the year in which the request is re17 ceived.

18 ‘‘(B) BUDGET NEUTRALITY ADJUSTMENT.—

19 In the case of a State requesting an adjustment

20 under this paragraph, the Secretary shall adjust

21 the payment rates otherwise established under

22 this paragraph for MedicarePlus payment areas

23 in the State in a manner so that the aggregate

24 of the payments under this section in the State

25 shall not exceed the aggregate payments that
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1 would have been made under this section for

2 MedicarePlus payment areas in the State in the

3 absence of the adjustment under this paragraph.

4 ‘‘(C) METROPOLITAN BASED SYSTEM.—The

5 metropolitan based system described in this sub6 paragraph is one in which—

7 ‘‘(i) all the portions of each metropoli8 tan statistical area in the State or in the

9 case of a consolidated metropolitan statis10 tical area, all of the portions of each pri11 mary metropolitan statistical area within

12 the consolidated area within the State, are

13 treated as a single MedicarePlus payment

14 area, and

15 ‘‘(ii) all areas in the State that do not

16 fall within a metropolitan statistical area

17 are treated as a single MedicarePlus pay18 ment area.

19 ‘‘(D) AREAS.—In subparagraph (C), the

20 terms ‘metropolitan statistical area’, ‘consoli21 dated metropolitan statistical area’, and ‘pri22 mary metropolitan statistical area’ mean any

23 area designated as such by the Secretary of Com24 merce.
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1 ‘‘(e) SPECIAL RULES FOR INDIVIDUALS ELECTING

2 HIGH DEDUCTIBLE PLANS.—

3 ‘‘(1) IN GENERAL.—In the case of an individual

4 who has elected a high deductible plan, notwithstand5 ing the preceding provisions of this section—

6 ‘‘(A) the amount of the monthly payment to

7 the MedicarePlus organization offering the high

8 deductible plan shall not exceed the monthly pre9 mium for the plan, and

10 ‘‘(B) subject to paragraph (2), the difference

11 between the amount of payment that would oth12 erwise be made and the amount of payment to

13 such organization shall be made directly into a

14 High Deductible MedicarePlus MSA established

15 (and, if applicable, designated) by the individual

16 under paragraph (2).

17 ‘‘(2) ESTABLISHMENT AND DESIGNATION OF

18 MEDICAREPLUS MEDICAL SAVINGS ACCOUNT AS RE19 QUIREMENT FOR PAYMENT OF CONTRIBUTION.—In the

20 case of an individual who has elected coverage under

21 a high deductible plan, no payment shall be made

22 under paragraph (1)(B) on behalf of an individual

23 for a month unless the individual—

24 ‘‘(A) has established before the beginning of

25 the month (or by such other deadline as the Sec-
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1 retary may specify) a High Deductible

2 MedicarePlus MSA (as defined in section

3 137(b)(2) of the Internal Revenue Code of 1986),

4 and

5 ‘‘(B) if the individual has established more

6 than one High Deductible MedicarePlus MSA,

7 has designated one of such accounts as the indi8 vidual’s High Deductible MedicarePlus MSA for

9 purposes of this part.

10 Under rules under this section, such an individual

11 may change the designation of such account under

12 subparagraph (B) for purposes of this part.

13 ‘‘(3) LUMP SUM DEPOSIT OF MEDICAL SAVINGS

14 ACCOUNT CONTRIBUTION.—In the case of an individ15 ual electing a high deductible plan effective beginning

16 with a month in a year, the amount of the contribu17 tion to the High Deductible MedicarePlus MSA on be18 half of the individual for that month and all succes19 sive months in the year shall be deposited during that

20 first month. In the case of a termination of such an

21 election as of a month before the end of a year, the

22 Secretary shall provide for a procedure for the recov23 ery of deposits attributable to the remaining months

24 in the year.
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1 ‘‘(4) PERMITTING CONTRIBUTIONS INTO

2 MEDICAREPLUS MSA.—Effective January 1, 1997, if a

3 member of a Federally-qualified health maintenance

4 organization certifies that a Rebate MedicarePlus

5 MSA (as defined in section 137(c) of the Internal

6 Revenue Code of 1986) has been established for the

7 benefit of such member, the health maintenance orga8 nization may reduce the basic health services pay9 ment otherwise determined under otherwise applicable

10 law by requiring the payment of a deductible by the

11 member for basic health services.

12 ‘‘(f) PAYMENTS OF REBATES.—

13 ‘‘(1) IN GENERAL.—If the amount of the monthly

14 premium for a MedicarePlus plan (other than a high

15 deductible plan) for an MedicarePlus payment area

for a year is less than 1 16 ⁄12 of the annual MedicarePlus

17 capitation rate applied under this section 1854 for

18 the area and year involved, at the election of an indi19 vidual enrolled under the plan the Secretary shall ei20 ther—

21 ‘‘(A) in the case of an individual who has

22 a Rebate MedicarePlus MSA account (as defined

23 in section 137(b)(3) of the Internal Revenue Code

24 of 1986), to deposit 100 percent of such difference
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1 in such an account specified by the individual;

2 or

3 ‘‘(B)(i) pay to the MedicarePlus organiza4 tion on behalf of such individual the monthly

5 amount equal to 100 percent of such difference

6 up to the amount of the premium amount of

7 such individual for supplemental benefits de8 scribed in section 1895H(b),

9 ‘‘(ii) pay to such individual an amount

10 equal to 75 percent of the remainder of such dif11 ference, and

12 ‘‘(iii) deposit any remainder of such dif13 ference in the Federal Hospital Insurance Trust

14 Fund.

15 ‘‘(2) TIME FOR PAYMENT.—

16 ‘‘(A) IN GENERAL.—Subject to subpara17 graph (B), payments and deposits described in

18 paragraph (1) shall be made on a monthly basis.

19 ‘‘(B) CASH REBATES.—A rebate under

20 paragraph (1)(B)(ii) shall be paid as of the close

21 of the calendar year to which the enrollment ap22 plied.

23 ‘‘(g) PAYMENTS FROM TRUST FUND.—The payment to

24 a MedicarePlus organization under this section for individ25 uals enrolled under this part with the organization, and
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1 payments to a High Deductible or Rebate MedicarePlus

2 MSA under subsection (e)(1)(B) or subsection (f), shall be

3 made from the Federal Hospital Insurance Trust Fund and

4 the Federal Supplementary Medical Insurance Trust Fund

5 in such proportion as the Secretary determines reflects the

6 relative weight that benefits under part A and under part

7 B represents of the actuarial value of the total benefits

8 under this title.

9 ‘‘(h) SPECIAL RULE FOR CERTAIN INPATIENT HOS10 PITAL STAYS.—In the case of an individual who is receiv11 ing inpatient hospital services from a subsection (d) hos12 pital (as defined in section 1886(d)(1)(B)) as of the effective

13 date of the individual’s—

14 ‘‘(1) election under this part of a MedicarePlus

15 plan offered by a MedicarePlus organization—

16 ‘‘(A) payment for such services until the

17 date of the individual’s discharge shall be made

18 under this title through the MedicarePlus plan or

19 the Medicare fee-for-service program option de20 scribed in section 1851(a)(1)(A) (as the case may

21 be) elected before the election with such organiza22 tion,

23 ‘‘(B) the elected organization shall not be fi24 nancially responsible for payment for such serv-
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1 ices until the date after the date of the individ2 ual’s discharge, and

3 ‘‘(C) the organization shall nonetheless be

4 paid the full amount otherwise payable to the or5 ganization under this part; or

6 ‘‘(2) termination of election with respect to a

7 MedicarePlus organization under this part—

8 ‘‘(A) the organization shall be financially

9 responsible for payment for such services after

10 such date and until the date of the individual’s

11 discharge,

12 ‘‘(B) payment for such services during the

13 stay shall not be made under section 1886(d) or

14 by any succeeding MedicarePlus organization,

15 and

16 ‘‘(C) the terminated organization shall not

17 receive any payment with respect to the individ18 ual under this part during the period the indi19 vidual is not enrolled.

20 ‘‘PREMIUMS AND REBATES

21 ‘‘SEC. 1855. (a) SUBMISSION AND CHARGING OF PRE22 MIUMS.—

23 ‘‘(1) IN GENERAL.—Subject to paragraph (3),

24 each MedicarePlus organization shall file with the

25 Secretary each year, in a form and manner and at

26 a time specified by the Secretary—
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1 ‘‘(A) the amount of the monthly premium

2 for coverage for services under section 1852(a)

3 under each MedicarePlus plan it offers under

4 this part in each MedicarePlus payment area (as

5 defined in section 1854(d)) in which the plan is

6 being offered; and

7 ‘‘(B) the enrollment capacity in relation to

8 the plan in each such area.

9 ‘‘(2) TERMINOLOGY.—In this part—

10 ‘‘(A) the term ‘monthly premium’ means,

11 with respect to a MedicarePlus plan offered by a

12 MedicarePlus organization, the monthly pre13 mium filed under paragraph (1), not taking into

14 account the amount of any payment made to15 ward the premium under section 1854; and

16 ‘‘(B) the term ‘net monthly premium’

17 means, with respect to such a plan and an indi18 vidual enrolled with the plan, the premium (as

19 defined in subparagraph (A)) for the plan re20 duced by the amount of payment made toward

21 such premium under section 1854.

22 ‘‘(3) LIMITATION ON PORTION OF MONTHLY PRE23 MIUM ATTRIBUTABLE TO REQUIRED COVERAGE.—In

24 no case may the portion of the monthly premium for

25 a MedicarePlus plan for an area and year attrib-
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1 utable to required services under section 1852(a)(1)

2 exceed the adjusted community rate for the plan (as

3 defined in subsection (f)(5)).

4 ‘‘(b) NET MONTHLY PREMIUM.—The amount of the net

5 monthly premium charged by a MedicarePlus organization

6 for a MedicarePlus plan offered in a MedicarePlus payment

7 area to an individual under this part shall be equal to the

8 amount (if any) by which—

9 ‘‘(1) the amount of the monthly premium for the

10 plan for the period involved, exceeds

‘‘(2) 1 11 ⁄12 of the annual MedicarePlus capitation

12 rate applied under section 1854 for the area and year

13 involved.

14 ‘‘(c) UNIFORM PREMIUM.—The monthly premium and

15 net monthly premium (including rebates offered) by a

16 MedicarePlus organization under this part may not vary

17 among individuals who reside in the same MedicarePlus

18 payment area.

19 ‘‘(d) TERMS AND CONDITIONS OF IMPOSING PRE20 MIUMS.—Each MedicarePlus organization shall permit the

21 payment of net monthly premiums on a monthly basis and

22 may terminate election of individuals for a MedicarePlus

23 plan for failure to make premium payments only in accord24 ance with section 1851(g)(3)(B)(i).
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1 ‘‘(e) RELATION OF PREMIUMS AND COST-SHARING TO

2 BENEFITS.—In no case may the portion of a MedicarePlus

3 organization’s monthly premium and the actuarial value

4 of its deductibles, coinsurance, and copayments charged for

5 (to the extent attributable to the required benefits described

6 in section 1852(a)(1) and not counting any amount attrib7 utable to balance billing) to individuals who are enrolled

8 under this part with the organization exceed the actuarial

9 value of the coinsurance and deductibles that would be ap10 plicable on the average to individuals enrolled under this

11 part with the organization (or, if the Secretary finds that

12 adequate data are not available to determine that actuarial

13 value, the actuarial value of the coinsurance and deductibles

14 applicable on the average to individuals in the area, in the

15 State, or in the United States, eligible to enroll under this

16 part with the organization, or other appropriate data) and

17 entitled to benefits under part A and enrolled under part

18 B if they were not members of a MedicarePlus organization.

19 ‘‘(f) REQUIREMENT FOR ADDITIONAL BENEFITS, RE20 BATES, OR BOTH.—

21 ‘‘(1) REQUIREMENT.—

22 ‘‘(A) IN GENERAL.—Each MedicarePlus or23 ganization (in relation to a MedicarePlus plan

24 it offers) shall provide that if there is an excess

25 amount (as defined in subparagraph (B)) for the
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1 plan for a contract year, subject to the succeed2 ing provisions of this subsection, the organiza3 tion shall provide to individuals such additional

4 benefits (as the organization may specify), a

5 monetary rebate (paid on a monthly basis), or a

6 combination thereof, in a total value which is at

7 least equal to the adjusted excess amount (as de8 fined in subparagraph (C)).

9 ‘‘(B) EXCESS AMOUNT.—For purposes of

10 this paragraph, the ‘excess amount’, for an orga11 nization for a plan, is the amount (if any) by

12 which—

13 ‘‘(i) the average of the capitation pay14 ments made to the organization under sec15 tion 1854 for the plan at the beginning of

16 contract year, exceeds

17 ‘‘(ii) the actuarial value of the required

18 benefits described in section 1852(a)(1)

19 under the plan for individuals under this

20 part, as determined based upon an adjusted

21 community rate described in paragraph (5)

22 (as reduced for the actuarial value of the co23 insurance and deductibles under parts A

24 and B).
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1 ‘‘(C) ADJUSTED EXCESS AMOUNT.—For

2 purposes of this paragraph, the ‘adjusted excess

3 amount’, for an organization for a plan, is the

4 excess amount reduced to reflect any amount

5 withheld and reserved for the organization for

6 the year under paragraph (3).

7 ‘‘(D) NO APPLICATION TO HIGH DEDUCT8 IBLE PLANS.—Subparagraph (A) shall not apply

9 to a high deductible plan.

10 ‘‘(E) UNIFORM APPLICATION.—This para11 graph shall be applied uniformly for all enrollees

12 for a plan in a MedicarePlus payment area.

13 ‘‘(F) CONSTRUCTION.—Nothing in this sub14 section shall be construed as preventing a

15 MedicarePlus organization from providing health

16 care benefits that are in addition to the benefits

17 otherwise required to be provided under this

18 paragraph and from imposing a premium for

19 such additional benefits.

20 ‘‘(2) RULES IN RELATION TO REBATES.—To the

21 extent that the adjusted excess amount for a plan ex22 ceeds the value of additional benefits provided under

23 subparagraph (A) by the MedicarePlus organization

24 in relation to the plan for a month, then the organi-
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1 zation shall provide for payment of the amount of

2 such excess as follows:

3 ‘‘(A) REBATE MEDICAREPLUS MSA.—If the

4 individual has a Rebate MedicarePlus MSA and

5 elects treatment under this subparagraph, the or6 ganization shall provide for payment of such ex7 cess into such MSA.

8 ‘‘(B) ADDITIONAL AMOUNT.—The organiza9 tion shall provide for payment of the amount of

10 any additional excess as follows:

11 ‘‘(i) 75 percent of such excess to the in12 dividual.

13 ‘‘(ii) 25 percent to the Federal Hos14 pital Insurance Trust Fund.

15 ‘‘(3) STABILIZATION FUND.—A MedicarePlus or16 ganization may provide that a part of the value of an

17 excess actuarial amount described in paragraph (1)

18 be withheld and reserved in the Federal Hospital In19 surance Trust Fund and in the Federal Supple20 mentary Medical Insurance Trust Fund (in such pro21 portions as the Secretary determines to be appro22 priate) by the Secretary for subsequent annual con23 tract periods, to the extent required to stabilize and

24 prevent undue fluctuations in the additional benefits

25 and rebates offered in those subsequent periods by the
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1 organization in accordance with such paragraph. Any

2 of such value of the amount reserved which is not pro3 vided as additional benefits described in paragraph

4 (1)(A) to individuals electing the MedicarePlus plan

5 of the organization in accordance with such para6 graph prior to the end of such periods, shall revert for

7 the use of such trust funds.

8 ‘‘(4) DETERMINATION BASED ON INSUFFICIENT

9 DATA.—For purposes of this subsection, if the Sec10 retary finds that there is insufficient enrollment expe11 rience (including no enrollment experience in the case

12 of a provider-sponsored organization) to determine an

13 average of the capitation payments to be made under

14 this part at the beginning of a contract period, the

15 Secretary may determine such an average based on

16 the enrollment experience of other contracts entered

17 into under this part.

18 ‘‘(5) ADJUSTED COMMUNITY RATE.—

19 ‘‘(A) IN GENERAL.—For purposes of this

20 subsection, subject to subparagraph (B), the term

21 ‘adjusted community rate’ for a service or serv22 ices means, at the election of a MedicarePlus or23 ganization, either—

24 ‘‘(i) the rate of payment for that serv25 ice or services which the Secretary annually
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1 determines would apply to an individual

2 electing a MedicarePlus plan under this

3 part if the rate of payment were determined

4 under a ‘community rating system’ (as de5 fined in section 1302(8) of the Public

6 Health Service Act, other than subpara7 graph (C)), or

8 ‘‘(ii) such portion of the weighted ag9 gregate premium, which the Secretary an10 nually estimates would apply to such an in11 dividual, as the Secretary annually esti12 mates is attributable to that service or serv13 ices,

14 but adjusted for differences between the utiliza15 tion characteristics of the individuals electing

16 coverage under this part and the utilization

17 characteristics of the other enrollees with the or18 ganization (or, if the Secretary finds that ade19 quate data are not available to adjust for those

20 differences, the differences between the utilization

21 characteristics of individuals selecting other

22 MedicarePlus coverage, or MedicarePlus eligible

23 individuals in the area, in the State, or in the

24 United States, eligible to elect MedicarePlus cov25 erage under this part and the utilization charac-
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1 teristics of the rest of the population in the area,

2 in the State, or in the United States, respec3 tively).

4 ‘‘(B) SPECIAL RULE FOR PROVIDER-SPON5 SORED ORGANIZATIONS.—In the case of a

6 MedicarePlus organization that is a provider7 sponsored organization, the adjusted community

8 rate under subparagraph (A) for a MedicarePlus

9 plan of the organization may be computed (in a

10 manner specified by the Secretary) using data in

11 the general commercial marketplace or (during a

12 transition period) based on the costs incurred by

13 the organization in providing such a plan.

14 ‘‘(g) TRANSITIONAL FILE AND USE FOR CERTAIN RE15 QUIREMENTS.—

16 ‘‘(1) IN GENERAL.—In the case of a

17 MedicarePlus plan proposed to be offered before the

18 end of the transition period (as defined in section

19 1851(e)(1)(B)) by a MedicarePlus organization de20 scribed in section 1853(f)(3) or by a MedicarePlus or21 ganization with a contract in effect under section

22 1857, if the organization submits complete informa23 tion to the Secretary regarding the plan demonstrat24 ing that the plan meets the requirements and stand25 ards under section 1852(a) and subsections (a)
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1 through (f) of this section (relating to benefits and

2 premiums), the plan shall be deemed as meeting such

3 requirements and standards under such provisions

4 unless the Secretary disapproves the plan within 60

5 days after the date of submission of the complete in6 formation.

7 ‘‘(2) CONSTRUCTION.—Nothing in paragraph (1)

8 shall be construed as waiving the requirement of a

9 contract under section 1857 or waiving requirements

10 and standards not referred to in paragraph (1).

11 ‘‘ESTABLISHMENT OF STANDARDS; CERTIFICATION OF

12 ORGANIZATIONS AND PLANS

13 ‘‘SEC. 1856. (a) ESTABLISHMENT OF STANDARDS.—

14 ‘‘(1) STANDARDS APPLICABLE TO STATE-REGU15 LATED ORGANIZATIONS AND PLANS AND NON-SOL16 VENCY STANDARDS FOR PROVIDER-SPONSORED ORGA17 NIZATIONS.—

18 ‘‘(A) RECOMMENDATIONS OF NAIC.—The

19 Secretary shall request the National Association

20 of Insurance Commissioners to develop and sub21 mit to the Secretary, not later than 12 months

22 after the date of the enactment of the Medicare

23 Preservation Act of 1995, proposed standards

24 consistent with the requirements of this part for

25 MedicarePlus organizations (other than union

26 sponsors and Taft-Hartley sponsors, and other
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1 than solvency standards described in subsection

2 (b) for provider-sponsored organizations) and

3 MedicarePlus plans offered by such organiza4 tions, except that such proposed standards may

5 relate to MedicarePlus organizations that are

6 qualified association sponsors only with respect

7 to MedicarePlus plans offered by them and only

8 if such plans are issued by organizations to

9 which section 1853(a)(1) applies.

10 ‘‘(B) REVIEW.—If the Association submits

11 such standards on a timely basis, the Secretary

12 shall review such standards to determine if the

13 standards meet the requirements of this part.

14 The Secretary shall complete the review of the

15 standards not later than 90 days after the date

16 of their submission. The Secretary shall promul17 gate such proposed standards to apply to organi18 zations and plans described in subparagraph (A)

19 except to the extent that the Secretary modifies

20 such proposed standards because they do not

21 meet such requirements.

22 ‘‘(C) FAILURE TO SUBMIT.—If the Associa23 tion does not submit such standards on a timely

24 basis, the Secretary shall promulgate such stand25 ards by not later than the date the Secretary
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1 would otherwise have been required to promul2 gate standards under subparagraph (B).

3 ‘‘(D) USE OF INTERIM RULES.—For the pe4 riod in which this part is in effect and standards

5 are being developed and established under the

6 preceding provisions of this subsection, the Sec7 retary shall provide by not later than June 1,

8 1996, for the application of such interim stand9 ards (without regard to any requirements for no10 tice and public comment) as may be appropriate

11 to provide for the expedited implementation of

12 this part. Such interim standards shall not

13 apply after the date standards are established

14 under the preceding provisions of this para15 graph.

16 ‘‘(2) ESTABLISHMENT OF STANDARDS FOR UNION

17 AND TAFT-HARTLEY SPONSORS, QUALIFIED ASSOCIA18 TION SPONSORS, AND PLANS.—

19 ‘‘(A) IN GENERAL.—The Secretary shall de20 velop and promulgate by regulation standards

21 consistent with the requirements of this part for

22 union and Taft-Hartley sponsors, for qualified

23 association sponsors, and for MedicarePlus plans

24 offered by such organizations (other than

25 MedicarePlus plans offered by qualified associa-
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1 tion sponsors that are issued by organizations to

2 which section 1853(a)(1) applies).

3 ‘‘(B) CONSULTATION WITH SECRETARY OF

4 LABOR.—The Secretary shall consult with the

5 Secretary of Labor with respect to such stand6 ards for such sponsors and plans.

7 ‘‘(C) TIMING.—Standards under this para8 graph shall be promulgated at or about the time

9 standards are promulgated under paragraph (1).

10 ‘‘(3) COORDINATION AMONG FINAL STANDARDS.—

11 In establishing standards (other than on an interim

12 basis) under this subsection and subsection (b), the

13 Secretary shall seek to provide for consistency (as ap14 propriate) across the different types of MedicarePlus

15 organizations, in order to promote equitable treat16 ment of different types of organizations and consistent

17 protection for individuals who elect plans offered by

18 the different types of MedicarePlus organizations.

19 ‘‘(4) USE OF CURRENT STANDARDS FOR INTERIM

20 STANDARDS.—To the extent practicable and consistent

21 with the requirements of this part, standards estab22 lished on an interim basis to carry out requirements

23 of this part may be based on currently applicable

24 standards, such as the rules established under section

25 1876 (as in effect as of the date of the enactment of
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1 this section) to carry out analogous provisions of such

2 section or standards established or developed for ap3 plication in the private health insurance market.

4 ‘‘(5) APPLICATION OF NEW STANDARDS TO ENTI5 TIES WITH A CONTRACT.—In the case of a

6 MedicarePlus organization with a contract in effect

7 under this part at the time standards applicable to

8 the organization under this section are changed, the

9 organization may elect not to have such changes

10 apply to the organization until the end of the current

11 contract year (or, if there is less than 6 months re12 maining in the contract year, until 1 year after the

13 end of the current contract year).

14 ‘‘(6) RELATION TO STATE LAWS.—The standards

15 established under this subsection shall supersede any

16 State law or regulation with respect to MedicarePlus

17 plans which are offered by MedicarePlus organiza18 tions under this part and are issued by organizations

19 to which section 1853(a)(1) applies, to the extent such

20 law or regulation is inconsistent with such standards.

21 ‘‘(b) ESTABLISHMENT OF SOLVENCY STANDARDS FOR

22 PROVIDER-SPONSORED ORGANIZATIONS.—

23 ‘‘(1) ESTABLISHMENT.—

24 ‘‘(A) IN GENERAL.—The Secretary shall es25 tablish, on an expedited basis and using a nego-
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1 tiated rulemaking process under subchapter 3 of

2 chapter 5 of title 5, United States Code, stand3 ards described in section 1853(e) (relating to the

4 financial solvency and capital adequacy of the

5 organization) that entities must meet to qualify

6 as provider-sponsored organizations under this

7 part.

8 ‘‘(B) FACTORS TO CONSIDER.—In establish9 ing solvency standards under subparagraph (A)

10 for provider-sponsored organizations, the Sec11 retary shall consult with interested parties and

12 shall take into account—

13 ‘‘(i) the delivery system assets of such

14 an organization and ability of such an or15 ganization to provide services directly to en16 rollees through affiliated providers, and

17 ‘‘(ii) alternative means of protecting

18 against insolvency, including reinsurance,

19 unrestricted surplus, letters of credit, guar20 antees, organizational insurance coverage,

21 partnerships with other licensed entities,

22 and valuation attributable to the ability of

23 such an organization to meet its service ob24 ligations through direct delivery of care.
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1 ‘‘(2) PUBLICATION OF NOTICE.—In carrying out

2 the rulemaking process under this subsection, the Sec3 retary, after consultation with the National Associa4 tion of Insurance Commissioners, the American Acad5 emy of Actuaries, organizations representative of

6 medicare beneficiaries, and other interested parties,

7 shall publish the notice provided for under section

8 564(a) of title 5, United States Code, by not later

9 than 45 days after the date of the enactment of Medi10 care Preservation Act of 1995.

11 ‘‘(3) TARGET DATE FOR PUBLICATION OF

12 RULE.—As part of the notice under paragraph (2),

13 and for purposes of this subsection, the ‘target date

14 for publication’ (referred to in section 564(a)(5) of

15 such title) shall be September 1, 1996.

16 ‘‘(4) ABBREVIATED PERIOD FOR SUBMISSION OF

17 COMMENTS.—In applying section 564(c) of such title

18 under this subsection, ‘15 days’ shall be substituted

19 for ‘30 days’.

20 ‘‘(5) APPOINTMENT OF NEGOTIATED RULE21 MAKING COMMITTEE AND FACILITATOR.—The Sec22 retary shall provide for—

23 ‘‘(A) the appointment of a negotiated rule24 making committee under section 565(a) of such

25 title by not later than 30 days after the end of
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1 the comment period provided for under section

2 564(c) of such title (as shortened under para3 graph (4)), and

4 ‘‘(B) the nomination of a facilitator under

5 section 566(c) of such title by not later than 10

6 days after the date of appointment of the com7 mittee.

8 ‘‘(6) PRELIMINARY COMMITTEE REPORT.—The

9 negotiated rulemaking committee appointed under

10 paragraph (5) shall report to the Secretary, by not

11 later than June 1, 1996, regarding the committee’s

12 progress on achieving a consensus with regard to the

13 rulemaking proceeding and whether such consensus is

14 likely to occur before one month before the target date

15 for publication of the rule. If the committee reports

16 that the committee has failed to make significant

17 progress towards such consensus or is unlikely to

18 reach such consensus by the target date, the Secretary

19 may terminate such process and provide for the publi20 cation of a rule under this subsection through such

21 other methods as the Secretary may provide.

22 ‘‘(7) FINAL COMMITTEE REPORT.—If the commit23 tee is not terminated under paragraph (6), the rule24 making committee shall submit a report containing a
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1 proposed rule by not later than one month before the

2 target publication date.

3 ‘‘(8) INTERIM, FINAL EFFECT.—The Secretary

4 shall publish a rule under this subsection in the Fed5 eral Register by not later than the target publication

6 date. Such rule shall be effective and final imme7 diately on an interim basis, but is subject to change

8 and revision after public notice and opportunity for

9 a period (of not less than 60 days) for public com10 ment. In connection with such rule, the Secretary

11 shall specify the process for the timely review and ap12 proval of applications of entities to be certified as

13 provider-sponsored organizations pursuant to such

14 rules and consistent with this subsection.

15 ‘‘(9) PUBLICATION OF RULE AFTER PUBLIC COM16 MENT.—The Secretary shall provide for consideration

17 of such comments and republication of such rule by

18 not later than 1 year after the target publication

19 date.

20 ‘‘(10) PROCESS FOR APPROVAL OF APPLICATIONS

21 FOR CERTIFICATION OF SOLVENCY.—

22 ‘‘(A) IN GENERAL.—The Secretary shall es23 tablish a process for the receipt and approval of

24 applications of entities for certification of sol25 vency of provider-sponsored organizations under
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1 this part. Under such process, the Secretary shall

2 act upon a complete application submitted with3 in 60 days after the date it is received.

4 ‘‘(B) CIRCULATION OF PROPOSED APPLICA5 TION FORM.—By March 1, 1996, the Secretary,

6 after consultation with the negotiated rule7 making committee, shall circulate a proposed ap8 plication form that could be used by entities con9 sidering being certified for solvency under this

10 part.

11 ‘‘(c) CERTIFICATION PROCESS.—

12 ‘‘(1) STATE CERTIFICATION PROCESS FOR STATE13 REGULATED ORGANIZATIONS AND NON-SOLVENCY

14 STANDARDS FOR PROVIDER-SPONSORED ORGANIZA15 TIONS.—

16 ‘‘(A) APPROVAL OF STATE PROCESS.—The

17 Secretary shall approve a MedicarePlus certifi18 cation and enforcement program established by a

19 State for applying the standards established

20 under this section to MedicarePlus organizations

21 (other than union sponsors and Taft-Hartley

22 sponsors and other than solvency standards for

23 provider-sponsored organizations) and

24 MedicarePlus plans offered by such organizations

25 if the Secretary determines that the program ef-
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1 fectively provides for the application and en2 forcement of such standards in the State with re3 spect to such organizations and plans and does

4 not discriminate in its application by type of or5 ganization or plan. Such program shall provide

6 for certification of compliance of MedicarePlus

7 organizations and plans with the applicable re8 quirements of this part not less often than once

9 every 3 years.

10 ‘‘(B) EFFECT OF CERTIFICATION UNDER

11 STATE PROCESS.—A MedicarePlus organization

12 and MedicarePlus plan offered by such an orga13 nization that is certified under such program is

14 considered to have been certified under this para15 graph with respect to the offering of the plan to

16 individuals residing in the State.

17 ‘‘(C) USER FEES.—The State may impose

18 user fees on organizations seeking certification

19 under this paragraph in such amounts as the

20 State deems sufficient to finance the costs of such

21 certification. Nothing in this subparagraph shall

22 be construed as restricting a State’s authority to

23 impose premium taxes, other taxes, or other lev24 ies.
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1 ‘‘(D) REVIEW.—The Secretary periodically

2 shall review State programs approved under sub3 paragraph (A) to determine if they continue to

4 provide for certification and enforcement de5 scribed in such paragraph. If the Secretary finds

6 that a State program no longer so provides, be7 fore making a final determination, the Secretary

8 shall provide the State an opportunity to adopt

9 such a plan of correction as would permit the

10 State program to meet the requirements of para11 graph (1). If the Secretary makes a final deter12 mination that the State program, after such an

13 opportunity, fails to meet such requirements, the

14 provisions of subsection (b) shall apply to

15 MedicarePlus organizations and plans in the

16 State.

17 ‘‘(E) EFFECT OF NO STATE PROGRAM.—Be18 ginning on the date standards are established

19 under section 1856, in the case of organizations

20 and plans in States in which a certification pro21 gram has not been approved and in operation

22 under subparagraph (A), the Secretary shall es23 tablish a process for the certification of

24 MedicarePlus organizations (other than union

25 sponsors and Taft-Hartley sponsors and other
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1 than solvency standards for provider-sponsored

2 organizations) and plans of such organizations

3 as meeting such standards.

4 ‘‘(F) PUBLICATION OF LIST OF APPROVED

5 STATE PROGRAMS.—The Secretary shall publish

6 (and periodically update) a list of those State

7 programs which are approved for purposes of

8 this paragraph.

9 ‘‘(2) FEDERAL CERTIFICATION PROCESS FOR

10 UNION SPONSORS AND TAFT-HARTLEY SPONSORS.—

11 ‘‘(A) ESTABLISHMENT.—The Secretary shall

12 establish a process for the certification of union

13 sponsors and Taft-Hartley sponsors and

14 MedicarePlus plans offered by such sponsors and

15 organizations as meeting the applicable stand16 ards established under this section.

17 ‘‘(B) INVOLVEMENT OF SECRETARY OF

18 LABOR.—Such process shall be established and

19 operated in cooperation with the Secretary of

20 Labor with respect to union sponsors and Taft21 Hartley sponsors.

22 ‘‘(C) USE OF STATE LICENSING AND PRI23 VATE ACCREDITATION PROCESSES.—

24 ‘‘(i) IN GENERAL.—The process under

25 this paragraph shall, to the maximum ex-
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1 tent practicable, provide that MedicarePlus

2 organizations and plans that are licensed or

3 certified through a qualified private accred4 itation process that the Secretary finds ap5 plies standards that are no less stringent

6 than the requirements of this part are

7 deemed to meet the corresponding require8 ments of this part for such an organization

9 or plan.

10 ‘‘(ii) PERIODIC ACCREDITATION.—The

11 use of an accreditation under clause (i)

12 shall be valid only for such period as the

13 Secretary specifies.

14 ‘‘(D) USER FEES.—The Secretary may im15 pose user fees on entities seeking certification

16 under this paragraph in such amounts as the

17 Secretary deems sufficient to finance the costs of

18 such certification.

19 ‘‘(3) NOTICE TO ENROLLEES IN CASE OF DECER20 TIFICATION.—If a MedicarePlus organization or plan

21 is decertified under this subsection, the organization

22 shall notify each enrollee with the organization and

23 plan under this part of such decertification.

24 ‘‘(4) QUALIFIED ASSOCIATION SPONSORS.—In

25 the case of MedicarePlus plans offered by a
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1 MedicarePlus organization that is a qualified associa2 tion sponsor and issued by an organization to which

3 section 1853(a)(1) applies or by a provider-sponsored

4 organization, nothing in this subsection shall be con5 strued as limiting the authority of States to regulate

6 such plans.

7 ‘‘CONTRACTS WITH MEDICAREPLUS ORGANIZATIONS

8 ‘‘SEC. 1857. (a) IN GENERAL.—The Secretary shall

9 not permit the election under section 1851 of a

10 MedicarePlus plan offered by a MedicarePlus organization

11 under this part, and no payment shall be made under sec12 tion 1854 to an organization, unless the Secretary has en13 tered into a contract under this section with an organiza14 tion with respect to the offering of such plan. Such a con15 tract with an organization may cover more than one

16 MedicarePlus plan. Such contract shall provide that the or17 ganization agrees to comply with the applicable require18 ments and standards of this part and the terms and condi19 tions of payment as provided for in this part.

20 ‘‘(b) MINIMUM ENROLLMENT REQUIREMENTS.—

21 ‘‘(1) IN GENERAL.—Subject to paragraphs (2)

22 and (3), the Secretary may not enter into a contract

23 under this section with a MedicarePlus organization

24 (other than a union sponsor or Taft-Hartley sponsor)

25 unless the organization has at least 5,000 individuals

26 (or 1,500 individuals in the case of an organization
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1 that is a provider-sponsored organization) who are re2 ceiving health benefits through the organization, ex3 cept that the standards under section 1856 may per4 mit the organization to have a lesser number of bene5 ficiaries (but not less than 500 in the case of an orga6 nization that is a provider-sponsored organization) if

7 the organization primarily serves individuals resid8 ing outside of urbanized areas.

9 ‘‘(2) EXCEPTION FOR HIGH DEDUCTIBLE

10 PLAN.—Paragraph (1) shall not apply with respect to

11 a contract that relates only to a high deductible plan.

12 ‘‘(3) ALLOWING TRANSITION.—The Secretary

13 may waive the requirement of paragraph (1) during

14 the first 3 contract years with respect to an organiza15 tion.

16 ‘‘(c) CONTRACT PERIOD AND EFFECTIVENESS.—

17 ‘‘(1) PERIOD.—Each contract under this section

18 shall be for a term of at least one year, as determined

19 by the Secretary, and may be made automatically re20 newable from term to term in the absence of notice by

21 either party of intention to terminate at the end of

22 the current term.

23 ‘‘(2) TERMINATION AUTHORITY.—In accordance

24 with procedures established under subsection (h), the

25 Secretary may at any time terminate any such con-
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1 tract or may impose the intermediate sanctions de2 scribed in an applicable paragraph of subsection (g)

3 on the MedicarePlus organization if the Secretary de4 termines that the organization—

5 ‘‘(A) has failed substantially to carry out

6 the contract;

7 ‘‘(B) is carrying out the contract in a man8 ner inconsistent with the efficient and effective

9 administration of this part; and

10 ‘‘(C) no longer substantially meets the ap11 plicable conditions of this part.

12 ‘‘(3) EFFECTIVE DATE OF CONTRACTS.—The ef13 fective date of any contract executed pursuant to this

14 section shall be specified in the contract, except that

15 in no case shall a contract under this section which

16 provides for coverage under a high deductible account

17 be effective before January 1997 with respect to such

18 coverage.

19 ‘‘(4) PREVIOUS TERMINATIONS.—The Secretary

20 may not enter into a contract with a MedicarePlus

21 organization if a previous contract with that organi22 zation under this section was terminated at the re23 quest of the organization within the preceding five24 year period, except in circumstances which warrant

25 special consideration, as determined by the Secretary.
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1 ‘‘(5) NO CONTRACTING AUTHORITY.—The author2 ity vested in the Secretary by this part may be per3 formed without regard to such provisions of law or

4 regulations relating to the making, performance,

5 amendment, or modification of contracts of the Unit6 ed States as the Secretary may determine to be incon7 sistent with the furtherance of the purpose of this

8 title.

9 ‘‘(d) PROTECTIONS AGAINST FRAUD AND BENEFICIARY

10 PROTECTIONS.—

11 ‘‘(1) INSPECTION AND AUDIT.—Each contract

12 under this section shall provide that the Secretary, or

13 any person or organization designated by the Sec14 retary—

15 ‘‘(A) shall have the right to inspect or other16 wise evaluate (i) the quality, appropriateness,

17 and timeliness of services performed under the

18 contract and (ii) the facilities of the organization

19 when there is reasonable evidence of some need

20 for such inspection, and

21 ‘‘(B) shall have the right to audit and in22 spect any books and records of the MedicarePlus

23 organization that pertain (i) to the ability of the

24 organization to bear the risk of potential finan25 cial losses, or (ii) to services performed or deter-
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1 minations of amounts payable under the con2 tract.

3 ‘‘(2) ENROLLEE NOTICE AT TIME OF TERMI4 NATION.—Each contract under this section shall re5 quire the organization to provide (and pay for) writ6 ten notice in advance of the contract’s termination, as

7 well as a description of alternatives for obtaining ben8 efits under this title, to each individual enrolled with

9 the organization under this part.

10 ‘‘(3) DISCLOSURE.—

11 ‘‘(A) IN GENERAL.—Each MedicarePlus or12 ganization shall, in accordance with regulations

13 of the Secretary, report to the Secretary finan14 cial information which shall include the follow15 ing:

16 ‘‘(i) Such information as the Secretary

17 may require demonstrating that the organi18 zation has a fiscally sound operation.

19 ‘‘(ii) A copy of the report, if any, filed

20 with the Health Care Financing Adminis21 tration containing the information required

22 to be reported under section 1124 by disclos23 ing entities.

24 ‘‘(iii) A description of transactions, as

25 specified by the Secretary, between the orga-
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1 nization and a party in interest. Such

2 transactions shall include—

3 ‘‘(I) any sale or exchange, or leas4 ing of any property between the orga5 nization and a party in interest;

6 ‘‘(II) any furnishing for consider7 ation of goods, services (including

8 management services), or facilities be9 tween the organization and a party in

10 interest, but not including salaries

11 paid to employees for services provided

12 in the normal course of their employ13 ment and health services provided to

14 members by hospitals and other pro15 viders and by staff, medical group (or

16 groups), individual practice associa17 tion (or associations), or any combina18 tion thereof; and

19 ‘‘(III) any lending of money or

20 other extension of credit between an or21 ganization and a party in interest.

22 The Secretary may require that information re23 ported respecting an organization which controls,

24 is controlled by, or is under common control

25 with, another entity be in the form of a consoli-
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1 dated financial statement for the organization

2 and such entity.

3 ‘‘(B) PARTY IN INTEREST DEFINED.—For

4 the purposes of this paragraph, the term ‘party

5 in interest’ means—

6 ‘‘(i) any director, officer, partner, or

7 employee responsible for management or ad8 ministration of a MedicarePlus organiza9 tion, any person who is directly or indi10 rectly the beneficial owner of more than 5

11 percent of the equity of the organization,

12 any person who is the beneficial owner of a

13 mortgage, deed of trust, note, or other inter14 est secured by, and valuing more than 5

15 percent of the organization, and, in the case

16 of a MedicarePlus organization organized

17 as a nonprofit corporation, an incorporator

18 or member of such corporation under appli19 cable State corporation law;

20 ‘‘(ii) any entity in which a person de21 scribed in clause (i)—

22 ‘‘(I) is an officer or director;

23 ‘‘(II) is a partner (if such entity

24 is organized as a partnership);
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1 ‘‘(III) has directly or indirectly a

2 beneficial interest of more than 5 per3 cent of the equity; or

4 ‘‘(IV) has a mortgage, deed of

5 trust, note, or other interest valuing

6 more than 5 percent of the assets of

7 such entity;

8 ‘‘(iii) any person directly or indirectly

9 controlling, controlled by, or under common

10 control with an organization; and

11 ‘‘(iv) any spouse, child, or parent of an

12 individual described in clause (i).

13 ‘‘(C) ACCESS TO INFORMATION.—Each

14 MedicarePlus organization shall make the infor15 mation reported pursuant to subparagraph (A)

16 available to its enrollees upon reasonable request.

17 ‘‘(4) LOAN INFORMATION.—The contract shall re18 quire the organization to notify the Secretary of loans

19 and other special financial arrangements which are

20 made between the organization and subcontractors,

21 affiliates, and related parties.

22 ‘‘(e) ADDITIONAL CONTRACT TERMS.—The contract

23 shall contain such other terms and conditions not inconsist24 ent with this part (including requiring the organization to
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1 provide the Secretary with such information) as the Sec2 retary may find necessary and appropriate.

3 ‘‘(f) INTERMEDIATE SANCTIONS.—

4 ‘‘(1) IN GENERAL.—If the Secretary determines

5 that a MedicarePlus organization with a contract

6 under this section—

7 ‘‘(A) fails substantially to provide medically

8 necessary items and services that are required

9 (under law or under the contract) to be provided

10 to an individual covered under the contract, if

11 the failure has adversely affected (or has substan12 tial likelihood of adversely affecting) the individ13 ual;

14 ‘‘(B) imposes net monthly premiums on in15 dividuals enrolled under this part in excess of

16 the net monthly premiums permitted;

17 ‘‘(C) acts to expel or to refuse to re-enroll an

18 individual in violation of the provisions of this

19 part;

20 ‘‘(D) engages in any practice that would

21 reasonably be expected to have the effect of deny22 ing or discouraging enrollment (except as per23 mitted by this part) by eligible individuals with

24 the organization whose medical condition or his-
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1 tory indicates a need for substantial future medi2 cal services;

3 ‘‘(E) misrepresents or falsifies information

4 that is furnished—

5 ‘‘(i) to the Secretary under this part,

6 or

7 ‘‘(ii) to an individual or to any other

8 entity under this part;

9 ‘‘(F) fails to comply with the requirements

10 of section 1852(j)(3); or

11 ‘‘(G) employs or contracts with any indi12 vidual or entity that is excluded from participa13 tion under this title under section 1128 or 1128A

14 for the provision of health care, utilization re15 view, medical social work, or administrative

16 services or employs or contracts with any entity

17 for the provision (directly or indirectly) through

18 such an excluded individual or entity of such

19 services;

20 the Secretary may provide, in addition to any other

21 remedies authorized by law, for any of the remedies

22 described in paragraph (2).

23 ‘‘(2) REMEDIES.—The remedies described in this

24 paragraph are—
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1 ‘‘(A) civil money penalties of not more than

2 $25,000 for each determination under paragraph

3 (1) or, with respect to a determination under

4 subparagraph (D) or (E)(i) of such paragraph,

5 of not more than $100,000 for each such deter6 mination, plus, with respect to a determination

7 under paragraph (1)(B), double the excess

8 amount charged in violation of such paragraph

9 (and the excess amount charged shall be deducted

10 from the penalty and returned to the individual

11 concerned), and plus, with respect to a deter12 mination under paragraph (1)(D), $15,000 for

13 each individual not enrolled as a result of the

14 practice involved,

15 ‘‘(B) suspension of enrollment of individ16 uals under this part after the date the Secretary

17 notifies the organization of a determination

18 under paragraph (1) and until the Secretary is

19 satisfied that the basis for such determination

20 has been corrected and is not likely to recur, or

21 ‘‘(C) suspension of payment to the organiza22 tion under this part for individuals enrolled

23 after the date the Secretary notifies the organiza24 tion of a determination under paragraph (1)

25 and until the Secretary is satisfied that the basis
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1 for such determination has been corrected and is

2 not likely to recur.

3 ‘‘(3) OTHER INTERMEDIATE SANCTIONS.—In the

4 case of a MedicarePlus organization for which the

5 Secretary makes a determination under subsection

6 (c)(2) the basis of which is not described in para7 graph (1), the Secretary may apply the following in8 termediate sanctions:

9 ‘‘(A) civil money penalties of not more than

10 $25,000 for each determination under subsection

11 (c)(2) if the deficiency that is the basis of the de12 termination has directly adversely affected (or

13 has the substantial likelihood of adversely affect14 ing) an individual covered under the organiza15 tion’s contract;

16 ‘‘(B) civil money penalties of not more than

17 $10,000 for each week beginning after the initi18 ation of procedures by the Secretary under sub19 section (h) during which the deficiency that is

20 the basis of a determination under subsection

21 (c)(2) exists; and

22 ‘‘(C) suspension of enrollment of individuals

23 under this part after the date the Secretary noti24 fies the organization of a determination under

25 subsection (c)(2) and until the Secretary is satis-
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1 fied that the deficiency that is the basis for the

2 determination has been corrected and is not like3 ly to recur.

4 ‘‘(4) PROCEEDINGS.—The provisions of section

5 1128A (other than subsections (a) and (b)) shall

6 apply to a civil money penalty under paragraph (1)

7 or (2) in the same manner as they apply to a civil

8 money penalty or proceeding under section 1128A(a).

9 ‘‘(g) PROCEDURES FOR IMPOSING SANCTIONS.—The

10 Secretary may terminate a contract with a MedicarePlus

11 organization under this section or may impose the inter12 mediate sanctions described in subsection (f) on the organi13 zation in accordance with formal investigation and compli14 ance procedures established by the Secretary under which—

15 ‘‘(1) the Secretary provides the organization with

16 the reasonable opportunity to develop and implement

17 a corrective action plan to correct the deficiencies that

18 were the basis of the Secretary’s determination under

19 subsection (c)(2);

20 ‘‘(2) the Secretary shall impose more severe sanc21 tions on organizations that have a history of defi22 ciencies or that have not taken steps to correct defi23 ciencies the Secretary has brought to their attention;
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1 ‘‘(3) there are no unreasonable or unnecessary

2 delays between the finding of a deficiency and the im3 position of sanctions; and

4 ‘‘(4) the Secretary provides the organization with

5 reasonable notice and opportunity for hearing (in6 cluding the right to appeal an initial decision) before

7 imposing any sanction or terminating the contract.

8 ‘‘STANDARDS FOR MEDICAREPLUS AND MEDICARE

9 INFORMATION TRANSACTIONS AND DATA ELEMENTS

10 ‘‘SEC. 1858. (a) ADOPTION OF STANDARDS FOR DATA

11 ELEMENTS.—

12 ‘‘(1) IN GENERAL.—Pursuant to subsection (b),

13 the Secretary shall adopt standards for information

14 transactions and data elements of MedicarePlus and

15 medicare information and modifications to the stand16 ards under this section that are—

17 ‘‘(A) consistent with the objective of reduc18 ing the administrative costs of providing and

19 paying for health care; and

20 ‘‘(B) developed or modified by a standard

21 setting organization (as defined in subsection

22 (h)(8)).

23 ‘‘(2) SPECIAL RULE RELATING TO DATA ELE24 MENTS.—The Secretary may adopt or modify a

25 standard relating to data elements that is different
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1 from the standard developed by a standard setting or2 ganization, if—

3 ‘‘(A) the different standard or modification

4 will substantially reduce administrative costs to

5 health care providers and health plans compared

6 to the alternative; and

7 ‘‘(B) the standard or modification is pro8 mulgated in accordance with the rulemaking

9 procedures of subchapter III of chapter 5 of title

10 5, United States Code.

11 ‘‘(3) SECURITY STANDARDS FOR HEALTH INFOR12 MATION NETWORK.—

13 ‘‘(A) IN GENERAL.—Each person, who

14 maintains or transmits MedicarePlus and medi15 care information or data elements of

16 MedicarePlus and medicare information and is

17 subject to this section, shall maintain reasonable

18 and appropriate administrative, technical, and

19 physical safeguards—

20 ‘‘(i) to ensure the integrity and con21 fidentiality of the information;

22 ‘‘(ii) to protect against any reasonably

23 anticipated—
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1 ‘‘(I) threats or hazards to the se2 curity or integrity of the information;

3 and

4 ‘‘(II) unauthorized uses or disclo5 sures of the information; and

6 ‘‘(iii) to otherwise ensure compliance

7 with this section by the officers and employ8 ees of such person.

9 ‘‘(B) SECURITY STANDARDS.—The Sec10 retary shall establish security standards and

11 modifications to such standards with respect to

12 MedicarePlus and medicare information network

13 services, health plans, and health care providers

14 that—

15 ‘‘(i) take into account—

16 ‘‘(I) the technical capabilities of

17 record systems used to maintain

18 MedicarePlus and medicare informa19 tion;

20 ‘‘(II) the costs of security meas21 ures;

22 ‘‘(III) the need for training per23 sons who have access to MedicarePlus

24 and medicare information; and
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1 ‘‘(IV) the value of audit trails in

2 computerized record systems; and

3 ‘‘(ii) ensure that a MedicarePlus and

4 medicare information network service, if it

5 is part of a larger organization, has policies

6 and security procedures which isolate the

7 activities of such service with respect to

8 processing information in a manner that

9 prevents unauthorized access to such infor10 mation by such larger organization.

11 The security standards established by the Sec12 retary shall be based on the standards developed

13 or modified by standard setting organizations. If

14 such standards do not exist, the Secretary shall

15 rely on the recommendations of the MedicarePlus

16 and Medicare Information Advisory Committee

17 (established under subsection (g)) and shall con18 sult with appropriate government agencies and

19 private organizations in accordance with para20 graph (5).

21 ‘‘(4) IMPLEMENTATION SPECIFICATIONS.—The

22 Secretary shall establish specifications for implement23 ing each of the standards and the modifications to the

24 standards adopted pursuant to paragraph (1) or (3).
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1 ‘‘(5) ASSISTANCE TO THE SECRETARY.—In com2 plying with the requirements of this section, the Sec3 retary shall rely on recommendations of the

4 MedicarePlus and Medicare Information Advisory

5 Committee established under subsection (g) and shall

6 consult with appropriate Federal and State agencies

7 and private organizations. The Secretary shall pub8 lish in the Federal Register the recommendations of

9 the MedicarePlus and Medicare Information Advisory

10 Committee regarding the adoption of a standard

11 under this section.

12 ‘‘(b) STANDARDS FOR INFORMATION TRANSACTIONS

13 AND DATA ELEMENTS.—

14 ‘‘(1) IN GENERAL.—The Secretary shall adopt

15 standards for transactions and data elements to make

16 MedicarePlus and medicare information uniformly

17 available to be exchanged electronically, that is—

18 ‘‘(A) appropriate for the following financial

19 and administrative transactions: claims (includ20 ing coordination of benefits) or equivalent en21 counter information, enrollment and

22 disenrollment, eligibility, premium payments,

23 and referral certification and authorization; and

24 ‘‘(B) related to other financial and admin25 istrative transactions determined appropriate by
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1 the Secretary consistent with the goals of im2 proving the operation of the health care system

3 and reducing administrative costs.

4 ‘‘(2) UNIQUE HEALTH IDENTIFIERS.—

5 ‘‘(A) ADOPTION OF STANDARDS.—The Sec6 retary shall adopt standards providing for a

7 standard unique health identifier for each indi8 vidual, employer, health plan, and health care

9 provider for use in the MedicarePlus and medi10 care information system. In developing unique

11 health identifiers for each health plan and health

12 care provider, the Secretary shall take into ac13 count multiple uses for identifiers and multiple

14 locations and specialty classifications for health

15 care providers.

16 ‘‘(B) PENALTY FOR IMPROPER DISCLO17 SURE.—A person who knowingly uses or causes

18 to be used a unique health identifier under sub19 paragraph (A) for a purpose that is not author20 ized by the Secretary shall—

21 ‘‘(i) be fined not more than $50,000,

22 imprisoned not more than 1 year, or both;

23 or

24 ‘‘(ii) if the offense is committed under

25 false pretenses, be fined not more than
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1 $100,000, imprisoned not more than 5

2 years, or both.

3 ‘‘(3) CODE SETS.—

4 ‘‘(A) IN GENERAL.—The Secretary, in con5 sultation with the MedicarePlus and Medicare

6 Information Advisory Committee, experts from

7 the private sector, and Federal and State agen8 cies, shall—

9 ‘‘(i) select code sets for appropriate

10 data elements from among the code sets that

11 have been developed by private and public

12 entities; or

13 ‘‘(ii) establish code sets for such data

14 elements if no code sets for the data ele15 ments have been developed.

16 ‘‘(B) DISTRIBUTION.—The Secretary shall

17 establish efficient and low-cost procedures for

18 distribution (including electronic distribution) of

19 code sets and modifications made to such code

20 sets under subsection (c)(2).

21 ‘‘(4) ELECTRONIC SIGNATURE.—

22 ‘‘(A) IN GENERAL.—The Secretary, after

23 consultation with the MedicarePlus and Medi24 care Information Advisory Committee, shall pro25 mulgate regulations specifying procedures for the
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1 electronic transmission and authentication of

2 signatures, compliance with which will be

3 deemed to satisfy Federal and State statutory re4 quirements for written signatures with respect to

5 information transactions required by this section

6 and written signatures on enrollment and

7 disenrollment forms.

8 ‘‘(B) PAYMENTS FOR SERVICES AND PRE9 MIUMS.—Nothing in this section shall be con10 strued to prohibit the payment of health care

11 services or health plan premiums by debit, cred12 it, payment card or numbers, or other electronic

13 means.

14 ‘‘(5) TRANSFER OF INFORMATION BETWEEN

15 HEALTH PLANS.—The Secretary shall develop rules

16 and procedures—

17 ‘‘(A) for determining the financial liability

18 of health plans when health care benefits are

19 payable under two or more health plans; and

20 ‘‘(B) for transferring among health plans

21 appropriate standard data elements needed for

22 the coordination of benefits, the sequential proc23 essing of claims, and other data elements for in24 dividuals who have more than one health plan.
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1 ‘‘(6) COORDINATION OF BENEFITS.—If, at the

2 end of the 5-year period beginning on the date of the

3 enactment of this section, the Secretary determines

4 that additional transaction standards for coordinat5 ing benefits are necessary to reduce administrative

6 costs or duplicative (or inappropriate) payment of

7 claims, the Secretary shall establish further trans8 action standards for the coordination of benefits be9 tween health plans.

10 ‘‘(7) PROTECTION OF TRADE SECRETS.—Except

11 as otherwise required by law, the standards adopted

12 under this section shall not require disclosure of trade

13 secrets or confidential commercial information by an

14 entity operating a MedicarePlus and medicare infor15 mation network.

16 ‘‘(c) TIMETABLES FOR ADOPTION OF STANDARDS.—

17 ‘‘(1) INITIAL STANDARDS.—Not later than 18

18 months after the date of the enactment of this section,

19 the Secretary shall adopt standards relating to the in20 formation transactions, data elements of

21 MedicarePlus and medicare information and security

22 described in subsections (a) and (b).

23 ‘‘(2) ADDITIONS AND MODIFICATIONS TO STAND24 ARDS.—
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1 ‘‘(A) IN GENERAL.—The Secretary shall re2 view the standards adopted under this section

3 and shall adopt additional or modified stand4 ards, that have been developed or modified by a

5 standard setting organization, as determined ap6 propriate, but not more frequently than once

7 every 12 months. Any addition or modification

8 to such standards shall be completed in a man9 ner which minimizes the disruption and cost of

10 compliance.

11 ‘‘(B) ADDITIONS AND MODIFICATIONS TO

12 CODE SETS.—

13 ‘‘(i) IN GENERAL.—The Secretary shall

14 ensure that procedures exist for the routine

15 maintenance, testing, enhancement, and ex16 pansion of code sets.

17 ‘‘(ii) ADDITIONAL RULES.—If a code

18 set is modified under this paragraph, the

19 modified code set shall include instructions

20 on how data elements of MedicarePlus and

21 medicare information that were encoded

22 prior to the modification may be converted

23 or translated so as to preserve the informa24 tional value of the data elements that ex25 isted before the modification. Any modifica-
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1 tion to a code set under this paragraph

2 shall be implemented in a manner that

3 minimizes the disruption and cost of com4 plying with such modification.

5 ‘‘(d) REQUIREMENTS FOR HEALTH PLANS.—

6 ‘‘(1) IN GENERAL.—If a person desires to con7 duct any of the information transactions described in

8 subsection (b)(1) with a health plan as a standard

9 transaction, the health plan shall conduct such stand10 ard transaction in a timely manner and the informa11 tion transmitted or received in connection with such

12 transaction shall be in the form of standard data ele13 ments of MedicarePlus and medicare information.

14 ‘‘(2) SATISFACTION OF REQUIREMENTS.—A

15 health plan may satisfy the requirement imposed on

16 such plan under paragraph (1) by directly transmit17 ting standard data elements of MedicarePlus and

18 medicare information or submitting nonstandard

19 data elements to a MedicarePlus and medicare infor20 mation network service for processing into standard

21 data elements and transmission.

22 ‘‘(3) TIMETABLES FOR COMPLIANCE WITH RE23 QUIREMENTS.—Not later than 24 months after the

24 date on which standards are adopted under sub25 sections (a) and (b) with respect to any type of infor-
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1 mation transaction or data element of MedicarePlus

2 and medicare information or with respect to security,

3 a health plan shall comply with the requirements of

4 this section with respect to such transaction or data

5 element.

6 ‘‘(4) COMPLIANCE WITH MODIFIED STAND7 ARDS.—If the Secretary adopts a modified standard

8 under subsection (a) or (b), a health plan shall be re9 quired to comply with the modified standard at such

10 time as the Secretary determines appropriate taking

11 into account the time needed to comply due to the na12 ture and extent of the modification. However, the time

13 determined appropriate under the preceding sentence

14 shall be not earlier than the last day of the 180-day

15 period beginning on the date such modified standard

16 is adopted. The Secretary may extend the time for

17 compliance for small health plans, if the Secretary de18 termines such extension is appropriate.

19 ‘‘(e) GENERAL PENALTY FOR FAILURE TO COMPLY

20 WITH REQUIREMENTS AND STANDARDS.—

21 ‘‘(1) GENERAL PENALTY.—

22 ‘‘(A) IN GENERAL.—Except as provided in

23 paragraph (2), the Secretary shall impose on

24 any person that violates a requirement or stand25 ard—
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1 ‘‘(i) with respect to MedicarePlus and

2 medicare information transactions, data

3 elements of MedicarePlus and medicare in4 formation, or security imposed under sub5 section (a) or (b); or

6 ‘‘(ii) with respect to health plans im7 posed under subsection (d);

8 a penalty of not more than $100 for each such

9 violation of a specific standard or requirement,

10 but the total amount imposed for all such viola11 tions of a specific standard or requirement dur12 ing the calendar year shall not exceed $25,000.

13 ‘‘(B) PROCEDURES.—The provisions of sec14 tion 1128A (other than subsections (a) and (b)

15 and the second sentence of subsection (f)) shall

16 apply to the imposition of a civil money penalty

17 under this paragraph in the same manner as

18 such provisions apply to the imposition of a pen19 alty under such section 1128A.

20 ‘‘(C) DENIAL OF PAYMENT.—Except as pro21 vided in paragraph (2), the Secretary may deny

22 payment under this title for an item or service

23 furnished by a person if the person fails to com24 ply with an applicable requirement or standard
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1 for MedicarePlus and medicare information re2 lating to that item or service.

3 ‘‘(2) LIMITATIONS.—

4 ‘‘(A) NONCOMPLIANCE NOT DISCOVERED.—

5 A penalty may not be imposed under paragraph

6 (1) if it is established to the satisfaction of the

7 Secretary that the person liable for the penalty

8 did not know, and by exercising reasonable dili9 gence would not have known, that such person

10 failed to comply with the requirement or stand11 ard described in paragraph (1).

12 ‘‘(B) FAILURES DUE TO REASONABLE

13 CAUSE.—

14 ‘‘(i) IN GENERAL.—Except as provided

15 in clause (ii), a penalty may not be im16 posed under paragraph (1) if—

17 ‘‘(I) the failure to comply was due

18 to reasonable cause and not to willful

19 neglect; and

20 ‘‘(II) the failure to comply is cor21 rected during the 30-day period begin22 ning on the first date the person liable

23 for the penalty knew, or by exercising

24 reasonable diligence would have known,

25 that the failure to comply occurred.
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1 ‘‘(ii) EXTENSION OF PERIOD.—

2 ‘‘(I) NO PENALTY.—The period re3 ferred to in clause (i)(II) may be ex4 tended as determined appropriate by

5 the Secretary based on the nature and

6 extent of the failure to comply.

7 ‘‘(II) ASSISTANCE.—If the Sec8 retary determines that a health plan

9 failed to comply because such plan was

10 unable to comply, the Secretary may

11 provide technical assistance to such

12 plan during the period described in

13 clause (i)(II). Such assistance shall be

14 provided in any manner determined

15 appropriate by the Secretary.

16 ‘‘(C) REDUCTION.—In the case of a failure

17 to comply which is due to reasonable cause and

18 not to willful neglect, any penalty under para19 graph (1) that is not entirely waived under sub20 paragraph (B) may be waived to the extent that

21 the payment of such penalty would be excessive

22 relative to the compliance failure involved.

23 ‘‘(f) EFFECT ON STATE LAW.—

24 ‘‘(1) GENERAL EFFECT.—
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1 ‘‘(A) GENERAL RULE.—Except as provided

2 in subparagraph (B), a provision, requirement,

3 or standard under this section shall supersede

4 any contrary provision of State law, including a

5 provision of State law that requires medical or

6 health plan records (including billing informa7 tion) to be maintained or transmitted in written

8 rather than electronic form.

9 ‘‘(B) EXCEPTIONS.—A provision, require10 ment, or standard under this section shall not

11 supersede a contrary provision of State law if

12 the Secretary determines that the provision of

13 State law should be continued for any reason,

14 including for reasons relating to prevention of

15 fraud and abuse or regulation of controlled sub16 stances.

17 ‘‘(2) PUBLIC HEALTH REPORTING.—Nothing in

18 this section shall be construed to invalidate or limit

19 the authority, power, or procedures established under

20 any law providing for the reporting of disease or in21 jury, child abuse, birth, or death, public health sur22 veillance, or public health investigation or interven23 tion.

24 ‘‘(g) MEDICAREPLUS AND MEDICARE INFORMATION

25 ADVISORY COMMITTEE.—
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1 ‘‘(1) ESTABLISHMENT.—There is established a

2 committee to be known as the MedicarePlus and Med3 icare Information Advisory Committee (in this sub4 section referred to as the ‘committee’).

5 ‘‘(2) DUTIES.—The committee shall—

6 ‘‘(A) advise the Secretary in the develop7 ment of standards under this section; and

8 ‘‘(B) be generally responsible for advising

9 the Secretary and the Congress on the status and

10 the future of the MedicarePlus and medicare in11 formation network.

12 ‘‘(3) MEMBERSHIP.—

13 ‘‘(A) IN GENERAL.—The committee shall

14 consist of 9 members of whom—

15 ‘‘(i) 3 shall be appointed by the Presi16 dent;

17 ‘‘(ii) 3 shall be appointed by the

18 Speaker of the House of Representatives

19 after consultation with the minority leader

20 of the House of Representatives; and

21 ‘‘(iii) 3 shall be appointed by the

22 President pro tempore of the Senate after

23 consultation with the minority leader of the

24 Senate.
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1 The appointments of the members shall be made

2 not later than 60 days after the date of the en3 actment of this section. The President shall des4 ignate 1 member as the Chair.

5 ‘‘(B) EXPERTISE.—The membership of the

6 committee shall consist of individuals who are of

7 recognized standing and distinction in the areas

8 of information systems, information networking

9 and integration, consumer health, or health care

10 financial management, and who possess the dem11 onstrated capacity to discharge the duties im12 posed on the committee.

13 ‘‘(C) TERMS.—Each member of the commit14 tee shall be appointed for a term of 5 years, ex15 cept that the members first appointed shall serve

16 staggered terms such that the terms of not more

17 than 3 members expire at one time.

18 ‘‘(D) INITIAL MEETING.—Not later than 30

19 days after the date on which a majority of the

20 members have been appointed, the committee

21 shall hold its first meeting.

22 ‘‘(4) REPORTS.—Not later than 1 year after the

23 date of the enactment of this section, and annually

24 thereafter, the committee shall submit to Congress and

25 the Secretary a report regarding—
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1 ‘‘(A) the extent to which entities using the

2 MedicarePlus and medicare information network

3 are meeting the standards adopted under this

4 section and working together to form an inte5 grated network that meets the needs of its users;

6 ‘‘(B) the extent to which such entities are

7 meeting the security standards established pursu8 ant to this section and the types of penalties as9 sessed for noncompliance with such standards;

10 ‘‘(C) any problems that exist with respect to

11 implementation of the MedicarePlus and medi12 care information network; and

13 ‘‘(D) the extent to which timetables under

14 this section are being met.

15 Reports made under this subsection shall be made

16 available to health care providers, health plans, and

17 other entities that use the MedicarePlus and medicare

18 information network to exchange MedicarePlus and

19 medicare information.

20 ‘‘(h) DEFINITIONS.—For purposes of this section:

21 ‘‘(1) CODE SET.—The term ‘code set’ means any

22 set of codes used for encoding data elements, such as

23 tables of terms, enrollment information, and encoun24 ter data.
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1 ‘‘(2) COORDINATION OF BENEFITS.—The term

2 ‘coordination of benefits’ means determining and co3 ordinating the financial obligations of health plans

4 when health care benefits are payable under such a

5 plan and under this title (including under a

6 MedicarePlus plan).

7 ‘‘(3) MEDICAREPLUS AND MEDICARE INFORMA8 TION.—The term ‘MedicarePlus and medicare infor9 mation’ means any information that relates to the en10 rollment of individuals under this title (including in11 formation relating to elections of MedicarePlus plans

12 under section 1851) and the provision of health bene13 fits (including benefits provided under such plans)

14 under this title.

15 ‘‘(4) MEDICAREPLUS AND MEDICARE INFORMA16 TION NETWORK.—The term ‘MedicarePlus and medi17 care information network’ means the MedicarePlus

18 and medicare information system that is formed

19 through the application of the requirements and

20 standards established under this section.

21 ‘‘(5) MEDICAREPLUS AND MEDICARE INFORMA22 TION NETWORK SERVICE.—The term ‘MedicarePlus

23 and medicare information network service’ means a

24 public or private entity that—
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1 ‘‘(A) processes or facilitates the processing

2 of nonstandard data elements of MedicarePlus

3 and medicare information into standard data

4 elements;

5 ‘‘(B) provides the means by which persons

6 may meet the requirements of this section; or

7 ‘‘(C) provides specific information process8 ing services.

9 ‘‘(6) HEALTH PLAN.—The term ‘health plan’

10 means a plan which provides, or pays the cost of,

11 health benefits. Such term includes the following, or

12 any combination thereof:

13 ‘‘(A) Part A or part B of this title, and in14 cludes a MedicarePlus plan.

15 ‘‘(B) The medicaid program under title XIX

16 and the MediGrant program under title XXI.

17 ‘‘(C) A medicare supplemental policy (as

18 defined in section 1882(g)(1)).

19 ‘‘(D) Worker’s compensation or similar in20 surance.

21 ‘‘(E) Automobile or automobile medical22 payment insurance.

23 ‘‘(F) A long-term care policy, other than a

24 fixed indemnity policy.
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1 ‘‘(G) The Federal Employees Health Benefit

2 Plan under chapter 89 of title 5, United States

3 Code.

4 ‘‘(H) An employee welfare benefit plan, as

5 defined in section 3(1) of the Employee Retire6 ment Income Security Act of 1974 (29 U.S.C.

7 1002(1)), but only to the extent the plan is estab8 lished or maintained for the purpose of provid9 ing health benefits.

10 ‘‘(7) INDIVIDUALLY IDENTIFIABLE

11 MEDICAREPLUS AND MEDICARE INFORMATION.—The

12 term ‘individually identifiable MedicarePlus and

13 medicare information’ means MedicarePlus and med14 icare enrollment information, including demographic

15 information collected from an individual, that—

16 ‘‘(A) is created or received by a health care

17 provider, health plan, employer, or MedicarePlus

18 and medicare information network service, and

19 ‘‘(B) identifies an individual.

20 ‘‘(8) STANDARD SETTING ORGANIZATION.—The

21 term ‘standard setting organization’ means a stand22 ard setting organization accredited by the American

23 National Standards Institute and includes the Na24 tional Council for Prescription Drug Program.
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1 ‘‘(9) STANDARD TRANSACTION.—The term

2 ‘standard transaction’ means, when referring to an

3 information transaction or to data elements of

4 MedicarePlus and medicare information, any trans5 action that meets the requirements and implementa6 tion specifications adopted by the Secretary under

7 subsections (a) and (b).

8 ‘‘DEFINITIONS; MISCELLANEOUS PROVISIONS

9 ‘‘SEC. 1859. (a) DEFINITIONS RELATING TO

10 MEDICAREPLUS ORGANIZATIONS.—In this part—

11 ‘‘(1) MEDICAREPLUS ORGANIZATION.—The term

12 ‘MedicarePlus organization’ means a public or pri13 vate entity that is certified under section 1857 as

14 meeting the requirements and standards of this part

15 for such an organization.

16 ‘‘(2) PROVIDER-SPONSORED ORGANIZATION.—

17 The term ‘provider-sponsored organization’ is defined

18 in section 1853(e).

19 ‘‘(3) QUALIFIED ASSOCIATION SPONSOR.—The

20 term ‘qualified association sponsor’ means an associa21 tion, religious fraternal organization, or other organi22 zation (which may be a trade, industry, or profes23 sional association, a chamber of commerce, or a pub24 lic entity association) that the Secretary finds—

25 ‘‘(A) is organized for purposes other than to

26 market a health plan,
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1 ‘‘(B) may not condition its membership on

2 health status, health claims experience, receipt of

3 health care, medical history, or lack of evidence

4 of insurability of a potential member,

5 ‘‘(C) may not exclude a member or spouse

6 of a member from health plan coverage based on

7 factors described in clause (ii);

8 ‘‘(D) does not exist solely or principally for

9 the purpose of selling insurance,

10 ‘‘(E) has at least 1,000 individual members

11 or 200 employer members,

12 ‘‘(F) is a permanent entity which receives a

13 substantial proportion of its financial support

14 from active members; and

15 ‘‘(G) is not owned or controlled by an in16 surance company.

17 Such term includes a subsidiary or corporation that

18 is wholly owned by one or more qualified organiza19 tions.

20 ‘‘(4) TAFT-HARTLEY SPONSOR.—The term ‘Taft21 Hartley sponsor’ means, in relation to a group health

22 plan that is established or maintained by two or more

23 employers or jointly by one or more employers and

24 one or more employee organizations, the association,

25 committee, joint board of trustees, or other similar
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1 group of representatives of parties who establish or

2 maintain the plan.

3 ‘‘(5) UNION SPONSOR.—The term ‘union sponsor’

4 means an employee organization in relation to a

5 group health plan that is established or maintained

6 by the organization other than pursuant to a collec7 tive bargaining agreement.

8 ‘‘(6) EMPLOYER, ETC.—In this subsection and

9 section 1851(b), the terms ‘employer’, ‘employee orga10 nization’, and ‘group health plan’ have the meanings

11 given such terms for purposes of part 6 of subtitle B

12 of title I of the Employee Retirement Income Security

13 Act of 1974.

14 ‘‘(b) DEFINITIONS RELATING TO MEDICAREPLUS

15 PLANS.—

16 ‘‘(1) MEDICAREPLUS PLAN.—The term

17 ‘MedicarePlus plan’ means health benefits coverage of18 fered under a policy, contract, or plan by a

19 MedicarePlus organization pursuant to and in ac20 cordance with a contract under section 1857.

21 ‘‘(2) HIGH DEDUCTIBLE PLAN.—

22 ‘‘(A) IN GENERAL.—The term ‘high deduct23 ible plan’ means a MedicarePlus plan that—

24 ‘‘(i) provides reimbursement for at

25 least the items and services described in sec-
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1 tion 1852(a)(1) in a year but only after the

2 enrollee incurs countable expenses (as speci3 fied under the plan) equal to the amount of

4 a deductible (described in subparagraph

5 (B));

6 ‘‘(ii) counts as such expenses (for pur7 poses of such deductible) at least all

8 amounts that would have been payable

9 under parts A and B or by the enrollee if

10 the enrollee had elected to receive benefits

11 through the provisions of such parts; and

12 ‘‘(iii) provides, after such deductible is

13 met for a year and for all subsequent ex14 penses for benefits referred to in clause (i)

15 in the year, for a level of reimbursement

16 that is not less than—

17 ‘‘(I) 100 percent of such expenses,

18 or

19 ‘‘(II) 100 percent of the amounts

20 that would have been paid (without re21 gard to any deductibles or coinsurance)

22 under parts A and B with respect to

23 such expenses,

24 whichever is less.
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1 ‘‘(B) DEDUCTIBLE.—The amount of deduct2 ible under a high deductible plan—

3 ‘‘(i) for contract year 1997 shall be not

4 more than $6,000; and

5 ‘‘(ii) for a subsequent contract year

6 shall be not more than the maximum

7 amount of such deductible for the previous

8 contract year under this subparagraph in9 creased by the national average per capita

10 growth percentage under section 1854(c)(6)

11 for the year.

12 If the amount of the deductible under clause (ii)

13 is not a multiple of $50, the amount shall be

14 rounded to the nearest multiple of $50.

15 ‘‘(3) MEDICAREPLUS UNRESTRICTED FEE-FOR16 SERVICE PLAN.—The term ‘MedicarePlus unrestricted

17 fee-for-service plan’ means a MedicarePlus plan that

18 provides for coverage of benefits without restrictions

19 relating to utilization and without regard to whether

20 the provider has a contract or other arrangement with

21 the organization offering the plan for the provision of

22 such benefits.

23 ‘‘(c) OTHER REFERENCES TO OTHER TERMS.—
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1 ‘‘(1) MEDICAREPLUS ELIGIBLE INDIVIDUAL.—

2 The term ‘MedicarePlus eligible individual’ is defined

3 in section 1851(a)(3).

4 ‘‘(2) MEDICAREPLUS PAYMENT AREA.—The term

5 ‘MedicarePlus payment area’ is defined in section

6 1854(d).

7 ‘‘(3) NATIONAL AVERAGE PER CAPITA GROWTH

8 PERCENTAGE.—The ‘national average per capita

9 growth percentage’ is defined in section 1854(c)(6).

10 ‘‘(4) MONTHLY PREMIUM; NET MONTHLY PRE11 MIUM.—The terms ‘monthly premium’ and ‘net

12 monthly premium’ are defined in section 1855(a)(2).

13 ‘‘(d) COORDINATED ACUTE AND LONG-TERM CARE

14 BENEFITS UNDER A MEDICAREPLUS PLAN.—Nothing in

15 this part shall be construed as preventing a State from co16 ordinating benefits under its MediGrant program under

17 title XXI with those provided under a MedicarePlus plan

18 in a manner that assures continuity of a full-range of acute

19 care and long-term care services to poor elderly or disabled

20 individuals eligible for benefits under this title and under

21 such program.’’.

22 (b) CONFORMING REFERENCES TO PREVIOUS PART

23 C.—Any reference in law (in effect before the date of the

24 enactment of this Act) to part C of title XVIII of the Social
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1 Security Act is deemed a reference to part D of such title

2 (as in effect after such date).

3 (c) USE OF INTERIM, FINAL REGULATIONS.—In order

4 to carry out the amendment made by subsection (a) in a

5 timely manner, the Secretary of Health and Human Serv6 ices may promulgate regulations that take effect on an in7 terim basis, after notice and pending opportunity for public

8 comment.

9 (d) ADVANCE DIRECTIVES.—Section 1866(f)(1) (42

10 U.S.C. 1395cc(f)(1)) is amended—

11 (1) by inserting ‘‘1853(g),’’ after ‘‘1833(s),’’, and

12 (2) by inserting ‘‘, MedicarePlus organization,’’

13 after ‘‘provider of services’’.

14 (e) CONFORMING AMENDMENT.—Section

15 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended by

16 inserting before the semicolon at the end the following: ‘‘and

17 in the case of hospitals to accept as payment in full for

18 inpatient hospital services that are emergency services (as

19 defined in section 1853(b)(4)) that are covered under this

20 title and are furnished to any individual enrolled under

21 part C with a MedicarePlus organization which does not

22 have a contract establishing payment amounts for services

23 furnished to members of the organization the amounts that

24 would be made as a payment in full under this title if the

25 individuals were not so enrolled’’.
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1 (f) SECRETARIAL SUBMISSION OF LEGISLATIVE PRO2 POSAL.—Not later than 90 days after the date of the enact3 ment of this Act, the Secretary of Health and Human Serv4 ices shall submit to the appropriate committees of Congress

5 a legislative proposal providing for such technical and con6 forming amendments in the law as are required by the pro7 visions of this chapter.

8 SEC. 8002. DUPLICATION AND COORDINATION OF MEDI9 CARE-RELATED PLANS.

10 (a) TREATMENT OF CERTAIN HEALTH INSURANCE

11 POLICIES AS NONDUPLICATIVE.—

12 (1) IN GENERAL.—Section 1882(d)(3)(A) (42

13 U.S.C. 1395ss(d)(3)(A)) is amended—

14 (A) by amending clause (i) to read as fol15 lows:

16 ‘‘(i) It is unlawful for a person to sell or issue to an

17 individual entitled to benefits under part A or enrolled

18 under part B of this title or electing a MedicarePlus plan

19 under section 1851—

20 ‘‘(I) a health insurance policy (other than a

21 medicare supplemental policy) with knowledge that

22 the policy duplicates health benefits to which the indi23 vidual is otherwise entitled under this title or title

24 XIX,
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1 ‘‘(II) in the case of an individual not electing a

2 MedicarePlus plan, a medicare supplemental policy

3 with knowledge that the individual is entitled to bene4 fits under another medicare supplemental policy, or

5 ‘‘(III) in the case of an individual electing a

6 MedicarePlus plan, a medicare supplemental policy

7 with knowledge that the policy duplicates health bene8 fits to which the individual is otherwise entitled

9 under this title or under another medicare supple10 mental policy.’’;

11 (B) in clause (iii), by striking ‘‘clause (i)’’

12 and inserting ‘‘clause (i)(II)’’; and

13 (C) by adding at the end the following new

14 clauses:

15 ‘‘(iv) For purposes of this subparagraph a health in16 surance policy shall be considered to ‘duplicate’ benefits

17 under this title only when, under its terms, the policy pro18 vides specific reimbursement for identical items and serv19 ices to the extent paid for under this title, and a health

20 insurance policy providing for benefits which are payable

21 to or on behalf of an individual without regard to other

22 health benefit coverage of such individual is not considered

23 to ‘duplicate’ any health benefits under this title.

24 ‘‘(v) For purposes of this subparagraph, a health in25 surance policy (or a rider to an insurance contract which
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1 is not a health insurance policy), including a policy (such

2 as a qualified long-term care insurance contract described

3 in section 7702B(b) of the Internal Revenue Code of 1986,

4 as added by the Revenue Reconciliation Act of 1995) pro5 viding benefits for long-term care, nursing home care, home

6 health care, or community-based care, that coordinates

7 against or excludes items and services available or paid for

8 under this title and (for policies sold or issued after Janu9 ary 1, 1996) that discloses such coordination or exclusion

10 in the policy’s outline of coverage, is not considered to ‘du11 plicate’ health benefits under this title. For purposes of this

12 clause, the terms ‘coordinates’ and ‘coordination’ mean,

13 with respect to a policy in relation to health benefits under

14 this title, that the policy under its terms is secondary to,

15 or excludes from payment, items and services to the extent

16 available or paid for under this title.

17 ‘‘(vi) A State may not impose, with respect to the sale

18 or issuance of a policy (or rider) that meets the require19 ments of this title pursuant to clause (iv) or (v) to an indi20 vidual entitled to benefits under part A or enrolled under

21 part B or enrolled under a MedicarePlus plan under part

22 C, any requirement based on the premise that such a policy

23 or rider duplicates health benefits to which the individual

24 is otherwise entitled under this title.’’.
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1 (2) CONFORMING AMENDMENTS.—Section

2 1882(d)(3) (42 U.S.C. 1395ss(d)(3)) is amended—

3 (A) in subparagraph (B), by inserting ‘‘(in4 cluding any MedicarePlus plan)’’ after ‘‘health

5 insurance policies’’;

6 (B) in subparagraph (C)—

7 (i) by striking ‘‘with respect to (i)’’

8 and inserting ‘‘with respect to’’, and

9 (ii) by striking ‘‘, (ii) the sale’’ and all

10 that follows up to the period at the end; and

11 (C) by striking subparagraph (D).

12 (3) MEDICAREPLUS PLANS NOT TREATED AS

13 MEDICARE SUPPLEMENTARY POLICIES.—Section

14 1882(g)(1) (42 U.S.C. 1395ss(g)(1)) is amended by

15 inserting ‘‘a MedicarePlus plan or’’ after ‘‘and does

16 not include’’.

17 (b) ADDITIONAL RULES RELATING TO INDIVIDUALS

18 ENROLLED IN MEDICAREPLUS PLANS.—Section 1882 (42

19 U.S.C. 1395ss) is further amended by adding at the end

20 the following new subsection:

21 ‘‘(u)(1) Notwithstanding the previous provisions of

22 this section, this section shall not apply to the sale or issu23 ance of a medicare supplemental policy to an individual

24 who has elected to enroll in a MedicarePlus plan under sec25 tion 1851.
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1 ‘‘(2)(A) It is unlawful for a person to sell or issue a

2 policy described in subparagraph (B) to an individual with

3 knowledge that the individual has in effect under section

4 1851 an election of a high deductible plan.

5 ‘‘(B) A policy described in this subparagraph is a

6 health insurance policy that provides for coverage of ex7 penses that are otherwise required to be counted toward

8 meeting the annual deductible amount provided under the

9 high deductible plan.’’.

10 SEC. 8003. TRANSITIONAL RULES FOR CURRENT MEDICARE

11 HMO PROGRAM.

12 (a) IN GENERAL.—Section 1876 (42 U.S.C. 1395mm)

13 is amended—

14 (1) in subsection (c)(3)(A)(i), by striking ‘‘would

15 result in failure to meet the requirements of sub16 section (f) or’’;

17 (2) by amending subsection (f) to read as follows:

18 ‘‘(f)(1) Except as provided in paragraph (3), the Sec19 retary shall not enter into, renew, or continue any risk20 sharing contract under this section with an eligible organi21 zation for any contract year beginning on or after—

22 ‘‘(A) the date standards for MedicarePlus organi23 zations and plans are first established under section

24 1856(a) with respect to MedicarePlus organizations
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1 that are insurers or health maintenance organiza2 tions, or

3 ‘‘(B) in the case of in the case of such an organi4 zation with such a contract in effect as of the date

5 such standards were first established, 1 year after

6 such date.

7 ‘‘(2) The Secretary shall not enter into, renew, or con8 tinue any risk-sharing contract under this section with an

9 eligible organization for any contract year beginning on or

10 after January 1, 2000.

11 ‘‘(3) An individual who is enrolled in part B only and

12 is enrolled in an eligible organization with a risk-sharing

13 contract under this section on December 31, 1996, may con14 tinue enrollment in such organization. Not later then July

15 1, 1996, the Secretary shall issue regulations relating to

16 such individuals and such organizations.

17 ‘‘(4) Notwithstanding subsection (a), the Secretary

18 shall provide that payment amounts under risk-sharing

19 contracts under this section for months in a year (beginning

20 with January 1996) shall be computed—

21 ‘‘(A) with respect to individuals entitled to bene22 fits under both parts A and B, by substituting pay23 ment rates under section 1854(a) for the payment

24 rates otherwise established under subsection 1876(a),

25 and
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1 ‘‘(B) with respect to individuals only entitled to

2 benefits under part B, by substituting an appropriate

3 proportion of such rates (reflecting the relative pro4 portion of payments under this title attributable to

5 such part) for the payment rates otherwise established

6 under subsection (a).

7 For purposes of carrying out this paragraph for payments

8 for months in 1996, the Secretary shall compute, announce,

9 and apply the payment rates under section 1854(a) (not10 withstanding any deadlines specified in such section) in as

11 timely a manner as possible and may (to the extent nec12 essary) provide for retroactive adjustment in payments

13 made under this section not in accordance with such

14 rates.’’; and

15 (3) in subsection (i)(1)(C), by striking ‘‘(e), and

16 (f)’’ and inserting ‘‘and (e)’’.

17 CHAPTER 2—SPECIAL RULES FOR

18 MEDICAREPLUS MEDICAL SAVINGS AC19 COUNTS

20 SEC. 8011. MEDICAREPLUS MSA.

21 (a) IN GENERAL.—Part III of subchapter B of chapter

22 1 of the Internal Revenue Code of 1986 (relating to amounts

23 specifically excluded from gross income) is amended by re24 designating section 137 as section 138 and by inserting

25 after section 136 the following new section:
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1 ‘‘SEC. 137. MEDICAREPLUS MSA.

2 ‘‘(a) EXCLUSION.—Gross income shall not include any

3 payment to the MedicarePlus MSA of an individual by the

4 Secretary of Health and Human Services under part C of

5 title XVIII of the Social Security Act.

6 ‘‘(b) MEDICAREPLUS MSA.—For purposes of this sec7 tion—

8 ‘‘(1) MEDICAREPLUS MSA.—The term

9 ‘MedicarePlus MSA’ means a medical savings account

10 (as defined in section 222(d))—

11 ‘‘(A) which is designated as a MedicarePlus

12 MSA,

13 ‘‘(B) notwithstanding section 222(f)(5),

14 with respect to which no contribution may be

15 made other than—

16 ‘‘(i) a contribution made by the Sec17 retary of Health and Human Services pur18 suant to part C of title XVIII of the Social

19 Security Act, or

20 ‘‘(ii) a trustee-to-trustee transfer de21 scribed in subsection (c)(4), and

22 ‘‘(C) the governing instrument of which pro23 vides that trustee-to-trustee transfers described in

24 subsection (c)(4) may be made to and from such

25 account.
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1 ‘‘(2) HIGH DEDUCTIBLE MSA.—The term ‘High

2 Deductible MedicarePlus MSA’ means a MedicarePlus

3 MSA which is established in connection with a high

4 deductible plan described in section 1859(b)(2) of the

5 Social Security Act.

6 ‘‘(3) REBATE MEDICAREPLUS MSA.—The term

7 ‘Rebate MedicarePlus MSA’ means a MedicarePlus

8 MSA other than a High Deductible MedicarePlus

9 MSA.

10 ‘‘(c) SPECIAL RULES FOR DISTRIBUTIONS.—

11 ‘‘(1) DISTRIBUTIONS FOR QUALIFIED MEDICAL

12 EXPENSES.—In applying section 222—

13 ‘‘(A) to a High Deductible MedicarePlus

14 MSA, qualified medical expenses shall include

15 only expenses for medical care of the account

16 holder, and

17 ‘‘(B) to a Rebate MedicarePlus MSA, quali18 fied medical expenses shall include only expenses

19 for medical care of the account holder and of the

20 spouse of the account holder if such spouse is en21 titled to benefits under part A of title XVIII of

22 the Social Security Act and is enrolled under

23 part B of such title.
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1 ‘‘(2) PENALTY FOR DISTRIBUTIONS FROM HIGH

2 DEDUCTIBLE MSA NOT USED FOR QUALIFIED MEDICAL

3 EXPENSES IF MINIMUM BALANCE NOT MAINTAINED.—

4 ‘‘(A) IN GENERAL.—The tax imposed by

5 this chapter for any taxable year in which there

6 is a payment or distribution from a High De7 ductible MedicarePlus MSA which is not used ex8 clusively to pay the qualified medical expenses of

9 the account holder shall be increased by 50 per10 cent of the excess (if any) of—

11 ‘‘(i) the amount of such payment or

12 distribution, over

13 ‘‘(ii) the excess (if any) of—

14 ‘‘(I) the fair market value of the

15 assets in such MSA as of the close of

16 the calendar year preceding the cal17 endar year in which the taxable year

18 begins, over

19 ‘‘(II) an amount equal to 60 per20 cent of the deductible under the high

21 deductible plan covering the account

22 holder as of January 1 of the calendar

23 year in which the taxable year begins.
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1 Section 222(f)(2) shall not apply to any pay2 ment or distribution from a High Deductible

3 MedicarePlus MSA.

4 ‘‘(B) EXCEPTIONS.—Subparagraph (A)

5 shall not apply if the payment or distribution is

6 made on or after the date the account holder—

7 ‘‘(i) becomes disabled within the mean8 ing of section 72(m)(7), or

9 ‘‘(ii) dies.

10 ‘‘(C) SPECIAL RULES.—For purposes of sub11 paragraph (A)—

12 ‘‘(i) all High Deductible MedicarePlus

13 MSAs of the account holder shall be treated

14 as 1 account,

15 ‘‘(ii) all payments and distributions

16 not used exclusively to pay the qualified

17 medical expenses of the account holder dur18 ing any taxable year shall be treated as 1

19 distribution, and

20 ‘‘(iii) any distribution of property

21 shall be taken into account at its fair mar22 ket value on the date of the distribution.

23 ‘‘(3) WITHDRAWAL OF ERRONEOUS CONTRIBU24 TIONS.—Section 222(f)(2) and paragraph (2) of this

25 subsection shall not apply to any payment or dis-
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1 tribution from a MedicarePlus MSA to the Secretary

2 of Health and Human Services of an erroneous con3 tribution to such MSA and of the net income attrib4 utable to such contribution.

5 ‘‘(4) TRUSTEE-TO-TRUSTEE TRANSFERS.—Sec6 tion 222(f)(2) and paragraph (2) of this subsection

7 shall not apply to—

8 ‘‘(A) any trustee-to-trustee transfer from a

9 High Deductible MedicarePlus MSA of an ac10 count holder to another High Deductible

11 MedicarePlus MSA of such account holder, and

12 ‘‘(B) any trustee-to-trustee transfer from a

13 Rebate MedicarePlus MSA of an account holder

14 to another Rebate MedicarePlus MSA of such ac15 count holder.

16 ‘‘(d) SPECIAL RULES FOR TREATMENT OF ACCOUNT

17 AFTER DEATH OF ACCOUNT HOLDER.—Notwithstanding

18 section 222(f)(1)(B), if, as of the date of the death of the

19 account holder, the spouse of such holder is not entitled to

20 benefits under title XVIII of the Social Security Act, then

21 after the date of such death—

22 ‘‘(1) the Secretary of Health and Human Serv23 ices may not make any payments to such

24 MedicarePlus MSA, other than payments attributable

25 to periods before such date, and
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1 ‘‘(2) such MSA shall be treated as medical sav2 ings account which is not a MedicarePlus MSA.

3 ‘‘(e) REPORTS.—In the case of a MedicarePlus MSA,

4 the report under section 222(h)—

5 ‘‘(1) shall include the fair market value of the as6 sets in such MedicarePlus MSA as of the close of each

7 calendar year, and

8 ‘‘(2) shall be furnished to the account holder—

9 ‘‘(A) not later than January 31 of the cal10 endar year following the calendar year to which

11 such reports relate, and

12 ‘‘(B) in such manner as the Secretary pre13 scribes in such regulations.’’

14 (b) CONFORMING AMENDMENTS.—

15 (1) The last sentence of section 4973(d) of such

16 Code, as added by section 11066(f)(4), is amended by

17 ‘‘or section 137(c)(3)’’ after ‘‘section 222(f)(3)’’.

18 (2) The table of sections for part III of sub19 chapter B of chapter 1 of such Code is amended by

20 striking the last item and inserting the following:

‘‘Sec. 137. MedicarePlus MSA.

‘‘Sec. 138. Cross references to other Acts.’’

21 (c) EFFECTIVE DATE.—The amendments made by this

22 section shall apply to taxable years beginning after Decem23 ber 31, 1996.
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1 SEC. 8012. CERTAIN REBATES EXCLUDED FROM GROSS

2 INCOME.

3 (a) IN GENERAL.—Section 105 of the Internal Revenue

4 Code of 1986 (relating to amounts received under accident

5 and health plans) is amended by adding at the end the fol6 lowing new subsection:

7 ‘‘(j) CERTAIN REBATES UNDER SOCIAL SECURITY

8 ACT.—Gross income does not include any rebate received

9 under part C of title XVIII of the Social Security Act dur10 ing the taxable year.’’

11 (b) EFFECTIVE DATE.—The amendment made by sub12 section (a) shall apply to amounts received after the date

13 of the enactment of this Act.

14 CHAPTER 3—MEDICARE PAYMENT REVIEW

15 COMMISSION

16 SEC. 8021. MEDICARE PAYMENT REVIEW COMMISSION.

17 (a) IN GENERAL.—Title XVIII is amended by insert18 ing after section 1804 the following new section:

19 ‘‘MEDICARE PAYMENT REVIEW COMMISSION

20 ‘‘SEC. 1805. (a) ESTABLISHMENT.—There is hereby es21 tablished the Medicare Payment Review Commission (in

22 this section referred to as the ‘Commission’).

23 ‘‘(b) DUTIES.—

24 ‘‘(1) GENERAL DUTIES AND REPORTS.—
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1 ‘‘(A) IN GENERAL.—The Commission shall

2 review, and make recommendations to Congress

3 concerning, payment policies under this title.

4 ‘‘(B) ANNUAL REPORTS.—By not later than

5 June 1 of each year, the Commission shall sub6 mit a report to Congress containing an examina7 tion of issues affecting the medicare program, in8 cluding the implications of changes in health

9 care delivery in the United States and in the

10 market for health care services on the medicare

11 program.

12 ‘‘(C) ADDITIONAL REPORTS.—The Commis13 sion may submit to Congress from time to time

14 such other reports as the Commission deems ap15 propriate. By not later than May 1, 1997, the

16 Commission shall submit to Congress a report on

17 the matter described in paragraph (2)(G).

18 ‘‘(D) AVAILABILITY OF REPORTS.—The

19 Commission shall transmit to the Secretary a

20 copy of each report submitted to Congress under

21 this subsection and shall make such reports

22 available to the public.

23 ‘‘(2) SPECIFIC DUTIES RELATING TO

24 MEDICAREPLUS PROGRAM.—Specifically, the Commis-
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1 sion shall review, with respect to the MedicarePlus

2 program under part C—

3 ‘‘(A) the methodology for making payment

4 to plans under such program, including the mak5 ing of differential payments and the distribution

6 of differential updates among different payment

7 areas;

8 ‘‘(B) the mechanisms used to adjust pay9 ments for risk and the need to adjust such mech10 anisms to take into account health status of bene11 ficiaries;

12 ‘‘(C) the implications of risk selection both

13 among MedicarePlus organizations and between

14 the MedicarePlus option and the Medicare fee15 for-service option;

16 ‘‘(D) in relation to payment under part C,

17 the development and implementation of mecha18 nisms to assure the quality of care for those en19 rolled with MedicarePlus organizations;

20 ‘‘(E) the impact of the MedicarePlus pro21 gram on access to care for medicare beneficiaries;

22 ‘‘(F) the feasibility and desirability of ex23 tending the rules for open enrollment that apply

24 during the transition period to apply in each

25 county during the first 2 years in which
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1 MedicarePlus plans are made available to indi2 viduals residing in the county; and

3 ‘‘(G) other major issues in implementation

4 and further development of the MedicarePlus

5 program.

6 ‘‘(3) SPECIFIC DUTIES RELATING TO THE FEE7 FOR-SERVICE SYSTEM.—Specifically, the Commission

8 shall review payment policies under parts A and B,

9 including—

10 ‘‘(A) the factors affecting expenditures for

11 services in different sectors, including the process

12 for updating hospital, physician, and other fees,

13 ‘‘(B) payment methodologies; and

14 ‘‘(C) the impact of payment policies on ac15 cess and quality of care for medicare bene16 ficiaries.

17 ‘‘(4) SPECIFIC DUTIES RELATING TO INTER18 ACTION OF PAYMENT POLICIES WITH HEALTH CARE

19 DELIVERY GENERALLY.—Specifically the Commission

20 shall review the effect of payment policies under this

21 title on the delivery of health care services under this

22 title and assess the implications of changes in the

23 health services market on the medicare program.

24 ‘‘(c) MEMBERSHIP.—
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1 ‘‘(1) NUMBER AND APPOINTMENT.—The Commis2 sion shall be composed of 15 members appointed by

3 the Comptroller General.

4 ‘‘(2) QUALIFICATIONS.—The membership of the

5 Commission shall include individuals with national

6 recognition for their expertise in health finance and

7 economics, actuarial science, health facility manage8 ment, health plans and integrated delivery systems,

9 reimbursement of health facilities, allopathic and os10 teopathic physicians, and other providers of services,

11 and other related fields, who provide a mix of dif12 ferent professionals, broad geographic representation,

13 and a balance between urban and rural representa14 tives, including physicians and other health profes15 sionals, employers, third party payors, individuals

16 skilled in the conduct and interpretation of bio17 medical, health services, and health economics re18 search and expertise in outcomes and effectiveness re19 search and technology assessment. Such membership

20 shall also include representatives of consumers and

21 the elderly.

22 ‘‘(3) TERMS.—

23 ‘‘(A) IN GENERAL.—The terms of members

24 of the Commission shall be for 3 years except
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1 that the Comptroller General shall designate

2 staggered terms for the members first appointed.

3 ‘‘(B) VACANCIES.—Any member appointed

4 to fill a vacancy occurring before the expiration

5 of the term for which the member’s predecessor

6 was appointed shall be appointed only for the re7 mainder of that term. A member may serve after

8 the expiration of that member’s term until a suc9 cessor has taken office. A vacancy in the Com10 mission shall be filled in the manner in which

11 the original appointment was made.

12 ‘‘(4) COMPENSATION.—While serving on the busi13 ness of the Commission (including traveltime), a

14 member of the Commission shall be entitled to com15 pensation at the per diem equivalent of the rate pro16 vided for level IV of the Executive Schedule under sec17 tion 5315 of title 5, United States Code; and while so

18 serving away from home and member’s regular place

19 of business, a member may be allowed travel expenses,

20 as authorized by the Chairman of the Commission.

21 Physicians serving as personnel of the Commission

22 may be provided a physician comparability allow23 ance by the Commission in the same manner as Gov24 ernment physicians may be provided such an allow25 ance by an agency under section 5948 of title 5, Unit-
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1 ed States Code, and for such purpose subsection (i) of

2 such section shall apply to the Commission in the

3 same manner as it applies to the Tennessee Valley

4 Authority. For purposes of pay (other than pay of

5 members of the Commission) and employment bene6 fits, rights, and privileges, all personnel of the Com7 mission shall be treated as if they were employees of

8 the United States Senate.

9 ‘‘(5) CHAIRMAN; VICE CHAIRMAN.—The Comp10 troller General shall designate a member of the Com11 mission, at the time of appointment of the member,

12 as Chairman and a member as Vice Chairman for

13 that term of appointment.

14 ‘‘(6) MEETINGS.—The Commission shall meet at

15 the call of the Chairman.

16 ‘‘(d) DIRECTOR AND STAFF; EXPERTS AND CONSULT17 ANTS.—Subject to such review as the Comptroller General

18 deems necessary to assure the efficient administration of the

19 Commission, the Commission may—

20 ‘‘(1) employ and fix the compensation of an Ex21 ecutive Director (subject to the approval of the Comp22 troller General) and such other personnel as may be

23 necessary to carry out its duties (without regard to

24 the provisions of title 5, United States Code, govern25 ing appointments in the competitive service);
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1 ‘‘(2) seek such assistance and support as may be

2 required in the performance of its duties from appro3 priate Federal departments and agencies;

4 ‘‘(3) enter into contracts or make other arrange5 ments, as may be necessary for the conduct of the

6 work of the Commission (without regard to section

7 3709 of the Revised Statutes (41 U.S.C. 5));

8 ‘‘(4) make advance, progress, and other pay9 ments which relate to the work of the Commission;

10 ‘‘(5) provide transportation and subsistence for

11 persons serving without compensation; and

12 ‘‘(6) prescribe such rules and regulations as it

13 deems necessary with respect to the internal organiza14 tion and operation of the Commission.

15 ‘‘(e) POWERS.—

16 ‘‘(1) OBTAINING OFFICIAL DATA.—The Commis17 sion may secure directly from any department or

18 agency of the United States information necessary to

19 enable it to carry out this section. Upon request of the

20 Chairman, the head of that department or agency

21 shall furnish that information to the Commission on

22 an agreed upon schedule.

23 ‘‘(2) DATA COLLECTION.—In order to carry out

24 its functions, the Commission shall collect and assess

25 information to—
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1 ‘‘(A) utilize existing information, both pub2 lished and unpublished, where possible, collected

3 and assessed either by its own staff or under

4 other arrangements made in accordance with

5 this section,

6 ‘‘(B) carry out, or award grants or con7 tracts for, original research and experimentation,

8 where existing information is inadequate, and

9 ‘‘(C) adopt procedures allowing any inter10 ested party to submit information for the Com11 mission’s use in making reports and rec12 ommendations.

13 ‘‘(3) ACCESS OF GAO TO INFORMATION.—The

14 Comptroller General shall have unrestricted access to

15 all deliberations, records, and data of the Commis16 sion, immediately upon request.

17 ‘‘(4) PERIODIC AUDIT.—The Commission shall be

18 subject to periodic audit by the General Accounting

19 Office.

20 ‘‘(5) OPEN MEETINGS, ETC..—Pursuant to regu21 lations of the Comptroller General, rules based upon

22 the requirements of section 10 of the Federal Advisory

23 Committee Act shall apply with respect to the Com24 mission.

25 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—
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1 ‘‘(1) REQUEST FOR APPROPRIATIONS.—The

2 Commission shall submit requests for appropriations

3 in the same manner as the Comptroller General sub4 mits requests for appropriations, but amounts appro5 priated for the Commission shall be separate from

6 amounts appropriated for the Comptroller General.

7 ‘‘(2) AUTHORIZATION.—There are authorized to

8 be appropriated such sums as may be necessary to

9 carry out the provisions of this section. 60 percent of

10 such appropriation shall be payable from the Federal

11 Hospital Insurance Trust Fund, and 40 percent of

12 such appropriation shall be payable from the Federal

13 Supplementary Medical Insurance Trust Fund.’’.

14 (b) ABOLITION OF PROPAC AND PPRC.—

15 (1) PROPAC.—

16 (A) IN GENERAL.—Section 1886(e) (42

17 U.S.C. 1395ww(e)) is amended—

18 (i) by striking paragraphs (2) and (6);

19 and

20 (ii) in paragraph (3), by striking ‘‘(A)

21 The Commission’’ and all that follows

22 through ‘‘(B)’’.

23 (B) CONFORMING AMENDMENT.—Section

24 1862 (42 U.S.C. 1395y) is amended by striking

25 ‘‘Prospective Payment Assessment Commission’’
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1 each place it appears in subsection (a)(1)(D)

2 and subsection (i) and inserting ‘‘Medicare Pay3 ment Review Commission’’.

4 (2) PPRC.—

5 (A) IN GENERAL.—Title XVIII is amended

6 by striking section 1845 (42 U.S.C. 1395w–1).

7 (B) CONFORMING AMENDMENTS.—

8 (i) Section 1834(b)(2) (42 U.S.C.

9 1395m(b)(2)) is amended by striking ‘‘Phy10 sician Payment Review Commission’’ and

11 inserting ‘‘Medicare Payment Review Com12 mission’’.

13 (ii) Section 1842(b) (42 U.S.C.

14 1395u(b)) is amended by striking ‘‘Physi15 cian Payment Review Commission’’ each

16 place it appears in paragraphs (9)(D) and

17 (14)(C)(i) and inserting ‘‘Medicare Pay18 ment Review Commission’’.

19 (iii) Section 1848 (42 U.S.C. 1395w–

20 4) is amended by striking ‘‘Physician Pay21 ment Review Commission’’ and inserting

22 ‘‘Medicare Payment Review Commission’’

23 each place it appears in paragraph

24 (2)(A)(ii), (2)(B)(iii), and (5) of subsection

25 (c), subsection (d)(2)(F), paragraphs (1)(B),
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1 (3), and (4)(A) of subsection (f), and para2 graphs (6)(C) and (7)(C) of subsection (g).

3 (c) EFFECTIVE DATE; TRANSITION.—

4 (1) IN GENERAL.—The Comptroller General shall

5 first provide for appointment of members to the Medi6 care Payment Review Commission (in this subsection

7 referred to as ‘‘MPRC’’) by not later than September

8 30, 1996.

9 (2) TRANSITION.—Effective January 1, 1997, the

10 Prospective Payment Assessment Commission (in this

11 subsection referred to as ‘‘ProPAC’’) and the Physi12 cian Payment Review Commission (in this subsection

13 referred to as ‘‘PPRC’’) are terminated and amend14 ments made by subsection (b) shall become effective.

15 The Comptroller General, to the maximum extent fea16 sible, shall provide for the transfer to the MPRC of

17 assets and staff of ProPAC and PPRC, without any

18 loss of benefits or seniority by virtue of such transfers.

19 Fund balances available to the ProPAC or PPRC for

20 any period shall be available to the MPRC for such

21 period for like purposes.

22 (3) CONTINUING RESPONSIBILITY FOR RE23 PORTS.—The MPRC shall be responsible for the prep24 aration and submission of reports required by law to

25 be submitted (and which have not been submitted by
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1 the date of establishment of the MPRC) by the

2 ProPAC and PPRC, and, for this purpose, any ref3 erence in law to either such Commission is deemed,

4 after the appointment of the MPRC, to refer to the

5 MPRC.

6 CHAPTER 4—TREATMENT OF HOSPITALS

7 WHICH PARTICIPATE IN PROVIDER8 SPONSORED ORGANIZATIONS

9 SEC. 8031. TREATMENT OF HOSPITALS WHICH PARTICIPATE

10 IN PROVIDER-SPONSORED ORGANIZATIONS.

11 (a) IN GENERAL.—Section 501 of the Internal Revenue

12 Code of 1986 (relating to exemption from tax on corpora13 tions, certain trusts, etc.), as amended by title XI, is amend14 ed by redesignating subsection (o) as subsection (p) and by

15 inserting after subsection (n) the following new subsection:

16 ‘‘(o) TREATMENT OF HOSPITALS PARTICIPATING IN

17 PROVIDER-SPONSORED ORGANIZATIONS.—An organization

18 shall not fail to be treated as organized and operated exclu19 sively for a charitable purpose for purposes of subsection

20 (c)(3) solely because a hospital which is owned and operated

21 by such organization participates in a provider-sponsored

22 organization (as defined in section 1853 of the Social Secu23 rity Act), whether or not the provider-sponsored organiza24 tion is exempt from tax. For purposes of subsection (c)(3),

25 any person with a material financial interest in such a
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1 provider-sponsored organization shall be treated as a pri2 vate shareholder or individual with respect to the hospital.’’

3 (b) EFFECTIVE DATE.—The amendment made by sub4 section (a) shall take effect on the date of the enactment

5 of this Act.

6 Subtitle B—Health Care Fraud and

7 Abuse Prevention

8 CHAPTER 1—FRAUD AND ABUSE CONTROL

9 PROGRAM

10 SEC. 8101. FRAUD AND ABUSE CONTROL PROGRAM.

11 (a) ESTABLISHMENT OF PROGRAM.—Title XI (42

12 U.S.C. 1301 et seq.) is amended by inserting after section

13 1128B the following new section:

14 ‘‘FRAUD AND ABUSE CONTROL PROGRAM

15 ‘‘SEC. 1128C. (a) ESTABLISHMENT OF PROGRAM.—

16 ‘‘(1) IN GENERAL.—Not later than January 1,

17 1996, the Secretary, acting through the Office of the

18 Inspector General of the Department of Health and

19 Human Services, and the Attorney General shall es20 tablish a program—

21 ‘‘(A) to coordinate Federal, State, and local

22 law enforcement programs to control fraud and

23 abuse with respect to health plans,

24 ‘‘(B) to conduct investigations, audits, eval25 uations, and inspections relating to the delivery
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1 of and payment for health care in the United

2 States,

3 ‘‘(C) to facilitate the enforcement of the pro4 visions of sections 1128, 1128A, and 1128B and

5 other statutes applicable to health care fraud and

6 abuse,

7 ‘‘(D) to provide for the modification and es8 tablishment of safe harbors and to issue interpre9 tative rulings and special fraud alerts pursuant

10 to section 1128D, and

11 ‘‘(E) to provide for the reporting and disclo12 sure of certain final adverse actions against

13 health care providers, suppliers, or practitioners

14 pursuant to the data collection system established

15 under section 1128E.

16 ‘‘(2) COORDINATION WITH HEALTH PLANS.—In

17 carrying out the program established under para18 graph (1), the Secretary and the Attorney General

19 shall consult with, and arrange for the sharing of

20 data with representatives of health plans.

21 ‘‘(3) GUIDELINES.—

22 ‘‘(A) IN GENERAL.—The Secretary and the

23 Attorney General shall issue guidelines to carry

24 out the program under paragraph (1). The pro25 visions of sections 553, 556, and 557 of title 5,
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1 United States Code, shall not apply in the issu2 ance of such guidelines.

3 ‘‘(B) INFORMATION GUIDELINES.—

4 ‘‘(i) IN GENERAL.—Such guidelines

5 shall include guidelines relating to the fur6 nishing of information by health plans, pro7 viders, and others to enable the Secretary

8 and the Attorney General to carry out the

9 program (including coordination with

10 health plans under paragraph (2)).

11 ‘‘(ii) CONFIDENTIALITY.—Such guide12 lines shall include procedures to assure that

13 such information is provided and utilized

14 in a manner that appropriately protects the

15 confidentiality of the information and the

16 privacy of individuals receiving health care

17 services and items.

18 ‘‘(iii) QUALIFIED IMMUNITY FOR PRO19 VIDING INFORMATION.—The provisions of

20 section 1157(a) (relating to limitation on

21 liability) shall apply to a person providing

22 information to the Secretary or the Attor23 ney General in conjunction with their per24 formance of duties under this section.
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1 ‘‘(4) ENSURING ACCESS TO DOCUMENTATION.—

2 The Inspector General of the Department of Health

3 and Human Services is authorized to exercise such

4 authority described in paragraphs (3) through (9) of

5 section 6 of the Inspector General Act of 1978 (5

6 U.S.C. App.) as necessary with respect to the activi7 ties under the fraud and abuse control program estab8 lished under this subsection.

9 ‘‘(5) AUTHORITY OF INSPECTOR GENERAL.—

10 Nothing in this Act shall be construed to diminish the

11 authority of any Inspector General, including such

12 authority as provided in the Inspector General Act of

13 1978 (5 U.S.C. App.).

14 ‘‘(b) ADDITIONAL USE OF FUNDS BY INSPECTOR GEN15 ERAL.—

16 ‘‘(1) REIMBURSEMENTS FOR INVESTIGATIONS.—

17 The Inspector General of the Department of Health

18 and Human Services is authorized to receive and re19 tain for current use reimbursement for the costs of

20 conducting investigations and audits and for mon21 itoring compliance plans when such costs are ordered

22 by a court, voluntarily agreed to by the payer, or oth23 erwise.

24 ‘‘(2) CREDITING.—Funds received by the Inspec25 tor General under paragraph (1) as reimbursement
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1 for costs of conducting investigations shall be depos2 ited to the credit of the appropriation from which ini3 tially paid, or to appropriations for similar purposes

4 currently available at the time of deposit, and shall

5 remain available for obligation for 1 year from the

6 date of the deposit of such funds.

7 ‘‘(c) HEALTH PLAN DEFINED.—For purposes of this

8 section, the term ‘health plan’ means a plan or program

9 that provides health benefits, whether directly, through in10 surance, or otherwise, and includes—

11 ‘‘(1) a policy of health insurance;

12 ‘‘(2) a contract of a service benefit organization;

13 and

14 ‘‘(3) a membership agreement with a health

15 maintenance organization or other prepaid health

16 plan.’’.

17 (b) ESTABLISHMENT OF HEALTH CARE FRAUD AND

18 ABUSE CONTROL ACCOUNT IN FEDERAL HOSPITAL INSUR19 ANCE TRUST FUND.—Section 1817 (42 U.S.C. 1395i) is

20 amended by adding at the end the following new subsection:

21 ‘‘(k) HEALTH CARE FRAUD AND ABUSE CONTROL AC22 COUNT.—

23 ‘‘(1) ESTABLISHMENT.—There is hereby estab24 lished in the Trust Fund an expenditure account to

25 be known as the ‘Health Care Fraud and Abuse Con-
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1 trol Account’ (in this subsection referred to as the ‘Ac2 count’).

3 ‘‘(2) APPROPRIATED AMOUNTS TO TRUST

4 FUND.—

5 ‘‘(A) IN GENERAL.—There are hereby ap6 propriated to the Trust Fund—

7 ‘‘(i) such gifts and bequests as may be

8 made as provided in subparagraph (B);

9 ‘‘(ii) such amounts as may be depos10 ited in the Trust Fund as provided in sec11 tions 8141(b) and 8142(c) of the Medicare

12 Preservation Act of 1995, and title XI; and

13 ‘‘(iii) such amounts as are transferred

14 to the Trust Fund under subparagraph (C).

15 ‘‘(B) AUTHORIZATION TO ACCEPT GIFTS.—

16 The Trust Fund is authorized to accept on behalf

17 of the United States money gifts and bequests

18 made unconditionally to the Trust Fund, for the

19 benefit of the Account or any activity financed

20 through the Account.

21 ‘‘(C) TRANSFER OF AMOUNTS.—The Manag22 ing Trustee shall transfer to the Trust Fund,

23 under rules similar to the rules in section 9601

24 of the Internal Revenue Code of 1986, an amount

25 equal to the sum of the following:
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1 ‘‘(i) Criminal fines recovered in cases

2 involving a Federal health care offense (as

3 defined in section 982(a)(6)(B) of title 18,

4 United States Code).

5 ‘‘(ii) Civil monetary penalties and as6 sessments imposed in health care cases, in7 cluding amounts recovered under titles XI,

8 XVIII, and XXI, and chapter 38 of title 31,

9 United States Code (except as otherwise

10 provided by law).

11 ‘‘(iii) Amounts resulting from the for12 feiture of property by reason of a Federal

13 health care offense.

14 ‘‘(iv) Penalties and damages obtained

15 and otherwise creditable to miscellaneous re16 ceipts of the general fund of the Treasury

17 obtained under sections 3729 through 3733

18 of title 31, United States Code (known as

19 the False Claims Act), in cases involving

20 claims related to the provision of health

21 care items and services (other than funds

22 awarded to a relator, for restitution or oth23 erwise authorized by law).

24 ‘‘(3) APPROPRIATED AMOUNTS TO ACCOUNT FOR

25 FRAUD AND ABUSE CONTROL PROGRAM, ETC.—
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1 ‘‘(A) DEPARTMENTS OF HEALTH AND

2 HUMAN SERVICES AND JUSTICE.—

3 ‘‘(i) IN GENERAL.—There are hereby

4 appropriated to the Account from the Trust

5 Fund such sums as the Secretary and the

6 Attorney General certify are necessary to

7 carry out the purposes described in sub8 paragraph (C), to be available without fur9 ther appropriation, in an amount not to ex10 ceed—

11 ‘‘(I) for fiscal year 1996,

12 $104,000,000, and

13 ‘‘(II) for each of the fiscal years

14 1997 through 2002, the limit for the

15 preceding fiscal year, increased by 15

16 percent; and

17 ‘‘(III) for each fiscal year after

18 fiscal year 2002, the limit for fiscal

19 year 2002.

20 ‘‘(ii) MEDICARE AND MEDIGRANT AC21 TIVITIES.—For each fiscal year, of the

22 amount appropriated in clause (i), the fol23 lowing amounts shall be available only for

24 the purposes of the activities of the Office of

25 the Inspector General of the Department of
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1 Health and Human Services with respect to

2 the medicare and MediGrant programs—

3 ‘‘(I) for fiscal year 1996, not less

4 than $60,000,000 and not more than

5 $70,000,000;

6 ‘‘(II) for fiscal year 1997, not less

7 than $80,000,000 and not more than

8 $90,000,000;

9 ‘‘(III) for fiscal year 1998, not

10 less than $90,000,000 and not more

11 than $100,000,000;

12 ‘‘(IV) for fiscal year 1999, not less

13 than $110,000,000 and not more than

14 $120,000,000;

15 ‘‘(V) for fiscal year 2000, not less

16 than $120,000,000 and not more than

17 $130,000,000;

18 ‘‘(VI) for fiscal year 2001, not less

19 than $140,000,000 and not more than

20 $150,000,000; and

21 ‘‘(VII) for each fiscal year after

22 fiscal year 2001, not less than

23 $150,000,000 and not more than

24 $160,000,000.
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1 ‘‘(B) FEDERAL BUREAU OF INVESTIGA2 TIONS.—There are hereby appropriated from the

3 general fund of the United States Treasury and

4 hereby appropriated to the Account for transfer

5 to the Federal Bureau of Investigations to carry

6 out the purposes described in subparagraph

7 (C)(i), to be available without further appropria8 tion—

9 ‘‘(i) for fiscal year 1996, $47,000,000;

10 ‘‘(ii) for fiscal year 1997, $56,000,000;

11 ‘‘(iii) for fiscal year 1998, $66,000,000;

12 ‘‘(iv) for fiscal year 1999, $76,000,000;

13 ‘‘(v) for fiscal year 2000, $88,000,000;

14 ‘‘(vi) for fiscal year 2001,

15 $101,000,000; and

16 ‘‘(vii) for each fiscal year after fiscal

17 year 2001, $114,000,000.

18 ‘‘(C) USE OF FUNDS.—The purposes de19 scribed in this subparagraph are as follows:

20 ‘‘(i) GENERAL USE.—To cover the costs

21 (including equipment, salaries and benefits,

22 and travel and training) of the administra23 tion and operation of the health care fraud

24 and abuse control program established
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1 under section 1128C(a), including the costs

2 of—

3 ‘‘(I) prosecuting health care mat4 ters (through criminal, civil, and ad5 ministrative proceedings);

6 ‘‘(II) investigations;

7 ‘‘(III) financial and performance

8 audits of health care programs and op9 erations;

10 ‘‘(IV) inspections and other eval11 uations; and

12 ‘‘(V) provider and consumer edu13 cation regarding compliance with the

14 provisions of title XI.

15 ‘‘(ii) USE BY STATE MEDIGRANT FRAUD

16 CONTROL UNITS FOR INVESTIGATION REIM17 BURSEMENTS.—To reimburse the various State

18 MediGrant fraud control units established under

19 section 2134(a) upon request to the Secretary for

20 the costs of the activities authorized under sec21 tion 2134(b).

22 ‘‘(4) APPROPRIATED AMOUNTS TO ACCOUNT FOR

23 MEDICARE INTEGRITY PROGRAM.—

24 ‘‘(A) IN GENERAL.—There are hereby ap25 propriated to the Account from the Trust Fund
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1 for each fiscal year such amounts as are nec2 essary to carry out the Medicare Integrity Pro3 gram under section 1893, subject to subpara4 graph (B) and to be available without further

5 appropriation.

6 ‘‘(B) AMOUNTS SPECIFIED.—The amount

7 appropriated under subparagraph (A) for a fis8 cal year is as follows:

9 ‘‘(i) For fiscal year 1996, such amount

10 shall be not less than $430,000,000 and not

11 more than $440,000,000.

12 ‘‘(ii) For fiscal year 1997, such

13 amount shall be not less than $490,000,000

14 and not more than $500,000,000.

15 ‘‘(iii) For fiscal year 1998, such

16 amount shall be not less than $550,000,000

17 and not more than $560,000,000.

18 ‘‘(iv) For fiscal year 1999, such

19 amount shall be not less than $620,000,000

20 and not more than $630,000,000.

21 ‘‘(v) For fiscal year 2000, such amount

22 shall be not less than $670,000,000 and not

23 more than $680,000,000.
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1 ‘‘(vi) For fiscal year 2001, such

2 amount shall be not less than $690,000,000

3 and not more than $700,000,000.

4 ‘‘(vii) For each fiscal year after fiscal

5 year 2001, such amount shall be not less

6 than $710,000,000 and not more than

7 $720,000,000.

8 ‘‘(5) ANNUAL REPORT.—The Secretary and the

9 Attorney General shall submit jointly an annual re10 port to Congress on the amount of revenue which is

11 generated and disbursed, and the justification for such

12 disbursements, by the Account in each fiscal year.’’.

13 SEC. 8102. MEDICARE INTEGRITY PROGRAM.

14 (a) ESTABLISHMENT OF MEDICARE INTEGRITY PRO15 GRAM.—Title XVIII is amended by adding at the end the

16 following new section:

17 ‘‘MEDICARE INTEGRITY PROGRAM

18 ‘‘SEC. 1893. (a) ESTABLISHMENT OF PROGRAM.—

19 There is hereby established the Medicare Integrity Program

20 (in this section referred to as the ‘Program’) under which

21 the Secretary shall promote the integrity of the medicare

22 program by entering into contracts in accordance with this

23 section with eligible private entities to carry out the activi24 ties described in subsection (b).

25 ‘‘(b) ACTIVITIES DESCRIBED.—The activities described

26 in this subsection are as follows:
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1 ‘‘(1) Review of activities of providers of services

2 or other individuals and entities furnishing items and

3 services for which payment may be made under this

4 title (including skilled nursing facilities and home

5 health agencies), including medical and utilization

6 review and fraud review (employing similar stand7 ards, processes, and technologies used by private

8 health plans, including equipment and software tech9 nologies which surpass the capability of the equip10 ment and technologies used in the review of claims

11 under this title as of the date of the enactment of this

12 section).

13 ‘‘(2) Audit of cost reports.

14 ‘‘(3) Determinations as to whether payment

15 should not be, or should not have been, made under

16 this title by reason of section 1862(b), and recovery

17 of payments that should not have been made.

18 ‘‘(4) Education of providers of services, bene19 ficiaries, and other persons with respect to payment

20 integrity and benefit quality assurance issues.

21 ‘‘(5) Developing (and periodically updating) a

22 list of items of durable medical equipment in accord23 ance with section 1834(a)(15) which are subject to

24 prior authorization under such section.
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1 ‘‘(c) ELIGIBILITY OF ENTITIES.—An entity is eligible

2 to enter into a contract under the Program to carry out

3 any of the activities described in subsection (b) if—

4 ‘‘(1) the entity has demonstrated capability to

5 carry out such activities;

6 ‘‘(2) in carrying out such activities, the entity

7 agrees to cooperate with the Inspector General of the

8 Department of Health and Human Services, the At9 torney General of the United States, and other law

10 enforcement agencies, as appropriate, in the inves11 tigation and deterrence of fraud and abuse in relation

12 to this title and in other cases arising out of such ac13 tivities;

14 ‘‘(3) the entity demonstrates to the Secretary

15 that the entity’s financial holdings, interests, or rela16 tionships will not interfere with its ability to perform

17 the functions to be required by the contract in an ef18 fective and impartial manner; and

19 ‘‘(4) the entity meets such other requirements as

20 the Secretary may impose.

21 In the case of the activity described in subsection (b)(5),

22 an entity shall be deemed to be eligible to enter into a con23 tract under the Program to carry out the activity if the

24 entity is a carrier with a contract in effect under section

25 1842.
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1 ‘‘(d) PROCESS FOR ENTERING INTO CONTRACTS.—The

2 Secretary shall enter into contracts under the Program in

3 accordance with such procedures as the Secretary shall by

4 regulation establish, except that such procedures shall in5 clude the following:

6 ‘‘(1) The Secretary shall determine the appro7 priate number of separate contracts which are nec8 essary to carry out the Program and the appropriate

9 times at which the Secretary shall enter into such

10 contracts.

11 ‘‘(2)(A) Except as provided in subparagraph

12 (B), the provisions of section 1153(e)(1) shall apply

13 to contracts and contracting authority under this sec14 tion.

15 ‘‘(B) Competitive procedures must be used when

16 entering into new contracts under this section, or at

17 any other time considered appropriate by the Sec18 retary, except that the Secretary may contract with

19 entities that are carrying out the activities described

20 in this section pursuant to agreements under section

21 1816 or contracts under section 1842 in effect on the

22 date of the enactment of this section.

23 ‘‘(3) A contract under this section may be re24 newed without regard to any provision of law requir25 ing competition if the contractor has met or exceeded
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1 the performance requirements established in the cur2 rent contract.

3 ‘‘(e) LIMITATION ON CONTRACTOR LIABILITY.—The

4 Secretary shall by regulation provide for the limitation of

5 a contractor’s liability for actions taken to carry out a con6 tract under the Program, and such regulation shall, to the

7 extent the Secretary finds appropriate, employ the same or

8 comparable standards and other substantive and procedural

9 provisions as are contained in section 1157.’’.

10 (b) ELIMINATION OF FI AND CARRIER RESPONSIBIL11 ITY FOR CARRYING OUT ACTIVITIES SUBJECT TO PRO12 GRAM.—

13 (1) RESPONSIBILITIES OF FISCAL

14 INTERMEDIARIES UNDER PART A.—Section 1816 (42

15 U.S.C. 1395h) is amended by adding at the end the

16 following new subsection:

17 ‘‘(l) No agency or organization may carry out (or re18 ceive payment for carrying out) any activity pursuant to

19 an agreement under this section to the extent that the activ20 ity is carried out pursuant to a contract under the Medicare

21 Integrity Program under section 1893.’’.

22 (2) RESPONSIBILITIES OF CARRIERS UNDER

23 PART B.—Section 1842(c) (42 U.S.C. 1395u(c)) is

24 amended by adding at the end the following new

25 paragraph:
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1 ‘‘(6) No carrier may carry out (or receive payment for

2 carrying out) any activity pursuant to a contract under

3 this subsection to the extent that the activity is carried out

4 pursuant to a contract under the Medicare Integrity Pro5 gram under section 1893. The previous sentence shall not

6 apply with respect to the activity described in section

7 1893(b)(5) (relating to prior authorization of certain items

8 of durable medical equipment under section 1834(a)(15)).’’.

9 SEC. 8103. BENEFICIARY INCENTIVE PROGRAMS.

10 (a) CLARIFICATION OF REQUIREMENT TO PROVIDE

11 EXPLANATION OF MEDICARE BENEFITS.—The Secretary of

12 Health and Human Services (in this section referred to as

13 the ‘‘Secretary’’) shall provide an explanation of benefits

14 under the medicare program under title XVIII of the Social

15 Security Act with respect to each item or service for which

16 payment may be made under the program which is fur17 nished to an individual, without regard to whether or not

18 a deductible or coinsurance may be imposed against the in19 dividual with respect to the item or service.

20 (b) PROGRAM TO COLLECT INFORMATION ON FRAUD

21 AND ABUSE.—

22 (1) ESTABLISHMENT OF PROGRAM.—Not later

23 than 3 months after the date of the enactment of this

24 Act, the Secretary shall establish a program under

25 which the Secretary shall encourage individuals to re-
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1 port to the Secretary information on individuals and

2 entities who are engaging or who have engaged in

3 acts or omissions which constitute grounds for the im4 position of a sanction under section 1128, section

5 1128A, or section 1128B of the Social Security Act,

6 or who have otherwise engaged in fraud and abuse

7 against the medicare program for which there is a

8 sanction provided under law. The program shall dis9 courage provision of, and not consider, information

10 which is frivolous or otherwise not relevant or mate11 rial to the imposition of such a sanction.

12 (2) PAYMENT OF PORTION OF AMOUNTS COL13 LECTED.—If an individual reports information to the

14 Secretary under the program established under para15 graph (1) which serves as the basis for the collection

16 by the Secretary or the Attorney General of any

17 amount of at least $100 (other than any amount paid

18 as a penalty under section 1128B of the Social Secu19 rity Act), the Secretary may pay a portion of the

20 amount collected to the individual (under procedures

21 similar to those applicable under section 7623 of the

22 Internal Revenue Code of 1986 to payments to indi23 viduals providing information on violations of such

24 Code).
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1 (c) PROGRAM TO COLLECT INFORMATION ON PROGRAM

2 EFFICIENCY.—

3 (1) ESTABLISHMENT OF PROGRAM.—Not later

4 than 3 months after the date of the enactment of this

5 Act, the Secretary shall establish a program under

6 which the Secretary shall encourage individuals to

7 submit to the Secretary suggestions on methods to im8 prove the efficiency of the medicare program.

9 (2) PAYMENT OF PORTION OF PROGRAM SAV10 INGS.—If an individual submits a suggestion to the

11 Secretary under the program established under para12 graph (1) which is adopted by the Secretary and

13 which results in savings to the program, the Secretary

14 may make a payment to the individual of such

15 amount as the Secretary considers appropriate.

16 SEC. 8104. APPLICATION OF CERTAIN HEALTH ANTI-FRAUD

17 AND ABUSE SANCTIONS TO FRAUD AND

18 ABUSE AGAINST FEDERAL HEALTH CARE

19 PROGRAMS.

20 (a) IN GENERAL.—Section 1128B (42 U.S.C. 1320a–

21 7b) is amended as follows:

22 (1) In the heading, by striking ‘‘MEDICARE OR

23 STATE HEALTH CARE PROGRAMS’’ and inserting

24 ‘‘FEDERAL HEALTH CARE PROGRAMS’’.
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1 (2) In subsection (a)(1), by striking ‘‘a program

2 under title XVIII or a State health care program (as

3 defined in section 1128(h))’’ and inserting ‘‘a Federal

4 health care program’’.

5 (3) In subsection (a)(5), by striking ‘‘a program

6 under title XVIII or a State health care program’’

7 and inserting ‘‘a Federal health care program’’.

8 (4) In the second sentence of subsection (a)—

9 (A) by striking ‘‘a State plan approved

10 under title XIX’’ and inserting ‘‘a Federal health

11 care program’’, and

12 (B) by striking ‘‘the State may at its option

13 (notwithstanding any other provision of that

14 title or of such plan)’’ and inserting ‘‘the admin15 istrator of such program may at its option (not16 withstanding any other provision of such pro17 gram)’’.

18 (5) In subsection (b), by striking ‘‘title XVIII or

19 a State health care program’’ each place it appears

20 and inserting ‘‘a Federal health care program’’.

21 (6) In subsection (c), by inserting ‘‘(as defined

22 in section 1128(h))’’ after ‘‘a State health care pro23 gram’’.

24 (7) By adding at the end the following new sub25 section:
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1 ‘‘(f) For purposes of this section, the term ‘Federal

2 health care program’ means—

3 ‘‘(1) any plan or program that provides health

4 benefits, whether directly, through insurance, or other5 wise, which is funded directly, in whole or in part,

6 by the United States Government; or

7 ‘‘(2) any State health care program, as defined

8 in section 1128(h).’’.

9 (b) EFFECTIVE DATE.—The amendments made by this

10 section shall take effect on January 1, 1996.

11 SEC. 8105. GUIDANCE REGARDING APPLICATION OF

12 HEALTH CARE FRAUD AND ABUSE SANC13 TIONS.

14 Title XI (42 U.S.C. 1301 et seq.), as amended by sec15 tion 8101, is amended by inserting after section 1128C the

16 following new section:

17 ‘‘GUIDANCE REGARDING APPLICATION OF HEALTH CARE

18 FRAUD AND ABUSE SANCTIONS

19 ‘‘SEC. 1128D. (a) SOLICITATION AND PUBLICATION OF

20 MODIFICATIONS TO EXISTING SAFE HARBORS AND NEW

21 SAFE HARBORS.—

22 ‘‘(1) IN GENERAL.—

23 ‘‘(A) SOLICITATION OF PROPOSALS FOR

24 SAFE HARBORS.—Not later than January 1,

25 1996, and not less than annually thereafter, the

26 Secretary shall publish a notice in the Federal
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1 Register soliciting proposals, which will be ac2 cepted during a 60-day period, for—

3 ‘‘(i) modifications to existing safe har4 bors issued pursuant to section 14(a) of the

5 Medicare and Medicaid Patient and Pro6 gram Protection Act of 1987 (42 U.S.C.

7 1320a–7b note);

8 ‘‘(ii) additional safe harbors specifying

9 payment practices that shall not be treated

10 as a criminal offense under section

11 1128B(b) and shall not serve as the basis

12 for an exclusion under section 1128(b)(7);

13 ‘‘(iii) interpretive rulings to be issued

14 pursuant to subsection (b); and

15 ‘‘(iv) special fraud alerts to be issued

16 pursuant to subsection (c).

17 ‘‘(B) PUBLICATION OF PROPOSED MODIFICA18 TIONS AND PROPOSED ADDITIONAL SAFE HAR19 BORS.—After considering the proposals described

20 in clauses (i) and (ii) of subparagraph (A), the

21 Secretary, in consultation with the Attorney

22 General, shall publish in the Federal Register

23 proposed modifications to existing safe harbors

24 and proposed additional safe harbors, if appro25 priate, with a 60-day comment period. After
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1 considering any public comments received dur2 ing this period, the Secretary shall issue final

3 rules modifying the existing safe harbors and es4 tablishing new safe harbors, as appropriate.

5 ‘‘(C) REPORT.—The Inspector General of

6 the Department of Health and Human Services

7 (in this section referred to as the ‘Inspector Gen8 eral’) shall, in an annual report to Congress or

9 as part of the year-end semiannual report re10 quired by section 5 of the Inspector General Act

11 of 1978 (5 U.S.C. App.), describe the proposals

12 received under clauses (i) and (ii) of subpara13 graph (A) and explain which proposals were in14 cluded in the publication described in subpara15 graph (B), which proposals were not included in

16 that publication, and the reasons for the rejection

17 of the proposals that were not included.

18 ‘‘(2) CRITERIA FOR MODIFYING AND ESTABLISH19 ING SAFE HARBORS.—In modifying and establishing

20 safe harbors under paragraph (1)(B), the Secretary

21 may consider the extent to which providing a safe

22 harbor for the specified payment practice may result

23 in any of the following:

24 ‘‘(A) An increase or decrease in access to

25 health care services.
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1 ‘‘(B) An increase or decrease in the quality

2 of health care services.

3 ‘‘(C) An increase or decrease in patient free4 dom of choice among health care providers.

5 ‘‘(D) An increase or decrease in competition

6 among health care providers.

7 ‘‘(E) An increase or decrease in the ability

8 of health care facilities to provide services in

9 medically underserved areas or to medically un10 derserved populations.

11 ‘‘(F) An increase or decrease in the cost to

12 Federal health care programs (as defined in sec13 tion 1128B(f)).

14 ‘‘(G) An increase or decrease in the poten15 tial overutilization of health care services.

16 ‘‘(H) The existence or nonexistence of any

17 potential financial benefit to a health care pro18 fessional or provider which may vary based on

19 their decisions of—

20 ‘‘(i) whether to order a health care

21 item or service; or

22 ‘‘(ii) whether to arrange for a referral

23 of health care items or services to a particu24 lar practitioner or provider.
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1 ‘‘(I) Any other factors the Secretary deems

2 appropriate in the interest of preventing fraud

3 and abuse in Federal health care programs (as

4 so defined).

5 ‘‘(b) INTERPRETIVE RULINGS.—

6 ‘‘(1) IN GENERAL.—

7 ‘‘(A) REQUEST FOR INTERPRETIVE RUL8 ING.—Any person may present, at any time, a

9 request to the Inspector General for a statement

10 of the Inspector General’s current interpretation

11 of the meaning of a specific aspect of the appli12 cation of sections 1128A and 1128B (in this sec13 tion referred to as an ‘interpretive ruling’).

14 ‘‘(B) ISSUANCE AND EFFECT OF INTERPRE15 TIVE RULING.—

16 ‘‘(i) IN GENERAL.—If appropriate, the

17 Inspector General shall in consultation with

18 the Attorney General, issue an interpretive

19 ruling not later than 90 days after receiv20 ing a request described in subparagraph

21 (A). Interpretive rulings shall not have the

22 force of law and shall be treated as an in23 terpretive rule within the meaning of sec24 tion 553(b) of title 5, United States Code.

25 All interpretive rulings issued pursuant to
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1 this clause shall be published in the Federal

2 Register or otherwise made available for

3 public inspection.

4 ‘‘(ii) REASONS FOR DENIAL.—If the

5 Inspector General does not issue an inter6 pretive ruling in response to a request de7 scribed in subparagraph (A), the Inspector

8 General shall notify the requesting party of

9 such decision not later than 60 days after

10 receiving such a request and shall identify

11 the reasons for such decision.

12 ‘‘(2) CRITERIA FOR INTERPRETIVE RULINGS.—

13 ‘‘(A) IN GENERAL.—In determining whether

14 to issue an interpretive ruling under paragraph

15 (1)(B), the Inspector General may consider—

16 ‘‘(i) whether and to what extent the re17 quest identifies an ambiguity within the

18 language of the statute, the existing safe

19 harbors, or previous interpretive rulings;

20 and

21 ‘‘(ii) whether the subject of the re22 quested interpretive ruling can be ade23 quately addressed by interpretation of the

24 language of the statute, the existing safe

25 harbor rules, or previous interpretive rul-
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1 ings, or whether the request would require a

2 substantive ruling (as defined in section

3 552 of title 5, United States Code) not au4 thorized under this subsection.

5 ‘‘(B) NO RULINGS ON FACTUAL ISSUES.—

6 The Inspector General shall not give an interpre7 tive ruling on any factual issue, including the

8 intent of the parties or the fair market value of

9 particular leased space or equipment.

10 ‘‘(c) SPECIAL FRAUD ALERTS.—

11 ‘‘(1) IN GENERAL.—

12 ‘‘(A) REQUEST FOR SPECIAL FRAUD

13 ALERTS.—Any person may present, at any time,

14 a request to the Inspector General for a notice

15 which informs the public of practices which the

16 Inspector General considers to be suspect or of

17 particular concern under the medicare program

18 or a State health care program, as defined in

19 section 1128(h) (in this subsection referred to as

20 a ‘special fraud alert’).

21 ‘‘(B) ISSUANCE AND PUBLICATION OF SPE22 CIAL FRAUD ALERTS.—Upon receipt of a request

23 described in subparagraph (A), the Inspector

24 General shall investigate the subject matter of the

25 request to determine whether a special fraud
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1 alert should be issued. If appropriate, the Inspec2 tor General shall issue a special fraud alert in

3 response to the request. All special fraud alerts

4 issued pursuant to this subparagraph shall be

5 published in the Federal Register.

6 ‘‘(2) CRITERIA FOR SPECIAL FRAUD ALERTS.—In

7 determining whether to issue a special fraud alert

8 upon a request described in paragraph (1), the In9 spector General may consider—

10 ‘‘(A) whether and to what extent the prac11 tices that would be identified in the special fraud

12 alert may result in any of the consequences de13 scribed in subsection (a)(2); and

14 ‘‘(B) the volume and frequency of the con15 duct that would be identified in the special fraud

16 alert.’’.

17 CHAPTER 2—REVISIONS TO CURRENT

18 SANCTIONS FOR FRAUD AND ABUSE

19 SEC. 8111. MANDATORY EXCLUSION FROM PARTICIPATION

20 IN MEDICARE AND STATE HEALTH CARE PRO21 GRAMS.

22 (a) INDIVIDUAL CONVICTED OF FELONY RELATING TO

23 HEALTH CARE FRAUD.—
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1 (1) IN GENERAL.—Section 1128(a) (42 U.S.C.

2 1320a–7(a)) is amended by adding at the end the fol3 lowing new paragraph:

4 ‘‘(3) FELONY CONVICTION RELATING TO HEALTH

5 CARE FRAUD.—Any individual or entity that has

6 been convicted after the date of the enactment of the

7 Medicare Preservation Act of 1995, under Federal or

8 State law, in connection with the delivery of a health

9 care item or service or with respect to any act or

10 omission in a health care program (other than those

11 specifically described in paragraph (1)) operated by

12 or financed in whole or in part by any Federal,

13 State, or local government agency, of a criminal of14 fense consisting of a felony relating to fraud, theft,

15 embezzlement, breach of fiduciary responsibility, or

16 other financial misconduct.’’.

17 (2) CONFORMING AMENDMENT.—Paragraph (1)

18 of section 1128(b) (42 U.S.C. 1320a–7(b)) is amended

19 to read as follows:

20 ‘‘(1) CONVICTION RELATING TO FRAUD.—Any in21 dividual or entity that has been convicted after the

22 date of the enactment of the Medicare Preservation

23 Act of 1995, under Federal or State law—

24 ‘‘(A) of a criminal offense consisting of a

25 misdemeanor relating to fraud, theft, embezzle-
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1 ment, breach of fiduciary responsibility, or other

2 financial misconduct—

3 ‘‘(i) in connection with the delivery of

4 a health care item or service, or

5 ‘‘(ii) with respect to any act or omis6 sion in a health care program (other than

7 those specifically described in subsection

8 (a)(1)) operated by or financed in whole or

9 in part by any Federal, State, or local gov10 ernment agency; or

11 ‘‘(B) of a criminal offense relating to fraud,

12 theft, embezzlement, breach of fiduciary respon13 sibility, or other financial misconduct with re14 spect to any act or omission in a program (other

15 than a health care program) operated by or fi16 nanced in whole or in part by any Federal,

17 State, or local government agency.’’.

18 (b) INDIVIDUAL CONVICTED OF FELONY RELATING TO

19 CONTROLLED SUBSTANCE.—

20 (1) IN GENERAL.—Section 1128(a) (42 U.S.C.

21 1320a–7(a)), as amended by subsection (a), is amend22 ed by adding at the end the following new paragraph:

23 ‘‘(4) FELONY CONVICTION RELATING TO CON24 TROLLED SUBSTANCE.—Any individual or entity that

25 has been convicted after the date of the enactment of
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1 the Medicare Preservation Act of 1995, under Federal

2 or State law, of a criminal offense consisting of a fel3 ony relating to the unlawful manufacture, distribu4 tion, prescription, or dispensing of a controlled sub5 stance.’’.

6 (2) CONFORMING AMENDMENT.—Section

7 1128(b)(3) (42 U.S.C. 1320a–7(b)(3)) is amended—

8 (A) in the heading, by striking ‘‘CONVIC9 TION’’ and inserting ‘‘MISDEMEANOR CONVIC10 TION’’; and

11 (B) by striking ‘‘criminal offense’’ and in12 serting ‘‘criminal offense consisting of a mis13 demeanor’’.

14 SEC. 8112. ESTABLISHMENT OF MINIMUM PERIOD OF EX15 CLUSION FOR CERTAIN INDIVIDUALS AND

16 ENTITIES SUBJECT TO PERMISSIVE EXCLU17 SION FROM MEDICARE AND STATE HEALTH

18 CARE PROGRAMS.

19 Section 1128(c)(3) (42 U.S.C. 1320a–7(c)(3)) is

20 amended by adding at the end the following new subpara21 graphs:

22 ‘‘(D) In the case of an exclusion of an individual or

23 entity under paragraph (1), (2), or (3) of subsection (b),

24 the period of the exclusion shall be 3 years, unless the Sec25 retary determines in accordance with published regulations
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1 that a shorter period is appropriate because of mitigating

2 circumstances or that a longer period is appropriate be3 cause of aggravating circumstances.

4 ‘‘(E) In the case of an exclusion of an individual or

5 entity under subsection (b)(4) or (b)(5), the period of the

6 exclusion shall not be less than the period during which the

7 individual’s or entity’s license to provide health care is re8 voked, suspended, or surrendered, or the individual or the

9 entity is excluded or suspended from a Federal or State

10 health care program.

11 ‘‘(F) In the case of an exclusion of an individual or

12 entity under subsection (b)(6)(B), the period of the exclu13 sion shall be not less than 1 year.’’.

14 SEC. 8113. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH

15 OWNERSHIP OR CONTROL INTEREST IN

16 SANCTIONED ENTITIES.

17 Section 1128(b) (42 U.S.C. 1320a–7(b)) is amended by

18 adding at the end the following new paragraph:

19 ‘‘(15) INDIVIDUALS CONTROLLING A SANCTIONED

20 ENTITY.—(A) Any individual—

21 ‘‘(i) who has a direct or indirect ownership

22 or control interest in a sanctioned entity and

23 who knows or should know (as defined in section

24 1128A(i)(6)) of the action constituting the basis
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1 for the conviction or exclusion described in sub2 paragraph (B); or

3 ‘‘(ii) who is an officer or managing em4 ployee (as defined in section 1126(b)) of such an

5 entity.

6 ‘‘(B) For purposes of subparagraph (A), the term

7 ‘sanctioned entity’ means an entity—

8 ‘‘(i) that has been convicted of any offense

9 described in subsection (a) or in paragraph (1),

10 (2), or (3) of this subsection; or

11 ‘‘(ii) that has been excluded from participa12 tion under a program under title XVIII or under

13 a State health care program.’’.

14 SEC. 8114. SANCTIONS AGAINST PRACTITIONERS AND PER15 SONS FOR FAILURE TO COMPLY WITH STATU16 TORY OBLIGATIONS.

17 (a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI18 TIONERS AND PERSONS FAILING TO MEET STATUTORY OB19 LIGATIONS.—

20 (1) IN GENERAL.—The second sentence of section

21 1156(b)(1) (42 U.S.C. 1320c–5(b)(1)) is amended by

22 striking ‘‘may prescribe)’’ and inserting ‘‘may pre23 scribe, except that such period may not be less than

24 1 year)’’.
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1 (2) CONFORMING AMENDMENT.—Section

2 1156(b)(2) (42 U.S.C. 1320c–5(b)(2)) is amended by

3 striking ‘‘shall remain’’ and inserting ‘‘shall (subject

4 to the minimum period specified in the second sen5 tence of paragraph (1)) remain’’.

6 (b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDITION

7 FOR IMPOSITION OF SANCTION.—Section 1156(b)(1) (42

8 U.S.C. 1320c–5(b)(1)) is amended—

9 (1) in the second sentence, by striking ‘‘and de10 termines’’ and all that follows through ‘‘such obliga11 tions,’’; and

12 (2) by striking the third sentence.

13 SEC. 8115. INTERMEDIATE SANCTIONS FOR MEDICARE

14 HEALTH MAINTENANCE ORGANIZATIONS.

15 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

16 ANY PROGRAM VIOLATIONS.—

17 (1) IN GENERAL.—Section 1876(i)(1) (42 U.S.C.

18 1395mm(i)(1)) is amended by striking ‘‘the Secretary

19 may terminate’’ and all that follows and inserting

20 ‘‘in accordance with procedures established under

21 paragraph (9), the Secretary may at any time termi22 nate any such contract or may impose the intermedi23 ate sanctions described in paragraph (6)(B) or (6)(C)

24 (whichever is applicable) on the eligible organization

25 if the Secretary determines that the organization—
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1 ‘‘(A) has failed substantially to carry out

2 the contract;

3 ‘‘(B) is carrying out the contract in a man4 ner substantially inconsistent with the efficient

5 and effective administration of this section; or

6 ‘‘(C) no longer substantially meets the ap7 plicable conditions of subsections (b), (c), (e),

8 and (f).’’.

9 (2) OTHER INTERMEDIATE SANCTIONS FOR MIS10 CELLANEOUS PROGRAM VIOLATIONS.—Section

11 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended by

12 adding at the end the following new subparagraph:

13 ‘‘(C) In the case of an eligible organization for which

14 the Secretary makes a determination under paragraph (1)

15 the basis of which is not described in subparagraph (A),

16 the Secretary may apply the following intermediate sanc17 tions:

18 ‘‘(i) Civil money penalties of not more than

19 $25,000 for each determination under paragraph (1)

20 if the deficiency that is the basis of the determination

21 has directly adversely affected (or has the substantial

22 likelihood of adversely affecting) an individual cov23 ered under the organization’s contract.

24 ‘‘(ii) Civil money penalties of not more than

25 $10,000 for each week beginning after the initiation
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1 of procedures by the Secretary under paragraph (9)

2 during which the deficiency that is the basis of a de3 termination under paragraph (1) exists.

4 ‘‘(iii) Suspension of enrollment of individuals

5 under this section after the date the Secretary notifies

6 the organization of a determination under paragraph

7 (1) and until the Secretary is satisfied that the defi8 ciency that is the basis for the determination has been

9 corrected and is not likely to recur.’’.

10 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

11 Section 1876(i) (42 U.S.C. 1395mm(i)) is amended

12 by adding at the end the following new paragraph:

13 ‘‘(9) The Secretary may terminate a contract with an

14 eligible organization under this section or may impose the

15 intermediate sanctions described in paragraph (6) on the

16 organization in accordance with formal investigation and

17 compliance procedures established by the Secretary under

18 which—

19 ‘‘(A) the Secretary first provides the organiza20 tion with the reasonable opportunity to develop and

21 implement a corrective action plan to correct the defi22 ciencies that were the basis of the Secretary’s deter23 mination under paragraph (1) and the organization

24 fails to develop or implement such a plan;
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1 ‘‘(B) in deciding whether to impose sanctions,

2 the Secretary considers aggravating factors such as

3 whether an organization has a history of deficiencies

4 or has not taken action to correct deficiencies the Sec5 retary has brought to the organization’s attention;

6 ‘‘(C) there are no unreasonable or unnecessary

7 delays between the finding of a deficiency and the im8 position of sanctions; and

9 ‘‘(D) the Secretary provides the organization

10 with reasonable notice and opportunity for hearing

11 (including the right to appeal an initial decision) be12 fore imposing any sanction or terminating the con13 tract.’’.

14 (4) CONFORMING AMENDMENTS.—Section

15 1876(i)(6)(B) (42 U.S.C. 1395mm(i)(6)(B)) is

16 amended by striking the second sentence.

17 (b) AGREEMENTS WITH PEER REVIEW ORGANIZA18 TIONS.—Section 1876(i)(7)(A) (42 U.S.C.

19 1395mm(i)(7)(A)) is amended by striking ‘‘an agreement’’

20 and inserting ‘‘a written agreement’’.

21 (c) EFFECTIVE DATE.—The amendments made by this

22 section shall apply with respect to contract years beginning

23 on or after January 1, 1996.
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1 SEC. 8116. ADDITIONAL EXCEPTION TO ANTI-KICKBACK

2 PENALTIES FOR DISCOUNTING AND MAN3 AGED CARE ARRANGEMENTS.

4 (a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C.

5 1320a-7b(b)(3)) is amended—

6 (1) by striking ‘‘and’’ at the end of subpara7 graph (D);

8 (2) by striking the period at the end of subpara9 graph (E) and inserting ‘‘; and’’; and

10 (3) by adding at the end the following new sub11 paragraph:

12 ‘‘(F) any remuneration between an organization

13 and an individual or entity providing items or serv14 ices, or a combination thereof, pursuant to a written

15 agreement between the organization and the individ16 ual or entity if the organization is a MedicarePlus or17 ganization under part C of title XVIII or if the writ18 ten agreement places the individual or entity at sub19 stantial financial risk for the cost or utilization of the

20 items or services, or a combination thereof, which the

21 individual or entity is obligated to provide, whether

22 through a withhold, capitation, incentive pool, per

23 diem payment, or any other similar risk arrangement

24 which places the individual or entity at substantial

25 financial risk.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to written agreements entered into on

3 or after January 1, 1996.

4 SEC. 8117. PENALTIES FOR THE FRAUDULENT CONVERSION

5 OF ASSETS IN ORDER TO OBTAIN STATE

6 HEALTH CARE PROGRAM BENEFITS.

7 Section 1128B(a) (42 U.S.C. 1320a–7b(a)) is amended

8 by striking ‘‘or’’ at the end of paragraph (4), by inserting

9 ‘‘or’’ at the end of paragraph (5), and by inserting after

10 paragraph (5) the following new paragraph:

11 ‘‘(6) knowingly and willfully converts assets, by

12 transfer (including any transfer in trust), aiding in

13 such a transfer, or otherwise, in order for an individ14 ual to become eligible for benefits under a State health

15 care program,’’.

16 SEC. 8118. EFFECTIVE DATE.

17 Except as otherwise provided, the amendments made

18 by this chapter shall take effect January 1, 1996.

19 CHAPTER 3—ADMINISTRATIVE AND

20 MISCELLANEOUS PROVISIONS

21 SEC. 8121. ESTABLISHMENT OF THE HEALTH CARE FRAUD

22 AND ABUSE DATA COLLECTION PROGRAM.

23 (a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.),

24 as amended by sections 8101 and 8105, is amended by in25 serting after section 1128D the following new section:
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1 ‘‘HEALTH CARE FRAUD AND ABUSE DATA COLLECTION

2 PROGRAM

3 ‘‘SEC. 1128E. (a) GENERAL PURPOSE.—Not later than

4 January 1, 1996, the Secretary shall establish a national

5 health care fraud and abuse data collection program for the

6 reporting of final adverse actions (not including settlements

7 in which no findings of liability have been made) against

8 health care providers, suppliers, or practitioners as required

9 by subsection (b), with access as set forth in subsection (c).

10 ‘‘(b) REPORTING OF INFORMATION.—

11 ‘‘(1) IN GENERAL.—Each government agency

12 and health plan shall report any final adverse action

13 (not including settlements in which no findings of li14 ability have been made) taken against a health care

15 provider, supplier, or practitioner.

16 ‘‘(2) INFORMATION TO BE REPORTED.—The in17 formation to be reported under paragraph (1) in18 cludes:

19 ‘‘(A) The name and TIN (as defined in sec20 tion 7701(a)(41) of the Internal Revenue Code of

21 1986) of any health care provider, supplier, or

22 practitioner who is the subject of a final adverse

23 action.

24 ‘‘(B) The name (if known) of any health

25 care entity with which a health care provider,
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1 supplier, or practitioner is affiliated or associ2 ated.

3 ‘‘(C) The nature of the final adverse action

4 and whether such action is on appeal.

5 ‘‘(D) A description of the acts or omissions

6 and injuries upon which the final adverse action

7 was based, and such other information as the

8 Secretary determines by regulation is required

9 for appropriate interpretation of information re10 ported under this section.

11 ‘‘(3) CONFIDENTIALITY.—In determining what

12 information is required, the Secretary shall include

13 procedures to assure that the privacy of individuals

14 receiving health care services is appropriately pro15 tected.

16 ‘‘(4) TIMING AND FORM OF REPORTING.—The in17 formation required to be reported under this sub18 section shall be reported regularly (but not less often

19 than monthly) and in such form and manner as the

20 Secretary prescribes. Such information shall first be

21 required to be reported on a date specified by the Sec22 retary.

23 ‘‘(5) TO WHOM REPORTED.—The information re24 quired to be reported under this subsection shall be re25 ported to the Secretary.
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1 ‘‘(c) DISCLOSURE AND CORRECTION OF INFORMA2 TION.—

3 ‘‘(1) DISCLOSURE.—With respect to the informa4 tion about final adverse actions (not including settle5 ments in which no findings of liability have been

6 made) reported to the Secretary under this section re7 specting a health care provider, supplier, or practi8 tioner, the Secretary shall, by regulation, provide

9 for—

10 ‘‘(A) disclosure of the information, upon re11 quest, to the health care provider, supplier, or li12 censed practitioner, and

13 ‘‘(B) procedures in the case of disputed ac14 curacy of the information.

15 ‘‘(2) CORRECTIONS.—Each Government agency

16 and health plan shall report corrections of informa17 tion already reported about any final adverse action

18 taken against a health care provider, supplier, or

19 practitioner, in such form and manner that the Sec20 retary prescribes by regulation.

21 ‘‘(d) ACCESS TO REPORTED INFORMATION.—

22 ‘‘(1) AVAILABILITY.—The information in this

23 database shall be available to Federal and State gov24 ernment agencies and health plans pursuant to proce25 dures that the Secretary shall provide by regulation.
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1 ‘‘(2) FEES FOR DISCLOSURE.—The Secretary

2 may establish or approve reasonable fees for the dis3 closure of information in this database (other than

4 with respect to requests by Federal agencies). The

5 amount of such a fee shall be sufficient to recover the

6 full costs of operating the database. Such fees shall be

7 available to the Secretary or, in the Secretary’s dis8 cretion to the agency designated under this section to

9 cover such costs.

10 ‘‘(e) PROTECTION FROM LIABILITY FOR REPORTING.—

11 No person or entity, including the agency designated by the

12 Secretary in subsection (b)(5) shall be held liable in any

13 civil action with respect to any report made as required

14 by this section, without knowledge of the falsity of the infor15 mation contained in the report.

16 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur17 poses of this section:

18 ‘‘(1) FINAL ADVERSE ACTION.—

19 ‘‘(A) IN GENERAL.—The term ‘final adverse

20 action’ includes:

21 ‘‘(i) Civil judgments against a health

22 care provider, supplier, or practitioner in

23 Federal or State court related to the deliv24 ery of a health care item or service.
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1 ‘‘(ii) Federal or State criminal convic2 tions related to the delivery of a health care

3 item or service.

4 ‘‘(iii) Actions by Federal or State

5 agencies responsible for the licensing and

6 certification of health care providers, sup7 pliers, and licensed health care practition8 ers, including—

9 ‘‘(I) formal or official actions,

10 such as revocation or suspension of a

11 license (and the length of any such sus12 pension), reprimand, censure or proba13 tion,

14 ‘‘(II) any other loss of license or

15 the right to apply for, or renew, a li16 cense of the provider, supplier, or prac17 titioner, whether by operation of law,

18 voluntary surrender, non-renewability,

19 or otherwise, or

20 ‘‘(III) any other negative action

21 or finding by such Federal or State

22 agency that is publicly available infor23 mation.

24 ‘‘(iv) Exclusion from participation in

25 Federal or State health care programs.
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1 ‘‘(v) Any other adjudicated actions or

2 decisions that the Secretary shall establish

3 by regulation.

4 ‘‘(B) EXCEPTION.—The term does not in5 clude any action with respect to a malpractice

6 claim.

7 ‘‘(2) PRACTITIONER.—The terms ‘licensed health

8 care practitioner’, ‘licensed practitioner’, and ‘practi9 tioner’ mean, with respect to a State, an individual

10 who is licensed or otherwise authorized by the State

11 to provide health care services (or any individual

12 who, without authority holds himself or herself out to

13 be so licensed or authorized).

14 ‘‘(3) GOVERNMENT AGENCY.—The term ‘Govern15 ment agency’ shall include:

16 ‘‘(A) The Department of Justice.

17 ‘‘(B) The Department of Health and

18 Human Services.

19 ‘‘(C) Any other Federal agency that either

20 administers or provides payment for the delivery

21 of health care services, including, but not limited

22 to the Department of Defense and the Veterans’

23 Administration.

24 ‘‘(D) State law enforcement agencies.

25 ‘‘(E) State MediGrant fraud control units.
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1 ‘‘(F) Federal or State agencies responsible

2 for the licensing and certification of health care

3 providers and licensed health care practitioners.

4 ‘‘(4) HEALTH PLAN.—The term ‘health plan’ has

5 the meaning given such term by section 1128C(c).

6 ‘‘(5) DETERMINATION OF CONVICTION.—For pur7 poses of paragraph (1), the existence of a conviction

8 shall be determined under paragraph (4) of section

9 1128(i).’’.

10 (b) IMPROVED PREVENTION IN ISSUANCE OF MEDI11 CARE PROVIDER NUMBERS.—Section 1842(r) (42 U.S.C.

12 1395u(r)) is amended by adding at the end the following

13 new sentence: ‘‘Under such system, the Secretary may im14 pose appropriate fees on such physicians to cover the costs

15 of investigation and recertification activities with respect

16 to the issuance of the identifiers.’’.

17 CHAPTER 4—CIVIL MONETARY PENALTIES

18 SEC. 8131. SOCIAL SECURITY ACT CIVIL MONETARY PEN19 ALTIES.

20 (a) GENERAL CIVIL MONETARY PENALTIES.—Section

21 1128A (42 U.S.C. 1320a–7a) is amended as follows:

22 (1) In the third sentence of subsection (a), by

23 striking ‘‘programs under title XVIII’’ and inserting

24 ‘‘Federal health care programs (as defined in section

25 1128B(f)(1))’’.
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1 (2) In subsection (f)—

2 (A) by redesignating paragraph (3) as

3 paragraph (4); and

4 (B) by inserting after paragraph (2) the fol5 lowing new paragraph:

6 ‘‘(3) With respect to amounts recovered arising

7 out of a claim under a Federal health care program

8 (as defined in section 1128B(f)), the portion of such

9 amounts as is determined to have been paid by the

10 program shall be repaid to the program, and the por11 tion of such amounts attributable to the amounts re12 covered under this section by reason of the amend13 ments made by the Medicare Preservation Act of 1995

14 (as estimated by the Secretary) shall be deposited into

15 the Federal Hospital Insurance Trust Fund pursuant

16 to section 1817(k)(2)(C).’’.

17 (3) In subsection (i)—

18 (A) in paragraph (2), by striking ‘‘title V,

19 XVIII, XIX, or XX of this Act’’ and inserting ‘‘a

20 Federal health care program (as defined in sec21 tion 1128B(f))’’,

22 (B) in paragraph (4), by striking ‘‘a health

23 insurance or medical services program under

24 title XVIII or XIX of this Act’’ and inserting ‘‘a
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1 Federal health care program (as so defined)’’,

2 and

3 (C) in paragraph (5), by striking ‘‘title V,

4 XVIII, XIX, or XX’’ and inserting ‘‘a Federal

5 health care program (as so defined)’’.

6 (4) By adding at the end the following new sub7 section:

8 ‘‘(m)(1) For purposes of this section, with respect to

9 a Federal health care program not contained in this Act,

10 references to the Secretary in this section shall be deemed

11 to be references to the Secretary or Administrator of the de12 partment or agency with jurisdiction over such program

13 and references to the Inspector General of the Department

14 of Health and Human Services in this section shall be

15 deemed to be references to the Inspector General of the appli16 cable department or agency.

17 ‘‘(2)(A) The Secretary and Administrator of the de18 partments and agencies referred to in paragraph (1) may

19 include in any action pursuant to this section, claims with20 in the jurisdiction of other Federal departments or agencies

21 as long as the following conditions are satisfied:

22 ‘‘(i) The case involves primarily claims submit23 ted to the Federal health care programs of the depart24 ment or agency initiating the action.
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1 ‘‘(ii) The Secretary or Administrator of the de2 partment or agency initiating the action gives notice

3 and an opportunity to participate in the investiga4 tion to the Inspector General of the department or

5 agency with primary jurisdiction over the Federal

6 health care programs to which the claims were sub7 mitted.

8 ‘‘(B) If the conditions specified in subparagraph (A)

9 are fulfilled, the Inspector General of the department or

10 agency initiating the action is authorized to exercise all

11 powers granted under the Inspector General Act of 1978

12 with respect to the claims submitted to the other depart13 ments or agencies to the same manner and extent as pro14 vided in that Act with respect to claims submitted to such

15 departments or agencies.’’.

16 (b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP

17 OR CONTROL INTEREST IN PARTICIPATING ENTITY.—Sec18 tion 1128A(a) (42 U.S.C. 1320a–7a(a)) is amended—

19 (1) by striking ‘‘or’’ at the end of paragraph

20 (1)(D);

21 (2) by striking ‘‘, or’’ at the end of paragraph

22 (2) and inserting a semicolon;

23 (3) by striking the semicolon at the end of para24 graph (3) and inserting ‘‘; or’’; and
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1 (4) by inserting after paragraph (3) the follow2 ing new paragraph:

3 ‘‘(4) in the case of a person who is not an orga4 nization, agency, or other entity, is excluded from

5 participating in a program under title XVIII or a

6 State health care program in accordance with this

7 subsection or under section 1128 and who, at the time

8 of a violation of this subsection—

9 ‘‘(i) retains a direct or indirect ownership

10 or control interest in an entity that is partici11 pating in a program under title XVIII or a

12 State health care program, and who knows or

13 should know of the action constituting the basis

14 for the exclusion; or

15 ‘‘(ii) is an officer or managing employee (as

16 defined in section 1126(b)) of such an entity;’’.

17 (c) MODIFICATIONS OF AMOUNTS OF PENALTIES AND

18 ASSESSMENTS.—Section 1128A(a) (42 U.S.C. 1320a–

19 7a(a)), as amended by subsection (b), is amended in the

20 matter following paragraph (4)—

21 (1) by striking ‘‘$2,000’’ and inserting

22 ‘‘$10,000’’;

23 (2) by inserting ‘‘; in cases under paragraph (4),

24 $10,000 for each day the prohibited relationship oc-
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1 curs’’ after ‘‘false or misleading information was

2 given’’; and

3 (3) by striking ‘‘twice the amount’’ and inserting

4 ‘‘3 times the amount’’.

5 (d) CLAIM FOR ITEM OR SERVICE BASED ON INCOR6 RECT CODING OR MEDICALLY UNNECESSARY SERVICES.—

7 Section 1128A(a)(1) (42 U.S.C. 1320a–7a(a)(1)) is amend8 ed—

9 (1) in subparagraph (A) by striking ‘‘claimed,’’

10 and inserting ‘‘claimed, including any person who

11 engages in a pattern or practice of presenting or

12 causing to be presented a claim for an item or service

13 that is based on a code that the person knows or

14 should know will result in a greater payment to the

15 person than the code the person knows or should know

16 is applicable to the item or service actually pro17 vided,’’;

18 (2) in subparagraph (C), by striking ‘‘or’’ at the

19 end;

20 (3) in subparagraph (D), by striking ‘‘; or’’ and

21 inserting ‘‘, or’’; and

22 (4) by inserting after subparagraph (D) the fol23 lowing new subparagraph:
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1 ‘‘(E) is for a medical or other item or serv2 ice that a person knows or should know is not

3 medically necessary; or’’.

4 (e) SANCTIONS AGAINST PRACTITIONERS AND PER5 SONS FOR FAILURE TO COMPLY WITH STATUTORY OBLIGA6 TIONS.—Section 1156(b)(3) (42 U.S.C. 1320c–5(b)(3)) is

7 amended by striking ‘‘the actual or estimated cost’’ and in8 serting ‘‘up to $10,000 for each instance’’.

9 (f) PROCEDURAL PROVISIONS.—Section 1876(i)(6) (42

10 U.S.C. 1395mm(i)(6)), as amended by section 8115(a)(2),

11 is amended by adding at the end the following new subpara12 graph:

13 ‘‘(D) The provisions of section 1128A (other than sub14 sections (a) and (b)) shall apply to a civil money penalty

15 under subparagraph (B)(i) or (C)(i) in the same manner

16 as such provisions apply to a civil money penalty or pro17 ceeding under section 1128A(a).’’.

18 (g) PROHIBITION AGAINST OFFERING INDUCEMENTS

19 TO INDIVIDUALS ENROLLED UNDER PROGRAMS OR

20 PLANS.—

21 (1) OFFER OF REMUNERATION.—Section

22 1128A(a) (42 U.S.C. 1320a–7a(a)) is amended—

23 (A) by striking ‘‘or’’ at the end of para24 graph (1)(D);
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1 (B) by striking ‘‘, or’’ at the end of para2 graph (2) and inserting a semicolon;

3 (C) by striking the semicolon at the end of

4 paragraph (3) and inserting ‘‘; or’’; and

5 (D) by inserting after paragraph (3) the fol6 lowing new paragraph:

7 ‘‘(4) offers to or transfers remuneration to any

8 individual eligible for benefits under title XVIII of

9 this Act, or under a State health care program (as de10 fined in section 1128(h)) that such person knows or

11 should know is likely to influence such individual to

12 order or receive from a particular provider, practi13 tioner, or supplier any item or service for which pay14 ment may be made, in whole or in part, under title

15 XVIII, or a State health care program (as so de16 fined);’’.

17 (2) REMUNERATION DEFINED.—Section 1128A(i)

18 (42 U.S.C. 1320a–7a(i)) is amended by adding the

19 following new paragraph:

20 ‘‘(6) The term ‘remuneration’ includes the waiv21 er of coinsurance and deductible amounts (or any

22 part thereof), and transfers of items or services for

23 free or for other than fair market value. The term ‘re24 muneration’ does not include—
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1 ‘‘(A) the waiver of coinsurance and deduct2 ible amounts by a person, if—

3 ‘‘(i) the waiver is not offered as part of

4 any advertisement or solicitation;

5 ‘‘(ii) the person does not routinely

6 waive coinsurance or deductible amounts;

7 and

8 ‘‘(iii) the person—

9 ‘‘(I) waives the coinsurance and

10 deductible amounts after determining

11 in good faith that the individual is in

12 financial need;

13 ‘‘(II) fails to collect coinsurance

14 or deductible amounts after making

15 reasonable collection efforts; or

16 ‘‘(III) provides for any permis17 sible waiver as specified in section

18 1128B(b)(3) or in regulations issued

19 by the Secretary;

20 ‘‘(B) differentials in coinsurance and de21 ductible amounts as part of a benefit plan design

22 as long as the differentials have been disclosed in

23 writing to all beneficiaries, third party payers,

24 and providers, to whom claims are presented and

25 as long as the differentials meet the standards as
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1 defined in regulations promulgated by the Sec2 retary not later than 180 days after the date of

3 the enactment of the Medicare Preservation Act

4 of 1995; or

5 ‘‘(C) incentives given to individuals to pro6 mote the delivery of preventive care as deter7 mined by the Secretary in regulations so pro8 mulgated.’’.

9 (h) EFFECTIVE DATE.—The amendments made by this

10 section shall take effect January 1, 1996.

11 SEC. 8132. CLARIFICATION OF LEVEL OF INTENT REQUIRED

12 FOR IMPOSITION OF SANCTIONS.

13 (a) CLARIFICATION OF LEVEL OF KNOWLEDGE RE14 QUIRED FOR IMPOSITION OF CIVIL MONETARY PEN15 ALTIES.—

16 (1) IN GENERAL.—Section 1128A(a) (42 U.S.C.

17 1320a–7a(a)) is amended—

18 (A) in paragraphs (1) and (2), by inserting

19 ‘‘knowingly’’ before ‘‘presents’’ each place it ap20 pears; and

21 (B) in paragraph (3), by striking ‘‘gives’’

22 and inserting ‘‘knowingly gives or causes to be

23 given’’.
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1 (2) DEFINITION OF STANDARD.—Section

2 1128A(i) (42 U.S.C. 1320a–7a(i)) is amended by

3 adding at the end the following new paragraph:

4 ‘‘(6) The term ‘should know’ means that a per5 son, with respect to information—

6 ‘‘(A) acts in deliberate ignorance of the

7 truth or falsity of the information; or

8 ‘‘(B) acts in reckless disregard of the truth

9 or falsity of the information,

10 and no proof of specific intent to defraud is re11 quired.’’.

12 (b) EFFECTIVE DATE.—The amendments made by this

13 section shall apply to acts or omissions occurring on or

14 after January 1, 1996.

15 SEC. 8133. PENALTY FOR FALSE CERTIFICATION FOR HOME

16 HEALTH SERVICES.

17 (a) IN GENERAL.—Section 1128A(b) (42 U.S.C.

18 1320a–7a(b)) is amended by adding at the end the following

19 new paragraph:

20 ‘‘(3)(A) Any physician who executes a document de21 scribed in subparagraph (B) with respect to an individual

22 knowing that all of the requirements referred to in such sub23 paragraph are not met with respect to the individual shall

24 be subject to a civil monetary penalty of not more than the

25 greater of—
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1 ‘‘(i) $5,000, or

2 ‘‘(ii) three times the amount of the payments

3 under title XVIII for home health services which are

4 made pursuant to such certification.

5 ‘‘(B) A document described in this subparagraph is

6 any document that certifies, for purposes of title XVIII, that

7 an individual meets the requirements of section

8 1814(a)(2)(C) or 1835(a)(2)(A) in the case of home health

9 services furnished to the individual.’’.

10 (b) EFFECTIVE DATE.—The amendment made by sub11 section (a) shall apply to certifications made on or after

12 the date of the enactment of this Act.

13 CHAPTER 5—AMENDMENTS TO CRIMINAL

14 LAW

15 SEC. 8141. HEALTH CARE FRAUD.

16 (a) IN GENERAL.—

17 (1) FINES AND IMPRISONMENT FOR HEALTH

18 CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,

19 United States Code, is amended by adding at the end

20 the following new section:

21 ‘‘§ 1347. Health care fraud

22 ‘‘(a) Whoever knowingly and willfully executes, or at23 tempts to execute, a scheme or artifice—
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1 ‘‘(1) to defraud any Federal health care pro2 gram, in connection with the delivery of or payment

3 for health care benefits, items, or services; or

4 ‘‘(2) to obtain, by means of false or fraudulent

5 pretenses, representations, or promises, any of the

6 money or property owned by, or under the custody or

7 control of, any Federal health care program in con8 nection with the delivery of or payment for health

9 care benefits, items, or services;

10 shall be fined under this title or imprisoned not more than

11 10 years, or both. If the violation results in serious bodily

12 injury (as defined in section 1365(g)(3) of this title), such

13 person may be imprisoned for any term of years.

14 ‘‘(b) For purposes of this section, the term ‘Federal

15 health care program’ has the same meaning given such term

16 in section 1128B(f) of the Social Security Act.’’.

17 (2) CLERICAL AMENDMENT.—The table of sec18 tions at the beginning of chapter 63 of title 18, Unit19 ed States Code, is amended by adding at the end the

20 following:

‘‘1347. Health care fraud.’’.

21 (b) CRIMINAL FINES DEPOSITED IN FEDERAL HOS22 PITAL INSURANCE TRUST FUND.—The Secretary of the

23 Treasury shall deposit into the Federal Hospital Insurance

24 Trust Fund pursuant to section 1817(k)(2)(C) of the Social

25 Security Act, as added by section 8101(b), an amount equal
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1 to the criminal fines imposed under section 1347 of title

2 18, United States Code (relating to health care fraud).

3 SEC. 8142. FORFEITURES FOR FEDERAL HEALTH CARE OF4 FENSES.

5 (a) IN GENERAL.—Section 982(a) of title 18, United

6 States Code, is amended by adding after paragraph (5) the

7 following new paragraph:

8 ‘‘(6)(A) The court, in imposing sentence on a person

9 convicted of a Federal health care offense, shall order the

10 person to forfeit property, real or personal, that constitutes

11 or is derived, directly or indirectly, from gross proceeds

12 traceable to the commission of the offense.

13 ‘‘(B) For purposes of this paragraph, the term ‘Federal

14 health care offense’ means a violation of, or a criminal con15 spiracy to violate—

16 ‘‘(i) section 1347 of this title;

17 ‘‘(ii) section 1128B of the Social Security Act;

18 and

19 ‘‘(iii) sections 287, 371, 664, 666, 669, 1001,

20 1027, 1341, 1343, 1920, or 1954 of this title if the

21 violation or conspiracy relates to health care fraud.’’.

22 (b) CONFORMING AMENDMENT.—Section 982(b)(1)(A)

23 of title 18, United States Code, is amended by inserting

24 ‘‘or (a)(6)’’ after ‘‘(a)(1)’’.
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1 (c) PROPERTY FORFEITED DEPOSITED IN FEDERAL

2 HOSPITAL INSURANCE TRUST FUND.—

3 (1) IN GENERAL.—After the payment of the costs

4 of asset forfeiture has been made, and notwithstand5 ing any other provision of law, the Secretary of the

6 Treasury shall deposit into the Federal Hospital In7 surance Trust Fund pursuant to section

8 1817(k)(2)(C) of the Social Security Act, as added by

9 section 8101(b), an amount equal to the net amount

10 realized from the forfeiture of property by reason of

11 a Federal health care offense pursuant to section

12 982(a)(6) of title 18, United States Code.

13 (2) COSTS OF ASSET FORFEITURE.—For pur14 poses of paragraph (1), the term ‘‘payment of the

15 costs of asset forfeiture’’ means—

16 (A) the payment, at the discretion of the At17 torney General, of any expenses necessary to

18 seize, detain, inventory, safeguard, maintain, ad19 vertise, sell, or dispose of property under seizure,

20 detention, or forfeited, or of any other necessary

21 expenses incident to the seizure, detention, for22 feiture, or disposal of such property, including

23 payment for—

24 (i) contract services,
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1 (ii) the employment of outside contrac2 tors to operate and manage properties or

3 provide other specialized services necessary

4 to dispose of such properties in an effort to

5 maximize the return from such properties;

6 and

7 (iii) reimbursement of any Federal,

8 State, or local agency for any expenditures

9 made to perform the functions described in

10 this subparagraph;

11 (B) at the discretion of the Attorney Gen12 eral, the payment of awards for information or

13 assistance leading to a civil or criminal forfeit14 ure involving any Federal agency participating

15 in the Health Care Fraud and Abuse Control Ac16 count;

17 (C) the compromise and payment of valid

18 liens and mortgages against property that has

19 been forfeited, subject to the discretion of the At20 torney General to determine the validity of any

21 such lien or mortgage and the amount of pay22 ment to be made, and the employment of attor23 neys and other personnel skilled in State real es24 tate law as necessary;
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1 (D) payment authorized in connection with

2 remission or mitigation procedures relating to

3 property forfeited; and

4 (E) the payment of State and local property

5 taxes on forfeited real property that accrued be6 tween the date of the violation giving rise to the

7 forfeiture and the date of the forfeiture order.

8 SEC. 8143. INJUNCTIVE RELIEF RELATING TO FEDERAL

9 HEALTH CARE OFFENSES.

10 (a) IN GENERAL.—Section 1345(a)(1) of title 18,

11 United States Code, is amended—

12 (1) by striking ‘‘or’’ at the end of subparagraph

13 (A);

14 (2) by inserting ‘‘or’’ at the end of subparagraph

15 (B); and

16 (3) by adding at the end the following new sub17 paragraph:

18 ‘‘(C) committing or about to commit a Fed19 eral health care offense (as defined in section

20 982(a)(6)(B) of this title);’’.

21 (b) FREEZING OF ASSETS.—Section 1345(a)(2) of title

22 18, United States Code, is amended by inserting ‘‘or a Fed23 eral health care offense (as defined in section 982(a)(6)(B))’’

24 after ‘‘title)’’.
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1 SEC. 8144. FALSE STATEMENTS.

2 (a) IN GENERAL.—Chapter 47 of title 18, United

3 States Code, is amended by adding at the end the following

4 new section:

5 ‘‘§ 1033. False statements relating to health care mat6 ters

7 ‘‘(a) Whoever, in any matter involving a Federal

8 health care program, knowingly and willfully—

9 ‘‘(1) falsifies, conceals, or covers up by any trick,

10 scheme, or device a material fact, or

11 ‘‘(2) makes any materially false, fictitious, or

12 fraudulent statement or representation, or makes or

13 uses any materially false writing or document know14 ing the same to contain any materially false, ficti15 tious, or fraudulent statement or entry,

16 shall be fined under this title or imprisoned not more than

17 5 years, or both.

18 ‘‘(b) For purposes of this section, the term ‘Federal

19 health care program’ has the same meaning given such term

20 in section 1128B(f) of the Social Security Act.’’.

21 (b) CLERICAL AMENDMENT.—The table of sections at

22 the beginning of chapter 47 of title 18, United States Code,

23 in amended by adding at the end the following:

‘‘1033. False statements relating to health care matters.’’.
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1 SEC. 8145. OBSTRUCTION OF CRIMINAL INVESTIGATIONS

2 OF FEDERAL HEALTH CARE OFFENSES.

3 (a) IN GENERAL.—Chapter 73 of title 18, United

4 States Code, is amended by adding at the end the following

5 new section:

6 ‘‘§ 1518. Obstruction of criminal investigations of Fed7 eral health care offenses

8 ‘‘(a) Whoever willfully prevents, obstructs, misleads,

9 delays or attempts to prevent, obstruct, mislead, or delay

10 the communication of information or records relating to a

11 Federal health care offense to a criminal investigator shall

12 be fined under this title or imprisoned not more than 5

13 years, or both.

14 ‘‘(b) As used in this section the term ‘Federal health

15 care offense’ has the same meaning given such term in sec16 tion 982(a)(6)(B) of this title.

17 ‘‘(c) As used in this section the term ‘criminal inves18 tigator’ means any individual duly authorized by a depart19 ment, agency, or armed force of the United States to con20 duct or engage in investigations for prosecutions for viola21 tions of health care offenses.’’.

22 (b) CLERICAL AMENDMENT.—The table of sections at

23 the beginning of chapter 73 of title 18, United States Code,

24 is amended by adding at the end the following:

‘‘1518. Obstruction of Criminal Investigations of Federal Health Care Offenses.’’.
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1 SEC. 8146. THEFT OR EMBEZZLEMENT.

2 (a) IN GENERAL.—Chapter 31 of title 18, United

3 States Code, is amended by adding at the end the following

4 new section:

5 ‘‘§ 669. Theft or embezzlement in connection with

6 health care

7 ‘‘(a) Whoever willfully embezzles, steals, or otherwise

8 willfully and unlawfully converts to the use of any person

9 other than the rightful owner, or intentionally misapplies

10 any of the moneys, funds, securities, premiums, credits,

11 property, or other assets of a Federal health care program,

12 shall be fined under this title or imprisoned not more than

13 10 years, or both.

14 ‘‘(b) As used in this section the term ‘Federal health

15 care program’ has the same meaning given such term in

16 section 1128B(f) of the Social Security Act.’’.

17 (b) CLERICAL AMENDMENT.—The table of sections at

18 the beginning of chapter 31 of title 18, United States Code,

19 is amended by adding at the end the following:

‘‘669. Theft or Embezzlement in Connection with Health Care.’’.

20 SEC. 8147. LAUNDERING OF MONETARY INSTRUMENTS.

21 Section 1956(c)(7) of title 18, United States Code, is

22 amended by adding at the end the following new subpara23 graph:

24 ‘‘(F) Any act or activity constituting an of25 fense involving a Federal health care offense as
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1 that term is defined in section 982(a)(6)(B) of

2 this title.’’.

3 SEC. 8148. AUTHORIZED INVESTIGATIVE DEMAND PROCE4 DURES.

5 (a) IN GENERAL.—Chapter 233 of title 18, United

6 States Code, is amended by adding after section 3485 the

7 following new section:

8 ‘‘§ 3486. Authorized investigative demand procedures

9 ‘‘(a)(1)(A) In any investigation relating to functions

10 set forth in paragraph (2), the Attorney General or designee

11 may issue in writing and cause to be served a subpoena

12 compelling production of any records (including any books,

13 papers, documents, electronic media, or other objects or tan14 gible things), which may be relevant to an authorized law

15 enforcement inquiry, that a person or legal entity may pos16 sess or have care, custody, or control.

17 ‘‘(B) A custodian of records may be required to give

18 testimony concerning the production and authentication of

19 such records.

20 ‘‘(C) The production of records may be required from

21 any place in any State or in any territory or other place

22 subject to the jurisdiction of the United States at any des23 ignated place; except that such production shall not be re24 quired more than 500 miles distant from the place where

25 the subpoena is served.
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1 ‘‘(D) Witnesses summoned under this section shall be

2 paid the same fees and mileage that are paid witnesses in

3 the courts of the United States.

4 ‘‘(E) A subpoena requiring the production of records

5 shall describe the objects required to be produced and pre6 scribe a return date within a reasonable period of time

7 within which the objects can be assembled and made avail8 able.

9 ‘‘(2) Investigative demands utilizing an administra10 tive subpoena are authorized for any investigation with re11 spect to any act or activity constituting or involving health

12 care fraud, including a scheme or artifice—

13 ‘‘(A) to defraud any Federal health care pro14 gram, in connection with the delivery of or payment

15 for health care benefits, items, or services; or

16 ‘‘(B) to obtain, by means of false or fraudulent

17 pretenses, representations, or promises, any of the

18 money or property owned by, or under the custody or

19 control or, any Federal health care program in con20 nection with the delivery of or payment for health

21 care benefits, items, or services.

22 ‘‘(b)(1) A subpoena issued under this section may be

23 served by any person designated in the subpoena to serve

24 it.
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1 ‘‘(2) Service upon a natural person may be made by

2 personal delivery of the subpoena to such person.

3 ‘‘(3) Service may be made upon a domestic or foreign

4 association which is subject to suit under a common name,

5 by delivering the subpoena to an officer, to a managing or

6 general agent, or to any other agent authorized by appoint7 ment or by law to receive service of process.

8 ‘‘(4) The affidavit of the person serving the subpoena

9 entered on a true copy thereof by the person serving it shall

10 be proof of service.

11 ‘‘(c)(1) In the case of contumacy by or refusal to obey

12 a subpoena issued to any person, the Attorney General may

13 invoke the aid of any court of the United States within the

14 jurisdiction of which the investigation is carried on or of

15 which the subpoenaed person is an inhabitant, or in which

16 such person carries on business or may be found, to compel

17 compliance with the subpoena.

18 ‘‘(2) The court may issue an order requiring the sub19 poenaed person to appear before the Attorney General to

20 produce records, if so ordered, or to give testimony required

21 under subsection (a)(1)(B).

22 ‘‘(3) Any failure to obey the order of the court may

23 be punished by the court as a contempt thereof.

24 ‘‘(4) All process in any such case may be served in

25 any judicial district in which such person may be found.
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1 ‘‘(d) Notwithstanding any Federal, State, or local law,

2 any person, including officers, agents, and employees, re3 ceiving a subpoena under this section, who complies in good

4 faith with the subpoena and thus produces the materials

5 sought, shall not be liable in any court of any State or the

6 United States to any customer or other person for such pro7 duction or for nondisclosure of that production to the cus8 tomer.

9 ‘‘(e)(1) Health information about an individual that

10 is disclosed under this section may not be used in, or dis11 closed to any person for use in, any administrative, civil,

12 or criminal action or investigation directed against the in13 dividual who is the subject of the information unless the

14 action or investigation arises out of and is directly related

15 to receipt of health care or payment for health care or action

16 involving a fraudulent claim related to health; or if author17 ized by an appropriate order of a court of competent juris18 diction, granted after application showing good cause there19 fore.

20 ‘‘(2) In assessing good cause, the court shall weigh the

21 public interest and the need for disclosure against the in22 jury to the patient, to the physician-patient relationship,

23 and to the treatment services.

24 ‘‘(3) Upon the granting of such order, the court, in

25 determining the extent to which any disclosure of all or any
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1 part of any record is necessary, shall impose appropriate

2 safeguards against unauthorized disclosure.

3 ‘‘(f) As used in this section the term ‘Federal health

4 care program’ has the same meaning given such term in

5 section 1128B(f) of the Social Security Act.’’.

6 (b) CLERICAL AMENDMENT.—The table of sections for

7 chapter 223 of title 18, United States Code, is amended by

8 inserting after the item relating to section 3405 the follow9 ing new item:

10 ‘‘§ 3486. Authorized investigative demand procedures’’.

11 (c) CONFORMING AMENDMENT.—Section

12 1510(b)(3)(B) of title 18, United States Code, is amended

13 by inserting ‘‘or a Department of Justice subpoena (issued

14 under section 3486),’’ after ‘‘subpoena’’.

15 CHAPTER 6—STATE HEALTH CARE FRAUD

16 CONTROL UNITS

17 SEC. 8151. STATE HEALTH CARE FRAUD CONTROL UNITS.

18 (a) EXTENSION OF CONCURRENT AUTHORITY TO IN19 VESTIGATE AND PROSECUTE FRAUD IN OTHER FEDERAL

20 PROGRAMS.—Paragraph (3) of section 2134(b), as added

21 by section 7001 of this Act, is amended—

22 (1) by inserting ‘‘(A)’’ after ‘‘in connection

23 with’’; and

24 (2) by striking ‘‘plan.’’ and inserting ‘‘plan; and

25 (B) upon the approval of the relevant Federal agency
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1 and the chief executive officer of the State or such offi2 cer’s designee, any aspect of the provision of health

3 care services and activities of providers of such serv4 ices under any Federal health care program (as de5 fined in section 1128B(f)(1)).’’.

6 (b) EXTENSION OF AUTHORITY TO INVESTIGATE AND

7 PROSECUTE PATIENT ABUSE IN NON-MEDIGRANT BOARD

8 AND CARE FACILITIES.—Paragraph (4) of section 2134(b),

9 as added by section 7001 of this Act, is amended to read

10 as follows:

11 ‘‘(4)(A) The entity has—

12 ‘‘(i) procedures for reviewing complaints of

13 abuse or neglect of patients in health care facili14 ties which receive payments under the

15 MediGrant plan funded under this title;

16 ‘‘(ii) at the option of the entity, procedures

17 for reviewing complaints of abuse or neglect of

18 patients residing in board and care facilities;

19 and

20 ‘‘(iii) where appropriate, procedures for act21 ing upon such complaints under the criminal

22 laws of the State or for referring such complaints

23 to other State agencies for action.

24 ‘‘(B) For purposes of this paragraph, the term

25 ‘board and care facility’ means a residential setting
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1 which receives payment from or on behalf of two or

2 more unrelated adults who reside in such facility, and

3 for whom one or both of the following is provided:

4 ‘‘(i) Nursing care services provided by, or

5 under the supervision of, a registered nurse, li6 censed practical nurse, or licensed nursing as7 sistant.

8 ‘‘(ii) Personal care services that assist resi9 dents with the activities of daily living, includ10 ing personal hygiene, dressing, bathing, eating,

11 toileting, ambulation, transfer, positioning, self12 medication, body care, travel to medical services,

13 essential shopping, meal preparation, laundry,

14 and housework.’’.

15 Subtitle C—Regulatory Relief

16 SEC. 8201. REPEAL OF PHYSICIAN OWNERSHIP REFERRAL

17 PROHIBITIONS BASED ON COMPENSATION

18 ARRANGEMENTS.

19 (a) IN GENERAL.—Section 1877(a)(2) (42 U.S.C.

20 1395nn(a)(2)) is amended by striking ‘‘is—’’ and all that

21 follows through ‘‘equity,’’ and inserting the following: ‘‘is

22 (except as provided in subsection (c)) an ownership or in23 vestment interest in the entity through equity,’’.

24 (b) CONFORMING AMENDMENTS.—Section 1877 (42

25 U.S.C. 1395nn) is amended as follows:
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1 (1) In subsection (b)—

2 (A) in the heading, by striking ‘‘TO BOTH

3 OWNERSHIP AND COMPENSATION ARRANGEMENT

4 PROHIBITIONS’’ and inserting ‘‘WHERE FINAN5 CIAL RELATIONSHIP EXISTS’’; and

6 (B) by redesignating paragraph (4) as

7 paragraph (7).

8 (2) In subsection (c)—

9 (A) by amending the heading to read as fol10 lows: ‘‘EXCEPTION FOR OWNERSHIP OR INVEST11 MENT INTEREST IN PUBLICLY TRADED SECURI12 TIES AND MUTUAL FUNDS’’; and

13 (B) in the matter preceding paragraph (1),

14 by striking ‘‘subsection (a)(2)(A)’’ and inserting

15 ‘‘subsection (a)(2)’’.

16 (3) In subsection (d)—

17 (A) by striking the matter preceding para18 graph (1);

19 (B) in paragraph (3), by striking ‘‘para20 graph (1)’’ and inserting ‘‘paragraph (4)’’; and

21 (C) by redesignating paragraphs (1), (2),

22 and (3) as paragraphs (4), (5), and (6), and by

23 transferring and inserting such paragraphs after

24 paragraph (3) of subsection (b).

25 (4) By striking subsection (e).
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1 (5) In subsection (f)(2)—

2 (A) in the matter preceding paragraph (1),

3 by striking ‘‘ownership, investment, and com4 pensation’’ and inserting ‘‘ownership and invest5 ment’’;

6 (B) in paragraph (2), by striking ‘‘sub7 section (a)(2)(A)’’ and all that follows through

8 ‘‘subsection (a)(2)(B)),’’ and inserting ‘‘sub9 section (a)(2),’’; and

10 (C) in paragraph (2), by striking ‘‘or who

11 have such a compensation relationship with the

12 entity’’.

13 (6) In subsection (h)—

14 (A) by striking paragraphs (1), (2), and

15 (3);

16 (B) in paragraph (4)(A), by striking

17 clauses (iv) and (vi);

18 (C) in paragraph (4)(B), by striking

19 ‘‘RULES.—’’ and all that follows through ‘‘(ii)

20 FACULTY’’ and inserting ‘‘RULES FOR FACULTY’’;

21 and

22 (D) by adding at the end of paragraph (4)

23 the following new subparagraph:

24 ‘‘(C) MEMBER OF A GROUP.—A physician

25 is a ‘member’ of a group if the physician is an
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1 owner or a bona fide employee, or both, of the

2 group.’’.

3 SEC. 8202. REVISION OF DESIGNATED HEALTH SERVICES

4 SUBJECT TO OWNERSHIP REFERRAL PROHI5 BITION.

6 (a) IN GENERAL.—Section 1877(h)(6) (42 U.S.C.

7 1395nn(h)(6)) is amended by striking subparagraphs (B)

8 through (K) and inserting the following:

9 ‘‘(B) Parenteral and enteral nutrients,

10 equipment, and supplies.

11 ‘‘(C) Radiology services, including magnetic

12 resonance imaging, computerized tomography,

13 and ultrasound services.

14 ‘‘(D) Outpatient physical or occupational

15 therapy services.’’.

16 (b) CONFORMING AMENDMENTS.—

17 (1) Section 1877(b)(2) (42 U.S.C. 1395nn(b)(2))

18 is amended in the matter preceding subparagraph (A)

19 by striking ‘‘services’’ and all that follows through

20 ‘‘supplies)—’’ and inserting ‘‘services—’’.

21 (2) Section 1877(h)(5)(C) (42 U.S.C.

22 1395nn(h)(5)(C)) is amended—

23 (A) by striking ‘‘, a request by a radiologist

24 for diagnostic radiology services, and a request

25 by a radiation oncologist for radiation therapy,’’
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1 and inserting ‘‘and a request by a radiologist for

2 magnetic resonance imaging or for computerized

3 tomography’’, and

4 (B) by striking ‘‘radiologist, or radiation

5 oncologist’’ and inserting ‘‘or radiologist’’.

6 SEC. 8203. DELAY IN IMPLEMENTATION OF 1993 OWNERSHIP

7 REFERRAL CHANGES UNTIL PROMULGATION

8 OF REGULATIONS.

9 (a) IN GENERAL.—Section 13562(b) of OBRA–1993

10 (42 U.S.C. 1395nn note) is amended—

11 (1) in paragraph (1), by striking ‘‘paragraph

12 (2)’’ and inserting ‘‘paragraphs (2) and (3)’’; and

13 (2) by adding at the end the following new para14 graph:

15 ‘‘(3) PROMULGATION OF REGULATIONS.—Not16 withstanding paragraphs (1) and (2), the amend17 ments made by this section shall not apply to any re18 ferrals made before the effective date of final regula19 tions promulgated by the Secretary of Health and

20 Human Services to carry out such amendments.’’.

21 (b) EFFECTIVE DATE.—The amendments made by sub22 section (a) shall take effect as if included in the enactment

23 of OBRA–1993.
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1 SEC. 8204. EXCEPTIONS TO OWNERSHIP REFERRAL PROHI2 BITIONS.

3 (a) REVISIONS TO EXCEPTION FOR IN-OFFICE ANCIL4 LARY SERVICES.—

5 (1) REPEAL OF SITE-OF-SERVICE REQUIRE6 MENT.—Section 1877 (42 U.S.C. 1395nn) is amend7 ed—

8 (A) by amending subparagraph (A) of sub9 section (b)(2) to read as follows:

10 ‘‘(A) that are furnished personally by the

11 referring physician, personally by a physician

12 who is a member of the same group practice as

13 the referring physician, or personally by individ14 uals who are under the general supervision of the

15 physician or of another physician in the group

16 practice, and’’, and

17 (B) by adding at the end of subsection (h)

18 the following new paragraph:

19 ‘‘(7) GENERAL SUPERVISION.—An individual is

20 considered to be under the ‘general supervision’ of a

21 physician if the physician (or group practice of which

22 the physician is a member) is legally responsible for

23 the services performed by the individual and for en24 suring that the individual meets licensure and certifi25 cation requirements, if any, applicable under other

26 provisions of law, regardless of whether or not the
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1 physician is physically present when the individual

2 furnishes an item or service.’’.

3 (2) CLARIFICATION OF TREATMENT OF PHYSI4 CIAN OWNERS OF GROUP PRACTICE.—Section

5 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is amend6 ed by striking ‘‘physician or such group practice’’

7 and inserting ‘‘physician, such group practice, or the

8 physician owners of such group practice’’.

9 (3) CONFORMING AMENDMENT.—Section

10 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended by

11 amending the heading to read as follows: ‘‘ANCILLARY

12 SERVICES FURNISHED PERSONALLY OR THROUGH

13 GROUP PRACTICE.—’’.

14 (b) CLARIFICATION OF EXCEPTION FOR SERVICES

15 FURNISHED IN A RURAL AREA.—Paragraph (5) of section

16 1877(b) (42 U.S.C. 1395nn(b)), as transferred by section

17 8201(b)(3)(C), is amended by striking ‘‘substantially all’’

18 and inserting ‘‘not less than 75 percent’’.

19 (c) REVISION OF EXCEPTION FOR CERTAIN MANAGED

20 CARE ARRANGEMENTS.—Section 1877(b)(3) (42 U.S.C.

21 1395nn(b)(3)) is amended—

22 (1) in the heading by inserting ‘‘MANAGED CARE

23 ARRANGEMENTS’’ after ‘‘PREPAID PLANS’’;

24 (2) in the matter preceding subparagraph (A),

25 by striking ‘‘organization—’’ and inserting ‘‘organi-
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1 zation, directly or through contractual arrangements

2 with other entities, to individuals enrolled with the

3 organization—’’;

4 (3) in subparagraph (A), by inserting ‘‘or part

5 C’’ after ‘‘section 1876’’;

6 (4) by striking ‘‘or’’ at the end of subparagraph

7 (C);

8 (5) by striking the period at the end of subpara9 graph (D) and inserting a comma; and

10 (6) by adding at the end the following new sub11 paragraphs:

12 ‘‘(E) with a contract with a State to pro13 vide services under the State plan under title

14 XIX (in accordance with section 1903(m)) or a

15 State MediGrant plan under title XXI; or

16 ‘‘(F) which is a MedicarePlus organization

17 under part C or which provides or arranges for

18 the provision of health care items or services

19 pursuant to a written agreement between the or20 ganization and an individual or entity if the

21 written agreement places the individual or entity

22 at substantial financial risk for the cost or utili23 zation of the items or services which the individ24 ual or entity is obligated to provide, whether

25 through a withhold, capitation, incentive pool,
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1 per diem payment, or any other similar risk ar2 rangement which places the individual or entity

3 at substantial financial risk.’’.

4 (d) NEW EXCEPTION FOR SHARED FACILITY SERV5 ICES.—

6 (1) IN GENERAL.—Section 1877(b) (42 U.S.C.

7 1395nn(b)), as amended by section 8201(b)(3)(C), is

8 amended—

9 (A) by redesignating paragraphs (4)

10 through (7) as paragraphs (5) through (8); and

11 (B) by inserting after paragraph (3) the fol12 lowing new paragraph:

13 ‘‘(4) SHARED FACILITY SERVICES.—In the case

14 of a designated health service consisting of a shared

15 facility service of a shared facility—

16 ‘‘(A) that is furnished—

17 ‘‘(i) personally by the referring physi18 cian who is a shared facility physician or

19 personally by an individual directly em20 ployed or under the general supervision of

21 such a physician,

22 ‘‘(ii) by a shared facility in a building

23 in which the referring physician furnishes

24 substantially all of the services of the physi-
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1 cian that are unrelated to the furnishing of

2 shared facility services, and

3 ‘‘(iii) to a patient of a shared facility

4 physician; and

5 ‘‘(B) that is billed by the referring physi6 cian or a group practice of which the physician

7 is a member.’’.

8 (2) DEFINITIONS.—Section 1877(h) (42 U.S.C.

9 1395nn(h)), as amended by section 8201(b)(6), is

10 amended by inserting before paragraph (4) the follow11 ing new paragraph:

12 ‘‘(1) SHARED FACILITY RELATED DEFINI13 TIONS.—

14 ‘‘(A) SHARED FACILITY SERVICE.—The

15 term ‘shared facility service’ means, with respect

16 to a shared facility, a designated health service

17 furnished by the facility to patients of shared fa18 cility physicians.

19 ‘‘(B) SHARED FACILITY.—The term ‘shared

20 facility’ means an entity that furnishes shared

21 facility services under a shared facility arrange22 ment.

23 ‘‘(C) SHARED FACILITY PHYSICIAN.—The

24 term ‘shared facility physician’ means, with re25 spect to a shared facility, a physician (or a
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1 group practice of which the physician is a mem2 ber) who has a financial relationship under a

3 shared facility arrangement with the facility.

4 ‘‘(D) SHARED FACILITY ARRANGEMENT.—

5 The term ‘shared facility arrangement’ means,

6 with respect to the provision of shared facility

7 services in a building, a financial arrange8 ment—

9 ‘‘(i) which is only between physicians

10 who are providing services (unrelated to

11 shared facility services) in the same build12 ing,

13 ‘‘(ii) in which the overhead expenses of

14 the facility are shared, in accordance with

15 methods previously determined by the phy16 sicians in the arrangement, among the phy17 sicians in the arrangement, and

18 ‘‘(iii) which, in the case of a corpora19 tion, is wholly owned and controlled by

20 shared facility physicians.’’.

21 (e) NEW EXCEPTION FOR SERVICES FURNISHED IN

22 COMMUNITIES WITH NO ALTERNATIVE PROVIDERS.—Sec23 tion 1877(b) (42 U.S.C. 1395nn(b)), as amended by section

24 8201(b)(3)(C) and subsection (d)(1), is amended—
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1 (1) by redesignating paragraphs (5) through (8)

2 as paragraphs (6) through (9); and

3 (2) by inserting after paragraph (4) the follow4 ing new paragraph:

5 ‘‘(5) NO ALTERNATIVE PROVIDERS IN AREA.—In

6 the case of a designated health service furnished in

7 any area with respect to which the Secretary deter8 mines that individuals residing in the area do not

9 have reasonable access to such a designated health

10 service for which subsection (a)(1) does not apply.’’.

11 (f) NEW EXCEPTION FOR SERVICES FURNISHED IN

12 AMBULATORY SURGICAL CENTERS.—Section 1877(b) (42

13 U.S.C. 1395nn(b)), as amended by section 8201(b)(3)(C),

14 subsection (d)(1), and subsection (e)(1), is amended—

15 (1) by redesignating paragraphs (6) through (9)

16 as paragraphs (7) through (10); and

17 (2) by inserting after paragraph (5) the follow18 ing new paragraph:

19 ‘‘(6) SERVICES FURNISHED IN AMBULATORY

20 SURGICAL CENTERS.—In the case of a designated

21 health service furnished in an ambulatory surgical

22 center described in section 1832(a)(2)(F)(i).’’.

23 (g) NEW EXCEPTION FOR SERVICES FURNISHED IN

24 RENAL DIALYSIS FACILITIES.—Section 1877(b) (42 U.S.C.

25 1395nn(b)), as amended by section 8201(b)(3)(C), sub-
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1 section (d)(1), subsection (e)(1), and subsection (f), is

2 amended—

3 (1) by redesignating paragraphs (7) through (10)

4 as paragraphs (8) through (11); and

5 (2) by inserting after paragraph (6) the follow6 ing new paragraph:

7 ‘‘(7) SERVICES FURNISHED IN RENAL DIALYSIS

8 FACILITIES.—In the case of a designated health serv9 ice furnished in a renal dialysis facility under section

10 1881.’’.

11 (h) NEW EXCEPTION FOR SERVICES FURNISHED IN A

12 HOSPICE.—Section 1877(b) (42 U.S.C. 1395nn(b)), as

13 amended by section 8201(b)(3)(C), subsection (d)(1), sub14 section (e)(1), subsection (f), and subsection (g), is amend15 ed—

16 (1) by redesignating paragraphs (8) through (11)

17 as paragraphs (9) through (12); and

18 (2) by inserting after paragraph (7) the follow19 ing new paragraph:

20 ‘‘(8) SERVICES FURNISHED BY A HOSPICE PRO21 GRAM.—In the case of a designated health service fur22 nished by a hospice program under section

23 1861(dd)(2).’’.

24 (i) NEW EXCEPTION FOR SERVICES FURNISHED IN A

25 COMPREHENSIVE OUTPATIENT REHABILITATION FACIL-
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1 ITY.—Section 1877(b) (42 U.S.C. 1395nn(b)), as amended

2 by section 8201(b)(3)(C), subsection (d)(1), subsection

3 (e)(1), subsection (f), subsection (g), and subsection (h), is

4 amended—

5 (1) by redesignating paragraphs (9) through (12)

6 as paragraphs (10) through (13); and

7 (2) by inserting after paragraph (8) the follow8 ing new paragraph:

9 ‘‘(9) SERVICES FURNISHED IN A COMPREHEN10 SIVE OUTPATIENT REHABILITATION FACILITY.—In the

11 case of a designated health service furnished in a com12 prehensive outpatient rehabilitation facility (as de13 fined in section 1861(cc)(2)).’’.

14 (j) DEFINITION OF REFERRAL.—Section

15 1877(h)(5)(A) (42 U.S.C. 1395nn(h)(5)(A)) is amended—

16 (1) by striking ‘‘an item or service’’ and insert17 ing ‘‘a designated health service’’, and

18 (2) by striking ‘‘the item or service’’ and insert19 ing ‘‘the designated health service’’.

20 SEC. 8205. EFFECTIVE DATE.

21 Except as provided in section 8203(b), the amendments

22 made by this subtitle shall apply to referrals made on or

23 after the date of the enactment of this Act, regardless of

24 whether or not regulations are promulgated to carry out

25 such amendments.
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1 Subtitle D—Modification in Pay2 ment Policies Regarding Grad3 uate Medical Education

4 SEC. 8301. INDIRECT MEDICAL EDUCATION PAYMENTS.

5 (a) MULTIYEAR TRANSITION REGARDING PERCENT6 AGES; 6.7 FOR 1996 TO 5.0 FOR 2001 AND AFTERWARDS.—

7 Section 1886(D)(5)(B)(ii) (42 U.S.C.

8 1395ww(d)(5)(B)(ii)) us amended to read as follows:

9 ‘‘(ii) For purposes of clause (i)(II), the indirect

10 teaching adjustment factor is equal to c × (((1+r) to

11 the nth power)¥1), where ‘r’ is the ratio of the hos12 pital’s full-time equivalent interns and residents to

13 beds and ‘n’ equal .405. For discharges occurring on

14 or after—

15 ‘‘(I) May 1, 1986, and before October 1,

16 1995, ‘c’ is equal to 1.89;

17 ‘‘(II) October 1, 1995, and before October 1,

18 1996, ‘c’ is equal to 1.654;

19 ‘‘(III) October 1, 1996, and before October

20 1, 1998, ‘c’ is equal to 1.481;

21 ‘‘(IV) October 1, 1998, and before October 1,

22 1999, ‘c’ is equal to 1.383;

23 ‘‘(V) October 1, 1999, and before October 1,

24 2000, ‘c’ is equal to 1.309; and
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1 ‘‘(VI) October 1, 2000, ‘c’ is equal to

2 1.235.’’.

3 (b) NO RESTANDARDIZATION OF PAYMENT

4 AMOUNTS REQUIRED.—Section 1886(d)(2)(C)(i) (42

5 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking ‘‘of

6 1985’’ and inserting ‘‘of 1985, but not taking into account

7 the amendments made by section 8301(a) of Medicate Pres8 ervation Act of 1995’’.

9 SEC. 8302. DIRECT GRADUATE MEDICAL EDUCATION.

10 (a) WEIGHTING FACTORS FOR RESIDENTS.—

11 (1) IN GENERAL.—Section 1886(h)(4)(C)(iv) (42

12 U.S.C. 1395ww(h)(4)(C)(iv)) is amended by striking

13 ‘‘50’’ and inserting ‘‘0.25’’.

14 (2) EFFECTIVE DATE.—The amendment made by

15 paragraph (1) shall apply with respect to cost report16 ing periods beginning on or after October 1, 1997.

17 (b) LIMITATION ON AGGREGATE NUMBER OF FULL18 TIME RESIDENTS.—

19 Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is

20 amended by adding at the end the following new subpara21 graph:

22 ‘‘(F) ADJUSTMENTS FOR CERTAIN FISCAL YEARS

23 IN PAYMENTS FOR PROGRAMS IN ALLOPATHIC AND OS24 TEOPATHIC MEDICINE.—
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1 ‘‘(i) IN GENERAL.—With respect to a cost

2 reporting period, the Secretary shall in accord3 ance with clause (ii) adjust the payments for ap4 proved medical residency training programs in

5 the fields of allopathic medicine and osteopathic

6 medicine if, in the fiscal year in which such cost

7 reporting period begins, the number of full-time8 equivalent residents determined under this para9 graph with respect to all such programs exceeds

10 the number of full-time-equivalent residents de11 termined with respect to all such programs as of

12 August 1, 1995.

13 ‘‘(ii) ADJUSTMENT DESCRIBED.—Adjust14 ments under clause (i) shall be made with re15 spect to cost reporting periods such that the total

16 amount of payments under this subsection for

17 the fiscal year involved does not exceed the

18 amount that would have been paid under this

19 subsection for such year if the number of full20 time-equivalent residents determined under

21 clause (i) for the year had not exceeded the num22 ber of full-time-equivalent residents with respect

23 to all such programs as of August 1, 1995.

24 ‘‘(iii) HOLD HARMLESS.—The Secretary

25 may provide that approved medical residency
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1 training programs that reduced or did not ex2 pand the number of full-time-equivalent residents

3 determined under this paragraph for a cost re4 porting period shall not be subject to the adjust5 ment described in clause (i).

6 ‘‘(iv) EFFECTIVE DATE.—The adjustment

7 described in clause (i) shall apply with respect

8 to cost reporting periods beginning on or after

9 October 1, 1995, and on or before September 30,

10 2002.’’.

11 Subtitle E—Provisions Relating to

12 Part A

13 CHAPTER 1—GENERAL PROVISIONS

14 RELATING TO PART A

15 SEC. 8401. PPS HOSPITAL PAYMENT UPDATE.

16 Section 1886(b)(3)(B)(i) (42 U.S.C.

17 1395ww(b)(3)(B)(i)) is amended by striking subclauses

18 (XI), (XII), and (XIII) and inserting the following new

19 subclauses:

20 ‘‘(XI) for fiscal year 1996 for hospitals in all

21 areas, the market basket percentage increase minus

22 2.5 percentage points,
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1 ‘‘(XII) for fiscal years 1997 through 2002 for

2 hospitals in all areas, the market basket percentage

3 increase minus 2.0 percentage points, and

4 ‘‘(XIII) for fiscal year 2003 and each subsequent

5 fiscal year for hospitals in all areas, the market bas6 ket percentage increase.’’.

7 SEC. 8402. PPS-EXEMPT HOSPITAL PAYMENTS.

8 (a) UPDATE.—

9 (1) IN GENERAL.—Section 1886(b)(3)(B)(ii) (42

10 U.S.C. 1395ww(b)(3)(B)(ii)) is amended—

11 (A) in subclause (V)—

12 (i) by striking ‘‘1997’’ and inserting

13 ‘‘1995’’, and

14 (ii) by striking ‘‘and’’ at the end,

15 (B) by redesignating subclause (VI) as

16 subclause (VII); and

17 (C) by inserting after subclause (V), the fol18 lowing subclause:

19 ‘‘(VI) except as provided in clause (vi), for fiscal

20 years 1996 through 2002, the market basket percent21 age increase minus the applicable reduction (as de22 fined in clause (vii)(II)); and’’.

23 (2) SPECIAL RULES FOR CERTAIN HOSPITALS.—

24 Section 1886(b)(3)(B) (42 U.S.C. 1395ww(b)(3)(B)))
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1 is amended by adding at the end the following new

2 clause:

3 ‘‘(vi) For purposes of clause (ii)(VI), the ‘applicable

4 percentage increase’ for a hospital—

5 ‘‘(I) for a fiscal year for which the hospital’s up6 date adjustment percentage (as defined in clause

7 (vii)(I)) is at least 10 percent, is the market basket

8 percentage increase, and

9 ‘‘(II) for which 150 percent of the hospital’s al10 lowable operating costs of inpatient hospital services

11 recognized under this title for the most recent cost re12 porting period for which information is available is

13 less than the hospital’s target amount (as determined

14 under subparagraph (A)) for such cost reporting pe15 riod, is 0 percent.’’.

16 (3) DEFINITIONS.—Section 1886(b)(3)(B) (42

17 U.S.C. 1395ww(b)(3)(B)), as amended by paragraph

18 (2), is amended by adding at the end the following

19 new clause:

20 ‘‘(vii) For purposes of clauses (ii)(VI) and (vi)—

21 ‘‘(I) a hospital’s ‘update adjustment percentage’

22 for a fiscal year is the percentage by which the hos23 pital’s allowable operating costs of inpatient hospital

24 services recognized under this title for the most recent

25 cost reporting period for which information is avail-
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1 able exceeds the hospital’s target amount (as deter2 mined under subparagraph (A)) for such cost report3 ing period, and

4 ‘‘(II) the ‘applicable reduction’ with respect to a

5 hospital for a fiscal year is 2.5 percentage points, re6 duced by 0.25 percentage point for each percentage

7 point (if any) the hospital’s update adjustment per8 centage for the fiscal year is less than 10 percentage

9 points.’’.

10 (3) EFFECT OF PAYMENT REDUCTION ON EXCEP11 TIONS AND ADJUSTMENTS.—Section 1886(b)(4)(A)(ii)

12 (42 U.S.C. 1395ww(b)(4)(A)(ii)) is amended by strik13 ing ‘‘paragraph (3)(B)(ii)(V)’’ and inserting

14 ‘‘subclause (V) or (VI) of paragraph (3)(B)(ii)’’.

15 (b) TARGET AMOUNTS FOR REHABILITATION HOS16 PITALS AND LONG-TERM CARE HOSPITALS.—Section

17 1886(b)(3) (42 U.S.C. 1395ww(b)(3)) is amended—

18 (1) in subparagraph (A), in the matter preceding

19 clause (i), by striking ‘‘and (E)’’ and inserting ‘‘(E),

20 (F), and (G)’’; and

21 (2) by adding at the end the following new sub22 paragraphs:

23 ‘‘(F) In the case of a rehabilitation hospital (or unit

24 thereof) (as described in clause (ii) of subsection (d)(1)(B)),
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1 for cost reporting periods beginning on or after October 1,

2 1995,—

3 ‘‘(i) in the case of a hospital which first receives

4 payments under this section before October 1, 1995,

5 the target amount determined under subparagraph

6 (A) for such hospital or unit for a cost reporting pe7 riod beginning during a fiscal year shall not be less

8 than 50 percent of the national mean of the target

9 amounts determined under this paragraph for all

10 such hospitals for cost reporting periods beginning

11 during such fiscal year (determined without regard to

12 this subparagraph); and

13 ‘‘(ii) in the case of a hospital which first receives

14 payments under this section on or after October 1,

15 1995, such target amount may not be greater than

16 130 percent of the national mean of the target

17 amounts for such hospitals (and units thereof) for cost

18 reporting periods beginning during fiscal year 1991.

19 ‘‘(G) In the case of a hospital which has an average

20 inpatient length of stay of greater than 25 days (as de21 scribed in clause (iv) of subsection (d)(1)(B)), for cost re22 porting periods beginning on or after October 1, 1995—

23 ‘‘(i) in the case of a hospital which first receives

24 payments under this section as a hospital that is not

25 a subsection (d) hospital or a subsection (d) Puerto
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1 Rico hospital before October 1, 1995, the target

2 amount determined under subparagraph (A) for such

3 hospital for a cost reporting period beginning during

4 a fiscal year shall not be less than 50 percent of the

5 national mean of the target amounts determined

6 under such subparagraph for all such hospitals for

7 cost reporting periods beginning during such fiscal

8 year (determined without regard to this subpara9 graph); and

10 ‘‘(ii) in the case of any other hospital which first

11 receives payment under this section as a hospital de12 scribed in clause (i) on or after October 1, 1995, such

13 target amount may not be greater than 130 percent

14 (or, if the Secretary determines it is appropriate,

15 such alternative percentage based on case-mix and

16 DRG category) of such national mean of the target

17 amounts for such hospitals for cost reporting periods

18 beginning during fiscal year 1991.’’.

19 (c) REBASING FOR CERTAIN LONG-TERM CARE HOS20 PITALS.—

21 (1) IN GENERAL.—Section 1886(b)(3) (42 U.S.C.

22 1395ww(b)(3)), as amended by subsection (b), is

23 amended—
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1 (A) in subparagraph (A) in the matter pre2 ceding clause (i), by striking ‘‘and (G)’’ and in3 serting ‘‘(G), and (H)’’;

4 (B) in subparagraph (B)(ii), by striking

5 ‘‘(A) and (E)’’ and inserting ‘‘(A), (E), and

6 (G)’’; and

7 (C) by adding at the end the following new

8 subparagraph:

9 ‘‘(H)(i) In the case of a qualified long-term care hos10 pital (as defined in clause (ii)), the term ‘target amount’

11 means—

12 ‘‘(I) with respect to the first 12-month cost re13 porting period in which this subparagraph is applied

14 to the hospital, the allowable operating costs of inpa15 tient hospital services (as defined in subsection (a)(4))

16 recognized under this title for the hospital for the 12-

17 month cost reporting period beginning during fiscal

18 year 1994; or

19 ‘‘(II) with respect to a later cost reporting pe20 riod, the target amount for the preceding cost report21 ing period, increased by the applicable percentage in22 crease under subparagraph (B)(ii) for that later cost

23 reporting period.

24 ‘‘(ii) In clause (i), a ‘qualified long-term care hospital’

25 means, with respect to a cost reporting period, a hospital
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1 described in clause (iv) of subsection (d)(1)(B) during fiscal

2 year 1995 for which the hospital’s allowable operating costs

3 of inpatient hospital services recognized under this title for

4 each of the two most recent previous 12-month cost report5 ing periods exceeded 115 percent of the hospital’s target

6 amount determined under this paragraph for such cost re7 porting periods, if the hospital has a disproportionate pa8 tient percentage during such cost reporting period (as deter9 mined by the Secretary under subsection (d)(5)(F)(vi) as

10 if the hospital were a subsection (d) hospital) of at least

11 70 percent.’’.

12 (2) EFFECTIVE DATE.—The amendment made by

13 paragraph (1) shall apply to discharges occurring

14 during cost reporting periods beginning on or after

15 October 1, 1995.

16 (d) TREATMENT OF CERTAIN LONG-TERM CARE HOS17 PITALS LOCATED WITHIN OTHER HOSPITALS.—

18 (1) IN GENERAL.—Section 1886(d)(1)(B) (42

19 U.S.C. 1395ww(d)(1)(B)) is amended in the matter

20 following clause (v) by striking the period and insert21 ing the following: ‘‘, or a hospital classified by the

22 Secretary as a long-term care hospital on or before

23 September 30, 1995, and located in the same building

24 as, or on the same campus as, another hospital.’’.
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1 (2) EFFECTIVE DATE.—The amendment made by

2 paragraph (1) shall apply to discharges occurring on

3 or after October 1, 1995.

4 (e) CAPITAL PAYMENTS FOR PPS-EXEMPT HOS5 PITALS.—Section 1886(g) (42 U.S.C. 1395ww(g)) is amend6 ed by adding at the end the following new paragraph:

7 ‘‘(4) In determining the amount of the payments that

8 may be made under this title with respect to all the capital9 related costs of inpatient hospital services furnished during

10 fiscal years 1996 through 2002 of a hospital which is not

11 a subsection (d) hospital or a subsection (d) Puerto Rico

12 hospital, the Secretary shall reduce the amounts of such

13 payments otherwise determined under this title by 10 per14 cent.’’.

15 SEC. 8403. REDUCTIONS IN DISPROPORTIONATE SHARE

16 PAYMENT ADJUSTMENTS.

17 (a) IN GENERAL.—Section 1886(d)(5)(F) (42 U.S.C.

18 1395ww(d)(5)(F)) is amended—

19 (1) in clause (ii), by striking ‘‘The amount’’ and

20 inserting ‘‘Subject to clause (ix), the amount’’; and

21 (2) by adding at the end the following new

22 clause:

23 ‘‘(ix) In the case of discharges occurring on or after

24 October 1, 1995, the additional payment amount otherwise

25 determined under clause (ii) shall be reduced as follows:
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1 ‘‘(I) For discharges occurring on or after October

2 1, 1995, and on or before September 30, 1996, by 5

3 percent.

4 ‘‘(II) For discharges occurring on or after Octo5 ber 1, 1996, and on or before September 30, 1997, by

6 10 percent.

7 ‘‘(III) For discharges occurring on or after Octo8 ber 1, 1997, and on or before September 30, 1998, by

9 17.5 percent.

10 ‘‘(IV) For discharges occurring on or after Octo11 ber 1, 1998, and on or before September 30, 1999, by

12 25 percent.

13 ‘‘(V) For discharges occurring on or after Octo14 ber 1, 1999, and on or before September 30, 2002, by

15 30 percent.’’.

16 (b) CONFORMING AMENDMENT RELATING TO DETER17 MINATION OF STANDARDIZED AMOUNTS.—Section

18 1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is

19 amended by striking the period at the end and inserting

20 the following: ‘‘, and the Secretary shall not take into ac21 count any reductions in the amount of such additional pay22 ments resulting from the amendments made by section

23 8403(a) of the Medicare Preservation Act of 1995.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by sub2 sections (a) and (b) shall apply to discharges occurring on

3 or after October 1, 1995.

4 SEC. 8404. CAPITAL PAYMENTS FOR PPS HOSPITALS.

5 (a) REDUCTION IN PAYMENTS.—

6 (1) CONTINUATION OF CURRENT REDUCTIONS.—

7 Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A))

8 is amended in the second sentence—

9 (A) by striking ‘‘through 1995’’ and insert10 ing ‘‘through 2002’’; and

11 (B) by inserting after ‘‘10 percent reduc12 tion’’ the following: ‘‘(or a 15 percent reduction

13 in the case of payments during fiscal years 1996

14 through 2002)’’.

15 (2) REDUCTION IN BASE PAYMENT RATES.—Sec16 tion 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is

17 amended by adding at the end the following new sen18 tence: ‘‘In addition to the reduction described in the

19 preceding sentence, for discharges occurring after Sep20 tember 30, 1995, the Secretary shall reduce by 7.47

21 percent the unadjusted standard Federal capital pay22 ment rate (as described in 42 CFR 412.308(c), as in

23 effect on the date of the enactment of the Medicare

24 Preservation Act of 1995) and shall reduce by 8.27

25 percent the unadjusted hospital-specific rate (as de-
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1 scribed in 42 CFR 412.328(e)(1), as in effect on such

2 date of enactment).’’.

3 (b) HOSPITAL-SPECIFIC ADJUSTMENT FOR CAPITAL4 RELATED TAX COSTS.—Section 1886(g)(1) (42 U.S.C.

5 1395ww(g)(1)) is amended—

6 (1) by redesignating subparagraph (C) as sub7 paragraph (D), and

8 (2) by inserting after subparagraph (B) the fol9 lowing subparagraph:

10 ‘‘(C)(i) For discharges occurring after Sep11 tember 30, 1995, such system shall provide for

12 an adjustment in an amount equal to the

13 amount determined under clause (iv) for capital14 related tax costs for each hospital that is eligible

15 for such adjustment.

16 ‘‘(ii) Subject to clause (iii), a hospital is el17 igible for an adjustment under this subpara18 graph, with respect to discharges occurring in a

19 fiscal year, if the hospital—

20 ‘‘(I) is a hospital that may otherwise

21 receive payments under this subsection,

22 ‘‘(II) is not a public hospital, and

23 ‘‘(III) incurs capital-related tax costs

24 for the fiscal year.
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1 ‘‘(iii)(I) In the case of a hospital that first

2 incurs capital-related tax costs in a fiscal year

3 after fiscal year 1992 because of a change from

4 nonproprietary to proprietary status or because

5 the hospital commenced operation after such fis6 cal year, the first fiscal year for which the hos7 pital shall be eligible for such adjustment is the

8 second full fiscal year following the fiscal year in

9 which the hospital first incurs such costs.

10 ‘‘(II) In the case of a hospital that first in11 curs capital-related tax costs in a fiscal year

12 after fiscal year 1992 because of a change in

13 State or local tax laws, the first fiscal year for

14 which the hospital shall be eligible for such ad15 justment is the fourth full fiscal year following

16 the fiscal year in which the hospital first incurs

17 such costs.

18 ‘‘(iv) The per discharge adjustment under

19 this clause shall be equal to the hospital-specific

20 capital-related tax costs per discharge of a hos21 pital for fiscal year 1992 (or, in the case of a

22 hospital that first incurs capital-related tax costs

23 for a fiscal year after fiscal year 1992, for the

24 first full fiscal year for which such costs are in25 curred), updated to the fiscal year to which the
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1 adjustment applies. Such per discharge adjust2 ment shall be added to the Federal capital rate,

3 after such rate has been adjusted as described in

4 42 CFR 412.312 (as in effect on the date of the

5 enactment of the Medicare Preservation Act of

6 1995), and before such rate is multiplied by the

7 applicable Federal rate percentage.

8 ‘‘(v) For purposes of this subparagraph,

9 capital-related tax costs include—

10 ‘‘(I) the costs of taxes on land and de11 preciable assets owned by a hospital and

12 used for patient care,

13 ‘‘(II) payments in lieu of such taxes

14 (made by hospitals that are exempt from

15 taxation), and

16 ‘‘(III) the costs of taxes paid by a hos17 pital as lessee of land, buildings, or fixed

18 equipment from a lessor that is unrelated to

19 the hospital under the terms of a lease that

20 requires the lessee to pay all expenses (in21 cluding mortgage, interest, and amortiza22 tion) and leaves the lessor with an amount

23 free of all claims (sometimes referred to as

24 a ‘net net net’ or ‘triple net’ lease).
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1 In determining the adjustment required under

2 clause (i), the Secretary shall not take into ac3 count any capital-related tax costs of a hospital

4 to the extent that such costs are based on tax

5 rates and assessments that exceed those for simi6 lar commercial properties.

7 ‘‘(vi) The system shall provide that the Fed8 eral capital rate for any fiscal year after Sep9 tember 30, 1995, shall be reduced by a percent10 age sufficient to ensure that the adjustments re11 quired to be paid under clause (i) for a fiscal

12 year neither increase nor decrease the total

13 amount that would have been paid under this

14 system but for the payment of such adjustments

15 for such fiscal year.’’.

16 (d) REVISION OF EXCEPTIONS PROCESS UNDER PRO17 SPECTIVE PAYMENT SYSTEM FOR CERTAIN PROJECTS.—

18 (1) IN GENERAL.—Section 1886(g)(1) (42 U.S.C.

19 1395ww(g)(1)), as amended by subsection (c), is

20 amended—

21 (A) by redesignating subparagraph (D) as

22 subparagraph (E), and

23 (B) by inserting after subparagraph (C) the

24 following subparagraph:
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1 ‘‘(D) The exceptions under the system provided by the

2 Secretary under subparagraph (B)(iii) shall include the

3 provision of exception payments under the special excep4 tions process provided under 42 CFR 412.348(g) (as in ef5 fect on September 1, 1995), except that the Secretary shall

6 revise such process as follows:

7 ‘‘(i) A hospital with at least 100 beds which is

8 located in an urban area shall be eligible under such

9 process without regard to its disproportionate patient

10 percentage under subsection (d)(5)(F) or whether it

11 qualifies for additional payment amounts under such

12 subsection.

13 ‘‘(ii) The minimum payment level for qualifying

14 hospitals shall be 85 percent.

15 ‘‘(iii) A hospital shall be considered to meet the

16 requirement that it completes the project involved no

17 later than the end of the hospital’s last cost reporting

18 period beginning after October 1, 2001, if—

19 ‘‘(I) the hospital has obtained a certificate

20 of need for the project approved by the State or

21 a local planning authority by September 1,

22 1995, and

23 ‘‘(II) by September 1, 1995, the hospital has

24 expended on the project at least $750,000 or 10

25 percent of the estimated cost of the project.
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1 ‘‘(iv) Offsetting amounts, as described in 42 CFR

2 412.348(g)(8)(ii), shall apply except that subpara3 graph (B) of such section shall be revised to require

4 that the additional payment that would otherwise be

5 payable for the cost reporting period shall be reduced

6 by the amount (if any) by which the hospital’s cur7 rent year medicare capital payments (excluding, if

8 applicable, 75 percent of the hospital’s capital-related

9 disproportionate share payments) exceeds its medicare

10 capital costs for such year.’’.

11 (2) LIMIT TO ADDITIONAL PAYMENTS.—The

12 amendment made by paragraph (1) shall not result

13 in aggregate additional payments under the special

14 exception process described in section 1886(b)(1)(D)

15 for fiscal years 1996 through 2000 in excess of an

16 amount equal to the sum of $50,000,000 per year

17 more than would have been paid in such fiscal years

18 if such amendment had not been enacted.

19 (3) CONFORMING AMENDMENT.—Section

20 1886(g)(1)(B)(iii) (42 U.S.C. 1395ww(g)(1)(B)(iii))

21 is amended by striking ‘‘may provide’’ and inserting

22 ‘‘shall provide (in accordance with subparagraph

23 (D)’’.
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1 SEC. 8405. REDUCTION IN PAYMENTS TO HOSPITALS FOR

2 ENROLLEES’ BAD DEBTS.

3 (a) IN GENERAL.—Section 1861(v)(1) (42 U.S.C.

4 1395x(v)(1)) is amended by adding at the end the following

5 new subparagraph:

6 ‘‘(T)(i) In determining such reasonable costs for hos7 pitals, the amount of bad debts otherwise treated as allow8 able costs which are attributable to the deductibles and coin9 surance amounts under this title shall be reduced by—

10 ‘‘(I) 75 percent for cost reporting periods begin11 ning during fiscal year 1996,

12 ‘‘(II) 60 percent for cost reporting periods begin13 ning during fiscal year 1997, and

14 ‘‘(III) 50 percent for subsequent cost reporting

15 periods.

16 ‘‘(ii) Clause (i) shall not apply with respect to bad

17 debt of a hospital described in section 1886(d)(1)(B)(iv) if

18 the debt is attributable to uncollectable deductible and coin19 surance payments owed by individuals enrolled in a State

20 plan under title XIX or under the MediGrant program

21 under title XXI.’’.

22 (b) EFFECTIVE DATE.—The amendment made by sub23 section (a) shall apply to hospital cost reporting periods

24 beginning on or after October 1, 1995.
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1 SEC. 8406. INCREASE IN UPDATE FOR CERTAIN HOSPITALS

2 WITH A HIGH PROPORTION OF MEDICARE PA3 TIENTS.

4 Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)), as

5 amended by subsections (b) and (c)(1) of section 8402, is

6 amended by adding at the end the following new subpara7 graph:

8 ‘‘(I)(i) For purposes of subsection (d), in the case of

9 a medicare-dependent hospital described in clause (ii), the

10 applicable percentage increase otherwise determined under

11 subparagraph (B)(i) shall be increased by—

12 ‘‘(I) 0.5 percentage points for discharges occur13 ring during cost reporting periods beginning during

14 fiscal year 1996, and

15 ‘‘(II) 0.3 percentage points for discharges occur16 ring during cost reporting periods beginning during

17 fiscal year 1997.

18 ‘‘(ii) A hospital described in this clause with respect

19 to a cost reporting period is a subsection (d) hospital meet20 ing the following requirements:

21 ‘‘(I) Not less than 60 percent of the hospital’s in22 patient days during the most recent cost reporting pe23 riod for which data is available were attributable to

24 inpatients entitled to benefits under part A.

25 ‘‘(II) The hospital does not receive any addi26 tional payment amount under subsection (d)(5)(F)
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1 (relating to payments for hospitals serving a dis2 proportionate number of low-income patients) with

3 respect to discharges occurring during the fiscal year.

4 ‘‘(III) The hospital does not receive any addi5 tional payment amount under subsection (d)(5)(B)

6 (relating to payment for the indirect costs of medical

7 education) or subsection (h) (relating to payment for

8 direct medical education costs).

9 ‘‘(IV) In the case of a hospital located in a rural

10 area, the hospital has more than 100 beds.’’.

11 CHAPTER 2—PAYMENTS TO SKILLED

12 NURSING FACILITIES

13 Subchapter A—Prospective Payment System

14 SEC. 8410. PROSPECTIVE PAYMENT SYSTEM FOR SKILLED

15 NURSING FACILITIES.

16 Title XVIII (42 U.S.C. 1395 et seq.) is amended by

17 adding the following new section after section 1888:

18 ‘‘PROSPECTIVE PAYMENT SYSTEM FOR SKILLED NURSING

19 FACILITIES

20 ‘‘SEC. 1889. (a) ESTABLISHMENT OF SYSTEM.—Not21 withstanding any other provision of this title, the Secretary

22 shall establish a prospective payment system under which

23 fixed payments for episodes of care shall be made, instead

24 of payments determined under section 1861(v), section

25 1888, or section 1888A, to skilled nursing facilities for all

26 extended care services furnished during the benefit period
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1 established under section 1812(a)(2). Such payments shall

2 constitute payment for capital costs and all routine and

3 non-routine service costs covered under this title that are

4 furnished to individuals who are inpatients of skilled nurs5 ing facilities during such benefit period, except for physi6 cians’ services. The payment amounts shall vary depending

7 on case-mix, patient acuity, and such other factors as the

8 Secretary determines are appropriate. The prospective pay9 ment system shall apply for cost reporting periods (or por10 tions of cost reporting periods) beginning on or after Octo11 ber 1, 1997.

12 ‘‘(b) 90 PERCENT OF LEVELS OTHERWISE IN EF13 FECT.—The Secretary shall establish the prospective pay14 ment amounts under subsection (a) at levels such that, in

15 the Secretary’s estimation, the amount of total payments

16 under this title shall not exceed 90 percent of the amount

17 of payments that would have been made under this title

18 for all routine and non-routine services and capital expend19 itures if this section had not been enacted.

20 ‘‘(c) ADJUSTMENT IN RATES TO TAKE INTO ACCOUNT

21 BENEFICIARY COST-SHARING.—The Secretary shall reduce

22 the prospective payment rates established under this section

23 to take into account the beneficiary coinsurance amount re24 quired under section 1813(a)(3).’’.
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1 Subchapter B—Interim Payment System

2 SEC. 8411. PAYMENTS FOR ROUTINE SERVICE COSTS.

3 (a) CLARIFICATION OF DEFINITION OF ROUTINE SERV4 ICE COSTS.—Section 1888 (42 U.S.C. 1395yy) is amended

5 by adding at the end the following new subsection:

6 ‘‘(e) For purposes of this section, the ‘routine service

7 costs’ of a skilled nursing facility are all costs which are

8 attributable to nursing services, room and board, adminis9 trative costs, other overhead costs, and all other ancillary

10 services (including supplies and equipment), excluding costs

11 attributable to covered non-routine services subject to pay12 ment amounts under section 1888A.’’.

13 (b) CONFORMING AMENDMENT.—Section 1888 (42

14 U.S.C. 1395yy) is amended in the heading by inserting

15 ‘‘AND CERTAIN ANCILLARY’’ after ‘‘SERVICE’’.

16 SEC. 8412. COST-EFFECTIVE MANAGEMENT OF COVERED

17 NON-ROUTINE SERVICES.

18 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et

19 seq.) is amended by inserting after section 1888 the follow20 ing new section:

21 ‘‘COST-EFFECTIVE MANAGEMENT OF COVERED NON22 ROUTINE SERVICES OF SKILLED NURSING FACILITIES

23 ‘‘SEC. 1888A. (a) DEFINITIONS.—For purposes of this

24 section:

25 ‘‘(1) COVERED NON-ROUTINE SERVICES.—The

26 term ‘covered non-routine services’ means post-hos-
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1 pital extended care services consisting of any of the

2 following:

3 ‘‘(A) Physical or occupational therapy or

4 speech-language pathology services, or res5 piratory therapy, including

6 supplies and support services directly related to such

7 services and therapy.

8 ‘‘(B) Prescription drugs.

9 ‘‘(C) Complex medical equipment.

10 ‘‘(D) Intravenous therapy and solutions (in11 cluding enteral and parenteral nutrients, sup12 plies, and equipment).

13 ‘‘(E) Radiation therapy.

14 ‘‘(F) Diagnostic services, including labora15 tory, radiology (including computerized tomog16 raphy services and imaging services), and pul17 monary services.

18 ‘‘(2) SNF MARKET BASKET PERCENTAGE IN19 CREASE.—The term ‘SNF market basket percentage

20 increase’ for a fiscal year means a percentage equal

21 to input price changes in routine service costs for the

22 year under section 1888(a).

23 ‘‘(3) STAY.—The term ‘stay’ means, with respect

24 to an individual who is a resident of a skilled nurs25 ing facility, a period of continuous days during
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1 which the facility provides extended care services for

2 which payment may be made under this title for the

3 individual during the individual’s spell of illness.

4 ‘‘(b) NEW PAYMENT METHOD FOR COVERED NON5 ROUTINE SERVICES BEGINNING IN FISCAL YEAR 1996.—

6 ‘‘(1) IN GENERAL.—The payment method estab7 lished under this section shall apply with respect to

8 covered non-routine services furnished during cost re9 porting periods (or portions of cost reporting periods)

10 beginning on or after October 1, 1995.

11 ‘‘(2) INTERIM PAYMENTS.—Subject to subsection

12 (c), a skilled nursing facility shall receive interim

13 payments under this title for covered non-routine

14 services furnished to an individual during cost report15 ing periods (or portions of cost reporting periods) de16 scribed in paragraph (1) in an amount equal to the

17 reasonable cost of providing such services in accord18 ance with section 1861(v). The Secretary may adjust

19 such payments if the Secretary determines (on the

20 basis of such estimated information as the Secretary

21 considers appropriate) that payments to the facility

22 under this paragraph for a cost reporting period

23 would substantially exceed the cost reporting period

24 amount determined under subsection (c)(2).
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1 ‘‘(3) RESPONSIBILITY OF SKILLED NURSING FA2 CILITY TO MANAGE BILLINGS.—

3 ‘‘(A) CLARIFICATION RELATING TO PART A

4 BILLING.—In the case of a covered non-routine

5 service furnished to an individual who (at the

6 time the service is furnished) is a resident of a

7 skilled nursing facility who is entitled to cov8 erage under section 1812(a)(2) for such service,

9 the skilled nursing facility shall submit a claim

10 for payment under this title for such service

11 under part A (without regard to whether or not

12 the item or service was furnished by the facility,

13 by others under arrangement with them made by

14 the facility, under any other contracting or con15 sulting arrangement, or otherwise).

16 ‘‘(B) PART B BILLING.—In the case of a

17 covered non-routine service other than a portable

18 X-ray or portable electrocardiogram treated as a

19 physician’s service for purposes of section

20 1848(j)(3)) furnished to an individual who (at

21 the time the service is furnished) is a resident of

22 a skilled nursing facility who is not entitled to

23 coverage under section 1812(a)(2) for such serv24 ice but is entitled to coverage under part B for

25 such service, the skilled nursing facility shall
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1 submit a claim for payment under this title for

2 such service under part B (without regard to

3 whether or not the item or service was furnished

4 by the facility, by others under arrangement

5 with them made by the facility, under any other

6 contracting or consulting arrangement, or other7 wise). This subparagraph shall not apply to phy8 sician’s services furnished by a physician (as de9 fined in section 1861(r)(1)) to a resident of a

10 skilled nursing facility if such services are not

11 covered non-routine services (as defined in sec12 tion 1888A(a)(1)) or services for which routine

13 service costs (as defined in section 1888(e)) are

14 determined.

15 ‘‘(C) MAINTAINING RECORDS ON SERVICES

16 FURNISHED TO RESIDENTS.—Each skilled nurs17 ing facility receiving payments for extended care

18 services under this title shall document on the fa19 cility’s cost report all covered non-routine serv20 ices furnished to all residents of the facility to

21 whom the facility provided extended care services

22 for which payment was made under part A or

23 B (including a portable X-ray or portable elec24 trocardiogram treated as a physician’s service

25 for purposes of section 1848(j)(3)) during a fiscal
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1 year (beginning with fiscal year 1996) (without

2 regard to whether or not the services were fur3 nished by the facility, by others under arrange4 ment with them made by the facility, under any

5 other contracting or consulting arrangement, or

6 otherwise).

7 ‘‘(c) NO PAYMENT IN EXCESS OF PRODUCT OF PER

8 STAY AMOUNT AND NUMBER OF STAYS.—

9 ‘‘(1) IN GENERAL.—If a skilled nursing facility

10 has received aggregate payments under subsection (b)

11 for covered non-routine services during a cost report12 ing period beginning during a fiscal year in excess of

13 an amount equal to the cost reporting period amount

14 determined under paragraph (2), the Secretary shall

15 reduce the payments made to the facility with respect

16 to such services for cost reporting periods beginning

17 during the following fiscal year in an amount equal

18 to such excess. The Secretary shall reduce payments

19 under this subparagraph at such times and in such

20 manner during a fiscal year as the Secretary finds

21 necessary to meet the requirement of this subpara22 graph.

23 ‘‘(2) COST REPORTING PERIOD AMOUNT.—The

24 cost reporting period amount determined under this

25 subparagraph is an amount equal to the product of—
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1 ‘‘(A) the per stay amount applicable to the

2 facility under subsection (d) for the period; and

3 ‘‘(B) the number of stays beginning during

4 the period for which payment was made to the

5 facility for such services.

6 ‘‘(3) PROSPECTIVE REDUCTION IN PAYMENTS.—

7 In addition to the process for reducing payments de8 scribed in paragraph (1), the Secretary may reduce

9 payments made to a facility under this section during

10 a cost reporting period if the Secretary determines

11 (on the basis of such estimated information as the

12 Secretary considers appropriate) that payments to the

13 facility under this section for the period will substan14 tially exceed the cost reporting period amount for the

15 period determined under this paragraph.

16 ‘‘(d) DETERMINATION OF FACILITY PER STAY

17 AMOUNT.—

18 ‘‘(1) AMOUNT FOR FISCAL YEAR 1996.—

19 ‘‘(A) IN GENERAL.—

20 ‘‘(i) ESTABLISHMENT.—Except as pro21 vided in subparagraph (B) and clause (ii),

22 the Secretary shall establish a per stay

23 amount for each nursing facility for the 12-

24 month cost reporting period beginning dur25 ing fiscal year 1996 that is the facility-spe-
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1 cific stay amount for the facility (as deter2 mined under subsection (e)) for the last 12-

3 month cost reporting period ending on or

4 before December 31, 1994, increased (in a

5 compounded manner) by the SNF market

6 basket percentage increase (as defined in

7 subsection (a)(2)) for each fiscal year

8 through fiscal year 1996.

9 ‘‘(ii) ADJUSTMENT IF IMPLEMENTA10 TION DELAYED.—If the amount under

11 clause (i) is not established prior to the cost

12 reporting period described in clause (i), the

13 Secretary shall adjust such amount for

14 stays after such amount is established in

15 such a manner so as to recover any

16 amounts in excess of the amounts which

17 would have been paid for stays before such

18 date if the amount had been in effect for

19 such stays.

20 ‘‘(B) FACILITIES NOT HAVING 1994 COST RE21 PORTING PERIOD.—In the case of a skilled nurs22 ing facility for which payments were not made

23 under this title for covered non-routine services

24 for the last 12-month cost reporting period end25 ing on or before December 31, 1994, the per stay
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1 amount for the 12-month cost reporting period

2 beginning during fiscal year 1996 shall be the

3 average of all per stay amounts determined

4 under subparagraph (A).

5 ‘‘(2) AMOUNT FOR FISCAL YEAR 1997 AND SUBSE6 QUENT FISCAL YEARS.—The per stay amount for a

7 skilled nursing facility for a 12-month cost reporting

8 period beginning during a fiscal year after 1996 is

9 equal to the per stay amount established under this

10 subsection for the 12-month cost reporting period be11 ginning during the preceding fiscal year (without re12 gard to any adjustment under paragraph (1)(A)(ii)),

13 increased by the SNF market basket percentage in14 crease for such subsequent fiscal year minus 2.0 per15 centage points.

16 ‘‘(e) DETERMINATION OF FACILITY-SPECIFIC STAY

17 AMOUNTS.—The ‘facility-specific stay amount’ for a skilled

18 nursing facility for a cost reporting period is—

19 ‘‘(1) the sum of—

20 ‘‘(A) the amount of payments made to the

21 facility under part A during the period which

22 are attributable to covered non-routine services

23 furnished during a stay; and

24 ‘‘(B) the Secretary’s best estimate of the

25 amount of payments made under part B during
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1 the period for covered non-routine services fur2 nished to all residents of the facility to whom the

3 facility provided extended care services for which

4 payment was made under part A during the pe5 riod (without regard to whether or not the serv6 ices were furnished by the facility, by others

7 under arrangement with them made by the facil8 ity under any other contracting or consulting ar9 rangement, or otherwise), as estimated by the

10 Secretary; divided by

11 ‘‘(2) the average number of days per stay for all

12 residents of the skilled nursing facility receiving ex13 tended care services furnished during the benefit pe14 riod established under section 1812(a)(2).

15 ‘‘(f) INTENSIVE NURSING OR THERAPY NEEDS.—

16 ‘‘(1) IN GENERAL.—In applying subsection (b) to

17 covered non-routine services furnished during a stay

18 beginning during a cost reporting period to a resident

19 of a skilled nursing facility who requires intensive

20 nursing or therapy services, the per stay amount for

21 such resident shall be the per stay amount developed

22 under paragraph (2) instead of the per stay amount

23 determined under subsection (d)(1)(A).

24 ‘‘(2) PER STAY AMOUNT FOR INTENSIVE NEED

25 RESIDENTS.—Upon the implementation of the pay-
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1 ment method established under this section, the Sec2 retary, after consultation with the Medicare Payment

3 Review Commission and skilled nursing facility ex4 perts, shall develop and publish a per stay amount for

5 residents of a skilled nursing facility who require in6 tensive nursing or therapy services..

7 ‘‘(3) BUDGET NEUTRALITY.—The Secretary shall

8 adjust payments under subsection (b) in a manner

9 that ensures that total payments for covered non-rou10 tine services under this section are not greater or less

11 than total payments for such services would have been

12 but for the application of paragraph (1).

13 ‘‘(g) EXCEPTIONS AND ADJUSTMENTS TO AMOUNTS.—

14 ‘‘(1) IN GENERAL.—The Secretary may make ex15 ceptions and adjustments to the cost reporting period

16 amounts applicable to a skilled nursing facility under

17 subsection (c)(2) for a cost reporting period, except

18 that the total amount of any additional payments

19 made under this section for covered non-routine serv20 ices during the cost reporting period as a result of

21 such exceptions and adjustments may not exceed 5

22 percent of the aggregate payments made to all skilled

23 nursing facilities for covered non-routine services dur24 ing the cost reporting period (determined without re25 gard to this paragraph).
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1 ‘‘(2) BUDGET NEUTRALITY.—The Secretary shall

2 adjust payments under subsection (b) in a manner

3 that ensures that total payments for covered non-rou4 tine services under this section are not greater or less

5 than total payments for such services would have been

6 but for the application of paragraph (1).

7 ‘‘(h) SPECIAL TREATMENT FOR MEDICARE LOW VOL8 UME SKILLED NURSING FACILITIES.—The Secretary shall

9 determine an appropriate manner in which to apply this

10 section, taking into account the purposes of this section, to

11 non-routine costs of a skilled nursing facility for which pay12 ment is made for routine service costs during a cost report13 ing period on the basis of prospective payments under sec14 tion 1888(d).

15 ‘‘(i) SPECIAL RULE FOR X-RAY SERVICES.—Before

16 furnishing a covered non-routine service consisting of an

17 X-ray service for which payment may be made under part

18 A or part B to a resident, a skilled nursing facility shall

19 consider whether furnishing the service through a provider

20 of portable X-ray service services would be appropriate, tak21 ing into account the cost effectiveness of the service and the

22 convenience to the resident.

23 ‘‘(j) MAINTAINING SAVINGS FROM PAYMENT SYS24 TEM.—The prospective payment system established under
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1 section 1889 shall reflect the payment methodology estab2 lished under this section for covered non-routine services.’’.

3 (b) CONFORMING AMENDMENT.—Section 1814(b) (42

4 U.S.C. 1395f(b)) is amended in the matter preceding para5 graph (1) by striking ‘‘1813 and 1886’’ and inserting

6 ‘‘1813, 1886, 1888, 1888A, and 1889’’.

7 SEC. 8413. PAYMENTS FOR ROUTINE SERVICE COSTS.

8 (a) MAINTAINING SAVINGS RESULTING FROM TEM9 PORARY FREEZE ON PAYMENT INCREASES.—

10 (1) BASING UPDATES TO PER DIEM COST LIMITS

11 ON LIMITS FOR FISCAL YEAR 1993.—

12 (A) IN GENERAL.—The last sentence of sec13 tion 1888(a) (42 U.S.C. 1395yy(a)) is amended

14 by adding at the end the following: ‘‘(except that

15 such updates may not take into account any

16 changes in the routine service costs of skilled

17 nursing facilities occurring during cost reporting

18 periods which began during fiscal year 1994 or

19 fiscal year 1995).’’.

20 (B) NO EXCEPTIONS PERMITTED BASED ON

21 AMENDMENT.—The Secretary of Health and

22 Human Services shall not consider the amend23 ment made by subparagraph (A) in making any

24 adjustments pursuant to section 1888(c) of the

25 Social Security Act.
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1 (2) PAYMENTS TO LOW MEDICARE VOLUME

2 SKILLED NURSING FACILITIES.—Any change made by

3 the Secretary of Health and Human Services in the

4 amount of any prospective payment paid to a skilled

5 nursing facility under section 1888(d) of the Social

6 Security Act for cost reporting periods beginning on

7 or after October 1, 1995, may not take into account

8 any changes in the costs of services occurring during

9 cost reporting periods which began during fiscal year

10 1994 or fiscal year 1995.

11 (b) BASING 1996 LIMITS ON NEW DEFINITION OF

12 ROUTINE COSTS.—The Secretary of Health and Human

13 Services shall take into account the new definition of rou14 tine service costs under section 1888(e) of the Social Secu15 rity Act, as added by section 8411, in determining the rou16 tine per diem cost limits under section 1888(a) for fiscal

17 year 1996 and each fiscal year thereafter.

18 (c) ESTABLISHMENT OF SCHEDULE FOR MAKING AD19 JUSTMENTS TO LIMITS.—Section 1888(c) (42 U.S.C.

20 1395yy(c)) is amended by striking the period at the end

21 of the second sentence and inserting ‘‘, and may only make

22 adjustments under this subsection with respect to a facility

23 which applies for an adjustment during an annual applica24 tion period established by the Secretary.’’.
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1 (d) LIMITATION TO EXCEPTIONS PROCESS OF THE

2 SECRETARY.—Section 1888(c) (42 U.S.C. 1395yy(c)) is

3 amended—

4 (1) by striking ‘‘(c) The Secretary’’ and inserting

5 ‘‘(c)(1) Subject to paragraph (2), the Secretary’’; and

6 (2) by adding at the end the following new para7 graph:

8 ‘‘(2) The Secretary may not make any adjustments

9 under this subsection in the limits set forth in subsection

10 (a) for a cost reporting period beginning during a fiscal

11 year to the extent that the total amount of the additional

12 payments made under this title as a result of such adjust13 ments is greater than an amount equal to—

14 ‘‘(A) for cost reporting periods beginning during

15 fiscal year 1996, the total amount of the additional

16 payments made under this title as a result of adjust17 ments under this subsection for cost reporting periods

18 beginning during fiscal year 1994 increased (on a

19 compounded basis) by the SNF market basket percent20 age increase (as defined in section 1888A(a)(2)) for

21 each fiscal year; and

22 ‘‘(B) for cost reporting periods beginning during

23 a subsequent fiscal year, the amount determined

24 under this paragraph for the preceding fiscal year,

25 increased by the SNF market basket percentage in-
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1 crease (as defined in section 1888A(a)(2)) for each fis2 cal year.’’.

3 (e) MAINTAINING SAVINGS FROM PAYMENT SYSTEM.—

4 The prospective payment system established under section

5 1889 of the Social Security Act, as added by section 8410,

6 shall reflect the routine per diem cost limits under section

7 1888(a) of such Act.

8 SEC. 8414. REDUCTIONS IN PAYMENT FOR CAPITAL-RELAT9 ED COSTS.

10 (a) IN GENERAL.—Section 1861(v)(1) (42 U.S.C.

11 1395x(v)(1)), as amended by section 8405(a), is amended

12 by adding at the end the following new subparagraph:

13 ‘‘(U) Such regulations shall provide that, in determin14 ing the amount of the payments that may be made under

15 this title with respect to all the capital-related costs of

16 skilled nursing facilities, the Secretary shall reduce the

17 amounts of such payments otherwise established under this

18 title by 10 percent for payments attributable to portions

19 of cost reporting periods occurring beginning in fiscal years

20 1996 through 2002.’’.

21 (b) MAINTAINING SAVINGS RESULTING FROM 10 PER22 CENT CAPITAL REDUCTION.—The prospective payment sys23 tem established under section 1889 of the Social Security

24 Act, as added by section 8410 of this Act, shall reflect the

25 10 percent reduction in payments for capital-related costs
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1 of skilled nursing facilities as such reduction is in effect

2 under section 1861(v)(1)(U) of the Social Security Act, as

3 added by subsection (a).

4 SEC. 8415. TREATMENT OF ITEMS AND SERVICES PAID FOR

5 UNDER PART B.

6 (a) REQUIRING PAYMENT FOR ALL ITEMS AND SERV7 ICES TO BE MADE TO FACILITY.—

8 (1) IN GENERAL.—The first sentence of section

9 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended—

10 (A) by striking ‘‘and (D)’’ and inserting

11 ‘‘(D)’’; and

12 (B) by striking the period at the end and

13 inserting the following: ‘‘, and (E) in the case of

14 an item or service (other than a portable X-ray

15 or portable electrocardiogram treated as a physi16 cian’s service for purposes of section 1848(j)(3))

17 furnished to an individual who (at the time the

18 item or service is furnished) is a resident of a

19 skilled nursing facility, payment shall be made

20 to the facility (without regard to whether or not

21 the item or service was furnished by the facility,

22 by others under arrangement with them made by

23 the facility, under any other contracting or con24 sulting arrangement, or otherwise), except that

25 this subparagraph shall not preclude a physician
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1 (as defined in section 1861(r)(1)) from receiving

2 payment for physician’s services provided to a

3 resident of a skilled nursing facility if such serv4 ices are not covered non-routine services (as de5 fined in section 1888A(a)(1)) or services for

6 which routine service costs (as defined in section

7 1888(e)) are determined.’’.

8 (2) EXCLUSION FOR ITEMS AND SERVICES NOT

9 BILLED BY FACILITY.—Section 1862(a) (42 U.S.C.

10 1395y(a)) is amended—

11 (A) by striking ‘‘or’’ at the end of para12 graph (14);

13 (B) by striking the period at the end of

14 paragraph (15) and inserting ‘‘; or’’; and

15 (C) by inserting after paragraph (15) the

16 following new paragraph:

17 ‘‘(16) where such expenses are for covered non18 routine services (as defined in section 1888A(a)(1))

19 (other than a portable X-ray or portable electrocardio20 gram treated as a physician’s service for purposes of

21 section 1848(j)(3)) furnished to an individual who is

22 a resident of a skilled nursing facility and for which

23 the claim for payment under this title is not submit24 ted by the facility.’’.
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1 (3) CONFORMING AMENDMENT.—Section

2 1832(a)(1) (42 U.S.C. 1395k(a)(1)) is amended by

3 striking ‘‘(2);’’ and inserting ‘‘(2) and section

4 1842(b)(6)(E);’’.

5 (b) REDUCTION IN PAYMENTS FOR ITEMS AND SERV6 ICES FURNISHED BY OR UNDER ARRANGEMENTS WITH FA7 CILITIES.—Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as

8 amended by section 8405(a) and section 8414(a), is amend9 ed by adding at the end the following new subparagraph:

10 ‘‘(V) In the case of an item or service furnished by

11 a skilled nursing facility (or by others under arrangement

12 with them made by a skilled nursing facility or under any

13 other contracting or consulting arrangement or otherwise)

14 for which payment is made under part B in an amount

15 determined in accordance with section 1833(a)(2)(B), the

16 Secretary shall reduce the reasonable cost for such item or

17 service otherwise determined under clause (i)(I) of such sec18 tion by 5.8 percent for payments attributable to portions

19 of cost reporting periods occurring during fiscal years 1996

20 through 2002.’’.

21 SEC. 8416. MEDICAL REVIEW PROCESS.

22 In order to ensure that medicare beneficiaries are fur23 nished appropriate extended care services, the Secretary of

24 Health and Human Services shall establish and implement

25 a thorough medical review process to examine the effects of
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1 the amendments made by this subchapter on the quality of

2 extended care services furnished to medicare beneficiaries.

3 In developing such a medical review process, the Secretary

4 shall place a particular emphasis on the quality of non5 routine covered services for which payment is made under

6 section 1888A of the Social Security Act.

7 SEC. 8417. REPORT BY MEDICARE PAYMENT REVIEW COM8 MISSION.

9 Not later than October 1, 1997, the Medicare Payment

10 Review Commission shall submit to Congress a report on

11 the system under which payment is made under the medi12 care program for extended care services furnished by skilled

13 nursing facilities, and shall include in the report the follow14 ing:

15 (1) An analysis of the effect of the methodology

16 established under section 1888A of the Social Security

17 Act (as added by section 8412) on the payments for,

18 and the quality of, extended care services under the

19 medicare program.

20 (2) An analysis of the advisability of determin21 ing the amount of payment for covered non-routine

22 services of facilities (as described in such section) on

23 the basis of the amounts paid for such services when

24 furnished by suppliers under part B of the medicare

25 program.
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1 (3) An analysis of the desirability of maintain2 ing separate routine cost-limits for hospital-based and

3 freestanding facilities in the costs of extended care

4 services recognized as reasonable under the medicare

5 program.

6 (4) An analysis of the quality of services fur7 nished by skilled nursing facilities.

8 (5) An analysis of the adequacy of the process

9 and standards used to provide exceptions to the limits

10 described in paragraph (3).

11 (6) An analysis of the effect of the prospective

12 payment methodology established under section 1889

13 of the Social Security Act (as added by section 8410)

14 on the payments for, and the quality of, extended care

15 services under the medicare program, including an

16 evaluation of the baseline used in establishing a sys17 tem for payment for extended care services furnished

18 by skilled nursing facilities.

19 SEC. 8418. EFFECTIVE DATE.

20 Except as otherwise provided in this subchapter, the

21 amendments made by this subchapter shall apply to services

22 furnished during cost reporting periods (or portions of cost

23 reporting periods) beginning on or after October 1, 1995.
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1 CHAPTER 3—OTHER PROVISIONS

2 RELATING TO PART A

3 SEC. 8421. PAYMENTS FOR HOSPICE SERVICES.

4 Section 1814(i)(1)(C)(ii) (42 U.S.C.

5 1395f(i)(1)(C)(ii)) is amended by striking subclauses (IV),

6 (V), and (VI), and inserting the following subclauses:

7 ‘‘(IV) for fiscal years 1996 through 2002, the

8 market basket percentage increase for the fiscal year

9 minus 2.0 percentage points; and

10 ‘‘(V) for a subsequent fiscal year, the market bas11 ket percentage increase for the fiscal year.’’.

12 SEC. 8422. PERMANENT EXTENSION OF HEMOPHILIA PASS13 THROUGH.

14 Effective as if included in the enactment of OBRA–

15 1989, section 6011(d) of such Act (as amended by section

16 13505 of OBRA–1993) is amended by striking ‘‘and shall

17 expire September 30, 1994’’.

18 Subtitle F—Provisions Relating to

19 Part B

20 CHAPTER 1—PAYMENT REFORMS

21 SEC. 8501. PAYMENTS FOR PHYSICIANS’ SERVICES.

22 (a) ESTABLISHING UPDATE TO CONVERSION FACTOR

23 TO MATCH SPENDING UNDER SUSTAINABLE GROWTH

24 RATE.—

25 (1) UPDATE.—
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1 (A) IN GENERAL.—Section 1848(d)(3) (42

2 U.S.C. 1395w–4(d)(3)) is amended to read as

3 follows:

4 ‘‘(3) UPDATE.—

5 ‘‘(A) IN GENERAL.—Unless Congress other6 wise provides, subject to subparagraph (E), for

7 purposes of this section the update for a year

8 (beginning with 1997) is equal to the product

9 of—

10 ‘‘(i) 1 plus the Secretary’s estimate of

11 the percentage increase in the medicare eco12 nomic index (described in the fourth sen13 tence of section 1842(b)(3)) for the year (di14 vided by 100), and

15 ‘‘(ii) 1 plus the Secretary’s estimate of

16 the update adjustment factor for the year

17 (divided by 100),

18 minus 1 and multiplied by 100.

19 ‘‘(B) UPDATE ADJUSTMENT FACTOR.—The

20 ‘update adjustment factor’ for a year is equal to

21 the quotient of—

22 ‘‘(i) the difference between (I) the sum

23 of the allowed expenditures for physicians’

24 services furnished during each of the years

25 1995 through the year involved and (II) the
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1 sum of the amount of actual expenditures

2 for physicians’ services furnished during

3 each of the years 1995 through the previous

4 year; divided by

5 ‘‘(ii) the Secretary’s estimate of al6 lowed expenditures for physicians’ services

7 furnished during the year.

8 ‘‘(C) DETERMINATION OF ALLOWED EX9 PENDITURES.—For purposes of subparagraph

10 (B), allowed expenditures for physicians’ services

11 shall be determined as follows (as estimated by

12 the Secretary):

13 ‘‘(i) In the case of allowed expenditures

14 for 1995, such expenditures shall be equal to

15 actual expenditures for services furnished

16 during the 12-month period ending with

17 June 30, 1995.

18 ‘‘(ii) In the case of allowed expendi19 tures for 1996 and each subsequent year,

20 such expenditures shall be equal to allowed

21 expenditures for the previous year, in22 creased by the sustainable growth rate

23 under subsection (f) for the fiscal year

24 which begins during the year.
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1 ‘‘(D) DETERMINATION OF ACTUAL EXPENDI2 TURES.—For purposes of subparagraph (B), the

3 amount of actual expenditures for physicians’

4 services furnished during a year shall be equal to

5 the amount of expenditures for such services dur6 ing the 12-month period ending with June of the

7 previous year.

8 ‘‘(E) RESTRICTION ON VARIATION FROM

9 MEDICARE ECONOMIC INDEX.—Notwithstanding

10 the amount of the update adjustment factor de11 termined under subparagraph (B) for a year, the

12 update in the conversion factor under this para13 graph for the year may not be—

14 ‘‘(i) greater than 103 percent of 1 plus

15 the Secretary’s estimate of the percentage

16 increase in the medicare economic index

17 (described in the fourth sentence of section

18 1842(b)(3)) for the year (divided by 100),

19 minus 1 and multiplied by 100; or

20 ‘‘(ii) less than 93 percent of 1 plus the

21 Secretary’s estimate of the percentage in22 crease in the medicare economic index (de23 scribed in the fourth sentence of section

24 1842(b)(3)) for the year (divided by 100),

25 minus 1 and multiplied by 100.’’.
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1 (B) EFFECTIVE DATE.—The amendments

2 made by subparagraph (A) shall apply to physi3 cians’ services furnished on or after January 1,

4 1997.

5 (2) CONFORMING AMENDMENTS.—(A) Section

6 1848(d)(2)(A) (42 U.S.C. 1395w–4(d)(2)(A)) is

7 amended—

8 (i) in the matter preceding clause (i)—

9 (I) by striking ‘‘(or updates) in the

10 conversion factor (or factors)’’ and inserting

11 ‘‘in the conversion factor’’;

12 (II) by striking ‘‘(beginning with

13 1991)’’ and inserting ‘‘(beginning with

14 1996)’’; and

15 (III) by striking the second sentence;

16 (ii) by amending clause (ii) to read as fol17 lows:

18 ‘‘(ii) such factors as enter into the cal19 culation of the update adjustment factor as

20 described in paragraph (3)(B); and’’;

21 (iii) by amending clause (iii) to read as fol22 lows:

23 ‘‘(iii) access to services.’’;

24 (iv) by striking clauses (iv), (v), and (vi);

25 and
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1 (v) by striking the last sentence.

2 (B) Section 1848(d)(2)(B) (42 U.S.C. 1395w–

3 4(d)(2)(B)) is amended—

4 (i) by striking ‘‘and’’ at the end of clause

5 (iii);

6 (ii) by striking the period at the end of

7 clause (iv) and inserting ‘‘; and’’; and

8 (iii) by adding at the end the following new

9 clause:

10 ‘‘(v) changes in volume or intensity of

11 services.’’.

12 (C) Section 1848(d)(2) (42 U.S.C. 1395w4–

13 (d)(2)) is further amended—

14 (i) by striking subparagraphs (C), (D), and

15 (E);

16 (ii) by redesignating subparagraph (F) as

17 subparagraph (C); and

18 (iii) in subparagraph (C), as redesignated,

19 by striking ‘‘(or updates) in the conversion factor

20 (or factors)’’ and inserting ‘‘in the conversion

21 factor’’.

22 (b) REPLACEMENT OF VOLUME PERFORMANCE STAND23 ARD WITH SUSTAINABLE GROWTH RATE.—
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1 (1) IN GENERAL.—Section 1848(f) (42 U.S.C.

2 1395w–4(f)) is amended by striking paragraphs (2)

3 through (5) and inserting the following:

4 ‘‘(2) SPECIFICATION OF GROWTH RATE.—

5 ‘‘(A) FISCAL YEAR 1996.—The sustainable

6 growth rate for all physicians’ services for fiscal

7 year 1996 shall be equal to the product of—

8 ‘‘(i) 1 plus the Secretary’s estimate of

9 the percentage change in the medicare eco10 nomic index for 1996 (described in the

11 fourth sentence of section 1842(b)(3)) (di12 vided by 100),

13 ‘‘(ii) 1 plus the Secretary’s estimate of

14 the percentage change (divided by 100) in

15 the average number of individuals enrolled

16 under this part (other than private plan en17 rollees) from fiscal year 1995 to fiscal year

18 1996,

19 ‘‘(iii) 1 plus the Secretary’s estimate of

20 the projected percentage growth in real gross

21 domestic product per capita (divided by

22 100) from fiscal year 1995 to fiscal year

23 1996, plus 2 percentage points, and

24 ‘‘(iv) 1 plus the Secretary’s estimate of

25 the percentage change (divided by 100) in
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1 expenditures for all physicians’ services in

2 fiscal year 1996 (compared with fiscal year

3 1995) which will result from changes in law

4 (including the Medicare Preservation Act of

5 1995), determined without taking into ac6 count estimated changes in expenditures due

7 to changes in the volume and intensity of

8 physicians’ services or changes in expendi9 tures resulting from changes in the update

10 to the conversion factor under subsection

11 (d),

12 minus 1 and multiplied by 100.

13 ‘‘(B) SUBSEQUENT FISCAL YEARS.—The

14 sustainable growth rate for all physicians’ serv15 ices for fiscal year 1997 and each subsequent fis16 cal year shall be equal to the product of—

17 ‘‘(i) 1 plus the Secretary’s estimate of

18 the percentage change in the medicare eco19 nomic index for the fiscal year involved (de20 scribed in the fourth sentence of section

21 1842(b)(3)) (divided by 100),

22 ‘‘(ii) 1 plus the Secretary’s estimate of

23 the percentage change (divided by 100) in

24 the average number of individuals enrolled

25 under this part (other than private plan en-
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1 rollees) from the previous fiscal year to the

2 fiscal year involved,

3 ‘‘(iii) 1 plus the Secretary’s estimate of

4 the projected percentage growth in real gross

5 domestic product per capita (divided by

6 100) from the previous fiscal year to the fis7 cal year involved, plus 2 percentage points,

8 and

9 ‘‘(iv) 1 plus the Secretary’s estimate of

10 the percentage change (divided by 100) in

11 expenditures for all physicians’ services in

12 the fiscal year (compared with the previous

13 fiscal year) which will result from changes

14 in law (including changes made by the Sec15 retary in response to section 1895), deter16 mined without taking into account esti17 mated changes in expenditures due to

18 changes in the volume and intensity of phy19 sicians’ services or changes in expenditures

20 resulting from changes in the update to the

21 conversion factor under subsection (d)(3),

22 minus 1 and multiplied by 100.

23 ‘‘(3) DEFINITIONS.—In this subsection:

24 ‘‘(A) SERVICES INCLUDED IN PHYSICIANS’

25 SERVICES.—The term ‘physicians’ services’ in-
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1 cludes other items and services (such as clinical

2 diagnostic laboratory tests and radiology serv3 ices), specified by the Secretary, that are com4 monly performed or furnished by a physician or

5 in a physician’s office, but does not include serv6 ices furnished to a private plan enrollee.

7 ‘‘(B) PRIVATE PLAN ENROLLEE.—The term

8 ‘private plan enrollee’ means, with respect to a

9 fiscal year, an individual enrolled under this

10 part who has elected to receive benefits under

11 this title for the fiscal year through a

12 MedicarePlus plan offered under part C or

13 through enrollment with an eligible organization

14 with a risk-sharing contract under section

15 1876.’’.

16 (2) CONFORMING AMENDMENTS.—Section 1848(f)

17 (42 U.S.C. 1395w–4(f)) is amended—

18 (A) in the heading, by striking ‘‘VOLUME

19 PERFORMANCE STANDARD RATES OF INCREASE’’

20 and inserting ‘‘SUSTAINABLE GROWTH RATE’’;

21 (B) in paragraph (1)—

22 (i) in the heading, by striking ‘‘VOL23 UME PERFORMANCE STANDARD RATES OF

24 INCREASE’’ and inserting ‘‘SUSTAINABLE

25 GROWTH RATE’’;
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1 (ii) in subparagraph (A), in the mat2 ter preceding clause (i), by striking ‘‘per3 formance standard rates of increase’’ and

4 inserting ‘‘sustainable growth rate’’; and

5 (iii) in subparagraph (A), by striking

6 ‘‘HMO enrollees’’ each place such term ap7 pears and inserting ‘‘private plan enroll8 ees’’;

9 (C) in subparagraph (B), by striking ‘‘per10 formance standard rates of increase’’ and insert11 ing ‘‘sustainable growth rate’’; and

12 (D) in subparagraph (C)—

13 (i) in the heading, by striking ‘‘PER14 FORMANCE STANDARD RATES OF INCREASE’’

15 and inserting ‘‘SUSTAINABLE GROWTH

16 RATE’’;

17 (ii) in the first sentence, by striking

18 ‘‘with 1991), the performance standard

19 rates of increase’’ and all that follows

20 through the first period and inserting ‘‘with

21 1997), the sustainable growth rate for the

22 fiscal year beginning in that year.’’; and

23 (iii) in the second sentence, by striking

24 ‘‘January 1, 1990, the performance stand25 ard rate of increase under subparagraph
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1 (D) for fiscal year 1990’’ and inserting

2 ‘‘January 1, 1997, the sustainable growth

3 rate for fiscal year 1997’’.

4 (c) ESTABLISHMENT OF SINGLE CONVERSION FACTOR

5 FOR 1996.—

6 (1) IN GENERAL.—Section 1848(d)(1) (42 U.S.C.

7 1395w–4(d)(1)) is amended—

8 (A) by redesignating subparagraph (C) as

9 subparagraph (D); and

10 (B) by inserting after subparagraph (B) the

11 following new subparagraph:

12 ‘‘(C) SPECIAL RULE FOR 1996.—For 1996,

13 the conversion factor under this subsection shall

14 be $35.42 for all physicians’ services.’’.

15 (2) CONFORMING AMENDMENTS.—Section 1848

16 (42 U.S.C. 1395w–4) is amended—

17 (A) by striking ‘‘(or factors)’’ each place it

18 appears in subsection (d)(1)(A) and

19 (d)(1)(D)(ii) (as redesignated by paragraph

20 (1)(a));

21 (B) in subsection (d)(1)(A), by striking ‘‘or

22 updates’’;

23 (C) in subsection (d)(1)(D)(ii) (as redesig24 nated by paragraph (1)(a)), by striking ‘‘(or up25 dates)’’; and
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1 (D) in subsection (i)(1)(C), by striking

2 ‘‘conversion factors’’ and inserting ‘‘the conver3 sion factor’’.

4 SEC. 8502. ELIMINATION OF FORMULA-DRIVEN OVERPAY5 MENTS FOR CERTAIN OUTPATIENT HOSPITAL

6 SERVICES.

7 (a) AMBULATORY SURGICAL CENTER PROCEDURES.—

8 Section 1833(i)(3)(B)(i)(II) (42 U.S.C.

9 1395l(i)(3)(B)(i)(II)) is amended—

10 (1) by striking ‘‘of 80 percent’’; and

11 (2) by striking the period at the end and insert12 ing the following: ‘‘, less the amount a provider may

13 charge as described in clause (ii) of section

14 1866(a)(2)(A).’’.

15 (b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE16 DURES.—Section 1833(n)(1)(B)(i)(II) (42 U.S.C.

17 1395l(n)(1)(B)(i)(II)) is amended—

18 (1) by striking ‘‘of 80 percent’’; and

19 (2) by striking the period at the end and insert20 ing the following: ‘‘, less the amount a provider may

21 charge as described in clause (ii) of section

22 1866(a)(2)(A).’’.

23 (c) EFFECTIVE DATE.—The amendments made by this

24 section shall apply to services furnished during portions of

25 cost reporting periods occurring on or after October 1, 1995.
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1 SEC. 8503. EXTENSION OF REDUCTIONS IN PAYMENTS FOR

2 COSTS OF HOSPITAL OUTPATIENT SERVICES.

3 (a) REDUCTION IN PAYMENTS FOR CAPITAL-RELATED

4 COSTS.—Section 1861(v)(1)(S)(ii)(I) (42 U.S.C.

5 1395x(v)(1)(S)(ii)(I)) is amended by striking ‘‘through

6 1998’’ and inserting ‘‘through 2002’’.

7 (b) REDUCTION IN PAYMENTS FOR OTHER COSTS.—

8 Section 1861(v)(1)(S)(ii)(II) (42 U.S.C.

9 1395x(v)(1)(S)(ii)(II)) is amended by striking ‘‘through

10 1998’’ and inserting ‘‘through 2002’’.

11 SEC. 8504. REDUCTION IN UPDATES TO PAYMENT AMOUNTS

12 FOR CLINICAL DIAGNOSTIC LABORATORY

13 TESTS.

14 (a) CHANGE IN UPDATE.—Section

15 1833(h)(2)(A)(ii)(IV) (42 U.S.C. 1395l(h)(2)(A)(ii)(IV)) is

16 amended by striking ‘‘1994 and 1995’’ and inserting ‘‘1994

17 through 2002’’.

18 (b) LOWERING CAP ON PAYMENT AMOUNTS.—Section

19 1833(h)(4)(B) (42 U.S.C. 1395l(h)(4)(B)) is amended—

20 (1) in clause (vi), by striking ‘‘and’’ at the end;

21 (2) in clause (vii)—

22 (A) by inserting ‘‘and before January 1,

23 1997,’’ after ‘‘1995,’’, and

24 (B) by striking the period at the end and

25 inserting ‘‘, and’’; and
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1 (3) by adding at the end the following new

2 clause:

3 ‘‘(viii) after December 31, 1996, is equal to 65

4 percent of such median.’’.

5 SEC. 8505. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.

6 (a) REDUCTION IN PAYMENT AMOUNTS FOR ITEMS OF

7 DURABLE MEDICAL EQUIPMENT.—

8 (1) FREEZE IN UPDATE FOR COVERED ITEMS.—

9 Section 1834(a)(14) (42 U.S.C. 1395m(a)(14)) is

10 amended—

11 (A) by striking ‘‘and’’ at the end of sub12 paragraph (A);

13 (B) in subparagraph (B)—

14 (i) by striking ‘‘a subsequent year’’

15 and inserting ‘‘1993, 1994, and 1995’’, and

16 (ii) by striking the period at the end

17 and inserting a semicolon; and

18 (C) by adding at the end the following:

19 ‘‘(C) for each of the years 1996 through

20 2002, 0 percentage points; and

21 ‘‘(D) for a subsequent year, the percentage

22 increase in the consumer price index for all

23 urban consumers (U.S. urban average) for the

24 12-month period ending with June of the pre25 vious year.’’.
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1 (2) UPDATE FOR ORTHOTICS AND PROSTHET2 ICS.—Section 1834(h)(4)(A) (42 U.S.C.

3 1395m(h)(4)(A)) is amended—

4 (A) by striking ‘‘and’’ at the end of clause

5 (iii);

6 (B) by redesignating clause (iv) as clause

7 (v); and

8 (C) by inserting after clause (iii) the follow9 ing new clause:

10 ‘‘(iv) for each of the years 1996

11 through 2002, 1 percent, and’’.

12 (b) OXYGEN AND OXYGEN EQUIPMENT.—

13 (1) IN GENERAL.—Section 1834(a)(9)(C) (42

14 U.S.C. 1395m(a)(9)(C)) is amended—

15 (A) by striking ‘‘and’’ at the end of clause

16 (iii);

17 (B) in clause (iv)—

18 (i) by striking ‘‘a subsequent year’’

19 and inserting ‘‘1993, 1994, and 1995’’, and

20 (ii) by striking the period at the end

21 and inserting a semicolon; and

22 (C) by adding at the end the following new

23 clauses:

24 ‘‘(v) in each of the years 1996 through

25 2002, is the national limited monthly pay-
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1 ment rate computed under subparagraph

2 (B) for the item for the year reduced by the

3 applicable percentage described in subpara4 graph (D) (but in no case may the amount

5 determined under this clause be less than 70

6 percent of such national limited payment

7 rate); and

8 ‘‘(vi) in a subsequent year, is the na9 tional limited monthly payment rate com10 puted under subparagraph (B) for the item

11 for the year.’’.

12 (2) APPLICABLE PERCENTAGE DESCRIBED.—Sec13 tion 1834(a)(9) (42 1395m(a)(9)) is amended by add14 ing at the end the following new subparagraph:

15 ‘‘(D) APPLICABLE PERCENTAGE DE16 SCRIBED.—In clause (v) of subparagraph (C),

17 the ‘applicable percentage’ with respect to a year

18 described in such clause is—

19 ‘‘(i) for 1996, 20 percent,

‘‘(ii) for 1997, 212 20 ⁄3 percent,

‘‘(iii) for 1998, 231 21 ⁄3 percent,

22 ‘‘(iv) for 1999, 25 percent,

‘‘(v) for 2000, 262 23 ⁄3 percent,

‘‘(vi) for 2001, 281 24 ⁄3 percent, and

25 ‘‘(vii) for 2002, 30 percent.’’.
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1 (c) PAYMENT FREEZE FOR PARENTERAL AND EN2 TERAL NUTRIENTS, SUPPLIES, AND EQUIPMENT.—In deter3 mining the amount of payment under part B of title XVIII

4 of the Social Security Act with respect to parenteral and

5 enteral nutrients, supplies, and equipment during each of

6 the years 1996 through 2002, the charges determined to be

7 reasonable with respect to such nutrients, supplies, and

8 equipment may not exceed the charges determined to be rea9 sonable with respect to such nutrients, supplies, and equip10 ment during 1993.

11 SEC. 8506. UPDATES FOR AMBULATORY SURGICAL SERV12 ICES.

13 Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is

14 amended—

15 (1) by striking ‘‘1996’’ and inserting ‘‘2003’’;

16 and

17 (2) by inserting before the first sentence the fol18 lowing new sentence: ‘‘Notwithstanding the second

19 sentence of subparagraph (A) or the second sentence

20 of subparagraph (B), the Secretary shall not update

21 amounts established under such subparagraphs for fis22 cal years 1996 through 2002.’’

23 SEC. 8507. PAYMENTS FOR AMBULANCE SERVICES.

24 Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amend25 ed by section 8405(a), section 8414(a), and section 8415(b),
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1 is amended by adding at the end the following new subpara2 graph:

3 ‘‘(W) In determining the reasonable cost or

4 charge of ambulance services for fiscal years 1996

5 through 2002, the Secretary shall not recognize any

6 costs in excess of costs recognized as reasonable for fis7 cal year 1995.’’.

8 SEC. 8508. ENSURING PAYMENT FOR PHYSICIAN AND

9 NURSE FOR JOINTLY FURNISHED ANESTHE10 SIA SERVICES.

11 (a) PAYMENT FOR JOINTLY FURNISHED SINGLE

12 CASE.—

13 (1) PAYMENT TO PHYSICIAN.—Section

14 1848(a)(4) (42 U.S.C. 1395w–4(a)(4)) is amended by

15 adding at the end the following new subparagraph:

16 ‘‘(C) PAYMENT FOR SINGLE CASE.—Not17 withstanding section 1862(a)(1)(A), with respect

18 to physicians’ services consisting of the furnish19 ing of anesthesia services for a single case that

20 are furnished jointly with a certified registered

21 nurse anesthetist, if the carrier determines that

22 the use of both the physician and the nurse anes23 thetist to furnish the anesthesia service was not

24 medically necessary, the fee schedule amount for

25 the physicians’ services shall be equal to 50 per-
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1 cent (or 55 percent, in the case of services fur2 nished during 1996 or 1997) of the fee schedule

3 amount applicable under this section for anesthe4 sia services personally performed by the physi5 cian alone (without regard to this subpara6 graph). Nothing in this subparagraph may be

7 construed to affect the application of any provi8 sion of law regarding balance billing.’’.

9 (2) PAYMENT TO CRNA.—Section 1833(l)(4)(B)

10 (42 U.S.C. 1395l(l)(4)(B)) is amended by adding at

11 the end the following new clause:

12 ‘‘(iv) Notwithstanding section 1862(a)(1)(A), in the

13 case of services of a certified registered nurse anesthetist

14 consisting of the furnishing of anesthesia services for a sin15 gle case that are furnished jointly with a physician, if the

16 carrier determines that the use of both the physician and

17 the nurse anesthetist to furnish the anesthesia service was

18 not medically necessary, the fee schedule amount for the

19 services furnished by the certified registered nurse anes20 thetist shall be equal to 50 percent (or 40 percent, in the

21 case of services furnished during 1996 or 1997) of the fee

22 schedule amount applicable under section 1848 for anesthe23 sia services personally performed by the physician alone

24 (without regard to this clause).’’.
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1 (b) EFFECTIVE DATE.—The amendments made by sub2 sections (a) shall apply to services furnished on or after

3 July 1, 1996.

4 CHAPTER 2—PART B PREMIUM

5 SEC. 8511. PROMOTING SOLVENCY OF PART A TRUST FUND

6 THROUGH PART B PREMIUM.

7 (a) IN GENERAL.—Section 1839(e)(1) (42 U.S.C.

8 1395r(e)(1)) is amended—

9 (1) in subparagraph (A), by striking ‘‘1999’’ and

10 inserting ‘‘2003’’, and

11 (2) by adding at the end the following new sub12 paragraph:

13 ‘‘(C)(i) For each month beginning with January 1996

14 through December 2002, the amount of the monthly pre15 mium under this part shall be increased by an amount

16 equal to 13 percent of the monthly actuarial rate for enroll17 ees age 65 and over, as determined under subsection (a)(1)

18 and applicable to such month.

19 ‘‘(ii) The Secretary shall transfer amounts received

20 pursuant to clause (i) to the Federal Hospital Insurance

21 Trust Fund.

22 ‘‘(iii) In applying section 1844(a), amounts attrib23 utable to clause (i) shall not be counted in determining the

24 dollar amount of the premium per enrollee under para25 graph (1)(A) or (1)(B).’’.
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1 (b) EFFECTIVE DATE.—The amendments made by sub2 section (a) apply to premiums for months beginning with

3 January 1996.

4 SEC. 8512. INCOME-RELATED REDUCTION IN MEDICARE

5 SUBSIDY.

6 (a) IN GENERAL.—Section 1839 (42 U.S.C. 1395r) is

7 amended by adding at the end the following:

8 ‘‘(h)(1) Notwithstanding the previous subsections of

9 this section, in the case of an individual whose modified

10 adjusted gross income for a taxable year ending with or

11 within a calendar year (as initially determined by the Sec12 retary in accordance with paragraph (3)) exceeds the

13 threshold amount described in paragraph (5)(B), the Sec14 retary shall increase the amount of the monthly premium

15 for months in the calendar year by an amount equal to

16 the difference between—

17 ‘‘(A) 200 percent of the monthly actuarial rate

18 for enrollees age 65 and over as determined under

19 subsection (a)(1) for that calendar year; and

20 ‘‘(B) the total of the monthly premiums paid by

21 the individual under this section (determined without

22 regard to subsection (b)) during such calendar year.

23 ‘‘(2) In the case of an individual described in para24 graph (1) whose modified adjusted gross income exceeds the

25 threshold amount by less than $50,000, the amount of the
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1 increase in the monthly premium applicable under para2 graph (1) shall be an amount which bears the same ratio

3 to the amount of the increase described in paragraph (1)

4 (determined without regard to this paragraph) as such ex5 cess bears to $50,000. In the case of a joint return filed

6 under section 6013 of the Internal Revenue Code of 1986

7 by spouses both of whom are enrolled under this part, the

8 previous sentence shall be applied by substituting ‘$60,000’

9 for ‘$50,000’. The preceding provisions of this paragraph

10 shall not apply to any individual whose threshold amount

11 is zero.

12 ‘‘(3) The Secretary shall make an initial determina13 tion of the amount of an individual’s modified adjusted

14 gross income for a taxable year ending with or within a

15 calendar year for purposes of this subsection as follows:

16 ‘‘(A) Not later than September 1 of the year pre17 ceding the year, the Secretary shall provide notice to

18 each individual whom the Secretary finds (on the

19 basis of the individual’s actual modified adjusted

20 gross income for the most recent taxable year for

21 which such information is available or other informa22 tion provided to the Secretary by the Secretary of the

23 Treasury) will be subject to an increase under this

24 subsection that the individual will be subject to such

25 an increase, and shall include in such notice the Sec-
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1 retary’s estimate of the individual’s modified adjusted

2 gross income for the year.

3 ‘‘(B) If, during the 30-day period beginning on

4 the date notice is provided to an individual under

5 subparagraph (A), the individual provides the Sec6 retary with information on the individual’s antici7 pated modified adjusted gross income for the year, the

8 amount initially determined by the Secretary under

9 this paragraph with respect to the individual shall be

10 based on the information provided by the individual.

11 ‘‘(C) If an individual does not provide the Sec12 retary with information under subparagraph (B), the

13 amount initially determined by the Secretary under

14 this paragraph with respect to the individual shall be

15 the amount included in the notice provided to the in16 dividual under subparagraph (A).

17 ‘‘(4)(A) If the Secretary determines (on the basis of

18 final information provided by the Secretary of the Treas19 ury) that the amount of an individual’s actual modified

20 adjusted gross income for a taxable year ending with or

21 within a calendar year is less than or greater than the

22 amount initially determined by the Secretary under para23 graph (3), the Secretary shall increase or decrease the

24 amount of the individual’s monthly premium under this

25 section (as the case may be) for months during the following
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calendar year by an amount equal to 1 1 ⁄12 of the difference

2 between—

3 ‘‘(i) the total amount of all monthly premiums

4 paid by the individual under this section during the

5 previous calendar year; and

6 ‘‘(ii) the total amount of all such premiums

7 which would have been paid by the individual during

8 the previous calendar year if the amount of the indi9 vidual’s modified adjusted gross income initially de10 termined under paragraph (3) were equal to the ac11 tual amount of the individual’s modified adjusted

12 gross income determined under this paragraph.

13 ‘‘(B)(i) In the case of an individual for whom the

14 amount initially determined by the Secretary under para15 graph (3) is based on information provided by the individ16 ual under subparagraph (B) of such paragraph, if the Sec17 retary determines under subparagraph (A) that the amount

18 of the individual’s actual modified adjusted gross income

19 for a taxable year is greater than the amount initially de20 termined under paragraph (3), the Secretary shall increase

21 the amount otherwise determined for the year under sub22 paragraph (A) by interest in an amount equal to the sum

23 of the amounts determined under clause (ii) for each of the

24 months described in clause (ii).
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1 ‘‘(ii) Interest shall be computed for any month in an

2 amount determined by applying the underpayment rate es3 tablished under section 6621 of the Internal Revenue Code

4 of 1986 (compounded daily) to any portion of the difference

5 between the amount initially determined under paragraph

6 (3) and the amount determined under subparagraph (A)

7 for the period beginning on the first day of the month begin8 ning after the individual provided information to the Sec9 retary under subparagraph (B) of paragraph (3) and end10 ing 30 days before the first month for which the individual’s

11 monthly premium is increased under this paragraph.

12 ‘‘(iii) Interest shall not be imposed under this subpara13 graph if the amount of the individual’s modified adjusted

14 gross income provided by the individual under subpara15 graph (B) of paragraph (3) was not less than the individ16 ual’s modified adjusted gross income determined on the

17 basis of information shown on the return of tax imposed

18 by chapter 1 of the Internal Revenue Code of 1986 for the

19 taxable year involved.

20 ‘‘(C) In the case of an individual who is not enrolled

21 under this part for any calendar year for which the individ22 ual’s monthly premium under this section for months dur23 ing the year would be increased pursuant to subparagraph

24 (A) if the individual were enrolled under this part for the

25 year, the Secretary may take such steps as the Secretary
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1 considers appropriate to recover from the individual the

2 total amount by which the individual’s monthly premium

3 for months during the year would have been increased

4 under subparagraph (A) if the individual were enrolled

5 under this part for the year.

6 ‘‘(D) In the case of a deceased individual for whom

7 the amount of the monthly premium under this section for

8 months in a year would have been decreased pursuant to

9 subparagraph (A) if the individual were not deceased, the

10 Secretary shall make a payment to the individual’s surviv11 ing spouse (or, in the case of an individual who does not

12 have a surviving spouse, to the individual’s estate) in an

13 amount equal to the difference between—

14 ‘‘(i) the total amount by which the individual’s

15 premium would have been decreased for all months

16 during the year pursuant to subparagraph (A); and

17 ‘‘(ii) the amount (if any) by which the individ18 ual’s premium was decreased for months during the

19 year pursuant to subparagraph (A).

20 ‘‘(5) In this subsection, the following definitions apply:

21 ‘‘(A) The term ‘modified adjusted gross income’

22 means adjusted gross income (as defined in section 62

23 of the Internal Revenue Code of 1986)—

24 ‘‘(i) determined without regard to sections

25 135, 911, 931, and 933 of such Code, and
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1 ‘‘(ii) increased by the amount of interest re2 ceived or accrued by the taxpayer during the

3 taxable year which is exempt from tax under

4 such Code.

5 ‘‘(B) The term ‘threshold amount’ means—

6 ‘‘(i) except as otherwise provided in this

7 paragraph, $60,000,

8 ‘‘(ii) $90,000, in the case of a joint return

9 (as defined in section 7701(a)(38) of such Code),

10 and

11 ‘‘(iii) zero in the case of a taxpayer who—

12 ‘‘(I) is married at the close of the tax13 able year but does not file a joint return (as

14 so defined) for such year, and

15 ‘‘(II) does not live apart from his

16 spouse at all times during the taxable year.

17 ‘‘(6)(A) The Secretary shall transfer amounts received

18 pursuant to this subsection to the Federal Hospital Insur19 ance Trust Fund.

20 ‘‘(B) In applying section 1844(a), amounts attrib21 utable to clause (i) shall not be counted in determining the

22 dollar amount of the premium per enrollee under para23 graph (1)(A) or (1)(B).’’.

24 (b) CONFORMING AMENDMENTS.—(1) Section 1839 (42

25 U.S.C. 1395r) is amended—
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1 (A) in subsection (a)(2), by inserting ‘‘or section

2 1839A’’ after ‘‘subsections (b) and (e)’’;

3 (B) in subsection (a)(3) of section 1839(a), by

4 inserting ‘‘or section 1839A’’ after ‘‘subsection (e)’’;

5 (C) in subsection (b), inserting ‘‘(and as in6 creased under section 1839A)’’ after ‘‘subsection (a) or

7 (e)’’; and

8 (D) in subsection (f), by striking ‘‘if an individ9 ual’’ and inserting the following: ‘‘if an individual

10 (other than an individual subject to an increase in

11 the monthly premium under this section pursuant to

12 subsection (h))’’.

13 (2) Section 1840(c) (42 U.S.C. 1395r(c)) is amended

14 by inserting ‘‘or an individual determines that the estimate

15 of modified adjusted gross income used in determining

16 whether the individual is subject to an increase in the

17 monthly premium under section 1839 pursuant to sub18 section (h) of such section (or in determining the amount

19 of such increase) is too low and results in a portion of the

20 premium not being deducted,’’ before ‘‘he may’’.

21 (c) REPORTING REQUIREMENTS FOR SECRETARY OF

22 THE TREASURY.—

23 (1) IN GENERAL.—Subsection (l) of section 6103

24 of the Internal Revenue Code of 1986 (relating to con25 fidentiality and disclosure of returns and return in-
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1 formation) is amended by adding at the end the fol2 lowing new paragraph:

3 ‘‘(15) DISCLOSURE OF RETURN INFORMATION TO

4 CARRY OUT INCOME-RELATED REDUCTION IN MEDI5 CARE PART B PREMIUM.—

6 ‘‘(A) IN GENERAL.—The Secretary may,

7 upon written request from the Secretary of

8 Health and Human Services, disclose to officers

9 and employees of the Health Care Financing Ad10 ministration return information with respect to

11 a taxpayer who is required to pay a monthly

12 premium under section 1839 of the Social Secu13 rity Act. Such return information shall be lim14 ited to—

15 ‘‘(i) taxpayer identity information

16 with respect to such taxpayer,

17 ‘‘(ii) the filing status of such taxpayer,

18 ‘‘(iii) the adjusted gross income of such

19 taxpayer,

20 ‘‘(iv) the amounts excluded from such

21 taxpayer’s gross income under sections 135

22 and 911,

23 ‘‘(v) the interest received or accrued

24 during the taxable year which is exempt
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1 from the tax imposed by chapter 1 to the ex2 tent such information is available, and

3 ‘‘(vi) the amounts excluded from such

4 taxpayer’s gross income by sections 931 and

5 933 to the extent such information is avail6 able.

7 ‘‘(B) RESTRICTION ON USE OF DISCLOSED

8 INFORMATION.—Return information disclosed

9 under subparagraph (A) may be used by officers

10 and employees of the Health Care Financing Ad11 ministration only for the purposes of, and to the

12 extent necessary in, establishing the appropriate

13 monthly premium under section 1839 of the So14 cial Security Act.’’

15 (2) CONFORMING AMENDMENT.—Paragraphs

16 (3)(A) and (4) of section 6103(p) of such Code are

17 each amended by striking ‘‘or (14)’’ each place it ap18 pears and inserting ‘‘(14), or (15)’’.

19 (d) EFFECTIVE DATE.—

20 (1) IN GENERAL.—The amendments made by

21 subsections (a) and (b) shall apply to the monthly

22 premium under section 1839 of the Social Security

23 Act for months beginning with January 1997.

24 (2) INFORMATION FOR PRIOR YEARS.—The Sec25 retary of Health and Human Services may request
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1 information under section 6013(l)(15) of the Social

2 Security Act (as added by subsection (c)) for taxable

3 years beginning after December 31, 1993.

4 Subtitle G—Provisions Relating to

5 Parts A and B

6 CHAPTER 1—PAYMENTS FOR HOME

7 HEALTH SERVICES

8 SEC. 8601. PAYMENT FOR HOME HEALTH SERVICES.

9 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395x et

10 seq.), as amended by section 8102, is amended by adding

11 at the end the following new section:

12 ‘‘PAYMENT FOR HOME HEALTH SERVICES

13 ‘‘SEC. 1894. (a) IN GENERAL.—

14 ‘‘(1) PER VISIT PAYMENTS.—Subject to sub15 section (c), the Secretary shall make per visit pay16 ments beginning with fiscal year 1997 to a home

17 health agency in accordance with this section for each

18 type of home health service described in paragraph

19 (2) furnished to an individual who at the time the

20 service is furnished is under a plan of care by the

21 home health agency under this title (without regard

22 to whether or not the item or service was furnished

23 by the agency or by others under arrangement with

24 them made by the agency, under any other contract25 ing or consulting arrangement, or otherwise).
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1 ‘‘(2) TYPES OF SERVICES.—The types of home

2 health services described in this paragraph are the fol3 lowing:

4 ‘‘(A) Part-time or intermittent nursing care

5 provided by or under the supervision of a reg6 istered professional nurse.

7 ‘‘(B) Physical therapy.

8 ‘‘(C) Occupational therapy.

9 ‘‘(D) Speech-language pathology services.

10 ‘‘(E) Medical social services under the direc11 tion of a physician.

12 ‘‘(F) To the extent permitted in regulations,

13 part-time or intermittent services of a home

14 health aide who has successfully completed a

15 training program approved by the Secretary.

16 ‘‘(b) ESTABLISHMENT OF PER VISIT RATE FOR EACH

17 TYPE OF SERVICES.—

18 ‘‘(1) IN GENERAL.—The Secretary shall, subject

19 to paragraph (3), establish a per visit payment rate

20 for a home health agency in an area (which shall be

21 the same area used to determine the area wage index

22 applicable to hospitals under section 1886(d)(3)(E))

23 for each type of home health service described in sub24 section (a)(2). Such rate shall be equal to the national

25 per visit payment rate determined under paragraph
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1 (2) for each such type, except that the labor-related

2 portion of such rate shall be adjusted by the area

3 wage index applicable under section 1886(d)(3)(E)

4 for the area in which the agency is located (as deter5 mined without regard to any reclassification of the

6 area under section 1886(d)(8)(B) or a decision of the

7 Medicare Geographic Classification Review Board or

8 the Secretary under section 1886(d)(10) for cost re9 porting periods beginning after October 1, 1995).

10 ‘‘(2) NATIONAL PER VISIT PAYMENT RATE.—The

11 national per visit payment rate for each type of serv12 ice described in subsection (a)(2)—

13 ‘‘(A) for fiscal year 1997, is an amount

14 equal to the national average amount paid per

15 visit under this title to home health agencies for

16 such type of service during the most recent 12-

17 month cost reporting period ending on or before

18 June 30, 1994; and

19 ‘‘(B) for each subsequent fiscal year, is an

20 amount equal to the national per visit payment

21 rate in effect for the preceding fiscal year, in22 creased by the home health market basket per23 centage increase for such subsequent fiscal year

24 minus 2.0 percentage points.
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1 ‘‘(3) REBASING OF RATES.—The Secretary shall

2 adjust the national per visit payment rates under this

3 subsection for cost reporting periods beginning on or

4 after October 1, 1999, and every 5 years thereafter, to

5 reflect the most recent available data.

6 ‘‘(4) HOME HEALTH MARKET BASKET PERCENT7 AGE INCREASE.—For purposes of this subsection, the

8 term ‘home health market basket percentage increase’

9 means, with respect to a fiscal year, a percentage (es10 timated by the Secretary before the beginning of the

11 fiscal year) determined and applied with respect to

12 the types of home health services described in sub13 section (a)(2) in the same manner as the market bas14 ket percentage increase under section

15 1886(b)(3)(B)(iii) is determined and applied to inpa16 tient hospital services for the fiscal year.

17 ‘‘(c) PER EPISODE LIMIT.—

18 ‘‘(1) AGGREGATE LIMIT.—

19 ‘‘(A) IN GENERAL.—Except as provided in

20 paragraph (2), a home health agency may not

21 receive aggregate per visit payments under sub22 section (a) for a fiscal year in excess of an

23 amount equal to the sum of the following prod24 ucts determined for each case-mix category for

25 which the agency receives payments:
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1 ‘‘(i) The number of episodes of each

2 such case-mix category during the fiscal

3 year; multiplied by

4 ‘‘(ii) the per episode limit determined

5 for such case-mix category for such fiscal

6 year.

7 ‘‘(B) ESTABLISHMENT OF PER EPISODE

8 LIMITS.—

9 ‘‘(i) IN GENERAL.—The per episode

10 limit for a fiscal year for any case-mix cat11 egory for the area in which a home health

12 agency is located (which shall be the same

13 area used to determine the area wage index

14 applicable to hospitals under section

15 1886(d)(3)(E)) is equal to—

16 ‘‘(I) the mean number of visits for

17 each type of home health service de18 scribed in subsection (a)(2) furnished

19 during an episode of such case-mix cat20 egory in such area during fiscal year

21 1994, adjusted by the case-mix adjust22 ment factor determined in clause (ii)

23 for the fiscal year involved; multiplied

24 by
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1 ‘‘(II) the per visit payment rate

2 established under subsection (b) for

3 such type of home health service for the

4 fiscal year for which the determination

5 is being made.

6 ‘‘(ii) CASE-MIX ADJUSTMENT FAC7 TOR.—For purposes of clause (i), the case8 mix adjustment factor for a year for—

9 ‘‘(I) each of fiscal years 1997

10 through 2000 is the factor determined

11 by the Secretary to assure that aggre12 gate payments for home health services

13 under this section during the year will

14 not exceed the payment for such serv15 ices during the previous year as a re16 sult of changes in the number and type

17 of home health visits within case-mix

18 categories over the previous year; and

19 ‘‘(II) each subsequent fiscal year,

20 is the factor determined by the Sec21 retary necessary to remove the effects of

22 case-mix increases due to reporting im23 provements instead of real changes in

24 patients’ resource usage.
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1 ‘‘(iii) REBASING OF PER EPISODE LIM2 ITS.—Beginning with fiscal year 1999 and

3 every 5 years thereafter, the Secretary shall

4 revise the mean number of home health vis5 its determined under clause (i)(I) for each

6 type of home health service visit described

7 in subsection (a)(2) furnished during an

8 episode in a case-mix category to reflect the

9 most recently available data on the number

10 of visits.

11 ‘‘(iv) DETERMINATION OF AREA.—In

12 the case of an area which the Secretary de13 termines has an insufficient number of

14 home health agencies to establish an appro15 priate per episode limit, the Secretary may

16 establish an area other than the area used

17 to determine the area wage under section

18 1886(d)(3)(E)) for purposes of establishing

19 an appropriate per episode limit.

20 ‘‘(C) CASE-MIX CATEGORY.—For purposes of

21 this paragraph, the term ‘case-mix category’

22 means each of the 18 case-mix categories estab23 lished under the Home Health Agency Prospec24 tive Payment Demonstration Project conducted

25 by the Health Care Financing Administration.
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1 The Secretary may develop an alternate meth2 odology for determining case-mix categories.

3 ‘‘(D) EPISODE.—

4 ‘‘(i) IN GENERAL.—For purposes of

5 this paragraph, the term ‘episode’ means the

6 continuous 120-day period that—

7 ‘‘(I) begins on the date of an indi8 vidual’s first visit for a type of home

9 health service described in subsection

10 (a)(2) for a case-mix category, and

11 ‘‘(II) is immediately preceded by

12 a 60-day period in which the individ13 ual did not receive visits for a type of

14 home health service described in sub15 section (a)(2).

16 ‘‘(ii) TREATMENT OF EPISODES SPAN17 NING COST REPORTING PERIODS.—The Sec18 retary shall provide for such rules as the

19 Secretary considers appropriate regarding

20 the treatment of episodes under this para21 graph which begin during a cost reporting

22 period and end in a subsequent cost report23 ing period.

24 ‘‘(E) EXEMPTIONS AND EXCEPTIONS.—The

25 Secretary may provide for exemptions and excep-
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1 tions to the limits established under this para2 graph for a fiscal year as the Secretary deems

3 appropriate, to the extent such exemptions and

4 exceptions do not result in greater payments

5 under this section than the exemptions and ex6 ceptions provided under section 1861(v)(1)(L)(ii)

7 in fiscal year 1994, increased by the home health

8 market basket percentage increase for the fiscal

9 year involved (as defined in subsection (b)(4)).

10 ‘‘(2) RECONCILIATION OF AMOUNTS.—

11 ‘‘(A) PAYMENTS IN EXCESS OF LIMITS.—

12 Subject to subparagraph (B), if a home health

13 agency has received aggregate per visit payments

14 under subsection (a) for a fiscal year in excess

15 of the amount determined under paragraph (1)

16 with respect to such home health agency for such

17 fiscal year, the Secretary shall reduce payments

18 under this section to the home health agency in

19 the following fiscal year in such manner as the

20 Secretary considers appropriate (including on

21 an installment basis) to recapture the amount of

22 such excess.

23 ‘‘(B) EXCEPTION FOR HOME HEALTH SERV24 ICES FURNISHED OVER A PERIOD GREATER THAN

25 165 DAYS.—
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1 ‘‘(i) IN GENERAL.—For purposes of

2 subparagraph (A), the amount of aggregate

3 per visit payments determined under sub4 section (a) shall not include payments for

5 home health visits furnished to an individ6 ual on or after a continuous period of more

7 than 165 days after an individual begins

8 an episode described in subsection (c)(1)(D)

9 (if such period is not interrupted by the be10 ginning of a new episode).

11 ‘‘(ii) REQUIREMENT OF CERTIFI12 CATION.—Clause (i) shall not apply if the

13 agency has not obtained a physician’s cer14 tification with respect to the individual re15 quiring such visits that includes a state16 ment that the individual requires such con17 tinued visits, the reason for the need for

18 such visits, and a description of such serv19 ices furnished during such visits.

20 ‘‘(C) SHARE OF SAVINGS.—

21 ‘‘(i) BONUS PAYMENTS.—If a home

22 health agency has received aggregate per

23 visit payments under subsection (a) for a

24 fiscal year in an amount less than the

25 amount determined under paragraph (1)
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1 with respect to such home health agency for

2 such fiscal year, the Secretary shall pay

3 such home health agency a bonus payment

4 equal to 50 percent of the difference between

5 such amounts in the following fiscal year,

6 except that the bonus payment may not ex7 ceed 5 percent of the aggregate per visit

8 payments made to the agency for the year.

9 ‘‘(ii) INSTALLMENT BONUS PAY10 MENTS.—The Secretary may make install11 ment payments during a fiscal year to a

12 home health agency based on the estimated

13 bonus payment that the agency would be el14 igible to receive with respect to such fiscal

15 year.

16 ‘‘(d) MEDICAL REVIEW PROCESS.—The Secretary

17 shall implement a medical review process (with a particu18 lar emphasis on fiscal years 1997 and 1998) for the system

19 of payments described in this section that shall provide an

20 assessment of the pattern of care furnished to individuals

21 receiving home health services for which payments are made

22 under this section to ensure that such individuals receive

23 appropriate home health services. Such review process shall

24 focus on low-cost episodes (as defined by the Secretary

25 under section (e)(3)(C)) and cases described in subsection
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1 (c)(2)(B) and shall require recertification by intermediaries

2 at 60 and 165 days into an episode described in subsection

3 (c)(1)(D).

4 ‘‘(e) ADJUSTMENT OF PAYMENTS TO AVOID CIR5 CUMVENTION OF LIMITS.—

6 ‘‘(1) IN GENERAL.—The Secretary shall provide

7 for appropriate adjustments to payments to home

8 health agencies under this section to ensure that agen9 cies do not circumvent the purpose of this section

10 by—

11 ‘‘(A) discharging patients to another home

12 health agency or similar provider;

13 ‘‘(B) altering corporate structure or name

14 to avoid being subject to this section or for the

15 purpose of increasing payments under this title;

16 or

17 ‘‘(C) undertaking other actions considered

18 unnecessary for effective patient care and in19 tended to achieve maximum payments under this

20 title.

21 ‘‘(2) TRACKING OF PATIENTS THAT SWITCH

22 HOME HEALTH AGENCIES DURING EPISODE.—

23 ‘‘(A) DEVELOPMENT OF SYSTEM.—The Sec24 retary shall develop a system that tracks home

25 health patients that receive home health services
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1 described in subsection (a)(2) from more than 1

2 home health agency during an episode described

3 in subsection (c)(1)(D).

4 ‘‘(B) ADJUSTMENT OF PAYMENTS.—The

5 Secretary shall adjust payments under this sec6 tion to each home health agency that furnishes

7 an individual with a type of home health service

8 described in subsection (a)(2) to ensure that ag9 gregate payments on behalf of such individual

10 during such episode do not exceed the amount

11 that would be paid under this section if the indi12 vidual received such services from a single home

13 health agency.

14 ‘‘(3) LOW-COST CASES.—

15 ‘‘(A) IN GENERAL.—The Secretary shall de16 velop and implement a system designed to adjust

17 payments to a home health agency for a fiscal

18 year to eliminate any increase in growth of the

19 percentage distribution of low-cost episodes for

20 which home health services are furnished by the

21 agency over such percentage distribution deter22 mined for the agency under subparagraph (B).

23 ‘‘(B) DISTRIBUTION.—The Secretary shall

24 profile each home health agency to determine the

25 distribution of all episodes by length of stay for
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1 each agency during the agency’s first 12-month

2 cost reporting period beginning during fiscal

3 year 1994.

4 ‘‘(C) LOW-COST EPISODE.—For purposes of

5 this paragraph, the Secretary shall define a low6 cost episode in a manner that provides that a

7 home health agency has an incentive to be cost

8 efficient in delivering home health services and

9 that the volume of such services does not increase

10 as a result of factors other than patient needs.

11 ‘‘(f) SPECIAL RULE FOR CHRISTIAN SCIENCE PROVID12 ERS.—

13 ‘‘(1) PAYMENT PERMITTED FOR SERVICES.—Not14 withstanding any other provision of this title, pay15 ment shall be made under this title for home health

16 services furnished by Christian Science providers who

17 meet applicable requirements of the First Church of

18 Christ, Scientist, Boston, Massachusetts, and are cer19 tified for purposes of this title under criteria estab20 lished by the Secretary, in accordance with a pay21 ment methodology established by the Secretary.

22 ‘‘(2) EFFECTIVE DATE.—Paragraph (1) shall

23 apply to services furnished during cost reporting peri24 ods which begin after the earlier of—
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1 ‘‘(A) the date on which the Secretary estab2 lishes the payment methodology and the certifi3 cation criteria described in paragraph (1), or

4 ‘‘(B) July 1, 1996.

5 ‘‘(g) REPORT BY MEDICARE PAYMENT REVIEW COM6 MISSION.—During the first 3 years in which payments are

7 made under this section, the Medicare Payment Review

8 Commission shall annually submit a report to Congress on

9 the effectiveness of the payment methodology established

10 under this section that shall include recommendations re11 garding the following:

12 ‘‘(1) Case-mix and volume increases.

13 ‘‘(2) Quality monitoring of home health agency

14 practices.

15 ‘‘(3) Whether a capitated payment for home care

16 patients receiving care during a continuous period ex17 ceeding 165 days is warranted.

18 ‘‘(4) Whether public providers of service are ade19 quately reimbursed.

20 ‘‘(5) On the adequacy of the exemptions and ex21 ceptions to the limits provided under subsection

22 (c)(1)(E).

23 ‘‘(6) The appropriateness of the methods pro24 vided under this section to adjust the per episode lim25 its and annual payment updates to reflect changes in
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1 the mix of services, number of visits, and assignment

2 to case categories to reflect changing patterns of home

3 health care.

4 ‘‘(7) The geographic areas used to determine the

5 per episode limits.’’.

6 (b) PAYMENT FOR PROSTHETICS AND ORTHOTICS

7 UNDER PART A.—Section 1814(k) (42 U.S.C. 1395f(k)) is

8 amended—

9 (1) by inserting ‘‘and prosthetics and orthotics’’

10 after ‘‘durable medical equipment’’; and

11 (2) by inserting ‘‘and 1834(h), respectively’’ after

12 ‘‘1834(a)(1)’’.

13 (c) CONFORMING AMENDMENTS.—

14 (1) PAYMENTS UNDER PART A.—Section 1814(b)

15 (42 U.S.C. 1395f(b)), as amended by section 8412(b),

16 is amended in the matter preceding paragraph (1) by

17 striking ‘‘1888 and 1888A’’ and inserting ‘‘1888,

18 1888A, and 1894’’.

19 (2) TREATMENT OF ITEMS AND SERVICES PAID

20 UNDER PART B.—

21 (A) PAYMENTS UNDER PART B.—Section

22 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amended—

23 (i) by amending subparagraph (A) to

24 read as follows:

25 ‘‘(A) with respect to home health services—
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1 ‘‘(i) that are a type of home health

2 service described in section 1894(a)(2), and

3 which are furnished to an individual who

4 (at the time the item or service is furnished)

5 is under a plan of care of a home health

6 agency, the amount determined under sec7 tion 1894;

8 ‘‘(ii) that are not described in clause

9 (i) (other than a covered osteoporosis drug)

10 (as defined in section 1861(kk)), the lesser

11 of—

12 ‘‘(I) the reasonable cost of such

13 services, as determined under section

14 1861(v), or

15 ‘‘(II) the customary charges with

16 respect to such services;’’.

17 (ii) by striking ‘‘and’’ at the end of

18 subparagraph (E);

19 (iii) by adding ‘‘and’’ at the end of

20 subparagraph (F); and

21 (iv) by adding at the end the following

22 new subparagraph:

23 ‘‘(G) with respect to items and services de24 scribed in section 1861(s)(10)(A), the lesser of—
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1 ‘‘(i) the reasonable cost of such services,

2 as determined under section 1861(v), or

3 ‘‘(ii) the customary charges with re4 spect to such services,

5 or, if such services are furnished by a public pro6 vider of services, or by another provider which

7 demonstrates to the satisfaction of the Secretary

8 that a significant portion of its patients are low9 income (and requests that payment be made

10 under this provision), free of charge or at nomi11 nal charges to the public, the amount determined

12 in accordance with section 1814(b)(2);’’.

13 (B) REQUIRING PAYMENT FOR ALL ITEMS

14 AND SERVICES TO BE MADE TO AGENCY.—

15 (i) IN GENERAL.—The first sentence of

16 section 1842(b)(6) (42 U.S.C. 1395u(b)(6)),

17 as amended by section 8415(a)(1), is

18 amended—

19 (I) by striking ‘‘and (E)’’ and in20 serting ‘‘(E)’’; and

21 (II) by striking the period at the

22 end and inserting the following: ‘‘, and

23 (F) in the case of types of home health

24 services described in section 1894(a)(2)

25 furnished to an individual who (at the
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1 time the item or service is furnished) is

2 under a plan of care of a home health

3 agency, payment shall be made to the

4 agency (without regard to whether or

5 not the item or service was furnished

6 by the agency, by others under ar7 rangement with them made by the

8 agency, or when any other contracting

9 or consulting arrangement, or other10 wise).’’.

11 (ii) CONFORMING AMENDMENT.—Sec12 tion 1832(a)(1) (42 U.S.C. 1395k(a)(1)) is

13 amended by striking ‘‘(2);’’ and inserting

14 ‘‘(2) and section 1842(b)(6)(F);’’.

15 (C) EXCLUSIONS FROM COVERAGE.—Section

16 1862(a) (42 U.S.C. 1395y(a)), as amended by

17 section 8415(a)(2), is amended—

18 (i) by striking ‘‘or’’ at the end of para19 graph (15);

20 (ii) by striking the period at the end of

21 paragraph (16) and inserting ‘‘or’’; and

22 (iii) by adding at the end the following

23 new paragraph:

24 ‘‘(17) where such expenses are for home health

25 services furnished to an individual who is under a
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1 plan of care of the home health agency if the claim

2 for payment for such services is not submitted by the

3 agency.’’.

4 (3) SUNSET OF REASONABLE COST LIMITA5 TIONS.—Section 1861(v)(1)(L) (42 U.S.C.

6 1395x(v)(1)(L)) is amended by adding at the end the

7 following new clause:

8 ‘‘(iv) This subparagraph shall apply only to services

9 furnished by home health agencies during cost reporting pe10 riods ending on or before September 30, 1996.’’.

11 (d) EFFECTIVE DATE.—The amendments made by this

12 section shall apply to cost reporting periods beginning on

13 or after October 1, 1996.

14 SEC. 8602. MAINTAINING SAVINGS RESULTING FROM TEM15 PORARY FREEZE ON PAYMENT INCREASES

16 FOR HOME HEALTH SERVICES.

17 (a) BASING UPDATES TO PER VISIT COST LIMITS ON

18 LIMITS FOR FISCAL YEAR 1993.—Section

19 1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) is

20 amended by adding at the end the following sentence: ‘‘In

21 establishing limits under this subparagraph, the Secretary

22 may not take into account any changes in the costs of the

23 provision of services furnished by home health agencies with

24 respect to cost reporting periods which began on or after

25 July 1, 1994, and before July 1, 1996.’’.
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1 (b) NO EXCEPTIONS PERMITTED BASED ON AMEND2 MENT.—The Secretary of Health and Human Services shall

3 not consider the amendment made by subsection (a) in mak4 ing any exemptions and exceptions pursuant to section

5 1861(v)(1)(L)(ii) of the Social Security Act.

6 SEC. 8603. EXTENSION OF WAIVER OF PRESUMPTION OF

7 LACK OF KNOWLEDGE OF EXCLUSION FROM

8 COVERAGE FOR HOME HEALTH AGENCIES.

9 Section 9305(g)(3) of OBRA–1986, as amended by sec10 tion 426(d) of the Medicare Catastrophic Coverage Act of

11 1988 and section 4207(b)(3) of the OBRA–1990 (as renum12 bered by section 160(d)(4) of the Social Security Act

13 Amendments of 1994), is amended by striking ‘‘December

14 31, 1995’’ and inserting ‘‘September 30, 1996.’’.

15 SEC. 8604. EXTENSION OF PERIOD OF HOME HEALTH AGEN16 CY CERTIFICATION.

17 Section 1891(c)(2)(A) (42 U.S.C. 1395bbb(c)(2)(A)) is

18 amended—

19 (1) by striking ‘‘15 months’’ and inserting ‘‘36

20 months’’; and

21 (2) by striking the second sentence and inserting

22 the following: ‘‘The Secretary shall establish a fre23 quency for surveys of home health agencies within this

24 36-month interval commensurate with the need to as25 sure the delivery of quality home health services.’’.
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1 PART 2—MEDICARE SECONDARY PAYER

2 IMPROVEMENTS

3 SEC. 8611. EXTENSION AND EXPANSION OF EXISTING RE4 QUIREMENTS.

5 (a) DATA MATCH.—

6 (1) Section 1862(b)(5)(C) (42 U.S.C.

7 1395y(b)(5)(C)) is amended by striking clause (iii).

8 (2) Section 6103(l)(12) of the Internal Revenue

9 Code of 1986 is amended by striking subparagraph

10 (F).

11 (b) APPLICATION TO DISABLED INDIVIDUALS IN

12 LARGE GROUP HEALTH PLANS.—

13 (1) IN GENERAL.—Section 1862(b)(1)(B) (42

14 U.S.C. 1395y(b)(1)(B)) is amended—

15 (A) in clause (i), by striking ‘‘clause (iv)’’

16 and inserting ‘‘clause (iii)’’,

17 (B) by striking clause (iii), and

18 (C) by redesignating clause (iv) as clause

19 (iii).

20 (2) CONFORMING AMENDMENTS.—Paragraphs

21 (1) through (3) of section 1837(i) (42 U.S.C.

22 1395p(i)) and the second sentence of section 1839(b)

23 (42 U.S.C. 1395r(b)) are each amended by striking

24 ‘‘1862(b)(1)(B)(iv)’’ each place it appears and insert25 ing ‘‘1862(b)(1)(B)(iii)’’.
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1 (c) INDIVIDUALS WITH END STAGE RENAL DIS2 EASE.—Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C))

3 is amended—

4 (1) in the last sentence by striking ‘‘October 1,

5 1998’’ and inserting ‘‘the date of the enactment of the

6 Medicare Preservation Act of 1995’’; and

7 (2) by adding at the end the following new sen8 tence: ‘‘Effective for items and services furnished on

9 or after the date of the enactment of the Medicare

10 Preservation Act of 1995, (with respect to periods be11 ginning on or after the date that is 18 months prior

12 to such date), clauses (i) and (ii) shall be applied by

13 substituting ‘30-month’ for ‘12-month’ each place it

14 appears.’’.

15 SEC. 8612. IMPROVEMENTS IN RECOVERY OF PAYMENTS.

16 (a) PERMITTING RECOVERY AGAINST THIRD PARTY

17 ADMINISTRATORS OF PRIMARY PLANS.—Section

18 1862(b)(2)(B)(ii) (42 U.S.C. 1395y(b)(2)(B)(ii)) is amend19 ed—

20 (1) by striking ‘‘under this subsection to pay’’

21 and inserting ‘‘(directly, as a third-party adminis22 trator, or otherwise) to make payment’’, and

23 (2) by adding at the end the following: ‘‘The

24 United States may not recover from a third-party ad25 ministrator under this clause in cases where the
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1 third-party administrator would not be able to re2 cover the amount at issue from the employer or group

3 health plan for whom it provides administrative serv4 ices due to the insolvency or bankruptcy of the em5 ployer or plan.’’.

6 (b) EXTENSION OF CLAIMS FILING PERIOD.—Section

7 1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amended by

8 adding at the end the following new clause:

9 ‘‘(v) CLAIMS-FILING PERIOD.—Not10 withstanding any other time limits that

11 may exist for filing a claim under an em12 ployer group health plan, the United States

13 may seek to recover conditional payments

14 in accordance with this subparagraph where

15 the request for payment is submitted to the

16 entity required or responsible under this

17 subsection to pay with respect to the item or

18 service (or any portion thereof) under a pri19 mary plan within the 3-year period begin20 ning on the date on which the item or serv21 ice was furnished.’’.

22 (c) EFFECTIVE DATE.—The amendments made by this

23 section shall apply to items and services furnished on or

24 after the date of the enactment of this Act.
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1 CHAPTER 3—OTHER ITEMS AND SERVICES

2 UNDER PARTS A AND B

3 SEC. 8621. MEDICARE COVERAGE OF CERTAIN ANTI-CANCER

4 DRUG TREATMENTS.

5 (a) COVERAGE OF CERTAIN SELF-ADMINISTERED

6 ANTICANCER DRUGS.—Section 1861(s)(2)(Q) (42 U.S.C.

7 1395x(s)(2)(Q)) is amended—

8 (1) by striking ‘‘(Q)’’ and inserting ‘‘(Q)(i)’’;

9 and

10 (2) by striking the semicolon at the end and in11 serting ‘‘, and’’; and

12 (3) by adding at the end the following:

13 ‘‘(ii) an oral drug (which is approved by the Federal

14 Food and Drug Administration) prescribed for use as an

15 anticancer nonsteroidal antiestrogen for the treatment of

16 breast cancer, but only if the manufacturer of such drug

17 has in effect a rebate agreement with the Secretary with

18 respect to such drug which has substantially similar terms

19 and conditions to the terms and conditions for such agree20 ments under section 1927 (as such section is in effect on

21 the date of the enactment of this clause);’’.

22 (b) UNIFORM COVERAGE OF ANTICANCER DRUGS IN

23 ALL SETTINGS.—Section 1861(t)(2)(A) (42 U.S.C.

24 1395x(t)(2)(A)) is amended by inserting ‘‘(including a

25 nonsteroidal antiestrogen regimen)’’ after ‘‘regimen’’.
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1 (c) CONFORMING AMENDMENT.—Section

2 1834(j)(5)(F)(iv) (42 U.S.C. 1395m(j)(5)(F)(iv)) is amend3 ed by striking ‘‘prescribed for use’’ and all that follows

4 through ‘‘1861(s)(2)(Q))’’ and inserting ‘‘described in sec5 tion 1861(s)(2)(Q)’’.

6 (d) EFFECTIVE DATE.—The amendments made by this

7 section shall apply to drugs furnished on or after January

8 1, 1996.

9 SEC. 8622. ADMINISTRATIVE PROVISIONS.

10 (a) INDIAN HEALTH SERVICE FACILITIES.—Nothing

11 in this Act shall be construed to change the status under

12 title XVIII of the Social Security Act (42 U.S.C. 1395 et

13 seq.) of—

14 (1) a Federally qualified health center (as de15 fined in section 1861(aa)(4) of such Act) which is an

16 outpatient health program or facility operated by a

17 tribe or tribal organization under the Indian Self-De18 termination Act or by an urban Indian organization

19 receiving funds under title V of the Indian Health

20 Care Improvement Act; or

21 (2) hospitals or skilled nursing facilities of the

22 Indian Health Service, whether operated by such

23 Service or by an Indian tribe or tribal organization

24 (as those terms are defined in section 4 of the Indian

25 Health Care Improvement Act), that are eligible for
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1 payments under title XVIII of the Social Security

2 Act, in accordance with section 1880 of such Act (42

3 U.S.C. 1395qq).

4 (b) CONFORMING AMENDMENT TO CERTIFICATION OF

5 CHRISTIAN SCIENCE PROVIDERS.—

6 (1) HOSPITALS.—Section 1861(e) (42 U.S.C.

7 1395x(e)) is amended in the sixth sentence by striking

8 ‘‘the First Church of Christ, Scientist, Boston, Massa9 chusetts,’’ and inserting ‘‘the Commission for Accredi10 tation of Christian Science Nursing Organizations/

11 Facilities, Inc.,’’.

12 (2) SKILLED NURSING FACILITIES.—Section

13 1861(y)(1) (42 U.S.C. 1395x(y)(1)) is amended by

14 striking ‘‘the First Church of Christ, Scientist, Bos15 ton, Massachusetts,’’ and inserting ‘‘the Commission

16 for Accreditation of Christian Science Nursing Orga17 nizations/Facilities, Inc.,’’.

18 (3) GENERAL PROVISIONS.—

19 (A) UNIFORM REPORTING SYSTEMS.—Sec20 tion 1122(h) (42 U.S.C. 1320a–1(h)) is amended

21 by striking ‘‘the First Church of Christ, Sci22 entist, Boston, Massachusetts’’ and inserting ‘‘the

23 Commission for Accreditation of Christian

24 Science Nursing Organizations/Facilities, Inc.’’.
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1 (B) PEER REVIEW.—Section 1162 (42

2 U.S.C. 1320c–11) is amended by striking ‘‘the

3 First Church of Christ, Scientist, Boston, Massa4 chusetts’’ and inserting ‘‘the Commission for Ac5 creditation of Christian Science Nursing Organi6 zations/Facilities, Inc.’’.

7 (4) EFFECTIVE DATE.—The amendments made

8 by this subsection shall take effect on January 1,

9 1997.

10 CHAPTER 4—FAILSAFE

11 SEC. 8631. FAILSAFE BUDGET MECHANISM.

12 (a) IN GENERAL.—Title XVIII, as amended by sec13 tions 8102(a) and 8601(a), is amended by adding at the

14 end the following new section:

15 ‘‘FAILSAFE BUDGET MECHANISM

16 ‘‘SEC. 1895. (a) REQUIREMENT OF PAYMENT AD17 JUSTMENTS TO ACHIEVE MEDICARE BUDGET TARGETS.—

18 ‘‘(1) IN GENERAL.—If the Secretary determines

19 under subsection (e)(3)(C) before a fiscal year (begin20 ning with fiscal year 1998) that—

21 ‘‘(A) the fee-for-service expenditures (as de22 fined in subsection (f) for all sectors of medicare

23 services (as defined in subsection (b)) for the fis24 cal year, will exceed

25 ‘‘(B) the sum of the allotments specified

26 under subsection (c)(2) for such fiscal year (tak-
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1 ing into account any adjustment in the allot2 ment under subsection (g) for that fiscal year)

3 for all sectors,

4 then, notwithstanding any other provisions of this

5 title, there shall be an adjustment (consistent with

6 subsection (d)) in applicable payment rates or pay7 ments for items and services included in each excess

8 spending sector in the fiscal year. In this section, the

9 term ‘aggregate excess spending’ means, for a fiscal

10 year, the amount by which the amount described in

11 subparagraph (A) (for the fiscal year) exceeds the

12 amount described in subparagraph (B) for such year.

13 ‘‘(2) EXCESS SPENDING SECTOR.—In this sec14 tion, the term ‘excess spending sector’ means, for a

15 fiscal year, a sector of medicare services for which the

16 Secretary determines under subsection (e)(3)(C)—

17 ‘‘(A) the fee-for-service expenditures (as de18 fined in subsection (f)) for all the fiscal year,

19 will exceed

20 ‘‘(B) the allotment specified under sub21 section (c)(2) for such fiscal year (taking into ac22 count any adjustment in the allotment under

23 subsection (g) for that fiscal year).

24 In this section, the term ‘excess spending’ means, for

25 a fiscal year with respect to such a sector, the amount
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1 by which the amount described in subparagraph (A)

2 (for the fiscal year and sector) exceeds the amount de3 scribed in subparagraph (B) for such year and sector.

4 ‘‘(b) SECTORS OF MEDICARE SERVICES DE5 SCRIBED.—

6 ‘‘(1) IN GENERAL.—For purposes of this section,

7 items and services included under each of the follow8 ing subparagraphs shall be considered to be a sepa9 rate ‘sector’ of medicare services:

10 ‘‘(A) Inpatient hospital services.

11 ‘‘(B) Home health services.

12 ‘‘(C) Extended care services (for inpatients

13 of skilled nursing facilities).

14 ‘‘(D) Hospice care.

15 ‘‘(E) Physicians’ services (including services

16 and supplies described in section 1861(s)(2)(A))

17 and services of other health care professionals

18 (including certified registered nurse anesthetists,

19 nurse practitioners, physician assistants, and

20 clinical psychologists) for which separate pay21 ment is made under this title.

22 ‘‘(F) Outpatient hospital services and am23 bulatory facility services.

24 ‘‘(G) Durable medical equipment and sup25 plies, including prosthetic devices and orthotics.
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1 ‘‘(H) Diagnostic tests (including clinical

2 laboratory services and x-ray services).

3 ‘‘(I) Other items and services.

4 ‘‘(2) CLASSIFICATION OF ITEMS AND SERV5 ICES.—The Secretary shall classify each type of items

6 and services covered and paid for separately under

7 this title into one of the sectors specified in paragraph

8 (1). After publication of such classification under sub9 section (e)(1), the Secretary is not authorized to make

10 substantive changes in such classification.

11 ‘‘(c) ALLOTMENT.—

12 ‘‘(1) ALLOTMENTS FOR EACH SECTOR.—For pur13 poses of this section, subject to subsection (g)(1), the

14 allotment for a sector of medicare services for a fiscal

15 year is equal to the product of—

16 ‘‘(A) the total allotment for the fiscal year

17 established under paragraph (2), and

18 ‘‘(B) the allotment proportion (specified

19 under paragraph (3)) for the sector and fiscal

20 year involved.

21 ‘‘(2) TOTAL ALLOTMENT.—

22 ‘‘(A) IN GENERAL.—For purposes of this

23 section, the total allotment for a fiscal year is

24 equal to—
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1 ‘‘(i) the medicare benefit budget for the

2 fiscal year (as specified under subparagraph

3 (B)), reduced by

4 ‘‘(ii) the amount of payments the Sec5 retary estimates will be made in the fiscal

6 year under the MedicarePlus program

7 under part C.

8 In making the estimate under clause (ii), the

9 Secretary shall take into account estimated en10 rollment and demographic profile of individuals

11 electing MedicarePlus products.

12 ‘‘(B) MEDICARE BENEFIT BUDGET.—For

13 purposes of this subsection, subject to subpara14 graph (C), the ‘medicare benefit budget’—

15 ‘‘(i) for fiscal year 1996 is $194.2 bil16 lion;

17 ‘‘(i) for fiscal year 1997 is $206.3 bil18 lion;

19 ‘‘(ii) for fiscal year 1998 is $217.8 bil20 lion;

21 ‘‘(iii) for fiscal year 1999 is $229.2 bil22 lion;

23 ‘‘(iv) for fiscal year 2000 is $247.2 bil24 lion;
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1 ‘‘(v) for fiscal year 2001 is $266.4 bil2 lion;

3 ‘‘(vi) for fiscal year 2002 is $289.0 bil4 lion; and

5 ‘‘(vii) for a subsequent fiscal year is

6 equal to the medicare benefit budget under

7 this subparagraph for the preceding fiscal

8 year multiplied by the product of (I) 1.05,

9 and (II) 1 plus the annual percentage in10 crease in the average number of medicare

11 beneficiaries from the previous fiscal year to

12 the fiscal year involved.

13 ‘‘(3) MEDICARE ALLOTMENT PROPORTIONS DE14 FINED.—

15 ‘‘(A) IN GENERAL.—For purposes of this

16 section and with respect to a sector of medicare

17 services for a fiscal year, the term ‘medicare al18 lotment proportion’ means the ratio of—

19 ‘‘(i) the baseline-projected medicare ex20 penditures (as determined under subpara21 graph (B)) for the sector for the fiscal year,

22 to

23 ‘‘(ii) the sum of such baseline expendi24 tures for all such sectors for the fiscal year.
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1 ‘‘(B) BASELINE-PROJECTED MEDICARE EX2 PENDITURES.—In this paragraph, the ‘baseline,

3 projected medicare expenditures’ for a sector of

4 medicare services—

5 ‘‘(i) for fiscal year 1996 is equal to fee6 for-service expenditures for such sector dur7 ing fiscal year 1995, increased by the base8 line annual growth rate for such sector of

9 medicare services for fiscal year 1996 (as

10 specified in table in subparagraph (C)); and

11 ‘‘(ii) for a subsequent fiscal year is

12 equal to the baseline-projected medicare ex13 penditures under this subparagraph for the

14 sector for the previous fiscal year increased

15 by the baseline annual growth rate for such

16 sector for the fiscal year involved (as speci17 fied in such table).

18 ‘‘(C) BASELINE ANNUAL GROWTH RATES.—

19 The following table specifies the baseline annual

20 growth rates for each of the sectors for different

21 fiscal years:

[In percent]

‘‘For the following sector—

Baseline annual growth rates for fiscal year—

1996 1997 1998 1999 2000 2001

2002

and

thereafter

(A) Inpatient hospital services ........................................................... 5.7 5.6 6.0 6.1 5.7 5.5 5.2

(B) Home health services .................................................................... 17.2 15.1 11.7 9.1 8.4 8.1 7.9

(C) Extended care services ................................................................. 19.7 12.3 9.3 8.7 8.6 8.4 8.0

(D) Hospice care ................................................................................. 32.0 24.0 18.0 15.0 12.0 10.0 9.0

(E) Physicians’ services ...................................................................... 12.4 9.7 8.7 9.0 9.3 9.6 10.1

(F) Outpatient hospital services ........................................................ 14.7 13.9 14.5 15.0 14.1 13.9 14.0

(G) Durable medical equipment and supplies .................................. 16.1 15.5 13.7 12.4 13.2 13.9 14.5
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[In percent]

‘‘For the following sector—

Baseline annual growth rates for fiscal year—

1996 1997 1998 1999 2000 2001

2002

and

thereafter

(H) Diagnostic tests ............................................................................ 13.1 11.3 11.0 11.4 11.4 11.5 11.9

(I) Other items and services ............................................................... 11.2 10.2 10.9 12.0 11.6 11.6 11.8

1 ‘‘(d) MANNER OF PAYMENT ADJUSTMENT.—

2 ‘‘(1) PAYMENT REDUCTIONS.—

3 ‘‘(A) IN GENERAL.—Subject to the succeed4 ing provisions of this subsection, the Secretary

5 shall apply a payment reduction for each excess

6 spending sector for a fiscal year in such a man7 ner as to—

8 ‘‘(i) make a change in payment rates

9 (to the maximum extent practicable) at the

10 time payment rates are otherwise changed

11 or subject to change for that fiscal year; and

12 ‘‘(ii) provide for the full appropriate

13 adjustment so that the fee-for-service ex14 penditures for the sector for the fiscal year

will be reduced by 1331 15 ⁄3 percent of the

16 amount of the sector reduction target for

17 that sector.

18 ‘‘(B) SECTOR REDUCTION TARGET.—In

19 paragraph (1), the ‘sector reduction target’ for

20 an excess spending sector for a fiscal year is

21 equal to the product of—
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1 ‘‘(i) the amount of the excess spending

2 for such sector and year (as defined in sub3 section (a)(2)); and

4 ‘‘(ii) the ratio of—

5 ‘‘(I) the aggregate excess spending

6 for the year (as defined in subsection

7 (a)(1)), to

8 ‘‘(II) the sum of the amounts of

9 the excess spending for all excess spend10 ing sectors.

11 ‘‘(2) TAKING INTO ACCOUNT VOLUME AND CASH

12 FLOW.—In providing for an adjustment in payments

13 under this subsection for a sector for a fiscal year, the

14 Secretary shall take into account (in a manner con15 sistent with actuarial projections)—

16 ‘‘(A) the impact of such an adjustment on

17 the volume or type of services provided in such

18 sector (and other sectors), and

19 ‘‘(B) the fact that an adjustment may apply

20 to items and services furnished in a fiscal year

21 (payment for which may occur in a subsequent

22 fiscal year),

23 in a manner that is consistent with assuring that

24 total fee-for-services expenditures for each sector for
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1 the fiscal year will not exceed the allotment under

2 subsection (c)(1) for such sector for such year.

3 ‘‘(3) PROPORTIONALITY OF REDUCTIONS WITHIN

4 A SECTOR.—In making adjustments under this sub5 section in payment for items and services included

6 within a sector of medicare services for a fiscal year,

7 the Secretary shall provide for such an adjustment

8 that results (to the maximum extent feasible) in the

9 same percentage reductions in aggregate Federal pay10 ments under parts A and B for the different classes

11 of items and services included within the sector for

12 the fiscal year.

13 ‘‘(4) APPLICATION TO PAYMENTS MADE BASED

14 ON PROSPECTIVE PAYMENT RATES DETERMINED ON A

15 FISCAL YEAR BASIS.—

16 ‘‘(A) IN GENERAL.—In applying subsection

17 (a) with respect to items and services for which

18 payment is made under part A or B on the basis

19 of rates that are established on a prospective

20 basis for (and in advance of) a fiscal year, the

21 Secretary shall provide for the payment adjust22 ment under such subsection through an appro23 priate reduction in such rates established for

24 items and services furnished (or, in the case of

25 payment for operating costs of inpatient hospital
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1 services of subsection (d) hospitals and subsection

2 (d) Puerto Rico hospitals (as defined in para3 graphs (1)(B) and (9)(A) of section 1886(d)),

4 discharges occurring) during such year.

5 ‘‘(B) DESCRIPTION OF APPLICATION TO

6 SPECIFIC SERVICES.—The payment adjustment

7 described in subparagraph (A) applies for a fis8 cal year to at least the following:

9 ‘‘(i) UPDATE FACTOR FOR PAYMENT

10 FOR OPERATING COSTS OF INPATIENT HOS11 PITAL SERVICES OF PPS HOSPITALS.—To

12 the computation of the applicable percent13 age increase specified in section

14 1886(d)(3)(B)(i) for discharges occurring in

15 the fiscal year.

16 ‘‘(ii) HOME HEALTH SERVICES.—To

17 the extent payment amounts for home health

18 services are based on per visit payment

19 rates under section 1894, to the computa20 tion of the increase in the national per visit

21 payment rates established for the year

22 under section 1894(b)(2)(B).

23 ‘‘(iii) HOSPICE CARE.—To the update

24 of payment rates for hospice care under sec-
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1 tion 1814(i) for services furnished during

2 the fiscal year.

3 ‘‘(iv) UPDATE FACTOR FOR PAYMENT

4 OF OPERATING COSTS OF INPATIENT HOS5 PITAL SERVICES OF PPS-EXEMPT HOS6 PITALS.—To the computation of the target

7 amount under section 1886(b)(3) for dis8 charges occurring during the fiscal year.

9 ‘‘(v) COVERED NON-ROUTINE SERVICES

10 OF SKILLED NURSING FACILITIES.—To the

11 computation of the facility per stay limits

12 for the year under section 1888A(d) for cov13 ered non-routine services of a skilled nurs14 ing facility (as described in such section).

15 ‘‘(5) APPLICATION TO PAYMENTS MADE BASED

16 ON PROSPECTIVE PAYMENT RATES DETERMINED ON A

17 CALENDAR YEAR BASIS.—

18 ‘‘(A) IN GENERAL.—In applying subsection

19 (a) for a fiscal year with respect to items and

20 services for which payment is made under part

21 A or B on the basis of rates that are established

22 on a prospective basis for (and in advance of) a

23 calendar year, the Secretary shall provide for the

24 payment adjustment under such subsection

25 through an appropriate reduction in such rates
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1 established for items and services furnished at

2 any time during such calendar year as follows:

3 ‘‘(i) For fiscal year 1997, the reduction

4 shall be made for payment rates during cal5 endar year 1997 in a manner so as to

6 achieve the necessary payment reductions

7 for such fiscal year for items and services

8 furnished during the first 3 quarters of cal9 endar year 1997.

10 ‘‘(ii) For a subsequent fiscal year, the

11 reduction shall be made for payment rates

12 during the calendar year in which the fiscal

13 year ends in a manner so as to achieve the

14 necessary payment reductions for such fiscal

15 year for items and services furnished during

16 the first 3 quarters of the calendar year, but

17 also taking into account the payment reduc18 tions made in the first quarter of the fiscal

19 year resulting from payment reductions

20 made under this paragraph for the previous

21 calendar year.

22 ‘‘(iii) Payment rate reductions effected

23 under this subparagraph for a calendar

24 year and applicable to the last 3 quarters of

25 the fiscal year in which the calendar year
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1 ends shall continue to apply during the first

2 quarter of the succeeding fiscal year.

3 ‘‘(B) APPLICATION IN SPECIFIC CASES.—

4 The payment adjustment described in subpara5 graph (A) applies for a fiscal year to at least the

6 following:

7 ‘‘(i) UPDATE IN CONVERSION FACTOR

8 FOR PHYSICIANS’ SERVICES.—To the com9 putation of the conversion factor under sub10 section (d) of section 1848 used in the fee

11 schedule established under subsection (b) of

12 such section for items and services furnished

13 during the calendar year in which the fiscal

14 year ends.

15 ‘‘(ii) PAYMENT RATES FOR OTHER

16 HEALTH CARE PROFESSIONALS.—To the

17 computation of payments for professional

18 services, furnished during the calendar year

19 in which the fiscal year ends, of certified

20 registered nurse anesthetists under section

21 1833(l), nurse midwives, physician assist22 ants, nurse practitioners and clinical nurse

23 specialists under section 1833(r), clinical

24 psychologists, clinical social workers, phys25 ical or occupational therapists, and any
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1 other health professionals for which pay2 ment rates are based (in whole or in part)

3 on payments for physicians’ services.

4 ‘‘(iii) UPDATE IN LAB FEE SCHED5 ULE.—To the computation of the fee sched6 ule amount under section 1833(h)(2) for

7 clinical diagnostic laboratory services fur8 nished during the calendar year in which

9 the fiscal year ends.

10 ‘‘(iv) UPDATE IN REASONABLE

11 CHARGES FOR VACCINES.—To the computa12 tion of the reasonable charge for vaccines

13 described in section 1861(s)(10) for vaccines

14 furnished during the calendar year in

15 which the fiscal year ends.

16 ‘‘(v) DURABLE MEDICAL EQUIPMENT17 RELATED ITEMS.—To the computation of

18 the payment basis under section

19 1834(a)(1)(B) for covered items described in

20 section 1834(a)(13), for services furnished

21 during the calendar year in which the fiscal

22 year ends.

23 ‘‘(vi) RADIOLOGIST SERVICES.—To the

24 computation of conversion factors for radi25 ologist services under section 1834(b), for
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1 services furnished during the calendar year

2 in which the fiscal year ends.

3 ‘‘(vii) SCREENING MAMMOGRAPHY.—To

4 the computation of payment rates for

5 screening mammography under section

6 1834(c)(1)(C)(ii), for screening mammog7 raphy performed during the calendar year

8 in which the fiscal year ends.

9 ‘‘(viii) PROSTHETICS AND

10 ORTHOTICS..—To the computation of the

11 amount to be recognized under section

12 1834(h) for payment for prosthetic devices

13 and orthotics and prosthetics, for items fur14 nished during the calendar year in which

15 the fiscal year ends.

16 ‘‘(ix) SURGICAL DRESSINGS.—To the

17 computation of the payment amount re18 ferred to in section 1834(i)(1)(B) for sur19 gical dressings, for items furnished during

20 the calendar year in which the fiscal year

21 ends.

22 ‘‘(x) PARENTERAL AND ENTERAL NU23 TRITION.—To the computation of reasonable

24 charge screens for payment for parenteral

25 and enteral nutrition under section 1834(h),
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1 for nutrients furnished during the calendar

2 year in which the fiscal year ends.

3 ‘‘(xi) AMBULANCE SERVICES.—To the

4 computation of limits on reasonable charges

5 for ambulance services, for services fur6 nished during the calendar year in which

7 the fiscal year ends.

8 ‘‘(6) APPLICATION TO PAYMENTS MADE BASED

9 ON COSTS DURING A COST REPORTING PERIOD.—

10 ‘‘(A) IN GENERAL.—In applying subsection

11 (a) for a fiscal year with respect to items and

12 services for which payment is made under part

13 A or B on the basis of costs incurred for items

14 and services in a cost reporting period, the Sec15 retary shall provide for the payment adjustment

16 under such subsection for a fiscal year through

17 an appropriate proportional reduction in the

18 payment for costs for such items and services in19 curred at any time during each cost reporting

20 period any part of which occurs during the fiscal

21 year involved, but only (for each such cost re22 porting period) in the same proportion as the

23 fraction of the cost reporting period that occurs

24 during the fiscal year involved.
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1 ‘‘(B) APPLICATION IN SPECIFIC CASES.—

2 The payment adjustment described in subpara3 graph (A) applies for a fiscal year to at least the

4 following:

5 ‘‘(i) CAPITAL-RELATED COSTS OF HOS6 PITAL SERVICES.—To the computation of

7 payment amounts for inpatient and out8 patient hospital services under sections

9 1886(g) and 1861(v) for portions of cost re10 porting periods occurring during the fiscal

11 year.

12 ‘‘(ii) OPERATING COSTS FOR PPS-EX13 EMPT HOSPITALS.—To the computation of

14 payment amounts under section 1886(b) for

15 operating costs of inpatient hospital services

16 of PPS-exempt hospitals for portions of cost

17 reporting periods occurring during the fis18 cal year.

19 ‘‘(iii) DIRECT GRADUATE MEDICAL

20 EDUCATION.—To the computation of pay21 ment amounts under section 1886(h) for

22 reasonable costs of direct graduate medical

23 education costs for portions of cost reporting

24 periods occurring during the fiscal year.
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1 ‘‘(iv) INPATIENT RURAL PRIMARY CARE

2 HOSPITAL SERVICES.—To the computation

3 of payment amounts under section 1814(j)

4 for inpatient rural primary care hospital

5 services for portions of cost reporting peri6 ods occurring during the fiscal year.

7 ‘‘(v) EXTENDED CARE SERVICES OF A

8 SKILLED NURSING FACILITY.—To the com9 putation of payment amounts under section

10 1861(v) for post-hospital extended care serv11 ices of a skilled nursing facility (other than

12 covered non-routine services subject to sec13 tion 1888A) for portions of cost reporting

14 periods occurring during the fiscal year.

15 ‘‘(vi) REASONABLE COST CON16 TRACTS.—To the computation of payment

17 amounts under section 1833(a)(1)(A) for or18 ganizations for portions of cost reporting

19 periods occurring during the fiscal year.

20 ‘‘(vii) HOME HEALTH SERVICES.—

21 Subject to paragraph (4)(B)(ii), for pay22 ment amounts for home health services, for

23 portions of cost reporting periods occurring

24 during such fiscal year.
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1 ‘‘(7) OTHER.—In applying subsection (a) for a

2 fiscal year with respect to items and services for

3 which payment is made under part A or B on a basis

4 not described in a previous paragraph of this sub5 section, the Secretary shall provide for the payment

6 adjustment under such subsection through an appro7 priate proportional reduction in the payments (or

8 payment bases for items and services furnished) dur9 ing the fiscal year.

10 ‘‘(8) ADJUSTMENT OF PAYMENT LIMITS.—The

11 Secretary shall provide for such proportional adjust12 ment in any limits on payment established under

13 part A or B for items and services within a sector as

14 may be appropriate based on (and in order to prop15 erly carry out) the adjustment to the amount of pay16 ment under this subsection in the sector.

17 ‘‘(9) REFERENCES TO PAYMENT RATES.—Except

18 as the Secretary may provide, any reference in this

19 title (other than this section) to a payment rate is

20 deemed a reference to such a rate as adjusted under

21 this subsection.

22 ‘‘(e) PUBLICATION OF DETERMINATIONS; JUDICIAL

23 REVIEW.—

24 ‘‘(1) ONE-TIME PUBLICATION OF SECTORS AND

25 GENERAL PAYMENT ADJUSTMENT METHODOLOGY.—
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1 Not later than October 1, 1996, the Secretary shall

2 publish in the Federal Register the classification of

3 medicare items and services into the sectors of medi4 care services under subsection (b) and the general

5 methodology to be used in applying payment adjust6 ments to the different classes of items and services

7 within the sectors.

8 ‘‘(2) INCLUSION OF INFORMATION IN PRESI9 DENT’S BUDGET.—

10 ‘‘(A) IN GENERAL.—With respect to fiscal

11 years beginning with fiscal year 1999, the Presi12 dent shall include in the budget submitted under

13 section 1105 of title 31, United States Code, in14 formation on—

15 ‘‘(i) the fee-for-service expenditures,

16 within each sector, for the second previous

17 fiscal year, and how such expenditures com18 pare to the adjusted sector allotment for

19 that sector for that fiscal year, and

20 ‘‘(ii) actual annual growth rates for

21 fee-for-service expenditures in the different

22 sectors in the second previous fiscal year.

23 ‘‘(B) RECOMMENDATION REGARDING

24 GROWTH FACTORS.—The President may include

25 in such budget for a fiscal year (beginning with
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1 fiscal year 1998) recommendations regarding

2 percentages that should be applied (for one or

3 more fiscal years beginning with that fiscal

4 year) instead of the baseline annual growth rates

5 under subsection (c)(3)(C). Such recommenda6 tions shall take into account medically appro7 priate practice patterns.

8 ‘‘(3) DETERMINATIONS CONCERNING PAYMENT

9 ADJUSTMENTS.—

10 ‘‘(A) RECOMMENDATIONS OF COMMIS11 SION.—By not later than March 1 of each year

12 (beginning with 1997), the Medicare Payment

13 Review Commission shall submit to the Sec14 retary and the Congress a report that analyzes

15 the previous operation (if any) of this section

16 and that includes recommendations concerning

17 the manner in which this section should be ap18 plied for the following fiscal year:

19 ‘‘(B) PRELIMINARY NOTICE BY SEC20 RETARY.—Not later than May 15 preceding the

21 beginning of each fiscal year (beginning with fis22 cal year 1998), the Secretary shall publish in the

23 FEDERAL REGISTER a notice containing the Sec24 retary’s preliminary determination, for each sec-
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1 tor of medicare services, concerning the follow2 ing:

3 ‘‘(i) the projected allotment under sub4 section (c) for such sector for the fiscal year.

5 ‘‘(ii) Whether there will be a payment

6 adjustment for items and services included

7 in such sector for the fiscal year under sub8 section (a).

9 ‘‘(iii) If there will be such an adjust10 ment, the size of such adjustment and the

11 methodology to be used in making such a

12 payment adjustment for classes of items and

13 services included in such sector.

14 ‘‘(iv) Beginning with fiscal year 1999,

15 the fee-for-service expenditures for such sec16 tor for the second preceding fiscal year.

17 Such notice shall include an explanation of the

18 basis for such determination. Determinations

19 under this subparagraph and subparagraph (C)

20 shall be based on the best data available at the

21 time of such determinations.

22 ‘‘(C) FINAL DETERMINATION.—Not later

23 than September 1 preceding the beginning of

24 each fiscal year (beginning with fiscal year

25 1998), the Secretary shall publish in the Federal
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1 Register a final determination, for each, sector of

2 medicare services, concerning the matters de3 scribed in subparagraph (B) and an explanation

4 of the reasons for any differences between such

5 determination and the preliminary determina6 tion for such fiscal year published under sub7 paragraph (B).

8 ‘‘(4) LIMITATION ON ADMINISTRATIVE OR JUDI9 CIAL REVIEW.—There shall be no administrative or

10 judicial review under section 1878 or otherwise of—

11 ‘‘(A) the classification of items and services

12 among the sectors of medicare services under sub13 section (b),

14 ‘‘(B) the determination of the amounts of

15 allotments for the different sectors of medicare

16 services under subsection (c),

17 ‘‘(C) the determination of the amount (or

18 method of application) of any payment adjust19 ment under subsection (d), or

20 ‘‘(D) any adjustment in an allotment ef21 fected under subsection (g).

22 ‘‘(f) FEE-FOR-SERVICE EXPENDITURES DE23 FINED.—In this section, the term ‘‘fee-for-service expendi24 tures’, for items and services within a sector of medicare

25 services in a fiscal year, means amounts payable for such
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1 items and services which are furnished during the fiscal

2 year, and—

3 ‘‘(1) includes types of expenses otherwise reim4 bursable under parts A and B (including administra5 tive costs incurred by organizations described in sec6 tions 1816 and 1842) with respect to such items and

7 services, and

8 ‘‘(2) does not include amounts paid under part

9 C.

10 ‘‘(g) LOOK-BACK ADJUSTMENT IN ALLOTMENTS TO

11 REFLECT ACTUAL EXPENDITURES.—

12 ‘‘(1) DETERMINATIONS.—

13 ‘‘(A) IN GENERAL.—If the Secretary esti14 mates under subsection (e)(3)(B) with respect to

15 a particular fiscal year (beginning with fiscal

16 year 1998) that—

17 ‘‘(i) the fee-for-service expenditures for

18 all sectors of medicare services for the sec19 ond preceding fiscal year, exceeded

20 ‘‘(ii) the sum of the adjusted allotments

21 for all sectors for such year (as defined in

22 paragraph (2)),

23 then the allotment for each final excess

24 spending sector (as defined in subparagraph

25 (B)(i)) for the particular fiscal year shall be re-
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1 duced by the look-back sector reduction amount

2 determined under subparagraph (B)(ii) for such

3 sector and year.

4 ‘‘(B) FINAL EXCESS SPENDING SECTORS.—

5 ‘‘(i) IN GENERAL.—In this paragraph,

6 the term final excess spending sector’ means,

7 for a fiscal year, a sector of medicare serv8 ices for which the Secretary determines

9 under subsection (e)(B) that—

10 ‘‘(I) the fee-for-service expendi11 tures (as defined in subsection (f) for

12 the fiscal year, exceeded

13 ‘‘(II) the adjusted allotment for

14 such fiscal year.

15 For purposes of clause (ii), the term ‘final

16 excess spending’ means, for a fiscal year

17 with respect to such a sector, the amount by

18 which the amount described in subclause (I)

19 (for the fiscal year and sector) exceeds the

20 amount described in subclause (II) for such

21 year and sector.

22 ‘‘(ii) LOOK BACK SECTOR REDUCTION

23 AMOUNT.—In subparagraph (A)(i), the ‘look

24 back sector reduction amount’ for a final
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1 excess spending sector for a fiscal year is

2 equal to the product of—

3 ‘‘(I) the amount of the final excess

4 spending for such sector and year (as

5 defined in clause (i)); and

6 ‘‘(II) the ratio of—

7 ‘‘(a) the aggregate final ex8 cess spending for the year (de9 scribed in subparagraph (A)(i)),

10 to

11 ‘‘(b) the sum of the amounts

12 of the final excess spending for all

13 final excess spending sectors.

14 ‘‘(2) ADJUSTED ALLOTMENT.—The adjusted al15 lotment under this paragraph for a sector for a fiscal

16 year is—

17 ‘‘(A) the amount that would be computed as

18 the allotment under subsection (c) for the sector

19 for the fiscal year if the actual amount of pay20 ments made in the fiscal year under the

21 MedicarePlus program under part C in the fiscal

22 year were substituted for the amount described

23 in subsection (c)(2)(A)(ii) for that fiscal year,

24 ‘‘(B) adjusted to take into account the

25 amount of any adjustment under paragraph (1)
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1 for that fiscal year (based on expenditures in the

2 second preceding fiscal year).’’.

3 (b) REPORT OF TRUSTEES ON GROWTH RATE IN

4 PART A EXPENDITURES.—Section 1817 (42 U.S.C. 1395i)

5 is amended by adding at the end the following new sub6 section:

7 ‘‘(k) Each annual report provided in subsection

8 (b)(2) shall include information regarding the annual rate

9 of growth in program expenditures that would be required

10 to maintain the financial solvency of the Trust Fund and

11 the extent to which the provisions of section 1895 restrain

12 the rate of growth of expenditures under this part in order

13 to achieve such solvency.’’.

14 Subtitle H—Rural Areas

15 SEC. 8701. MEDICARE-DEPENDENT, SMALL, RURAL HOS16 PITAL PAYMENT EXTENSION.

17 (a) SPECIAL TREATMENT EXTENDED.—

18 (1) PAYMENT METHODOLOGY.—Section

19 1886(d)(5)(G) (42 U.S.C. 1395ww(d)(5)(G)) is

20 amended—

21 (A) in clause (i), by striking ‘‘October 1,

22 1994,’’ and inserting ‘‘October 1, 1994, or begin23 ning on or after September 1, 1995, and before

24 October 1, 2000,’’; and
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1 (B) in clause (ii)(II), by striking ‘‘October

2 1, 1994,’’ and inserting ‘‘October 1, 1994, or be3 ginning on or after September 1, 1995, and be4 fore October 1, 2000,’’.

5 (2) EXTENSION OF TARGET AMOUNT.—Section

6 1886(b)(3)(D) (42 U.S.C. 1395ww(b)(3)(D)) is

7 amended—

8 (A) in the matter preceding clause (i), by

9 striking ‘‘September 30, 1994,’’ and inserting

10 ‘‘September 30, 1994, and for cost reporting pe11 riods beginning on or after September 1, 1995,

12 and before October 1, 2000,’’;

13 (B) in clause (ii), by striking ‘‘and’’ at the

14 end;

15 (C) in clause (iii), by striking the period at

16 the end and inserting ‘‘, and’’; and

17 (D) by adding at the end the following new

18 clause:

19 ‘‘(iv) with respect to discharges occurring during

20 September 1995 through fiscal year 1999, the target

21 amount for the preceding year increased by the appli22 cable percentage increase under subparagraph

23 (B)(iv).’’.

24 (3) PERMITTING HOSPITALS TO DECLINE RE25 CLASSIFICATION.—Section 13501(e)(2) of OBRA–93
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1 (42 U.S.C. 1395ww note) is amended by striking ‘‘or

2 fiscal year 1994’’ and inserting ‘‘, fiscal year 1994,

3 fiscal year 1995, fiscal year 1996, fiscal year 1997,

4 fiscal year 1998, or fiscal year 1999’’.

5 (b) EFFECTIVE DATE.—The amendments made by sub6 section (a) shall apply with respect to discharges occurring

7 on or after September 1, 1995.

8 SEC. 8702. MEDICARE RURAL HOSPITAL FLEXIBILITY PRO9 GRAM.

10 (a) MEDICARE RURAL HOSPITAL FLEXIBILITY PRO11 GRAM.—Section 1820 (42 U.S.C. 1395i–4) is amended to

12 read as follows:

13 ‘‘MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM

14 ‘‘SEC. 1820. (a) ESTABLISHMENT.—Any State that

15 submits an application in accordance with subsection (b)

16 may establish a medicare rural hospital flexibility program

17 described in subsection (c).

18 ‘‘(b) APPLICATION.—A State may establish a medicare

19 rural hospital flexibility program described in subsection

20 (c) if the State submits to the Secretary at such time and

21 in such form as the Secretary may require an application

22 containing—

23 ‘‘(1) assurances that the State—

24 ‘‘(A) has developed, or is in the process of

25 developing, a State rural health care plan that—
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1 ‘‘(i) provides for the creation of one or

2 more rural health networks (as defined in

3 subsection (d)) in the State,

4 ‘‘(ii) promotes regionalization of rural

5 health services in the State, and

6 ‘‘(iii) improves access to hospital and

7 other health services for rural residents of

8 the State;

9 ‘‘(B) has developed the rural health care

10 plan described in subparagraph (A) in consulta11 tion with the hospital association of the State,

12 rural hospitals located in the State, and the

13 State Office of Rural Health (or, in the case of

14 a State in the process of developing such plan,

15 that assures the Secretary that the State will

16 consult with its State hospital association, rural

17 hospitals located in the State, and the State Of18 fice of Rural Health in developing such plan);

19 ‘‘(2) assurances that the State has designated

20 (consistent with the rural health care plan described

21 in paragraph (1)(A)), or is in the process of so des22 ignating, rural nonprofit or public hospitals or facili23 ties located in the State as critical access hospitals;

24 and
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1 ‘‘(3) such other information and assurances as

2 the Secretary may require.

3 ‘‘(c) MEDICARE RURAL HOSPITAL FLEXIBILITY PRO4 GRAM DESCRIBED.—

5 ‘‘(1) IN GENERAL.—A State that has submitted

6 an application in accordance with subsection (b),

7 may establish a medicare rural hospital flexibility

8 program that provides that—

9 ‘‘(A) the State shall develop at least one

10 rural health network (as defined in subsection

11 (d)) in the State; and

12 ‘‘(B) at least one facility in the State shall

13 be designated as a critical access hospital in ac14 cordance with paragraph (2).

15 ‘‘(2) STATE DESIGNATION OF FACILITIES.—

16 ‘‘(A) IN GENERAL.—A State may designate

17 one or more facilities as a critical access hospital

18 in accordance with subparagraph (B).

19 ‘‘(B) CRITERIA FOR DESIGNATION AS CRITI20 CAL ACCESS HOSPITAL.—A State may designate

21 a facility as a critical access hospital if the facil22 ity—

23 ‘‘(i) is located in a county (or equiva24 lent unit of local government) in a rural
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1 area (as defined in section 1886(d)(2)(D))

2 that—

3 ‘‘(I) is located more than a 35-

4 mile drive from a hospital, or another

5 facility described in this subsection, or

6 ‘‘(II) is certified by the State as

7 being a necessary provider of health

8 care services to residents in the area;

9 ‘‘(ii) makes available 24-hour emer10 gency care services that a State determines

11 are necessary for ensuring access to emer12 gency care services in each area served by

13 a critical access hospital;

14 ‘‘(iii) provides not more than 6 acute

15 care inpatient beds (meeting such standards

16 as the Secretary may establish) for provid17 ing inpatient care for a period not to exceed

18 72 hours (unless a longer period is required

19 because transfer to a hospital is precluded

20 because of inclement weather or other emer21 gency conditions), except that a peer review

22 organization or equivalent entity may, on

23 request, waive the 72-hour restriction on a

24 case-by-case basis;
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1 ‘‘(iv) meets such staffing requirements

2 as would apply under section 1861(e) to a

3 hospital located in a rural area, except

4 that—

5 ‘‘(I) the facility need not meet

6 hospital standards relating to the num7 ber of hours during a day, or days

8 during a week, in which the facility

9 must be open and fully staffed, except

10 insofar as the facility is required to

11 make available emergency care services

12 as determined under clause (ii) and

13 must have nursing services available

14 on a 24-hour basis, but need not other15 wise staff the facility except when an

16 inpatient is present,

17 ‘‘(II) the facility may provide any

18 services otherwise required to be pro19 vided by a full-time, on-site dietitian,

20 pharmacist, laboratory technician,

21 medical technologist, and radiological

22 technologist on a part-time, off-site

23 basis under arrangements as defined in

24 section 1861(w)(1), and
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1 ‘‘(III) the inpatient care described

2 in clause (iii) may be provided by a

3 physician’s assistant, nurse practi4 tioner, or clinical nurse specialist sub5 ject to the oversight of a physician who

6 need not be present in the facility; and

7 ‘‘(v) meets the requirements of sub8 paragraph (I) of paragraph (2) of section

9 1861(aa).

10 ‘‘(d) RURAL HEALTH NETWORK DEFINED.—

11 ‘‘(1) IN GENERAL.—For purposes of this section,

12 the term ‘rural health network’ means, with respect to

13 a State, an organization consisting of—

14 ‘‘(A) at least 1 facility that the State has

15 designated or plans to designate as a critical ac16 cess hospital, and

17 ‘‘(B) at least 1 hospital that furnishes acute

18 care services.

19 ‘‘(2) AGREEMENTS.—

20 ‘‘(A) IN GENERAL.—Each critical access

21 hospital that is a member of a rural health net22 work shall have an agreement with respect to

23 each item described in subparagraph (B) with at

24 least 1 hospital that is a member of the network.
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1 ‘‘(B) ITEMS DESCRIBED.—The items de2 scribed in this subparagraph are the following:

3 ‘‘(i) Patient referral and transfer.

4 ‘‘(ii) The development and use of com5 munications systems including (where fea6 sible)—

7 ‘‘(I) telemetry systems, and

8 ‘‘(II) systems for electronic shar9 ing of patient data.

10 ‘‘(iii) The provision of emergency and

11 non-emergency transportation among the

12 facility and the hospital.

13 ‘‘(C) CREDENTIALING AND QUALITY ASSUR14 ANCE.—Each critical access hospital that is a

15 member of a rural health network shall have an

16 agreement with respect to credentialing and

17 quality assurance with at least 1—

18 ‘‘(i) hospital that is a member of the

19 network;

20 ‘‘(ii) peer review organization or

21 equivalent entity; or

22 ‘‘(iii) other appropriate and qualified

23 entity identified in the State rural health

24 care plan.
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1 ‘‘(e) CERTIFICATION BY THE SECRETARY.—The Sec2 retary shall certify a facility as a critical access hospital

3 if the facility—

4 ‘‘(1) is located in a State that has established a

5 medicare rural hospital flexibility program in accord6 ance with subsection (c);

7 ‘‘(2) is designated as a critical access hospital by

8 the State in which it is located; and

9 ‘‘(3) meets such other criteria as the Secretary

10 may require.

11 ‘‘(f) PERMITTING MAINTENANCE OF SWING BEDS.—

12 Nothing in this section shall be construed to prohibit a State

13 from designating or the Secretary from certifying a facility

14 as a critical access hospital solely because, at the time the

15 facility applies to the State for designation as a critical

16 access hospital, there is in effect an agreement between the

17 facility and the Secretary under section 1883 under which

18 the facility’s inpatient hospital facilities are used for the

19 furnishing of extended care services, except that the number

20 of beds used for the furnishing of such services may not ex21 ceed 12 beds (minus the number of inpatient beds used for

22 providing inpatient care in the facility pursuant to sub23 section (c)(2)(B)(iii)). For purposes of the previous sen24 tence, the number of beds of the facility used for the furnish25 ing of extended care services shall not include any beds of
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1 a unit of the facility that is licensed as a distinct-part

2 skilled nursing facility at the time the facility applies to

3 the State for designation as a critical access hospital.

4 ‘‘(g) WAIVER OF CONFLICTING PART A PROVISIONS.—

5 The Secretary is authorized to waive such provisions of this

6 part and part C as are necessary to conduct the program

7 established under this section.’’.

8 (b) PART A AMENDMENTS RELATING TO RURAL PRI9 MARY CARE HOSPITALS AND CRITICAL ACCESS HOS10 PITALS.—

11 (1) DEFINITIONS.—Section 1861(mm) (42

12 U.S.C. 1395x(mm)) is amended to read as follows:

13 ‘‘CRITICAL ACCESS HOSPITAL; CRITICAL ACCESS HOSPITAL

14 SERVICES

15 ‘‘(mm)(1) The term ‘critical access hospital’ means a

16 facility certified by the Secretary as a critical access hos17 pital under section 1820(e).

18 ‘‘(2) The term ‘inpatient critical access hospital serv19 ices’ means items and services, furnished to an inpatient

20 of a critical access hospital by such facility, that would be

21 inpatient hospital services if furnished to an inpatient of

22 a hospital by a hospital.’’.

23 (2) COVERAGE AND PAYMENT.—(A) Section

24 1812(a)(1) (42 U.S.C. 1395d(a)(1)) is amended by

25 striking ‘‘or inpatient rural primary care hospital
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1 services’’ and inserting ‘‘or inpatient critical access

2 hospital services’’.

3 (B) Sections 1813(a) and section 1813(b)(3)(A)

4 (42 U.S.C. 1395e(a), 1395e(b)(3)(A)) are each amend5 ed by striking ‘‘inpatient rural primary care hospital

6 services’’ each place it appears, and inserting ‘‘inpa7 tient critical access hospital services’’.

8 (C) Section 1813(b)(3)(B) (42 U.S.C.

9 1395e(b)(3)(B)) is amended by striking ‘‘inpatient

10 rural primary care hospital services’’ and inserting

11 ‘‘inpatient critical access hospital services’’.

12 (D) Section 1814 (42 U.S.C. 1395f) is amend13 ed—

14 (i) in subsection (a)(8) by striking ‘‘rural

15 primary care hospital’’ each place it appears

16 and inserting ‘‘critical access hospital’’; and

17 (ii) in subsection (b), by striking ‘‘other

18 than a rural primary care hospital providing

19 inpatient rural primary care hospital services,’’

20 and inserting ‘‘other than a critical access hos21 pital providing inpatient critical access hospital

22 services,’’; and

23 (iii) by amending subsection (l) to read as

24 follows:
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1 ‘‘(l) PAYMENT FOR INPATIENT CRITICAL ACCESS HOS2 PITAL SERVICES.—The amount of payment under this part

3 for inpatient critical access hospital services is the reason4 able costs of the critical access hospital in providing such

5 services.’’.

6 (3) TREATMENT OF CRITICAL ACCESS HOSPITALS

7 AS PROVIDERS OF SERVICES.—(A) Section 1861(u)

8 (42 U.S.C. 1395x(u)) is amended by striking ‘‘rural

9 primary care hospital’’ and inserting ‘‘critical access

10 hospital’’.

11 (B) The first sentence of section 1864(a) (42

12 U.S.C. 1395aa(a)) is amended by striking ‘‘a rural

13 primary care hospital’’ and inserting ‘‘a critical ac14 cess hospital’’.

15 (4) CONFORMING AMENDMENTS.—(A) Section

16 1128A(b)(1) (42 U.S.C. 1320a–7a(b)(1)) is amended

17 by striking ‘‘rural primary care hospital’’ each place

18 it appears and inserting ‘‘critical access hospital’’.

19 (B) Section 1128B(c) (42 U.S.C. 1320a–7b(c)) is

20 amended by striking ‘‘rural primary care hospital’’

21 and inserting ‘‘critical access hospital’’.

22 (C) Section 1134 (42 U.S.C. 1320b–4) is amend23 ed by striking ‘‘rural primary care hospitals’’ each

24 place it appears and inserting ‘‘critical access hos25 pitals’’.
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1 (D) Section 1138(a)(1) (42 U.S.C. 1320b–

2 8(a)(1)) is amended—

3 (i) in the matter preceding subparagraph

4 (A), by striking ‘‘rural primary care hospital’’

5 and inserting ‘‘critical access hospital’’; and

6 (ii) in the matter preceding clause (i) of

7 subparagraph (A), by striking ‘‘rural primary

8 care hospital’’ and inserting ‘‘critical access hos9 pital’’.

10 (E) Section 1816(c)(2)(C) (42 U.S.C.

11 1395h(c)(2)(C)) is amended by striking ‘‘rural pri12 mary care hospital’’ and inserting ‘‘critical access

13 hospital’’.

14 (F) Section 1833 (42 U.S.C. 1395l) is amend15 ed—

16 (i) in subsection (h)(5)(A)(iii), by striking

17 ‘‘rural primary care hospital’’ and inserting

18 ‘‘critical access hospital’’;

19 (ii) in subsection (i)(1)(A), by striking

20 ‘‘rural primary care hospital’’ and inserting

21 ‘‘critical access hospital’’;

22 (iii) in subsection (i)(3)(A), by striking

23 ‘‘rural primary care hospital services’’ and in24 serting ‘‘critical access hospital services’’;
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1 (iv) in subsection (l)(5)(A), by striking

2 ‘‘rural primary care hospital’’ each place it ap3 pears and inserting ‘‘critical access hospital’’;

4 and

5 (v) in subsection (l)(5)(B), by striking

6 ‘‘rural primary care hospital’’ each place it ap7 pears and inserting ‘‘critical access hospital’’.

8 (G) Section 1835(c) (42 U.S.C. 1395n(c)) is

9 amended by striking ‘‘rural primary care hospital’’

10 each place it appears and inserting ‘‘critical access

11 hospital’’.

12 (H) Section 1842(b)(6)(A)(ii) (42 U.S.C.

13 1395u(b)(6)(A)(ii)) is amended by striking ‘‘rural

14 primary care hospital’’ and inserting ‘‘critical access

15 hospital’’.

16 (I) Section 1861 (42 U.S.C. 1395x) is amend17 ed—

18 (i) in subsection (a)—

19 (I) in paragraph (1), by striking ‘‘in20 patient rural primary care hospital serv21 ices’’ and inserting ‘‘inpatient critical ac22 cess hospital services’’; and

23 (II) in paragraph (2), by striking

24 ‘‘rural primary care hospital’’ and insert25 ing ‘‘critical access hospital’’;
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1 (ii) in the last sentence of subsection (e), by

2 striking ‘‘rural primary care hospital’’ and in3 serting ‘‘critical access hospital’’;

4 (iii) in subsection (v)(1)(S)(ii)(III), by

5 striking ‘‘rural primary care hospital’’ and in6 serting ‘‘critical access hospital’’;

7 (iv) in subsection (w)(1), by striking ‘‘rural

8 primary care hospital’’ and inserting ‘‘critical

9 access hospital’’; and

10 (v) in subsection (w)(2), by striking ‘‘rural

11 primary care hospital’’ each place it appears

12 and inserting ‘‘critical access hospital’’.

13 (J) Section 1862(a)(14) (42 U.S.C.

14 1395y(a)(14)) is amended by striking ‘‘rural primary

15 care hospital’’ each place it appears and inserting

16 ‘‘critical access hospital’’.

17 (K) Section 1866(a)(1) (42 U.S.C 1395cc(a)(1))

18 is amended—

19 (i) in subparagraph (F)(ii), by striking

20 ‘‘rural primary care hospitals’’ and inserting

21 ‘‘critical access hospitals’’;

22 (ii) in subparagraph (H), in the matter

23 preceding clause (i), by striking ‘‘rural primary

24 care hospitals’’ and ‘‘rural primary care hospital

25 services’’ and inserting ‘‘critical access hospitals’’
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1 and ‘‘critical access hospital services’’, respec2 tively;

3 (iii) in subparagraph (I), in the matter

4 preceding clause (i), by striking ‘‘rural primary

5 care hospital’’ and inserting ‘‘critical access hos6 pital’’; and

7 (iv) in subparagraph (N)—

8 (I) in the matter preceding clause (i),

9 by striking ‘‘rural primary care hospitals’’

10 and inserting ‘‘critical access hospitals’’,

11 and

12 (II) in clause (i), by striking ‘‘rural

13 primary care hospital’’ and inserting ‘‘crit14 ical access hospital’’.

15 (L) Section 1866(a)(3) (42 U.S.C 1395cc(a)(3))

16 is amended—

17 (i) by striking ‘‘rural primary care hos18 pital’’ each place it appears in subparagraphs

19 (A) and (B) and inserting ‘‘critical access hos20 pital’’; and

21 (ii) in subparagraph (C)(ii)(II), by striking

22 ‘‘rural primary care hospitals’’ each place it ap23 pears and inserting ‘‘critical access hospitals’’.
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1 (M) Section 1867(e)(5) (42 U.S.C. 1395dd(e)(5))

2 is amended by striking ‘‘rural primary care hospital’’

3 and inserting ‘‘critical access hospital’’.

4 (c) PAYMENT CONTINUED TO DESIGNATED EACHS.—

5 Section 1886(d)(5)(D) (42 U.S.C. 1395ww(d)(5)(D)) is

6 amended—

7 (1) in clause (iii)(III), by inserting ‘‘as in effect

8 on September 30, 1995’’ before the period at the end;

9 and

10 (2) in clause (v)—

11 (A) by inserting ‘‘as in effect on September

12 30, 1995’’ after ‘‘1820 (i)(1)’’; and

13 (B) by striking ‘‘1820(g)’’ and inserting

14 ‘‘1820(e)’’.

15 (d) PART B AMENDMENTS RELATING TO CRITICAL AC16 CESS HOSPITALS.—

17 (1) COVERAGE.—(A) Section 1861(mm) (42

18 U.S.C. 1395x(mm)) as amended by subsection (d)(1),

19 is amended by adding at the end the following new

20 paragraph:

21 ‘‘(3) The term ‘outpatient critical access hospital serv22 ices’ means medical and other health services furnished by

23 a critical access hospital on an outpatient basis.’’.

24 (B) Section 1832(a)(2)(H) (42 U.S.C.

25 1395k(a)(2)(H)) is amended by striking ‘‘rural pri-
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1 mary care hospital services’’ and inserting ‘‘critical

2 access hospital services’’.

3 (2) PAYMENT.—(A) Section 1833(a) (42 U.S.C.

4 1395l(a)) is amended in paragraph (6), by striking

5 ‘‘outpatient rural primary care hospital services’’ and

6 inserting ‘‘outpatient critical access hospital services’’.

7 (B) Section 1834(g) (42 U.S.C. 1395m(g)) is

8 amended to read as follows:

9 ‘‘(g) PAYMENT FOR OUTPATIENT CRITICAL ACCESS

10 HOSPITAL SERVICES.—The amount of payment under this

11 part for outpatient critical access hospital services is the

12 reasonable costs of the critical access hospital in providing

13 such services.’’.

14 (e) EFFECTIVE DATE.—The amendments made by this

15 section shall apply to services furnished on or after October

16 1, 1995.

17 SEC. 8703. ESTABLISHMENT OF RURAL EMERGENCY ACCESS

18 CARE HOSPITALS.

19 (a) IN GENERAL.—Section 1861 (42 U.S.C. 1395x) is

20 amended by adding at the end the following new subsection:

21 ‘‘Rural Emergency Access Care Hospital; Rural

22 Emergency Access Care Hospital Services

23 ‘‘(oo)(1) The term ‘rural emergency access care hos24 pital’ means, for a fiscal year, a facility with respect to

25 which the Secretary finds the following:
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1 ‘‘(A) The facility is located in a rural area (as

2 defined in section 1886(d)(2)(D)).

3 ‘‘(B) The facility was a hospital under this title

4 at any time during the 5-year period that ends on the

5 date of the enactment of this subsection.

6 ‘‘(C) The facility is in danger of closing due to

7 low inpatient utilization rates and operating losses,

8 and the closure of the facility would limit the access

9 to emergency services of individuals residing in the

10 facility’s service area.

11 ‘‘(D) The facility has entered into (or plans to

12 enter into) an agreement with a hospital with a par13 ticipation agreement in effect under section 1866(a),

14 and under such agreement the hospital shall accept

15 patients transferred to the hospital from the facility

16 and receive data from and transmit data to the facil17 ity.

18 ‘‘(E) There is a practitioner who is qualified to

19 provide advanced cardiac life support services (as de20 termined by the State in which the facility is located)

21 on-site at the facility on a 24-hour basis.

22 ‘‘(F) A physician is available on-call to provide

23 emergency medical services on a 24-hour basis.
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1 ‘‘(G) The facility meets such staffing require2 ments as would apply under section 1861(e) to a hos3 pital located in a rural area, except that—

4 ‘‘(i) the facility need not meet hospital

5 standards relating to the number of hours during

6 a day, or days during a week, in which the facil7 ity must be open, except insofar as the facility

8 is required to provide emergency care on a 24-

9 hour basis under subparagraphs (E) and (F);

10 and

11 ‘‘(ii) the facility may provide any services

12 otherwise required to be provided by a full-time,

13 on-site dietitian, pharmacist, laboratory techni14 cian, medical technologist, or radiological tech15 nologist on a part-time, off-site basis.

16 ‘‘(H) The facility meets the requirements appli17 cable to clinics and facilities under subparagraphs

18 (C) through (J) of paragraph (2) of section 1861(aa)

19 and of clauses (ii) and (iv) of the second sentence of

20 such paragraph (or, in the case of the requirements

21 of subparagraph (E), (F), or (J) of such paragraph,

22 would meet the requirements if any reference in such

23 subparagraph to a ‘nurse practitioner’ or to ‘nurse

24 practitioners’ were deemed to be a reference to a

25 ‘nurse practitioner or nurse’ or to ‘nurse practitioners
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1 or nurses’); except that in determining whether a fa2 cility meets the requirements of this subparagraph,

3 subparagraphs (E) and (F) of that paragraph shall

4 be applied as if any reference to a ‘physician’ is a

5 reference to a physician as defined in section

6 1861(r)(1).

7 ‘‘(2) The term ‘rural emergency access care hospital

8 services’ means the following services provided by a rural

9 emergency access care hospital and furnished to an individ10 ual over a continuous period not to exceed 24 hours (except

11 that such services may be furnished over a longer period

12 in the case of an individual who is unable to leave the hos13 pital because of inclement weather):

14 ‘‘(A) An appropriate medical screening examina15 tion (as described in section 1867(a)).

16 ‘‘(B) Necessary stabilizing examination and

17 treatment services for an emergency medical condition

18 and labor (as described in section 1867(b)).’’.

19 (b) REQUIRING RURAL EMERGENCY ACCESS CARE

20 HOSPITALS TO MEET HOSPITAL ANTI-DUMPING REQUIRE21 MENTS.—Section 1867(e)(5) (42 U.S.C. 1395dd(e)(5)) is

22 amended by striking ‘‘1861(mm)(1))’’ and inserting

23 ‘‘1861(mm)(1)) and a rural emergency access care hospital

24 (as defined in section 1861(oo)(1))’’.

25 (c) COVERAGE AND PAYMENT FOR SERVICES.—
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1 (1) COVERAGE.—Section 1832(a)(2) (42 U.S.C.

2 1395k(a)(2)) is amended—

3 (A) by striking ‘‘and’’ at the end of sub4 paragraph (I);

5 (B) by striking the period at the end of sub6 paragraph (J) and inserting ‘‘; and’’; and

7 (C) by adding at the end the following new

8 subparagraph:

9 ‘‘(K) rural emergency access care hospital

10 services (as defined in section 1861(oo)(2)).’’.

11 (2) PAYMENT BASED ON PAYMENT FOR OUT12 PATIENT CRITICAL ACCESS HOSPITAL SERVICES.—

13 (A) IN GENERAL.—Section 1833(a)(6) (42

14 U.S.C. 1395l(a)(6)), as amended by section

15 8702(f)(2), is amended by striking ‘‘services,’’

16 and inserting ‘‘services and rural emergency ac17 cess care hospital services,’’.

18 (B) PAYMENT METHODOLOGY DESCRIBED.—

19 Section 1834(g) (42 U.S.C. 1395m(g)), as

20 amended by section 8702(f)(2)(B), is amended—

21 (i) in the heading, by striking ‘‘SERV22 ICES’’ and inserting ‘‘SERVICES AND RURAL

23 EMERGENCY ACCESS CARE HOSPITAL

24 SERVICES’’; and
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1 (ii) by adding at the end the following

2 new sentence: ‘‘The amount of payment for

3 rural emergency access care hospital serv4 ices provided during a year shall be deter5 mined using the applicable method provided

6 under this subsection for determining pay7 ment for outpatient rural primary care hos8 pital services during the year.’’.

9 (d) EFFECTIVE DATE.—The amendments made by this

10 section shall apply to fiscal years beginning on or after Oc11 tober 1, 1995.

12 SEC. 8704. CLASSIFICATION OF RURAL REFERRAL CENTERS.

13 (a) PROHIBITING DENIAL OF REQUEST FOR RECLAS14 SIFICATION ON BASIS OF COMPARABILITY OF WAGES.—

15 (1) IN GENERAL.—Section 1886(d)(10)(D) (42

16 U.S.C. 1395ww(d)(10)(D)) is amended—

17 (A) by redesignating clause (iii) as clause

18 (iv); and

19 (B) by inserting after clause (ii) the follow20 ing new clause:

21 ‘‘(iii) Under the guidelines published by the Secretary

22 under clause (i), in the case of a hospital which is classified

23 by the Secretary as a rural referral center under paragraph

24 (5)(C), the Board may not reject the application of the hos25 pital under this paragraph on the basis of any comparison
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1 between the average hourly wage of the hospital and the

2 average hourly wage of hospitals in the area in which it

3 is located.’’.

4 (2) EFFECTIVE DATE.—Notwithstanding section

5 1886(d)(10)(C)(ii) of the Social Security Act, a hos6 pital may submit an application to the Medicare Ge7 ographic Classification Review Board during the 30-

8 day period beginning on the date of the enactment of

9 this Act requesting a change in its classification for

10 purposes of determining the area wage index applica11 ble to the hospital under section 1886(d)(3)(D) of such

12 Act for fiscal year 1997, if the hospital would be eligi13 ble for such a change in its classification under the

14 standards described in section 1886(d)(10)(D) (as

15 amended by paragraph (1)) but for its failure to meet

16 the deadline for applications under section

17 1886(d)(10)(C)(ii).

18 (b) CONTINUING TREATMENT OF PREVIOUSLY DES19 IGNATED CENTERS.—Any hospital classified as a rural re20 ferral center by the Secretary of Health and Human Serv21 ices under section 1886(d)(5)(C) of the Social Security Act

22 for fiscal year 1994 shall be classified as such a rural refer23 ral center for fiscal year 1996 and each subsequent fiscal

24 year.
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1 SEC. 8705. FLOOR ON AREA WAGE INDEX.

2 (a) IN GENERAL.—For purposes of section

3 1886(d)(3)(E) of the Social Security Act for discharges oc4 curring on or after October 1, 1995, the area wage index

5 applicable under such section to any hospital which is not

6 located in a rural area (as defined in section 1886(d)(2)(D)

7 of such Act) may not be less than the average of the area

8 wage indices applicable under such section to hospitals lo9 cated in rural areas in the State in which the hospital is

10 located.

11 (b) IMPLEMENTATION.—The Secretary of Health and

12 Human Services shall adjust the area wage indices referred

13 to in subsection (a) for hospitals not described in such sub14 section in a manner which assures that the aggregate pay15 ments made under section 1886(d) of the Social Security

16 Act in a fiscal year for the operating costs of inpatient hos17 pital services are not greater or less than those which would

18 have been made in the year if this section did not apply.

19 SEC. 8706. ADDITIONAL PAYMENTS FOR PHYSICIANS’ SERV20 ICES FURNISHED IN SHORTAGE AREAS.

21 (a) INCREASE IN AMOUNT OF ADDITIONAL PAY22 MENT.—Section 1833(m) (42 U.S.C. 1395l(m)) is amended

23 by striking ‘‘10 percent’’ and inserting ‘‘20 percent’’.

24 (b) RESTRICTION TO PRIMARY CARE SERVICES.—Sec25 tion 1833(m) (42 U.S.C. 1395l(m)) is amended by inserting
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1 after ‘‘physicians’ services’’ the following: ‘‘consisting of pri2 mary care services (as defined in section 1842(i)(4))’’.

3 (c) EXTENSION OF PAYMENT FOR FORMER SHORTAGE

4 AREAS.—

5 (1) IN GENERAL.—Section 1833(m) (42 U.S.C.

6 1395l(m)) is amended by striking ‘‘area,’’ and insert7 ing ‘‘area (or, in the case of an area for which the

8 designation as a health professional shortage area

9 under such section is withdrawn, in the case of physi10 cians’ services furnished to such an individual during

11 the 3-year period beginning on the effective date of the

12 withdrawal of such designation),’’.

13 (2) EFFECTIVE DATE.—The amendment made by

14 paragraph (1) shall apply to physicians’ services fur15 nished in an area for which the designation as a

16 health professional shortage area under section

17 332(a)(1)(A) of the Public Health Service Act is with18 drawn on or after January 1, 1996.

19 (d) REQUIRING CARRIERS TO REPORT ON SERVICES

20 PROVIDED.—Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is

21 amended—

22 (1) by striking ‘‘and’’ at the end of subpara23 graph (I); and

24 (2) by inserting after subparagraph (I) the fol25 lowing new subparagraph:
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1 ‘‘(J) will provide information to the Secretary

2 (on such periodic basis as the Secretary may require)

3 on the types of providers to whom the carrier makes

4 additional payments for certain physicians’ services

5 pursuant to section 1833(m), together with a descrip6 tion of the services furnished by such providers; and’’.

7 (e) EFFECTIVE DATE.—The amendments made by sub8 sections (a), (b), and (d) shall apply to physicians’ services

9 furnished on or after October 1, 1995.

10 SEC. 8707. PAYMENTS TO PHYSICIAN ASSISTANTS AND

11 NURSE PRACTITIONERS FOR SERVICES FUR12 NISHED IN OUTPATIENT OR HOME SETTINGS.

13 (a) COVERAGE IN OUTPATIENT OR HOME SETTINGS

14 FOR PHYSICIAN ASSISTANTS AND NURSE PRACTITION15 ERS.—Section 1861(s)(2)(K) (42 U.S.C. 1395x(s)(2)(K)) is

16 amended—

17 (1) in clause (i)—

18 (A) by striking ‘‘or’’ at the end of subclause

19 (II); and

20 (B) by inserting ‘‘or (IV) in an outpatient

21 or home setting as defined by the Secretary’’ fol22 lowing ‘‘shortage area,’’; and

23 (2) in clause (ii)—

24 (A) by striking ‘‘in a skilled’’ and inserting

25 ‘‘in (I) a skilled’’; and
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1 (B) by inserting ‘‘, or (II) in an outpatient

2 or home setting (as defined by the Secretary),’’

3 after ‘‘(as defined in section 1919(a))’’.

4 (b) PAYMENTS TO PHYSICIAN ASSISTANTS AND NURSE

5 PRACTITIONERS IN OUTPATIENT OR HOME SETTINGS.—

6 (1) IN GENERAL.—Section 1833(r)(1) (42 U.S.C.

7 1395l(r)(1)) is amended—

8 (A) by inserting ‘‘services described in sec9 tion 1861(s)(2)(K)(ii)(II) (relating to nurse

10 practitioner services furnished in outpatient or

11 home settings), and services described in section

12 1861(s)(2)(K)(i)(IV) (relating to physician as13 sistant services furnished in an outpatient or

14 home setting’’ after ‘‘rural area),’’; and

15 (B) by striking ‘‘or clinical nurse special16 ist’’ and inserting ‘‘clinical nurse specialist, or

17 physician assistant’’.

18 (2) CONFORMING AMENDMENT.—Section

19 1842(b)(6)(C) (42 U.S.C. 1395u(b)(6)(C)) is amended

20 by striking ‘‘clauses (i), (ii), or (iv)’’ and inserting

21 ‘‘subclauses (I), (II), or (III) of clause (i), clause

22 (ii)(I), or clause (iv)’’.

23 (c) PAYMENT UNDER THE FEE SCHEDULE TO PHYSI24 CIAN ASSISTANTS AND NURSE PRACTITIONERS IN OUT25 PATIENT OR HOME SETTINGS.—
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1 (1) PHYSICIAN ASSISTANTS.—Section

2 1842(b)(12) (42 U.S.C. 1395u(b)(12)) is amended by

3 adding at the end the following new subparagraph:

4 ‘‘(C) With respect to services described in clauses

5 (i)(IV), (ii)(II), and (iv) of section 1861(s)(2)(K) (relating

6 to physician assistants and nurse practitioners furnishing

7 services in outpatient or home settings)—

8 ‘‘(i) payment under this part may only be made

9 on an assignment-related basis; and

10 ‘‘(ii) the amounts paid under this part shall be

11 equal to 80 percent of (I) the lesser of the actual

12 charge or 85 percent of the fee schedule amount pro13 vided under section 1848 for the same service pro14 vided by a physician who is not a specialist; or (II)

15 in the case of services as an assistant at surgery, the

16 lesser of the actual charge or 85 percent of the amount

17 that would otherwise be recognized if performed by a

18 physician who is serving as an assistant at surgery.’’.

19 (2) CONFORMING AMENDMENT.—Section

20 1842(b)(12)(A) (42 U.S.C. 1395u(b)(12)(A)) is

21 amended in the matter preceding clause (i) by strik22 ing ‘‘(i), (ii),’’ and inserting ‘‘subclauses (I), (II), or

23 (III) of clause (i), or subclause (I) of clause (ii)’’.

24 (3) TECHNICAL AMENDMENT.—Section

25 1842(b)(12)(A) (42 U.S.C. 1395u(b)(12)(A)) is
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1 amended in the matter preceding clause (i) by strik2 ing ‘‘a physician assistants’’ and inserting ‘‘physi3 cian assistants’’.

4 (d) EFFECTIVE DATE.—The amendments made by this

5 section shall apply to services furnished on or after October

6 1, 1995.

7 SEC. 8708. EXPANDING ACCESS TO NURSE AIDE TRAINING

8 IN UNDERSERVED AREAS.

9 (a) IN GENERAL.—Section 1819(f)(2)(B)(iii)(I) (42

10 U.S.C. 1396r(f)(2)(B)(iii)(I)) is amended in the matter pre11 ceding item (a), by striking ‘‘by or in a nursing facility’’

12 and inserting ‘‘by a nursing facility (or in such a facility,

13 unless the State determines that there is no other such pro14 gram offered within a reasonable distance, provides notice

15 of the approval to the State long term care ombudsman,

16 and assures, through an oversight effort, that an adequate

17 environment exists for such a program)’’.

18 (b) EFFECTIVE DATE.—The amendment made by sub19 section (a) shall apply to nurse aide training and com20 petency evaluation programs under section 1819 of the So21 cial Security Act which are offered on or after October 1,

22 1995.
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1 TITLE IX—TRANSPORTATION

2 AND RELATED PROVISIONS

3 SEC. 9001. MINIMUM ALLOCATION FOR HIGHWAY PRO4 GRAMS.

5 (a) TECHNICAL CORRECTION.—With respect to fiscal

6 year 1996—

7 (1) the Secretary of Transportation shall deter8 mine, in accordance with the policies established by

9 the Intermodal Surface Transportation Efficiency Act

10 of 1991 (105 Stat. 1914)—

11 (A) which of the States will no longer re12 quire an apportionment under section 157(a)(4)

13 of title 23, United States Code; and

14 (B) which of the States will require de15 creased funding under such section 157(a)(4);

16 as a result of the termination of the Interstate con17 struction program; and

18 (2) as a result of the reduced number of States

19 that may require an apportionment under such sec20 tion 157(a)(4), and the decrease in the amount of

21 funds some States will require under such section

22 157(a)(4), the maximum amount available for appor23 tionment under such section 157(a)(4) shall be re24 duced from the amount apportioned under such sec25 tion 157(a)(4) for fiscal year 1995 by 60.4 percent.
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1 (b) EFFECT ON CERTAIN CALCULATIONS.—The correc2 tion made by subsection (a) shall be made after the reduc3 tion required under section 1003(c) of the Intermodal Sur4 face Transportation Efficiency Act of 1991 (105 Stat. 1921)

5 and shall not be taken into account in making the calcula6 tions under sections 1003(c), 1013(c), and 1015 of such Act

7 (105 Stat. 1921, 1940, and 1943).

8 SEC. 9002. EXTENSION OF HIGHER VESSEL TONNAGE DU9 TIES.

10 (a) EXTENSION OF DUTIES.—Section 36 of the Act of

11 August 5, 1909 (36 Stat. 111; 46 U.S.C. App. 121), is

12 amended by striking ‘‘for fiscal years 1991, 1992, 1993,

13 1994, 1995, 1996, 1997, 1998,’’ each place it appears and

14 inserting ‘‘for fiscal years through fiscal year 2002,’’.

15 (b) CONFORMING AMENDMENT.—The Act entitled ‘‘An

16 Act concerning tonnage duties on vessels entering otherwise

17 than by sea’’, approved March 8, 1910 (36 Stat. 234; 46

18 U.S.C. App. 132), is amended by striking ‘‘for fiscal years

19 1991, 1992, 1993, 1994, 1995, 1996, 1997, and 1998,’’ and

20 inserting ‘‘for fiscal years through fiscal year 2002,’’.

21 SEC. 9003. FEMA RADIOLOGICAL EMERGENCY PREPARED22 NESS FEES.

23 (a) IN GENERAL.—The Director of the Federal Emer24 gency Management Agency may assess and collect fees ap-
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1 plicable to persons subject to radiological emergency pre2 paredness regulations issued by the Director.

3 (b) REQUIREMENTS.—The assessment and collection of

4 fees by the Director under subsection (a) shall be fair and

5 equitable and shall reflect the full amount of costs to the

6 Agency of providing radiological emergency planning, pre7 paredness, response, and associated services. Such fees shall

8 be assessed by the Director in a manner that reflects the

9 use of resources of the Agency for classes of regulated persons

10 and the administrative costs of collecting such fees.

11 (c) AMOUNT OF FEES.—The aggregate amount of fees

12 assessed under subsection (a) in a fiscal year shall approxi13 mate, but not be less than, 100 percent of the amounts an14 ticipated by the Director to be obligated for the radiological

15 emergency preparedness program of the Agency for such fis16 cal year.

17 (d) DEPOSIT OF FEES IN TREASURY.—Fees received

18 pursuant to subsection (a) shall be deposited in the general

19 fund of the Treasury as offsetting receipts.

20 (e) EXPIRATION OF AUTHORITY.—The authority of the

21 Director to assess and collect fees under subsection (a) shall

22 expire on September 30, 2002.
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1 TITLE X—VETERANS AND

2 RELATED PROVISIONS

3 SEC. 10001. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This title may be cited as the

5 ‘‘Veterans Reconciliation Act of 1995’’.

6 (b) TABLE OF CONTENTS.—The table of contents for

7 this title is as follows:

Sec. 10001. Short title; table of contents.

Subtitle A—Extension of Temporary Authorities

Sec. 10011. Authority to require that certain veterans make copayments in exchange for receiving health-care benefits.

Sec. 10012. Medical care cost recovery authority.

Sec. 10013. Income verification authority.

Sec. 10014. Limitation on pension for certain recipients of medicaid-covered

nursing home care.

Sec. 10015. Home loan fees.

Sec. 10016. Procedures applicable to liquidation sales on defaulted home loans

guaranteed by the Department of Veterans Affairs.

Sec. 10017. Enhanced loan asset sale authority.

Subtitle B—Other Matters

Sec. 10021. Revision to prescription drug copayment.

Sec. 10022. Rounding down of cost-of-living adjustments in compensation and

DIC rates.

Sec. 10023. Revised standard for liability for injuries resulting from Department

of Veterans Affairs treatment.

Sec. 10024. Withholding of payments and benefits.

8 Subtitle A—Extension of Temporary

9 Authorities

10 SEC. 10011. AUTHORITY TO REQUIRE THAT CERTAIN VETER11 ANS MAKE COPAYMENTS IN EXCHANGE FOR

12 RECEIVING HEALTH-CARE BENEFITS.

13 (a) HOSPITAL AND MEDICAL CARE.—Section 8013(e)

14 of the Omnibus Budget Reconciliation Act of 1990 (38

15 U.S.C. 1710 note) is amended by striking out ‘‘September
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1 30, 1998’’ and inserting in lieu thereof ‘‘September 30,

2 2002’’.

3 (b) OUTPATIENT MEDICATIONS.—Section 1722A(c) of

4 title 38, United States Code, is amended by striking out

5 ‘‘September 30, 1998’’ and inserting in lieu thereof ‘‘Sep6 tember 30, 2002’’.

7 SEC. 10012. MEDICAL CARE COST RECOVERY AUTHORITY.

8 Section 1729(a)(2)(E) of title 38, United States Code,

9 is amended by striking out ‘‘before October 1, 1998,’’ and

10 inserting ‘‘before October 1, 2002,’’.

11 SEC. 10013. INCOME VERIFICATION AUTHORITY.

12 Section 5317(g) of title 38, United States Code, is

13 amended by striking out ‘‘September 30, 1998’’ and insert14 ing in lieu thereof ‘‘September 30, 2002’’.

15 SEC. 10014. LIMITATION ON PENSION FOR CERTAIN RECIPI16 ENTS OF MEDICAID-COVERED NURSING

17 HOME CARE.

18 Section 5503(f)(7) of title 38, United States Code, is

19 amended by striking out ‘‘September 30, 1998’’ and insert20 ing in lieu thereof ‘‘September 30, 2002’’.

21 SEC. 10015. HOME LOAN FEES.

22 Section 3729(a) of title 38, United States Code, is

23 amended—
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1 (1) in paragraph (4), by striking out ‘‘October 1,

2 1998’’ and inserting in lieu thereof ‘‘October 1, 2002’’;

3 and

4 (2) in paragraph (5)(C), by striking out ‘‘Octo5 ber 1, 1998’’ and inserting in lieu thereof ‘‘October 1,

6 2002’’.

7 SEC. 10016. PROCEDURES APPLICABLE TO LIQUIDATION

8 SALES ON DEFAULTED HOME LOANS GUAR9 ANTEED BY THE DEPARTMENT OF VETERANS

10 AFFAIRS.

11 Section 3732(c)(11) of title 38, United States Code, is

12 amended by striking out ‘‘October 1, 1998’’ and inserting

13 ‘‘October 1, 2002’’.

14 SEC. 10017. ENHANCED LOAN ASSET SALE AUTHORITY.

15 Section 3720(h)(2) of title 38, United States Code, is

16 amended by striking out ‘‘December 31, 1995’’ and insert17 ing in lieu thereof ‘‘September 30, 2002’’.

18 Subtitle B—Other Matters

19 SEC. 10021. REVISION TO PRESCRIPTION DRUG

20 COPAYMENT.

21 (a) INCREASE IN AMOUNT OF COPAYMENT.—Section

22 1722A(a) of title 38, United States Code, is amended—

23 (1) in paragraph (1), by striking out ‘‘$2’’ and

24 inserting in lieu thereof ‘‘$4’’;

25 (2) by striking out paragraph (2); and
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1 (3) by redesignating paragraph (3) as para2 graph (2) and in that paragraph—

3 (A) striking out ‘‘or’’ at the end of subpara4 graph (A);

5 (B) striking out the period at the end of

6 subparagraph (B) and inserting in lieu thereof

7 ‘‘; or’’; and

8 (C) adding at the end the following new

9 subparagraph:

10 ‘‘(C) to a veteran who is a former prisoner of

11 war.’’.

12 (b) RECOVERY OF INDEBTEDNESS.—(1) Section 5302

13 of such title is amended by adding at the end the following

14 new subsection:

15 ‘‘(f) The Secretary may not waive under this section

16 the recovery of any payment or the collection of any indebt17 edness owed under section 1722A of this title.’’.

18 (2) The amendment made by paragraph (1) shall

19 apply with respect to amounts that become due to the Unit20 ed States under section 1722A of title 38, United States

21 Code, on or after the date of the enactment of this Act.

22 SEC. 10022. ROUNDING DOWN OF COST-OF-LIVING ADJUST23 MENTS IN COMPENSATION AND DIC RATES.

24 (a) FISCAL YEAR 1996 COLA.—(1) Effective as of De25 cember 1, 1995, the Secretary of Veterans Affairs shall re-
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1 compute any increase in an adjustment that is otherwise

2 provided by law to be effective during fiscal year 1996 in

3 the rates of disability compensation and dependency and

4 indemnity compensation paid by the Secretary as such

5 rates were in effect on November 30, 1995. The recomputa6 tion shall provide for the same percentage increase as pro7 vided under such law, but with amounts so recomputed (if

8 not a whole dollar amount) rounded down to the next lower

9 whole dollar amount (rather than to the nearest whole dol10 lar amount) and with each old-law DIC rate increased by

11 the amount by which the new-law DIC rate is increased

12 (rather than by a uniform percentage).

13 (2) For purposes of paragraph (1):

14 (A) The term ‘‘old-law DIC rate’’ means a dollar

15 amount in effect under section 1311(a)(3) of title 38,

16 United States Code.

17 (B) The term ‘‘new-law DIC rate’’ means the

18 dollar amount in effect under section 1311(a)(1) of

19 title 38, United States Code.

20 (b) OUT-YEAR COMPENSATION COLAS.—(1) Chapter

21 11 of title 38, United States Code, is amended by inserting

22 after section 1102 the following new section:

23 ‘‘§ 1103. Cost-of-living adjustments

24 ‘‘(a) In the computation of cost-of-living adjustments

25 for fiscal years 1997 through 2002 in the rates of, and dol-
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1 lar limitations applicable to, compensation payable under

2 this chapter, such adjustments shall be made by a uniform

3 percentage that is no more than the percentage equal to the

4 social security increase for that fiscal year, with all in5 creased monthly rates and limitations (other than increased

6 rates or limitations equal to a whole dollar amount) round7 ed down to the next lower whole dollar amount.

8 ‘‘(b) For purposes of this section, the term ‘social secu9 rity increase’ means the percentage by which benefit

10 amounts payable under title II of the Social Security Act

11 (42 U.S.C. 401 et seq.) are increased for any fiscal year

12 as a result of a determination under section 215(i) of such

13 Act (42 U.S.C. 415(i)).’’.

14 (2) The table of sections at the beginning of such chap15 ter is amended by inserting after the item relating to section

16 1102 the following new item:

‘‘1103. Cost-of-living adjustments.’’.

17 (c) OUT-YEAR DIC COLAS.—(1) Chapter 13 of title

18 38, United States Code, is amended by inserting after sec19 tion 1302 the following new section:

20 ‘‘§ 1303. Cost-of-living adjustments

21 ‘‘(a) In the computation of cost-of-living adjustments

22 for fiscal years 1997 through 2002 in the rates of depend23 ency and indemnity compensation payable under this chap24 ter, such adjustments (except as provided in subsection (b))

25 shall be made by a uniform percentage that is no more than
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1 the percentage equal to the social security increase for that

2 fiscal year, with all increased monthly rates (other than in3 creased rates equal to a whole dollar amount) rounded down

4 to the next lower whole dollar amount.

5 ‘‘(b)(1) Cost-of-living adjustments for each of fiscal

6 years 1997 through 2002 in old-law DIC rates shall be in

7 a whole dollar amount that is no greater than the amount

8 by which the new-law DIC rate is increased for that fiscal

9 year as determined under subsection (a).

10 ‘‘(2) For purposes of paragraph (1):

11 ‘‘(A) The term ‘old-law DIC rates’ means the

12 dollar amounts in effect under section 1311(a)(3) of

13 this title.

14 ‘‘(B) The term ‘new-law DIC rate’ means the

15 dollar amount in effect under section 1311(a)(1) of

16 this title.

17 ‘‘(c) For purposes of this section, the term ‘social secu18 rity increase’ means the percentage by which benefit

19 amounts payable under title II of the Social Security Act

20 (42 U.S.C. 401 et seq.) are increased for any fiscal year

21 as a result of a determination under section 215(i) of such

22 Act (42 U.S.C. 415(i)).’’.

23 (2) The table of sections at the beginning of such chap24 ter is amended by inserting after the item relating to section

25 1302 the following new item:

‘‘1303. Cost-of-living adjustments.’’.
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1 SEC. 10023. REVISED STANDARD FOR LIABILITY FOR INJU2 RIES RESULTING FROM DEPARTMENT OF

3 VETERANS AFFAIRS TREATMENT.

4 (a) REVISED STANDARD.—Section 1151 of title 38,

5 United States Code, is amended—

6 (1) by designating the second sentence as sub7 section (c);

8 (2) by striking out the first sentence and insert9 ing in lieu thereof the following:

10 ‘‘(a) Compensation under this chapter and dependency

11 and indemnity compensation under chapter 13 of this title

12 shall be awarded for a qualifying additional disability of

13 a veteran or the qualifying death of a veteran in the same

14 manner as if such disability or death were service-con15 nected.

16 ‘‘(b)(1) For purposes of this section, a disability or

17 death is a qualifying additional disability or a qualifying

18 death only if the disability or death—

19 ‘‘(A) was caused by Department health care and

20 was a proximate result of—

21 ‘‘(i) negligence on the part of the Depart22 ment in furnishing the Department health care;

23 or

24 ‘‘(ii) an event not reasonably foreseeable; or

25 ‘‘(B) was incurred as a proximate result of the

26 provision of training and rehabilitation services by
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1 the Secretary (including by a service-provider used by

2 the Secretary for such purpose under section 3115 of

3 this title) as part of an approved rehabilitation pro4 gram under chapter 31 of this title.

5 ‘‘(2) For purposes of this section, the term ‘Department

6 health care’ means hospital care, medical or surgical treat7 ment, or an examination that is furnished under any law

8 administered by the Secretary to a veteran by a Depart9 ment employee or in a facility over which the Secretary

10 has direct jurisdiction.

11 ‘‘(3) A disability or death of a veteran which is the

12 result of the veteran’s willful misconduct is not a qualifying

13 disability or death for purposes of this section.’’; and

14 (3) by adding at the end the following:

15 ‘‘(d) Effective with respect to injuries, aggravations of

16 injuries, and deaths occurring after September 30, 2002, a

17 disability or death is a qualifying additional disability or

18 a qualifying death for purposes of this section (notwith19 standing the provisions of subsection (b)(1)) if the disability

20 or death—

21 ‘‘(1) was the result of Department health care; or

22 ‘‘(2) was the result of the pursuit of a course of

23 vocational rehabilitation under chapter 31 of this

24 title.’’.
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1 (b) CONFORMING AMENDMENTS.—Subsection (c) of

2 such section, as designated by subsection (a)(1), is amend3 ed—

4 (1) by striking out ‘‘, aggravation,’’ both places

5 it appears; and

6 (2) by striking out ‘‘sentence’’ and inserting in

7 lieu thereof ‘‘subsection’’.

8 (c) EFFECTIVE DATE.—The amendments made by this

9 section shall apply to any administrative or judicial deter10 mination of eligibility for benefits under section 1151 of

11 title 38, United States Code, based on a claim that is re12 ceived by the Secretary on or after October 1, 1995, includ13 ing any such determination based on an original applica14 tion or an application seeking to reopen, revise, reconsider,

15 or otherwise readjudicate any claim for benefits under sec16 tion 1151 of that title or any predecessor provision of law.

17 SEC. 10024. WITHHOLDING OF PAYMENTS AND BENEFITS.

18 (a) NOTICE REQUIRED IN LIEU OF CONSENT OR

19 COURT ORDER.—Section 3726 of title 38, United States

20 Code, is amended by striking out ‘‘unless’’ and all that fol21 lows and inserting in lieu thereof the following: ‘‘unless the

22 Secretary provides such veteran or surviving spouse with

23 notice by certified mail with return receipt requested of the

24 authority of the Secretary to waive the payment of indebt25 edness under section 5302(b) of this title. If the Secretary
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1 does not waive the entire amount of the liability, the Sec2 retary shall then determine whether the veteran or surviving

3 spouse should be released from liability under section

4 3713(b) of this title. If the Secretary determines that the

5 veteran or surviving spouse should not be released from li6 ability, the Secretary shall notify the veteran or surviving

7 spouse of that determination and provide a notice of the

8 procedure for appealing that determination, unless the Sec9 retary has previously made such determination and notified

10 the veteran or surviving spouse of the procedure for appeal11 ing the determination.’’.

12 (b) CONFORMING AMENDMENT.—Section 5302(b) of

13 such title is amended by inserting ‘‘with return receipt re14 quested’’ after ‘‘certified mail’’.

15 (c) EFFECTIVE DATE.—The amendments made by this

16 section shall apply with respect to any indebtedness to the

17 United States arising pursuant to chapter 37 of title 38,

18 United States Code, before, on, or after the date of the enact19 ment of this Act.

20 TITLE XI—REVENUE

21 PROVISIONS

22 SEC. 11000. SHORT TITLES; AMENDMENT OF 1986 CODE;

23 TABLE OF CONTENTS.

24 (a) REVENUE RECONCILIATION ACT.—This title may

25 be cited as the ‘‘Revenue Reconciliation Act of 1995’’.
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1 (b) CONTRACT WITH AMERICA.—Subtitles A, B, C,

2 and D of this title may be cited as the ‘‘Contract With

3 America Tax Relief Act of 1995’’.

4 (c) AMENDMENT OF 1986 CODE.—Except as otherwise

5 expressly provided, whenever in this title an amendment

6 or repeal is expressed in terms of an amendment to, or re7 peal of, a section or other provision, the reference shall be

8 considered to be made to a section or other provision of the

9 Internal Revenue Code of 1986.

10 (d) TABLE OF CONTENTS.—The table of contents for

11 this title is as follows:

TITLE XI—REVENUE PROVISIONS

Sec. 11000. Short titles; amendment of 1986 Code; table of contents.

Subtitle A—Family Tax Relief

Sec. 11001. Child tax credit.

Sec. 11002. Reduction in marriage penalty.

Sec. 11003. Credit for adoption expenses.

Sec. 11004. Deduction for interest on education loans.

Sec. 11005. Deduction for taxpayers with certain persons requiring custodial care

in their households.

Subtitle B—Savings and Investment Incentives

CHAPTER 1—RETIREMENT SAVINGS INCENTIVES

SUBCHAPTER A—INDIVIDUAL RETIREMENT PLANS

PART I—RESTORATION OF IRA DEDUCTION

Sec. 11011. Restoration of IRA deduction.

Sec. 11012. Inflation adjustment for deductible amount.

Sec. 11013. Homemakers eligible for full IRA deduction.

PART II—NONDEDUCTIBLE TAX-FREE IRAS

Sec. 11015. Establishment of American Dream IRA.
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SUBCHAPTER B—PENALTY-FREE DISTRIBUTIONS

Sec. 11016. Distributions from certain plans may be used without penalty to purchase first homes or to pay higher education or financially devastating medical expenses.

SUBCHAPTER C—SIMPLE SAVINGS PLANS

Sec. 11018. Establishment of savings incentive match plans for employees of

small employers.

Sec. 11019. Extension of simple plan to 401(k) arrangements.

CHAPTER 2—CAPITAL GAINS REFORM

SUBCHAPTER A—TAXPAYERS OTHER THAN CORPORATIONS

Sec. 11021. Capital gains deduction.

Sec. 11022. Indexing of certain assets acquired after December 31, 2000, for purposes of determining gain.

Sec. 11023. Modifications to exclusion of gain on certain small business stock.

SUBCHAPTER B—CORPORATE CAPITAL GAINS

Sec. 11025. Reduction of alternative capital gain tax for corporations.

SUBCHAPTER C—CAPITAL LOSS DEDUCTION ALLOWED WITH RESPECT TO SALE

OR EXCHANGE OF PRINCIPAL RESIDENCE

Sec. 11026. Capital loss deduction allowed with respect to sale or exchange of

principal residence.

CHAPTER 3—CORPORATE ALTERNATIVE MINIMUM TAX REFORM

Sec. 11031. Modification of depreciation rules under minimum tax.

Sec. 11032. Long-term unused credits allowed against minimum tax.

CHAPTER 4—COST RECOVERY PROVISIONS

Sec. 11035. Treatment of abandonment of lessor improvements at termination of

lease.

Sec. 11036. Increase in expense treatment for small businesses.

Subtitle C—Health Related Provisions

CHAPTER 1—LONG-TERM CARE PROVISIONS

SUBCHAPTER A—LONG-TERM CARE SERVICES AND CONTRACTS

PART I—GENERAL PROVISIONS

Sec. 11041. Treatment of long-term care insurance.

Sec. 11042. Qualified long-term care services treated as medical care.

Sec. 11043. Certain exchanges of life insurance contracts for qualified long-term

care insurance contracts not taxable.

Sec. 11044. Exception from penalty tax for amounts withdrawn from certain retirement plans for qualified long-term care insurance.

Sec. 11045. Reporting requirements.

PART II—CONSUMER PROTECTION PROVISIONS

Sec. 11051. Policy requirements.
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Sec. 11052. Requirements for issuers of long-term care insurance policies.

Sec. 11053. Coordination with State requirements.

Sec. 11054. Effective dates.

SUBCHAPTER B—TREATMENT OF ACCELERATED DEATH BENEFITS

Sec. 11061. Treatment of accelerated death benefits by recipient.

Sec. 11062. Tax treatment of companies issuing qualified accelerated death benefit riders.

CHAPTER 2—MEDICAL SAVINGS ACCOUNTS

Sec. 11066. Medical savings accounts.

CHAPTER 3—INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF

SELF-EMPLOYED INDIVIDUALS

Sec. 11068. Increase in deduction for health insurance costs of self-employed individuals.

Subtitle D—Estate and Gift Provisions

Sec. 11071. Cost-of-living adjustments relating to estate and gift tax provisions.

Sec. 11072. Family-owned business exclusion.

Sec. 11073. Treatment of land subject to a qualified conservation easement.

Sec. 11074. Expansion of exception from generation-skipping transfer tax for

transfers to individuals with deceased parents.

Sec. 11075. Extension of treatment of certain rents under section 2032A to lineal

descendants.

Subtitle E—Extension of Expiring Provisions

CHAPTER 1—TEMPORARY EXTENSIONS

Sec. 11111. Work opportunity tax credit.

Sec. 11112. Employer-provided educational assistance programs.

Sec. 11113. Research credit.

Sec. 11114. Orphan drug tax credit.

Sec. 11115. Contributions of stock to private foundations.

Sec. 11116. Delay of tax on fuel used in commercial aviation.

Sec. 11117. Extension of airport and airway trust fund excise taxes.

Sec. 11118. Extension of Internal Revenue Service user fees.

CHAPTER 2—SUNSET OF LOW-INCOME HOUSING CREDIT

Sec. 11121. Sunset of low-income housing credit.

CHAPTER 3—EXTENSIONS OF SUPERFUND AND OIL SPILL LIABILITY TAXES

Sec. 11131. Extension of Hazardous Substance Superfund taxes.

Sec. 11132. Extension of oil spill liability tax.

CHAPTER 4—EXTENSIONS RELATING TO FUEL TAXES

Sec. 11141. Ethanol blender refunds.

Sec. 11142. Extension of binding contract date for biomass and coal facilities.

Sec. 11143. Exemption from diesel fuel dyeing requirements with respect to certain States.
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Sec. 11144. Moratorium for excise tax on diesel fuel sold for use or used in dieselpowered motorboats.

CHAPTER 5—PERMANENT EXTENSION OF FUTA EXEMPTION FOR ALIEN

AGRICULTURAL WORKERS

Sec. 11151. FUTA exemption for alien agricultural workers.

CHAPTER 6—DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRATION OF

CERTAIN VETERANS PROGRAMS

Sec. 11161. Disclosure of return information for administration of certain veterans programs.

Subtitle F—Taxpayer Bill of Rights 2 Provisions

Sec. 11201. Expansion of authority to abate interest.

Sec. 11202. Extension of interest-free period for payment of tax after notice and

demand.

Sec. 11203. Joint return may be made after separate returns without full payment of tax.

Sec. 11204. Modifications to certain levy exemption amounts.

Sec. 11205. Offers-in-compromise.

Sec. 11206. Increased limit on attorney fees.

Sec. 11207. Award of litigation costs permitted in declaratory judgment proceedings.

Sec. 11208. Increase in limit on recovery of civil damages for unauthorized collection actions.

Sec. 11209. Enrolled agents included as third-party recordkeepers.

Sec. 11210. Annual reminders to taxpayers with outstanding delinquent accounts.

Subtitle G—Casualty and Involuntary Conversion Provisions

Sec. 11251. Basis adjustment to property held by corporation where stock in corporation is replacement property under involuntary conversion

rules.

Sec. 11252. Expansion of requirement that involuntarily converted property be

replaced with property acquired from an unrelated person.

Sec. 11253. Special rule for crop insurance proceeds and disaster payments.

Sec. 11254. Application of involuntary exclusion rules to presidentially declared

disasters.

Subtitle H—Exempt Organizations and Charitable Reforms

CHAPTER 1—EXCISE TAX ON AMOUNTS OF PRIVATE EXCESS BENEFITS

Sec. 11271. Excise taxes for failure by certain charitable organizations to meet

certain qualification requirements.

Sec. 11272. Reporting of certain excise taxes and other information.

Sec. 11273. Increase in penalties on exempt organizations for failure to file complete and timely annual returns.

CHAPTER 2—OTHER PROVISIONS

Sec. 11276. Cooperative service organizations for certain foundations.

Sec. 11277. Exclusion from unrelated business taxable income for certain sponsorship payments.

Sec. 11278. Treatment of dues paid to agricultural or horticultural organizations.
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Sec. 11279. Repeal of credit for contributions to community development corporations.

Subtitle I—Tax Reform and Other Provisions

CHAPTER 1—PROVISIONS RELATING TO BUSINESSES

Sec. 11301. Tax treatment of certain extraordinary dividends.

Sec. 11302. Registration of confidential corporate tax shelters.

Sec. 11303. Denial of deduction for interest on loans with respect to companyowned insurance.

Sec. 11304. Termination of suspense accounts for family corporations required to

use accrual method of accounting.

Sec. 11305. Termination of Puerto Rico and possession tax credit.

Sec. 11306. Depreciation under income forecast method.

Sec. 11307. Transfers of excess pension assets.

Sec. 11308. Repeal of exclusion for interest on loans used to acquire employer securities.

CHAPTER 2—LEGAL REFORMS

Sec. 11311. Repeal of exclusion for punitive damages and for damages not attributable to physical injuries or sickness.

Sec. 11312. Reporting of certain payments made to attorneys.

CHAPTER 3—REFORMS RELATING TO NONRECOGNITION PROVISIONS

Sec. 11321. No rollover or exclusion of gain on sale of principal residence which

is attributable to depreciation deductions.

Sec. 11322. Nonrecognition of gain on sale of principal residence by noncitizens

limited to new residences located in the United States.

CHAPTER 4—EXCISE TAX AND TAX-EXEMPT BOND PROVISIONS

Sec. 11331. Repeal of diesel fuel tax rebate to purchasers of diesel-powered automobiles and light trucks.

Sec. 11332. Modifications to excise tax on ozone-depleting chemicals.

Sec. 11333. Election to avoid tax-exempt bond penalties for local furnishers of

electricity and gas.

Sec. 11334. Tax-exempt bonds for sale of Alaska Power Administration Facility.

CHAPTER 5—FOREIGN TRUST TAX COMPLIANCE

Sec. 11341. Improved information reporting on foreign trusts.

Sec. 11342. Modifications of rules relating to foreign trusts having one or more

United States beneficiaries.

Sec. 11343. Foreign persons not to be treated as owners under grantor trust rules.

Sec. 11344. Information reporting regarding foreign gifts.

Sec. 11345. Modification of rules relating to foreign trusts which are not grantor

trusts.

Sec. 11346. Residence of estates and trusts, etc.

CHAPTER 6—TREATMENT OF INDIVIDUALS WHO LOSE UNITED STATES

CITIZENSHIP

Sec. 11348. Revision of income, estate, and gift taxes on individuals who lose

United States citizenship.

Sec. 11349. Information on individuals losing United States citizenship.
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CHAPTER 7—FINANCIAL ASSET SECURITIZATION INVESTMENTS

Sec. 11351. Financial Asset Securitization Investment Trusts.

CHAPTER 8—DEPRECIATION PROVISIONS

Sec. 11361. Treatment of contributions in aid of construction.

Sec. 11362. Deduction for certain operating authority.

Sec. 11363. Class life for gas station convenience stores and similar structures.

CHAPTER 9—OTHER PROVISIONS

Sec. 11371. Application of failure-to-pay penalty to substitute returns.

Sec. 11372. Extension of withholding to certain gambling winnings.

Sec. 11373. Losses from foreclosure property.

Sec. 11374. Nonrecognition treatment for certain transfers by common trust funds

to regulated investment companies.

Sec. 11375. Exclusion for energy conservation subsidies limited to subsidies with

respect to dwelling units.

Sec. 11376. Election to cease status as qualified scholarship funding corporation.

Sec. 11377. Certain amounts derived from foreign corporations treated as unrelated business taxable income.

Sec. 11378. Repeal of financial institution transition rule to interest allocation

rules.

Sec. 11379. Repeal of bad debt reserve method for thrift savings associations.

Sec. 11380. Newspaper distributors treated as direct sellers.

Subtitle J—Tax Simplification

CHAPTER 1—PROVISIONS RELATING TO INDIVIDUALS

SUBCHAPTER A—PROVISIONS RELATING TO ROLLOVER OF GAIN ON SALE OF

PRINCIPAL RESIDENCE

Sec. 11401. Multiple sales within rollover period.

Sec. 11402. Special rules in case of divorce.

Sec. 11403. One-time exclusion of gain from sale of principal residence for certain spouses.

SUBCHAPTER B—OTHER PROVISIONS

Sec. 11411. Treatment of certain reimbursed expenses of rural mail carriers.

Sec. 11412. Treatment of traveling expenses of certain Federal employees engaged

in criminal investigations.

CHAPTER 2—PENSION SIMPLIFICATION

SUBCHAPTER A—SIMPLIFIED DISTRIBUTION RULES

Sec. 11421. Repeal of 5-year income averaging for lump-sum distributions.

Sec. 11422. Repeal of $5,000 exclusion of employees’ death benefits.

Sec. 11423. Simplified method for taxing annuity distributions under certain employer plans.

Sec. 11424. Required distributions.

SUBCHAPTER B—INCREASED ACCESS TO PENSION PLANS

Sec. 11431. Tax-exempt organizations eligible under section 401(k).
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SUBCHAPTER C—NONDISCRIMINATION PROVISIONS

Sec. 11441. Definition of highly compensated employees; repeal of family aggregation.

Sec. 11442. Modification of additional participation requirements.

Sec. 11443. Nondiscrimination rules for qualified cash or deferred arrangements

and matching contributions.

Sec. 11444. Definition of compensation for section 415 purposes.

SUBCHAPTER D—MISCELLANEOUS PROVISIONS

Sec. 11451. Plans covering self-employed individuals.

Sec. 11452. Elimination of special vesting rule for multiemployer plans.

Sec. 11453. Distributions under rural cooperative plans.

Sec. 11454. Treatment of governmental plans under section 415.

Sec. 11455. Uniform retirement age.

Sec. 11456. Contributions on behalf of disabled employees.

Sec. 11457. Treatment of deferred compensation plans of State and local governments and tax-exempt organizations.

Sec. 11458. Trust requirement for deferred compensation plans of State and local

governments.

Sec. 11459. Transition rule for computing maximum benefits under section 415

limitations.

Sec. 11460. Modifications of section 403(b).

Sec. 11461. Waiver of minimum period for joint and survivor annuity explanation before annuity starting date.

Sec. 11462. Repeal of limitation in case of defined benefit plan and defined contribution plan for same employee; excess distributions.

Sec. 11463. Tax on prohibited transactions.

Sec. 11464. Treatment of leased employees.

CHAPTER 3—TREATMENT OF LARGE PARTNERSHIPS

Sec. 11471. Simplified flow-through for electing large partnerships.

Sec. 11472. Returns may be required on magnetic media.

CHAPTER 4—FOREIGN PROVISIONS

SUBCHAPTER A—MODIFICATIONS TO TREATMENT OF PASSIVE FOREIGN

INVESTMENT COMPANIES

Sec. 11481. United States shareholders of controlled foreign corporations not subject to PFIC inclusion.

Sec. 11482. Election of mark to market for marketable stock in passive foreign

investment company.

Sec. 11483. Modifications to definition of passive income.

Sec. 11484. Effective date.

SUBCHAPTER B—TREATMENT OF CONTROLLED FOREIGN CORPORATIONS

Sec. 11486. Gain on certain stock sales by controlled foreign corporations treated

as dividends.

Sec. 11487. Miscellaneous modifications to subpart F.

Sec. 11488. Indirect foreign tax credit allowed for certain lower tier companies.

Sec. 11489. Repeal of inclusion of certain earnings invested in excess passive assets.
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CHAPTER 5—OTHER INCOME TAX PROVISIONS

SUBCHAPTER A—PROVISIONS RELATING TO S CORPORATIONS

Sec. 11501. S corporations permitted to have 75 shareholders.

Sec. 11502. Electing small business trusts.

Sec. 11503. Expansion of post-death qualification for certain trusts.

Sec. 11504. Financial institutions permitted to hold safe harbor debt.

Sec. 11505. Rules relating to inadvertent terminations and invalid elections.

Sec. 11506. Agreement to terminate year.

Sec. 11507. Expansion of post-termination transition period.

Sec. 11508. S corporations permitted to hold subsidiaries.

Sec. 11509. Treatment of distributions during loss years.

Sec. 11510. Treatment of S corporations under subchapter C.

Sec. 11511. Elimination of certain earnings and profits.

Sec. 11512. Carryover of disallowed losses and deductions under at-risk rules allowed.

Sec. 11513. Adjustments to basis of inherited S stock to reflect certain items of

income.

Sec. 11514. S corporations eligible for rules applicable to real property subdivided for sale by noncorporate taxpayers.

Sec. 11515. Effective date.

SUBCHAPTER B—REPEAL OF 30-PERCENT GROSS INCOME LIMITATION ON

REGULATED INVESTMENT COMPANIES

Sec. 11521. Repeal of 30-percent gross income limitation.

SUBCHAPTER C—ACCOUNTING PROVISIONS

Sec. 11551. Modifications to look-back method for long-term contracts.

Sec. 11552. Application of mark to market accounting method to traders in securities.

Sec. 11553. Modification of ruling amounts for nuclear decommissioning costs.

SUBCHAPTER D—TAX-EXEMPT BOND PROVISION

Sec. 11561. Repeal of debt service-based limitation on investment in certain

nonpurpose investments.

SUBCHAPTER E—INSURANCE PROVISIONS

Sec. 11571. Treatment of certain insurance contracts on retired lives.

Sec. 11572. Treatment of modified guaranteed contracts.

SUBCHAPTER F—OTHER PROVISIONS

Sec. 11581. Closing of partnership taxable year with respect to deceased partner,

etc.

Sec. 11582. Credit for social security taxes paid with respect to employee cash

tips.

Sec. 11583. Due date for first quarter estimated tax payments by private foundations.

CHAPTER 6—ESTATES AND TRUSTS

SUBCHAPTER A—INCOME TAX PROVISIONS

Sec. 11601. Certain revocable trusts treated as part of estate.

Sec. 11602. Distributions during first 65 days of taxable year of estate.
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Sec. 11603. Separate share rules available to estates.

Sec. 11604. Executor of estate and beneficiaries treated as related persons for disallowance of losses, etc.

Sec. 11605. Limitation on taxable year of estates.

Sec. 11606. Treatment of funeral trusts.

SUBCHAPTER B—ESTATE AND GIFT TAX PROVISIONS

Sec. 11611. Clarification of waiver of certain rights of recovery.

Sec. 11612. Adjustments for gifts within 3 years of decedent’s death.

Sec. 11613. Clarification of qualified terminable interest rules.

Sec. 11614. Transitional rule under section 2056A.

Sec. 11615. Opportunity to correct certain failures under section 2032A.

Sec. 11616. Gifts may not be revalued for estate tax purposes after expiration of

statute of limitations.

Sec. 11617. Clarifications relating to disclaimers.

Sec. 11618. Clarification of treatment of survivor annuities under qualified terminable interest rules.

Sec. 11619. Treatment under qualified domestic trust rules of forms of ownership

which are not trusts.

SUBCHAPTER C—GENERATION-SKIPPING TAX PROVISIONS

Sec. 11631. Taxable termination not to include direct skips.

CHAPTER 7—EXCISE TAX SIMPLIFICATION

SUBCHAPTER A—PROVISIONS RELATED TO DISTILLED SPIRITS, WINES, AND

BEER

Sec. 11641. Credit or refund for imported bottled distilled spirits returned to distilled spirits plant.

Sec. 11642. Fermented material from any brewery may be received at a distilled

spirits plant.

Sec. 11643. Refund of tax on wine returned to bond not limited to

unmerchantable wine.

Sec. 11644. Beer may be withdrawn free of tax for destruction.

Sec. 11645. Transfer to brewery of beer imported in bulk without payment of tax.

SUBCHAPTER B—CONSOLIDATION OF TAXES ON AVIATION GASOLINE

Sec. 11651. Consolidation of taxes on aviation gasoline.

SUBCHAPTER C—OTHER EXCISE TAX PROVISIONS

Sec. 11661. Certain combinations not treated as manufacture under retail sales

tax on heavy trucks.

CHAPTER 8—ADMINISTRATIVE PROVISION

Sec. 11671. Certain notices disregarded under provision increasing interest rate

on large corporate underpayments.

Subtitle K—Miscellaneous Provisions

Sec. 11701. Treatment of storage of product samples.

Sec. 11702. Adjustment of death benefit limits for certain policies.

Sec. 11703. Organizations subject to section 833.
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Sec. 11704. Correction of inflation adjustment in luxury excise tax on automobiles.

Sec. 11705. Extension and phasedown of luxury passenger automobile tax.

Subtitle L—Generalized System of Preferences

Sec. 11801. Short title.

Sec. 11802. Generalized System of Preferences.

Sec. 11803. Retroactive application for certain liquidations and reliquidations.

Sec. 11804. Conforming amendments.

Subtitle M—Increase in Public Debt Limit

Sec. 11901. Increase in public debt limit.

1 Subtitle A—Family Tax Relief

2 SEC. 11001. CHILD TAX CREDIT.

3 (a) IN GENERAL.—Subpart A of part IV of subchapter

4 A of chapter 1 (relating to nonrefundable personal credits)

5 is amended by inserting after section 22 the following new

6 section:

7 ‘‘SEC. 23. CHILD TAX CREDIT.

8 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be allowed

9 as a credit against the tax imposed by this chapter for the

10 taxable year an amount equal to $500 multiplied by the

11 number of qualifying children of the taxpayer.

12 ‘‘(b) LIMITATION.—

13 ‘‘(1) IN GENERAL.—The amount of the credit

14 which would (but for this subsection) be allowed by

15 subsection (a) shall be reduced (but not below zero) by

16 $25 for each $1,000 (or fraction thereof) by which the

17 taxpayer’s adjusted gross income exceeds the threshold

18 amount.
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1 ‘‘(2) THRESHOLD AMOUNT.—For purposes of

2 paragraph (1), the term ‘threshold amount’ means—

3 ‘‘(A) $110,000 in the case of a joint return,

4 ‘‘(B) $75,000 in the case of an individual

5 who is not married, and

6 ‘‘(C) $55,000 in the case of a married indi7 vidual filing a separate return.

8 For purposes of this paragraph, marital status shall

9 be determined under section 7703.

10 ‘‘(c) QUALIFYING CHILD.—For purposes of this sec11 tion—

12 ‘‘(1) IN GENERAL.—The term ‘qualifying child’

13 means any individual if—

14 ‘‘(A) the taxpayer is allowed a deduction

15 under section 151 with respect to such individual

16 for such taxable year,

17 ‘‘(B) such individual has not attained the

18 age of 18 as of the close of the calendar year in

19 which the taxable year of the taxpayer begins,

20 and

21 ‘‘(C) such individual bears a relationship to

22 the taxpayer described in section 32(c)(3)(B) (de23 termined without regard to clause (ii) thereof).

24 ‘‘(2) EXCEPTION FOR CERTAIN NONCITIZENS.—

25 The term ‘qualifying child’ shall not include any in-
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1 dividual who would not be a dependent if the first

2 sentence of section 152(b)(3) were applied without re3 gard to all that follows ‘resident of the United States’.

4 ‘‘(d) TAXABLE YEAR MUST BE FULL TAXABLE

5 YEAR.—Except in the case of a taxable year closed by rea6 son of the death of the taxpayer, no credit shall be allowable

7 under this section in the case of a taxable year covering

8 a period of less than 12 months.’’.

9 (b) NOTICE OF CREDIT.—The Secretary of the Treas10 ury shall transmit to all individual taxpayers by a separate

11 mailing made on or before February 1, 1996, a notice which

12 states only the following: ‘‘The Balanced Budget Act of 1995

13 was recently passed by the Congress. The Act’s child tax

14 credit allows taxpayers to reduce their taxes by $500 per

15 child. The credit is effective October 1, 1995. You may wish

16 to check with your employer about changing your tax with17 holding to take immediate advantage of the credit to which

18 you are entitled for the current tax year. In addition, the

19 Internal Revenue Service will be sending you a form in

20 June of this year which you may use to claim the credit

21 to which you are entitled for the period from October 1

22 through December 31, 1995 ($125 per child for 1995). In

23 order to obtain your 1995 credit, you should file this form

24 by August 15, 1996. Your refund will be sent to you some25 time after October 1, 1996.’’
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1 (c) CLERICAL AMENDMENT.—The table of sections for

2 subpart A of part IV of subchapter A of chapter 1 is amend3 ed by inserting after the item relating to section 22 the fol4 lowing new item:

‘‘Sec. 23. Child tax credit.’’.

5 (d) EFFECTIVE DATE.—The amendments made by this

6 section shall apply to taxable years beginning after Decem7 ber 31, 1995.

8 (e) PAYMENT OF 1995 CHILD CREDIT AMOUNT.—

9 (1) IN GENERAL.—The Secretary shall take such

10 actions as are necessary to ensure that the 1995 child

11 credit amount is paid to taxpayers entitled to pay12 ment of such credit amount.

13 (2) PAYMENTS GENERALLY DURING OCTOBER

14 1996.—In the case of taxpayers submitting the form

15 referred to in paragraph (4) before August 16, 1996,

16 the Secretary shall take such actions as are necessary

17 to ensure that payments required by paragraph (1)

18 are mailed after September 30, 1996, and before Octo19 ber 16, 1996.

20 (3) 1995 CHILD CREDIT AMOUNT.—For purposes

21 of paragraph (1), the 1995 child credit amount is an

22 amount equal to 25 percent of the amount of the cred23 it which would be allowed to the taxpayer under sec24 tion 23 of the Internal Revenue Code of 1986 (as
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1 added by this section) if such section were in effect for

2 the taxpayer’s taxable year beginning in 1995.

3 (4) ENTITLEMENT TO CREDIT.—A taxpayer shall

4 be entitled to a 1995 child credit amount if (and only

5 if) the taxpayer submits to the Secretary a form

6 which the Secretary shall prescribe for purposes of de7 termining such amount. The Secretary shall mail

8 such form to taxpayers on or before June 1, 1996.

9 (5) PAYMENT TREATED AS OVERPAYMENT.—The

10 1995 child credit amount shall be treated for purposes

11 of subtitle F of such Code as a payment of tax for the

12 taxpayer’s taxable year beginning in 1995 which was

13 made on August 15, 1996, or, if later, the date the

14 form referred to in paragraph (4) is filed, and shall

15 be refunded or credited in the same manner as if it

16 were an overpayment of tax for such taxable year. No

17 interest shall be paid under section 6611 of such Code

18 on amounts paid under paragraph (1) before October

19 16, 1996.

20 (6) SECRETARY.—For purposes of this sub21 section, the term ‘‘Secretary’’ means the Secretary of

22 the Treasury or his delegate.
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1 SEC. 11002. REDUCTION IN MARRIAGE PENALTY.

2 (a) INCREASE IN BASIC STANDARD DEDUCTION FOR

3 MARRIED INDIVIDUALS.—Section 63(c) (relating to stand4 ard deduction) is amended—

5 (1) by striking ‘‘$5,000’’ in paragraph (2)(A)

6 and inserting ‘‘the applicable dollar amount’’,

7 (2) by striking ‘‘$2,500’’ in paragraph (2)(D)

and inserting ‘‘1 8 ⁄2 of the applicable dollar amount’’,

9 and

10 (3) by inserting after paragraph (6) the follow11 ing new paragraph:

12 ‘‘(7) APPLICABLE DOLLAR AMOUNT.—For pur13 poses of paragraph (2), the applicable dollar amount

14 for any taxable year shall be the product of the dollar

15 amount in effect under paragraph (2)(C) for such

16 year multiplied by the applicable factor determined

17 under the following table:

‘‘For taxable years beginning in

calendar year—

The applicable

factor is—

1996 ................................................................................................ 1.68

1997 ................................................................................................ 1.71

1998 ................................................................................................ 1.72

1999 ................................................................................................ 1.73

2000 ................................................................................................ 1.75

2001 ................................................................................................ 1.77

2002 ................................................................................................ 1.78

2003 ................................................................................................ 1.88

2004 ................................................................................................ 1.91

2005 and thereafter ........................................................................ 2.00.

18 If the amount determined under the preceding sen19 tence is not a multiple of $50, such amount shall be

20 rounded to the nearest multiple of $50.’’
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1 (b) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to taxable years beginning after Decem3 ber 31, 1995.

4 SEC. 11003. CREDIT FOR ADOPTION EXPENSES.

5 (a) IN GENERAL.—Subpart A of part IV of subchapter

6 A of chapter 1 (relating to nonrefundable personal credits),

7 as amended by section 11001, is amended by inserting after

8 section 23 the following new section:

9 ‘‘SEC. 24. ADOPTION EXPENSES.

10 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an indi11 vidual, there shall be allowed as a credit against the tax

12 imposed by this chapter for the taxable year the amount

13 of the qualified adoption expenses paid or incurred by the

14 taxpayer during such taxable year.

15 ‘‘(b) LIMITATIONS.—

16 ‘‘(1) DOLLAR LIMITATION.—The aggregate

17 amount of qualified adoption expenses which may be

18 taken into account under subsection (a) with respect

19 to the adoption of a child shall not exceed $5,000.

20 ‘‘(2) INCOME LIMITATION.—The amount allow21 able as a credit under subsection (a) for any taxable

22 year shall be reduced (but not below zero) by an

23 amount which bears the same ratio to the amount so

24 allowable (determined without regard to this para25 graph but with regard to paragraph (1)) as—
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1 ‘‘(A) the amount (if any) by which the tax2 payer’s adjusted gross income (determined with3 out regard to sections 911, 931, and 933) exceeds

4 $75,000, bears to

5 ‘‘(B) $40,000.

6 ‘‘(3) DENIAL OF DOUBLE BENEFIT.—

7 ‘‘(A) IN GENERAL.—No credit shall be al8 lowed under subsection (a) for any expense for

9 which a deduction or credit is allowable under

10 any other provision of this chapter.

11 ‘‘(B) GRANTS.—No credit shall be allowed

12 under subsection (a) for any expense to the ex13 tent that funds for such expense are received

14 under any Federal, State, or local program. The

15 preceding sentence shall not apply to expenses for

16 the adoption of a child with special needs.

17 ‘‘(C) REIMBURSEMENT.—No credit shall be

18 allowed under subsection (a) for any expense to

19 the extent that such expense is reimbursed and

20 the reimbursement is excluded from gross income

21 under section 138.

22 ‘‘(c) CARRYFORWARDS OF UNUSED CREDIT.—If the

23 credit allowable under subsection (a) for any taxable year

24 exceeds the limitation imposed by section 26(a) for such tax25 able year reduced by the sum of the credits allowable under
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1 this subpart (other than this section), such excess shall be

2 carried to the succeeding taxable year and added to the

3 credit allowable under subsection (a) for such taxable year.

4 No credit may be carried forward under this subsection to

5 any taxable year following the fifth taxable year after the

6 taxable year in which the credit arose. For purposes of the

7 preceding sentence, credits shall be treated as used on a

8 first-in first-out basis.

9 ‘‘(d) DEFINITIONS.—For purposes of this section—

10 ‘‘(1) QUALIFIED ADOPTION EXPENSES.—The

11 term ‘qualified adoption expenses’ means reasonable

12 and necessary adoption fees, court costs, attorney fees,

13 and other expenses—

14 ‘‘(A) which are directly related to, and the

15 principal purpose of which is for, the legal adop16 tion of an eligible child by the taxpayer, and

17 ‘‘(B) which are not incurred in violation of

18 State or Federal law or in carrying out any sur19 rogate parenting arrangement.

20 Such term shall not include expenses for a foreign

21 adoption unless the child is actually adopted.

22 ‘‘(2) EXPENSES FOR ADOPTION OF SPOUSE’S

23 CHILD NOT ELIGIBLE.—The term ‘qualified adoption

24 expenses’ shall not include any expenses in connection
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1 with the adoption by an individual of a child who is

2 the child of such individual’s spouse.

3 ‘‘(3) ELIGIBLE CHILD.—The term ‘eligible child’

4 means any individual—

5 ‘‘(A) who has not attained age 18 as of the

6 time of the adoption, or

7 ‘‘(B) who is physically or mentally incapa8 ble of caring for himself.

9 ‘‘(4) CHILD WITH SPECIAL NEEDS.—The term

10 ‘child with special needs’ means any child if—

11 ‘‘(A) a State has determined that the child

12 cannot or should not be returned to the home of

13 his parents, and

14 ‘‘(B) such State has determined that there

15 exists with respect to the child a specific factor

16 or condition (such as his ethnic background, age,

17 or membership in a minority or sibling group,

18 or the presence of factors such as medical condi19 tions or physical, mental, or emotional handi20 caps) because of which it is reasonable to con21 clude that such child cannot be placed with

22 adoptive parents without providing adoption as23 sistance.

24 ‘‘(e) MARRIED COUPLES MUST FILE JOINT RE25 TURNS.—Rules similar to the rules of paragraphs (2), (3),
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1 and (4) of section 21(e) shall apply for purposes of this sec2 tion.’’.

3 (b) EXCLUSION OF AMOUNTS RECEIVED UNDER EM4 PLOYER’S ADOPTION ASSISTANCE PROGRAMS.—Part III of

5 subchapter B of chapter 1 (relating to items specifically ex6 cluded from gross income), as amended by title VIII, is

7 amended by redesignating section 138 as section 139 and

8 by inserting after section 137 the following new section:

9 ‘‘SEC. 138. ADOPTION ASSISTANCE PROGRAMS.

10 ‘‘(a) IN GENERAL.—Gross income of an employee does

11 not include amounts paid or expenses incurred by the em12 ployer for qualified adoption expenses in connection with

13 the adoption of a child by an employee if such amounts

14 are furnished pursuant to an adoption assistance program.

15 ‘‘(b) LIMITATIONS.—

16 ‘‘(1) DOLLAR LIMITATION.—The aggregate

17 amount excludable from gross income under sub18 section (a) for all taxable years with respect to the

19 adoption of any single child by the taxpayer shall not

20 exceed $5,000.

21 ‘‘(2) INCOME LIMITATION.—The amount exclud22 able from gross income under subsection (a) for any

23 taxable year shall be reduced (but not below zero) by

24 an amount which bears the same ratio to the amount
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1 so excludable (determined without regard to this

2 paragraph but with regard to paragraph (1)) as—

3 ‘‘(A) the amount (if any) by which the tax4 payer’s adjusted gross income (determined with5 out regard to this section and sections 911, 931,

6 and 933) exceeds $75,000, bears to

7 ‘‘(B) $40,000.

8 ‘‘(c) ADOPTION ASSISTANCE PROGRAM.—For purposes

9 of this section, an adoption assistance program is a plan

10 of an employer—

11 ‘‘(1) under which the employer provides employ12 ees with adoption assistance, and

13 ‘‘(2) which meets requirements similar to the re14 quirements of paragraphs (2), (3), and (5) of section

15 127(b).

16 An adoption reimbursement program operated under sec17 tion 1052 of title 10, United States Code (relating to armed

18 forces) or section 514 of title 14, United States Code (relat19 ing to members of the Coast Guard) shall be treated as an

20 adoption assistance program for purposes of this section.

21 ‘‘(d) QUALIFIED ADOPTION EXPENSES.—For purposes

22 of this section, the term ‘qualified adoption expenses’ has

23 the meaning given such term by section 24(d).’’.

24 (c) CONFORMING AMENDMENTS.—
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1 (1) The table of sections for subpart A of part IV

2 of subchapter A of chapter 1, as amended by section

3 11001, is amended by inserting after the item relating

4 to section 23 the following new item:

‘‘Sec. 24. Adoption expenses.’’.

5 (2) The table of sections for part III of sub6 chapter B of chapter 1 is amended by striking the

7 item relating to section 138 and inserting the follow8 ing:

‘‘Sec. 138. Adoption assistance programs.

‘‘Sec. 139. Cross reference to other Acts.’’.

9 (d) EFFECTIVE DATE.—The amendments made by this

10 section shall apply to taxable years beginning after Decem11 ber 31, 1995.

12 SEC. 11004. DEDUCTION FOR INTEREST ON EDUCATION

13 LOANS.

14 (a) IN GENERAL.—Part VII of subchapter B of chapter

15 1 (relating to additional itemized deductions for individ16 uals) is amended by redesignating section 220 as section

17 221 and by inserting after section 219 the following new

18 section:

19 ‘‘SEC. 220. INTEREST ON EDUCATION LOANS.

20 ‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an

21 individual, there shall be allowed as a deduction for the tax22 able year an amount equal to the interest paid by the tax-
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1 payer during the taxable year on any qualified education

2 loan.

3 ‘‘(b) MAXIMUM DEDUCTION.—

4 ‘‘(1) IN GENERAL.—Except as provided in para5 graph (2), the deduction allowed by subsection (a) for

6 the taxable year shall not exceed $2,500.

7 ‘‘(2) LIMITATION BASED ON MODIFIED ADJUSTED

8 GROSS INCOME.—

9 ‘‘(A) IN GENERAL.—If the modified adjusted

10 gross income of the taxpayer for the taxable year

11 exceeds $45,000 ($65,000 in the case of a joint

12 return), the amount which would (but for this

13 paragraph) be allowable as a deduction under

14 this section shall be reduced (but not below zero)

15 by the amount which bears the same ratio to the

16 amount which would be so allowable as such ex17 cess bears to $20,000.

18 ‘‘(B) MODIFIED ADJUSTED GROSS IN19 COME.—The term ‘modified adjusted gross in20 come’ means adjusted gross income determined—

21 ‘‘(i) without regard to this section and

22 sections 135, 911, 931, and 933, and

23 ‘‘(ii) after application of sections 86,

24 219, and 469.
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1 For purposes of sections 86, 135, 219, and 469,

2 adjusted gross income shall be determined with3 out regard to the deduction allowed under this

4 section.

5 ‘‘(C) INFLATION ADJUSTMENT.—In the case

6 of any taxable year beginning after 1996, the

7 $45,000 and $65,000 amounts referred to in sub8 paragraph (A) shall be increased by an amount

9 equal to—

10 ‘‘(i) such dollar amount, multiplied by

11 ‘‘(ii) the cost-of-living adjustment de12 termined under section (1)(f)(3) for the cal13 endar year in which the taxable year be14 gins, by substituting ‘1995’ for ‘1992’.

15 ‘‘(D) ROUNDING.—If any amount as ad16 justed under subparagraph (C) is not a multiple

17 of $50, such amount shall be rounded to the

18 nearest multiple of $50.

19 ‘‘(c) DEPENDENTS NOT ELIGIBLE FOR DEDUCTION.—

20 No deduction shall be allowed by this section to an individ21 ual for the taxable year if a deduction under section 151

22 with respect to such individual is allowed to another tax23 payer for the taxable year beginning in the calendar year

24 in which such individual’s taxable year begins.
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1 ‘‘(d) LIMIT ON PERIOD DEDUCTION ALLOWED.—A de2 duction shall be allowed under this section only with respect

3 to interest paid on any qualified education loan during the

4 first 60 months (whether or not consecutive) in which inter5 est payments are required. For purposes of this paragraph,

6 any loan and all refinancings of such loan shall be treated

7 as 1 loan.

8 ‘‘(e) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) QUALIFIED EDUCATION LOAN.—The term

10 ‘qualified education loan’ means any indebtedness in11 curred to pay qualified higher education expenses—

12 ‘‘(A) which are incurred on behalf of the

13 taxpayer or the taxpayer’s spouse,

14 ‘‘(B) which are paid or incurred within a

15 reasonable period of time before or after the in16 debtedness is incurred, and

17 ‘‘(C) which are attributable to education

18 furnished during a period during which the re19 cipient was at least a half-time student.

20 Such term includes indebtedness used to refinance in21 debtedness which qualifies as a qualified education

22 loan. The term ‘qualified education loan’ shall not in23 clude any indebtedness owed to a person who is relat24 ed (within the meaning of section 267(b) or

25 707(b)(1)) to the taxpayer.
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1 ‘‘(2) QUALIFIED HIGHER EDUCATION EX2 PENSES.—The term ‘qualified higher education ex3 penses’ means the cost of attendance (as defined in

4 section 472 of the Higher Education Act of 1965, 20

5 U.S.C. 1087ll, as in effect on the day before the date

6 of the enactment of this Act) of the taxpayer or the

7 taxpayer’s spouse at an eligible educational institu8 tion, reduced by the sum of—

9 ‘‘(A) the amount excluded from gross in10 come under section 135 by reason of such ex11 penses, and

12 ‘‘(B) the amount of the reduction described

13 in section 135(d)(1).

14 For purposes of the preceding sentence, the term ‘eli15 gible educational institution’ has the same meaning

16 given such term by section 135(c)(3), except that such

17 term shall also include an institution conducting an

18 internship or residency program leading to a degree

19 or certificate awarded by an institution of higher edu20 cation, a hospital, or a health care facility which of21 fers postgraduate training.

22 ‘‘(3) HALF-TIME STUDENT.—The term ‘half-time

23 student’ means any individual who would be a stu24 dent as defined in section 151(c)(4) if ‘half-time’ were
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1 substituted for ‘full-time’ each place it appears in

2 such section.

3 ‘‘(4) DEPENDENT.—The term ‘dependent’ has the

4 meaning given such term by section 152.

5 ‘‘(f) SPECIAL RULES.—

6 ‘‘(1) DENIAL OF DOUBLE BENEFIT.—No deduc7 tion shall be allowed under this section for any

8 amount for which a deduction is allowable under any

9 other provision of this chapter.

10 ‘‘(2) MARRIED COUPLES MUST FILE JOINT RE11 TURN.—If the taxpayer is married at the close of the

12 taxable year, the deduction shall be allowed under

13 subsection (a) only if the taxpayer and the taxpayer’s

14 spouse file a joint return for the taxable year.

15 ‘‘(3) MARITAL STATUS.—Marital status shall be

16 determined in accordance with section 7703.’’.

17 (b) DEDUCTION ALLOWED WHETHER OR NOT TAX18 PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a) of

19 section 62 is amended by inserting after paragraph (15)

20 the following new paragraph:

21 ‘‘(16) INTEREST ON EDUCATION LOANS.—The de22 duction allowed by section 220.’’

23 (c) REPORTING REQUIREMENT.—

24 (1) IN GENERAL.—Subpart B of part III of sub25 chapter A of chapter 61 (relating to information con-
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1 cerning transactions with other persons) is amended

2 by inserting after section 6050P the following new

3 section:

4 ‘‘SEC. 6050Q. RETURNS RELATING TO EDUCATION LOAN IN5 TEREST RECEIVED IN TRADE OR BUSINESS

6 FROM INDIVIDUALS.

7 ‘‘(a) EDUCATION LOAN INTEREST OF $600 OR

8 MORE.—Any person—

9 ‘‘(1) who is engaged in a trade or business, and

10 ‘‘(2) who, in the course of such trade or business,

11 receives from any individual interest aggregating

12 $600 or more for any calendar year on 1 or more

13 qualified education loans,

14 shall make the return described in subsection (b) with re15 spect to each individual from whom such interest was re16 ceived at such time as the Secretary may by regulations

17 prescribe.

18 ‘‘(b) FORM AND MANNER OF RETURNS.—A return is

19 described in this subsection if such return—

20 ‘‘(1) is in such form as the Secretary may pre21 scribe,

22 ‘‘(2) contains—

23 ‘‘(A) the name, address, and TIN of the in24 dividual from whom the interest described in

25 subsection (a)(2) was received,
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1 ‘‘(B) the amount of such interest received

2 for the calendar year, and

3 ‘‘(C) such other information as the Sec4 retary may prescribe.

5 ‘‘(c) APPLICATION TO GOVERNMENTAL UNITS.—For

6 purposes of subsection (a)—

7 ‘‘(1) TREATED AS PERSONS.—The term ‘person’

8 includes any governmental unit (and any agency or

9 instrumentality thereof).

10 ‘‘(2) SPECIAL RULES.—In the case of a govern11 mental unit or any agency or instrumentality there12 of—

13 ‘‘(A) subsection (a) shall be applied without

14 regard to the trade or business requirement con15 tained therein, and

16 ‘‘(B) any return required under subsection

17 (a) shall be made by the officer or employee ap18 propriately designated for the purpose of making

19 such return.

20 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID21 UALS WITH RESPECT TO WHOM INFORMATION IS RE22 QUIRED.—Every person required to make a return under

23 subsection (a) shall furnish to each individual whose name

24 is required to be set forth in such return a written statement

25 showing—
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1 ‘‘(1) the name and address of the person required

2 to make such return, and

3 ‘‘(2) the aggregate amount of interest described

4 in subsection (a)(2) received by the person required to

5 make such return from the individual to whom the

6 statement is required to be furnished.

7 The written statement required under the preceding sen8 tence shall be furnished on or before January 31 of the year

9 following the calendar year for which the return under sub10 section (a) was required to be made.

11 ‘‘(e) QUALIFIED EDUCATION LOAN DEFINED.—For

12 purposes of this section, except as provided in regulations

13 prescribed by the Secretary, the term ‘qualified education

14 loan’ has the meaning given such term by section 220(e)(1).

15 ‘‘(f) RETURNS WHICH WOULD BE REQUIRED TO BE

16 MADE BY 2 OR MORE PERSONS.—Except to the extent pro17 vided in regulations prescribed by the Secretary, in the case

18 of interest received by any person on behalf of another per19 son, only the person first receiving such interest shall be

20 required to make the return under subsection (a).’’.

21 (2) ASSESSABLE PENALTIES.—Section 6724(d)

22 (relating to definitions) is amended—

23 (A) by redesignating clauses (ix) through

24 (xiv) as clauses (x) through (xv), respectively, in

25 paragraph (1)(B) and by inserting after clause
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1 (viii) of such paragraph the following new

2 clause:

3 ‘‘(ix) section 6050Q (relating to re4 turns relating to education loan interest re5 ceived in trade or business from individ6 uals),’’, and

7 (B) by redesignating subparagraphs (Q)

8 through (T) as subparagraphs (R) through (U),

9 respectively, in paragraph (2) and by inserting

10 after subparagraph (P) of such paragraph the

11 following new subparagraph:

12 ‘‘(Q) section 6050Q (relating to returns re13 lating to education loan interest received in

14 trade or business from individuals),’’.

15 (d) CLERICAL AMENDMENT.—The table of sections for

16 part VII of subchapter B of chapter 1 is amended by strik17 ing the last item and inserting the following new items:

‘‘Sec. 220. Interest on education loans.

‘‘Sec. 221. Cross reference.’’.

18 (e) EFFECTIVE DATE.—The amendments made by this

19 section shall apply to any qualified education loan (as de20 fined in section 220(e)(1) of the Internal Revenue Code of

21 1986, as added by this section) incurred on, before, or after

22 the date of the enactment of this Act, but only with respect

23 to any loan interest payment due after December 31, 1995.
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1 SEC. 11005. DEDUCTION FOR TAXPAYERS WITH CERTAIN

2 PERSONS REQUIRING CUSTODIAL CARE IN

3 THEIR HOUSEHOLDS.

4 (a) IN GENERAL.—Part VII of subchapter B of chapter

5 1 is amended by redesignating section 221 as section 222

6 and by inserting after section 220 the following new section:

7 ‘‘SEC. 221. TAXPAYERS WITH CERTAIN PERSONS REQUIRING

8 CUSTODIAL CARE IN THEIR HOUSEHOLDS.

9 ‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an

10 individual who maintains a household which includes as

11 a member one or more qualified persons, there shall be al12 lowed as a deduction for the taxable year an amount equal

13 to $1,000 for each such person.

14 ‘‘(b) QUALIFIED PERSON.—For purposes of this sec15 tion, the term ‘qualified person’ means any individual—

16 ‘‘(1) who is a father or mother of the taxpayer,

17 his spouse, or his former spouse or who is an ancestor

18 of such a father or mother,

19 ‘‘(2) who is physically or mentally incapable of

20 caring for himself,

21 ‘‘(3) who has as his principal place of abode for

22 more than half of the taxable year the home of the

23 taxpayer,

24 ‘‘(4) over half of whose support, for the calendar

25 year in which the taxable year of the taxpayer begins,

26 was received from the taxpayer, and
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1 ‘‘(5) whose name and TIN are included on the

2 taxpayer’s return for the taxable year.

3 For purposes of paragraph (1), a stepfather or stepmother

4 shall be treated as a father or mother.

5 ‘‘(c) SPECIAL RULES.—For purposes of this section,

6 rules similar to the rules of paragraphs (1), (2), (3), and

7 (4) of section 21(e) shall apply.’’

8 (b) DEDUCTION ALLOWED WHETHER OR NOT TAX9 PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a) of

10 section 62 is amended by inserting after paragraph (16)

11 the following new paragraph:

12 ‘‘(17) TAXPAYERS WITH CERTAIN PERSONS RE13 QUIRING CUSTODIAL CARE IN THEIR HOUSEHOLDS.—

14 The deduction allowed by section 221.’’

15 (c) CLERICAL AMENDMENT.—The table of sections for

16 part VII of subchapter B of chapter 1 is amended by strik17 ing the last item and inserting the following new items:

‘‘Sec. 221. Taxpayers with certain persons requiring custodial care

in their households.

‘‘Sec. 222. Cross reference.’’

18 (d) EFFECTIVE DATE.—The amendments made by this

19 section shall apply to taxable years beginning after Decem20 ber 31, 1995.
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1 Subtitle B—Savings and Investment

2 Incentives

3 CHAPTER 1—RETIREMENT SAVINGS

4 INCENTIVES

5 Subchapter A—Individual Retirement Plans

6 PART I—RESTORATION OF IRA DEDUCTION

7 SEC. 11011. RESTORATION OF IRA DEDUCTION.

8 (a) INCREASE IN INCOME LIMITS FOR ACTIVE PAR9 TICIPANTS.—

10 (1) IN GENERAL.—Subparagraph (B) of section

11 219(g)(3) (relating to applicable dollar amount) is

12 amended to read as follows:

13 ‘‘(B) APPLICABLE DOLLAR AMOUNT.—The

14 term ‘applicable dollar amount’ means the fol15 lowing:

16 ‘‘(i) In the case of a taxpayer filing a

17 joint return:

The applicable

‘‘For taxable years beginning in: dollar amount is:

1996 ................................................................................................ $45,000

1997 ................................................................................................ $50,000

1998 ................................................................................................ $55,000

1999 ................................................................................................ $60,000

2000 ................................................................................................ $65,000

2001 ................................................................................................ $70,000

2002 ................................................................................................ $75,000

2003 ................................................................................................ $80,000

2004 ................................................................................................ $85,000

2005 ................................................................................................ $90,000

2006 ................................................................................................ $95,000

2007 and thereafter ........................................................................ $100,000.
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1 ‘‘(ii) In the case of any other taxpayer

2 (other than a married individual filing a

3 separate return):

The applicable

‘‘For taxable years beginning in: dollar amount is:

1996 ................................................................................................ $30,000

1997 ................................................................................................ $35,000

1998 ................................................................................................ $40,000

1999 ................................................................................................ $45,000

2000 ................................................................................................ $50,000

2001 ................................................................................................ $55,000

2002 ................................................................................................ $60,000

2003 ................................................................................................ $65,000

2004 ................................................................................................ $70,000

2005 ................................................................................................ $75,000

2006 ................................................................................................ $80,000

2007 and thereafter ........................................................................ $85,000.

4 ‘‘(iii) In the case of a married individ5 ual filing a separate return, zero.’’

6 (2) INCREASE IN PHASEOUT RANGE FOR JOINT

7 RETURNS.—

8 (A) IN GENERAL.—Clause (ii) of section

9 219(g)(2)(A) is amended by inserting ‘‘(the

10 phaseout amount in the case of a joint return)’’

11 after ‘‘$10,000’’.

12 (B) PHASEOUT AMOUNT.—Paragraph (3) of

13 section 219(g) is amended—

14 (i) by adding at the end the following

15 new subparagraph:

16 ‘‘(C) PHASEOUT AMOUNT.—The phaseout

17 amount is:

The applicable

‘‘For taxable years beginning in: dollar amount is:

1996 ................................................................................................ $12,500

1997 ................................................................................................ $15,000
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The applicable

‘‘For taxable years beginning in: dollar amount is:

1998 ................................................................................................ $17,500

1999 and thereafter ........................................................................ $20,000.’’,

1 and

2 (ii) by inserting ‘‘; PHASEOUT

3 AMOUNT’’ after ‘‘AMOUNT’’ in the heading.

4 (3) COST-OF-LIVING ADJUSTMENTS.—Section

5 219(h), as added by section 11012(a), is amended—

6 (A) by adding at the end the following new

7 paragraph:

8 ‘‘(2) PHASE-OUT RANGES.—In the case of any

9 taxable year beginning in a calendar year after 2007,

10 the $100,000 and $85,000 amounts in clauses (i) and

11 (ii) of subsection (g)(3)(B) shall each be increased by

12 an amount equal to the product of such dollar

13 amount and the cost-of-living adjustment determined

14 under section 1(f)(3) for the calendar year, except

15 that subparagraph (B) thereof shall be applied by

16 substituting ‘2006’ for ‘1992’. If any amount to which

17 either such amount is increased is not a multiple of

18 $1,000, such amount shall be rounded to the next

19 lower multiple of $1,000.’’, and

20 (B) by striking ‘‘In the case’’ and inserting:

21 ‘‘(1) DEDUCTIBLE AMOUNT.—In the case’’.

22 (b) INDIVIDUAL NOT DISQUALIFIED BY SPOUSE’S PAR23 TICIPATION.—Paragraph (1) of section 219(g) (relating to
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1 limitation on deduction for active participants in certain

2 pension plans) is amended by striking ‘‘or the individual’s

3 spouse’’.

4 (c) REPORTING REQUIREMENTS.—Section 408(i) is

5 amended by striking ‘‘under regulations’’ and ‘‘in such reg6 ulations’’ each place such terms appear.

7 (d) EFFECTIVE DATE.—The amendments made by this

8 section shall apply to taxable years beginning after Decem9 ber 31, 1995.

10 SEC. 11012. INFLATION ADJUSTMENT FOR DEDUCTIBLE

11 AMOUNT.

12 (a) IN GENERAL.—Section 219 is amended by redesig13 nating subsection (h) as subsection (i) and by inserting

14 after subsection (g) the following new subsection:

15 ‘‘(h) COST-OF-LIVING ADJUSTMENTS.—In the case of

16 any taxable year beginning in a calendar year after 1996,

17 the $2,000 amount under subsection (b)(1)(A) shall be in18 creased by an amount equal to the product of $2,000 and

19 the cost-of-living adjustment determined under section

20 1(f)(3) for the calendar year in which the taxable year be21 gins, except that subparagraph (B) thereof shall be applied

22 by substituting ‘1995’ for ‘1992’. If the amount to which

23 $2,000 would be increased under the preceding sentence is

24 not a multiple of $500, such amount shall be rounded to

25 the next lower multiple of $500.’’
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1 (b) CONFORMING AMENDMENTS.—

2 (1) Section 408(a)(1) is amended by striking ‘‘in

3 excess of $2,000 on behalf of any individual’’ and in4 serting ‘‘on behalf of any individual in excess of the

5 amount in effect for such taxable year under section

6 219(b)(1)(A)’’.

7 (2) Section 408(b)(2)(B) is amended by striking

8 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

9 under section 219(b)(1)(A)’’.

10 (3) Section 408(j) is amended by striking

11 ‘‘$2,000’’.

12 SEC. 11013. HOMEMAKERS ELIGIBLE FOR FULL IRA DEDUC13 TION.

14 (a) SPOUSAL IRA COMPUTED ON BASIS OF COM15 PENSATION OF BOTH SPOUSES.—Subsection (c) of section

16 219 (relating to special rules for certain married individ17 uals) is amended to read as follows:

18 ‘‘(c) SPECIAL RULES FOR CERTAIN MARRIED INDIVID19 UALS.—

20 ‘‘(1) IN GENERAL.—In the case of an individual

21 to whom this paragraph applies for the taxable year,

22 the limitation of paragraph (1) of subsection (b) shall

23 be equal to the lesser of—

24 ‘‘(A) the dollar amount in effect under sub25 section (b)(1)(A) for the taxable year, or
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1 ‘‘(B) the sum of—

2 ‘‘(i) the compensation includible in

3 such individual’s gross income for the tax4 able year, plus

5 ‘‘(ii) the compensation includible in

6 the gross income of such individual’s spouse

7 for the taxable year reduced by—

8 ‘‘(I) the amount allowed as a de9 duction under subsection (a) to such

10 spouse for such taxable year, and

11 ‘‘(II) the amount of any contribu12 tion on behalf of such spouse to an AD

13 IRA under section 408A for such tax14 able year.

15 ‘‘(2) INDIVIDUALS TO WHOM PARAGRAPH (1) AP16 PLIES.—Paragraph (1) shall apply to any individual

17 if—

18 ‘‘(A) such individual files a joint return for

19 the taxable year, and

20 ‘‘(B) the amount of compensation (if any)

21 includible in such individual’s gross income for

22 the taxable year is less than the compensation

23 includible in the gross income of such individ24 ual’s spouse for the taxable year.’’

25 (b) CONFORMING AMENDMENTS.—
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1 (1) Paragraph (2) of section 219(f) (relating to

2 other definitions and special rules) is amended by

3 striking ‘‘subsections (b) and (c)’’ and inserting ‘‘sub4 section (b)’’.

5 (2) Section 408(d)(5) is amended by striking

6 ‘‘$2,250’’ and inserting ‘‘the dollar amount in effect

7 under section 219(b)(1)(A)’’.

8 (3) Section 219(g)(1) is amended by striking

9 ‘‘(c)(2)’’ and inserting ‘‘(c)(1)(A)’’.

10 (c) EFFECTIVE DATE.—The amendments made by this

11 section shall apply to taxable years beginning after Decem12 ber 31, 1995.

13 PART II—NONDEDUCTIBLE TAX-FREE IRAS

14 SEC. 11015. ESTABLISHMENT OF AMERICAN DREAM IRA.

15 (a) IN GENERAL.—Subpart A of part I of subchapter

16 D of chapter 1 (relating to pension, profit-sharing, stock

17 bonus plans, etc.) is amended by inserting after section 408

18 the following new section:

19 ‘‘SEC. 408A. AMERICAN DREAM IRA.

20 ‘‘(a) GENERAL RULE.—Except as provided in this sec21 tion, an American Dream IRA shall be treated for purposes

22 of this title in the same manner as an individual retirement

23 plan.

24 ‘‘(b) AMERICAN DREAM IRA.—For purposes of this

25 title, the term ‘American Dream IRA’ or ‘AD IRA’ means
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1 an individual retirement plan (as defined in section

2 7701(a)(37)) which is designated at the time of the estab3 lishment of the plan as an American Dream IRA. Such

4 designation shall be made in such manner as the Secretary

5 may prescribe.

6 ‘‘(c) TREATMENT OF CONTRIBUTIONS.—

7 ‘‘(1) NO DEDUCTION ALLOWED.—No deduction

8 shall be allowed under section 219 for a contribution

9 to an AD IRA.

10 ‘‘(2) CONTRIBUTION LIMIT.—The aggregate

11 amount of contributions for any taxable year to all

12 AD IRAs maintained for the benefit of an individual

13 shall not exceed the excess (if any) of—

14 ‘‘(A) the maximum amount allowable as a

15 deduction under section 219 with respect to such

16 individual for such taxable year (computed with17 out regard to subsection (g) of such section), over

18 ‘‘(B) the amount so allowed.

19 ‘‘(3) CONTRIBUTIONS PERMITTED AFTER AGE

701 20 ⁄2.—Contributions to an AD IRA may be made

21 even after the individual for whom the account is

maintained has attained age 701 22 ⁄2.

23 ‘‘(4) MANDATORY DISTRIBUTION RULES NOT TO

24 APPLY, ETC.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraph (B), subsections (a)(6) and (b)(3)

3 of section 408 (relating to required distributions)

4 and section 4974 (relating to excise tax on cer5 tain accumulations in qualified retirement

6 plans) shall not apply to any AD IRA.

7 ‘‘(B) POST-DEATH DISTRIBUTIONS.—Rules

8 similar to the rules of section 401(a)(9) (other

9 than subparagraph (A) thereof) shall apply for

10 purposes of this section.

11 ‘‘(5) RULES RELATING TO ROLLOVER CONTRIBU12 TIONS.—

13 ‘‘(A) IN GENERAL.—No rollover contribu14 tion may be made to an AD IRA unless it is a

15 qualified rollover contribution.

16 ‘‘(B) COORDINATION WITH LIMIT.—A quali17 fied rollover contribution shall not be taken into

18 account for purposes of paragraph (2).

19 ‘‘(6) TIME WHEN CONTRIBUTIONS MADE.—For

20 purposes of this section, the rule of section 219(f)(3)

21 shall apply.

22 ‘‘(d) DISTRIBUTION RULES.—For purposes of this

23 title—

24 ‘‘(1) GENERAL RULES.—
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1 ‘‘(A) EXCLUSIONS FROM GROSS INCOME.—

2 Any qualified distribution from an AD IRA

3 shall not be includible in gross income.

4 ‘‘(B) NONQUALIFIED DISTRIBUTIONS.—In

5 applying section 72 to any distribution from an

6 AD IRA which is not a qualified distribution,

7 such distribution shall be treated as made from

8 contributions to the AD IRA to the extent that

9 such distribution, when added to all previous

10 distributions from the AD IRA, does not exceed

11 the aggregate amount of contributions to the AD

12 IRA. For purposes of the preceding sentence, all

13 AD IRAs maintained for the benefit of an indi14 vidual shall be treated as 1 account.

15 ‘‘(C) EXCEPTION FROM PENALTY TAX.—Sec16 tion 72(t) shall not apply to—

17 ‘‘(i) any qualified distribution from an

18 AD IRA, and

19 ‘‘(ii) any qualified special purpose dis20 tribution (whether or not a qualified dis21 tribution) from an AD IRA.

22 ‘‘(2) QUALIFIED DISTRIBUTION.—For purposes

23 of this subsection—

24 ‘‘(A) IN GENERAL.—The term ‘qualified dis25 tribution’ means any payment or distribution—
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1 ‘‘(i) made on or after the date on

which the individual attains age 591 2 ⁄2,

3 ‘‘(ii) made to a beneficiary (or to the

4 estate of the individual) on or after the

5 death of the individual,

6 ‘‘(iii) attributable to the individual’s

7 being disabled (within the meaning of sec8 tion 72(m)(7)), or

9 ‘‘(iv) which is a qualified special pur10 pose distribution.

11 ‘‘(B) DISTRIBUTIONS WITHIN 5 YEARS.—No

12 payment or distribution shall be treated as a

13 qualified distribution if—

14 ‘‘(i) it is made within the 5-taxable

15 year period beginning with the 1st taxable

16 year for which the individual made a con17 tribution to an AD IRA (or such individ18 ual’s spouse made a contribution to an AD

19 IRA) established for such individual, or

20 ‘‘(ii) in the case of a payment or dis21 tribution properly allocable (as determined

22 in the manner prescribed by the Secretary)

23 to a qualified rollover contribution (or in24 come allocable thereto), it is made within

25 the 5-taxable year period beginning with the
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1 taxable year in which the rollover contribu2 tion was made.

3 Clause (ii) shall not apply to a qualified rollover

4 contribution from an AD IRA.

5 ‘‘(3) ROLLOVERS.—

6 ‘‘(A) IN GENERAL.—Paragraph (1) shall

7 not apply to any distribution which is trans8 ferred in a qualified rollover contribution to an

9 AD IRA.

10 ‘‘(B) INCOME INCLUSION FOR ROLLOVERS

11 FROM NON-AD IRAS.—In the case of any quali12 fied rollover contribution from an individual re13 tirement plan (other than an AD IRA) to an AD

14 IRA established for the benefit of the payee or

15 distributee, as the case may be—

16 ‘‘(i) sections 72(t) and 408(d)(3) shall

17 not apply, and

18 ‘‘(ii) in any case where such contribu19 tion is made before January 1, 1998, any

20 amount required to be included in gross in21 come by reason of this paragraph shall be

22 so included ratably over the 4-taxable year

23 period beginning with the taxable year in

24 which the payment or distribution is made.
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1 ‘‘(C) ADDITIONAL REPORTING REQUIRE2 MENTS.—The Secretary shall require that trust3 ees of AD IRAs, trustees of individual retirement

4 plans, or both, whichever is appropriate, shall

5 include such additional information in reports

6 required under section 408(i) as is necessary to

7 ensure that amounts required to be included in

8 gross income under subparagraph (B) are so in9 cluded.

10 ‘‘(4) QUALIFIED SPECIAL PURPOSE DISTRIBU11 TION.—For purposes of this section, the term ‘quali12 fied special purpose distribution’ means any distribu13 tion to which subparagraph (B), (D), or (E) of sec14 tion 72(t)(2) applies.

15 ‘‘(e) QUALIFIED ROLLOVER CONTRIBUTION.—For pur16 poses of this section—

17 ‘‘(1) IN GENERAL.—The term ‘qualified rollover

18 contribution’ means a rollover contribution to an AD

19 IRA from another such account, or from an individ20 ual retirement plan, but only if such rollover con21 tribution meets the requirements of section 408(d)(3).

22 For purposes of section 408(d)(3)(B), there shall be

23 disregarded any qualified rollover contribution from

24 an individual retirement plan to an AD IRA.
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1 ‘‘(2) CONVERSIONS.—The conversion of an indi2 vidual retirement plan to an AD IRA shall be treated

3 as if it were a qualified rollover contribution.’’

4 (b) REPEAL OF NONDEDUCTIBLE CONTRIBUTIONS.—

5 (1) Subsection (f) of section 219 is amended by

6 striking paragraph (7).

7 (2) Paragraph (5) of section 408(d) is amended

8 by striking the last sentence.

9 (3) Section 408(o) is amended by adding at the

10 end the following new paragraph:

11 ‘‘(5) TERMINATION.—This subsection shall not

12 apply to any designated nondeductible contribution

13 for any taxable year beginning after December 31,

14 1995.’’

15 (4) Subsection (b) of section 4973 is amended by

16 striking the last sentence.

17 (c) EXCESS DISTRIBUTIONS TAX NOT TO APPLY.—

18 Subparagraph (B) of section 4980A(e)(1) is amended by in19 serting ‘‘other than an AD IRA (as defined in section

20 408A(b))’’ after ‘‘retirement plan’’.

21 (d) EXCESS CONTRIBUTIONS.—Section 4973(b) is

22 amended to read as follows:

23 ‘‘(b) EXCESS CONTRIBUTIONS.—For purposes of this

24 section—
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1 ‘‘(1) IN GENERAL.—In the case of individual re2 tirement accounts or individual retirement annuities,

3 the term ‘excess contributions’ means the sum of—

4 ‘‘(A) the amount determined under para5 graph (2) for the taxable year, plus

6 ‘‘(B) the carryover amount determined

7 under paragraph (3) for the taxable year.

8 ‘‘(2) CURRENT YEAR.—The amount determined

9 under this paragraph for any taxable year is an

10 amount equal to the sum of—

11 ‘‘(A) the excess (if any) of—

12 ‘‘(i) the amount contributed for the

13 taxable year to the accounts or for the an14 nuities or bonds (other than AD IRAs), over

15 ‘‘(ii) the amount allowable as a deduc16 tion under section 219 for the taxable year,

17 plus

18 ‘‘(B) the excess (if any) of—

19 ‘‘(i) the amount described in clause (i)

20 (taking into account contributions to AD

21 IRAs) contributed for the taxable year, over

22 ‘‘(ii) the amount allowable as a deduc23 tion under section 219 for the taxable year

24 (computed without regard to section

25 219(g)).
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1 ‘‘(3) CARRYOVER AMOUNT.—The carryover

2 amount determined under this paragraph for any

3 taxable year is the amount determined under para4 graph (2) for the preceding taxable year, reduced by

5 the sum of—

6 ‘‘(A) the distributions out of the account for

7 the taxable year which were included in the gross

8 income of the payee under section 408(d)(1),

9 ‘‘(B) the distributions out of the account for

10 the taxable year to which section 408(d)(5) ap11 plies, and

12 ‘‘(C) the excess (if any) of the amount deter13 mined under paragraph (2)(B)(ii) over the

14 amount determined under paragraph (2)(B)(i).

15 ‘‘(4) SPECIAL RULES.—For purposes of this sub16 section—

17 ‘‘(A) ROLLOVER CONTRIBUTIONS.—Rollover

18 distributions described in sections 402(c),

19 403(a)(4), 403(b)(8), 408(d)(3), and 408A(e)

20 shall not be taken into account.

21 ‘‘(B) CONTRIBUTIONS RETURNED BEFORE

22 DUE DATE.—Any contribution which is distrib23 uted from an individual retirement plan in a

24 distribution to which section 408(d)(4) applies

25 shall not be taken into account.
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1 ‘‘(C) EXCESS CONTRIBUTIONS TREATED AS

2 CONTRIBUTIONS.—In applying paragraph

3 (3)(C), the determination as to amounts contrib4 uted for a taxable year shall be made without re5 gard to section 219(f)(6).’’

6 (e) CLERICAL AMENDMENT.—The table of sections for

7 subpart A of part I of subchapter D of chapter 1 is amended

8 by inserting after the item relating to section 408 the follow9 ing new item:

‘‘Sec. 408A. American Dream IRA.’’

10 (f) EFFECTIVE DATE.—The amendments made by this

11 section shall apply to taxable years beginning after Decem12 ber 31, 1995.

13 Subchapter B—Penalty-Free Distributions

14 SEC. 11016. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE

15 USED WITHOUT PENALTY TO PURCHASE

16 FIRST HOMES OR TO PAY HIGHER EDU17 CATION OR FINANCIALLY DEVASTATING MED18 ICAL EXPENSES.

19 (a) IN GENERAL.—Paragraph (2) of section 72(t) (re20 lating to exceptions to 10-percent additional tax on early

21 distributions from qualified retirement plans) is amended

22 by adding at the end the following new subparagraph:

23 ‘‘(D) DISTRIBUTIONS FROM INDIVIDUAL RETIRE24 MENT PLANS FOR FIRST-TIME HOMEBUYERS OR EDU-
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1 CATIONAL EXPENSES.—Distributions to an individual

2 from an individual retirement plan—

3 ‘‘(i) which are qualified first-time home4 buyer distributions (as defined in paragraph

5 (6)), or

6 ‘‘(ii) to the extent such distributions do not

7 exceed the qualified higher education expenses (as

8 defined in paragraph (7)) of the taxpayer for the

9 taxable year.

10 (b) FINANCIALLY DEVASTATING MEDICAL EX11 PENSES.—

12 (1) IN GENERAL.—Section 72(t)(3)(A) is amend13 ed by striking ‘‘(B),’’.

14 (2) CERTAIN LINEAL DESCENDANTS AND ANCES15 TORS TREATED AS DEPENDENTS.—Subparagraph (B)

16 of section 72(t)(2) is amended by striking ‘‘medical

17 care’’ and all that follows and inserting ‘‘medical care

18 determined—

19 ‘‘(i) without regard to whether the em20 ployee itemizes deductions for such taxable

21 year, and

22 ‘‘(ii) in the case of an individual re23 tirement plan, by treating such employee’s

24 dependents as including—
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1 ‘‘(I) all children and grand2 children of the employee or such em3 ployee’s spouse, and

4 ‘‘(II) all ancestors of the employee

5 or such employee’s spouse.’’

6 (3) CONFORMING AMENDMENT.—Subparagraph

7 (B) of section 72(t)(2) is amended by striking ‘‘or

8 (C)’’ and inserting ‘‘, (C), (D), or (E)’’.

9 (c) DEFINITIONS.—Section 72(t) is amended by add10 ing at the end the following new paragraphs:

11 ‘‘(6) QUALIFIED FIRST-TIME HOMEBUYER DIS12 TRIBUTIONS.—For purposes of paragraph (2)(D)(i)—

13 ‘‘(A) IN GENERAL.—The term ‘qualified

14 first-time homebuyer distribution’ means any

15 payment or distribution received by an individ16 ual to the extent such payment or distribution is

17 used by the individual before the close of the 60th

18 day after the day on which such payment or dis19 tribution is received to pay qualified acquisition

20 costs with respect to a principal residence of a

21 first-time homebuyer who is such individual, the

22 spouse of such individual, or any child, grand23 child, or ancestor of such individual or the indi24 vidual’s spouse.
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1 ‘‘(B) LIFETIME DOLLAR LIMITATION.—The

2 aggregate amount of payments or distributions

3 received by an individual which may be treated

4 as qualified first-time homebuyer distributions

5 for any taxable year shall not exceed the excess

6 (if any) of—

7 ‘‘(i) $10,000, over

8 ‘‘(ii) the aggregate amounts treated as

9 qualified first-time homebuyer distributions

10 with respect to such individual for all prior

11 taxable years.

12 ‘‘(C) QUALIFIED ACQUISITION COSTS.—For

13 purposes of this paragraph, the term ‘qualified

14 acquisition costs’ means the costs of acquiring,

15 constructing, or reconstructing a residence. Such

16 term includes any usual or reasonable settlement,

17 financing, or other closing costs.

18 ‘‘(D) FIRST-TIME HOMEBUYER; OTHER

19 DEFINITIONS.—For purposes of this para20 graph—

21 ‘‘(i) FIRST-TIME HOMEBUYER.—The

22 term ‘first-time homebuyer’ means any in23 dividual if—

24 ‘‘(I) such individual (and if mar25 ried, such individual’s spouse) had no
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1 present ownership interest in a prin2 cipal residence during the 2-year pe3 riod ending on the date of acquisition

4 of the principal residence to which this

5 paragraph applies, and

6 ‘‘(II) subsection (h) or (k) of sec7 tion 1034 did not suspend the running

8 of any period of time specified in sec9 tion 1034 with respect to such individ10 ual on the day before the date the dis11 tribution is applied pursuant to sub12 paragraph (A).

13 ‘‘(ii) PRINCIPAL RESIDENCE.—The

14 term ‘principal residence’ has the same

15 meaning as when used in section 1034.

16 ‘‘(iii) DATE OF ACQUISITION.—The

17 term ‘date of acquisition’ means the date—

18 ‘‘(I) on which a binding contract

19 to acquire the principal residence to

20 which subparagraph (A) applies is en21 tered into, or

22 ‘‘(II) on which construction or re23 construction of such a principal resi24 dence is commenced.
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1 ‘‘(E) SPECIAL RULE WHERE DELAY IN AC2 QUISITION.—If any distribution from any indi3 vidual retirement plan fails to meet the require4 ments of subparagraph (A) solely by reason of a

5 delay or cancellation of the purchase or construc6 tion of the residence, the amount of the distribu7 tion may be contributed to an individual retire8 ment plan as provided in section 408(d)(3)(A)(i)

9 (determined by substituting ‘120 days’ for ‘60

10 days’ in such section), except that—

11 ‘‘(i) section 408(d)(3)(B) shall not be

12 applied to such contribution, and

13 ‘‘(ii) such amount shall not be taken

14 into account in determining whether section

15 408(d)(3)(A)(i) applies to any other

16 amount.

17 ‘‘(7) QUALIFIED HIGHER EDUCATION EX18 PENSES.—For purposes of paragraph (2)(D)(ii)—

19 ‘‘(A) IN GENERAL.—The term ‘qualified

20 higher education expenses’ means tuition, fees,

21 books, supplies, and equipment required for the

22 enrollment or attendance of—

23 ‘‘(i) the taxpayer,

24 ‘‘(ii) the taxpayer’s spouse, or
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1 ‘‘(iii) any child (as defined in section

2 151(c)(3)), grandchild, or ancestor of the

3 taxpayer or the taxpayer’s spouse,

4 at an eligible educational institution (as defined

5 in section 135(c)(3)).

6 ‘‘(B) COORDINATION WITH SAVINGS BOND

7 PROVISIONS.—The amount of qualified higher

8 education expenses for any taxable year shall be

9 reduced by any amount excludable from gross in10 come under section 135.’’

11 (d) PENALTY-FREE DISTRIBUTIONS FOR CERTAIN UN12 EMPLOYED INDIVIDUALS.—Paragraph (2) of section 72(t)

13 is amended by adding at the end the following new subpara14 graph:

15 ‘‘(E) DISTRIBUTIONS TO UNEMPLOYED INDI16 VIDUALS.—A distribution from an individual re17 tirement plan to an individual after separation

18 from employment, if—

19 ‘‘(i) such individual has received un20 employment compensation for 12 consecu21 tive weeks under any Federal or State un22 employment compensation law by reason of

23 such separation, and

24 ‘‘(ii) such distributions are made dur25 ing any taxable year during which such un-
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1 employment compensation is paid or the

2 succeeding taxable year.

3 To the extent provided in regulations, a self-em4 ployed individual shall be treated as meeting the

5 requirements of clause (i) if, under Federal or

6 State law, the individual would have received

7 unemployment compensation but for the fact the

8 individual was self-employed.’’.

9 (e) EFFECTIVE DATE.—The amendments made by this

10 section shall apply to taxable years beginning after Decem11 ber 31, 1995.

12 Subchapter C—Simple Savings Plans

13 SEC. 11018. ESTABLISHMENT OF SAVINGS INCENTIVE

14 MATCH PLANS FOR EMPLOYEES OF SMALL

15 EMPLOYERS.

16 (a) IN GENERAL.—Section 408 (relating to individual

17 retirement accounts) is amended by redesignating sub18 section (p) as subsection (q) and by inserting after sub19 section (o) the following new subsection:

20 ‘‘(p) SIMPLE RETIREMENT ACCOUNTS.—

21 ‘‘(1) IN GENERAL.—For purposes of this title, the

22 term ‘simple retirement account’ means an individual

23 retirement plan (as defined in section 7701(a)(37))—

24 ‘‘(A) with respect to which the requirements

25 of paragraphs (3), (4), and (5) are met; and
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1 ‘‘(B) with respect to which the only con2 tributions allowed are contributions under a

3 qualified salary reduction arrangement.

4 ‘‘(2) QUALIFIED SALARY REDUCTION ARRANGE5 MENT.—

6 ‘‘(A) IN GENERAL.—For purposes of this

7 subsection, the term ‘qualified salary reduction

8 arrangement’ means a written arrangement of

9 an eligible employer under which—

10 ‘‘(i) an employee eligible to participate

11 in the arrangement may elect to have the

12 employer make payments—

13 ‘‘(I) as elective employer contribu14 tions to a simple retirement account on

15 behalf of the employee, or

16 ‘‘(II) to the employee directly in

17 cash,

18 ‘‘(ii) the amount which an employee

19 may elect under clause (i) for any year is

20 required to be expressed as a percentage of

21 compensation and may not exceed a total of

22 $6,000 for any year,

23 ‘‘(iii) the employer is required to make

24 a matching contribution to the simple re25 tirement account for any year in an
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1 amount equal to so much of the amount the

2 employee elects under clause (i)(I) as does

3 not exceed the applicable percentage of com4 pensation for the year, and

5 ‘‘(iv) no contributions may be made

6 other than contributions described in clause

7 (i) or (iii).

8 ‘‘(B) DEFINITIONS.—For purposes of this

9 subsection—

10 ‘‘(i) ELIGIBLE EMPLOYER.—The term

11 ‘eligible employer’ means an employer who

12 employs 100 or fewer employees on any day

13 during the year.

14 ‘‘(ii) APPLICABLE PERCENTAGE.—

15 ‘‘(I) IN GENERAL.—The term ‘ap16 plicable percentage’ means 3 percent.

17 ‘‘(II) ELECTION OF LOWER PER18 CENTAGE.—An employer may elect to

19 apply a lower percentage (not less than

20 1 percent) for any year for all employ21 ees eligible to participate in the plan

22 for such year if the employer notifies

23 the employees of such lower percentage

24 within a reasonable period of time be25 fore the 60-day election period for such
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1 year under paragraph (5)(C). An em2 ployer may not elect a lower percent3 age under this subclause for any year

4 if that election would result in the ap5 plicable percentage being lower than 3

6 percent in more than 2 of the years in

7 the 5-year period ending with such

8 year.

9 ‘‘(III) SPECIAL RULE FOR YEARS

10 ARRANGEMENT NOT IN EFFECT.—If

11 any year in the 5-year period de12 scribed in subclause (II) is a year

13 prior to the first year for which any

14 qualified salary reduction arrangement

15 is in effect with respect to the employer

16 (or any predecessor), the employer

17 shall be treated as if the level of the

18 employer matching contribution was at

19 3 percent of compensation for such

20 prior year.

21 ‘‘(C) ARRANGEMENT MAY BE ONLY PLAN OF

22 EMPLOYER.—

23 ‘‘(i) IN GENERAL.—An arrangement

24 shall not be treated as a qualified salary re25 duction arrangement for any year if the
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1 employer (or any predecessor employer)

2 maintained a qualified plan with respect to

3 which contributions were made, or benefits

4 were accrued, for service in any year in the

5 period beginning with the year such ar6 rangement became effective and ending with

7 the year for which the determination is

8 being made.

9 ‘‘(ii) QUALIFIED PLAN.—For purposes

10 of this subparagraph, the term ‘qualified

11 plan’ means a plan, contract, pension, or

12 trust described in subparagraph (A) or (B)

13 of section 219(g)(5).

14 ‘‘(D) COST-OF-LIVING ADJUSTMENT.—The

15 Secretary shall adjust the $6,000 amount under

16 subparagraph (A)(ii) at the same time and in

17 the same manner as under section 415(d), except

18 that the base period taken into account shall be

19 the calendar quarter ending September 30, 1995,

20 and any increase under this subparagraph which

21 is not a multiple of $500 shall be rounded to the

22 next lower multiple of $500.

23 ‘‘(3) VESTING REQUIREMENTS.—The require24 ments of this paragraph are met with respect to a

25 simple retirement account if the employee’s rights to
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1 any contribution to the simple retirement account are

2 nonforfeitable. For purposes of this paragraph, rules

3 similar to the rules of subsection (k)(4) shall apply.

4 ‘‘(4) PARTICIPATION REQUIREMENTS.—

5 ‘‘(A) IN GENERAL.—The requirements of

6 this paragraph are met with respect to any sim7 ple retirement account for a year only if, under

8 the qualified salary reduction arrangement, all

9 employees of the employer who—

10 ‘‘(i) received at least $5,000 in com11 pensation from the employer during any 2

12 preceding years, and

13 ‘‘(ii) are reasonably expected to receive

14 at least $5,000 in compensation during the

15 year,

16 are eligible to make the election under paragraph

17 (2)(A)(i).

18 ‘‘(B) EXCLUDABLE EMPLOYEES.—An em19 ployer may elect to exclude from the requirement

20 under subparagraph (A) employees described in

21 section 410(b)(3).

22 ‘‘(5) ADMINISTRATIVE REQUIREMENTS.—The re23 quirements of this paragraph are met with respect to

24 any simplified retirement account if, under the quali25 fied salary reduction arrangement—
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1 ‘‘(A) an employer must—

2 ‘‘(i) make the elective employer con3 tributions under paragraph (2)(A)(i) not

4 later than the close of the 30-day period fol5 lowing the last day of the month with re6 spect to which the contributions are to be

7 made, and

8 ‘‘(ii) make the matching contributions

9 under paragraph (2)(A)(iii) not later

10 than the date described in section

11 404(m)(2)(B),

12 ‘‘(B) an employee may elect to terminate

13 participation in such arrangement at any time

14 during the year, except that if an employee so

15 terminates, the arrangement may provide that

16 the employee may not elect to resume participa17 tion until the beginning of the next year, and

18 ‘‘(C) each employee eligible to participate

19 may elect, during the 60-day period before the

20 beginning of any year, to participate in the ar21 rangement, or to modify the amounts subject to

22 such arrangement, for such year.

23 ‘‘(6) DEFINITIONS.—For purposes of this sub24 section—

25 ‘‘(A) COMPENSATION.—
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1 ‘‘(i) IN GENERAL.—The term ‘com2 pensation’ means amounts described in

3 paragraphs (3) and (8) of section 6051(a).

4 ‘‘(ii) SELF-EMPLOYED.—In the case of

5 an employee described in subparagraph (B),

6 the term ‘compensation’ means net earnings

7 from self-employment determined under sec8 tion 1402(a) without regard to any con9 tribution under this subsection.

10 ‘‘(B) EMPLOYEE.—The term ‘employee’ in11 cludes an employee as defined in section

12 401(c)(1).

13 ‘‘(C) YEAR.—The term ‘year’ means the cal14 endar year.’’

15 (b) TAX TREATMENT OF SIMPLE RETIREMENT AC16 COUNTS.—

17 (1) DEDUCTIBILITY OF CONTRIBUTIONS BY EM18 PLOYEES.—

19 (A) Section 219(b) (relating to maximum

20 amount of deduction) is amended by adding at

21 the end the following new paragraph:

22 ‘‘(4) SPECIAL RULE FOR SIMPLE RETIREMENT

23 ACCOUNTS.—This section shall not apply with respect

24 to any amount contributed to a simple retirement ac25 count established under section 408(p).’’
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1 (B) Section 219(g)(5)(A) (defining active

2 participant) is amended by striking ‘‘or’’ at the

3 end of clause (iv) and by adding at the end the

4 following new clause:

5 ‘‘(vi) any simple retirement account

6 (within the meaning of section 408(p)), or’’.

7 (2) DEDUCTIBILITY OF EMPLOYER CONTRIBU8 TIONS.—Section 404 (relating to deductions for con9 tributions of an employer to pension, etc. plans) is

10 amended by adding at the end the following new sub11 section:

12 ‘‘(m) SPECIAL RULES FOR SIMPLE RETIREMENT AC13 COUNTS.—

14 ‘‘(1) IN GENERAL.—Employer contributions to a

15 simple retirement account shall be treated as if they

16 are made to a plan subject to the requirements of this

17 section.

18 ‘‘(2) TIMING.—

19 ‘‘(A) DEDUCTION.—Contributions described

20 in paragraph (1) shall be deductible in the tax21 able year of the employer with or within which

22 the calendar year for which the contributions

23 were made ends.

24 ‘‘(B) CONTRIBUTIONS AFTER END OF

25 YEAR.—For purposes of this subsection, contribu-
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1 tions shall be treated as made for a taxable year

2 if they are made on account of the taxable year

3 and are made not later than the time prescribed

4 by law for filing the return for the taxable year

5 (including extensions thereof).’’

6 (3) CONTRIBUTIONS AND DISTRIBUTIONS.—

7 (A) Section 402 (relating to taxability of

8 beneficiary of employees’ trust) is amended by

9 adding at the end the following new subsection:

10 ‘‘(k) TREATMENT OF SIMPLE RETIREMENT AC11 COUNTS.—Rules similar to the rules of paragraphs (1) and

12 (3) of subsection (h) shall apply to contributions and dis13 tributions with respect to a simple retirement account

14 under section 408(p).’’

15 (B) Section 408(d)(3) is amended by add16 ing at the end the following new subparagraph:

17 ‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—

18 This paragraph shall not apply to any amount

19 paid or distributed out of a simple retirement

20 account (as defined in section 408(p)) unless—

21 ‘‘(i) it is paid into another simple re22 tirement account, or

23 ‘‘(ii) in the case of any payment or

24 distribution to which section 72(t)(8) does
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1 not apply, it is paid into an individual re2 tirement plan.’’

3 (C) Clause (i) of section 457(c)(2)(B) is

4 amended by striking ‘‘section 402(h)(1)(B)’’ and

5 inserting ‘‘section 402(h)(1)(B) or (k)’’.

6 (4) PENALTIES.—

7 (A) EARLY WITHDRAWALS.—Section 72(t)

8 (relating to additional tax in early distribu9 tions), as amended by this Act, is amended by

10 adding at the end the following new paragraph:

11 ‘‘(8) SPECIAL RULES FOR SIMPLE RETIREMENT

12 ACCOUNTS.—In the case of any amount received from

13 a simple retirement account (within the meaning of

14 section 408(p)) during the 2-year period beginning on

15 the date such individual first participated in any

16 qualified salary reduction arrangement maintained

17 by the individual’s employer under section 408(p)(2),

18 paragraph (1) shall be applied by substituting ‘25

19 percent’ for ‘10 percent’.’’

20 (B) FAILURE TO REPORT.—Section 6693 is

21 amended by redesignating subsection (c) as sub22 section (d) and by inserting after subsection (b)

23 the following new subsection:

24 ‘‘(c) PENALTIES RELATING TO SIMPLE RETIREMENT

25 ACCOUNTS.—
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1 ‘‘(1) EMPLOYER PENALTIES.—An employer who

2 fails to provide 1 or more notices required by section

3 408(l)(2)(C) shall pay a penalty of $50 for each day

4 on which such failures continue.

5 ‘‘(2) TRUSTEE PENALTIES.—A trustee who

6 fails—

7 ‘‘(A) to provide 1 or more statements re8 quired by the last sentence of section 408(i) shall

9 pay a penalty of $50 for each day on which such

10 failures continue, or

11 ‘‘(B) to provide 1 or more summary de12 scriptions required by section 408(l)(2)(B) shall

13 pay a penalty of $50 for each day on which such

14 failures continue.

15 ‘‘(3) REASONABLE CAUSE EXCEPTION.—No pen16 alty shall be imposed under this subsection with re17 spect to any failure which the taxpayer shows was

18 due to reasonable cause.’’

19 (5) REPORTING REQUIREMENTS.—

20 (A)(i) Section 408(l) is amended by adding

21 at the end the following new paragraph:

22 ‘‘(2) SIMPLE RETIREMENT ACCOUNTS.—

23 ‘‘(A) NO EMPLOYER REPORTS.—Except as

24 provided in this paragraph, no report shall be

25 required under this section by an employer
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1 maintaining a qualified salary reduction ar2 rangement under subsection (p).

3 ‘‘(B) SUMMARY DESCRIPTION.—The trustee

4 of any simple retirement account established

5 pursuant to a qualified salary reduction ar6 rangement under subsection (p) shall provide to

7 the employer maintaining the arrangement, each

8 year a description containing the following in9 formation:

10 ‘‘(i) The name and address of the em11 ployer and the trustee.

12 ‘‘(ii) The requirements for eligibility

13 for participation.

14 ‘‘(iii) The benefits provided with re15 spect to the arrangement.

16 ‘‘(iv) The time and method of making

17 elections with respect to the arrangement.

18 ‘‘(v) The procedures for, and effects of,

19 withdrawals (including rollovers) from the

20 arrangement.

21 ‘‘(C) EMPLOYEE NOTIFICATION.—The em22 ployer shall notify each employee immediately

23 before the period for which an election described

24 in subsection (p)(5)(C) may be made of the em25 ployee’s opportunity to make such election. Such
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1 notice shall include a copy of the description de2 scribed in subparagraph (B).’’

3 (ii) Section 408(l) is amended by striking

4 ‘‘An employer’’ and inserting—

5 ‘‘(1) IN GENERAL.—An employer’’.

6 (5) REPORTING REQUIREMENTS.—Section 408(i)

7 is amended by adding at the end the following new

8 flush sentence:

9 ‘‘In the case of a simple retirement account under sub10 section (p), only one report under this subsection shall be

11 required to be submitted each calendar year to the Secretary

12 (at the time provided under paragraph (2)) but, in addition

13 to the report under this subsection, there shall be furnished,

14 within 30 days after each calendar year, to the individual

15 on whose behalf the account is maintained a statement with

16 respect to the account balance as of the close of, and the

17 account activity during, such calendar year.’’

18 (6) EXEMPTION FROM TOP-HEAVY PLAN

19 RULES.—Section 416(g)(4) (relating to special rules

20 for top-heavy plans) is amended by adding at the end

21 the following new subparagraph:

22 ‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—The

23 term ‘top-heavy plan’ shall not include a simple

24 retirement account under section 408(p).’’

25 (7) CONFORMING AMENDMENTS.—
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1 (A) Section 280G(b)(6) is amended by strik2 ing ‘‘or’’ at the end of subparagraph (B), by

3 striking the period at the end of subparagraph

4 (C) and inserting ‘‘, or’’ and by adding after

5 subparagraph (C) the following new subpara6 graph:

7 ‘‘(D) a simple retirement account described

8 in section 408(p).’’

9 (B) Section 402(g)(3) is amended by strik10 ing ‘‘and’’ at the end of subparagraph (B), by

11 striking the period at the end of subparagraph

12 (C) and inserting ‘‘, and’’, and by adding after

13 subparagraph (C) the following new subpara14 graph:

15 ‘‘(D) any elective employer contribution

16 under section 408(p)(2)(A)(i).’’

17 (C) Subsections (b), (c), (m)(4)(B), and

18 (n)(3)(B) of section 414 are each amended by in19 serting ‘‘408(p),’’ after ‘‘408(k),’’.

20 (D) Section 4972(d)(1)(A) is amended by

21 striking ‘‘and’’ at the end of clause (ii), by strik22 ing the period at the end of clause (iii) and in23 serting ‘‘, and’’, and by adding after clause (iii)

24 the following new clause:
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1 ‘‘(iv) any simple retirement account

2 (within the meaning of section 408(p)).’’

3 (c) REPEAL OF SIMPLIFIED EMPLOYEE PENSIONS.—

4 Section 408(k) is amended by adding at the end the follow5 ing new paragraph:

6 ‘‘(10) TERMINATION.—This subsection shall not

7 apply to any years beginning after December 31,

8 1995. This paragraph shall not apply to a simplified

9 employee pension established before January 1,

10 1996.’’

11 (d) MODIFICATIONS OF ERISA.—

12 (1) REPORTING REQUIREMENTS.—Section 101 of

13 the Employee Retirement Income Security Act of

14 1974 (29 U.S.C. 1021) is amended by redesignating

15 subsection (g) as subsection (h) and by inserting after

16 subsection (f) the following new subsection:

17 ‘‘(g) SIMPLE RETIREMENT ACCOUNTS.—

18 ‘‘(1) NO EMPLOYER REPORTS.—Except as pro19 vided in this subsection, no report shall be required

20 under this section by an employer maintaining a

21 qualified salary reduction arrangement under section

22 408(p) of the Internal Revenue Code of 1986.

23 ‘‘(2) SUMMARY DESCRIPTION.—The trustee of

24 any simple retirement account established pursuant

25 to a qualified salary reduction arrangement under
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1 section 408(p) of such Code shall provide to the em2 ployer maintaining the arrangement each year a de3 scription containing the following information:

4 ‘‘(A) The name and address of the employer

5 and the trustee.

6 ‘‘(B) The requirements for eligibility for

7 participation.

8 ‘‘(C) The benefits provided with respect to

9 the arrangement.

10 ‘‘(D) The time and method of making elec11 tions with respect to the arrangement.

12 ‘‘(E) The procedures for, and effects of,

13 withdrawals (including rollovers) from the ar14 rangement.

15 ‘‘(3) EMPLOYEE NOTIFICATION.—The employer

16 shall notify each employee immediately before the pe17 riod for which an election described in section 408

18 (p)(5)(C) of such Code may be made of the employee’s

19 opportunity to make such election. Such notice shall

20 include a copy of the description described in para21 graph (2).’’

22 (2) FIDUCIARY DUTIES.—Section 404 (c) of such

23 Act (29 U.S.C. 1104(c)) is amended by inserting

24 ‘‘(1)’’ after ‘‘(c)’’, by redesignating paragraphs (1)

25 and (2) as subparagraphs (A) and (B), respectively,
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1 and by adding at the end the following new para2 graph:

3 ‘‘(2) In the case of a simple retirement account

4 established pursuant to a qualified salary reduction

5 arrangement under section 408(p) of the Internal

6 Revenue Code of 1986, a participant or beneficiary

7 shall, for purposes of paragraph (1), be treated as ex8 ercising control over the assets in the account upon

9 the earliest of—

10 ‘‘(A) an affirmative election with respect to

11 the initial investment of any contribution,

12 ‘‘(B) a rollover to any other simple retire13 ment account or individual retirement plan, or

14 ‘‘(C) one year after the simple retirement

15 account is established.

16 No reports, other than those required under section

17 101(g), shall be required with respect to a simple re18 tirement account established pursuant to such a

19 qualified salary reduction arrangement.’’

20 (e) EFFECTIVE DATE.—The amendments made by this

21 section shall apply to taxable years beginning after Decem22 ber 31, 1995.
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1 SEC. 11019. EXTENSION OF SIMPLE PLAN TO 401(k) AR2 RANGEMENTS.

3 (a) ALTERNATIVE METHOD OF SATISFYING SECTION

4 401(k) NONDISCRIMINATION TESTS.—Section 401(k) (relat5 ing to cash or deferred arrangements) is amended by adding

6 at the end the following new paragraph:

7 ‘‘(11) ADOPTION OF SIMPLE PLAN TO MEET NON8 DISCRIMINATION TESTS.—

9 ‘‘(A) IN GENERAL.—A cash or deferred ar10 rangement maintained by an eligible employer

11 shall be treated as meeting the requirements of

12 paragraph (3)(A)(ii) if such arrangement

13 meets—

14 ‘‘(i) the contribution requirements of

15 subparagraph (B),

16 ‘‘(ii) the exclusive benefit requirements

17 of subparagraph (C), and

18 ‘‘(iii) the vesting requirements of sec19 tion 408(p)(3).

20 ‘‘(B) CONTRIBUTION REQUIREMENTS.—The

21 requirements of this subparagraph are met if,

22 under the arrangement—

23 ‘‘(i) an employee may elect to have the

24 employer make elective contributions for the

25 year on behalf of the employee to a trust

26 under the plan in an amount which is ex-
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1 pressed as a percentage of compensation of

2 the employee but which in no event exceeds

3 $6,000,

4 ‘‘(ii) the employer is required to make

5 a matching contribution to the trust for the

6 year in an amount equal to so much of the

7 amount the employee elects under clause (i)

8 as does not exceed 3 percent of compensa9 tion for the year, and

10 ‘‘(iii) no other contributions may be

11 made other than contributions described in

12 clause (i) or (ii).

13 ‘‘(C) EXCLUSIVE BENEFIT.—The require14 ments of this subparagraph are met for any year

15 to which this paragraph applies if no contribu16 tions were made, or benefits were accrued, for

17 services during such year under any qualified

18 plan of the employer on behalf of any employee

19 eligible to participate in the cash or deferred ar20 rangement, other than contributions described in

21 subparagraph (B).

22 ‘‘(D) DEFINITIONS AND SPECIAL RULE.—

23 ‘‘(i) DEFINITIONS.—For purposes of

24 this paragraph, any term used in this para25 graph which is also used in section 408(p)
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1 shall have the meaning given such term by

2 such section.

3 ‘‘(ii) COORDINATION WITH TOP-HEAVY

4 RULES.—A plan meeting the requirements

5 of this paragraph for any year shall not be

6 treated as a top-heavy plan under section

7 416 for such year.’’

8 (b) ALTERNATIVE METHODS OF SATISFYING SECTION

9 401(m) NONDISCRIMINATION TESTS.—Section 401(m) (re10 lating to nondiscrimination test for matching contributions

11 and employee contributions) is amended by redesignating

12 paragraph (10) as paragraph (11) and by adding after

13 paragraph (9) the following new paragraph:

14 ‘‘(10) ALTERNATIVE METHOD OF SATISFYING

15 TESTS.—A defined contribution plan shall be treated

16 as meeting the requirements of paragraph (2) with re17 spect to matching contributions if the plan—

18 ‘‘(A) meets the contribution requirements of

19 subparagraph (B) of subsection (k)(11),

20 ‘‘(B) meets the exclusive benefit require21 ments of subsection (k)(11)(C), and

22 ‘‘(C) meets the vesting requirements of sec23 tion 408(p)(3).’’
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to plan years beginning after December

3 31, 1995.

4 CHAPTER 2—CAPITAL GAINS REFORM

5 Subchapter A—Taxpayers Other Than

6 Corporations

7 SEC. 11021. CAPITAL GAINS DEDUCTION.

8 (a) IN GENERAL.—Part I of subchapter P of chapter

9 1 (relating to treatment of capital gains) is amended by

10 redesignating section 1202 as section 1203 and by inserting

11 after section 1201 the following new section:

12 ‘‘SEC. 1202. CAPITAL GAINS DEDUCTION.

13 ‘‘(a) GENERAL RULE.—If for any taxable year a tax14 payer other than a corporation has a net capital gain, 50

15 percent of such gain shall be a deduction from gross income.

16 ‘‘(b) ESTATES AND TRUSTS.—In the case of an estate

17 or trust, the deduction shall be computed by excluding the

18 portion (if any) of the gains for the taxable year from sales

19 or exchanges of capital assets which, under sections 652 and

20 662 (relating to inclusions of amounts in gross income of

21 beneficiaries of trusts), is includible by the income bene22 ficiaries as gain derived from the sale or exchange of capital

23 assets.

24 ‘‘(c) COORDINATION WITH TREATMENT OF CAPITAL

25 GAIN UNDER LIMITATION ON INVESTMENT INTEREST.—For
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1 purposes of this section, the net capital gain for any taxable

2 year shall be reduced (but not below zero) by the amount

3 which the taxpayer takes into account as investment income

4 under section 163(d)(4)(B)(iii).

5 ‘‘(d) SPECIAL RULE FOR COLLECTIBLES.—

6 ‘‘(1) IN GENERAL.—The rate of tax imposed by

7 section 1 on the excess of—

8 ‘‘(A) the net capital gain for the taxable

9 year determined as if section 1222(12) had not

10 applied to any collectible which is sold or ex11 changed during the taxable year and the basis of

12 which was not adjusted under section 1022(a),

13 over

14 ‘‘(B) the net capital gain for the taxable

15 year,

16 shall not exceed 28 percent.

17 ‘‘(2) ELECTION.—A taxpayer may elect to treat

18 any collectible specified in such election as not being

19 an indexed asset for purposes of section 1022. Any

20 such election, and any specification therein, once

21 made, shall be irrevocable.

22 ‘‘(e) TRANSITIONAL RULE.—

23 ‘‘(1) IN GENERAL.—In the case of a taxable year

24 which includes January 1, 1995—
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1 ‘‘(A) the amount taken into account as the

2 net capital gain under subsection (a) shall not

3 exceed the net capital gain determined by only

4 taking into account gains and losses properly

5 taken into account for the portion of the taxable

6 year on or after January 1, 1995, and

7 ‘‘(B) the amount of the net capital gain

8 taken into account in applying section 1(h) for

9 such year shall be reduced by the amount taken

10 into account under subparagraph (A) for such

11 year.

12 ‘‘(2) SPECIAL RULES FOR PASS-THRU ENTI13 TIES.—

14 ‘‘(A) IN GENERAL.—In applying paragraph

15 (1) with respect to any pass-thru entity, the de16 termination of when gains and losses are prop17 erly taken into account shall be made at the en18 tity level.

19 ‘‘(B) PASS-THRU ENTITY DEFINED.—For

20 purposes of subparagraph (A), the term ‘pass21 thru entity’ means—

22 ‘‘(i) a regulated investment company,

23 ‘‘(ii) a real estate investment trust,

24 ‘‘(iii) an S corporation,

25 ‘‘(iv) a partnership,
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1 ‘‘(v) an estate or trust, and

2 ‘‘(vi) a common trust fund.’’.

3 (b) DEDUCTION ALLOWABLE IN COMPUTING AD4 JUSTED GROSS INCOME.—Subsection (a) of section 62, as

5 amended by sections 11004 and 11005, is amended by in6 serting after paragraph (17) the following new paragraph:

7 ‘‘(18) LONG-TERM CAPITAL GAINS.—The deduc8 tion allowed by section 1202.’’.

9 (c) TREATMENT OF COLLECTIBLES.—

10 (1) IN GENERAL.—Section 1222 is amended by

11 inserting after paragraph (11) the following new

12 paragraph:

13 ‘‘(12) SPECIAL RULE FOR COLLECTIBLES.—

14 ‘‘(A) IN GENERAL.—Any gain or loss from

15 the sale or exchange of a collectible shall be treat16 ed as a short-term capital gain or loss (as the

17 case may be), without regard to the period such

18 asset was held. The preceding sentence shall

19 apply only to the extent the gain or loss is taken

20 into account in computing taxable income.

21 ‘‘(B) TREATMENT OF CERTAIN SALES OF IN22 TEREST IN PARTNERSHIP, ETC.—For purposes of

23 subparagraph (A), any gain from the sale or ex24 change of an interest in a partnership, S cor25 poration, or trust which is attributable to unre-
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1 alized appreciation in the value of collectibles

2 held by such entity shall be treated as gain from

3 the sale or exchange of a collectible. Rules simi4 lar to the rules of section 751(f) shall apply for

5 purposes of the preceding sentence.

6 ‘‘(C) COLLECTIBLE.—For purposes of this

7 paragraph, the term ‘collectible’ means any cap8 ital asset which is a collectible (as defined in sec9 tion 408(m) without regard to paragraph (3)

10 thereof).’’.

11 (2) CHARITABLE DEDUCTION NOT AFFECTED.—

12 (A) Paragraph (1) of section 170(e) is

13 amended by adding at the end the following new

14 sentence: ‘‘For purposes of this paragraph, sec15 tion 1222 shall be applied without regard to

16 paragraph (12) thereof (relating to special rule

17 for collectibles).’’.

18 (B) Clause (iv) of section 170(b)(1)(C) is

19 amended by inserting before the period at the

20 end the following: ‘‘and section 1222 shall be ap21 plied without regard to paragraph (12) thereof

22 (relating to special rule for collectibles)’’.

23 (d) TECHNICAL AND CONFORMING CHANGES.—

24 (1) Section 1 is amended by striking subsection

25 (h).
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1 (2) Paragraph (1) of section 170(e) is amended

2 by striking ‘‘the amount of gain’’ in the material fol3 lowing subparagraph (B)(ii) and inserting ‘‘50 per4 cent (80 percent in the case of a corporation) of the

5 amount of gain’’.

6 (3) Subparagraph (B) of section 172(d)(2) is

7 amended to read as follows:

8 ‘‘(B) the deduction under section 1202 shall

9 not be allowed.’’.

10 (4) The last sentence of section 453A(c)(3) is

11 amended by striking all that follows ‘‘long-term cap12 ital gain,’’ and inserting ‘‘the maximum rate on net

13 capital gain under section 1201 or the deduction

14 under section 1202 (whichever is appropriate) shall

15 be taken into account.’’.

16 (5) Paragraph (4) of section 642(c) is amended

17 to read as follows:

18 ‘‘(4) ADJUSTMENTS.—To the extent that the

19 amount otherwise allowable as a deduction under this

20 subsection consists of gain from the sale or exchange

21 of capital assets held for more than 1 year, proper ad22 justment shall be made for any deduction allowable to

23 the estate or trust under section 1202 (relating to cap24 ital gains deduction). In the case of a trust, the de-
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1 duction allowed by this subsection shall be subject to

2 section 681 (relating to unrelated business income).’’.

3 (6) The last sentence of section 643(a)(3) is

4 amended to read as follows: ‘‘The deduction under sec5 tion 1202 (relating to capital gains deduction) shall

6 not be taken into account.’’.

7 (7) Subparagraph (C) of section 643(a)(6) is

8 amended by inserting ‘‘(i)’’ before ‘‘there shall’’ and

9 by inserting before the period ‘‘, and (ii) the deduc10 tion under section 1202 (relating to capital gains de11 duction) shall not be taken into account’’.

12 (8)(A) Paragraph (2) of section 904(b) is amend13 ed by striking subparagraph (A), by redesignating

14 subparagraph (B) as subparagraph (A), and by in15 serting after subparagraph (A) (as so redesignated)

16 the following new subparagraph:

17 ‘‘(B) OTHER TAXPAYERS.—In the case of a

18 taxpayer other than a corporation, taxable in19 come from sources outside the United States shall

20 include gain from the sale or exchange of capital

21 assets only to the extent of foreign source capital

22 gain net income.’’.

23 (B) Subparagraph (A) of section 904(b)(2), as so

24 redesignated, is amended—
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1 (i) by striking all that precedes clause (i)

2 and inserting the following:

3 ‘‘(A) CORPORATIONS.—In the case of a cor4 poration—’’, and

5 (ii) by striking in clause (i) ‘‘in lieu of ap6 plying subparagraph (A),’’.

7 (C) Paragraph (3) of section 904(b) is amended

8 by striking subparagraphs (D) and (E) and inserting

9 the following new subparagraph:

10 ‘‘(D) RATE DIFFERENTIAL PORTION.—The

11 rate differential portion of foreign source net

12 capital gain, net capital gain, or the excess of

13 net capital gain from sources within the United

14 States over net capital gain, as the case may be,

15 is the same proportion of such amount as the ex16 cess of the highest rate of tax specified in section

17 11(b) over the alternative rate of tax under sec18 tion 1201(a) bears to the highest rate of tax spec19 ified in section 11(b).’’.

20 (D) Clause (v) of section 593(b)(2)(D) is amend21 ed—

22 (i) by striking ‘‘if there is a capital gain

23 rate differential (as defined in section

24 904(b)(3)(D)) for the taxable year,’’, and
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HR 2491 EAS

1 (ii) by striking ‘‘section 904(b)(3)(E)’’ and

2 inserting ‘‘section 904(b)(3)(D)’’.

3 (9) The last sentence of section 1044(d) is

4 amended by striking ‘‘1202’’ and inserting ‘‘1203’’.

5 (10)(A) Paragraph (2) of section 1211(b) is

6 amended to read as follows:

7 ‘‘(2) the sum of—

8 ‘‘(A) the excess of the net short-term capital

9 loss over the net long-term capital gain, and

10 ‘‘(B) one-half of the excess of the net long11 term capital loss over the net short-term capital

12 gain.’’.

13 (B) So much of paragraph (2) of section 1212(b)

14 as precedes subparagraph (B) thereof is amended to

15 read as follows:

16 ‘‘(2) SPECIAL RULES.—

17 ‘‘(A) ADJUSTMENTS.—

18 ‘‘(i) For purposes of determining the

19 excess referred to in paragraph (1)(A), there

20 shall be treated as short-term capital gain

21 in the taxable year an amount equal to the

22 lesser of—

23 ‘‘(I) the amount allowed for the

24 taxable year under paragraph (1) or

25 (2) of section 1211(b), or
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1 ‘‘(II) the adjusted taxable income

2 for such taxable year.

3 ‘‘(ii) For purposes of determining the

4 excess referred to in paragraph (1)(B), there

5 shall be treated as short-term capital gain

6 in the taxable year an amount equal to the

7 sum of—

8 ‘‘(I) the amount allowed for the

9 taxable year under paragraph (1) or

10 (2) of section 1211(b) or the adjusted

11 taxable income for such taxable year,

12 whichever is the least, plus

13 ‘‘(II) the excess of the amount de14 scribed in subclause (I) over the net

15 short-term capital loss (determined

16 without regard to this subsection) for

17 such year.’’.

18 (C) Subsection (b) of section 1212 is amended by

19 adding at the end the following new paragraph:

20 ‘‘(3) TRANSITIONAL RULE.—In the case of any

21 amount which, under this subsection and section

22 1211(b) (as in effect for taxable years beginning before

23 January 1, 1996), is treated as a capital loss in the

24 first taxable year beginning after December 31, 1995,

25 paragraph (2) and section 1211(b) (as so in effect)
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1 shall apply (and paragraph (2) and section 1211(b)

2 as in effect for taxable years beginning after December

3 31, 1995, shall not apply) to the extent such amount

4 exceeds the total of any capital gain net income (de5 termined without regard to this subsection) for tax6 able years beginning after December 31, 1995.’’.

7 (11) Paragraph (1) of section 1402(i) is amend8 ed by inserting ‘‘, and the deduction provided by sec9 tion 1202 shall not apply’’ before the period at the

10 end thereof.

11 (12) Subsection (e) of section 1445 is amended—

12 (A) in paragraph (1) by striking ‘‘35 per13 cent (or, to the extent provided in regulations, 28

14 percent)’’ and inserting ‘‘28 percent (or, to the

15 extent provided in regulations, 19.8 percent)’’,

16 and

17 (B) in paragraph (2) by striking ‘‘35 per18 cent’’ and inserting ‘‘28 percent’’.

19 (13)(A) The second sentence of section

20 7518(g)(6)(A) is amended—

21 (i) by striking ‘‘during a taxable year to

22 which section 1(h) or 1201(a) applies’’, and

23 (ii) by striking ‘‘28 percent (34 percent’’

24 and inserting ‘‘19.8 percent (28 percent’’.
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1 (B) The second sentence of section 607(h)(6)(A)

2 of the Merchant Marine Act, 1936 is amended—

3 (i) by striking ‘‘during a taxable year to

4 which section 1(h) or 1201(a) of such Code ap5 plies’’, and

6 (ii) by striking ‘‘28 percent (34 percent’’

7 and inserting ‘‘19.8 percent (28 percent’’.

8 (e) CLERICAL AMENDMENT.—The table of sections for

9 part I of subchapter P of chapter 1 is amended by striking

10 the item relating to section 1202 and by inserting after the

11 item relating to section 1201 the following new items:

‘‘Sec. 1202. Capital gains deduction.

‘‘Sec. 1203. Small business stock eligible for preferential rates.’’.

12 (f) EFFECTIVE DATE.—

13 (1) IN GENERAL.—Except as otherwise provided

14 in this subsection, the amendments made by this sec15 tion shall apply to taxable years ending after Decem16 ber 31, 1994.

17 (2) COLLECTIBLES.—The amendments made by

18 subsection (c) shall apply to sales and exchanges after

19 December 31, 1994.

20 (3) REPEAL OF SECTION 1(h).—The amendment

21 made by subsection (d)(1) shall apply to taxable years

22 beginning after January 1, 1995.
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1 (4) CONTRIBUTIONS.—The amendment made by

2 subsection (d)(2) shall apply to contributions after

3 December 31, 1994.

4 (5) USE OF LONG-TERM LOSSES.—The amend5 ments made by subsection (d)(10) shall apply to tax6 able years beginning after December 31, 1995.

7 (6) WITHHOLDING.—The amendment made by

8 subsection (d)(12) shall apply only to amounts paid

9 after the date of the enactment of this Act.

10 SEC. 11022. INDEXING OF CERTAIN ASSETS ACQUIRED

11 AFTER DECEMBER 31, 2000, FOR PURPOSES OF

12 DETERMINING GAIN.

13 (a) IN GENERAL.—Part II of subchapter O of chapter

14 1 (relating to basis rules of general application) is amended

15 by inserting after section 1021 the following new section:

16 ‘‘SEC. 1022. INDEXING OF CERTAIN ASSETS ACQUIRED

17 AFTER DECEMBER 31, 2000, FOR PURPOSES OF

18 DETERMINING GAIN.

19 ‘‘(a) GENERAL RULE.—

20 ‘‘(1) INDEXED BASIS SUBSTITUTED FOR AD21 JUSTED BASIS.—Solely for purposes of determining

22 gain on the sale or other disposition by a taxpayer

23 (other than a corporation) of an indexed asset which

24 has been held for more than 3 years, the indexed basis

25 of the asset shall be substituted for its adjusted basis.
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1 ‘‘(2) EXCEPTION FOR DEPRECIATION, ETC.—The

2 deductions for depreciation, depletion, and amortiza3 tion shall be determined without regard to the appli4 cation of paragraph (1) to the taxpayer or any other

5 person.

6 ‘‘(b) INDEXED ASSET.—

7 ‘‘(1) IN GENERAL.—For purposes of this section,

8 the term ‘indexed asset’ means—

9 ‘‘(A) common stock in a C corporation

10 (other than a foreign corporation), and

11 ‘‘(B) tangible property,

12 which is a capital asset or property used in the trade

13 or business (as defined in section 1231(b)).

14 ‘‘(2) STOCK IN CERTAIN FOREIGN CORPORATIONS

15 INCLUDED.—For purposes of this section—

16 ‘‘(A) IN GENERAL.—The term ‘indexed

17 asset’ includes common stock in a foreign cor18 poration which is regularly traded on an estab19 lished securities market.

20 ‘‘(B) EXCEPTION.—Subparagraph (A) shall

21 not apply to—

22 ‘‘(i) stock of a foreign investment com23 pany (within the meaning of section

24 1246(b)),
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HR 2491 EAS

1 ‘‘(ii) stock in a passive foreign invest2 ment company (as defined in section 1296),

3 ‘‘(iii) stock in a foreign corporation

4 held by a United States person who meets

5 the requirements of section 1248(a)(2), and

6 ‘‘(iv) stock in a foreign personal hold7 ing company (as defined in section 552).

8 ‘‘(C) TREATMENT OF AMERICAN DEPOSI9 TORY RECEIPTS.—An American depository re10 ceipt for common stock in a foreign corporation

11 shall be treated as common stock in such cor12 poration.

13 ‘‘(c) INDEXED BASIS.—For purposes of this section—

14 ‘‘(1) GENERAL RULE.—The indexed basis for any

15 asset is—

16 ‘‘(A) the adjusted basis of the asset, in17 creased by

18 ‘‘(B) the applicable inflation adjustment.

19 ‘‘(2) APPLICABLE INFLATION ADJUSTMENT.—The

20 applicable inflation adjustment for any asset is an

21 amount equal to—

22 ‘‘(A) the adjusted basis of the asset, multi23 plied by

24 ‘‘(B) the percentage (if any) by which—
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1 ‘‘(i) the gross domestic product deflator

2 for the last calendar quarter ending before

3 the asset is disposed of, exceeds

4 ‘‘(ii) the gross domestic product

5 deflator for the last calendar quarter ending

6 before the asset was acquired by the tax7 payer.

8 The percentage under subparagraph (B) shall be

rounded to the nearest 1 9 ⁄10 of 1 percentage point.

10 ‘‘(3) GROSS DOMESTIC PRODUCT DEFLATOR.—

11 The gross domestic product deflator for any calendar

12 quarter is the implicit price deflator for the gross do13 mestic product for such quarter (as shown in the last

14 revision thereof released by the Secretary of Commerce

15 before the close of the following calendar quarter).

16 ‘‘(d) SUSPENSION OF HOLDING PERIOD WHERE DI17 MINISHED RISK OF LOSS; TREATMENT OF SHORT SALES.—

18 ‘‘(1) IN GENERAL.—If the taxpayer (or a related

19 person) enters into any transaction which substan20 tially reduces the risk of loss from holding any asset,

21 such asset shall not be treated as an indexed asset for

22 the period of such reduced risk.

23 ‘‘(2) SHORT SALES.—

24 ‘‘(A) IN GENERAL.—In the case of a short

25 sale of an indexed asset with a short sale period
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1 in excess of 3 years, for purposes of this title, the

2 amount realized shall be an amount equal to the

3 amount realized (determined without regard to

4 this paragraph) increased by the applicable in5 flation adjustment. In applying subsection (c)(2)

6 for purposes of the preceding sentence, the date

7 on which the property is sold short shall be treat8 ed as the date of acquisition and the closing date

9 for the sale shall be treated as the date of disposi10 tion.

11 ‘‘(B) SHORT SALE PERIOD.—For purposes

12 of subparagraph (A), the short sale period begins

13 on the day that the property is sold and ends on

14 the closing date for the sale.

15 ‘‘(e) TREATMENT OF REGULATED INVESTMENT COM16 PANIES AND REAL ESTATE INVESTMENT TRUSTS.—

17 ‘‘(1) ADJUSTMENTS AT ENTITY LEVEL.—

18 ‘‘(A) IN GENERAL.—Except as otherwise

19 provided in this paragraph, the adjustment

20 under subsection (a) shall be allowed to any

21 qualified investment entity (including for pur22 poses of determining the earnings and profits of

23 such entity).

24 ‘‘(B) EXCEPTION FOR CORPORATE SHARE25 HOLDERS.—Under regulations—
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1 ‘‘(i) in the case of a distribution by a

2 qualified investment entity (directly or in3 directly) to a corporation—

4 ‘‘(I) the determination of whether

5 such distribution is a dividend shall be

6 made without regard to this section,

7 and

8 ‘‘(II) the amount treated as gain

9 by reason of the receipt of any capital

10 gain dividend shall be increased by the

11 percentage by which the entity’s net

12 capital gain for the taxable year (de13 termined without regard to this sec14 tion) exceeds the entity’s net capital

15 gain for such year determined with re16 gard to this section, and

17 ‘‘(ii) there shall be other appropriate

18 adjustments (including deemed distribu19 tions) so as to ensure that the benefits of

20 this section are not allowed (directly or in21 directly) to corporate shareholders of quali22 fied investment entities.

23 For purposes of the preceding sentence, any

24 amount includible in gross income under section

25 852(b)(3)(D) shall be treated as a capital gain
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1 dividend and an S corporation shall not be

2 treated as a corporation.

3 ‘‘(C) EXCEPTION FOR QUALIFICATION PUR4 POSES.—This section shall not apply for pur5 poses of sections 851(b) and 856(c).

6 ‘‘(D) EXCEPTION FOR CERTAIN TAXES IM7 POSED AT ENTITY LEVEL.—

8 ‘‘(i) TAX ON FAILURE TO DISTRIBUTE

9 ENTIRE GAIN.—If any amount is subject to

10 tax under section 852(b)(3)(A) for any tax11 able year, the amount on which tax is im12 posed under such section shall be increased

13 by the percentage determined under sub14 paragraph (B)(i)(II). A similar rule shall

15 apply in the case of any amount subject to

16 tax under paragraph (2) or (3) of section

17 857(b) to the extent attributable to the ex18 cess of the net capital gain over the deduc19 tion for dividends paid determined with ref20 erence to capital gain dividends only. The

21 first sentence of this clause shall not apply

22 to so much of the amount subject to tax

23 under section 852(b)(3)(A) as is designated

24 by the company under section 852(b)(3)(D).
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1 ‘‘(ii) OTHER TAXES.—This section

2 shall not apply for purposes of determining

3 the amount of any tax imposed by para4 graph (4), (5), or (6) of section 857(b).

5 ‘‘(2) ADJUSTMENTS TO INTERESTS HELD IN EN6 TITY.—

7 ‘‘(A) REGULATED INVESTMENT COMPA8 NIES.—Stock in a regulated investment company

9 (within the meaning of section 851) shall be an

10 indexed asset for any calendar quarter in the

11 same ratio as—

12 ‘‘(i) the average of the fair market val13 ues of the indexed assets held by such com14 pany at the close of each month during such

15 quarter, bears to

16 ‘‘(ii) the average of the fair market val17 ues of all assets held by such company at

18 the close of each such month.

19 ‘‘(B) REAL ESTATE INVESTMENT TRUSTS.—

20 Stock in a real estate investment trust (within

21 the meaning of section 856) shall be an indexed

22 asset for any calendar quarter in the same ratio

23 as—
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1 ‘‘(i) the fair market value of the in2 dexed assets held by such trust at the close

3 of such quarter, bears to

4 ‘‘(ii) the fair market value of all assets

5 held by such trust at the close of such quar6 ter.

7 ‘‘(C) RATIO OF 80 PERCENT OR MORE.—If

8 the ratio for any calendar quarter determined

9 under subparagraph (A) or (B) would (but for

10 this subparagraph) be 80 percent or more, such

11 ratio for such quarter shall be 100 percent.

12 ‘‘(D) RATIO OF 20 PERCENT OR LESS.—If

13 the ratio for any calendar quarter determined

14 under subparagraph (A) or (B) would (but for

15 this subparagraph) be 20 percent or less, such

16 ratio for such quarter shall be zero.

17 ‘‘(E) LOOK-THRU OF PARTNERSHIPS.—For

18 purposes of this paragraph, a qualified invest19 ment entity which holds a partnership interest

20 shall be treated (in lieu of holding a partnership

21 interest) as holding its proportionate share of the

22 assets held by the partnership.

23 ‘‘(3) TREATMENT OF RETURN OF CAPITAL DIS24 TRIBUTIONS.—Except as otherwise provided by the

25 Secretary, a distribution with respect to stock in a
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1 qualified investment entity which is not a dividend

2 and which results in a reduction in the adjusted basis

3 of such stock shall be treated as allocable to stock ac4 quired by the taxpayer in the order in which such

5 stock was acquired.

6 ‘‘(4) QUALIFIED INVESTMENT ENTITY.—For pur7 poses of this subsection, the term ‘qualified investment

8 entity’ means—

9 ‘‘(A) a regulated investment company

10 (within the meaning of section 851), and

11 ‘‘(B) a real estate investment trust (within

12 the meaning of section 856).

13 ‘‘(f) OTHER PASS-THRU ENTITIES.—

14 ‘‘(1) PARTNERSHIPS.—

15 ‘‘(A) IN GENERAL.—In the case of a part16 nership, the adjustment made under subsection

17 (a) at the partnership level shall be passed

18 through to the partners.

19 ‘‘(B) SPECIAL RULE IN THE CASE OF SEC20 TION 754 ELECTIONS.—In the case of a transfer

21 of an interest in a partnership with respect to

22 which the election provided in section 754 is in

23 effect—

24 ‘‘(i) the adjustment under section

25 743(b)(1) shall, with respect to the trans-
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1 feror partner, be treated as a sale of the

2 partnership assets for purposes of applying

3 this section, and

4 ‘‘(ii) with respect to the transferee

5 partner, the partnership’s holding period

6 for purposes of this section in such assets

7 shall be treated as beginning on the date of

8 such adjustment.

9 ‘‘(2) S CORPORATIONS.—In the case of an S cor10 poration, the adjustment made under subsection (a)

11 at the corporate level shall be passed through to the

12 shareholders. This section shall not apply for purposes

13 of determining the amount of any tax imposed by sec14 tion 1374 or 1375.

15 ‘‘(3) COMMON TRUST FUNDS.—In the case of a

16 common trust fund, the adjustment made under sub17 section (a) at the trust level shall be passed through

18 to the participants.

19 ‘‘(4) INDEXING ADJUSTMENT DISREGARDED IN

20 DETERMINING LOSS ON SALE OF INTEREST IN EN21 TITY.—Notwithstanding the preceding provisions of

22 this subsection, for purposes of determining the

23 amount of any loss on a sale or exchange of an inter24 est in a partnership, S corporation, or common trust

25 fund, the adjustment made under subsection (a) shall
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1 not be taken into account in determining the adjusted

2 basis of such interest.

3 ‘‘(g) DISPOSITIONS BETWEEN RELATED PERSONS.—

4 ‘‘(1) IN GENERAL.—This section shall not apply

5 to any sale or other disposition of property between

6 related persons except to the extent that the basis of

7 such property in the hands of the transferee is a sub8 stituted basis.

9 ‘‘(2) RELATED PERSONS DEFINED.—For pur10 poses of this section, the term ‘related persons’

11 means—

12 ‘‘(A) persons bearing a relationship set forth

13 in section 267(b), and

14 ‘‘(B) persons treated as single employer

15 under subsection (b) or (c) of section 414.

16 ‘‘(h) TRANSFERS TO INCREASE INDEXING ADJUST17 MENT.—If any person transfers cash, debt, or any other

18 property to another person and the principal purpose of

19 such transfer is to secure or increase an adjustment under

20 subsection (a), the Secretary may disallow part or all of

21 such adjustment or increase.

22 ‘‘(i) SPECIAL RULES.—For purposes of this section—

23 ‘‘(1) TREATMENT OF IMPROVEMENTS, ETC.—If

24 there is an addition to the adjusted basis of any tan25 gible property or of any stock in a corporation during
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1 the taxable year by reason of an improvement to such

2 property or a contribution to capital of such corpora3 tion—

4 ‘‘(A) such addition shall never be taken into

5 account under subsection (c)(1)(A) if the aggre6 gate amount thereof during the taxable year with

7 respect to such property or stock is less than

8 $1,000, and

9 ‘‘(B) such addition shall be treated as a sep10 arate asset acquired at the close of such taxable

11 year if the aggregate amount thereof during the

12 taxable year with respect to such property or

13 stock is $1,000 or more.

14 A rule similar to the rule of the preceding sentence

15 shall apply to any other portion of an asset to the ex16 tent that separate treatment of such portion is appro17 priate to carry out the purposes of this section.

18 ‘‘(2) ASSETS WHICH ARE NOT INDEXED ASSETS

19 THROUGHOUT HOLDING PERIOD.—The applicable in20 flation adjustment shall be appropriately reduced for

21 periods during which the asset was not an indexed

22 asset.

23 ‘‘(3) TREATMENT OF CERTAIN DISTRIBUTIONS.—

24 A distribution with respect to stock in a corporation
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1 which is not a dividend shall be treated as a disposi2 tion.

3 ‘‘(4) ACQUISITION DATE WHERE THERE HAS

4 BEEN PRIOR APPLICATION OF SUBSECTION (a)(1) WITH

5 RESPECT TO THE TAXPAYER.—If there has been a

6 prior application of subsection (a)(1) to an asset

7 while such asset was held by the taxpayer, the date

8 of acquisition of such asset by the taxpayer shall be

9 treated as not earlier than the date of the most recent

10 such prior application.

11 ‘‘(5) COLLAPSIBLE CORPORATIONS.—The appli12 cation of section 341(a) (relating to collapsible cor13 porations) shall be determined without regard to this

14 section.

15 ‘‘(j) REGULATIONS.—The Secretary shall prescribe

16 such regulations as may be necessary or appropriate to

17 carry out the purposes of this section.’’

18 (b) CLERICAL AMENDMENT.—The table of sections for

19 part II of subchapter O of chapter 1 is amended by insert20 ing after the item relating to section 1021 the following new

21 item:

‘‘Sec. 1022. Indexing of certain assets acquired after December 31,

2000, for purposes of determining gain.’’

22 (c) EFFECTIVE DATE.—

23 (1) IN GENERAL.—The amendments made by

24 this section shall apply to the disposition of any
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1 property the holding period of which begins after De2 cember 31, 2000.

3 (2) CERTAIN TRANSACTIONS BETWEEN RELATED

4 PERSONS.—The amendments made by this section

5 shall not apply to the disposition of any property ac6 quired after December 31, 2000, from a related person

7 (as defined in section 1022(g)(2) of the Internal Reve8 nue Code of 1986, as added by this section) if—

9 (A) such property was so acquired for a

10 price less than the property’s fair market value,

11 and

12 (B) the amendments made by this section

13 did not apply to such property in the hands of

14 such related person.

15 (d) ELECTION TO RECOGNIZE GAIN ON ASSETS HELD

16 ON JANUARY 1, 2001.—For purposes of the Internal Reve17 nue Code of 1986—

18 (1) IN GENERAL.—A taxpayer other than a cor19 poration may elect to treat—

20 (A) any readily tradable stock (which is an

21 indexed asset) held by such taxpayer on January

22 1, 2001, and not sold before the next business

23 day after such date, as having been sold on such

24 next business day for an amount equal to its

25 closing market price on such next business day
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1 (and as having been reacquired on such next

2 business day for an amount equal to such closing

3 market price), and

4 (B) any other indexed asset held by the tax5 payer on January 1, 2001, as having been sold

6 on such date for an amount equal to its fair

7 market value on such date (and as having been

8 reacquired on such date for an amount equal to

9 such fair market value).

10 (2) TREATMENT OF GAIN OR LOSS.—

11 (A) Any gain resulting from an election

12 under paragraph (1) shall be treated as received

13 or accrued on the date the asset is treated as sold

14 under paragraph (1) and shall be recognized not15 withstanding any provision of the Internal Reve16 nue Code of 1986.

17 (B) Any loss resulting from an election

18 under paragraph (1) shall not be allowed for any

19 taxable year.

20 (3) ELECTION.—An election under paragraph

21 (1) shall be made in such manner as the Secretary of

22 the Treasury or his delegate may prescribe and shall

23 specify the assets for which such election is made.

24 Such an election, once made with respect to any asset,

25 shall be irrevocable.
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1 (4) READILY TRADABLE STOCK.—For purposes of

2 this subsection, the term ‘‘readily tradable stock’’

3 means any stock which, as of January 1, 2001, is

4 readily tradable on an established securities market

5 or otherwise.

6 (e) TREATMENT OF PRINCIPAL RESIDENCES.—Prop7 erty held and used by the taxpayer on January 1, 2001,

8 as his principal residence (within the meaning of section

9 1034 of the Internal Revenue Code of 1986) shall be treat10 ed—

11 (1) for purposes of subsection (c)(1) of this sec12 tion and section 1022 of such Code, as having a hold13 ing period which begins on January 1, 2001, and

14 (2) for purposes of section 1022(c)(2)(B)(ii) of

15 such Code, as having been acquired on January 1,

16 2001.

17 Subsection (d) shall not apply to property to which this

18 subsection applies.

19 SEC. 11023. MODIFICATIONS TO EXCLUSION OF GAIN ON

20 CERTAIN SMALL BUSINESS STOCK.

21 (a) REDUCED RATE IN LIEU OF EXCLUSION.—

22 (1) Section 1, as amended by section 11021, is

23 amended by adding at the end the following new sub24 section:
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1 ‘‘(h) MAXIMUM CAPITAL GAINS RATE FOR CERTAIN

2 SMALL BUSINESS STOCK.—

3 ‘‘(1) IN GENERAL.—If for any taxable year a

4 taxpayer has gain from the sale or exchange of any

5 qualified small business stock held for more than 5

6 years, then the tax imposed by this section shall not

7 exceed the sum of—

8 ‘‘(A) a tax computed on the taxable income

reduced by 1 9 ⁄2 the amount of the small business

10 gain, at the rates and in the manner as if this

11 subsection had not been enacted, plus

12 ‘‘(B) a tax of 14 percent of the small busi13 ness gain.

14 ‘‘(2) SMALL BUSINESS GAIN.—For purposes of

15 paragraph (1), the term ‘small business gain’ means

16 the lesser of—

17 ‘‘(A) gain from the sale or exchange of any

18 qualified small business stock held for more than

19 5 years, or

20 ‘‘(B) the net capital gain taken into account

21 under section 1202(a).

22 ‘‘(3) QUALIFIED SMALL BUSINESS STOCK.—The

23 term ‘qualified small business stock’ has the meaning

24 given such term by section 1203(c).’’
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1 (2) Subsection (a) of section 1203, as redesig2 nated by section 11021, is amended to read as follows:

3 ‘‘(a) APPLICATION OF REDUCED RATES TO QUALIFIED

4 SMALL BUSINESS STOCK GAINS.—

‘‘For treatment of gain on qualified small business

stock held for more than 5 years, see sections 1(h)

and 1201(b).’’.

5 (b) REPEAL OF MINIMUM TAX PREFERENCE.—

6 (1) Subsection (a) of section 57 is amended by

7 striking paragraph (7).

8 (2) Subclause (II) of section 53(d)(1)(B)(ii) is

9 amended by striking ‘‘, (5), and (7)’’ and inserting

10 ‘‘and (5)’’.

11 (c) STOCK OF LARGER BUSINESSES ELIGIBLE FOR

12 REDUCED RATES.—Paragraph (1) of section 1203(d), as

13 redesignated by section 11021, is amended by striking

14 ‘‘$50,000,000’’ each place it appears and inserting

15 ‘‘$100,000,000’’.

16 (d) REPEAL OF PER-ISSUER LIMITATION.—Section

17 1203, as so redesignated, is amended by striking subsection

18 (b).

19 (e) OTHER MODIFICATIONS.—

20 (1) REPEAL OF WORKING CAPITAL LIMITA21 TION.—Paragraph (6) of section 1203(e), as so redes22 ignated, is amended—

23 (A) by striking ‘‘2 years’’ in subparagraph

24 (B) and inserting ‘‘5 years’’, and
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1 (B) by striking the last sentence.

2 (2) EXCEPTION FROM REDEMPTION RULES

3 WHERE BUSINESS PURPOSE.—Paragraph (3) of sec4 tion 1203(c), as so redesignated, is amended by add5 ing at the end the following new subparagraph:

6 ‘‘(D) WAIVER WHERE BUSINESS PUR7 POSE.—A purchase of stock by the issuing cor8 poration shall be disregarded for purposes of sub9 paragraph (B) if the issuing corporation estab10 lishes that there was a business purpose for such

11 purchase and one of the principal purposes of the

12 purchase was not to avoid the limitations of this

13 section.’’.

14 (f) CLERICAL AMENDMENT.—The section heading for

15 section 1203, as redesignated by section 11021, is amended

16 to read as follows:

17 ‘‘SEC. 1203. SMALL BUSINESS STOCK ELIGIBLE FOR PREF18 ERENTIAL RATES.’’

19 (g) EFFECTIVE DATES.—

20 (1) REDUCED RATES.—The amendments made

21 by subsections (a) and (b) shall apply to taxable years

22 beginning after the date of the enactment of this Act.

23 (2) INCREASE IN SIZE.—The amendment made

24 by subsection (c) shall apply to stock issued after the

25 date of the enactment of this Act.
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1 (3) OTHER RULES.—The amendments made by

2 subsections (d) and (e) shall apply to stock issued

3 after August 10, 1993.

4 Subchapter B—Corporate Capital Gains

5 SEC. 11025. REDUCTION OF ALTERNATIVE CAPITAL GAIN

6 TAX FOR CORPORATIONS.

7 (a) IN GENERAL.—Section 1201 is amended to read

8 as follows:

9 ‘‘SEC. 1201. ALTERNATIVE TAX FOR CORPORATIONS.

10 ‘‘(a) GENERAL RULE.—If for any taxable year a cor11 poration has a net capital gain, then, in lieu of the tax

12 imposed by sections 11, 511, and 831 (a) and (b) (whichever

13 is applicable), there is hereby imposed a tax (if such tax

14 is less than the tax imposed by such sections) which shall

15 consist of the sum of—

16 ‘‘(1) a tax computed on the taxable income re17 duced by the amount of the net capital gain, at the

18 rates and in the manner as if this subsection had not

19 been enacted, plus

20 ‘‘(2) a tax of 28 percent of the net capital gain.

21 ‘‘(b) SPECIAL RULES FOR QUALIFIED SMALL BUSI22 NESS GAIN.—

23 ‘‘(1) IN GENERAL.—If for any taxable year a

24 corporation has gain from the sale or exchange of any

25 qualified small business stock held for more than 5
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1 years, the amount determined under subsection (a)(2)

2 for such taxable year shall be equal to the sum of—

3 ‘‘(A) 21 percent of the lesser of such gain or

4 the corporation’s net capital gain, plus

5 ‘‘(B) 28 percent of the net capital gain re6 duced by the gain taken into account under sub7 paragraph (A).

8 ‘‘(2) QUALIFIED SMALL BUSINESS STOCK.—For

9 purposes of paragraph (1), the term ‘qualified small

10 business stock’ has the meaning given such term by

11 section 1203(c), except that stock shall not be treated

12 as qualified small business stock if such stock was at

13 any time held by a member of the parent-subsidiary

14 controlled group (as defined in section 1203(d)(3))

15 which includes the qualified small business.

16 ‘‘(c) TRANSITIONAL RULE.—

17 ‘‘(1) IN GENERAL.—In applying this section, net

18 capital gain for any taxable year shall not exceed the

19 net capital gain determined by taking into account

20 only gains and losses properly taken into account for

21 the portion of the taxable year after December 31,

22 1994.

23 ‘‘(2) SPECIAL RULE FOR PASS-THRU ENTITIES.—

24 Section 1202(e)(2) shall apply for purposes of para25 graph (1).
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1 ‘‘(d) CROSS REFERENCES.—

‘‘For computation of the alternative tax—

‘‘(1) in the case of life insurance companies, see

section 801(a)(2),

‘‘(2) in the case of regulated investment companies and their shareholders, see section 852(b)(3)(A)

and (D), and

‘‘(3) in the case of real estate investment trusts,

see section 857(b)(3)(A).’’.

2 (b) TECHNICAL AMENDMENT.—Clause (iii) of section

3 852(b)(3)(D) is amended by striking ‘‘65 percent’’ and in4 serting ‘‘72 percent’’.

5 (c) EFFECTIVE DATE.—

6 (1) IN GENERAL.—The amendments made by

7 this section shall apply to taxable years ending after

8 December 31, 1994.

9 (2) QUALIFIED SMALL BUSINESS STOCK.—Sec10 tion 1201(b) of the Internal Revenue Code of 1986 (as

11 added by subsection (a)) shall apply to gain from

12 qualified small business stock acquired on or after the

13 date of the enactment of this Act.

14 Subchapter C—Capital Loss Deduction Al15 lowed With Respect to Sale or Exchange of

16 Principal Residence

17 SEC. 11026. CAPITAL LOSS DEDUCTION ALLOWED WITH RE18 SPECT TO SALE OR EXCHANGE OF PRINCIPAL

19 RESIDENCE.

20 (a) IN GENERAL.—Subsection (c) of section 165 (relat21 ing to limitation on losses of individuals) is amended by
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1 striking ‘‘and’’ at the end of paragraph (2), by striking the

2 period at the end of paragraph (3) and inserting ‘‘; and’’,

3 and by adding at the end the following new paragraph:

4 ‘‘(4) losses arising from the sale or exchange of

5 the principal residence (within the meaning of section

6 1034) of the taxpayer.’’

7 (b) EFFECTIVE DATE.—The amendment made by sub8 section (a) shall apply to sales and exchanges after Decem9 ber 31, 1994, in taxable years ending after such date.

10 CHAPTER 3—CORPORATE ALTERNATIVE

11 MINIMUM TAX REFORM

12 SEC. 11031. MODIFICATION OF DEPRECIATION RULES

13 UNDER MINIMUM TAX.

14 (a) IN GENERAL.—Clause (i) of section 56(a)(1)(A) is

15 amended by inserting ‘‘and before January 1, 1996,’’ after

16 ‘‘December 31, 1986,’’.

17 (b) CONFORMING AMENDMENT.—Clause (ii) of section

18 56(a)(1)(A) is amended by striking ‘‘The method’’ and in19 serting ‘‘In the case of property placed in service before Jan20 uary 1, 1996, the method’’.

21 (c) EFFECTIVE DATE.—The amendments made by this

22 section shall apply to taxable years ending after December

23 31, 1995.
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1 SEC. 11032. LONG-TERM UNUSED CREDITS ALLOWED

2 AGAINST MINIMUM TAX.

3 (a) IN GENERAL.—Section 53(c) (relating to limita4 tion) is amended by adding at the end the following new

5 paragraph:

6 ‘‘(2) SPECIAL RULE FOR TAXPAYERS WITH LONG7 TERM UNUSED CREDITS.—

8 ‘‘(A) IN GENERAL.—If—

9 ‘‘(i) a corporation to which section

10 56(g) applies has a long-term unused mini11 mum tax credit for a taxable year, and

12 ‘‘(ii) no credit would be allowable

13 under this section for the taxable year by

14 reason of paragraph (1),

15 then there shall be allowed a credit under sub16 section (a) for the taxable year in the amount de17 termined under subparagraph (B).

18 ‘‘(B) AMOUNT OF CREDIT.—For purposes of

19 subparagraph (A), the amount of the credit shall

20 be equal to the least of the following for the tax21 able year:

22 ‘‘(i) The long-term unused minimum

23 tax credit.

24 ‘‘(ii) 50 percent of the taxpayer’s ten25 tative minimum tax.
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1 ‘‘(iii) The excess (if any) of the amount

2 under paragraph (1)(B) over the amount

3 under paragraph (1)(A).

4 ‘‘(C) LONG-TERM UNUSED MINIMUM TAX

5 CREDIT.—For purposes of this paragraph—

6 ‘‘(i) IN GENERAL.—The long-term un7 used minimum tax credit for any taxable

8 year is the portion of the minimum tax

9 credit determined under subsection (b) at10 tributable to the adjusted net minimum tax

11 for taxable years beginning after 1986 and

12 ending before the 7th taxable year imme13 diately preceding the taxable year for which

14 the determination is being made.

15 ‘‘(ii) FIRST-IN, FIRST-OUT ORDERING

16 RULE.—For purposes of clause (i), credits

17 shall be treated as allowed under subsection

18 (a) on a first-in, first-out basis.’’.

19 (b) CONFORMING AMENDMENTS.—(1) Section 53(c) (as

20 in effect before the amendment made by subsection (a)) is

21 amended—

22 (A) by striking ‘‘The’’ and inserting:

23 ‘‘(1) IN GENERAL.—The’’, and

24 (B) by redesignating paragraphs (1) and (2) as

25 subparagraphs (A) and (B), respectively.
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1 (2) Subparagraph (C) of section 108(b)(4) is amended

2 by striking ‘‘and (G)’’ in the text and heading thereof and

3 inserting ‘‘, (C), and (G)’’.

4 (c) EFFECTIVE DATE.—The amendments made by this

5 section shall apply to taxable years beginning after Decem6 ber 31, 1995.

7 CHAPTER 4—COST RECOVERY

8 PROVISIONS

9 SEC. 11035. TREATMENT OF ABANDONMENT OF LESSOR IM10 PROVEMENTS AT TERMINATION OF LEASE.

11 (a) IN GENERAL.—Paragraph (8) of section 168(i) is

12 amended to read as follows:

13 ‘‘(8) TREATMENT OF LEASEHOLD IMPROVE14 MENTS.—

15 ‘‘(A) IN GENERAL.—In the case of any

16 building erected (or improvements made) on

17 leased property, if such building or improvement

18 is property to which this section applies, the de19 preciation deduction shall be determined under

20 the provisions of this section.

21 ‘‘(B) TREATMENT OF LESSOR IMPROVE22 MENTS WHICH ARE ABANDONED AT TERMINATION

23 OF LEASE.—An improvement—
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1 ‘‘(i) which is made by the lessor of

2 leased property for the lessee of such prop3 erty, and

4 ‘‘(ii) which is irrevocably disposed of

5 or abandoned by the lessor at the termi6 nation of the lease by such lessee,

7 shall be treated for purposes of determining gain

8 or loss under this title as disposed of by the les9 sor when so disposed of or abandoned.’’

10 (b) EFFECTIVE DATE.—Subparagraph (B) of section

11 168(i)(8) of the Internal Revenue Code of 1986, as added

12 by the amendment made by subsection (a), shall apply to

13 improvements disposed of or abandoned after March 13,

14 1995.

15 SEC. 11036. INCREASE IN EXPENSE TREATMENT FOR SMALL

16 BUSINESSES.

17 (a) GENERAL RULE.—Paragraph (1) of section 179(b)

18 (relating to dollar limitation) is amended to read as follows:

19 ‘‘(1) DOLLAR LIMITATION.—The aggregate cost

20 which may be taken into account under subsection (a)

21 for any taxable year shall not exceed the following ap22 plicable amount:

‘‘If the taxable year The applicable

begins in: amount is:

1996 ............................................................................ $19,000

1997 ............................................................................ 20,000

1998 ............................................................................ 21,000

1999 ............................................................................ 22,000

2000 ............................................................................ 23,000
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2001 ............................................................................ 24,000

2002 or thereafter ....................................................... 25,000.’’

1 (b) EFFECTIVE DATE.—The amendment made by sub2 section (a) shall apply to taxable years beginning after De3 cember 31, 1995.

4 Subtitle C—Health Related

5 Provisions

6 CHAPTER 1—LONG-TERM CARE

7 PROVISIONS

8 Subchapter A—Long-Term Care Services and

9 Contracts

10 PART I—GENERAL PROVISIONS

11 SEC. 11041. TREATMENT OF LONG-TERM CARE INSURANCE.

12 (a) GENERAL RULE.—Chapter 79 (relating to defini13 tions) is amended by inserting after section 7702A the fol14 lowing new section:

15 ‘‘SEC. 7702B. TREATMENT OF QUALIFIED LONG-TERM CARE

16 INSURANCE.

17 ‘‘(a) IN GENERAL.—For purposes of this title—

18 ‘‘(1) a qualified long-term care insurance con19 tract shall be treated as an accident and health insur20 ance contract,

21 ‘‘(2) amounts (other than policyholder dividends,

22 as defined in section 808, or premium refunds) re23 ceived under a qualified long-term care insurance

24 contract shall be treated as amounts received for per-
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1 sonal injuries and sickness and shall be treated as re2 imbursement for expenses actually incurred for medi3 cal care (as defined in section 213(d)),

4 ‘‘(3) any plan of an employer providing coverage

5 under a qualified long-term care insurance contract

6 shall be treated as an accident and health plan with

7 respect to such coverage,

8 ‘‘(4) except as provided in subsection (d)(3),

9 amounts paid for a qualified long-term care insur10 ance contract providing the benefits described in sub11 section (b)(2)(A) shall be treated as payments made

12 for insurance for purposes of section 213(d)(1)(D),

13 and

14 ‘‘(5) a qualified long-term care insurance con15 tract shall be treated as a guaranteed renewable con16 tract subject to the rules of section 816(e).

17 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE CON18 TRACT.—For purposes of this title—

19 ‘‘(1) IN GENERAL.—The term ‘qualified long20 term care insurance contract’ means any insurance

21 contract if—

22 ‘‘(A) the only insurance protection provided

23 under such contract is coverage of qualified long24 term care services,
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1 ‘‘(B) such contract does not pay or reim2 burse expenses incurred for services or items to

3 the extent that such expenses are reimbursable

4 under title XVIII of the Social Security Act or

5 would be so reimbursable but for the application

6 of a deductible or coinsurance amount,

7 ‘‘(C) such contract is guaranteed renewable,

8 ‘‘(D) such contract does not provide for a

9 cash surrender value or other money that can

10 be—

11 ‘‘(i) paid, assigned, or pledged as col12 lateral for a loan, or

13 ‘‘(ii) borrowed,

14 other than as provided in subparagraph (E) or

15 paragraph (2)(C),

16 ‘‘(E) all refunds of premiums, and all pol17 icyholder dividends or similar amounts, under

18 such contract are to be applied as a reduction in

19 future premiums or to increase future benefits,

20 and

21 ‘‘(F) such contract meets the requirements of

22 subsection (f).

23 ‘‘(2) SPECIAL RULES.—

24 ‘‘(A) PER DIEM, ETC. PAYMENTS PER25 MITTED.—A contract shall not fail to be de-
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1 scribed in subparagraph (A) or (B) of paragraph

2 (1) by reason of payments being made on a per

3 diem or other periodic basis without regard to

4 the expenses incurred during the period to which

5 the payments relate.

6 ‘‘(B) SPECIAL RULES RELATING TO MEDI7 CARE.—

8 ‘‘(i) Paragraph (1)(B) shall not apply

9 to expenses which are reimbursable under

10 title XVIII of the Social Security Act only

11 as a secondary payor.

12 ‘‘(ii) No provision of law shall be con13 strued or applied so as to prohibit the offer14 ing of a qualified long-term care insurance

15 contract on the basis that the contract co16 ordinates its benefits with those provided

17 under such title.

18 ‘‘(C) REFUNDS OF PREMIUMS.—Paragraph

19 (1)(E) shall not apply to any refund on the

20 death of the insured, or on a complete surrender

21 or cancellation of the contract, which cannot ex22 ceed the aggregate premiums paid under the con23 tract. Any refund on a complete surrender or

24 cancellation of the contract shall be includible in

25 gross income to the extent that any deduction or
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1 exclusion was allowable with respect to the pre2 miums.

3 ‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For

4 purposes of this section—

5 ‘‘(1) IN GENERAL.—The term ‘qualified long6 term care services’ means necessary diagnostic, pre7 ventive, therapeutic, curing, treating, mitigating, and

8 rehabilitative services, and maintenance or personal

9 care services, which—

10 ‘‘(A) are required by a chronically ill indi11 vidual, and

12 ‘‘(B) are provided pursuant to a plan of

13 care prescribed by a licensed health care practi14 tioner.

15 ‘‘(2) CHRONICALLY ILL INDIVIDUAL.—

16 ‘‘(A) IN GENERAL.—The term ‘chronically

17 ill individual’ means any individual who has

18 been certified by a licensed health care practi19 tioner as—

20 ‘‘(i) being unable to perform (without

21 substantial assistance from another individ22 ual) at least 2 activities of daily living for

23 a period of at least 90 days due to a loss

24 of functional capacity or to cognitive im25 pairment, or
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1 ‘‘(ii) having a level of disability simi2 lar (as determined by the Secretary in con3 sultation with the Secretary of Health and

4 Human Services) to the level of disability

5 described in clause (i).

6 Such term shall not include any individual oth7 erwise meeting the requirements of the preceding

8 sentence unless within the preceding 12-month

9 period a licensed health care practitioner has

10 certified that such individual meets such require11 ments.

12 ‘‘(B) ACTIVITIES OF DAILY LIVING.—For

13 purposes of subparagraph (A), each of the follow14 ing is an activity of daily living:

15 ‘‘(i) Eating.

16 ‘‘(ii) Toileting.

17 ‘‘(iii) Transferring.

18 ‘‘(iv) Bathing.

19 ‘‘(v) Dressing.

20 ‘‘(vi) Continence.

21 Nothing in this section shall be construed to re22 quire a contract to take into account all of the

23 preceding activities of daily living.

24 ‘‘(3) MAINTENANCE OR PERSONAL CARE SERV25 ICES.—The term ‘maintenance or personal care serv-
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1 ices’ means any care the primary purpose of which

2 is the provision of needed assistance with any of the

3 disabilities as a result of which the individual is a

4 chronically ill individual (including the protection

5 from threats to health and safety due to severe cog6 nitive impairment).

7 ‘‘(4) LICENSED HEALTH CARE PRACTITIONER.—

8 The term ‘licensed health care practitioner’ means

9 any physician (as defined in section 1861(r)(1) of the

10 Social Security Act) and any registered professional

11 nurse, licensed social worker, or other individual who

12 meets such requirements as may be prescribed by the

13 Secretary.

14 ‘‘(d) SPECIAL RULES FOR TREATMENT OF

15 INSUREDS.—

16 ‘‘(1) AGGREGATE PAYMENTS IN EXCESS OF LIM17 ITS.—

18 ‘‘(A) IN GENERAL.—If the aggregate amount

19 of periodic payments under all qualified long20 term care insurance contracts with respect to an

21 insured for any period exceed the dollar amount

22 in effect for such period under subparagraph (C),

23 such excess payments shall be treated as made

24 for qualified long-term care services only to the

25 extent of the costs incurred by the payee (not oth-
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1 erwise compensated for by insurance or other2 wise) for qualified long-term care services pro3 vided during such period for such insured.

4 ‘‘(B) PERIODIC PAYMENTS.—For purposes

5 of subparagraph (A), the term ‘periodic pay6 ment’ means any payment (whether on a peri7 odic basis or otherwise) made without regard to

8 the extent of the costs incurred by the payee for

9 qualified long-term care services.

10 ‘‘(C) DOLLAR AMOUNT.—The dollar amount

11 in effect under this paragraph shall be $175 per

12 day (or the equivalent amount in the case of

13 payments on another periodic basis).

14 ‘‘(D) INFLATION ADJUSTMENT.—In the case

15 of a calendar year after 1996, the dollar amount

16 contained in subparagraph (C) shall be increased

17 at the same time and in the same manner as

18 amounts are increased pursuant to section

19 213(d)(11).

20 ‘‘(e) TREATMENT OF COVERAGE PROVIDED AS PART

21 OF A LIFE INSURANCE CONTRACT.—Except as otherwise

22 provided in regulations prescribed by the Secretary, in the

23 case of any long-term care insurance coverage (whether or

24 not qualified) provided by a rider on a life insurance con25 tract—
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1 ‘‘(1) IN GENERAL.—This section shall apply as

2 if the portion of the contract providing such coverage

3 is a separate contract.

4 ‘‘(2) APPLICATION OF 7702.—Section 7702(c)(2)

5 (relating to the guideline premium limitation) shall

6 be applied by increasing the guideline premium limi7 tation with respect to a life insurance contract, as of

8 any date—

9 ‘‘(A) by the sum of any charges (but not

10 premium payments) against the life insurance

11 contract’s cash surrender value (within the

12 meaning of section 7702(f)(2)(A)) for such cov13 erage made to that date under the contract, less

14 ‘‘(B) any such charges the imposition of

15 which reduces the premiums paid for the con16 tract (within the meaning of section 7702(f)(1)).

17 ‘‘(3) APPLICATION OF SECTION 213.—No deduc18 tion shall be allowed under section 213(a) for charges

19 against the life insurance contract’s cash surrender

20 value described in paragraph (2), unless such charges

21 are includible in income as a result of the application

22 of section 72(e)(10) and the rider is a qualified long23 term care insurance contract under subsection (b).

24 ‘‘(4) PORTION DEFINED.—For purposes of this

25 subsection, the term ‘portion’ means only the terms
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1 and benefits under a life insurance contract that are

2 in addition to the terms and benefits under the con3 tract without regard to the coverage under a qualified

4 long-term care insurance contract.’’

5 (b) RESERVE METHOD.—Clause (iii) of section

6 807(d)(3)(A) is amended by inserting ‘‘(other than a quali7 fied long-term care insurance contract, as defined in section

8 7702B(b))’’ after ‘‘insurance contract’’.

9 (c) LONG-TERM CARE INSURANCE NOT PERMITTED

10 UNDER CAFETERIA PLANS OR FLEXIBLE SPENDING AR11 RANGEMENTS.—

12 (1) CAFETERIA PLANS.—Section 125(f) is

13 amended by adding at the end the following new sen14 tence: ‘‘Such term shall not include any long-term

15 care insurance contract (as defined in section

16 4980C).’’

17 (2) FLEXIBLE SPENDING ARRANGEMENTS.—The

18 text of section 106 (relating to contributions by em19 ployer to accident and health plans) is amended to

20 read as follows:

21 ‘‘(a) GENERAL RULE.—Except as provided in sub22 section (b), gross income of an employee does not include

23 employer-provided coverage under an accident or health

24 plan.
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1 ‘‘(b) INCLUSION OF LONG-TERM CARE BENEFITS PRO2 VIDED THROUGH FLEXIBLE SPENDING ARRANGEMENTS.—

3 ‘‘(1) IN GENERAL.—Effective on and after Janu4 ary 1, 1996, gross income of an employee shall in5 clude employer-provided coverage for qualified long6 term care services (as defined in section 7702B(c)) to

7 the extent that such coverage is provided through a

8 flexible spending or similar arrangement.

9 ‘‘(2) FLEXIBLE SPENDING ARRANGEMENT.—For

10 purposes of this subsection, a flexible spending ar11 rangement is a benefit program which provides em12 ployees with coverage under which—

13 ‘‘(A) specified incurred expenses may be re14 imbursed (subject to reimbursement maximums

15 and other reasonable conditions), and

16 ‘‘(B) the maximum amount of reimburse17 ment which is reasonably available to a partici18 pant for such coverage is less than 500 percent

19 of the value of such coverage.

20 In the case of an insured plan, the maximum amount

21 reasonably available shall be determined on the basis

22 of the underlying coverage.’’

23 (d) CONTINUATION COVERAGE EXCISE TAX NOT TO

24 APPLY.—Subsection (f) of section 4980B is amended by

25 adding at the end the following new paragraph:
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1 ‘‘(9) CONTINUATION OF LONG-TERM CARE COV2 ERAGE NOT REQUIRED.—A group health plan shall

3 not be treated as failing to meet the requirements of

4 this subsection solely by reason of failing to provide

5 coverage under any qualified long-term care insur6 ance contract (as defined in section 7702B(b)).’’

7 (e) AMOUNTS PAID TO RELATIVES TREATED AS NOT

8 PAID FOR MEDICAL CARE.—Section 213(d) is amended by

9 adding at the end the following new paragraph:

10 ‘‘(10) CERTAIN PAYMENTS TO RELATIVES TREAT11 ED AS NOT PAID FOR MEDICAL CARE.—An amount

12 paid for a qualified long-term care service (as defined

13 in section 7702B(c)) provided to an individual shall

14 be treated as not paid for medical care if such service

15 is provided—

16 ‘‘(A) by a relative (directly or through a

17 partnership, corporation, or other entity) unless

18 the relative is a licensed professional with respect

19 to such services, or

20 ‘‘(B) by a corporation or partnership which

21 is related (within the meaning of section 267(b)

22 or 707(b)) to the individual.

23 For purposes of this paragraph, the term ‘relative’

24 means an individual bearing a relationship to the in25 dividual which is described in any of paragraphs (1)
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1 through (8) of section 152(a). This paragraph shall

2 not apply for purposes of section 105(b) with respect

3 to reimbursements through insurance.’’

4 (f) CLERICAL AMENDMENT.—The table of sections for

5 chapter 79 is amended by inserting after the item relating

6 to section 7702A the following new item:

‘‘Sec. 7702B. Treatment of qualified long-term care insurance.’’.

7 (g) EFFECTIVE DATE.—

8 (1) IN GENERAL.—The amendments made by

9 this section shall apply to contracts issued after De10 cember 31, 1995.

11 (2) CONTINUATION OF EXISTING POLICIES.—In

12 the case of any contract issued before January 1,

13 1996, which met the long-term care insurance require14 ments of the State in which the contract was sitused

15 at the time the contract was issued—

16 (A) such contract shall be treated for pur17 poses of the Internal Revenue Code of 1986 as a

18 qualified long-term care insurance contract (as

19 defined in section 7702B(b) of such Code), and

20 (B) services provided under, or reimbursed

21 by, such contract shall be treated for such pur22 poses as qualified long-term care services (as de23 fined in section 7702B(c) of such Code).

24 (3) EXCHANGES OF EXISTING POLICIES.—If,

25 after the date of enactment of this Act and before Jan-
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1 uary 1, 1997, a contract providing for long-term care

2 insurance coverage is exchanged solely for a qualified

3 long-term care insurance contract (as defined in sec4 tion 7702B(b) of such Code), no gain or loss shall be

5 recognized on the exchange. If, in addition to a quali6 fied long-term care insurance contract, money or

7 other property is received in the exchange, then any

8 gain shall be recognized to the extent of the sum of

9 the money and the fair market value of the other

10 property received. For purposes of this paragraph, the

11 cancellation of a contract providing for long-term

12 care insurance coverage and reinvestment of the can13 cellation proceeds in a qualified long-term care insur14 ance contract within 60 days thereafter shall be treat15 ed as an exchange.

16 (4) ISSUANCE OF CERTAIN RIDERS PER17 MITTED.—For purposes of applying sections 101(f),

18 7702, and 7702A of the Internal Revenue Code of

19 1986 to any contract—

20 (A) the issuance of a rider which is treated

21 as a qualified long-term care insurance contract

22 under section 7702B, and

23 (B) the addition of any provision required

24 to conform any other long-term care rider to be

25 so treated,
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1 shall not be treated as a modification or material

2 change of such contract.

3 SEC. 11042. QUALIFIED LONG-TERM CARE SERVICES TREAT4 ED AS MEDICAL CARE.

5 (a) GENERAL RULE.—Paragraph (1) of section 213(d)

6 (defining medical care) is amended by striking ‘‘or’’ at the

7 end of subparagraph (B), by redesignating subparagraph

8 (C) as subparagraph (D), and by inserting after subpara9 graph (B) the following new subparagraph:

10 ‘‘(C) for qualified long-term care services

11 (as defined in section 7702B(c)), or’’.

12 (b) TECHNICAL AMENDMENTS.—

13 (1) Subparagraph (D) of section 213(d)(1) (as

14 redesignated by subsection (a)) is amended by strik15 ing ‘‘subparagraphs (A) and (B)’’ and inserting ‘‘sub16 paragraphs (A), (B), and (C)’’.

17 (2)(A) Paragraph (1) of section 213(d) is

18 amended by adding at the end the following new flush

19 sentence:

20 ‘‘In the case of a qualified long-term care insurance

21 contract (as defined in section 7702B(b)), only eligi22 ble long-term care premiums (as defined in para23 graph (11)) shall be taken into account under sub24 paragraph (D).’’
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1 (B) Subsection (d) of section 213 is amended by

2 adding at the end the following new paragraph:

3 ‘‘(11) ELIGIBLE LONG-TERM CARE PREMIUMS.—

4 ‘‘(A) IN GENERAL.—For purposes of this

5 section, the term ‘eligible long-term care pre6 miums’ means the amount paid during a taxable

7 year for any qualified long-term care insurance

8 contract (as defined in section 7702B(b)) cover9 ing an individual, to the extent such amount

10 does not exceed the limitation determined under

11 the following table:

‘‘In the case of an individual

with an attained age before the The limitation

close of the taxable year of: is:

40 or less ............................................................ $200

More than 40 but not more than 50 ................ 375

More than 50 but not more than 60 ................ 750

More than 60 but not more than 70 ................ 2,000

More than 70 ...................................................... 2,500.

12 ‘‘(B) INDEXING.—

13 ‘‘(i) IN GENERAL.—In the case of any

14 taxable year beginning in a calendar year

15 after 1996, each dollar amount contained in

16 subparagraph (A) shall be increased by the

17 medical care cost adjustment of such

18 amount for such calendar year. If any in19 crease determined under the preceding sen20 tence is not a multiple of $10, such increase
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1 shall be rounded to the nearest multiple of

2 $10.

3 ‘‘(ii) MEDICAL CARE COST ADJUST4 MENT.—For purposes of clause (i), the med5 ical care cost adjustment for any calendar

6 year is the percentage (if any) by which—

7 ‘‘(I) the medical care component

8 of the Consumer Price Index (as de9 fined in section 1(f)(5)) for August of

10 the preceding calendar year, exceeds

11 ‘‘(II) such component for August

12 of 1995.

13 The Secretary shall, in consultation with

14 the Secretary of Health and Human Serv15 ices, prescribe an adjustment which the Sec16 retary determines is more appropriate for

17 purposes of this paragraph than the adjust18 ment described in the preceding sentence,

19 and the adjustment so prescribed shall

20 apply in lieu of the adjustment described in

21 the preceding sentence.’’

22 (3) Paragraph (6) of section 213(d) is amend23 ed—
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1 (A) by striking ‘‘subparagraphs (A) and

2 (B)’’ and inserting ‘‘subparagraphs (A), (B),

3 and (C)’’, and

4 (B) by striking ‘‘paragraph (1)(C)’’ in sub5 paragraph (A) and inserting ‘‘paragraph

6 (1)(D)’’.

7 (4) Paragraph (7) of section 213(d) is amended

8 by striking ‘‘subparagraphs (A) and (B)’’ and insert9 ing ‘‘subparagraphs (A), (B), and (C)’’.

10 (c) EFFECTIVE DATE.—The amendments made by this

11 section shall apply to taxable years beginning after Decem12 ber 31, 1995.

13 SEC. 11043. CERTAIN EXCHANGES OF LIFE INSURANCE CON14 TRACTS FOR QUALIFIED LONG-TERM CARE

15 INSURANCE CONTRACTS NOT TAXABLE.

16 (a) IN GENERAL.—Subsection (a) of section 1035 (re17 lating to certain exchanges of insurance contracts) is

18 amended by striking the period at the end of paragraph

19 (3) and inserting ‘‘; or’’, and by adding at the end the fol20 lowing new paragraph:

21 ‘‘(4) a contract of life insurance or an endow22 ment or annuity contract for a qualified long-term

23 care insurance contract (as defined in section

24 7702B(b)).’’
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1 (b) EFFECTIVE DATE.—The amendment made by this

2 section shall apply to taxable years beginning after Decem3 ber 31, 1995.

4 SEC. 11044. EXCEPTION FROM PENALTY TAX FOR AMOUNTS

5 WITHDRAWN FROM CERTAIN RETIREMENT

6 PLANS FOR QUALIFIED LONG-TERM CARE IN7 SURANCE.

8 (a) IN GENERAL.—Paragraph (2) of section 72(t) is

9 amended by adding at the end the following new subpara10 graph:

11 ‘‘(F) PREMIUMS FOR QUALIFIED LONG12 TERM CARE INSURANCE CONTRACTS.—Distribu13 tions to an individual from an individual retire14 ment plan, or from amounts attributable to em15 ployer contributions made pursuant to elective

16 deferrals described in subparagraph (A) or (C) of

17 section 402(g)(3), to the extent such distributions

18 do not exceed the premiums for a qualified long19 term care insurance contract (as defined in sec20 tion 7702B(b)) for such individual or the spouse

21 of such individual. In applying subparagraph

22 (B), such premiums shall be treated as amounts

23 not paid for medical care.’’

24 (b) DISTRIBUTIONS PERMITTED FROM CERTAIN

25 PLANS TO PAY LONG-TERM CARE PREMIUMS.—
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1 (1) Section 401(k)(2)(B)(i) is amended by strik2 ing ‘‘or’’ at the end of subclause (III), by striking

3 ‘‘and’’ at the end of subclause (IV) and inserting

4 ‘‘or’’, and by inserting after subclause (IV) the follow5 ing new subclause:

6 ‘‘(V) the date distributions for

7 premiums for a long-term care insur8 ance contract (as defined in section

9 7702B(b)) for coverage of such individ10 ual or the spouse of such individual

11 are made, and’’.

12 (2) Section 403(b)(11) is amended by striking

13 ‘‘or’’ at the end of subparagraph (A), by striking the

14 period at the end of subparagraph (B) and inserting

15 ‘‘, or’’, and by inserting after subparagraph (B) the

16 following new subparagraph:

17 ‘‘(C) for the payment of premiums for a

18 long-term care insurance contract (as defined in

19 section 7702B(b)) for coverage of the employee or

20 the spouse of the employee.’’

21 (3) Subparagraph (A) of section 457(d)(1) is

22 amended by striking ‘‘or’’ at the end of clause (ii), by

23 striking ‘‘and’’ at the end of clause (iii) and inserting

24 ‘‘or’’, and by inserting after clause (iii) the following

25 new clause:
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1 ‘‘(iv) the date distributions for pre2 miums for a long-term care insurance con3 tract (as defined in section 7702B(b)) for

4 coverage of such individual or the spouse of

5 such individual are made, and’’.

6 (c) EFFECTIVE DATE.—The amendments made by this

7 section shall apply to payments and distributions after De8 cember 31, 1995.

9 SEC. 11045. REPORTING REQUIREMENTS.

10 (a) IN GENERAL.—Subpart B of part III of subchapter

11 A of chapter 61, as amended by section 11004, is amended

12 by adding at the end the following new section:

13 ‘‘SEC. 6050R. CERTAIN LONG-TERM CARE BENEFITS.

14 ‘‘(a) REQUIREMENT OF REPORTING.—Any person who

15 pays long-term care benefits shall make a return, according

16 to the forms or regulations prescribed by the Secretary, set17 ting forth—

18 ‘‘(1) the aggregate amount of such benefits paid

19 by such person to any individual during any cal20 endar year, and

21 ‘‘(2) the name, address, and TIN of such individ22 ual.

23 ‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS

24 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.—

25 Every person required to make a return under subsection
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1 (a) shall furnish to each individual whose name is required

2 to be set forth in such return a written statement showing—

3 ‘‘(1) the name of the person making the pay4 ments, and

5 ‘‘(2) the aggregate amount of long-term care ben6 efits paid to the individual which are required to be

7 shown on such return.

8 The written statement required under the preceding sen9 tence shall be furnished to the individual on or before Janu10 ary 31 of the year following the calendar year for which

11 the return under subsection (a) was required to be made.

12 ‘‘(c) LONG-TERM CARE BENEFITS.—For purposes of

13 this section, the term ‘long-term care benefit’ means any

14 amount paid under a long-term care insurance policy

15 (within the meaning of section 4980C(e)).’’.

16 (b) PENALTIES.—

17 (1) Subparagraph (B) of section 6724(d)(1), as

18 amended by section 11004, is amended by redesignat19 ing clauses (x) through (xv) as clauses (xi) through

20 (xvi), respectively, and by inserting after clause (ix)

21 the following new clause:

22 ‘‘(x) section 6050R (relating to certain

23 long-term care benefits),’’.

24 (2) Paragraph (2) of section 6724(d), as amend25 ed by section 11004, is amended by redesignating sub-
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1 paragraphs (R) through (U) as subparagraphs (S)

2 through (V), respectively, and by inserting after sub3 paragraph (P) the following new subparagraph:

4 ‘‘(R) section 6050R(b) (relating to certain

5 long-term care benefits),’’.

6 (c) CLERICAL AMENDMENT.—The table of sections for

7 subpart B of part III of subchapter A of chapter 61 is

8 amended by adding at the end the following new item:

‘‘Sec. 6050R. Certain long-term care benefits.’’

9 (d) EFFECTIVE DATE.—The amendments made by this

10 section shall apply to benefits paid after December 31, 1995.

11 PART II—CONSUMER PROTECTION PROVISIONS

12 SEC. 11051. POLICY REQUIREMENTS.

13 Section 7702B (as added by section 11041) is amended

14 by adding at the end the following new subsection:

15 ‘‘(f) CONSUMER PROTECTION PROVISIONS.—

16 ‘‘(1) IN GENERAL.—The requirements of this sub17 section are met with respect to any contract if any

18 long-term care insurance policy issued under the con19 tract meets—

20 ‘‘(A) the requirements of the model regula21 tion and model Act described in paragraph (2),

22 ‘‘(B) the disclosure requirement of para23 graph (3), and

24 ‘‘(C) the requirements relating to

25 nonforfeitability under paragraph (4).
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1 ‘‘(2) REQUIREMENTS OF MODEL REGULATION

2 AND ACT.—

3 ‘‘(A) IN GENERAL.—The requirements of

4 this paragraph are met with respect to any pol5 icy if such policy meets—

6 ‘‘(i) MODEL REGULATION.—The follow7 ing requirements of the model regulation:

8 ‘‘(I) Section 7A (relating to guar9 anteed renewal or noncancellability),

10 and the requirements of section 6B of

11 the model Act relating to such section

12 7A.

13 ‘‘(II) Section 7B (relating to pro14 hibitions on limitations and exclu15 sions).

16 ‘‘(III) Section 7C (relating to ex17 tension of benefits).

18 ‘‘(IV) Section 7D (relating to con19 tinuation or conversion of coverage).

20 ‘‘(V) Section 7E (relating to dis21 continuance and replacement of poli22 cies).

23 ‘‘(VI) Section 8 (relating to unin24 tentional lapse).
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1 ‘‘(VII) Section 9 (relating to dis2 closure), other than section 9F thereof.

3 ‘‘(VIII) Section 10 (relating to

4 prohibitions against post-claims under5 writing).

6 ‘‘(IX) Section 11 (relating to min7 imum standards).

8 ‘‘(X) Section 12 (relating to re9 quirement to offer inflation protection),

10 except that any requirement for a sig11 nature on a rejection of inflation pro12 tection shall permit the signature to be

13 on an application or on a separate

14 form.

15 ‘‘(XI) Section 23 (relating to pro16 hibition against preexisting conditions

17 and probationary periods in replace18 ment policies or certificates).

19 ‘‘(ii) MODEL ACT.—The following re20 quirements of the model Act:

21 ‘‘(I) Section 6C (relating to pre22 existing conditions).

23 ‘‘(II) Section 6D (relating to

24 prior hospitalization).
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1 ‘‘(B) DEFINITIONS.—For purposes of this

2 paragraph—

3 ‘‘(i) MODEL PROVISIONS.—The terms

4 ‘model regulation’ and ‘model Act’ mean the

5 long-term care insurance model regulation,

6 and the long-term care insurance model Act,

7 respectively, promulgated by the National

8 Association of Insurance Commissioners (as

9 adopted as of January 1993).

10 ‘‘(ii) COORDINATION.—Any provision

11 of the model regulation or model Act listed

12 under clause (i) or (ii) of subparagraph (A)

13 shall be treated as including any other pro14 vision of such regulation or Act necessary to

15 implement the provision.

16 ‘‘(3) DISCLOSURE REQUIREMENT.—The require17 ment of this paragraph is met with respect to any

18 policy if such policy meets the requirements of section

19 4980C(d)(1).

20 ‘‘(4) NONFORFEITURE REQUIREMENTS.—

21 ‘‘(A) IN GENERAL.—The requirements of

22 this paragraph are met with respect to any level

23 premium long-term care insurance policy, if the

24 issuer of such policy offers to the policyholder,

25 including any group policyholder, a
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1 nonforfeiture provision meeting the requirements

2 of subparagraph (B).

3 ‘‘(B) REQUIREMENTS OF PROVISION.—The

4 nonforfeiture provision required under subpara5 graph (A) shall meet the following requirements:

6 ‘‘(i) The nonforfeiture provision shall

7 be appropriately captioned.

8 ‘‘(ii) The nonforfeiture provision shall

9 provide for a benefit available in the event

10 of a default in the payment of any pre11 miums and the amount of the benefit may

12 be adjusted subsequent to being initially

13 granted only as necessary to reflect changes

14 in claims, persistency, and interest as re15 flected in changes in rates for premium

16 paying policies approved by the Secretary

17 for the same policy form.

18 ‘‘(iii) The nonforfeiture provision shall

19 provide at least one of the following:

20 ‘‘(I) Reduced paid-up insurance.

21 ‘‘(II) Extended term insurance.

22 ‘‘(III) Shortened benefit period.

23 ‘‘(IV) Other similar offerings ap24 proved by the Secretary.
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1 ‘‘(5) LONG-TERM CARE INSURANCE POLICY DE2 FINED.—For purposes of this subsection, the term

3 ‘long-term care insurance policy’ has the meaning

4 given such term by section 4980C(e).’’.

5 SEC. 11052. REQUIREMENTS FOR ISSUERS OF LONG-TERM

6 CARE INSURANCE POLICIES.

7 (a) IN GENERAL.—Chapter 43 is amended by adding

8 at the end the following new section:

9 ‘‘SEC. 4980C. REQUIREMENTS FOR ISSUERS OF LONG-TERM

10 CARE INSURANCE POLICIES.

11 ‘‘(a) GENERAL RULE.—There is hereby imposed on

12 any person failing to meet the requirements of subsection

13 (c) or (d) a tax in the amount determined under subsection

14 (b).

15 ‘‘(b) AMOUNT.—

16 ‘‘(1) IN GENERAL.—The amount of the tax im17 posed by subsection (a) shall be $100 per policy for

18 each day any requirements of subsection (c) or (d) are

19 not met with respect to each long-term care insurance

20 policy.

21 ‘‘(2) WAIVER.—In the case of a failure which is

22 due to reasonable cause and not to willful neglect, the

23 Secretary may waive part or all of the tax imposed

24 by subsection (a) to the extent that payment of the tax

25 would be excessive relative to the failure involved.
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1 ‘‘(c) RESPONSIBILITIES.—The requirements of this

2 subsection are as follows:

3 ‘‘(1) REQUIREMENTS OF MODEL PROVISIONS.—

4 ‘‘(A) MODEL REGULATION.—The following

5 requirements of the model regulation must be

6 met:

7 ‘‘(i) Section 13 (relating to application

8 forms and replacement coverage).

9 ‘‘(ii) Section 14 (relating to reporting

10 requirements), except that the issuer shall

11 also report at least annually the number of

12 claims denied during the reporting period

13 for each class of business (expressed as a

14 percentage of claims denied), other than

15 claims denied for failure to meet the wait16 ing period or because of any applicable pre17 existing condition.

18 ‘‘(iii) Section 20 (relating to filing re19 quirements for marketing).

20 ‘‘(iv) Section 21 (relating to standards

21 for marketing), including inaccurate com22 pletion of medical histories, other than sec23 tions 21C(1) and 21C(6) thereof, except

24 that—
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1 ‘‘(I) in addition to such require2 ments, no person shall, in selling or of3 fering to sell a long-term care insur4 ance policy, misrepresent a material

5 fact; and

6 ‘‘(II) no such requirements shall

7 include a requirement to inquire or

8 identify whether a prospective appli9 cant or enrollee for long-term care in10 surance has accident and sickness in11 surance.

12 ‘‘(v) Section 22 (relating to appro13 priateness of recommended purchase).

14 ‘‘(vi) Section 24 (relating to standard

15 format outline of coverage).

16 ‘‘(vii) Section 25 (relating to require17 ment to deliver shopper’s guide).

18 ‘‘(B) MODEL ACT.—The following require19 ments of the model Act must be met:

20 ‘‘(i) Section 6F (relating to right to re21 turn), except that such section shall also

22 apply to denials of applications and any

23 refund shall be made within 30 days of the

24 return or denial.
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1 ‘‘(ii) Section 6G (relating to outline of

2 coverage).

3 ‘‘(iii) Section 6H (relating to require4 ments for certificates under group plans).

5 ‘‘(iv) Section 6I (relating to policy

6 summary).

7 ‘‘(v) Section 6J (relating to monthly

8 reports on accelerated death benefits).

9 ‘‘(vi) Section 7 (relating to incontest10 ability period).

11 ‘‘(C) DEFINITIONS.—For purposes of this

12 paragraph, the terms ‘model regulation’ and

13 ‘model Act’ have the meanings given such terms

14 by section 7702B(f)(2)(B).

15 ‘‘(2) DELIVERY OF POLICY.—If an application

16 for a long-term care insurance policy (or for a certifi17 cate under a group long-term care insurance policy)

18 is approved, the issuer shall deliver to the applicant

19 (or policyholder or certificateholder) the policy (or

20 certificate) of insurance not later than 30 days after

21 the date of the approval.

22 ‘‘(3) INFORMATION ON DENIALS OF CLAIMS.—If

23 a claim under a long-term care insurance policy is

24 denied, the issuer shall, within 60 days of the date of
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1 a written request by the policyholder or

2 certificateholder (or representative)—

3 ‘‘(A) provide a written explanation of the

4 reasons for the denial, and

5 ‘‘(B) make available all information di6 rectly relating to such denial.

7 ‘‘(d) DISCLOSURE.—The requirements of this sub8 section are met if the issuer of a long-term care insurance

9 policy discloses in such policy and in the outline of coverage

10 required under subsection (c)(1)(B)(ii) that the policy is in11 tended to be a qualified long-term care insurance contract

12 under section 7702B(b).

13 ‘‘(e) LONG-TERM CARE INSURANCE POLICY DE14 FINED.—For purposes of this section, the term ‘long-term

15 care insurance policy’ means any product which is adver16 tised, marketed, or offered as long-term care insurance.’’.

17 (b) CONFORMING AMENDMENT.—The table of sections

18 for chapter 43 is amended by adding at the end the follow19 ing new item:

‘‘Sec. 4980C. Requirements for issuers of long-term care insurance

policies.’’.

20 SEC. 11053. COORDINATION WITH STATE REQUIREMENTS.

21 Nothing in this part shall prevent a State from estab22 lishing, implementing, or continuing in effect standards re23 lated to the protection of policyholders of long-term care in24 surance policies (as defined in section 4980C(e) of the Inter-
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1 nal Revenue Code of 1986), if such standards are not in

2 conflict with or inconsistent with the standards established

3 under such Code.

4 SEC. 11054. EFFECTIVE DATES.

5 (a) IN GENERAL.—The provisions of, and amendments

6 made by, this part shall apply to contracts issued after De7 cember 31, 1995. The provisions of section 11041(g) of this

8 Act (relating to transition rule) shall apply to such con9 tracts.

10 (b) ISSUERS.—The amendments made by section

11 11052 shall apply to actions taken after December 31, 1995.

12 Subchapter B—Treatment of Accelerated

13 Death Benefits

14 SEC. 11061. TREATMENT OF ACCELERATED DEATH BENE15 FITS BY RECIPIENT.

16 (a) IN GENERAL.—Section 101 (relating to certain

17 death benefits) is amended by adding at the end the follow18 ing new subsection:

19 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED DEATH

20 BENEFITS.—

21 ‘‘(1) IN GENERAL.—For purposes of this section,

22 the following amounts shall be treated as an amount

23 paid by reason of the death of an insured:
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1 ‘‘(A) Any amount received under a life in2 surance contract on the life of an insured who is

3 a terminally ill individual.

4 ‘‘(B) Any amount received under a life in5 surance contract on the life of an insured who is

6 a chronically ill individual (as determined in

7 such manner as the Secretary may prescribe) but

8 only if such amount is received under a rider or

9 other provision of such contract which is treated

10 as a qualified long-term care insurance contract

11 under section 7702B.

12 ‘‘(2) TREATMENT OF VIATICAL SETTLEMENTS.—

13 ‘‘(A) IN GENERAL.—In the case of a life in14 surance contract on the life of an insured de15 scribed in paragraph (1), if—

16 ‘‘(i) any portion of such contract is

17 sold to any viatical settlement provider, or

18 ‘‘(ii) any portion of the death benefit is

19 assigned to such a provider,

20 the amount paid for such sale or assignment

21 shall be treated as an amount paid under the life

22 insurance contract by reason of the death of such

23 insured.

24 ‘‘(B) VIATICAL SETTLEMENT PROVIDER.—

25 The term ‘viatical settlement provider’ means
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1 any person regularly engaged in the trade or

2 business of purchasing, or taking assignments of,

3 life insurance contracts on the lives of insureds

4 described in paragraph (1) if—

5 ‘‘(i) such person is licensed for such

6 purposes in the State in which the insured

7 resides, or

8 ‘‘(ii) in the case of an insured who re9 sides in a State not requiring the licensing

10 of such persons for such purposes—

11 ‘‘(I) such person meets the re12 quirements of sections 8 and 9 of the

13 Viatical Settlements Model Act of the

14 National Association of Insurance

15 Commissioners, and

16 ‘‘(II) meets the requirements of the

17 Model Regulations of the National As18 sociation of Insurance Commissioners

19 (relating to standards for evaluation of

20 reasonable payments) in determining

21 amounts paid by such person in con22 nection with such purchases or assign23 ments.

24 ‘‘(3) DEFINITIONS.—For purposes of this sub25 section—
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1 ‘‘(A) TERMINALLY ILL INDIVIDUAL.—The

2 term ‘terminally ill individual’ means an indi3 vidual who has been certified by a physician as

4 having an illness or physical condition which

5 can reasonably be expected to result in death in

6 24 months or less after the date of the certifi7 cation.

8 ‘‘(B) PHYSICIAN.—The term ‘physician’ has

9 the meaning given to such term by section

10 1861(r)(1) of the Social Security Act (42 U.S.C.

11 1395x(r)(1)).

12 ‘‘(4) EXCEPTION FOR BUSINESS-RELATED POLI13 CIES.—This subsection shall not apply in the case of

14 any amount paid to any taxpayer other than the in15 sured if such taxpayer has an insurable interest with

16 respect to the life of the insured by reason of the in17 sured being a director, officer, or employee of the tax18 payer or by reason of the insured being financially

19 interested in any trade or business carried on by the

20 taxpayer.’’

21 (b) EFFECTIVE DATE.—The amendment made by sub22 section (a) shall apply to amounts received after December

23 31, 1995.
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1 SEC. 11062. TAX TREATMENT OF COMPANIES ISSUING

2 QUALIFIED ACCELERATED DEATH BENEFIT

3 RIDERS.

4 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID5 ERS TREATED AS LIFE INSURANCE.—Section 818 (relating

6 to other definitions and special rules) is amended by adding

7 at the end the following new subsection:

8 ‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT RID9 ERS TREATED AS LIFE INSURANCE.—For purposes of this

10 part—

11 ‘‘(1) IN GENERAL.—Any reference to a life insur12 ance contract shall be treated as including a reference

13 to a qualified accelerated death benefit rider on such

14 contract.

15 ‘‘(2) QUALIFIED ACCELERATED DEATH BENEFIT

16 RIDERS.—For purposes of this subsection, the term

17 ‘qualified accelerated death benefit rider’ means any

18 rider on a life insurance contract if the only pay19 ments under the rider are payments meeting the re20 quirements of section 101(g).

21 ‘‘(3) EXCEPTION FOR LONG-TERM CARE RID22 ERS.—Paragraph (1) shall not apply to any rider

23 which is treated as a long-term care insurance con24 tract under section 7702B.’’

25 (b) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—The amendment made by this

2 section shall take effect on January 1, 1996.

3 (2) ISSUANCE OF RIDER NOT TREATED AS MATE4 RIAL CHANGE.—For purposes of applying sections

5 101(f), 7702, and 7702A of the Internal Revenue Code

6 of 1986 to any contract—

7 (A) the issuance of a qualified accelerated

8 death benefit rider (as defined in section 818(g)

9 of such Code (as added by this Act)), and

10 (B) the addition of any provision required

11 to conform an accelerated death benefit rider to

12 the requirements of such section 818(g),

13 shall not be treated as a modification or material

14 change of such contract.

15 CHAPTER 2—MEDICAL SAVINGS

16 ACCOUNTS

17 SEC. 11066. MEDICAL SAVINGS ACCOUNTS.

18 (a) IN GENERAL.—Part VII of subchapter B of chapter

19 1 (relating to additional itemized deductions for individ20 uals) is amended by redesignating section 222 as section

21 223 and by inserting after section 221 the following new

22 section:

23 ‘‘SEC. 222. MEDICAL SAVINGS ACCOUNTS.

24 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi25 vidual who is an eligible individual for any month during
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1 the taxable year, there shall be allowed as a deduction for

2 the taxable year an amount equal to the aggregate amount

3 paid in cash during such taxable year by such individual

4 to a medical savings account of such individual.

5 ‘‘(b) LIMITATIONS.—

6 ‘‘(1) IN GENERAL.—Except as otherwise provided

7 in this subsection, the amount allowable as a deduc8 tion under subsection (a) to an individual for the tax9 able year shall not exceed—

10 ‘‘(A) except as provided in subparagraph

11 (B), the lesser of—

12 ‘‘(i) $2,000, or

13 ‘‘(ii) the annual deductible limit for

14 any individual covered under the high de15 ductible health plan, or

16 ‘‘(B) in the case of a high deductible health

17 plan covering the taxpayer and any other eligi18 ble individual who is the spouse or any depend19 ent (as defined in section 152) of the taxpayer,

20 the lesser of—

21 ‘‘(i) $4,000, or

22 ‘‘(ii) the annual limit under the plan

23 on the aggregate amount of deductibles re24 quired to be paid by all individuals.
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1 The preceding sentence shall not apply if the spouse

2 of such individual is covered under any other high de3 ductible health plan.

4 ‘‘(2) SPECIAL RULE FOR MARRIED INDIVID5 UALS.—

6 ‘‘(A) IN GENERAL.—This subsection shall be

7 applied separately for each married individual.

8 ‘‘(B) SPECIAL RULE.—If individuals who

9 are married to each other are covered under the

10 same high deductible health plan, then the

11 amounts applicable under paragraph (1)(B)

12 shall be divided equally between them unless they

13 agree on a different division.

14 ‘‘(3) COORDINATION WITH EXCLUSION FOR EM15 PLOYER CONTRIBUTIONS.—No deduction shall be al16 lowed under this section for any amount paid for any

17 taxable year to a medical savings account of an indi18 vidual if—

19 ‘‘(A) any amount is paid to any medical

20 savings account of such individual which is ex21 cludable from gross income under section 106(b)

22 for such year, or

23 ‘‘(B) in a case described in paragraph (2),

24 any amount is paid to any medical savings ac-
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1 count of either spouse which is so excludable for

2 such year.

3 ‘‘(4) PRORATION OF LIMITATION.—

4 ‘‘(A) IN GENERAL.—The limitation under

5 paragraph (1) shall be the sum of the monthly

6 limitations for months during the taxable year

7 that the individual is an eligible individual if—

8 ‘‘(i) such individual is not an eligible

9 individual for all months of the taxable

10 year,

11 ‘‘(ii) the deductible under the high de12 ductible health plan covering such individ13 ual is not the same throughout such taxable

14 year, or

15 ‘‘(iii) such limitation is determined

16 under paragraph (1)(B) for some but not

17 all months during such taxable year.

18 ‘‘(B) MONTHLY LIMITATION.—The monthly

19 limitation for any month shall be an amount

equal to 1 20 ⁄12 of the limitation which would (but

21 for this paragraph and paragraph (3)) be deter22 mined under paragraph (1) if the facts and cir23 cumstances as of the first day of such month that

24 such individual is covered under a high deduct-
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1 ible health plan were true for the entire taxable

2 year.

3 ‘‘(5) DENIAL OF DEDUCTION TO DEPENDENTS.—

4 No deduction shall be allowed under this section to

5 any individual with respect to whom a deduction

6 under section 151 is allowable to another taxpayer for

7 a taxable year beginning in the calendar year in

8 which such individual’s taxable year begins.

9 ‘‘(c) DEFINITIONS.—For purposes of this section—

10 ‘‘(1) ELIGIBLE INDIVIDUAL.—

11 ‘‘(A) IN GENERAL.—The term ‘eligible indi12 vidual’ means, with respect to any month, any

13 individual—

14 ‘‘(i) who is covered under a high de15 ductible health plan as of the 1st day of

16 such month, and

17 ‘‘(ii) who is not, while covered under a

18 high deductible health plan, covered under

19 any health plan—

20 ‘‘(I) which is not a high deduct21 ible health plan, and

22 ‘‘(II) which provides coverage for

23 any benefit which is covered under the

24 high deductible health plan.
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1 ‘‘(B) CERTAIN COVERAGE DISREGARDED.—

2 Subparagraph (A)(ii) shall be applied without

3 regard to—

4 ‘‘(i) coverage for any benefit provided

5 by permitted insurance, and

6 ‘‘(ii) coverage (whether through insur7 ance or otherwise) for accidents, disability,

8 dental care, vision care, or long-term care.

9 ‘‘(2) HIGH DEDUCTIBLE HEALTH PLAN.—The

10 term ‘high deductible health plan’ means a health

11 plan which—

12 ‘‘(A) has an annual deductible limit for

13 each individual covered by the plan which is not

14 less than $1,500, and

15 ‘‘(B) has an annual limit on the aggregate

16 amount of deductibles required to be paid with

17 respect to all individuals covered by the plan

18 which is not less than $3,000.

19 Such term does not include a health plan if substan20 tially all of its coverage is coverage described in para21 graph (1)(B).

22 ‘‘(3) PERMITTED INSURANCE.—The term ‘per23 mitted insurance’ means—

24 ‘‘(A) Medicare supplemental insurance,
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1 ‘‘(B) insurance if substantially all of the

2 coverage provided under such insurance relates

3 to—

4 ‘‘(i) liabilities incurred under workers’

5 compensation laws,

6 ‘‘(ii) tort liabilities,

7 ‘‘(iii) liabilities relating to ownership

8 or use of property, or

9 ‘‘(iv) such other similar liabilities as

10 the Secretary may specify by regulations,

11 ‘‘(C) insurance for a specified disease or ill12 ness, and

13 ‘‘(D) insurance paying a fixed amount per

14 day (or other period) of hospitalization.

15 ‘‘(d) MEDICAL SAVINGS ACCOUNT.—For purposes of

16 this section—

17 ‘‘(1) MEDICAL SAVINGS ACCOUNT.—The term

18 ‘medical savings account’ means a trust created or or19 ganized in the United States exclusively for the pur20 pose of paying the qualified medical expenses of the

21 account holder, but only if the written governing in22 strument creating the trust meets the following re23 quirements:
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1 ‘‘(A) Except in the case of a rollover con2 tribution described in subsection (f)(5), no con3 tribution will be accepted—

4 ‘‘(i) unless it is in cash, or

5 ‘‘(ii) to the extent such contribution,

6 when added to previous contributions to the

7 trust for the calendar year, exceeds $4,000.

8 ‘‘(B) The trustee is a bank (as defined in

9 section 408(n)), an insurance company (as de10 fined in section 816), or another person who

11 demonstrates to the satisfaction of the Secretary

12 that the manner in which such person will ad13 minister the trust will be consistent with the re14 quirements of this section.

15 ‘‘(C) No part of the trust assets will be in16 vested in life insurance contracts.

17 ‘‘(D) The assets of the trust will not be com18 mingled with other property except in a common

19 trust fund or common investment fund.

20 ‘‘(E) The interest of an individual in the

21 balance in his account is nonforfeitable.

22 ‘‘(2) QUALIFIED MEDICAL EXPENSES.—

23 ‘‘(A) IN GENERAL.—The term ‘qualified

24 medical expenses’ means, with respect to an ac25 count holder, amounts paid by such holder for
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1 medical care (as defined in section 213(d)) for

2 such individual, the spouse of such individual,

3 and any dependent (as defined in section 152) of

4 such individual, but only to the extent such

5 amounts are not compensated for by insurance

6 or otherwise.

7 ‘‘(B) HEALTH INSURANCE MAY NOT BE PUR8 CHASED FROM ACCOUNT.—

9 ‘‘(i) IN GENERAL.—Subparagraph (A)

10 shall not apply to any payment for insur11 ance.

12 ‘‘(ii) EXCEPTIONS.—Clause (i) shall

13 not apply to any expense for coverage

14 under—

15 ‘‘(I) a health plan during any pe16 riod of continuation coverage required

17 under any Federal law,

18 ‘‘(II) a qualified long-term care

19 contract (as defined in section 7702B),

20 or

21 ‘‘(III) a health plan during a pe22 riod in which the individual is receiv23 ing unemployment compensation under

24 any Federal or State law.
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1 ‘‘(3) ACCOUNT HOLDER.—The term ‘account

2 holder’ means the individual on whose behalf the med3 ical savings account was established.

4 ‘‘(4) CERTAIN RULES TO APPLY.—Rules similar

5 to the following rules shall apply for purposes of this

6 section:

7 ‘‘(A) Section 219(d)(2) (relating to no de8 duction for rollovers).

9 ‘‘(B) Section 219(f)(3) (relating to time

10 when contributions deemed made).

11 ‘‘(C) Except as provided in section 106(b),

12 section 219(f)(5) (relating to employer pay13 ments).

14 ‘‘(D) Section 408(g) (relating to community

15 property laws).

16 ‘‘(E) Section 408(h) (relating to custodial

17 accounts).

18 ‘‘(e) TAX TREATMENT OF ACCOUNTS.—

19 ‘‘(1) IN GENERAL.—A medical savings account is

20 exempt from taxation under this subtitle unless such

21 account has ceased to be a medical savings account by

22 reason of paragraph (2) or (3). Notwithstanding the

23 preceding sentence, any such account is subject to the

24 taxes imposed by section 511 (relating to imposition
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1 of tax on unrelated business income of charitable, etc.

2 organizations).

3 ‘‘(2) ACCOUNT TERMINATIONS.—Rules similar to

4 the rules of paragraphs (2) and (4) of section 408(e)

5 shall apply to medical savings accounts, and any

6 amount treated as distributed under such rules shall

7 be treated as not used to pay qualified medical ex8 penses.

9 ‘‘(f) TAX TREATMENT OF DISTRIBUTIONS.—

10 ‘‘(1) AMOUNTS USED FOR QUALIFIED MEDICAL

11 EXPENSES.—

12 ‘‘(A) IN GENERAL.—Any amount paid or

13 distributed out of a medical savings account

14 which is used exclusively to pay qualified medi15 cal expenses of any account holder (or any

16 spouse or dependent of the holder) shall not be

17 includible in gross income.

18 ‘‘(B) TREATMENT AFTER DEATH OF AC19 COUNT HOLDER.—

20 ‘‘(i) TREATMENT IF HOLDER IS

21 SPOUSE.—If, after the death of the account

22 holder, the account holder’s interest is pay23 able to (or for the benefit of) the holder’s

24 spouse, the medical savings account shall be
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1 treated as if the spouse were the account

2 holder.

3 ‘‘(ii) TREATMENT IF DESIGNATED

4 HOLDER IS NOT SPOUSE.—In the case of an

5 account holder’s interest in a medical sav6 ings account which is payable to (or for the

7 benefit of) any person other than such hold8 er’s spouse upon the death of such holder—

9 ‘‘(I) such account shall cease to be

10 a medical savings account as of the

11 date of death, and

12 ‘‘(II) an amount equal to the fair

13 market value of the assets in such ac14 count on such date shall be includible

15 if such person is not the estate of such

16 holder, in such person’s gross income

17 for the taxable year which includes

18 such date, or if such person is the es19 tate of such holder, in such holder’s

20 gross income for the last taxable year

21 of such holder.

22 ‘‘(2) INCLUSION OF AMOUNTS NOT USED FOR

23 QUALIFIED MEDICAL EXPENSES.—

24 ‘‘(A) IN GENERAL.—Any amount paid or

25 distributed out of a medical savings account
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1 which is not used exclusively to pay the qualified

2 medical expenses of the account holder or of the

3 spouse or dependents of such holder shall be in4 cluded in the gross income of such holder.

5 ‘‘(B) SPECIAL RULES.—For purposes of

6 subparagraph (A)—

7 ‘‘(i) all medical savings accounts of the

8 account holder shall be treated as 1 account,

9 ‘‘(ii) all payments and distributions

10 during any taxable year shall be treated as

11 1 distribution, and

12 ‘‘(iii) any distribution of property

13 shall be taken into account at its fair mar14 ket value on the date of the distribution.

15 ‘‘(3) EXCESS CONTRIBUTIONS RETURNED BE16 FORE DUE DATE OF RETURN.—Paragraph (2) shall

17 not apply to the distribution of any contribution paid

18 during a taxable year to a medical savings account

19 to the extent that such contribution exceeds the

20 amount under subsection (d)(1)(A)(ii) if—

21 ‘‘(A) such distribution is received by the in22 dividual on or before the last day prescribed by

23 law (including extensions of time) for filing such

24 individual’s return for such taxable year, and
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1 ‘‘(B) such distribution is accompanied by

2 the amount of net income attributable to such ex3 cess contribution.

4 Any net income described in subparagraph (B) shall

5 be included in the gross income of the individual for

6 the taxable year in which it is received.

7 ‘‘(4) PENALTY FOR DISTRIBUTIONS NOT USED

8 FOR QUALIFIED MEDICAL EXPENSES.—

9 ‘‘(A) IN GENERAL.—The tax imposed by

10 this chapter on the account holder for any tax11 able year in which there is a payment or dis12 tribution from a medical savings account of such

13 holder which is includible in gross income under

14 paragraph (2) shall be increased by 10 percent

15 of the amount which is so includible.

16 ‘‘(B) EXCEPTION FOR DISABILITY OR

17 DEATH.—Subparagraph (A) shall not apply if

18 the payment or distribution is made after the ac19 count holder becomes disabled within the mean20 ing of section 72(m)(7) or dies.

21 ‘‘(C) EXCEPTION FOR DISTRIBUTIONS

AFTER AGE 591 22 ⁄2.—Subparagraph (A) shall not

23 apply to any payment or distribution after the

24 date on which the account holder attains age

591 25 ⁄2.
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1 ‘‘(5) ROLLOVER CONTRIBUTION.—An amount is

2 described in this paragraph as a rollover contribution

3 if it meets the requirements of subparagraphs (A) and

4 (B).

5 ‘‘(A) IN GENERAL.—Paragraph (2) shall

6 not apply to any amount paid or distributed

7 from a medical savings account to the account

8 holder to the extent the amount received is paid

9 into a medical savings account for the benefit of

10 such holder not later than the 60th day after the

11 day on which the holder receives the payment or

12 distribution.

13 ‘‘(B) LIMITATION.—This paragraph shall

14 not apply to any amount described in subpara15 graph (A) received by an individual from a med16 ical savings account if, at any time during the

17 1-year period ending on the day of such receipt,

18 such individual received any other amount de19 scribed in subparagraph (A) from a medical sav20 ings account which was not includible in the in21 dividual’s gross income because of the applica22 tion of this paragraph.

23 ‘‘(6) COORDINATION WITH MEDICAL EXPENSE

24 DEDUCTION.—For purposes of determining the

25 amount of the deduction under section 213, any pay-
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1 ment or distribution out of a medical savings account

2 for qualified medical expenses shall not be treated as

3 an expense paid for medical care.

4 ‘‘(7) TRANSFER OF ACCOUNT INCIDENT TO DI5 VORCE.—The transfer of an individual’s interest in a

6 medical savings account to an individual’s spouse or

7 former spouse under a divorce or separation instru8 ment described in subparagraph (A) of section

9 71(b)(2) shall not be considered a taxable transfer

10 made by such individual notwithstanding any other

11 provision of this subtitle, and such interest shall, after

12 such transfer, be treated as a medical savings account

13 with respect to which the spouse is the account holder.

14 ‘‘(g) COST-OF-LIVING ADJUSTMENT.—

15 ‘‘(1) IN GENERAL.—In the case of any taxable

16 year beginning in a calendar year after 1996, each

17 dollar amount in subsection (b)(1), (c)(2), or

18 (d)(1)(A) shall be increased by an amount equal to—

19 ‘‘(A) such dollar amount, multiplied by

20 ‘‘(B) the medical care cost adjustment for

21 such calendar year.

22 If any increase under the preceding sentence is not a

23 multiple of $50, such increase shall be rounded to the

24 nearest multiple of $50.
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1 ‘‘(2) MEDICAL CARE COST ADJUSTMENT.—For

2 purposes of paragraph (1), the medical care cost ad3 justment for any calendar year is the percentage (if

4 any) by which—

5 ‘‘(A) the medical care component of the

6 Consumer Price Index (as defined in section

7 1(f)(5)) for August of the preceding calendar

8 year, exceeds

9 ‘‘(B) such component for August of 1995.

10 ‘‘(h) REPORTS.—The Secretary may require the trustee

11 of a medical savings account to make such reports regarding

12 such account to the Secretary and to the account holder with

13 respect to contributions, distributions, and such other mat14 ters as the Secretary determines appropriate. The reports

15 required by this subsection shall be filed at such time and

16 in such manner and furnished to such individuals at such

17 time and in such manner as may be required by those regu18 lations.’’

19 (b) DEDUCTION ALLOWED WHETHER OR NOT INDIVID20 UAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) of

21 section 62 is amended by inserting after paragraph (18)

22 the following new paragraph:

23 ‘‘(19) MEDICAL SAVINGS ACCOUNTS.—The deduc24 tion allowed by section 222.’’
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1 (c) EXCLUSIONS FOR EMPLOYER CONTRIBUTIONS TO

2 MEDICAL SAVINGS ACCOUNTS.—

3 (1) EXCLUSION FROM INCOME TAX.—Section 106

4 (relating to contributions by employer to accident and

5 health plans), as amended by this Act, is amended—

6 (A) by adding at the end the following new

7 subsection:

8 ‘‘(c) CONTRIBUTIONS TO MEDICAL SAVINGS AC9 COUNTS.—

10 ‘‘(1) IN GENERAL.—In the case of an employee

11 who is an eligible individual, gross income does not

12 include amounts contributed by such employee’s em13 ployer to any medical savings account of such em14 ployee.

15 ‘‘(2) COORDINATION WITH DEDUCTION LIMITA16 TION.—The amount excluded from the gross income of

17 an employee under this subsection for any taxable

18 year shall not exceed the limitation under section

19 222(b)(1) (determined without regard to this sub20 section) which is applicable to such employee for such

21 taxable year.

22 ‘‘(3) NO CONSTRUCTIVE RECEIPT.—No amount

23 shall be included in the gross income of any employee

24 solely because the employee may choose between the

25 contributions referred to in paragraph (1) and em-
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1 ployer contributions to another health plan of the em2 ployer.

3 ‘‘(4) SPECIAL RULE FOR DEDUCTION OF EM4 PLOYER CONTRIBUTIONS.—Any employer contribution

5 to a medical savings account, if otherwise allowable

6 as a deduction under this chapter, shall be allowed

7 only for the taxable year in which paid.

8 ‘‘(5) DEFINITIONS.—For purposes of this sub9 section, the terms ‘eligible individual’ and ‘medical

10 savings account’ have the respective meanings given

11 to such terms by section 222’’, and

12 (B) by striking ‘‘subsection (b)’’ in sub13 section (a) and inserting ‘‘this subsection’’.

14 (2) EXCLUSION FROM WITHHOLDING TAX.—Sub15 section (a) of section 3401 is amended by striking

16 ‘‘or’’ at the end of paragraph (19), by striking the pe17 riod at the end of paragraph (20) and inserting ‘‘;

18 or’’, and by inserting after paragraph (20) the follow19 ing new paragraph:

20 ‘‘(21) any payment made to or for the benefit of

21 an employee if at the time of such payment it is rea22 sonable to believe that the employee will be able to ex23 clude such payment from income under section

24 106(b).’’
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1 (d) MEDICAL SAVINGS ACCOUNT CONTRIBUTIONS NOT

2 AVAILABLE UNDER CAFETERIA PLANS.—Subsection (f) of

3 section 125 is amended by inserting ‘‘106(b),’’ before ‘‘117’’.

4 (e) EXCLUSION OF MEDICAL SAVINGS ACCOUNTS

5 FROM ESTATE TAX.—Part IV of subchapter A of chapter

6 11 is amended by adding at the end the following new sec7 tion:

8 ‘‘SEC. 2057. MEDICAL SAVINGS ACCOUNTS.

9 ‘‘For purposes of the tax imposed by section 2001, the

10 value of the taxable estate shall be determined by deducting

11 from the value of the gross estate an amount equal to the

12 value of any medical savings account (as defined in section

13 222(d)) included in the gross estate.’’

14 (f) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

15 (relating to tax on excess contributions to individual retire16 ment accounts, certain section 403(b) contracts, and certain

17 individual retirement annuities) is amended—

18 (1) by inserting ‘‘medical savings ac19 counts,’’ after ‘‘accounts,’’ in the heading of such

20 section,

21 (2) by striking ‘‘or’’ at the end of paragraph (1)

22 of subsection (a),

23 (3) by redesignating paragraph (2) of subsection

24 (a) as paragraph (3) and by inserting after para25 graph (1) the following:
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1 ‘‘(2) a medical savings account (within the

2 meaning of section 222(d)), or’’, and

3 (4) by adding at the end the following new sub4 section:

5 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

6 ACCOUNTS.—For purposes of this section, in the case of a

7 medical savings account (within the meaning of section

8 222(d)), the term ‘excess contributions’ means the sum of—

9 ‘‘(1) the amount by which the amount contrib10 uted for the taxable year to the account exceeds the

11 amount which may be contributed to the account

12 under section 222(d)(1)(B)(ii) for such taxable year,

13 and

14 ‘‘(2) the amount determined under this sub15 section for the preceding taxable year, reduced by the

16 sum of distributions out of the account included in

17 gross income under section 222(f) (2) or (3) and the

18 excess (if any) of the maximum amount allowable as

19 a deduction under section 222 for the taxable year

20 over the amount contributed.

21 For purposes of this subsection, any contribution which is

22 distributed out of the medical savings account in a distribu23 tion to which section 222(f)(3) applies shall be treated as

24 an amount not contributed.’’

25 (g) TAX ON PROHIBITED TRANSACTIONS.—
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1 (1) Section 4975 (relating to tax on prohibited

2 transactions) is amended by adding at the end of sub3 section (c) the following new paragraph:

4 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC5 COUNTS.—An individual for whose benefit a medical

6 savings account (within the meaning of section

7 222(d)) is established shall be exempt from the tax

8 imposed by this section with respect to any trans9 action concerning such account (which would other10 wise be taxable under this section) if, with respect to

11 such transaction, the account ceases to be a medical

12 savings account by reason of the application of sec13 tion 222(e)(2) to such account.’’

14 (2) Paragraph (1) of section 4975(e) is amended

15 to read as follows:

16 ‘‘(1) PLAN.—For purposes of this section, the

17 term ‘plan’ means—

18 ‘‘(A) a trust described in section 401(a)

19 which forms a part of a plan, or a plan de20 scribed in section 403(a), which trust or plan is

21 exempt from tax under section 501(a),

22 ‘‘(B) an individual retirement account de23 scribed in section 408(a),

24 ‘‘(C) an individual retirement annuity de25 scribed in section 408(b),
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1 ‘‘(D) a medical savings account described in

2 section 220(d), or

3 ‘‘(E) a trust, plan, account, or annuity

4 which, at any time, has been determined by the

5 Secretary to be described in any preceding sub6 paragraph of this paragraph.’’

7 (h) FAILURE TO PROVIDE REPORTS ON

8 MEDICAREPLUS MSA’S.—

9 (1) Subsection (a) of section 6693 (relating to

10 failure to provide reports on individual retirement

11 accounts or annuities) is amended to read as follows:

12 ‘‘(a) REPORTS.—

13 ‘‘(1) IN GENERAL.—If a person required to file

14 a report under a provision referred to in paragraph

15 (2) fails to file such report at the time and in the

16 manner required by such provision, such person shall

17 pay a penalty of $50 for each failure unless it is

18 shown that such failure is due to reasonable cause.

19 ‘‘(2) PROVISIONS.—The provisions referred to in

20 this paragraph are—

21 ‘‘(A) subsections (i) and (l) of section 408

22 (relating to individual retirement plans), and

23 ‘‘(B) section 222(h) (relating to medical

24 savings accounts).’’
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1 (i) EXCEPTION FROM CAPITALIZATION OF POLICY AC2 QUISITION EXPENSES.—Subparagraph (B) of section

3 848(e)(1) (defining specified insurance contract) is amend4 ed by striking ‘‘and’’ at the end of clause (ii), by striking

5 the period at the end of clause (iii) and inserting ‘‘, and’’,

6 and by adding at the end the following new clause:

7 ‘‘(iv) any contract which is a medical

8 savings account (as defined in section

9 222(d)).’’.

10 (j) CLERICAL AMENDMENT.—The table of sections for

11 part VII of subchapter B of chapter 1 is amended by strik12 ing the last item and inserting the following:

‘‘Sec. 222. Medical savings accounts.

‘‘Sec. 223. Cross reference.’’

13 (k) EFFECTIVE DATE.—The amendments made by this

14 section shall apply to taxable years beginning after Decem15 ber 31, 1995.

16 CHAPTER 3—INCREASE IN DEDUCTION

17 FOR HEALTH INSURANCE COSTS OF

18 SELF-EMPLOYED INDIVIDUALS

19 SEC. 11068. INCREASE IN DEDUCTION FOR HEALTH INSUR20 ANCE COSTS OF SELF-EMPLOYED INDIVID21 UALS.

22 (a) IN GENERAL.—Paragraph (1) of section 162(l) is

23 amended to read as follows:

24 ‘‘(1) ALLOWANCE OF DEDUCTION.—
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1 ‘‘(A) IN GENERAL.—In the case of an indi2 vidual who is an employee within the meaning

3 of section 401(c)(1), there shall be allowed as a

4 deduction under this section an amount equal to

5 the applicable percentage of the amount paid

6 during the taxable year for insurance which con7 stitutes medical care for the taxpayer, his spouse,

8 and dependents.

9 ‘‘(B) APPLICABLE PERCENTAGE.—For pur10 poses of subparagraph (A), the applicable per11 centage shall be determined under the following

12 table:

The applicable

‘‘For taxable years beginning in

calendar year—

percentage is—

1996 or 1997 .................................................................................. 30

1998 or 1999 .................................................................................. 35

2000 or 2001 .................................................................................. 40

2002 or thereafter .......................................................................... 50.’’

13 (b) EFFECTIVE DATE.—The amendment made by this

14 section shall apply to taxable years beginning after Decem15 ber 31, 1995.

16 Subtitle D—Estate and Gift

17 Provisions

18 SEC. 11071. COST-OF-LIVING ADJUSTMENTS RELATING TO

19 ESTATE AND GIFT TAX PROVISIONS.

20 (a) INCREASE IN UNIFIED ESTATE AND GIFT TAX

21 CREDIT.—

22 (1) ESTATE TAX CREDIT.—
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1 (A) Subsection (a) of section 2010 (relating

2 to unified credit against estate tax) is amended

3 by striking ‘‘$192,800’’ and inserting ‘‘the appli4 cable credit amount’’.

5 (B) Section 2010 is amended by redesignat6 ing subsection (c) as subsection (d) and by in7 serting after subsection (b) the following new

8 subsection:

9 ‘‘(c) APPLICABLE CREDIT AMOUNT.—For purposes of

10 this section—

11 ‘‘(1) IN GENERAL.—The applicable credit

12 amount is the amount of the tentative tax which

13 would be determined under the rate schedule set forth

14 in section 2001(c) if the amount with respect to which

15 such tentative tax is to be computed were the applica16 ble exclusion amount determined in accordance with

17 the following table:

‘‘In the case of estates of decedents The applicable exclusion

dying, and gifts made, during: amount is:

1996 ............................................................................ $625,000

1997 ............................................................................ $650,000

1998 ............................................................................ $675,000

1999 ............................................................................ $700,000

2000 ............................................................................ $725,000

2001 or thereafter ....................................................... $750,000.

18 ‘‘(2) COST-OF-LIVING ADJUSTMENTS.—In the

19 case of any decedent dying, and gift made, in a cal20 endar year after 2001, the $750,000 amount set forth
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1 in paragraph (1) shall be increased by an amount

2 equal to—

3 ‘‘(A) $750,000, multiplied by

4 ‘‘(B) the cost-of-living adjustment deter5 mined under section 1(f)(3) for such calendar

6 year by substituting ‘calendar year 2000’ for

7 ‘calendar year 1992’ in subparagraph (B) there8 of.

9 If any amount as adjusted under the preceding sen10 tence is not a multiple of $10,000, such amount shall

11 be rounded to the nearest multiple of $10,000.’’

12 (C) Paragraph (1) of section 6018(a) is

13 amended by striking ‘‘$600,000’’ and inserting

14 ‘‘the applicable exclusion amount in effect under

15 section 2010(c) (as adjusted under paragraph (2)

16 thereof) for the calendar year which includes the

17 date of death’’.

18 (D) Paragraph (2) of section 2001(c) is

19 amended by striking ‘‘$21,040,000’’ and insert20 ing ‘‘the amount at which the average tax rate

21 under this section is 55 percent’’.

22 (E) Subparagraph (A) of section 2102(c)(3)

23 is amended by striking ‘‘$192,800’’ and inserting

24 ‘‘the applicable credit amount in effect under sec-
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1 tion 2010(c) for the calendar year which includes

2 the date of death’’.

3 (2) UNIFIED GIFT TAX CREDIT.—Paragraph (1)

4 of section 2505(a) is amended by striking ‘‘$192,800’’

5 and inserting ‘‘the applicable credit amount in effect

6 under section 2010(c) for such calendar year’’.

7 (3) EFFECTIVE DATE.—The amendments made

8 by this subsection shall apply to the estates of dece9 dents dying, and gifts made, after December 31, 1995.

10 (b) ALTERNATE VALUATION OF CERTAIN FARM, ETC.,

11 REAL PROPERTY.—Subsection (a) of section 2032A is

12 amended by adding at the end the following new paragraph:

13 ‘‘(3) INFLATION ADJUSTMENT.—In the case of es14 tates of decedents dying in a calendar year after

15 2000, the $750,000 amount contained in paragraph

16 (2) shall be increased by an amount equal to—

17 ‘‘(A) $750,000, multiplied by

18 ‘‘(B) the cost-of-living adjustment deter19 mined under section 1(f)(3) for such calendar

20 year by substituting ‘calendar year 1999’ for

21 ‘calendar year 1992’ in subparagraph (B) there22 of.

23 If any amount as adjusted under the preceding sen24 tence is not a multiple of $10,000, such amount shall

25 be rounded to the nearest multiple of $10,000.’’
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1 (c) ANNUAL GIFT TAX EXCLUSION.—Subsection (b) of

2 section 2503 is amended—

3 (1) by striking the subsection heading and in4 serting the following:

5 ‘‘(b) EXCLUSIONS FROM GIFTS.—

6 ‘‘(1) IN GENERAL.—’’,

7 (2) by moving the text 2 ems to the right, and

8 (3) by adding at the end the following new para9 graph:

10 ‘‘(2) INFLATION ADJUSTMENT.—In the case of

11 gifts made in a calendar year after 2000, the $10,000

12 amount contained in paragraph (1) shall be increased

13 by an amount equal to—

14 ‘‘(A) $10,000, multiplied by

15 ‘‘(B) the cost-of-living adjustment deter16 mined under section 1(f)(3) for such calendar

17 year by substituting ‘calendar year 1999’ for

18 ‘calendar year 1992’ in subparagraph (B) there19 of.

20 If any amount as adjusted under the preceding sen21 tence is not a multiple of $1,000, such amount shall

22 be rounded to the nearest multiple of $1,000.’’

23 (d) EXEMPTION FROM GENERATION-SKIPPING TAX.—

24 Section 2631 (relating to GST exemption) is amended by

25 adding at the end the following new subsection:
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1 ‘‘(c) INFLATION ADJUSTMENT.—In the case of an indi2 vidual who dies in any calendar year after 2000, the

3 $1,000,000 amount contained in subsection (a) shall be in4 creased by an amount equal to—

5 ‘‘(1) $1,000,000, multiplied by

6 ‘‘(2) the cost-of-living adjustment determined

7 under section 1(f)(3) for such calendar year by sub8 stituting ‘calendar year 1999’ for ‘calendar year

9 1992’ in subparagraph (B) thereof.

10 If any amount as adjusted under the preceding sentence is

11 not a multiple of $10,000, such amount shall be rounded

12 to the nearest multiple of $10,000.’’

13 (e) AMOUNT OF TAX ELIGIBLE FOR 4 PERCENT IN14 TEREST RATE ON EXTENSION OF TIME FOR PAYMENT OF

15 ESTATE TAX ON CLOSELY HELD BUSINESS.—

16 (1) Subparagraph (A) of section 6601(j)(2) is

17 amended by striking ‘‘$345,800’’ and inserting ‘‘the

18 applicable limitation amount’’.

19 (2) Subsection (j) of section 6601 is amended by

20 redesignating paragraph (3) as paragraph (4) and by

21 inserting after paragraph (2) the following new para22 graph:

23 ‘‘(3) APPLICABLE LIMITATION AMOUNT.—

24 ‘‘(A) IN GENERAL.—For purposes of para25 graph (2), the applicable limitation amount is
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1 the amount of the tentative tax which would be

2 determined under the rate schedule set forth in

3 section 2001(c) if the amount with respect to

4 which such tentative tax is to be computed were

5 $1,000,000.

6 ‘‘(B) INFLATION ADJUSTMENT.—In the case

7 of estates of decedents dying in a calendar year

8 after 2000, the $1,000,000 amount contained in

9 subparagraph (A) shall be increased by an

10 amount equal to—

11 ‘‘(i) $1,000,000, multiplied by

12 ‘‘(ii) the cost-of-living adjustment de13 termined under section 1(f)(3) for such cal14 endar year by substituting ‘calendar year

15 1999’ for ‘calendar year 1992’ in subpara16 graph (B) thereof.

17 If any amount as adjusted under the preceding

18 sentence is not a multiple of $10,000, such

19 amount shall be rounded to the nearest multiple

20 of $10,000.’’

21 SEC. 11072. FAMILY-OWNED BUSINESS EXCLUSION.

22 (a) IN GENERAL.—Part III of subchapter A of chapter

23 11 (relating to gross estate) is amended by inserting after

24 section 2033 the following new section:
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1 ‘‘SEC. 2033A. FAMILY-OWNED BUSINESS EXCLUSION.

2 ‘‘(a) IN GENERAL.—In the case of an estate of a dece3 dent to which this section applies, the value of the gross

4 estate shall not include the lesser of—

5 ‘‘(1) the adjusted value of the qualified family6 owned business interests of the decedent otherwise in7 cludible in the estate, or

8 ‘‘(2) the sum of—

9 ‘‘(A) $1,000,000, plus

10 ‘‘(B) 50 percent of the excess (if any) of the

11 adjusted value of such interests over $1,000,000,

12 but not over $2,500,000.

13 ‘‘(b) ESTATES TO WHICH SECTION APPLIES.—

14 ‘‘(1) IN GENERAL.—This section shall apply to

15 an estate if—

16 ‘‘(A) the decedent was (at the date of the de17 cedent’s death) a citizen or resident of the United

18 States,

19 ‘‘(B) the sum of—

20 ‘‘(i) the adjusted value of the qualified

21 family-owned business interests described in

22 paragraph (2), plus

23 ‘‘(ii) the amount of the gifts of such in24 terests determined under paragraph (3),

25 exceeds 50 percent of the adjusted gross estate,

26 and
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1 ‘‘(C) during the 8-year period ending on the

2 date of the decedent’s death there have been peri3 ods aggregating 5 years or more during which—

4 ‘‘(i) such interests were owned by the

5 decedent or a member of the decedent’s fam6 ily, and

7 ‘‘(ii) there was material participation

8 (within the meaning of section 2032A(e)(6))

9 by the decedent or a member of the dece10 dent’s family in the operation of the busi11 ness to which such interests relate.

12 ‘‘(2) INCLUDIBLE QUALIFIED FAMILY-OWNED

13 BUSINESS INTERESTS.—The qualified family-owned

14 business interests described in this paragraph are the

15 interests which—

16 ‘‘(A) are included in determining the value

17 of the gross estate (without regard to this sec18 tion), and

19 ‘‘(B) are acquired by any qualified heir

20 from, or passed to any qualified heir from, the

21 decedent (within the meaning of section

22 2032A(e)(9)).

23 ‘‘(3) INCLUDIBLE GIFTS OF INTERESTS.—The

24 amount of the gifts of qualified family-owned business
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1 interests determined under this paragraph is the ex2 cess of—

3 ‘‘(A) the sum of—

4 ‘‘(i) the amount of such gifts from the

5 decedent to members of the decedent’s family

6 taken into account under subsection

7 2001(b)(1)(B), plus

8 ‘‘(ii) the amount of such gifts otherwise

9 excluded under section 2503(b),

10 to the extent such interests are continuously held

11 by members of such family (other than the dece12 dent’s spouse) between the date of the gift and the

13 date of the decedent’s death, over

14 ‘‘(B) the amount of such gifts from the dece15 dent to members of the decedent’s family other16 wise included in the gross estate.

17 ‘‘(c) ADJUSTED GROSS ESTATE.—For purposes of this

18 section, the term ‘adjusted gross estate’ means the value of

19 the gross estate (determined without regard to this sec20 tion)—

21 ‘‘(1) reduced by any amount deductible under

22 paragraph (3) or (4) of section 2053(a), and

23 ‘‘(2) increased by the excess of—

24 ‘‘(A) the sum of—
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1 ‘‘(i) the amount of gifts determined

2 under subsection (b)(3), plus

3 ‘‘(ii) the amount (if more than de

4 minimis) of other transfers from the dece5 dent to the decedent’s spouse (at the time of

6 the transfer) within 10 years of the date of

7 the decedent’s death, plus

8 ‘‘(iii) the amount of other gifts (not in9 cluded under clause (i) or (ii)) from the de10 cedent within 3 years of such date, other

11 than gifts to members of the decedent’s fam12 ily otherwise excluded under section

13 2503(b), over

14 ‘‘(B) the sum of the amounts described in

15 clauses (i), (ii), and (iii) of subparagraph (A)

16 which are otherwise includible in the gross estate.

17 For purposes of the preceding sentence, the Secretary may

18 provide that de minimis gifts to persons other than members

19 of the decedent’s family shall not be taken into account.

20 ‘‘(d) ADJUSTED VALUE OF THE QUALIFIED FAMILY21 OWNED BUSINESS INTERESTS.—For purposes of this sec22 tion, the adjusted value of any qualified family-owned busi23 ness interest is the value of such interest for purposes of

24 this chapter (determined without regard to this section), re25 duced by the excess of—
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1 ‘‘(1) any amount deductible under paragraph (3)

2 or (4) of section 2053(a), over

3 ‘‘(2) the sum of—

4 ‘‘(A) any indebtedness on any qualified res5 idence of the decedent the interest on which is de6 ductible under section 163(h)(3), plus

7 ‘‘(B) any indebtedness to the extent the tax8 payer establishes that the proceeds of such in9 debtedness were used for the payment of edu10 cational and medical expenses of the decedent,

11 the decedent’s spouse, or the decedent’s depend12 ents (within the meaning of section 152), plus

13 ‘‘(C) any indebtedness not described in

14 clause (i) or (ii), to the extent such indebtedness

15 does not exceed $10,000.

16 ‘‘(e) QUALIFIED FAMILY-OWNED BUSINESS INTER17 EST.—

18 ‘‘(1) IN GENERAL.—For purposes of this section,

19 the term ‘qualified family-owned business interest’

20 means—

21 ‘‘(A) an interest as a proprietor in a trade

22 or business carried on as a proprietorship, or

23 ‘‘(B) an interest in an entity carrying on

24 a trade or business, if—

25 ‘‘(i) at least—
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1 ‘‘(I) 50 percent of such entity is

2 owned (directly or indirectly) by the

3 decedent and members of the decedent’s

4 family,

5 ‘‘(II) 70 percent of such entity is

6 so owned by members of 2 families, or

7 ‘‘(III) 90 percent of such entity is

8 so owned by members of 3 families,

9 and

10 ‘‘(ii) for purposes of subclause (II) or

11 (III) of clause (i), at least 30 percent of

12 such entity is so owned by the decedent and

13 members of the decedent’s family.

14 ‘‘(2) LIMITATION.—Such term shall not in15 clude—

16 ‘‘(A) any interest in a trade or business the

17 principal place of business of which is not lo18 cated in the United States,

19 ‘‘(B) any interest in an entity, if the stock

20 or debt of such entity or a controlled group (as

21 defined in section 267(f)(1)) of which such entity

22 was a member was readily tradable on an estab23 lished securities market or secondary market (as

24 defined by the Secretary) at any time within 3

25 years of the date of the decedent’s death,
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1 ‘‘(C) any interest in a trade or business not

2 described in section 542(c)(2), if more than 35

3 percent of the adjusted ordinary gross income of

4 such trade or business for the taxable year which

5 includes the date of the decedent’s death would

6 qualify as personal holding company income (as

7 defined in section 543(a)),

8 ‘‘(D) that portion of an interest in a trade

9 or business that is attributable to—

10 ‘‘(i) cash or marketable securities, or

11 both, in excess of the reasonably expected

12 day-to-day working capital needs of such

13 trade or business, and

14 ‘‘(ii) any other assets of the trade or

15 business (other than assets used in the ac16 tive conduct of a trade or business described

17 in section 542(c)(2)), the income of which is

18 described in section 543(a) or in subpara19 graph (B), (C), (D), or (E) of section

20 954(c)(1) (determined by substituting ‘trade

21 or business’ for ‘controlled foreign corpora22 tion’).

23 ‘‘(3) RULES REGARDING OWNERSHIP.—

24 ‘‘(A) OWNERSHIP OF ENTITIES.—For pur25 poses of paragraph (1)(B)—
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1 ‘‘(i) CORPORATIONS.—Ownership of a

2 corporation shall be determined by the hold3 ing of stock possessing the appropriate per4 centage of the total combined voting power

5 of all classes of stock entitled to vote and the

6 appropriate percentage of the total value of

7 shares of all classes of stock.

8 ‘‘(ii) PARTNERSHIPS.—Ownership of a

9 partnership shall be determined by the own10 ing of the appropriate percentage of the

11 capital interest in such partnership.

12 ‘‘(B) OWNERSHIP OF TIERED ENTITIES.—

13 For purposes of this section, if by reason of hold14 ing an interest in a trade or business, a dece15 dent, any member of the decedent’s family, any

16 qualified heir, or any member of any qualified

17 heir’s family is treated as holding an interest in

18 any other trade or business—

19 ‘‘(i) such ownership interest in the

20 other trade or business shall be disregarded

21 in determining if the ownership interest in

22 the first trade or business is a qualified

23 family-owned business interest, and

24 ‘‘(ii) this section shall be applied sepa25 rately in determining if such interest in
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1 any other trade or business is a qualified

2 family-owned business interest.

3 ‘‘(C) INDIVIDUAL OWNERSHIP RULES.—For

4 purposes of this section, an interest owned, di5 rectly or indirectly, by or for an entity described

6 in paragraph (1)(B) shall be considered as being

7 owned proportionately by or for the entity’s

8 shareholders, partners, or beneficiaries. A person

9 shall be treated as a beneficiary of any trust

10 only if such person has a present interest in such

11 trust.

12 ‘‘(f) TAX TREATMENT OF FAILURE TO MATERIALLY

13 PARTICIPATE IN BUSINESS OR DISPOSITIONS OF INTER14 ESTS.—

15 ‘‘(1) IN GENERAL.—There is imposed an addi16 tional estate tax if, within 10 years after the date of

17 the decedent’s death and before the date of the quali18 fied heir’s death—

19 ‘‘(A) the material participation require20 ments described in section 2032A(c)(6)(B) are

21 not met with respect to the qualified family22 owned business interest which was acquired (or

23 passed) from the decedent,

24 ‘‘(B) the qualified heir disposes of any por25 tion of a qualified family-owned business interest
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1 (other than by a disposition to a member of the

2 qualified heir’s family or through a qualified

3 conservation contribution under section 170(h)),

4 ‘‘(C) the qualified heir loses United States

5 citizenship (within the meaning of section 877)

6 or with respect to whom an event described in

7 subparagraph (A) or (B) of section 877(e)(1) oc8 curs, and such heir does not comply with the re9 quirements of subsection (g), or

10 ‘‘(D) the principal place of business of a

11 trade or business of the qualified family-owned

12 business interest ceases to be located in the Unit13 ed States.

14 ‘‘(2) ADDITIONAL ESTATE TAX.—

15 ‘‘(A) IN GENERAL.—The amount of the ad16 ditional estate tax imposed by paragraph (1)

17 shall be equal to—

18 ‘‘(i) the applicable percentage of the

19 adjusted tax difference attributable to the

20 qualified family-owned business interest (as

21 determined under rules similar to the rules

22 of section 2032A(c)(2)(B)), plus

23 ‘‘(ii) interest on the amount deter24 mined under clause (i) at the

25 underpayment rate established under sec-
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1 tion 6621 for the period beginning on the

2 date the estate tax liability was due under

3 this chapter and ending on the date such

4 additional estate tax is due.

5 ‘‘(B) APPLICABLE PERCENTAGE.—For pur6 poses of this paragraph, the applicable percent7 age shall be determined under the following table:

‘‘If the event described in paragraph

(1) occurs in the following year

of

The applicable

material participation: percentage is:

1 through 6 ..................................................................................... 100

7 ...................................................................................................... 80

8 ...................................................................................................... 60

9 ...................................................................................................... 40

10 .................................................................................................... 20.

8 ‘‘(g) SECURITY REQUIREMENTS FOR NONCITIZEN

9 QUALIFIED HEIRS.—

10 ‘‘(1) IN GENERAL.—Except upon the application

11 of subparagraph (F) or (M) of subsection (h)(3), if a

12 qualified heir is not a citizen of the United States,

13 any interest under this section passing to or acquired

14 by such heir (including any interest held by such heir

15 at a time described in subsection (f)(1)(C)) shall be

16 treated as a qualified family-owned business interest

17 only if the interest passes or is acquired (or is held)

18 in a qualified trust.

19 ‘‘(2) QUALIFIED TRUST.—The term ‘qualified

20 trust’ means a trust—
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1 ‘‘(A) which is organized under, and gov2 erned by, the laws of the United States or a

3 State, and

4 ‘‘(B) except as otherwise provided in regula5 tions, with respect to which the trust instrument

6 requires that at least 1 trustee of the trust be an

7 individual citizen of the United States or a do8 mestic corporation.

9 ‘‘(h) OTHER DEFINITIONS AND APPLICABLE RULES.—

10 For purposes of this section—

11 ‘‘(1) QUALIFIED HEIR.—The term ‘qualified

12 heir’—

13 ‘‘(A) has the meaning given to such term by

14 section 2032A(e)(1), and

15 ‘‘(B) includes any active employee of the

16 trade or business to which the qualified family17 owned business interest relates if such employee

18 has been employed by such trade or business for

19 a period of at least 10 years before the date of

20 the decedent’s death.

21 ‘‘(2) MEMBER OF THE FAMILY.—The term ‘mem22 ber of the family’ has the meaning given to such term

23 by section 2032A(e)(2).

24 ‘‘(3) APPLICABLE RULES.—Rules similar to the

25 following rules shall apply:
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1 ‘‘(A) Section 2032A(b)(4) (relating to dece2 dents who are retired or disabled).

3 ‘‘(B) Section 2032A(b)(5) (relating to spe4 cial rules for surviving spouses).

5 ‘‘(C) Section 2032A(c)(2)(D) (relating to

6 partial dispositions).

7 ‘‘(D) Section 2032A(c)(3) (relating to only

8 1 additional tax imposed with respect to any 1

9 portion).

10 ‘‘(E) Section 2032A(c)(4) (relating to due

11 date).

12 ‘‘(F) Section 2032A(c)(5) (relating to liabil13 ity for tax; furnishing of bond).

14 ‘‘(G) Section 2032A(c)(7) (relating to no

15 tax if use begins within 2 years; active manage16 ment by eligible qualified heir treated as mate17 rial participation).

18 ‘‘(H) Section 2032A(e)(10) (relating to com19 munity property).

20 ‘‘(I) Section 2032A(e)(14) (relating to treat21 ment of replacement property acquired in section

22 1031 or 1033 transactions).

23 ‘‘(J) Section 2032A(f) (relating to statute of

24 limitations).
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1 ‘‘(K) Section 6166(b)(3) (relating to farm2 houses and certain other structures taken into

3 account).

4 ‘‘(L) Subparagraphs (B), (C), and (D) of

5 section 6166(g)(1) (relating to acceleration of

6 payment).

7 ‘‘(M) Section 6324B (relating to special lien

8 for additional estate tax).

9 ‘‘(4) COORDINATION WITH OTHER ESTATE TAX

10 BENEFITS.—If there is a reduction in the value of the

11 gross estate under this section—

12 ‘‘(A) the dollar limitation applicable under

13 section 2032A(a)(2), and

14 ‘‘(B) the $1,000,000 amount under section

15 6601(j)(3) (as adjusted),

16 shall each be reduced (but not below zero) by the

17 amount of such reduction.’’.

18 (b) CLERICAL AMENDMENT.—The table of sections for

19 part III of subchapter A of chapter 11 is amended by insert20 ing after the item relating to section 2033 the following new

21 item:

‘‘Sec. 2033A. Family-owned business exclusion.’’.

22 (c) EFFECTIVE DATE.—The amendments made by this

23 section shall apply to estates of decedents dying after De24 cember 31, 1995.
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1 SEC. 11073. TREATMENT OF LAND SUBJECT TO A QUALI2 FIED CONSERVATION EASEMENT.

3 (a) ESTATE TAX WITH RESPECT TO LAND SUBJECT

4 TO A QUALIFIED CONSERVATION EASEMENT.—Section 2031

5 (relating to the definition of gross estate) is amended by

6 redesignating subsection (c) as subsection (d) and by insert7 ing after subsection (b) the following new subsection:

8 ‘‘(c) ESTATE TAX WITH RESPECT TO LAND SUBJECT

9 TO A QUALIFIED CONSERVATION EASEMENT.—

10 ‘‘(1) IN GENERAL.—If the executor makes the

11 election described in paragraph (4), then, except as

12 otherwise provided in this subsection, there shall be

13 excluded from the gross estate the applicable percent14 age of the lesser of—

15 ‘‘(A) the value of land subject to a qualified

16 conservation easement, reduced by the amount of

17 any deduction under section 2055(f) with respect

18 to such land, or

19 ‘‘(B) the excess (if any) of $5,000,000 over

20 the lesser of—

21 ‘‘(i) $2,500,000, or

22 ‘‘(ii) the adjusted value of the qualified

23 family-owned business interests of the dece24 dent determined under section 2033A.

25 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

26 of paragraph (1), the term ‘applicable percentage’
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1 means 40 percent reduced (but not below zero) by 2

2 percentage points for each percentage point (or frac3 tion thereof) by which the value of the qualified con4 servation easement is less than 30 percent of the value

5 of the land (determined without regard to the value

6 of such easement and reduced by the value of any re7 tained development right (as defined in paragraph

8 (4)).

9 ‘‘(3) TREATMENT OF CERTAIN INDEBTEDNESS.—

10 ‘‘(A) IN GENERAL.—The exclusion provided

11 in paragraph (1) shall not apply to the extent

12 that the land is debt-financed property.

13 ‘‘(B) DEFINITIONS.—For purposes of this

14 paragraph—

15 ‘‘(i) DEBT-FINANCED PROPERTY.—The

16 term ‘debt-financed property’ means any

17 property with respect to which there is an

18 acquisition indebtedness (as defined in

19 clause (ii)) on the date of the decedent’s

20 death.

21 ‘‘(ii) ACQUISITION INDEBTEDNESS.—

22 The term ‘acquisition indebtedness’ means,

23 with respect to debt-financed property, the

24 unpaid amount of—
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1 ‘‘(I) the indebtedness incurred by

2 the donor in acquiring such property,

3 ‘‘(II) the indebtedness incurred be4 fore the acquisition of such property if

5 such indebtedness would not have been

6 incurred but for such acquisition,

7 ‘‘(III) the indebtedness incurred

8 after the acquisition of such property if

9 such indebtedness would not have been

10 incurred but for such acquisition and

11 the incurrence of such indebtedness was

12 reasonably foreseeable at the time of

13 such acquisition, and

14 ‘‘(IV) the extension, renewal, or

15 refinancing of an acquisition indebted16 ness.

17 ‘‘(4) TREATMENT OF RETAINED DEVELOPMENT

18 RIGHT.—

19 ‘‘(A) IN GENERAL.—Paragraph (1) shall

20 not apply to the value of any development right

21 retained by the donor in the conveyance of a

22 qualified conservation easement.

23 ‘‘(B) TERMINATION OF RETAINED DEVELOP24 MENT RIGHT.—If every person in being who has

25 an interest (whether or not in possession) in the
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1 land executes an agreement to extinguish perma2 nently some or all of any development rights (as

3 defined in subparagraph (D)) retained by the

4 donor on or before the date for filing the return

5 of the tax imposed by section 2001, then any tax

6 imposed by section 2001 shall be reduced accord7 ingly. Such agreement shall be filed with the re8 turn of the tax imposed by section 2001. The

9 agreement shall be in such form as the Secretary

10 shall prescribe.

11 ‘‘(C) ADDITIONAL TAX.—Any failure to im12 plement the agreement described in subpara13 graph (B) not later than the earlier of—

14 ‘‘(i) the date which is 2 years after the

15 date of the decedent’s death, or

16 ‘‘(ii) the date of the sale of such land

17 subject to the qualified conservation ease18 ment,

19 shall result in the imposition of an additional

20 tax in the amount of the tax which would have

21 been due on the retained development rights sub22 ject to such agreement. Such additional tax shall

23 be due and payable on the last day of the 6th

24 month following such date.
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1 ‘‘(D) DEVELOPMENT RIGHT DEFINED.—For

2 purposes of this paragraph, the term ‘develop3 ment right’ means any right to use the land sub4 ject to the qualified conservation easement in

5 which such right is retained for any commercial

6 purpose which is not subordinate to and directly

7 supportive of the use of such land as a farm for

8 farming purposes (within the meaning of section

9 6420(c)).

10 ‘‘(4) ELECTION.—The election under this sub11 section shall be made on the return of the tax imposed

12 by section 2001. Such an election, once made, shall be

13 irrevocable.

14 ‘‘(5) CALCULATION OF ESTATE TAX DUE.—An

15 executor making the election described in paragraph

16 (4) shall, for purposes of calculating the amount of

17 tax imposed by section 2001, include the value of any

18 development right (as defined in paragraph (3)) re19 tained by the donor in the conveyance of such quali20 fied conservation easement. The computation of tax

21 on any retained development right prescribed in this

22 paragraph shall be done in such manner and on such

23 forms as the Secretary shall prescribe.

24 ‘‘(6) DEFINITIONS.—For purposes of this sub25 section—
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1 ‘‘(A) LAND SUBJECT TO A QUALIFIED CON2 SERVATION EASEMENT.—The term ‘land subject

3 to a qualified conservation easement’ means

4 land—

5 ‘‘(i) which is located—

6 ‘‘(I) in or within 25 miles of an

7 area which, on the date of the dece8 dent’s death, is a metropolitan area (as

9 defined by the Office of Management

10 and Budget),

11 ‘‘(II) in or within 25 miles of an

12 area which, on the date of the dece13 dent’s death, is a national park or wil14 derness area designated as part of the

15 National Wilderness Preservation Sys16 tem (unless it is determined by the

17 Secretary that land in or within 25

18 miles of such a park or wilderness area

19 is not under significant development

20 pressure), or

21 ‘‘(III) in or within 10 miles of an

22 area which, on the date of the dece23 dent’s death, is an Urban National

24 Forest (as designated by the Forest

25 Service),
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1 ‘‘(ii) which was owned by the decedent

2 or a member of the decedent’s family at all

3 times during the 3-year period ending on

4 the date of the decedent’s death, and

5 ‘‘(iii) with respect to which a qualified

6 conservation easement has been made by the

7 decedent or a member of the decedent’s fam8 ily.

9 ‘‘(B) QUALIFIED CONSERVATION EASE10 MENT.—The term ‘qualified conservation ease11 ment’ means a qualified conservation contribu12 tion (as defined in section 170(h)(1)) of a quali13 fied real property interest (as defined in section

14 170(h)(2)(C)), except that clause (iv) of section

15 170(h)(4)(A) shall not apply, and the restriction

16 on the use of such interest described in section

17 170(h)(2)(C) shall include a prohibition on com18 mercial recreational activity.

19 ‘‘(C) MEMBER OF FAMILY.—The term ‘mem20 ber of the decedent’s family’ means any member

21 of the family (as defined in section 2032A(e)(2))

22 of the decedent.

23 ‘‘(7) APPLICATION OF THIS SECTION TO INTER24 ESTS IN PARTNERSHIPS, CORPORATIONS, AND

25 TRUSTS.—This section shall apply to an interest in
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1 a partnership, corporation, or trust if at least 30 per2 cent of the entity is owned (directly or indirectly) by

3 the decedent, as determined under the rules described

4 in section 2033A(e)(3).’’.

5 (b) CARRYOVER BASIS.—Section 1014(a) (relating to

6 basis of property acquired from a decedent) is amended by

7 striking the period at the end of paragraph (3) and insert8 ing ‘‘, or’’ and by adding after paragraph (3) the following

9 new paragraph:

10 ‘‘(4) to the extent of the applicability of the ex11 clusion described in section 2031(c), the basis in the

12 hands of the decedent.’’.

13 (c) QUALIFIED CONSERVATION CONTRIBUTION IS NOT

14 A DISPOSITION.—Subsection (c) of section 2032A (relating

15 to alternative valuation method) is amended by adding at

16 the end the following new paragraph:

17 ‘‘(8) QUALIFIED CONSERVATION CONTRIBUTION

18 IS NOT A DISPOSITION.—A qualified conservation con19 tribution (as defined in section 170(h)) by gift or oth20 erwise shall not be deemed a disposition under sub21 section (c)(1)(A).’’.

22 (d) EFFECTIVE DATE.—The amendments made by this

23 section shall apply to estates of decedents dying after De24 cember 31, 1995.
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1 SEC. 11074. EXPANSION OF EXCEPTION FROM GENERATION2 SKIPPING TRANSFER TAX FOR TRANSFERS TO

3 INDIVIDUALS WITH DECEASED PARENTS.

4 (a) IN GENERAL.—Section 2651 (relating to genera5 tion assignment) is amended by redesignating subsection (e)

6 as subsection (f), and by inserting after subsection (d) the

7 following new subsection:

8 ‘‘(e) SPECIAL RULE FOR PERSONS WITH A DECEASED

9 PARENT.—

10 ‘‘(1) IN GENERAL.—For purposes of determining

11 whether any transfer is a generation-skipping trans12 fer, if—

13 ‘‘(A) an individual is a descendant of a

14 parent of the transferor (or the transferor’s

15 spouse or former spouse), and

16 ‘‘(B) such individual’s parent who is a lin17 eal descendant of the parent of the transferor (or

18 the transferor’s spouse or former spouse) is dead

19 at the time the transfer (from which an interest

20 of such individual is established or derived) is

21 subject to a tax imposed by chapter 11 or 12

22 upon the transferor (and if there shall be more

23 than 1 such time, then at the earliest such time),

24 such individual shall be treated as if such individual

25 were a member of the generation which is 1 genera26 tion below the lower of the transferor’s generation or
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1 the generation assignment of the youngest living an2 cestor of such individual who is also a descendant of

3 the parent of the transferor (or the transferor’s spouse

4 or former spouse), and the generation assignment of

5 any descendant of such individual shall be adjusted

6 accordingly.

7 ‘‘(2) LIMITED APPLICATION OF SUBSECTION TO

8 COLLATERAL HEIRS.—This subsection shall not apply

9 with respect to a transfer to any individual who is

10 not a lineal descendant of the transferor (or the trans11 feror’s spouse or former spouse) if, at the time of the

12 transfer, such transferor has any living lineal de13 scendant.’’

14 (b) CONFORMING AMENDMENTS.—

15 (1) Section 2612(c) (defining direct skip) is

16 amended by striking paragraph (2) and by redesig17 nating paragraph (3) as paragraph (2).

18 (2) Section 2612(c)(2) (as so redesignated) is

19 amended by striking ‘‘section 2651(e)(2)’’ and insert20 ing ‘‘section 2651(f)(2)’’.

21 (c) EFFECTIVE DATE.—The amendments made by this

22 section shall apply to terminations, distributions, and

23 transfers occurring after December 31, 1994.
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1 SEC. 11075. EXTENSION OF TREATMENT OF CERTAIN RENTS

2 UNDER SECTION 2032A TO LINEAL DESCEND3 ANTS.

4 (a) GENERAL RULE.—Paragraph (7) of section

5 2032A(c) (relating to special rules for tax treatment of dis6 positions and failures to use for qualified use) is amended

7 by adding at the end the following new subparagraph:

8 ‘‘(E) CERTAIN RENTS TREATED AS QUALI9 FIED USE.—For purposes of this subsection, a

10 surviving spouse or lineal descendant of the dece11 dent shall not be treated as failing to use quali12 fied real property in a qualified use solely be13 cause such spouse or descendant rents such prop14 erty to a member of the family of such spouse or

15 descendant on a net cash basis. For purposes of

16 the preceding sentence, a legally adopted child of

17 an individual shall be treated as the child of

18 such individual by blood.’’.

19 (b) CONFORMING AMENDMENT.—Section

20 2032A(b)(5)(A) is amended by striking out the last sentence.

21 (c) EFFECTIVE DATE.—The amendments made by this

22 section shall apply with respect to leases entered into after

23 December 31, 1995.
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1 Subtitle E—Extension of Expiring

2 Provisions

3 CHAPTER 1—TEMPORARY EXTENSIONS

4 SEC. 11111. WORK OPPORTUNITY TAX CREDIT.

5 (a) AMOUNT OF CREDIT.—Subsection (a) of section 51

6 (relating to amount of credit) is amended by striking ‘‘40

7 percent’’ and inserting ‘‘35 percent’’.

8 (b) MEMBERS OF TARGETED GROUPS.—Subsection (d)

9 of section 51 is amended to read as follows:

10 ‘‘(d) MEMBERS OF TARGETED GROUPS.—For purposes

11 of this subpart—

12 ‘‘(1) IN GENERAL.—An individual is a member

13 of a targeted group if such individual is—

14 ‘‘(A) a qualified IV–A recipient,

15 ‘‘(B) a qualified veteran,

16 ‘‘(C) a qualified ex-felon,

17 ‘‘(D) a high-risk youth,

18 ‘‘(E) a vocational rehabilitation referral, or

19 ‘‘(F) a qualified summer youth employee.

20 ‘‘(2) QUALIFIED IV–A RECIPIENT.—

21 ‘‘(A) IN GENERAL.—The term ‘qualified IV–

22 A recipient’ means any individual who is cer23 tified by the designated local agency as being a

24 member of a family receiving assistance under a

25 IV–A program for at least a 9-month period end-
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1 ing during the 9-month period ending on the

2 hiring date.

3 ‘‘(B) IV–A PROGRAM.—For purposes of this

4 paragraph, the term ‘IV–A program’ means any

5 program providing assistance under a State

6 plan approved under part A of title IV of the So7 cial Security Act (relating to assistance for

8 needy families with minor children) and any

9 successor of such program.

10 ‘‘(3) QUALIFIED VETERAN.—

11 ‘‘(A) IN GENERAL.—The term ‘qualified vet12 eran’ means any veteran who is certified by the

13 designated local agency as being—

14 ‘‘(i) a member of a family receiving as15 sistance under a IV–A program (as defined

16 in paragraph (2)(B)) for at least a 9-month

17 period ending during the 12-month period

18 ending on the hiring date, or

19 ‘‘(ii) a member of a family receiving

20 assistance under a food stamp program

21 under the Food Stamp Act of 1977 for at

22 least a 3-month period ending during the

23 12-month period ending on the hiring date.

24 ‘‘(B) VETERAN.—For purposes of subpara25 graph (A), the term ‘veteran’ means any individ-
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1 ual who is certified by the designated local agen2 cy as—

3 ‘‘(i)(I) having served on active duty

4 (other than active duty for training) in the

5 Armed Forces of the United States for a pe6 riod of more than 180 days, or

7 ‘‘(II) having been discharged or re8 leased from active duty in the Armed Forces

9 of the United States for a service-connected

10 disability, and

11 ‘‘(ii) not having any day during the

12 60-day period ending on the hiring date

13 which was a day of extended active duty in

14 the Armed Forces of the United States.

15 For purposes of clause (ii), the term ‘extended

16 active duty’ means a period of more than 90

17 days during which the individual was on active

18 duty (other than active duty for training).

19 ‘‘(4) QUALIFIED EX-FELON.—The term ‘qualified

20 ex-felon’ means any individual who is certified by the

21 designated local agency—

22 ‘‘(A) as having been convicted of a felony

23 under any statute of the United States or any

24 State,
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1 ‘‘(B) as having a hiring date which is not

2 more than 1 year after the last date on which

3 such individual was so convicted or was released

4 from prison, and

5 ‘‘(C) as being a member of a family which

6 had an income during the 6 months immediately

7 preceding the earlier of the month in which such

8 income determination occurs or the month in

9 which the hiring date occurs, which, on an an10 nual basis, would be 70 percent or less of the Bu11 reau of Labor Statistics lower living standard.

12 Any determination under subparagraph (C) shall be

13 valid for the 45-day period beginning on the date

14 such determination is made.

15 ‘‘(5) HIGH-RISK YOUTH.—

16 ‘‘(A) IN GENERAL.—The term ‘high-risk

17 youth’ means any individual who is certified by

18 the designated local agency—

19 ‘‘(i) as having attained age 18 but not

20 age 25 on the hiring date, and

21 ‘‘(ii) as having his principal place of

22 abode within an empowerment zone or en23 terprise community.

24 ‘‘(B) YOUTH MUST CONTINUE TO RESIDE IN

25 ZONE.—In the case of a high-risk youth, the term
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1 ‘qualified wages’ shall not include wages paid or

2 incurred for services performed while such

3 youth’s principal place of abode is outside an

4 empowerment zone or enterprise community.

5 ‘‘(6) VOCATIONAL REHABILITATION REFERRAL.—

6 The term ‘vocational rehabilitation referral’ means

7 any individual who is certified by the designated

8 local agency as—

9 ‘‘(A) having a physical or mental disability

10 which, for such individual, constitutes or results

11 in a substantial handicap to employment, and

12 ‘‘(B) having been referred to the employer

13 upon completion of (or while receiving) rehabili14 tative services pursuant to—

15 ‘‘(i) an individualized written rehabili16 tation plan under a State plan for voca17 tional rehabilitation services approved

18 under the Rehabilitation Act of 1973, or

19 ‘‘(ii) a program of vocational rehabili20 tation carried out under chapter 31 of title

21 38, United States Code.

22 ‘‘(7) QUALIFIED SUMMER YOUTH EMPLOYEE.—

23 ‘‘(A) IN GENERAL.—The term ‘qualified

24 summer youth employee’ means any individ25 ual—
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1 ‘‘(i) who performs services for the em2 ployer between May 1 and September 15,

3 ‘‘(ii) who is certified by the designated

4 local agency as having attained age 16 but

5 not 18 on the hiring date (or if later, on

6 May 1 of the calendar year involved),

7 ‘‘(iii) who has not been an employee of

8 the employer during any period prior to the

9 90-day period described in subparagraph

10 (B)(i), and

11 ‘‘(iv) who is certified by the designated

12 local agency as having his principal place

13 of abode within an empowerment zone or

14 enterprise community.

15 ‘‘(B) SPECIAL RULES FOR DETERMINING

16 AMOUNT OF CREDIT.—For purposes of applying

17 this subpart to wages paid or incurred to any

18 qualified summer youth employee—

19 ‘‘(i) subsection (b)(2) shall be applied

20 by substituting ‘any 90-day period between

21 May 1 and September 15’ for ‘the 1-year

22 period beginning with the day the individ23 ual begins work for the employer’, and

24 ‘‘(ii) subsection (b)(3) shall be applied

25 by substituting ‘$3,000’ for ‘$6,000’.
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1 The preceding sentence shall not apply to an in2 dividual who, with respect to the same employer,

3 is certified as a member of another targeted

4 group after such individual has been a qualified

5 summer youth employee.

6 ‘‘(C) YOUTH MUST CONTINUE TO RESIDE IN

7 ZONE.—Paragraph (5)(B) shall apply for pur8 poses of this paragraph.

9 ‘‘(8) HIRING DATE.—The term ‘hiring date’

10 means the day the individual is hired by the em11 ployer.

12 ‘‘(9) DESIGNATED LOCAL AGENCY.—The term

13 ‘designated local agency’ means a State employment

14 security agency established in accordance with the Act

15 of June 6, 1933, as amended (29 U.S.C. 49–49n).

16 ‘‘(10) SPECIAL RULES FOR CERTIFICATIONS.—

17 ‘‘(A) IN GENERAL.—An individual shall not

18 be treated as a member of a targeted group un19 less—

20 ‘‘(i) on or before the day on which such

21 individual begins work for the employer, the

22 employer has received a certification from a

23 designated local agency that such individual

24 is a member of a targeted group, or
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1 ‘‘(ii)(I) on or before the day the indi2 vidual is offered employment with the em3 ployer, a pre-screening notice is completed

4 by the employer with respect to such indi5 vidual, and

6 ‘‘(II) not later than the 14th day after

7 the individual begins work for the employer,

8 the employer submits such notice, signed by

9 the employer and the individual under pen10 alties of perjury, to the designated local

11 agency as part of a written request for such

12 a certification from such agency.

13 For purposes of this paragraph, the term ‘pre14 screening notice’ means a document (in such

15 form as the Secretary shall prescribe) which con16 tains information provided by the individual on

17 the basis of which the employer believes that the

18 individual is a member of a targeted group.

19 ‘‘(B) INCORRECT CERTIFICATIONS.—If—

20 ‘‘(i) an individual has been certified by

21 a designated local agency as a member of a

22 targeted group, and

23 ‘‘(ii) such certification is incorrect be24 cause it was based on false information pro25 vided by such individual,
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1 the certification shall be revoked and wages paid

2 by the employer after the date on which notice

3 of revocation is received by the employer shall

4 not be treated as qualified wages.

5 ‘‘(C) EXPLANATION OF DENIAL OF RE6 QUEST.—If a designated local agency denies a

7 request for certification of membership in a tar8 geted group, such agency shall provide to the per9 son making such request a written explanation

10 of the reasons for such denial.’’

11 (c) MINIMUM EMPLOYMENT PERIOD.—Paragraph (3)

12 of section 51(i) (relating to certain individuals ineligible)

13 is amended to read as follows:

14 ‘‘(3) INDIVIDUALS NOT MEETING MINIMUM EM15 PLOYMENT PERIOD.—No wages shall be taken into ac16 count under subsection (a) with respect to any indi17 vidual unless such individual either—

18 ‘‘(A) is employed by the employer at least

19 180 days (20 days in the case of a qualified

20 summer youth employee), or

21 ‘‘(B) has completed at least 500 hours (120

22 hours in the case of a qualified summer youth

23 employee) of services performed for the em24 ployer.’’
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1 (d) TERMINATION.—Paragraph (4) of section 51(c)

2 (relating to wages defined) is amended to read as follows:

3 ‘‘(4) TERMINATION.—The term ‘wages’ shall not

4 include any amount paid or incurred to an individ5 ual who begins work for the employer—

6 ‘‘(A) after December 31, 1994, and before

7 January 1, 1996, or

8 ‘‘(B) after December 31, 1996.’’

9 (e) REDESIGNATION OF CREDIT.—

10 (1) Sections 38(b)(2) and 51(a) are each amend11 ed by striking ‘‘targeted jobs credit’’ and inserting

12 ‘‘work opportunity credit’’.

13 (2) The subpart heading for subpart F of part IV

14 of subchapter A of chapter 1 is amended by striking

15 ‘‘Targeted Jobs Credit’’ and inserting ‘‘Work

16 Opportunity Credit’’.

17 (3) The table of subparts for such part IV is

18 amended by striking ‘‘targeted jobs credit’’ and insert19 ing ‘‘work opportunity credit’’.

20 (4) The heading for paragraph (3) of section

21 1396(c) is amended by striking ‘‘TARGETED JOBS

22 CREDIT’’ and inserting ‘‘WORK OPPORTUNITY CRED23 IT’’.

24 (f) TECHNICAL AMENDMENTS.—
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1 (1) Paragraph (1) of section 51(c) is amended by

2 striking ‘‘, subsection (d)(8)(D),’’.

3 (2) Paragraph (3) of section 51(i) is amended by

4 striking ‘‘(d)(12)’’ each place it appears and inserting

5 ‘‘(d)(6)’’.

6 (g) EFFECTIVE DATE.—The amendments made by this

7 section shall apply to individuals who begin work for the

8 employer after December 31, 1995.

9 SEC. 11112. EMPLOYER-PROVIDED EDUCATIONAL ASSIST10 ANCE PROGRAMS.

11 (a) EXTENSION.—Subsection (d) of section 127 (relat12 ing to educational assistance programs) is amended by

13 striking ‘‘December 31, 1994’’ and inserting ‘‘December 31,

14 1996’’.

15 (b) LIMITATION TO EDUCATION BELOW GRADUATE

16 LEVEL.—The last sentence of section 127(c)(1) is amended

17 by inserting before the period ‘‘or at the graduate level’’.

18 (c) EFFECTIVE DATES.—

19 (1) EXTENSION.—The amendment made by sub20 section (a) shall apply to taxable years beginning

21 after December 31, 1994.

22 (2) LIMITATION.—The amendment made by sub23 section (b) shall apply to taxable years beginning

24 after December 31, 1995.
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1 SEC. 11113. RESEARCH CREDIT.

2 (a) IN GENERAL.—Subsection (h) of section 41 (relat3 ing to credit for research activities) is amended—

4 (1) by striking ‘‘June 30, 1995’’ each place it

5 appears and inserting ‘‘December 31, 1996’’, and

6 (2) by striking ‘‘July 1, 1995’’ each place it ap7 pears and inserting ‘‘January 1, 1997’’.

8 (b) BASE AMOUNT FOR START-UP COMPANIES.—

9 Clause (i) of section 41(c)(3)(B) (relating to start-up com10 panies) is amended to read as follows:

11 ‘‘(i) TAXPAYERS TO WHICH SUBPARA12 GRAPH APPLIES.—The fixed-base percentage

13 shall be determined under this subpara14 graph if—

15 ‘‘(I) the first taxable year in

16 which a taxpayer had both gross re17 ceipts and qualified research expenses

18 begins after December 31, 1983, or

19 ‘‘(II) there are fewer than 3 tax20 able years beginning after December

21 31, 1983, and before January 1, 1989,

22 in which the taxpayer had both gross

23 receipts and qualified research ex24 penses.’’.

25 (c) ELECTION OF ALTERNATIVE INCREMENTAL CRED26 IT.—Subsection (c) of section 41 is amended by redesignat-
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1 ing paragraphs (4) and (5) as paragraphs (5) and (6), re2 spectively, and by inserting after paragraph (3) the follow3 ing new paragraph:

4 ‘‘(4) ELECTION OF ALTERNATIVE INCREMENTAL

5 CREDIT.—

6 ‘‘(A) IN GENERAL.—At the election of the

7 taxpayer, the credit determined under subsection

8 (a)(1) shall be equal to the sum of—

9 ‘‘(i) 1.65 percent of so much of the

10 qualified research expenses for the taxable

11 year as exceeds 1 percent of the average de12 scribed in subsection (c)(1)(B) but does not

13 exceed 1.5 percent of such average,

14 ‘‘(ii) 2.2 percent of so much of such ex15 penses as exceeds 1.5 percent of such average

16 but does not exceed 2 percent of such aver17 age, and

18 ‘‘(iii) 2.75 percent of so much of such

19 expenses as exceeds 2 percent of such aver20 age.

21 ‘‘(B) ELECTION.—An election under this

22 paragraph may be made only for the first tax23 able year of the taxpayer beginning after June

24 30, 1995. Such an election shall apply to the

25 taxable year for which made and all succeeding
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1 taxable years unless revoked with the consent of

2 the Secretary.’’

3 (d) INCREASED CREDIT FOR CONTRACT RESEARCH

4 EXPENSES WITH RESPECT TO CERTAIN RESEARCH CON5 SORTIA.—Paragraph (3) of section 41(b) is amended by

6 adding at the end the following new subparagraph:

7 ‘‘(C) AMOUNTS PAID TO CERTAIN RESEARCH

8 CONSORTIA.—

9 ‘‘(i) IN GENERAL.—Subparagraph (A)

10 shall be applied by substituting ‘75 percent’

11 for ‘65 percent’ with respect to amounts

12 paid or incurred by the taxpayer to a quali13 fied research consortium for qualified re14 search.

15 ‘‘(ii) QUALIFIED RESEARCH CONSOR16 TIUM.—The term ‘qualified research consor17 tium’ means any organization described in

18 subsection (e)(6)(B) if—

19 ‘‘(I) at least 15 unrelated tax20 payers paid (during the calendar year

21 in which the taxable year of the tax22 payer begins) amounts to such organi23 zation for qualified research,

24 ‘‘(II) no 3 persons paid during

25 such calendar year more than 50 per-
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1 cent of the total amounts paid during

2 such calendar year for qualified re3 search, and

4 ‘‘(III) no person contributed more

5 than 20 percent of such total amounts.

6 For purposes of subclause (I), all persons

7 treated as a single employer under sub8 section (a) or (b) of section 52 shall be

9 treated as related taxpayers.’’

10 (e) CONFORMING AMENDMENT.—Subparagraph (D) of

11 section 28(b)(1) is amended by striking ‘‘June 30, 1995’’

12 and inserting ‘‘December 31, 1996’’.

13 (f) EFFECTIVE DATE.—

14 (1) IN GENERAL.—Except as provided in para15 graph (2), the amendments made by this section shall

16 apply to taxable years ending after June 30, 1995.

17 (2) SUBSECTIONS (c) AND (d).—The amendments

18 made by subsections (c) and (d) shall apply to taxable

19 years beginning after June 30, 1995.

20 SEC. 11114. ORPHAN DRUG TAX CREDIT.

21 (a) RECATEGORIZED AS A BUSINESS CREDIT.—

22 (1) IN GENERAL.—Section 28 (relating to clini23 cal testing expenses for certain drugs for rare diseases

24 or conditions) is transferred to subpart D of part IV
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1 of subchapter A of chapter 1, inserted after section

2 45B, and redesignated as section 45C.

3 (2) CONFORMING AMENDMENT.—Subsection (b)

4 of section 38 (relating to general business credit) is

5 amended by striking ‘‘plus’’ at the end of paragraph

6 (10), by striking the period at the end of paragraph

7 (11) and inserting ‘‘, plus’’, and by adding at the end

8 the following new paragraph:

9 ‘‘(12) the orphan drug credit determined under

10 section 45C(a).’’.

11 (3) CLERICAL AMENDMENTS.—

12 (A) The table of sections for subpart B of

13 such part IV is amended by striking the item re14 lating to section 28.

15 (B) The table of sections for subpart D of

16 such part IV is amended by adding at the end

17 the following new item:

‘‘Sec. 45C. Clinical testing expenses for certain drugs for rare diseases or

conditions.’’.

18 (b) CREDIT TERMINATION.—Subsection (e) of section

19 45C, as redesignated by subsection (a)(1), is amended by

20 striking ‘‘December 31, 1994’’ and inserting ‘‘December 31,

21 1996’’.

22 (c) NO PRE-1995 CARRYBACKS.—Subsection (d) of sec23 tion 39 (relating to carryback and carryforward of unused
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1 credits) is amended by adding at the end the following new

2 paragraph:

3 ‘‘(7) NO CARRYBACK OF SECTION 45C CREDIT BE4 FORE 1995.—No portion of the unused business credit

5 for any taxable year which is attributable to the or6 phan drug credit determined under section 45C may

7 be carried back to a taxable year beginning before

8 January 1, 1995.’’.

9 (d) ADDITIONAL CONFORMING AMENDMENTS.—

10 (1) Section 45C(a), as redesignated by subsection

11 (a)(1), is amended by striking ‘‘There shall be allowed

12 as a credit against the tax imposed by this chapter

13 for the taxable year’’ and inserting ‘‘For purposes of

14 section 38, the credit determined under this section

15 for the taxable year is’’.

16 (2) Section 45C(d), as so redesignated, is amend17 ed by striking paragraph (2) and by redesignating

18 paragraphs (3), (4), and (5) as paragraphs (2), (3),

19 and (4).

20 (3) Section 29(b)(6)(A) is amended by striking

21 ‘‘sections 27 and 28’’ and inserting ‘‘section 27’’.

22 (4) Section 30(b)(3)(A) is amended by striking

23 ‘‘sections 27, 28, and 29’’ and inserting ‘‘sections 27

24 and 29’’.

25 (5) Section 53(d)(1)(B) is amended—
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1 (A) by striking ‘‘or not allowed under sec2 tion 28 solely by reason of the application of sec3 tion 28(d)(2)(B),’’ in clause (iii), and

4 (B) by striking ‘‘or not allowed under sec5 tion 28 solely by reason of the application of sec6 tion 28(d)(2)(B)’’ in clause (iv)(II).

7 (6) Section 55(c)(2) is amended by striking

8 ‘‘28(d)(2),’’.

9 (7) Section 280C(b) is amended—

10 (A) by striking ‘‘section 28(b)’’ in para11 graph (1) and inserting ‘‘section 45C(b)’’,

12 (B) by striking ‘‘section 28’’ in paragraphs

13 (1) and (2)(A) and inserting ‘‘section 45C(b)’’,

14 and

15 (C) by striking ‘‘subsection (d)(2) thereof’’

16 in paragraphs (1) and (2)(A) and inserting ‘‘sec17 tion 38(c)’’.

18 (e) EFFECTIVE DATE.—The amendments made by this

19 section shall apply to taxable years ending after December

20 31, 1994.

21 SEC. 11115. CONTRIBUTIONS OF STOCK TO PRIVATE FOUN22 DATIONS.

23 (a) IN GENERAL.—Subparagraph (D) of section

24 170(e)(5) (relating to special rule for contributions of stock

25 for which market quotations are readily available) is
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1 amended by striking ‘‘December 31, 1994’’ and inserting

2 ‘‘December 31, 1996’’.

3 (b) EFFECTIVE DATE.—The amendment made by this

4 section shall apply to contributions made after December

5 31, 1994.

6 SEC. 11116. DELAY OF TAX ON FUEL USED IN COMMERCIAL

7 AVIATION.

8 (a) IN GENERAL.—Sections 4092(b)(2), 6421(f)(2)(B),

9 and 6427(l)(4)(B) are each amended by striking ‘‘Septem10 ber 30, 1995’’ and inserting ‘‘September 30, 1997’’.

11 (b) CONFORMING AMENDMENT.—Section 13245 of the

12 Omnibus Budget Reconciliation Act of 1993 is hereby re13 pealed.

14 (c) EFFECTIVE DATE.—

15 (1) IN GENERAL.—The amendments made by

16 this section shall take effect after September 30, 1995,

17 but shall not take effect if section 11117 does not take

18 effect.

19 (2) CROSS REFERENCE.—

For refund of tax paid on commercial aviation fuel

before the date of the enactment of this Act, see section 6427(l) of the Internal Revenue Code of 1986.

20 (d) FLOOR STOCKS TAX.—

21 (1) IMPOSITION OF TAX.—In the case of commer22 cial aviation fuel which is held by any person on Oc23 tober 1, 1997, there is hereby imposed a floor stocks

24 tax equal to 4.3 cents per gallon.
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1 (2) LIABILITY FOR TAX AND METHOD OF PAY2 MENT.—

3 (A) LIABILITY FOR TAX.—A person holding

4 aviation fuel on October 1, 1997, to which the

5 tax imposed by paragraph (1) applies shall be

6 liable for such tax.

7 (B) METHOD OF PAYMENT.—The tax im8 posed by paragraph (1) shall be paid in such

9 manner as the Secretary shall prescribe.

10 (C) TIME FOR PAYMENT.—The tax imposed

11 by paragraph (1) shall be paid on or before

12 April 30, 1998.

13 (3) DEFINITIONS.—For purposes of this sub14 section—

15 (A) HELD BY A PERSON.—Aviation fuel

16 shall be considered as ‘‘held by a person’’ if title

17 thereto has passed to such person (whether or not

18 delivery to the person has been made).

19 (B) COMMERCIAL AVIATION FUEL.—The

20 term ‘‘commercial aviation fuel’’ means aviation

21 fuel (as defined in section 4093 of such Code)

22 which is held on October 1, 1997, for sale or use

23 in commercial aviation (as defined in section

24 4092(b) of such Code).
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1 (C) SECRETARY.—The term ‘‘Secretary’’

2 means the Secretary of the Treasury or the Sec3 retary’s delegate.

4 (4) EXCEPTION FOR EXEMPT USES.—The tax

5 imposed by paragraph (1) shall not apply to aviation

6 fuel held by any person exclusively for any use for

7 which a credit or refund of the entire tax imposed by

8 section 4091 of such Code (other than the rate im9 posed by section 4091(b)(2) of such Code) is allowable

10 for aviation fuel so used.

11 (5) EXCEPTION FOR CERTAIN AMOUNTS OF

12 FUEL.—

13 (A) IN GENERAL.—No tax shall be imposed

14 by paragraph (1) on aviation fuel held on Octo15 ber 1, 1997, by any person if the aggregate

16 amount of commercial aviation fuel held by such

17 person on such date does not exceed 2,000 gal18 lons. The preceding sentence shall apply only if

19 such person submits to the Secretary (at the time

20 and in the manner required by the Secretary)

21 such information as the Secretary shall require

22 for purposes of this paragraph.

23 (B) EXEMPT FUEL.—For purposes of sub24 paragraph (A), there shall not be taken into ac25 count fuel held by any person which is exempt
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1 from the tax imposed by paragraph (1) by rea2 son of paragraph (4).

3 (C) CONTROLLED GROUPS.—For purposes of

4 this paragraph—

5 (i) CORPORATIONS.—

6 (I) IN GENERAL.—All persons

7 treated as a controlled group shall be

8 treated as 1 person.

9 (II) CONTROLLED GROUP.—The

10 term ‘‘controlled group’’ has the mean11 ing given to such term by subsection

12 (a) of section 1563 of such Code; except

13 that for such purposes the phrase

14 ‘‘more than 50 percent’’ shall be sub15 stituted for the phrase ‘‘at least 80 per16 cent’’ each place it appears in such

17 subsection.

18 (ii) NONINCORPORATED PERSONS

19 UNDER COMMON CONTROL.—Under regula20 tions prescribed by the Secretary, principles

21 similar to the principles of clause (i) shall

22 apply to a group of persons under common

23 control where 1 or more of such persons is

24 not a corporation.
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1 (6) OTHER LAWS APPLICABLE.—All provisions of

2 law, including penalties, applicable with respect to

3 the taxes imposed by section 4091 of such Code shall,

4 insofar as applicable and not inconsistent with the

5 provisions of this subsection, apply with respect to the

6 floor stock taxes imposed by paragraph (1) to the

7 same extent as if such taxes were imposed by such sec8 tion 4091.

9 SEC. 11117. EXTENSION OF AIRPORT AND AIRWAY TRUST

10 FUND EXCISE TAXES.

11 (a) FUEL TAX.—

12 (1) Subparagraph (A) of section 4091(b)(3) is

13 amended by striking ‘‘January 1, 1996’’ and insert14 ing ‘‘October 1, 1996’’.

15 (2) Paragraph (2) of section 4081(d), as amend16 ed by section 11651 of this Act, is amended by strik17 ing ‘‘January 1, 1996’’ and inserting ‘‘October 1,

18 1996’’.

19 (b) TICKET TAXES.—Sections 4261(g) and 4271(d) are

20 each amended by striking ‘‘January 1, 1996’’ and inserting

21 ‘‘October 1, 1996’’.

22 (c) TRANSFER TO AIRPORT AND AIRWAY TRUST

23 FUND.—
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1 (1) Subsection (b) of section 9502 is amended by

2 striking ‘‘January 1, 1996’’ each place it appears and

3 inserting ‘‘October 1, 1996’’.

4 (2) Paragraph (3) of section 9502(f) is amended

5 by striking ‘‘December 31, 1995’’ and inserting ‘‘Sep6 tember 30, 1996’’.

7 SEC. 11118. EXTENSION OF INTERNAL REVENUE SERVICE

8 USER FEES.

9 Subsection (c) of section 10511 of the Revenue Act of

10 1987 is amended by striking ‘‘October 1, 2000’’ and by in11 serting ‘‘October 1, 2002’’.

12 CHAPTER 2—SUNSET OF LOW-INCOME

13 HOUSING CREDIT

14 SEC. 11121. SUNSET OF LOW-INCOME HOUSING CREDIT.

15 (a) REPEAL OF REALLOCATION OF UNUSED CREDITS

16 AMONG STATES.—Subparagraph (D) of section 42(h)(3) is

17 amended by adding at the end the following new clause:

18 ‘‘(v) TERMINATION.—No amount may

19 be allocated under this paragraph for any

20 calendar year after 1995.’’

21 (b) TERMINATION.—Section 42 is amended by adding

22 at the end the following new subsection:

23 ‘‘(o) TERMINATION.—

24 ‘‘(1) IN GENERAL.—Except as provided in para25 graph (2)—
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1 ‘‘(A) clause (i) of subsection (h)(3)(C) shall

2 not apply to any amount allocated after Decem3 ber 31, 1997, and

4 ‘‘(B) subsection (h)(4) shall not apply to

5 any building placed in service after such date.

6 ‘‘(2) EXCEPTION FOR BOND-FINANCED BUILDINGS

7 IN PROGRESS.—For purposes of paragraph (1)(B), a

8 building shall be treated as placed in service before

9 January 1, 1998, if—

10 ‘‘(A) the bonds with respect to such building

11 are issued before such date,

12 ‘‘(B) the taxpayer’s basis in the project (of

13 which the building is a part) as of December 31,

14 1997, is more than 10 percent of the taxpayer’s

15 reasonably expected basis in such project as of

16 December 31, 1999, and

17 ‘‘(C) such building is placed in service be18 fore January 1, 2000.’’

19 CHAPTER 3—EXTENSIONS OF SUPERFUND

20 AND OIL SPILL LIABILITY TAXES

21 SEC. 11131. EXTENSION OF HAZARDOUS SUBSTANCE

22 SUPERFUND TAXES.

23 (a) EXTENSION OF TAXES.—

24 (1) ENVIRONMENTAL TAX.—Section 59A(e) is

25 amended to read as follows:
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1 ‘‘(e) APPLICATION OF TAX.—The tax imposed by this

2 section shall apply to taxable years beginning after Decem3 ber 31, 1986, and before January 1, 1997.’’.

4 (2) EXCISE TAXES.—Section 4611(e) is amended

5 to read as follows:

6 ‘‘(e) APPLICATION OF HAZARDOUS SUBSTANCE

7 SUPERFUND FINANCING RATE.—The Hazardous Substance

8 Superfund financing rate under this section shall apply

9 after December 31, 1986, and before October 1, 1996.’’.

10 (b) TERMINATION ON DEPOSITS OF TAXES INTO HAZ11 ARDOUS SUBSTANCE SUPERFUND.—Paragraph (1) of sec12 tion 9507(b) is amended by inserting ‘‘before August 1,

13 1996’’ after ‘‘received’’.

14 (c) EFFECTIVE DATE.—The amendments made by this

15 section shall take effect on the date of the enactment of this

16 Act.

17 SEC. 11132. EXTENSION OF OIL SPILL LIABILITY TAX.

18 (a) IN GENERAL.—Section 4611(f)(1) (relating to ap19 plication of oil spill liability trust fund financing rate) is

20 amended by striking ‘‘after December 31, 1989, and before

21 January 1, 1995’’ and inserting ‘‘after December 31, 1995,

22 and before October 1, 2002’’.

23 (b) EFFECTIVE DATE.—The amendment made by this

24 section shall take effect on January 1, 1996.
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1 CHAPTER 4—EXTENSIONS RELATING TO

2 FUEL TAXES

3 SEC. 11141. ETHANOL BLENDER REFUNDS.

4 (a) IN GENERAL.—Paragraph (4) of section 6427(f)

5 (relating to gasoline, diesel fuel, and aviation fuel used to

6 produce certain alcohol fuels) is amended by striking

7 ‘‘1995’’ and inserting ‘‘1999’’.

8 (b) SPECIAL RULE.—With respect to refund claims

9 which could have been filed under section 6427(f) of the In10 ternal Revenue Code of 1986 during the period beginning

11 on October 8, 1995, and ending on the date of the enactment

12 of this Act, but for the expiration of such section after Sep13 tember 30, 1995, interest shall accrue on such claims from

14 the date which is the later of—

15 (1) November 1, 1995, or

16 (2) 20 days after the claim could have been filed

17 under such section as in effect on September 30, 1995.

18 (c) EFFECTIVE DATE.—The amendment made by sub19 section (a) shall take effect on the date of the enactment

20 of this Act.

21 SEC. 11142. EXTENSION OF BINDING CONTRACT DATE FOR

22 BIOMASS AND COAL FACILITIES.

23 (a) IN GENERAL.—Subparagraph (A) of section

24 29(g)(1) (relating to extension of certain facilities) is

25 amended by striking ‘‘January 1, 1997’’ and inserting
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1 ‘‘January 1, 1998’’ and by striking ‘‘January 1, 1996’’ and

2 inserting ‘‘July 1, 1996’’.

3 (b) EFFECTIVE DATE.—The amendment made by this

4 section shall take effect on the date of the enactment of this

5 Act.

6 SEC. 11143. EXEMPTION FROM DIESEL FUEL DYEING RE7 QUIREMENTS WITH RESPECT TO CERTAIN

8 STATES.

9 (a) IN GENERAL.—Section 4082 (relating to exemp10 tions for diesel fuel) is amended by redesignating sub11 sections (c) and (d) as subsections (d) and (e), respectively,

12 and by inserting after subsection (b) the following new sub13 section:

14 ‘‘(c) EXCEPTION TO DYEING REQUIREMENTS.—Para15 graph (2) of subsection (a) shall not apply with respect to

16 any diesel fuel—

17 ‘‘(1) removed, entered, or sold in a State for ulti18 mate sale or use in an area of such State on or after

19 the date on which such area is exempted from the fuel

20 dyeing requirements under subsection (i) of section

21 211 of the Clean Air Act (as in effect on the date of

22 the enactment of this subsection) by the Administrator

23 of the Environmental Protection Agency under para24 graph (4) of such subsection (i) (as so in effect), and
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1 ‘‘(2) the use of which is certified pursuant to reg2 ulations issued by the Secretary.’’

3 (b) EFFECTIVE DATE.—The amendments made by this

4 section shall take effect on the first day of the first calendar

5 quarter beginning after the date of the enactment of this

6 Act.

7 SEC. 11144. MORATORIUM FOR EXCISE TAX ON DIESEL

8 FUEL SOLD FOR USE OR USED IN DIESEL9 POWERED MOTORBOATS.

10 (a) IN GENERAL.—Subparagraph (D) of section

11 4041(a)(1) (relating to the imposition of tax on diesel fuel

12 and special motor fuels) is amended to read as follows:

13 ‘‘(D) DIESEL FUEL USED IN MOTOR14 BOATS.—

15 ‘‘(i) MORATORIUM.—No tax shall be

16 imposed by subsection (a) or (d)(1) on die17 sel fuel sold for use or used in a diesel-pow18 ered motorboat during the period after De19 cember 31, 1995, and before July 1, 1997.

20 ‘‘(ii) SPECIAL TERMINATION DATE.—In

21 the case of any sale for use, or use, of fuel

22 in a diesel-powered motorboat—

23 ‘‘(I) effective during the period

24 after September 30, 1999, and before

25 January 1, 2000, the rate of tax im-
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1 posed by this paragraph is 24.3 cents

2 per gallon, and

3 ‘‘(II) the termination of the tax

4 under subsection (d) shall not occur be5 fore January 1, 2000.’’.

6 (b) EFFECTIVE DATE.—The amendments made by this

7 section shall take effect after December 31, 1995.

8 CHAPTER 5—PERMANENT EXTENSION OF

9 FUTA EXEMPTION FOR ALIEN AGRI10 CULTURAL WORKERS

11 SEC. 11151. FUTA EXEMPTION FOR ALIEN AGRICULTURAL

12 WORKERS.

13 (a) IN GENERAL.—Subparagraph (B) of section

14 3306(c)(1) (defining employment) is amended by striking

15 ‘‘before January 1, 1995,’’.

16 (b) EFFECTIVE DATE.—The amendment made by sub17 section (a) shall apply to services performed after December

18 31, 1994.
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1 CHAPTER 6—DISCLOSURE OF RETURN IN2 FORMATION FOR ADMINISTRATION OF

3 CERTAIN VETERANS PROGRAMS

4 SEC. 11161. DISCLOSURE OF RETURN INFORMATION FOR

5 ADMINISTRATION OF CERTAIN VETERANS

6 PROGRAMS.

7 (a) GENERAL RULE.—Subparagraph (D) of section

8 6103(l)(7) (relating to disclosure of return information to

9 Federal, State, and local agencies administering certain

10 programs) is amended by striking ‘‘Clause (viii) shall not

11 apply after September 30, 1998.’’ and inserting ‘‘Clause

12 (viii) shall not apply after September 30, 2002.’’

13 (b) EFFECTIVE DATE.—The amendment made by sub14 section (a) shall take effect on the date of the enactment

15 of this Act.

16 Subtitle F—Taxpayer Bill of Rights

17 2 Provisions

18 SEC. 11201. EXPANSION OF AUTHORITY TO ABATE INTER19 EST.

20 (a) GENERAL RULE.—Paragraph (1) of section

21 6404(e) (relating to abatement of interest in certain cases)

22 is amended—

23 (1) by inserting ‘‘unreasonable’’ before ‘‘error’’

24 each place it appears in subparagraphs (A) and (B),

25 and
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1 (2) by striking ‘‘in performing a ministerial

2 act’’ each place it appears and inserting ‘‘in perform3 ing a ministerial or managerial act’’.

4 (b) CLERICAL AMENDMENT.—The subsection heading

5 for subsection (e) of section 6404 is amended—

6 (1) by striking ‘‘ASSESSMENTS’’ and inserting

7 ‘‘ABATEMENT’’, and

8 (2) by inserting ‘‘UNREASONABLE’’ before ‘‘ER9 RORS’’.

10 (c) EFFECTIVE DATE.—The amendments made by this

11 section shall apply to interest accruing with respect to defi12 ciencies or payments for taxable years beginning after the

13 date of the enactment of this Act.

14 SEC. 11202. EXTENSION OF INTEREST-FREE PERIOD FOR

15 PAYMENT OF TAX AFTER NOTICE AND DE16 MAND.

17 (a) GENERAL RULE.—Paragraph (3) of section

18 6601(e) (relating to payments made within 10 days after

19 notice and demand) is amended to read as follows:

20 ‘‘(3) PAYMENTS MADE WITHIN SPECIFIED PE21 RIOD AFTER NOTICE AND DEMAND.—If notice and de22 mand is made for payment of any amount and if

23 such amount is paid within 21 calendar days (10

24 business days if the amount for which such notice and

25 demand is made equals or exceeds $100,000) after the
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1 date of such notice and demand, interest under this

2 section on the amount so paid shall not be imposed

3 for the period after the date of such notice and de4 mand.’’

5 (b) CONFORMING AMENDMENTS.—

6 (1) Subparagraph (A) of section 6601(e)(2) is

7 amended by striking ‘‘10 days from the date of notice

8 and demand therefor’’ and inserting ‘‘21 calendar

9 days from the date of notice and demand therefor (10

10 business days if the amount for which such notice and

11 demand is made equals or exceeds $100,000)’’.

12 (2) Paragraph (3) of section 6651(a) is amended

13 by striking ‘‘10 days of the date of the notice and de14 mand therefor’’ and inserting ‘‘21 calendar days from

15 the date of notice and demand therefor (10 business

16 days if the amount for which such notice and demand

17 is made equals or exceeds $100,000)’’.

18 (c) EFFECTIVE DATE.—The amendments made by this

19 section shall apply in the case of any notice and demand

20 given after June 30, 1996.

21 SEC. 11203. JOINT RETURN MAY BE MADE AFTER SEPARATE

22 RETURNS WITHOUT FULL PAYMENT OF TAX.

23 (a) GENERAL RULE.—Paragraph (2) of section

24 6013(b) (relating to limitations on filing of joint return

25 after filing separate returns) is amended by striking sub-
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1 paragraph (A) and redesignating the following subpara2 graphs accordingly.

3 (b) EFFECTIVE DATE.—The amendment made by sub4 section (a) shall apply to taxable years beginning after the

5 date of the enactment of this Act.

6 SEC. 11204. MODIFICATIONS TO CERTAIN LEVY EXEMPTION

7 AMOUNTS.

8 (a) FUEL, ETC.—Paragraph (2) of section 6334(a) (re9 lating to fuel, provisions, furniture, and personal effects ex10 empt from levy) is amended—

11 (1) by striking ‘‘If the taxpayer is the head of a

12 family, so’’ and inserting ‘‘So’’,

13 (2) by striking ‘‘his household’’ and inserting

14 ‘‘the taxpayer’s household’’, and

15 (3) by striking ‘‘$1,650 ($1,550 in the case of

16 levies issued during 1989)’’ and inserting ‘‘$2,500’’.

17 (b) BOOKS, ETC.—Paragraph (3) of section 6334(a)

18 (relating to books and tools of a trade, business, or profes19 sion) is amended by striking ‘‘$1,100 ($1,050 in the case

20 of levies issued during 1989)’’ and inserting ‘‘$1,250’’.

21 (c) INFLATION ADJUSTMENT.—Section 6334 (relating

22 to property exempt from levy) is amended by adding at the

23 end the following new subsection:

24 ‘‘(f) INFLATION ADJUSTMENT.—
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1 ‘‘(1) IN GENERAL.—In the case of any calendar

2 year beginning after 1996, each dollar amount re3 ferred to in paragraphs (2) and (3) of subsection (a)

4 shall be increased by an amount equal to—

5 ‘‘(A) such dollar amount, multiplied by

6 ‘‘(B) the cost-of-living adjustment deter7 mined under section 1(f)(3) for such calendar

8 year, by substituting ‘calendar year 1995’ for

9 ‘calendar year 1992’ in subparagraph (B) there10 of.

11 ‘‘(2) ROUNDING.—If any dollar amount after

12 being increased under paragraph (1) is not a mul13 tiple of $10, such dollar amount shall be rounded to

14 the nearest multiple of $10.’’.

15 (d) EFFECTIVE DATE.—The amendments made by this

16 section shall take effect with respect to levies issued after

17 December 31, 1995.

18 SEC. 11205. OFFERS-IN-COMPROMISE.

19 (a) REVIEW REQUIREMENTS.—Subsection (b) of sec20 tion 7122 (relating to records) is amended by striking

21 ‘‘$500.’’ and inserting ‘‘$50,000. However, such compromise

22 shall be subject to continuing quality review by the Sec23 retary.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by this

2 section shall take effect on the date of the enactment of this

3 Act.

4 SEC. 11206. INCREASED LIMIT ON ATTORNEY FEES.

5 (a) IN GENERAL.—Paragraph (1) of section 7430(c)

6 (defining reasonable litigation costs) is amended—

7 (1) by striking ‘‘$75’’ in clause (iii) of subpara8 graph (B) and inserting ‘‘$110’’,

9 (2) by striking ‘‘an increase in the cost of living

10 or’’ in clause (iii) of subparagraph (B), and

11 (3) by adding after clause (iii) the following:

12 ‘‘In the case of any calendar year beginning after

13 1996, the dollar amount referred to in clause (iii)

14 shall be increased by an amount equal to such dollar

15 amount multiplied by the cost-of-living adjustment

16 determined under section 1(f)(3) for such calendar

17 year, by substituting ‘calendar year 1995’ for ‘cal18 endar year 1992’ in subparagraph (B) thereof. If any

19 dollar amount after being increased under the preced20 ing sentence is not a multiple of $10, such dollar

21 amount shall be rounded to the nearest multiple of

22 $10.’’

23 (b) EFFECTIVE DATE.—The amendment made by this

24 section shall apply in the case of proceedings commenced

25 after the date of the enactment of this Act.
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1 SEC. 11207. AWARD OF LITIGATION COSTS PERMITTED IN

2 DECLARATORY JUDGMENT PROCEEDINGS.

3 (a) IN GENERAL.—Subsection (b) of section 7430 is

4 amended by striking paragraph (3) and by redesignating

5 paragraph (4) as paragraph (3).

6 (b) EFFECTIVE DATE.—The amendment made by this

7 section shall apply in the case of proceedings commenced

8 after the date of the enactment of this Act.

9 SEC. 11208. INCREASE IN LIMIT ON RECOVERY OF CIVIL

10 DAMAGES FOR UNAUTHORIZED COLLECTION

11 ACTIONS.

12 (a) GENERAL RULE.—Subsection (b) of section 7433

13 (relating to damages) is amended by striking ‘‘$100,000’’

14 and inserting ‘‘$1,000,000’’.

15 (b) EFFECTIVE DATE.—The amendment made by sub16 section (a) shall apply to actions by officers or employees

17 of the Internal Revenue Service after the date of the enact18 ment of this Act.

19 SEC. 11209. ENROLLED AGENTS INCLUDED AS THIRD-PARTY

20 RECORDKEEPERS.

21 (a) IN GENERAL.—Paragraph (3) of section 7609(a)

22 (relating to third-party recordkeeper defined) is amended

23 by striking ‘‘and’’ at the end of subparagraph (G), by strik24 ing the period at the end of subparagraph (H) and inserting

25 ‘‘; and’’, and by adding at the end the following the sub26 paragraph:
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1 ‘‘(I) any enrolled agent.’’

2 (b) EFFECTIVE DATE.—The amendment made by sub3 section (a) shall apply to summonses issued after the date

4 of the enactment of this Act.

5 SEC. 11210. ANNUAL REMINDERS TO TAXPAYERS WITH OUT6 STANDING DELINQUENT ACCOUNTS.

7 (a) IN GENERAL.—Chapter 77 (relating to miscellane8 ous provisions) is amended by adding at the end the follow9 ing new section:

10 ‘‘SEC. 7524. ANNUAL NOTICE OF TAX DELINQUENCY.

11 ‘‘Not less often than annually, the Secretary shall send

12 a written notice to each taxpayer who has a tax delinquent

13 account of the amount of the tax delinquency as of the date

14 of the notice.’’

15 (b) CLERICAL AMENDMENT.—The table of sections for

16 chapter 77 is amended by adding at the end the following

17 new item:

‘‘Sec. 7524. Annual notice of tax delinquency.’’

18 (c) EFFECTIVE DATE.—The amendments made by this

19 section shall apply to calendar years after 1995.
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1 Subtitle G—Casualty and

2 Involuntary Conversion Provisions

3 SEC. 11251. BASIS ADJUSTMENT TO PROPERTY HELD BY

4 CORPORATION WHERE STOCK IN CORPORA5 TION IS REPLACEMENT PROPERTY UNDER IN6 VOLUNTARY CONVERSION RULES.

7 (a) IN GENERAL.—Subsection (b) of section 1033 is

8 amended to read as follows:

9 ‘‘(b) BASIS OF PROPERTY ACQUIRED THROUGH IN10 VOLUNTARY CONVERSION.—

11 ‘‘(1) CONVERSIONS DESCRIBED IN SUBSECTION

12 (a)(1).—If the property was acquired as the result of

13 a compulsory or involuntary conversion described in

14 subsection (a)(1), the basis shall be the same as in the

15 case of the property so converted—

16 ‘‘(A) decreased in the amount of any money

17 received by the taxpayer which was not expended

18 in accordance with the provisions of law (appli19 cable to the year in which such conversion was

20 made) determining the taxable status of the gain

21 or loss upon such conversion, and

22 ‘‘(B) increased in the amount of gain or de23 creased in the amount of loss to the taxpayer rec24 ognized upon such conversion under the law ap-
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1 plicable to the year in which such conversion

2 was made.

3 ‘‘(2) CONVERSIONS DESCRIBED IN SUBSECTION

4 (a)(2).—In the case of property purchased by the tax5 payer in a transaction described in subsection (a)(2)

6 which resulted in the nonrecognition of any part of

7 the gain realized as the result of a compulsory or in8 voluntary conversion, the basis shall be the cost of

9 such property decreased in the amount of the gain not

10 so recognized; and if the property purchased consists

11 of more than 1 piece of property, the basis determined

12 under this sentence shall be allocated to the purchased

13 properties in proportion to their respective costs.

14 ‘‘(3) PROPERTY HELD BY CORPORATION THE

15 STOCK OF WHICH IS REPLACEMENT PROPERTY.—

16 ‘‘(A) IN GENERAL.—If the basis of stock in

17 a corporation is decreased under paragraph (2),

18 an amount equal to such decrease shall also be

19 applied to reduce the basis of property held by

20 the corporation at the time the taxpayer ac21 quired control (as defined in subsection

22 (a)(2)(E)) of such corporation.

23 ‘‘(B) LIMITATION.—Subparagraph (A) shall

24 not apply to the extent that it would (but for

25 this subparagraph) require a reduction in the
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1 aggregate adjusted bases of the property of the

2 corporation below the taxpayer’s adjusted basis

3 of the stock in the corporation (determined im4 mediately after such basis is decreased under

5 paragraph (2)).

6 ‘‘(C) ALLOCATION OF BASIS REDUCTION.—

7 The decrease required under subparagraph (A)

8 shall be allocated—

9 ‘‘(i) first to property which is similar

10 or related in service or use to the converted

11 property,

12 ‘‘(ii) second to depreciable property (as

13 defined in section 1017(b)(3)(B)) not de14 scribed in clause (i), and

15 ‘‘(iii) then to other property.

16 ‘‘(D) SPECIAL RULES.—

17 ‘‘(i) REDUCTION NOT TO EXCEED AD18 JUSTED BASIS OF PROPERTY.—No reduction

19 in the basis of any property under this

20 paragraph shall exceed the adjusted basis of

21 such property (determined without regard

22 to such reduction).

23 ‘‘(ii) ALLOCATION OF REDUCTION

24 AMONG PROPERTIES.—If more than 1 prop25 erty is described in a clause of subpara-
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1 graph (C), the reduction under this para2 graph shall be allocated among such prop3 erty in proportion to the adjusted bases of

4 such property (as so determined).’’.

5 (b) EFFECTIVE DATE.—The amendment made by this

6 section shall apply to involuntary conversions occurring

7 after September 13, 1995.

8 SEC. 11252. EXPANSION OF REQUIREMENT THAT INVOLUN9 TARILY CONVERTED PROPERTY BE RE10 PLACED WITH PROPERTY ACQUIRED FROM

11 AN UNRELATED PERSON.

12 (a) IN GENERAL.—Subsection (i) of section 1033 is

13 amended to read as follows:

14 ‘‘(i) REPLACEMENT PROPERTY MUST BE ACQUIRED

15 FROM UNRELATED PERSON IN CERTAIN CASES.—

16 ‘‘(1) IN GENERAL.—If the property which is in17 voluntarily converted is held by a taxpayer to which

18 this subsection applies, subsection (a) shall not apply

19 if the replacement property or stock is acquired from

20 a related person. The preceding sentence shall not

21 apply to the extent that the related person acquired

22 the replacement property or stock from an unrelated

23 person during the period applicable under subsection

24 (a)(2)(B).
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1 ‘‘(2) TAXPAYERS TO WHICH SUBSECTION AP2 PLIES.—This subsection shall apply to—

3 ‘‘(A) a C corporation,

4 ‘‘(B) a partnership in which 1 or more C

5 corporations own, directly or indirectly (deter6 mined in accordance with section 707(b)(3)),

7 more than 50 percent of the capital interest, or

8 profits interest, in such partnership at the time

9 of the involuntary conversion, and

10 ‘‘(C) any other taxpayer if, with respect to

11 property which is involuntarily converted during

12 the taxable year, the aggregate of the amount of

13 realized gain on such property on which there is

14 realized gain exceeds $100,000.

15 In the case of a partnership, subparagraph (C) shall

16 apply with respect to the partnership and with re17 spect to each partner. A similar rule shall apply in

18 the case of an S corporation and its shareholders.

19 ‘‘(3) RELATED PERSON.—For purposes of this

20 subsection, a person is related to another person if the

21 person bears a relationship to the other person de22 scribed in section 267(b) or 707(b)(1).’’.

23 (b) EFFECTIVE DATE.—The amendment made by this

24 section shall apply to involuntary conversions occurring

25 after September 13, 1995.
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1 SEC. 11253. SPECIAL RULE FOR CROP INSURANCE PRO2 CEEDS AND DISASTER PAYMENTS.

3 (a) IN GENERAL.—Section 451(d) (relating to special

4 rule for crop insurance proceeds and disaster payments) is

5 amended to read as follows:

6 ‘‘(d) SPECIAL RULE FOR CROP INSURANCE PROCEEDS

7 AND DISASTER PAYMENTS.—

8 ‘‘(1) GENERAL RULE.—In the case of any pay9 ment described in paragraph (2), a taxpayer report10 ing on the cash receipts and disbursements method of

11 accounting—

12 ‘‘(A) may elect to treat any such payment

13 received in the taxable year of destruction or

14 damage of crops as having been received in the

15 following taxable year if the taxpayer establishes

16 that, under the taxpayer’s practice, income from

17 such crops involved would have been reported in

18 a following taxable year, or

19 ‘‘(B) may elect to treat any such payment

20 received in a taxable year following the taxable

21 year of the destruction or damage of crops as

22 having been received in the taxable year of de23 struction or damage, if the taxpayer establishes

24 that, under the taxpayer’s practice, income from

25 such crops involved would have been reported in

26 the taxable year of destruction or damage.
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1 ‘‘(2) PAYMENTS DESCRIBED.—For purposes of

2 this subsection, a payment is described in this para3 graph if such payment—

4 ‘‘(A) is insurance proceeds received on ac5 count of destruction or damage to crops, or

6 ‘‘(B) is disaster assistance received under

7 any Federal law as a result of—

8 ‘‘(i) destruction or damage to crops

9 caused by drought, flood, or other natural

10 disaster, or

11 ‘‘(ii) inability to plant crops because of

12 such a disaster.’’.

13 (b) EFFECTIVE DATE.—The amendment made by sub14 section (a) applies to payments received after December 31,

15 1992, as a result of destruction or damage occurring after

16 such date.

17 SEC. 11254. APPLICATION OF INVOLUNTARY EXCLUSION

18 RULES TO PRESIDENTIALLY DECLARED DIS19 ASTERS.

20 (a) IN GENERAL.—Section 1033(h) is amended by re21 designating paragraphs (2) and (3) as paragraphs (3) and

22 (4) and by inserting after paragraph (1) the following new

23 paragraph:

24 ‘‘(2) TRADE OR BUSINESS AND INVESTMENT

25 PROPERTY.—If a taxpayer’s property held for produc-
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1 tive use in a trade or business or for investment is

2 compulsorily or involuntarily converted as a result of

3 a Presidentially declared disaster, tangible property

4 of a type held for productive use in a trade or busi5 ness shall be treated for purposes of subsection (a) as

6 property similar or related in use to the property so

7 converted.’’.

8 (b) CONFORMING AMENDMENTS.—Section 1033(h) is

9 amended—

10 (1) by striking ‘‘residence’’ in paragraph (3) (as

11 redesignated by subsection (a)) and inserting ‘‘prop12 erty’’,

13 (2) by striking ‘‘Principal Residences’’ in the

14 heading and inserting ‘‘Property’’, and

15 (3) by striking ‘‘(1) IN GENERAL.—’’ and insert16 ing ‘‘(1) PRINCIPAL RESIDENCES.—’’.

17 (c) EFFECTIVE DATE.—The amendments made by this

18 section shall apply to disasters declared after December 31,

19 1994, in taxable years ending after such date.
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1 Subtitle H—Exempt Organizations

2 and Charitable Reforms

3 CHAPTER 1—EXCISE TAX ON AMOUNTS OF

4 PRIVATE EXCESS BENEFITS

5 SEC. 11271. EXCISE TAXES FOR FAILURE BY CERTAIN CHAR6 ITABLE ORGANIZATIONS TO MEET CERTAIN

7 QUALIFICATION REQUIREMENTS.

8 (a) IN GENERAL.—Chapter 42 (relating to private

9 foundations and certain other tax-exempt organizations) is

10 amended by redesignating subchapter D as subchapter E

11 and by inserting after subchapter C the following new sub12 chapter:

13 ‘‘Subchapter D—Failure By Certain

14 Charitable Organizations To

15 Meet Certain Qualification Re16 quirements

‘‘Sec. 4958. Taxes on excess benefit transactions.

17 ‘‘SEC. 4958. TAXES ON EXCESS BENEFIT TRANSACTIONS.

18 ‘‘(a) INITIAL TAXES.—

19 ‘‘(1) ON THE DISQUALIFIED PERSON.—There is

20 hereby imposed on each excess benefit transaction a

21 tax equal to 25 percent of the excess benefit. The tax

22 imposed by this paragraph shall be paid by any dis23 qualified person referred to in subsection (f)(1) with

24 respect to such transaction.
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1 ‘‘(2) ON THE MANAGEMENT.—In any case in

2 which a tax is imposed by paragraph (1), there is

3 hereby imposed on the participation of any organiza4 tion manager in the excess benefit transaction, know5 ing that it is such a transaction, a tax equal to 10

6 percent of the excess benefit, unless such participation

7 is not willful and is due to reasonable cause. The tax

8 imposed by this paragraph shall be paid by any orga9 nization manager who participated in the excess ben10 efit transaction.

11 ‘‘(b) ADDITIONAL TAX ON THE DISQUALIFIED PER12 SON.—In any case in which an initial tax is imposed by

13 subsection (a)(1) on an excess benefit transaction and the

14 excess benefit involved in such transaction is not corrected

15 within the taxable period, there is hereby imposed a tax

16 equal to 200 percent of the excess benefit involved. The tax

17 imposed by this subsection shall be paid by any disqualified

18 person referred to in subsection (f)(1) with respect to such

19 transaction.

20 ‘‘(c) EXCESS BENEFIT TRANSACTION; EXCESS BENE21 FIT.—For purposes of this section—

22 ‘‘(1) EXCESS BENEFIT TRANSACTION.—

23 ‘‘(A) IN GENERAL.—The term ‘excess benefit

24 transaction’ means any transaction in which an

25 economic benefit is provided by an applicable
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1 tax-exempt organization directly or indirectly to

2 or for the use of any disqualified person if the

3 value of the economic benefit provided exceeds the

4 value of the consideration (including the per5 formance of services) received for providing such

6 benefit. For purposes of the preceding sentence,

7 an economic benefit shall not be treated as con8 sideration for the performance of services unless

9 such organization clearly indicated its intent to

10 so treat such benefit.

11 ‘‘(B) EXCESS BENEFIT.—The term ‘excess

12 benefit’ means the excess referred to in subpara13 graph (A).

14 ‘‘(2) AUTHORITY TO INCLUDE CERTAIN OTHER

15 PRIVATE INUREMENT.—To the extent provided in reg16 ulations prescribed by the Secretary, the term ‘excess

17 benefit transaction’ includes any transaction in which

18 the amount of any economic benefit provided to or for

19 the use of a disqualified person is determined in

20 whole or in part by the revenues of 1 or more activi21 ties of the organization but only if such transaction

22 results in inurement not permitted under paragraph

23 (3) or (4) of section 501(c), as the case may be. In

24 the case of any such transaction, the excess benefit
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1 shall be the amount of the inurement not so per2 mitted.

3 ‘‘(d) SPECIAL RULES.—For purposes of this section—

4 ‘‘(1) JOINT AND SEVERAL LIABILITY.—If more

5 than 1 person is liable for any tax imposed by sub6 section (a) or subsection (b), all such persons shall be

7 jointly and severally liable for such tax.

8 ‘‘(2) LIMIT FOR MANAGEMENT.—With respect to

9 any 1 excess benefit transaction, the maximum

10 amount of the tax imposed by subsection (a)(2) shall

11 not exceed $10,000.

12 ‘‘(e) APPLICABLE TAX-EXEMPT ORGANIZATION.—For

13 purposes of this subchapter, the term ‘applicable tax-exempt

14 organization’ means—

15 ‘‘(1) any organization which (without regard to

16 any excess benefit) would be described in paragraph

17 (3) or (4) of section 501(c) and exempt from tax

18 under section 501(a), and

19 ‘‘(2) any organization which was described in

20 paragraph (1) at any time during the 2-year period

21 ending on the date of the transaction.

22 Such term shall not include a private foundation (as de23 fined in section 509(a)).

24 ‘‘(f) OTHER DEFINITIONS.—For purposes of this sec25 tion—
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1 ‘‘(1) DISQUALIFIED PERSON.—The term ‘dis2 qualified person’ means, with respect to any trans3 action—

4 ‘‘(A) any person who was, at any time dur5 ing the 5-year period ending on the date of such

6 transaction, in a position to exercise substantial

7 influence over the affairs of the organization,

8 ‘‘(B) a member of the family of an individ9 ual described in subparagraph (A), and

10 ‘‘(C) a 35-percent controlled entity.

11 ‘‘(2) ORGANIZATION MANAGER.—The term ‘orga12 nization manager’ means, with respect to any appli13 cable tax-exempt organization, any officer, director,

14 or trustee of such organization (or any individual

15 having powers or responsibilities similar to those of

16 officers, directors, or trustees of the organization).

17 ‘‘(3) 35-PERCENT CONTROLLED ENTITY.—

18 ‘‘(A) IN GENERAL.—The term ‘35-percent

19 controlled entity’ means—

20 ‘‘(i) a corporation in which persons de21 scribed in subparagraph (A) or (B) of para22 graph (1) own more than 35 percent of the

23 total combined voting power,
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1 ‘‘(ii) a partnership in which such per2 sons own more than 35 percent of the prof3 its interest, and

4 ‘‘(iii) a trust or estate in which such

5 persons own more than 35 percent of the

6 beneficial interest.

7 ‘‘(B) CONSTRUCTIVE OWNERSHIP RULES.—

8 Rules similar to the rules of paragraphs (3) and

9 (4) of section 4946(a) shall apply for purposes of

10 this paragraph.

11 ‘‘(4) FAMILY MEMBERS.—The members of an in12 dividual’s family shall be determined under section

13 4946(d); except that such members also shall include

14 the brothers and sisters (whether by the whole or half

15 blood) of the individual and their spouses.

16 ‘‘(5) TAXABLE PERIOD.—The term ‘taxable pe17 riod’ means, with respect to any excess benefit trans18 action, the period beginning with the date on which

19 the transaction occurs and ending on the earliest of—

20 ‘‘(A) the date of mailing a notice of defi21 ciency under section 6212 with respect to the tax

22 imposed by subsection (a)(1), or

23 ‘‘(B) the date on which the tax imposed by

24 subsection (a)(1) is assessed.
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1 ‘‘(6) CORRECTION.—The terms ‘correction’ and

2 ‘correct’ mean, with respect to any excess benefit

3 transaction, undoing the excess benefit to the extent

4 possible, and where fully undoing the excess benefit is

5 not possible, such additional corrective action as is

6 prescribed by the Secretary by regulations.’’

7 (b) APPLICATION OF PRIVATE INUREMENT RULE TO

8 TAX-EXEMPT ORGANIZATIONS DESCRIBED IN SECTION

9 501(c)(4).—

10 (1) Paragraph (4) of section 501(c) is amended

11 by inserting ‘‘(A)’’ after ‘‘(4)’’ and by adding at the

12 end the following:

13 ‘‘(B) Subparagraph (A) shall not apply to an

14 entity unless no part of the net earnings of such en15 tity inures to the benefit of any private shareholder

16 or individual.’’

17 (2) In the case of an organization operating on

18 a cooperative basis which, before the date of the enact19 ment of this Act, was determined by the Secretary of

20 the Treasury or his delegate, to be described in section

21 501(c)(4) of the Internal Revenue Code of 1986 and

22 exempt from tax under section 501(a) of such Code,

23 the allocation or return of net margins or capital to

24 the members of such organization in accordance with

25 its incorporating statute and bylaws shall not be
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1 treated for purposes of such Code as the inurement of

2 the net earnings of such organization to the benefit of

3 any private shareholder or individual. The preceding

4 sentence shall apply only if such statute and bylaws

5 are substantially as such statute and bylaws were in

6 existence on the date of the enactment of this Act.

7 (c) TECHNICAL AND CONFORMING AMENDMENTS.—

8 (1) Subsection (e) of section 4955 is amended—

9 (A) by striking ‘‘SECTION 4945’’ in the

10 heading and inserting ‘‘SECTIONS 4945 and

11 4958’’, and

12 (B) by inserting before the period ‘‘or an ex13 cess benefit for purposes of section 4958’’.

14 (2) Subsections (a), (b), and (c) of section 4963

15 are each amended by inserting ‘‘4958,’’ after ‘‘4955,’’.

16 (3) Subsection (e) of section 6213 is amended by

17 inserting ‘‘4958 (relating to private excess benefit),’’

18 before ‘‘4971’’.

19 (4) Paragraphs (2) and (3) of section 7422(g)

20 are each amended by inserting ‘‘4958,’’ after ‘‘4955,’’.

21 (5) Subsection (b) of section 7454 is amended by

22 inserting ‘‘or whether an organization manager (as

23 defined in section 4958(f)(2)) has ‘knowingly’ partici24 pated in an excess benefit transaction (as defined in

25 section 4958(c)),’’ after ‘‘section 4912(b),’’.
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1 (6) The table of subchapters for chapter 42 is

2 amended by striking the last item and inserting the

3 following:

‘‘Subchapter D. Failure by certain charitable organizations to meet

certain qualification requirements.

‘‘Subchapter E. Abatement of first and second tier taxes in certain

cases.’’

4 (d) EFFECTIVE DATES.—

5 (1) IN GENERAL.—The amendments made by

6 this section (other than subsection (b)) shall apply to

7 excess benefit transactions occurring on or after Sep8 tember 14, 1995.

9 (2) BINDING CONTRACTS.—The amendments re10 ferred to in paragraph (1) shall not apply to any

11 benefit arising from a transaction pursuant to any

12 written contract which was binding on September 13,

13 1995, and at all times thereafter before such trans14 action occurred.

15 (3) APPLICATION OF PRIVATE INUREMENT RULE

16 TO TAX-EXEMPT ORGANIZATIONS DESCRIBED IN SEC17 TION 501(C)(4).—

18 (A) IN GENERAL.—The amendment made

19 by subsection (b) shall apply to inurement occur20 ring on or after September 14, 1995.

21 (B) BINDING CONTRACTS.—The amendment

22 made by subsection (b) shall not apply to any

23 inurement occurring before January 1, 1997,
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1 pursuant to a written contract which was bind2 ing on September 13, 1995, and at all times

3 thereafter before such inurement occurred.

4 SEC. 11272. REPORTING OF CERTAIN EXCISE TAXES AND

5 OTHER INFORMATION.

6 (a) REPORTING BY ORGANIZATIONS DESCRIBED IN

7 SECTION 501(c)(3).—Subsection (b) of section 6033 (relat8 ing to certain organizations described in section 501(c)(3))

9 is amended by striking ‘‘and’’ at the end of paragraph (9),

10 by redesignating paragraph (10) as paragraph (14), and

11 by inserting after paragraph (9) the following new para12 graphs:

13 ‘‘(10) the respective amounts (if any) of the taxes

14 paid by the organization during the taxable year

15 under the following provisions:

16 ‘‘(A) section 4911 (relating to tax on excess

17 expenditures to influence legislation),

18 ‘‘(B) section 4912 (relating to tax on dis19 qualifying lobbying expenditures of certain orga20 nizations), and

21 ‘‘(C) section 4955 (relating to taxes on po22 litical expenditures of section 501(c)(3) organiza23 tions),

24 ‘‘(11) the respective amounts (if any) of the taxes

25 paid by the organization, or any disqualified person
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1 with respect to such organization, during the taxable

2 year under section 4958 (relating to taxes on private

3 excess benefit from certain charitable organizations),

4 ‘‘(12) such information as the Secretary may re5 quire with respect to any excess benefit transaction

6 (as defined in section 4958),

7 ‘‘(13) the name of each disqualified person (as

8 defined in section 4958(f)(1)(A)) with respect to such

9 organization and such other information as the Sec10 retary may prescribe, and’’.

11 (b) ORGANIZATIONS DESCRIBED IN SECTION

12 501(c)(4).—Section 6033 is amended by redesignating sub13 section (f) as subsection (g) and by inserting after sub14 section (e) the following new subsection:

15 ‘‘(f) CERTAIN ORGANIZATIONS DESCRIBED IN SECTION

16 501(c)(4).—Every organization described in section

17 501(c)(4) which is subject to the requirements of subsection

18 (a) shall include on the return required under subsection

19 (a) the information referred to in paragraphs (11), (12) and

20 (13) of subsection (b) with respect to such organization.’’

21 (c) EFFECTIVE DATE.—The amendments made by this

22 section shall apply to returns for taxable years beginning

23 after the date of the enactment of this Act.
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1 SEC. 11273. INCREASE IN PENALTIES ON EXEMPT ORGANI2 ZATIONS FOR FAILURE TO FILE COMPLETE

3 AND TIMELY ANNUAL RETURNS.

4 (a) IN GENERAL.—Subparagraph (A) of section

5 6652(c)(1) (relating to annual returns under section 6033)

6 is amended by striking ‘‘$10’’ and inserting ‘‘$20’’ and by

7 striking ‘‘$5,000’’ and inserting ‘‘$10,000’’.

8 (b) LARGER PENALTY ON ORGANIZATIONS HAVING

9 GROSS RECEIPTS IN EXCESS OF $1,000,000.—Subpara10 graph (A) of section 6652(c)(1) is amended by adding at

11 the end the following new sentence: ‘‘In the case of an orga12 nization having gross receipts exceeding $1,000,000 for any

13 year, with respect to the return required under section 6033

14 for such year, the first sentence of this subparagraph shall

15 be applied by substituting ‘$100’ for ‘$20’ and, in lieu of

16 applying the second sentence of this subparagraph, the max17 imum penalty under this subparagraph shall not exceed

18 $50,000.’’

19 (c) EFFECTIVE DATE.—The amendments made by this

20 section shall apply to returns for taxable years ending on

21 or after December 31, 1995.

22 CHAPTER 2—OTHER PROVISIONS

23 SEC. 11276. COOPERATIVE SERVICE ORGANIZATIONS FOR

24 CERTAIN FOUNDATIONS.

25 (a) IN GENERAL.—Section 501 (relating to exemption

26 from tax on corporations, certain trusts, etc.) is amended
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1 by redesignating subsection (n) as subsection (o) and by in2 serting after subsection (m) the following new subsection:

3 ‘‘(n) COOPERATIVE SERVICE ORGANIZATIONS FOR

4 CERTAIN FOUNDATIONS.—

5 ‘‘(1) IN GENERAL.—For purposes of this title, if

6 an organization—

7 ‘‘(A) is organized and operated solely for

8 purposes referred to in subsection (f)(1),

9 ‘‘(B) is composed solely of members which

10 are exempt from taxation under subsection (a)

11 and are—

12 ‘‘(i) private foundations, or

13 ‘‘(ii) community foundations as to

14 which section 170(b)(1)(A)(vi) applies,

15 ‘‘(C) has at least 20 members,

16 ‘‘(D) does not at any time after the second

17 taxable year beginning after the date of its orga18 nization or, if later, beginning after the date of

19 the enactment of this subsection, have a member

20 which holds more than 10 percent (by value) of

21 the interests in the organization,

22 ‘‘(E) is organized and controlled by its

23 members but is not controlled by any one mem24 ber and does not have a member which controls

25 another member of the organization, and
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1 ‘‘(F) permits members of the organization to

2 require the dismissal of any of the organization’s

3 investment advisers, following reasonable notice,

4 if members holding a majority of interest in the

5 account managed by such adviser vote to remove

6 such adviser,

7 then such organization shall be treated as an organi8 zation organized and operated exclusively for chari9 table purposes.

10 ‘‘(2) TREATMENT OF INCOME OF MEMBERS.—If

11 any member of an organization described in para12 graph (1) is a private foundation (other than an ex13 empt operating foundation, as defined in section

14 4940(d)), such private foundation’s allocable share of

15 the capital gain net income and gross investment in16 come of the organization for any taxable year of the

17 organization shall be treated, for purposes of section

18 4940, as capital gain net income and gross invest19 ment income of such private foundation (whether or

20 not distributed to such foundation) for the taxable

21 year of such private foundation with or within which

22 the taxable year of the organization described in

23 paragraph (1) ends (and such private foundation

24 shall take into account its allocable share of the de-
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1 ductions referred to in section 4940(c)(3) of the orga2 nization).

3 ‘‘(3) APPLICABLE EXCISE TAXES.—Subchapter A

4 of chapter 42 (other than sections 4940 and 4942)

5 shall apply to any organization described in para6 graph (1).’’.

7 (b) CONFORMING AMENDMENTS.—

8 (1) Section 4945(d) is amended by adding at the

9 end the following new flush sentence:

10 ‘‘Paragraph (4)(B) shall not apply to a grant to an organi11 zation described in section 501(n).’’

12 (2) Section 4942(g)(1)(A) is amended by insert13 ing ‘‘or an organization described in section 501(n)’’

14 after ‘‘subsection (j)(3))’’.

15 (c) EFFECTIVE DATE.—The amendments made by this

16 section shall apply to taxable years ending after December

17 31, 1995.

18 SEC. 11277. EXCLUSION FROM UNRELATED BUSINESS TAX19 ABLE INCOME FOR CERTAIN SPONSORSHIP

20 PAYMENTS.

21 (a) IN GENERAL.—Section 513 (relating to unrelated

22 trade or business income) is amended by adding at the end

23 the following new subsection:

24 ‘‘(i) TREATMENT OF CERTAIN SPONSORSHIP PAY25 MENTS.—
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1 ‘‘(1) IN GENERAL.—The term ‘unrelated trade or

2 business’ does not include the activity of soliciting

3 and receiving qualified sponsorship payments.

4 ‘‘(2) QUALIFIED SPONSORSHIP PAYMENTS.—For

5 purposes of this subsection—

6 ‘‘(A) IN GENERAL.—The term ‘qualified

7 sponsorship payment’ means any payment made

8 by any person engaged in a trade or business

9 with respect to which there is no arrangement or

10 expectation that such person will receive any

11 substantial return benefit other than the use or

12 acknowledgement of the name or logo (or product

13 lines) of such person’s trade or business in con14 nection with the activities of the organization

15 that receives such payment. Such a use or ac16 knowledgement does not include advertising such

17 person’s products or services (including messages

18 containing qualitative or comparative language,

19 price information or other indications of savings

20 or value, an endorsement, or an inducement to

21 purchase, sell, or use such products or services).

22 ‘‘(B) LIMITATIONS.—

23 ‘‘(i) CONTINGENT PAYMENTS.—The

24 term ‘qualified sponsorship payment’ does

25 not include any payment if the amount of
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1 such payment is contingent upon the level

2 of attendance at one or more events, broad3 cast ratings, or other factors indicating the

4 degree of public exposure to one or more

5 events.

6 ‘‘(ii) ACKNOWLEDGEMENTS OR ADVER7 TISING IN PERIODICALS.—The term ‘quali8 fied sponsorship payment’ does not include

9 any payment which entitles the payor to an

10 acknowledgement or advertising in regu11 larly scheduled and printed material pub12 lished by or on behalf of the payee organiza13 tion that is not related to and primarily

14 distributed in connection with a specific

15 event conducted by the payee organization.

16 ‘‘(3) ALLOCATION OF PORTIONS OF SINGLE PAY17 MENT.—For purposes of this subsection, to the extent

18 that a portion of a payment would (if made as a sep19 arate payment) be a qualified sponsorship payment,

20 such portion of such payment and the other portion

21 of such payment shall be treated as separate pay22 ments.’’.

23 (b) EFFECTIVE DATE.—The amendment made by this

24 section shall apply to payments solicited or received after

25 December 31, 1995.
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1 SEC. 11278. TREATMENT OF DUES PAID TO AGRICULTURAL

2 OR HORTICULTURAL ORGANIZATIONS.

3 (a) GENERAL RULE.—Section 512 (defining unrelated

4 business taxable income) is amended by adding at the end

5 the following new subsection:

6 ‘‘(d) TREATMENT OF DUES OF AGRICULTURAL OR

7 HORTICULTURAL ORGANIZATIONS.—

8 ‘‘(1) IN GENERAL.—If—

9 ‘‘(A) an agricultural or horticultural orga10 nization described in section 501(c)(5) requires

11 annual dues to be paid in order to be a member

12 of such organization, and

13 ‘‘(B) the amount of such required annual

14 dues does not exceed $100,

15 in no event shall any portion of such dues be treated

16 as derived by such organization from an unrelated

17 trade or business by reason of any benefits or privi18 leges to which members of such organization are enti19 tled.

20 ‘‘(2) INDEXATION OF $100 AMOUNT.—In the case

21 of any taxable year beginning in a calendar year

22 after 1995, the $100 amount in paragraph (1) shall

23 be increased by an amount equal to—

24 ‘‘(A) $100, multiplied by

25 ‘‘(B) the cost-of-living adjustment deter26 mined under section 1(f)(3) for the calendar year
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1 in which the taxable year begins, by substituting

2 ‘calendar year 1994’ for ‘calendar year 1992’ in

3 subparagraph (B) thereof.

4 ‘‘(3) DUES.—For purposes of this subsection, the

5 term ‘dues’ means any payment required to be made

6 in order to be recognized by the organization as a

7 member of the organization.’’.

8 (b) EFFECTIVE DATE.—The amendment made by this

9 section shall apply to taxable years beginning after Decem10 ber 31, 1994.

11 SEC. 11279. REPEAL OF CREDIT FOR CONTRIBUTIONS TO

12 COMMUNITY DEVELOPMENT CORPORATIONS.

13 (a) IN GENERAL.—Section 13311 of the Revenue Rec14 onciliation Act of 1993 (relating to credit for contributions

15 to certain community development corporations) is hereby

16 repealed.

17 (b) EFFECTIVE DATE.—The amendment made by this

18 section shall apply to contributions made after the date of

19 the enactment of this Act (other than contributions made

20 pursuant to a legally enforceable agreement which is effect

21 on the date of the enactment of this Act).
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1 Subtitle I—Tax Reform and Other

2 Provisions

3 CHAPTER 1—PROVISIONS RELATING TO

4 BUSINESSES

5 SEC. 11301. TAX TREATMENT OF CERTAIN EXTRAORDINARY

6 DIVIDENDS.

7 (a) TREATMENT OF EXTRAORDINARY DIVIDENDS IN

8 EXCESS OF BASIS.—Paragraph (2) of section 1059(a) (re9 lating to corporate shareholder’s basis in stock reduced by

10 nontaxed portion of extraordinary dividends) is amended

11 to read as follows:

12 ‘‘(2) AMOUNTS IN EXCESS OF BASIS.—If the

13 nontaxed portion of such dividends exceeds such basis,

14 such excess shall be treated as gain from the sale or

15 exchange of such stock for the taxable year in which

16 the extraordinary dividend is received.’’.

17 (b) TREATMENT OF REDEMPTIONS WHERE OPTIONS

18 INVOLVED.—Paragraph (1) of section 1059(e) (relating to

19 treatment of partial liquidations and non-pro rata redemp20 tions) is amended to read as follows:

21 ‘‘(1) TREATMENT OF PARTIAL LIQUIDATIONS AND

22 CERTAIN REDEMPTIONS.—Except as otherwise pro23 vided in regulations—

24 ‘‘(A) REDEMPTIONS.—In the case of any re25 demption of stock—
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1 ‘‘(i) which is part of a partial liquida2 tion (within the meaning of section 302(e))

3 of the redeeming corporation,

4 ‘‘(ii) which is not pro rata as to all

5 shareholders, or

6 ‘‘(iii) which would not have been treat7 ed (in whole or in part) as a dividend if

8 any options had not been taken into ac9 count under section 318(a)(4),

10 any amount treated as a dividend with respect

11 to such redemption shall be treated as an ex12 traordinary dividend to which paragraphs (1)

13 and (2) of subsection (a) apply without regard

14 to the period the taxpayer held such stock. In the

15 case of a redemption described in clause (iii),

16 only the basis in the stock redeemed shall be

17 taken into account under subsection (a).

18 ‘‘(B) REORGANIZATIONS, ETC.—An ex19 change described in section 356(a)(1) which is

20 treated as a dividend under section 356(a)(2)

21 shall be treated as a redemption of stock for pur22 poses of applying subparagraph (A).’’.

23 (c) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to distributions after May 3,

3 1995.

4 (2) TRANSITION RULE.—The amendments made

5 by this section shall not apply to any distribution

6 made pursuant to the terms of—

7 (A) a written binding contract in effect on

8 May 3, 1995, and at all times thereafter before

9 such distribution, or

10 (B) a tender offer outstanding on May 3,

11 1995.

12 (3) CERTAIN DIVIDENDS NOT PURSUANT TO CER13 TAIN REDEMPTIONS.—In determining whether the

14 amendment made by subsection (a) applies to any ex15 traordinary dividend other than a dividend treated as

16 an extraordinary dividend under section 1059(e)(1) of

17 the Internal Revenue Code of 1986 (as amended by

18 this Act), paragraphs (1) and (2) shall be applied by

19 substituting ‘‘September 13, 1995’’ for ‘‘May 3,

20 1995’’.

21 SEC. 11302. REGISTRATION OF CONFIDENTIAL CORPORATE

22 TAX SHELTERS.

23 (a) IN GENERAL.—Section 6111 (relating to registra24 tion of tax shelters) is amended by redesignating subsections
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1 (d) and (e) as subsections (e) and (f), respectively, and by

2 inserting after subsection (c) the following new subsection:

3 ‘‘(d) CERTAIN CONFIDENTIAL ARRANGEMENTS TREAT4 ED AS TAX SHELTERS.—

5 ‘‘(1) IN GENERAL.—For purposes of this section,

6 the term ‘tax shelter’ includes any entity, plan, ar7 rangement, or transaction—

8 ‘‘(A) a significant purpose of the structure

9 of which is the avoidance or evasion of Federal

10 income tax for a direct or indirect participant

11 which is a corporation,

12 ‘‘(B) which is offered to any potential par13 ticipant under conditions of confidentiality, and

14 ‘‘(C) for which the tax shelter promoters

15 may receive fees in excess of $100,000 in the ag16 gregate.

17 ‘‘(2) CONDITIONS OF CONFIDENTIALITY.—For

18 purposes of paragraph (1)(B), an offer is under con19 ditions of confidentiality if—

20 ‘‘(A) the potential participant to whom the

21 offer is made (or any other person acting on be22 half of such participant) has an understanding

23 or agreement with or for the benefit of any pro24 moter of the tax shelter that such participant (or

25 such other person) will limit disclosure of the tax
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1 shelter or any significant tax features of the tax

2 shelter, or

3 ‘‘(B) any promoter of the tax shelter—

4 ‘‘(i) claims, knows, or has reason to

5 know,

6 ‘‘(ii) knows or has reason to know that

7 any other person (other than the potential

8 participant) claims, or

9 ‘‘(iii) causes another person to claim,

10 that the tax shelter (or any aspect thereof) is

11 proprietary to any person other than the poten12 tial participant or is otherwise protected from

13 disclosure to or use by others.

14 For purposes of this subsection, the term ‘promoter’

15 means any person or any related person (within the

16 meaning of section 267 or 707) who participates in

17 the organization, management, or sale of the tax shel18 ter.

19 ‘‘(3) PERSONS OTHER THAN PROMOTER RE20 QUIRED TO REGISTER IN CERTAIN CASES.—

21 ‘‘(A) IN GENERAL.—If—

22 ‘‘(i) the requirements of subsection (a)

23 are not met with respect to any tax shelter

24 (as defined in paragraph (1)) by any tax

25 shelter promoter, and
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1 ‘‘(ii) no tax shelter promoter is a Unit2 ed States person,

3 then each United States person who discussed

4 participation in such shelter shall register such

5 shelter under subsection (a).

6 ‘‘(B) EXCEPTION.—Subparagraph (A) shall

7 not apply to a United States person who dis8 cussed participation in a tax shelter if—

9 ‘‘(i) such person notified the promoter

10 in writing (not later than the close of the

11 90th day after the day on which such dis12 cussions began) that such person would not

13 participate in such shelter, and

14 ‘‘(ii) such person does not participate

15 in such shelter.

16 ‘‘(4) OFFER TO PARTICIPATE TREATED AS OFFER

17 FOR SALE.—For purposes of subsections (a) and (b),

18 an offer to participate in a tax shelter (as defined in

19 paragraph (1)) shall be treated as an offer for sale.’’.

20 (b) PENALTY.—Subsection (a) of section 6707 (relating

21 to failure to furnish information regarding tax shelters) is

22 amended by adding at the end the following new paragraph:

23 ‘‘(3) CONFIDENTIAL ARRANGEMENTS.—

24 ‘‘(A) IN GENERAL.—In the case of a tax

25 shelter (as defined in section 6111(d)), the pen-
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1 alty imposed under paragraph (1) shall be an

2 amount equal to the greater of—

3 ‘‘(i) 50 percent of the fees paid to any

4 promoter of the tax shelter with respect to

5 offerings made before the date such shelter is

6 registered under section 6111, or

7 ‘‘(ii) $10,000.

8 Clause (i) shall be applied by substituting ‘75

9 percent’ for ‘50 percent’ in the case of an inten10 tional failure or act described in paragraph (1).

11 ‘‘(B) SPECIAL RULE FOR PARTICIPANTS RE12 QUIRED TO REGISTER SHELTER.—In the case of

13 a person required to register such a tax shelter

14 by reason of section 6111(d)(3)—

15 ‘‘(i) such person shall be required to

16 pay the penalty under paragraph (1) only

17 if such person actually participated in such

18 shelter,

19 ‘‘(ii) the amount of such penalty shall

20 be determined by taking into account under

21 subparagraph (A)(i) only the fees paid by

22 such person, and

23 ‘‘(iii) such penalty shall be in addition

24 to the penalty imposed on any other person

25 for failing to register such shelter.’’.
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1 (c) CONFORMING AMENDMENTS.—

2 (1) Paragraph (2) of section 6707(a) is amended

3 by striking ‘‘The penalty’’ and inserting ‘‘Except as

4 provided in paragraph (3), the penalty’’.

5 (2) Subparagraph (A) of section 6707(a)(1) is

6 amended by striking ‘‘paragraph (2)’’ and inserting

7 ‘‘paragraph (2) or (3), as the case may be’’.

8 (d) EFFECTIVE DATE.—The amendments made by this

9 section shall apply to any tax shelter (as defined in section

10 6111(d) of the Internal Revenue Code of 1986, as amended

11 by this section) interests in which are offered to potential

12 participants after the Secretary of the Treasury prescribes

13 guidance with respect to meeting requirements added by

14 such amendments.

15 SEC. 11303. DENIAL OF DEDUCTION FOR INTEREST ON

16 LOANS WITH RESPECT TO COMPANY-OWNED

17 INSURANCE.

18 (a) IN GENERAL.—Paragraph (4) of section 264(a) is

19 amended—

20 (1) by inserting ‘‘, or any endowment or annuity

21 contracts owned by the taxpayer covering any indi22 vidual,’’ after ‘‘the life of any individual’’, and

23 (2) by striking all that follows ‘‘carried on by the

24 taxpayer’’ and inserting a period.
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1 (b) EXCEPTION FOR CONTRACTS RELATING TO KEY

2 PERSONS; PERMISSIBLE INTEREST RATES.—Section 264 is

3 amended—

4 (1) by striking ‘‘Any’’ in subsection (a)(4) and

5 inserting ‘‘Except as provided in subsection (d), any’’,

6 and

7 (2) by adding at the end the following new sub8 section:

9 ‘‘(d) SPECIAL RULES FOR APPLICATION OF SUB10 SECTION (a)(4).—

11 ‘‘(1) EXCEPTION FOR KEY PERSONS.—Subsection

12 (a)(4) shall not apply to any interest paid or accrued

13 on any indebtedness with respect to policies or con14 tracts covering an individual who is a key person to

15 the extent that the aggregate amount of such indebted16 ness with respect to policies and contracts covering

17 such individual does not exceed $50,000.

18 ‘‘(2) INTEREST RATE CAP ON KEY PERSONS AND

19 PRE-1986 CONTRACTS.—

20 ‘‘(A) IN GENERAL.—No deduction shall be

21 allowed by reason of paragraph (1) or the last

22 sentence of subsection (a) with respect to interest

23 paid or accrued for any month to the extent the

24 amount of such interest exceeds the amount
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1 which would have been determined if the appli2 cable rate of interest were used for such month.

3 ‘‘(B) APPLICABLE RATE OF INTEREST.—For

4 purposes of subparagraph (A)—

5 ‘‘(i) IN GENERAL.—The applicable rate

6 of interest for any month is the rate of in7 terest described as Moody’s Corporate Bond

8 Yield Average-Monthly Average Corporates

9 as published by Moody’s Investors Service,

10 Inc., or any successor thereto, for such

11 month.

12 ‘‘(ii) PRE-1986 CONTRACT.—In the case

13 of indebtedness on a contract to which the

14 last sentence of subsection (a) applies—

15 ‘‘(I) which is a contract providing

16 a fixed rate of interest, the applicable

17 rate of interest for any month shall be

18 the Moody’s rate described in clause (i)

19 for the month in which the contract

20 was purchased, or

21 ‘‘(II) which is a contract provid22 ing a variable rate of interest, the ap23 plicable rate of interest for any month

24 in an applicable period shall be such
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1 Moody’s rate for the last month preced2 ing such period.

3 For purposes of subclause (II), the taxpayer

4 shall elect an applicable period for such

5 contract on its return of tax imposed by

6 this chapter for its first taxable year ending

7 on or after October 13, 1995. Such applica8 ble period shall be for any number of

9 months (not greater than 12) specified in

10 the election and may not be changed by the

11 taxpayer without the consent of the Sec12 retary.

13 ‘‘(3) KEY PERSON.—For purposes of paragraph

14 (1), the term ‘key person’ means an officer or 20-per15 cent owner, except that the number of individuals who

16 may be treated as key persons with respect to any

17 taxpayer shall not exceed the greater of—

18 ‘‘(A) 5 individuals, or

19 ‘‘(B) the lesser of 5 percent of the total offi20 cers and employees of the taxpayer or 10 indi21 viduals.

22 ‘‘(4) 20-PERCENT OWNER.—For purposes of this

23 subsection, the term ‘20-percent owner’ means—

24 ‘‘(A) if the taxpayer is a corporation, any

25 person who owns directly 20 percent or more of
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1 the outstanding stock of the corporation or stock

2 possessing 20 percent or more of the total com3 bined voting power of all stock of the corpora4 tion, or

5 ‘‘(B) if the taxpayer is not a corporation,

6 any person who owns 20 percent or more of the

7 capital or profits interest in the employer.

8 ‘‘(5) AGGREGATION RULES.—

9 ‘‘(A) IN GENERAL.—For purposes of para10 graph (4)(A) and applying the $50,000 limita11 tion in paragraph (1)—

12 ‘‘(i) all members of a controlled group

13 shall be treated as 1 taxpayer, and

14 ‘‘(ii) such limitation shall be allocated

15 among the members of such group in such

16 manner as the Secretary may prescribe.

17 ‘‘(B) CONTROLLED GROUP.—For purposes

18 of this paragraph, all persons treated as a single

19 employer under subsection (a) or (b) of section

20 52 or subsection (m) or (o) of section 414 shall

21 be treated as members of a controlled group.’’.

22 (c) EFFECTIVE DATES.—

23 (1) IN GENERAL.—The amendments made by

24 this section shall apply to interest paid or accrued

25 after December 31, 1995.
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1 (2) TRANSITION RULE FOR EXISTING INDEBTED2 NESS.—

3 (A) IN GENERAL.—In the case of—

4 (i) indebtedness incurred before Janu5 ary 1, 1996, or

6 (ii) indebtedness incurred before Janu7 ary 1, 1997 with respect to any contract or

8 policy entered into in 1994 or 1995,

9 the amendments made by this section shall not

10 apply to qualified interest paid or accrued on

11 such indebtedness after October 13, 1995, and be12 fore January 1, 1999.

13 (B) QUALIFIED INTEREST.—For purposes of

14 subparagraph (A), the qualified interest with re15 spect to any indebtedness for any month is the

16 amount of interest which would be paid or ac17 crued for such month on such indebtedness if—

18 (i) in the case of any interest paid or

19 accrued after December 31, 1995, indebted20 ness with respect to no more than 20,000

21 insured individuals were taken into ac22 count, and

23 (ii) the lesser of the following rates of

24 interest were used for such month:
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1 (I) The rate of interest specified

2 under the terms of the indebtedness as

3 in effect on October 13, 1995 (and

4 without regard to modification of such

5 terms after such date).

6 (II) The applicable percentage

7 rate of interest described as Moody’s

8 Corporate Bond Yield Average-Monthly

9 Average Corporates as published by

10 Moody’s Investors Service, Inc., or any

11 successor thereto, for such month.

12 For purposes of clause (i), all persons treated as

13 a single employer under subsection (a) or (b) of

14 section 52 of the Internal Revenue Code of 1986

15 or subsection (m) or (o) of section 414 of such

16 Code shall be treated as one person.

17 (C) APPLICABLE PERCENTAGE.—For pur18 poses of subparagraph (B), the applicable per19 centage is as follows:

For calendar year: The percentage is:

1995 ................................................................................. 100 percent

1996 ................................................................................. 90 percent

1997 ................................................................................. 80 percent

1998 ................................................................................. 70 percent.

20 (3) SPECIAL RULE FOR GRANDFATHERED CON21 TRACTS.—This section shall not apply to any con22 tract purchased on or before June 20, 1986, except

23 that section 264(d)(2) of the Internal Revenue Code of
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1 1986 shall apply to interest paid or accrued after Oc2 tober 13, 1995.

3 (d) SPREAD OF INCOME INCLUSION ON SURRENDER,

4 ETC. OF CONTRACTS.—

5 (1) IN GENERAL.—If any amount is received

6 under any life insurance policy or endowment or an7 nuity contract described in paragraph (4) of section

8 264(a) of the Internal Revenue Code of 1986—

9 (A) on the complete surrender, redemption,

10 or maturity of such policy or contract during

11 calendar year 1996, 1997, or 1998, or

12 (B) in full discharge during any such cal13 endar year of the obligation under the policy or

14 contract which is in the nature of a refund of the

15 consideration paid for the policy or contract,

16 then (in lieu of any other inclusion in gross income)

17 such amount shall be includible in gross income rat18 ably over the 4-taxable year period beginning with the

19 taxable year such amount would (but for this para20 graph) be includible. The preceding sentence shall

21 only apply to the extent the amount is includible in

22 gross income for the taxable year in which the event

23 described in subparagraph (A) or (B) occurs.

24 (2) SPECIAL RULES FOR APPLYING SECTION

25 264.—A contract shall not be treated as—
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1 (A) failing to meet the requirement of sec2 tion 264(c)(1) of the Internal Revenue Code of

3 1986, or

4 (B) a single premium contract under sec5 tion 264(b)(1) of such Code,

6 solely by reason of an occurrence described in sub7 paragraph (A) or (B) of paragraph (1) of this sub8 section or solely by reason of no additional premiums

9 being received under the contract by reason of a lapse

10 occurring after October 13, 1995.

11 (3) SPECIAL RULE FOR DEFERRED ACQUISITION

12 COSTS.—In the case of the occurrence of any event de13 scribed in subparagraph (A) or (B) of paragraph (1)

14 of this subsection with respect to any policy or con15 tract—

16 (A) section 848 of the Internal Revenue

17 Code of 1986 shall not apply to the unamortized

18 balance (if any) of the specified policy acquisi19 tion expenses attributable to such policy or con20 tract immediately before the insurance compa21 ny’s taxable year in which such event occurs,

22 and

23 (B) there shall be allowed as a deduction to

24 such company for such taxable year under chap-
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1 ter 1 of such Code an amount equal to such

2 unamortized balance.

3 SEC. 11304. TERMINATION OF SUSPENSE ACCOUNTS FOR

4 FAMILY CORPORATIONS REQUIRED TO USE

5 ACCRUAL METHOD OF ACCOUNTING.

6 (a) IN GENERAL.—Subsection (i) of section 447 (relat7 ing to method of accounting for corporations engaged in

8 farming) is amended by adding at the end the following

9 new paragraph:

10 ‘‘(7) TERMINATION.—

11 ‘‘(A) IN GENERAL.—No suspense account

12 may be established under this subsection by any

13 corporation required by this section to change its

14 method of accounting for any taxable year end15 ing after September 13, 1995.

16 ‘‘(B) 20-YEAR PHASEOUT OF EXISTING SUS17 PENSE ACCOUNTS.—Each suspense account

18 under this subsection shall be reduced (but not

19 below zero) for each of the first 20 taxable years

20 beginning after September 13, 1995, by an

21 amount equal to the applicable portion of such

22 account. Any reduction in a suspense account

23 under this paragraph shall be included in gross

24 income for the taxable year of the reduction. The

25 amount of the reduction required under this
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1 paragraph for any taxable year shall be reduced

2 (but not below zero) by the amount of any reduc3 tion required for such taxable year under any

4 other provision of this subsection.

5 ‘‘(C) APPLICABLE PORTION.—For purposes

6 of subparagraph (B), the term ‘applicable por7 tion’ means, for any taxable year, the amount

8 which would ratably reduce the amount in the

9 account (after taking into account prior reduc10 tions) to zero over the period consisting of such

11 taxable year and the remaining taxable years in

12 such first 20 taxable years.’’.

13 (b) EFFECTIVE DATE.—The amendment made by this

14 section shall apply to taxable years ending after September

15 13, 1995.

16 SEC. 11305. TERMINATION OF PUERTO RICO AND POSSES17 SION TAX CREDIT.

18 (a) IN GENERAL.—Section 936 is amended by adding

19 at the end the following new subsection:

20 ‘‘(j) TERMINATION.—

21 ‘‘(1) IN GENERAL.—Except as otherwise provided

22 in this subsection, this section shall not apply to any

23 taxable year beginning after December 31, 1995.
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1 ‘‘(2) TRANSITION RULES FOR ACTIVE BUSINESS

2 INCOME CREDIT.—Except as provided in paragraph

3 (3)—

4 ‘‘(A) IN GENERAL.—In the case of an exist5 ing credit claimant to which subsection (a)(4)(B)

6 does not apply, the credit determined under sub7 section (a)(1)(A) shall be allowed for taxable

8 years beginning after December 31, 1995, and

9 before January 1, 2002.

10 ‘‘(B) SPECIAL RULE FOR REDUCED CRED11 IT.—

12 ‘‘(i) IN GENERAL.—In the case of an

13 existing credit claimant to which subsection

14 (a)(4)(B) applies, the credit determined

15 under subsection (a)(1)(A) shall be allowed

16 for taxable years beginning after December

17 31, 1995, and before January 1, 1998.

18 ‘‘(ii) ELECTION IRREVOCABLE AFTER

19 1997.—An election under subsection

20 (a)(4)(B)(iii) which is in effect for the tax21 payer’s last taxable year beginning before

22 1997 may not be revoked unless it is re23 voked for the taxpayer’s first taxable year

24 beginning in 1997 and all subsequent tax25 able years.
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1 ‘‘(3) ADDITIONAL RESTRICTED CREDIT.—

2 ‘‘(A) IN GENERAL.—In the case of an exist3 ing credit claimant—

4 ‘‘(i) the credit under subsection

5 (a)(1)(A) shall be allowed for the period be6 ginning with the first taxable year after the

7 last taxable year to which subparagraph (A)

8 or (B) of paragraph (2), whichever is ap9 propriate, applied and ending with the last

10 taxable year beginning before January 1,

11 2006, except that

12 ‘‘(ii) the aggregate amount of taxable

13 income taken into account under subsection

14 (a)(1)(A) for any such taxable year shall

15 not exceed the adjusted base period income

16 of such claimant.

17 ‘‘(B) COORDINATION WITH SUBSECTION

18 (a)(4).—The amount of income described in sub19 section (a)(1)(A) which is taken into account in

20 applying subsection (a)(4) shall be such income

21 as reduced under this paragraph.

22 ‘‘(4) ADJUSTED BASE PERIOD INCOME.—For

23 purposes of paragraph (3)—

24 ‘‘(A) IN GENERAL.—The term ‘adjusted base

25 period income’ means the average of the infla-
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1 tion-adjusted possession incomes of the corpora2 tion for each base period year.

3 ‘‘(B) INFLATION-ADJUSTED POSSESSION IN4 COME.—For purposes of subparagraph (A), the

5 inflation-adjusted possession income of any cor6 poration for any base period year shall be an

7 amount equal to the sum of—

8 ‘‘(i) the possession income of such cor9 poration for such base period year, plus

10 ‘‘(ii) such possession income multiplied

11 by the inflation adjustment percentage for

12 such base period year.

13 ‘‘(C) INFLATION ADJUSTMENT PERCENT14 AGE.—For purposes of subparagraph (B), the in15 flation adjustment percentage for any base pe16 riod year means the percentage (if any) by

17 which—

18 ‘‘(i) the CPI for 1995, exceeds

19 ‘‘(ii) the CPI for the calendar year in

20 which the base period year for which the de21 termination is being made ends.

22 For purposes of the preceding sentence, the CPI

23 for any calendar year is the CPI (as defined in

24 section 1(f)(5)) for such year under section

25 1(f)(4).
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1 ‘‘(D) INCREASE IN INFLATION ADJUSTMENT

2 PERCENTAGE FOR GROWTH DURING BASE

3 YEARS.—The inflation adjustment percentage

4 (determined under subparagraph (C) without re5 gard to this subparagraph) for each of the 5 tax6 able years referred to in paragraph (5)(A) shall

7 be increased by—

8 ‘‘(i) 5 percentage points in the case of

9 a taxable year ending during the 1-year pe10 riod ending on October 13, 1995;

11 ‘‘(ii) 10.25 percentage points in the

12 case of a taxable year ending during the 1-

13 year period ending on October 13, 1994;

14 ‘‘(iii) 15.76 percentage points in the

15 case of a taxable year ending during the 1-

16 year period ending on October 13, 1993;

17 ‘‘(iv) 21.55 percentage points in the

18 case of a taxable year ending during the 1-

19 year period ending on October 13, 1992;

20 and

21 ‘‘(v) 27.63 percentage points in the

22 case of a taxable year ending during the 1-

23 year period ending on October 13, 1991.

24 ‘‘(5) BASE PERIOD YEAR.—For purposes of this

25 subsection—
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1 ‘‘(A) IN GENERAL.—The term ‘base period

2 year’ means each of 3 taxable years which are

3 among the 5 most recent taxable years of the cor4 poration ending before October 14, 1995, deter5 mined by disregarding—

6 ‘‘(i) one taxable year for which the cor7 poration had the largest inflation-adjusted

8 possession income, and

9 ‘‘(ii) one taxable year for which the

10 corporation had the smallest inflation-ad11 justed possession income.

12 ‘‘(B) CORPORATIONS NOT HAVING SIGNIFI13 CANT POSSESSION INCOME THROUGHOUT 5-YEAR

14 PERIOD.—

15 ‘‘(i) IN GENERAL.—If a corporation

16 does not have significant possession income

17 for each of the most recent 5 taxable years

18 ending before October 14, 1995, then, in lieu

19 of applying subparagraph (A), the term

20 ‘base period year’ means only those taxable

21 years (of such 5 taxable years) for which the

22 corporation has significant possession in23 come; except that, if such corporation has

24 significant possession income for 4 of such
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1 5 taxable years, the rule of subparagraph

2 (A)(ii) shall apply.

3 ‘‘(ii) SPECIAL RULE.—If there is no

4 year (of such 5 taxable years) for which a

5 corporation has significant possession in6 come—

7 ‘‘(I) the term ‘base period year’

8 means the first taxable year ending on

9 or after October 14, 1995, but

10 ‘‘(II) the amount of possession in11 come for such year which is taken into

12 account under paragraph (4) shall be

13 the amount which would be determined

14 if such year were a short taxable year

15 ending on September 30, 1995.

16 ‘‘(iii) SIGNIFICANT POSSESSION IN17 COME.—For purposes of this subparagraph,

18 the term ‘significant possession income’

19 means possession income which exceeds 2

20 percent of the possession income of the tax21 payer for the taxable year (of the period of

22 6 taxable years ending with the first taxable

23 year ending on or after October 14, 1995)

24 having the greatest possession income.
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1 ‘‘(C) ELECTION TO USE ONE BASE PERIOD

2 YEAR.—

3 ‘‘(i) IN GENERAL.—At the election of

4 the taxpayer, the term ‘base period year’

5 means—

6 ‘‘(I) only the last taxable year of

7 the corporation ending in calendar

8 year 1992, or

9 ‘‘(II) a deemed taxable year which

10 includes the first ten months of cal11 endar year 1995.

12 ‘‘(ii) BASE PERIOD INCOME FOR

13 1995.—In determining the adjusted base pe14 riod income of the corporation for the

15 deemed taxable year under clause (i)(II),

16 the possession income shall be annualized

17 and shall be determined without regard to

18 any extraordinary item.

19 ‘‘(iii) ELECTION.—An election under

20 this subparagraph by any possession cor21 poration may be made only for the corpora22 tion’s first taxable year beginning after De23 cember 31, 1995, for which it is a possession

24 corporation. The rules of subclauses (II)

25 and (III) of subsection (a)(4)(B)(iii) shall
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1 apply to the election under this subpara2 graph.

3 ‘‘(D) ACQUISITIONS AND DISPOSITIONS.—

4 Rules similar to the rules of subparagraphs (A)

5 and (B) of section 41(f)(3) shall apply for pur6 poses of this subsection.

7 ‘‘(6) POSSESSION INCOME.—For purposes of this

8 subsection, the term ‘possession income’ means the in9 come referred to in subsection (a)(1)(A), except that

10 there shall not be taken into account any such income

11 from an applicable possession (as defined in para12 graph (8)(B)). In no event shall possession income be

13 treated as being less than zero.

14 ‘‘(7) SHORT YEARS.—If the current year or a

15 base period year is a short taxable year, the applica16 tion of this subsection shall be made with such

17 annualizations as the Secretary shall prescribe.

18 ‘‘(8) SPECIAL RULES FOR CERTAIN POSSES19 SIONS.—

20 ‘‘(A) IN GENERAL.—In the case of an exist21 ing credit claimant with respect to an applicable

22 possession, this section (other than the preceding

23 paragraphs of this subsection) shall apply to tax24 able years beginning after December 31, 1995,

25 and before January 1, 2006.
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1 ‘‘(B) APPLICABLE POSSESSION.—For pur2 poses of this paragraph, the term ‘applicable pos3 session’ means Guam, American Samoa, and the

4 Commonwealth of the Northern Mariana Islands.

5 ‘‘(9) EXISTING CREDIT CLAIMANT.—For purposes

6 of this subsection—

7 ‘‘(A) IN GENERAL.—The term ‘existing cred8 it claimant’ means a corporation—

9 ‘‘(i) which was actively conducting a

10 trade or business in a possession on October

11 13, 1995, and

12 ‘‘(ii) with respect to which an election

13 under this section is in effect for the cor14 poration’s taxable year which includes Octo15 ber 13, 1995.

16 ‘‘(B) NEW LINES OF BUSINESS PROHIB17 ITED.—If, after October 13, 1995, a corporation

18 which would (but for this subparagraph) be an

19 existing credit claimant adds a substantial new

20 line of business, such corporation shall cease to

21 be treated as an existing credit claimant as of

22 the close of the taxable year ending before the

23 date of such addition.

24 ‘‘(C) BINDING CONTRACT EXCEPTION.—If,

25 on October 13, 1995, and at all times thereafter,
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1 there is in effect with respect to a corporation a

2 binding contract for the acquisition of assets to

3 be used in, or for the sale of assets to be produced

4 from, a trade or business, the corporation shall

5 be treated for purposes of this paragraph as ac6 tively conducting such trade or business on Octo7 ber 13, 1995. The preceding sentence shall not

8 apply if such trade or business is not actively

9 conducted before January 1, 1996.

10 ‘‘(D) SPECIAL RULE FOR APPLICABLE POS11 SESSIONS.—In determining under paragraph (8)

12 whether a taxpayer is an existing credit claim13 ant with respect to an applicable possession, this

14 paragraph shall be applied separately with re15 spect to such possession.’’

16 (b) EFFECTIVE DATE.—The amendment made by this

17 section shall apply to taxable years beginning after Decem18 ber 31, 1995.

19 SEC. 11306. DEPRECIATION UNDER INCOME FORECAST

20 METHOD.

21 (a) GENERAL RULE.—Section 167 (relating to depre22 ciation) is amended by redesignating subsection (g) as sub23 section (h) and by inserting after subsection (f) the follow24 ing new subsection:
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1 ‘‘(g) DEPRECIATION UNDER INCOME FORECAST

2 METHOD.—

3 ‘‘(1) IN GENERAL.—If the depreciation deduction

4 allowable under this section to any taxpayer with re5 spect to any property is determined under the income

6 forecast method or any similar method—

7 ‘‘(A) in determining the amount of the de8 preciation deduction under such method, the esti9 mated income from the property shall include all

10 income earned before the close of the 10th taxable

11 year following the taxable year in which the

12 property was placed in service in connection

13 with the ultimate use of the property by, or the

14 ultimate sale of merchandise to, persons who are

15 not related persons (within the meaning of sec16 tion 267(b)) to the taxpayer,

17 ‘‘(B) the adjusted basis of the property shall

18 only include amounts with respect to which the

19 requirements of section 461(h) are satisfied,

20 ‘‘(C) the depreciation deduction under such

21 method for the 10th taxable year beginning after

22 the taxable year in which the property was

23 placed in service shall be equal to the adjusted

24 basis of such property as of the beginning of such

25 10th taxable year, and
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1 ‘‘(D) such taxpayer shall pay (or be entitled

2 to receive) interest computed under the look-back

3 method of paragraph (2) for any recomputation

4 year.

5 ‘‘(2) LOOK-BACK METHOD.—The interest com6 puted under the look-back method of this paragraph

7 for any recomputation year shall be determined by—

8 ‘‘(A) first determining the depreciation de9 ductions under this section with respect to such

10 property which would have been allowable for

11 prior taxable years if the determination of the

12 amounts so allowable had been made on the basis

13 of the sum of the following (instead of the esti14 mated income with respect to such property)—

15 ‘‘(i) the actual income from such prop16 erty for periods before the close of the recom17 putation year, and

18 ‘‘(ii) an estimate of the future income

19 with respect to such property for periods

20 after the recomputation year,

21 ‘‘(B) second, determining (solely for pur22 poses of computing such interest) the overpay23 ment or underpayment of tax for each such prior

24 taxable year which would result solely from the

25 application of subparagraph (A), and
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1 ‘‘(C) then using the adjusted overpayment

2 rate (as defined in section 460(b)(7)),

3 compounded daily, on the overpayment or

4 underpayment determined under subparagraph

5 (B).

6 For purposes of the preceding sentence, any cost in7 curred after the property is placed in service (which

8 is not treated as a separate property under para9 graph (5)) shall be taken into account by discounting

10 (using the Federal mid-term rate determined under

11 section 1274(d) as of the time such cost is incurred)

12 such cost to its value as of the date the property is

13 placed in service. The taxpayer may elect with respect

14 to any property to have the preceding sentence not

15 apply to such property.

16 ‘‘(3) EXCEPTION FROM LOOK-BACK METHOD.—

17 Paragraph (1)(D) shall not apply with respect to any

18 property which, when placed in service by the tax19 payer, had a basis of $100,000 or less.

20 ‘‘(4) RECOMPUTATION YEAR.—For purposes of

21 this subsection, except as provided in regulations, the

22 term ‘recomputation year’ means, with respect to any

23 property, the third and the 10th taxable years begin24 ning after the taxable year in which the property was

25 placed in service, unless the actual income from the
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1 property for the period before the close of such third

2 or 10th taxable year is within 10 percent of the esti3 mated income from the property for such period

4 which was taken into account under paragraph

5 (1)(A).

6 ‘‘(5) SPECIAL RULES.—

7 ‘‘(A) CERTAIN COSTS TREATED AS SEPA8 RATE PROPERTY.—For purposes of this sub9 section, the following costs shall be treated as

10 separate properties:

11 ‘‘(i) Any costs incurred with respect to

12 any property after the 10th taxable year be13 ginning after the taxable year in which the

14 property was placed in service.

15 ‘‘(ii) Any costs incurred after the prop16 erty is placed in service and before the close

17 of such 10th taxable year if such costs are

18 significant and give rise to a significant in19 crease in the income from the property

20 which was not included in the estimated in21 come from the property.

22 ‘‘(B) SYNDICATION INCOME FROM TELE23 VISION SERIES.—In the case of property which is

24 an episode in a television series, income from

25 syndicating such series shall not be required to
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1 be taken into account under this subsection be2 fore the earlier of—

3 ‘‘(i) the 4th taxable year beginning

4 after the date the first episode in such series

5 is placed in service, or

6 ‘‘(ii) the earliest taxable year in which

7 the taxpayer has an arrangement relating

8 to the future syndication of such series.

9 ‘‘(C) COLLECTION OF INTEREST.—For pur10 poses of subtitle F (other than sections 6654 and

11 6655), any interest required to be paid by the

12 taxpayer under paragraph (1) for any recom13 putation year shall be treated as an increase in

14 the tax imposed by this chapter for such year.

15 ‘‘(D) DETERMINATIONS.—For purposes of

16 paragraph (2), determinations of the amount of

17 income from any property shall be determined in

18 the same manner as for purposes of applying the

19 income forecast method; except that any income

20 from the disposition of such property shall be

21 taken into account.

22 ‘‘(E) TREATMENT OF PASS-THRU ENTI23 TIES.—Rules similar to the rules of section

24 460(b)(4) shall apply for purposes of this sub25 section.’’.
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1 (b) EFFECTIVE DATE.—

2 (1) IN GENERAL.—The amendment made by sub3 section (a) shall apply to property placed in service

4 after September 13, 1995.

5 (2) BINDING CONTRACTS.—The amendment

6 made by subsection (a) shall not apply to any prop7 erty produced or acquired by the taxpayer pursuant

8 to a written contract which was binding on Septem9 ber 13, 1995, and at all times thereafter before such

10 production or acquisition.

11 SEC. 11307. TRANSFERS OF EXCESS PENSION ASSETS.

12 (a) IN GENERAL.—Section 420 (relating to transfers

13 of excess pension assets to retiree health accounts) is amend14 ed by adding at the end the following new subsection:

15 ‘‘(f) SIMILAR RULES TO APPLY TO OTHER TRANSFERS

16 OF EXCESS PLAN ASSETS.—

17 ‘‘(1) IN GENERAL.—If there is a qualified em18 ployee benefit transfer of any excess pension assets of

19 a defined benefit plan (other than a multiemployer

20 plan) to an employer—

21 ‘‘(A) a trust which is part of such plan

22 shall not be treated as failing to meet the re23 quirements of section 401(a) solely by reason of

24 such transfer (or any other action authorized

25 under this section), and
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1 ‘‘(B) such transfer shall not be treated as—

2 ‘‘(i) an employer reversion for purposes

3 of section 4980, or

4 ‘‘(ii) a prohibited transaction for pur5 poses of section 4975.

6 The gross income of the employer shall include the

7 amount of any qualified employee benefit transfer

8 made during the taxable year.

9 ‘‘(2) QUALIFIED EMPLOYEE BENEFIT TRANS10 FER.—For purposes of this section—

11 ‘‘(A) IN GENERAL.—The term ‘qualified em12 ployee benefit transfer’ means a transfer—

13 ‘‘(i) of excess pension assets of a de14 fined benefit plan to the employer, and

15 ‘‘(ii) with respect to which—

16 ‘‘(I) the use requirements of para17 graph (3) are met, and

18 ‘‘(II) the requirements of sub19 section (c)(2)(A) are met (determined

20 by treating such transfer as a qualified

21 transfer).

22 ‘‘(B) LIMITATION ON AMOUNTS TRANS23 FERRED.—The amount of excess pension assets

24 which may be transferred in qualified employee

25 benefit transfers during any taxable year shall
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1 not exceed the amount which is reasonably esti2 mated to be the amount the employer maintain3 ing the plan will pay (whether directly or

4 through reimbursement) during the taxable year

5 for qualified current employee benefit liabilities.

6 ‘‘(C) COORDINATION WITH TRANSFERS TO

7 RETIREE HEALTH ACCOUNTS.—Such term shall

8 not include any qualified transfer (as defined in

9 subsection (b)).

10 ‘‘(D) EXPIRATION.—No transfer in any tax11 able year beginning after December 31, 2001,

12 shall be treated as a qualified employee benefit

13 transfer.

14 ‘‘(3) RESTRICTIONS ON USE OF TRANSFERRED

15 ASSETS.—

16 ‘‘(A) IN GENERAL.—Any assets transferred

17 to an employer in a qualified employee benefit

18 transfer shall be used only to pay qualified cur19 rent employee benefit liabilities for the taxable

20 year of the transfer (whether directly or through

21 reimbursement).

22 ‘‘(B) AMOUNTS NOT USED TO PAY BENE23 FITS.—An employer shall transfer to a plan an

24 amount equal to any assets transferred out of the

25 plan in a qualified employee benefit transfer
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1 which are not used as provided in subparagraph

2 (A). Such amount shall be treated in the same

3 manner as amounts are treated under subsection

4 (c)(1)(B), except that allocable income shall be

5 determined by using the Federal short-term rate

6 under section 1274(d).

7 ‘‘(C) QUALIFIED CURRENT EMPLOYEE BEN8 EFIT LIABILITIES.—For purposes of this sub9 section—

10 ‘‘(i) IN GENERAL.—The term ‘qualified

11 current employee benefit liabilities’ means,

12 with respect to any taxable year, the aggre13 gate amounts (including administrative ex14 penses) for which a deduction is allowable

15 to the employer for such taxable year with

16 respect to applicable employee benefits.

17 ‘‘(ii) APPLICABLE EMPLOYEE BENE18 FITS.—The term ‘applicable employee bene19 fits’ means—

20 ‘‘(I) contributions to a trust de21 scribed in section 401(a) which is ex22 empt from tax under section 501(a),

23 ‘‘(II) benefits under an accident

24 or health plan (within the meaning of

25 section 105),
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1 ‘‘(III) disability benefits,

2 ‘‘(IV) benefits under an edu3 cational assistance program of the em4 ployer described in section 127(b), and

5 ‘‘(V) benefits under a dependent

6 care assistance program of the em7 ployer described in section 129(d).

8 ‘‘(4) DEFINITION AND SPECIAL RULES.—For

9 purposes of this subsection—

10 ‘‘(A) EXCESS PENSION ASSETS.—The term

11 ‘excess pension assets’ has the meaning given

12 such term by subsection (e)(2).

13 ‘‘(B) COORDINATION WITH SECTION 412.—

14 In the case of a qualified employee benefit trans15 fer—

16 ‘‘(i) any assets transferred in a plan

17 year on or before the valuation date for such

18 year (and any income allocable thereto)

19 shall, for purposes of section 412, be treated

20 as assets in the plan as of the valuation

21 date for such year, and

22 ‘‘(ii) the plan shall be treated as hav23 ing a net experience loss under section

24 412(b)(2)(B)(iv) in an amount equal to the

25 amount of such transfer and for which am-
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1 ortization charges begin for the first plan

2 year after the plan year in which such

3 transfer occurs, except that such section

4 shall be applied to such amount by sub5 stituting ‘10 plan years’ for ‘5 plan years’.’’

6 (b) EXCESS ASSETS.—Section 420(e)(2) is amended to

7 read as follows:

8 ‘‘(2) EXCESS PENSION ASSETS.—The term ‘excess

9 pension assets’ means the excess (if any) of—

10 ‘‘(A) the amount determined under section

11 412(c)(7)(A)(ii), over

12 ‘‘(B) the greater of—

13 ‘‘(i) the amount determined under sec14 tion 412(c)(7)(A)(i)(II), or

15 ‘‘(ii) 125 percent of termination liabil16 ity determined under section 414(l), except

17 that the actuarial assumptions used in

18 making such determinations shall be the as19 sumptions used by the Pension Benefit

20 Guaranty Corporation for single-employer

21 plan termination purposes under regula22 tions under title IV of the Employee Retire23 ment Income Security Act of 1974.

24 The determination under the preceding sentence with

25 respect to any transfer shall be made as of the date
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1 of the transfer. No substantial changes in the regula2 tions described in clause (ii) which are made after the

3 date of the enactment of the Revenue Reconciliation

4 Act of 1995 shall be taken into account for purposes

5 of such clause.’’

6 (c) TAXPAYERS IN BANKRUPTCY MAY NOT MAKE

7 TRANSFERS.—Section 420(e) is amended by adding at the

8 end the following new paragraph:

9 ‘‘(5) EXCLUSION OF TAXPAYERS IN BANK10 RUPTCY.—No qualified transfer or qualified employee

11 benefit transfer may be made under this section by a

12 taxpayer if—

13 ‘‘(A) the taxpayer has filed, or has had filed

14 against it, a petition in a title 11 or similar

15 case (within the meaning of section 368(a)(3)),

16 and

17 ‘‘(B) such case is still pending.’’

18 (d) CONFORMING AMENDMENTS TO ERISA.—

19 (1) NOTICE.—Section 101(e) of the Employee

20 Retirement Income Security Act of 1974 (29 U.S.C.

21 1021(e)) is amended—

22 (A) by inserting ‘‘or a qualified employee

23 benefit transfer,’’ after ‘‘to a health benefits ac24 count,’’ in paragraphs (1) and (2)(A),
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1 (B) by inserting ‘‘or qualified employee ben2 efits’’ after ‘‘the amount of health benefits liabil3 ities’’ in paragraph (1),

4 (C) in paragraph (3)—

5 (i) by striking ‘‘January 1, 1995’’ and

6 inserting ‘‘the date of the enactment of the

7 Revenue Reconciliation Act of 1995’’, and

8 (ii) by striking ‘‘paragraph (1)’’ and

9 inserting ‘‘this subsection’’, and

10 (D) by striking ‘‘TO HEALTH BENEFITS AC11 COUNTS’’ in the heading.

12 (2) EXCLUSIVE BENEFIT.—Paragraph (1) of sec13 tion 403(c) of such Act (29 U.S.C. 1103(c)(1)) is

14 amended by striking ‘‘January 1, 1995’’ and insert15 ing ‘‘the date of the enactment of the Revenue Rec16 onciliation Act of 1995’’.

17 (3) EXEMPTION FROM PROHIBITED TRANS18 ACTION.—Paragraph (13) of section 408(b) of such

19 Act (29 U.S.C. 1108(b)(13)) is amended—

20 (A) by striking ‘‘retiree health account’’ and

21 inserting ‘‘health benefits account’’,

22 (B) by inserting before the period at the end

23 ‘‘, or any transfer of such assets in a taxable

24 year beginning before January 1, 2002, in a
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1 qualified employee benefit transfer permitted

2 under such section 420’’, and

3 (C) by striking ‘‘January 1, 1995’’ and in4 serting ‘‘the date of the enactment of the Revenue

5 Reconciliation Act of 1995’’.

6 (e) EFFECTIVE DATES.—

7 (1) IN GENERAL.—The amendments made by

8 this section shall apply to transfers on and after the

9 date of the enactment of this Act.

10 (2) QUALIFIED TRANSFERS.—To the extent the

11 amendments made by subsections (b), (c), and (d)

12 apply to qualified transfers under section 420 of the

13 Internal Revenue Code of 1986 (as in effect on the

14 day before the date of the enactment of this Act), such

15 amendments shall apply to transfers occurring after

16 December 31, 1995.

17 SEC. 11308. REPEAL OF EXCLUSION FOR INTEREST ON

18 LOANS USED TO ACQUIRE EMPLOYER SECU19 RITIES.

20 (a) IN GENERAL.—Section 133 (relating to interest on

21 certain loans used to acquire employer securities) is hereby

22 repealed.

23 (b) CONFORMING AMENDMENTS.—
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1 (1) Subparagraph (B) of section 291(e)(1) is

2 amended by striking clause (iv) and by redesignating

3 clause (v) as clause (iv).

4 (2) Section 812 is amended by striking sub5 section (g).

6 (3) Paragraph (5) of section 852(b) is amended

7 by striking subparagraph (C).

8 (4) Paragraph (2) of section 4978(b) is amended

9 by striking subparagraph (A) and all that follows and

10 inserting the following:

11 ‘‘(A) first from qualified securities to which

12 section 1042 applied acquired during the 3-year

13 period ending on the date of the disposition, be14 ginning with the securities first so acquired, and

15 ‘‘(B) then from any other employer securi16 ties.

17 If subsection (d) applies to a disposition, the disposi18 tion shall be treated as made from employer securities

19 in the opposite order of the preceding sentence.’’.

20 (5)(A) Section 4978B (relating to tax on disposi21 tion of employer securities to which section 133 ap22 plied) is hereby repealed.

23 (B) The table of sections for chapter 43 is

24 amended by striking the item relating to section

25 4978B.
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1 (6) Subsection (e) of section 6047 is amended by

2 striking paragraphs (1), (2), and (3) and inserting

3 the following new paragraphs:

4 ‘‘(1) any employer maintaining, or the plan ad5 ministrator (within the meaning of section 414(g)) of,

6 an employee stock ownership plan which holds stock

7 with respect to which section 404(k) applies to divi8 dends paid on such stock, or

9 ‘‘(2) both such employer or plan administrator,’’.

10 (7) Subsection (f) of section 7872 is amended by

11 striking paragraph (12).

12 (c) EFFECTIVE DATE.—

13 (1) IN GENERAL.—The amendments made by

14 this section shall apply to loans made after October

15 13, 1995.

16 (2) REFINANCINGS.—The amendments made by

17 this section shall not apply to loans made after Octo18 ber 13, 1995, to refinance securities acquisition loans

19 (determined without regard to section 133(b)(1)(B) of

20 the Internal Revenue Code of 1986, as in effect on the

21 day before the date of the enactment of this Act) made

22 on or before such date or to refinance loans described

23 in this paragraph if—
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1 (A) the refinancing loans meet the require2 ments of section 133 of such Code (as so in ef3 fect),

4 (B) immediately after the refinancing the

5 principal amount of the loan resulting from the

6 refinancing does not exceed the principal amount

7 of the refinanced loan (immediately before the re8 financing), and

9 (C) the term of such refinancing loan does

10 not extend beyond the last day of the term of the

11 original securities acquisition loan.

12 For purposes of this paragraph, the term ‘‘securities

13 acquisition loan’’ includes a loan from a corporation

14 to an employee stock ownership plan described in sec15 tion 133(b)(3) of such Code (as so in effect).

16 CHAPTER 2—LEGAL REFORMS

17 SEC. 11311. REPEAL OF EXCLUSION FOR PUNITIVE DAM18 AGES AND FOR DAMAGES NOT ATTRIBUTABLE

19 TO PHYSICAL INJURIES OR SICKNESS.

20 (a) IN GENERAL.—Paragraph (2) of section 104(a)

21 (relating to compensation for injuries or sickness) is amend22 ed to read as follows:

23 ‘‘(2) the amount of any damages (other than pu24 nitive damages) received (whether by suit or agree25 ment and whether as lump sums or as periodic pay-
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1 ments) on account of personal physical injuries or

2 physical sickness;’’.

3 (b) EMOTIONAL DISTRESS AS SUCH TREATED AS NOT

4 PHYSICAL INJURY OR PHYSICAL SICKNESS.—Section

5 104(a) is amended by striking the last sentence and insert6 ing the following new sentence: ‘‘For purposes of paragraph

7 (2), emotional distress shall not be treated as a physical

8 injury or physical sickness. The preceding sentence shall not

9 apply to an amount of damages not in excess of the amount

10 paid for medical care (described in subparagraph (A) or

11 (B) of section 213(d)(1)) attributable to emotional dis12 tress.’’.

13 (c) SPECIAL RULE FOR STATES IN WHICH ONLY PUNI14 TIVE DAMAGES MAY BE AWARDED IN WRONGFUL DEATH

15 ACTIONS.—Section 104 is amended by redesignating sub16 section (c) as subsection (d) and by inserting after sub17 section (b) the following new subsection:

18 ‘‘(c) RESTRICTION ON PUNITIVE DAMAGES NOT TO

19 APPLY IN CERTAIN CASES.—The restriction on the applica20 tion of subsection (a)(2) to punitive damages shall not

21 apply to punitive damages which—

22 ‘‘(1) are awarded in a civil action—

23 ‘‘(A) which is a wrongful death action, and

24 ‘‘(B) with respect to which applicable State

25 law (as in effect on February 1, 1996, and with-
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1 out regard to any modification after such date)

2 provides, or has been construed to provide by a

3 court of competent jurisdiction pursuant to a de4 cision issued on or before February 1, 1996, that

5 only punitive damages may be awarded in such

6 an action, and

7 ‘‘(2) would have been excludable from gross in8 come under subsection (a)(2) as in effect for amounts

9 received on December 31, 1995.

10 This subsection shall cease to apply to any civil action filed

11 on or after the first date on which the applicable State law

12 ceases to provide (or is no longer construed to provide) the

13 treatment described in paragraph (2).’’

14 (d) EFFECTIVE DATE.—

15 (1) IN GENERAL.—Except as provided in para16 graph (2), the amendments made by this section shall

17 apply to amounts received after December 31, 1995,

18 in taxable years ending after such date.

19 (2) EXCEPTION.—The amendments made by this

20 section shall not apply to any amount received under

21 a written binding agreement, court decree, or medi22 ation award in effect on (or issued on or before) Sep23 tember 13, 1995.
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1 SEC. 11312. REPORTING OF CERTAIN PAYMENTS MADE TO

2 ATTORNEYS.

3 (a) IN GENERAL.—Section 6045 (relating to returns

4 of brokers) is amended by adding at the end the following

5 new subsection:

6 ‘‘(f) RETURN REQUIRED IN THE CASE OF PAYMENTS

7 TO ATTORNEYS.—

8 ‘‘(1) IN GENERAL.—Any person engaged in a

9 trade or business and making a payment (in the

10 course of such trade or business) to which this sub11 section applies shall file a return under subsection (a)

12 and a statement under subsection (b) with respect to

13 such payment.

14 ‘‘(2) APPLICATION OF SUBSECTION.—

15 ‘‘(A) IN GENERAL.—This subsection shall

16 apply to any payment to an attorney in connec17 tion with legal services (whether or not such serv18 ices are performed for the payor).

19 ‘‘(B) EXCEPTION.—This subsection shall not

20 apply to the portion of any payment which is re21 quired to be reported under section 6041(a) (or

22 would be so required but for the dollar limitation

23 contained therein) or section 6051.’’.

24 (b) REPORTING OF ATTORNEYS’ FEES PAYABLE TO

25 CORPORATIONS.—The regulations providing an exception

26 under section 6041 of the Internal Revenue Code of 1986
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1 for payments made to corporations shall not apply to pay2 ments of attorneys’ fees.

3 (c) EFFECTIVE DATE.—The amendment made by this

4 section shall apply to payments made after December 31,

5 1996.

6 CHAPTER 3—REFORMS RELATING TO

7 NONRECOGNITION PROVISIONS

8 SEC. 11321. NO ROLLOVER OR EXCLUSION OF GAIN ON SALE

9 OF PRINCIPAL RESIDENCE WHICH IS ATTRIB10 UTABLE TO DEPRECIATION DEDUCTIONS.

11 (a) IN GENERAL.—Subsection (d) of section 1034 (re12 lating to limitations) is amended by adding at the end the

13 following new paragraph:

14 ‘‘(3) RECOGNITION OF GAIN ATTRIBUTABLE TO

15 DEPRECIATION.—Subsection (a) shall not apply to so

16 much of the gain from the sale of any residence as

17 does not exceed the portion of the depreciation adjust18 ments (as defined in section 1250(b)(3)) attributable

19 to periods after December 31, 1995, in respect of such

20 residence.’’.

21 (b) COMPARABLE TREATMENT UNDER 1-TIME EXCLU22 SION OF GAIN ON SALE OF PRINCIPAL RESIDENCE.—Sub23 section (d) of section 121 is amended by adding at the end

24 the following new paragraph:
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1 ‘‘(10) RECOGNITION OF GAIN ATTRIBUTABLE TO

2 DEPRECIATION.—

3 ‘‘(A) IN GENERAL.—Subsection (a) shall not

4 apply to so much of the gain from the sale of

5 any property as does not exceed the portion of

6 the depreciation adjustments (as defined in sec7 tion 1250(b)(3)) attributable to periods after De8 cember 31, 1995, in respect of such property.

9 ‘‘(B) COORDINATION WITH PARAGRAPH

10 (5).—If this section does not apply to gain at11 tributable to a portion of a residence by reason

12 of paragraph (5), subparagraph (A) shall not

13 apply to depreciation adjustments attributable to

14 such portion.’’.

15 (c) EFFECTIVE DATE.—The amendments made by this

16 section shall apply to taxable years ending after December

17 31, 1995.

18 SEC. 11322. NONRECOGNITION OF GAIN ON SALE OF PRIN19 CIPAL RESIDENCE BY NONCITIZENS LIMITED

20 TO NEW RESIDENCES LOCATED IN THE UNIT21 ED STATES.

22 (a) IN GENERAL.—Subsection (d) of section 1034 (re23 lating to limitations) (as amended by section 11321) is

24 amended by adding at the end the following new paragraph:
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1 ‘‘(4) NEW RESIDENCE MUST BE LOCATED IN

2 UNITED STATES IN CERTAIN CASES.—

3 ‘‘(A) IN GENERAL.—In the case of a sale of

4 an old residence by a taxpayer—

5 ‘‘(i) who is not a citizen of the United

6 States at the time of sale, and

7 ‘‘(ii) who is not a citizen or resident of

8 the United States on the date which is 2

9 years after the date of the sale of such old

10 residence,

11 subsection (a) shall apply only if the new resi12 dence is located in the United States or a posses13 sion of the United States.

14 ‘‘(B) PROPERTY HELD JOINTLY BY HUS15 BAND AND WIFE.—Subparagraph (A) shall not

16 apply if—

17 ‘‘(i) the old residence is held by a hus18 band and wife as joint tenants, tenants by

19 the entirety, or community property,

20 ‘‘(ii) such husband and wife make a

21 joint return for the taxable year of the sale

22 or exchange, and

23 ‘‘(iii) one spouse is a citizen of the

24 United States at the time of sale.’’.

25 (b) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—The amendment made by this

2 section shall apply to sales of old residences after De3 cember 31, 1995.

4 (2) TREATMENT OF PURCHASES OF NEW RESI5 DENCES.—The amendment made by this section shall

6 not apply to new residences—

7 (A) purchased before September 13, 1995, or

8 (B) purchased on or after such date pursu9 ant to a binding contract in effect on such date

10 and at all times thereafter before such purchase.

11 (3) CERTAIN RULES TO APPLY.—For purposes of

12 this subsection, the rules of paragraphs (1), (2), and

13 (3) of section 1034(c) of the Internal Revenue Code of

14 1986 shall apply.

15 CHAPTER 4—EXCISE TAX AND TAX16 EXEMPT BOND PROVISIONS

17 SEC. 11331. REPEAL OF DIESEL FUEL TAX REBATE TO PUR18 CHASERS OF DIESEL-POWERED AUTO19 MOBILES AND LIGHT TRUCKS.

20 (a) IN GENERAL.—Section 6427 (relating to fuels not

21 used for taxable purposes) is amended by striking subsection

22 (g).

23 (b) CONFORMING AMENDMENTS.—

24 (1) Paragraph (3) of section 34(a) is amended to

25 read as follows:
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1 ‘‘(3) under section 6427 with respect to fuels

2 used for nontaxable purposes or resold during the tax3 able year (determined without regard to section

4 6427(k)).’’.

5 (2) Paragraphs (1) and (2)(A) of section 6427(i)

6 are each amended—

7 (A) by striking ‘‘(g),’’, and

8 (B) by striking ‘‘(or a qualified diesel pow9 ered highway vehicle purchased)’’ each place it

10 appears.

11 (c) EFFECTIVE DATE.—The amendments made by this

12 section shall apply to vehicles purchased after December 31,

13 1995.

14 SEC. 11332. MODIFICATIONS TO EXCISE TAX ON OZONE-DE15 PLETING CHEMICALS.

16 (a) IN GENERAL.—Section 4682(d)(1) (relating to re17 cycling) is amended by inserting ‘‘, or on any recycled

18 halon imported from any country which is a signatory to

19 the Montreal Protocol on Substances that Deplete the Ozone

20 Layer’’ before the period at the end.

21 (b) CERTIFICATION SYSTEM.—The Secretary of the

22 Treasury, after consultation with the Administrator of the

23 Environmental Protection Agency, shall develop a certifi24 cation system to ensure compliance with the recycling re25 quirement for imported halon under section 4682(d)(1) of
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1 the Internal Revenue Code of 1986, as amended by sub2 section (a).

3 (c) EFFECTIVE DATE.—The amendment made by sub4 section (a) shall take effect on the date of the enactment

5 of this Act.

6 SEC. 11333. ELECTION TO AVOID TAX-EXEMPT BOND PEN7 ALTIES FOR LOCAL FURNISHERS OF ELEC8 TRICITY AND GAS.

9 Section 142(f) (relating to local furnishing of electric

10 energy or gas) is amended by adding at the end the follow11 ing new paragraphs:

12 ‘‘(3) ELECTION TO AVOID PENALTIES FOR CER13 TAIN FURNISHERS.—

14 ‘‘(A) IN GENERAL.—If—

15 ‘‘(i) a person engaged in the local fur16 nishing of electric energy or gas, directly or

17 indirectly financed facilities for such fur18 nishing in whole or in part with exempt fa19 cility bonds described in subsection (a)(8)

20 issued before the date of the enactment of

21 this paragraph,

22 ‘‘(ii) such bonds would (but for this

23 paragraph) cease to be tax-exempt by reason

24 of such person failing to meet the local fur25 nishing requirement of such section as a re-
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1 sult of a service area expansion by such per2 son, and

3 ‘‘(iii) an election described in subpara4 graph (B) is made by such person with re5 spect to all such facilities of the person,

6 then such bonds shall not cease to be tax-exempt

7 by reason of such expansion (and section

8 150(b)(4) shall not apply to interest on such

9 bonds).

10 ‘‘(B) ELECTION.—An election is described

11 in this subparagraph if it is an election made in

12 such manner as the Secretary prescribes, and

13 such person agrees that—

14 ‘‘(i) no bond exempt from tax under

15 section 103 and described in subsection

16 (a)(8) may be issued on or after the date of

17 the enactment of this paragraph with re18 spect to the facilities for the local furnishing

19 of electric energy or gas, or both of such per20 son, other than such a bond issued to refund

21 another bond if the amount of such bond

22 does not exceed the outstanding amount of

23 the refunded bond and the maturity date of

24 the refunding bond is not later than the av25 erage maturity date of the refunded bonds
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1 to be refunded by the issue of which the re2 funding bond is a part,

3 ‘‘(ii) the expansion of the service

4 area—

5 ‘‘(I) is not financed with the pro6 ceeds of any exempt facility bond de7 scribed in subsection (a)(8), and

8 ‘‘(II) is not treated as a

9 nonqualifying use under the rules of

10 paragraph (2), and

11 ‘‘(iii) all outstanding bonds used to fi12 nance the facilities for such person are re13 deemed not later than 6 months after the

14 later of—

15 ‘‘(I) the earliest date on which

16 such bonds may be redeemed, or

17 ‘‘(II) the date of the election.

18 ‘‘(C) RELATED PERSONS.—For purposes of

19 this paragraph, the term ‘person’ includes a

20 group of related persons (within the meaning of

21 section 144(a)(3)) which includes such person.

22 ‘‘(4) APPLICATION OF SECTION.—For purposes of

23 this section, no person may qualify on or after the

24 date of the enactment of this paragraph for tax-ex25 empt bond financing for the local furnishing of elec-
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1 tric energy or gas unless such person is engaged on

2 such date in the local furnishing of the energy source

3 for which facilities are financed.’’.

4 SEC. 11334. TAX-EXEMPT BONDS FOR SALE OF ALASKA

5 POWER ADMINISTRATION FACILITY.

6 Sections 142(f)(4) (as added by section 11333(a)) and

7 147(d) of the Internal Revenue Code of 1986 shall not apply

8 with respect to any private activity bond issued after the

9 date of the enactment of this Act and used to finance the

10 acquisition of the Snettisham hydroelectric project from the

11 Alaska Power Administration in determining if such bond

12 is a qualified bond for purposes of such Code.

13 CHAPTER 5—FOREIGN TRUST TAX

14 COMPLIANCE

15 SEC. 11341. IMPROVED INFORMATION REPORTING ON FOR16 EIGN TRUSTS.

17 (a) IN GENERAL.—Section 6048 (relating to returns

18 as to certain foreign trusts) is amended to read as follows:

19 ‘‘SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN FOR20 EIGN TRUSTS.

21 ‘‘(a) NOTICE OF CERTAIN EVENTS.—

22 ‘‘(1) GENERAL RULE.—On or before the 90th day

23 (or such later day as the Secretary may prescribe)

24 after any reportable event, the responsible party shall
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1 provide written notice of such event to the Secretary

2 in accordance with paragraph (2).

3 ‘‘(2) CONTENTS OF NOTICE.—The notice required

4 by paragraph (1) shall contain such information as

5 the Secretary may prescribe, including—

6 ‘‘(A) the amount of money or other property

7 (if any) transferred to the trust in connection

8 with the reportable event, and

9 ‘‘(B) the identity of the trust and of each

10 trustee and beneficiary (or class of beneficiaries)

11 of the trust.

12 ‘‘(3) REPORTABLE EVENT.—For purposes of this

13 subsection—

14 ‘‘(A) IN GENERAL.—The term ‘reportable

15 event’ means—

16 ‘‘(i) the creation of any foreign trust

17 by a United States person,

18 ‘‘(ii) the transfer of any money or

19 property (directly or indirectly) to a foreign

20 trust by a United States person, including

21 a transfer by reason of death, and

22 ‘‘(iii) the death of a citizen or resident

23 of the United States if—

24 ‘‘(I) the decedent was treated as

25 the owner of any portion of a foreign
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1 trust under the rules of subpart E of

2 part I of subchapter J of chapter 1, or

3 ‘‘(II) any portion of a foreign

4 trust was included in the gross estate

5 of the decedent.

6 ‘‘(B) EXCEPTIONS.—

7 ‘‘(i) FAIR MARKET VALUE SALES.—

8 Subparagraph (A)(ii) shall not apply to

9 any transfer of property to a trust in ex10 change for consideration of at least the fair

11 market value of the transferred property.

12 For purposes of the preceding sentence, con13 sideration other than cash shall be taken

14 into account at its fair market value and

15 the rules of section 679(a)(3) shall apply.

16 ‘‘(ii) DEFERRED COMPENSATION AND

17 CHARITABLE TRUSTS.—Subparagraph (A)

18 shall not apply with respect to a trust

19 which is—

20 ‘‘(I) described in section 402(b),

21 404(a)(4), or 404A, or

22 ‘‘(II) determined by the Secretary

23 to be described in section 501(c)(3).

24 ‘‘(4) RESPONSIBLE PARTY.—For purposes of this

25 subsection, the term ‘responsible party’ means—
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1 ‘‘(A) the grantor in the case of the creation

2 of an inter vivos trust,

3 ‘‘(B) the transferor in the case of a report4 able event described in paragraph (3)(A)(ii)

5 other than a transfer by reason of death, and

6 ‘‘(C) the executor of the decedent’s estate in

7 any other case.

8 ‘‘(b) UNITED STATES GRANTOR OF FOREIGN TRUST.—

9 ‘‘(1) IN GENERAL.—If, at any time during any

10 taxable year of a United States person, such person

11 is treated as the owner of any portion of a foreign

12 trust under the rules of subpart E of part I of sub13 chapter J of chapter 1, such person shall be respon14 sible to ensure that—

15 ‘‘(A) such trust makes a return for such

16 year which sets forth a full and complete ac17 counting of all trust activities and operations for

18 the year, the name of the United States agent for

19 such trust, and such other information as the

20 Secretary may prescribe, and

21 ‘‘(B) such trust furnishes such information

22 as the Secretary may prescribe to each United

23 States person (i) who is treated as the owner of

24 any portion of such trust or (ii) who receives
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1 (directly or indirectly) any distribution from the

2 trust.

3 ‘‘(2) TRUSTS NOT HAVING UNITED STATES

4 AGENT.—

5 ‘‘(A) IN GENERAL.—If the rules of this

6 paragraph apply to any foreign trust, the deter7 mination of amounts required to be taken into

8 account with respect to such trust by a United

9 States person under the rules of subpart E of

10 part I of subchapter J of chapter 1 shall be de11 termined by the Secretary.

12 ‘‘(B) UNITED STATES AGENT REQUIRED.—

13 The rules of this paragraph shall apply to any

14 foreign trust to which paragraph (1) applies un15 less such trust agrees (in such manner, subject to

16 such conditions, and at such time as the Sec17 retary shall prescribe) to authorize a United

18 States person to act as such trust’s limited agent

19 solely for purposes of applying sections 7602,

20 7603, and 7604 with respect to—

21 ‘‘(i) any request by the Secretary to ex22 amine records or produce testimony related

23 to the proper treatment of amounts required

24 to be taken into account under the rules re25 ferred to in subparagraph (A), or
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1 ‘‘(ii) any summons by the Secretary

2 for such records or testimony.

3 The appearance of persons or production of

4 records by reason of a United States person

5 being such an agent shall not subject such per6 sons or records to legal process for any purpose

7 other than determining the correct treatment

8 under this title of the amounts required to be

9 taken into account under the rules referred to in

10 subparagraph (A). A foreign trust which ap11 points an agent described in this subparagraph

12 shall not be considered to have an office or a per13 manent establishment in the United States, or to

14 be engaged in a trade or business in the United

15 States, solely because of the activities of such

16 agent pursuant to this subsection.

17 ‘‘(C) OTHER RULES TO APPLY.—Rules simi18 lar to the rules of paragraphs (2) and (4) of sec19 tion 6038A(e) shall apply for purposes of this

20 paragraph.

21 ‘‘(c) REPORTING BY UNITED STATES BENEFICIARIES

22 OF FOREIGN TRUSTS.—

23 ‘‘(1) IN GENERAL.—If any United States person

24 receives (directly or indirectly) during any taxable

25 year of such person any distribution from a foreign
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1 trust, such person shall make a return with respect to

2 such trust for such year which includes—

3 ‘‘(A) the name of such trust,

4 ‘‘(B) the aggregate amount of the distribu5 tions so received from such trust during such

6 taxable year, and

7 ‘‘(C) such other information as the Sec8 retary may prescribe.

9 ‘‘(2) INCLUSION IN INCOME IF RECORDS NOT

10 PROVIDED.—

11 ‘‘(A) IN GENERAL.—If adequate records are

12 not provided to the Secretary to determine the

13 proper treatment of any distribution from a for14 eign trust, such distribution shall be treated as

15 an accumulation distribution includible in the

16 gross income of the distributee under chapter 1.

17 To the extent provided in regulations, the preced18 ing sentence shall not apply if the foreign trust

19 elects to be subject to rules similar to the rules

20 of subsection (b)(2)(B).

21 ‘‘(B) APPLICATION OF ACCUMULATION DIS22 TRIBUTION RULES.—For purposes of applying

23 section 668 in a case to which subparagraph (A)

24 applies, the applicable number of years for pur-
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poses of section 668(a) shall be 1 1 ⁄2 of the number

2 of years the trust has been in existence.

3 ‘‘(d) SPECIAL RULES.—

4 ‘‘(1) DETERMINATION OF WHETHER UNITED

5 STATES PERSON RECEIVES DISTRIBUTION.—For pur6 poses of this section, in determining whether a United

7 States person receives a distribution from a foreign

8 trust, the fact that a portion of such trust is treated

9 as owned by another person under the rules of sub10 part E of part I of subchapter J of chapter 1 shall

11 be disregarded.

12 ‘‘(2) DOMESTIC TRUSTS WITH FOREIGN ACTIVI13 TIES.—To the extent provided in regulations, a trust

14 which is a United States person shall be treated as

15 a foreign trust for purposes of this section and section

16 6677 if such trust has substantial activities, or holds

17 substantial property, outside the United States.

18 ‘‘(3) TIME AND MANNER OF FILING INFORMA19 TION.—Any notice or return required under this sec20 tion shall be made at such time and in such manner

21 as the Secretary shall prescribe.

22 ‘‘(4) MODIFICATION OF RETURN REQUIRE23 MENTS.—The Secretary is authorized to suspend or

24 modify any requirement of this section if the Sec25 retary determines that the United States has no sig-
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1 nificant tax interest in obtaining the required infor2 mation.’’.

3 (b) INCREASED PENALTIES.—Section 6677 (relating to

4 failure to file information returns with respect to certain

5 foreign trusts) is amended to read as follows:

6 ‘‘SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT

7 TO CERTAIN FOREIGN TRUSTS.

8 ‘‘(a) CIVIL PENALTY.—In addition to any criminal

9 penalty provided by law, if any notice or return required

10 to be filed by section 6048—

11 ‘‘(1) is not filed on or before the time provided

12 in such section, or

13 ‘‘(2) does not include all the information re14 quired pursuant to such section or includes incorrect

15 information,

16 the person required to file such notice or return shall pay

17 a penalty equal to 35 percent of the gross reportable

18 amount. If any failure described in the preceding sentence

19 continues for more than 90 days after the day on which

20 the Secretary mails notice of such failure to the person re21 quired to pay such penalty, such person shall pay a penalty

22 (in addition to the amount determined under the preceding

23 sentence) of $10,000 for each 30-day period (or fraction

24 thereof) during which such failure continues after the expi25 ration of such 90-day period. In no event shall the penalty
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1 under this subsection with respect to any failure exceed the

2 gross reportable amount.

3 ‘‘(b) SPECIAL RULES FOR RETURNS UNDER SECTION

4 6048(b).—In the case of a return required under section

5 6048(b)—

6 ‘‘(1) the United States person referred to in such

7 section shall be liable for the penalty imposed by sub8 section (a), and

9 ‘‘(2) subsection (a) shall be applied by substitut10 ing ‘5 percent’ for ‘35 percent’.

11 ‘‘(c) GROSS REPORTABLE AMOUNT.—For purposes of

12 subsection (a), the term ‘gross reportable amount’ means—

13 ‘‘(1) the gross value of the property involved in

14 the event (determined as of the date of the event) in

15 the case of a failure relating to section 6048(a),

16 ‘‘(2) the gross value of the portion of the trust’s

17 assets at the close of the year treated as owned by the

18 United States person in the case of a failure relating

19 to section 6048(b)(1), and

20 ‘‘(3) the gross amount of the distributions in the

21 case of a failure relating to section 6048(c).

22 ‘‘(d) REASONABLE CAUSE EXCEPTION.—No penalty

23 shall be imposed by this section on any failure which is

24 shown to be due to reasonable cause and not due to willful

25 neglect. The fact that a foreign jurisdiction would impose
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1 a civil or criminal penalty on the taxpayer (or any other

2 person) for disclosing the required information is not rea3 sonable cause.

4 ‘‘(e) DEFICIENCY PROCEDURES NOT TO APPLY.—Sub5 chapter B of chapter 63 (relating to deficiency procedures

6 for income, estate, gift, and certain excise taxes) shall not

7 apply in respect of the assessment or collection of any pen8 alty imposed by subsection (a).’’.

9 (c) CONFORMING AMENDMENTS.—

10 (1) Paragraph (2) of section 6724(d), as amend11 ed by sections 11004 and 11045, is amended by strik12 ing ‘‘or’’ at the end of subparagraph (U), by striking

13 the period at the end of subparagraph (V) and insert14 ing ‘‘, or’’, and by inserting after subparagraph (V)

15 the following new subparagraph:

16 ‘‘(W) section 6048(b)(1)(B) (relating to for17 eign trust reporting requirements).’’.

18 (2) The table of sections for subpart B of part

19 III of subchapter A of chapter 61 is amended by strik20 ing the item relating to section 6048 and inserting

21 the following new item:

‘‘Sec. 6048. Information with respect to certain foreign trusts.’’.

22 (3) The table of sections for part I of subchapter

23 B of chapter 68 is amended by striking the item relat-
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1 ing to section 6677 and inserting the following new

2 item:

‘‘Sec. 6677. Failure to file information with respect to certain foreign trusts.’’.

3 (d) EFFECTIVE DATES.—

4 (1) REPORTABLE EVENTS.—To the extent related

5 to subsection (a) of section 6048 of the Internal Reve6 nue Code of 1986, as amended by this section, the

7 amendments made by this section shall apply to re8 portable events (as defined in such section 6048) oc9 curring after the date of the enactment of this Act.

10 (2) GRANTOR TRUST REPORTING.—To the extent

11 related to subsection (b) of such section 6048, the

12 amendments made by this section shall apply to tax13 able years of United States persons beginning after

14 the date of the enactment of this Act.

15 (3) REPORTING BY UNITED STATES BENE16 FICIARIES.—To the extent related to subsection (c) of

17 such section 6048, the amendments made by this sec18 tion shall apply to distributions received after the

19 date of the enactment of this Act.

20 SEC. 11342. MODIFICATIONS OF RULES RELATING TO FOR21 EIGN TRUSTS HAVING ONE OR MORE UNITED

22 STATES BENEFICIARIES.

23 (a) TREATMENT OF TRUST OBLIGATIONS, ETC.—
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1 (1) Paragraph (2) of section 679(a) is amended

2 by striking subparagraph (B) and inserting the fol3 lowing:

4 ‘‘(B) TRANSFERS AT FAIR MARKET

5 VALUE.—To any transfer of property to a trust

6 in exchange for consideration of at least the fair

7 market value of the transferred property. For

8 purposes of the preceding sentence, consideration

9 other than cash shall be taken into account at its

10 fair market value.’’.

11 (2) Subsection (a) of section 679 (relating to for12 eign trusts having one or more United States bene13 ficiaries) is amended by adding at the end the follow14 ing new paragraph:

15 ‘‘(3) CERTAIN OBLIGATIONS NOT TAKEN INTO AC16 COUNT UNDER FAIR MARKET VALUE EXCEPTION.—

17 ‘‘(A) IN GENERAL.—In determining whether

18 paragraph (2)(B) applies to any transfer by a

19 person described in clause (ii) or (iii) of sub20 paragraph (C), there shall not be taken into ac21 count—

22 ‘‘(i) except as provided in regulations,

23 any obligation of a person described in sub24 paragraph (C), and
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1 ‘‘(ii) to the extent provided in regula2 tions, any obligation which is guaranteed

3 by a person described in subparagraph (C).

4 ‘‘(B) TREATMENT OF PRINCIPAL PAYMENTS

5 ON OBLIGATION.—Principal payments by the

6 trust on any obligation referred to in subpara7 graph (A) shall be taken into account on and

8 after the date of the payment in determining the

9 portion of the trust attributable to the property

10 transferred.

11 ‘‘(C) PERSONS DESCRIBED.—The persons

12 described in this subparagraph are—

13 ‘‘(i) the trust,

14 ‘‘(ii) any grantor or beneficiary of the

15 trust, and

16 ‘‘(iii) any person who is related (with17 in the meaning of section 643(i)(2)(B)) to

18 any grantor or beneficiary of the trust.’’.

19 (b) EXEMPTION OF TRANSFERS TO CHARITABLE

20 TRUSTS.—Subsection (a) of section 679 is amended by

21 striking ‘‘section 404(a)(4) or 404A’’ and inserting ‘‘section

22 6048(a)(3)(B)(ii)’’.

23 (c) OTHER MODIFICATIONS.—Subsection (a) of section

24 679 is amended by adding at the end the following new

25 paragraphs:
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1 ‘‘(4) SPECIAL RULES APPLICABLE TO FOREIGN

2 GRANTOR WHO LATER BECOMES A UNITED STATES

3 PERSON.—

4 ‘‘(A) IN GENERAL.—If a nonresident alien

5 individual has a residency starting date within

6 5 years after directly or indirectly transferring

7 property to a foreign trust, this section and sec8 tion 6048 shall be applied as if such individual

9 transferred to such trust on the residency start10 ing date an amount equal to the portion of such

11 trust attributable to the property transferred by

12 such individual to such trust in such transfer.

13 ‘‘(B) TREATMENT OF UNDISTRIBUTED IN14 COME.—For purposes of this section, undistrib15 uted net income for periods before such individ16 ual’s residency starting date shall be taken into

17 account in determining the portion of the trust

18 which is attributable to property transferred by

19 such individual to such trust but shall not other20 wise be taken into account.

21 ‘‘(C) RESIDENCY STARTING DATE.—For

22 purposes of this paragraph, an individual’s resi23 dency starting date is the residency starting date

24 determined under section 7701(b)(2)(A).

25 ‘‘(5) OUTBOUND TRUST MIGRATIONS.—If—
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1 ‘‘(A) an individual who is a citizen or resi2 dent of the United States transferred property to

3 a trust which was not a foreign trust, and

4 ‘‘(B) such trust becomes a foreign trust

5 while such individual is alive,

6 then this section and section 6048 shall be applied as

7 if such individual transferred to such trust on the

8 date such trust becomes a foreign trust an amount

9 equal to the portion of such trust attributable to the

10 property previously transferred by such individual to

11 such trust. A rule similar to the rule of paragraph

12 (4)(B) shall apply for purposes of this paragraph.’’.

13 (d) MODIFICATIONS RELATING TO WHETHER TRUST

14 HAS UNITED STATES BENEFICIARIES.—Subsection (c) of

15 section 679 is amended by adding at the end the following

16 new paragraph:

17 ‘‘(3) CERTAIN UNITED STATES BENEFICIARIES

18 DISREGARDED.—A beneficiary shall not be treated as

19 a United States person in applying this section with

20 respect to any transfer of property to foreign trust if

21 such beneficiary first became a United States person

22 more than 5 years after the date of such transfer.’’.

23 (e) TECHNICAL AMENDMENT.—Subparagraph (A) of

24 section 679(c)(2) is amended to read as follows:
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1 ‘‘(A) in the case of a foreign corporation,

2 such corporation is a controlled foreign corpora3 tion (as defined in section 957(a)),’’.

4 (f) REGULATIONS.—Section 679 is amended by adding

5 at the end the following new subsection:

6 ‘‘(d) REGULATIONS.—The Secretary shall prescribe

7 such regulations as may be necessary or appropriate to

8 carry out the purposes of this section.’’.

9 (g) EFFECTIVE DATE.—The amendments made by this

10 section shall apply to transfers of property after February

11 6, 1995.

12 SEC. 11343. FOREIGN PERSONS NOT TO BE TREATED AS

13 OWNERS UNDER GRANTOR TRUST RULES.

14 (a) GENERAL RULE.—

15 (1) Subsection (f) of section 672 (relating to spe16 cial rule where grantor is foreign person) is amended

17 to read as follows:

18 ‘‘(f) SUBPART NOT TO RESULT IN FOREIGN OWNER19 SHIP.—

20 ‘‘(1) IN GENERAL.—Notwithstanding any other

21 provision of this subpart, this subpart shall apply

22 only to the extent such application results in an

23 amount being currently taken into account (directly

24 or through 1 or more entities) under this chapter in
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1 computing the income of a citizen or resident of the

2 United States or a domestic corporation.

3 ‘‘(2) EXCEPTIONS.—

4 ‘‘(A) CERTAIN REVOCABLE AND IRREV5 OCABLE TRUSTS.—Paragraph (1) shall not

6 apply to any trust if—

7 ‘‘(i) the power to revest absolutely in

8 the grantor title to the trust property is ex9 ercisable solely by the grantor without the

10 approval or consent of any other person or

11 with the consent of a related or subordinate

12 party who is subservient to the grantor, or

13 ‘‘(ii) the only amounts distributable

14 from such trust (whether income or corpus)

15 during the lifetime of the grantor are

16 amounts distributable to the grantor or the

17 spouse of the grantor.

18 ‘‘(B) COMPENSATORY TRUSTS.—Except as

19 provided in regulations, paragraph (1) shall not

20 apply to any portion of a trust distributions

21 from which are taxable as compensation for serv22 ices rendered.

23 ‘‘(3) SPECIAL RULES.—Except as otherwise pro24 vided in regulations prescribed by the Secretary—
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1 ‘‘(A) a controlled foreign corporation (as de2 fined in section 957) shall be treated as a domes3 tic corporation for purposes of paragraph (1),

4 and

5 ‘‘(B) paragraph (1) shall not apply for pur6 poses of applying section 1296.

7 ‘‘(4) RECHARACTERIZATION OF PURPORTED

8 GIFTS.—In the case of any transfer directly or indi9 rectly from a partnership or foreign corporation

10 which the transferee treats as a gift or bequest, the

11 Secretary may recharacterize such transfer in such

12 circumstances as the Secretary determines to be ap13 propriate to prevent the avoidance of the purposes of

14 this subsection.

15 ‘‘(5) SPECIAL RULE WHERE GRANTOR IS FOR16 EIGN PERSON.—If

17 ‘‘(A) but for this subsection, a foreign per18 son would be treated as the owner of any portion

19 of a trust, and

20 ‘‘(B) such trust has a beneficiary who is a

21 United States person,

22 such beneficiary shall be treated as the grantor of

23 such portion to the extent such beneficiary has made

24 transfers of property by gift (directly or indirectly) to

25 such foreign person. For purposes of the preceding
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1 sentence, any gift shall not be taken into account to

2 the extent such gift would be excluded from taxable

3 gifts under section 2503(b).

4 ‘‘(6) REGULATIONS.—The Secretary shall pre5 scribe such regulations as may be necessary or appro6 priate to carry out the purposes of this subsection, in7 cluding regulations providing that paragraph (1)

8 shall not apply in appropriate cases.’’.

9 (2) The last sentence of subsection (c) of section

10 672 of such Code is amended by inserting ‘‘subsection

11 (f) and’’ before ‘‘sections 674’’.

12 (b) CREDIT FOR CERTAIN TAXES.—Paragraph (2) of

13 section 665(d) is amended by adding at the end the follow14 ing new sentence: ‘‘Under rules or regulations prescribed

15 by the Secretary, in the case of any foreign trust of which

16 the settlor or another person would be treated as owner of

17 any portion of the trust under subpart E but for section

18 672(f), the term ‘taxes imposed on the trust’ includes the

19 allocable amount of any income, war profits, and excess

20 profits taxes imposed by any foreign country or possession

21 of the United States on the settlor or such other person in

22 respect of trust gross income.’’.

23 (c) DISTRIBUTIONS BY CERTAIN FOREIGN TRUSTS

24 THROUGH NOMINEES.—
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1 (1) Section 643 is amended by adding at the end

2 the following new subsection:

3 ‘‘(h) DISTRIBUTIONS BY CERTAIN FOREIGN TRUSTS

4 THROUGH NOMINEES.—For purposes of this part, any

5 amount paid to a United States person which is derived

6 directly or indirectly from a foreign trust of which the

7 payor is not the grantor shall be deemed in the year of pay8 ment to have been directly paid by the foreign trust to such

9 United States person.’’.

10 (2) Section 665 is amended by striking sub11 section (c).

12 (d) EFFECTIVE DATE.—

13 (1) IN GENERAL.—Except as provided by para14 graph (2), the amendments made by this section shall

15 take effect on the date of the enactment of this Act.

16 (2) EXCEPTION FOR CERTAIN TRUSTS.—The

17 amendments made by this section shall not apply to

18 any trust—

19 (A) which is treated as owned by the grant20 or or another person under section 676 or 677

21 (other than subsection (a)(3) thereof) of the In22 ternal Revenue Code of 1986, and

23 (B) which is in existence on September 19,

24 1995.
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1 The preceding sentence shall not apply to the portion

2 of any such trust attributable to any transfer to such

3 trust after September 19, 1995.

4 (e) TRANSITIONAL RULE.—If—

5 (1) by reason of the amendments made by this

6 section, any person other than a United States person

7 ceases to be treated as the owner of a portion of a do8 mestic trust, and

9 (2) before January 1, 1997, such trust becomes

10 a foreign trust, or the assets of such trust are trans11 ferred to a foreign trust,

12 no tax shall be imposed by section 1491 of the Internal Rev13 enue Code of 1986 by reason of such trust becoming a for14 eign trust or the assets of such trust being transferred to

15 a foreign trust.

16 SEC. 11344. INFORMATION REPORTING REGARDING FOR17 EIGN GIFTS.

18 (a) IN GENERAL.—Subpart A of part III of subchapter

19 A of chapter 61 is amended by inserting after section 6039E

20 the following new section:

21 ‘‘SEC. 6039F. NOTICE OF GIFTS RECEIVED FROM FOREIGN

22 PERSONS.

23 ‘‘(a) IN GENERAL.—If the value of the aggregate for24 eign gifts received by a United States person (other than

25 an organization described in section 501(c) and exempt
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1 from tax under section 501(a)) during any taxable year ex2 ceeds $10,000, such United States person shall furnish (at

3 such time and in such manner as the Secretary shall pre4 scribe) such information as the Secretary may prescribe re5 garding each foreign gift received during such year.

6 ‘‘(b) FOREIGN GIFT.—For purposes of this section, the

7 term ‘foreign gift’ means any amount received from a per8 son other than a United States person which the recipient

9 treats as a gift or bequest. Such term shall not include any

10 qualified transfer (within the meaning of section

11 2503(e)(2)).

12 ‘‘(c) PENALTY FOR FAILURE TO FILE INFORMATION.—

13 ‘‘(1) IN GENERAL.—If a United States person

14 fails to furnish the information required by subsection

15 (a) with respect to any foreign gift within the time

16 prescribed therefor (including extensions)—

17 ‘‘(A) the tax consequences of the receipt of

18 such gift shall be determined by the Secretary in

19 the Secretary’s sole discretion from the Sec20 retary’s own knowledge or from such information

21 as the Secretary may obtain through testimony

22 or otherwise, and

23 ‘‘(B) such United States person shall pay

24 (upon notice and demand by the Secretary and

25 in the same manner as tax) an amount equal to
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1 5 percent of the amount of such foreign gift for

2 each month for which the failure continues (not

3 to exceed 25 percent of such amount in the aggre4 gate).

5 ‘‘(2) REASONABLE CAUSE EXCEPTION.—Para6 graph (1) shall not apply to any failure to report a

7 foreign gift if the United States person shows that the

8 failure is due to reasonable cause and not due to will9 ful neglect.

10 ‘‘(d) COST-OF-LIVING ADJUSTMENT.—In the case of

11 any taxable year beginning after December 31, 1996, the

12 $10,000 amount under subsection (a) shall be increased by

13 an amount equal to the product of such amount and the

14 cost-of-living adjustment for such taxable year under section

15 1(f)(3), except that subparagraph (B) thereof shall be ap16 plied by substituting ‘1995’ for ‘1992’.

17 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

18 such regulations as may be necessary or appropriate to

19 carry out the purposes of this section.’’.

20 (b) CLERICAL AMENDMENT.—The table of sections for

21 such subpart is amended by inserting after the item relating

22 to section 6039E the following new item:

‘‘Sec. 6039F. Notice of large gifts received from foreign persons.’’.

23 (c) EFFECTIVE DATE.—The amendments made by this

24 section shall apply to amounts received after the date of
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1 the enactment of this Act in taxable years ending after such

2 date.

3 SEC. 11345. MODIFICATION OF RULES RELATING TO FOR4 EIGN TRUSTS WHICH ARE NOT GRANTOR

5 TRUSTS.

6 (a) MODIFICATION OF INTEREST CHARGE ON ACCUMU7 LATION DISTRIBUTIONS.—Subsection (a) of section 668 (re8 lating to interest charge on accumulation distributions from

9 foreign trusts) is amended to read as follows:

10 ‘‘(a) GENERAL RULE.—For purposes of the tax deter11 mined under section 667(a)—

12 ‘‘(1) INTEREST DETERMINED USING

13 UNDERPAYMENT RATES.—The interest charge deter14 mined under this section with respect to any distribu15 tion is the amount of interest which would be deter16 mined on the partial tax computed under section

17 667(b) for the period described in paragraph (2)

18 using the rates and the method under section 6621

19 applicable to underpayments of tax.

20 ‘‘(2) PERIOD.—For purposes of paragraph (1),

21 the period described in this paragraph is the period

22 which begins on the date which is the applicable num23 ber of years before the date of the distribution and

24 which ends on the date of the distribution.
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1 ‘‘(3) APPLICABLE NUMBER OF YEARS.—For pur2 poses of paragraph (2)—

3 ‘‘(A) IN GENERAL.—The applicable number

4 of years with respect to a distribution is the

5 number determined by dividing—

6 ‘‘(i) the sum of the products described

7 in subparagraph (B) with respect to each

8 undistributed income year, by

9 ‘‘(ii) the aggregate undistributed net

10 income.

11 The quotient determined under the preceding

12 sentence shall be rounded under procedures pre13 scribed by the Secretary.

14 ‘‘(B) PRODUCT DESCRIBED.—For purposes

15 of subparagraph (A), the product described in

16 this subparagraph with respect to any undistrib17 uted income year is the product of—

18 ‘‘(i) the undistributed net income for

19 such year, and

20 ‘‘(ii) the sum of the number of taxable

21 years between such year and the taxable

22 year of the distribution (counting in each

23 case the undistributed income year but not

24 counting the taxable year of the distribu25 tion).
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1 ‘‘(4) UNDISTRIBUTED INCOME YEAR.—For pur2 poses of this subsection, the term ‘undistributed in3 come year’ means any prior taxable year of the trust

4 for which there is undistributed net income, other

5 than a taxable year during all of which the bene6 ficiary receiving the distribution was not a citizen or

7 resident of the United States.

8 ‘‘(5) DETERMINATION OF UNDISTRIBUTED NET

9 INCOME.—Notwithstanding section 666, for purposes

10 of this subsection, an accumulation distribution from

11 the trust shall be treated as reducing proportionately

12 the undistributed net income for undistributed income

13 years.

14 ‘‘(6) PERIODS BEFORE 1996.—Interest for the

15 portion of the period described in paragraph (2)

16 which occurs before January 1, 1996, shall be deter17 mined—

18 ‘‘(A) by using an interest rate of 6 percent,

19 and

20 ‘‘(B) without compounding until January

21 1, 1996.’’.

22 (b) ABUSIVE TRANSACTIONS.—Section 643(a) is

23 amended by inserting after paragraph (6) the following new

24 paragraph:
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1 ‘‘(7) ABUSIVE TRANSACTIONS.—The Secretary

2 shall prescribe such regulations as may be necessary

3 or appropriate to carry out the purposes of this part,

4 including regulations to prevent avoidance of such

5 purposes.’’.

6 (c) TREATMENT OF LOANS FROM TRUSTS.—

7 (1) IN GENERAL.—Section 643 (relating to defi8 nitions applicable to subparts A, B, C, and D) is

9 amended by adding at the end the following new sub10 section:

11 ‘‘(i) LOANS FROM FOREIGN TRUSTS.—For purposes of

12 subparts B, C, and D—

13 ‘‘(1) GENERAL RULE.—Except as provided in

14 regulations, if a foreign trust makes a loan of cash or

15 marketable securities directly or indirectly to—

16 ‘‘(A) any grantor or beneficiary of such

17 trust who is a United States person, or

18 ‘‘(B) any United States person not de19 scribed in subparagraph (A) who is related to

20 such grantor or beneficiary,

21 the amount of such loan shall be treated as a distribu22 tion by such trust to such grantor or beneficiary (as

23 the case may be).

24 ‘‘(2) DEFINITIONS AND SPECIAL RULES.—For

25 purposes of this subsection—
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1 ‘‘(A) CASH.—The term ‘cash’ includes for2 eign currencies and cash equivalents.

3 ‘‘(B) RELATED PERSON.—

4 ‘‘(i) IN GENERAL.—A person is related

5 to another person if the relationship between

6 such persons would result in a disallowance

7 of losses under section 267 or 707(b). In ap8 plying section 267 for purposes of the pre9 ceding sentence, section 267(c)(4) shall be

10 applied as if the family of an individual

11 includes the spouses of the members of the

12 family.

13 ‘‘(ii) ALLOCATION.—If any person de14 scribed in paragraph (1)(B) is related to

15 more than one person, the grantor or bene16 ficiary to whom the treatment under this

17 subsection applies shall be determined under

18 regulations prescribed by the Secretary.

19 ‘‘(C) EXCLUSION OF TAX-EXEMPTS.—The

20 term ‘United States person’ does not include any

21 entity exempt from tax under this chapter.

22 ‘‘(D) TRUST NOT TREATED AS SIMPLE

23 TRUST.—Any trust which is treated under this

24 subsection as making a distribution shall be

25 treated as not described in section 651.
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1 ‘‘(3) SUBSEQUENT TRANSACTIONS REGARDING

2 LOAN PRINCIPAL.—If any loan is taken into account

3 under paragraph (1), any subsequent transaction be4 tween the trust and the original borrower regarding

5 the principal of the loan (by way of complete or par6 tial repayment, satisfaction, cancellation, discharge,

7 or otherwise) shall be disregarded for purposes of this

8 title.’’.

9 (2) TECHNICAL AMENDMENT.—Paragraph (8) of

10 section 7872(f) is amended by inserting ‘‘, 643(i),’’ be11 fore ‘‘or 1274’’ each place it appears.

12 (d) EFFECTIVE DATES.—

13 (1) INTEREST CHARGE.—The amendment made

14 by subsection (a) shall apply to distributions after the

15 date of the enactment of this Act.

16 (2) ABUSIVE TRANSACTIONS.—The amendment

17 made by subsection (b) shall take effect on the date of

18 the enactment of this Act.

19 (3) LOANS FROM TRUSTS.—The amendment

20 made by subsection (c) shall apply to loans of cash

21 or marketable securities after September 19, 1995.

22 SEC. 11346. RESIDENCE OF ESTATES AND TRUSTS, ETC.

23 (a) TREATMENT AS UNITED STATES PERSON.—

24 (1) IN GENERAL.—Paragraph (30) of section

25 7701(a) is amended by striking subparagraph (D)
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1 and by inserting after subparagraph (C) the follow2 ing:

3 ‘‘(D) any estate or trust if—

4 ‘‘(i) a court within the United States

5 is able to exercise primary supervision over

6 the administration of the estate or trust,

7 and

8 ‘‘(ii) in the case of a trust, one or more

9 United States fiduciaries have the authority

10 to control all substantial decisions of the

11 trust.’’.

12 (2) CONFORMING AMENDMENT.—Paragraph (31)

13 of section 7701(a) is amended to read as follows:

14 ‘‘(31) FOREIGN ESTATE OR TRUST.—The term

15 ‘foreign estate’ or ‘foreign trust’ means any estate or

16 trust other than an estate or trust described in section

17 7701(a)(30)(D).’’.

18 (3) EFFECTIVE DATE.—The amendments made

19 by this subsection shall apply—

20 (A) to taxable years beginning after Decem21 ber 31, 1996, or

22 (B) at the election of the trustee of a trust,

23 to taxable years ending after the date of the en24 actment of this Act.

25 Such an election, once made, shall be irrevocable.
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1 (b) DOMESTIC TRUSTS WHICH BECOME FOREIGN

2 TRUSTS.—

3 (1) IN GENERAL.—Section 1491 (relating to im4 position of tax on transfers to avoid income tax) is

5 amended by adding at the end the following new flush

6 sentence:

7 ‘‘If a trust which is not a foreign trust becomes a foreign

8 trust, such trust shall be treated for purposes of this section

9 as having transferred, immediately before becoming a for10 eign trust, all of its assets to a foreign trust.’’.

11 (2) PENALTY.—Section 1494 is amended by add12 ing at the end the following new subsection:

13 ‘‘(c) PENALTY.—In the case of any failure to file a re14 turn required by the Secretary with respect to any transfer

15 described in section 1491 with respect to a trust, the person

16 required to file such return shall be liable for the penalties

17 provided in section 6677 in the same manner as if such

18 failure were a failure to file a return under section

19 6048(a).’’.

20 (3) EFFECTIVE DATE.—The amendments made

21 by this subsection shall take effect on the date of the

22 enactment of this Act.
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1 CHAPTER 6—TREATMENT OF INDIVID2 UALS WHO LOSE UNITED STATES CITI3 ZENSHIP

4 SEC. 11348. REVISION OF INCOME, ESTATE, AND GIFT TAXES

5 ON INDIVIDUALS WHO LOSE UNITED STATES

6 CITIZENSHIP.

7 (a) IN GENERAL.—Subsection (a) of section 877 is

8 amended to read as follows:

9 ‘‘(a) TREATMENT OF EXPATRIATES.—

10 ‘‘(1) IN GENERAL.—Every nonresident alien in11 dividual who, within the 10-year period immediately

12 preceding the close of the taxable year, lost United

13 States citizenship, unless such loss did not have for 1

14 of its principal purposes the avoidance of taxes under

15 this subtitle or subtitle B, shall be taxable for such

16 taxable year in the manner provided in subsection (b)

17 if the tax imposed pursuant to such subsection exceeds

18 the tax which, without regard to this section, is im19 posed pursuant to section 871.

20 ‘‘(2) CERTAIN INDIVIDUALS TREATED AS HAVING

21 TAX AVOIDANCE PURPOSE.—For purposes of para22 graph (1), an individual shall be treated as having a

23 principal purpose to avoid such taxes if—

24 ‘‘(A) the average annual net income tax (as

25 defined in section 38(c)(1)) of such individual
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1 for the period of 5 taxable years ending before

2 the date of the loss of United States citizenship

3 is greater than $100,000, or

4 ‘‘(B) the net worth of the individual as of

5 such date is $500,000 or more.

6 In the case of the loss of United States citizenship in

7 any calendar year after 1996, such $100,000 and

8 $500,000 amounts shall be increased by an amount

9 equal to such dollar amount multiplied by the cost10 of-living adjustment determined under section 1(f)(3)

11 for such calendar year by substituting ‘1994’ for

12 ‘1992’ in subparagraph (B) thereof. Any increase

13 under the preceding sentence shall be rounded to the

14 nearest multiple of $1,000.’’

15 (b) EXCEPTIONS.—

16 (1) IN GENERAL.—Section 877 is amended by

17 striking subsection (d), by redesignating subsection (c)

18 as subsection (d), and by inserting after subsection (b)

19 the following new subsection:

20 ‘‘(c) TAX AVOIDANCE NOT PRESUMED IN CERTAIN

21 CASES.—

22 ‘‘(1) IN GENERAL.—Subsection (a)(2) shall not

23 apply to an individual if—
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1 ‘‘(A) such individual is described in a sub2 paragraph of paragraph (2) of this subsection,

3 and

4 ‘‘(B) within the 1-year period beginning on

5 the date of the loss of United States citizenship,

6 such individual submits a ruling request for the

7 Secretary’s determination as to whether such loss

8 has for 1 of its principal purposes the avoidance

9 of taxes under this subtitle or subtitle B.

10 ‘‘(2) INDIVIDUALS DESCRIBED.—

11 ‘‘(A) DUAL CITIZENSHIP, ETC.—An individ12 ual is described in this subparagraph if—

13 ‘‘(i) the individual became at birth a

14 citizen of the United States and a citizen of

15 another country and continues to be a citi16 zen of such other country, or

17 ‘‘(ii) the individual becomes (not later

18 than the close of a reasonable period after

19 loss of United States citizenship) a citizen

20 of the country in which—

21 ‘‘(I) such individual was born,

22 ‘‘(II) if such individual is mar23 ried, such individual’s spouse was

24 born, or
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1 ‘‘(III) either of such individual’s

2 parents were born.

3 ‘‘(B) LONG-TERM FOREIGN RESIDENTS.—An

4 individual is described in this subparagraph if,

5 for each year in the 10-year period ending on the

6 date of loss of United States citizenship, the in7 dividual was present in the United States for 30

8 days or less. The rule of section 7701(b)(3)(D)(ii)

9 shall apply for purposes of this subparagraph.

10 ‘‘(C) RENUNCIATION UPON REACHING AGE

11 OF MAJORITY.—An individual is described in

12 this subparagraph if the individual’s loss of

13 United States citizenship occurs before such individual attains age 181 14 ⁄2.

15 ‘‘(D) INDIVIDUALS SPECIFIED IN REGULA16 TIONS.—An individual is described in this sub17 paragraph if the individual is described in a

18 category of individuals prescribed by regulation

19 by the Secretary.’’

20 (2) TECHNICAL AMENDMENT.—Paragraph (1) of

21 section 877(b) of such Code is amended by striking

22 ‘‘subsection (c)’’ and inserting ‘‘subsection (d)’’.

23 (c) TREATMENT OF PROPERTY DISPOSED OF IN NON24 RECOGNITION TRANSACTIONS; TREATMENT OF DISTRIBU25 TIONS FROM CERTAIN CONTROLLED FOREIGN CORPORA-
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1 TIONS.—Subsection (d) of section 877, as redesignated by

2 subsection (b), is amended to read as follows:

3 ‘‘(d) SPECIAL RULES FOR SOURCE, ETC.—For pur4 poses of subsection (b)—

5 ‘‘(1) SOURCE RULES.—The following items of

6 gross income shall be treated as income from sources

7 within the United States:

8 ‘‘(A) SALE OF PROPERTY.—Gains on the

9 sale or exchange of property (other than stock or

10 debt obligations) located in the United States.

11 ‘‘(B) STOCK OR DEBT OBLIGATIONS.—Gains

12 on the sale or exchange of stock issued by a do13 mestic corporation or debt obligations of United

14 States persons or of the United States, a State

15 or political subdivision thereof, or the District of

16 Columbia.

17 ‘‘(C) INCOME OR GAIN DERIVED FROM CON18 TROLLED FOREIGN CORPORATION.—Any income

19 or gain derived from stock in a foreign corpora20 tion but only—

21 ‘‘(i) if the individual losing United

22 States citizenship owned (within the mean23 ing of section 958(a)), or is considered as

24 owning (by applying the ownership rules of

25 section 958(b)), at any time during the 2-
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1 year period ending on the date of the loss

2 of United States citizenship, more than 50

3 percent of—

4 ‘‘(I) the total combined voting

5 power of all classes of stock entitled to

6 vote of such corporation, or

7 ‘‘(II) the total value of the stock of

8 such corporation, and

9 ‘‘(ii) to the extent such income or gain

10 does not exceed the earnings and profits at11 tributable to such stock which were earned

12 or accumulated before the loss of citizenship

13 and during periods that the ownership re14 quirements of clause (i) are met.

15 ‘‘(2) GAIN RECOGNITION ON CERTAIN EX16 CHANGES.—

17 ‘‘(A) IN GENERAL.—In the case of any ex18 change of property to which this paragraph ap19 plies, notwithstanding any other provision of

20 this title, such property shall be treated as sold

21 for its fair market value on the date of such ex22 change, and any gain shall be recognized for the

23 taxable year which includes such date.

24 ‘‘(B) EXCHANGES TO WHICH PARAGRAPH

25 APPLIES.—This paragraph shall apply to any
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1 exchange during the 10-year period described in

2 subsection (a) if—

3 ‘‘(i) gain would not (but for this para4 graph) be recognized on such exchange in

5 whole or in part for purposes of this sub6 title,

7 ‘‘(ii) income derived from such prop8 erty was from sources within the United

9 States (or, if no income was so derived,

10 would have been from such sources), and

11 ‘‘(iii) income derived from the property

12 acquired in the exchange would be from

13 sources outside the United States.

14 ‘‘(C) EXCEPTION.—Subparagraph (A) shall

15 not apply if the individual enters into an agree16 ment with the Secretary which specifies that any

17 income or gain derived from the property ac18 quired in the exchange (or any other property

19 which has a basis determined in whole or part

20 by reference to such property) during such 10-

21 year period shall be treated as from sources with22 in the United States. If the property transferred

23 in the exchange is disposed of by the person ac24 quiring such property, such agreement shall ter25 minate and any gain which was not recognized
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1 by reason of such agreement shall be recognized

2 as of the date of such disposition.

3 ‘‘(D) SECRETARY MAY EXTEND PERIOD.—

4 To the extent provided in regulations prescribed

5 by the Secretary, subparagraph (B) shall be ap6 plied by substituting the 15-year period begin7 ning 5 years before the loss of United States citi8 zenship for the 10-year period referred to therein.

9 ‘‘(E) SECRETARY MAY REQUIRE RECOGNI10 TION OF GAIN IN CERTAIN CASES.—To the extent

11 provided in regulations prescribed by the Sec12 retary—

13 ‘‘(i) the removal of appreciated tan14 gible personal property from the United

15 States, and

16 ‘‘(ii) any other occurrence which (with17 out recognition of gain) results in a change

18 in the source of the income or gain from

19 property from sources within the United

20 States to sources outside the United States,

21 shall be treated as an exchange to which this

22 paragraph applies.

23 ‘‘(3) SUBSTANTIAL DIMINISHING OF RISKS OF

24 OWNERSHIP.—For purposes of determining whether

25 this section applies to any gain on the sale or ex-
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1 change of any property, the running of the 10-year

2 period described in subsection (a) shall be suspended

3 for any period during which the individual’s risk of

4 loss with respect to the property is substantially di5 minished by—

6 ‘‘(A) the holding of a put with respect to

7 such property (or similar property),

8 ‘‘(B) the holding by another person of a

9 right to acquire the property, or

10 ‘‘(C) a short sale or any other transaction.’’

11 (d) CREDIT FOR FOREIGN TAXES IMPOSED ON UNITED

12 STATES SOURCE INCOME.—

13 (1) Subsection (b) of section 877 is amended by

14 adding at the end the following new sentence: ‘‘The

15 tax imposed solely by reason of this section shall be

16 reduced (but not below zero) by the amount of any in17 come, war profits, and excess profits taxes (within the

18 meaning of section 903) paid to any foreign country

19 or possession of the United States on any income of

20 the taxpayer on which tax is imposed solely by reason

21 of this section.’’

22 (2) Subsection (a) of section 877, as amended by

23 subsection (a), is amended by inserting ‘‘(after any

24 reduction in such tax under the last sentence of such

25 subsection)’’ after ‘‘such subsection’’.
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1 (e) COMPARABLE ESTATE AND GIFT TAX TREAT2 MENT.—

3 (1) ESTATE TAX.—

4 (A) IN GENERAL.—Subsection (a) of section

5 2107 is amended to read as follows:

6 ‘‘(a) TREATMENT OF EXPATRIATES.—

7 ‘‘(1) RATE OF TAX.—A tax computed in accord8 ance with the table contained in section 2001 is here9 by imposed on the transfer of the taxable estate, deter10 mined as provided in section 2106, of every decedent

11 nonresident not a citizen of the United States if,

12 within the 10-year period ending with the date of

13 death, such decedent lost United States citizenship,

14 unless such loss did not have for 1 of its principal

15 purposes the avoidance of taxes under this subtitle or

16 subtitle A.

17 ‘‘(2) CERTAIN INDIVIDUALS TREATED AS HAVING

18 TAX AVOIDANCE PURPOSE.—

19 ‘‘(A) IN GENERAL.—For purposes of para20 graph (1), an individual shall be treated as hav21 ing a principal purpose to avoid such taxes if

22 such individual is so treated under section

23 877(a)(2).
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1 ‘‘(B) EXCEPTION.—Subparagraph (A) shall

2 not apply to a decedent meeting the requirements

3 of section 877(c)(1).’’

4 (B) CREDIT FOR FOREIGN DEATH TAXES.—

5 Subsection (c) of section 2107 is amended by re6 designating paragraph (2) as paragraph (3) and

7 by inserting after paragraph (1) the following

8 new paragraph:

9 ‘‘(2) CREDIT FOR FOREIGN DEATH TAXES.—

10 ‘‘(A) IN GENERAL.—The tax imposed by

11 subsection (a) shall be credited with the amount

12 of any estate, inheritance, legacy, or succession

13 taxes actually paid to any foreign country in re14 spect of any property which is included in the

15 gross estate solely by reason of subsection (b).

16 ‘‘(B) LIMITATION ON CREDIT.—The credit

17 allowed by subparagraph (A) for such taxes paid

18 to a foreign country shall not exceed the lesser

19 of—

20 ‘‘(i) the amount which bears the same

21 ratio to the amount of such taxes actually

22 paid to such foreign country in respect of

23 property included in the gross estate as the

24 value of the property included in the gross

25 estate solely by reason of subsection (b)
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1 bears to the value of all property subjected

2 to such taxes by such foreign country, or

3 ‘‘(ii) such property’s proportionate

4 share of the excess of—

5 ‘‘(I) the tax imposed by subsection

6 (a), over

7 ‘‘(II) the tax which would be im8 posed by section 2101 but for this sec9 tion.

10 ‘‘(C) PROPORTIONATE SHARE.—For pur11 poses of subparagraph (B), a property’s propor12 tionate share is the percentage which the value of

13 the property which is included in the gross estate

14 solely by reason of subsection (b) bears to the

15 total value of the gross estate.’’

16 (C) EXPANSION OF INCLUSION IN GROSS ES17 TATE OF STOCK OF FOREIGN CORPORATIONS.—

18 Paragraph (2) of section 2107(b) is amended by

19 striking ‘‘more than 50 percent of’’ and all that

20 follows and inserting ‘‘more than 50 percent of—

21 ‘‘(A) the total combined voting power of all

22 classes of stock entitled to vote of such corpora23 tion, or

24 ‘‘(B) the total value of the stock of such cor25 poration,’’.
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1 (2) GIFT TAX.—

2 (A) IN GENERAL.—Paragraph (3) of section

3 2501(a) is amended to read as follows:

4 ‘‘(3) EXCEPTION.—

5 ‘‘(A) CERTAIN INDIVIDUALS.—Paragraph

6 (2) shall not apply in the case of a donor who,

7 within the 10-year period ending with the date

8 of transfer, lost United States citizenship, unless

9 such loss did not have for 1 of its principal pur10 poses the avoidance of taxes under this subtitle or

11 subtitle A.

12 ‘‘(B) CERTAIN INDIVIDUALS TREATED AS

13 HAVING TAX AVOIDANCE PURPOSE.—For pur14 poses of subparagraph (A), an individual shall

15 be treated as having a principal purpose to

16 avoid such taxes if such individual is so treated

17 under section 877(a)(2).

18 ‘‘(C) EXCEPTION FOR CERTAIN INDIVID19 UALS.—Subparagraph (B) shall not apply to a

20 decedent meeting the requirements of section

21 877(c)(1).

22 ‘‘(D) CREDIT FOR FOREIGN GIFT TAXES.—

23 The tax imposed by this section solely by reason

24 of this paragraph shall be credited with the

25 amount of any gift tax actually paid to any for-
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1 eign country in respect of any gift which is tax2 able under this section solely by reason of this

3 paragraph.’’

4 (f) COMPARABLE TREATMENT OF LAWFUL PERMA5 NENT RESIDENTS WHO CEASE TO BE TAXED AS RESI6 DENTS.—

7 (1) IN GENERAL.—Section 877 is amended by re8 designating subsection (e) as subsection (f) and by in9 serting after subsection (d) the following new sub10 section:

11 ‘‘(e) COMPARABLE TREATMENT OF LAWFUL PERMA12 NENT RESIDENTS WHO CEASE TO BE TAXED AS RESI13 DENTS.—

14 ‘‘(1) IN GENERAL.—Any long-term resident of

15 the United States who—

16 ‘‘(A) ceases to be a lawful permanent resi17 dent of the United States (within the meaning of

18 section 7701(b)(6)), or

19 ‘‘(B) commences to be treated as a resident

20 of a foreign country under the provisions of a

21 tax treaty between the United States and the for22 eign country and who does not waive the benefits

23 of such treaty applicable to residents of the for24 eign country,
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1 shall be treated for purposes of this section and sec2 tions 2107, 2501, and 6039F in the same manner as

3 if such resident were a citizen of the United States

4 who lost United States citizenship on the date of such

5 cessation or commencement.

6 ‘‘(2) LONG-TERM RESIDENT.—For purposes of

7 this subsection, the term ‘long-term resident’ means

8 any individual (other than a citizen of the United

9 States) who is a lawful permanent resident of the

10 United States in at least 8 taxable years during the

11 period of 15 taxable years ending with the taxable

12 year during which the event described in subpara13 graph (A) or (B) of paragraph (1) occurs. For pur14 poses of the preceding sentence, an individual shall

15 not be treated as a lawful permanent resident for any

16 taxable year if such individual is treated as a resi17 dent of a foreign country for the taxable year under

18 the provisions of a tax treaty between the United

19 States and the foreign country and does not waive the

20 benefits of such treaty applicable to residents of the

21 foreign country.

22 ‘‘(3) SPECIAL RULES.—

23 ‘‘(A) EXCEPTIONS NOT TO APPLY.—Sub24 section (c) shall not apply to an individual who

25 is treated as provided in paragraph (1).
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1 ‘‘(B) STEP-UP IN BASIS.—Solely for pur2 poses of determining any tax imposed by reason

3 of this subsection, property which was held by

4 the long-term resident on the date the individual

5 first became a resident of the United States shall

6 be treated as having a basis on such date of not

7 less than the fair market value of such property

8 on such date. The preceding sentence shall not

9 apply if the individual elects not to have such

10 sentence apply. Such an election, once made,

11 shall be irrevocable.

12 ‘‘(4) AUTHORITY TO EXEMPT INDIVIDUALS.—

13 This subsection shall not apply to an individual who

14 is described in a category of individuals prescribed by

15 regulation by the Secretary.

16 ‘‘(5) REGULATIONS.—The Secretary shall pre17 scribe such regulations as may be appropriate to

18 carry out this subsection, including regulations pro19 viding for the application of this subsection in cases

20 where an alien individual becomes a resident of the

21 United States during the 10-year period after being

22 treated as provided in paragraph (1).’’

23 (2) CONFORMING AMENDMENTS.—

24 (A) Section 2107 is amended by striking

25 subsection (d), by redesignating subsection (e) as
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1 subsection (d), and by inserting after subsection

2 (d) (as so redesignated) the following new sub3 section:

4 ‘‘(e) CROSS REFERENCE.—

‘‘For comparable treatment of long-term lawful

permanent residents who ceased to be taxed as residents, see section 877(e).’’

5 (B) Paragraph (3) of section 2501(a) (as

6 amended by subsection (e)) is amended by add7 ing at the end the following new subparagraph:

8 ‘‘(E) CROSS REFERENCE.—

‘‘For comparable treatment of long-term lawful

permanent residents who ceased to be taxed as residents, see section 877(e).’’

9 (g) EFFECTIVE DATE.—

10 (1) IN GENERAL.—The amendments made by

11 this section shall apply to—

12 (A) individuals losing United States citi13 zenship (within the meaning of section 877 of the

14 Internal Revenue Code of 1986) on or after Feb15 ruary 6, 1995, and

16 (B) long-term residents of the United States

17 with respect to whom an event described in sub18 paragraph (A) or (B) of section 877(e)(1) of such

19 Code occurs on or after February 6, 1995.

20 (2) SPECIAL RULE.—

21 (A) IN GENERAL.—In the case of an indi22 vidual who performed an act of expatriation
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1 specified in paragraph (1), (2), (3), or (4) of sec2 tion 349(a) of the Immigration and Nationality

3 Act (8 U.S.C. 1481(a)(1)–(4)) before February 6,

4 1995, but who did not, on or before such date,

5 furnish to the United States Department of State

6 a signed statement of voluntary relinquishment

7 of United States nationality confirming the per8 formance of such act, the amendments made by

9 this section and section 11349 shall apply to

10 such individual except that—

11 (i) the 10-year period described in sec12 tion 877(a) of such Code shall not expire be13 fore the end of the 10-year period beginning

14 on the date such statement is so furnished,

15 and

16 (ii) the 1-year period referred to in sec17 tion 877(c) of such Code, as amended by

18 this section, shall not expire before the date

19 which is 1 year after the date of the enact20 ment of this Act.

21 (B) EXCEPTION.—Subparagraph (A) shall

22 not apply if the individual establishes to the sat23 isfaction of the Secretary of the Treasury that

24 such loss of United States citizenship occurred

25 before February 6, 1994.
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1 SEC. 11349. INFORMATION ON INDIVIDUALS LOSING UNIT2 ED STATES CITIZENSHIP.

3 (a) IN GENERAL.—Subpart A of part III of subchapter

4 A of chapter 61, as amended by section 11344, is amended

5 by inserting after section 6039F the following new section:

6 ‘‘SEC. 6039G. INFORMATION ON INDIVIDUALS LOSING UNIT7 ED STATES CITIZENSHIP.

8 ‘‘(a) IN GENERAL.—Notwithstanding any other provi9 sion of law, any individual who loses United States citizen10 ship (within the meaning of section 877(a)) shall provide

11 a statement which includes the information described in

12 subsection (b). Such statement shall be—

13 ‘‘(1) provided not later than the earliest date of

14 any act referred to in subsection (c), and

15 ‘‘(2) provided to the person or court referred to

16 in subsection (c) with respect to such act.

17 ‘‘(b) INFORMATION TO BE PROVIDED.—Information

18 required under subsection (a) shall include—

19 ‘‘(1) the taxpayer’s TIN,

20 ‘‘(2) the mailing address of such individual’s

21 principal foreign residence,

22 ‘‘(3) the foreign country in which such individ23 ual is residing,

24 ‘‘(4) the foreign country of which such individual

25 is a citizen,
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1 ‘‘(5) in the case of an individual having a net

2 worth of at least the dollar amount applicable under

3 section 877(a)(2)(B), information detailing the assets

4 and liabilities of such individual, and

5 ‘‘(6) such other information as the Secretary

6 may prescribe.

7 ‘‘(c) ACTS DESCRIBED.—For purposes of this section,

8 the acts referred to in this subsection are—

9 ‘‘(1) the individual’s renunciation of his United

10 States nationality before a diplomatic or consular of11 ficer of the United States pursuant to paragraph (5)

12 of section 349(a) of the Immigration and Nationality

13 Act (8 U.S.C. 1481(a)(5)),

14 ‘‘(2) the individual’s furnishing to the United

15 States Department of State a signed statement of vol16 untary relinquishment of United States nationality

17 confirming the performance of an act of expatriation

18 specified in paragraph (1), (2), (3), or (4) of section

19 349(a) of the Immigration and Nationality Act (8

20 U.S.C. 1481(a)(1)–(4)),

21 ‘‘(3) the issuance by the United States Depart22 ment of State of a certificate of loss of nationality to

23 the individual, or
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1 ‘‘(4) the cancellation by a court of the United

2 States of a naturalized citizen’s certificate of natu3 ralization.

4 ‘‘(d) PENALTY.—Any individual failing to provide a

5 statement required under subsection (a) shall be subject to

6 a penalty for each year (of the 10-year period beginning

7 on the date of loss of United States citizenship) during any

8 portion of which such failure continues in an amount equal

9 to the greater of—

10 ‘‘(1) 5 percent of the tax required to be paid

11 under section 877 for the taxable year ending during

12 such year, or

13 ‘‘(2) $1,000,

14 unless it is shown that such failure is due to reasonable

15 cause and not to willful neglect.

16 ‘‘(e) INFORMATION TO BE PROVIDED TO SEC17 RETARY.—Notwithstanding any other provision of law—

18 ‘‘(1) any Federal agency or court which collects

19 (or is required to collect) the statement under sub20 section (a) shall provide to the Secretary—

21 ‘‘(A) a copy of any such statement, and

22 ‘‘(B) the name (and any other identifying

23 information) of any individual refusing to com24 ply with the provisions of subsection (a),
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1 ‘‘(2) the Secretary of State shall provide to the

2 Secretary a copy of each certificate as to the loss of

3 American nationality under section 358 of the Immi4 gration and Nationality Act which is approved by the

5 Secretary of State, and

6 ‘‘(3) the Federal agency primarily responsible for

7 administering the immigration laws shall provide to

8 the Secretary the name of each lawful permanent resi9 dent of the United States (within the meaning of sec10 tion 7701(b)(6)) whose status as such has been re11 voked or has been administratively or judicially de12 termined to have been abandoned.

13 ‘‘(f) REPORTING BY LONG-TERM LAWFUL PERMANENT

14 RESIDENTS WHO CEASE TO BE TAXED AS RESIDENTS.—

15 In lieu of applying the last sentence of subsection (a), any

16 individual who is required to provide a statement under

17 this section by reason of section 877(e)(1) shall provide such

18 statement with the return of tax imposed by chapter 1 for

19 the taxable year during which the event described in such

20 section occurs.

21 ‘‘(g) EXEMPTION.—The Secretary may by regulations

22 exempt any class of individuals from the requirements of

23 this section if he determines that applying this section to

24 such individuals is not necessary to carry out the purposes

25 of this section.’’
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1 (b) CLERICAL AMENDMENT.—The table of sections for

2 such subpart A is amended by inserting after the item relat3 ing to section 6039F the following new item:

‘‘Sec. 6039G. Information on individuals losing United States citizenship.’’

4 (c) EFFECTIVE DATE.—The amendments made by this

5 section shall apply to—

6 (1) individuals losing United States citizenship

7 (within the meaning of section 877 of the Internal

8 Revenue Code of 1986) on or after February 6, 1995,

9 and

10 (2) long-term residents of the United States with

11 respect to whom an event described in subparagraph

12 (A) or (B) of section 877(e)(1) of such Code occurs on

13 or after such date.

14 In no event shall any statement required by such amend15 ments be due before the 90th day after the date of the enact16 ment of this Act.

17 CHAPTER 7—FINANCIAL ASSET

18 SECURITIZATION INVESTMENTS

19 SEC. 11351. FINANCIAL ASSET SECURITIZATION INVEST20 MENT TRUSTS.

21 (a) IN GENERAL.—Subchapter M of chapter 1 is

22 amended by adding at the end the following new part:
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1 ‘‘PART V—FINANCIAL ASSET SECURITIZATION

2 INVESTMENT TRUSTS

‘‘Sec. 860H. Taxation of a FASIT; other general rules.

‘‘Sec. 860I. Gain recognition on contributions to and distributions from a

FASIT and in other cases.

‘‘Sec. 860J. Non-FASIT losses not to offset certain FASIT inclusions.

‘‘Sec. 860K. Treatment of transfers of high-yield interests to disqualified

holders.

‘‘Sec. 860L. Definitions and other special rules.

3 ‘‘SEC. 860H. TAXATION OF A FASIT; OTHER GENERAL RULES.

4 ‘‘(a) TAXATION OF FASIT.—A FASIT as such shall

5 not be subject to taxation under this subtitle (and shall not

6 be treated as a trust, partnership, corporation, or taxable

7 mortgage pool).

8 ‘‘(b) TAXATION OF HOLDER OF OWNERSHIP INTER9 EST.—In determining the taxable income of the holder of

10 the ownership interest in a FASIT—

11 ‘‘(1) all assets, liabilities, and items of income,

12 gain, deduction, loss, and credit of a FASIT shall be

13 treated as assets, liabilities, and such items (as the

14 case may be) of such holder,

15 ‘‘(2) the constant yield method (including the

16 rules of section 1272(a)(6)) shall be applied under an

17 accrual method of accounting in determining all in18 terest, acquisition discount, original issue discount,

19 and market discount and all premium deductions or

20 adjustments with respect to all debt instruments of the

21 FASIT,
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1 ‘‘(3) the amount of the tax imposed by section

2 860L(e) (relating to tax on income from foreclosure

3 property) shall be allowed as a deduction,

4 ‘‘(4) there shall not be taken into account any

5 item of income, gain, loss, or deduction allocable to

6 prohibited income, and

7 ‘‘(5) interest accrued by the FASIT which is ex8 empt from tax imposed by this subtitle shall, when

9 taken into account by such holder, be treated as ordi10 nary income.

11 For purposes of this subtitle, securities treated as held by

12 such holder under paragraph (1) shall be treated as held

13 for investment.

14 ‘‘(c) TREATMENT OF REGULAR INTERESTS.—For pur15 poses of this title—

16 ‘‘(1) a regular interest in a FASIT, if not other17 wise a debt instrument, shall be treated as a debt in18 strument,

19 ‘‘(2) section 163(e)(5) shall not apply to such an

20 interest, and

21 ‘‘(3) amounts includible in gross income with re22 spect to such an interest shall be determined under an

23 accrual method of accounting.
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1 ‘‘SEC. 860I. GAIN RECOGNITION ON CONTRIBUTIONS TO

2 AND DISTRIBUTIONS FROM A FASIT AND IN

3 OTHER CASES.

4 ‘‘(a) CONTRIBUTIONS TO FASIT.—

5 ‘‘(1) IN GENERAL.—If property is contributed to

6 a FASIT by the holder of the ownership interest in

7 such FASIT, gain (if any) shall be recognized to such

8 holder in an amount equal to the excess (if any) of

9 such property’s value under subsection (e) on the date

10 of such contribution over its adjusted basis on such

11 date.

12 ‘‘(2) DEBT INSTRUMENTS ACQUIRED OTHER

13 THAN BY CONTRIBUTION BY HOLDER OF OWNERSHIP

14 INTEREST.—For purposes of this part, any debt in15 strument which is acquired by a FASIT other than

16 in a contribution by the holder of the ownership in17 terest in the FASIT shall be treated—

18 ‘‘(A) as having been acquired by such holder

19 at its fair market value on the date of its acqui20 sition by the FASIT, and

21 ‘‘(B) as having been contributed by such

22 holder to the FASIT at its value under sub23 section (e) on such date.

24 ‘‘(3) DEFERRAL OF GAIN RECOGNITION.—The

25 Secretary may prescribe regulations which—
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1 ‘‘(A) provide that gain otherwise recognized

2 under paragraph (1) shall not be recognized be3 fore the earliest date on which such property

4 supports any regular interest in such FASIT or

5 any indebtedness of the holder of the ownership

6 interest (or of any person related to such holder),

7 and

8 ‘‘(B) provide such adjustments to the other

9 provisions of this part to the extent appropriate

10 in the context of the treatment provided under

11 subparagraph (A).

12 ‘‘(b) CERTAIN DISTRIBUTIONS.—If a FASIT makes a

13 distribution of property with respect to the ownership inter14 est in the FASIT, gain (if any) shall be recognized to such

15 FASIT on the distribution in the same manner as if the

16 FASIT had sold such property to the distributee at its value

17 under subsection (e) on the date of such distribution.

18 ‘‘(c) GAIN RECOGNITION ON PROPERTY OUTSIDE

19 FASIT WHICH SUPPORTS REGULAR INTERESTS.—If prop20 erty held by the holder of the ownership interest in a FASIT

21 (or by any person related to such holder) supports any regu22 lar interest in such FASIT—

23 ‘‘(1) gain shall be recognized to such holder in

24 the same manner as if such holder had sold such

25 property at its value under subsection (e) on the ear-
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1 liest date such property supports such an interest,

2 and

3 ‘‘(2) such property shall be treated as held by

4 such FASIT for purposes of this part.

5 ‘‘(d) GAIN RECOGNITION ON RETAINED INTERESTS.—

6 If—

7 ‘‘(1) any interest in a debt instrument is con8 tributed to a FASIT, and

9 ‘‘(2) the contributor (or any person related to

10 such contributor) retains any interest in such instru11 ment (including a right to receive excessive servicing

12 fees with respect to such instrument),

13 then gain shall be recognized to such contributor (or person)

14 in the same manner as if the contributor (or person) had

15 sold the retained interest at its value under subsection (e)

16 on the date of such contribution.

17 ‘‘(e) VALUATION.—For purposes of this section—

18 ‘‘(1) IN GENERAL.—The value of any property

19 under this subsection shall be—

20 ‘‘(A) in the case of property other than a

21 debt instrument, its fair market value, and

22 ‘‘(B) in the case of a debt instrument, the

23 sum of the present values of the reasonably ex24 pected payments under such instrument deter-
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1 mined (in the manner provided by regulations

2 prescribed by the Secretary)—

3 ‘‘(i) as of the date of the event resulting

4 in the gain recognition under this section,

5 and

6 ‘‘(ii) by using a discount rate equal to

7 120 percent of the applicable Federal rate

8 (as defined in section 1274(d)), or such

9 other discount rate specified in such regula10 tions, compounded semiannually.

11 ‘‘(2) SPECIAL RULE FOR REVOLVING LOAN AC12 COUNTS.—For purposes of paragraph (1)—

13 ‘‘(A) each extension of credit (other than the

14 accrual of interest) on a revolving loan account

15 shall be treated as a separate debt instrument,

16 and

17 ‘‘(B) payments on such extensions of credit

18 having substantially the same terms shall be ap19 plied to such extensions beginning with the earli20 est such extension.

21 ‘‘(f) SPECIAL RULES.—

22 ‘‘(1) NONRECOGNITION RULES NOT TO APPLY.—

23 Gain required to be recognized under this section

24 shall be recognized notwithstanding any other provi25 sion of this subtitle.
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1 ‘‘(2) BASIS ADJUSTMENTS.—The basis of any

2 property on which gain is recognized under this sec3 tion shall be increased by the amount of gain so rec4 ognized.

5 ‘‘SEC. 860J. NON-FASIT LOSSES NOT TO OFFSET CERTAIN

6 FASIT INCLUSIONS.

7 ‘‘(a) IN GENERAL.—The taxable income of the holder

8 of the ownership interest or any high-yield interest in a

9 FASIT for any taxable year shall in no event be less than

10 such holder’s taxable income determined solely with respect

11 to such interests.

12 ‘‘(b) COORDINATION WITH SECTION 172.—Any in13 crease in the taxable income of any holder of the ownership

14 interest or a high-yield interest in a FASIT for any taxable

15 year by reason of subsection (a) shall be disregarded—

16 ‘‘(1) in determining under section 172 the

17 amount of any net operating loss for such taxable

18 year, and

19 ‘‘(2) in determining taxable income for such tax20 able year for purposes of the 2nd sentence of section

21 172(b)(2).

22 ‘‘(c) COORDINATION WITH MINIMUM TAX.—For pur23 poses of part VI of subchapter A of this chapter—
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1 ‘‘(1) the reference in section 55(b)(2) to taxable

2 income shall be treated as a reference to taxable in3 come determined without regard to this section,

4 ‘‘(2) the alternative minimum taxable income of

5 any holder of the ownership interest or a high-yield

6 interest in a FASIT for any taxable year shall in no

7 event be less than such holder’s taxable income deter8 mined solely with respect to such interests, and

9 ‘‘(3) any increase in taxable income under this

10 section shall be disregarded for purposes of computing

11 the alternative tax net operating loss deduction.

12 ‘‘SEC. 860K. TREATMENT OF TRANSFERS OF HIGH-YIELD IN13 TERESTS TO DISQUALIFIED HOLDERS.

14 ‘‘(a) GENERAL RULE.—If any high-yield interest is

15 held by a disqualified holder, this chapter shall be applied

16 as if the transferor of such interest to such holder had not

17 transferred such interest.

18 ‘‘(b) EXCEPTIONS.—Rules similar to the rules of para19 graphs (4) and (7) of section 860E(e) shall apply to the

20 tax imposed by reason of subsection (a).

21 ‘‘(c) DISQUALIFIED HOLDER.—For purposes of this

22 section, the term ‘disqualified holder’ means any holder

23 other than an eligible corporation (as defined in section

24 860L(a)(2)).
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1 ‘‘(d) TREATMENT OF INTERESTS HELD BY SECURI2 TIES DEALERS.—

3 ‘‘(1) IN GENERAL.—Subsection (a) shall not

4 apply to any high-yield interest held by a disqualified

5 holder if such holder is a dealer in securities who ac6 quired such interest exclusively for sale to customers

7 in the ordinary course of business (and not for invest8 ment).

9 ‘‘(2) CHANGE IN DEALER STATUS.—

10 ‘‘(A) IN GENERAL.—In the case of a dealer

11 in securities which is not an eligible corporation

12 (as defined in section 860L(a)(2)), if—

13 ‘‘(i) such dealer ceases to be a dealer in

14 securities, or

15 ‘‘(ii) such dealer commences holding

16 the high-yield interest for investment,

17 there is hereby imposed (in addition to other

18 taxes) an excise tax equal to the product of the

19 highest rate of tax specified in section 11(b)(1)

20 and the income of such dealer attributable to

21 such interest for periods after the date of such

22 cessation or commencement.

23 ‘‘(B) HOLDING FOR 31 DAYS OR LESS.—For

24 purposes of subparagraph (A)(ii), a dealer shall

25 not be treated as holding an interest for invest-
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1 ment before the 32d day after the date such deal2 er acquired such interest unless such interest is

3 so held as part of a plan to avoid the purposes

4 of this paragraph.

5 ‘‘(C) ADMINISTRATIVE PROVISIONS.—The

6 deficiency procedures of subtitle F shall apply to

7 the tax imposed by this paragraph.

8 ‘‘(e) TREATMENT OF HIGH-YIELD INTERESTS IN PASS9 THRU ENTITIES.—If a pass-thru entity (as defined in sec10 tion 860E(e)(6)) issues a debt or equity interest—

11 ‘‘(1) which is supported by any regular interest

12 in a FASIT, and

13 ‘‘(2) which has an original yield to maturity

14 which is greater than each of—

15 ‘‘(A) the sum determined under clauses (i)

16 and (ii) of section 163(i)(1)(B) with respect to

17 such debt or equity interest, and

18 ‘‘(B) the yield to maturity on such regular

19 interest,

20 there is hereby imposed on the pass-thru entity a tax

21 (in addition to other taxes) equal to the product of the

22 highest rate of tax specified in section 11(b)(1) and

23 the income of the holder of such debt or equity interest

24 which is properly attributable to such regular inter25 est. For purposes of the preceding sentence, the yield
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1 to maturity of any equity interest shall be determined

2 under regulations prescribed by the Secretary.

3 ‘‘SEC. 860L. DEFINITIONS AND OTHER SPECIAL RULES.

4 ‘‘(a) FASIT.—

5 ‘‘(1) IN GENERAL.—For purposes of this title, the

6 terms ‘financial asset securitization investment trust’

7 and ‘FASIT’ mean any entity—

8 ‘‘(A) for which an election to be treated as

9 a FASIT applies for the taxable year,

10 ‘‘(B) all of the interests in which are regu11 lar interests or the ownership interest,

12 ‘‘(C) which has only 1 ownership interest

13 and such ownership interest is held directly by

14 an eligible corporation,

15 ‘‘(D) as of the close of the 3rd month begin16 ning after the day of its formation and at all

17 times thereafter, substantially all of the assets of

18 which (including assets treated as held by the en19 tity under section 860I(c)(2)) consist of per20 mitted assets, and

21 ‘‘(E) which is not described in section

22 851(a).

23 A rule similar to the rule of the last sentence of sec24 tion 860D(a) shall apply for purposes of this para25 graph.
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1 ‘‘(2) ELIGIBLE CORPORATION.—For purposes of

2 paragraph (1)(C), the term ‘eligible corporation’

3 means any domestic C corporation other than—

4 ‘‘(A) a corporation which is exempt from, or

5 is not subject to, tax under this chapter,

6 ‘‘(B) an entity described in section 851(a)

7 or 856(a),

8 ‘‘(C) a REMIC, and

9 ‘‘(D) an organization to which part I of

10 subchapter T applies.

11 ‘‘(3) ELECTION.—

12 ‘‘(A) IN GENERAL.—An entity (otherwise

13 meeting the requirements of paragraph (1)) may

14 elect to be treated as a FASIT. Except as pro15 vided in paragraph (5), such an election shall

16 apply to the taxable year for which made and all

17 subsequent taxable years unless revoked with the

18 consent of the Secretary.

19 ‘‘(B) ELECTIONS MADE AFTER 1ST TAXABLE

20 YEAR OF ENTITY.—If the election under subpara21 graph (A) is made after the first taxable year of

22 the entity, all property held (or treated as held

23 under section 860I(c)(2)) by such entity as of the

24 first day of the first taxable year for which such

25 election is made shall be treated as contributed
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1 to such entity on such first day by the holder of

2 the ownership interest in such entity.

3 ‘‘(4) TERMINATION.—If any entity ceases to be a

4 FASIT at any time during the taxable year, such en5 tity shall not be treated as a FASIT for such taxable

6 year or any succeeding taxable year.

7 ‘‘(5) INADVERTENT TERMINATIONS, ETC.—Rules

8 similar to the rules of section 860D(b)(2)(B) shall

9 apply to inadvertent failures to qualify or remain

10 qualified as a FASIT.

11 ‘‘(b) INTERESTS IN FASIT.—For purposes of this

12 part—

13 ‘‘(1) REGULAR INTEREST.—

14 ‘‘(A) IN GENERAL.—The term ‘regular in15 terest’ means any interest which is issued by a

16 FASIT with fixed terms and which is designated

17 as a regular interest if—

18 ‘‘(i) such interest unconditionally enti19 tles the holder to receive a specified prin20 cipal amount (or other similar amount),

21 ‘‘(ii) except as otherwise provided by

22 the Secretary—

23 ‘‘(I) in the case of a FASIT which

24 would be treated as a REMIC if an

25 election under section 860D(b) had
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1 been made, interest payments (or other

2 similar amounts), if any, with respect

3 to such interest at or before maturity

4 meet the requirements applicable under

5 clause (i) or (ii) of section

6 860G(a)(1)(B), or

7 ‘‘(II) in the case of any other

8 FASIT, interest payments (or other

9 similar amounts), if any, with respect

10 to such interest are determined using a

11 current rate which is reasonably ex12 pected to measure contemporaneous

13 variations in the cost of newly bor14 rowed funds in the currency in which

15 the regular interest is denominated,

16 ‘‘(iii) such interest does not have a

17 stated maturity (including options to

18 renew) greater than 30 years (or such

19 longer period as may be permitted by regu20 lations),

21 ‘‘(iv) the issue price of such interest

22 does not exceed 125 percent of its stated

23 principal amount, and

24 ‘‘(v) the yield to maturity on such in25 terest is less than the sum determined under
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1 section 163(i)(1)(B) with respect to such in2 terest.

3 Interest shall not fail to meet the requirements of

4 clause (i) merely because the timing (but not the

5 amount) of the principal payments (or other

6 similar amounts) may be contingent on the ex7 tent that payments on debt instruments held by

8 the FASIT are made in advance of anticipated

9 payments and on the amount of income from

10 permitted assets.

11 ‘‘(B) HIGH-YIELD INTERESTS.—

12 ‘‘(i) IN GENERAL.—The term ‘regular

13 interest’ includes any high-yield interest.

14 ‘‘(ii) HIGH-YIELD INTEREST.—The

15 term ‘high-yield interest’ means any interest

16 which would be described in subparagraph

17 (A) but for failing to meet the requirements

18 of one or more of clauses (i), (iv), or (v)

19 thereof.

20 ‘‘(2) OWNERSHIP INTEREST.—The term ‘owner21 ship interest’ means the interest issued by a FASIT

22 which is designated as an ownership interest and

23 which is not a regular interest.

24 ‘‘(c) PERMITTED ASSETS.—For purposes of this

25 part—
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1 ‘‘(1) IN GENERAL.—The term ‘permitted asset’

2 means—

3 ‘‘(A) cash or cash equivalents,

4 ‘‘(B) any debt instrument (as defined in

5 section 1275(a)(1)) under which interest pay6 ments (or other similar amounts), if any, at or

7 before maturity meet the requirements applicable

8 under clause (i) or (ii) of section 860G(a)(1)(B),

9 ‘‘(C) foreclosure property,

10 ‘‘(D) any asset—

11 ‘‘(i) which is an interest rate or foreign

12 currency notional principal contract, letter

13 of credit, insurance, guarantee against pay14 ment defaults, or other similar instrument,

15 permitted by the Secretary, and

16 ‘‘(ii) which is a reasonably required to

17 guarantee or hedge against the FASIT’s

18 risks associated with being the obligor on

19 interests issued by the FASIT, and

20 ‘‘(E) contract rights to acquire debt instru21 ments described in subparagraph (B) or assets

22 described in subparagraph (D).

23 ‘‘(2) DEBT ISSUED BY HOLDER OF OWNERSHIP

24 INTEREST NOT PERMITTED ASSET.—The term ‘per25 mitted asset’ shall not include any debt instrument is-
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1 sued by the holder of the ownership interest in the

2 FASIT or by any person related to such holder or

3 any direct or indirect interest in such a debt instru4 ment. The preceding sentence shall not apply to cash

5 equivalents and to any other investment specified in

6 regulations prescribed by the Secretary.

7 ‘‘(3) FORECLOSURE PROPERTY.—The term ‘fore8 closure property’ means property—

9 ‘‘(A) which would be foreclosure property

10 under section 856(e) (determined without regard

11 to paragraph (5) thereof) if acquired by a real

12 estate investment trust, and

13 ‘‘(B) which is acquired in connection with

14 the default or imminent default of a debt instru15 ment held by the FASIT unless the security in16 terest in such property was created for the prin17 cipal purpose of permitting the FASIT to invest

18 in such property.

19 Solely for purposes of subsection (a)(1), the deter20 mination of whether any property is foreclosure prop21 erty shall be made without regard to section

22 856(e)(4).

23 ‘‘(d) TAX ON PROHIBITED TRANSACTIONS.—

24 ‘‘(1) IN GENERAL.—There is hereby imposed for

25 each taxable year of a FASIT a tax equal to 100 per-
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1 cent of the net income derived from prohibited trans2 actions.

3 ‘‘(2) PROHIBITED TRANSACTIONS.—For purposes

4 of this part, the term ‘prohibited transaction’

5 means—

6 ‘‘(A) the receipt of any income derived from

7 any asset that is not a permitted asset,

8 ‘‘(B) except as provided in paragraph (3),

9 the disposition of any permitted asset,

10 ‘‘(C) the receipt of any income derived from

11 any loan originated by the FASIT, and

12 ‘‘(D) the receipt of any income representing

13 a fee or other compensation for services (other

14 than any fee received as compensation for a

15 waiver, amendment, or consent under permitted

16 assets (other than foreclosure property) held by

17 the FASIT).

18 ‘‘(3) EXCEPTION FOR INCOME FROM CERTAIN

19 DISPOSITIONS.—

20 ‘‘(A) IN GENERAL.—Paragraph (2)(B) shall

21 not apply to a disposition which would not be a

22 prohibited transaction (as defined in section

23 860F(a)(2)) by reason of—

24 ‘‘(i) clause (ii), (iii), or (iv) of section

25 860F(a)(2)(A), or
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1 ‘‘(ii) section 860F(a)(5),

2 if the FASIT were treated as a REMIC and debt

3 instruments described in subsection (c)(1)(B)

4 were treated as qualified mortgages.

5 ‘‘(B) SUBSTITUTION OF DEBT INSTRU6 MENTS; REDUCTION OF OVER7 COLLATERALIZATION.—Paragraph (2)(B) shall

8 not apply to—

9 ‘‘(i) the substitution of a debt instru10 ment described in subsection (c)(1)(B) for

11 another debt instrument which is a per12 mitted asset, or

13 ‘‘(ii) the distribution of a debt instru14 ment contributed by the holder of the owner15 ship interest to such holder in order to re16 duce over-collateralization of the FASIT,

17 but only if a principal purpose of acquiring the

18 debt instrument which is disposed of was not the

19 recognition of gain (or the reduction of a loss) as

20 a result of an increase in the market value of the

21 debt instrument after its acquisition by the

22 FASIT.

23 ‘‘(C) LIQUIDATION OF CLASS OF REGULAR

24 INTERESTS.—Paragraph (2)(B) shall not apply
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1 to the complete liquidation of any class of regu2 lar interests.

3 ‘‘(4) NET INCOME.—For purposes of this sub4 section, net income shall be determined in accordance

5 with section 860F(a)(3).

6 ‘‘(e) TAX ON INCOME FROM FORECLOSURE PROP7 ERTY.—

8 ‘‘(1) IN GENERAL.—A tax is hereby imposed for

9 each taxable year on the net income from foreclosure

10 property of each FASIT. Such tax shall be computed

11 by multiplying the net income from foreclosure prop12 erty by the highest rate of tax specified in section

13 11(b).

14 ‘‘(2) NET INCOME FROM FORECLOSURE PROP15 ERTY.—For purposes of this part, the term ‘net in16 come from foreclosure property’ means the amount

17 which would be the FASIT’s net income from fore18 closure property under section 857(b)(4)(B) if the

19 FASIT were a real estate investment trust.

20 ‘‘(f) COORDINATION WITH WASH SALES RULES.—

21 Rules similar to the rules of section 860F(d) shall apply

22 to the ownership interest in a FASIT.

23 ‘‘(g) RELATED PERSON.—For purposes of this part, a

24 person (hereinafter in this subsection referred to as the ‘re25 lated person’) is related to any person if—
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1 ‘‘(1) the related person bears a relationship to

2 such person specified in section 267(b) or section

3 707(b)(1), or

4 ‘‘(2) the related person and such person are en5 gaged in trades or businesses under common control

6 (within the meaning of subsections (a) and (b) of sec7 tion 52).

8 For purposes of paragraph (1), in applying section 267(b)

9 or 707(b)(1), ‘20 percent’ shall be substituted for ‘50 per10 cent’.

11 ‘‘(h) REGULATIONS.—The Secretary shall prescribe

12 such regulations as may be necessary or appropriate to

13 carry out the purposes of this part, including regulations

14 to prevent the abuse of the purposes of this part through

15 transactions which are not primarily related to

16 securitization of debt instruments by a FASIT.’’.

17 (b) TECHNICAL AMENDMENTS.—

18 (1) Paragraph (2) of section 26(b) is amended by

19 striking ‘‘and’’ at the end of subparagraph (M), by

20 striking the period at the end of subparagraph (N)

21 and inserting ‘‘, and’’, and by adding at the end the

22 following new subparagraphs:

23 ‘‘(O) section 860K (relating to treatment of

24 transfers of high-yield interests to disqualified

25 holders).’’.
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1 (2) Paragraph (6) of section 56(g) is amended by

2 striking ‘‘or REMIC’’ and inserting ‘‘REMIC, or

3 FASIT’’.

4 (3) Clause (ii) of section 382(l)(4)(B) is amended

5 by striking ‘‘or a REMIC to which part IV of sub6 chapter M applies’’ and inserting ‘‘a REMIC to

7 which part IV of subchapter M applies, or a FASIT

8 to which part V of subchapter M applies’’.

9 (4) Paragraph (1) of section 582(c) is amended

10 by inserting ‘‘, and any regular or ownership interest

11 in a FASIT,’’ after ‘‘REMIC’’.

12 (5) Subparagraph (E) of section 856(c)(6) is

13 amended by adding at the end the following new sen14 tence: ‘‘References in the preceding provisions of this

15 subparagraph to a REMIC shall be treated as includ16 ing a reference to a FASIT.’’.

17 (6) Subparagraph (C) of section 1202(e)(4) is

18 amended by striking ‘‘or REMIC’’ and inserting

19 ‘‘REMIC, or FASIT’’.

20 (7) Clause (xi) of section 7701(a)(19)(C) is

21 amended to read as follows:

22 ‘‘(xi) any regular or residual interest

23 in a REMIC, and any regular or ownership

24 interest in a FASIT, but only in the pro25 portion which the assets of such REMIC or
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1 FASIT consist of property described in any

2 of the preceding clauses of this subpara3 graph; except that if 95 percent or more of

4 the assets of such REMIC or FASIT are as5 sets described in clauses (i) through (x), the

6 entire interest in the REMIC or FASIT

7 shall qualify.’’.

8 (8) Subparagraph (A) of section 7701(i)(2) is

9 amended by inserting ‘‘or a FASIT’’ after ‘‘a

10 REMIC’’.

11 (c) CLERICAL AMENDMENT.—The table of parts for

12 subchapter M of chapter 1 is amended by adding at the

13 end the following new item:

‘‘Part V. Financial asset securitization investment trusts.’’.

14 (d) EFFECTIVE DATE.—The amendments made by this

15 section shall take effect on the date of the enactment of this

16 Act.

17 CHAPTER 8—DEPRECIATION PROVISIONS

18 SEC. 11361. TREATMENT OF CONTRIBUTIONS IN AID OF

19 CONSTRUCTION.

20 (a) TREATMENT OF CONTRIBUTIONS IN AID OF CON21 STRUCTION.—

22 (1) IN GENERAL.—Section 118 (relating to con23 tributions to the capital of a corporation) is amend24 ed—
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1 (A) by redesignating subsection (c) as sub2 section (e), and

3 (B) by inserting after subsection (b) the fol4 lowing new subsections:

5 ‘‘(c) SPECIAL RULES FOR WATER AND SEWERAGE

6 DISPOSAL UTILITIES.—

7 ‘‘(1) GENERAL RULE.—For purposes of this sec8 tion, the term ‘contribution to the capital of the tax9 payer’ includes any amount of money or other prop10 erty received from any person (whether or not a

11 shareholder) by a regulated public utility which pro12 vides water or sewerage disposal services if—

13 ‘‘(A) such amount is a contribution in aid

14 of construction,

15 ‘‘(B) in the case of contribution of property

16 other than water or sewerage disposal facilities,

17 such amount meets the requirements of the ex18 penditure rule of paragraph (2), and

19 ‘‘(C) such amount (or any property ac20 quired or constructed with such amount) is not

21 included in the taxpayer’s rate base for rate22 making purposes.

23 ‘‘(2) EXPENDITURE RULE.—An amount meets

24 the requirements of this paragraph if—
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1 ‘‘(A) an amount equal to such amount is

2 expended for the acquisition or construction of

3 tangible property described in section 1231(b)—

4 ‘‘(i) which is the property for which

5 the contribution was made or is of the same

6 type as such property, and

7 ‘‘(ii) which is used predominantly in

8 the trade or business of furnishing water or

9 sewerage disposal services,

10 ‘‘(B) the expenditure referred to in subpara11 graph (A) occurs before the end of the second tax12 able year after the year in which such amount

13 was received, and

14 ‘‘(C) accurate records are kept of the

15 amounts contributed and expenditures made, the

16 expenditures to which contributions are allo17 cated, and the year in which the contributions

18 and expenditures are received and made.

19 ‘‘(3) DEFINITIONS.—For purposes of this sub20 section—

21 ‘‘(A) CONTRIBUTION IN AID OF CONSTRUC22 TION.—The term ‘contribution in aid of con23 struction’ shall be defined by regulations pre24 scribed by the Secretary, except that such term
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1 shall not include amounts paid as service

2 charges for starting or stopping services.

3 ‘‘(B) PREDOMINANTLY.—The term ‘pre4 dominantly’ means 80 percent or more.

5 ‘‘(C) REGULATED PUBLIC UTILITY.—The

6 term ‘regulated public utility’ has the meaning

7 given such term by section 7701(a)(33), except

8 that such term shall not include any utility

9 which is not required to provide water or sewer10 age disposal services to members of the general

11 public in its service area.

12 ‘‘(4) DISALLOWANCE OF DEDUCTIONS AND CRED13 ITS; ADJUSTED BASIS.—Notwithstanding any other

14 provision of this subtitle, no deduction or credit shall

15 be allowed for, or by reason of, any expenditure which

16 constitutes a contribution in aid of construction to

17 which this subsection applies. The adjusted basis of

18 any property acquired with contributions in aid of

19 construction to which this subsection applies shall be

20 zero.

21 ‘‘(d) STATUTE OF LIMITATIONS.—If the taxpayer for

22 any taxable year treats an amount as a contribution to the

23 capital of the taxpayer described in subsection (c), then—

24 ‘‘(1) the statutory period for the assessment of

25 any deficiency attributable to any part of such
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1 amount shall not expire before the expiration of 3

2 years from the date the Secretary is notified by the

3 taxpayer (in such manner as the Secretary may pre4 scribe) of—

5 ‘‘(A) the amount of the expenditure referred

6 to in subparagraph (A) of subsection (c)(2),

7 ‘‘(B) the taxpayer’s intention not to make

8 the expenditures referred to in such subpara9 graph, or

10 ‘‘(C) a failure to make such expenditure

11 within the period described in subparagraph (B)

12 of subsection (c)(2); and

13 ‘‘(2) such deficiency may be assessed before the

14 expiration of such 3-year period notwithstanding the

15 provisions of any other law or rule of law which

16 would otherwise prevent such assessment.’’.

17 (2) CONFORMING AMENDMENT.—Section 118(b)

18 is amended by inserting ‘‘except as provided in sub19 section (c),’’ before ‘‘the term’’.

20 (3) EFFECTIVE DATE.—The amendments made

21 by this subsection shall apply to amounts received

22 after the date of the enactment of this Act.

23 (b) RECOVERY METHOD AND PERIOD FOR WATER

24 UTILITY PROPERTY.—
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1 (1) REQUIREMENT TO USE STRAIGHT LINE

2 METHOD.—Section 168(b)(3) is amended by adding

3 at the end the following new subparagraph:

4 ‘‘(F) Water utility property described in

5 subsection (e)(5).’’.

6 (2) 25-YEAR RECOVERY PERIOD.—The table con7 tained in section 168(c)(1) is amended by inserting

8 the following item after the item relating to 20-year

9 property:

‘‘Water utility property ......................................................... 25 years’’.

10 (3) WATER UTILITY PROPERTY.—

11 (A) IN GENERAL.—Section 168(e) is amend12 ed by adding at the end the following new para13 graph:

14 ‘‘(5) WATER UTILITY PROPERTY.—The term

15 ‘water utility property’ means property—

16 ‘‘(A) which is an integral part of the gath17 ering, treatment, or commercial distribution of

18 water, and which, without regard to this para19 graph, would be 20-year property, and

20 ‘‘(B) any municipal sewer.’’.

21 (B) CONFORMING AMENDMENTS.—Section

22 168 is amended—

23 (i) by striking subparagraph (F) of

24 subsection (e)(3), and
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1 (ii) by striking the item relating to

2 subparagraph (F) in the table in subsection

3 (g)(3).

4 (4) ALTERNATIVE SYSTEM.—Clause (iv) of sec5 tion 168(g)(2)(C) is amended by inserting ‘‘or water

6 utility property’’ after ‘‘tunnel bore’’.

7 (5) EFFECTIVE DATE.—The amendments made

8 by this subsection shall apply to property placed in

9 service after the date of the enactment of this Act,

10 other than property placed in service pursuant to a

11 binding contract in effect on such date and at all

12 times thereafter before the property is placed in serv13 ice.

14 SEC. 11362. DEDUCTION FOR CERTAIN OPERATING AU15 THORITY.

16 (a) GENERAL RULE.—For purpose of chapter 1 of the

17 Internal Revenue Code of 1986, in computing the taxable

18 income of a taxpayer who, on January 1, 1995, held one

19 or more operating authorities preempted by section 601 of

20 the Federal Aviation Administration Authorization Act of

21 1994, the taxpayer shall be entitled to deduct ratably over

22 the 36-month period beginning with January 1995 an

23 amount equal to the aggregate adjusted bases of such operat24 ing authorities held by the taxpayer on January 1, 1995.
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1 (b) TREATMENT AS DEPRECIATION.—Any deduction

2 under subsection (a) shall be treated as a deduction for de3 preciation for purposes of the Internal Revenue Code of

4 1986.

5 (c) EFFECTIVE DATE.—The provisions of this section

6 shall apply to taxable years ending after December 31,

7 1994.

8 SEC. 11363. CLASS LIFE FOR GAS STATION CONVENIENCE

9 STORES AND SIMILAR STRUCTURES.

10 (a) IN GENERAL.—Section 168(e)(3)(E) (classifying

11 certain property as 15-year property) is amended by strik12 ing ‘‘and’’ at the end of clause (i), by striking the period

13 at the end of clause (ii) and inserting ‘‘, and’’, and by add14 ing at the end the following new clause:

15 ‘‘(iii) any section 1250 property which

16 is a retail motor fuels outlet (whether or not

17 food or other convenience items are sold at

18 the outlet).’’.

19 (b) CONFORMING AMENDMENT.—Subparagraph (B) of

20 section 168(g)(3) is amended by inserting after the item re21 lating to subparagraph (E)(ii) in the table contained there22 in the following new item:

‘‘(E)(iii) 20’’.

23 (c) EFFECTIVE DATE.—The amendments made by this

24 section shall apply to property which is placed in service

25 on or after the date of the enactment of this Act and to
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1 which section 168 of the Internal Revenue Code of 1986 ap2 plies after the amendment made by section 201 of the Tax

3 Reform Act of 1986. A taxpayer may elect to have such

4 amendments apply with respect to any property placed in

5 service before such date and to which such section so applies.

6 CHAPTER 9—OTHER PROVISIONS

7 SEC. 11371. APPLICATION OF FAILURE-TO-PAY PENALTY TO

8 SUBSTITUTE RETURNS.

9 (a) GENERAL RULE.—Section 6651 (relating to failure

10 to file tax return or to pay tax) is amended by adding at

11 the end the following new subsection:

12 ‘‘(g) TREATMENT OF RETURNS PREPARED BY SEC13 RETARY UNDER SECTION 6020(b).—In the case of any re14 turn made by the Secretary under section 6020(b)—

15 ‘‘(1) such return shall be disregarded for pur16 poses of determining the amount of the addition

17 under paragraph (1) of subsection (a), but

18 ‘‘(2) such return shall be treated as the return

19 filed by the taxpayer for purposes of determining the

20 amount of the addition under paragraphs (2) and (3)

21 of subsection (a).’’.

22 (b) EFFECTIVE DATE.—The amendment made by sub23 section (a) shall apply in the case of any return the due

24 date for which (determined without regard to extensions)

25 is after the date of the enactment of this Act.
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1 SEC. 11372. EXTENSION OF WITHHOLDING TO CERTAIN

2 GAMBLING WINNINGS.

3 (a) REPEAL OF EXEMPTION FOR BINGO AND KENO.—

4 Paragraph (5) of section 3402(q) is amended to read as fol5 lows:

6 ‘‘(5) EXEMPTION FOR SLOT MACHINES.—The tax

7 imposed under paragraph (1) shall not apply to

8 winnings from a slot machine.’’.

9 (b) THRESHOLD AMOUNT.—Paragraph (3) of section

10 3402(q) is amended—

11 (1) by striking ‘‘(B) and (C)’’ in subparagraph

12 (A) and inserting ‘‘(B), (C), and (D)’’, and

13 (2) by adding at the end the following new sub14 paragraph:

15 ‘‘(D) BINGO AND KENO.—Proceeds of more

16 than $5,000 from a wager placed in a bingo or

17 keno game.’’.

18 (c) EFFECTIVE DATE.—The amendments made by this

19 section shall take effect on January 1, 1996.

20 SEC. 11373. LOSSES FROM FORECLOSURE PROPERTY.

21 (a) IN GENERAL.—Section 818(b) is amended by add22 ing at the end the following new paragraph:

23 ‘‘(2) LOSSES FROM FORECLOSURE PROPERTY.—

24 ‘‘(A) IN GENERAL.—The amortizable por25 tion of any loss arising from the sale or exchange

26 of foreclosure property which (without regard to
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1 this paragraph) is treated as a capital loss shall

2 be treated as a loss from the sale or exchange of

3 real property used in carrying on an insurance

4 business which is recognized ratably over the 10-

5 taxable year period beginning with the taxable

6 year following the taxable year in which the sale

7 or exchange of the foreclosure property occurred.

8 ‘‘(B) AMORTIZABLE PORTION.—For pur9 poses of this paragraph—

10 ‘‘(i) IN GENERAL.—The amortizable

11 portion of a loss referred to in subpara12 graph (A) is the percentage (not greater

13 than 20 percent) of such loss to which the

14 taxpayer elects to have this paragraph

15 apply.

16 ‘‘(ii) SUBSEQUENT MODIFICATIONS OF

17 AMOUNT.—The taxpayer may elect for any

18 of the taxable years in the change period to

19 change (subject to the limitation under

20 clause (i)) the percentage of a loss referred

21 to in subparagraph (A) which is treated as

22 the amortizable portion of such loss. If the

23 taxpayer so elects, each such changed per24 centage shall be treated as if it were the per25 centage specified in the election made under
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1 clause (i), and proper adjustments shall be

2 made for all taxable years to reflect each

3 such change.

4 ‘‘(iii) STATUTE OF LIMITATIONS.— For

5 purposes of section 6501(h) and 6511(d)(2),

6 any change by reason of an election under

7 clause (ii) shall be treated as a capital loss

8 carryback from the year such change is

9 made.

10 ‘‘(iv) CHANGE PERIOD.—For purposes

11 of clause (ii), the change period is the 3-tax12 able year period following the taxable year

13 in which the sale or exchange of the fore14 closure property occurred.

15 ‘‘(C) ELECTION TO TREAT UNAMORTIZED

16 ORDINARY LOSSES AS CAPITAL LOSSES.—

17 ‘‘(i) IN GENERAL.—The taxpayer may

18 elect to treat any unused amount of any or19 dinary loss described in subparagraph (A)

20 as a capital loss arising in the taxable year

21 for which the election under this subpara22 graph is made.

23 ‘‘(ii) LIMITATION ON ELECTION.—An

24 election may be made under clause (i) with

25 respect to any loss only for any taxable year
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1 in the 5-taxable year period following the

2 taxable year referred to in subparagraph

3 (A).

4 ‘‘(iii) UNUSED AMOUNT OF ORDINARY

5 LOSS.—For purposes of clause (i), the un6 used amount of an ordinary loss is the

7 amount of the amortizable portion of any

8 loss which has not been recognized as of the

9 close of the preceding taxable year.

10 ‘‘(iv) ORDERING RULE.—Any unused

11 amount of an ordinary loss with respect to

12 which an election was made under clause

13 (i) shall be treated as coming first from the

14 last taxable year in the 10-taxable year pe15 riod referred to in subparagraph (A) and

16 then from each preceding taxable year in re17 verse chronological order.

18 ‘‘(D) FORECLOSURE PROPERTY.—For pur19 poses of this paragraph, the term ‘foreclosure

20 property’ means any real property used in a

21 trade or businesses (as defined in section 1231(b)

22 without regard to this subsection) which is ac23 quired by a life insurance company as the result

24 of—
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1 ‘‘(i) such company having bid on such

2 property at foreclosure, or

3 ‘‘(ii) such company having otherwise

4 reduced such property to ownership or pos5 session by agreement or process of law, after

6 there was a default (or default was immi7 nent) on indebtedness which such property

8 secured.

9 ‘‘(E) TIME FOR MAKING ELECTIONS.—Any

10 election under this paragraph for any taxable

11 year shall be made on or before the due date (in12 cluding extensions) for the return of tax for such

13 taxable year.’’

14 (b) CONFORMING AMENDMENTS.—Section 818(b) is

15 amended—

16 (1) by striking ‘‘In the’’ and inserting:

17 ‘‘(1) IN GENERAL.—In the ’’, and

18 (2) by redesignating paragraphs (1) and (2) and

19 subparagraphs (A) and (B) of paragraph (1) as sub20 paragraphs (A) and (B) and clauses (i) and (ii) of

21 subparagraph (A), respectively.

22 (c) EFFECTIVE DATE.—The amendments made by this

23 section shall apply to taxable years beginning after Decem24 ber 31, 1994.
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1 SEC. 11374. NONRECOGNITION TREATMENT FOR CERTAIN

2 TRANSFERS BY COMMON TRUST FUNDS TO

3 REGULATED INVESTMENT COMPANIES.

4 (a) GENERAL RULE.—Section 584 (relating to com5 mon trust funds) is amended by redesignating subsection

6 (h) as subsection (i) and by inserting after subsection (g)

7 the following new subsection:

8 ‘‘(h) NONRECOGNITION TREATMENT FOR CERTAIN

9 TRANSFERS TO REGULATED INVESTMENT COMPANIES.—

10 ‘‘(1) IN GENERAL.—If—

11 ‘‘(A) pursuant to a single plan, a common

12 trust fund transfers substantially all of its assets

13 to one or more regulated investment companies

14 in exchange solely for stock in the company or

15 companies to which such assets are so trans16 ferred, and

17 ‘‘(B) such stock is distributed by such com18 mon trust fund to participants in such common

19 trust fund in exchange solely for their interests

20 in such common trust fund,

21 no gain or loss shall be recognized by such common

22 trust fund by reason of such transfer or distribution,

23 and no gain or loss shall be recognized by any partic24 ipant in such common trust fund by reason of such

25 exchange.

26 ‘‘(2) BASIS RULES.—
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1 ‘‘(A) REGULATED INVESTMENT COMPANY.—

2 The basis of any asset received by a regulated in3 vestment company in a transfer referred to in

4 paragraph (1)(A) shall be the same as it would

5 be in the hands of the common trust fund.

6 ‘‘(B) PARTICIPANTS.—The basis of the stock

7 which is received in an exchange referred to in

8 paragraph (1)(B) shall be the same as that of the

9 property exchanged. If stock in more than one

10 regulated investment company is received in

11 such exchange, the basis determined under the

12 preceding sentence shall be allocated among the

13 stock in each such company on the basis of re14 spective fair market values.

15 ‘‘(3) TREATMENT OF ASSUMPTIONS OF LIABIL16 ITY.—

17 ‘‘(A) IN GENERAL.—In determining whether

18 the transfer referred to in paragraph (1)(A) is in

19 exchange solely for stock in one or more regu20 lated investment companies, the assumption by

21 any such company of a liability of the common

22 trust fund, and the fact that any property trans23 ferred by the common trust fund is subject to a

24 liability, shall be disregarded.
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1 ‘‘(B) SPECIAL RULE WHERE ASSUMED LI2 ABILITIES EXCEED BASIS.—

3 ‘‘(i) IN GENERAL.—If, in any transfer

4 referred to in paragraph (1)(A), the as5 sumed liabilities exceed the aggregate ad6 justed bases (in the hands of the common

7 trust fund) of the assets transferred to the

8 regulated investment company or compa9 nies—

10 ‘‘(I) notwithstanding paragraph

11 (1), gain shall be recognized to the

12 common trust fund on such transfer in

13 an amount equal to such excess,

14 ‘‘(II) the basis of the assets re15 ceived by the regulated investment

16 company or companies in such trans17 fer shall be increased by the amount so

18 recognized, and

19 ‘‘(III) any adjustment to the basis

20 of a participant’s interest in the com21 mon trust fund as a result of the gain

22 so recognized shall be treated as occur23 ring immediately before the exchange

24 referred to in paragraph (1)(B).
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1 If the transfer referred to in paragraph

2 (1)(A) is to two or more regulated invest3 ment companies, the basis increase under

4 subclause (II) shall be allocated among such

5 companies on the basis of the respective fair

6 market values of the assets received by each

7 of such companies.

8 ‘‘(ii) ASSUMED LIABILITIES.—For pur9 poses of clause (i), the term ‘assumed liabil10 ities’ means the aggregate of—

11 ‘‘(I) any liability of the common

12 trust fund assumed by any regulated

13 investment company in connection

14 with the transfer referred to in para15 graph (1)(A), and

16 ‘‘(II) any liability to which prop17 erty so transferred is subject.

18 ‘‘(4) COMMON TRUST FUND MUST MEET DIVER19 SIFICATION RULES.—This subsection shall not apply

20 to any common trust fund which would not meet the

21 requirements of section 368(a)(2)(F)(ii) if it were a

22 corporation. For purposes of the preceding sentence,

23 Government securities shall not be treated as securi24 ties of an issuer in applying the 25-percent and 50-

25 percent test and such securities shall not be excluded
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1 for purposes of determining total assets under clause

2 (iv) of section 368(a)(2)(F).’’.

3 (b) EFFECTIVE DATE.—The amendment made by sub4 section (a) shall apply to transfers after December 31, 1995.

5 SEC. 11375. EXCLUSION FOR ENERGY CONSERVATION SUB6 SIDIES LIMITED TO SUBSIDIES WITH RE7 SPECT TO DWELLING UNITS.

8 (a) IN GENERAL.—Paragraph (1) of section 136(c)

9 (defining energy conservation measure) is amended by

10 striking ‘‘energy demand—’’ and all that follows and in11 serting ‘‘energy demand with respect to a dwelling unit.’’

12 (b) CONFORMING AMENDMENTS.—

13 (1) Subsection (a) of section 136 is amended to

14 read as follows:

15 ‘‘(a) EXCLUSION.—Gross income shall not include the

16 value of any subsidy provided (directly or indirectly) by

17 a public utility to a customer for the purchase or installa18 tion of any energy conservation measure.’’

19 (2) Paragraph (2) of section 136(c) is amend20 ed—

21 (A) by striking subparagraph (A) and by

22 redesignating subparagraphs (B) and (C) as sub23 paragraphs (A) and (B), respectively, and

24 (B) by striking ‘‘AND SPECIAL RULES’’ in

25 the paragraph heading.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to amounts received after December 31,

3 1995, unless received pursuant to a written binding con4 tract in effect on September 13, 1995, and at all times there5 after.

6 SEC. 11376. ELECTION TO CEASE STATUS AS QUALIFIED

7 SCHOLARSHIP FUNDING CORPORATION.

8 (a) IN GENERAL.—Subsection (d) of section 150 (relat9 ing to definitions and special rules) is amended by adding

10 at the end thereof the following new paragraph:

11 ‘‘(3) ELECTION TO CEASE STATUS AS QUALIFIED

12 SCHOLARSHIP FUNDING CORPORATION.—

13 ‘‘(A) IN GENERAL.—Any qualified scholar14 ship funding bond, and qualified student loan

15 bond, outstanding on the date of the issuer’s elec16 tion under this paragraph (and any bond (or se17 ries of bonds) issued to refund such a bond) shall

18 not fail to be a tax-exempt bond solely because

19 the issuer ceases to be described in subpara20 graphs (A) and (B) of paragraph (2) if the is21 suer meets the requirements of subparagraphs

22 (B) and (C) of this paragraph.

23 ‘‘(B) ASSETS AND LIABILITIES OF ISSUER

24 TRANSFERRED TO TAXABLE SUBSIDIARY.—The
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1 requirements of this subparagraph are met by an

2 issuer if—

3 ‘‘(i) all of the student loan notes of the

4 issuer and other assets pledged to secure the

5 repayment of qualified scholarship funding

6 bond indebtedness of the issuer are trans7 ferred to another corporation within a rea8 sonable period after the election is made

9 under this paragraph;

10 ‘‘(ii) such transferee corporation as11 sumes or otherwise provides for the payment

12 of all of the qualified scholarship funding

13 bond indebtedness of the issuer within a

14 reasonable period after the election is made

15 under this paragraph;

16 ‘‘(iii) to the extent permitted by law,

17 such transferee corporation assumes all of

18 the responsibilities, and succeeds to all of

19 the rights, of the issuer under the issuer’s

20 agreements with the Secretary of Education

21 in respect of student loans;

22 ‘‘(iv) immediately after such transfer,

23 the issuer, together with any other issuer

24 which has made an election under this

25 paragraph in respect of such transferee,
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1 hold all of the senior stock in such transferee

2 corporation; and

3 ‘‘(v) such transferee corporation is not

4 exempt from tax under this chapter.

5 ‘‘(C) ISSUER TO OPERATE AS INDEPENDENT

6 ORGANIZATION DESCRIBED IN SECTION

7 501(c)(3).—The requirements of this subpara8 graph are met by an issuer if, within a reason9 able period after the transfer referred to in sub10 paragraph (B)—

11 ‘‘(i) the issuer is described in section

12 501(c)(3) and exempt from tax under sec13 tion 501(a);

14 ‘‘(ii) the issuer no longer is described

15 in subparagraphs (A) and (B) of paragraph

16 (2); and

17 ‘‘(iii) at least 80 percent of the mem18 bers of the board of directors of the issuer

19 are independent members.

20 ‘‘(D) SENIOR STOCK.—For purposes of this

21 paragraph, the term ‘senior stock’ means stock—

22 ‘‘(i) which participates pro rata and

23 fully in the equity value of the corporation

24 with all other common stock of the corpora25 tion but which has the right to payment of
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1 liquidation proceeds prior to payment of

2 liquidation proceeds in respect of other com3 mon stock of the corporation;

4 ‘‘(ii) which has a fixed right upon liq5 uidation and upon redemption to an

6 amount equal to the greater of—

7 ‘‘(I) the fair market value of such

8 stock on the date of liquidation or re9 demption (whichever is applicable); or

10 ‘‘(II) the fair market value of all

11 assets transferred in exchange for such

12 stock and reduced by the amount of all

13 liabilities of the corporation which has

14 made an election under this paragraph

15 assumed by the transferee corporation

16 in such transfer;

17 ‘‘(iii) the holder of which has the right

18 to require the transferee corporation to re19 deem on a date that is not later than 10

20 years after the date on which an election

21 under this paragraph was made and pursu22 ant to such election such stock was issued;

23 and

24 ‘‘(iv) in respect of which, during the

25 time such stock is outstanding, there is not
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1 outstanding any equity interest in the cor2 poration having any liquidation, redemp3 tion or dividend rights in the corporation

4 which are superior to those of such stock.

5 ‘‘(E) INDEPENDENT MEMBER.—The term

6 ‘independent member’ means a member of the

7 board of directors of the issuer who (except for

8 services as a member of such board) receives no

9 compensation directly or indirectly—

10 ‘‘(i) for services performed in connec11 tion with such transferee corporation, or

12 ‘‘(ii) for services as a member of the

13 board of directors or as an officer of such

14 transferee corporation.

15 For purposes of clause (ii), the term ‘officer’ in16 cludes any individual having powers or respon17 sibilities similar to those of officers.

18 ‘‘(F) COORDINATION WITH CERTAIN PRI19 VATE FOUNDATION TAXES.—For purposes of sec20 tions 4942 (relating to the excise tax on a failure

21 to distribute income) and 4943 (relating to the

22 excise tax on excess business holdings), the trans23 feree corporation referred to in subparagraph (B)

24 shall be treated as a functionally related business

25 (within the meaning of section 4942(j)(4)) with
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1 respect to the issuer during the period commenc2 ing with the date on which an election is made

3 under this paragraph and ending on the date

4 that is the earlier of—

5 ‘‘(i) the last day of the last taxable

6 year for which more than 50 percent of the

7 gross income of such transferee corporation

8 is derived from, or more than 50 percent of

9 the assets (by value) of such transferee cor10 poration consists of, student loan notes in11 curred under the Higher Education Act of

12 1965; or

13 ‘‘(ii) the last day of the taxable year of

14 the issuer during which occurs the date

15 which is 10 years after the date on which

16 the election under this paragraph is made.

17 ‘‘(G) ELECTION.—An election under this

18 paragraph may be revoked only with the consent

19 of the Secretary.’’

20 (b) EFFECTIVE DATE.—The amendment made by this

21 section shall take effect on the date of the enactment of this

22 Act.
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1 SEC. 11377. CERTAIN AMOUNTS DERIVED FROM FOREIGN

2 CORPORATIONS TREATED AS UNRELATED

3 BUSINESS TAXABLE INCOME.

4 (a) GENERAL RULE.—Subsection (b) of section 512

5 (relating to modifications) is amended by adding at the end

6 thereof the following new paragraph:

7 ‘‘(18) TREATMENT OF CERTAIN AMOUNTS DE8 RIVED FROM FOREIGN CORPORATIONS.—

9 ‘‘(A) IN GENERAL.—Notwithstanding para10 graph (1), any amount included in gross income

11 under section 951(a)(1)(A) shall be included as

12 an item of gross income derived from an unre13 lated trade or business to the extent the amount

14 so included is attributable to insurance income

15 (as defined in section 953) which, if derived di16 rectly by the organization, would be treated as

17 gross income from an unrelated trade or busi18 ness. There shall be allowed all deductions di19 rectly connected with amounts included in gross

20 income under the preceding sentence.

21 ‘‘(B) EXCEPTION.—Subparagraph (A) shall

22 not apply to income attributable to a policy of

23 insurance or reinsurance with respect to which

24 the person (directly or indirectly) insured is—

25 ‘‘(i) such organization,
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1 ‘‘(ii) an affiliate of such organization

2 which is exempt from tax under section

3 501(a), or

4 ‘‘(iii) a director or officer of, or an in5 dividual who performs services for, such or6 ganization or affiliate but only if the insur7 ance covers primarily risks associated with

8 the performance of services for the benefit of

9 such organization or affiliate.

10 For purposes of this subparagraph, the deter11 mination as to whether an entity is an affiliate

12 of an organization shall be made under rules

13 similar to the rules of section 168(h)(4)(B).

14 ‘‘(C) REGULATIONS.—The Secretary shall

15 prescribe such regulations as may be necessary

16 or appropriate to carry out the purposes of this

17 paragraph, including regulations for the appli18 cation of this paragraph in the case of income

19 paid through 1 or more entities or between 2 or

20 more chains of entities.’’

21 (b) EFFECTIVE DATE.—The amendment made by this

22 section shall apply to amounts included in gross income

23 in any taxable year beginning after December 31, 1995.
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1 SEC. 11378. REPEAL OF FINANCIAL INSTITUTION TRANSI2 TION RULE TO INTEREST ALLOCATION

3 RULES.

4 (a) IN GENERAL.—Paragraph (5) of section 1215(c)

5 of the Tax Reform Act of 1986 (Public Law 99–514, 100

6 Stat. 2548) is hereby repealed.

7 (b) EFFECTIVE DATE.—The amendments made by this

8 section shall apply to taxable years beginning after Decem9 ber 31, 1995.

10 SEC. 11379. REPEAL OF BAD DEBT RESERVE METHOD FOR

11 THRIFT SAVINGS ASSOCIATIONS.

12 (a) IN GENERAL.—Section 593 (relating to reserves for

13 losses on loans) is hereby repealed.

14 (b) CONFORMING AMENDMENTS.—

15 (1) Subsection (d) of section 50 is amended by

16 adding at the end the following new sentence:

17 ‘‘Paragraphs (1)(A), (2)(A), and (4) of section 46(e) re18 ferred to in paragraph (1) of this subsection shall not apply

19 to any taxable year beginning after December 31, 1995.’’

20 (2) Subsection (e) of section 52 is amended by

21 striking paragraph (1) and by redesignating para22 graphs (2) and (3) as paragraphs (1) and (2), respec23 tively.

24 (3) Subsection (a) of section 57 is amended by

25 striking paragraph (4).
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1 (4) Section 246 is amended by striking sub2 section (f).

3 (5) Clause (i) of section 291(e)(1)(B) is amended

4 by striking ‘‘or to which section 593 applies’’.

5 (6) Subparagraph (A) of section 585(a)(2) is

6 amended by striking ‘‘other than an organization to

7 which section 593 applies’’.

8 (7) Sections 595 and 596 are hereby repealed.

9 (8) Subsection (a) of section 860E is amended—

10 (A) by striking ‘‘Except as provided in

11 paragraph (2), the’’ in paragraph (1) and in12 serting ‘‘The’’,

13 (B) by striking paragraphs (2) and (4) and

14 redesignating paragraphs (3) and (5) as para15 graphs (2) and (3), respectively, and

16 (C) by striking in paragraph (2) (as so re17 designated) all that follows ‘‘subsection’’ and in18 serting a period.

19 (9) Paragraph (3) of section 992(d) is amended

20 by striking ‘‘or 593’’.

21 (10) Section 1038 is amended by striking sub22 section (f).

23 (11) Clause (ii) of section 1042(c)(4)(B) is

24 amended by striking ‘‘or 593’’.
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1 (12) Subsection (c) of section 1277 is amended

2 by striking ‘‘or to which section 593 applies’’.

3 (13) Subparagraph (B) of section 1361(b)(2) is

4 amended by striking ‘‘or to which section 593 ap5 plies’’.

6 (14) The table of sections for part II of sub7 chapter H of chapter 1 is amended by striking the

8 items relating to sections 593, 595, and 596.

9 (c) EFFECTIVE DATE.—

10 (1) IN GENERAL.—Except as provided in para11 graph (2), the amendments made by this section shall

12 apply to taxable years beginning after December 31,

13 1995.

14 (2) REPEAL OF SECTION 595.—The repeal of sec15 tion 595 under subsection (b)(7) shall apply to prop16 erty acquired in taxable years beginning after Decem17 ber 31, 1995.

18 (d) 6-YEAR SPREAD OF ADJUSTMENTS.—

19 (1) IN GENERAL.—In the case of any taxpayer

20 who is required by reason of the amendments made

21 by this section to change its method of computing re22 serves for bad debts—

23 (A) such change shall be treated as a change

24 in a method of accounting,
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1 (B) such change shall be treated as initiated

2 by the taxpayer and as having been made with

3 the consent of the Secretary, and

4 (C) the net amount of the adjustments re5 quired to be taken into account by the taxpayer

6 under section 481(a)—

7 (i) shall be determined by taking into

8 account only applicable excess reserves, and

9 (ii) as so determined, shall be taken

10 into account ratably over the 6-taxable year

11 period beginning with the first taxable year

12 beginning after December 31, 1995.

13 (2) APPLICABLE EXCESS RESERVES.—

14 (A) IN GENERAL.—For purposes of para15 graph (1), the term ‘applicable excess reserves’

16 means the excess (if any) of—

17 (i) the balance of the reserves described

18 in section 593(c)(1) of such Code (as in ef19 fect on the day before the date of the enact20 ment of this Act) as of the close of the tax21 payer’s last taxable year beginning before

22 January 1, 1996, over

23 (ii) the lesser of—

24 (I) the balance of such reserves as

25 of the close of the taxpayer’s last tax-
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1 able year beginning before January 1,

2 1988, or

3 (II) the balance of the reserves de4 scribed in subclause (I), reduce by an

5 amount determined in the same man6 ner as under section 585(b)(2)(B)(ii)

7 on the basis of the taxable years de8 scribed in clause (i) and this clause.

9 (B) SPECIAL RULE FOR THRIFTS WHICH

10 BECOME SMALL BANKS.—In the case of a bank

11 (as defined in section 581 of such Code) which

12 is not a large bank (as defined in section

13 585(c)(2) of such Code) for its first taxable year

14 beginning after December 31, 1995—

15 (i) the balance taken into account

16 under subparagraph (A)(ii) shall not be less

17 than the amount which would be the bal18 ance of such reserve as of the close of its last

19 taxable year beginning before January 1,

20 1996, if the additions to such reserve for all

21 taxable years had been determined under

22 section 585(b)(2)(A), and

23 (ii) the opening balance of the reserve

24 for bad debts as of the beginning of such

25 first taxable year shall be the balance taken
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1 into account under subparagraph (A)(ii)

2 (determined after the application of clause

3 (i) of this subparagraph).

4 The preceding sentence shall not apply for pur5 poses of paragraphs (5), (6), and (7).

6 (3) RECAPTURE OF PRE-1988 RESERVES WHERE

7 TAXPAYER CEASES TO BE BANK.—If during any tax8 able year beginning after December 31, 1995, a tax9 payer to which paragraph (1) applied is not a bank

10 (as defined in section 581), paragraph (1) shall apply

11 to the reserves described in subparagraph (A)(ii) ex12 cept that such reserves shall be taken into account rat13 ably over the 6-taxable year period beginning with

14 such taxable year.

15 (4) SUSPENSION OF RECAPTURE IF RESIDENTIAL

16 LOAN REQUIREMENT MET.—

17 (A) IN GENERAL.—In the case of a bank

18 which meets the residential loan requirement of

19 subparagraph (B) for a taxable year beginning

20 after December 31, 1995, and before January 1,

21 1998—

22 (i) no adjustment shall be taken into

23 account under paragraph (1) for such tax24 able year, and
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1 (ii) such taxable year shall be dis2 regarded in determining—

3 (I) whether any other taxable year

4 is a taxable year for which an adjust5 ment is required to be taken into ac6 count under paragraph (1), and

7 (II) the amount of such adjust8 ment.

9 (B) RESIDENTIAL LOAN REQUIREMENT.—A

10 taxpayer meets the residential loan requirement

11 of this subparagraph for any taxable year if the

12 principal amount of the residential loans made

13 by the taxpayer during such year is not less than

14 the base amount for such year.

15 (C) RESIDENTIAL LOAN.—For purposes of

16 this paragraph, the term ‘‘residential loan’’

17 means any loan described in clause (v) of section

18 7701(a)(19)(C) of such Code but only if such

19 loan is incurred in acquiring, constructing, or

20 improving the property described in such clause.

21 (D) BASE AMOUNT.—For purposes of sub22 paragraph (B), the base amount is the average

23 of the principal amounts of the residential loans

24 made by the taxpayer during the 6 most recent

25 taxable years beginning before January 1, 1996.
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1 At the election of the taxpayer who made such

2 loans during each of such 6 taxable years, the

3 preceding sentence shall be applied without re4 gard to the taxable year in which such principal

5 amount was the highest and the taxable year in

6 such principal amount was the lowest. Such an

7 election may be made only for the first taxable

8 year beginning after December 31, 1995, and, if

9 made for such taxable year, shall apply to the

10 succeeding taxable year unless revoked with the

11 consent of the Secretary of the Treasury or his

12 delegate.

13 (E) CONTROLLED GROUPS.—In the case of

14 a taxpayer which is a member of any controlled

15 group of corporations described in section

16 1563(a)(1) of such Code, subparagraph (B) shall

17 be applied with respect to such group.

18 (5) CONTINUED APPLICATION OF FRESH START

19 UNDER SECTION 585 TRANSITIONAL RULES.—In the

20 case of a taxpayer to which paragraph (1) applied

21 and which was not a large bank (as defined in section

22 585(c)(2) of such Code) for its first taxable year be23 ginning after December 31, 1995:

24 (A) IN GENERAL.—For purposes of deter25 mining the net amount of adjustments referred to
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1 in section 585(c)(3)(A)(iii) of such Code, there

2 shall be taken into account only the excess of the

3 reserve for bad debts as of the close of the last

4 taxable year before the disqualification year over

5 the balance taken into account by such taxpayer

6 under paragraph (2)(A)(ii) of this subsection.

7 (B) TREATMENT UNDER ELECTIVE CUT-OFF

8 METHOD.—For purposes of applying section

9 585(c)(4) of such Code—

10 (i) the balance of the reserve taken into

11 account under subparagraph (B) thereof

12 shall be reduced by the balance taken into

13 account by such taxpayer under paragraph

14 (2)(A)(ii) of this subsection, and

15 (ii) no amount shall be includible in

16 gross income by reason of such reduction.

17 (6) CONTINUED APPLICATION OF SECTION

18 593(e).—Notwithstanding the amendments made by

19 this section, in the case of a taxpayer to which para20 graph (1) of this subsection applies, section 593(e) of

21 such Code (as in effect on the day before the date of

22 the enactment of this Act) shall continue to apply to

23 such taxpayer as if such taxpayer were a domestic

24 building and loan association but the amount of the

25 reserves taken into account under subparagraphs (B)
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1 and (C) of section 593(e)(1) (as so in effect) shall be

2 the balance taken into account by such taxpayer

3 under paragraph (2)(A)(ii) of this subsection.

4 (7) CERTAIN ITEMS INCLUDED AS SECTION 381(c)

5 ITEMS.—The balance of the applicable excess reserves,

6 and the balance taken into account by a taxpayer

7 under paragraph (2)(A)(ii) of this subsection, shall be

8 treated as items described in section 381(c) of such

9 Code.

10 (8) CONVERSIONS TO CREDIT UNIONS.—In the

11 case of a taxpayer to which paragraph (1) applied

12 which becomes a credit union described in section

13 501(c)(14)(A)—

14 (A) any amount required to be included in

15 the gross income of the credit union by reason of

16 this subsection shall be treated as derived from

17 an unrelated trade or business (as defined in sec18 tion 513), and

19 (B) for purposes of paragraph (3), the cred20 it union shall not be treated as if it were a bank.

21 (9) REGULATIONS.—The Secretary of the Treas22 ury or his delegate shall prescribe such regulations as

23 may be necessary to carry out this subsection, includ24 ing regulations providing for the application of para-
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1 graphs (4) and (6) in the case of acquisitions, merg2 ers, spin-offs, and other reorganizations.

3 SEC. 11380. NEWSPAPER DISTRIBUTORS TREATED AS DI4 RECT SELLERS.

5 (a) IN GENERAL.—Section 3508(b)(2)(A) in amended

6 by striking ‘‘or’’ at the end of clause (i), by inserting ‘‘or’’

7 at the end of clause (ii), and by inserting after clause (ii)

8 the following new clause:

9 ‘‘(iii) is engaged in the trade or busi10 ness of the delivering or distribution of

11 newspapers or shopping news (including

12 any services directly related to such trade or

13 business),’’.

14 (b) EFFECTIVE DATE.—The amendments made by this

15 section shall apply to services performed after December 31,

16 1995.

17 Subtitle J—Tax Simplification

18 CHAPTER 1—PROVISIONS RELATING TO

19 INDIVIDUALS

20 Subchapter A—Provisions Relating To Roll21 over of Gain on Sale of Principal Resi22 dence

23 SEC. 11401. MULTIPLE SALES WITHIN ROLLOVER PERIOD.

24 (a) GENERAL RULE.—
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1 (1) Section 1034(d) (relating to limitation on

2 rollover of gain on sale of principal residence), as

3 amended by sections 11321 and 11322, is amended by

4 striking paragraphs (1) and (2) and by redesignating

5 paragraphs (3) and (4) as paragraphs (1) and (2),

6 respectively.

7 (2) Paragraph (4) of section 1034(c) is amended

8 to read as follows:

9 ‘‘(4) If the taxpayer, during the period described

10 in subsection (a), purchases more than 1 residence

11 which is used by him as his principal residence at

12 some time within 2 years after the date of the sale of

13 the old residence, only the first of such residences so

14 used by him after the date of such sale shall constitute

15 the new residence.’’

16 (3) Subsections (h)(1) and (k) of section 1034

17 are each amended by striking ‘‘(other than the 2 years

18 referred to in subsection (c)(4))’’.

19 (b) EFFECTIVE DATE.—The amendments made by this

20 section shall apply to sales of old residences (within the

21 meaning of section 1034 of the Internal Revenue Code of

22 1986) after the date of the enactment of this Act.

23 SEC. 11402. SPECIAL RULES IN CASE OF DIVORCE.

24 (a) IN GENERAL.—Subsection (c) of section 1034 is

25 amended by adding at the end the following new paragraph:
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1 ‘‘(5) If—

2 ‘‘(A) a residence is sold by an individual

3 pursuant to a divorce or marital separation, and

4 ‘‘(B) the taxpayer used such residence as his

5 principal residence at any time during the 2-

6 year period ending on the date of such sale,

7 for purposes of this section, such residence shall be

8 treated as the taxpayer’s principal residence at the

9 time of such sale.’’

10 (b) EFFECTIVE DATE.—The amendment made by sub11 section (a) shall apply to sales of old residences (within the

12 meaning of section 1034 of the Internal Revenue Code of

13 1986) after the date of the enactment of this Act.

14 SEC. 11403. ONE-TIME EXCLUSION OF GAIN FROM SALE OF

15 PRINCIPAL RESIDENCE FOR CERTAIN

16 SPOUSES.

17 (a) IN GENERAL.—Paragraph (2) of section 121(b)

18 (relating to one-time exclusion of gain from sale of prin19 cipal residence by individual who has attained age 55) is

20 amended by adding at the end the following new sentence:

21 ‘‘For purposes of applying the preceding sentence to indi22 viduals who are married to each other, an election by one

23 individual with respect to a sale or exchange occurring be24 fore the marriage shall be disregarded for purposes of per25 mitting an election with respect to property owned and used
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1 by the other individual as his principal residence through2 out the 3-year period ending on the date of the marriage.’’

3 (b) EFFECTIVE DATE.—The amendment made by sub4 section (a) shall apply for purposes of determining whether

5 an election may be made under section 121 of the Internal

6 Revenue Code of 1986 with respect to a sale or exchange

7 occurring after September 13, 1995.

8 Subchapter B—Other Provisions

9 SEC. 11411. TREATMENT OF CERTAIN REIMBURSED EX10 PENSES OF RURAL MAIL CARRIERS.

11 (a) IN GENERAL.—Section 162 (relating to trade or

12 business expenses) is amended by redesignating subsection

13 (o) as subsection (p) and by inserting after subsection (n)

14 the following new subsection:

15 ‘‘(o) TREATMENT OF CERTAIN REIMBURSED EX16 PENSES OF RURAL MAIL CARRIERS.—

17 ‘‘(1) GENERAL RULE.—In the case of any em18 ployee of the United States Postal Service who per19 forms services involving the collection and delivery of

20 mail on a rural route and who receives qualified re21 imbursements for the expenses incurred by such em22 ployee for the use of a vehicle in performing such

23 services—

24 ‘‘(A) the amount allowable as a deduction

25 under this chapter for the use of a vehicle in per-
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1 forming such services shall be equal to the

2 amount of such qualified reimbursements; and

3 ‘‘(B) such qualified reimbursements shall be

4 treated as paid under a reimbursement or other

5 expense allowance arrangement for purposes of

6 section 62(a)(2)(A) (and section 62(c) shall not

7 apply to such qualified reimbursements).

8 ‘‘(2) DEFINITION OF QUALIFIED REIMBURSE9 MENTS.—For purposes of this subsection, the term

10 ‘qualified reimbursements’ means the amounts paid

11 by the United States Postal Service to employees as

12 an equipment maintenance allowance under the 1991

13 collective bargaining agreement between the United

14 States Postal Service and the National Rural Letter

15 Carriers’ Association. Amounts paid as an equipment

16 maintenance allowance by such Postal Service under

17 later collective bargaining agreements that supersede

18 the 1991 agreement shall be considered qualified reim19 bursements if such amounts do not exceed the

20 amounts that would have been paid under the 1991

21 agreement, adjusted for changes in the Consumer

22 Price Index (as defined in section 1(f)(5)) since

23 1991.’’
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1 (b) TECHNICAL AMENDMENT.—Section 6008 of the

2 Technical and Miscellaneous Revenue Act of 1988 is hereby

3 repealed.

4 (c) EFFECTIVE DATE.—The amendments made by this

5 section shall apply to taxable years beginning after Decem6 ber 31, 1995.

7 SEC. 11412. TREATMENT OF TRAVELING EXPENSES OF CER8 TAIN FEDERAL EMPLOYEES ENGAGED IN

9 CRIMINAL INVESTIGATIONS.

10 (a) IN GENERAL.—Subsection (a) of section 162 is

11 amended by adding at the end the following new sentence:

12 ‘‘The preceding sentence shall not apply to any Federal em13 ployee during any period for which such employee is cer14 tified by the Attorney General (or the designee thereof) as

15 traveling on behalf of the United States in temporary duty

16 status to investigate, or provide support services for the in17 vestigation of, a Federal crime.’’

18 (b) EFFECTIVE DATE.—The amendment made by sub19 section (a) shall apply to taxable years ending after the date

20 of the enactment of this Act.
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1 CHAPTER 2—PENSION SIMPLIFICATION

2 Subchapter A—Simplified Distribution Rules

3 SEC. 11421. REPEAL OF 5-YEAR INCOME AVERAGING FOR

4 LUMP-SUM DISTRIBUTIONS.

5 (a) IN GENERAL.—Subsection (d) of section 402 (relat6 ing to taxability of beneficiary of employees’ trust) is

7 amended to read as follows:

8 ‘‘(d) TAXABILITY OF BENEFICIARY OF CERTAIN FOR9 EIGN SITUS TRUSTS.—For purposes of subsections (a), (b),

10 and (c), a stock bonus, pension, or profit-sharing trust

11 which would qualify for exemption from tax under section

12 501(a) except for the fact that it is a trust created or orga13 nized outside the United States shall be treated as if it were

14 a trust exempt from tax under section 501(a).’’.

15 (b) CONFORMING AMENDMENTS.—

16 (1) Subparagraph (D) of section 402(e)(4) (relat17 ing to other rules applicable to exempt trusts) is

18 amended to read as follows:

19 ‘‘(D) LUMP-SUM DISTRIBUTION.—For pur20 poses of this paragraph—

21 ‘‘(i) IN GENERAL.—The term ‘lump

22 sum distribution’ means the distribution or

23 payment within one taxable year of the re24 cipient of the balance to the credit of an em-
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1 ployee which becomes payable to the recipi2 ent—

3 ‘‘(I) on account of the employee’s

4 death,

5 ‘‘(II) after the employee attains

age 591 6 ⁄2,

7 ‘‘(III) on account of the employ8 ee’s separation from service, or

9 ‘‘(IV) after the employee has be10 come disabled (within the meaning of

11 section 72(m)(7)),

12 from a trust which forms a part of a plan

13 described in section 401(a) and which is ex14 empt from tax under section 501 or from a

15 plan described in section 403(a). Subclause

16 (III) of this clause shall be applied only

17 with respect to an individual who is an em18 ployee without regard to section 401(c)(1),

19 and subclause (IV) shall be applied only

20 with respect to an employee within the

21 meaning of section 401(c)(1). For purposes

22 of this clause, a distribution to two or more

23 trusts shall be treated as a distribution to

24 one recipient. For purposes of this para25 graph, the balance to the credit of the em-
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1 ployee does not include the accumulated de2 ductible employee contributions under the

3 plan (within the meaning of section

4 72(o)(5)).

5 ‘‘(ii) AGGREGATION OF CERTAIN

6 TRUSTS AND PLANS.—For purposes of deter7 mining the balance to the credit of an em8 ployee under clause (i)—

9 ‘‘(I) all trusts which are part of a

10 plan shall be treated as a single trust,

11 all pension plans maintained by the

12 employer shall be treated as a single

13 plan, all profit-sharing plans main14 tained by the employer shall be treated

15 as a single plan, and all stock bonus

16 plans maintained by the employer

17 shall be treated as a single plan, and

18 ‘‘(II) trusts which are not quali19 fied trusts under section 401(a) and

20 annuity contracts which do not satisfy

21 the requirements of section 404(a)(2)

22 shall not be taken into account.

23 ‘‘(iii) COMMUNITY PROPERTY LAWS.—

24 The provisions of this paragraph shall be
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1 applied without regard to community prop2 erty laws.

3 ‘‘(iv) AMOUNTS SUBJECT TO PEN4 ALTY.—This paragraph shall not apply to

5 amounts described in subparagraph (A) of

6 section 72(m)(5) to the extent that section

7 72(m)(5) applies to such amounts.

8 ‘‘(v) BALANCE TO CREDIT OF EM9 PLOYEE NOT TO INCLUDE AMOUNTS PAY10 ABLE UNDER QUALIFIED DOMESTIC RELA11 TIONS ORDER.—For purposes of this para12 graph, the balance to the credit of an em13 ployee shall not include any amount pay14 able to an alternate payee under a qualified

15 domestic relations order (within the mean16 ing of section 414(p)).

17 ‘‘(vi) TRANSFERS TO COST-OF-LIVING

18 ARRANGEMENT NOT TREATED AS DISTRIBU19 TION.—For purposes of this paragraph, the

20 balance to the credit of an employee under

21 a defined contribution plan shall not in22 clude any amount transferred from such de23 fined contribution plan to a qualified cost24 of-living arrangement (within the meaning
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1 of section 415(k)(2)) under a defined benefit

2 plan.

3 ‘‘(vii) LUMP-SUM DISTRIBUTIONS OF

4 ALTERNATE PAYEES.—If any distribution

5 or payment of the balance to the credit of

6 an employee would be treated as a lump7 sum distribution, then, for purposes of this

8 paragraph, the payment under a qualified

9 domestic relations order (within the mean10 ing of section 414(p)) of the balance to the

11 credit of an alternate payee who is the

12 spouse or former spouse of the employee

13 shall be treated as a lump-sum distribution.

14 For purposes of this clause, the balance to

15 the credit of the alternate payee shall not

16 include any amount payable to the em17 ployee.’’.

18 (2) Section 402(c) (relating to rules applicable to

19 rollovers from exempt trusts) is amended by striking

20 paragraph (10).

21 (3) Paragraph (1) of section 55(c) (defining reg22 ular tax) is amended by striking ‘‘shall not include

23 any tax imposed by section 402(d) and’’.

24 (4) Paragraph (8) of section 62(a) (relating to

25 certain portion of lump-sum distributions from pen-
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1 sion plans taxed under section 402(d)) is hereby re2 pealed.

3 (5) Section 401(a)(28)(B) (relating to coordina4 tion with distribution rules) is amended by striking

5 clause (v).

6 (6) Subparagraph (B)(ii) of section 401(k)(10)

7 (relating to distributions that must be lump-sum dis8 tributions) is amended to read as follows:

9 ‘‘(ii) LUMP-SUM DISTRIBUTION.—For pur10 poses of this subparagraph, the term ‘lump-sum

11 distribution’ means any distribution of the bal12 ance to the credit of an employee immediately

13 before the distribution.’’.

14 (7) Section 406(c) (relating to termination of

15 status as deemed employee not to be treated as sepa16 ration from service for purposes of limitation of tax)

17 is hereby repealed.

18 (8) Section 407(c) (relating to termination of

19 status as deemed employee not to be treated as sepa20 ration from service for purposes of limitation of tax)

21 is hereby repealed.

22 (9) Section 691(c) (relating to deduction for es23 tate tax) is amended by striking paragraph (5).
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1 (10) Paragraph (1) of section 871(b) (relating to

2 imposition of tax) is amended by striking ‘‘section 1,

3 55, or 402(d)(1)’’ and inserting ‘‘section 1 or 55’’.

4 (11) Subsection (b) of section 877 (relating to al5 ternative tax) is amended by striking ‘‘section 1, 55,

6 or 402(d)(1)’’ and inserting ‘‘section 1 or 55’’.

7 (12) Section 4980A(c)(4) is amended—

8 (A) by striking ‘‘to which an election under

9 section 402(d)(4)(B) applies’’ and inserting ‘‘(as

10 defined in section 402(e)(4)(D)) with respect to

11 which the individual elects to have this para12 graph apply’’,

13 (B) by adding at the end the following new

14 flush sentence:

15 ‘‘An individual may elect to have this paragraph

16 apply to only one lump-sum distribution.’’, and

17 (C) by striking the heading and inserting:

18 ‘‘(4) SPECIAL ONE-TIME ELECTION.—’’.

19 (13) Section 402(e) is amended by striking para20 graph (5).

21 (c) EFFECTIVE DATES.—

22 (1) IN GENERAL.—The amendments made by

23 this section shall apply to taxable years beginning

24 after December 31, 1998.
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1 (2) RETENTION OF CERTAIN TRANSITION

2 RULES.—Notwithstanding any other provision of this

3 section, the amendments made by this section shall

4 not apply to any distribution for which the taxpayer

5 elects the benefits of section 1122 (h)(3) or (h)(5) of

6 the Tax Reform Act of 1986. For purposes of the pre7 ceding sentence, the rules of sections 402(c)(10) and

8 402(d) of the Internal Revenue Code of 1986 (as in

9 effect before the amendments made by this Act) shall

10 apply.

11 SEC. 11422. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES’

12 DEATH BENEFITS.

13 (a) IN GENERAL.—Subsection (b) of section 101 is

14 hereby repealed.

15 (b) CONFORMING AMENDMENTS.—

16 (1) Subsection (c) of section 101 is amended by

17 striking ‘‘subsection (a) or (b)’’ and inserting ‘‘sub18 section (a)’’.

19 (2) Sections 406(e) and 407(e) are each amended

20 by striking paragraph (2) and by redesignating para21 graph (3) as paragraph (2).

22 (3) Section 7701(a)(20) is amended by striking

23 ‘‘, for the purposes of applying the provisions of sec24 tion 101(b) with respect to employees’ death benefits’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to taxable years beginning after Decem3 ber 31, 1995.

4 SEC. 11423. SIMPLIFIED METHOD FOR TAXING ANNUITY

5 DISTRIBUTIONS UNDER CERTAIN EMPLOYER

6 PLANS.

7 (a) GENERAL RULE.—Subsection (d) of section 72 (re8 lating to annuities; certain proceeds of endowment and life

9 insurance contracts) is amended to read as follows:

10 ‘‘(d) SPECIAL RULES FOR QUALIFIED EMPLOYER RE11 TIREMENT PLANS.—

12 ‘‘(1) SIMPLIFIED METHOD OF TAXING ANNUITY

13 PAYMENTS.—

14 ‘‘(A) IN GENERAL.—In the case of any

15 amount received as an annuity under a qualified

16 employer retirement plan—

17 ‘‘(i) subsection (b) shall not apply, and

18 ‘‘(ii) the investment in the contract

19 shall be recovered as provided in this para20 graph.

21 ‘‘(B) METHOD OF RECOVERING INVESTMENT

22 IN CONTRACT.—

23 ‘‘(i) IN GENERAL.—Gross income shall

24 not include so much of any monthly annu25 ity payment under a qualified employer re-
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1 tirement plan as does not exceed the amount

2 obtained by dividing—

3 ‘‘(I) the investment in the con4 tract (as of the annuity starting date),

5 by

6 ‘‘(II) the number of anticipated

7 payments determined under the table

8 contained in clause (iii) (or, in the

9 case of a contract to which subsection

10 (c)(3)(B) applies, the number of

11 monthly annuity payments under such

12 contract).

13 ‘‘(ii) CERTAIN RULES MADE APPLICA14 BLE.—Rules similar to the rules of para15 graphs (2) and (3) of subsection (b) shall

16 apply for purposes of this paragraph.

17 ‘‘(iii) NUMBER OF ANTICIPATED PAY18 MENTS.—

‘‘If the age of the

primary annuitant on The number

the annuity starting of anticipated

date is: payments is:

Not more than 55 ........................................ 360

More than 55 but not more than 60 .......... 310

More than 60 but not more than 65 .......... 260

More than 65 but not more than 70 .......... 210

More than 70 ............................................... 160.

19 ‘‘(C) ADJUSTMENT FOR REFUND FEATURE

20 NOT APPLICABLE.—For purposes of this para21 graph, investment in the contract shall be deter-
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1 mined under subsection (c)(1) without regard to

2 subsection (c)(2).

3 ‘‘(D) SPECIAL RULE WHERE LUMP SUM

4 PAID IN CONNECTION WITH COMMENCEMENT OF

5 ANNUITY PAYMENTS.—If, in connection with the

6 commencement of annuity payments under any

7 qualified employer retirement plan, the taxpayer

8 receives a lump sum payment—

9 ‘‘(i) such payment shall be taxable

10 under subsection (e) as if received before the

11 annuity starting date, and

12 ‘‘(ii) the investment in the contract for

13 purposes of this paragraph shall be deter14 mined as if such payment had been so re15 ceived.

16 ‘‘(E) EXCEPTION.—This paragraph shall

17 not apply in any case where the primary annu18 itant has attained age 75 on the annuity start19 ing date unless there are fewer than 5 years of

20 guaranteed payments under the annuity.

21 ‘‘(F) ADJUSTMENT WHERE ANNUITY PAY22 MENTS NOT ON MONTHLY BASIS.—In any case

23 where the annuity payments are not made on a

24 monthly basis, appropriate adjustments in the

25 application of this paragraph shall be made to
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1 take into account the period on the basis of

2 which such payments are made.

3 ‘‘(G) QUALIFIED EMPLOYER RETIREMENT

4 PLAN.—For purposes of this paragraph, the term

5 ‘qualified employer retirement plan’ means any

6 plan or contract described in paragraph (1), (2),

7 or (3) of section 4974(c).

8 ‘‘(2) TREATMENT OF EMPLOYEE CONTRIBUTIONS

9 UNDER DEFINED CONTRIBUTION PLANS.—For pur10 poses of this section, employee contributions (and any

11 income allocable thereto) under a defined contribution

12 plan may be treated as a separate contract.’’.

13 (b) EFFECTIVE DATE.—The amendment made by this

14 section shall apply in cases where the annuity starting date

15 is after December 31, 1995.

16 SEC. 11424. REQUIRED DISTRIBUTIONS.

17 (a) IN GENERAL.—Section 401(a)(9)(C) (defining re18 quired beginning date) is amended to read as follows:

19 ‘‘(C) REQUIRED BEGINNING DATE.—For

20 purposes of this paragraph—

21 ‘‘(i) IN GENERAL.—The term ‘required

22 beginning date’ means April 1 of the cal23 endar year following the later of—

24 ‘‘(I) the calendar year in which

the employee attains age 701 25 ⁄2, or
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1 ‘‘(II) the calendar year in which

2 the employee retires.

3 ‘‘(ii) EXCEPTION.—Subclause (II) of

4 clause (i) shall not apply—

5 ‘‘(I) except as provided in section

6 409(d), in the case of an employee who

7 is a 5-percent owner (as defined in sec8 tion 416) with respect to the plan year

9 ending in the calendar year in which

the employee attains age 701 10 ⁄2, or

11 ‘‘(II) for purposes of section 408

12 (a)(6) or (b)(3).

13 ‘‘(iii) ACTUARIAL ADJUSTMENT.—In

14 the case of an employee to whom clause

15 (i)(II) applies who retires in a calendar

16 year after the calendar year in which the

employee attains age 701 17 ⁄2, the employee’s

18 accrued benefit shall be actuarially in19 creased to take into account the period after

age 701 20 ⁄2 in which the employee was not re21 ceiving any benefits under the plan.

22 ‘‘(iv) EXCEPTION FOR GOVERNMENTAL

23 AND CHURCH PLANS.—Clauses (ii) and (iii)

24 shall not apply in the case of a govern25 mental plan or church plan. For purposes
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1 of this clause, the term ‘church plan’ means

2 a plan maintained by a church for church

3 employees, and the term ‘church’ means any

4 church (as defined in section

5 3121(w)(3)(A)) or qualified church-con6 trolled organization (as defined in section

7 3121(w)(3)(B)).’’.

8 (b) EFFECTIVE DATE.—The amendment made by sub9 section (a) shall apply to years beginning after December

10 31, 1995.

11 Subchapter B—Increased Access to Pension

12 Plans

13 SEC. 11431. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER

14 SECTION 401(k).

15 (a) IN GENERAL.—Subparagraph (B) of section

16 401(k)(4) is amended to read as follows:

17 ‘‘(B) ELIGIBILITY OF STATE AND LOCAL

18 GOVERNMENTS AND TAX-EXEMPT ORGANIZA19 TIONS.—

20 ‘‘(i) GOVERNMENTS INELIGIBLE.—A

21 cash or deferred arrangement shall not be

22 treated as a qualified cash or deferred ar23 rangement if it is part of a plan main24 tained by a State or local government or

25 political subdivision thereof, or any agency
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1 or instrumentality thereof. This clause shall

2 not apply to a rural cooperative plan.

3 ‘‘(ii) TAX-EXEMPTS ELIGIBLE.—

4 ‘‘(I) IN GENERAL.—Any organiza5 tion exempt from tax under this sub6 title may include a qualified cash or

7 deferred arrangement as part of a plan

8 maintained by it.

9 ‘‘(II) TREATMENT OF INDIAN

10 TRIBAL GOVERNMENTS.—An employer

11 which is an Indian tribal government

12 (as defined in section 7701(a)(40)), a

13 subdivision of an Indian tribal govern14 ment (determined in accordance with

15 section 7871(d)), an agency or instru16 mentality of an Indian tribal govern17 ment or subdivision thereof, or a cor18 poration chartered under Federal,

19 State, or tribal law which is owned in

20 whole or in part by any of the fore21 going shall be treated as an organiza22 tion exempt from tax under this sub23 title for purposes of subclause (I).

24 (b) EFFECTIVE DATE.—The amendment made by this

25 section shall apply to plan years beginning after December
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1 31, 1996, but shall not apply to any cash or deferred ar2 rangement to which clause (i) of section 1116(f)(2)(B) of

3 the Tax Reform Act of 1986 applies.

4 Subchapter C—Nondiscrimination Provisions

5 SEC. 11441. DEFINITION OF HIGHLY COMPENSATED EM6 PLOYEES; REPEAL OF FAMILY AGGREGATION.

7 (a) IN GENERAL.—Paragraph (1) of section 414(q)

8 (defining highly compensated employee) is amended to read

9 as follows:

10 ‘‘(1) IN GENERAL.—The term ‘highly com11 pensated employee’ means any employee who—

12 ‘‘(A) was a 5-percent owner at any time

13 during the year or the preceding year, or

14 ‘‘(B) for the preceding year had compensa15 tion from the employer in excess of $80,000 and

16 was in the top-paid group of the employer.

17 The Secretary shall adjust the $80,000 amount under

18 subparagraph (B) at the same time and in the same

19 manner as under section 415(d), except that the base

20 period shall be the calendar quarter ending September

21 30, 1996.’’.

22 (b) REPEAL OF FAMILY AGGREGATION RULES.—

23 (1) IN GENERAL.—Paragraph (6) of section

24 414(q) is hereby repealed.
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1 (2) COMPENSATION LIMIT.—Paragraph (17)(A)

2 of section 401(a) is amended by striking the last sen3 tence.

4 (3) DEDUCTION.—Subsection (l) of section 404 is

5 amended by striking the last sentence.

6 (c) CONFORMING AMENDMENTS.—

7 (1)(A) Subsection (q) of section 414 is amended

8 by striking paragraphs (2), (5), (8), and (12) and by

9 redesignating paragraphs (3), (4), (7), (9), (10), and

10 (11) as paragraphs (2) through (7), respectively.

11 (B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii),

12 408(k)(2)(C), and 416(i)(1)(D) are each amended by

13 striking ‘‘section 414(q)(7)’’ and inserting ‘‘section

14 414(q)(4)’’.

15 (C) Section 416(i)(1)(A) is amended by striking

16 ‘‘section 414(q)(8)’’ and inserting ‘‘section 414(r)(9)’’.

17 (2)(A) Section 414(r) is amended by adding at

18 the end the following new paragraph:

19 ‘‘(9) EXCLUDED EMPLOYEES.—For purposes of

20 this subsection, the following employees shall be ex21 cluded:

22 ‘‘(A) Employees who have not completed 6

23 months of service.

24 ‘‘(B) Employees who normally work less

than 171 25 ⁄2 hours per week.
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1 ‘‘(C) Employees who normally work not

2 more than 6 months during any year.

3 ‘‘(D) Employees who have not attained the

4 age of 21.

5 ‘‘(E) Except to the extent provided in regu6 lations, employees who are included in a unit of

7 employees covered by an agreement which the

8 Secretary of Labor finds to be a collective bar9 gaining agreement between employee representa10 tives and the employer.

11 Except as provided by the Secretary, the employer

12 may elect to apply subparagraph (A), (B), (C), or (D)

13 by substituting a shorter period of service, smaller

14 number of hours or months, or lower age for the pe15 riod of service, number of hours or months, or age (as

16 the case may be) specified in such subparagraph.’’.

17 (B) Subparagraph (A) of section 414(r)(2) is

18 amended by striking ‘‘subsection (q)(8)’’ and inserting

19 ‘‘paragraph (9)’’.

20 (3) Section 1114(c)(4) of the Tax Reform Act of

21 1986 is amended by adding at the end the following

22 new sentence: ‘‘Any reference in this paragraph to

23 section 414(q) shall be treated as a reference to such

24 section as in effect on the day before the date of the
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1 enactment of the Revenue Reconciliation Act of

2 1995.’’.

3 (d) EFFECTIVE DATE.—

4 (1) IN GENERAL.—The amendments made by

5 this section shall apply to years beginning after De6 cember 31, 1995, except that in determining whether

7 an employee is a highly compensated employee for

8 years beginning in 1996, such amendments shall be

9 treated as having been in effect for years beginning in

10 1995.

11 (2) FAMILY AGGREGATION.—The amendments

12 made by subsection (b) shall apply to years beginning

13 after December 31, 1995.

14 SEC. 11442. MODIFICATION OF ADDITIONAL PARTICIPATION

15 REQUIREMENTS.

16 (a) GENERAL RULE.—Section 401(a)(26)(A) (relating

17 to additional participation requirements) is amended to

18 read as follows:

19 ‘‘(A) IN GENERAL.—In the case of a trust which

20 is a part of a defined benefit plan, such trust shall

21 not constitute a qualified trust under this subsection

22 unless on each day of the plan year such trust benefits

23 at least the lesser of—

24 ‘‘(i) 50 employees of the employer, or

25 ‘‘(ii) the greater of—
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1 ‘‘(I) 40 percent of all employees of the

2 employer, or

3 ‘‘(II) 2 employees (or if there is only 1

4 employee, such employee).’’.

5 (b) SEPARATE LINE OF BUSINESS TEST.—Section

6 401(a)(26)(G) (relating to separate line of business) is

7 amended by striking ‘‘paragraph (7)’’ and inserting ‘‘para8 graph (2)(A) or (7)’’.

9 (c) EFFECTIVE DATE.—The amendment made by this

10 section shall apply to years beginning after December 31,

11 1995.

12 SEC. 11443. NONDISCRIMINATION RULES FOR QUALIFIED

13 CASH OR DEFERRED ARRANGEMENTS AND

14 MATCHING CONTRIBUTIONS.

15 (a) ALTERNATIVE METHODS OF SATISFYING SECTION

16 401(k) NONDISCRIMINATION TESTS.—Section 401(k) (relat17 ing to cash or deferred arrangements), as amended by this

18 Act, is amended by adding at the end the following new

19 paragraph:

20 ‘‘(12) ALTERNATIVE METHODS OF MEETING NON21 DISCRIMINATION REQUIREMENTS.—

22 ‘‘(A) IN GENERAL.—A cash or deferred ar23 rangement shall be treated as meeting the re24 quirements of paragraph (3)(A)(ii) if such ar25 rangement—
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1 ‘‘(i) meets the contribution require2 ments of subparagraph (B) or (C), and

3 ‘‘(ii) meets the notice requirements of

4 subparagraph (D).

5 ‘‘(B) MATCHING CONTRIBUTIONS.—

6 ‘‘(i) IN GENERAL.—The requirements

7 of this subparagraph are met if, under the

8 arrangement, the employer makes matching

9 contributions on behalf of each employee

10 who is not a highly compensated employee

11 in an amount equal to—

12 ‘‘(I) 100 percent of the elective

13 contributions of the employee to the ex14 tent such elective contributions do not

15 exceed 3 percent of the employee’s com16 pensation, and

17 ‘‘(II) 50 percent of the elective

18 contributions of the employee to the ex19 tent that such elective contributions ex20 ceed 3 percent but do not exceed 5 per21 cent of the employee’s compensation.

22 ‘‘(ii) RATE FOR HIGHLY COMPENSATED

23 EMPLOYEES.—The requirements of this sub24 paragraph are not met if, under the ar25 rangement, the matching contribution with
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1 respect to any elective contribution of a

2 highly compensated employee at any level of

3 compensation is greater than that with re4 spect to an employee who is not a highly

5 compensated employee.

6 ‘‘(iii) ALTERNATIVE PLAN DESIGNS.—

7 If the matching contribution with respect to

8 any elective contribution at any specific

9 level of compensation is not equal to the

10 percentage required under clause (i), an ar11 rangement shall not be treated as failing to

12 meet the requirements of clause (i) if—

13 ‘‘(I) the level of an employer’s

14 matching contribution does not in15 crease as an employee’s elective con16 tributions increase, and

17 ‘‘(II) the aggregate amount of

18 matching contributions with respect to

19 elective contributions not in excess of

20 such level of compensation is at least

21 equal to the amount of matching con22 tributions which would be made if

23 matching contributions were made on

24 the basis of the percentages described in

25 clause (i).
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1 ‘‘(C) NONELECTIVE CONTRIBUTIONS.—The

2 requirements of this subparagraph are met if,

3 under the arrangement, the employer is required,

4 without regard to whether the employee makes an

5 elective contribution or employee contribution, to

6 make a contribution to a defined contribution

7 plan on behalf of each employee who is not a

8 highly compensated employee and who is eligible

9 to participate in the arrangement in an amount

10 equal to at least 3 percent of the employee’s com11 pensation.

12 ‘‘(D) NOTICE REQUIREMENT.—An arrange13 ment meets the requirements of this paragraph

14 if, under the arrangement, each employee eligible

15 to participate is, within a reasonable period be16 fore any year, given written notice of the em17 ployee’s rights and obligations under the ar18 rangement which—

19 ‘‘(i) is sufficiently accurate and com20 prehensive to appraise the employee of such

21 rights and obligations, and

22 ‘‘(ii) is written in a manner calculated

23 to be understood by the average employee el24 igible to participate.

25 ‘‘(E) OTHER REQUIREMENTS.—
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1 ‘‘(i) WITHDRAWAL AND VESTING RE2 STRICTIONS.—An arrangement shall not be

3 treated as meeting the requirements of sub4 paragraph (B) or (C) unless the require5 ments of subparagraphs (B) and (C) of

6 paragraph (2) are met with respect to all

7 employer contributions (including matching

8 contributions).

9 ‘‘(ii) SOCIAL SECURITY AND SIMILAR

10 CONTRIBUTIONS NOT TAKEN INTO AC11 COUNT.—An arrangement shall not be treat12 ed as meeting the requirements of subpara13 graph (B) or (C) unless such requirements

14 are met without regard to subsection (l),

15 and, for purposes of subsection (l), employer

16 contributions under subparagraph (B) or

17 (C) shall not be taken into account.

18 ‘‘(F) OTHER PLANS.—An arrangement shall

19 be treated as meeting the requirements under

20 subparagraph (A)(i) if any other plan main21 tained by the employer meets such requirements

22 with respect to employees eligible under the ar23 rangement.’’.

24 (b) ALTERNATIVE METHODS OF SATISFYING SECTION

25 401(m) NONDISCRIMINATION TESTS.—Section 401(m) (re-
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1 lating to nondiscrimination test for matching contributions

2 and employee contributions), as amended by this Act, is

3 amended by redesignating paragraph (10) as paragraph

4 (11) and by adding after paragraph (9) the following new

5 paragraph:

6 ‘‘(11) ALTERNATIVE METHOD OF SATISFYING

7 TESTS.—

8 ‘‘(A) IN GENERAL.—A defined contribution

9 plan shall be treated as meeting the requirements

10 of paragraph (2) with respect to matching con11 tributions if the plan—

12 ‘‘(i) meets the contribution require13 ments of subparagraph (B) or (C) of sub14 section (k)(12),

15 ‘‘(ii) meets the notice requirements of

16 subsection (k)(12)(D), and

17 ‘‘(iii) meets the requirements of sub18 paragraph (B).

19 ‘‘(B) LIMITATION ON MATCHING CONTRIBU20 TIONS.—The requirements of this subparagraph

21 are met if—

22 ‘‘(i) matching contributions on behalf

23 of any employee may not be made with re24 spect to an employee’s contributions or elec-
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1 tive deferrals in excess of 6 percent of the

2 employee’s compensation,

3 ‘‘(ii) the level of an employer’s match4 ing contribution does not increase as an

5 employee’s contributions or elective deferrals

6 increase, and

7 ‘‘(iii) the matching contribution with

8 respect to any highly compensated employee

9 at a specific level of compensation is not

10 greater than that with respect to an em11 ployee who is not a highly compensated em12 ployee.’’.

13 (c) YEAR FOR COMPUTING NONHIGHLY COMPENSATED

14 EMPLOYEE PERCENTAGE.—

15 (1) CASH OR DEFERRED ARRANGEMENTS.—

16 Clause (ii) of section 401(k)(3)(A) is amended—

17 (A) by striking ‘‘such year’’ and inserting

18 ‘‘the plan year’’,

19 (B) by striking ‘‘for such plan year’’ and

20 inserting ‘‘the preceding plan year’’, and

21 (C) by adding at the end the following new

22 sentence: ‘‘An arrangement may apply this

23 clause by using the plan year rather than the

24 preceding plan year if the employer so elects, ex-
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1 cept that if such an election is made, it may not

2 be changed except as provided by the Secretary.’’.

3 (2) MATCHING AND EMPLOYEE CONTRIBU4 TIONS.—Section 401(m)(2)(A) is amended—

5 (A) by inserting ‘‘for such plan year’’ after

6 ‘‘highly compensated employee’’,

7 (B) by inserting ‘‘for the preceding plan

8 year’’ after ‘‘eligible employees’’ each place it ap9 pears in clause (i) and clause (ii), and

10 (C) by adding at the end the following flush

11 sentence: ‘‘This subparagraph may be applied by

12 using the plan year rather than the preceding

13 plan year if the employer so elects, except that

14 if such an election is made, it may not be

15 changed except as provided the Secretary.’’.

16 (d) SPECIAL RULE FOR DETERMINING AVERAGE DE17 FERRAL PERCENTAGE FOR FIRST PLAN YEAR, ETC.—

18 (1) Paragraph (3) of section 401(k) is amended

19 by adding at the end the following new subparagraph:

20 ‘‘(E) For purposes of this paragraph, in the

21 case of the first plan year of any plan, the

22 amount taken into account as the actual deferral

23 percentage of nonhighly compensated employees

24 for the preceding plan year shall be—

25 ‘‘(i) 3 percent, or
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1 ‘‘(ii) if the employer makes an election

2 under this subclause, the actual deferral

3 percentage of nonhighly compensated em4 ployees determined for such first plan

5 year.’’.

6 (2) Paragraph (3) of section 401(m) is amended

7 by adding at the end the following: ‘‘Rules similar to

8 the rules of subsection (k)(3)(E) shall apply for pur9 poses of this subsection.’’.

10 (e) DISTRIBUTION OF EXCESS CONTRIBUTIONS.—

11 (1) Subparagraph (C) of section 401(k)(8) (relat12 ing to arrangement not disqualified if excess contribu13 tions distributed) is amended by striking ‘‘on the

14 basis of the respective portions of the excess contribu15 tions attributable to each of such employees’’ and in16 serting ‘‘on the basis of the amount of contributions

17 by, or on behalf of, each of such employees’’.

18 (2) Subparagraph (C) of section 401(m)(6) (re19 lating to method of distributing excess aggregate con20 tributions) is amended by striking ‘‘on the basis of the

21 respective portions of such amounts attributable to

22 each of such employees’’ and inserting ‘‘on the basis

23 of the amount of contributions on behalf of, or by,

24 each such employee’’.

25 (f) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to years beginning after De3 cember 31, 1998.

4 (2) EXCESS CONTRIBUTIONS.—The amendments

5 made by subsection (e) shall apply to years beginning

6 after December 31, 1995.

7 SEC. 11444. DEFINITION OF COMPENSATION FOR SECTION

8 415 PURPOSES.

9 (a) GENERAL RULE.—Section 415(c)(3) (defining par10 ticipant’s compensation) is amended by adding at the end

11 the following new subparagraph:

12 ‘‘(D) CERTAIN DEFERRALS INCLUDED.—The

13 term ‘participant’s compensation’ shall in14 clude—

15 ‘‘(i) any elective deferral (as defined in

16 section 402(g)(3)), and

17 ‘‘(ii) any amount which is contributed

18 by the employer at the election of the em19 ployee and which is not includible in the

20 gross income of the employee under section

21 125 or 457.’’.

22 (b) CONFORMING AMENDMENTS.—

23 (1) Section 414(q)(4), as redesignated by section

24 11441, is amended to read as follows:
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1 ‘‘(7) COMPENSATION.—For purposes of this sub2 section, the term ‘compensation’ has the meaning

3 given such term by section 415(c)(3).’’.

4 (2) Section 414(s)(2) is amended by inserting

5 ‘‘not’’ after ‘‘elect’’ in the text and heading thereof.

6 (c) EFFECTIVE DATE.—The amendments made by this

7 section shall apply to years beginning after December 31,

8 1997.

9 Subchapter D—Miscellaneous Provisions

10 SEC. 11451. PLANS COVERING SELF-EMPLOYED INDIVID11 UALS.

12 (a) AGGREGATION RULES.—Section 401(d) (relating

13 to additional requirements for qualification of trusts and

14 plans benefiting owner-employees) is amended to read as

15 follows:

16 ‘‘(d) CONTRIBUTION LIMIT ON OWNER-EMPLOYEES.—

17 A trust forming part of a pension or profit-sharing plan

18 which provides contributions or benefits for employees some

19 or all of whom are owner-employees shall constitute a quali20 fied trust under this section only if, in addition to meeting

21 the requirements of subsection (a), the plan provides that

22 contributions on behalf of any owner-employee may be

23 made only with respect to the earned income of such owner24 employee which is derived from the trade or business with

25 respect to which such plan is established.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to years beginning after December 31,

3 1995.

4 SEC. 11452. ELIMINATION OF SPECIAL VESTING RULE FOR

5 MULTIEMPLOYER PLANS.

6 (a) IN GENERAL.—Paragraph (2) of section 411(a)

7 (relating to minimum vesting standards) is amended—

8 (1) by striking ‘‘subparagraph (A), (B), or (C)’’

9 and inserting ‘‘subparagraph (A) or (B)’’; and

10 (2) by striking subparagraph (C).

11 (b) EFFECTIVE DATE.—The amendments made by this

12 section shall apply to plan years beginning on or after the

13 earlier of—

14 (1) the later of—

15 (A) January 1, 1996, or

16 (B) the date on which the last of the collec17 tive bargaining agreements pursuant to which

18 the plan is maintained terminates (determined

19 without regard to any extension thereof after the

20 date of the enactment of this Act), or

21 (2) January 1, 1998.

22 Such amendments shall not apply to any individual who

23 does not have more than 1 hour of service under the plan

24 on or after the 1st day of the 1st plan year to which such

25 amendments apply.
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1 SEC. 11453. DISTRIBUTIONS UNDER RURAL COOPERATIVE

2 PLANS.

3 (a) DISTRIBUTIONS FOR HARDSHIP OR AFTER A CER4 TAIN AGE.—Section 401(k)(7) is amended by adding at the

5 end the following new subparagraph:

6 ‘‘(C) SPECIAL RULE FOR CERTAIN DIS7 TRIBUTIONS.—A rural cooperative plan which

8 includes a qualified cash or deferred arrange9 ment shall not be treated as violating the re10 quirements of section 401(a) or of paragraph (2)

11 merely by reason of a hardship distribution or a

12 distribution to a participant after attainment of

age 591 13 ⁄2. For purposes of this section, the term

14 ‘hardship distribution’ means a distribution de15 scribed in paragraph (2)(B)(i)(IV) (without re16 gard to the limitation of its application to prof17 it-sharing or stock bonus plans).’’.

18 (b) PUBLIC UTILITY DISTRICTS.—Clause (i) of section

19 401(k)(7)(B) (defining rural cooperative) is amended to

20 read as follows:

21 ‘‘(i) any organization which—

22 ‘‘(I) is engaged primarily in pro23 viding electric service on a mutual or

24 cooperative basis, or

25 ‘‘(II) is engaged primarily in pro26 viding electric service to the public in
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1 its area of service and which is exempt

2 from tax under this subtitle or which is

3 a State or local government (or an

4 agency or instrumentality thereof),

5 other than a municipality (or an agen6 cy or instrumentality thereof).’’

7 (c) EFFECTIVE DATES.—

8 (1) DISTRIBUTIONS.—The amendments made by

9 subsection (a) shall apply to distributions after the

10 date of the enactment of this Act.

11 (2) RURAL COOPERATIVE.—The amendments

12 made by subsection (b) shall apply to plan years be13 ginning after December 31, 1994.

14 SEC. 11454. TREATMENT OF GOVERNMENTAL PLANS UNDER

15 SECTION 415.

16 (a) COMPENSATION LIMIT.—Subsection (b) of section

17 415 is amended by adding immediately after paragraph

18 (10) the following new paragraph:

19 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN20 MENTAL PLANS.—In the case of a governmental plan

21 (as defined in section 414(d)), subparagraph (B) of

22 paragraph (1) shall not apply.’’

23 (b) TREATMENT OF CERTAIN EXCESS BENEFIT

24 PLANS.—
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1 (1) IN GENERAL.—Section 415 is amended by

2 adding at the end the following new subsection:

3 ‘‘(m) TREATMENT OF QUALIFIED GOVERNMENTAL EX4 CESS BENEFIT ARRANGEMENTS.—

5 ‘‘(1) GOVERNMENTAL PLAN NOT AFFECTED.—In

6 determining whether a governmental plan (as defined

7 in section 414(d)) meets the requirements of this sec8 tion, benefits provided under a qualified governmental

9 excess benefit arrangement shall not be taken into ac10 count. Income accruing to a governmental plan (or to

11 a trust that is maintained solely for the purpose of

12 providing benefits under a qualified governmental ex13 cess benefit arrangement) in respect of a qualified

14 governmental excess benefit arrangement shall con15 stitute income derived from the exercise of an essen16 tial governmental function upon which such govern17 mental plan (or trust) shall be exempt from tax under

18 section 115.

19 ‘‘(2) TAXATION OF PARTICIPANT.—For purposes

20 of this chapter—

21 ‘‘(A) the taxable year or years for which

22 amounts in respect of a qualified governmental

23 excess benefit arrangement are includible in

24 gross income by a participant, and
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1 ‘‘(B) the treatment of such amounts when so

2 includible by the participant,

3 shall be determined as if such qualified governmental

4 excess benefit arrangement were treated as a plan for

5 the deferral of compensation which is maintained by

6 a corporation not exempt from tax under this chapter

7 and which does not meet the requirements for quali8 fication under section 401.

9 ‘‘(3) QUALIFIED GOVERNMENTAL EXCESS BENE10 FIT ARRANGEMENT.—For purposes of this subsection,

11 the term ‘qualified governmental excess benefit ar12 rangement’ means a portion of a governmental plan

13 if—

14 ‘‘(A) such portion is maintained solely for

15 the purpose of providing to participants in the

16 plan that part of the participant’s annual bene17 fit otherwise payable under the terms of the plan

18 that exceeds the limitations on benefits imposed

19 by this section,

20 ‘‘(B) under such portion no election is pro21 vided at any time to the participant (directly or

22 indirectly) to defer compensation, and

23 ‘‘(C) benefits described in subparagraph (A)

24 are not paid from a trust forming a part of such

25 governmental plan unless such trust is main-
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1 tained solely for the purpose of providing such

2 benefits.’’

3 (2) COORDINATION WITH SECTION 457.—Sub4 section (e) of section 457 is amended by adding at the

5 end the following new paragraph:

6 ‘‘(15) TREATMENT OF QUALIFIED GOVERN7 MENTAL EXCESS BENEFIT ARRANGEMENTS.—Sub8 sections (b)(2) and (c)(1) shall not apply to any

9 qualified governmental excess benefit arrangement (as

10 defined in section 415(m)(3)), and benefits provided

11 under such an arrangement shall not be taken into

12 account in determining whether any other plan is an

13 eligible deferred compensation plan.’’

14 (3) CONFORMING AMENDMENT.—Paragraph (2)

15 of section 457(f) is amended by striking ‘‘and’’ at the

16 end of subparagraph (C), by striking the period at the

17 end of subparagraph (D) and inserting ‘‘, and’’, and

18 by inserting immediately thereafter the following new

19 subparagraph:

20 ‘‘(E) a qualified governmental excess benefit

21 arrangement described in section 415(m).’’

22 (c) EXEMPTION FOR SURVIVOR AND DISABILITY BENE23 FITS.—Paragraph (2) of section 415(b) is amended by add24 ing at the end the following new subparagraph:
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1 ‘‘(I) EXEMPTION FOR SURVIVOR AND DIS2 ABILITY BENEFITS PROVIDED UNDER GOVERN3 MENTAL PLANS.—Subparagraph (B) of para4 graph (1), subparagraph (C) of this paragraph,

5 and paragraph (5) shall not apply to—

6 ‘‘(i) income received from a govern7 mental plan (as defined in section 414(d))

8 as a pension, annuity, or similar allowance

9 as the result of the recipient becoming dis10 abled by reason of personal injuries or sick11 ness, or

12 ‘‘(ii) amounts received from a govern13 mental plan by the beneficiaries, survivors,

14 or the estate of an employee as the result of

15 the death of the employee.’’

16 (d) REVOCATION OF GRANDFATHER ELECTION.—

17 (1) IN GENERAL.—Subparagraph (C) of section

18 415(b)(10) is amended by adding at the end the fol19 lowing new clause:

20 ‘‘(ii) REVOCATION OF ELECTION.—An

21 election under clause (i) may be revoked not

22 later than the last day of the third plan

23 year beginning after the date of the enact24 ment of this clause. The revocation shall

25 apply to all plan years to which the election
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1 applied and to all subsequent plan years.

2 Any amount paid by a plan in a taxable

3 year ending after the revocation shall be in4 cludible in income in such taxable year

5 under the rules of this chapter in effect for

6 such taxable year, except that, for purposes

7 of applying the limitations imposed by this

8 section, any portion of such amount which

9 is attributable to any taxable year during

10 which the election was in effect shall be

11 treated as received in such taxable year.’’

12 (2) CONFORMING AMENDMENT.—Subparagraph

13 (C) of section 415(b)(10) is amended by striking

14 ‘‘This’’ and inserting:

15 ‘‘(i) IN GENERAL.—This’’.

16 (e) EFFECTIVE DATE.—

17 (1) IN GENERAL.—The amendments made by

18 subsections (a), (b), and (c) shall apply to years be19 ginning after December 31, 1994. The amendments

20 made by subsection (d) shall apply with respect to

21 revocations adopted after the date of the enactment of

22 this Act.

23 (2) TREATMENT FOR YEARS BEGINNING BEFORE

24 DATE OF ENACTMENT.—Nothing in the amendments

25 made by this section shall be construed to infer that
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1 a governmental plan (as defined in section 414(d) of

2 the Internal Revenue Code of 1986) fails to satisfy the

3 requirements of section 415 of such Code for any tax4 able year beginning before the date of the enactment

5 of this Act.

6 SEC. 11455. UNIFORM RETIREMENT AGE.

7 (a) DISCRIMINATION TESTING.—Paragraph (5) of sec8 tion 401(a) (relating to special rules relating to non9 discrimination requirements) is amended by adding at the

10 end the following new subparagraph:

11 ‘‘(F) SOCIAL SECURITY RETIREMENT AGE.—

12 For purposes of testing for discrimination under

13 paragraph (4)—

14 ‘‘(i) the social security retirement age

15 (as defined in section 415(b)(8)) shall be

16 treated as a uniform retirement age, and

17 ‘‘(ii) subsidized early retirement bene18 fits and joint and survivor annuities shall

19 not be treated as being unavailable to em20 ployees on the same terms merely because

21 such benefits or annuities are based in

22 whole or in part on an employee’s social se23 curity retirement age (as so defined).’’
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1 (b) EFFECTIVE DATE.—The amendment made by this

2 section shall apply to years beginning after December 31,

3 1995.

4 SEC. 11456. CONTRIBUTIONS ON BEHALF OF DISABLED EM5 PLOYEES.

6 (a) ALL DISABLED PARTICIPANTS RECEIVING CON7 TRIBUTIONS.—Section 415(c)(3)(C) is amended by adding

8 at the end the following: ‘‘If a defined contribution plan

9 provides for the continuation of contributions on behalf of

10 all participants described in clause (i) for a fixed or deter11 minable period, this subparagraph shall be applied without

12 regard to clauses (ii) and (iii).’’

13 (b) EFFECTIVE DATE.—The amendment made by this

14 section shall apply to years beginning after December 31,

15 1995.

16 SEC. 11457. TREATMENT OF DEFERRED COMPENSATION

17 PLANS OF STATE AND LOCAL GOVERNMENTS

18 AND TAX-EXEMPT ORGANIZATIONS.

19 (a) SPECIAL RULES FOR PLAN DISTRIBUTIONS.—

20 Paragraph (9) of section 457(e) (relating to other defini21 tions and special rules) is amended to read as follows:

22 ‘‘(9) BENEFITS NOT TREATED AS MADE AVAIL23 ABLE BY REASON OF CERTAIN ELECTIONS, ETC.—

24 ‘‘(A) TOTAL AMOUNT PAYABLE IS $3,500 OR

25 LESS.—The total amount payable to a partici-
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1 pant under the plan shall not be treated as made

2 available merely because the participant may

3 elect to receive such amount (or the plan may

4 distribute such amount without the participant’s

5 consent) if—

6 ‘‘(i) such amount does not exceed

7 $3,500, and

8 ‘‘(ii) such amount may be distributed

9 only if—

10 ‘‘(I) no amount has been deferred

11 under the plan with respect to such

12 participant during the 2-year period

13 ending on the date of the distribution,

14 and

15 ‘‘(II) there has been no prior dis16 tribution under the plan to such par17 ticipant to which this subparagraph

18 applied.

19 A plan shall not be treated as failing to meet the

20 distribution requirements of subsection (d) by

21 reason of a distribution to which this subpara22 graph applies.

23 ‘‘(B) ELECTION TO DEFER COMMENCEMENT

24 OF DISTRIBUTIONS.—The total amount payable

25 to a participant under the plan shall not be
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1 treated as made available merely because the

2 participant may elect to defer commencement of

3 distributions under the plan if—

4 ‘‘(i) such election is made after

5 amounts may be available under the plan

6 in accordance with subsection (d)(1)(A) and

7 before commencement of such distributions,

8 and

9 ‘‘(ii) the participant may make only 1

10 such election.’’.

11 (b) COST-OF-LIVING ADJUSTMENT OF MAXIMUM DE12 FERRAL AMOUNT.—Subsection (e) of section 457, as amend13 ed by section 11454(b)(2) (relating to governmental plans),

14 is amended by adding at the end the following new para15 graph:

16 ‘‘(16) COST-OF-LIVING ADJUSTMENT OF MAXIMUM

17 DEFERRAL AMOUNT.—The Secretary shall adjust the

18 $7,500 amount specified in subsections (b)(2) and

19 (c)(1) at the same time and in the same manner as

20 under section 415(d), except that the base period shall

21 be the calendar quarter ending September 30, 1994,

22 and any increase under this paragraph which is not

23 a multiple of $500 shall be rounded to the next lowest

24 multiple of $500.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to taxable years beginning after Decem3 ber 31, 1995.

4 SEC. 11458. TRUST REQUIREMENT FOR DEFERRED COM5 PENSATION PLANS OF STATE AND LOCAL

6 GOVERNMENTS.

7 (a) IN GENERAL.—Section 457 is amended by adding

8 at the end the following new subsection:

9 ‘‘(g) GOVERNMENTAL PLANS MUST MAINTAIN SET

10 ASIDES FOR EXCLUSIVE BENEFIT OF PARTICIPANTS.—

11 ‘‘(1) IN GENERAL.—A plan maintained by an el12 igible employer described in subsection (e)(1)(A) shall

13 not be treated as an eligible deferred compensation

14 plan unless all assets and income of the plan de15 scribed in subsection (b)(6) are held in trust for the

16 exclusive benefit of participants and their bene17 ficiaries.

18 ‘‘(2) TAXABILITY OF TRUSTS AND PARTICI19 PANTS.—For purposes of this title—

20 ‘‘(A) a trust described in paragraph (1)

21 shall be treated as an organization exempt from

22 taxation under section 501(a), and

23 ‘‘(B) notwithstanding any other provision

24 of this title, amounts in the trust shall be includ25 ible in the gross income of participants and
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1 beneficiaries only to the extent, and at the time,

2 provided in this section.

3 ‘‘(3) CUSTODIAL ACCOUNTS AND CONTRACTS.—

4 For purposes of this subsection, custodial accounts

5 and contracts described in section 401(f) shall be

6 treated as trusts under rules similar to the rules

7 under section 401(f).’’

8 (b) CONFORMING AMENDMENT.—Paragraph (6) of sec9 tion 457(b) is amended by inserting ‘‘except as provided

10 in subsection (g),’’ before ‘‘which provides that’’.

11 (c) EFFECTIVE DATES.—

12 (1) IN GENERAL.—Except as provided in para13 graph (2), the amendments made by this section shall

14 apply to assets and income described in section

15 457(b)(6) of the Internal Revenue Code of 1986 held

16 by a plan on and after the date of the enactment of

17 this Act.

18 (2) TRANSITION RULE.—In the case of assets and

19 income described in paragraph (1) held by a plan be20 fore the first day of the first calendar quarter begin21 ning after the close of the first regular session of the

22 State legislature of the State in which the govern23 mental entity maintaining the plan is located begin24 ning after the date of the enactment of this Act, a

25 trust need not be established by reason of the amend-
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1 ments made by this section before such first day. For

2 purposes of the preceding sentence, in the case of a

3 State that has a 2-year legislative session, each year

4 of such session shall be deemed to be a separate regu5 lar session of the State legislature.

6 SEC. 11459. TRANSITION RULE FOR COMPUTING MAXIMUM

7 BENEFITS UNDER SECTION 415 LIMITATIONS.

8 (a) IN GENERAL.—Subparagraph (A) of section

9 767(d)(3) of the Uruguay Round Agreements Act is amend10 ed to read as follows:

11 ‘‘(A) EXCEPTION.—A plan that was adopt12 ed and in effect before December 8, 1994, shall

13 not be required to apply the amendments made

14 by subsection (b) with respect to benefits accrued

15 before the earlier of—

16 ‘‘(i) the later of the date a plan amend17 ment applying such amendment is adopted

18 or made effective, or

19 ‘‘(ii) the first day of the first limita20 tion year beginning after December 31,

21 1999.

22 Determinations under section 415(b)(2)(E) of the

23 Internal Revenue Code of 1986 shall be made

24 with respect to such benefits on the basis of such

25 section as in effect on December 7, 1994 (except
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1 that the modification made by subsection (b)

2 shall be taken into account), and the provisions

3 of the plan as in effect on December 7, 1994, but

4 only if such provisions of the plan meet the re5 quirements of such section (as so in effect).’’

6 (b) MODIFICATION OF CERTAIN ASSUMPTIONS FOR AD7 JUSTING BENEFITS OF DEFINED BENEFIT PLANS FOR

8 EARLY RETIREES.—Subparagraph (E) of section 415(b)(2)

9 (relating to limitation on certain assumptions) is amend10 ed—

11 (1) by striking ‘‘Except as provided in clause

12 (ii), for purposes of adjusting any benefit or limita13 tion under subparagraph (B) or (C),’’ in clause (i)

14 and inserting ‘‘For purposes of adjusting any limita15 tion under subparagraph (C) and, except as provided

16 in clause (ii), for purposes of adjusting any benefit

17 under subparagraph (B),’’, and

18 (2) by striking ‘‘For purposes of adjusting the

19 benefit or limitation of any form of benefit subject to

20 section 417(e)(3),’’ in clause (ii) and inserting ‘‘For

21 purposes of adjusting any benefit under subparagraph

22 (B) for any form of benefit subject to section

23 417(e)(3),’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall take effect as if included in the provisions of

3 section 767 of the Uruguay Round Agreements Act.

4 (d) TRANSITIONAL RULE.—In the case of a plan that

5 was adopted and in effect before December 8, 1994, if—

6 (1) a plan amendment was adopted or made ef7 fective on or before the date of the enactment of this

8 Act applying the amendments made by section 767(b)

9 of the Uruguay Round Agreements Act, and

10 (2) within 1 year after the date of the enactment

11 of this Act, a plan amendment is adopted which re12 peals the amendment referred to in paragraph (1),

13 the amendment referred to in paragraph (1) shall not be

14 taken into account in applying section 767(d)(3)(A) of the

15 Uruguay Round Agreements Act, as amended by subsection

16 (a).

17 SEC. 11460. MODIFICATIONS OF SECTION 403(b).

18 (a) MULTIPLE SALARY REDUCTION AGREEMENTS

19 PERMITTED.—

20 (1) GENERAL RULE.—For purposes of section

21 403(b) of the Internal Revenue Code of 1986, the fre22 quency that an employee is permitted to enter into a

23 salary reduction agreement, the salary to which such

24 an agreement may apply, and the ability to revoke

25 such an agreement shall be determined under the rules
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1 applicable to cash or deferred elections under section

2 401(k) of such Code.

3 (2) EFFECTIVE DATE.—This subsection shall

4 apply to taxable years beginning after December 31,

5 1995.

6 (b) TREATMENT OF INDIAN TRIBAL GOVERNMENTS.—

7 (1) IN GENERAL.—In the case of any contract

8 purchased in a plan year beginning before January

9 1, 1995, section 403(b) of the Internal Revenue Code

10 of 1986 shall be applied as if any reference to an em11 ployer described in section 501(c)(3) of the Internal

12 Revenue Code of 1986 which is exempt from tax

13 under section 501 of such Code included a reference

14 to an employer which is an Indian tribal government

15 (as defined by section 7701(a)(40) of such Code), a

16 subdivision of an Indian tribal government (deter17 mined in accordance with section 7871(d) of such

18 Code), an agency or instrumentality of an Indian

19 tribal government or subdivision thereof, or a cor20 poration chartered under Federal, State, or tribal law

21 which is owned in whole or in part by any of the

22 foregoing.

23 (2) ROLLOVERS.—Solely for purposes of apply24 ing section 403(b)(8) of such Code to a contract to

25 which paragraph (1) applies, a qualified cash or de-
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1 ferred arrangement under section 401(k) of such Code

2 shall be treated as if it were a plan or contract de3 scribed in clause (ii) of section 403(b)(8)(A) of such

4 Code.

5 (c) ELECTIVE DEFERRALS.—

6 (1) IN GENERAL.—Subparagraph (E) of section

7 403(b)(1) is amended to read as follows:

8 ‘‘(E) in the case of a contract purchased

9 under a salary reduction agreement, the contract

10 meets the requirements of section 401(a)(30),’’.

11 (2) EFFECTIVE DATE.—The amendment made by

12 this subsection shall apply to years beginning after

13 December 31, 1995.

14 SEC. 11461. WAIVER OF MINIMUM PERIOD FOR JOINT AND

15 SURVIVOR ANNUITY EXPLANATION BEFORE

16 ANNUITY STARTING DATE.

17 (a) GENERAL RULE.—For purposes of section

18 417(a)(3)(A) of the Internal Revenue Code of 1986 (relating

19 to plan to provide written explanations), the minimum pe20 riod prescribed by the Secretary of the Treasury between

21 the date that the explanation referred to in such section is

22 provided and the annuity starting date shall not apply if

23 waived by the participant and, if applicable, the partici24 pant’s spouse.
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1 (b) EFFECTIVE DATE.—Subsection (a) shall apply to

2 plan years beginning after December 31, 1995.

3 SEC. 11462. REPEAL OF LIMITATION IN CASE OF DEFINED

4 BENEFIT PLAN AND DEFINED CONTRIBUTION

5 PLAN FOR SAME EMPLOYEE; EXCESS DIS6 TRIBUTIONS.

7 (a) IN GENERAL.—Section 415(e) is repealed.

8 (b) EXCESS DISTRIBUTIONS.—Section 4980A is

9 amended by adding at the end the following new subsection:

10 ‘‘(g) LIMITATION ON APPLICATION.—This section shall

11 not apply to distributions during years beginning after De12 cember 31, 1995, and before January 1, 1999, and such dis13 tributions shall be treated as made first from amounts not

14 described in subsection (f).’’

15 (c) CONFORMING AMENDMENTS.—

16 (1) Subparagraph (B) of section 415(b)(5) is

17 amended by striking ‘‘and subsection (e)’’.

18 (2) Paragraph (1) of section 415(f) is amended

19 by striking ‘‘subsections (b), (c), and (e)’’ and insert20 ing ‘‘subsections (b) and (c)’’.

21 (3) Subsection (g) of section 415 is amended by

22 striking ‘‘subsections (e) and (f)’’ in the last sentence

23 and inserting ‘‘subsection (f)’’.

24 (4) Clause (i) of section 415(k)(2)(A) is amended

25 to read as follows:
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1 ‘‘(i) any contribution made directly by

2 an employee under such an arrangement

3 shall not be treated as an annual addition

4 for purposes of subsection (c), and’’.

5 (5) Clause (ii) of section 415(k)(2)(A) is amend6 ed by striking ‘‘subsections (c) and (e)’’ and inserting

7 ‘‘subsection (c)’’.

8 (6) Section 416 is amended by striking sub9 section (h).

10 (d) EFFECTIVE DATE.—

11 (1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section shall

13 apply to limitation years beginning after December

14 31, 1998.

15 (2) EXCESS DISTRIBUTIONS.—The amendment

16 made by subsection (b) shall apply to years beginning

17 after December 31, 1995.

18 SEC. 11463. TAX ON PROHIBITED TRANSACTIONS.

19 (a) IN GENERAL.—Section 4975(a) is amended by

20 striking ‘‘5 percent’’ and inserting ‘‘10 percent’’.

21 (b) EFFECTIVE DATE.—The amendment made by this

22 section shall apply to prohibited transactions occurring

23 after December 31, 1995.
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1 SEC. 11464. TREATMENT OF LEASED EMPLOYEES.

2 (a) GENERAL RULE.—Subparagraph (C) of section

3 414(n)(2) (defining leased employee) is amended to read as

4 follows:

5 ‘‘(C) such services are performed under pri6 mary direction or control by the recipient.’’.

7 (b) EFFECTIVE DATE.—The amendment made by sub8 section (a) shall apply to years beginning after December

9 31, 1995, but shall not apply to any relationship deter10 mined under an Internal Revenue Service ruling issued be11 fore the date of the enactment of this Act pursuant to section

12 414(n)(2)(C) of the Internal Revenue Code of 1986 (as in

13 effect on the day before such date) not to involve a leased

14 employee.

15 CHAPTER 3—TREATMENT OF LARGE

16 PARTNERSHIPS

17 SEC. 11471. SIMPLIFIED FLOW-THROUGH FOR ELECTING

18 LARGE PARTNERSHIPS.

19 (a) GENERAL RULE.—Subchapter K (relating to part20 ners and partnerships) is amended by adding at the end

21 the following new part:

22 ‘‘PART IV—SPECIAL RULES FOR ELECTING LARGE

23 PARTNERSHIPS

‘‘Sec. 771. Application of subchapter to electing large partnerships.

‘‘Sec. 772. Simplified flow-through.

‘‘Sec. 773. Computations at partnership level.

‘‘Sec. 774. Other modifications.

‘‘Sec. 775. Electing large partnership defined.
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‘‘Sec. 776. Special rules for partnerships holding oil and gas properties.

‘‘Sec. 777. Regulations.

1 ‘‘SEC. 771. APPLICATION OF SUBCHAPTER TO ELECTING

2 LARGE PARTNERSHIPS.

3 ‘‘The preceding provisions of this subchapter to the ex4 tent inconsistent with the provisions of this part shall not

5 apply to an electing large partnership and its partners.

6 ‘‘SEC. 772. SIMPLIFIED FLOW-THROUGH.

7 ‘‘(a) GENERAL RULE.—In determining the income tax

8 of a partner of an electing large partnership, such partner

9 shall take into account separately such partner’s distribu10 tive share of the partnership’s—

11 ‘‘(1) taxable income or loss from passive loss lim12 itation activities,

13 ‘‘(2) taxable income or loss from other activities,

14 ‘‘(3) net capital gain (or net capital loss)—

15 ‘‘(A) to the extent allocable to passive loss

16 limitation activities, and

17 ‘‘(B) to the extent allocable to other activi18 ties,

19 ‘‘(4) tax-exempt interest,

20 ‘‘(5) applicable net AMT adjustment separately

21 computed for—

22 ‘‘(A) passive loss limitation activities, and

23 ‘‘(B) other activities,

24 ‘‘(6) general credits,
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1 ‘‘(7) low-income housing credit determined under

2 section 42,

3 ‘‘(8) rehabilitation credit determined under sec4 tion 47,

5 ‘‘(9) foreign income taxes,

6 ‘‘(10) the credit allowable under section 29, and

7 ‘‘(11) other items to the extent that the Secretary

8 determines that the separate treatment of such items

9 is appropriate.

10 ‘‘(b) SEPARATE COMPUTATIONS.—In determining the

11 amounts required under subsection (a) to be separately

12 taken into account by any partner, this section and section

13 773 shall be applied separately with respect to such partner

14 by taking into account such partner’s distributive share of

15 the items of income, gain, loss, deduction, or credit of the

16 partnership.

17 ‘‘(c) TREATMENT AT PARTNER LEVEL.—

18 ‘‘(1) IN GENERAL.—Except as provided in this

19 subsection, rules similar to the rules of section 702(b)

20 shall apply to any partner’s distributive share of the

21 amounts referred to in subsection (a).

22 ‘‘(2) INCOME OR LOSS FROM PASSIVE LOSS LIMI23 TATION ACTIVITIES.—For purposes of this chapter,

24 any partner’s distributive share of any income or loss

25 described in subsection (a)(1) shall be treated as an
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1 item of income or loss (as the case may be) from the

2 conduct of a trade or business which is a single pas3 sive activity (as defined in section 469). A similar

4 rule shall apply to a partner’s distributive share of

5 amounts referred to in paragraphs (3)(A) and (5)(A)

6 of subsection (a).

7 ‘‘(3) INCOME OR LOSS FROM OTHER ACTIVI8 TIES.—

9 ‘‘(A) IN GENERAL.—For purposes of this

10 chapter, any partner’s distributive share of any

11 income or loss described in subsection (a)(2)

12 shall be treated as an item of income or expense

13 (as the case may be) with respect to property

14 held for investment.

15 ‘‘(B) DEDUCTIONS FOR LOSS NOT SUBJECT

16 TO SECTION 67.—The deduction under section

17 212 for any loss described in subparagraph (A)

18 shall not be treated as a miscellaneous itemized

19 deduction for purposes of section 67.

20 ‘‘(4) TREATMENT OF NET CAPITAL GAIN OR

21 LOSS.—For purposes of this chapter, any partner’s

22 distributive share of any gain or loss described in

23 subsection (a)(3) shall be treated as a long-term cap24 ital gain or loss, as the case may be.
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1 ‘‘(5) MINIMUM TAX TREATMENT.—In determin2 ing the alternative minimum taxable income of any

3 partner, such partner’s distributive share of any ap4 plicable net AMT adjustment shall be taken into ac5 count in lieu of making the separate adjustments pro6 vided in sections 56, 57, and 58 with respect to the

7 items of the partnership. Except as provided in regu8 lations, the applicable net AMT adjustment shall be

9 treated, for purposes of section 53, as an adjustment

10 or item of tax preference not specified in section

11 53(d)(1)(B)(ii).

12 ‘‘(6) GENERAL CREDITS.—A partner’s distribu13 tive share of the amount referred to in paragraph (6)

14 of subsection (a) shall be taken into account as a cur15 rent year business credit.

16 ‘‘(d) OPERATING RULES.—For purposes of this sec17 tion—

18 ‘‘(1) PASSIVE LOSS LIMITATION ACTIVITY.—The

19 term ‘passive loss limitation activity’ means—

20 ‘‘(A) any activity which involves the con21 duct of a trade or business, and

22 ‘‘(B) any rental activity.

23 For purposes of the preceding sentence, the term

24 ‘trade or business’ includes any activity treated as a
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1 trade or business under paragraph (5) or (6) of sec2 tion 469(c).

3 ‘‘(2) TAX-EXEMPT INTEREST.—The term ‘tax-ex4 empt interest’ means interest excludable from gross

5 income under section 103.

6 ‘‘(3) APPLICABLE NET AMT ADJUSTMENT.—

7 ‘‘(A) IN GENERAL.—The applicable net

8 AMT adjustment is—

9 ‘‘(i) with respect to taxpayers other

10 than corporations, the net adjustment deter11 mined by using the adjustments applicable

12 to individuals, and

13 ‘‘(ii) with respect to corporations, the

14 net adjustment determined by using the ad15 justments applicable to corporations.

16 ‘‘(B) NET ADJUSTMENT.—The term ‘net ad17 justment’ means the net adjustment in the items

18 attributable to passive loss activities or other ac19 tivities (as the case may be) which would result

20 if such items were determined with the adjust21 ments of sections 56, 57, and 58.

22 ‘‘(4) TREATMENT OF CERTAIN SEPARATELY

23 STATED ITEMS.—

24 ‘‘(A) EXCLUSION FOR CERTAIN PUR25 POSES.—In determining the amounts referred to
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1 in paragraphs (1) and (2) of subsection (a), any

2 net capital gain or net capital loss (as the case

3 may be), and any item referred to in subsection

4 (a)(11), shall be excluded.

5 ‘‘(B) ALLOCATION RULES.—The net capital

6 gain shall be treated—

7 ‘‘(i) as allocable to passive loss limita8 tion activities to the extent the net capital

9 gain does not exceed the net capital gain de10 termined by only taking into account gains

11 and losses from sales and exchanges of prop12 erty used in connection with such activities,

13 and

14 ‘‘(ii) as allocable to other activities to

15 the extent such gain exceeds the amount al16 located under clause (i).

17 A similar rule shall apply for purposes of allo18 cating any net capital loss.

19 ‘‘(C) NET CAPITAL LOSS.—The term ‘net

20 capital loss’ means the excess of the losses from

21 sales or exchanges of capital assets over the gains

22 from sales or exchange of capital assets.

23 ‘‘(5) GENERAL CREDITS.—The term ‘general

24 credits’ means any credit other than the low-income
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1 housing credit, the rehabilitation credit, the foreign

2 tax credit, and the credit allowable under section 29.

3 ‘‘(6) FOREIGN INCOME TAXES.—The term ‘for4 eign income taxes’ means taxes described in section

5 901 which are paid or accrued to foreign countries

6 and to possessions of the United States.

7 ‘‘(e) SPECIAL RULE FOR UNRELATED BUSINESS

8 TAX.—In the case of a partner which is an organization

9 subject to tax under section 511, such partner’s distributive

10 share of any items shall be taken into account separately

11 to the extent necessary to comply with the provisions of sec12 tion 512(c)(1).

13 ‘‘(f) SPECIAL RULES FOR APPLYING PASSIVE LOSS

14 LIMITATIONS.—If any person holds an interest in an elect15 ing large partnership other than as a limited partner—

16 ‘‘(1) paragraph (2) of subsection (c) shall not

17 apply to such partner, and

18 ‘‘(2) such partner’s distributive share of the part19 nership items allocable to passive loss limitation ac20 tivities shall be taken into account separately to the

21 extent necessary to comply with the provisions of sec22 tion 469.

23 The preceding sentence shall not apply to any items alloca24 ble to an interest held as a limited partner.
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1 ‘‘SEC. 773. COMPUTATIONS AT PARTNERSHIP LEVEL.

2 ‘‘(a) GENERAL RULE.—

3 ‘‘(1) TAXABLE INCOME.—The taxable income of

4 an electing large partnership shall be computed in the

5 same manner as in the case of an individual except

6 that—

7 ‘‘(A) the items described in section 772(a)

8 shall be separately stated, and

9 ‘‘(B) the modifications of subsection (b)

10 shall apply.

11 ‘‘(2) ELECTIONS.—All elections affecting the

12 computation of the taxable income of an electing large

13 partnership or the computation of any credit of an

14 electing large partnership shall be made by the part15 nership; except that the election under section 901,

16 and any election under section 108, shall be made by

17 each partner separately.

18 ‘‘(3) LIMITATIONS, ETC.—

19 ‘‘(A) IN GENERAL.—Except as provided in

20 subparagraph (B), all limitations and other pro21 visions affecting the computation of the taxable

22 income of an electing large partnership or the

23 computation of any credit of an electing large

24 partnership shall be applied at the partnership

25 level (and not at the partner level).
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1 ‘‘(B) CERTAIN LIMITATIONS APPLIED AT

2 PARTNER LEVEL.—The following provisions shall

3 be applied at the partner level (and not at the

4 partnership level):

5 ‘‘(i) Section 68 (relating to overall lim6 itation on itemized deductions).

7 ‘‘(ii) Sections 49 and 465 (relating to

8 at risk limitations).

9 ‘‘(iii) Section 469 (relating to limita10 tion on passive activity losses and credits).

11 ‘‘(iv) Any other provision specified in

12 regulations.

13 ‘‘(4) COORDINATION WITH OTHER PROVISIONS.—

14 Paragraphs (2) and (3) shall apply notwithstanding

15 any other provision of this chapter other than this

16 part.

17 ‘‘(b) MODIFICATIONS TO DETERMINATION OF TAXABLE

18 INCOME.—In determining the taxable income of an electing

19 large partnership—

20 ‘‘(1) CERTAIN DEDUCTIONS NOT ALLOWED.—The

21 following deductions shall not be allowed:

22 ‘‘(A) The deduction for personal exemptions

23 provided in section 151.

24 ‘‘(B) The net operating loss deduction pro25 vided in section 172.
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1 ‘‘(C) The additional itemized deductions for

2 individuals provided in part VII of subchapter B

3 (other than section 212 thereof).

4 ‘‘(2) CHARITABLE DEDUCTIONS.—In determining

5 the amount allowable under section 170, the limita6 tion of section 170(b)(2) shall apply.

7 ‘‘(3) COORDINATION WITH SECTION 67.—In lieu

8 of applying section 67, 70 percent of the amount of

9 the miscellaneous itemized deductions shall be dis10 allowed.

11 ‘‘(c) SPECIAL RULES FOR INCOME FROM DISCHARGE

12 OF INDEBTEDNESS.—If an electing large partnership has

13 income from the discharge of any indebtedness—

14 ‘‘(1) such income shall be excluded in determin15 ing the amounts referred to in section 772(a), and

16 ‘‘(2) in determining the income tax of any part17 ner of such partnership—

18 ‘‘(A) such income shall be treated as an

19 item required to be separately taken into account

20 under section 772(a), and

21 ‘‘(B) the provisions of section 108 shall be

22 applied without regard to this part.
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1 ‘‘SEC. 774. OTHER MODIFICATIONS.

2 ‘‘(a) TREATMENT OF CERTAIN OPTIONAL ADJUST3 MENTS, ETC.—In the case of an electing large partner4 ship—

5 ‘‘(1) computations under section 773 shall be

6 made without regard to any adjustment under section

7 743(b) or 108(b), but

8 ‘‘(2) a partner’s distributive share of any

9 amount referred to in section 772(a) shall be appro10 priately adjusted to take into account any adjustment

11 under section 743(b) or 108(b) with respect to such

12 partner.

13 ‘‘(b) CREDIT RECAPTURE DETERMINED AT PARTNER14 SHIP LEVEL.—

15 ‘‘(1) IN GENERAL.—In the case of an electing

16 large partnership—

17 ‘‘(A) any credit recapture shall be taken

18 into account by the partnership, and

19 ‘‘(B) the amount of such recapture shall be

20 determined as if the credit with respect to which

21 the recapture is made had been fully utilized to

22 reduce tax.

23 ‘‘(2) METHOD OF TAKING RECAPTURE INTO AC24 COUNT.—An electing large partnership shall take into

25 account a credit recapture by reducing the amount of

26 the appropriate current year credit to the extent
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1 thereof, and if such recapture exceeds the amount of

2 such current year credit, the partnership shall be lia3 ble to pay such excess.

4 ‘‘(3) DISPOSITIONS NOT TO TRIGGER RECAP5 TURE.—No credit recapture shall be required by rea6 son of any transfer of an interest in an electing large

7 partnership.

8 ‘‘(4) CREDIT RECAPTURE.—For purposes of this

9 subsection, the term ‘credit recapture’ means any in10 crease in tax under section 42(j) or 50(a).

11 ‘‘(c) PARTNERSHIP NOT TERMINATED BY REASON OF

12 CHANGE IN OWNERSHIP.—Subparagraph (B) of section

13 708(b)(1) shall not apply to an electing large partnership.

14 ‘‘(d) PARTNERSHIP ENTITLED TO CERTAIN CRED15 ITS.—The following shall be allowed to an electing large

16 partnership and shall not be taken into account by the part17 ners of such partnership:

18 ‘‘(1) The credit provided by section 34.

19 ‘‘(2) Any credit or refund under section

20 852(b)(3)(D).

21 ‘‘(e) TREATMENT OF REMIC RESIDUALS.—For pur22 poses of applying section 860E(e)(6) to any electing large

23 partnership—

24 ‘‘(1) all interests in such partnership shall be

25 treated as held by disqualified organizations,
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1 ‘‘(2) in lieu of applying subparagraph (C) of sec2 tion 860E(e)(6), the amount subject to tax under sec3 tion 860E(e)(6) shall be excluded from the gross in4 come of such partnership, and

5 ‘‘(3) subparagraph (D) of section 860E(e)(6)

6 shall not apply.

7 ‘‘(f) SPECIAL RULES FOR APPLYING CERTAIN IN8 STALLMENT SALE RULES.—In the case of an electing large

9 partnership—

10 ‘‘(1) the provisions of sections 453(l)(3) and

11 453A shall be applied at the partnership level, and

12 ‘‘(2) in determining the amount of interest pay13 able under such sections, such partnership shall be

14 treated as subject to tax under this chapter at the

15 highest rate of tax in effect under section 1 or 11.

16 ‘‘SEC. 775. ELECTING LARGE PARTNERSHIP DEFINED.

17 ‘‘(a) GENERAL RULE.—For purposes of this part—

18 ‘‘(1) IN GENERAL.—The term ‘electing large

19 partnership’ means, with respect to any partnership

20 taxable year, any partnership if—

21 ‘‘(A) the number of persons who were part22 ners in such partnership in the preceding part23 nership taxable year equaled or exceeded 100,

24 and
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1 ‘‘(B) such partnership elects the application

2 of this part.

3 To the extent provided in regulations, a partnership

4 shall cease to be treated as an electing large partner5 ship for any partnership taxable year if in such tax6 able year fewer than 100 persons were partners in

7 such partnership.

8 ‘‘(2) ELECTION.—The election under this sub9 section shall apply to the taxable year for which made

10 and all subsequent taxable years unless revoked with

11 the consent of the Secretary.

12 ‘‘(b) SPECIAL RULES FOR CERTAIN SERVICE PART13 NERSHIPS.—

14 ‘‘(1) CERTAIN PARTNERS NOT COUNTED.—For

15 purposes of this section, the term ‘partner’ does not

16 include any individual performing substantial serv17 ices in connection with the activities of the partner18 ship and holding an interest in such partnership, or

19 an individual who formerly performed substantial

20 services in connection with such activities and who

21 held an interest in such partnership at the time the

22 individual performed such services.

23 ‘‘(2) EXCLUSION.—For purposes of this part, an

24 election under subsection (a) shall not be effective
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1 with respect to any partnership if substantially all

2 the partners of such partnership—

3 ‘‘(A) are individuals performing substantial

4 services in connection with the activities of such

5 partnership or are personal service corporations

6 (as defined in section 269A(b)) the owner-em7 ployees (as defined in section 269A(b)) of which

8 perform such substantial services,

9 ‘‘(B) are retired partners who had per10 formed such substantial services, or

11 ‘‘(C) are spouses of partners who are per12 forming (or had previously performed) such sub13 stantial services.

14 ‘‘(3) SPECIAL RULE FOR LOWER TIER PARTNER15 SHIPS.—For purposes of this subsection, the activities

16 of a partnership shall include the activities of any

17 other partnership in which the partnership owns di18 rectly an interest in the capital and profits of at least

19 80 percent.

20 ‘‘(c) EXCLUSION OF COMMODITY POOLS.—For pur21 poses of this part, an election under subsection (a) shall

22 not be effective with respect to any partnership the prin23 cipal activity of which is the buying and selling of commod24 ities (not described in section 1221(1)), or options, futures,

25 or forwards with respect to such commodities.
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1 ‘‘(d) SECRETARY MAY RELY ON TREATMENT ON RE2 TURN.—If, on the partnership return of any partnership,

3 such partnership is treated as an electing large partnership,

4 such treatment shall be binding on such partnership and

5 all partners of such partnership but not on the Secretary.

6 ‘‘SEC. 776. SPECIAL RULES FOR PARTNERSHIPS HOLDING

7 OIL AND GAS PROPERTIES.

8 ‘‘(a) EXCEPTION FOR PARTNERSHIPS HOLDING SIG9 NIFICANT OIL AND GAS PROPERTIES.—

10 ‘‘(1) IN GENERAL.—For purposes of this part, an

11 election under section 775(a) shall not be effective

12 with respect to any partnership if the average per13 centage of assets (by value) held by such partnership

14 during the taxable year which are oil or gas prop15 erties is at least 25 percent. For purposes of the pre16 ceding sentence, any interest held by a partnership in

17 another partnership shall be disregarded, except that

18 the partnership shall be treated as holding its propor19 tionate share of the assets of such other partnership.

20 ‘‘(2) ELECTION TO WAIVE EXCEPTION.—Any

21 partnership may elect to have paragraph (1) not

22 apply. Such an election shall apply to the partner23 ship taxable year for which made and all subsequent

24 partnership taxable years unless revoked with the con25 sent of the Secretary.
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1 ‘‘(b) SPECIAL RULES WHERE PART APPLIES.—

2 ‘‘(1) COMPUTATION OF PERCENTAGE DEPLE3 TION.—In the case of an electing large partnership,

4 except as provided in paragraph (2)—

5 ‘‘(A) the allowance for depletion under sec6 tion 611 with respect to any partnership oil or

7 gas property shall be computed at the partner8 ship level without regard to any provision of sec9 tion 613A requiring such allowance to be com10 puted separately by each partner,

11 ‘‘(B) such allowance shall be determined

12 without regard to the provisions of section

13 613A(c) limiting the amount of production for

14 which percentage depletion is allowable and

15 without regard to paragraph (1) of section

16 613A(d), and

17 ‘‘(C) paragraph (3) of section 705(a) shall

18 not apply.

19 ‘‘(2) TREATMENT OF CERTAIN PARTNERS.—

20 ‘‘(A) IN GENERAL.—In the case of a dis21 qualified person, the treatment under this chap22 ter of such person’s distributive share of any

23 item of income, gain, loss, deduction, or credit

24 attributable to any partnership oil or gas prop25 erty shall be determined without regard to this
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1 part. Such person’s distributive share of any

2 such items shall be excluded for purposes of mak3 ing determinations under sections 772 and 773.

4 ‘‘(B) DISQUALIFIED PERSON.—For purposes

5 of subparagraph (A), the term ‘disqualified per6 son’ means, with respect to any partnership tax7 able year—

8 ‘‘(i) any person referred to in para9 graph (2) or (4) of section 613A(d) for such

10 person’s taxable year in which such part11 nership taxable year ends, and

12 ‘‘(ii) any other person if such person’s

13 average daily production of domestic crude

14 oil and natural gas for such person’s tax15 able year in which such partnership taxable

16 year ends exceeds 500 barrels.

17 ‘‘(C) AVERAGE DAILY PRODUCTION.—For

18 purposes of subparagraph (B), a person’s average

19 daily production of domestic crude oil and natu20 ral gas for any taxable year shall be computed

21 as provided in section 613A(c)(2)—

22 ‘‘(i) by taking into account all produc23 tion of domestic crude oil and natural gas

24 (including such person’s proportionate share

25 of any production of a partnership),
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1 ‘‘(ii) by treating 6,000 cubic feet of

2 natural gas as a barrel of crude oil, and

3 ‘‘(iii) by treating as 1 person all per4 sons treated as 1 taxpayer under section

5 613A(c)(8) or among whom allocations are

6 required under such section.

7 ‘‘SEC. 777. REGULATIONS.

8 ‘‘The Secretary shall prescribe such regulations as may

9 be appropriate to carry out the purposes of this part.’’

10 (b) CLERICAL AMENDMENT.—The table of parts for

11 subchapter K of chapter 1 is amended by adding at the end

12 the following new item:

‘‘Part IV. Special rules for electing large partnerships.’’

13 (c) EFFECTIVE DATE.—The amendments made by this

14 section shall apply to partnership taxable years beginning

15 after December 31, 1995.

16 SEC. 11472. RETURNS MAY BE REQUIRED ON MAGNETIC

17 MEDIA.

18 (a) IN GENERAL.—Paragraph (2) of section 6011(e)

19 (relating to returns on magnetic media) is amended by add20 ing at the end the following new sentence:

21 ‘‘Notwithstanding the preceding sentence, the Sec22 retary shall require partnerships having more than

23 100 partners to file returns on magnetic media.’’
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1 (b) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to partnership taxable years beginning

3 after December 31, 1995.

4 CHAPTER 4—FOREIGN PROVISIONS

5 Subchapter A—Modifications to Treatment of

6 Passive Foreign Investment Companies

7 SEC. 11481. UNITED STATES SHAREHOLDERS OF CON8 TROLLED FOREIGN CORPORATIONS NOT SUB9 JECT TO PFIC INCLUSION.

10 Section 1296 is amended by adding at the end the fol11 lowing new subsection:

12 ‘‘(e) EXCEPTION FOR UNITED STATES SHAREHOLDERS

13 OF CONTROLLED FOREIGN CORPORATIONS.—

14 ‘‘(1) IN GENERAL.—For purposes of this part, a

15 corporation shall not be treated with respect to a

16 shareholder as a passive foreign investment company

17 during the qualified portion of such shareholder’s

18 holding period with respect to stock in such corpora19 tion.

20 ‘‘(2) QUALIFIED PORTION.—For purposes of this

21 subsection, the term ‘qualified portion’ means the por22 tion of the shareholder’s holding period—

23 ‘‘(A) which is after December 31, 1995, and

24 ‘‘(B) during which the shareholder is a

25 United States shareholder (as defined in section
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1 951(b)) of the corporation and the corporation is

2 a controlled foreign corporation.

3 ‘‘(3) NEW HOLDING PERIOD IF QUALIFIED POR4 TION ENDS.—

5 ‘‘(A) IN GENERAL.—Except as provided in

6 subparagraph (B), if the qualified portion of a

7 shareholder’s holding period with respect to any

8 stock ends after December 31, 1995, solely for

9 purposes of this part, the shareholder’s holding

10 period with respect to such stock shall be treated

11 as beginning as of the first day following such

12 period.

13 ‘‘(B) EXCEPTION.—Subparagraph (A) shall

14 not apply if such stock was, with respect to such

15 shareholder, stock in a passive foreign investment

16 company at any time before the qualified portion

17 of the shareholder’s holding period with respect

18 to such stock and no election under section

19 1298(b)(1) is made.’’

20 SEC. 11482. ELECTION OF MARK TO MARKET FOR MARKET21 ABLE STOCK IN PASSIVE FOREIGN INVEST22 MENT COMPANY.

23 (a) IN GENERAL.—Part VI of subchapter P of chapter

24 1 is amended by redesignating subpart C as subpart D, by

25 redesignating sections 1296 and 1297 as sections 1297 and
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1 1298, respectively, and by inserting after subpart B the fol2 lowing new subpart:

3 ‘‘Subpart C—Election of Mark to Market For

4 Marketable Stock

‘‘Sec. 1296. Election of mark to market for marketable stock.

5 ‘‘SEC. 1296. ELECTION OF MARK TO MARKET FOR MARKET6 ABLE STOCK.

7 ‘‘(a) GENERAL RULE.—In the case of marketable stock

8 in a passive foreign investment company which is owned

9 (or treated under subsection (g) as owned) by a United

10 States person at the close of any taxable year of such person,

11 at the election of such person—

12 ‘‘(1) If the fair market value of such stock as of

13 the close of such taxable year exceeds its adjusted

14 basis, such United States person shall include in gross

15 income for such taxable year an amount equal to the

16 amount of such excess.

17 ‘‘(2) If the adjusted basis of such stock exceeds

18 the fair market value of such stock as of the close of

19 such taxable year, such United States person shall be

20 allowed a deduction for such taxable year equal to the

21 lesser of—

22 ‘‘(A) the amount of such excess, or

23 ‘‘(B) the unreversed inclusions with respect

24 to such stock.
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1 ‘‘(b) BASIS ADJUSTMENTS.—

2 ‘‘(1) IN GENERAL.—The adjusted basis of stock

3 in a passive foreign investment company—

4 ‘‘(A) shall be increased by the amount in5 cluded in the gross income of the United States

6 person under subsection (a)(1) with respect to

7 such stock, and

8 ‘‘(B) shall be decreased by the amount al9 lowed as a deduction to the United States person

10 under subsection (a)(2) with respect to such

11 stock.

12 ‘‘(2) SPECIAL RULE FOR STOCK CONSTRUCTIVELY

13 OWNED.—In the case of stock in a passive foreign in14 vestment company which the United States person is

15 treated as owning under subsection (g)—

16 ‘‘(A) the adjustments under paragraph (1)

17 shall apply to such stock in the hands of the per18 son actually holding such stock but only for pur19 poses of determining the subsequent treatment

20 under this chapter of the United States person

21 with respect to such stock, and

22 ‘‘(B) similar adjustments shall be made to

23 the adjusted basis of the property by reason of

24 which the United States person is treated as

25 owning such stock.
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1 ‘‘(c) CHARACTER AND SOURCE RULES.—

2 ‘‘(1) ORDINARY TREATMENT.—

3 ‘‘(A) GAIN.—Any amount included in gross

4 income under subsection (a)(1), and any gain on

5 the sale or other disposition of marketable stock

6 in a passive foreign investment company (with

7 respect to which an election under this section is

8 in effect), shall be treated as ordinary income.

9 ‘‘(B) LOSS.—Any—

10 ‘‘(i) amount allowed as a deduction

11 under subsection (a)(2), and

12 ‘‘(ii) loss on the sale or other disposi13 tion of marketable stock in a passive foreign

14 investment company (with respect to which

15 an election under this section is in effect) to

16 the extent that the amount of such loss does

17 not exceed the unreversed inclusions with re18 spect to such stock,

19 shall be treated as an ordinary loss. The amount

20 so treated shall be treated as a deduction allow21 able in computing adjusted gross income.

22 ‘‘(2) SOURCE.—The source of any amount in23 cluded in gross income under subsection (a)(1) (or al24 lowed as a deduction under subsection (a)(2)) shall be

25 determined in the same manner as if such amount
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1 were gain or loss (as the case may be) from the sale

2 of stock in the passive foreign investment company.

3 ‘‘(d) UNREVERSED INCLUSIONS.—For purposes of this

4 section, the term ‘unreversed inclusions’ means, with respect

5 to any stock in a passive foreign investment company, the

6 excess (if any) of—

7 ‘‘(1) the amount included in gross income of the

8 taxpayer under subsection (a)(1) with respect to such

9 stock for prior taxable years, over

10 ‘‘(2) the amount allowed as a deduction under

11 subsection (a)(2) with respect to such stock for prior

12 taxable years.

13 The amount referred to in paragraph (1) shall include any

14 amount which would have been included in gross income

15 under subsection (a)(1) with respect to such stock for any

16 prior taxable year but for section 1291.

17 ‘‘(e) MARKETABLE STOCK.—For purposes of this sec18 tion—

19 ‘‘(1) IN GENERAL.—The term ‘marketable stock’

20 means—

21 ‘‘(A) any stock which is regularly traded

22 on—

23 ‘‘(i) a national securities exchange

24 which is registered with the Securities and

25 Exchange Commission or the national mar-
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1 ket system established pursuant to section

2 11A of the Securities and Exchange Act of

3 1934, or

4 ‘‘(ii) any exchange or other market

5 which the Secretary determines has rules

6 adequate to carry out the purposes of this

7 part,

8 ‘‘(B) to the extent provided in regulations,

9 stock in any foreign corporation which is com10 parable to a regulated investment company and

11 which offers for sale or has outstanding any

12 stock of which it is the issuer and which is re13 deemable at its net asset value, and

14 ‘‘(C) to the extent provided in regulations,

15 any option on stock described in subparagraph

16 (A) or (B).

17 ‘‘(2) SPECIAL RULE FOR REGULATED INVEST18 MENT COMPANIES.—In the case of any regulated in19 vestment company which is offering for sale or has

20 outstanding any stock of which it is the issuer and

21 which is redeemable at its net asset value, all stock

22 in a passive foreign investment company which it

23 owns directly or indirectly shall be treated as market24 able stock for purposes of this section. Except as pro25 vided in regulations, similar treatment as marketable
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1 stock shall apply in the case of any other regulated

2 investment company which publishes net asset valu3 ations at least annually.

4 ‘‘(f) TREATMENT OF CONTROLLED FOREIGN CORPORA5 TIONS WHICH ARE SHAREHOLDERS IN PASSIVE FOREIGN

6 INVESTMENT COMPANIES.—In the case of a foreign corpora7 tion which is a controlled foreign corporation and which

8 owns (or is treated under subsection (g) as owning) stock

9 in a passive foreign investment company—

10 ‘‘(1) this section (other than subsection (c)(2))

11 shall apply to such foreign corporation in the same

12 manner as if such corporation were a United States

13 person, and

14 ‘‘(2) for purposes of subpart F of part III of sub15 chapter N—

16 ‘‘(A) any amount included in gross income

17 under subsection (a)(1) shall be treated as for18 eign personal holding company income described

19 in section 954(c)(1)(A), and

20 ‘‘(B) any amount allowed as a deduction

21 under subsection (a)(2) shall be treated as a de22 duction allocable to foreign personal holding

23 company income so described.

24 ‘‘(g) STOCK OWNED THROUGH CERTAIN FOREIGN EN25 TITIES.—Except as provided in regulations—
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1 ‘‘(1) IN GENERAL.—For purposes of this section,

2 stock owned, directly or indirectly, by or for a foreign

3 partnership or foreign trust or foreign estate shall be

4 considered as being owned proportionately by its

5 partners or beneficiaries. Stock considered to be

6 owned by a person by reason of the application of the

7 preceding sentence shall, for purposes of applying

8 such sentence, be treated as actually owned by such

9 person.

10 ‘‘(2) TREATMENT OF CERTAIN DISPOSITIONS.—

11 In any case in which a United States person is treat12 ed as owning stock in a passive foreign investment

13 company by reason of paragraph (1)—

14 ‘‘(A) any disposition by the United States

15 person or by any other person which results in

16 the United States person being treated as no

17 longer owning such stock, and

18 ‘‘(B) any disposition by the person owning

19 such stock,

20 shall be treated as a disposition by the United States

21 person of the stock in the passive foreign investment

22 company.

23 ‘‘(h) COORDINATION WITH SECTION 851(b).—For pur24 poses of paragraphs (2) and (3) of section 851(b), any
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1 amount included in gross income under subsection (a) shall

2 be treated as a dividend.

3 ‘‘(i) STOCK ACQUIRED FROM A DECEDENT.—In the

4 case of stock of a passive foreign investment company which

5 is acquired by bequest, devise, or inheritance (or by the dece6 dent’s estate) and with respect to which an election under

7 this section was in effect as of the date of the decedent’s

8 death, notwithstanding section 1014, the basis of such stock

9 in the hands of the person so acquiring it shall be the ad10 justed basis of such stock in the hands of the decedent imme11 diately before his death (or, if lesser, the basis which would

12 have been determined under section 1014 without regard to

13 this subsection).

14 ‘‘(j) COORDINATION WITH SECTION 1291 FOR FIRST

15 YEAR OF ELECTION.—

16 ‘‘(1) TAXPAYERS OTHER THAN REGULATED IN17 VESTMENT COMPANIES.—

18 ‘‘(A) IN GENERAL.—If the taxpayer elects

19 the application of this section with respect to

20 any marketable stock in a corporation after the

21 beginning of the taxpayer’s holding period in

22 such stock, and if the requirements of subpara23 graph (B) are not satisfied, section 1291 shall

24 apply to—
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1 ‘‘(i) any distributions with respect to,

2 or disposition of, such stock in the first tax3 able year of the taxpayer for which such

4 election is made, and

5 ‘‘(ii) any amount which, but for sec6 tion 1291, would have been included in

7 gross income under subsection (a) with re8 spect to such stock for such taxable year in

9 the same manner as if such amount were

10 gain on the disposition of such stock.

11 ‘‘(B) REQUIREMENTS.—The requirements of

12 this subparagraph are met if, with respect to

13 each of such corporation’s taxable years for

14 which such corporation was a passive foreign in15 vestment company and which begin after Decem16 ber 31, 1986, and included any portion of the

17 taxpayer’s holding period in such stock, such cor18 poration was treated as a qualified electing fund

19 under this part with respect to the taxpayer.

20 ‘‘(2) SPECIAL RULES FOR REGULATED INVEST21 MENT COMPANIES.—

22 ‘‘(A) IN GENERAL.—If a regulated invest23 ment company elects the application of this sec24 tion with respect to any marketable stock in a

25 corporation after the beginning of the taxpayer’s
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1 holding period in such stock, then, with respect

2 to such company’s first taxable year for which

3 such company elects the application of this sec4 tion with respect to such stock—

5 ‘‘(i) section 1291 shall not apply to

6 such stock with respect to any distribution

7 or disposition during, or amount included

8 in gross income under this section for, such

9 first taxable year, but

10 ‘‘(ii) such regulated investment compa11 ny’s tax under this chapter for such first

12 taxable year shall be increased by the aggre13 gate amount of interest which would have

14 been determined under section 1291(c)(3) if

15 section 1291 were applied without regard to

16 this subparagraph.

17 Clause (ii) shall not apply if for the preceding

18 taxable year the company elected to mark to

19 market the stock held by such company as of the

20 last day of such preceding taxable year.

21 ‘‘(B) DISALLOWANCE OF DEDUCTION.—No

22 deduction shall be allowed to any regulated in23 vestment company for the increase in tax under

24 subparagraph (A)(ii).
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1 ‘‘(k) ELECTION.—This section shall apply to market2 able stock in a passive foreign investment company which

3 is held by a United States person only if such person elects

4 to apply this section with respect to such stock. Such an

5 election shall apply to the taxable year for which made and

6 all subsequent taxable years unless—

7 ‘‘(1) such stock ceases to be marketable stock, or

8 ‘‘(2) the Secretary consents to the revocation of

9 such election.

10 ‘‘(l) TRANSITION RULE FOR INDIVIDUALS BECOMING

11 SUBJECT TO UNITED STATES TAX.—If any individual be12 comes a United States person in a taxable year beginning

13 after December 31, 1995, solely for purposes of this section,

14 the adjusted basis (before adjustments under subsection (b))

15 of any marketable stock in a passive foreign investment

16 company owned by such individual on the first day of such

17 taxable year shall be treated as being the greater of its fair

18 market value on such first day or its adjusted basis on such

19 first day.’’

20 (b) COORDINATION WITH INTEREST CHARGE, ETC.—

21 (1) Paragraph (1) of section 1291(d) is amended

22 by adding at the end the following new flush sentence:

23 ‘‘Except as provided in section 1296(j), this section

24 also shall not apply if an election under section

25 1296(k) is in effect for the taxpayer’s taxable year.’’
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1 (2) The subsection heading for subsection (d) of

2 section 1291 is amended by striking ‘‘SUBPART B’’

3 and inserting ‘‘SUBPARTS B AND C’’.

4 (3) Subparagraph (A) of section 1291(a)(3) is

5 amended to read as follows:

6 ‘‘(A) HOLDING PERIOD.—The taxpayer’s

7 holding period shall be determined under section

8 1223; except that—

9 ‘‘(i) for purposes of applying this sec10 tion to an excess distribution, such holding

11 period shall be treated as ending on the date

12 of such distribution, and

13 ‘‘(ii) if section 1296 applied to such

14 stock with respect to the taxpayer for any

15 prior taxable year, such holding period shall

16 be treated as beginning on the first day of

17 the first taxable year beginning after the

18 last taxable year for which section 1296 so

19 applied.’’

20 (c) CONFORMING AMENDMENTS.—

21 (1) Sections 532(b)(4) and 542(c)(10) are each

22 amended by striking ‘‘section 1296’’ and inserting

23 ‘‘section 1297’’.
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1 (2) Subsection (f) of section 551 is amended by

2 striking ‘‘section 1297(b)(5)’’ and inserting ‘‘section

3 1298(b)(5)’’

4 (3) Subsections (a)(1) and (d) of section 1293

5 are each amended by striking ‘‘section 1297(a)’’ and

6 inserting ‘‘section 1298(a)’’.

7 (4) Paragraph (3) of section 1297(b), as redesig8 nated by subsection (a), is hereby repealed.

9 (5) The table of sections for subpart D of part

10 VI of subchapter P of chapter 1, as redesignated by

11 subsection (a), is amended to read as follows:

‘‘Sec. 1297. Passive foreign investment company.

‘‘Sec. 1298. Special rules.’’

12 (6) The table of subparts for part VI of sub13 chapter P of chapter 1 is amended by striking the last

14 item and inserting the following new items:

‘‘Subpart C. Election of mark to market for marketable stock.

‘‘Subpart D. General provisions.’’

15 (d) CLARIFICATION OF GAIN RECOGNITION ELEC16 TION.—The last sentence of section 1298(b)(1), as so redesig17 nated, is amended by inserting ‘‘(determined without re18 gard to the preceding sentence)’’ after ‘‘investment com19 pany’’.

20 SEC. 11483. MODIFICATIONS TO DEFINITION OF PASSIVE IN21 COME.

22 (a) EXCEPTION FOR SAME COUNTRY INCOME NOT TO

23 APPLY.—Paragraph (1) of section 1297(b) (defining passive
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1 income), as redesignated by section 11482, is amended by

2 inserting before the period ‘‘without regard to paragraph

3 (3) thereof’’.

4 (b) PASSIVE INCOME NOT TO INCLUDE FSC IN5 COME.—Paragraph (2) of section 1297(b), as so redesig6 nated, is amended by striking ‘‘or’’ at the end of subpara7 graph (B), by striking the period at the end of subpara8 graph (C) and inserting ‘‘, or’’, and by inserting after sub9 paragraph (C) the following new subparagraph:

10 ‘‘(D) any foreign trade income of a FSC.’’

11 SEC. 11484. EFFECTIVE DATE.

12 The amendments made by this subchapter shall apply

13 to—

14 (1) taxable years of United States persons begin15 ning after December 31, 1995, and

16 (2) taxable years of foreign corporations ending

17 with or within such taxable years of United States

18 persons.
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1 Subchapter B—Treatment of Controlled

2 Foreign Corporations

3 SEC. 11486. GAIN ON CERTAIN STOCK SALES BY CON4 TROLLED FOREIGN CORPORATIONS TREATED

5 AS DIVIDENDS.

6 (a) GENERAL RULE.—Section 964 (relating to mis7 cellaneous provisions) is amended by adding at the end the

8 following new subsection:

9 ‘‘(e) GAIN ON CERTAIN STOCK SALES BY CONTROLLED

10 FOREIGN CORPORATIONS TREATED AS DIVIDENDS.—

11 ‘‘(1) IN GENERAL.—If a controlled foreign cor12 poration sells or exchanges stock in any other foreign

13 corporation, gain recognized on such sale or exchange

14 shall be included in the gross income of such con15 trolled foreign corporation as a dividend to the same

16 extent that it would have been so included under sec17 tion 1248(a) if such controlled foreign corporation

18 were a United States person. For purposes of deter19 mining the amount which would have been so includ20 ible, the determination of whether such other foreign

21 corporation was a controlled foreign corporation shall

22 be made without regard to the preceding sentence.

23 ‘‘(2) SAME COUNTRY EXCEPTION NOT APPLICA24 BLE.—Clause (i) of section 954(c)(3)(A) shall not
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1 apply to any amount treated as a dividend by reason

2 of paragraph (1).

3 ‘‘(3) CLARIFICATION OF DEEMED SALES.—For

4 purposes of this subsection, a controlled foreign cor5 poration shall be treated as having sold or exchanged

6 any stock if, under any provision of this subtitle, such

7 controlled foreign corporation is treated as having

8 gain from the sale or exchange of such stock.’’

9 (b) AMENDMENT OF SECTION 904(d).—Clause (i) of

10 section 904(d)(2)(E) is amended by striking ‘‘and except

11 as provided in regulations, the taxpayer was a United

12 States shareholder in such corporation’’.

13 (c) EFFECTIVE DATES.—

14 (1) The amendment made by subsection (a) shall

15 apply to gain recognized on transactions occurring

16 after the date of the enactment of this Act.

17 (2) The amendment made by subsection (b) shall

18 apply to distributions after the date of the enactment

19 of this Act.

20 SEC. 11487. MISCELLANEOUS MODIFICATIONS TO SUBPART

21 F.

22 (a) SECTION 1248 GAIN TAKEN INTO ACCOUNT IN DE23 TERMINING PRO RATA SHARE.—

24 (1) IN GENERAL.—Paragraph (2) of section

25 951(a) (defining pro rata share of subpart F income)
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1 is amended by adding at the end the following new

2 sentence: ‘‘For purposes of subparagraph (B), any

3 gain included in the gross income of any person as

4 a dividend under section 1248 shall be treated as a

5 distribution received by such person with respect to

6 the stock involved.’’

7 (2) EFFECTIVE DATE.—The amendment made by

8 paragraph (1) shall apply to dispositions after the

9 date of the enactment of this Act.

10 (b) BASIS ADJUSTMENTS IN STOCK HELD BY FOREIGN

11 CORPORATION.—

12 (1) IN GENERAL.—Section 961 (relating to ad13 justments to basis of stock in controlled foreign cor14 porations and of other property) is amended by add15 ing at the end the following new subsection:

16 ‘‘(c) BASIS ADJUSTMENTS IN STOCK HELD BY FOR17 EIGN CORPORATION.—Under regulations prescribed by the

18 Secretary, if a United States shareholder is treated under

19 section 958(a)(2) as owning any stock in a controlled for20 eign corporation which is actually owned by another con21 trolled foreign corporation, adjustments similar to the ad22 justments provided by subsections (a) and (b) shall be made

23 to the basis of such stock in the hands of such other con24 trolled foreign corporation, but only for the purposes of de25 termining the amount included under section 951 in the
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1 gross income of such United States shareholder (or any

2 other United States shareholder who acquires from any per3 son any portion of the interest of such United States share4 holder by reason of which such shareholder was treated as

5 owning such stock, but only to the extent of such portion,

6 and subject to such proof of identity of such interest as the

7 Secretary may prescribe by regulations).’’

8 (2) EFFECTIVE DATE.—The amendment made by

9 paragraph (1) shall apply for purposes of determin10 ing inclusions for taxable years of United States

11 shareholders beginning after December 31, 1995.

12 (c) DETERMINATION OF PREVIOUSLY TAXED INCOME

13 IN SECTION 304 DISTRIBUTIONS, ETC.—

14 (1) IN GENERAL.—Section 959 (relating to exclu15 sion from gross income of previously taxed earnings

16 and profits) is amended by adding at the end the fol17 lowing new subsection:

18 ‘‘(g) ADJUSTMENTS FOR CERTAIN TRANSACTIONS.—If

19 by reason of—

20 ‘‘(1) a transaction to which section 304 applies,

21 ‘‘(2) the structure of a United States sharehold22 er’s holdings in controlled foreign corporations, or

23 ‘‘(3) other circumstances,

24 there would be a multiple inclusion of any item in income

25 (or an inclusion or exclusion without an appropriate basis
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1 adjustment) by reason of this subpart, the Secretary may

2 prescribe regulations providing such modifications in the

3 application of this subpart as may be necessary to eliminate

4 such multiple inclusion or provide such basis adjustment,

5 as the case may be.’’

6 (2) EFFECTIVE DATE.—The amendment made by

7 paragraph (1) shall take effect on the date of the en8 actment of this Act.

9 (d) CLARIFICATION OF TREATMENT OF BRANCH TAX

10 EXEMPTIONS OR REDUCTIONS.—

11 (1) IN GENERAL.—Subsection (b) of section 952

12 is amended by adding at the end the following new

13 sentence: ‘‘For purposes of this subsection, any exemp14 tion (or reduction) with respect to the tax imposed by

15 section 884 shall not be taken into account.’’.

16 (2) EFFECTIVE DATE.—The amendment made by

17 paragraph (1) shall apply to taxable years beginning

18 after December 31, 1986.

19 SEC. 11488. INDIRECT FOREIGN TAX CREDIT ALLOWED FOR

20 CERTAIN LOWER TIER COMPANIES.

21 (a) SECTION 902 CREDIT.—

22 (1) IN GENERAL.—Subsection (b) of section 902

23 (relating to deemed taxes increased in case of certain

24 2nd and 3rd tier foreign corporations) is amended to

25 read as follows:
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1 ‘‘(b) DEEMED TAXES INCREASED IN CASE OF CERTAIN

2 LOWER TIER CORPORATIONS.—

3 ‘‘(1) IN GENERAL.—If—

4 ‘‘(A) any foreign corporation is a member

5 of a qualified group, and

6 ‘‘(B) such foreign corporation owns 10 per7 cent or more of the voting stock of another mem8 ber of such group from which it receives divi9 dends in any taxable year,

10 such foreign corporation shall be deemed to have paid

11 the same proportion of such other member’s post-1986

12 foreign income taxes as would be determined under

13 subsection (a) if such foreign corporation were a do14 mestic corporation.

15 ‘‘(2) QUALIFIED GROUP.—For purposes of para16 graph (1), the term ‘qualified group’ means—

17 ‘‘(A) the foreign corporation described in

18 subsection (a), and

19 ‘‘(B) any other foreign corporation if—

20 ‘‘(i) the domestic corporation owns at

21 least 5 percent of the voting stock of such

22 other foreign corporation indirectly through

23 a chain of foreign corporations connected

24 through stock ownership of at least 10 per25 cent of their voting stock,
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1 ‘‘(ii) the foreign corporation described

2 in subsection (a) is the first tier corporation

3 in such chain, and

4 ‘‘(iii) such other corporation is not

5 below the sixth tier in such chain.

6 The term ‘qualified group’ shall not include any for7 eign corporation below the third tier in the chain re8 ferred to in clause (i) unless such foreign corporation

9 is a controlled foreign corporation (as defined in sec10 tion 957) and the domestic corporation is a United

11 States shareholder (as defined in section 951(b)) in

12 such foreign corporation. Paragraph (1) shall apply

13 to those taxes paid by a member of the qualified

14 group below the third tier only with respect to periods

15 during which it was a controlled foreign corpora16 tion.’’

17 (2) CONFORMING AMENDMENTS.—

18 (A) Subparagraph (B) of section 902(c)(3)

19 is amended by adding ‘‘or’’ at the end of clause

20 (i) and by striking clauses (ii) and (iii) and in21 serting the following new clause:

22 ‘‘(ii) the requirements of subsection

23 (b)(2) are met with respect to such foreign

24 corporation.’’
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1 (B) Subparagraph (B) of section 902(c)(4)

2 is amended by striking ‘‘3rd foreign corporation’’

3 and inserting ‘‘sixth tier foreign corporation’’.

4 (C) The heading for paragraph (3) of sec5 tion 902(c) is amended by striking ‘‘WHERE DO6 MESTIC CORPORATION ACQUIRES 10 PERCENT OF

7 FOREIGN CORPORATION’’ and inserting ‘‘WHERE

8 FOREIGN CORPORATION FIRST QUALIFIES’’.

9 (D) Paragraph (3) of section 902(c) is

10 amended by striking ‘‘ownership’’ each place it

11 appears.

12 (b) SECTION 960 CREDIT.—Paragraph (1) of section

13 960(a) (relating to special rules for foreign tax credits) is

14 amended to read as follows:

15 ‘‘(1) DEEMED PAID CREDIT.—For purposes of

16 subpart A of this part, if there is included under sec17 tion 951(a) in the gross income of a domestic corpora18 tion any amount attributable to earnings and profits

19 of a foreign corporation which is a member of a

20 qualified group (as defined in section 902(b)) with re21 spect to the domestic corporation, then, except to the

22 extent provided in regulations, section 902 shall be

23 applied as if the amount so included were a dividend

24 paid by such foreign corporation (determined by ap-
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1 plying section 902(c) in accordance with section

2 904(d)(3)(B)).’’

3 (c) EFFECTIVE DATE.—

4 (1) IN GENERAL.—The amendments made by

5 this section shall apply to taxes of foreign corpora6 tions for taxable years of such corporations beginning

7 after the date of enactment of this Act.

8 (2) SPECIAL RULE.—In the case of any chain of

9 foreign corporations described in clauses (i) and (ii)

10 of section 902(b)(2)(B) of the Internal Revenue Code

11 of 1986 (as amended by this section), no liquidation,

12 reorganization, or similar transaction in a taxable

13 year beginning after the date of the enactment of this

14 Act shall have the effect of permitting taxes to be

15 taken into account under section 902 of the Internal

16 Revenue Code of 1986 which could not have been

17 taken into account under such section but for such

18 transaction.

19 SEC. 11489. REPEAL OF INCLUSION OF CERTAIN EARNINGS

20 INVESTED IN EXCESS PASSIVE ASSETS.

21 (a) IN GENERAL.—

22 (1) REPEAL OF INCLUSION.—Paragraph (1) of

23 section 951(a) (relating to amounts included in gross

24 income of United States shareholders) is amended by

25 striking subparagraph (C), by striking ‘‘; and’’ at the
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1 end of subparagraph (B) and inserting a period, and

2 by adding ‘‘and’’ at the end of subparagraph (A).

3 (2) REPEAL OF INCLUSION AMOUNT.—Section

4 956A (relating to earnings invested in excess passive

5 assets) is repealed.

6 (b) CONFORMING AMENDMENTS.—

7 (1) Paragraph (1) of section 956(b) is amended

8 to read as follows:

9 ‘‘(1) APPLICABLE EARNINGS.—For purposes of

10 this section, the term ‘applicable earnings’ means,

11 with respect to any controlled foreign corporation, the

12 sum of—

13 ‘‘(A) the amount (not including a deficit)

14 referred to in section 316(a)(1), and

15 ‘‘(B) the amount referred to in section

16 316(a)(2),

17 but reduced by distributions made during the taxable

18 year.’’

19 (2) Paragraph (3) of section 956(b) is amended

20 to read as follows:

21 ‘‘(3) SPECIAL RULE WHERE CORPORATION

22 CEASES TO BE CONTROLLED FOREIGN CORPORA23 TION.—If any foreign corporation ceases to be a con24 trolled foreign corporation during any taxable year—
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1 ‘‘(A) the determination of any United

2 States shareholder’s pro rata share shall be made

3 on the basis of stock owned (within the meaning

4 of section 958(a)) by such shareholder on the last

5 day during the taxable year on which the foreign

6 corporation is a controlled foreign corporation,

7 ‘‘(B) the average referred to in subsection

8 (a)(1)(A) for such taxable year shall be deter9 mined by only taking into account quarters end10 ing on or before such last day, and

11 ‘‘(C) in determining applicable earnings,

12 the amount taken into account by reason of

13 being described in paragraph (2) of section

14 316(a) shall be the portion of the amount so de15 scribed which is allocable (on a pro rata basis)

16 to the part of such year during which the cor17 poration is a controlled foreign corporation.’’

18 (3) Subsection (a) of section 959 (relating to ex19 clusion from gross income of previously taxed earn20 ings and profits) is amended by adding ‘‘or’’ at the

21 end of paragraph (1), by striking ‘‘or’’ at the end of

22 paragraph (2), and by striking paragraph (3).

23 (4) Subsection (a) of section 959 is amended by

24 striking ‘‘paragraphs (2) and (3)’’ in the last sentence

25 and inserting ‘‘paragraph (2)’’.
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1 (5) Subsection (c) of section 959 is amended by

2 adding at the end the following flush sentence:

3 ‘‘References in this subsection to section 951(a)(1)(C) and

4 subsection (a)(3) shall be treated as references to such provi5 sions as in effect on the day before the date of the enactment

6 of the Revenue Reconciliation Act of 1995.’’

7 (6) Paragraph (1) of section 959(f) is amended

8 to read as follows:

9 ‘‘(1) IN GENERAL.—For purposes of this section,

10 amounts that would be included under subparagraph

11 (B) of section 951(a)(1) (determined without regard

12 to this section) shall be treated as attributable first to

13 earnings described in subsection (c)(2), and then to

14 earnings described in subsection (c)(3).’’

15 (7) Paragraph (2) of section 959(f) is amended

16 by striking ‘‘subparagraphs (B) and (C) of section

17 951(a)(1)’’ and inserting ‘‘section 951(a)(1)(B)’’.

18 (8) Subsection (b) of section 989 is amended by

19 striking ‘‘subparagraph (B) or (C) of section

20 951(a)(1)’’ and inserting ‘‘section 951(a)(1)(B)’’.

21 (9) Paragraph (9) of section 1298(b), as redesig22 nated by section 11482, is amended by striking ‘‘sub23 paragraph (B) or (C) of section 951(a)(1)’’ and in24 serting ‘‘section 951(a)(1)(B)’’.
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1 (10) Subsections (d)(3)(B) and (e)(2)(B)(ii) of

2 section 1298, as redesignated by section 11482, are

3 each amended by striking ‘‘or section 956A’’.

4 (c) CLERICAL AMENDMENT.—The table of sections for

5 subpart F of part III of subchapter N of chapter 1 is

6 amended by striking the item relating to section 956A.

7 (d) EFFECTIVE DATE.—The amendments made by this

8 section shall apply to taxable years of foreign corporations

9 beginning after September 30, 1995, and to taxable years

10 of United States shareholders within which or with which

11 such taxable years of foreign corporations end.

12 CHAPTER 5—OTHER INCOME TAX

13 PROVISIONS

14 Subchapter A—Provisions Relating to S

15 Corporations

16 SEC. 11501. S CORPORATIONS PERMITTED TO HAVE 75

17 SHAREHOLDERS.

18 Subparagraph (A) of section 1361(b)(1) (defining

19 small business corporation) is amended by striking ‘‘35

20 shareholders’’ and inserting ‘‘75 shareholders’’.

21 SEC. 11502. ELECTING SMALL BUSINESS TRUSTS.

22 (a) GENERAL RULE.—Subparagraph (A) of section

23 1361(c)(2) (relating to certain trusts permitted as share24 holders) is amended by inserting after clause (iv) the follow25 ing new clause:
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1 ‘‘(v) An electing small business trust.’’

2 (b) CURRENT BENEFICIARIES TREATED AS SHARE3 HOLDERS.—Subparagraph (B) of section 1361(c)(2) is

4 amended by adding at the end the following new clause:

5 ‘‘(v) In the case of a trust described in

6 clause (v) of subparagraph (A), each poten7 tial current beneficiary of such trust shall

8 be treated as a shareholder; except that, if

9 for any period there is no potential current

10 beneficiary of such trust, such trust shall be

11 treated as the shareholder during such pe12 riod.’’

13 (c) ELECTING SMALL BUSINESS TRUST DEFINED.—

14 Section 1361 (defining S corporation) is amended by add15 ing at the end the following new subsection:

16 ‘‘(e) ELECTING SMALL BUSINESS TRUST DEFINED.—

17 ‘‘(1) ELECTING SMALL BUSINESS TRUST.—For

18 purposes of this section—

19 ‘‘(A) IN GENERAL.—Except as provided in

20 subparagraph (B), the term ‘electing small busi21 ness trust’ means any trust if—

22 ‘‘(i) such trust does not have as a bene23 ficiary any person other than (I) an indi24 vidual, (II) an estate, or (III) an organiza25 tion described in paragraph (2), (3), (4), or
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1 (5) of section 170(c) which holds a contin2 gent interest and is not a potential current

3 beneficiary,

4 ‘‘(ii) no interest in such trust was ac5 quired by purchase, and

6 ‘‘(iii) an election under this subsection

7 applies to such trust.

8 ‘‘(B) CERTAIN TRUSTS NOT ELIGIBLE.—The

9 term ‘electing small business trust’ shall not in10 clude—

11 ‘‘(i) any qualified subchapter S trust

12 (as defined in subsection (d)(3)) if an elec13 tion under subsection (d)(2) applies to any

14 corporation the stock of which is held by

15 such trust, and

16 ‘‘(ii) any trust exempt from tax under

17 this subtitle.

18 ‘‘(C) PURCHASE.—For purposes of subpara19 graph (A), the term ‘purchase’ means any acqui20 sition if the basis of the property acquired is de21 termined under section 1012.

22 ‘‘(2) POTENTIAL CURRENT BENEFICIARY.—For

23 purposes of this section, the term ‘potential current

24 beneficiary’ means, with respect to any period, any

25 person who at any time during such period is entitled
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1 to, or at the discretion of any person may receive, a

2 distribution from the principal or income of the trust.

3 If a trust disposes of all of the stock which it holds

4 in an S corporation, then, with respect to such cor5 poration, the term ‘potential current beneficiary’ does

6 not include any person who first met the requirements

7 of the preceding sentence during the 60-day period

8 ending on the date of such disposition.

9 ‘‘(3) ELECTION.—An election under this sub10 section shall be made by the trustee. Any such election

11 shall apply to the taxable year of the trust for which

12 made and all subsequent taxable years of such trust

13 unless revoked with the consent of the Secretary.

14 ‘‘(4) CROSS REFERENCE.—

‘‘For special treatment of electing small business

trusts, see section 641(d).’’

15 (d) TAXATION OF ELECTING SMALL BUSINESS

16 TRUSTS.—Section 641 (relating to imposition of tax on

17 trusts) is amended by adding at the end the following new

18 subsection:

19 ‘‘(d) SPECIAL RULES FOR TAXATION OF ELECTING

20 SMALL BUSINESS TRUSTS.—

21 ‘‘(1) IN GENERAL.—For purposes of this chap22 ter—

23 ‘‘(A) the portion of any electing small busi24 ness trust which consists of stock in 1 or more
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1 S corporations shall be treated as a separate

2 trust, and

3 ‘‘(B) the amount of the tax imposed by this

4 chapter on such separate trust shall be deter5 mined with the modifications of paragraph (2).

6 ‘‘(2) MODIFICATIONS.—For purposes of para7 graph (1), the modifications of this paragraph are the

8 following:

9 ‘‘(A) Except as provided in section 1(h), the

10 amount of the tax imposed by section 1(e) shall

11 be determined by using the highest rate of tax set

12 forth in section 1(e).

13 ‘‘(B) The exemption amount under section

14 55(d) shall be zero.

15 ‘‘(C) The only items of income, loss, deduc16 tion, or credit to be taken into account are the

17 following:

18 ‘‘(i) The items required to be taken

19 into account under section 1366.

20 ‘‘(ii) Any gain or loss from the disposi21 tion of stock in an S corporation.

22 ‘‘(iii) To the extent provided in regula23 tions, State or local income taxes or admin24 istrative expenses to the extent allocable to

25 items described in clauses (i) and (ii).
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1 No deduction or credit shall be allowed for any

2 amount not described in this paragraph, and no

3 item described in this paragraph shall be appor4 tioned to any beneficiary.

5 ‘‘(D) No amount shall be allowed under

6 paragraph (1) or (2) of section 1211(b).

7 ‘‘(3) TREATMENT OF REMAINDER OF TRUST AND

8 DISTRIBUTIONS.—For purposes of determining—

9 ‘‘(A) the amount of the tax imposed by this

10 chapter on the portion of any electing small

11 business trust not treated as a separate trust

12 under paragraph (1), and

13 ‘‘(B) the distributable net income of the en14 tire trust,

15 the items referred to in paragraph (2)(C) shall be ex16 cluded. Except as provided in the preceding sentence,

17 this subsection shall not affect the taxation of any dis18 tribution from the trust.

19 ‘‘(4) TREATMENT OF UNUSED DEDUCTIONS

20 WHERE TERMINATION OF SEPARATE TRUST.—If a

21 portion of an electing small business trust ceases to

22 be treated as a separate trust under paragraph (1),

23 any carryover or excess deduction of the separate

24 trust which is referred to in section 642(h) shall be

25 taken into account by the entire trust.
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1 ‘‘(5) ELECTING SMALL BUSINESS TRUST.—For

2 purposes of this subsection, the term ‘electing small

3 business trust’ has the meaning given such term by

4 section 1361(e)(1).’’

5 (e) TECHNICAL AMENDMENT.—Paragraph (1) of sec6 tion 1366(a) is amended by inserting ‘‘, or of a trust or

7 estate which terminates,’’ after ‘‘who dies’’.

8 SEC. 11503. EXPANSION OF POST-DEATH QUALIFICATION

9 FOR CERTAIN TRUSTS.

10 Subparagraph (A) of section 1361(c)(2) (relating to

11 certain trusts permitted as shareholders) is amended—

12 (1) by striking ‘‘60-day period’’ each place it ap13 pears in clauses (ii) and (iii) and inserting ‘‘2-year

14 period’’, and

15 (2) by striking the last sentence in clause (ii).

16 SEC. 11504. FINANCIAL INSTITUTIONS PERMITTED TO HOLD

17 SAFE HARBOR DEBT.

18 Clause (iii) of section 1361(c)(5)(B) (defining straight

19 debt) is amended by striking ‘‘or a trust described in para20 graph (2)’’ and inserting ‘‘a trust described in paragraph

21 (2), or a person which is actively and regularly engaged

22 in the business of lending money.’’
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1 SEC. 11505. RULES RELATING TO INADVERTENT TERMI2 NATIONS AND INVALID ELECTIONS.

3 (a) GENERAL RULE.—Subsection (f) of section 1362

4 (relating to inadvertent terminations) is amended to read

5 as follows:

6 ‘‘(f) INADVERTENT INVALID ELECTIONS OR TERMI7 NATIONS.—If—

8 ‘‘(1) an election under subsection (a) by any cor9 poration—

10 ‘‘(A) was not effective for the taxable year

11 for which made (determined without regard to

12 subsection (b)(2)) by reason of a failure to meet

13 the requirements of section 1361(b) or to obtain

14 shareholder consents, or

15 ‘‘(B) was terminated under paragraph (2)

16 or (3) of subsection (d),

17 ‘‘(2) the Secretary determines that the cir18 cumstances resulting in such ineffectiveness or termi19 nation were inadvertent,

20 ‘‘(3) no later than a reasonable period of time

21 after discovery of the circumstances resulting in such

22 ineffectiveness or termination, steps were taken—

23 ‘‘(A) so that the corporation is a small busi24 ness corporation, or

25 ‘‘(B) to acquire the required shareholder

26 consents, and
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1 ‘‘(4) the corporation, and each person who was

2 a shareholder in the corporation at any time during

3 the period specified pursuant to this subsection, agrees

4 to make such adjustments (consistent with the treat5 ment of the corporation as an S corporation) as may

6 be required by the Secretary with respect to such pe7 riod,

8 then, notwithstanding the circumstances resulting in such

9 ineffectiveness or termination, such corporation shall be

10 treated as an S corporation during the period specified by

11 the Secretary.’’

12 (b) LATE ELECTIONS.—Subsection (b) of section 1362

13 is amended by adding at the end the following new para14 graph:

15 ‘‘(5) AUTHORITY TO TREAT LATE ELECTIONS AS

16 TIMELY.—If—

17 ‘‘(A) an election under subsection (a) is

18 made for any taxable year (determined without

19 regard to paragraph (3)) after the date pre20 scribed by this subsection for making such elec21 tion for such taxable year, and

22 ‘‘(B) the Secretary determines that there

23 was reasonable cause for the failure to timely

24 make such election,
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1 the Secretary may treat such election as timely made

2 for such taxable year (and paragraph (3) shall not

3 apply).’’

4 (c) EFFECTIVE DATE.—The amendments made by sub5 section (a) and (b) shall apply with respect to elections for

6 taxable years beginning after December 31, 1982.

7 SEC. 11506. AGREEMENT TO TERMINATE YEAR.

8 Paragraph (2) of section 1377(a) (relating to pro rata

9 share) is amended to read as follows:

10 ‘‘(2) ELECTION TO TERMINATE YEAR.—

11 ‘‘(A) IN GENERAL.—If any shareholder ter12 minates the shareholder’s interest in the corpora13 tion during the taxable year and all affected

14 shareholders and the corporation agree to the ap15 plication of this paragraph, paragraph (1) shall

16 be applied to the affected shareholders as if the

17 taxable year consisted of 2 taxable years the first

18 of which ends on the date of the termination.

19 ‘‘(B) AFFECTED SHAREHOLDERS.—For

20 purposes of subparagraph (A), the term ‘affected

21 shareholders’ means the shareholder whose inter22 est is terminated and all shareholders to whom

23 such shareholder has transferred shares during

24 the taxable year. If such shareholder has trans25 ferred shares to the corporation, the term ‘af-
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1 fected shareholders’ shall include all persons who

2 are shareholders during the taxable year.’’

3 SEC. 11507. EXPANSION OF POST-TERMINATION TRANSI4 TION PERIOD.

5 (a) IN GENERAL.—Paragraph (1) of section 1377(b)

6 (relating to post-termination transition period) is amended

7 by striking ‘‘and’’ at the end of subparagraph (A), by redes8 ignating subparagraph (B) as subparagraph (C), and by

9 inserting after subparagraph (A) the following new sub10 paragraph:

11 ‘‘(B) the 120-day period beginning on the

12 date of any determination pursuant to an audit

13 of the taxpayer which follows the termination of

14 the corporation’s election and which adjusts a

15 subchapter S item of income, loss, or deduction

16 of the corporation arising during the S period

17 (as defined in section 1368(e)(2)), and’’.

18 (b) DETERMINATION DEFINED.—Paragraph (2) of sec19 tion 1377(b) is amended by striking subparagraphs (A) and

20 (B), by redesignating subparagraph (C) as subparagraph

21 (B), and by inserting before subparagraph (B) (as so redes22 ignated) the following new subparagraph:

23 ‘‘(A) a determination as defined in section

24 1313(a), or’’.
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1 (c) REPEAL OF SPECIAL AUDIT PROVISIONS FOR SUB2 CHAPTER S ITEMS.—

3 (1) GENERAL RULE.—Subchapter D of chapter

4 63 (relating to tax treatment of subchapter S items)

5 is hereby repealed.

6 (2) CONSISTENT TREATMENT REQUIRED.—Sec7 tion 6037 (relating to return of S corporation) is

8 amended by adding at the end the following new sub9 section:

10 ‘‘(c) SHAREHOLDER’S RETURN MUST BE CONSISTENT

11 WITH CORPORATE RETURN OR SECRETARY NOTIFIED OF

12 INCONSISTENCY.—

13 ‘‘(1) IN GENERAL.—A shareholder of an S cor14 poration shall, on such shareholder’s return, treat a

15 subchapter S item in a manner which is consistent

16 with the treatment of such item on the corporate re17 turn.

18 ‘‘(2) NOTIFICATION OF INCONSISTENT TREAT19 MENT.—

20 ‘‘(A) IN GENERAL.—In the case of any sub21 chapter S item, if—

22 ‘‘(i)(I) the corporation has filed a re23 turn but the shareholder’s treatment on his

24 return is (or may be) inconsistent with the
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1 treatment of the item on the corporate re2 turn, or

3 ‘‘(II) the corporation has not filed a re4 turn, and

5 ‘‘(ii) the shareholder files with the Sec6 retary a statement identifying the inconsist7 ency,

8 paragraph (1) shall not apply to such item.

9 ‘‘(B) SHAREHOLDER RECEIVING INCORRECT

10 INFORMATION.—A shareholder shall be treated as

11 having complied with clause (ii) of subpara12 graph (A) with respect to a subchapter S item if

13 the shareholder—

14 ‘‘(i) demonstrates to the satisfaction of

15 the Secretary that the treatment of the sub16 chapter S item on the shareholder’s return

17 is consistent with the treatment of the item

18 on the schedule furnished to the shareholder

19 by the corporation, and

20 ‘‘(ii) elects to have this paragraph

21 apply with respect to that item.

22 ‘‘(3) EFFECT OF FAILURE TO NOTIFY.—In any

23 case—

24 ‘‘(A) described in subparagraph (A)(i)(I) of

25 paragraph (2), and
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1 ‘‘(B) in which the shareholder does not com2 ply with subparagraph (A)(ii) of paragraph (2),

3 any adjustment required to make the treatment of the

4 items by such shareholder consistent with the treat5 ment of the items on the corporate return shall be

6 treated as arising out of mathematical or clerical er7 rors and assessed according to section 6213(b)(1).

8 Paragraph (2) of section 6213(b) shall not apply to

9 any assessment referred to in the preceding sentence.

10 ‘‘(4) SUBCHAPTER S ITEM.—For purposes of this

11 subsection, the term ‘subchapter S item’ means any

12 item of an S corporation to the extent that regula13 tions prescribed by the Secretary provide that, for

14 purposes of this subtitle, such item is more appro15 priately determined at the corporation level than at

16 the shareholder level.

17 ‘‘(5) ADDITION TO TAX FOR FAILURE TO COMPLY

18 WITH SECTION.—

‘‘For addition to tax in the case of a shareholder’s

negligence in connection with, or disregard of, the

requirements of this section, see part II of subchapter A of chapter 68.’’

19 (3) CONFORMING AMENDMENTS.—

20 (A) Section 1366 is amended by striking

21 subsection (g).

22 (B) Subsection (b) of section 6233 is

23 amended to read as follows:
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1 ‘‘(b) SIMILAR RULES IN CERTAIN CASES.—If a part2 nership return is filed for any taxable year but it is deter3 mined that there is no entity for such taxable year, to the

4 extent provided in regulations, rules similar to the rules

5 of subsection (a) shall apply.’’

6 (C) The table of subchapters for chapter 63

7 is amended by striking the item relating to sub8 chapter D.

9 SEC. 11508. S CORPORATIONS PERMITTED TO HOLD SUB10 SIDIARIES.

11 (a) IN GENERAL.—Paragraph (2) of section 1361(b)

12 (defining ineligible corporation) is amended by striking

13 subparagraph (A) and by redesignating subparagraphs (B),

14 (C), (D), and (E) as subparagraphs (A), (B), (C), and (D),

15 respectively.

16 (b) TREATMENT OF CERTAIN WHOLLY OWNED S COR17 PORATION SUBSIDIARIES.—Section 1361(b) (defining small

18 business corporation) is amended by adding at the end the

19 following new paragraph:

20 ‘‘(3) TREATMENT OF CERTAIN WHOLLY OWNED

21 SUBSIDIARIES.—

22 ‘‘(A) IN GENERAL.—For purposes of this

23 title—
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1 ‘‘(i) a corporation which is a qualified

2 subchapter S subsidiary shall not be treated

3 as a separate corporation, and

4 ‘‘(ii) all assets, liabilities, and items of

5 income, deduction, and credit of a qualified

6 subchapter S subsidiary shall be treated as

7 assets, liabilities, and such items (as the

8 case may be) of the S corporation.

9 ‘‘(B) QUALIFIED SUBCHAPTER S SUBSIDI10 ARY.—For purposes of this paragraph, the term

11 ‘qualified subchapter S subsidiary’ means any

12 domestic corporation which is not an ineligible

13 corporation (as defined in paragraph (2)), if—

14 ‘‘(i) 100 percent of the stock of such

15 corporation is held by the S corporation,

16 and

17 ‘‘(ii) the S corporation elects to treat

18 such corporation as a qualified subchapter

19 S subsidiary.

20 ‘‘(C) TREATMENT OF TERMINATIONS OF

21 QUALIFIED SUBCHAPTER S SUBSIDIARY STA22 TUS.—For purposes of this title, if any corpora23 tion which was a qualified subchapter S subsidi24 ary ceases to meet the requirements of subpara25 graph (B), such corporation shall be treated as
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1 a new corporation acquiring all of its assets

2 (and assuming all of its liabilities) immediately

3 before such cessation from the S corporation in

4 exchange for its stock.’’

5 (c) CERTAIN DIVIDENDS NOT TREATED AS PASSIVE

6 INVESTMENT INCOME.—Paragraph (3) of section 1362(d) is

7 amended by adding at the end the following new subpara8 graph:

9 ‘‘(F) TREATMENT OF CERTAIN DIVI10 DENDS.—If an S corporation holds stock in a C

11 corporation meeting the requirements of section

12 1504(a)(2), the term ‘passive investment income’

13 shall not include dividends from such C corpora14 tion to the extent such dividends are attributable

15 to the earnings and profits of such C corporation

16 derived from the active conduct of a trade or

17 business.’’

18 (d) CONFORMING AMENDMENTS.—

19 (1) Subsection (c) of section 1361 is amended by

20 striking paragraph (6).

21 (2) Subsection (b) of section 1504 (defining in22 cludible corporation) is amended by adding at the

23 end the following new paragraph:

24 ‘‘(8) An S corporation.’’
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1 SEC. 11509. TREATMENT OF DISTRIBUTIONS DURING LOSS

2 YEARS.

3 (a) ADJUSTMENTS FOR DISTRIBUTIONS TAKEN INTO

4 ACCOUNT BEFORE LOSSES.—

5 (1) Subparagraph (A) of section 1366(d)(1) (re6 lating to losses and deductions cannot exceed share7 holder’s basis in stock and debt) is amended by strik8 ing ‘‘paragraph (1)’’ and inserting ‘‘paragraphs (1)

9 and (2)(A)’’.

10 (2) Subsection (d) of section 1368 (relating to

11 certain adjustments taken into account) is amended

12 by adding at the end the following new sentence:

13 ‘‘In the case of any distribution made during any taxable

14 year, the adjusted basis of the stock shall be determined with

15 regard to the adjustments provided in paragraph (1) of sec16 tion 1367(a) for the taxable year.’’

17 (b) ACCUMULATED ADJUSTMENTS ACCOUNT.—Para18 graph (1) of section 1368(e) (relating to accumulated ad19 justments account) is amended by adding at the end the

20 following new subparagraph:

21 ‘‘(C) NET LOSS FOR YEAR DISREGARDED.—

22 ‘‘(i) IN GENERAL.—In applying this section

23 to distributions made during any taxable year,

24 the amount in the accumulated adjustments ac25 count as of the close of such taxable year shall
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1 be determined without regard to any net negative

2 adjustment for such taxable year.

3 ‘‘(ii) NET NEGATIVE ADJUSTMENT.—For

4 purposes of clause (i), the term ‘net negative ad5 justment’ means, with respect to any taxable

6 year, the excess (if any) of—

7 ‘‘(I) the reductions in the account for

8 the taxable year (other than for distribu9 tions), over

10 ‘‘(II) the increases in such account for

11 such taxable year.’’

12 (c) CONFORMING AMENDMENTS.—Subparagraph (A)

13 of section 1368(e)(1) is amended—

14 (1) by striking ‘‘as provided in subparagraph

15 (B)’’ and inserting ‘‘as otherwise provided in this

16 paragraph’’, and

17 (2) by striking ‘‘section 1367(b)(2)(A)’’ and in18 serting ‘‘section 1367(a)(2)’’.

19 SEC. 11510. TREATMENT OF S CORPORATIONS UNDER SUB20 CHAPTER C.

21 Subsection (a) of section 1371 (relating to application

22 of subchapter C rules) is amended to read as follows:

23 ‘‘(a) APPLICATION OF SUBCHAPTER C RULES.—Ex24 cept as otherwise provided in this title, and except to the
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1 extent inconsistent with this subchapter, subchapter C shall

2 apply to an S corporation and its shareholders.’’

3 SEC. 11511. ELIMINATION OF CERTAIN EARNINGS AND

4 PROFITS.

5 (a) IN GENERAL.—If—

6 (1) a corporation was an electing small business

7 corporation under subchapter S of chapter 1 of the

8 Internal Revenue Code of 1986 for any taxable year

9 beginning before January 1, 1983, and

10 (2) such corporation is an S corporation under

11 subchapter S of chapter 1 of such Code for its first

12 taxable year beginning after December 31, 1995,

13 the amount of such corporation’s accumulated earnings and

14 profits (as of the beginning of such first taxable year) shall

15 be reduced by an amount equal to the portion (if any) of

16 such accumulated earnings and profits which were accumu17 lated in any taxable year beginning before January 1, 1983,

18 for which such corporation was an electing small business

19 corporation under such subchapter S.

20 (b) CONFORMING AMENDMENTS.—

21 (1) Paragraph (3) of section 1362(d) is amend22 ed—

23 (A) by striking ‘‘SUBCHAPTER C’’ in the

24 paragraph heading and inserting ‘‘ACCUMU25 LATED’’,
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1 (B) by striking ‘‘subchapter C’’ in subpara2 graph (A)(i)(I) and inserting ‘‘accumulated’’,

3 and

4 (C) by striking subparagraph (B) and re5 designating the following subparagraphs accord6 ingly.

7 (2)(A) Subsection (a) of section 1375 is amended

8 by striking ‘‘subchapter C’’ in paragraph (1) and in9 serting ‘‘accumulated’’.

10 (B) Paragraph (3) of section 1375(b) is amended

11 to read as follows:

12 ‘‘(3) PASSIVE INVESTMENT INCOME, ETC.—The

13 terms ‘passive investment income’ and ‘gross receipts’

14 have the same respective meanings as when used in

15 paragraph (3) of section 1362(d).’’

16 (C) The section heading for section 1375 is

17 amended by striking ‘‘subchapter c’’ and inserting

18 ‘‘accumulated’’.

19 (D) The table of sections for part III of sub20 chapter S of chapter 1 is amended by striking ‘‘sub21 chapter C’’ in the item relating to section 1375 and

22 inserting ‘‘accumulated’’.

23 (3) Clause (i) of section 1042(c)(4)(A) is amend24 ed by striking ‘‘section 1362(d)(3)(D)’’ and inserting

25 ‘‘section 1362(d)(3)(C)’’.
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1 SEC. 11512. CARRYOVER OF DISALLOWED LOSSES AND DE2 DUCTIONS UNDER AT-RISK RULES ALLOWED.

3 Paragraph (3) of section 1366(d) (relating to carryover

4 of disallowed losses and deductions to post-termination

5 transition period) is amended by adding at the end the fol6 lowing new subparagraph:

7 ‘‘(D) AT-RISK LIMITATIONS.—To the extent

8 that any increase in adjusted basis described in

9 subparagraph (B) would have increased the

10 shareholder’s amount at risk under section 465 if

11 such increase had occurred on the day preceding

12 the commencement of the post-termination tran13 sition period, rules similar to the rules described

14 in subparagraphs (A) through (C) shall apply to

15 any losses disallowed by reason of section

16 465(a).’’

17 SEC. 11513. ADJUSTMENTS TO BASIS OF INHERITED S

18 STOCK TO REFLECT CERTAIN ITEMS OF IN19 COME.

20 (a) IN GENERAL.—Subsection (b) of section 1367 (re21 lating to adjustments to basis of stock of shareholders, etc.)

22 is amended by adding at the end the following new para23 graph:

24 ‘‘(4) ADJUSTMENTS IN CASE OF INHERITED

25 STOCK.—
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1 ‘‘(A) IN GENERAL.—If any person acquires

2 stock in an S corporation by reason of the death

3 of a decedent or by bequest, devise, or inherit4 ance, section 691 shall be applied with respect to

5 any item of income of the S corporation in the

6 same manner as if the decedent had held directly

7 his pro rata share of such item.

8 ‘‘(B) ADJUSTMENTS TO BASIS.—The basis

9 determined under section 1014 of any stock in

10 an S corporation shall be reduced by the portion

11 of the value of the stock which is attributable to

12 items constituting income in respect of the dece13 dent.’’

14 (b) EFFECTIVE DATE.—The amendment made by sub15 section (a) shall apply in the case of decedents dying after

16 the date of the enactment of this Act.

17 SEC. 11514. S CORPORATIONS ELIGIBLE FOR RULES APPLI18 CABLE TO REAL PROPERTY SUBDIVIDED FOR

19 SALE BY NONCORPORATE TAXPAYERS.

20 (a) IN GENERAL.—Subsection (a) of section 1237 (re21 lating to real property subdivided for sale) is amended by

22 striking ‘‘other than a corporation’’ in the material preced23 ing paragraph (1) and inserting ‘‘other than a C corpora24 tion’’.
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1 (b) CONFORMING AMENDMENT.—Subparagraph (A) of

2 section 1237(a)(2) is amended by inserting ‘‘an S corpora3 tion which included the taxpayer as a shareholder,’’ after

4 ‘‘controlled by the taxpayer,’’.

5 SEC. 11515. EFFECTIVE DATE.

6 (a) IN GENERAL.—Except as otherwise provided in

7 this subchapter, the amendments made by this subchapter

8 shall apply to taxable years beginning after December 31,

9 1995.

10 (b) TREATMENT OF CERTAIN ELECTIONS UNDER

11 PRIOR LAW.—For purposes of section 1362(g) of the Inter12 nal Revenue Code of 1986 (relating to election after termi13 nation), any termination under section 1362(d) of such

14 Code in a taxable year beginning before January 1, 1996,

15 shall not be taken into account.

16 Subchapter B—Repeal of 30-Percent Gross In17 come Limitation on Regulated Investment

18 Companies

19 SEC. 11521. REPEAL OF 30-PERCENT GROSS INCOME LIMITA20 TION.

21 (a) GENERAL RULE.—Subsection (b) of section 851

22 (relating to limitations) is amended by striking paragraph

23 (3), by adding ‘‘and’’ at the end of paragraph (2), and by

24 redesignating paragraph (4) as paragraph (3).

25 (b) TECHNICAL AMENDMENTS.—
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1 (1) The material following paragraph (3) of sec2 tion 851(b) (as redesignated by subsection (a)) is

3 amended—

4 (A) by striking out ‘‘paragraphs (2) and

5 (3)’’ and inserting ‘‘paragraph (2)’’, and

6 (B) by striking out the last sentence thereof.

7 (2) Subsection (c) of section 851 is amended by

8 striking ‘‘subsection (b)(4)’’ each place it appears (in9 cluding the heading) and inserting ‘‘subsection

10 (b)(3)’’.

11 (3) Subsection (d) of section 851 is amended by

12 striking ‘‘subsections (b)(4)’’ and inserting ‘‘sub13 sections (b)(3)’’.

14 (4) Paragraph (1) of section 851(e) is amended

15 by striking ‘‘subsection (b)(4)’’ and inserting ‘‘sub16 section (b)(3)’’.

17 (5) Paragraph (4) of section 851(e) is amended

18 by striking ‘‘subsections (b)(4)’’ and inserting ‘‘sub19 sections (b)(3)’’.

20 (6) Section 851 is amended by striking sub21 section (g) and redesignating subsection (h) as sub22 section (g).

23 (7) Subsection (g) of section 851 (as redesignated

24 by paragraph (6)) is amended by striking paragraph

25 (3).
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1 (8) Section 817(h)(2) is amended—

2 (A) by striking ‘‘851(b)(4)’’ in subpara3 graph (A) and inserting ‘‘851(b)(3)’’, and

4 (B) by striking ‘‘851(b)(4)(A)(i)’’ in sub5 paragraph (B) and inserting ‘‘851(b)(3)(A)(i)’’.

6 (9) Section 1092(f)(2) is amended by striking

7 ‘‘Except for purposes of section 851(b)(3), the’’ and

8 inserting ‘‘The’’.

9 (c) EFFECTIVE DATE.—The amendments made by this

10 section shall apply to taxable years ending after the date

11 of the enactment of this Act.

12 Subchapter C—Accounting Provisions

13 SEC. 11551. MODIFICATIONS TO LOOK-BACK METHOD FOR

14 LONG-TERM CONTRACTS.

15 (a) LOOK-BACK METHOD NOT TO APPLY IN CERTAIN

16 CASES.—Subsection (b) of section 460 (relating to percent17 age of completion method) is amended by adding at the end

18 the following new paragraph:

19 ‘‘(6) ELECTION TO HAVE LOOK-BACK METHOD

20 NOT APPLY IN DE MINIMIS CASES.—

21 ‘‘(A) AMOUNTS TAKEN INTO ACCOUNT

22 AFTER COMPLETION OF CONTRACT.—Paragraph

23 (1)(B) shall not apply with respect to any tax24 able year (beginning after the taxable year in

25 which the contract is completed) if—
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1 ‘‘(i) the cumulative taxable income (or

2 loss) under the contract as of the close of

3 such taxable year, is within

4 ‘‘(ii) 10 percent of the cumulative look5 back taxable income (or loss) under the con6 tract as of the close of the most recent tax7 able year to which paragraph (1)(B) ap8 plied (or would have applied but for sub9 paragraph (B)).

10 ‘‘(B) DE MINIMIS DISCREPANCIES.—Para11 graph (1)(B) shall not apply in any case to

12 which it would otherwise apply if—

13 ‘‘(i) the cumulative taxable income (or

14 loss) under the contract as of the close of

15 each prior contract year, is within

16 ‘‘(ii) 10 percent of the cumulative look17 back income (or loss) under the contract as

18 of the close of such prior contract year.

19 ‘‘(C) DEFINITIONS.—For purposes of this

20 paragraph—

21 ‘‘(i) CONTRACT YEAR.—The term ‘con22 tract year’ means any taxable year for

23 which income is taken into account under

24 the contract.
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1 ‘‘(ii) LOOK-BACK INCOME OR LOSS.—

2 The look-back income (or loss) is the

3 amount which would be the taxable income

4 (or loss) under the contract if the allocation

5 method set forth in paragraph (2)(A) were

6 used in determining taxable income.

7 ‘‘(iii) DISCOUNTING NOT APPLICA8 BLE.—The amounts taken into account

9 after the completion of the contract shall be

10 determined without regard to any discount11 ing under the 2nd sentence of paragraph

12 (2).

13 ‘‘(D) CONTRACTS TO WHICH PARAGRAPH

14 APPLIES.—This paragraph shall only apply if

15 the taxpayer makes an election under this sub16 paragraph. Unless revoked with the consent of

17 the Secretary, such an election shall apply to all

18 long-term contracts completed during the taxable

19 year for which election is made or during any

20 subsequent taxable year.’’

21 (b) MODIFICATION OF INTEREST RATE.—

22 (1) IN GENERAL.—Subparagraph (C) of section

23 460(b)(2) is amended by striking ‘‘the overpayment

24 rate established by section 6621’’ and inserting ‘‘the
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1 adjusted overpayment rate (as defined in paragraph

2 (7))’’.

3 (2) ADJUSTED OVERPAYMENT RATE.—Subsection

4 (b) of section 460 is amended by adding at the end

5 the following new paragraph:

6 ‘‘(7) ADJUSTED OVERPAYMENT RATE.—

7 ‘‘(A) IN GENERAL.—The adjusted overpay8 ment rate for any interest accrual period is the

9 overpayment rate in effect under section 6621 for

10 the calendar quarter in which such interest ac11 crual period begins.

12 ‘‘(B) INTEREST ACCRUAL PERIOD.—For

13 purposes of subparagraph (A), the term ‘interest

14 accrual period’ means the period—

15 ‘‘(i) beginning on the day after the re16 turn due date for any taxable year of the

17 taxpayer, and

18 ‘‘(ii) ending on the return due date for

19 the following taxable year.

20 For purposes of the preceding sentence, the term

21 ‘return due date’ means the date prescribed for

22 filing the return of the tax imposed by this chap23 ter (determined without regard to extensions).’’
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to contracts completed in taxable years

3 ending after the date of the enactment of this Act.

4 SEC. 11552. APPLICATION OF MARK TO MARKET ACCOUNT5 ING METHOD TO TRADERS IN SECURITIES.

6 (a) IN GENERAL.—Section 475 (relating to mark to

7 market accounting method for dealers in securities) is

8 amended by redesignating subsection (e) as subsection (f)

9 and by inserting after subsection (d) the following new sub10 section:

11 ‘‘(e) AUTHORITY TO EXTEND METHOD TO TRADERS

12 IN SECURITIES.—

13 ‘‘(1) IN GENERAL.—A trader in securities may

14 elect to have the provisions of this section (other than

15 subsection (d)(3)) apply to securities held by the trad16 er. Such election may be made only with the consent

17 of the Secretary.

18 ‘‘(2) TRADER IN SECURITIES.—For purposes of

19 this subsection, the term ‘trader in securities’ means

20 a taxpayer who is regularly engaged in trading secu21 rities.’’

22 (b) EFFECTIVE DATE.—The amendments made by this

23 section shall apply to taxable years ending on and after

24 December 31, 1995.
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1 SEC. 11553. MODIFICATION OF RULING AMOUNTS FOR NU2 CLEAR DECOMMISSIONING COSTS.

3 (a) IN GENERAL.—Section 468A(d) (relating to ruling

4 amount) is amended by adding at the end the following new

5 paragraph:

6 ‘‘(4) NONSUBSTANTIAL MODIFICATIONS.—A

7 taxpayer may modify a schedule of ruling

8 amounts under paragraph (1) without a review

9 under paragraph (3) if such modification does

10 not substantially modify the ruling amount. The

11 taxpayer shall notify the Secretary of any such

12 modification.’’

13 (b) EFFECTIVE DATE.—The amendment made by this

14 section shall apply to modifications after the date of the

15 enactment of this Act.

16 Subchapter D—Tax-Exempt Bond Provision

17 SEC. 11561. REPEAL OF DEBT SERVICE-BASED LIMITATION

18 ON INVESTMENT IN CERTAIN NONPURPOSE

19 INVESTMENTS.

20 (a) IN GENERAL.—Subsection (d) of section 148 (relat21 ing to special rules for reasonably required reserve or re22 placement fund) is amended by striking paragraph (3).

23 (b) EFFECTIVE DATE.—The amendments made by this

24 part shall apply to bonds issued after the date of the enact25 ment of this Act.
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1 Subchapter E—INSURANCE PROVISIONS

2 SEC. 11571. TREATMENT OF CERTAIN INSURANCE CON3 TRACTS ON RETIRED LIVES.

4 (a) GENERAL RULE.—

5 (1) Paragraph (2) of section 817(d) (defining

6 variable contract) is amended by striking ‘‘or’’ at the

7 end of subparagraph (A), by striking ‘‘and’’ at the

8 end of subparagraph (B) and inserting ‘‘or’’, and by

9 inserting after subparagraph (B) the following new

10 subparagraph:

11 ‘‘(C) provides for funding of insurance on

12 retired lives as described in section 807(c)(6),

13 and’’.

14 (2) Paragraph (3) of section 817(d) is amended

15 by striking ‘‘or’’ at the end of subparagraph (A), by

16 striking the period at the end of subparagraph (B)

17 and inserting ‘‘, or’’, and by inserting after subpara18 graph (B) the following new subparagraph:

19 ‘‘(C) in the case of funds held under a con20 tract described in paragraph (2)(C), the amounts

21 paid in, or the amounts paid out, reflect the in22 vestment return and the market value of the seg23 regated asset account.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to taxable years beginning after Decem3 ber 31, 1995.

4 SEC. 11572. TREATMENT OF MODIFIED GUARANTEED CON5 TRACTS.

6 (a) GENERAL RULE.—Subpart E of part I of sub7 chapter L of chapter 1 (relating to definitions and special

8 rules) is amended by inserting after section 817 the follow9 ing new section:

10 ‘‘SEC. 817A. SPECIAL RULES FOR MODIFIED GUARANTEED

11 CONTRACTS.

12 ‘‘(a) COMPUTATION OF RESERVES.—In the case of a

13 modified guaranteed contract, clause (ii) of section

14 807(e)(1)(A) shall not apply.

15 ‘‘(b) SEGREGATED ASSETS UNDER MODIFIED GUAR16 ANTEED CONTRACTS MARKED TO MARKET.—

17 ‘‘(1) IN GENERAL.—In the case of any life insur18 ance company, for purposes of this subtitle—

19 ‘‘(A) Any gain or loss with respect to a seg20 regated asset shall be treated as ordinary income

21 or loss, as the case may be.

22 ‘‘(B) If any segregated asset is held by such

23 company as of the close of any taxable year—

24 ‘‘(i) such company shall recognize gain

25 or loss as if such asset were sold for its fair
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1 market value on the last business day of

2 such taxable year, and

3 ‘‘(ii) any such gain or loss shall be

4 taken into account for such taxable year.

5 Proper adjustment shall be made in the amount

6 of any gain or loss subsequently realized for gain

7 or loss taken into account under the preceding

8 sentence. The Secretary may provide by regula9 tions for the application of this subparagraph at

10 times other than the times provided in this sub11 paragraph.

12 ‘‘(2) SEGREGATED ASSET.—For purposes of

13 paragraph (1), the term ‘segregated asset’ means any

14 asset held as part of a segregated account referred to

15 in subsection (d)(1) under a modified guaranteed con16 tract.

17 ‘‘(c) SPECIAL RULE IN COMPUTING LIFE INSURANCE

18 RESERVES.—For purposes of applying section 816(b)(1)(A)

19 to any modified guaranteed contract, an assumed rate of

20 interest shall include a rate of interest determined, from

21 time to time, with reference to a market rate of interest.

22 ‘‘(d) MODIFIED GUARANTEED CONTRACT DEFINED.—

23 For purposes of this section, the term ‘modified guaranteed

24 contract’ means a contract not described in section 817—
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1 ‘‘(1) all or part of the amounts received under

2 which are allocated to an account which, pursuant to

3 State law or regulation, is segregated from the general

4 asset accounts of the company and is valued from

5 time to time with reference to market values,

6 ‘‘(2) which—

7 ‘‘(A) provides for the payment of annuities,

8 ‘‘(B) is a life insurance contract, or

9 ‘‘(C) is a pension plan contract which is

10 not a life, accident, or health, property, casualty,

11 or liability contract,

12 ‘‘(3) for which reserves are valued at market for

13 annual statement purposes, and

14 ‘‘(4) which provides for a net surrender value or

15 a policyholder’s fund (as defined in section 807(e)(1)).

16 If only a portion of a contract is not described in section

17 817, such portion shall be treated for purposes of this section

18 as a separate contract.

19 ‘‘(e) REGULATIONS.—The Secretary may prescribe reg20 ulations—

21 ‘‘(1) to provide for the treatment of market value

22 adjustments under sections 72, 7702, 7702A, and

23 807(e)(1)(B),

24 ‘‘(2) to determine the interest rates applicable

25 under sections 807(c)(3), 807(d)(2)(B), and 812 with
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1 respect to a modified guaranteed contract annually,

2 in a manner appropriate for modified guaranteed

3 contracts and, to the extent appropriate for such a

4 contract, to modify or waive the applicability of sec5 tion 811(d),

6 ‘‘(3) to provide rules to limit ordinary gain or

7 loss treatment to assets constituting reserves for modi8 fied guaranteed contracts (and not other assets) of the

9 company,

10 ‘‘(4) to provide appropriate treatment of trans11 fers of assets to and from the segregated account, and

12 ‘‘(5) as may be necessary or appropriate to carry

13 out the purposes of this section.’’.

14 (b) CLERICAL AMENDMENT.—The table of sections for

15 subpart E of part I of subchapter L of chapter 1 is amended

16 by inserting after the item relating to section 817 the follow17 ing new item:

‘‘Sec. 817A. Special rules for modified guaranteed contracts.’’.

18 (c) EFFECTIVE DATE.—

19 (1) IN GENERAL.—The amendments made by

20 this section shall apply to taxable years beginning

21 after December 31, 1995.

22 (2) TREATMENT OF NET ADJUSTMENTS.—In the

23 case of any taxpayer required by the amendments

24 made by this section to change its calculation of re25 serves to take into account market value adjustments
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1 and to mark segregated assets to market for any tax2 able year—

3 (A) such changes shall be treated as a

4 change in method of accounting initiated by the

5 taxpayer,

6 (B) such changes shall be treated as made

7 with the consent of the Secretary, and

8 (C) the adjustments required by reason of

9 section 481 of the Internal Revenue Code of 1986

10 shall be taken into account as ordinary income

11 or loss by the taxpayer for the taxpayer’s first

12 taxable year beginning after December 31, 1995.

13 Subchapter F—Other Provisions

14 SEC. 11581. CLOSING OF PARTNERSHIP TAXABLE YEAR

15 WITH RESPECT TO DECEASED PARTNER, ETC.

16 (a) GENERAL RULE.—Subparagraph (A) of section

17 706(c)(2) (relating to disposition of entire interest) is

18 amended to read as follows:

19 ‘‘(A) DISPOSITION OF ENTIRE INTEREST.—

20 The taxable year of a partnership shall close

21 with respect to a partner whose entire interest in

22 the partnership terminates (whether by reason of

23 death, liquidation, or otherwise).’’
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1 (b) CLERICAL AMENDMENT.—The paragraph heading

2 for paragraph (2) of section 706(c) is amended to read as

3 follows:

4 ‘‘(2) TREATMENT OF DISPOSITIONS.—’’.

5 (c) EFFECTIVE DATE.—The amendments made by this

6 section shall apply to partnership taxable years beginning

7 after December 31, 1995.

8 SEC. 11582. CREDIT FOR SOCIAL SECURITY TAXES PAID

9 WITH RESPECT TO EMPLOYEE CASH TIPS.

10 (a) REPORTING REQUIREMENT NOT CONSIDERED.—

11 Subparagraph (A) of section 45B(b)(1) (relating to excess

12 employer social security tax) is amended by inserting

13 ‘‘(without regard to whether such tips are reported under

14 section 6053)’’ after ‘‘section 3121(q)’’.

15 (b) TAXES PAID.—Subsection (d) of section 13443 of

16 the Revenue Reconciliation Act of 1993 is amended by in17 serting ‘‘, with respect to services performed before, on, or

18 after such date’’ after ‘‘1993’’.

19 (c) EFFECTIVE DATE.—The amendments made by this

20 section shall take effect as if included in the amendments

21 made by, and the provisions of, section 13443 of the Reve22 nue Reconciliation Act of 1993.
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1 SEC. 11583. DUE DATE FOR FIRST QUARTER ESTIMATED

2 TAX PAYMENTS BY PRIVATE FOUNDATIONS.

3 (a) IN GENERAL.—Paragraph (3) of section 6655(g)

4 is amended by inserting after subparagraph (C) the follow5 ing new subparagraph:

6 ‘‘(D) In the case of any private foundation,

7 subsection (c)(2) shall be applied by substituting

8 ‘May 15’ for ‘April 15 ’ ’’.

9 (b) EFFECTIVE DATE.—The amendment made by sub10 section (a) shall apply to taxable years beginning after De11 cember 31, 1995.

12 CHAPTER 6—ESTATES AND TRUSTS

13 Subchapter A—Income Tax Provisions

14 SEC. 11601. CERTAIN REVOCABLE TRUSTS TREATED AS

15 PART OF ESTATE.

16 (a) IN GENERAL.—Subpart A of part I of subchapter

17 J (relating to estates, trusts, beneficiaries, and decedents)

18 is amended by adding at the end the following new section:

19 ‘‘SEC. 646. CERTAIN REVOCABLE TRUSTS TREATED AS PART

20 OF ESTATE.

21 ‘‘(a) GENERAL RULE.—For purposes of this subtitle,

22 if both the executor (if any) of an estate and the trustee

23 of a qualified revocable trust elect the treatment provided

24 in this section, such trust shall be treated and taxed as part

25 of such estate (and not as a separate trust) for all taxable
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1 years of the estate ending after the date of the decedent’s

2 death and before the applicable date.

3 ‘‘(b) DEFINITIONS.—For purposes of subsection (a)—

4 ‘‘(1) QUALIFIED REVOCABLE TRUST.—The term

5 ‘qualified revocable trust’ means any trust (or portion

6 thereof) which was treated under section 676 as

7 owned by the decedent of the estate referred to in sub8 section (a) by reason of a power in the grantor (deter9 mined without regard to section 672(e)).

10 ‘‘(2) APPLICABLE DATE.—The term ‘applicable

11 date’ means—

12 ‘‘(A) if no return of tax imposed by chapter

13 11 is required to be filed, the date which is 2

14 years after the date of the decedent’s death, and

15 ‘‘(B) if such a return is required to be filed,

16 the date which is 6 months after the date of the

17 final determination of the liability for tax im18 posed by chapter 11.

19 ‘‘(c) ELECTION.—The election under subsection (a)

20 shall be made not later than the time prescribed for filing

21 the return of tax imposed by this chapter for the first tax22 able year of the estate (determined with regard to exten23 sions) and, once made, shall be irrevocable.’’

24 (b) COMPARABLE TREATMENT UNDER GENERATION25 SKIPPING TAX.—Paragraph (1) of section 2652(b) is
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1 amended by adding at the end the following new sentence:

2 ‘‘Such term shall not include any trust during any period

3 the trust is treated as part of an estate under section 646.’’

4 (c) CLERICAL AMENDMENT.—The table of sections for

5 such subpart A is amended by adding at the end the follow6 ing new item:

‘‘Sec. 646. Certain revocable trusts treated as part of estate.’’

7 (d) EFFECTIVE DATE.—The amendments made by this

8 section shall apply with respect to estates of decedents dying

9 after the date of the enactment of this Act.

10 SEC. 11602. DISTRIBUTIONS DURING FIRST 65 DAYS OF TAX11 ABLE YEAR OF ESTATE.

12 (a) IN GENERAL.—Subsection (b) of section 663 (relat13 ing to distributions in first 65 days of taxable year) is

14 amended by inserting ‘‘an estate or’’ before ‘‘a trust’’ each

15 place it appears.

16 (b) CONFORMING AMENDMENT.—Paragraph (2) of sec17 tion 663(b) is amended by striking ‘‘the fiduciary of such

18 trust’’ and inserting ‘‘the executor of such estate or the fidu19 ciary of such trust (as the case may be)’’.

20 (c) EFFECTIVE DATE.—The amendments made by this

21 section shall apply to taxable years beginning after the date

22 of the enactment of this Act.
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1 SEC. 11603. SEPARATE SHARE RULES AVAILABLE TO

2 ESTATES.

3 (a) IN GENERAL.—Subsection (c) of section 663 (relat4 ing to separate shares treated as separate trusts) is amend5 ed—

6 (1) by inserting before the last sentence the fol7 lowing new sentence: ‘‘Rules similar to the rules of the

8 preceding provisions of this subsection shall apply to

9 treat substantially separate and independent shares of

10 different beneficiaries in an estate having more than

11 1 beneficiary as separate estates.’’, and

12 (2) by inserting ‘‘or estates’’ after ‘‘trusts’’ in the

13 last sentence.

14 (b) CONFORMING AMENDMENT.—The subsection head15 ing of section 663(c) is amended by inserting ‘‘ESTATES

16 OR’’ before ‘‘TRUSTS’’.

17 (c) EFFECTIVE DATE.—The amendments made by this

18 section shall apply to estates of decedents dying after the

19 date of the enactment of this Act.

20 SEC. 11604. EXECUTOR OF ESTATE AND BENEFICIARIES

21 TREATED AS RELATED PERSONS FOR DIS22 ALLOWANCE OF LOSSES, ETC.

23 (a) DISALLOWANCE OF LOSSES.—Subsection (b) of sec24 tion 267 (relating to losses, expenses, and interest with re25 spect to transactions between related taxpayers) is amended

26 by striking ‘‘or’’ at the end of paragraph (11), by striking
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1 the period at the end of paragraph (12) and inserting ‘‘;

2 or’’, and by adding at the end the following new paragraph:

3 ‘‘(13) Except in the case of a sale or exchange in

4 satisfaction of a pecuniary bequest, an executor of an

5 estate and a beneficiary of such estate.’’

6 (b) ORDINARY INCOME FROM GAIN FROM SALE OF

7 DEPRECIABLE PROPERTY.—Subsection (b) of section 1239

8 is amended by striking the period at the end of paragraph

9 (2) and inserting ‘‘, and’’ and by adding at the end the

10 following new paragraph:

11 ‘‘(3) except in the case of a sale or exchange in

12 satisfaction of a pecuniary bequest, an executor of an

13 estate and a beneficiary of such estate.’’

14 (c) EFFECTIVE DATE.—The amendments made by this

15 section shall apply to taxable years beginning after the date

16 of the enactment of this Act.

17 SEC. 11605. LIMITATION ON TAXABLE YEAR OF ESTATES.

18 (a) IN GENERAL.—Section 645 (relating to taxable

19 year of trusts) is amended to read as follows:

20 ‘‘SEC. 645. TAXABLE YEAR OF ESTATES AND TRUSTS.

21 ‘‘(a) ESTATES.—For purposes of this subtitle, the tax22 able year of an estate shall be a year ending on October

23 31, November 30, or December 31.

24 ‘‘(b) TRUSTS.—
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1 ‘‘(1) IN GENERAL.—For purposes of this subtitle,

2 the taxable year of any trust shall be the calendar

3 year.

4 ‘‘(2) EXCEPTION FOR TRUSTS EXEMPT FROM TAX

5 AND CHARITABLE TRUSTS.—Paragraph (1) shall not

6 apply to a trust exempt from taxation under section

7 501(a) or to a trust described in section 4947(a)(1).’’

8 (b) CLERICAL AMENDMENT.—The table of sections for

9 subpart A of part I of subchapter J of chapter 1 is amended

10 by striking the item relating to section 645 and inserting

11 the following new item:

‘‘Sec. 645. Taxable year of estates and trusts.’’

12 (c) EFFECTIVE DATE.—The amendments made by this

13 section shall apply to estates of decedents dying after the

14 date of the enactment of this Act.

15 SEC. 11606. TREATMENT OF FUNERAL TRUSTS.

16 (a) IN GENERAL.—Subpart F of part I of subchapter

17 J of chapter 1 is amended by adding at the end the follow18 ing new section:

19 ‘‘SEC. 684. TREATMENT OF FUNERAL TRUSTS.

20 ‘‘(a) IN GENERAL.—In the case of a qualified funeral

21 trust—

22 ‘‘(1) subparts B, C, D, and E shall not apply,

23 and

24 ‘‘(2) no deduction shall be allowed by section

25 642(b).
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1 ‘‘(b) QUALIFIED FUNERAL TRUST.—For purposes of

2 this subsection, the term ‘qualified funeral trust’ means any

3 trust (other than a foreign trust) if—

4 ‘‘(1) the trust arises as a result of a contract

5 with a person engaged in the trade or business of pro6 viding funeral or burial services or property nec7 essary to provide such services,

8 ‘‘(2) the sole purpose of the trust is to hold, in9 vest, and reinvest funds in the trust and to use such

10 funds solely to make payments for such services or

11 property for the benefit of the beneficiaries of the

12 trust,

13 ‘‘(3) the only beneficiaries of such trust are indi14 viduals who have entered into contracts described in

15 paragraph (1) to have such services or property pro16 vided at their death,

17 ‘‘(4) the only contributions to the trust are con18 tributions by or for the benefit of such beneficiaries,

19 ‘‘(5) the trustee elects the application of this sub20 section, and

21 ‘‘(6) the trust would (but for the election de22 scribed in paragraph (5)) be treated as owned by the

23 beneficiaries under subpart E.

24 ‘‘(c) DOLLAR LIMITATION ON CONTRIBUTIONS.—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified funeral

2 trust’ shall not include any trust which accepts aggre3 gate contributions by or for the benefit of an individ4 ual in excess of $7,000.

5 ‘‘(2) RELATED TRUSTS.—For purposes of para6 graph (1), all trusts having trustees which are related

7 persons shall be treated as 1 trust. For purposes of the

8 preceding sentence, persons are related if—

9 ‘‘(A) the relationship between such persons

10 would result in the disallowance of losses under

11 section 267 or 707(b),

12 ‘‘(B) such persons are treated as a single

13 employer under subsection (a) or (b) of section

14 52, or

15 ‘‘(C) the Secretary determines that treating

16 such persons as related is necessary to prevent

17 avoidance of the purposes of this section.

18 ‘‘(3) INFLATION ADJUSTMENT.—In the case of

19 any contract referred to in subsection (b)(1) which is

20 entered into during any calendar year after 1996, the

21 dollar amount referred to paragraph (1) shall be in22 creased by an amount equal to—

23 ‘‘(A) such dollar amount, multiplied by

24 ‘‘(B) the cost-of-living adjustment deter25 mined under section 1(f)(3) for such calendar
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1 year, by substituting ‘calendar year 1995’ for

2 ‘calendar year 1992’ in subparagraph (B) there3 of.

4 If any dollar amount after being increased under the

5 preceding sentence is not a multiple of $100, such dol6 lar amount shall be rounded to the nearest multiple

7 of $100.

8 ‘‘(d) APPLICATION OF RATE SCHEDULE.—Section 1(e)

9 shall be applied to each qualified funeral trust by treating

10 each beneficiary’s interest in each such trust as a separate

11 trust.

12 ‘‘(e) TREATMENT OF AMOUNTS REFUNDED TO BENE13 FICIARY ON CANCELLATION.—No gain or loss shall be recog14 nized to a beneficiary described in subsection (b)(3) of any

15 qualified funeral trust by reason of any payment from such

16 trust to such beneficiary by reason of cancellation of a con17 tract referred to in subsection (b)(1). If any payment re18 ferred to in the preceding sentence consists of property other

19 than money, the basis of such property in the hands of such

20 beneficiary shall be the same as the trust’s basis in such

21 property immediately before the payment.

22 ‘‘(f) SIMPLIFIED REPORTING.—The Secretary may

23 prescribe rules for simplified reporting of all trusts having

24 a single trustee.’’
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1 (b) CLERICAL AMENDMENT.—The table of sections for

2 subpart F of part I of subchapter J of chapter 1 is amended

3 by adding at the end the following new item:

‘‘Sec. 684. Treatment of funeral trusts.’’

4 (c) EFFECTIVE DATE.—The amendments made by this

5 section shall apply to taxable years beginning after the date

6 of the enactment of this Act.

7 Subchapter B—Estate and Gift Tax Provisions

8 SEC. 11611. CLARIFICATION OF WAIVER OF CERTAIN

9 RIGHTS OF RECOVERY.

10 (a) AMENDMENT TO SECTION 2207A.—Paragraph (2)

11 of section 2207A(a) (relating to right of recovery in the case

12 of certain marital deduction property) is amended to read

13 as follows:

14 ‘‘(2) DECEDENT MAY OTHERWISE DIRECT.—

15 Paragraph (1) shall not apply with respect to any

16 property to the extent that the decedent in his will (or

17 a revocable trust) specifically indicates an intent to

18 waive any right of recovery under this subchapter

19 with respect to such property.’’

20 (b) AMENDMENT TO SECTION 2207B.—Paragraph (2)

21 of section 2207B(a) (relating to right of recovery where de22 cedent retained interest) is amended to read as follows:

23 ‘‘(2) DECEDENT MAY OTHERWISE DIRECT.—

24 Paragraph (1) shall not apply with respect to any

25 property to the extent that the decedent in his will (or
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1 a revocable trust) specifically indicates an intent to

2 waive any right of recovery under this subchapter

3 with respect to such property.’’

4 (c) EFFECTIVE DATE.—The amendments made by this

5 section shall apply with respect to the estates of decedents

6 dying after the date of the enactment of this Act.

7 SEC. 11612. ADJUSTMENTS FOR GIFTS WITHIN 3 YEARS OF

8 DECEDENT’S DEATH.

9 (a) GENERAL RULE.—Section 2035 is amended to

10 read as follows:

11 ‘‘SEC. 2035. ADJUSTMENTS FOR CERTAIN GIFTS MADE

12 WITHIN 3 YEARS OF DECEDENT’S DEATH.

13 ‘‘(a) INCLUSION OF CERTAIN PROPERTY IN GROSS ES14 TATE.—If—

15 ‘‘(1) the decedent made a transfer (by trust or

16 otherwise) of an interest in any property, or relin17 quished a power with respect to any property, during

18 the 3-year period ending on the date of the decedent’s

19 death, and

20 ‘‘(2) the value of such property (or an interest

21 therein) would have been included in the decedent’s

22 gross estate under section 2036, 2037, 2038, or 2042

23 if such transferred interest or relinquished power had

24 been retained by the decedent on the date of his death,
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1 the value of the gross estate shall include the value of any

2 property (or interest therein) which would have been so in3 cluded.

4 ‘‘(b) INCLUSION OF GIFT TAX ON GIFTS MADE DURING

5 3 YEARS BEFORE DECEDENT’S DEATH.—The amount of

6 the gross estate (determined without regard to this sub7 section) shall be increased by the amount of any tax paid

8 under chapter 12 by the decedent or his estate on any gift

9 made by the decedent or his spouse during the 3-year period

10 ending on the date of the decedent’s death.

11 ‘‘(c) OTHER RULES RELATING TO TRANSFERS WITHIN

12 3 YEARS OF DEATH.—

13 ‘‘(1) IN GENERAL.—For purposes of—

14 ‘‘(A) section 303(b) (relating to distribu15 tions in redemption of stock to pay death taxes),

16 ‘‘(B) section 2032A (relating to special

17 valuation of certain farms, etc., real property),

18 and

19 ‘‘(C) subchapter C of chapter 64 (relating to

20 lien for taxes),

21 the value of the gross estate shall include the value of

22 all property to the extent of any interest therein of

23 which the decedent has at any time made a transfer,

24 by trust or otherwise, during the 3-year period ending

25 on the date of the decedent’s death.
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1 ‘‘(2) COORDINATION WITH SECTION 6166.—An es2 tate shall be treated as meeting the 35 percent of ad3 justed gross estate requirement of section 6166(a)(1)

4 only if the estate meets such requirement both with

5 and without the application of paragraph (1).

6 ‘‘(3) MARITAL AND SMALL TRANSFERS.—Para7 graph (1) shall not apply to any transfer (other than

8 a transfer with respect to a life insurance policy)

9 made during a calendar year to any donee if the dece10 dent was not required by section 6019 (other than by

11 reason of section 6019(2)) to file any gift tax return

12 for such year with respect to transfers to such donee.

13 ‘‘(d) EXCEPTION.—Subsection (a) shall not apply to

14 any bona fide sale for an adequate and full consideration

15 in money or money’s worth.

16 ‘‘(e) TREATMENT OF CERTAIN TRANSFERS FROM REV17 OCABLE TRUSTS.—For purposes of this section and section

18 2038, any transfer from any portion of a trust during any

19 period that such portion was treated under section 676 as

20 owned by the decedent by reason of a power in the grantor

21 (determined without regard to section 672(e)) shall be treat22 ed as a transfer made directly by the decedent.’’

23 (b) CLERICAL AMENDMENT.—The table of sections for

24 part III of subchapter A of chapter 11 is amended by strik-
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1 ing ‘‘gifts’’ in the item relating to section 2035 and insert2 ing ‘‘certain gifts’’.

3 (c) EFFECTIVE DATE.—The amendments made by this

4 section shall apply to the estates of decedents dying after

5 the date of the enactment of this Act.

6 SEC. 11613. CLARIFICATION OF QUALIFIED TERMINABLE IN7 TEREST RULES.

8 (a) GENERAL RULE.—

9 (1) ESTATE TAX.—Subparagraph (B) of section

10 2056(b)(7) (defining qualified terminable interest

11 property) is amended by adding at the end the follow12 ing new clause:

13 ‘‘(vi) TREATMENT OF CERTAIN INCOME

14 DISTRIBUTIONS.—An income interest shall

15 not fail to qualify as a qualified income in16 terest for life solely because income for the

17 period after the last distribution date and

18 on or before the date of the surviving

19 spouse’s death is not required to be distrib20 uted to the surviving spouse or to the estate

21 of the surviving spouse.’’

22 (2) GIFT TAX.—Paragraph (3) of section 2523(f)

23 is amended by striking ‘‘and (iv)’’ and inserting

24 ‘‘(iv), and (vi)’’.
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1 (b) CLARIFICATION OF SUBSEQUENT INCLUSIONS.—

2 Section 2044 is amended by adding at the end the following

3 new subsection:

4 ‘‘(d) CLARIFICATION OF INCLUSION OF CERTAIN IN5 COME.—The amount included in the gross estate under sub6 section (a) shall include the amount of any income from

7 the property to which this section applies for the period

8 after the last distribution date and on or before the date

9 of the decedent’s death if such income is not otherwise in10 cluded in the decedent’s gross estate.’’

11 (c) EFFECTIVE DATE.—

12 (1) IN GENERAL.—The amendments made by

13 this section shall apply with respect to the estates of

14 decedents dying, and gifts made, after the date of the

15 enactment of this Act.

16 (2) APPLICATION OF SECTION 2044 TO TRANS17 FERS BEFORE DATE OF ENACTMENT.—In the case of

18 the estate of any decedent dying after the date of the

19 enactment of this Act, if there was a transfer of prop20 erty on or before such date—

21 (A) such property shall not be included in

22 the gross estate of the decedent under section

23 2044 of the Internal Revenue Code of 1986 if no

24 prior marital deduction was allowed with respect
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1 to such a transfer of such property to the dece2 dent, but

3 (B) such property shall be so included if

4 such a deduction was allowed.

5 SEC. 11614. TRANSITIONAL RULE UNDER SECTION 2056A.

6 (a) GENERAL RULE.—In the case of any trust created

7 under an instrument executed before the date of the enact8 ment of the Revenue Reconciliation Act of 1990, such trust

9 shall be treated as meeting the requirements of paragraph

10 (1) of section 2056A(a) of the Internal Revenue Code of

11 1986 if the trust instrument requires that all trustees of

12 the trust be individual citizens of the United States or do13 mestic corporations.

14 (b) EFFECTIVE DATE.—The provisions of subsection

15 (a) shall take effect as if included in the provisions of sec16 tion 11702(g) of the Revenue Reconciliation Act of 1990.

17 SEC. 11615. OPPORTUNITY TO CORRECT CERTAIN FAILURES

18 UNDER SECTION 2032A.

19 (a) GENERAL RULE.—Paragraph (3) of section

20 2032A(d) (relating to modification of election and agree21 ment to be permitted) is amended to read as follows:

22 ‘‘(3) MODIFICATION OF ELECTION AND AGREE23 MENT TO BE PERMITTED.—The Secretary shall pre24 scribe procedures which provide that in any case in

25 which the executor makes an election under para-
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1 graph (1) (and submits the agreement referred to in

2 paragraph (2)) within the time prescribed therefor,

3 but—

4 ‘‘(A) the notice of election, as filed, does not

5 contain all required information, or

6 ‘‘(B) signatures of 1 or more persons re7 quired to enter into the agreement described in

8 paragraph (2) are not included on the agreement

9 as filed, or the agreement does not contain all re10 quired information,

11 the executor will have a reasonable period of time (not

12 exceeding 90 days) after notification of such failures

13 to provide such information or signatures.’’

14 (b) EFFECTIVE DATE.—The amendment made by sub15 section (a) shall apply to the estates of decedents dying after

16 the date of the enactment of this Act.

17 SEC. 11616. GIFTS MAY NOT BE REVALUED FOR ESTATE TAX

18 PURPOSES AFTER EXPIRATION OF STATUTE

19 OF LIMITATIONS.

20 (a) IN GENERAL.—Section 2001 (relating to imposi21 tion and rate of estate tax) is amended by adding at the

22 end the following new subsection:

23 ‘‘(f) VALUATION OF GIFTS.—If—

24 ‘‘(1) the time has expired within which a tax

25 may be assessed under chapter 12 (or under cor-
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1 responding provisions of prior laws) on the transfer

2 of property by gift made during a preceding calendar

3 period (as defined in section 2502(b)), and

4 ‘‘(2) the value of such gift is shown on the return

5 for such preceding calendar period or is disclosed in

6 such return, or in a statement attached to the return,

7 in a manner adequate to apprise the Secretary of the

8 nature of such gift,

9 the value of such gift shall, for purposes of computing the

10 tax under this chapter, be the value of such gift as finally

11 determined for purposes of chapter 12.’’

12 (b) MODIFICATION OF APPLICATION OF STATUTE OF

13 LIMITATIONS.—Paragraph (9) of section 6501(c) is amend14 ed to read as follows:

15 ‘‘(9) GIFT TAX ON CERTAIN GIFTS NOT SHOWN

16 ON RETURN.—If any gift of property the value of

17 which (or any increase in taxable gifts required under

18 section 2701(d)) is required to be shown on a return

19 of tax imposed by chapter 12 (without regard to sec20 tion 2503(b)), and is not shown on such return, any

21 tax imposed by chapter 12 on such gift may be as22 sessed, or a proceeding in court for the collection of

23 such tax may be begun without assessment, at any

24 time. The preceding sentence shall not apply to any

25 item which is disclosed in such return, or in a state-
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1 ment attached to the return, in a manner adequate to

2 apprise the Secretary of the nature of such item. The

3 value of any item which is so disclosed may not be

4 redetermined by the Secretary after the expiration of

5 the period under subsection (a).’’

6 (c) DECLARATORY JUDGMENT PROCEDURE FOR DE7 TERMINING VALUE OF GIFT.—

8 (1) IN GENERAL.—Part IV of subchapter C of

9 chapter 76 is amended by inserting after section 7476

10 the following new section:

11 ‘‘SEC. 7477. DECLARATORY JUDGMENTS RELATING TO

12 VALUE OF CERTAIN GIFTS.

13 ‘‘(a) CREATION OF REMEDY.—In a case of an actual

14 controversy involving a determination by the Secretary of

15 the value of any gift shown on the return of tax imposed

16 by chapter 12 or disclosed on such return or in any state17 ment attached to such return, upon the filing of an appro18 priate pleading, the Tax Court may make a declaration of

19 the value of such gift. Any such declaration shall have the

20 force and effect of a decision of the Tax Court and shall

21 be reviewable as such.

22 ‘‘(b) LIMITATIONS.—

23 ‘‘(1) PETITIONER.—A pleading may be filed

24 under this section only by the donor.
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1 ‘‘(2) EXHAUSTION OF ADMINISTRATIVE REM2 EDIES.—The court shall not issue a declaratory judg3 ment or decree under this section in any proceeding

4 unless it determines that the petitioner has exhausted

5 all available administrative remedies within the In6 ternal Revenue Service.

7 ‘‘(3) TIME FOR BRINGING ACTION.—If the Sec8 retary sends by certified or registered mail notice of

9 his determination as described in subsection (a) to the

10 petitioner, no proceeding may be initiated under this

11 section unless the pleading is filed before the 91st day

12 after the date of such mailing.’’

13 (2) CLERICAL AMENDMENT.—The table of sec14 tions for such part IV is amended by inserting after

15 the item relating to section 7476 the following new

16 item:

‘‘Sec. 7477. Declaratory judgments relating to value of certain

gifts.’’

17 (d) CONFORMING AMENDMENT.—Subsection (c) of sec18 tion 2504 is amended by striking ‘‘, and if a tax under

19 this chapter or under corresponding provisions of prior

20 laws has been assessed or paid for such preceding calendar

21 period’’.

22 (e) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—The amendments made by

2 subsections (a) and (c) shall apply to gifts made after

3 the date of the enactment of this Act.

4 (2) SUBSECTION (b).—The amendment made by

5 subsection (b) shall apply to gifts made in calendar

6 years ending after the date of the enactment of this

7 Act.

8 SEC. 11617. CLARIFICATIONS RELATING TO DISCLAIMERS.

9 (a) PARTIAL TRANSFER-TYPE DISCLAIMERS PER10 MITTED.—Paragraph (3) of section 2518(c) (relating to cer11 tain transfers treated as disclaimers) is amended by insert12 ing ‘‘(or an undivided portion of such interest)’’ after ‘‘en13 tire interest in the property’’.

14 (b) RETENTION OF INTEREST BY DECEDENT’S SPOUSE

15 PERMITTED IN TRANSFER-TYPE DISCLAIMERS.—Para16 graph (3) of section 2518(c) is amended by adding at the

17 end the following new flush sentence:

18 ‘‘For purposes of the preceding sentence, a written

19 transfer by the spouse of the decedent of property to

20 a trust shall not fail to be treated as a transfer of

21 such spouse’s interest in such property by reason of

22 such spouse having an interest in such trust.’’

23 (c) DISCLAIMERS ARE EFFECTIVE FOR INCOME TAX

24 PURPOSES.—Subsection (a) of section 2518 is amended by
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1 inserting ‘‘and subtitle A’’ after ‘‘this subtitle’’ each place

2 it appears.

3 (d) EFFECTIVE DATE.—The amendments made by this

4 section shall apply to transfers creating an interest in the

5 person disclaiming, and disclaimers, made after the date

6 of the enactment of this Act.

7 SEC. 11618. CLARIFICATION OF TREATMENT OF SURVIVOR

8 ANNUITIES UNDER QUALIFIED TERMINABLE

9 INTEREST RULES.

10 (a) IN GENERAL.—Subparagraph (C) of section

11 2056(b)(7) is amended by inserting ‘‘(or, in the case of an

12 interest in an annuity arising under the community prop13 erty laws of a State, included in the gross estate of the dece14 dent under section 2033)’’ after ‘‘section 2039’’.

15 (b) EFFECTIVE DATE.—The amendment made by this

16 section shall apply to estates of decedents dying after the

17 date of the enactment of this Act.

18 SEC. 11619. TREATMENT UNDER QUALIFIED DOMESTIC

19 TRUST RULES OF FORMS OF OWNERSHIP

20 WHICH ARE NOT TRUSTS.

21 (a) IN GENERAL.—Subsection (c) of section 2056A (de22 fining qualified domestic trust) is amended by adding at

23 the end the following new paragraph:

24 ‘‘(3) TRUST.—To the extent provided in regula25 tions prescribed by the Secretary, the term ‘trust’ in-
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1 cludes other arrangements which have substantially

2 the same effect as a trust.’’

3 (b) EFFECTIVE DATE.—The amendment made by this

4 section shall apply to estates of decedents dying after the

5 date of the enactment of this Act.

6 Subchapter C—Generation-Skipping Tax

7 Provisions

8 SEC. 11631. TAXABLE TERMINATION NOT TO INCLUDE DI9 RECT SKIPS.

10 (a) IN GENERAL.—Paragraph (1) of section 2612(a)

11 (defining taxable termination) is amended by adding at the

12 end the following new flush sentence:

13 ‘‘Such term shall not include a direct skip.’’

14 (b) EFFECTIVE DATE.—The amendment made by sub15 section (a) shall apply to generation-skipping transfers (as

16 defined in section 2611 of the Internal Revenue Code of

17 1986) after the date of the enactment of this Act.

18 CHAPTER 7—EXCISE TAX SIMPLIFICATION

19 Subchapter A—Provisions Related to Distilled

20 Spirits, Wines, and Beer

21 SEC. 11641. CREDIT OR REFUND FOR IMPORTED BOTTLED

22 DISTILLED SPIRITS RETURNED TO DISTILLED

23 SPIRITS PLANT.

24 (a) IN GENERAL.—Paragraph (1) of section 5008(c)

25 (relating to distilled spirits returned to bonded premises)
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1 is amended by striking ‘‘withdrawn from bonded premises

2 on payment or determination of tax’’ and inserting ‘‘on

3 which tax has been determined or paid’’.

4 (b) EFFECTIVE DATE.—The amendment made by sub5 section (a) shall take effect at the beginning of the first cal6 endar quarter beginning more than 180 days after the date

7 of the enactment of this Act.

8 SEC. 11642. FERMENTED MATERIAL FROM ANY BREWERY

9 MAY BE RECEIVED AT A DISTILLED SPIRITS

10 PLANT.

11 (a) IN GENERAL.—Paragraph (2) of section 5222(b)

12 (relating to production, receipt, removal, and use of distill13 ing materials) is amended to read as follows:

14 ‘‘(2) beer conveyed without payment of tax from

15 brewery premises, beer which has been lawfully re16 moved from brewery premises upon determination of

17 tax, or’’.

18 (b) CLARIFICATION OF AUTHORITY TO PERMIT RE19 MOVAL OF BEER WITHOUT PAYMENT OF TAX FOR USE AS

20 DISTILLING MATERIAL.—Section 5053 (relating to exemp21 tions) is amended by redesignating subsection (f) as sub22 section (i) and by inserting after subsection (e) the following

23 new subsection:

24 ‘‘(f) REMOVAL FOR USE AS DISTILLING MATERIAL.—

25 Subject to such regulations as the Secretary may prescribe,
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1 beer may be removed from a brewery without payment of

2 tax to any distilled spirits plant for use as distilling mate3 rial.’’

4 (c) CLARIFICATION OF REFUND AND CREDIT OF

5 TAX.—Section 5056 (relating to refund and credit of tax,

6 or relief from liability) is amended—

7 (1) by redesignating subsection (c) as subsection

8 (d) and by inserting after subsection (b) the following

9 new subsection:

10 ‘‘(c) BEER RECEIVED AT A DISTILLED SPIRITS

11 PLANT.—Any tax paid by any brewer on beer produced in

12 the United States may be refunded or credited to the brewer,

13 without interest, or if the tax has not been paid, the brewer

14 may be relieved of liability therefor, under regulations as

15 the Secretary may prescribe, if such beer is received on the

16 bonded premises of a distilled spirits plant pursuant to the

17 provisions of section 5222(b)(2), for use in the production

18 of distilled spirits.’’, and

19 (2) by striking ‘‘or rendering unmerchantable’’

20 in subsection (d) (as so redesignated) and inserting

21 ‘‘rendering unmerchantable, or receipt on the bonded

22 premises of a distilled spirits plant’’.

23 (d) EFFECTIVE DATE.—The amendments made by this

24 section shall take effect at the beginning of the first calendar
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1 quarter beginning more than 180 days after the date of the

2 enactment of this Act.

3 SEC. 11643. REFUND OF TAX ON WINE RETURNED TO BOND

4 NOT LIMITED TO UNMERCHANTABLE WINE.

5 (a) IN GENERAL.—Subsection (a) of section 5044 (re6 lating to refund of tax on unmerchantable wine) is amended

7 by striking ‘‘as unmerchantable’’.

8 (b) CONFORMING AMENDMENTS.—

9 (1) Section 5361 is amended by striking

10 ‘‘unmerchantable’’.

11 (2) The section heading for section 5044 is

12 amended by striking ‘‘unmerchantable’’.

13 (3) The item relating to section 5044 in the table

14 of sections for subpart C of part I of subchapter A of

15 chapter 51 is amended by striking ‘‘unmerchantable’’.

16 (c) EFFECTIVE DATE.—The amendments made by this

17 section shall take effect at the beginning of the first calendar

18 quarter beginning more than 180 days after the date of the

19 enactment of this Act.

20 SEC. 11644. BEER MAY BE WITHDRAWN FREE OF TAX FOR

21 DESTRUCTION.

22 (a) IN GENERAL.—Section 5053 is amended by insert23 ing after subsection (g) the following new subsection:

24 ‘‘(h) REMOVALS FOR DESTRUCTION.—Subject to such

25 regulations as the Secretary may prescribe, beer may be re-
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1 moved from the brewery without payment of tax for destruc2 tion.’’

3 (b) EFFECTIVE DATE.—The amendment made by sub4 section (a) shall take effect at the beginning of the first cal5 endar quarter beginning more than 180 days after the date

6 of the enactment of this Act.

7 SEC. 11645. TRANSFER TO BREWERY OF BEER IMPORTED IN

8 BULK WITHOUT PAYMENT OF TAX.

9 (a) IN GENERAL.—Part II of subchapter G of chapter

10 51 is amended by adding at the end the following new sec11 tion:

12 ‘‘SEC. 5418. BEER IMPORTED IN BULK.

13 ‘‘Beer imported or brought into the United States in

14 bulk containers may, under such regulations as the Sec15 retary may prescribe, be withdrawn from customs custody

16 and transferred in such bulk containers to the premises of

17 a brewery without payment of the internal revenue tax im18 posed on such beer. The proprietor of a brewery to which

19 such beer is transferred shall become liable for the tax on

20 the beer withdrawn from customs custody under this section

21 upon release of the beer from customs custody, and the im22 porter, or the person bringing such beer into the United

23 States, shall thereupon be relieved of the liability for such

24 tax.’’
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1 (b) CLERICAL AMENDMENT.—The table of sections for

2 such part II is amended by adding at the end the following

3 new item:

‘‘Sec. 5418. Beer imported in bulk.’’

4 (c) EFFECTIVE DATE.—The amendments made by this

5 section shall take effect at the beginning of the first calendar

6 quarter beginning more than 180 days after the date of the

7 enactment of this Act.

8 Subchapter B—Consolidation of Taxes on

9 Aviation Gasoline

10 SEC. 11651. CONSOLIDATION OF TAXES ON AVIATION GASO11 LINE.

12 (a) IN GENERAL.—Subparagraph (A) of section

13 4081(a)(2) (relating to imposition of tax on gasoline and

14 diesel fuel) is amended by redesignating clause (ii) as clause

15 (iii) and by striking clause (i) and inserting the following:

16 ‘‘(i) in the case of gasoline other than

17 aviation gasoline, 18.3 cents per gallon,

18 ‘‘(ii) in the case of aviation gasoline,

19 19.3 cents per gallon, and’’.

20 (b) TERMINATION.—Subsection (d) of section 4081 is

21 amended by redesignating paragraph (2) as paragraph (3)

22 and by inserting after paragraph (1) the following new

23 paragraph:
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1 ‘‘(2) AVIATION GASOLINE.—On and after Janu2 ary 1, 1996, the rate specified in subsection

3 (a)(2)(A)(ii) shall be 4.3 cents per gallon.’’

4 (c) REPEAL OF RETAIL LEVEL TAX.—

5 (1) Subsection (c) of section 4041 is amended by

6 striking paragraphs (2) and (3) and by redesignating

7 paragraphs (4) and (5) as paragraphs (2) and (3),

8 respectively.

9 (2) Paragraph (3) of section 4041(c), as redesig10 nated by paragraph (1), is amended by striking

11 ‘‘paragraphs (1) and (2)’’ and inserting ‘‘paragraph

12 (1)’’.

13 (d) CONFORMING AMENDMENTS.—

14 (1) Paragraph (1) of section 4041(k) is amended

15 by adding ‘‘and’’ at the end of subparagraph (A), by

16 striking ‘‘, and’’ at the end of subparagraph (B) and

17 inserting a period, and by striking subparagraph (C).

18 (2) Paragraph (1) of section 4081(d) is amended

19 by striking ‘‘each rate of tax specified in subsection

20 (a)(2)(A)’’ and inserting ‘‘the rates of tax specified in

21 clauses (i) and (iii) of subsection (a)(2)(A)’’.

22 (3) Sections 6421(f)(2)(A) and 9502(f)(1)(A) are

23 each amended by striking ‘‘section 4041(c)(4)’’ and

24 inserting ‘‘section 4041(c)(2)’’.
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1 (4) Paragraph (2) of section 9502(b) is amended

2 by striking ‘‘14 cents’’ and inserting ‘‘15 cents’’.

3 (e) EFFECTIVE DATE.—The amendments made by this

4 section shall take effect on January 1, 1996.

5 (f) FLOOR STOCKS TAX.—

6 (1) IMPOSITION OF TAX.—In the case of aviation

7 gasoline on which tax was imposed under section

8 4081 of the Internal Revenue Code of 1986 before

9 January 1, 1996, and which is held on such date by

10 any person, there is hereby imposed a floor stocks tax

11 of 1 cent per gallon of such gasoline.

12 (2) LIABILITY FOR TAX AND METHOD OF PAY13 MENT.—

14 (A) LIABILITY FOR TAX.—A person holding

15 aviation gasoline on January 1, 1996, to which

16 the tax imposed by paragraph (1) applies shall

17 be liable for such tax.

18 (B) METHOD OF PAYMENT.—The tax im19 posed by paragraph (1) shall be paid in such

20 manner as the Secretary shall prescribe.

21 (C) TIME FOR PAYMENT.—The tax imposed

22 by paragraph (1) shall be paid on or before June

23 30, 1996.

24 (3) DEFINITIONS.—For purposes of this sub25 section:
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1 (A) HELD BY A PERSON.—Gasoline shall be

2 considered as ‘‘held by a person’’ if title thereto

3 has passed to such person (whether or not deliv4 ery to the person has been made).

5 (B) SECRETARY.—The term ‘‘Secretary’’

6 means the Secretary of the Treasury or his dele7 gate.

8 (4) EXCEPTION FOR EXEMPT USES.—The tax

9 imposed by paragraph (1) shall not apply to gasoline

10 held by any person exclusively for any use to the ex11 tent a credit or refund of the tax imposed by section

12 4081 of such Code is allowable for such use.

13 (5) EXCEPTION FOR FUEL HELD IN AIRCRAFT

14 TANK.—No tax shall be imposed by paragraph (1) on

15 aviation gasoline held in the tank of an aircraft.

16 (6) EXCEPTION FOR CERTAIN AMOUNTS OF

17 FUEL.—

18 (A) IN GENERAL.—No tax shall be imposed

19 by paragraph (1) on aviation gasoline held on

20 January 1, 1996, by any person if the aggregate

21 amount of aviation gasoline held by such person

22 on such date does not exceed 6,000 gallons. The

23 preceding sentence shall apply only if such per24 son submits to the Secretary (at the time and in

25 the manner required by the Secretary) such in-
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1 formation as the Secretary shall require for pur2 poses of this paragraph.

3 (B) EXEMPT FUEL.—For purposes of sub4 paragraph (A), there shall not be taken into ac5 count fuel held by any person which is exempt

6 from the tax imposed by paragraph (1) by rea7 son of paragraph (4) or (5).

8 (C) CONTROLLED GROUPS.—

9 (i) CORPORATIONS.—In the case of a

10 controlled group, the 6,000 gallon amount

11 in subparagraph (A) shall be apportioned

12 among the component members of such

13 group in such manner as the Secretary

14 shall by regulations prescribe. For purposes

15 of the preceding sentence, the term ‘‘con16 trolled group’’ has the meaning given to

17 such term by subsection (a) of section 1563

18 of such Code; except that for such purposes

19 the phrase ‘‘more than 50 percent’’ shall be

20 substituted for the phrase ‘‘at least 80 per21 cent’’ each place it appears in such sub22 section.

23 (ii) NONINCORPORATED PERSONS

24 UNDER COMMON CONTROL.—Under regula25 tions prescribed by the Secretary, principles
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1 similar to the principles of clause (i) shall

2 apply to a group under common control

3 where 1 or more of the members is not a

4 corporation.

5 (7) OTHER LAWS APPLICABLE.—All provisions of

6 law, including penalties, applicable with respect to

7 the taxes imposed by section 4081 of such Code shall,

8 insofar as applicable and not inconsistent with the

9 provisions of this subsection, apply with respect to the

10 floor stock taxes imposed by paragraph (1) to the

11 same extent as if such taxes were imposed by such sec12 tion 4081.

13 Subchapter C—Other Excise Tax Provisions

14 SEC. 11661. CERTAIN COMBINATIONS NOT TREATED AS

15 MANUFACTURE UNDER RETAIL SALES TAX ON

16 HEAVY TRUCKS.

17 (a) IN GENERAL.—Paragraph (2) of section 4052(c)

18 (relating to certain combinations not treated as manufac19 ture) is amended by striking ‘‘or wood or metal floor’’ and

20 inserting ‘‘wood or metal floor, or a power take-off and

21 dump body’’.

22 (b) REMOVAL OF FIFTH WHEEL.—Paragraph (1) of

23 section 4052(c) is amended by inserting before the period

24 ‘‘or the removal of any coupling device (including any fifth

25 wheel)’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall take effect on the date of the enactment of this

3 Act.

4 CHAPTER 8—ADMINISTRATIVE PROVISION

5 SEC. 11671. CERTAIN NOTICES DISREGARDED UNDER PRO6 VISION INCREASING INTEREST RATE ON

7 LARGE CORPORATE UNDERPAYMENTS.

8 (a) GENERAL RULE.—Subparagraph (B) of section

9 6621(c)(2) (defining applicable date) is amended by adding

10 at the end the following new clause:

11 ‘‘(iii) EXCEPTION FOR LETTERS OR

12 NOTICES INVOLVING SMALL AMOUNTS.—For

13 purposes of this paragraph, any letter or

14 notice shall be disregarded if the amount of

15 the deficiency or proposed deficiency (or the

16 assessment or proposed assessment) set forth

17 in such letter or notice is not greater than

18 $100,000 (determined by not taking into ac19 count any interest, penalties, or additions

20 to tax).’’

21 (b) EFFECTIVE DATE.—The amendment made by sub22 section (a) shall apply for purposes of determining interest

23 for periods after December 31, 1995.
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1 Subtitle K—Miscellaneous

2 Provisions

3 SEC. 11701. TREATMENT OF STORAGE OF PRODUCT SAM4 PLES.

5 (a) IN GENERAL.—Paragraph (2) of section 280A(c)

6 is amended by striking ‘‘inventory’’ and inserting ‘‘inven7 tory or product samples’’.

8 (b) EFFECTIVE DATE.—The amendment made by sub9 section (a) shall apply to taxable years beginning after De10 cember 31, 1995.

11 SEC. 11702. ADJUSTMENT OF DEATH BENEFIT LIMITS FOR

12 CERTAIN POLICIES.

13 (a) IN GENERAL.—Subparagraph (C)(i) of section

14 7702(e)(2) (relating to limited increases in death benefit

15 permitted) is amended by striking ‘‘$5,000’’ and inserting

16 ‘‘$7,000’’ and by striking ‘‘$25,000’’ and inserting

17 ‘‘$30,000’’.

18 (b) INFLATION ADJUSTMENTS.—Section 7702(e) (re19 lating to computational rules) is amended by adding at the

20 end the following new paragraph:

21 ‘‘(3) INFLATION ADJUSTMENT TO DEATH BENE22 FIT LIMITS FOR YEARS AFTER 1996.—In the case of

23 any taxable year beginning in a calendar year after

24 1996, each dollar amount contained in paragraph

25 (2)(C)(i) shall be increased by an amount equal to—
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1 ‘‘(A) such dollar amount, multiplied by

2 ‘‘(B) the cost-of-living adjustment deter3 mined under section 1(f)(3), for the calendar

4 year in which the taxable year begins, by sub5 stituting ‘calendar year 1995’ for ‘calendar year

6 1992’ in subparagraph (B) thereof.’’.

7 (c) CONFORMING AMENDMENT.—Section 72(e)(10)(B)

8 is amended by striking ‘‘$25,000’’ and inserting ‘‘$30,000

9 (adjusted at the same time and in the same manner as

10 under section 7702(e)(3))’’.

11 (d) EFFECTIVE DATE.—The amendments made by this

12 section shall apply to contracts entered into after December

13 31, 1995.

14 SEC. 11703. ORGANIZATIONS SUBJECT TO SECTION 833.

15 (a) IN GENERAL.—Section 833(c) (relating to organi16 zation to which section applies) is amended by adding at

17 the end the following new paragraph:

18 ‘‘(4) TREATMENT AS EXISTING BLUE CROSS OR

19 BLUE SHIELD ORGANIZATION.—

20 ‘‘(A) IN GENERAL.—Paragraph (2) shall be

21 applied to an organization described in subpara22 graph (B) as if it were a Blue Cross or Blue

23 Shield organization.
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1 ‘‘(B) APPLICABLE ORGANIZATION.—An or2 ganization is described in this subparagraph if

3 it—

4 ‘‘(i) is organized under, and governed

5 by, State laws which are specifically and

6 exclusively applicable to not-for-profit

7 health insurance or health service type orga8 nizations, and

9 ‘‘(ii) is not a Blue Cross or Blue

10 Shield organization or health maintenance

11 organization.’’.

12 (b) EFFECTIVE DATE.—The amendment made by this

13 section shall apply to taxable years ending after October

14 13, 1995.

15 SEC. 11704. CORRECTION OF INFLATION ADJUSTMENT IN

16 LUXURY EXCISE TAX ON AUTOMOBILES.

17 (a) IN GENERAL.—Subsection (e) of section 4001 (re18 lating to inflation adjustment) is amended to read as fol19 lows:

20 ‘‘(e) INFLATION ADJUSTMENT.—

21 ‘‘(1) IN GENERAL.—The $30,000 amount in sub22 section (a) and section 4003(a) shall be increased by

23 an amount equal to—

24 ‘‘(A) $30,000, multiplied by
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1 ‘‘(B) the cost-of-living adjustment under sec2 tion 1(f)(3) for the calendar year in which the

3 vehicle is sold, determined by substituting ‘cal4 endar year 1990’ for ‘calendar year 1992’ in

5 subparagraph (B) thereof.

6 ‘‘(2) ROUNDING.—If any amount as adjusted

7 under paragraph (1) is not a multiple of $2,000, such

8 amount shall be rounded to the next lowest multiple

9 of $2,000.’’

10 (b) EFFECTIVE DATE.—The amendment made by sub11 section (a) shall take effect on the date of the enactment

12 of this Act.

13 SEC. 11705. EXTENSION AND PHASEDOWN OF LUXURY PAS14 SENGER AUTOMOBILE TAX.

15 (a) EXTENSION.—Subsection (f) of section 4001 is

16 amended by striking ‘‘1999’’ and inserting ‘‘2002’’.

17 (b) PHASEDOWN.—Section 4001 is amended by redes18 ignating subsection (f) (as amended by subsection (a) of this

19 section) as subsection (g) and by inserting after subsection

20 (e) the following new subsection:

21 ‘‘(f) PHASEDOWN.—For sales occurring in a calendar

22 year after 1995 and before 2003, subsection (a) shall be ap23 plied by substituting for ‘10 percent’ the percentage deter24 mined in accordance with the following table:

‘‘If the calendar year is: The percentage is:

1996 ............................................................................................. 9 percent

1997 ............................................................................................. 8 percent
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1998 ............................................................................................. 7 percent

1999 ............................................................................................. 6 percent

2000 ............................................................................................. 5 percent

2001 ............................................................................................. 4 percent

2002 ............................................................................................. 3 percent.’’

1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall take effect on January 1, 1996.

3 Subtitle L—Generalized System of

4 Preferences

5 SEC. 11801. SHORT TITLE.

6 This subtitle may be cited as the ‘‘GSP Renewal Act

7 of 1995’’.

8 SEC. 11802. GENERALIZED SYSTEM OF PREFERENCES.

9 (a) IN GENERAL.—Title V of the Trade Act of 1974

10 is amended to read as follows:

11 ‘‘TITLE V—GENERALIZED

12 SYSTEM OF PREFERENCES

13 ‘‘SEC. 501. AUTHORITY TO EXTEND PREFERENCES.

14 ‘‘The President may provide duty-free treatment for

15 any eligible article from any beneficiary developing country

16 in accordance with the provisions of this title. In taking

17 any such action, the President shall have due regard for—

18 ‘‘(1) the effect such action will have on further19 ing the economic development of developing countries

20 through the expansion of their exports;

21 ‘‘(2) the extent to which other major developed

22 countries are undertaking a comparable effort to as23 sist developing countries by granting generalized pref-
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1 erences with respect to imports of products of such

2 countries;

3 ‘‘(3) the anticipated impact of such action on

4 United States producers of like or directly competitive

5 products; and

6 ‘‘(4) the extent of the beneficiary developing

7 country’s competitiveness with respect to eligible arti8 cles.

9 ‘‘SEC. 502. DESIGNATION OF BENEFICIARY DEVELOPING

10 COUNTRIES.

11 ‘‘(a) AUTHORITY TO DESIGNATE COUNTRIES.—

12 ‘‘(1) BENEFICIARY DEVELOPING COUNTRIES.—

13 The President is authorized to designate countries as

14 beneficiary developing countries for purposes of this

15 title.

16 ‘‘(2) LEAST-DEVELOPED BENEFICIARY DEVELOP17 ING COUNTRIES.—The President is authorized to des18 ignate any beneficiary developing country as a least19 developed beneficiary developing country for purposes

20 of this title, based on the considerations in section 501

21 and subsection (c) of this section.

22 ‘‘(b) COUNTRIES INELIGIBLE FOR DESIGNATION.—

23 ‘‘(1) SPECIFIC COUNTRIES.—The following coun24 tries may not be designated as beneficiary developing

25 countries for purposes of this title:
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1 ‘‘(A) Australia.

2 ‘‘(B) Canada.

3 ‘‘(C) European Union member states.

4 ‘‘(D) Iceland.

5 ‘‘(E) Japan.

6 ‘‘(F) Monaco.

7 ‘‘(G) New Zealand.

8 ‘‘(H) Norway.

9 ‘‘(I) Switzerland.

10 ‘‘(2) OTHER BASES FOR INELIGIBILITY.—The

11 President shall not designate any country a bene12 ficiary developing country under this title if any of

13 the following applies:

14 ‘‘(A) Such country is a Communist country,

15 unless—

16 ‘‘(i) the products of such country re17 ceive nondiscriminatory treatment,

18 ‘‘(ii) such country is a WTO Member

19 (as such term is defined in section 2(10) of

20 the Uruguay Round Agreements Act) (19

21 U.S.C. 3501(10)) and a member of the

22 International Monetary Fund, and

23 ‘‘(iii) such country is not dominated or

24 controlled by international communism.
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1 ‘‘(B) Such country is a party to an ar2 rangement of countries and participates in any

3 action pursuant to such arrangement, the effect

4 of which is—

5 ‘‘(i) to withhold supplies of vital com6 modity resources from international trade

7 or to raise the price of such commodities to

8 an unreasonable level, and

9 ‘‘(ii) to cause serious disruption of the

10 world economy.

11 ‘‘(C) Such country affords preferential

12 treatment to the products of a developed country,

13 other than the United States, which has, or is

14 likely to have, a significant adverse effect on

15 United States commerce.

16 ‘‘(D)(i) Such country—

17 ‘‘(I) has nationalized, expropriated, or

18 otherwise seized ownership or control of

19 property, including patents, trademarks, or

20 copyrights, owned by a United States citi21 zen or by a corporation, partnership, or as22 sociation which is 50 percent or more bene23 ficially owned by United States citizens,

24 ‘‘(II) has taken steps to repudiate or

25 nullify an existing contract or agreement
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1 with a United States citizen or a corpora2 tion, partnership, or association which is 50

3 percent or more beneficially owned by Unit4 ed States citizens, the effect of which is to

5 nationalize, expropriate, or otherwise seize

6 ownership or control of property, including

7 patents, trademarks, or copyrights, so

8 owned, or

9 ‘‘(III) has imposed or enforced taxes or

10 other exactions, restrictive maintenance or

11 operational conditions, or other measures

12 with respect to property, including patents,

13 trademarks, or copyrights, so owned, the ef14 fect of which is to nationalize, expropriate,

15 or otherwise seize ownership or control of

16 such property,

17 unless clause (ii) applies.

18 ‘‘(ii) This clause applies if the President de19 termines that—

20 ‘‘(I) prompt, adequate, and effective

21 compensation has been or is being made to

22 the citizen, corporation, partnership, or as23 sociation referred to in clause (i),

24 ‘‘(II) good faith negotiations to provide

25 prompt, adequate, and effective compensa-
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1 tion under the applicable provisions of

2 international law are in progress, or the

3 country described in clause (i) is otherwise

4 taking steps to discharge its obligations

5 under international law with respect to

6 such citizen, corporation, partnership, or

7 association, or

8 ‘‘(III) a dispute involving such citizen,

9 corporation, partnership, or association

10 over compensation for such a seizure has

11 been submitted to arbitration under the pro12 visions of the Convention for the Settlement

13 of Investment Disputes, or in another mutu14 ally agreed upon forum,

15 and the President promptly furnishes a copy of

16 such determination to the Senate and House of

17 Representatives.

18 ‘‘(E) Such country fails to act in good faith

19 in recognizing as binding or in enforcing arbi20 tral awards in favor of United States citizens or

21 a corporation, partnership, or association which

22 is 50 percent or more beneficially owned by

23 United States citizens, which have been made by

24 arbitrators appointed for each case or by perma-
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1 nent arbitral bodies to which the parties involved

2 have submitted their dispute.

3 ‘‘(F) Such country aids or abets, by grant4 ing sanctuary from prosecution to, any individ5 ual or group which has committed an act of

6 international terrorism.

7 ‘‘(G) Such country has not taken or is not

8 taking steps to afford internationally recognized

9 worker rights to workers in the country (includ10 ing any designated zone in that country).

11 Subparagraphs (D), (E), (F), and (G) shall not pre12 vent the designation of any country as a beneficiary

13 developing country under this title if the President

14 determines that such designation will be in the na15 tional economic interest of the United States and re16 ports such determination to the Congress with the rea17 sons therefor.

18 ‘‘(c) FACTORS AFFECTING COUNTRY DESIGNATION.—

19 In determining whether to designate any country as a bene20 ficiary developing country under this title, the President

21 shall take into account—

22 ‘‘(1) an expression by such country of its desire

23 to be so designated;

24 ‘‘(2) the level of economic development of such

25 country, including its per capita gross national prod-
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1 uct, the living standards of its inhabitants, and any

2 other economic factors which the President deems ap3 propriate;

4 ‘‘(3) whether or not other major developed coun5 tries are extending generalized preferential tariff

6 treatment to such country;

7 ‘‘(4) the extent to which such country has as8 sured the United States that it will provide equitable

9 and reasonable access to the markets and basic com10 modity resources of such country and the extent to

11 which such country has assured the United States

12 that it will refrain from engaging in unreasonable ex13 port practices;

14 ‘‘(5) the extent to which such country is provid15 ing adequate and effective protection of intellectual

16 property rights;

17 ‘‘(6) the extent to which such country has taken

18 action to—

19 ‘‘(A) reduce trade distorting investment

20 practices and policies (including export perform21 ance requirements); and

22 ‘‘(B) reduce or eliminate barriers to trade

23 in services; and

24 ‘‘(7) whether or not such country has taken or is

25 taking steps to afford to workers in that country (in-
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1 cluding any designated zone in that country) inter2 nationally recognized worker rights.

3 ‘‘(d) WITHDRAWAL, SUSPENSION, OR LIMITATION OF

4 COUNTRY DESIGNATION.—

5 ‘‘(1) IN GENERAL.—The President may with6 draw, suspend, or limit the application of the duty7 free treatment accorded under this title with respect

8 to any country. In taking any action under this sub9 section, the President shall consider the factors set

10 forth in section 501 and subsection (c) of this section.

11 ‘‘(2) CHANGED CIRCUMSTANCES.—The President

12 shall, after complying with the requirements of sub13 section (f)(2), withdraw or suspend the designation of

14 any country as a beneficiary developing country if,

15 after such designation, the President determines that

16 as the result of changed circumstances such country

17 would be barred from designation as a beneficiary de18 veloping country under subsection (b)(2). Such coun19 try shall cease to be a beneficiary developing country

20 on the day on which the President issues an Executive

21 order or Presidential proclamation revoking the des22 ignation of such country under this title.

23 ‘‘(3) ADVICE TO CONGRESS.—The President

24 shall, as necessary, advise the Congress on the appli25 cation of section 501 and subsection (c) of this sec-
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1 tion, and the actions the President has taken to with2 draw, to suspend, or to limit the application of duty3 free treatment with respect to any country which has

4 failed to adequately take the actions described in sub5 section (c).

6 ‘‘(e) MANDATORY GRADUATION OF BENEFICIARY DE7 VELOPING COUNTRIES.—If the President determines that a

8 beneficiary developing country has become a ‘high income’

9 country, as defined by the official statistics of the Inter10 national Bank for Reconstruction and Development, then

11 the President shall terminate the designation of such coun12 try as a beneficiary developing country for purposes of this

13 title, effective on January 1 of the second year following

14 the year in which such determination is made.

15 ‘‘(f) CONGRESSIONAL NOTIFICATION.—

16 ‘‘(1) NOTIFICATION OF DESIGNATION.—

17 ‘‘(A) IN GENERAL.—Before the President

18 designates any country as a beneficiary develop19 ing country under this title, the President shall

20 notify the Congress of the President’s intention to

21 make such designation, together with the consid22 erations entering into such decision.

23 ‘‘(B) DESIGNATION AS LEAST-DEVELOPED

24 BENEFICIARY DEVELOPING COUNTRY.—At least

25 60 days before the President designates any
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1 country as a least-developed beneficiary develop2 ing country, the President shall notify the Con3 gress of the President’s intention to make such

4 designation.

5 ‘‘(2) NOTIFICATION OF TERMINATION.—If the

6 President has designated any country as a beneficiary

7 developing country under this title, the President

8 shall not terminate such designation unless, at least

9 60 days before such termination, the President has

10 notified the Congress and has notified such country of

11 the President’s intention to terminate such designa12 tion, together with the considerations entering into

13 such decision.

14 ‘‘SEC. 503. DESIGNATION OF ELIGIBLE ARTICLES.

15 ‘‘(a) ELIGIBLE ARTICLES.—

16 ‘‘(1) DESIGNATION.—

17 ‘‘(A) IN GENERAL.—Except as provided in

18 subsection (b), the President is authorized to des19 ignate articles as eligible articles from all bene20 ficiary developing countries for purposes of this

21 title by Executive order or Presidential procla22 mation after receiving the advice of the Inter23 national Trade Commission in accordance with

24 subsection (e).
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1 ‘‘(B) LEAST-DEVELOPED BENEFICIARY DE2 VELOPING COUNTRIES.—Except for articles de3 scribed in subparagraphs (A), (B), and (E) of

4 subsection (b)(1) and articles described in para5 graphs (2) and (3) of subsection (b), the Presi6 dent may, in carrying out section 502(d)(1) and

7 subsection (c)(1) of this section, designate articles

8 as eligible articles only for countries designated

9 as least-developed beneficiary developing coun10 tries under section 502(a)(2) if, after receiving

11 the advice of the International Trade Commis12 sion in accordance with subsection (e) of this sec13 tion, the President determines that such articles

14 are not import-sensitive in the context of imports

15 from least-developed beneficiary developing coun16 tries.

17 ‘‘(C) THREE-YEAR RULE.—If, after receiv18 ing the advice of the International Trade Com19 mission under subsection (e), an article has been

20 formally considered for designation as an eligible

21 article under this title and denied such designa22 tion, such article may not be reconsidered for

23 such designation for a period of 3 years after

24 such denial.

25 ‘‘(2) RULE OF ORIGIN.—
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1 ‘‘(A) GENERAL RULE.—The duty-free treat2 ment provided under this title shall apply to any

3 eligible article which is the growth, product, or

4 manufacture of a beneficiary developing country

5 if—

6 ‘‘(i) that article is imported directly

7 from a beneficiary developing country into

8 the customs territory of the United States;

9 and

10 ‘‘(ii) the sum of—

11 ‘‘(I) the cost or value of the mate12 rials produced in the beneficiary devel13 oping country or any two or more such

14 countries that are members of the same

15 association of countries and are treated

16 as one country under section 507(2),

17 plus

18 ‘‘(II) the direct costs of processing

19 operations performed in such bene20 ficiary developing country or such

21 member countries,

22 is not less than 35 percent of the appraised

23 value of such article at the time it is en24 tered.
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1 ‘‘(B) EXCLUSIONS.—An article shall not be

2 treated as the growth, product, or manufacture of

3 a beneficiary developing country by virtue of

4 having merely undergone—

5 ‘‘(i) simple combining or packaging

6 operations, or

7 ‘‘(ii) mere dilution with water or mere

8 dilution with another substance that does

9 not materially alter the characteristics of

10 the article.

11 ‘‘(3) REGULATIONS.—The Secretary of the Treas12 ury, after consulting with the United States Trade

13 Representative, shall prescribe such regulations as

14 may be necessary to carry out paragraph (2), includ15 ing, but not limited to, regulations providing that, in

16 order to be eligible for duty-free treatment under this

17 title, an article—

18 ‘‘(A) must be wholly the growth, product, or

19 manufacture of a beneficiary developing country,

20 or

21 ‘‘(B) must be a new or different article of

22 commerce which has been grown, produced, or

23 manufactured in the beneficiary developing

24 country.
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1 ‘‘(b) ARTICLES THAT MAY NOT BE DESIGNATED AS

2 ELIGIBLE ARTICLES.—

3 ‘‘(1) IMPORT SENSITIVE ARTICLES.—The Presi4 dent may not designate any article as an eligible ar5 ticle under subsection (a) if such article is within one

6 of the following categories of import-sensitive articles:

7 ‘‘(A) Textile and apparel articles which

8 were not eligible articles for purposes of this title

9 on January 1, 1994, as this title was in effect

10 on such date.

11 ‘‘(B) Watches, except those watches entered

12 after June 30, 1989, that the President specifi13 cally determines, after public notice and com14 ment, will not cause material injury to watch or

15 watch band, strap, or bracelet manufacturing

16 and assembly operations in the United States or

17 the United States insular possessions.

18 ‘‘(C) Import-sensitive electronic articles.

19 ‘‘(D) Import-sensitive steel articles.

20 ‘‘(E) Footwear, handbags, luggage, flat

21 goods, work gloves, and leather wearing apparel

22 which were not eligible articles for purposes of

23 this title on January 1, 1995, as this title was

24 in effect on such date.
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1 ‘‘(F) Import-sensitive semimanufactured

2 and manufactured glass products.

3 ‘‘(G) Any other articles which the President

4 determines to be import-sensitive in the context

5 of the Generalized System of Preferences.

6 ‘‘(2) ARTICLES AGAINST WHICH OTHER ACTIONS

7 TAKEN.—An article shall not be an eligible article for

8 purposes of this title for any period during which

9 such article is the subject of any action proclaimed

10 pursuant to section 203 of this Act (19 U.S.C. 2253)

11 or section 232 or 351 of the Trade Expansion Act of

12 1962 (19 U.S.C. 1862, 1981).

13 ‘‘(3) AGRICULTURAL PRODUCTS.—No quantity of

14 an agricultural product subject to a tariff-rate quota

15 that exceeds the in-quota quantity shall be eligible for

16 duty-free treatment under this title.

17 ‘‘(c) WITHDRAWAL, SUSPENSION, OR LIMITATION OF

18 DUTY-FREE TREATMENT; COMPETITIVE NEED LIMITA19 TION.—

20 ‘‘(1) IN GENERAL.—The President may with21 draw, suspend, or limit the application of the duty22 free treatment accorded under this title with respect

23 to any article, except that no rate of duty may be es24 tablished with respect to any article pursuant to this

25 subsection other than the rate which would apply but
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1 for this title. In taking any action under this sub2 section, the President shall consider the factors set

3 forth in sections 501 and 502(c).

4 ‘‘(2) COMPETITIVE NEED LIMITATION.—

5 ‘‘(A) BASIS FOR WITHDRAWAL OF DUTY6 FREE TREATMENT.—

7 ‘‘(i) IN GENERAL.—Except as provided

8 in clause (ii) and subject to subsection (d),

9 whenever the President determines that a

10 beneficiary developing country has exported

11 (directly or indirectly) to the United States

12 during any calendar year beginning after

13 December 31, 1995—

14 ‘‘(I) a quantity of an eligible arti15 cle having an appraised value in excess

16 of the applicable amount for the cal17 endar year, or

18 ‘‘(II) a quantity of an eligible ar19 ticle equal to or exceeding 50 percent of

20 the appraised value of the total im21 ports of that article into the United

22 States during any calendar year,

23 the President shall, not later than July 1 of

24 the next calendar year, terminate the duty-
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1 free treatment for that article from that

2 beneficiary developing country.

3 ‘‘(ii) ANNUAL ADJUSTMENT OF APPLI4 CABLE AMOUNT.—For purposes of applying

5 clause (i), the applicable amount is—

6 ‘‘(I) for 1996, $75,000,000, and

7 ‘‘(II) for each calendar year there8 after, an amount equal to the applica9 ble amount in effect for the preceding

10 calendar year plus $5,000,000.

11 ‘‘(B) COUNTRY DEFINED.—For purposes of

12 this paragraph, the term ‘country’ does not in13 clude an association of countries which is treated

14 as one country under section 507(2), but does in15 clude a country which is a member of any such

16 association.

17 ‘‘(C) REDESIGNATIONS.—A country which

18 is no longer treated as a beneficiary developing

19 country with respect to an eligible article by rea20 son of subparagraph (A) may, subject to the con21 siderations set forth in sections 501 and 502, be

22 redesignated a beneficiary developing country

23 with respect to such article if imports of such ar24 ticle from such country did not exceed the limita-
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1 tions in subparagraph (A) during the preceding

2 calendar year.

3 ‘‘(D) LEAST-DEVELOPED BENEFICIARY DE4 VELOPING COUNTRIES.—Subparagraph (A) shall

5 not apply to any least-developed beneficiary de6 veloping country.

7 ‘‘(E) ARTICLES NOT PRODUCED IN THE

8 UNITED STATES EXCLUDED.—Subparagraph

9 (A)(i)(II) shall not apply with respect to any eli10 gible article if a like or directly competitive arti11 cle was not produced in the United States on

12 January 1, 1995.

13 ‘‘(F) DE MINIMIS WAIVERS.—

14 ‘‘(i) IN GENERAL.—The President may

15 disregard subparagraph (A)(i)(II) with re16 spect to any eligible article from any bene17 ficiary developing country if the aggregate

18 appraised value of the imports of such arti19 cle into the United States during the pre20 ceding calendar year does not exceed the ap21 plicable amount for such preceding calendar

22 year.

23 ‘‘(ii) APPLICABLE AMOUNT.—For pur24 poses applying clause (i), the applicable

25 amount is—
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1 ‘‘(I) for calendar year 1995,

2 $13,000,000, and

3 ‘‘(II) for each calendar year there4 after, an amount equal to the applica5 ble amount in effect for the preceding

6 calendar year plus $500,000.

7 ‘‘(d) WAIVER OF COMPETITIVE NEED LIMITATION.—

8 ‘‘(1) IN GENERAL.—The President may waive the

9 application of subsection (c)(2) with respect to any el10 igible article of any beneficiary developing country if,

11 before July 1 of the calendar year beginning after the

12 calendar year for which a determination described in

13 subsection (c)(2)(A) was made with respect to such el14 igible article, the President—

15 ‘‘(A) receives the advice of the International

16 Trade Commission under section 332 of the Tar17 iff Act of 1930 on whether any industry in the

18 United States is likely to be adversely affected by

19 such waiver,

20 ‘‘(B) determines, based on the consider21 ations described in sections 501 and 502(c) and

22 the advice described in subparagraph (A), that

23 such waiver is in the national economic interest

24 of the United States, and
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1 ‘‘(C) publishes the determination described

2 in subparagraph (B) in the Federal Register.

3 ‘‘(2) CONSIDERATIONS BY THE PRESIDENT.—In

4 making any determination under paragraph (1), the

5 President shall give great weight to—

6 ‘‘(A) the extent to which the beneficiary de7 veloping country has assured the United States

8 that such country will provide equitable and rea9 sonable access to the markets and basic commod10 ity resources of such country, and

11 ‘‘(B) the extent to which such country pro12 vides adequate and effective protection of intellec13 tual property rights.

14 ‘‘(3) OTHER BASES FOR WAIVER.—The President

15 may waive the application of subsection (c)(2) if, be16 fore July 1 of the calendar year beginning after the

17 calendar year for which a determination described in

18 subsection (c)(2) was made with respect to a bene19 ficiary developing country, the President determines

20 that—

21 ‘‘(A) there has been a historical preferential

22 trade relationship between the United States and

23 such country,
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1 ‘‘(B) there is a treaty or trade agreement in

2 force covering economic relations between such

3 country and the United States, and

4 ‘‘(C) such country does not discriminate

5 against, or impose unjustifiable or unreasonable

6 barriers to, United States commerce,

7 and the President publishes that determination in the

8 Federal Register.

9 ‘‘(4) LIMITATIONS ON WAIVERS.—

10 ‘‘(A) IN GENERAL.—The President may not

11 exercise the waiver authority under this sub12 section with respect to a quantity of an eligible

13 article entered during any calendar year begin14 ning after 1995, the aggregate appraised value of

15 which equals or exceeds 30 percent of the aggre16 gate appraised value of all articles that entered

17 duty-free under this title during the preceding

18 calendar year.

19 ‘‘(B) OTHER WAIVER LIMITS.—The Presi20 dent may not exercise the waiver authority pro21 vided under this subsection with respect to a

22 quantity of an eligible article entered during any

23 calendar year beginning after 1995, the aggre24 gate appraised value of which exceeds 15 percent

25 of the aggregate appraised value of all articles
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1 that have entered duty-free under this title dur2 ing the preceding calendar year from those bene3 ficiary developing countries which for the preced4 ing calendar year—

5 ‘‘(i) had a per capita gross national

6 product (calculated on the basis of the best

7 available information, including that of the

8 International Bank for Reconstruction and

9 Development) of $5,000 or more; or

10 ‘‘(ii) had exported (either directly or

11 indirectly) to the United States a quantity

12 of articles that was duty-free under this title

13 that had an aggregate appraised value of

14 more than 10 percent of the aggregate ap15 praised value of all articles that entered

16 duty-free under this title during that year.

17 ‘‘(C) CALCULATION OF LIMITATIONS.—There

18 shall be counted against the limitations imposed

19 under subparagraphs (A) and (B) for any cal20 endar year only that value of any eligible article

21 of any country that—

22 ‘‘(i) entered duty-free under this title

23 during such calendar year; and

24 ‘‘(ii) is in excess of the value of that

25 article that would have been so entered dur-
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1 ing such calendar year if the limitations

2 under subsection (c)(2)(A) applied.

3 ‘‘(5) EFFECTIVE PERIOD OF WAIVER.—Any

4 waiver granted under this subsection shall remain in

5 effect until the President determines that such waiver

6 is no longer warranted due to changed circumstances.

7 ‘‘(e) INTERNATIONAL TRADE COMMISSION ADVICE.—

8 Before designating articles as eligible articles under sub9 section (a)(1), the President shall publish and furnish the

10 International Trade Commission with lists of articles which

11 may be considered for designation as eligible articles for

12 purposes of this title. The provisions of sections 131, 132,

13 133, and 134 shall be complied with as though action under

14 section 501 and this section were action under section 123

15 to carry out a trade agreement entered into under section

16 123.

17 ‘‘(f) SPECIAL RULE CONCERNING PUERTO RICO.—No

18 action under this title may affect any tariff duty imposed

19 by the Legislature of Puerto Rico pursuant to section 319

20 of the Tariff Act of 1930 on coffee imported into Puerto

21 Rico.

22 ‘‘SEC. 504. REVIEW AND REPORTS TO CONGRESS.

23 ‘‘The President shall submit an annual report to the

24 Congress on the status of internationally recognized worker

25 rights within each beneficiary developing country.
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1 ‘‘SEC. 505. DATE OF TERMINATION.

2 ‘‘No duty-free treatment provided under this title shall

3 remain in effect after December 31, 1996.

4 ‘‘SEC. 506. AGRICULTURAL EXPORTS OF BENEFICIARY DE5 VELOPING COUNTRIES.

6 ‘‘The appropriate agencies of the United States shall

7 assist beneficiary developing countries to develop and im8 plement measures designed to assure that the agricultural

9 sectors of their economies are not directed to export markets

10 to the detriment of the production of foodstuffs for their citi11 zenry.

12 ‘‘SEC. 507. DEFINITIONS.

13 ‘‘For purposes of this title:

14 ‘‘(1) BENEFICIARY DEVELOPING COUNTRY.—The

15 term ‘beneficiary developing country’ means any

16 country with respect to which there is in effect an Ex17 ecutive order or Presidential proclamation by the

18 President designating such country as a beneficiary

19 developing country for purposes of this title.

20 ‘‘(2) COUNTRY.—The term ‘country’ means any

21 foreign country or territory, including any overseas

22 dependent territory or possession of a foreign country,

23 or the Trust Territory of the Pacific Islands. In the

24 case of an association of countries which is a free

25 trade area or customs union, or which is contributing

26 to comprehensive regional economic integration
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1 among its members through appropriate means, in2 cluding, but not limited to, the reduction of duties,

3 the President may by Executive order or Presidential

4 proclamation provide that all members of such asso5 ciation other than members which are barred from

6 designation under section 502(b) shall be treated as

7 one country for purposes of this title.

8 ‘‘(3) ENTERED.—The term ‘entered’ means en9 tered, or withdrawn from warehouse for consumption,

10 in the customs territory of the United States.

11 ‘‘(4) INTERNATIONALLY RECOGNIZED WORKER

12 RIGHTS.—The term ‘internationally recognized work13 er rights’ includes—

14 ‘‘(A) the right of association;

15 ‘‘(B) the right to organize and bargain col16 lectively;

17 ‘‘(C) a prohibition on the use of any form

18 of forced or compulsory labor;

19 ‘‘(D) a minimum age for the employment of

20 children; and

21 ‘‘(E) acceptable conditions of work with re22 spect to minimum wages, hours of work, and oc23 cupational safety and health.

24 ‘‘(5) LEAST-DEVELOPED BENEFICIARY DEVELOP25 ING COUNTRY.—The term ‘least-developed beneficiary
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1 developing country’ means a beneficiary developing

2 country that is designated as a least-developed bene3 ficiary developing country under section 502(a)(2).’’.

4 (b) TABLE OF CONTENTS.—The items relating to title

5 V in the table of contents of the Trade Act of 1974 are

6 amended to read as follows:

‘‘TITLE V—GENERALIZED SYSTEM OF PREFERENCES

‘‘Sec. 501. Authority to extend preferences.

‘‘Sec. 502. Designation of beneficiary developing countries.

‘‘Sec. 503. Designation of eligible articles.

‘‘Sec. 504. Review and reports to Congress.

‘‘Sec. 505. Date of termination.

‘‘Sec. 506. Agricultural exports of beneficiary developing countries.

‘‘Sec. 507. Definitions.’’.

7 SEC. 11803. RETROACTIVE APPLICATION FOR CERTAIN LIQ8 UIDATIONS AND RELIQUIDATIONS.

9 (a) IN GENERAL.—Notwithstanding section 514 of the

10 Tariff Act of 1930 or any other provision of law and subject

11 to subsection (b), the entry—

12 (1) of any article to which duty-free treatment

13 under title V of the Trade Act of 1974 would have ap14 plied if the entry had been made on July 31, 1995,

15 and

16 (2) that was made after July 31, 1995, and be17 fore the date of the enactment of this Act,

18 shall be liquidated or reliquidated as free of duty, and the

19 Secretary of the Treasury shall refund any duty paid with

20 respect to such entry. As used in this subsection, the term
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1 ‘‘entry’’ includes a withdrawal from warehouse for con2 sumption.

3 (b) REQUESTS.—Liquidation or reliquidation may be

4 made under subsection (a) with respect to an entry only

5 if a request therefor is filed with the Customs Service, with6 in 180 days after the date of the enactment of this Act, that

7 contains sufficient information to enable the Customs Serv8 ice—

9 (1) to locate the entry; or

10 (2) to reconstruct the entry if it cannot be lo11 cated.

12 SEC. 11804. CONFORMING AMENDMENTS.

13 (a) TRADE LAWS.—

14 (1) Section 1211(b) of the Omnibus Trade and

15 Competitiveness Act of 1988 (19 U.S.C. 3011(b)) is

16 amended—

17 (A) in paragraph (1), by striking ‘‘(19

18 U.S.C. 2463(a), 2464(c)(3))’’ and inserting ‘‘(as

19 in effect on July 31, 1995)’’; and

20 (B) in paragraph (2), by striking ‘‘(19

21 U.S.C. 2464(c)(1))’’ and inserting the following:

22 ‘‘(as in effect on July 31, 1995)’’.

23 (2) Section 203(c)(7) of the Andean Trade Pref24 erence Act (19 U.S.C. 3202(c)(7)) is amended by

25 striking ‘‘502(a)(4)’’ and inserting ‘‘507(4)’’.
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1 (3) Section 212(b)(7) of the Caribbean Basin

2 Economic Recovery Act (19 U.S.C. 2702(b)(7)) is

3 amended by striking ‘‘502(a)(4)’’ and inserting

4 ‘‘507(4)’’.

5 (4) General note 3(a)(iv)(C) of the Harmonized

6 Tariff Schedule of the United States is amended by

7 striking ‘‘sections 503(b) and 504(c)’’ and inserting

8 ‘‘subsections (a), (c), and (d) of section 503’’.

9 (5) Section 201(a)(2) of the North American

10 Free Trade Agreement Implementation Act (19 U.S.C.

11 3331(a)(2)) is amended by striking ‘‘502(a)(2) of the

12 Trade Act of 1974 (19 U.S.C. 2462(a)(2))’’ and in13 serting ‘‘502(f)(2) of the Trade Act of 1974’’.

14 (6) Section 131 of the Uruguay Round Agree15 ments Act (19 U.S.C. 3551) is amended in subsections

16 (a) and (b)(1) by striking ‘‘502(a)(4)’’ and inserting

17 ‘‘507(4)’’.

18 (b) OTHER LAWS.—

19 (1) Section 871(f)(2)(B) of the Internal Revenue

20 Code of 1986 is amended by striking ‘‘within the

21 meaning of section 502’’ and inserting ‘‘under title

22 V’’.

23 (2) Section 2202(8) of the Export Enhancement

24 Act of 1988 (15 U.S.C. 4711(8)) is amended by strik25 ing ‘‘502(a)(4)’’ and inserting ‘‘507(4)’’.
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1 (3) Section 231A(a) of the Foreign Assistance

2 Act of 1961 (22 U.S.C. 2191a(a)) is amended—

3 (A) in paragraph (1) by striking ‘‘502(a)(4)

4 of the Trade Act of 1974 (19 U.S.C. 2462(a)(4))’’

5 and inserting ‘‘507(4) of the Trade Act of 1974’’;

6 (B) in paragraph (2) by striking ‘‘505(c) of

7 the Trade Act of 1974 (19 U.S.C. 2465(c))’’ and

8 inserting ‘‘504 of the Trade Act of 1974’’; and

9 (C) in paragraph (4) by striking

10 ‘‘502(a)(4)’’ and inserting ‘‘507(4)’’.

11 (4) Section 1621(a)(1) of the International Fi12 nancial Institutions Act (22 U.S.C. 262p–4p(a)(1)) is

13 amended by striking ‘‘502(a)(4)’’ and inserting

14 ‘‘507(4)’’.

15 (5) Section 103B of the Agricultural Act of 1949

16 (7 U.S.C. 1444–2) is amended in subsections

17 (a)(5)(F)(v) and (n)(1)(C) by striking ‘‘503(d) of the

18 Trade Act of 1974 (19 U.S.C. 2463(d))’’ and inserting

19 ‘‘503(b)(3) of the Trade Act of 1974’’.

20 Subtitle M—Increase in Public Debt

21 LImit

22 SEC. 11901. INCREASE IN PUBLIC DEBT LIMIT.

23 Subsection (b) of section 3101 of title 31, United States

24 Code, is amended by striking the dollar amount contained
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1 in the first sentence and inserting ‘‘$5,500,000,000,000’’

2 and by striking the second sentence (if any).

3 TITLE XII—TEACHING HOS4 PITALS AND GRADUATE MEDI5 CAL EDUCATION; ASSET

6 SALES; WELFARE; AND OTHER

7 PROVISIONS

8 SEC. 12001. SHORT TITLE.

9 Subtitles A through K of this title may be cited as the

10 ‘‘Personal Responsibility and Work Opportunity Act of

11 1995’’.

12 SEC. 12002. TABLE OF CONTENTS.

13 The table of contents of subtitles A through L of this

14 title is as follows:

Sec. 12001. Short title.

Sec. 12002. Table of contents.

Subtitle A—Block Grants for Temporary Assistance for Needy Families

Sec. 12100. References to the Social Security Act.

Sec. 12101. Block grants to States.

Sec. 12102. Report on data processing.

Sec. 12103. Conforming amendments to the Social Security Act.

Sec. 12104. Conforming amendments to the Food Stamp Act of 1977 and related

provisions.

Sec. 12105. Conforming amendments to other laws.

Sec. 12106. Effective date; transition rule.

Subtitle B—Supplemental Security Income

Sec. 12200. Reference to Social Security Act.

CHAPTER 1—ELIGIBILITY RESTRICTIONS

Sec. 12201. Denial of supplemental security income benefits by reason of disability to drug addicts and alcoholics.

Sec. 12202. Denial of SSI benefits for 10 years to individuals found to have

fraudulently misrepresented residence in order to obtain benefits

simultaneously in 2 or more States.

Sec. 12203. Denial of SSI benefits for fugitive felons and probation and parole

violators.
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CHAPTER 2—BENEFITS FOR DISABLED CHILDREN

Sec. 12211. Definition and eligibility rules.

Sec. 12212. Eligibility redeterminations and continuing disability reviews.

Sec. 12213. Additional accountability requirements.

Sec. 12214. Reduction in cash benefits payable to institutionalized individuals

whose medical costs are covered by private insurance.

Sec. 12215. Regulations.

Subtitle C—Child Support

Sec. 12300. Reference to Social Security Act.

CHAPTER 1—ELIGIBILITY FOR SERVICES; DISTRIBUTION OF PAYMENTS

Sec. 12301. State obligation to provide child support enforcement services.

Sec. 12302. Distribution of child support collections.

Sec. 12303. Privacy safeguards.

CHAPTER 2—LOCATE AND CASE TRACKING

Sec. 12311. State case registry.

Sec. 12312. Collection and disbursement of support payments.

Sec. 12313. State directory of new hires.

Sec. 12314. Amendments concerning income withholding.

Sec. 12315. Locator information from interstate networks.

Sec. 12316. Expansion of the Federal parent locator service.

Sec. 12317. Collection and use of social security numbers for use in child support

enforcement.

CHAPTER 3—STREAMLINING AND UNIFORMITY OF PROCEDURES

Sec. 12321. Adoption of uniform State laws.

Sec. 12322. Improvements to full faith and credit for child support orders.

Sec. 12323. Administrative enforcement in interstate cases.

Sec. 12324. Use of forms in interstate enforcement.

Sec. 12325. State laws providing expedited procedures.

CHAPTER 4—PATERNITY ESTABLISHMENT

Sec. 12331. State laws concerning paternity establishment.

Sec. 12332. Outreach for voluntary paternity establishment.

Sec. 12333. Cooperation by applicants for and recipients of temporary family assistance.

CHAPTER 5—PROGRAM ADMINISTRATION AND FUNDING

Sec. 12341. Performance-based incentives and penalties.

Sec. 12342. Federal and State reviews and audits.

Sec. 12343. Required reporting procedures.

Sec. 12344. Automated data processing requirements.

Sec. 12345. Technical assistance.

Sec. 12346. Reports and data collection by the Secretary.

CHAPTER 6—ESTABLISHMENT AND MODIFICATION OF SUPPORT ORDERS

Sec. 12351. Simplified process for review and adjustment of child support orders.

Sec. 12352. Furnishing consumer reports for certain purposes relating to child

support.
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Sec. 12353. Nonliability for financial institutions providing financial records to

State child support enforcement agencies in child support cases.

CHAPTER 7—ENFORCEMENT OF SUPPORT ORDERS

Sec. 12361. Internal Revenue Service collection of arrearages.

Sec. 12362. Authority to collect support from Federal employees.

Sec. 12363. Enforcement of child support obligations of members of the Armed

Forces.

Sec. 12364. Voiding of fraudulent transfers.

Sec. 12365. Work requirement for persons owing past-due child support.

Sec. 12366. Definition of support order.

Sec. 12367. Reporting arrearages to credit bureaus.

Sec. 12368. Liens.

Sec. 12369. State law authorizing suspension of licenses.

Sec. 12370. International child support enforcement.

Sec. 12371. Financial institution data matches.

Sec. 12372. Enforcement of orders against paternal or maternal grandparents in

cases of minor parents.

CHAPTER 8—MEDICAL SUPPORT

Sec. 12376. Correction to ERISA definition of medical child support order.

Sec. 12377. Enforcement of orders for health care coverage.

CHAPTER 9—ENHANCING RESPONSIBILITY AND OPPORTUNITY FOR NONRESIDENTIAL PARENTS

Sec. 12381. Grants to States for access and visitation programs.

CHAPTER 10—EFFECT OF ENACTMENT

Sec. 12391. Effective dates.

Subtitle D—Restricting Welfare and Public Benefits for Aliens

CHAPTER 1—ELIGIBILITY FOR FEDERAL BENEFITS

Sec. 12401. Aliens who are not qualified aliens ineligible for Federal public benefits.

Sec. 12402. Limited eligibility of certain qualified aliens for certain Federal programs.

Sec. 12403. Five-year limited eligibility of qualified aliens for Federal meanstested public benefit.

CHAPTER 2—ATTRIBUTION OF INCOME AND AFFIDAVITS OF SUPPORT

Sec. 12421. Attribution of sponsor’s income and resources to alien.

Sec. 12422. Requirements for sponsor’s affidavit of support.

Sec. 12423. Cosignature of alien student loans.

CHAPTER 3—GENERAL PROVISIONS

Sec. 12431. Definitions.

Sec. 12432. Reapplication for SSI benefits.

Sec. 12433. Statutory construction.
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Subtitle E—Teaching Hospital and Graduate Medical Education Trust Fund

CHAPTER 1—TRUST FUND

Sec. 13501. Establishment of Fund; payments to teaching hospitals.

CHAPTER 2—AMENDMENTS TO MEDICARE PROGRAM

Sec. 13511. Transfer of funds.

Subtitle F—National Defense Stockpile

Sec. 12601. Disposal of certain materials in national defense stockpile for deficit

reduction.

Subtitle G—Child Protection Block Grant Program and Foster Care and

Adoption Assistance

Sec. 12701. Establishment of program.

Sec. 12702. Conforming amendments.

Sec. 12703. Effective date; transition rule.

Subtitle H—Child Care

Sec. 12801. Short title and references.

Sec. 12802. Authorization of appropriations.

Sec. 12803. Lead agency.

Sec. 12804. Application and plan.

Sec. 12805. Limitation on State allotments.

Sec. 12806. Activities to improve the quality of child care.

Sec. 12807. Administration and enforcement.

Sec. 12808. Payments.

Sec. 12809. Annual report and audits.

Sec. 12810. Allotments.

Sec. 12811. Definitions.

Subtitle I—Child Nutrition Programs

CHAPTER 1—NATIONAL SCHOOL LUNCH ACT

Sec. 12901. Termination of additional payment for lunches served in high free

and reduced price participation schools.

Sec. 12902. Direct Federal expenditures.

Sec. 12903. Value of food assistance.

Sec. 12904. Reduced price lunches.

Sec. 12905. Lunches, breakfasts, and supplements.

Sec. 12906. Summer food service program for children.

Sec. 12907. Child care food program.

Sec. 12908. Pilot projects.

Sec. 12909. Information clearinghouse.

CHAPTER 2—CHILD NUTRITION ACT

Sec. 12921. Special milk program.

Sec. 12922. Free and reduced price breakfasts.

Sec. 12923. Conforming reimbursement for paid breakfasts and lunches.

Sec. 12924. School breakfast program authorization.

Sec. 12925. Miscellaneous provisions and definitions.

Sec. 12926. Nutrition education and training.
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Subtitle J—Food Stamps and Commodity Distribution

Sec. 13001. Short title.

CHAPTER 1—FOOD STAMP PROGRAM

Sec. 13011. Definition of certification period.

Sec. 13012. Definition of coupon.

Sec. 13013. Treatment of children living at home.

Sec. 13014. Optional additional criteria for separate household determinations.

Sec. 13015. Adjustment of thrifty food plan.

Sec. 13016. Definition of homeless individual.

Sec. 13017. State option for eligibility standards.

Sec. 13018. Earnings of students.

Sec. 13019. Energy assistance.

Sec. 13020. Deductions from income.

Sec. 13021. Vehicle allowance.

Sec. 13022. Vendor payments for transitional housing counted as income.

Sec. 13023. Doubled penalties for violating food stamp program requirements.

Sec. 13024. Disqualification of convicted individuals.

Sec. 13025. Disqualification.

Sec. 13026. Caretaker exemption.

Sec. 13027. Employment and training.

Sec. 13028. Comparable treatment for disqualification.

Sec. 13029. Disqualification for receipt of multiple food stamp benefits.

Sec. 13030. Disqualification of fleeing felons.

Sec. 13031. Cooperation with child support agencies.

Sec. 13032. Disqualification relating to child support arrears.

Sec. 13033. Work requirement.

Sec. 13034. Encourage electronic benefit transfer systems.

Sec. 13035. Value of minimum allotment.

Sec. 13036. Benefits on recertification.

Sec. 13037. Optional combined allotment for expedited households.

Sec. 13038. Failure to comply with other means-tested public assistance programs.

Sec. 13039. Allotments for households residing in centers.

Sec. 13040. Condition precedent for approval of retail food stores and wholesale

food concerns.

Sec. 13041. Authority to establish authorization periods.

Sec. 13042. Information for verifying eligibility for authorization.

Sec. 13043. Waiting period for stores that fail to meet authorization criteria.

Sec. 13044. Expedited coupon service.

Sec. 13045. Withdrawing fair hearing requests.

Sec. 13046. Disqualification of retailers who intentionally submit falsified applications.

Sec. 13047. Disqualification of retailers who are disqualified under the WIC program.

Sec. 13048. Collection of overissuances.

Sec. 13049. Authority to suspend stores violating program requirements pending

administrative and judicial review.

Sec. 13050. Limitation of Federal match.

Sec. 13051. Work supplementation or support program.

Sec. 13052. Authorization of pilot projects.

Sec. 13053. Employment initiatives program.

Sec. 13054. Reauthorization of Puerto Rico nutrition assistance program.

Sec. 13055. Simplified food stamp program.
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Sec. 13056. State food assistance block grant.

Sec. 13057. American Samoa.

Sec. 13058. Assistance for community food projects.

CHAPTER 2—COMMODITY DISTRIBUTION PROGRAMS

Sec. 13071. Emergency food assistance program.

Subtitle K—Miscellaneous

Sec. 13101. Food stamp eligibility.

Sec. 13102. Reduction in block grants for social services.

Subtitle L—Reform of the Earned Income Credit

Sec. 13200. Amendment of 1986 code.

Sec. 13201. Earned income credit denied to individuals not authorized to be employed in the United States.

Sec. 13202. Repeal of earned income credit for individuals without children.

Sec. 13203. Modification of earned income credit amount and phaseout.

Sec. 13204. Rules relating to denial of earned income credit on basis of disqualified income.

Sec. 13205. Modification of adjusted gross income definition for earned income

credit.

Sec. 13206. Provisions to improve tax compliance.

Subtitle M—Clinical Laboratories

Sec. 13301. Exemption of physician office laboratories.

1 Subtitle A—Block Grants for Tem2 porary Assistance for Needy

3 Families

4 SEC. 12100. REFERENCES TO THE SOCIAL SECURITY ACT.

5 Except as otherwise specifically provided, wherever in

6 this subtitle an amendment is expressed in terms of an

7 amendment to or repeal of a section or other provision, the

8 reference shall be considered to be made to that section or

9 other provision of the Social Security Act.

10 SEC. 12101. BLOCK GRANTS TO STATES.

11 Part A of title IV (42 U.S.C. 601 et seq.) is amended

12 to read as follows:
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1 ‘‘PART A—BLOCK GRANTS TO STATES FOR

2 TEMPORARY ASSISTANCE FOR NEEDY FAMILIES

3 ‘‘SEC. 401. ELIGIBLE STATES; STATE PLAN.

4 ‘‘(a) IN GENERAL.—As used in this part, the term ‘eli5 gible State’ means, with respect to a fiscal year, a State

6 that, during the 2-year period immediately preceding the

7 fiscal year, has submitted to the Secretary a plan that in8 cludes the following:

9 ‘‘(1) OUTLINE OF FAMILY ASSISTANCE PRO10 GRAM.—

11 ‘‘(A) GENERAL PROVISIONS.—A written

12 document that outlines how the State intends to

13 do the following:

14 ‘‘(i) Conduct a program, designed to

15 serve all political subdivisions in the State,

16 that provides assistance to needy families

17 with (or expecting) children and provides

18 parents with job preparation, work, and

19 support services to enable them to leave the

20 program and become self-sufficient.

21 ‘‘(ii) Require a parent or caretaker re22 ceiving assistance under the program to en23 gage in work (as defined by the State) once

24 the State determines the parent or caretaker

25 is ready to engage in work, or once the par26 ent or caretaker has received assistance
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1 under the program for 24 months (whether

2 or not consecutive), whichever is earlier.

3 ‘‘(iii) Ensure that parents and care4 takers receiving assistance under the pro5 gram engage in work activities in accord6 ance with section 406.

7 ‘‘(iv) Take such reasonable steps as the

8 State deems necessary to restrict the use

9 and disclosure of information about indi10 viduals and families receiving assistance

11 under the program.

12 ‘‘(v) Establish goals and take action to

13 prevent and reduce the incidence of out-of14 wedlock pregnancies, with special emphasis

15 on teenage pregnancies, and establish nu16 merical goals for reducing the illegitimacy

17 ratio of the State (as defined in section

18 402(a)(2)(B)) for calendar years 1996

19 through 2005.

20 ‘‘(B) SPECIAL PROVISIONS.—

21 ‘‘(i) The document shall indicate

22 whether the State intends to treat families

23 moving into the State from another State

24 differently than other families under the
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1 program, and if so, how the State intends

2 to treat such families under the program.

3 ‘‘(ii) The document shall indicate

4 whether the State intends to provide assist5 ance under the program to individuals who

6 are not citizens of the United States, and if

7 so, shall include an overview of such assist8 ance.

9 ‘‘(2) CERTIFICATION THAT THE STATE WILL OP10 ERATE A CHILD SUPPORT ENFORCEMENT PROGRAM.—

11 A certification by the chief executive officer of the

12 State that, during the fiscal year, the State will oper13 ate a child support enforcement program under the

14 State plan approved under part D.

15 ‘‘(3) CERTIFICATION THAT THE STATE WILL OP16 ERATE A CHILD PROTECTION PROGRAM.—A certifi17 cation by the chief executive officer of the State that,

18 during the fiscal year, the State will operate a child

19 protection program under the State plan approved

20 under part B.

21 ‘‘(4) CERTIFICATION OF THE ADMINISTRATION

22 OF THE PROGRAM.—A certification by the chief execu23 tive officer of the State specifying which State agency

24 or agencies will administer and supervise the pro25 gram referred to in paragraph (1) for the fiscal year,
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1 which shall include assurances that local governments

2 and private sector organizations—

3 ‘‘(A) have been consulted regarding the plan

4 and design of welfare services in the State so

5 that services are provided in a manner appro6 priate to local populations; and

7 ‘‘(B) have had at least 60 days to submit

8 comments on the plan and the design of such

9 services.

10 ‘‘(5) CERTIFICATION THAT THE STATE WILL

11 PROVIDE INDIANS WITH EQUITABLE ACCESS TO AS12 SISTANCE.—A certification by the chief executive offi13 cer of the State that, during the fiscal year, the State

14 will provide each Indian who is a member of an In15 dian tribe in the State that does not have a tribal

16 family assistance plan approved under section 411

17 with equitable access to assistance under the State

18 program funded under this part.

19 ‘‘(b) SPECIAL RULE FOR FISCAL YEAR 1996.—Not20 withstanding subsection (a), the term ‘eligible State’ means,

21 with respect to fiscal year 1996, a State that has submitted

22 to the Secretary a plan described in subsection (a) within

23 3 months after the date of the enactment of this part.
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1 ‘‘(c) PUBLIC AVAILABILITY OF STATE PLAN SUM2 MARY.—The State shall make available to the public a sum3 mary of any plan submitted by the State under this section.

4 ‘‘SEC. 402. PAYMENTS TO STATES.

5 ‘‘(a) GRANTS.—

6 ‘‘(1) FAMILY ASSISTANCE GRANT.—

7 ‘‘(A) IN GENERAL.—Each eligible State

8 shall be entitled to receive from the Secretary, for

9 each of fiscal years 1996, 1997, 1998, 1999, and

10 2000, a grant in an amount equal to the State

11 family assistance grant. The payment of these

12 grants to States shall not be deemed to entitle

13 any individual or family to any assistance

14 under any State program funded under this

15 part.

16 ‘‘(B) STATE FAMILY ASSISTANCE GRANT DE17 FINED.—As used in this part, the term ‘State

18 family assistance grant’ means the greatest of—

‘‘(i) 1 19 ⁄3 of the total amount required to

20 be paid to the State under section 403 of

21 this title (as in effect on September 30,

22 1995) for fiscal years 1992, 1993, and 1994

23 (other than with respect to amounts ex24 pended by the State for child care under
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1 subsection (g) or (i) of section 402 (as so in

2 effect));

3 ‘‘(ii) the total amount required to be

4 paid to the State under such section 403 for

5 fiscal year 1994 (other than with respect to

6 amounts expended by the State for child

7 care under subsection (g) or (i) of section

8 402 (as so in effect)); or

‘‘(iii) 4 9 ⁄3 of the total amount required

10 to be paid to the State under such section

11 403 for the 1st 3 quarters of fiscal year

12 1995 (other than with respect to amounts

13 expended by the State under the State plan

14 approved under part F (as so in effect) or

15 for child care under subsection (g) or (i) of

16 section 402 (as so in effect)), plus the total

17 amount required to be paid to the State for

18 fiscal year 1995 under section 403(l) (as so

19 in effect).

20 ‘‘(2) GRANT TO REWARD STATES THAT REDUCE

21 OUT-OF-WEDLOCK BIRTHS.—

22 ‘‘(A) IN GENERAL.—In addition to any

23 grant under paragraph (1), each eligible State

24 shall be entitled to receive from the Secretary for

25 fiscal year 1998 or any succeeding fiscal year, a
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1 grant in an amount equal to the State family

2 assistance grant multiplied by—

3 ‘‘(i) 5 percent if—

4 ‘‘(I) the illegitimacy ratio of the

5 State for the fiscal year is at least 1

6 percentage point lower than the illegit7 imacy ratio of the State for fiscal year

8 1995; and

9 ‘‘(II) the rate of induced preg10 nancy terminations in the State for the

11 fiscal year is less than the rate of in12 duced pregnancy terminations in the

13 State for fiscal year 1995; or

14 ‘‘(ii) 10 percent—

15 ‘‘(I) if the illegitimacy ratio of the

16 State for the fiscal year is at least 2

17 percentage points lower than the ille18 gitimacy ratio of the State for fiscal

19 year 1995; and

20 ‘‘(II) the rate of induced preg21 nancy terminations in the State for the

22 fiscal year is less than the rate of in23 duced pregnancy terminations in the

24 State for fiscal year 1995.
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1 ‘‘(B) ILLEGITIMACY RATIO.—As used in this

2 paragraph, the term ‘illegitimacy ratio’ means,

3 with respect to a State and a fiscal year—

4 ‘‘(i) the number of out-of-wedlock births

5 that occurred in the State during the most

6 recent fiscal year for which such informa7 tion is available; divided by

8 ‘‘(ii) the number of births that occurred

9 in the State during the most recent fiscal

10 year for which such information is avail11 able.

12 ‘‘(C) DISREGARD OF CHANGES IN DATA DUE

13 TO CHANGED REPORTING METHODS.—For pur14 poses of subparagraph (A), the Secretary shall

15 disregard—

16 ‘‘(i) any difference between the illegit17 imacy ratio of a State for a fiscal year and

18 the illegitimacy ratio of the State for fiscal

19 year 1995 which is attributable to a change

20 in State methods of reporting data used to

21 calculate the illegitimacy ratio; and

22 ‘‘(ii) any difference between the rate of

23 induced pregnancy terminations in a State

24 for a fiscal year and such rate for fiscal

25 year 1995 which is attributable to a change
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1 in State methods of reporting data used to

2 calculate such rate.

3 ‘‘(3) SUPPLEMENTAL GRANT FOR POPULATION

4 INCREASES IN CERTAIN STATES.—

5 ‘‘(A) IN GENERAL.—In addition to any

6 grant under paragraph (1), each qualifying

7 State shall, subject to subparagraph (E), be enti8 tled to receive from the Secretary for each of fis9 cal years 1997, 1998, 1999, and 2000, a grant

10 in an amount equal to the sum of—

11 ‘‘(i) the amount (if any) required to be

12 paid to the State under this paragraph for

13 the immediately preceding fiscal year; and

14 ‘‘(ii) 2.5 percent of the sum of—

15 ‘‘(I) the total amount required to

16 be paid to the State under part A (as

17 in effect during fiscal year 1994) for

18 fiscal year 1994; and

19 ‘‘(II) the amount (if any) required

20 to be paid to the State under this

21 paragraph for the fiscal year preceding

22 the fiscal year specified in the matter

23 preceding clause (i).

24 ‘‘(B) QUALIFYING STATE.—
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1 ‘‘(i) IN GENERAL.—For purposes of

2 this paragraph, a State is a qualifying

3 State for a fiscal year if—

4 ‘‘(I) the level of welfare spending

5 per poor person by the State for the

6 immediately preceding fiscal year is

7 less than the national average level of

8 State welfare spending per poor person

9 for such preceding fiscal year; and

10 ‘‘(II) the population growth rate

11 of the State (as determined by the Bu12 reau of the Census for the most recent

13 fiscal year for which information is

14 available exceeds the average popu15 lation growth rate for all States (as so

16 determined) for such most recent fiscal

17 year.

18 ‘‘(ii) STATE MUST QUALIFY IN FISCAL

19 YEAR 1997.—Notwithstanding clause (i), a

20 State shall not be a qualifying State for

21 any fiscal year after 1997 by reason of

22 clause (i) if the State is not a qualifying

23 State for fiscal year 1997 by reason of

24 clause (i).
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1 ‘‘(iii) CERTAIN STATES DEEMED

2 QUALIFYING STATES.—For purposes of this

3 paragraph, a State is deemed to be a quali4 fying State for fiscal years 1997, 1998,

5 1999, and 2000 if—

6 ‘‘(I) the level of welfare spending

7 per poor person by the State for fiscal

8 year 1996 is less than 35 percent of the

9 national average level of State welfare

10 spending per poor person for fiscal

11 year 1996; or

12 ‘‘(II) the population of the State

13 increased by more than 10 percent

14 from April 1, 1990 to July 1, 1994, as

15 determined by the Bureau of the Cen16 sus.

17 ‘‘(C) DEFINITIONS.—As used in this para18 graph:

19 ‘‘(i) LEVEL OF WELFARE SPENDING

20 PER POOR PERSON.—The term ‘level of

21 State welfare spending per poor person’

22 means, with respect to a State and a fiscal

23 year—

24 ‘‘(I) the sum of—
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1 ‘‘(aa) the total amount re2 quired to be paid to the State

3 under part A (as in effect during

4 fiscal year 1994) for fiscal year

5 1994; and

6 ‘‘(bb) the amount (if any)

7 paid to the State under this para8 graph for the immediately preced9 ing fiscal year; divided by

10 ‘‘(II) the number of individuals,

11 according to the 1990 decennial census,

12 who were residents of the State and

13 whose income was below the poverty

14 line.

15 ‘‘(ii) NATIONAL AVERAGE LEVEL OF

16 STATE WELFARE SPENDING PER POOR PER17 SON.—The term ‘national average level of

18 State welfare spending per poor person’

19 means, with respect to a fiscal year, an

20 amount equal to—

21 ‘‘(I) the total amount required to

22 be paid to the States under part A (as

23 in effect during fiscal year 1994) for

24 fiscal year 1994; divided by
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1 ‘‘(II) the number of individuals,

2 according to the 1990 decennial census,

3 who were residents of any State and

4 whose income was below the poverty

5 line.

6 ‘‘(iii) STATE.—The term ‘State’ means

7 each of the 50 States of the United States

8 and the District of Columbia.

9 ‘‘(D) APPROPRIATION.—Out of any money

10 in the Treasury of the United States not other11 wise appropriated, there are appropriated 1996,

12 1997, 1998, 1999, and 2000 such sums as are

13 necessary for grants under this paragraph, in a

14 total amount not to exceed $800,000,000.

15 ‘‘(E) GRANTS REDUCED PRO RATA IF IN16 SUFFICIENT APPROPRIATIONS.—If the amount

17 appropriated pursuant to this paragraph for a

18 fiscal year is less than the total amount of pay19 ments otherwise required to be made under this

20 paragraph for the fiscal year, then the amount

21 otherwise payable to each qualifying State for

22 the fiscal year under this paragraph shall be re23 duced by a percentage equal to the amount so

24 appropriated divided by such total amount.

25 ‘‘(b) CONTINGENCY FUND.—
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1 ‘‘(1) ESTABLISHMENT.—There is hereby estab2 lished in the Treasury of the United States a fund

3 which shall be known as the ‘Contingency Fund for

4 State Welfare Programs’ (in this section referred to as

5 the ‘Fund’).

6 ‘‘(2) DEPOSITS INTO FUND.—Out of any money

7 in the Treasury of the United States not otherwise

8 appropriated, there are appropriated for fiscal years

9 1996, 1997, 1998, 1999, and 2000 such sums as are

10 necessary for payment to the Fund in a total amount

11 not to exceed $800,000,000.

12 ‘‘(3) COMPUTATION OF GRANT.—

13 ‘‘(A) IN GENERAL.—Subject to subpara14 graph (B), the Secretary of the Treasury shall

15 pay to each eligible State for a fiscal year an

16 amount equal to the Federal medical assistance

17 percentage for the State for the fiscal year (as

18 defined in section 1905(b), as in effect on the

19 date of the enactment of this part) of so much of

20 the expenditures by the State in the fiscal year

21 under the State program funded under this part

22 as exceed the historic State expenditures (as de23 fined in section 408(a)(7)(B)(iii)) for the State.

24 ‘‘(B) LIMITATION.—The total amount paid

25 to a State under subparagraph (A) for any fiscal
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1 year shall not exceed an amount equal to 20 per2 cent of the State family assistance grant for the

3 fiscal year.

4 ‘‘(C) METHOD OF RECONCILIATION.—If, at

5 the end of any fiscal year, the Secretary finds

6 that a State to which amounts from the Fund

7 were paid in the fiscal year did not meet the

8 maintenance of effort requirement under para9 graph (4)(B) for the fiscal year, the Secretary

10 shall reduce the grant payable to the State under

11 subsection (a)(1) for the immediately succeeding

12 fiscal year by such amounts.

13 ‘‘(4) ELIGIBLE STATE.—

14 ‘‘(A) IN GENERAL.—For purposes of this

15 subsection, a State is an eligible State for a fis16 cal year, if—

17 ‘‘(i)(I) the average rate of total unem18 ployment in such State (seasonally ad19 justed) for the period consisting of the most

20 recent 3 months for which data for all

21 States are published equals or exceeds 6.5

22 percent; and

23 ‘‘(II) the average rate of total unem24 ployment in such State (seasonally ad25 justed) for the 3-month period equals or ex-
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1 ceeds 110 percent of such average rate for

2 either (or both) of the corresponding 3-

3 month periods ending in the 2 preceding

4 calendar years; and

5 ‘‘(ii) has met the maintenance of effort

6 requirement under subparagraph (B) for the

7 State program funded under this part for

8 the fiscal year.

9 ‘‘(B) MAINTENANCE OF EFFORT.—The

10 maintenance of effort requirement for any State

11 under this subparagraph for any fiscal year is

12 the expenditure by the State during the fiscal

13 year of an amount at least equal to 100 percent

14 of the level of historic State expenditures for the

15 State (as determined under section 408(e)).

16 ‘‘(5) STATE.—As used in this subsection, the

17 term ‘State’ means each of the 50 States of the United

18 States and the District of Columbia.

19 ‘‘(c) CONDITION OF GRANT.—

20 ‘‘(1) IN GENERAL.—Notwithstanding any other

21 provision of this section, as a condition of receiving

22 a grant under this section, a State shall not provide

23 cash assistance to a family that includes an adult

24 who has received assistance under any State program

25 funded under this part for 60 months (whether or not
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1 consecutive) after September 30, 1995, except as pro2 vided in paragraphs (2) and (3).

3 ‘‘(2) MINOR CHILD EXCEPTION.—In determining

4 the number of months for which an individual who

5 is a parent or pregnant, as the case may be, has re6 ceived assistance under the State program funded

7 under this part, there shall be disregarded any month

8 for which such assistance was provided with respect

9 to the individual and throughout which the individ10 ual was—

11 ‘‘(A) a minor child; and

12 ‘‘(B) not the head of a household or married

13 to the head of a household.

14 ‘‘(3) HARDSHIP EXCEPTION.—

15 ‘‘(A) IN GENERAL.—The State may exempt

16 a family from the application of paragraph (1)

17 by reason of hardship or if the family includes

18 an individual who has been battered or subjected

19 to extreme cruelty.

20 ‘‘(B) LIMITATION.—The number of families

21 with respect to which an exemption made by a

22 State under subparagraph (A) is in effect for a

23 fiscal year shall not exceed 15 percent of the av24 erage monthly number of families to which the
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1 State is providing assistance under the program

2 funded under this part.

3 ‘‘(C) BATTERED OR SUBJECT TO EXTREME

4 CRUELTY DEFINED.—For purposes of subpara5 graph (A), an individual has been battered or

6 subjected to extreme cruelty if the individual has

7 been subjected to—

8 ‘‘(i) physical acts that resulted in, or

9 threatened to result in, physical injury to

10 the individual;

11 ‘‘(ii) sexual abuse;

12 ‘‘(iii) sexual activity involving a de13 pendent child;

14 ‘‘(iv) being forced as the caretaker rel15 ative of a dependent child to engage in

16 nonconsensual sexual acts or activities;

17 ‘‘(v) threats of, or attempts at, physical

18 or sexual abuse;

19 ‘‘(vi) mental abuse; or

20 ‘‘(vii) neglect or deprivation of medical

21 care.

22 ‘‘(4) RULE OF INTERPRETATION.—Paragraph (1)

23 shall not be interpreted to require any State to pro24 vide assistance to any individual for any period of

25 time under the State program funded under this part.
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1 ‘‘SEC. 403. USE OF GRANTS.

2 ‘‘(a) GENERAL RULES.—Subject to this part, a State

3 to which a grant is made under section 402 may use the

4 grant—

5 ‘‘(1) in any manner that is reasonably cal6 culated to increase the flexibility of States in operat7 ing a program designed to—

8 ‘‘(A) provide assistance to needy families so

9 that children may be cared for in their own

10 homes or in the homes of relatives;

11 ‘‘(B) end the dependence of needy parents

12 on government benefits by promoting job prepa13 ration, work, and marriage;

14 ‘‘(C) prevent and reduce the incidence of

15 out-of-wedlock pregnancies and establish annual

16 numerical goals for preventing and reducing the

17 incidence of these pregnancies; and

18 ‘‘(D) encourage the formation and mainte19 nance of two-parent families; and

20 ‘‘(2) in any manner that the State was author21 ized to use amounts received under part A or F of

22 this title, as such parts were in effect on September

23 30, 1995.

24 ‘‘(b) LIMITATION ON USE OF GRANT FOR ADMINISTRA25 TIVE PURPOSES.—
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1 ‘‘(1) LIMITATION.—A State to which a grant is

2 made under section 402 shall not expend more than

3 15 percent of the grant for administrative purposes.

4 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

5 apply to the use of a grant for information technology

6 and computerization needed for tracking or monitor7 ing required by or under this part.

8 ‘‘(c) AUTHORITY TO USE PORTION OF GRANT FOR

9 OTHER PURPOSES.—

10 ‘‘(1) IN GENERAL.—A State may use not more

11 than 30 percent of the amount of the grant made to

12 the State under section 402 for a fiscal year to carry

13 out a State program pursuant to any or all of the fol14 lowing provisions of law:

15 ‘‘(A) Part B of this title.

16 ‘‘(B) Title XX of this Act.

17 ‘‘(C) The Child Care and Development

18 Block Grant Act of 1990.

19 ‘‘(2) APPLICABLE RULES.—Any amount paid to

20 the State under this part that is used to carry out a

21 State program pursuant to a provision of law speci22 fied in paragraph (1) shall not be subject to the re23 quirements of this part, but shall be subject to the re24 quirements that apply to Federal funds provided di-
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1 rectly under the provision of law to carry out the pro2 gram.

3 ‘‘(d) AUTHORITY TO RESERVE CERTAIN AMOUNTS FOR

4 ASSISTANCE.—A State may reserve amounts paid to the

5 State under this part for any fiscal year for the purpose

6 of providing, without fiscal year limitation, assistance

7 under the State program funded under this part.

8 ‘‘(e) AUTHORITY TO OPERATE EMPLOYMENT PLACE9 MENT PROGRAM.—A State to which a grant is made under

10 section 402 may use the grant to make payments (or pro11 vide job placement vouchers) to State-approved public and

12 private job placement agencies that provide employment

13 placement services to individuals who receive assistance

14 under the State program funded under this part.

15 ‘‘(f) IMPLEMENTATION OF ELECTRONIC BENEFIT

16 TRANSFER SYSTEM.—A State to which a grant is made

17 under section 402 is encouraged to implement an electronic

18 benefit transfer system for providing assistance under the

19 State program funded under this part, and may use the

20 grant for such purpose.

21 ‘‘SEC. 404. ADMINISTRATIVE PROVISIONS.

22 ‘‘(a) QUARTERLY.—The Secretary shall pay each grant

23 payable to a State under section 402 in quarterly install24 ments.
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1 ‘‘(b) NOTIFICATION.—Not later than 3 months before

2 the payment of any such quarterly installment to a State,

3 the Secretary shall notify the State of the amount of any

4 reduction determined under section 411(a)(1)(B) with re5 spect to the State.

6 ‘‘(c) COMPUTATION AND CERTIFICATION OF PAYMENTS

7 TO STATES.—

8 ‘‘(1) COMPUTATION.—The Secretary shall esti9 mate the amount to be paid to each eligible State for

10 each quarter under this part, such estimate to be

11 based on a report filed by the State containing an es12 timate by the State of the total sum to be expended

13 by the State in the quarter under the State program

14 funded under this part and such other information as

15 the Secretary may find necessary.

16 ‘‘(2) CERTIFICATION.—The Secretary of Health

17 and Human Services shall certify to the Secretary of

18 the Treasury the amount estimated by the Secretary

19 under paragraph (1) with respect to a State.

20 ‘‘(d) PAYMENT METHOD.—Upon receipt of a certifi21 cation under subsection (c)(2) with respect to a State, the

22 Secretary of the Treasury shall, through the Fiscal Service

23 of the Department of the Treasury and before audit or set24 tlement by the General Accounting Office, pay to the State,
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1 at the time or times fixed by the Secretary of Health and

2 Human Services, the amount so certified.

3 ‘‘SEC. 405. FEDERAL LOANS FOR STATE WELFARE PRO4 GRAMS.

5 ‘‘(a) LOAN AUTHORITY.—

6 ‘‘(1) IN GENERAL.—The Secretary shall make

7 loans to any loan-eligible State, for a period to matu8 rity of not more than 3 years.

9 ‘‘(2) LOAN-ELIGIBLE STATE.—As used in para10 graph (1), the term ‘loan-eligible State’ means a State

11 against which a penalty has not been imposed under

12 section 408(a)(1) at any time before the loan is to be

13 made.

14 ‘‘(b) RATE OF INTEREST.—The Secretary shall charge

15 and collect interest on any loan made under this section

16 at a rate equal to the current average market yield on out17 standing marketable obligations of the United States with

18 remaining periods to maturity comparable to the period to

19 maturity of the loan.

20 ‘‘(c) USE OF LOAN.—A State shall use a loan made

21 to the State under this section only for any purpose for

22 which grant amounts received by the State under section

23 402(a) may be used including—

24 ‘‘(1) welfare anti-fraud activities; and
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1 ‘‘(2) the provision of assistance under the State

2 program to Indian families that have moved from the

3 service area of an Indian tribe with a tribal family

4 assistance plan approved under section 411.

5 ‘‘(d) LIMITATION ON TOTAL AMOUNT OF LOANS TO A

6 STATE.—The cumulative dollar amount of all loans made

7 to a State under this section during fiscal years 1996

8 through 2000 shall not exceed 10 percent of the State family

9 assistance grant.

10 ‘‘(e) LIMITATION ON TOTAL AMOUNT OF OUTSTANDING

11 LOANS.—The total dollar amount of loans outstanding

12 under this section may not exceed $1,700,000,000.

13 ‘‘(f) APPROPRIATION.—Out of any money in the Treas14 ury of the United States not otherwise appropriated, there

15 are appropriated such sums as may be necessary for the

16 cost of loans under this section.

17 ‘‘SEC. 406. MANDATORY WORK REQUIREMENTS.

18 ‘‘(a) PARTICIPATION RATE REQUIREMENTS.—

19 ‘‘(1) ALL FAMILIES.—A State to which a grant

20 is made under section 402 for a fiscal year shall

21 achieve the minimum participation rate specified in

22 the following table for the fiscal year with respect to

23 all families receiving assistance under the State pro24 gram funded under this part:
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The minimum

participation

‘‘If the fiscal year is: rate is:

1996 .................................................................... 15

1997 .................................................................... 20

1998 .................................................................... 25

1999 .................................................................... 30

2000 .................................................................... 35

2001 .................................................................... 40

2002 or thereafter .............................................. 50.

1 ‘‘(2) 2-PARENT FAMILIES.—A State to which a

2 grant is made under section 402 for a fiscal year

3 shall achieve the minimum participation rate speci4 fied in the following table for the fiscal year with re5 spect to 2-parent families receiving assistance under

6 the State program funded under this part:

The minimum

participation

‘‘If the fiscal year is: rate is:

1996 .................................................................... 50

1997 .................................................................... 75

1998 .................................................................... 75

1999 or thereafter .............................................. 90.

7 ‘‘(b) CALCULATION OF PARTICIPATION RATES.—

8 ‘‘(1) ALL FAMILIES.—

9 ‘‘(A) AVERAGE MONTHLY RATE.—For pur10 poses of subsection (a)(1), the participation rate

11 for all families of a State for a fiscal year is the

12 average of the participation rates for all families

13 of the State for each month in the fiscal year.

14 ‘‘(B) MONTHLY PARTICIPATION RATES.—

15 The participation rate of a State for all families

16 of the State for a month, expressed as a percent17 age, is—
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1 ‘‘(i) the number of families receiving

2 assistance under the State program funded

3 under this part that include an adult who

4 is engaged in work for the month; divided

5 by

6 ‘‘(ii) the amount by which—

7 ‘‘(I) the number of families receiv8 ing such assistance during the month

9 that include an adult receiving such

10 assistance; exceeds

11 ‘‘(II) the number of families re12 ceiving such assistance that are subject

13 in such month to a reduction or termi14 nation of assistance pursuant to sec15 tion 408(a)(2) but have not been sub16 ject to such penalty for more than 3

17 months within the preceding 12-month

18 period (whether or not consecutive).

19 ‘‘(2) 2-PARENT FAMILIES.—

20 ‘‘(A) AVERAGE MONTHLY RATE.—For pur21 poses of subsection (a)(2), the participation rate

22 for 2-parent families of a State for a fiscal year

23 is the average of the participation rates for 2-

24 parent families of the State for each month in

25 the fiscal year.
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1 ‘‘(B) MONTHLY PARTICIPATION RATES.—

2 The participation rate of a State for 2-parent

3 families of the State for a month shall be cal4 culated by use of the formula set forth in para5 graph (1)(B), except that in the formula the term

6 ‘number of 2-parent families’ shall be substituted

7 for the term ‘number of families’ each place such

8 latter term appears.

9 ‘‘(3) PRO RATA REDUCTION OF PARTICIPATION

10 RATE DUE TO CASELOAD REDUCTIONS NOT REQUIRED

11 BY FEDERAL LAW.—

12 ‘‘(A) IN GENERAL.—The Secretary shall

13 prescribe regulations for reducing the minimum

14 participation rate otherwise required by this sec15 tion for a fiscal year by the number of percent16 age points equal to the number of percentage

17 points (if any) by which—

18 ‘‘(i) the number of families receiving

19 assistance during the fiscal year under the

20 State program funded under this part is

21 less than

22 ‘‘(ii) the number of families that re23 ceived aid under the State plan approved

24 under part A of this title (as in effect on
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1 September 30, 1995) during the fiscal year

2 immediately preceding such effective date.

3 The minimum participation rate shall not be re4 duced to the extent that the Secretary determines

5 that the reduction in the number of families re6 ceiving such assistance is required by Federal

7 law.

8 ‘‘(B) ELIGIBILITY CHANGES NOT COUNT9 ED.—The regulations described in subparagraph

10 (A) shall not take into account families that are

11 diverted from a State program funded under this

12 part as a result of differences in eligibility cri13 teria under a State program funded under this

14 part and eligibility criteria under such State’s

15 plan under the aid to families with dependent

16 children program, as such plan was in effect on

17 the day before the date of the enactment of the

18 Personal Responsibility and Work Opportunity

19 Act of 1995. Such regulations shall place the

20 burden on the Secretary to prove that such fami21 lies were diverted as a direct result of differences

22 in such eligibility criteria.

23 ‘‘(4) STATE OPTION TO INCLUDE INDIVIDUALS

24 RECEIVING ASSISTANCE UNDER A TRIBAL FAMILY AS25 SISTANCE PLAN.—For purposes of paragraphs (1)(B)
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1 and (2)(B), a State may, at its option, include fami2 lies receiving assistance under a tribal family assist3 ance plan approved under section 411.

4 ‘‘(c) ENGAGED IN WORK.—

5 ‘‘(1) ALL FAMILIES.—For purposes of subsection

6 (b)(1)(B)(i), a recipient is engaged in work for a

7 month in a fiscal year if the recipient is participat8 ing in such activities for at least the minimum aver9 age number of hours per week specified in the follow10 ing table during the month, not fewer than 20 hours

11 per week of which are attributable to an activity de12 scribed in paragraph (1), (2), (3), (4), (5), (7), or (8)

13 of subsection (d) (or, in the case of the first 4 weeks

14 for which the recipient is required under this section

15 to participate in work activities, an activity described

16 in subsection (d)(6)):

The minimum

‘‘If the month is average number of

in fiscal year: hours per week is:

1996 .............................................................. 20

1997 .............................................................. 20

1998 .............................................................. 20

1999 .............................................................. 25

2000 .............................................................. 30

2001 .............................................................. 30

2002 .............................................................. 35

2003 or thereafter ........................................ 35.

17 ‘‘(2) 2-PARENT FAMILIES.—For purposes of sub18 section (b)(2)(B)(i), an adult is engaged in work for

19 a month in a fiscal year if the adult is making

20 progress in such activities for at least 35 hours per
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1 week during the month, not fewer than 30 hours per

2 week of which are attributable to an activity described

3 in paragraph (1), (2), (3), (4), (5), (7), or (8) of sub4 section (d) (or, in the case of the first 4 weeks for

5 which the recipient is required under this section to

6 participate in work activities, an activity described

7 in subsection (d)(6)).

8 ‘‘(3) LIMITATION ON VOCATIONAL EDUCATION AC9 TIVITIES COUNTED AS WORK.—For purposes of deter10 mining monthly participation rates under para11 graphs (1)(B)(i) and (2)(B)(i) of subsection (b), not

12 more than 20 percent of adults in all families and in

13 2-parent families determined to be engaged in work

14 in the State for a month may meet the work activity

15 requirement through participation in vocational edu16 cational training.

17 ‘‘(d) WORK ACTIVITIES DEFINED.—As used in this

18 section, the term ‘work activities’ means—

19 ‘‘(1) unsubsidized employment;

20 ‘‘(2) subsidized private sector employment;

21 ‘‘(3) subsidized public sector employment;

22 ‘‘(4) work experience (including work associated

23 with the refurbishing of publicly assisted housing) if

24 sufficient private sector employment is not available;

25 ‘‘(5) on-the-job training;
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1 ‘‘(6) job search and job readiness assistance;

2 ‘‘(7) community service programs;

3 ‘‘(8) vocational educational training (not to ex4 ceed 12 months with respect to any individual);

5 ‘‘(9) job skills training directly related to em6 ployment;

7 ‘‘(10) education directly related to employment,

8 in the case of a recipient who has not attained 20

9 years of age, and has not received a high school di10 ploma or a certificate of high school equivalency; and

11 ‘‘(11) satisfactory attendance at secondary

12 school, in the case of a recipient who—

13 ‘‘(A) has not completed secondary school;

14 and

15 ‘‘(B) is a dependent child, or a head of

16 household who has not attained 20 years of age.

17 ‘‘SEC. 407. PROHIBITIONS.

18 ‘‘(a) IN GENERAL.—

19 ‘‘(1) NO ASSISTANCE FOR FAMILIES WITHOUT A

20 MINOR CHILD.—A State to which a grant is made

21 under section 402 may not use any part of the grant

22 to provide assistance to a family, unless the family

23 includes—
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1 ‘‘(A) a minor child who resides with a cus2 todial parent or other adult caretaker relative of

3 the child; or

4 ‘‘(B) a pregnant individual.

5 ‘‘(2) REDUCED ASSISTANCE FOR FAMILY IF

6 ADULT REFUSES TO WORK.—

7 ‘‘(A) IN GENERAL.—Except as provided in

8 subparagraph (B), a State to which a grant is

9 made under section 402 may not fail to—

10 ‘‘(i) reduce the amount of assistance

11 otherwise payable to a family receiving as12 sistance under the State program funded

13 under this part, pro rata (or more, at the

14 option of the State) with respect to any pe15 riod during a month in which an adult

16 member of the family refuses to engage in

17 work required in accordance with this sec18 tion; or

19 ‘‘(ii) terminate such assistance,

20 subject to such good cause and other exceptions

21 as the State may establish.

22 ‘‘(B) EXCEPTION.—Notwithstanding sub23 paragraph (A), a State may not reduce or termi24 nate assistance under the State program funded

25 under this part based on a refusal of an adult
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1 to work if the adult is a single custodial parent

2 caring for a child who has not attained 6 years

3 of age, and the adult proves that the adult has

4 a demonstrated inability (as determined by the

5 State) to obtain needed child care, for 1 or more

6 of the following reasons:

7 ‘‘(i) Unavailability of appropriate

8 child care within a reasonable distance from

9 the individual’s home or work site.

10 ‘‘(ii) Unavailability or unsuitability of

11 informal child care by a relative or under

12 other arrangements.

13 ‘‘(iii) Unavailability of appropriate

14 and affordable formal child care arrange15 ments.

16 ‘‘(3) REDUCTION OR ELIMINATION OF ASSIST17 ANCE FOR NONCOOPERATION IN CHILD SUPPORT.—If

18 the agency responsible for administering the State

19 plan approved under part D determines that an indi20 vidual is not cooperating with the State in establish21 ing, modifying, or enforcing a support order with re22 spect to a child of the individual, then the State—

23 ‘‘(A) shall deduct from the assistance that

24 would otherwise be provided to the family of the

25 individual under the State program funded
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1 under this part the share of such assistance at2 tributable to the individual; and

3 ‘‘(B) may deny the family any assistance

4 under the State program.

5 ‘‘(4) NO ASSISTANCE FOR FAMILIES NOT ASSIGN6 ING CERTAIN SUPPORT RIGHTS TO THE STATE.—

7 ‘‘(A) IN GENERAL.—A State to which a

8 grant is made under section 402 may not fail to

9 require, as a condition of providing assistance to

10 a family under the State program funded under

11 this part, that a member of the family assign to

12 the State any rights the family member may

13 have (on behalf of the family member or of any

14 other person for whom the family member has

15 applied for or is receiving such assistance) to

16 support from any other person, not exceeding the

17 total amount of assistance so provided to the

18 family, which accrue (or have accrued) before the

19 date the family leaves the program, which as20 signment, on and after the date the the family

21 leaves the program, shall not apply with respect

22 to—

23 ‘‘(i) if the assignment occurs on or

24 after October 1, 1997, and before October 1,

25 2000, any support (other than support col-
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1 lected pursuant to section 464) which ac2 crued before the family received such assist3 ance and which the State has not collected

4 by September 30, 2000; or

5 ‘‘(ii) if the assignment occurs on or

6 after October 1, 2000, any support (other

7 than support collected pursuant to section

8 464) which accrued before the family re9 ceived such assistance and which the State

10 has not collected by the date the family

11 leaves the program.

12 ‘‘(B) LIMITATION.—A State to which a

13 grant is made under section 402 may not re14 quire, as a condition of providing assistance to

15 any family under the State program funded

16 under this part, that a member of the family as17 sign to the State any rights to support described

18 in subparagraph (A) which accrue after the date

19 the family leaves the program.

20 ‘‘(5) NO ASSISTANCE FOR TEENAGE PARENTS

21 WHO DO NOT ATTEND HIGH SCHOOL OR OTHER

22 EQUIVALENT TRAINING PROGRAM.—A State to which

23 a grant is made under section 402 may not use any

24 part of the grant to provide assistance to an individ25 ual who has not attained 18 years of age, is not mar-
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1 ried, has a minor child at least 12 weeks of age in

2 his or her care, and has not successfully completed a

3 high-school education (or its equivalent), if the indi4 vidual does not participate in—

5 ‘‘(A) educational activities directed toward

6 the attainment of a high school diploma or its

7 equivalent; or

8 ‘‘(B) an alternative educational or training

9 program that has been approved by the State.

10 ‘‘(6) NO ASSISTANCE FOR TEENAGE PARENTS

11 NOT LIVING IN ADULT-SUPERVISED SETTINGS.—

12 ‘‘(A) IN GENERAL.—

13 ‘‘(i) REQUIREMENT.—Except as pro14 vided in subparagraph (B), a State to

15 which a grant is made under section 402

16 may not use any part of the grant to pro17 vide assistance to an individual described

18 in clause (ii) of this subparagraph if the in19 dividual and the minor child referred to in

20 clause (ii)(II) do not reside in a place of

21 residence maintained by a parent, legal

22 guardian, or other adult relative of the in23 dividual as such parent’s, guardian’s, or

24 adult relative’s own home.
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1 ‘‘(ii) INDIVIDUAL DESCRIBED.— For

2 purposes of clause (i), an individual de3 scribed in this clause is an individual

4 who—

5 ‘‘(I) has not attained 18 years of

6 age; and

7 ‘‘(II) is not married, and has a

8 minor child in his or her care.

9 ‘‘(B) EXCEPTION.—

10 ‘‘(i) PROVISION OF, OR ASSISTANCE IN

11 LOCATING, ADULT-SUPERVISED LIVING AR12 RANGEMENT.—In the case of an individual

13 who is described in clause (ii), the State

14 agency referred to in section 401(a)(4) shall

15 provide, or assist the individual in locating,

16 a second chance home, maternity home, or

17 other appropriate adult-supervised support18 ive living arrangement, taking into consid19 eration the needs and concerns of the indi20 vidual, unless the State agency determines

21 that the individual’s current living arrange22 ment is appropriate, and thereafter shall re23 quire that the individual and the minor

24 child referred to in subparagraph (A)(ii)(II)

25 reside in such living arrangement as a con-
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1 dition of the continued receipt of assistance

2 under the State program funded under this

3 part (or in an alternative appropriate ar4 rangement, should circumstances change

5 and the current arrangement cease to be ap6 propriate).

7 ‘‘(ii) INDIVIDUAL DESCRIBED.—For

8 purposes of clause (i), an individual is de9 scribed in this clause if the individual is de10 scribed in subparagraph (A)(ii), and—

11 ‘‘(I) the individual has no parent,

12 legal guardian or other appropriate

13 adult relative described in subclause

14 (II) of his or her own who is living or

15 whose whereabouts are known;

16 ‘‘(II) no living parent, legal

17 guardian, or other appropriate adult

18 relative, who would otherwise meet ap19 plicable State criteria to act as the in20 dividual’s legal guardian, of such indi21 vidual allows the individual to live in

22 the home of such parent, guardian, or

23 relative;

24 ‘‘(III) the State agency determines

25 that—
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1 ‘‘(aa) the individual or the

2 minor child referred to in sub3 paragraph (A)(ii)(II) is being or

4 has been subjected to serious phys5 ical or emotional harm, sexual

6 abuse, or exploitation in the resi7 dence of the individual’s own par8 ent or legal guardian; or

9 ‘‘(bb) substantial evidence ex10 ists of an act or failure to act that

11 presents an imminent or serious

12 harm if the individual and the

13 minor child lived in the same res14 idence with the individual’s own

15 parent or legal guardian; or

16 ‘‘(IV) the State agency otherwise

17 determines that it is in the best inter18 est of the minor child to waive the re19 quirement of subparagraph (A) with

20 respect to the individual or the minor

21 child.

22 ‘‘(iii) SECOND-CHANCE HOME.—For

23 purposes of this subparagraph, the term

24 ‘second-chance home’ means an entity that

25 provides individuals described in clause (ii)
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1 with a supportive and supervised living ar2 rangement in which such individuals are

3 required to learn parenting skills, including

4 child development, family budgeting, health

5 and nutrition, and other skills to promote

6 their long-term economic independence and

7 the well-being of their children.

8 ‘‘(7) NO MEDICAL SERVICES.—

9 ‘‘(A) IN GENERAL.—Except as provided in

10 subparagraph (B), a State to which a grant is

11 made under section 402 may not use any part

12 of the grant to provide medical services.

13 ‘‘(B) EXCEPTION FOR FAMILY PLANNING

14 SERVICES.—As used in subparagraph (A), the

15 term ‘medical services’ does not include family

16 planning services.

17 ‘‘(8) DENIAL OF ASSISTANCE FOR 10 YEARS TO A

18 PERSON FOUND TO HAVE FRAUDULENTLY MISREPRE19 SENTED RESIDENCE IN ORDER TO OBTAIN ASSIST20 ANCE IN 2 OR MORE STATES.—a State to which a

21 grant is made under section 402 may not use any

22 part of the grant to provide cash assistance to an in23 dividual during the 10-year period that begins on the

24 date the individual is convicted in Federal or State

25 court of having made a fraudulent statement or rep-
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1 resentation with respect to the place of residence of

2 the individual in order to receive assistance simulta3 neously from 2 or more States under programs that

4 are funded under this title, title XIX, or the Food

5 Stamp Act of 1977, or benefits in 2 or more States

6 under the supplemental security income program

7 under title XVI.

8 ‘‘(9) DENIAL OF ASSISTANCE FOR FUGITIVE FEL9 ONS AND PROBATION AND PAROLE VIOLATORS.—

10 ‘‘(A) IN GENERAL.—A State to which a

11 grant is made under section 402 may not use

12 any part of the grant to provide assistance to

13 any individual who is—

14 ‘‘(i) fleeing to avoid prosecution, or

15 custody or confinement after conviction,

16 under the laws of the place from which the

17 individual flees, for a crime, or an attempt

18 to commit a crime, which is a felony under

19 the laws of the place from which the indi20 vidual flees, or which, in the case of the

21 State of New Jersey, is a high misdemeanor

22 under the laws of such State; or

23 ‘‘(ii) violating a condition of probation

24 or parole imposed under Federal or State

25 law.
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1 ‘‘(B) EXCHANGE OF INFORMATION WITH

2 LAW ENFORCEMENT AGENCIES.—If a State to

3 which a grant is made under section 402 estab4 lishes safeguards against the use or disclosure of

5 information about applicants or recipients of as6 sistance under the State program funded under

7 this part, the safeguards shall not prevent the

8 State agency administering the program from

9 furnishing a Federal, State, or local law enforce10 ment officer, upon the request of the officer, with

11 the current address of any recipient if the officer

12 furnishes the agency with the name of the recipi13 ent and notifies the agency that—

14 ‘‘(i) such recipient—

15 ‘‘(I) is fleeing to avoid prosecu16 tion, or custody or confinement after

17 conviction, under the laws of the place

18 from which the recipient flees, for a

19 crime, or an attempt to commit a

20 crime, which is a felony under the laws

21 of the place from which the recipient

22 flees, or which, in the case of the State

23 of New Jersey, is a high misdemeanor

24 under the laws of such State;
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1 ‘‘(II) is violating a condition of

2 probation or parole imposed under

3 Federal or State law; or

4 ‘‘(III) has information that is

5 necessary for the officer to conduct the

6 official duties of the officer; and

7 ‘‘(ii) the location or apprehension of

8 the recipient is within such official duties.

9 ‘‘(10) DENIAL OF ASSISTANCE FOR MINOR CHIL10 DREN WHO ARE ABSENT FROM THE HOME FOR A SIG11 NIFICANT PERIOD.—

12 ‘‘(A) IN GENERAL.—A State to which a

13 grant is made under section 402 may not use

14 any part of the grant to provide assistance for

15 a minor child who has been, or is expected by a

16 parent (or other caretaker relative) of the child

17 to be, absent from the home for a period of 45

18 consecutive days or, at the option of the State,

19 such period of not less than 30 and not more

20 than 90 consecutive days as the State may pro21 vide for in the State plan submitted pursuant to

22 section 401.

23 ‘‘(B) STATE AUTHORITY TO ESTABLISH

24 GOOD CAUSE EXCEPTIONS.—The State may es25 tablish such good cause exceptions to subpara-
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1 graph (A) as the State considers appropriate if

2 such exceptions are provided for in the State

3 plan submitted pursuant to section 401.

4 ‘‘(C) DENIAL OF ASSISTANCE FOR RELATIVE

5 WHO FAILS TO NOTIFY STATE AGENCY OF AB6 SENCE OF CHILD.—A State to which a grant is

7 made under section 402 may not use any part

8 of the grant to provide assistance for an individ9 ual who is a parent (or other caretaker relative)

10 of a minor child and who fails to notify the

11 agency administering the State program funded

12 under this part, of the absence of the minor child

13 from the home for the period specified in or pro14 vided for under subparagraph (A), by the end of

15 the 5-day period that begins with the date that

16 it becomes clear to the parent (or relative) that

17 the minor child will be absent for such period so

18 specified or provided for.

19 ‘‘(11) INCOME SECURITY PAYMENTS NOT TO BE

20 DISREGARDED IN DETERMINING THE AMOUNT OF AS21 SISTANCE TO BE PROVIDED TO A FAMILY.—If a State

22 to which a grant is made under section 402 uses any

23 part of the grant to provide assistance for any indi24 vidual who is receiving a payment under a State

25 plan for old-age assistance approved under section 2,
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1 a State program funded under part B that provides

2 cash payments for foster care, or the supplemental se3 curity income program under title XVI, then the

4 State may not disregard the payment in determining

5 the amount of assistance to be provided to the family

6 of which the individual is a member under the State

7 program funded under this part.

8 ‘‘SEC. 408. PENALTIES.

9 ‘‘(a) IN GENERAL.—Subject to subsections (b), (c), and

10 (d):

11 ‘‘(1) FOR USE OF GRANT IN VIOLATION OF THIS

12 PART.—

13 ‘‘(A) GENERAL PENALTY.—If an audit con14 ducted under chapter 75 of title 31, United

15 States Code, finds that an amount paid to a

16 State under section 402 for a fiscal year has

17 been used in violation of this part, the Secretary

18 shall reduce the grant payable to the State under

19 section 402(a)(1) for the immediately succeeding

20 fiscal year quarter by the amount so used.

21 ‘‘(B) ENHANCED PENALTY FOR INTEN22 TIONAL VIOLATIONS.—If the State does not prove

23 to the satisfaction of the Secretary that the State

24 did not intend to use the amount in violation of

25 this part, the Secretary shall further reduce the
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1 grant payable to the State under section

2 402(a)(1) for the immediately succeeding fiscal

3 year quarter by an amount equal to 5 percent of

4 the State family assistance grant.

5 ‘‘(2) FOR FAILURE TO SUBMIT REQUIRED RE6 PORT.—

7 ‘‘(A) IN GENERAL.—If the Secretary deter8 mines that a State has not, within 6 months

9 after the end of a fiscal year, submitted the re10 port required by section 410 for the fiscal year,

11 the Secretary shall reduce the grant payable to

12 the State under section 402(a)(1) for the imme13 diately succeeding fiscal year by an amount

14 equal to 4 percent of the State family assistance

15 grant.

16 ‘‘(B) RESCISSION OF PENALTY.—The Sec17 retary shall rescind a penalty imposed on a

18 State under subparagraph (A) with respect to a

19 report for a fiscal year if the State submits the

20 report before the end of the immediately succeed21 ing fiscal year.

22 ‘‘(3) FOR FAILURE TO SATISFY MINIMUM PAR23 TICIPATION RATES.—

24 ‘‘(A) IN GENERAL.—If the Secretary deter25 mines that a State to which a grant is made
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1 under section 402 for a fiscal year has failed to

2 comply with section 406(a) for the fiscal year,

3 the Secretary shall reduce the grant payable to

4 the State under section 402(a)(1) for the imme5 diately succeeding fiscal year by an amount

6 equal to not more than 5 percent of the State

7 family assistance grant.

8 ‘‘(B) PENALTY BASED ON SEVERITY OF

9 FAILURE.—The Secretary shall impose reduc10 tions under subparagraph (A) based on the de11 gree of noncompliance.

12 ‘‘(4) FOR FAILURE TO PARTICIPATE IN THE IN13 COME AND ELIGIBILITY VERIFICATION SYSTEM.—If

14 the Secretary determines that a State program funded

15 under this part is not participating during a fiscal

16 year in the income and eligibility verification system

17 required by section 1137, the Secretary shall reduce

18 the grant payable to the State under section 402(a)(1)

19 for the immediately succeeding fiscal year by an

20 amount equal to not more than 2 percent of the State

21 family assistance grant.

22 ‘‘(5) FOR FAILURE TO COMPLY WITH PATERNITY

23 ESTABLISHMENT AND CHILD SUPPORT ENFORCEMENT

24 REQUIREMENTS UNDER PART D.—Notwithstanding

25 any other provision of this Act, if the Secretary deter-
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1 mines that the State agency that administers a pro2 gram funded under this part does not enforce the pen3 alties requested by the agency administering part D

4 against recipients of assistance under the State pro5 gram who fail to cooperate in establishing paternity

6 in accordance with such part, the Secretary shall re7 duce the grant payable to the State under section

8 402(a)(1) for the immediately succeeding fiscal year

9 (without regard to this section) by not more than 5

10 percent.

11 ‘‘(6) FOR FAILURE TO TIMELY REPAY A FEDERAL

12 LOAN FUND FOR STATE WELFARE PROGRAMS.—If the

13 Secretary determines that a State has failed to repay

14 any amount borrowed from the Federal Loan Fund

15 for State Welfare Programs established under section

16 405 within the period of maturity applicable to the

17 loan, plus any interest owed on the loan, the Sec18 retary shall reduce the grant payable to the State

19 under section 402(a)(1) for the immediately succeed20 ing fiscal year quarter (without regard to this sec21 tion) by the outstanding loan amount, plus the inter22 est owed on the outstanding amount. The Secretary

23 may not forgive any outstanding loan amount or in24 terest owed on the outstanding amount.

25 ‘‘(7) MAINTENANCE OF EFFORT.—
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1 ‘‘(A) IN GENERAL.—The Secretary shall re2 duce the grant payable to the State under section

3 402(a)(1) for fiscal year 1996, 1997, 1998, 1999,

4 or 2000 by the amount (if any) by which State

5 expenditures under the State program funded

6 under this part for the then immediately preced7 ing fiscal year is less than the applicable per8 centage of historic State expenditures.

9 ‘‘(B) DEFINITIONS.—As used in this para10 graph:

11 ‘‘(i) STATE EXPENDITURES UNDER

12 THE STATE PROGRAM FUNDED UNDER THIS

13 PART.—

14 ‘‘(I) IN GENERAL.—The term

15 ‘State expenditures under the State

16 program funded under this part’

17 means, with respect to a State and a

18 fiscal year, the sum of the expenditures

19 by the State under the program for the

20 fiscal year for—

21 ‘‘(aa) cash assistance;

22 ‘‘(bb) child care assistance;

23 ‘‘(cc) education, job training,

24 and work;
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1 ‘‘(dd) administrative costs;

2 and

3 ‘‘(ee) any other use of funds

4 allowable under section 403(a)(1).

5 ‘‘(II) EXCLUSION OF TRANSFERS

6 FROM OTHER STATE AND LOCAL PRO7 GRAMS.—Such term does not include

8 funding supplanted by transfers from

9 other State and local programs.

10 ‘‘(ii) APPLICABLE PERCENTAGE.—The

11 term ‘applicable percentage’ means—

12 ‘‘(I) for fiscal year 1996, 75 per13 cent; and

14 ‘‘(II) for fiscal years 1997, 1998,

15 1999, and 2000, 75 percent reduced (if

16 appropriate) in accordance with sub17 paragraph (C)(iii).

18 ‘‘(iii) HISTORIC STATE EXPENDI19 TURES.—The term ‘historic State expendi20 tures’ means, with respect to a State, the

21 lesser of—

22 ‘‘(I) the expenditures by the State

23 under parts A and F of this title (as

24 in effect during fiscal year 1994) for

25 fiscal year 1994; or
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1 ‘‘(II) the amount which bears the

2 same ratio to the amount described in

3 subclause (I) as—

4 ‘‘(aa) the State family assist5 ance grant for the immediately

6 preceding fiscal year; bears to

7 ‘‘(bb) the total amount of

8 Federal payments to the State

9 under section 403 (as in effect

10 during fiscal year 1994) for fiscal

11 year 1994.

12 ‘‘(iv) EXPENDITURES BY THE STATE.—

13 The term ‘expenditures by the State’ does

14 not include any expenditures from amounts

15 made available by the Federal Government,

16 State funds expended for the medicaid pro17 gram under title XIX or the MediGrant

18 program under title XXI, or any State

19 funds which are used to match Federal

20 funds or are expended as a condition of re21 ceiving Federal funds under Federal pro22 grams other than under title I.

23 ‘‘(C) APPLICABLE PERCENTAGE REDUCED

24 FOR STATES WITH BEST OR MOST IMPROVED

25 PERFORMANCE IN CERTAIN AREAS.—
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1 ‘‘(i) SCORING OF STATE PERFORM2 ANCE.—Beginning with fiscal year 1997,

3 the Secretary shall assign to each State a

4 score that represents the performance of the

5 State for the fiscal year in each category de6 scribed in clause (ii).

7 ‘‘(ii) CATEGORIES.—The categories de8 scribed in this clause are the following:

9 ‘‘(I) Increasing the number of

10 families that received assistance under

11 a State program funded under this

12 part in the fiscal year, and that, dur13 ing the fiscal year, become ineligible

14 for such assistance as a result of

15 unsubsidized employment.

16 ‘‘(II) Reducing the percentage of

17 families that, within 18 months after

18 becoming ineligible for assistance

19 under the State program funded under

20 this part, become eligible for such as21 sistance.

22 ‘‘(III) Increasing the amount

23 earned by families that receive assist24 ance under this part.
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1 ‘‘(IV) Reducing the percentage of

2 families in the State that receive as3 sistance under the State program fund4 ed under this part.

5 ‘‘(iii) REDUCTION OF MAINTENANCE OF

6 EFFORT THRESHOLD.—

7 ‘‘(I) REDUCTION FOR STATES

8 WITH 5 GREATEST SCORES IN EACH

9 CATEGORY OF PERFORMANCE.—The

10 applicable percentage for a State for a

11 fiscal year shall be reduced by 2 per12 centage points, with respect to each

13 category described in clause (ii) for

14 which the score assigned to the State

15 under clause (i) for the fiscal year is 1

16 of the 5 highest scores so assigned to

17 States.

18 ‘‘(II) REDUCTION FOR STATES

19 WITH 5 GREATEST IMPROVEMENT IN

20 SCORES IN EACH CATEGORY OF PER21 FORMANCE.—The applicable percentage

22 for a State for a fiscal year shall be re23 duced by 2 percentage points for a

24 State for a fiscal year, with respect to

25 each category described in clause (ii)
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1 for which the difference between the

2 score assigned to the State under clause

3 (i) for the fiscal year and the score so

4 assigned to the State for the imme5 diately preceding fiscal year is 1 of the

6 5 greatest such differences.

7 ‘‘(III) LIMITATION ON REDUC8 TION.—The applicable percentage for a

9 State for a fiscal year may not be re10 duced by more than 8 percentage

11 points pursuant to this clause.

12 ‘‘(8) PENALTIES FOR SUBSTANTIAL NONCOMPLI13 ANCE OF STATE CHILD SUPPORT ENFORCEMENT PRO14 GRAM WITH REQUIREMENTS OF PART D.—

15 ‘‘(A) IN GENERAL.—If a State program op16 erated under part D is found as a result of a re17 view conducted under section 452(a)(4) not to

18 have complied substantially with the require19 ments of such part for any quarter, and the Sec20 retary determines that the program is not com21 plying substantially with such requirements at

22 the time the finding is made, the Secretary shall,

23 subject to paragraph (2), reduce the grant pay24 able to the State under section 402(a)(1) for the

25 quarter and each subsequent quarter that ends
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1 before the 1st quarter throughout which the pro2 gram is found not to be in substantial compli3 ance with such requirements by—

4 ‘‘(i) not less than 1 nor more than 2

5 percent;

6 ‘‘(ii) not less than 2 nor more than 3

7 percent, if the finding is the 2nd consecutive

8 such finding made as a result of such a re9 view; or

10 ‘‘(iii) not less than 3 nor more than 5

11 percent, if the finding is the 3rd or a subse12 quent consecutive such finding made as a

13 result of such a review.

14 ‘‘(B) DISREGARD OF NONCOMPLIANCE

15 WHICH IS OF A TECHNICAL NATURE.—For pur16 poses of subparagraph (A) and section 452(a)(4),

17 a State which is not in full compliance with the

18 requirements of this part shall be determined to

19 be in substantial compliance with such require20 ments only if the Secretary determines that any

21 noncompliance with such requirements is of a

22 technical nature which does not adversely affect

23 the performance of the State’s program operated

24 under part D.
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1 ‘‘(9) FOR FAILURE TO EXPEND ADDITIONAL

2 STATE FUNDS TO REPLACE GRANT REDUCTIONS.—If

3 the grant payable to a State under section 402(a)(1)

4 for a fiscal year is reduced by reason of any of the

5 preceding paragraphs of this subsection, the State

6 shall, during the immediately succeeding fiscal year,

7 expend under the State program funded under this

8 part an amount equal to the sum of—

9 ‘‘(A) the applicable percentage of the his10 toric State expenditures; and

11 ‘‘(B) 105 percent of the total amount of

12 such reductions under such preceding para13 graphs.

14 ‘‘(b) REASONABLE CAUSE EXCEPTION.—The Secretary

15 may not impose a penalty on a State under subsection (a)

16 with respect to a requirement if the Secretary determines

17 that the State has reasonable cause for failing to comply

18 with the requirement.

19 ‘‘(c) CORRECTIVE COMPLIANCE PLAN.—

20 ‘‘(1) IN GENERAL.—

21 ‘‘(A) NOTIFICATION OF VIOLATION.—Not22 withstanding any other provision of law, the

23 Federal Government shall, before assessing a

24 penalty against a State under subsection (a), no25 tify the State of the violation of law for which
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1 the penalty would be assessed and allow the

2 State the opportunity to enter into a corrective

3 compliance plan in accordance with this sub4 section which outlines how the State will correct

5 any such violations and how the State will in6 sure continuing compliance with the require7 ments of this part.

8 ‘‘(B) 60-DAY PERIOD TO PROPOSE A COR9 RECTIVE COMPLIANCE PLAN.—Any State notified

10 under subparagraph (A) shall have 60 days in

11 which to submit to the Federal Government a

12 corrective compliance plan to correct any viola13 tions described in subparagraph (A).

14 ‘‘(C) ACCEPTANCE OF PLAN.—The Federal

15 Government shall have 60 days to accept or re16 ject the State’s corrective compliance plan and

17 may consult with the State during this period to

18 modify the plan. If the Federal Government does

19 not accept or reject the corrective compliance

20 plan during the period, the corrective compliance

21 plan shall be deemed to be accepted.

22 ‘‘(2) FAILURE TO CORRECT.—If a corrective

23 compliance plan is accepted by the Federal Govern24 ment, no penalty shall be imposed with respect to a

25 violation described in paragraph (1) if the State cor-
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1 rects the violation pursuant to the plan. If a State

2 has not corrected the violation in a timely manner

3 under the plan, some or all of the penalty shall be as4 sessed.

5 ‘‘(d) LIMITATION ON AMOUNT OF PENALTY.—

6 ‘‘(1) IN GENERAL.—In imposing the penalties

7 described in subsection (a), the Secretary shall not re8 duce any quarterly payment to a State by more than

9 25 percent.

10 ‘‘(2) CARRYFORWARD OF UNRECOVERED PEN11 ALTIES.—To the extent that paragraph (1) prevents

12 the Secretary from recovering during a fiscal year the

13 full amount of all penalties imposed on a State under

14 subsection (a) for a prior fiscal year, the Secretary

15 shall apply any remaining amount of such penalties

16 to the grant payable to the State under section

17 402(a)(1) for the immediately succeeding fiscal year.

18 ‘‘SEC. 409. APPEAL OF ADVERSE DECISION.

19 ‘‘(a) IN GENERAL.—Within 5 days after the date any

20 adverse decision is made or action is taken under this part

21 with respect to a State, the Secretary shall notify the chief

22 executive officer of the State of the adverse decision or ac23 tion, including any decision with respect to the State plan

24 submitted under section 401 or the imposition of a penalty

25 under section 408.
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1 ‘‘(b) ADMINISTRATIVE REVIEW OF ADVERSE DECI2 SION.—

3 ‘‘(1) IN GENERAL.—Within 60 days after the

4 date a State receives notice under this section of an

5 adverse decision, the State may appeal the decision,

6 in whole or in part, to the Departmental Appeals

7 Board established in the Department of Health and

8 Human Services (in this section referred to as the

9 ‘Board’) by filing an appeal with the Board.

10 ‘‘(2) PROCEDURAL RULES.—The Board shall

11 consider a State’s appeal on the basis of such docu12 mentation as the State may submit and as the Board

13 may require to support the final decision of the

14 Board. In deciding whether to uphold an adverse de15 cision or any portion of such a decision, the Board

16 shall conduct a thorough review of the issues and take

17 into account all relevant evidence. The Board shall

18 make a final determination with respect to an appeal

19 filed under this paragraph not less than 60 days after

20 the date the appeal is filed.

21 ‘‘(c) JUDICIAL REVIEW OF ADVERSE DECISION.—

22 ‘‘(1) IN GENERAL.—Within 90 days after the

23 date of a final decision by the Board with respect to

24 an adverse decision regarding a State under this sec25 tion, the State may obtain judicial review of the final
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1 decision (and the findings incorporated into the final

2 decision) by filing an action in—

3 ‘‘(A) the district court of the United States

4 for the judicial district in which the principal or

5 headquarters office of the State agency is located;

6 or

7 ‘‘(B) the United States District Court for

8 the District of Columbia.

9 ‘‘(2) PROCEDURAL RULES.—The district court in

10 which an action is filed shall review the final decision

11 of the Board on the record established in the adminis12 trative proceeding, in accordance with the standards

13 of review prescribed by subparagraphs (A) through

14 (E) of section 706(2) of title 5, United States Code.

15 The review shall be on the basis of the documents and

16 supporting data submitted to the Board.

17 ‘‘SEC. 410. DATA COLLECTION AND REPORTING.

18 ‘‘(a) GENERAL REPORTING REQUIREMENT.—Begin19 ning July 1, 1996, each State shall collect on a monthly

20 basis, and report to the Secretary on a quarterly basis, the

21 following information on the families receiving assistance

22 under the State program funded under this part:

23 ‘‘(1) The county of residence of the family.

24 ‘‘(2) Whether a child receiving such assistance or

25 an adult in the family is disabled.
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1 ‘‘(3) The ages of the members of such families.

2 ‘‘(4) The number of individuals in the family,

3 and the relation of each family member to the young4 est child in the family.

5 ‘‘(5) The employment status and earnings of the

6 employed adult in the family.

7 ‘‘(6) The marital status of the adults in the fam8 ily, including whether such adults have never mar9 ried, are widowed, or are divorced.

10 ‘‘(7) The educational status of each adult in the

11 family.

12 ‘‘(8) The educational status of each child in the

13 family.

14 ‘‘(9) Whether the family received subsidized hous15 ing, assistance under the State MediGrant plan ap16 proved under title XXI, food stamps, or subsidized

17 child care, and if the latter 2, the amount received.

18 ‘‘(10) The number of months that the family has

19 received each type of assistance under the program.

20 ‘‘(11) If the adults participated in, and the num21 ber of hours per week of participation in, the follow22 ing activities:

23 ‘‘(A) Education.

24 ‘‘(B) Subsidized private sector employment.

25 ‘‘(C) Unsubsidized employment.
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1 ‘‘(D) Public sector employment, work expe2 rience, or community service.

3 ‘‘(E) Job search.

4 ‘‘(F) Job skills training or on-the-job train5 ing.

6 ‘‘(G) Vocational education.

7 ‘‘(12) Information necessary to calculate partici8 pation rates under section 406.

9 ‘‘(13) The type and amount of assistance re10 ceived under the program, including the amount of

11 and reason for any reduction of assistance (including

12 sanctions).

13 ‘‘(14) From a sample of closed cases, whether the

14 family left the program, and if so, whether the family

15 left due to—

16 ‘‘(A) employment;

17 ‘‘(B) marriage;

18 ‘‘(C) the prohibition set forth in section

19 407(a)(8);

20 ‘‘(D) sanction; or

21 ‘‘(E) State policy.

22 ‘‘(15) Any amount of unearned income received

23 by any member of the family.

24 ‘‘(16) The citizenship of the members of the fam25 ily.
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1 ‘‘(b) USE OF ESTIMATES.—

2 ‘‘(1) AUTHORITY.—A State may comply with

3 subsection (a) by submitting an estimate which is ob4 tained through the use of scientifically acceptable

5 sampling methods approved by the Secretary.

6 ‘‘(2) SAMPLING AND OTHER METHODS.—The

7 Secretary shall provide the States with such case sam8 pling plans and data collection procedures as the Sec9 retary deems necessary to produce statistically valid

10 estimates of the performance of State programs fund11 ed under this part. The Secretary may develop and

12 implement procedures for verifying the quality of

13 data submitted by the States.

14 ‘‘(c) REPORT ON USE OF FEDERAL FUNDS TO COVER

15 ADMINISTRATIVE COSTS AND OVERHEAD.—The report re16 quired by subsection (a) for a fiscal quarter shall include

17 a statement of the percentage of the funds paid to the State

18 under this part for the quarter that are used to cover ad19 ministrative costs or overhead.

20 ‘‘(d) REPORT ON STATE EXPENDITURES ON PRO21 GRAMS FOR NEEDY FAMILIES.—The report required by sub22 section (a) for a fiscal quarter shall include a statement

23 of the total amount expended by the State during the quar24 ter on programs for needy families.
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1 ‘‘(e) REPORT ON NONCUSTODIAL PARENTS PARTICI2 PATING IN WORK ACTIVITIES.—The report required by sub3 section (a) for a fiscal quarter shall include the number of

4 noncustodial parents in the State who participated in work

5 activities (as defined in section 406(d)) during the quarter.

6 ‘‘(f) REPORT ON TRANSITIONAL SERVICES.—The re7 port required by subsection (a) for a fiscal quarter shall

8 include the total amount expended by the State during the

9 quarter to provide transitional services to a family that has

10 ceased to receive assistance under this part because of em11 ployment, along with a description of such services.

12 ‘‘(g) REPORT TO CONGRESS.—Not later than 6 months

13 after the end of fiscal year 1997, and each fiscal year there14 after, the Secretary shall transmit to the Congress a report

15 describing—

16 ‘‘(1) whether the States are meeting—

17 ‘‘(A) the participation rates described in

18 section 406(a); and

19 ‘‘(B) the objectives of—

20 ‘‘(i) increasing employment and earn21 ings of needy families, and child support

22 collections; and

23 ‘‘(ii) decreasing out-of-wedlock preg24 nancies and child poverty;
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1 ‘‘(2) the demographic and financial characteris2 tics of families applying for assistance, families re3 ceiving assistance, and families that become ineligible

4 to receive assistance;

5 ‘‘(3) the characteristics of each State program

6 funded under this part; and

7 ‘‘(4) the trends in employment and earnings of

8 needy families with minor children living at home.

9 ‘‘SEC. 411. DIRECT FUNDING AND ADMINISTRATION BY IN10 DIAN TRIBES.

11 ‘‘(a) GRANTS FOR INDIAN TRIBES.—

12 ‘‘(1) TRIBAL FAMILY ASSISTANCE GRANT.—

13 ‘‘(A) IN GENERAL.—For each of fiscal years

14 1997, 1998, 1999, and 2000, the Secretary shall

15 pay to each Indian tribe that has an approved

16 tribal family assistance plan a tribal family as17 sistance grant for the fiscal year in an amount

18 equal to the amount determined under subpara19 graph (B), and shall reduce the grant payable

20 under section 402(a)(1) to any State in which

21 lies the service area or areas of the Indian tribe

22 by that portion of the amount so determined that

23 is attributable to expenditures by the State.

24 ‘‘(B) AMOUNT DETERMINED.—
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1 ‘‘(i) IN GENERAL.—The amount deter2 mined under this subparagraph is an

3 amount equal to the total amount of the

4 Federal payments to a State or States

5 under section 403 for fiscal year 1994 (as

6 in effect during such fiscal year) attrib7 utable to expenditures by the State or States

8 under parts A and F of this title (as so in

9 effect) for fiscal year 1994 for Indian fami10 lies residing in the service area or areas

11 identified by the Indian tribe pursuant to

12 subsection (b)(1)(C).

13 ‘‘(ii) USE OF STATE SUBMITTED

14 DATA.—

15 ‘‘(I) IN GENERAL.—The Secretary

16 shall use State submitted data to make

17 each determination under clause (i).

18 ‘‘(II) DISAGREEMENT WITH DE19 TERMINATION.—If an Indian tribe or

20 tribal organization disagrees with

21 State submitted data described under

22 subclause (I), the Indian tribe or tribal

23 organization may submit to the Sec24 retary such additional information as

25 may be relevant to making the deter-
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1 mination under clause (i) and the Sec2 retary may consider such information

3 before making such determination.

4 ‘‘(2) GRANTS FOR INDIAN TRIBES THAT RE5 CEIVED JOBS FUNDS.—

6 ‘‘(A) IN GENERAL.—The Secretary shall pay

7 to each eligible Indian tribe for each of fiscal

8 years 1996, 1997, 1998, 1999, and 2000 a grant

9 in an amount equal to the amount received by

10 the Indian tribe in fiscal year 1994 under sec11 tion 482(i) (as in effect during fiscal year 1994).

12 ‘‘(B) ELIGIBLE INDIAN TRIBE.—For pur13 poses of subparagraph (A), the term ‘eligible In14 dian tribe’ means an Indian tribe or Alaska Na15 tive organization that conducted a job opportuni16 ties and basic skills training program in fiscal

17 year 1995 under section 482(i) (as in effect dur18 ing such fiscal year).

19 ‘‘(C) USE OF GRANT.—Each Indian tribe to

20 which a grant is made under this paragraph

21 shall use the grant for the purpose of operating

22 a program to make work activities available to

23 members of the Indian tribe.

24 ‘‘(D) APPROPRIATION.—Out of any money

25 in the Treasury of the United States not other-
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1 wise appropriated, there are appropriated

2 $7,638,474 for each fiscal year specified in sub3 paragraph (A) for grants under subparagraph

4 (A).

5 ‘‘(b) 3-YEAR TRIBAL FAMILY ASSISTANCE PLAN.—

6 ‘‘(1) IN GENERAL.—Any Indian tribe that de7 sires to receive a tribal family assistance grant shall

8 submit to the Secretary a 3-year tribal family assist9 ance plan that—

10 ‘‘(A) outlines the Indian tribe’s approach to

11 providing welfare-related services for the 3-year

12 period, consistent with this section;

13 ‘‘(B) specifies whether the welfare-related

14 services provided under the plan will be provided

15 by the Indian tribe or through agreements, con16 tracts, or compacts with intertribal consortia,

17 States, or other entities;

18 ‘‘(C) identifies the population and service

19 area or areas to be served by such plan;

20 ‘‘(D) provides that a family receiving as21 sistance under the plan may not receive duplica22 tive assistance from other State or tribal pro23 grams funded under this part;

24 ‘‘(E) identifies the employment opportuni25 ties in or near the service area or areas of the
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1 Indian tribe and the manner in which the In2 dian tribe will cooperate and participate in en3 hancing such opportunities for recipients of as4 sistance under the plan consistent with any ap5 plicable State standards; and

6 ‘‘(F) applies the fiscal accountability provi7 sions of section 5(f)(1) of the Indian Self-Deter8 mination and Education Assistance Act (25

9 U.S.C. 450c(f)(1)), relating to the submission of

10 a single-agency audit report required by chapter

11 75 of title 31, United States Code.

12 ‘‘(2) APPROVAL.—The Secretary shall approve

13 each tribal family assistance plan submitted in ac14 cordance with paragraph (1).

15 ‘‘(3) CONSORTIUM OF TRIBES.—Nothing in this

16 section shall preclude the development and submission

17 of a single tribal family assistance plan by the par18 ticipating Indian tribes of an intertribal consortium.

19 ‘‘(c) MINIMUM WORK PARTICIPATION REQUIREMENTS

20 AND TIME LIMITS.—The Secretary, with the participation

21 of Indian tribes, shall establish for each Indian tribe receiv22 ing a grant under this section minimum work participa23 tion requirements, appropriate time limits for receipt of

24 welfare-related services under the grant, and penalties

25 against individuals—
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1 ‘‘(1) consistent with the purposes of this section;

2 ‘‘(2) consistent with the economic conditions and

3 resources available to each tribe; and

4 ‘‘(3) similar to comparable provisions in section

5 406(d).

6 ‘‘(d) EMERGENCY ASSISTANCE.—Nothing in this sec7 tion shall preclude an Indian tribe from seeking emergency

8 assistance from any Federal loan program or emergency

9 fund.

10 ‘‘(e) ACCOUNTABILITY.—Nothing in this section shall

11 be construed to limit the ability of the Secretary to main12 tain program funding accountability consistent with—

13 ‘‘(1) generally accepted accounting principles;

14 and

15 ‘‘(2) the requirements of the Indian Self-Deter16 mination and Education Assistance Act (25 U.S.C.

17 450 et seq.).

18 ‘‘(f) PENALTIES.—

19 ‘‘(1) Subsections (a)(1), (a)(6), and (b) of section

20 408, shall apply to an Indian tribe with an approved

21 tribal assistance plan in the same manner as such

22 subsections apply to a State.

23 ‘‘(2) Section 408(a)(3) shall apply to an Indian

24 tribe with an approved tribal assistance plan by sub25 stituting ‘meet minimum work participation require-
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1 ments established under section 411(c)’ for ‘comply

2 with section 406(a)’.

3 ‘‘(g) DATA COLLECTION AND REPORTING.—Section

4 410 shall apply to an Indian tribe with an approved tribal

5 family assistance plan.

6 ‘‘(h) SPECIAL RULE FOR INDIAN TRIBES IN ALAS7 KA.—

8 ‘‘(1) IN GENERAL.—Notwithstanding any other

9 provision of this section, and except as provided in

10 paragraph (2), a tribal organization in the State of

11 Alaska that receives a tribal family assistance grant

12 under this section shall use the grant to operate a

13 program in accordance with the requirements com14 parable to the requirements applicable to the program

15 of the State of Alaska funded under this part. Com16 parability of programs shall be established on the

17 basis of program criteria developed by the Secretary

18 in consultation with the State of Alaska and the trib19 al organizations.

20 ‘‘(2) WAIVER.—An Indian tribe described in

21 paragraph (1) may apply to the appropriate State

22 authority to receive a waiver of the requirement of

23 paragraph (1).
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1 ‘‘SEC. 412. RESEARCH, EVALUATIONS, AND NATIONAL STUD2 IES.

3 ‘‘(a) RESEARCH.—The Secretary shall conduct re4 search on the benefits, effects, and costs of operating dif5 ferent State programs funded under this part, including

6 time limits relating to eligibility for assistance. The re7 search shall include studies on the effects of different pro8 grams and the operation of such programs on welfare de9 pendency, illegitimacy, teen pregnancy, employment rates,

10 child well-being, and any other area the Secretary deems

11 appropriate. The Secretary shall also conduct research on

12 the costs and benefits of State activities under section 406.

13 ‘‘(b) DEVELOPMENT AND EVALUATION OF INNOVATIVE

14 APPROACHES TO REDUCING WELFARE DEPENDENCY AND

15 INCREASING CHILD WELL-BEING.—

16 ‘‘(1) IN GENERAL.—The Secretary may assist

17 States in developing, and shall evaluate, innovative

18 approaches for reducing welfare dependency and in19 creasing the well-being of minor children living at

20 home with respect to recipients of assistance under

21 programs funded under this part. The Secretary may

22 provide funds for training and technical assistance to

23 carry out the approaches developed pursuant to this

24 paragraph.

25 ‘‘(2) EVALUATIONS.—In performing the evalua26 tions under paragraph (1), the Secretary shall, to the
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1 maximum extent feasible, use random assignment as

2 an evaluation methodology.

3 ‘‘(c) DISSEMINATION OF INFORMATION.—The Sec4 retary shall develop innovative methods of disseminating

5 information on any research, evaluations, and studies con6 ducted under this section, including the facilitation of the

7 sharing of information and best practices among States and

8 localities through the use of computers and other tech9 nologies.

10 ‘‘(d) ANNUAL RANKING OF STATES AND REVIEW OF

11 MOST AND LEAST SUCCESSFUL WORK PROGRAMS.—

12 ‘‘(1) ANNUAL RANKING OF STATES.—The Sec13 retary shall rank annually the States to which grants

14 are paid under section 402 in the order of their suc15 cess in placing recipients of assistance under the

16 State program funded under this part into long-term

17 private sector jobs, reducing the overall welfare case18 load, and, when a practicable method for calculating

19 this information becomes available, diverting individ20 uals from formally applying to the State program

21 and receiving assistance. In ranking States under this

22 subsection, the Secretary shall take into account the

23 average number of minor children living at home in

24 families in the State that have incomes below the pov-
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1 erty line and the amount of funding provided each

2 State for such families.

3 ‘‘(2) ANNUAL REVIEW OF MOST AND LEAST SUC4 CESSFUL WORK PROGRAMS.—The Secretary shall re5 view the programs of the 3 States most recently

6 ranked highest under paragraph (1) and the 3 States

7 most recently ranked lowest under paragraph (1) that

8 provide parents with work experience, assistance in

9 finding employment, and other work preparation ac10 tivities and support services to enable the families of

11 such parents to leave the program and become self-suf12 ficient.

13 ‘‘(e) ANNUAL RANKING OF STATES AND REVIEW OF IS14 SUES RELATING TO OUT-OF-WEDLOCK BIRTHS.—

15 ‘‘(1) ANNUAL RANKING OF STATES.—

16 ‘‘(A) IN GENERAL.—The Secretary shall an17 nually rank States to which grants are made

18 under section 402 based on the following ranking

19 factors:

20 ‘‘(i) ABSOLUTE OUT-OF-WEDLOCK RA21 TIOS.—The ratio represented by—

22 ‘‘(I) the total number of out-of23 wedlock births in families receiving as24 sistance under the State program

25 under this part in the State for the
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1 most recent fiscal year for which infor2 mation is available; over

3 ‘‘(II) the total number of births in

4 families receiving assistance under the

5 State program under this part in the

6 State for such year.

7 ‘‘(ii) NET CHANGES IN THE OUT-OF8 WEDLOCK RATIO.—The difference between

9 the ratio described in subparagraph (A)(i)

10 for the most recent fiscal year for which in11 formation is available and such State’s

12 ratio determined for the preceding year.

13 ‘‘(2) ANNUAL REVIEW.—The Secretary shall re14 view the programs of the 5 States most recently

15 ranked highest under paragraph (1) and the 5 States

16 most recently ranked the lowest under paragraph (1).

17 ‘‘(f) STATE-INITIATED STUDIES.—A State shall be eli18 gible to receive funding to evaluate the State’s family assist19 ance program funded under this part if—

20 ‘‘(1) the State submits a proposal to the Sec21 retary for such evaluation,

22 ‘‘(2) the Secretary determines that the design

23 and approach of the evaluation is rigorous and is

24 likely to yield information that is credible and will

25 be useful to other States, and
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1 ‘‘(3) unless otherwise waived by the Secretary,

2 the State provides a non-Federal share of at least 10

3 percent of the cost of such study.

4 ‘‘(g) FUNDING OF STUDIES AND DEMONSTRATIONS.—

5 ‘‘(1) IN GENERAL.—Out of any money in the

6 Treasury of the United States not otherwise appro7 priated, there are appropriated $15,000,000 for each

8 fiscal year specified in section 402(a)(1) for the pur9 pose of paying—

10 ‘‘(A) the cost of conducting the research de11 scribed in subsection (a);

12 ‘‘(B) the cost of developing and evaluating

13 innovative approaches for reducing welfare de14 pendency and increasing the well-being of minor

15 children under subsection (b);

16 ‘‘(C) the Federal share of any State-initi17 ated study approved under subsection (f); and

18 ‘‘(D) an amount determined by the Sec19 retary to be necessary to operate and evaluate

20 demonstration projects, relating to this part, that

21 are in effect or approved under section 1115 as

22 of September 30, 1995, and are continued after

23 such date.

24 ‘‘(2) ALLOCATION.—Of the amount appropriated

25 under paragraph (1) for a fiscal year—
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1 ‘‘(A) 50 percent shall be allocated for the

2 purposes described in subparagraphs (A) and

3 (B) of paragraph (1), and

4 ‘‘(B) 50 percent shall be allocated for the

5 purposes described in subparagraphs (C) and

6 (D) of paragraph (1).

7 ‘‘SEC. 413. STUDY BY THE CENSUS BUREAU.

8 ‘‘(a) IN GENERAL.—The Bureau of the Census shall

9 expand the Survey of Income and Program Participation

10 as necessary to obtain such information as will enable in11 terested persons to evaluate the impact of the amendments

12 made by subtitle A of the Personal Responsibility and Work

13 Opportunity Act of 1995 on a random national sample of

14 recipients of assistance under State programs funded under

15 this part and (as appropriate) other low income families,

16 and in doing so, shall pay particular attention to the issues

17 of out-of-wedlock birth, welfare dependency, the beginning

18 and end of welfare spells, and the causes of repeat welfare

19 spells.

20 ‘‘(b) APPROPRIATION.—Out of any money in the

21 Treasury of the United States not otherwise appropriated,

22 there are appropriated $10,000,000 for each of fiscal years

23 1996, 1997, 1998, 1999, and 2000 for payment to the Bu24 reau of the Census to carry out subsection (a).
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1 ‘‘SEC. 414. WAIVERS.

2 ‘‘(a) CONTINUATION OF WAIVERS.—

3 ‘‘(1) IN GENERAL.—Except as provided in para4 graph (2), if any waiver granted to a State under sec5 tion 1115 or otherwise which relates to the provision

6 of assistance under a State plan under this part is

7 in effect or approved by the Secretary as of October

8 1, 1995, the amendments made by the Personal Re9 sponsibility and Work Opportunity Act of 1995 shall

10 not apply with respect to the State before the expira11 tion (determined without regard to any extensions) of

12 the waiver to the extent such amendments are incon13 sistent with the terms of the waiver.

14 ‘‘(2) FINANCING LIMITATION.—Notwithstanding

15 any other provision of law, beginning with fiscal year

16 1996, a State operating under a waiver described in

17 paragraph (1) shall receive the payment described for

18 such State for such fiscal year under section 402, in

19 lieu of any other payment provided for in the waiver.

20 ‘‘(b) STATE OPTION TO TERMINATE WAIVER.—

21 ‘‘(1) IN GENERAL.—A State may terminate a

22 waiver described in subsection (a) before the expira23 tion of the waiver.

24 ‘‘(2) REPORT.—A State which terminates a

25 waiver under paragraph (1) shall submit a report to

26 the Secretary summarizing the waiver and any avail-
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1 able information concerning the result or effect of

2 such waiver.

3 ‘‘(3) HOLD HARMLESS PROVISION.—

4 ‘‘(A) IN GENERAL.—Notwithstanding any

5 other provision of law, a State that, not later

6 than the date described in subparagraph (B),

7 submits a written request to terminate a waiver

8 described in subsection (a) shall be held harmless

9 for accrued cost neutrality liabilities incurred

10 under the terms and conditions of such waiver.

11 ‘‘(B) DATE DESCRIBED.—The date described

12 in this subparagraph is the later of—

13 ‘‘(i) January 1, 1996; or

14 ‘‘(ii) 90 days following the adjourn15 ment of the first regular session of the State

16 legislature that begins after the date of the

17 enactment of the Personal Responsibility

18 and Work Opportunity Act of 1995.

19 ‘‘(c) SECRETARIAL ENCOURAGEMENT OF CURRENT

20 WAIVERS.—The Secretary shall encourage any State oper21 ating a waiver described in subsection (a) to continue such

22 waiver and to evaluate, using random sampling and other

23 characteristics of accepted scientific evaluations, the result

24 or effect of such waiver.
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1 ‘‘(d) CONTINUATION OF INDIVIDUAL WAIVERS.—A

2 State may elect to continue one or more individual waivers

3 described in subsection (a)(1).

4 ‘‘SEC. 415. ASSISTANT SECRETARY FOR FAMILY SUPPORT.

5 ‘‘The programs under this part and part D shall be

6 administered by an Assistant Secretary for Family Support

7 within the Department of Health and Human Services, who

8 shall be appointed by the President, by and with the advice

9 and consent of the Senate, and who shall be in addition

10 to any other Assistant Secretary of Health and Human

11 Services provided for by law.

12 ‘‘SEC. 416. LIMITATION ON FEDERAL AUTHORITY.

13 ‘‘No officer or employee of the Federal Government

14 may regulate the conduct of States under this part or en15 force any provision of this part, except to the extent ex16 pressly provided in this part.

17 ‘‘SEC. 417. DEFINITIONS.

18 ‘‘As used in this part:

19 ‘‘(1) ADULT.—The term ‘adult’ means an indi20 vidual who is not a minor child.

21 ‘‘(2) MINOR CHILD.—The term ‘minor child’

22 means an individual who—

23 ‘‘(A) has not attained 18 years of age; or

24 ‘‘(B) has not attained 19 years of age and

25 is a full-time student in a secondary school (or
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1 in the equivalent level of vocational or technical

2 training).

3 ‘‘(3) FISCAL YEAR.—The term ‘fiscal year’

4 means any 12-month period ending on September 30

5 of a calendar year.

6 ‘‘(4) INDIAN, INDIAN TRIBE, AND TRIBAL ORGANI7 ZATION.—

8 ‘‘(A) IN GENERAL.—Except as provided in

9 subparagraph (B), the terms ‘Indian’, ‘Indian

10 tribe’, and ‘tribal organization’ have the mean11 ing given such terms by section 4 of the Indian

12 Self-Determination and Education Assistance

13 Act (25 U.S.C. 450b).

14 ‘‘(B) SPECIAL RULE FOR INDIAN TRIBES IN

15 ALASKA.—The term ‘Indian tribe’ means, with

16 respect to the State of Alaska, only the following

17 Alaska Native regional nonprofit corporations:

18 ‘‘(i) Arctic Slope Native Association.

19 ‘‘(ii) Kawerak, Inc.

20 ‘‘(iii) Maniilaq Association.

21 ‘‘(iv) Association of Village Council

22 Presidents.

23 ‘‘(v) Tanana Chiefs Conference.

24 ‘‘(vi) Cook Inlet Tribal Council.

25 ‘‘(vii) Bristol Bay Native Association.
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1 ‘‘(viii) Aleutian and Pribilof Island

2 Association.

3 ‘‘(ix) Chugachmuit.

4 ‘‘(x) Tlingit Haida Central Council.

5 ‘‘(xi) Kodiak Area Native Association.

6 ‘‘(xii) Copper River Native Associa7 tion.

8 ‘‘(xiii) Metlakatla Indian Tribe.

9 ‘‘(5) STATE.—Except as otherwise specifically

10 provided, the term ‘State’ includes the several States,

11 the District of Columbia, the Commonwealth of Puer12 to Rico, the United States Virgin Islands, Guam, and

13 American Samoa.’’.

14 SEC. 12102. REPORT ON DATA PROCESSING.

15 (a) IN GENERAL.—Within 6 months after the date of

16 the enactment of this Act, the Secretary of Health and

17 Human Services shall prepare and submit to the Congress

18 a report on—

19 (1) the status of the automated data processing

20 systems operated by the States to assist management

21 in the administration of State programs under part

22 A of title IV of the Social Security Act (whether in

23 effect before or after October 1, 1995); and

24 (2) what would be required to establish a system

25 capable of—
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1 (A) tracking participants in public pro2 grams over time; and

3 (B) checking case records of the States to de4 termine whether individuals are participating in

5 public programs of 2 or more States.

6 (b) PREFERRED CONTENTS.—The report required by

7 subsection (a) should include—

8 (1) a plan for building on the automated data

9 processing systems of the States to establish a system

10 with the capabilities described in subsection (a)(2);

11 and

12 (2) an estimate of the amount of time required

13 to establish such a system and of the cost of establish14 ing such a system.

15 SEC. 12103. CONFORMING AMENDMENTS TO THE SOCIAL

16 SECURITY ACT.

17 (a) AMENDMENTS TO TITLE II.—

18 (1) Section 205(c)(2)(C)(vi) (42 U.S.C.

19 405(c)(2)(C)(vi)), as so redesignated by section

20 321(a)(9)(B) of the Social Security Independence and

21 Program Improvements Act of 1994, is amended—

22 (A) by inserting ‘‘an agency administering

23 a program funded under part A of title IV or’’

24 before ‘‘an agency operating’’; and
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1 (B) by striking ‘‘A or D of title IV of this

2 Act’’ and inserting ‘‘D of such title’’.

3 (2) Section 228(d)(1) (42 U.S.C. 428(d)(1)) is

4 amended by inserting ‘‘under a State program funded

5 under’’ before ‘‘part A of title IV’’.

6 (b) AMENDMENTS TO PART D OF TITLE IV.—

7 (1) Section 451 (42 U.S.C. 651) is amended by

8 striking ‘‘aid’’ and inserting ‘‘assistance under a

9 State program funded’’.

10 (2) Section 452(a)(10)(C) (42 U.S.C.

11 652(a)(10)(C)) is amended—

12 (A) by striking ‘‘aid to families with de13 pendent children’’ and inserting ‘‘assistance

14 under a State program funded under part A’’;

15 (B) by striking ‘‘such aid’’ and inserting

16 ‘‘such assistance’’; and

17 (C) by striking ‘‘under section 402(a)(26) or

18 471(a)(17)’’ and inserting ‘‘pursuant to section

19 408(a)(4) or under section 471(a)(17)’’.

20 (3) Section 452(a)(10)(F) (42 U.S.C.

21 652(a)(10)(F)) is amended—

22 (A) by striking ‘‘aid under a State plan ap23 proved’’ and inserting ‘‘assistance under a State

24 program funded’’; and
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1 (B) by striking ‘‘in accordance with the

2 standards referred to in section

3 402(a)(26)(B)(ii)’’ and inserting ‘‘by the State’’.

4 (4) Section 452(b) (42 U.S.C. 652(b)) is amend5 ed in the first sentence by striking ‘‘aid under the

6 State plan approved under part A’’ and inserting

7 ‘‘assistance under the State program funded under

8 part A’’.

9 (5) Section 452(d)(3)(B)(i) (42 U.S.C.

10 652(d)(3)(B)(i)) is amended by striking ‘‘1115(c)’’

11 and inserting ‘‘1115(b)’’.

12 (6) Section 452(g)(2)(A)(ii)(I) (42 U.S.C.

13 652(g)(2)(A)(ii)(I)) is amended by striking ‘‘aid is

14 being paid under the State’s plan approved under

15 part A or E’’ and inserting ‘‘assistance is being pro16 vided under the State program funded under part A

17 or aid is being paid under the State’s plan approved

18 under part E’’.

19 (7) Section 452(g)(2)(A) (42 U.S.C.

20 652(g)(2)(A)) is amended in the matter following

21 clause (iii) by striking ‘‘aid was being paid under the

22 State’s plan approved under part A or E’’ and insert23 ing ‘‘assistance was being provided under the State

24 program funded under part A or aid was being paid

25 under the State’s plan approved under part E’’.
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1 (8) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is

2 amended in the matter following subparagraph (B)—

3 (A) by striking ‘‘who is a dependent child’’

4 and inserting ‘‘with respect to whom assistance

5 is being provided under the State program fund6 ed under part A’’;

7 (B) by inserting ‘‘by the State agency ad8 ministering the State plan approved under this

9 part’’ after ‘‘found’’; and

10 (C) by striking ‘‘under section 402(a)(26)’’

11 and inserting ‘‘with the State in establishing pa12 ternity’’.

13 (9) Section 452(h) (42 U.S.C. 652(h)) is amend14 ed by striking ‘‘under section 402(a)(26)’’ and insert15 ing ‘‘pursuant to section 408(a)(4)’’.

16 (10) Section 453(c)(3) (42 U.S.C. 653(c)(3)) is

17 amended by striking ‘‘aid under part A of this title’’

18 and inserting ‘‘assistance under a State program

19 funded under part A’’.

20 (11) Section 454(5)(A) (42 U.S.C. 654(5)(A))) is

21 amended—

22 (A) by striking ‘‘under section 402(a)(26)’’

23 and inserting ‘‘pursuant to section 408(a)(4)’’;

24 and
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1 (B) by striking ‘‘; except that this para2 graph shall not apply to such payments for any

3 month following the first month in which the

4 amount collected is sufficient to make such fam5 ily ineligible for assistance under the State plan

6 approved under part A;’’ and inserting a

7 comma.

8 (12) Section 454(6)(D) (42 U.S.C. 654(6)(D)) is

9 amended by striking ‘‘aid under a State plan ap10 proved’’ and inserting ‘‘assistance under a State pro11 gram funded’’.

12 (13) Section 456(a)(1) (42 U.S.C. 656(a)(1)) is

13 amended by striking ‘‘under section 402(a)(26)’’.

14 (14) Section 466(a)(3)(B) (42 U.S.C.

15 666(a)(3)(B)) is amended by striking ‘‘402(a)(26)’’

16 and inserting ‘‘408(a)(4)’’.

17 (15) Section 466(b)(2) (42 U.S.C. 666(b)(2)) is

18 amended by striking ‘‘aid’’ and inserting ‘‘assistance

19 under a State program funded’’.

20 (16) Section 469(a) (42 U.S.C. 669(a)) is

21 amended—

22 (A) by striking ‘‘aid under plans approved’’

23 and inserting ‘‘assistance under State programs

24 funded’’; and
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1 (B) by striking ‘‘such aid’’ and inserting

2 ‘‘such assistance’’.

3 (c) REPEAL OF PART F OF TITLE IV.—Part F of title

4 IV (42 U.S.C. 681–687) is repealed.

5 (d) AMENDMENT TO TITLE X.—Section 1002(a)(7) (42

6 U.S.C. 1202(a)(7)) is amended by striking ‘‘aid to families

7 with dependent children under the State plan approved

8 under section 402 of this Act’’ and inserting ‘‘assistance

9 under a State program funded under part A of title IV’’.

10 (e) AMENDMENTS TO TITLE XI.—

11 (1) Section 1108 (42 U.S.C. 1308) is amended to

12 read as follows:

13 ‘‘SEC. 1108. LIMITATION ON PAYMENTS TO PUERTO RICO,

14 THE VIRGIN ISLANDS, GUAM, AND AMERICAN

15 SAMOA.

16 ‘‘(a) IN GENERAL.—Notwithstanding any other provi17 sion of this Act, the total amount certified by the Secretary

18 of Health and Human Services under titles I, X, XIV, and

19 XVI, and under parts A and B of title IV for payment to

20 any territory for a fiscal year shall not exceed the ceiling

21 amount for the territory for the fiscal year.

22 ‘‘(b) DEFINITIONS.—As used in this section:

23 ‘‘(1) TERRITORY.—The term ‘territory’ means

24 Puerto Rico, the Virgin Islands, Guam, and Amer25 ican Samoa.
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1 ‘‘(2) CEILING AMOUNT.—The term ‘ceiling

2 amount’ means, with respect to a territory and a fis3 cal year, the mandatory ceiling amount with respect

4 to the territory plus the discretionary ceiling amount

5 with respect to the territory, reduced for the fiscal

6 year in accordance with subsection (e).

7 ‘‘(3) MANDATORY CEILING AMOUNT.—The term

8 ‘mandatory ceiling amount’ means—

9 ‘‘(A) $103,538,000 with respect to for Puer10 to Rico;

11 ‘‘(B) $4,812,000 with respect to Guam;

12 ‘‘(C) $3,677,397 with respect to the Virgin

13 Islands; and

14 ‘‘(D) $1,122,095 with respect to American

15 Samoa.

16 ‘‘(4) DISCRETIONARY CEILING AMOUNT.—The

17 term ‘discretionary ceiling amount’ means, with re18 spect to a territory, the dollar amount specified in

19 subsection (c)(2) with respect to the territory.

20 ‘‘(c) DISCRETIONARY GRANTS.—

21 ‘‘(1) IN GENERAL.—The Secretary shall make a

22 grant to each territory for any fiscal year in the

23 amount appropriated pursuant to paragraph (2) for

24 the fiscal year for payment to the territory.
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1 ‘‘(2) USE OF GRANT.—Any territory to which a

2 grant is made under paragraph (1) may expend the

3 amount under any program operated or funded under

4 any provision of law specified in subsection (a).

5 ‘‘(3) LIMITATION ON AUTHORIZATION OF APPRO6 PRIATIONS.—For grants under paragraph (1), there

7 are authorized to be appropriated to the Secretary for

8 each fiscal year—

9 ‘‘(A) $7,951,000 for payment to Puerto

10 Rico;

11 ‘‘(B) $345,000 for payment to Guam;

12 ‘‘(C) $275,000 for payment to the Virgin Is13 lands; and

14 ‘‘(D) $190,000 for payment to American

15 Samoa.

16 ‘‘(d) AUTHORITY TO TRANSFER FUNDS AMONG PRO17 GRAMS.—Notwithstanding any other provision of this Act,

18 any territory to which an amount is paid under any provi19 sion of law specified in subsection (a) may use part or all

20 of the amount to carry out any program operated by the

21 territory, or funded, under any other such provision of law.

22 ‘‘(e) MAINTENANCE OF EFFORT.—The ceiling amount

23 with respect to a territory shall be reduced for a fiscal year

24 by an amount equal to the amount (if any) by which—
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1 ‘‘(1) the total amount expended by the territory

2 under all programs of the territory operated pursuant

3 to the provisions of law specified in subsection (a) (as

4 such provisions were in effect for fiscal year 1995) for

5 fiscal year 1995; exceeds

6 ‘‘(2) the total amount expended by the territory

7 under all programs of the territory that are funded

8 under the provisions of law specified in subsection (a)

9 for the fiscal year that immediately precedes the fiscal

10 year referred to in the matter preceding paragraph

11 (1).’’.

12 (2) Section 1109 (42 U.S.C. 1309) is amended

13 by striking ‘‘or part A of title IV,’’.

14 (3) Section 1115 (42 U.S.C. 1315) is amended—

15 (A) in subsection (a)(2)—

16 (i) by inserting ‘‘(A)’’ after ‘‘(2)’’;

17 (ii) by striking ‘‘403,’’;

18 (iii) by striking the period at the end

19 and inserting ‘‘, and’’; and

20 (iv) by adding at the end the following

21 new subparagraph:

22 ‘‘(B) costs of such project which would not other23 wise be a permissible use of funds under part A of

24 title IV and which are not included as part of the

25 costs of projects under section 1110, shall to the extent
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1 and for the period prescribed by the Secretary, be re2 garded as a permissible use of funds under such

3 part.’’; and

4 (B) in subsection (c)(3), by striking ‘‘under

5 the program of aid to families with dependent

6 children’’ and inserting ‘‘part A of such title’’.

7 (4) Section 1116 (42 U.S.C. 1316) is amended—

8 (A) in each of subsections (a)(1), (b), and

9 (d), by striking ‘‘or part A of title IV,’’; and

10 (B) in subsection (a)(3), by striking ‘‘404,’’.

11 (5) Section 1118 (42 U.S.C. 1318) is amended—

12 (A) by striking ‘‘403(a),’’;

13 (B) by striking ‘‘and part A of title IV,’’;

14 and

15 (C) by striking ‘‘, and shall, in the case of

16 American Samoa, mean 75 per centum with re17 spect to part A of title IV’’.

18 (6) Section 1119 (42 U.S.C. 1319) is amended—

19 (A) by striking ‘‘or part A of title IV’’; and

20 (B) by striking ‘‘403(a),’’.

21 (7) Section 1133(a) (42 U.S.C. 1320b–3(a)) is

22 amended by striking ‘‘or part A of title IV,’’.

23 (8) Section 1136 (42 U.S.C. 1320b–6) is re24 pealed.
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1 (9) Section 1137 (42 U.S.C. 1320b–7) is amend2 ed—

3 (A) in subsection (b), by striking paragraph

4 (1) and inserting the following:

5 ‘‘(1) any State program funded under part A of

6 title IV of this Act;’’; and

7 (B) in subsection (d)(1)(B)—

8 (i) by striking ‘‘In this subsection—’’

9 and all that follows through ‘‘(ii) in’’ and

10 inserting ‘‘In this subsection, in’’;

11 (ii) by redesignating subclauses (I),

12 (II), and (III) as clauses (i), (ii), and (iii);

13 and

14 (iii) by moving such redesignated ma15 terial 2 ems to the left.

16 (f) AMENDMENT TO TITLE XIV.—Section 1402(a)(7)

17 (42 U.S.C. 1352(a)(7)) is amended by striking ‘‘aid to fam18 ilies with dependent children under the State plan approved

19 under section 402 of this Act’’ and inserting ‘‘assistance

20 under a State program funded under part A of title IV’’.

21 (g) AMENDMENT TO TITLE XVI AS IN EFFECT WITH

22 RESPECT TO THE TERRITORIES.—Section 1602(a)(11), as

23 in effect without regard to the amendment made by section

24 301 of the Social Security Amendments of 1972 (42 U.S.C.

25 1382 note), is amended by striking ‘‘aid under the State
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1 plan approved’’ and inserting ‘‘assistance under a State

2 program funded’’.

3 (h) AMENDMENT TO TITLE XVI AS IN EFFECT WITH

4 RESPECT TO THE STATES.—Section 1611(c)(5)(A) (42

5 U.S.C. 1382(c)(5)(A)) is amended to read as follows: ‘‘(A)

6 a State program funded under part A of title IV,’’.

7 SEC. 12104. CONFORMING AMENDMENTS TO THE FOOD

8 STAMP ACT OF 1977 AND RELATED PROVI9 SIONS.

10 (a) Section 5 of the Food Stamp Act of 1977 (7 U.S.C.

11 2014) is amended—

12 (1) in the second sentence of subsection (a), by

13 striking ‘‘plan approved’’ and all that follows through

14 ‘‘title IV of the Social Security Act’’ and inserting

15 ‘‘program funded under part A of title IV of the So16 cial Security Act (42 U.S.C. 601 et seq.) that the Sec17 retary determines complies with standards established

18 by the Secretary that ensure that the standards under

19 the State program are comparable to or more restric20 tive than those in effect on June 1, 1995’’;

21 (2) in subsection (d)—

22 (A) in paragraph (5), by striking ‘‘assist23 ance to families with dependent children’’ and

24 inserting ‘‘assistance under a State program

25 funded’’; and
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1 (B) by striking paragraph (13) and redesig2 nating paragraphs (14), (15), and (16) as para3 graphs (13), (14), and (15), respectively;

4 (3) in subsection (j), by striking ‘‘plan approved

5 under part A of title IV of such Act (42 U.S.C. 601

6 et seq.)’’ and inserting ‘‘program funded under part

7 A of title IV of the Act (42 U.S.C. 601 et seq.) that

8 the Secretary determines complies with standards es9 tablished by the Secretary that ensure that the stand10 ards under the State program are comparable to or

11 more restrictive than those in effect on June 1, 1995’’.

12 (b) Section 6 of such Act (7 U.S.C. 2015) is amend13 ed—

14 (1) in subsection (c)(5), by striking ‘‘the State

15 plan approved’’ and inserting ‘‘the State program

16 funded’’;

17 (2) in subsection (e)—

18 (A) by striking ‘‘aid to families with de19 pendent children’’ and inserting ‘‘benefits under

20 a State program funded’’; and

21 (B) by inserting before the semicolon the fol22 lowing: ‘‘that the Secretary determines complies

23 with standards established by the Secretary that

24 ensure that the standards under the State pro-
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1 gram are comparable to or more restrictive than

2 those in effect on June 1, 1995’’; and

3 (3) by adding at the end the following new sub4 section:

5 ‘‘(i) ELIGIBILITY UNDER OTHER LAW.—Notwith6 standing any other provision of this Act, a household may

7 not receive benefits under this Act as a result of the house8 hold’s eligibility under a State program funded under part

9 A of title IV of the Social Security Act (42 U.S.C. 601 et

10 seq.), unless the Secretary determines that any household

11 with income above 130 percent of the poverty guidelines is

12 not eligible for the program.’’.

13 (c) Section 16(g)(4) of such Act (7 U.S.C. 2025(g)(4))

14 is amended by striking ‘‘State plans under the Aid to Fami15 lies with Dependent Children Program under’’ and insert16 ing ‘‘State programs funded under part A of’’.

17 (d) Section 17 of such Act (7 U.S.C. 2026) is amend18 ed—

19 (1) in the first sentence of subsection (b)(1)(A),

20 by striking ‘‘to aid to families with dependent chil21 dren under part A of title IV of the Social Security

22 Act’’ and inserting ‘‘or are receiving assistance under

23 a State program funded under part A of title IV of

24 the Social Security Act (42 U.S.C. 601 et seq.)’’; and
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1 (2) in subsection (b)(3), by adding at the end the

2 following new subparagraph:

3 ‘‘(I) The Secretary may not grant a waiver

4 under this paragraph on or after October 1, 1995.

5 Any reference in this paragraph to a provision of title

6 IV of the Social Security Act shall be deemed to be

7 a reference to such provision as in effect on September

8 30, 1995.’’;

9 (e) Section 20 of such Act (7 U.S.C. 2029) is amend10 ed—

11 (1) in subsection (a)(2)(B) by striking ‘‘operat12 ing—’’ and all that follows through ‘‘(ii) any other’’

13 and inserting ‘‘operating any’’; and

14 (2) in subsection (b)—

15 (A) in paragraph (1)—

16 (i) by striking ‘‘(b)(1) A household’’

17 and inserting ‘‘(b) A household’’; and

18 (ii) in subparagraph (B), by striking

19 ‘‘training program’’ and inserting ‘‘activ20 ity’’;

21 (B) by striking paragraph (2); and

22 (C) by redesignating subparagraphs (A)

23 through (F) as paragraphs (1) through (6), re24 spectively.
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1 (f) Section 5(h)(1) of the Agriculture and Consumer

2 Protection Act of 1973 (Public Law 93–186; 7 U.S.C. 612c

3 note) is amended by striking ‘‘the program for aid to fami4 lies with dependent children’’ and inserting ‘‘the State pro5 gram funded’’.

6 (g) Section 9 of the National School Lunch Act (42

7 U.S.C. 1758) is amended—

8 (1) in subsection (b)—

9 (A) in paragraph (2)(C)(ii)(II)—

10 (i) by striking ‘‘program for aid to

11 families with dependent children’’ and in12 serting ‘‘State program funded’’; and

13 (ii) by inserting before the period at

14 the end the following: ‘‘that the Secretary

15 determines complies with standards estab16 lished by the Secretary that ensure that the

17 standards under the State program are

18 comparable to or more restrictive than those

19 in effect on June 1, 1995’’; and

20 (B) in paragraph (6)—

21 (i) in subparagraph (A)(ii)—

22 (I) by striking ‘‘an AFDC assist23 ance unit (under the aid to families

24 with dependent children program au-
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HR 2491 EAS

1 thorized’’ and inserting ‘‘a family

2 (under the State program funded’’; and

3 (II) by striking ‘‘, in a State’’

4 and all that follows through

5 ‘‘9902(2)))’’ and inserting ‘‘that the

6 Secretary determines complies with

7 standards established by the Secretary

8 that ensure that the standards under

9 the State program are comparable to

10 or more restrictive than those in effect

11 on June 1, 1995’’; and

12 (ii) in subparagraph (B), by striking

13 ‘‘aid to families with dependent children’’

14 and inserting ‘‘assistance under the State

15 program funded under part A of title IV of

16 the Social Security Act (42 U.S.C. 601 et

17 seq.) that the Secretary determines complies

18 with standards established by the Secretary

19 that ensure that the standards under the

20 State program are comparable to or more

21 restrictive than those in effect on June 1,

22 1995’’; and

23 (2) in subsection (d)(2)(C)—
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1 (A) by striking ‘‘program for aid to families

2 with dependent children’’ and inserting ‘‘State

3 program funded’’; and

4 (B) by inserting before the period at the end

5 the following: ‘‘that the Secretary determines

6 complies with standards established by the Sec7 retary that ensure that the standards under the

8 State program are comparable to or more re9 strictive than those in effect on June 1, 1995’’.

10 (h) Section 17(d)(2)(A)(ii)(II) of the Child Nutrition

11 Act of 1966 (42 U.S.C. 1786(d)(2)(A)(ii)(II)) is amended—

12 (1) by striking ‘‘program for aid to families with

13 dependent children established’’ and inserting ‘‘State

14 program funded’’; and

15 (2) by inserting before the semicolon the follow16 ing: ‘‘that the Secretary determines complies with

17 standards established by the Secretary that ensure

18 that the standards under the State program are com19 parable to or more restrictive than those in effect on

20 June 1, 1995’’.

21 SEC. 12105. CONFORMING AMENDMENTS TO OTHER LAWS.

22 (a) Subsection (b) of section 508 of the Unemployment

23 Compensation Amendments of 1976 (42 U.S.C. 603a; Pub24 lic Law 94–566; 90 Stat. 2689) is amended to read as fol25 lows:
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1 ‘‘(b) PROVISION FOR REIMBURSEMENT OF EX2 PENSES.—For purposes of section 455 of the Social Security

3 Act, expenses incurred to reimburse State employment of4 fices for furnishing information requested of such offices—

5 ‘‘(1) pursuant to the third sentence of section

6 3(a) of the Act entitled ‘An Act to provide for the es7 tablishment of a national employment system and for

8 cooperation with the States in the promotion of such

9 system, and for other purposes’, approved June 6,

10 1933 (29 U.S.C. 49b(a)), or

11 ‘‘(2) by a State or local agency charged with the

12 duty of carrying a State plan for child support ap13 proved under part D of title IV of the Social Security

14 Act,

15 shall be considered to constitute expenses incurred in the

16 administration of such State plan.’’.

17 (b) Section 9121 of the Omnibus Budget Reconcili18 ation Act of 1987 (42 U.S.C. 602 note) is repealed.

19 (c) Section 9122 of the Omnibus Budget Reconciliation

20 Act of 1987 (42 U.S.C. 602 note) is repealed.

21 (d) Section 221 of the Housing and Urban-Rural Re22 covery Act of 1983 (42 U.S.C. 602 note), relating to treat23 ment under AFDC of certain rental payments for federally

24 assisted housing, is repealed.
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1 (e) Section 159 of the Tax Equity and Fiscal Respon2 sibility Act of 1982 (42 U.S.C. 602 note) is repealed.

3 (f) Section 202(d) of the Social Security Amendments

4 of 1967 (81 Stat. 882; 42 U.S.C. 602 note) is repealed.

5 (g) Section 903 of the Stewart B. McKinney Homeless

6 Assistance Amendments Act of 1988 (42 U.S.C. 11381 note),

7 relating to demonstration projects to reduce number of

8 AFDC families in welfare hotels, is amended—

9 (1) in subsection (a), by striking ‘‘aid to families

10 with dependent children under a State plan ap11 proved’’ and inserting ‘‘assistance under a State pro12 gram funded’’; and

13 (2) in subsection (c), by striking ‘‘aid to families

14 with dependent children in the State under a State

15 plan approved’’ and inserting ‘‘assistance in the State

16 under a State program funded’’.

17 (h) The Higher Education Act of 1965 (20 U.S.C. 1001

18 et seq.) is amended—

19 (1) in section 404C(c)(3) (20 U.S.C. 1070a–

20 23(c)(3)), by striking ‘‘(Aid to Families with Depend21 ent Children)’’; and

22 (2) in section 480(b)(2) (20 U.S.C.

23 1087vv(b)(2)), by striking ‘‘aid to families with de24 pendent children under a State plan approved’’ and

25 inserting ‘‘assistance under a State program funded’’.
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HR 2491 EAS

1 (i) The Carl D. Perkins Vocational and Applied Tech2 nology Education Act (20 U.S.C. 2301 et seq.) is amend3 ed—

4 (1) in section 231(d)(3)(A)(ii) (20 U.S.C.

5 2341(d)(3)(A)(ii)), by striking ‘‘the program for aid

6 to dependent children’’ and inserting ‘‘the State pro7 gram funded’’;

8 (2) in section 232(b)(2)(B) (20 U.S.C.

9 2341a(b)(2)(B)), by striking ‘‘the program for aid to

10 families with dependent children’’ and inserting ‘‘the

11 State program funded’’; and

12 (3) in section 521(14)(B)(iii) (20 U.S.C.

13 2471(14)(B)(iii)), by striking ‘‘the program for aid to

14 families with dependent children’’ and inserting ‘‘the

15 State program funded’’.

16 (j) The Elementary and Secondary Education Act of

17 1965 (20 U.S.C. 2701 et seq.) is amended—

18 (1) in section 1113(a)(5) (20 U.S.C. 6313(a)(5)),

19 by striking ‘‘Aid to Families with Dependent Chil20 dren Program’’ and inserting ‘‘State program funded

21 under part A of title IV of the Social Security Act’’;

22 (2) in section 1124(c)(5) (20 U.S.C. 6333(c)(5)),

23 by striking ‘‘the program of aid to families with de24 pendent children under a State plan approved under’’
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HR 2491 EAS

1 and inserting ‘‘a State program funded under part A

2 of’’; and

3 (3) in section 5203(b)(2) (20 U.S.C.

4 7233(b)(2))—

5 (A) in subparagraph (A)(xi), by striking

6 ‘‘Aid to Families with Dependent Children bene7 fits’’ and inserting ‘‘assistance under a State

8 program funded under part A of title IV of the

9 Social Security Act’’; and

10 (B) in subparagraph (B)(viii), by striking

11 ‘‘Aid to Families with Dependent Children’’ and

12 inserting ‘‘assistance under the State program

13 funded under part A of title IV of the Social Se14 curity Act’’.

15 (k) Chapter VII of title I of Public Law 99–88 (25

16 U.S.C. 13d–1) is amended to read as follows: ‘‘Provided fur17 ther, That general assistance payments made by the Bureau

18 of Indian Affairs shall be made—

19 ‘‘(1) after April 29, 1985, and before October 1,

20 1995, on the basis of Aid to Families with Dependent

21 Children (AFDC) standards of need; and

22 ‘‘(2) on and after October 1, 1995, on the basis

23 of standards of need established under the State pro24 gram funded under part A of title IV of the Social

25 Security Act,
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HR 2491 EAS

1 except that where a State ratably reduces its AFDC or State

2 program payments, the Bureau shall reduce general assist3 ance payments in such State by the same percentage as the

4 State has reduced the AFDC or State program payment.’’.

5 (l) The Internal Revenue Code of 1986 (26 U.S.C. 1

6 et seq.) is amended—

7 (1) in section 51(d)(9) (26 U.S.C. 51(d)(9)), by

8 striking all that follows ‘‘agency as’’ and inserting

9 ‘‘being eligible for financial assistance under part A

10 of title IV of the Social Security Act and as having

11 continually received such financial assistance during

12 the 90-day period which immediately precedes the

13 date on which such individual is hired by the em14 ployer.’’;

15 (2) in section 3304(a)(16) (26 U.S.C.

16 3304(a)(16)), by striking ‘‘eligibility for aid or serv17 ices,’’ and all that follows through ‘‘children ap18 proved’’ and inserting ‘‘eligibility for assistance, or

19 the amount of such assistance, under a State program

20 funded’’;

21 (3) in section 6103(l)(7)(D)(i) (26 U.S.C.

22 6103(l)(7)(D)(i)), by striking ‘‘aid to families with

23 dependent children provided under a State plan ap24 proved’’ and inserting ‘‘a State program funded’’;
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HR 2491 EAS

1 (4) in section 6334(a)(11)(A) (26 U.S.C.

2 6334(a)(11)(A)), by striking ‘‘(relating to aid to fam3 ilies with dependent children)’’; and

4 (5) in section 7523(b)(3)(C) (26 U.S.C.

5 7523(b)(3)(C)), by striking ‘‘aid to families with de6 pendent children’’ and inserting ‘‘assistance under a

7 State program funded under part A of title IV of the

8 Social Security Act’’.

9 (m) Section 3(b) of the Wagner-Peyser Act (29 U.S.C.

10 49b(b)) is amended by striking ‘‘State plan approved under

11 part A of title IV’’ and inserting ‘‘State program funded

12 under part A of title IV’’.

13 (n) The Job Training Partnership Act (29 U.S.C. 1501

14 et seq.) is amended—

15 (1) in section 4(29)(A)(i) (29 U.S.C.

16 1503(29)(A)(i)), by striking ‘‘(42 U.S.C. 601 et seq.)’’;

17 (2) in section 106(b)(6)(C) (29 U.S.C.

18 1516(b)(6)(C)), by striking ‘‘State aid to families

19 with dependent children records,’’ and inserting

20 ‘‘records collected under the State program funded

21 under part A of title IV of the Social Security Act,’’;

22 (3) in section 121(b)(2) (29 U.S.C. 1531(b)(2))—

23 (A) by striking ‘‘the JOBS program’’ and

24 inserting ‘‘the work activities required under

25 title IV of the Social Security Act’’; and
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HR 2491 EAS

1 (B) by striking the second sentence;

2 (4) in section 123(c) (29 U.S.C. 1533(c))—

3 (A) in paragraph (1)(E), by repealing

4 clause (vi); and

5 (B) in paragraph (2)(D), by repealing

6 clause (v);

7 (5) in section 203(b)(3) (29 U.S.C. 1603(b)(3)),

8 by striking ‘‘, including recipients under the JOBS

9 program’’;

10 (6) in subparagraphs (A) and (B) of section

11 204(a)(1) (29 U.S.C. 1604(a)(1) (A) and (B)), by

12 striking ‘‘(such as the JOBS program)’’ each place it

13 appears;

14 (7) in section 205(a) (29 U.S.C. 1605(a)), by

15 striking paragraph (4) and inserting the following:

16 ‘‘(4) the portions of title IV of the Social Secu17 rity Act relating to work activities;’’;

18 (8) in section 253 (29 U.S.C. 1632)—

19 (A) in subsection (b)(2), by repealing sub20 paragraph (C); and

21 (B) in paragraphs (1)(B) and (2)(B) of

22 subsection (c), by striking ‘‘the JOBS program

23 or’’ each place it appears;

24 (9) in section 264 (29 U.S.C. 1644)—
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HR 2491 EAS

1 (A) in subparagraphs (A) and (B) of sub2 section (b)(1), by striking ‘‘(such as the JOBS

3 program)’’ each place it appears; and

4 (B) in subparagraphs (A) and (B) of sub5 section (d)(3), by striking ‘‘and the JOBS pro6 gram’’ each place it appears;

7 (10) in section 265(b) (29 U.S.C. 1645(b)), by

8 striking paragraph (6) and inserting the following:

9 ‘‘(6) the portion of title IV of the Social Security

10 Act relating to work activities;’’;

11 (11) in the second sentence of section 429(e) (29

12 U.S.C. 1699(e)), by striking ‘‘and shall be in an

13 amount that does not exceed the maximum amount

14 that may be provided by the State pursuant to section

15 402(g)(1)(C) of the Social Security Act (42 U.S.C.

16 602(g)(1)(C))’’;

17 (12) in section 454(c) (29 U.S.C. 1734(c)), by

18 striking ‘‘JOBS and’’;

19 (13) in section 455(b) (29 U.S.C. 1735(b)), by

20 striking ‘‘the JOBS program,’’;

21 (14) in section 501(1) (29 U.S.C. 1791(1)), by

22 striking ‘‘aid to families with dependent children

23 under part A of title IV of the Social Security Act (42

24 U.S.C. 601 et seq.)’’ and inserting ‘‘assistance under
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HR 2491 EAS

1 the State program funded under part A of title IV of

2 the Social Security Act’’;

3 (15) in section 506(1)(A) (29 U.S.C.

4 1791e(1)(A)), by striking ‘‘aid to families with de5 pendent children’’ and inserting ‘‘assistance under the

6 State program funded’’;

7 (16) in section 508(a)(2)(A) (29 U.S.C.

8 1791g(a)(2)(A)), by striking ‘‘aid to families with de9 pendent children’’ and inserting ‘‘assistance under the

10 State program funded’’; and

11 (17) in section 701(b)(2)(A) (29 U.S.C.

12 1792(b)(2)(A))—

13 (A) in clause (v), by striking the semicolon

14 and inserting ‘‘; and’’; and

15 (B) by striking clause (vi).

16 (o) Section 3803(c)(2)(C)(iv) of title 31, United States

17 Code, is amended to read as follows:

18 ‘‘(iv) assistance under a State program

19 funded under part A of title IV of the Social

20 Security Act’’.

21 (p) Section 2605(b)(2)(A)(i) of the Low-Income Home

22 Energy Assistance Act of 1981 (42 U.S.C. 8624(b)(2)(A)(i))

23 is amended to read as follows:
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1 ‘‘(i) assistance under the State pro2 gram funded under part A of title IV of the

3 Social Security Act;’’.

4 (q) Section 303(f)(2) of the Family Support Act of

5 1988 (42 U.S.C. 602 note) is amended—

6 (1) by striking ‘‘(A)’’; and

7 (2) by striking subparagraphs (B) and (C).

8 (r) The Balanced Budget and Emergency Deficit Con9 trol Act of 1985 (2 U.S.C. 900 et seq.) is amended—

10 (1) in the first section 255(h) (2 U.S.C. 905(h)),

11 by striking ‘‘Aid to families with dependent children

12 (75–0412–0–1–609);’’ and inserting ‘‘Block grants to

13 States for temporary assistance for needy families;’’;

14 and

15 (2) in section 256 (2 U.S.C. 906)—

16 (A) by striking subsection (k); and

17 (B) by redesignating subsection (l) as sub18 section (k).

19 (s) The Immigration and Nationality Act (8 U.S.C.

20 1101 et seq.) is amended—

21 (1) in section 210(f) (8 U.S.C. 1160(f)), by strik22 ing ‘‘aid under a State plan approved under’’ each

23 place it appears and inserting ‘‘assistance under a

24 State program funded under’’;

25 (2) in section 245A(h) (8 U.S.C. 1255a(h))—
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HR 2491 EAS

1 (A) in paragraph (1)(A)(i), by striking

2 ‘‘program of aid to families with dependent chil3 dren’’ and inserting ‘‘State program of assist4 ance’’; and

5 (B) in paragraph (2)(B), by striking ‘‘aid

6 to families with dependent children’’ and insert7 ing ‘‘assistance under a State program funded

8 under part A of title IV of the Social Security

9 Act’’; and

10 (3) in section 412(e)(4) (8 U.S.C. 1522(e)(4)), by

11 striking ‘‘State plan approved’’ and inserting ‘‘State

12 program funded’’.

13 (t) Section 640(a)(4)(B)(i) of the Head Start Act (42

14 U.S.C. 9835(a)(4)(B)(i)) is amended by striking ‘‘program

15 of aid to families with dependent children under a State

16 plan approved’’ and inserting ‘‘State program of assistance

17 funded’’.

18 (u) Section 9 of the Act of April 19, 1950 (64 Stat.

19 47, chapter 92; 25 U.S.C. 639) is repealed.

20 (v) Subparagraph (E) of section 213(d)(6) of the

21 School-To-Work Opportunities Act of 1994 (20 U.S.C.

22 6143(d)(6)) is amended to read as follows:

23 ‘‘(E) part A of title IV of the Social Secu24 rity Act (42 U.S.C. 601 et seq.) relating to work

25 activities;’’.
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1 SEC. 12106. EFFECTIVE DATE; TRANSITION RULE.

2 (a) IN GENERAL.—Except as otherwise provided in

3 this subtitle, this subtitle and the amendments made by this

4 subtitle shall take effect on October 1, 1995.

5 (b) PENALTIES.—

6 (1) IN GENERAL.—Paragraphs (2) through (7)

7 and paragraph (9) of section 408(a) of the Social Se8 curity Act (as added by section 12101 of this Act)

9 shall apply with respect to fiscal years beginning on

10 or after October 1, 1996.

11 (2) MISUSE OF FUNDS.—Paragraphs (1) and (8)

12 of section 408(a) of the Social Security Act (as added

13 by section 12101 of this Act, shall apply with respect

14 to fiscal years beginning on or after October 1, 1995.

15 (c) TRANSITION RULES.—

16 (1) STATE OPTION TO CONTINUE AFDC PRO17 GRAM.—

18 (A) 9-MONTH EXTENSION.—A State may

19 elect to continue the State AFDC program until

20 June 30, 1996.

21 (B) NO INDIVIDUAL OR FAMILY ENTITLE22 MENT UNDER CONTINUED STATE AFDC PRO23 GRAMS.—Notwithstanding any other provision of

24 law or any rule of law, no individual or family

25 is entitled to aid under any State AFDC pro-
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HR 2491 EAS

1 gram on or after the date of the enactment of

2 this Act.

3 (C) LIMITATIONS ON FEDERAL OBLIGA4 TIONS.—

5 (i) UNDER AFDC PROGRAM.—If a State

6 elects to continue the State AFDC program

7 pursuant to subparagraph (A), the total ob8 ligations of the Federal Government to the

9 State under part A of title IV of the Social

10 Security Act (as in effect on September 30,

11 1995) after the date of the enactment of this

12 Act shall not exceed an amount equal to—

13 (I) the State family assistance

14 grant (as defined in section

15 402(a)(1)(B) of the Social Security Act

16 (as in effect pursuant to the amend17 ment made by section 12101 of this

18 Act)); minus

19 (II) any obligations of the Federal

20 Government to the State under such

21 part (as in effect on September 30,

22 1995) with respect to expenditures by

23 the State during the period that begins

24 on October 1, 1995, and ends on the
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HR 2491 EAS

1 day before the date of the enactment of

2 this Act.

3 (ii) UNDER TEMPORARY FAMILY AS4 SISTANCE PROGRAM.—Notwithstanding sec5 tion 402(a)(1) of the Social Security Act (as

6 in effect pursuant to the amendment made

7 by section 12101 of this Act), the total obli8 gations of the Federal Government to the

9 State under such section 402(a)(1) for fiscal

10 year 1996 after the termination of the State

11 AFDC program shall not exceed an amount

12 equal to—

13 (I) the amount described in clause

14 (i)(I) of this subparagraph; minus

15 (II) any obligations of the Federal

16 Government to the State under part A

17 of title IV of the Social Security Act

18 (as in effect on September 30, 1995)

19 with respect to expenditures by the

20 State on or after October 1, 1995.

21 (D) SUBMISSION OF STATE PLAN FOR FIS22 CAL YEAR 1996 DEEMED ACCEPTANCE OF GRANT

23 LIMITATIONS AND FORMULA.—The submission of

24 a plan by a State under section 401(a) of the So25 cial Security Act (as in effect pursuant to the
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HR 2491 EAS

1 amendment made by section 12101 of this Act)

2 for fiscal year 1996 is deemed to constitute the

3 State’s acceptance of the grant reductions under

4 subparagraph (C)(ii) of this paragraph (includ5 ing the formula for computing the amount of the

6 reduction).

7 (E) STATE AFDC PROGRAM DEFINED.—As

8 used in this paragraph, the term ‘‘State AFDC

9 program’’ means the State program under parts

10 A and F of title IV of the Social Security Act

11 (as in effect on September 30, 1995).

12 (2) CLAIMS, ACTIONS, AND PROCEEDINGS.—The

13 amendments made by this subtitle shall not apply

14 with respect to—

15 (A) powers, duties, functions, rights, claims,

16 penalties, or obligations applicable to aid, assist17 ance, or services provided before the effective date

18 of this subtitle under the provisions amended;

19 and

20 (B) administrative actions and proceedings

21 commenced before such date, or authorized before

22 such date to be commenced, under such provi23 sions.

24 (3) CLOSING OUT ACCOUNT FOR THOSE PRO25 GRAMS TERMINATED OR SUBSTANTIALLY MODIFIED BY
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HR 2491 EAS

1 THIS SUBTITLE.—In closing out accounts, Federal

2 and State officials may use scientifically acceptable

3 statistical sampling techniques. Claims made under

4 programs which are repealed or substantially amend5 ed in this subtitle and which involve State expendi6 tures in cases where assistance or services were pro7 vided during a prior fiscal year, shall be treated as

8 expenditures during fiscal year 1995 for purposes of

9 reimbursement even if payment was made by a State

10 on or after October 1, 1995. States shall complete the

11 filing of all claims no later than September 30, 1997.

12 Federal department heads shall—

13 (A) use the single audit procedure to review

14 and resolve any claims in connection with the

15 close out of programs, and

16 (B) reimburse States for any payments

17 made for assistance or services provided during

18 a prior fiscal year from funds for fiscal year

19 1995, rather than the funds authorized by this

20 subtitle.

21 (4) CONTINUANCE IN OFFICE OF ASSISTANT SEC22 RETARY FOR FAMILY SUPPORT.—The individual who,

23 on the day before the effective date of this subtitle, is

24 serving as Assistant Secretary for Family Support

25 within the Department of Health and Human Serv-
1945

HR 2491 EAS

1 ices shall, until a successor is appointed to such posi2 tion—

3 (A) continue to serve in such position; and

4 (B) except as otherwise provided by law—

5 (i) continue to perform the functions of

6 the Assistant Secretary for Family Support

7 under section 417 of the Social Security Act

8 (as in effect before such effective date); and

9 (ii) have the powers and duties of the

10 Assistant Secretary for Family Support

11 under section 415 of the Social Security Act

12 (as in effect pursuant to the amendment

13 made by section 12101 of this Act).

14 (d) SUNSET.—The amendment made by section 12101

15 shall be effective only during the 6-year period beginning

16 on October 1, 1995.

17 Subtitle B—Supplemental Security

18 Income

19 SEC. 12200. REFERENCE TO SOCIAL SECURITY ACT.

20 Except as otherwise specifically provided, where ever

21 in this subtitle an amendment is expressed in terms of an

22 amendment to or repeal of a section or other provision, the

23 reference shall be considered to be made to that section or

24 other provision of the Social Security Act.
1946

HR 2491 EAS

1 CHAPTER 1—ELIGIBILITY RESTRICTIONS

2 SEC. 12201. DENIAL OF SUPPLEMENTAL SECURITY INCOME

3 BENEFITS BY REASON OF DISABILITY TO

4 DRUG ADDICTS AND ALCOHOLICS.

5 (a) IN GENERAL.—Section 1614(a)(3) (42 U.S.C.

6 1382c(a)(3)) is amended by adding at the end the following:

7 ‘‘(I) Notwithstanding subparagraph (A), an individ8 ual shall not be considered to be disabled for purposes of

9 this title if alcoholism or drug addiction would (but for this

10 subparagraph) be a contributing factor material to the

11 Commissioner’s determination that the individual is dis12 abled.’’.

13 (b) REPRESENTATIVE PAYEE REQUIREMENTS.—

14 (1) Section 1631(a)(2)(A)(ii)(II) (42 U.S.C.

15 1383(a)(2)(A)(ii)(II)) is amended to read as follows:

16 ‘‘(II) In the case of an individual eligible for benefits

17 under this title by reason of disability, the payment of such

18 benefits shall be made to a representative payee if the Com19 missioner of Social Security determines that such payment

20 would serve the interest of the individual because the indi21 vidual also has an alcoholism or drug addiction condition

22 that prevents the individual from managing such benefits.’’.

23 (2) Section 1631(a)(2)(B)(vii) (42 U.S.C.

24 1383(a)(2)(B)(vii)) is amended by striking ‘‘eligible

25 for benefits’’ and all that follows through ‘‘is disabled’’
1947

HR 2491 EAS

1 and inserting ‘‘described in subparagraph

2 (A)(ii)(II)’’.

3 (3) Section 1631(a)(2)(B)(ix)(II) (42 U.S.C.

4 1383(a)(2)(B)(ix)(II)) is amended by striking all that

5 follows ‘‘15 years, or’’ and inserting ‘‘described in

6 subparagraph (A)(ii)(II)’’.

7 (4) Section 1631(a)(2)(D)(i)(II) (42 U.S.C.

8 1383(a)(2)(D)(i)(II)) is amended by striking ‘‘eligible

9 for benefits’’ and all that follows through ‘‘is disabled’’

10 and inserting ‘‘described in subparagraph

11 (A)(ii)(II)’’.

12 (c) TREATMENT REFERRALS FOR INDIVIDUALS WITH

13 AN ALCOHOLISM OR DRUG ADDICTION CONDITION.—Title

14 XVI (42 U.S.C. 1381 et seq.) is amended by adding at the

15 end the following new section:

16 ‘‘TREATMENT REFERRALS FOR INDIVIDUALS WITH AN

17 ALCOHOLISM OR DRUG ADDICTION CONDITION

18 ‘‘SEC. 1636. In the case of any eligible individual

19 whose benefits under this title by reason of disability are

20 paid to a representative payee pursuant to section

21 1631(a)(2)(A)(ii)(II), the Commissioner of Social Security

22 shall refer such individual to the appropriate State agency

23 administering the State plan for substance abuse treatment

24 services approved under subpart II of part B of title XIX

25 of the Public Health Service Act (42 U.S.C. 300x–21 et

26 seq.).’’.
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HR 2491 EAS

1 (d) CONFORMING AMENDMENTS.—

2 (1) Section 1611(e) (42 U.S.C. 1382(e)) is

3 amended by striking paragraph (3).

4 (2) Section 1634 (42 U.S.C. 1383c) is amended

5 by striking subsection (e).

6 (3) Section 201(c)(1) of the Social Security Inde7 pendence and Program Improvements Act of 1994 (42

8 U.S.C. 425 note) is amended—

9 (A) by striking ‘‘to—’’ and all that follows

10 through ‘‘in cases in which’’ and inserting ‘‘to

11 individuals who are entitled to disability insur12 ance benefits or child’s, widow’s, or widower’s

13 insurance benefits based on disability under title

14 II of the Social Security Act, in cases in which’’;

15 (B) by striking ‘‘either subparagraph (A) or

16 subparagraph (B)’’ and inserting ‘‘the preceding

17 sentence’’; and

18 (C) by striking ‘‘subparagraph (A) or (B)’’

19 and inserting ‘‘the preceding sentence’’.

20 (e) SUPPLEMENTAL FUNDING FOR ALCOHOL AND SUB21 STANCE ABUSE TREATMENT PROGRAMS.—

22 (1) IN GENERAL.—Out of any money in the

23 Treasury not otherwise appropriated, there are hereby

24 appropriated to supplement State and Tribal pro25 grams funded under section 1933 of the Public Health
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1 Service Act (42 U.S.C. 300x–33), $50,000,000 for

2 each of the fiscal years 1997 and 1998.

3 (2) ADDITIONAL FUNDS.—Amounts appropriated

4 under paragraph (1) shall be in addition to any

5 funds otherwise appropriated for allotments under

6 section 1933 of the Public Health Service Act (42

7 U.S.C. 300x–33) and shall be allocated pursuant to

8 such section 1933.

9 (3) USE OF FUNDS.—A State or Tribal govern10 ment receiving an allotment under this subsection

11 shall consider as priorities, for purposes of expending

12 funds allotted under this subsection, activities relating

13 to the treatment of the abuse of alcohol and other

14 drugs.

15 (f) EFFECTIVE DATES.—

16 (1) IN GENERAL.—Except as provided in para17 graphs (2) and (3), the amendments made by this sec18 tion shall apply to applicants for benefits for months

19 beginning on or after the date of the enactment of this

20 Act, without regard to whether regulations have been

21 issued to implement such amendments.

22 (2) APPLICATION TO CURRENT RECIPIENTS.—

23 (A) APPLICATION AND NOTICE.—Notwith24 standing any other provision of law, in the case

25 of an individual who is receiving supplemental
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1 security income benefits under title XVI of the

2 Social Security Act as of the date of the enact3 ment of this Act and whose eligibility for such

4 benefits would terminate by reason of the amend5 ments made by this section, such amendments

6 shall apply with respect to the benefits of such

7 individual, including such individual’s treat8 ment (if any) provided pursuant to such title as

9 in effect on the day before the date of such enact10 ment, for months beginning on or after January

11 1, 1997, and the Commissioner of Social Secu12 rity shall so notify the individual not later than

13 90 days after the date of the enactment of this

14 Act.

15 (B) REAPPLICATION.—

16 (i) IN GENERAL.—Not later than 120

17 days after the date of the enactment of this

18 Act, each individual notified pursuant to

19 subparagraph (A) who desires to reapply

20 for benefits under title XVI of the Social Se21 curity Act, as amended by this title, may

22 reapply to the Commissioner of Social Secu23 rity.

24 (ii) DETERMINATION OF ELIGI25 BILITY.—Not later than January 1, 1997,
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1 the Commissioner of Social Security shall

2 complete the eligibility redetermination of

3 each individual who reapplies for benefits

4 under clause (i) pursuant to the procedures

5 of title XVI of such Act.

6 (3) ADDITIONAL APPLICATION OF PAYEE REP7 RESENTATIVE AND TREATMENT REFERRAL REQUIRE8 MENTS.—The amendments made by subsections (b)

9 and (c) shall also apply—

10 (A) in the case of any individual who is re11 ceiving supplemental security income benefits

12 under title XVI of the Social Security Act as of

13 the date of the enactment of this Act, on and

14 after the date of such individual’s first continu15 ing disability review occurring after such date of

16 enactment, and

17 (B) in the case of any individual who re18 ceives supplemental security income benefits

19 under title XVI of the Social Security Act and

20 has attained age 65, in such manner as deter21 mined appropriate by the Commissioner of So22 cial Security.
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1 SEC. 12202. DENIAL OF SSI BENEFITS FOR 10 YEARS TO IN2 DIVIDUALS FOUND TO HAVE FRAUDULENTLY

3 MISREPRESENTED RESIDENCE IN ORDER TO

4 OBTAIN BENEFITS SIMULTANEOUSLY IN 2 OR

5 MORE STATES.

6 (a) IN GENERAL.—Section 1614(a) (42 U.S.C.

7 1382c(a)) is amended by adding at the end the following

8 new paragraph:

9 ‘‘(5) An individual shall not be considered an eligible

10 individual for the purposes of this title during the 10-year

11 period that begins on the date the individual is convicted

12 in Federal or State court of having made a fraudulent state13 ment or representation with respect to the place of residence

14 of the individual in order to receive assistance simulta15 neously from 2 or more States under programs that are

16 funded under title IV, title XXI, or the Food Stamp Act

17 of 1977, or benefits in 2 or more States under the supple18 mental security income program under this title.’’.

19 (b) EFFECTIVE DATE.—The amendment made by this

20 section shall take effect on the date of the enactment of this

21 Act.

22 SEC. 12203. DENIAL OF SSI BENEFITS FOR FUGITIVE FEL23 ONS AND PROBATION AND PAROLE VIOLA24 TORS.

25 (a) IN GENERAL.—Section 1611(e) (42 U.S.C.

26 1382(e)), as amended by section 12201(d)(1), is amended
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1 by inserting after paragraph (2) the following new para2 graph:

3 ‘‘(3) A person shall not be considered an eligible indi4 vidual or eligible spouse for purposes of this title with re5 spect to any month if during such month the person is—

6 ‘‘(A) fleeing to avoid prosecution, or custody or

7 confinement after conviction, under the laws of the

8 place from which the person flees, for a crime, or an

9 attempt to commit a crime, which is a felony under

10 the laws of the place from which the person flees, or

11 which, in the case of the State of New Jersey, is a

12 high misdemeanor under the laws of such State; or

13 ‘‘(B) violating a condition of probation or parole

14 imposed under Federal or State law.’’.

15 (b) EXCHANGE OF INFORMATION WITH LAW ENFORCE16 MENT AGENCIES.—Section 1611(e) (42 U.S.C. 1382(e)), as

17 amended by section 12201(d)(1) and subsection (a), is

18 amended by inserting after paragraph (3) the following new

19 paragraph:

20 ‘‘(4) Notwithstanding any other provision of law, the

21 Commissioner shall furnish any Federal, State, or local law

22 enforcement officer, upon the request of the officer, with the

23 current address, Social Security number, and photograph

24 (if applicable) of any recipient of benefits under this title,
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1 if the officer furnishes the Commissioner with the name of

2 the recipient and notifies the Commissioner that—

3 ‘‘(A) the recipient—

4 ‘‘(i) is described in subparagraph (A) or

5 (B) of paragraph (3); or

6 ‘‘(ii) has information that is necessary for

7 the officer to conduct the officer’s official duties;

8 and

9 ‘‘(B) the location or apprehension of the recipi10 ent is within the officer’s official duties.’’.

11 (c) EFFECTIVE DATE.—The amendments made by this

12 section shall take effect on the date of the enactment of this

13 Act.

14 CHAPTER 2—BENEFITS FOR DISABLED

15 CHILDREN

16 SEC. 12211. DEFINITION AND ELIGIBILITY RULES.

17 (a) DEFINITION OF CHILDHOOD DISABILITY.—Section

18 1614(a)(3) (42 U.S.C. 1382c(a)(3)), as amended by section

19 7251(a), is amended—

20 (1) in subparagraph (A), by striking ‘‘An indi21 vidual’’ and inserting ‘‘Except as provided in sub22 paragraph (C), an individual’’;

23 (2) in subparagraph (A), by striking ‘‘(or, in the

24 case of an individual under the age of 18, if he suffers
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1 from any medically determinable physical or mental

2 impairment of comparable severity)’’;

3 (3) by redesignating subparagraphs (C) through

4 (I) as subparagraphs (D) through (J), respectively;

5 (4) by inserting after subparagraph (B) the fol6 lowing new subparagraph:

7 ‘‘(C) An individual under the age of 18 shall be consid8 ered disabled for the purposes of this title if that individual

9 has a medically determinable physical or mental impair10 ment, which results in marked and severe functional limita11 tions, and which can be expected to result in death or which

12 has lasted or can be expected to last for a continuous period

13 of not less than 12 months. Notwithstanding the preceding

14 sentence, no individual under the age of 18 who engages

15 in substantial gainful activity (determined in accordance

16 with regulations prescribed pursuant to subparagraph (E))

17 may be considered to be disabled.’’; and

18 (5) in subparagraph (F), as redesignated by

19 paragraph (3), by striking ‘‘(D)’’ and inserting

20 ‘‘(E)’’.

21 (b) CHANGES TO CHILDHOOD SSI REGULATIONS.—

22 (1) MODIFICATION TO MEDICAL CRITERIA FOR

23 EVALUATION OF MENTAL AND EMOTIONAL DIS24 ORDERS.—The Commissioner of Social Security shall

25 modify sections 112.00C.2. and 112.02B.2.c.(2) of ap-
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1 pendix 1 to subpart P of part 404 of title 20, Code

2 of Federal Regulations, to eliminate references to

3 maladaptive behavior in the domain of personal/

4 behavorial function.

5 (2) DISCONTINUANCE OF INDIVIDUALIZED FUNC6 TIONAL ASSESSMENT.—The Commissioner of Social

7 Security shall discontinue the individualized func8 tional assessment for children set forth in sections

9 416.924d and 416.924e of title 20, Code of Federal

10 Regulations.

11 (c) MEDICAL IMPROVEMENT REVIEW STANDARD AS IT

12 APPLIES TO INDIVIDUALS UNDER THE AGE OF 18.—Sec13 tion 1614(a)(4) (42 U.S.C. 1382(a)(4)) is amended—

14 (1) by redesignating subclauses (I) and (II) of

15 clauses (i) and (ii) of subparagraph (B) as subclauses

16 (aa) and (bb), respectively;

17 (2) by redesignating clauses (i) and (ii) of sub18 paragraphs (A) and (B) as subclauses (I) and (II),

19 respectively;

20 (3) by redesignating subparagraphs (A) through

21 (C) as clauses (i) through (iii), respectively, and by

22 moving their left hand margin 2 ems to the right;

23 (4) by inserting before clause (i) (as redesignated

24 by paragraph (3)) the following:
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1 ‘‘(A) in the case of an individual who is age

2 18 or older—’’;

3 (5) at the end of subparagraph (A)(iii) (as redes4 ignated by paragraphs (3) and (4)), by striking the

5 period and inserting ‘‘; or’’;

6 (6) by inserting after and below subparagraph

7 (A)(iii) (as so redesignated) the following:

8 ‘‘(B) in the case of an individual who is

9 under the age of 18—

10 ‘‘(i) substantial evidence which dem11 onstrates that there has been medical im12 provement in the individual’s impairment

13 or combination of impairments, and that

14 such impairment or combination of impair15 ments no longer results in marked and se16 vere functional limitations; or

17 ‘‘(ii) substantial evidence which dem18 onstrates that, as determined on the basis of

19 new or improved diagnostic techniques or

20 evaluations, the individual’s impairment or

21 combination of impairments, is not as dis22 abling as it was considered to be at the time

23 of the most recent prior decision that he or

24 she was under a disability or continued to

25 be under a disability, and such impairment
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1 or combination of impairments does not re2 sult in marked or severe functional limita3 tions; or’’;

4 (7) by redesignating subparagraph (D) as sub5 paragraph (C) and by inserting in such subpara6 graph ‘‘in the case of any individual,’’ before ‘‘sub7 stantial evidence’’; and

8 (8) in the first sentence following subparagraph

9 (C) (as redesignated by paragraph (7)), by—

10 (A) inserting ‘‘(i)’’ before ‘‘to restore’’; and

11 (B) inserting ‘‘, or (ii) in the case of an in12 dividual under the age of 18, to eliminate or im13 prove the individual’s impairment or combina14 tion of impairments so that it no longer results

15 in marked and severe functional limitations’’

16 immediately before the period.

17 (d) AMOUNT OF BENEFITS.—Section 1611(b) (42

18 U.S.C. 1382(b)) is amended by adding at the end the follow19 ing new paragraph:

20 ‘‘(3)(i) Except with respect to individuals described in

21 clause (ii), the benefit under this title for an individual de22 scribed in section 1614(a)(3)(C) shall be payable at a rate

23 equal to 75 percent of the rate otherwise determined under

24 this subsection.
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1 ‘‘(ii) An individual is described in this clause if such

2 individual is described in section 1614(a)(3)(C), and—

3 ‘‘(I) in the case of such an individual under the

4 age of 6, such individual has a medical impairment

5 that severely limits the individual’s ability to func6 tion in a manner appropriate to individuals of the

7 same age and who without special personal assistance

8 would require specialized care outside the home; or

9 ‘‘(II) in the case of such an individual who has

10 attained the age of 6, such individual requires per11 sonal care assistance with—

12 ‘‘(aa) at least 2 activities of daily living;

13 ‘‘(bb) continual 24-hour supervision or

14 monitoring to avoid causing injury or harm to

15 self or others; or

16 ‘‘(cc) the administration of medical treat17 ment; and

18 who without such assistance would require full-time

19 or part-time specialized care outside the home.

20 ‘‘(iii)(I) For purposes of clause (ii), the term ‘special21 ized care’ means medical care beyond routine administra22 tion of medication.

23 ‘‘(II) For purposes of clause (ii)(II)—
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1 ‘‘(aa) the term ‘personal care assistance’ means

2 at least hands-on and stand-by assistance, super3 vision, or cueing; and

4 ‘‘(bb) the term ‘activities of daily living’ means

5 eating, toileting, dressing, bathing, and mobility.’’.

6 (e) EFFECTIVE DATES, ETC.—

7 (1) EFFECTIVE DATES.—

8 (A) IN GENERAL.—The provisions of, and

9 amendments made by, subsections (a), (b), and

10 (c) shall apply to applicants for benefits under

11 title XVI of the Social Security Act for months

12 beginning on or after the date of the enactment

13 of this Act, without regard to whether regulations

14 have been issued to implement such provisions

15 and amendments.

16 (B) ELIGIBILITY RULES.—The amendments

17 made by subsection (d) shall apply to—

18 (i) applicants for benefits under title

19 XVI of the Social Security Act for months

20 beginning on or after January 1, 1997; and

21 (ii) with respect to continuing disabil22 ity reviews of eligibility for benefits under

23 such title occurring on or after such date.

24 (2) APPLICATION TO CURRENT RECIPIENTS.—
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1 (A) ELIGIBILITY DETERMINATIONS.—Not

2 later than 1 year after the date of the enactment

3 of this Act, the Commissioner of Social Security

4 shall redetermine the eligibility of any individ5 ual under age 18 who is receiving supplemental

6 security income benefits based on a disability

7 under title XVI of the Social Security Act as of

8 the date of the enactment of this Act and whose

9 eligibility for such benefits may terminate by

10 reason of the provisions of, and amendments

11 made by, subsections (a), (b), and (c). With re12 spect to any redetermination under this subpara13 graph—

14 (i) section 1614(a)(4) of the Social Se15 curity Act (42 U.S.C. 1382c(a)(4)) shall not

16 apply;

17 (ii) the Commissioner of Social Secu18 rity shall apply the eligibility criteria for

19 new applicants for benefits under title XVI

20 of such Act;

21 (iii) the Commissioner shall give such

22 redetermination priority over all continuing

23 eligibility reviews and other reviews under

24 such title; and
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1 (iv) such redetermination shall be

2 counted as a review or redetermination oth3 erwise required to be made under section

4 208 of the Social Security Independence

5 and Program Improvements Act of 1994 or

6 any other provision of title XVI of the So7 cial Security Act.

8 (B) GRANDFATHER PROVISION.—The provi9 sions of, and amendments made by, subsections

10 (a), (b), and (c), and the redetermination under

11 subparagraph (A), shall only apply with respect

12 to the benefits of an individual described in sub13 paragraph (A) for months beginning on or after

14 January 1, 1997.

15 (C) NOTICE.—Not later than 90 days after

16 the date of the enactment of this Act, the Com17 missioner of Social Security shall notify an in18 dividual described in subparagraph (A) of the

19 provisions of this paragraph.

20 (3) REGULATIONS.—The Commissioner of Social

21 Security shall submit for review to the committees of

22 jurisdiction in the Congress any final regulation per23 taining to the eligibility of individuals under age 18

24 for benefits under title XVI of the Social Security Act

25 at least 45 days before the effective date of such regu-
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1 lation. The submission under this paragraph shall in2 clude supporting documentation providing a cost

3 analysis, workload impact, and projections as to how

4 the regulation will effect the future number of recipi5 ents under such title.

6 (4) APPROPRIATIONS.—

7 (A) IN GENERAL.—Out of any money in the

8 Treasury not otherwise appropriated, there are

9 authorized to be appropriated and are hereby

10 appropriated, to remain available without fiscal

11 year limitation, $200,000,000 for fiscal year

12 1996, $75,000,000 for fiscal year 1997, and

13 $25,000,000 for fiscal year 1998, for the Com14 missioner of Social Security to utilize only for

15 continuing disability reviews and

16 redeterminations under title XVI of the Social

17 Security Act, with reviews and redeterminations

18 for individuals affected by the provisions of sub19 section (b) given highest priority.

20 (B) ADDITIONAL FUNDS.—Amounts appro21 priated under subparagraph (A) shall be in ad22 dition to any funds otherwise appropriated for

23 continuing disability reviews and

24 redeterminations under title XVI of the Social

25 Security Act.
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1 SEC. 12212. ELIGIBILITY REDETERMINATIONS AND CON2 TINUING DISABILITY REVIEWS.

3 (a) CONTINUING DISABILITY REVIEWS RELATING TO

4 CERTAIN CHILDREN.—Section 1614(a)(3)(H) (42 U.S.C.

5 1382c(a)(3)(H)), as redesignated by section 12211(a)(3), is

6 amended—

7 (1) by inserting ‘‘(i)’’ after ‘‘(H)’’; and

8 (2) by adding at the end the following new

9 clause:

10 ‘‘(ii)(I) Not less frequently than once every 3 years,

11 the Commissioner shall review in accordance with para12 graph (4) the continued eligibility for benefits under this

13 title of each individual who has not attained 18 years of

14 age and is eligible for such benefits by reason of an impair15 ment (or combination of impairments) which may improve

16 (or, at the option of the Commissioner, which is unlikely

17 to improve).

18 ‘‘(II) A representative payee of a recipient whose case

19 is reviewed under this clause shall present, at the time of

20 review, evidence demonstrating that the recipient is, and

21 has been, receiving treatment, to the extent considered medi22 cally necessary and available, of the condition which was

23 the basis for providing benefits under this title.

24 ‘‘(III) If the representative payee refuses to comply

25 without good cause with the requirements of subclause (II),

26 the Commissioner of Social Security shall, if the Commis-
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1 sioner determines it is in the best interest of the individual,

2 promptly terminate payment of benefits to the representa3 tive payee, and provide for payment of benefits to an alter4 native representative payee of the individual or, if the inter5 est of the individual under this title would be served thereby,

6 to the individual.

7 ‘‘(IV) Subclause (II) shall not apply to the representa8 tive payee of any individual with respect to whom the Com9 missioner determines such application would be inappro10 priate or unnecessary. In making such determination, the

11 Commissioner shall take into consideration the nature of

12 the individual’s impairment (or combination of impair13 ments). Section 1631(c) shall not apply to a finding by the

14 Commissioner that the requirements of subclause (II) should

15 not apply to an individual’s representative payee.’’.

16 (b) DISABILITY ELIGIBILITY REDETERMINATIONS RE17 QUIRED FOR SSI RECIPIENTS WHO ATTAIN 18 YEARS OF

18 AGE.—

19 (1) IN GENERAL.—Section 1614(a)(3)(H) (42

20 U.S.C. 1382c(a)(3)(H)), as amended by subsection

21 (a), is amended by adding at the end the following

22 new clause:

23 ‘‘(iii) If an individual is eligible for benefits under this

24 title by reason of disability for the month preceding the
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HR 2491 EAS

1 month in which the individual attains the age of 18 years,

2 the Commissioner shall redetermine such eligibility—

3 ‘‘(I) during the 1-year period beginning on the

4 individual’s 18th birthday; and

5 ‘‘(II) by applying the criteria used in determin6 ing the initial eligibility for applicants who are age

7 18 or older.

8 With respect to a redetermination under this clause, para9 graph (4) shall not apply and such redetermination shall

10 be considered a substitute for a review or redetermination

11 otherwise required under any other provision of this sub12 paragraph during that 1-year period.’’.

13 (2) CONFORMING REPEAL.—Section 207 of the

14 Social Security Independence and Program Improve15 ments Act of 1994 (42 U.S.C. 1382 note; 108 Stat.

16 1516) is hereby repealed.

17 (c) CONTINUING DISABILITY REVIEW REQUIRED FOR

18 LOW BIRTH WEIGHT BABIES.—Section 1614(a)(3)(H) (42

19 U.S.C. 1382c(a)(3)(H)), as amended by subsections (a) and

20 (b), is amended by adding at the end the following new

21 clause:

22 ‘‘(iv)(I) Not later than 12 months after the birth of

23 an individual, the Commissioner shall review in accordance

24 with paragraph (4) the continuing eligibility for benefits

25 under this title by reason of disability of such individual
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1 whose low birth weight is a contributing factor material

2 to the Commissioner’s determination that the individual is

3 disabled.

4 ‘‘(II) A review under subclause (I) shall be considered

5 a substitute for a review otherwise required under any other

6 provision of this subparagraph during that 12-month pe7 riod.

8 ‘‘(III) A representative payee of a recipient whose case

9 is reviewed under this clause shall present, at the time of

10 review, evidence demonstrating that the recipient is, and

11 has been, receiving treatment, to the extent considered medi12 cally necessary and available, of the condition which was

13 the basis for providing benefits under this title.

14 ‘‘(IV) If the representative payee refuses to comply

15 without good cause with the requirements of subclause (III),

16 the Commissioner of Social Security shall, if the Commis17 sioner determines it is in the best interest of the individual,

18 promptly terminate payment of benefits to the representa19 tive payee, and provide for payment of benefits to an alter20 native representative payee of the individual or, if the inter21 est of the individual under this title would be served thereby,

22 to the individual.

23 ‘‘(V) Subclause (III) shall not apply to the representa24 tive payee of any individual with respect to whom the Com25 missioner determines such application would be inappro-
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1 priate or unnecessary. In making such determination, the

2 Commissioner shall take into consideration the nature of

3 the individual’s impairment (or combination of impair4 ments). Section 1631(c) shall not apply to a finding by the

5 Commissioner that the requirements of subclause (III)

6 should not apply to an individual’s representative payee.’’.

7 (d) EFFECTIVE DATE.—The amendments made by this

8 section shall apply to benefits for months beginning on or

9 after the date of the enactment of this Act, without regard

10 to whether regulations have been issued to implement such

11 amendments.

12 SEC. 12213. ADDITIONAL ACCOUNTABILITY REQUIREMENTS.

13 (a) DISPOSAL OF RESOURCES FOR LESS THAN FAIR

14 MARKET VALUE.—

15 (1) IN GENERAL.—Section 1613(c) (42 U.S.C.

16 1382b(c)) is amended to read as follows:

17 ‘‘(c) DISPOSAL OF RESOURCES FOR LESS THAN FAIR

18 MARKET VALUE.—(1)(A)(i) If an individual who has not

19 attained 18 years of age (or any person acting on such indi20 vidual’s behalf) disposes of resources of the individual for

21 less than fair market value on or after the look-back date

22 specified in clause (ii)(I), the individual is ineligible for

23 benefits under this title for months during the period begin24 ning on the date specified in clause (iii) and equal to the

25 number of months specified in clause (iv).
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1 ‘‘(ii)(I) The look-back date specified in this subclause

2 is a date that is 36 months before the date specified in

3 subclause (II).

4 ‘‘(II) The date specified in this subclause is the date

5 on which the individual applies for benefits under this title

6 or, if later, the date on which the disposal of the individual’s

7 resources for less than fair market value occurs.

8 ‘‘(iii) The date specified in this clause is the first day

9 of the first month that follows the month in which the indi10 vidual’s resources were disposed of for less than fair market

11 value and that does not occur in any other period of ineli12 gibility under this paragraph.

13 ‘‘(iv) The number of months of ineligibility under this

14 clause for an individual shall be equal to—

15 ‘‘(I) the total, cumulative uncompensated value

16 of all the individual’s resources so disposed of on or

17 after the look-back date specified in clause (ii)(I), di18 vided by

19 ‘‘(II) the amount of the maximum monthly bene20 fit payable under section 1611(b) to an eligible indi21 vidual for the month in which the date specified in

22 clause (ii)(II) occurs.

23 ‘‘(B) An individual shall not be ineligible for benefits

24 under this title by reason of subparagraph (A) if the Com25 missioner determines that—
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1 ‘‘(i) the individual intended to dispose of the re2 sources at fair market value;

3 ‘‘(ii) the resources were transferred exclusively

4 for a purpose other than to qualify for benefits under

5 this title;

6 ‘‘(iii) all resources transferred for less than fair

7 market value have been returned to the individual; or

8 ‘‘(iv) the denial of eligibility would work an

9 undue hardship on the individual (as determined on

10 the basis of criteria established by the Commissioner

11 in regulations).

12 ‘‘(C) For purposes of this paragraph, in the case of

13 a resource held by an individual in common with another

14 person or persons in a joint tenancy, tenancy in common,

15 or similar arrangement, the resource (or the affected portion

16 of such resource) shall be considered to be disposed of by

17 such individual when any action is taken, either by such

18 individual or by any other person, that reduces or elimi19 nates such individual’s ownership or control of such re20 source.

21 ‘‘(D)(i) Notwithstanding subparagraph (A), this sub22 section shall not apply to a transfer of a resource to a trust

23 if the portion of the trust attributable to such resource is

24 considered a resource available to the individual pursuant
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1 to subsection (e)(3) (or would be so considered, but for the

2 application of subsection (e)(4)).

3 ‘‘(ii) In the case of a trust established by an individual

4 (within the meaning of paragraph (2)(A) of subsection (e)),

5 if from such portion of the trust (if any) that is considered

6 a resource available to the individual pursuant to para7 graph (3) of such subsection (or would be so considered but

8 for the application of paragraph (2) of such subsection) or

9 the residue of such portion upon the termination of the

10 trust—

11 ‘‘(I) there is made a payment other than to or

12 for the benefit of the individual, or

13 ‘‘(II) no payment could under any circumstance

14 be made to the individual,

15 then the payment described in subclause (I) or the fore16 closure of payment described in subclause (II) shall be con17 sidered a disposal of resources by the individual subject to

18 this subsection, as of the date of such payment or fore19 closure, respectively.

20 ‘‘(2)(A) At the time an individual (and the individ21 ual’s eligible spouse, if any) applies for benefits under this

22 title, and at the time the eligibility of an individual (and

23 such spouse, if any) for such benefits is redetermined, the

24 Commissioner of Social Security shall—
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1 ‘‘(i) inform such individual of the provisions of

2 paragraph (1) providing for a period of ineligibility

3 for benefits under this title for individuals who make

4 certain dispositions of resources for less than fair

5 market value, and inform such individual that infor6 mation obtained pursuant to clause (ii) will be made

7 available to the State agency administering a State

8 plan under title XXI (as provided in subparagraph

9 (B)); and

10 ‘‘(ii) obtain from such individual information

11 which may be used in determining whether or not a

12 period of ineligibility for such benefits would be re13 quired by reason of paragraph (1).

14 ‘‘(B) The Commissioner of Social Security shall make

15 the information obtained under subparagraph (A)(ii) avail16 able, on request, to any State agency administering a State

17 plan approved under title XXI.

18 ‘‘(3) For purposes of this subsection—

19 ‘‘(A) the term ‘trust’ includes any legal instru20 ment or device that is similar to a trust; and

21 ‘‘(B) the term ‘benefits under this title’ includes

22 supplementary payments pursuant to an agreement

23 for Federal administration under section 1616(a),

24 and payments pursuant to an agreement entered into

25 under section 212(b) of Public Law 93–66.’’.
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1 (2) EFFECTIVE DATE.—The amendment made by

2 this subsection shall be effective with respect to trans3 fers of resources for less than fair market value that

4 occur at least 90 days after the date of the enactment

5 of this Act.

6 (b) TREATMENT OF ASSETS HELD IN TRUST.—

7 (1) TREATMENT AS RESOURCE.—Section 1613

8 (42 U.S.C. 1382) is amended by adding at the end the

9 following new subsection:

10 ‘‘TRUSTS

11 ‘‘(e)(1) In determining the resources of an individual

12 who has not attained 18 years of age, the provisions of

13 paragraph (3) shall apply to a trust established by such

14 individual.

15 ‘‘(2)(A) For purposes of this subsection, an individual

16 shall be considered to have established a trust if any assets

17 of the individual were transferred to the trust.

18 ‘‘(B) In the case of an irrevocable trust to which the

19 assets of an individual and the assets of any other person

20 or persons were transferred, the provisions of this subsection

21 shall apply to the portion of the trust attributable to the

22 assets of the individual.

23 ‘‘(C) This subsection shall apply without regard to—

24 ‘‘(i) the purposes for which the trust is estab25 lished;
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1 ‘‘(ii) whether the trustees have or exercise any

2 discretion under the trust;

3 ‘‘(iii) any restrictions on when or whether dis4 tributions may be made from the trust; or

5 ‘‘(iv) any restrictions on the use of distributions

6 from the trust.

7 ‘‘(3)(A) In the case of a revocable trust, the corpus of

8 the trust shall be considered a resource available to the indi9 vidual.

10 ‘‘(B) In the case of an irrevocable trust, if there are

11 any circumstances under which payment from the trust

12 could be made to or for the benefit of the individual, the

13 portion of the corpus from which payment to or for the bene14 fit of the individual could be made shall be considered a

15 resource available to the individual.

16 ‘‘(4) The Commissioner may waive the application of

17 this subsection with respect to any individual if the Com18 missioner determines, on the basis of criteria prescribed in

19 regulations, that such application would work an undue

20 hardship on such individual.

21 ‘‘(5) For purposes of this subsection—

22 ‘‘(A) the term ‘trust’ includes any legal instru23 ment or device that is similar to a trust;

24 ‘‘(B) the term ‘corpus’ means all property and

25 other interests held by the trust, including accumu-
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1 lated earnings and any other addition to such trust

2 after its establishment (except that such term does not

3 include any such earnings or addition in the month

4 in which such earnings or addition is credited or oth5 erwise transferred to the trust);

6 ‘‘(C) the term ‘asset’ includes any income or re7 source of the individual, including—

8 ‘‘(i) any income otherwise excluded by sec9 tion 1612(b);

10 ‘‘(ii) any resource otherwise excluded by

11 this section; and

12 ‘‘(iii) any other payment or property that

13 the individual is entitled to but does not receive

14 or have access to because of action by—

15 ‘‘(I) such individual;

16 ‘‘(II) a person or entity (including a

17 court) with legal authority to act in place

18 of, or on behalf of, such individual; or

19 ‘‘(III) a person or entity (including a

20 court) acting at the direction of, or upon

21 the request of, such individual; and

22 ‘‘(D) the term ‘benefits under this title’ includes

23 supplementary payments pursuant to an agreement

24 for Federal administration under section 1616(a),
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1 and payments pursuant to an agreement entered into

2 under section 212(b) of Public Law 93–66.’’.

3 (2) TREATMENT AS INCOME.—Section 1612(a)(2)

4 (42 U.S.C. 1382a(a)(2)) is amended—

5 (A) by striking ‘‘and’’ at the end of sub6 paragraph (E);

7 (B) by striking the period at the end of sub8 paragraph (F) and inserting ‘‘; and’’; and

9 (C) by adding at the end the following new

10 subparagraph:

11 ‘‘(G) any earnings of, and additions to, the

12 corpus of a trust (as defined in section 1613(f))

13 established by an individual (within the mean14 ing of paragraph (2)(A) of section 1613(e)) and

15 of which such individual is a beneficiary (other

16 than a trust to which paragraph (4) of such sec17 tion applies); except that in the case of an irrev18 ocable trust, there shall exist circumstances

19 under which payment from such earnings or ad20 ditions could be made to, or for the benefit of,

21 such individual.’’.

22 (3) EFFECTIVE DATE.—The amendments made

23 by this subsection shall take effect on January 1,

24 1996, and shall apply to trusts established on or after

25 such date.
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1 (c) REQUIREMENT TO ESTABLISH ACCOUNT.—

2 (1) IN GENERAL.—Section 1631(a)(2) (42 U.S.C.

3 1383(a)(2)) is amended—

4 (A) by redesignating subparagraphs (F)

5 and (G) as subparagraphs (G) and (H), respec6 tively; and

7 (B) by inserting after subparagraph (E) the

8 following new subparagraph:

9 ‘‘(F)(i)(I) Each representative payee of an eligible in10 dividual under the age of 18 who is eligible for the payment

11 of benefits described in subclause (II) shall establish on be12 half of such individual an account in a financial institu13 tion into which such benefits shall be paid, and shall there14 after maintain such account for use in accordance with

15 clause (ii).

16 ‘‘(II) Benefits described in this subclause are past-due

17 monthly benefits under this title (which, for purposes of this

18 subclause, include State supplementary payments made by

19 the Commissioner pursuant to an agreement under section

20 1616 or section 212(b) of Public Law 93–66) in an amount

21 (after any withholding by the Commissioner for reimburse22 ment to a State for interim assistance under subsection (g))

23 that exceeds the product of—

24 ‘‘(aa) 6, and
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1 ‘‘(bb) the maximum monthly benefit payable

2 under this title to an eligible individual.

3 ‘‘(ii)(I) A representative payee may use funds in the

4 account established under clause (i) to pay for allowable

5 expenses described in subclause (II).

6 ‘‘(II) An allowable expense described in this subclause

7 is an expense for—

8 ‘‘(aa) education or job skills training;

9 ‘‘(bb) personal needs assistance;

10 ‘‘(cc) special equipment;

11 ‘‘(dd) housing modification;

12 ‘‘(ee) medical treatment;

13 ‘‘(ff) therapy or rehabilitation; or

14 ‘‘(gg) any other item or service that the Commis15 sioner determines to be appropriate;

16 provided that such expense benefits such individual and, in

17 the case of an expense described in division (cc), (dd), (ff),

18 or (gg), is related to the impairment (or combination of

19 impairments) of such individual.

20 ‘‘(III) The use of funds from an account established

21 under clause (i) in any manner not authorized by this

22 clause—

23 ‘‘(aa) by a representative payee shall constitute

24 misuse of benefits for all purposes of this paragraph,

25 and any representative payee who knowingly misuses
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1 benefits from such an account shall be liable to the

2 Commissioner in an amount equal to the total

3 amount of such misused benefits; and

4 ‘‘(bb) by an eligible individual who is his or her

5 own representative payee shall be considered an over6 payment subject to recovery under subsection (b).

7 ‘‘(IV) This clause shall continue to apply to funds in

8 the account after the child has reached age 18, regardless

9 of whether benefits are paid directly to the beneficiary or

10 through a representative payee.

11 ‘‘(iii) The representative payee may deposit into the

12 account established pursuant to clause (i)—

13 ‘‘(I) past-due benefits payable to the eligible in14 dividual in an amount less than that specified in

15 clause (i)(II), and

16 ‘‘(II) any other funds representing an

17 underpayment under this title to such individual,

18 provided that the amount of such underpayment is

19 equal to or exceeds the maximum monthly benefit

20 payable under this title to an eligible individual.

21 ‘‘(iv) The Commissioner of Social Security shall estab22 lish a system for accountability monitoring whereby such

23 representative payee shall report, at such time and in such

24 manner as the Commissioner shall require, on activity re-
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1 specting funds in the account established pursuant to clause

2 (i).’’.

3 (2) EXCLUSION FROM RESOURCES.—Section

4 1613(a) (42 U.S.C. 1382b(a)) is amended—

5 (A) in paragraph (9), by striking ‘‘; and’’

6 and inserting a semicolon;

7 (B) in the first paragraph (10), by striking

8 the period and inserting a semicolon;

9 (C) by redesignating the second paragraph

10 (10) as paragraph (11), and by striking the pe11 riod and inserting ‘‘; and’’; and

12 (D) by adding at the end the following:

13 ‘‘(12) the assets and accrued interest or other

14 earnings of any account established and maintained

15 in accordance with section 1631(a)(2)(F).’’.

16 (3) EXCLUSION FROM INCOME.—Section 1612(b)

17 (42 U.S.C. 1382a(b)) is amended—

18 (A) by striking ‘‘and’’ at the end of para19 graph (19);

20 (B) by striking the period at the end of

21 paragraph (20) and inserting ‘‘; and’’; and

22 (C) by adding at the end the following new

23 paragraph:
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1 ‘‘(21) the interest or other earnings on any ac2 count established and maintained in accordance with

3 section 1631(a)(2)(F).’’.

4 (4) EFFECTIVE DATE.—The amendments made

5 by this subsection shall apply to payments made after

6 the date of the enactment of this Act.

7 SEC. 12214. REDUCTION IN CASH BENEFITS PAYABLE TO IN8 STITUTIONALIZED INDIVIDUALS WHOSE MED9 ICAL COSTS ARE COVERED BY PRIVATE IN10 SURANCE.

11 (a) IN GENERAL.—Section 1611(e)(1)(B) (42 U.S.C.

12 1382(e)(1)(B)) is amended—

13 (1) by striking ‘‘title XIX, or’’ and inserting

14 ‘‘title XIX,’’; and

15 (2) by inserting ‘‘or, in the case of an eligible in16 dividual under the age of 18 receiving payments

17 (with respect to such individual) under any health in18 surance policy issued by a private provider of such

19 insurance’’ after ‘‘section 1614(f)(2)(B),’’.

20 (b) EFFECTIVE DATE.—The amendment made by this

21 section shall apply to benefits for months beginning 90 or

22 more days after the date of the enactment of this Act, with23 out regard to whether regulations have been issued to imple24 ment such amendments.
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HR 2491 EAS

1 SEC. 12215. REGULATIONS.

2 Within 3 months after the date of the enactment of this

3 Act, the Commissioner of Social Security shall prescribe

4 such regulations as may be necessary to implement the

5 amendments made by sections 12211, 12212, 12213, and

6 12214.

7 Subtitle C—Child Support

8 SEC. 12300. REFERENCE TO SOCIAL SECURITY ACT.

9 Except as otherwise specifically provided, where ever

10 in this subtitle an amendment is expressed in terms of an

11 amendment to or repeal of a section or other provision, the

12 reference shall be considered to be made to that section or

13 other provision of the Social Security Act.

14 CHAPTER 1—ELIGIBILITY FOR SERVICES;

15 DISTRIBUTION OF PAYMENTS

16 SEC. 12301. STATE OBLIGATION TO PROVIDE CHILD SUP17 PORT ENFORCEMENT SERVICES.

18 (a) STATE PLAN REQUIREMENTS.—Section 454 (42

19 U.S.C. 654) is amended—

20 (1) by striking paragraph (4) and inserting the

21 following new paragraph:

22 ‘‘(4) provide that the State will—

23 ‘‘(A) provide services relating to the estab24 lishment of paternity or the establishment, modi25 fication, or enforcement of child support obliga-
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1 tions, as appropriate, under the plan with re2 spect to—

3 ‘‘(i) each child for whom (I) assistance

4 is provided under the State program funded

5 under part A of this title, (II) benefits or

6 services for foster care maintenance and

7 adoption assistance are provided under the

8 State program funded under part B of this

9 title, or (III) medical assistance is provided

10 under the State plan approved under title

11 XXI, unless the State agency administering

12 the plan determines (in accordance with

13 paragraph (29)) that it is against the best

14 interests of the child to do so; and

15 ‘‘(ii) any other child, if an individual

16 applies for such services with respect to the

17 child; and

18 ‘‘(B) enforce any support obligation estab19 lished with respect to—

20 ‘‘(i) a child with respect to whom the

21 State provides services under the plan; or

22 ‘‘(ii) the custodial parent of such a

23 child.’’; and

24 (2) in paragraph (6)—
1984

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1 (A) by striking ‘‘provide that’’ and insert2 ing ‘‘provide that—’’;

3 (B) by striking subparagraph (A) and in4 serting the following new subparagraph:

5 ‘‘(A) services under the plan shall be made

6 available to residents of other States on the same

7 terms as to residents of the State submitting the

8 plan;’’;

9 (C) in subparagraph (B), by inserting ‘‘on

10 individuals not receiving assistance under any

11 State program funded under part A’’ after ‘‘such

12 services shall be imposed’’;

13 (D) in each of subparagraphs (B), (C), (D),

14 and (E)—

15 (i) by indenting the subparagraph in

16 the same manner as, and aligning the left

17 margin of the subparagraph with the left

18 margin of, the matter inserted by subpara19 graph (B) of this paragraph; and

20 (ii) by striking the final comma and

21 inserting a semicolon; and

22 (E) in subparagraph (E), by indenting each

23 of clauses (i) and (ii) 2 additional ems.

24 (b) CONTINUATION OF SERVICES FOR FAMILIES CEAS25 ING TO RECEIVE ASSISTANCE UNDER THE STATE PRO-
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1 GRAM FUNDED UNDER PART A.—Section 454 (42 U.S.C.

2 654) is amended—

3 (1) by striking ‘‘and’’ at the end of paragraph

4 (23);

5 (2) by striking the period at the end of para6 graph (24) and inserting ‘‘; and’’; and

7 (3) by adding after paragraph (24) the following

8 new paragraph:

9 ‘‘(25) provide that if a family with respect to

10 which services are provided under the plan ceases to

11 receive assistance under the State program funded

12 under part A, the State shall provide appropriate no13 tice to the family and continue to provide such serv14 ices, subject to the same conditions and on the same

15 basis as in the case of other individuals to whom serv16 ices are furnished under the plan, except that an ap17 plication or other request to continue services shall

18 not be required of such a family and paragraph

19 (6)(B) shall not apply to the family.’’.

20 (c) CONFORMING AMENDMENTS.—

21 (1) Section 452(b) (42 U.S.C. 652(b)) is amend22 ed by striking ‘‘454(6)’’ and inserting ‘‘454(4)’’.

23 (2) Section 452(g)(2)(A) (42 U.S.C.

24 652(g)(2)(A)) is amended by striking ‘‘454(6)’’ each

25 place it appears and inserting ‘‘454(4)(A)(ii)’’.
1986

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1 (3) Section 466(a)(3)(B) (42 U.S.C.

2 666(a)(3)(B)) is amended by striking ‘‘in the case of

3 overdue support which a State has agreed to collect

4 under section 454(6)’’ and inserting ‘‘in any other

5 case’’.

6 (4) Section 466(e) (42 U.S.C. 666(e)) is amended

7 by striking ‘‘paragraph (4) or (6) of section 454’’ and

8 inserting ‘‘section 454(4)’’.

9 SEC. 12302. DISTRIBUTION OF CHILD SUPPORT COLLEC10 TIONS.

11 (a) IN GENERAL.—Section 457 (42 U.S.C. 657) is

12 amended to read as follows:

13 ‘‘SEC. 457. DISTRIBUTION OF COLLECTED SUPPORT.

14 ‘‘(a) IN GENERAL.—An amount collected on behalf of

15 a family as support by a State pursuant to a plan approved

16 under this part shall be distributed as follows:

17 ‘‘(1) FAMILIES RECEIVING ASSISTANCE.—In the

18 case of a family receiving assistance from the State,

19 the State shall—

20 ‘‘(A) retain, or distribute to the family, the

21 State share of the amount so collected; and

22 ‘‘(B) pay to the Federal Government the

23 Federal share of the amount so collected.
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1 ‘‘(2) FAMILIES THAT FORMERLY RECEIVED AS2 SISTANCE.—In the case of a family that formerly re3 ceived assistance from the State:

4 ‘‘(A) CURRENT SUPPORT PAYMENTS.—To

5 the extent that the amount so collected does not

6 exceed the amount required to be paid to the

7 family for the month in which collected, the

8 State shall distribute the amount so collected to

9 the family.

10 ‘‘(B) PAYMENTS OF ARREARAGES.—To the

11 extent that the amount so collected exceeds the

12 amount required to be paid to the family for the

13 month in which collected, the State shall distrib14 ute the amount so collected as follows:

15 ‘‘(i) DISTRIBUTION OF ARREARAGES

16 THAT ACCRUED AFTER THE FAMILY CEASED

17 TO RECEIVE ASSISTANCE.—

18 ‘‘(I) PRE-OCTOBER 1997.—The

19 provisions of this section (other than

20 subsection (b)(1)) as in effect on the

21 day before the date of the enactment of

22 section 12302 of the Personal Respon23 sibility and Work Opportunity Act of

24 1995 shall apply with respect to the
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1 distribution of support arrearages

2 that—

3 ‘‘(aa) accrued after the fam4 ily ceased to receive assistance,

5 and

6 ‘‘(bb) are collected before Oc7 tober 1, 1997.

8 ‘‘(II) POST-SEPTEMBER 1997.—

9 With respect to amounts collected on or

10 after October 1, 1997—

11 ‘‘(aa) IN GENERAL.—The

12 State shall distribute any amount

13 collected (other than amounts de14 scribed in clause (iv)) to the fam15 ily to the extent necessary to sat16 isfy any support arrearages with

17 respect to the family that accrued

18 after the family ceased to receive

19 assistance from the State.

20 ‘‘(bb) REIMBURSEMENT OF

21 GOVERNMENTS FOR ASSISTANCE

22 PROVIDED TO THE FAMILY.—To

23 the extent that division (aa) does

24 not apply to the amount, the

25 State shall retain the State share
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1 of the amount so collected, and

2 pay to the Federal Government

3 the Federal share (as defined in

4 subsection (c)(2)(A)) of the

5 amount so collected, to the extent

6 necessary to reimburse amounts

7 paid to the family as assistance

8 by the State.

9 ‘‘(cc) DISTRIBUTION OF THE

10 REMAINDER TO THE FAMILY.—To

11 the extent that neither division

12 (aa) nor division (bb) applies to

13 the amount so collected, the State

14 shall distribute the amount to the

15 family.

16 ‘‘(ii) DISTRIBUTION OF ARREARAGES

17 THAT ACCRUED BEFORE THE FAMILY RE18 CEIVED ASSISTANCE.—

19 ‘‘(I) PRE-OCTOBER 2000.—The

20 provisions of this section (other than

21 subsection (b)(1)) as in effect on the

22 day before the date of the enactment of

23 section 12302 of the Personal Respon24 sibility and Work Opportunity Act of

25 1995 shall apply with respect to the
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1 distribution of support arrearages

2 that—

3 ‘‘(aa) accrued before the fam4 ily received assistance, and

5 ‘‘(bb) are collected before Oc6 tober 1, 2000.

7 ‘‘(II) POST-SEPTEMBER 2000.—

8 Unless based on the report required by

9 paragraph (4), the Congress determines

10 otherwise, with respect to amounts col11 lected on or after October 1, 2000—

12 ‘‘(aa) IN GENERAL.—The

13 State shall first distribute any

14 amount collected (other than

15 amounts described in clause (iv))

16 to the family to the extent nec17 essary to satisfy any support ar18 rears with respect to the family

19 that accrued before the family re20 ceived assistance from the State .

21 ‘‘(bb) REIMBURSEMENT OF

22 GOVERNMENTS FOR ASSISTANCE

23 PROVIDED TO THE FAMILY.—The

24 State shall retain the State share

25 of the amounts so collected in ex-
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1 cess of those distributed pursuant

2 to division (aa) and pay to the

3 Federal Government the Federal

4 share (as defined in subsection

5 (c)(2)) of the amount so collected,

6 to the extent necessary to reim7 burse all or part of the amounts

8 paid to the family as assistance

9 by the State.

10 ‘‘(cc) DISTRIBUTION OF THE

11 REMAINDER TO THE FAMILY.—To

12 the extent that neither division

13 (aa) nor division (bb) applies to

14 the amount so collected, the State

15 shall distribute the amount to the

16 family.

17 ‘‘(iii) DISTRIBUTION OF ARREARAGES

18 THAT ACCRUED WHILE THE FAMILY RE19 CEIVED ASSISTANCE.—In the case of a fam20 ily described in this subparagraph, the pro21 visions of paragraph (1) shall apply with

22 respect to the distribution of support arrear23 ages that accrued while the family received

24 assistance.
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1 ‘‘(iv) AMOUNTS COLLECTED PURSUANT

2 TO SECTION 464.—Notwithstanding any

3 other provision of this section, any amount

4 of support collected pursuant to section 464

5 shall be retained by the State to the extent

6 necessary to reimburse amounts paid to the

7 family as assistance by the State. The State

8 shall pay to the Federal Government the

9 Federal share of the amounts so retained.

10 To the extent the amount collected pursuant

11 to section 464 exceeds the amount so re12 tained, the State shall distribute the excess

13 to the family.

14 ‘‘(v) ORDERING RULES FOR DISTRIBU15 TIONS.—For purposes of this subparagraph,

16 the State shall treat any support arrearages

17 collected as accruing in the following order:

18 ‘‘(I) to the period after the family

19 ceased to receive assistance;

20 ‘‘(II) to the period before the fam21 ily received assistance; and

22 ‘‘(III) to the period while the fam23 ily was receiving assistance.
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HR 2491 EAS

1 ‘‘(3) FAMILIES THAT NEVER RECEIVED ASSIST2 ANCE.—In the case of any other family, the State

3 shall distribute the amount so collected to the family.

4 ‘‘(4) STUDY AND REPORT.—Not later than Octo5 ber 1, 1998, the Secretary shall report to the Congress

6 the Secretary’s findings with respect to—

7 ‘‘(A) whether the distribution of post-assist8 ance arrearages to families has been effective in

9 moving people off of welfare and keeping them

10 off of welfare;

11 ‘‘(B) whether early implementation of a

12 pre-assistance arrearage program by some states

13 has been effective in moving people off of welfare

14 and keeping them off of welfare;

15 ‘‘(C) what the overall impact has been of the

16 amendments made by the Personal Responsibil17 ity and Work Opportunity Act of 1995 with re18 spect to child support enforcement in moving

19 people off of welfare and keeping them off of wel20 fare; and

21 ‘‘(D) based on the information and data the

22 Secretary has obtained, what changes, if any,

23 should be made in the policies related to the dis24 tribution of child support arrearages.
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1 ‘‘(b) CONTINUATION OF ASSIGNMENTS.—Any rights to

2 support obligations, which were assigned to a State as a

3 condition of receiving assistance from the State under part

4 A and which were in effect on the day before the date of

5 the enactment of the Personal Responsibility and Work Op6 portunity Act of 1995, shall remain assigned after such

7 date.

8 ‘‘(c) DEFINITIONS.—As used in subsection (a):

9 ‘‘(1) ASSISTANCE.—The term ‘assistance from

10 the State’ means—

11 ‘‘(A) assistance under the State program

12 funded under part A or under the State plan ap13 proved under part A of this title (as in effect on

14 the day before the date of the enactment of the

15 Personal Responsibility and Work Opportunity

16 Act of 1995); or

17 ‘‘(B) benefits under the State plan approved

18 under part E of this title (as in effect on the day

19 before the date of the enactment of the Personal

20 Responsibility and Work Opportunity Act of

21 1995).

22 ‘‘(2) FEDERAL SHARE.—The term ‘Federal share’

23 means—

24 ‘‘(A) if the amounts collected and retained

25 by the State (to the extent necessary to reimburse
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HR 2491 EAS

1 amounts paid to families as assistance by the

2 State) are equal to or greater than such amounts

3 collected in fiscal year 1995 (reduced by amounts

4 not retained by the State in fiscal year 1995 as

5 a result of the application of subsection (b)(1) of

6 this section as in effect on the day before the date

7 of the enactment of the Personal Responsibility

8 and Work Opportunity Act of 1995), the highest

9 Federal medical assistance percentage in effect

10 for the State in fiscal year 1995 or any succeed11 ing year of the amount so collected; or

12 ‘‘(B) if the amounts so collected and re13 tained by the State are less than such amounts

14 collected in fiscal year 1995 (reduced by amounts

15 not retained by the State in fiscal year 1995 as

16 a result of the application of subsection (b)(1) of

17 this section as in effect on the day before the date

18 of the enactment of the Personal Responsibility

19 and Work Opportunity Act of 1995), the

20 amounts so collected and retained less the State

21 share in fiscal year 1995.

22 ‘‘(3) FEDERAL MEDICAL ASSISTANCE PERCENT23 AGE.—The term ‘Federal medical assistance percent24 age’ means—
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1 ‘‘(A) the Federal medical assistance percent2 age (as defined in section 1118), in the case of

3 Puerto Rico, the Virgin Islands, Guam, and

4 American Samoa; or

5 ‘‘(B) the Federal medical assistance percent6 age (as defined in section 2122(c)) in the case of

7 any other State.

8 ‘‘(4) STATE SHARE.—The term ‘State share’

9 means 100 percent minus the Federal share.

10 ‘‘(d) CONTINUATION OF SERVICES FOR FAMILIES

11 CEASING TO RECEIVE ASSISTANCE UNDER THE STATE

12 PROGRAM FUNDED UNDER PART A.—When a family with

13 respect to which services are provided under a State plan

14 approved under this part ceases to receive assistance under

15 the State program funded under part A, the State shall pro16 vide appropriate notice to the family and continue to pro17 vide such services, subject to the same conditions and on

18 the same basis as in the case of individuals to whom services

19 are furnished under section 454, except that an application

20 or other request to continue services shall not be required

21 of such a family and section 454(6)(B) shall not apply to

22 the family.’’.

23 (b) CONFORMING AMENDMENT.—Section 464(a)(1) (42

24 U.S.C. 664(a)(1)) is amended by striking ‘‘section 457(b)(4)

25 or (d)(3)’’ and inserting ‘‘section 457’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall be effective on October 1, 1996, or earlier at

3 the State’s option.

4 SEC. 12303. PRIVACY SAFEGUARDS.

5 (a) STATE PLAN REQUIREMENT.—Section 454 (42

6 U.S.C. 654), as amended by section 12301(b) of this Act,

7 is amended—

8 (1) by striking ‘‘and’’ at the end of paragraph

9 (24);

10 (2) by striking the period at the end of para11 graph (25) and inserting ‘‘; and’’; and

12 (3) by adding after paragraph (25) the following

13 new paragraph:

14 ‘‘(26) will have in effect safeguards, applicable to

15 all confidential information handled by the State

16 agency, that are designed to protect the privacy rights

17 of the parties, including—

18 ‘‘(A) safeguards against unauthorized use or

19 disclosure of information relating to proceedings

20 or actions to establish paternity, or to establish

21 or enforce support;

22 ‘‘(B) prohibitions against the release of in23 formation on the whereabouts of 1 party to an24 other party against whom a protective order
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1 with respect to the former party has been en2 tered; and

3 ‘‘(C) prohibitions against the release of in4 formation on the whereabouts of 1 party to an5 other party if the State has reason to believe that

6 the release of the information may result in

7 physical or emotional harm to the former

8 party.’’.

9 (b) EFFECTIVE DATE.—The amendment made by sub10 section (a) shall become effective on October 1, 1997.

11 CHAPTER 2—LOCATE AND CASE

12 TRACKING

13 SEC. 12311. STATE CASE REGISTRY.

14 Section 454A, as added by section 12344(a)(2) of this

15 Act, is amended by adding at the end the following new

16 subsections:

17 ‘‘(e) STATE CASE REGISTRY.—

18 ‘‘(1) CONTENTS.—The automated system re19 quired by this section shall include a registry (which

20 shall be known as the ‘State case registry’) that con21 tains records with respect to—

22 ‘‘(A) each case in which services are being

23 provided by the State agency under the State

24 plan approved under this part; and
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1 ‘‘(B) each support order established or

2 modified in the State on or after October 1,

3 1998.

4 ‘‘(2) LINKING OF LOCAL REGISTRIES.—The State

5 case registry may be established by linking local case

6 registries of support orders through an automated in7 formation network, subject to this section.

8 ‘‘(3) USE OF STANDARDIZED DATA ELEMENTS.—

9 Such records shall use standardized data elements for

10 both parents (such as names, social security numbers

11 and other uniform identification numbers, dates of

12 birth, and case identification numbers), and contain

13 such other information (such as on-case status) as the

14 Secretary may require.

15 ‘‘(4) PAYMENT RECORDS.—Each case record in

16 the State case registry with respect to which services

17 are being provided under the State plan approved

18 under this part and with respect to which a support

19 order has been established shall include a record of—

20 ‘‘(A) the amount of monthly (or other peri21 odic) support owed under the order, and other

22 amounts (including arrearages, interest or late

23 payment penalties, and fees) due or overdue

24 under the order;
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1 ‘‘(B) any amount described in subpara2 graph (A) that has been collected;

3 ‘‘(C) the distribution of such collected

4 amounts;

5 ‘‘(D) the birth date of any child for whom

6 the order requires the provision of support; and

7 ‘‘(E) the amount of any lien imposed with

8 respect to the order pursuant to section

9 466(a)(4).

10 ‘‘(5) UPDATING AND MONITORING.—The State

11 agency operating the automated system required by

12 this section shall promptly establish and maintain,

13 and regularly monitor, case records in the State case

14 registry with respect to which services are being pro15 vided under the State plan approved under this part,

16 on the basis of—

17 ‘‘(A) information on administrative actions

18 and administrative and judicial proceedings and

19 orders relating to paternity and support;

20 ‘‘(B) information obtained from comparison

21 with Federal, State, or local sources of informa22 tion;

23 ‘‘(C) information on support collections and

24 distributions; and

25 ‘‘(D) any other relevant information.
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1 ‘‘(f) INFORMATION COMPARISONS AND OTHER DISCLO2 SURES OF INFORMATION.—The State shall use the auto3 mated system required by this section to extract informa4 tion from (at such times, and in such standardized format

5 or formats, as may be required by the Secretary), to share

6 and compare information with, and to receive information

7 from, other data bases and information comparison serv8 ices, in order to obtain (or provide) information necessary

9 to enable the State agency (or the Secretary or other State

10 or Federal agencies) to carry out this part, subject to section

11 6103 of the Internal Revenue Code of 1986. Such informa12 tion comparison activities shall include the following:

13 ‘‘(1) FEDERAL CASE REGISTRY OF CHILD SUP14 PORT ORDERS.—Furnishing to the Federal Case Reg15 istry of Child Support Orders established under sec16 tion 453(h) (and update as necessary, with informa17 tion including notice of expiration of orders) the min18 imum amount of information on child support cases

19 recorded in the State case registry that is necessary

20 to operate the registry (as specified by the Secretary

21 in regulations).

22 ‘‘(2) FEDERAL PARENT LOCATOR SERVICE.—Ex23 changing information with the Federal Parent Loca24 tor Service for the purposes specified in section 453.
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1 ‘‘(3) TEMPORARY FAMILY ASSISTANCE AND

2 MEDIGRANT AGENCIES.—Exchanging information

3 with State agencies (of the State and of other States)

4 administering programs funded under part A, pro5 grams operated under State plans under title XXI,

6 and other programs designated by the Secretary, as

7 necessary to perform State agency responsibilities

8 under this part and under such programs.

9 ‘‘(4) INTRASTATE AND INTERSTATE INFORMATION

10 COMPARISONS.—Exchanging information with other

11 agencies of the State, agencies of other States, and

12 interstate information networks, as necessary and ap13 propriate to carry out (or assist other States to carry

14 out) the purposes of this part.’’.

15 SEC. 12312. COLLECTION AND DISBURSEMENT OF SUPPORT

16 PAYMENTS.

17 (a) STATE PLAN REQUIREMENT.—Section 454 (42

18 U.S.C. 654), as amended by sections 12301(b) and 12303(a)

19 of this Act, is amended—

20 (1) by striking ‘‘and’’ at the end of paragraph

21 (25);

22 (2) by striking the period at the end of para23 graph (26) and inserting ‘‘; and’’; and

24 (3) by adding after paragraph (26) the following

25 new paragraph:
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1 ‘‘(27) provide that, on and after October 1, 1998,

2 the State agency will—

3 ‘‘(A) operate a State disbursement unit in

4 accordance with section 454B; and

5 ‘‘(B) have sufficient State staff (consisting

6 of State employees) and (at State option) con7 tractors reporting directly to the State agency

8 to—

9 ‘‘(i) monitor and enforce support col10 lections through the unit (including carry11 ing out the automated data processing re12 sponsibilities described in section 454A(g));

13 and

14 ‘‘(ii) take the actions described in sec15 tion 466(c)(1) in appropriate cases.’’.

16 (b) ESTABLISHMENT OF STATE DISBURSEMENT

17 UNIT.—Part D of title IV (42 U.S.C. 651–669), as amended

18 by section 12344(a)(2) of this Act, is amended by inserting

19 after section 454A the following new section:

20 ‘‘SEC. 454B. COLLECTION AND DISBURSEMENT OF SUPPORT

21 PAYMENTS.

22 ‘‘(a) STATE DISBURSEMENT UNIT.—

23 ‘‘(1) IN GENERAL.—In order for a State to meet

24 the requirements of this section, the State agency

25 must establish and operate a unit (which shall be
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1 known as the ‘State disbursement unit’) for the collec2 tion and disbursement of payments under support or3 ders in all cases being enforced by the State pursuant

4 to section 454(4).

5 ‘‘(2) OPERATION.—The State disbursement unit

6 shall be operated—

7 ‘‘(A) directly by the State agency (or 2 or

8 more State agencies under a regional cooperative

9 agreement), or (to the extent appropriate) by a

10 contractor responsible directly to the State agen11 cy; and

12 ‘‘(B) in coordination with the automated

13 system established by the State pursuant to sec14 tion 454A.

15 ‘‘(3) LINKING OF LOCAL DISBURSEMENT

16 UNITS.—The State disbursement unit may be estab17 lished by linking local disbursement units through an

18 automated information network, subject to this sec19 tion, if the Secretary agrees that the system will not

20 cost more nor take more time to establish or operate

21 than a centralized system. In addition, employers

22 shall be given 1 location to which income withholding

23 is sent.

24 ‘‘(b) REQUIRED PROCEDURES.—The State disburse25 ment unit shall use automated procedures, electronic proc-
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1 esses, and computer-driven technology to the maximum ex2 tent feasible, efficient, and economical, for the collection and

3 disbursement of support payments, including procedures—

4 ‘‘(1) for receipt of payments from parents, em5 ployers, and other States, and for disbursements to

6 custodial parents and other obligees, the State agency,

7 and the agencies of other States;

8 ‘‘(2) for accurate identification of payments;

9 ‘‘(3) to ensure prompt disbursement of the custo10 dial parent’s share of any payment; and

11 ‘‘(4) to furnish to any parent, upon request,

12 timely information on the current status of support

13 payments under an order requiring payments to be

14 made by or to the parent.

15 ‘‘(c) TIMING OF DISBURSEMENTS.—

16 ‘‘(1) IN GENERAL.—Except as provided in para17 graph (2), the State disbursement unit shall distribute

18 all amounts payable under section 457(a) within 2

19 business days after receipt from the employer or other

20 source of periodic income, if sufficient information

21 identifying the payee is provided.

22 ‘‘(2) PERMISSIVE RETENTION OF ARREARAGES.—

23 The State disbursement unit may delay the distribu24 tion of collections toward arrearages until the resolu-
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1 tion of any timely appeal with respect to such arrear2 ages.

3 ‘‘(d) BUSINESS DAY DEFINED.—As used in this sec4 tion, the term ‘business day’ means a day on which State

5 offices are open for regular business.’’.

6 (c) USE OF AUTOMATED SYSTEM.—Section 454A, as

7 added by section 12344(a)(2) and as amended by section

8 12311 of this Act, is amended by adding at the end the

9 following new subsection:

10 ‘‘(g) COLLECTION AND DISTRIBUTION OF SUPPORT

11 PAYMENTS.—

12 ‘‘(1) IN GENERAL.—The State shall use the auto13 mated system required by this section, to the maxi14 mum extent feasible, to assist and facilitate the collec15 tion and disbursement of support payments through

16 the State disbursement unit operated under section

17 454B, through the performance of functions, includ18 ing, at a minimum—

19 ‘‘(A) transmission of orders and notices to

20 employers (and other debtors) for the withholding

21 of wages and other income—

22 ‘‘(i) within 2 business days after re23 ceipt from a court, another State, an em24 ployer, the Federal Parent Locator Service,

25 or another source recognized by the State of
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1 notice of, and the income source subject to,

2 such withholding; and

3 ‘‘(ii) using uniform formats prescribed

4 by the Secretary;

5 ‘‘(B) ongoing monitoring to promptly iden6 tify failures to make timely payment of support;

7 and

8 ‘‘(C) automatic use of enforcement proce9 dures (including procedures authorized pursuant

10 to section 466(c)) if payments are not timely

11 made.

12 ‘‘(2) BUSINESS DAY DEFINED.—As used in para13 graph (1), the term ‘business day’ means a day on

14 which State offices are open for regular business.’’.

15 (d) EFFECTIVE DATE.—The amendments made by this

16 section shall become effective on October 1, 1998.

17 SEC. 12313. STATE DIRECTORY OF NEW HIRES.

18 (a) STATE PLAN REQUIREMENT.—Section 454 (42

19 U.S.C. 654), as amended by sections 12301(b), 12303(a)

20 and 12312(a) of this Act, is amended—

21 (1) by striking ‘‘and’’ at the end of paragraph

22 (26);

23 (2) by striking the period at the end of para24 graph (27) and inserting ‘‘; and’’; and
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1 (3) by adding after paragraph (27) the following

2 new paragraph:

3 ‘‘(28) provide that, on and after October 1, 1997,

4 the State will operate a State Directory of New Hires

5 in accordance with section 453A.’’.

6 (b) STATE DIRECTORY OF NEW HIRES.—Part D of

7 title IV (42 U.S.C. 651–669) is amended by inserting after

8 section 453 the following new section:

9 ‘‘SEC. 453A. STATE DIRECTORY OF NEW HIRES.

10 ‘‘(a) ESTABLISHMENT.—

11 ‘‘(1) IN GENERAL.—

12 ‘‘(A) REQUIREMENT FOR STATES THAT

13 HAVE NO DIRECTORY.—Except as provided in

14 subparagraph (B), not later than October 1,

15 1997, each State shall establish an automated di16 rectory (to be known as the ‘State Directory of

17 New Hires’) which shall contain information

18 supplied in accordance with subsection (b) by

19 employers on each newly hired employee.

20 ‘‘(B) STATES WITH NEW HIRE REPORTING

21 IN EXISTENCE.—A State which has a new hire

22 reporting law in existence on the date of the en23 actment of this section may continue to operate

24 under the State law, but the State must meet the
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1 requirements of this section (other than sub2 section (f)) not later than October 1, 1997.

3 ‘‘(2) DEFINITIONS.—As used in this section:

4 ‘‘(A) EMPLOYEE.—The term ‘employee’—

5 ‘‘(i) means an individual who is an

6 employee within the meaning of chapter 24

7 of the Internal Revenue Code of 1986; and

8 ‘‘(ii) does not include an employee of a

9 Federal or State agency performing intel10 ligence or counterintelligence functions, if

11 the head of such agency has determined that

12 reporting pursuant to paragraph (1) with

13 respect to the employee could endanger the

14 safety of the employee or compromise an on15 going investigation or intelligence mission.

16 ‘‘(B) EMPLOYER.—

17 ‘‘(i) IN GENERAL.—The term ‘em18 ployer’ has the meaning given such term in

19 section 3401(d) of the Internal Revenue

20 Code of 1996 and includes any govern21 mental entity and any labor organization.

22 ‘‘(ii) LABOR ORGANIZATION.—The

23 term ‘labor organization’ shall have the

24 meaning given such term in section 2(5) of

25 the National Labor Relations Act, and in-
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1 cludes any entity (also known as a ‘hiring

2 hall’) which is used by the organization and

3 an employer to carry out requirements de4 scribed in section 8(f)(3) of such Act of an

5 agreement between the organization and the

6 employer.

7 ‘‘(b) EMPLOYER INFORMATION.—

8 ‘‘(1) REPORTING REQUIREMENT.—

9 ‘‘(A) IN GENERAL.—Except as provided in

10 subparagraphs (B) and (C), each employer shall

11 furnish to the Directory of New Hires of the

12 State in which a newly hired employee works, a

13 report that contains the name, address, and so14 cial security number of the employee, and the

15 name of, and identifying number assigned under

16 section 6109 of the Internal Revenue Code of

17 1986 to, the employer.

18 ‘‘(B) MULTISTATE EMPLOYERS.—An em19 ployer that has employees who are employed in

20 2 or more States and that transmits reports

21 magnetically or electronically may comply with

22 subparagraph (A) by designating 1 State in

23 which such employer has employees to which the

24 employer will transmit the report described in

25 subparagraph (A), and transmitting such report
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1 to such State. Any employer that transmits re2 ports pursuant to this subparagraph shall notify

3 the Secretary in writing as to which State such

4 employer designates for the purpose of sending

5 reports.

6 ‘‘(C) FEDERAL GOVERNMENT EMPLOYERS.—

7 Any department, agency, or instrumentality of

8 the United States shall comply with subpara9 graph (A) by transmitting the report described

10 in subparagraph (A) to the National Directory

11 of New Hires established pursuant to section

12 453.

13 ‘‘(2) TIMING OF REPORT.—Each State may pro14 vide the time within which the report required by

15 paragraph (1) shall be made with respect to an em16 ployee, but such report shall be made not later than

17 20 days after the date the employer hires the em18 ployee.

19 ‘‘(c) REPORTING FORMAT AND METHOD.—Each report

20 required by subsection (b) shall be made on a W–4 form

21 or, at the option of the employer, an equivalent form, and

22 may be transmitted by 1st class mail, magnetically, or elec23 tronically.
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1 ‘‘(d) CIVIL MONEY PENALTIES ON NONCOMPLYING EM2 PLOYERS.—The State shall have the option to set a State

3 civil money penalty which shall be less than—

4 ‘‘(1) $25; or

5 ‘‘(2) $500 if, under State law, the failure is the

6 result of a conspiracy between the employer and the

7 employee to not supply the required report or to sup8 ply a false or incomplete report.

9 ‘‘(e) ENTRY OF EMPLOYER INFORMATION.—Informa10 tion shall be entered into the data base maintained by the

11 State Directory of New Hires within 5 business days of re12 ceipt from an employer pursuant to subsection (b).

13 ‘‘(f) INFORMATION COMPARISONS.—

14 ‘‘(1) IN GENERAL.—Not later than May 1, 1998,

15 an agency designated by the State shall, directly or

16 by contract, conduct automated comparisons of the so17 cial security numbers reported by employers pursuant

18 to subsection (b) and the social security numbers ap19 pearing in the records of the State case registry for

20 cases being enforced under the State plan.

21 ‘‘(2) NOTICE OF MATCH.—When an information

22 comparison conducted under paragraph (1) reveals a

23 match with respect to the social security number of an

24 individual required to provide support under a sup25 port order, the State Directory of New Hires shall
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1 provide the agency administering the State plan ap2 proved under this part of the appropriate State with

3 the name, address, and social security number of the

4 employee to whom the social security number is as5 signed, and the name of, and identifying number as6 signed under section 6109 of the Internal Revenue

7 Code of 1986 to, the employer.

8 ‘‘(g) TRANSMISSION OF INFORMATION.—

9 ‘‘(1) TRANSMISSION OF WAGE WITHHOLDING NO10 TICES TO EMPLOYERS.—Within 2 business days after

11 the date information regarding a newly hired em12 ployee is entered into the State Directory of New

13 Hires, the State agency enforcing the employee’s child

14 support obligation shall transmit a notice to the em15 ployer of the employee directing the employer to with16 hold from the wages of the employee an amount equal

17 to the monthly (or other periodic) child support obli18 gation (including any past due support obligation) of

19 the employee, unless the employee’s wages are not sub20 ject to withholding pursuant to section 466(b)(3).

21 ‘‘(2) TRANSMISSIONS TO THE NATIONAL DIREC22 TORY OF NEW HIRES.—

23 ‘‘(A) NEW HIRE INFORMATION.—Within 3

24 business days after the date information regard25 ing a newly hired employee is entered into the
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1 State Directory of New Hires, the State Direc2 tory of New Hires shall furnish the information

3 to the National Directory of New Hires.

4 ‘‘(B) WAGE AND UNEMPLOYMENT COM5 PENSATION INFORMATION.—The State Directory

6 of New Hires shall, on a quarterly basis, furnish

7 to the National Directory of New Hires extracts

8 of the reports required under section 303(a)(6) to

9 be made to the Secretary of Labor concerning the

10 wages and unemployment compensation paid to

11 individuals, by such dates, in such format, and

12 containing such information as the Secretary of

13 Health and Human Services shall specify in reg14 ulations.

15 ‘‘(3) BUSINESS DAY DEFINED.—As used in this

16 subsection, the term ‘business day’ means a day on

17 which State offices are open for regular business.

18 ‘‘(h) OTHER USES OF NEW HIRE INFORMATION.—

19 ‘‘(1) LOCATION OF CHILD SUPPORT OBLIGORS.—

20 The agency administering the State plan approved

21 under this part shall use information received pursu22 ant to subsection (f)(2) to locate individuals for pur23 poses of establishing paternity and establishing, modi24 fying, and enforcing child support obligations.
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1 ‘‘(2) VERIFICATION OF ELIGIBILITY FOR CERTAIN

2 PROGRAMS.—A State agency responsible for admin3 istering a program specified in section 1137(b) shall

4 have access to information reported by employers pur5 suant to subsection (b) of this section for purposes of

6 verifying eligibility for the program.

7 ‘‘(3) ADMINISTRATION OF EMPLOYMENT SECU8 RITY AND WORKERS’ COMPENSATION.—State agencies

9 operating employment security and workers’ com10 pensation programs shall have access to information

11 reported by employers pursuant to subsection (b) for

12 the purposes of administering such programs.’’.

13 (c) QUARTERLY WAGE REPORTING.—Section

14 1137(a)(3) (42 U.S.C. 1320b–7(a)(3)) is amended—

15 (1) by inserting ‘‘(including State and local gov16 ernmental entities and labor organizations (as defined

17 in section 453A(a)(2)(B)(iii))’’ after ‘‘employers’’;

18 and

19 (2) by inserting ‘‘, and except that no report

20 shall be filed with respect to an employee of a State

21 or local agency performing intelligence or counter22 intelligence functions, if the head of such agency has

23 determined that filing such a report could endanger

24 the safety of the employee or compromise an ongoing
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1 investigation or intelligence mission’’ after ‘‘para2 graph (2)’’.

3 SEC. 12314. AMENDMENTS CONCERNING INCOME WITH4 HOLDING.

5 (a) MANDATORY INCOME WITHHOLDING.—

6 (1) IN GENERAL.—Section 466(a)(1) (42 U.S.C.

7 666(a)(1)) is amended to read as follows:

8 ‘‘(1)(A) Procedures described in subsection (b)

9 for the withholding from income of amounts payable

10 as support in cases subject to enforcement under the

11 State plan.

12 ‘‘(B) Procedures under which the wages of a per13 son with a support obligation imposed by a support

14 order issued (or modified) in the State before October

15 1, 1996, if not otherwise subject to withholding under

16 subsection (b), shall become subject to withholding as

17 provided in subsection (b) if arrearages occur, without

18 the need for a judicial or administrative hearing.’’.

19 (2) CONFORMING AMENDMENTS.—

20 (A) Section 466(b) (42 U.S.C. 666(b)) is

21 amended in the matter preceding paragraph (1),

22 by striking ‘‘subsection (a)(1)’’ and inserting

23 ‘‘subsection (a)(1)(A)’’.

24 (B) Section 466(b)(4) (42 U.S.C. 666(b)(4))

25 is amended to read as follows:
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1 ‘‘(4)(A) Such withholding must be carried out in

2 full compliance with all procedural due process re3 quirements of the State, and the State must send no4 tice to each noncustodial parent to whom paragraph

5 (1) applies—

6 ‘‘(i) that the withholding has commenced;

7 and

8 ‘‘(ii) of the procedures to follow if the

9 noncustodial parent desires to contest such with10 holding on the grounds that the withholding or

11 the amount withheld is improper due to a mis12 take of fact.

13 ‘‘(B) The notice under subparagraph (A) of this

14 paragraph shall include the information provided to

15 the employer under paragraph (6)(A).’’.

16 (C) Section 466(b)(5) (42 U.S.C. 666(b)(5))

17 is amended by striking all that follows ‘‘adminis18 tered by’’ and inserting ‘‘the State through the

19 State disbursement unit established pursuant to

20 section 454B, in accordance with the require21 ments of section 454B.’’.

22 (D) Section 466(b)(6)(A) (42 U.S.C.

23 666(b)(6)(A)) is amended—

24 (i) in clause (i), by striking ‘‘to the ap25 propriate agency’’ and all that follows and
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1 inserting ‘‘to the State disbursement unit

2 within 2 business days after the date the

3 amount would (but for this subsection) have

4 been paid or credited to the employee, for

5 distribution in accordance with this part.

6 The employer shall comply with the proce7 dural rules relating to income withholding

8 of the State in which the employee works,

9 regardless of the State where the notice

10 originates.’’.

11 (ii) in clause (ii), by inserting ‘‘be in

12 a standard format prescribed by the Sec13 retary, and’’ after ‘‘shall’’; and

14 (iii) by adding at the end the following

15 new clause:

16 ‘‘(iii) As used in this subparagraph, the term

17 ‘business day’ means a day on which State offices are

18 open for regular business.’’.

19 (E) Section 466(b)(6)(D) (42 U.S.C.

20 666(b)(6)(D)) is amended by striking ‘‘any em21 ployer’’ and all that follows and inserting ‘‘any

22 employer who—

23 ‘‘(i) discharges from employment, refuses to

24 employ, or takes disciplinary action against any

25 noncustodial parent subject to wage withholding
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1 required by this subsection because of the exist2 ence of such withholding and the obligations or

3 additional obligations which it imposes upon the

4 employer; or

5 ‘‘(ii) fails to withhold support from wages,

6 or to pay such amounts to the State disburse7 ment unit in accordance with this subsection.’’.

8 (F) Section 466(b) (42 U.S.C. 666(b)) is

9 amended by adding at the end the following new

10 paragraph:

11 ‘‘(11) Procedures under which the agency admin12 istering the State plan approved under this part may

13 execute a withholding order without advance notice to

14 the obligor, including issuing the withholding order

15 through electronic means.’’.

16 (b) CONFORMING AMENDMENT.—Section 466(c) (42

17 U.S.C. 666(c)) is repealed.

18 SEC. 12315. LOCATOR INFORMATION FROM INTERSTATE

19 NETWORKS.

20 Section 466(a) (42 U.S.C. 666(a)) is amended by add21 ing at the end the following new paragraph:

22 ‘‘(12) LOCATOR INFORMATION FROM INTERSTATE

23 NETWORKS.—Procedures to ensure that all Federal

24 and State agencies conducting activities under this

25 part have access to any system used by the State to
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1 locate an individual for purposes relating to motor

2 vehicles or law enforcement.’’.

3 SEC. 12316. EXPANSION OF THE FEDERAL PARENT LOCA4 TOR SERVICE.

5 (a) EXPANDED AUTHORITY TO LOCATE INDIVIDUALS

6 AND ASSETS.—Section 453 (42 U.S.C. 653) is amended—

7 (1) in subsection (a), by striking all that follows

8 ‘‘subsection (c))’’ and inserting ‘‘, for the purpose of

9 establishing parentage, establishing, setting the

10 amount of, modifying, or enforcing child support obli11 gations, or enforcing child custody or visitation or12 ders—

13 ‘‘(1) information on, or facilitating the discovery

14 of, the location of any individual—

15 ‘‘(A) who is under an obligation to pay

16 child support or provide child custody or visita17 tion rights;

18 ‘‘(B) against whom such an obligation is

19 sought;

20 ‘‘(C) to whom such an obligation is owed,

21 including the individual’s social security number (or

22 numbers), most recent address, and the name, address,

23 and employer identification number of the individ24 ual’s employer;
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1 ‘‘(2) information on the individual’s wages (or

2 other income) from, and benefits of, employment (in3 cluding rights to or enrollment in group health care

4 coverage); and

5 ‘‘(3) information on the type, status, location,

6 and amount of any assets of, or debts owed by or to,

7 any such individual.’’; and

8 (2) in subsection (b)—

9 (A) in the matter preceding paragraph (1),

10 by striking ‘‘social security’’ and all that follows

11 through ‘‘absent parent’’ and inserting ‘‘informa12 tion described in subsection (a)’’; and

13 (B) in the flush paragraph at the end, by

14 adding the following: ‘‘No information shall be

15 disclosed to any person if the State has notified

16 the Secretary that the State has reasonable evi17 dence of domestic violence or child abuse and the

18 disclosure of such information could be harmful

19 to the custodial parent or the child of such par20 ent. Information received or transmitted pursu21 ant to this section shall be subject to the safe22 guard provisions contained in section 454(26).’’.

23 (b) AUTHORIZED PERSON FOR INFORMATION REGARD24 ING VISITATION RIGHTS.—Section 453(c) (42 U.S.C.

25 653(c)) is amended—
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1 (1) in paragraph (1), by striking ‘‘support’’ and

2 inserting ‘‘support or to seek to enforce orders provid3 ing child custody or visitation rights’’; and

4 (2) in paragraph (2), by striking ‘‘, or any agent

5 of such court; and’’ and inserting ‘‘or to issue an

6 order against a resident parent for child custody or

7 visitation rights, or any agent of such court;’’.

8 (c) REIMBURSEMENT FOR INFORMATION FROM FED9 ERAL AGENCIES.—Section 453(e)(2) (42 U.S.C. 653(e)(2))

10 is amended in the 4th sentence by inserting ‘‘in an amount

11 which the Secretary determines to be reasonable payment

12 for the information exchange (which amount shall not in13 clude payment for the costs of obtaining, compiling, or

14 maintaining the information)’’ before the period.

15 (d) REIMBURSEMENT FOR REPORTS BY STATE AGEN16 CIES.—Section 453 (42 U.S.C. 653) is amended by adding

17 at the end the following new subsection:

18 ‘‘(g) REIMBURSEMENT FOR REPORTS BY STATE AGEN19 CIES.—The Secretary may reimburse Federal and State

20 agencies for the costs incurred by such entities in furnishing

21 information requested by the Secretary under this section

22 in an amount which the Secretary determines to be reason23 able payment for the information exchange (which amount

24 shall not include payment for the costs of obtaining, compil25 ing, or maintaining the information).’’.
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1 (e) CONFORMING AMENDMENTS.—

2 (1) Sections 452(a)(9), 453(a), 453(b), 463(a),

3 463(e), and 463(f) (42 U.S.C. 652(a)(9), 653(a),

4 653(b), 663(a), 663(e), and 663(f)) are each amended

5 by inserting ‘‘Federal’’ before ‘‘Parent’’ each place

6 such term appears.

7 (2) Section 453 (42 U.S.C. 653) is amended in

8 the heading by adding ‘‘FEDERAL’’ before ‘‘PARENT’’.

9 (f) NEW COMPONENTS.—Section 453 (42 U.S.C. 653),

10 as amended by subsection (d) of this section, is amended

11 by adding at the end the following new subsections:

12 ‘‘(h) FEDERAL CASE REGISTRY OF CHILD SUPPORT

13 ORDERS.—

14 ‘‘(1) IN GENERAL.—Not later than October 1,

15 1998, in order to assist States in administering pro16 grams under State plans approved under this part

17 and programs funded under part A, and for the other

18 purposes specified in this section, the Secretary shall

19 establish and maintain in the Federal Parent Locator

20 Service an automated registry (which shall be known

21 as the ‘Federal Case Registry of Child Support Or22 ders’), which shall contain abstracts of support orders

23 and other information described in paragraph (2)

24 with respect to each case in each State case registry

25 maintained pursuant to section 454A(e), as furnished
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1 (and regularly updated), pursuant to section 454A(f),

2 by State agencies administering programs under this

3 part.

4 ‘‘(2) CASE INFORMATION.—The information re5 ferred to in paragraph (1) with respect to a case shall

6 be such information as the Secretary may specify in

7 regulations (including the names, social security

8 numbers or other uniform identification numbers,

9 and State case identification numbers) to identify the

10 individuals who owe or are owed support (or with re11 spect to or on behalf of whom support obligations are

12 sought to be established), and the State or States

13 which have the case.

14 ‘‘(i) NATIONAL DIRECTORY OF NEW HIRES.—

15 ‘‘(1) IN GENERAL.—In order to assist States in

16 administering programs under State plans approved

17 under this part and programs funded under part A,

18 and for the other purposes specified in this section,

19 the Secretary shall, not later than October 1, 1996, es20 tablish and maintain in the Federal Parent Locator

21 Service an automated directory to be known as the

22 National Directory of New Hires, which shall contain

23 the information supplied pursuant to section

24 453A(g)(2).
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1 ‘‘(2) ENTRY OF DATA.—Information shall be en2 tered into the data base maintained by the National

3 Directory of New Hires within 2 business days of re4 ceipt pursuant to section 453A(g)(2).

5 ‘‘(3) ADMINISTRATION OF FEDERAL TAX LAWS.—

6 The Secretary of the Treasury shall have access to the

7 information in the National Directory of New Hires

8 for purposes of administering section 32 of the Inter9 nal Revenue Code of 1986, or the advance payment

10 of the earned income tax credit under section 3507 of

11 such Code, and verifying a claim with respect to em12 ployment in a tax return.

13 ‘‘(4) LIST OF MULTISTATE EMPLOYERS.—The

14 Secretary shall maintain within the National Direc15 tory of New Hires a list of multistate employers that

16 report information regarding newly hired employees

17 pursuant to section 453A(b)(1)(B), and the State

18 which each such employer has designated to receive

19 such information.

20 ‘‘(j) INFORMATION COMPARISONS AND OTHER DISCLO21 SURES.—

22 ‘‘(1) VERIFICATION BY SOCIAL SECURITY ADMIN23 ISTRATION.—

24 ‘‘(A) IN GENERAL.—The Secretary shall

25 transmit information on individuals and em-
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1 ployers maintained under this section to the So2 cial Security Administration to the extent nec3 essary for verification in accordance with sub4 paragraph (B).

5 ‘‘(B) VERIFICATION BY SSA.—The Social

6 Security Administration shall verify the accu7 racy of, correct, or supply to the extent possible,

8 and report to the Secretary, the following infor9 mation supplied by the Secretary pursuant to

10 subparagraph (A):

11 ‘‘(i) The name, social security number,

12 and birth date of each such individual.

13 ‘‘(ii) The employer identification num14 ber of each such employer.

15 ‘‘(2) INFORMATION COMPARISONS.—For the pur16 pose of locating individuals in a paternity establish17 ment case or a case involving the establishment,

18 modification, or enforcement of a support order, the

19 Secretary shall—

20 ‘‘(A) compare information in the National

21 Directory of New Hires against information in

22 the support case abstracts in the Federal Case

23 Registry of Child Support Orders not less often

24 than every 2 business days; and
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1 ‘‘(B) within 2 such days after such a com2 parison reveals a match with respect to an indi3 vidual, report the information to the State agen4 cy responsible for the case.

5 ‘‘(3) INFORMATION COMPARISONS AND DISCLO6 SURES OF INFORMATION IN ALL REGISTRIES FOR

7 TITLE IV PROGRAM PURPOSES.—To the extent and

8 with the frequency that the Secretary determines to be

9 effective in assisting States to carry out their respon10 sibilities under programs operated under this part

11 and programs funded under part A, the Secretary

12 shall—

13 ‘‘(A) compare the information in each com14 ponent of the Federal Parent Locator Service

15 maintained under this section against the infor16 mation in each other such component (other than

17 the comparison required by paragraph (2)), and

18 report instances in which such a comparison re19 veals a match with respect to an individual to

20 State agencies operating such programs; and

21 ‘‘(B) disclose information in such registries

22 to such State agencies.

23 ‘‘(4) PROVISION OF NEW HIRE INFORMATION TO

24 THE SOCIAL SECURITY ADMINISTRATION.—The Na25 tional Directory of New Hires shall provide the Com-
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1 missioner of Social Security with all information in

2 the National Directory, which shall be used to deter3 mine the accuracy of payments under the supple4 mental security income program under title XVI and

5 in connection with benefits under title II.

6 ‘‘(5) RESEARCH.—The Secretary may provide

7 access to information reported by employers pursuant

8 to section 453A(b) for research purposes found by the

9 Secretary to be likely to contribute to achieving the

10 purposes of part A or this part, but without personal

11 identifiers.

12 ‘‘(k) FEES.—

13 ‘‘(1) FOR SSA VERIFICATION.—The Secretary

14 shall reimburse the Commissioner of Social Security,

15 at a rate negotiated between the Secretary and the

16 Commissioner, for the costs incurred by the Commis17 sioner in performing the verification services de18 scribed in subsection (j).

19 ‘‘(2) FOR INFORMATION FROM STATE DIREC20 TORIES OF NEW HIRES.—The Secretary shall reim21 burse costs incurred by State directories of new hires

22 in furnishing information as required by subsection

23 (j)(3), at rates which the Secretary determines to be

24 reasonable (which rates shall not include payment for
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1 the costs of obtaining, compiling, or maintaining such

2 information).

3 ‘‘(3) FOR INFORMATION FURNISHED TO STATE

4 AND FEDERAL AGENCIES.—A State or Federal agency

5 that receives information from the Secretary pursuant

6 to this section shall reimburse the Secretary for costs

7 incurred by the Secretary in furnishing the informa8 tion, at rates which the Secretary determines to be

9 reasonable (which rates shall include payment for the

10 costs of obtaining, verifying, maintaining, and com11 paring the information).

12 ‘‘(l) RESTRICTION ON DISCLOSURE AND USE.—Infor13 mation in the Federal Parent Locator Service, and infor14 mation resulting from comparisons using such information,

15 shall not be used or disclosed except as expressly provided

16 in this section, subject to section 6103 of the Internal Reve17 nue Code of 1986.

18 ‘‘(m) INFORMATION INTEGRITY AND SECURITY.—The

19 Secretary shall establish and implement safeguards with re20 spect to the entities established under this section designed

21 to—

22 ‘‘(1) ensure the accuracy and completeness of in23 formation in the Federal Parent Locator Service; and

24 ‘‘(2) restrict access to confidential information in

25 the Federal Parent Locator Service to authorized per-
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1 sons, and restrict use of such information to author2 ized purposes.

3 ‘‘(n) FEDERAL GOVERNMENT REPORTING.—Each de4 partment, agency, and instrumentality of the United States

5 shall on a quarterly basis report to the Federal Parent Lo6 cator Service the name and social security number of each

7 employee and the wages paid to the employee during the

8 previous quarter, except that such a report shall not be filed

9 with respect to an employee of a department, agency, or

10 instrumentality performing intelligence or counterintel11 ligence functions, if the head of such department, agency,

12 or instrumentality has determined that filing such a report

13 could endanger the safety of the employee or compromise

14 an ongoing investigation or intelligence mission.’’.

15 (g) CONFORMING AMENDMENTS.—

16 (1) TO PART D OF TITLE IV OF THE SOCIAL SE17 CURITY ACT.—

18 (A) Section 454(8)(B) (42 U.S.C.

19 654(8)(B)) is amended to read as follows:

20 ‘‘(B) the Federal Parent Locator Service es21 tablished under section 453;’’.

22 (B) Section 454(13) (42 U.S.C.654(13)) is

23 amended by inserting ‘‘and provide that infor24 mation requests by parents who are residents of

25 other States be treated with the same priority as
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1 requests by parents who are residents of the State

2 submitting the plan’’ before the semicolon.

3 (2) TO FEDERAL UNEMPLOYMENT TAX ACT.—

4 Section 3304(a)(16) of the Internal Revenue Code of

5 1986 is amended—

6 (A) by striking ‘‘Secretary of Health, Edu7 cation, and Welfare’’ each place such term ap8 pears and inserting ‘‘Secretary of Health and

9 Human Services’’;

10 (B) in subparagraph (B), by striking ‘‘such

11 information’’ and all that follows and inserting

12 ‘‘information furnished under subparagraph (A)

13 or (B) is used only for the purposes authorized

14 under such subparagraph;’’;

15 (C) by striking ‘‘and’’ at the end of sub16 paragraph (A);

17 (D) by redesignating subparagraph (B) as

18 subparagraph (C); and

19 (E) by inserting after subparagraph (A) the

20 following new subparagraph:

21 ‘‘(B) wage and unemployment compensa22 tion information contained in the records of such

23 agency shall be furnished to the Secretary of

24 Health and Human Services (in accordance with

25 regulations promulgated by such Secretary) as
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1 necessary for the purposes of the National Direc2 tory of New Hires established under section

3 453(i) of the Social Security Act, and’’.

4 (3) TO STATE GRANT PROGRAM UNDER TITLE III

5 OF THE SOCIAL SECURITY ACT.—Subsection (h) of sec6 tion 303 (42 U.S.C. 503) is amended to read as fol7 lows:

8 ‘‘(h)(1) The State agency charged with the administra9 tion of the State law shall, on a reimbursable basis—

10 ‘‘(A) disclose quarterly, to the Secretary of

11 Health and Human Services wage and claim infor12 mation, as required pursuant to section 453(i)(1),

13 contained in the records of such agency;

14 ‘‘(B) ensure that information provided pursuant

15 to subparagraph (A) meets such standards relating to

16 correctness and verification as the Secretary of Health

17 and Human Services, with the concurrence of the Sec18 retary of Labor, may find necessary; and

19 ‘‘(C) establish such safeguards as the Secretary of

20 Labor determines are necessary to insure that infor21 mation disclosed under subparagraph (A) is used only

22 for purposes of section 453(i)(1) in carrying out the

23 child support enforcement program under title IV.

24 ‘‘(2) Whenever the Secretary of Labor, after reasonable

25 notice and opportunity for hearing to the State agency
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1 charged with the administration of the State law, finds that

2 there is a failure to comply substantially with the require3 ments of paragraph (1), the Secretary of Labor shall notify

4 such State agency that further payments will not be made

5 to the State until the Secretary of Labor is satisfied that

6 there is no longer any such failure. Until the Secretary of

7 Labor is so satisfied, the Secretary shall make no future

8 certification to the Secretary of the Treasury with respect

9 to the State.

10 ‘‘(3) For purposes of this subsection—

11 ‘‘(A) the term ‘wage information’ means infor12 mation regarding wages paid to an individual, the

13 social security account number of such individual,

14 and the name, address, State, and the Federal em15 ployer identification number of the employer paying

16 such wages to such individual; and

17 ‘‘(B) the term ‘claim information’ means infor18 mation regarding whether an individual is receiving,

19 has received, or has made application for, unemploy20 ment compensation, the amount of any such com21 pensation being received (or to be received by such in22 dividual), and the individual’s current (or most re23 cent) home address.’’.
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1 (4) DISCLOSURE OF CERTAIN INFORMATION TO

2 AGENTS OF CHILD SUPPORT ENFORCEMENT AGEN3 CIES.—

4 (A) IN GENERAL.—Paragraph (6) of section

5 6103(l) of the Internal Revenue Code of 1986 (re6 lating to disclosure of return information to Fed7 eral, State, and local child support enforcement

8 agencies) is amended by redesignating subpara9 graph (B) as subparagraph (C) and by inserting

10 after subparagraph (A) the following new sub11 paragraph:

12 ‘‘(B) DISCLOSURE TO CERTAIN AGENTS.—

13 The address and social security account number

14 (or numbers) of an individual with respect to

15 any individual with respect to whom child sup16 port obligations are sought to be established or

17 enforced may be disclosed by any child support

18 enforcement agency to any agent of such agency

19 which is under contract with such agency to

20 carry out the purposes described in subpara21 graph (C).’’

22 (B) CONFORMING AMENDMENTS.—

23 (i) Paragraph (3) of section 6103(a) of

24 such Code is amended by striking ‘‘(l)(12)’’
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1 and inserting ‘‘paragraph (6) or (12) of

2 subsection (l)’’.

3 (ii) Subparagraph (C) of section

4 6103(l)(6) of such Code, as redesignated by

5 subsection (a), is amended to read as fol6 lows:

7 ‘‘(C) RESTRICTION ON DISCLOSURE.—Infor8 mation may be disclosed under this paragraph

9 only for purposes of, and to the extent necessary

10 in, establishing and collecting child support obli11 gations from, and locating, individuals owing

12 such obligations.’’

13 (iii) The material following subpara14 graph (F) of section 6103(p)(4) of such

15 Code is amended by striking ‘‘subsection

16 (l)(12)(B)’’ and inserting ‘‘paragraph

17 (6)(A) or (12)(B) of subsection (l)’’.

18 SEC. 12317. COLLECTION AND USE OF SOCIAL SECURITY

19 NUMBERS FOR USE IN CHILD SUPPORT EN20 FORCEMENT.

21 (a) STATE LAW REQUIREMENT.—Section 466(a) (42

22 U.S.C. 666(a)), as amended by section 12315 of this Act,

23 is amended by adding at the end the following new para24 graph:
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1 ‘‘(13) RECORDING OF SOCIAL SECURITY NUM2 BERS IN CERTAIN FAMILY MATTERS.—Procedures re3 quiring that the social security number of—

4 ‘‘(A) any applicant for a professional li5 cense, commercial driver’s license, occupational

6 license, or marriage license be recorded on the

7 application;

8 ‘‘(B) any individual who is subject to a di9 vorce decree, support order, or paternity deter10 mination or acknowledgment be placed in the

11 records relating to the matter; and

12 ‘‘(C) any individual who has died be placed

13 in the records relating to the death and be re14 corded on the death certificate.

15 For purposes of subparagraph (A), if a State allows

16 the use of a number other than the social security

17 number, the State shall so advise any applicants.’’.

18 (b) CONFORMING AMENDMENTS.—Section

19 205(c)(2)(C) (42 U.S.C. 405(c)(2)(C)), as amended by sec20 tion 321(a)(9) of the Social Security Independence and

21 Program Improvements Act of 1994, is amended—

22 (1) in clause (i), by striking ‘‘may require’’ and

23 inserting ‘‘shall require’’;

24 (2) in clause (ii), by inserting after the 1st sen25 tence the following: ‘‘In the administration of any
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1 law involving the issuance of a marriage certificate or

2 license, each State shall require each party named in

3 the certificate or license to furnish to the State (or po4 litical subdivision thereof), or any State agency hav5 ing administrative responsibility for the law involved,

6 the social security number of the party.’’;

7 (3) in clause (ii), by inserting ‘‘or marriage cer8 tificate’’ after ‘‘Such numbers shall not be recorded on

9 the birth certificate’’.

10 (4) in clause (vi), by striking ‘‘may’’ and insert11 ing ‘‘shall’’; and

12 (5) by adding at the end the following new

13 clauses:

14 ‘‘(x) An agency of a State (or a politi15 cal subdivision thereof) charged with the ad16 ministration of any law concerning the is17 suance or renewal of a license, certificate,

18 permit, or other authorization to engage in

19 a profession, an occupation, or a commer20 cial activity shall require all applicants for

21 issuance or renewal of the license, certifi22 cate, permit, or other authorization to pro23 vide the applicant’s social security number

24 to the agency for the purpose of administer25 ing such laws, and for the purpose of re-
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1 sponding to requests for information from

2 an agency operating pursuant to part D of

3 title IV.

4 ‘‘(xi) All divorce decrees, support or5 ders, and paternity determinations issued,

6 and all paternity acknowledgments made,

7 in each State shall include the social secu8 rity number of each party to the decree,

9 order, determination, or acknowledgement

10 in the records relating to the matter, for the

11 purpose of responding to requests for infor12 mation from an agency operating pursuant

13 to part D of title IV.’’.

14 CHAPTER 3—STREAMLINING AND

15 UNIFORMITY OF PROCEDURES

16 SEC. 12321. ADOPTION OF UNIFORM STATE LAWS.

17 Section 466 (42 U.S.C. 666) is amended by adding

18 at the end the following new subsection:

19 ‘‘(f) UNIFORM INTERSTATE FAMILY SUPPORT ACT.—

20 ‘‘(1) ENACTMENT AND USE.—In order to satisfy

21 section 454(20)(A), on or after January 1, 1998, each

22 State must have in effect the Uniform Interstate Fam23 ily Support Act, as approved by the American Bar

24 Association on February 9, 1993, together with any

25 amendments officially adopted before January 1,
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1 1998 by the National Conference of Commissioners on

2 Uniform State Laws.

3 ‘‘(2) EMPLOYERS TO FOLLOW PROCEDURAL

4 RULES OF STATE WHERE EMPLOYEE WORKS.—The

5 State law enacted pursuant to paragraph (1) shall

6 provide that an employer that receives an income

7 withholding order or notice pursuant to section 501

8 of the Uniform Interstate Family Support Act follow

9 the procedural rules that apply with respect to such

10 order or notice under the laws of the State in which

11 the obligor works.

12 SEC. 12322. IMPROVEMENTS TO FULL FAITH AND CREDIT

13 FOR CHILD SUPPORT ORDERS.

14 Section 1738B of title 28, United States Code, is

15 amended—

16 (1) in subsection (a)(2), by striking ‘‘subsection

17 (e)’’ and inserting ‘‘subsections (e), (f), and (i)’’;

18 (2) in subsection (b), by inserting after the 2nd

19 undesignated paragraph the following:

20 ‘‘ ‘child’s home State’ means the State in which

21 a child lived with a parent or a person acting as par22 ent for at least 6 consecutive months immediately pre23 ceding the time of filing of a petition or comparable

24 pleading for support and, if a child is less than 6

25 months old, the State in which the child lived from
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1 birth with any of them. A period of temporary ab2 sence of any of them is counted as part of the 6-month

3 period.’’;

4 (3) in subsection (c), by inserting ‘‘by a court of

5 a State’’ before ‘‘is made’’;

6 (4) in subsection (c)(1), by inserting ‘‘and sub7 sections (e), (f), and (g)’’ after ‘‘located’’;

8 (5) in subsection (d)—

9 (A) by inserting ‘‘individual’’ before ‘‘con10 testant’’; and

11 (B) by striking ‘‘subsection (e)’’ and insert12 ing ‘‘subsections (e) and (f)’’;

13 (6) in subsection (e), by striking ‘‘make a modi14 fication of a child support order with respect to a

15 child that is made’’ and inserting ‘‘modify a child

16 support order issued’’;

17 (7) in subsection (e)(1), by inserting ‘‘pursuant

18 to subsection (i)’’ before the semicolon;

19 (8) in subsection (e)(2)—

20 (A) by inserting ‘‘individual’’ before ‘‘con21 testant’’ each place such term appears; and

22 (B) by striking ‘‘to that court’s making the

23 modification and assuming’’ and inserting ‘‘with

24 the State of continuing, exclusive jurisdiction for
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1 a court of another State to modify the order and

2 assume’’;

3 (9) by redesignating subsections (f) and (g) as

4 subsections (g) and (h), respectively;

5 (10) by inserting after subsection (e) the follow6 ing new subsection:

7 ‘‘(f) RECOGNITION OF CHILD SUPPORT ORDERS.—If

8 1 or more child support orders have been issued in this or

9 another State with regard to an obligor and a child, a court

10 shall apply the following rules in determining which order

11 to recognize for purposes of continuing, exclusive jurisdic12 tion and enforcement:

13 ‘‘(1) If only 1 court has issued a child support

14 order, the order of that court must be recognized.

15 ‘‘(2) If 2 or more courts have issued child sup16 port orders for the same obligor and child, and only

17 1 of the courts would have continuing, exclusive juris18 diction under this section, the order of that court

19 must be recognized.

20 ‘‘(3) If 2 or more courts have issued child sup21 port orders for the same obligor and child, and more

22 than 1 of the courts would have continuing, exclusive

23 jurisdiction under this section, an order issued by a

24 court in the current home State of the child must be

25 recognized, but if an order has not been issued in the
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1 current home State of the child, the order most re2 cently issued must be recognized.

3 ‘‘(4) If 2 or more courts have issued child sup4 port orders for the same obligor and child, and none

5 of the courts would have continuing, exclusive juris6 diction under this section, a court may issue a child

7 support order, which must be recognized.

8 ‘‘(5) The court that has issued an order recog9 nized under this subsection is the court having con10 tinuing, exclusive jurisdiction.’’;

11 (11) in subsection (g) (as so redesignated)—

12 (A) by striking ‘‘PRIOR’’ and inserting

13 ‘‘MODIFIED’’; and

14 (B) by striking ‘‘subsection (e)’’ and insert15 ing ‘‘subsections (e) and (f)’’;

16 (12) in subsection (h) (as so redesignated)—

17 (A) in paragraph (2), by inserting ‘‘includ18 ing the duration of current payments and other

19 obligations of support’’ before the comma; and

20 (B) in paragraph (3), by inserting ‘‘arrears

21 under’’ after ‘‘enforce’’; and

22 (13) by adding at the end the following new sub23 section:

24 ‘‘(i) REGISTRATION FOR MODIFICATION.—If there is

25 no individual contestant or child residing in the issuing
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1 State, the party or support enforcement agency seeking to

2 modify, or to modify and enforce, a child support order is3 sued in another State shall register that order in a State

4 with jurisdiction over the nonmovant for the purpose of

5 modification.’’.

6 SEC. 12323. ADMINISTRATIVE ENFORCEMENT IN INTER7 STATE CASES.

8 Section 466(a) (42 U.S.C. 666(a)), as amended by sec9 tions 12315 and 12317(a) of this Act, is amended by adding

10 at the end the following new paragraph:

11 ‘‘(14) ADMINISTRATIVE ENFORCEMENT IN INTER12 STATE CASES.—Procedures under which—

13 ‘‘(A)(i) the State shall respond within 5

14 business days to a request made by another State

15 to enforce a support order; and

16 ‘‘(ii) the term ‘business day’ means a day

17 on which State offices are open for regular busi18 ness;

19 ‘‘(B) the State may, by electronic or other

20 means, transmit to another State a request for

21 assistance in a case involving the enforcement of

22 a support order, which request—

23 ‘‘(i) shall include such information as

24 will enable the State to which the request is

25 transmitted to compare the information
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1 about the case to the information in the

2 data bases of the State; and

3 ‘‘(ii) shall constitute a certification by

4 the requesting State—

5 ‘‘(I) of the amount of support

6 under the order the payment of which

7 is in arrears; and

8 ‘‘(II) that the requesting State has

9 complied with all procedural due proc10 ess requirements applicable to the case;

11 ‘‘(C) if the State provides assistance to an12 other State pursuant to this paragraph with re13 spect to a case, neither State shall consider the

14 case to be transferred to the caseload of such

15 other State; and

16 ‘‘(D) the State shall maintain records of—

17 ‘‘(i) the number of such requests for as18 sistance received by the State;

19 ‘‘(ii) the number of cases for which the

20 State collected support in response to such

21 a request; and

22 ‘‘(iii) the amount of such collected sup23 port.’’.
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1 SEC. 12324. USE OF FORMS IN INTERSTATE ENFORCEMENT.

2 (a) PROMULGATION.—Section 452(a) (42 U.S.C.

3 652(a)) is amended—

4 (1) by striking ‘‘and’’ at the end of paragraph

5 (9);

6 (2) by striking the period at the end of para7 graph (10) and inserting ‘‘; and’’; and

8 (3) by adding at the end the following new para9 graph:

10 ‘‘(11) not later than June 30, 1996, after con11 sulting with the State directors of programs under

12 this part, promulgate forms to be used by States in

13 interstate cases for—

14 ‘‘(A) collection of child support through in15 come withholding;

16 ‘‘(B) imposition of liens; and

17 ‘‘(C) administrative subpoenas.’’.

18 (b) USE BY STATES.—Section 454(9) (42 U.S.C.

19 654(9)) is amended—

20 (1) by striking ‘‘and’’ at the end of subpara21 graph (C);

22 (2) by inserting ‘‘and’’ at the end of subpara23 graph (D); and

24 (3) by adding at the end the following new sub25 paragraph:
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1 ‘‘(E) no later than October 1, 1996, in

2 using the forms promulgated pursuant to section

3 452(a)(11) for income withholding, imposition of

4 liens, and issuance of administrative subpoenas

5 in interstate child support cases;’’.

6 SEC. 12325. STATE LAWS PROVIDING EXPEDITED PROCE7 DURES.

8 (a) STATE LAW REQUIREMENTS.—Section 466 (42

9 U.S.C. 666), as amended by section 12314 of this Act, is

10 amended—

11 (1) in subsection (a)(2), by striking the 1st sen12 tence and inserting the following: ‘‘Expedited admin13 istrative and judicial procedures (including the proce14 dures specified in subsection (c)) for establishing pa15 ternity and for establishing, modifying, and enforcing

16 support obligations.’’; and

17 (2) by inserting after subsection (b) the following

18 new subsection:

19 ‘‘(c) EXPEDITED PROCEDURES.—The procedures spec20 ified in this subsection are the following:

21 ‘‘(1) ADMINISTRATIVE ACTION BY STATE AGEN22 CY.—Procedures which give the State agency the au23 thority to take the following actions relating to estab24 lishment or enforcement of support orders, without the

25 necessity of obtaining an order from any other judi-
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1 cial or administrative tribunal, and to recognize and

2 enforce the authority of State agencies of other States)

3 to take the following actions:

4 ‘‘(A) GENETIC TESTING.—To order genetic

5 testing for the purpose of paternity establishment

6 as provided in section 466(a)(5).

7 ‘‘(B) FINANCIAL OR OTHER INFORMATION.—

8 To subpoena any financial or other information

9 needed to establish, modify, or enforce a support

10 order, and to impose penalties for failure to re11 spond to such a subpoena.

12 ‘‘(C) RESPONSE TO STATE AGENCY RE13 QUEST.—To require all entities in the State (in14 cluding for-profit, nonprofit, and governmental

15 employers) to provide promptly, in response to a

16 request by the State agency of that or any other

17 State administering a program under this part,

18 information on the employment, compensation,

19 and benefits of any individual employed by such

20 entity as an employee or contractor, and to sanc21 tion failure to respond to any such request.

22 ‘‘(D) ACCESS TO CERTAIN RECORDS.—To

23 obtain access, subject to safeguards on privacy

24 and information security, to the following
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1 records (including automated access, in the case

2 of records maintained in automated data bases):

3 ‘‘(i) Records of other State and local

4 government agencies, including—

5 ‘‘(I) vital statistics (including

6 records of marriage, birth, and di7 vorce);

8 ‘‘(II) State and local tax and rev9 enue records (including information on

10 residence address, employer, income

11 and assets);

12 ‘‘(III) records concerning real and

13 titled personal property;

14 ‘‘(IV) records of occupational and

15 professional licenses, and records con16 cerning the ownership and control of

17 corporations, partnerships, and other

18 business entities;

19 ‘‘(V) employment security records;

20 ‘‘(VI) records of agencies admin21 istering public assistance programs;

22 ‘‘(VII) records of the motor vehicle

23 department; and

24 ‘‘(VIII) corrections records.
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1 ‘‘(ii) Certain records held by private

2 entities, including—

3 ‘‘(I) customer records of public

4 utilities and cable television compa5 nies; and

6 ‘‘(II) information (including in7 formation on assets and liabilities) on

8 individuals who owe or are owed sup9 port (or against or with respect to

10 whom a support obligation is sought)

11 held by financial institutions (subject

12 to limitations on liability of such enti13 ties arising from affording such ac14 cess), as provided pursuant to agree15 ments described in subsection (a)(18).

16 ‘‘(E) CHANGE IN PAYEE.—In cases in which

17 support is subject to an assignment in order to

18 comply with a requirement imposed pursuant to

19 part A or section 1912, or to a requirement to

20 pay through the State disbursement unit estab21 lished pursuant to section 454B, upon providing

22 notice to obligor and obligee, to direct the obligor

23 or other payor to change the payee to the appro24 priate government entity.
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1 ‘‘(F) INCOME WITHHOLDING.—To order in2 come withholding in accordance with subsections

3 (a)(1) and (b) of section 466.

4 ‘‘(G) SECURING ASSETS.—In cases in which

5 there is a support arrearage, to secure assets to

6 satisfy the arrearage by—

7 ‘‘(i) intercepting or seizing periodic or

8 lump-sum payments from—

9 ‘‘(I) a State or local agency, in10 cluding unemployment compensation,

11 workers’ compensation, and other bene12 fits; and

13 ‘‘(II) judgments, settlements, and

14 lotteries;

15 ‘‘(ii) attaching and seizing assets of the

16 obligor held in financial institutions;

17 ‘‘(iii) attaching public and private re18 tirement funds; and

19 ‘‘(iv) imposing liens in accordance

20 with subsection (a)(4) and, in appropriate

21 cases, to force sale of property and distribu22 tion of proceeds.

23 ‘‘(H) INCREASE MONTHLY PAYMENTS.—For

24 the purpose of securing overdue support, to in25 crease the amount of monthly support payments
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1 to include amounts for arrearages, subject to

2 such conditions or limitations as the State may

3 provide.

4 Such procedures shall be subject to due process safe5 guards, including (as appropriate) requirements for

6 notice, opportunity to contest the action, and oppor7 tunity for an appeal on the record to an independent

8 administrative or judicial tribunal.

9 ‘‘(2) SUBSTANTIVE AND PROCEDURAL RULES.—

10 The expedited procedures required under subsection

11 (a)(2) shall include the following rules and authority,

12 applicable with respect to all proceedings to establish

13 paternity or to establish, modify, or enforce support

14 orders:

15 ‘‘(A) LOCATOR INFORMATION; PRESUMP16 TIONS CONCERNING NOTICE.—Procedures under

17 which—

18 ‘‘(i) each party to any paternity or

19 child support proceeding is required (subject

20 to privacy safeguards) to file with the tribu21 nal and the State case registry upon entry

22 of an order, and to update as appropriate,

23 information on location and identity of the

24 party, including social security number,

25 residential and mailing addresses, telephone
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1 number, driver’s license number, and name,

2 address, and name and telephone number of

3 employer; and

4 ‘‘(ii) in any subsequent child support

5 enforcement action between the parties,

6 upon sufficient showing that diligent effort

7 has been made to ascertain the location of

8 such a party, the tribunal may deem State

9 due process requirements for notice and

10 service of process to be met with respect to

11 the party, upon delivery of written notice to

12 the most recent residential or employer ad13 dress filed with the tribunal pursuant to

14 clause (i).

15 ‘‘(B) STATEWIDE JURISDICTION.—Proce16 dures under which—

17 ‘‘(i) the State agency and any admin18 istrative or judicial tribunal with authority

19 to hear child support and paternity cases

20 exerts statewide jurisdiction over the par21 ties; and

22 ‘‘(ii) in a State in which orders are is23 sued by courts or administrative tribunals,

24 a case may be transferred between local ju25 risdictions in the State without need for
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1 any additional filing by the petitioner, or

2 service of process upon the respondent, to re3 tain jurisdiction over the parties.

4 ‘‘(3) COORDINATION WITH ERISA.—Notwith5 standing subsection (d) of section 514 of the Employee

6 Retirement Income Security Act of 1974 (relating to

7 effect on other laws), nothing in this subsection shall

8 be construed to alter, amend, modify, invalidate, im9 pair, or supersede subsections (a), (b), and (c) of such

10 section 514 as it applies with respect to any proce11 dure referred to in paragraph (1) and any expedited

12 procedure referred to in paragraph (2), except to the

13 extent that such procedure would be consistent with

14 the requirements of section 206(d)(3) of such Act (re15 lating to qualified domestic relations orders) or the

16 requirements of section 609(a) of such Act (relating to

17 qualified medical child support orders) if the reference

18 in such section 206(d)(3) to a domestic relations order

19 and the reference in such section 609(a) to a medical

20 child support order were a reference to a support

21 order referred to in paragraphs (1) and (2) relating

22 to the same matters, respectively.’’.

23 (b) AUTOMATION OF STATE AGENCY FUNCTIONS.—

24 Section 454A, as added by section 12344(a)(2) and as
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1 amended by sections 12311 and 12312(c) of this Act, is

2 amended by adding at the end the following new subsection:

3 ‘‘(h) EXPEDITED ADMINISTRATIVE PROCEDURES.—

4 The automated system required by this section shall be used,

5 to the maximum extent feasible, to implement the expedited

6 administrative procedures required by section 466(c).’’.

7 CHAPTER 4—PATERNITY ESTABLISHMENT

8 SEC. 12331. STATE LAWS CONCERNING PATERNITY ESTAB9 LISHMENT.

10 (a) STATE LAWS REQUIRED.—Section 466(a)(5) (42

11 U.S.C. 666(a)(5)) is amended to read as follows:

12 ‘‘(5) PROCEDURES CONCERNING PATERNITY ES13 TABLISHMENT.—

14 ‘‘(A) ESTABLISHMENT PROCESS AVAILABLE

15 FROM BIRTH UNTIL AGE 18.—

16 ‘‘(i) Procedures which permit the estab17 lishment of the paternity of a child at any

18 time before the child attains 18 years of age.

19 ‘‘(ii) As of August 16, 1984, clause (i)

20 shall also apply to a child for whom pater21 nity has not been established or for whom a

22 paternity action was brought but dismissed

23 because a statute of limitations of less than

24 18 years was then in effect in the State.
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1 ‘‘(B) PROCEDURES CONCERNING GENETIC

2 TESTING.—

3 ‘‘(i) GENETIC TESTING REQUIRED IN

4 CERTAIN CONTESTED CASES.—Procedures

5 under which the State is required, in a con6 tested paternity case (unless otherwise

7 barred by State law) to require the child

8 and all other parties (other than individ9 uals found under section 454(29) to have

10 good cause for refusing to cooperate) to sub11 mit to genetic tests upon the request of any

12 such party, if the request is supported by a

13 sworn statement by the party—

14 ‘‘(I) alleging paternity, and set15 ting forth facts establishing a reason16 able possibility of the requisite sexual

17 contact between the parties; or

18 ‘‘(II) denying paternity, and set19 ting forth facts establishing a reason20 able possibility of the nonexistence of

21 sexual contact between the parties.

22 ‘‘(ii) OTHER REQUIREMENTS.—Proce23 dures which require the State agency, in

24 any case in which the agency orders genetic

25 testing—
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1 ‘‘(I) to pay costs of such tests, sub2 ject to recoupment (if the State so

3 elects) from the alleged father if pater4 nity is established; and

5 ‘‘(II) to obtain additional testing

6 in any case if an original test result is

7 contested, upon request and advance

8 payment by the contestant.

9 ‘‘(C) VOLUNTARY PATERNITY ACKNOWLEDG10 MENT.—

11 ‘‘(i) SIMPLE CIVIL PROCESS.—Proce12 dures for a simple civil process for volun13 tarily acknowledging paternity under which

14 the State must provide that, before a mother

15 and a putative father can sign an acknowl16 edgment of paternity, the mother and the

17 putative father must be given notice, orally

18 and in writing, of the alternatives to, the

19 legal consequences of, and the rights (in20 cluding, if 1 parent is a minor, any rights

21 afforded due to minority status) and re22 sponsibilities that arise from, signing the

23 acknowledgment.

24 ‘‘(ii) HOSPITAL-BASED PROGRAM.—

25 Such procedures must include a hospital-
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1 based program for the voluntary acknowl2 edgment of paternity focusing on the period

3 immediately before or after the birth of a

4 child, subject to such good cause exceptions,

5 taking into account the best interests of the

6 child, as the State may establish.

7 ‘‘(iii) PATERNITY ESTABLISHMENT

8 SERVICES.—

9 ‘‘(I) STATE-OFFERED SERVICES.—

10 Such procedures must require the State

11 agency responsible for maintaining

12 birth records to offer voluntary pater13 nity establishment services.

14 ‘‘(II) REGULATIONS.—

15 ‘‘(aa) SERVICES OFFERED BY

16 HOSPITALS AND BIRTH RECORD

17 AGENCIES.—The Secretary shall

18 prescribe regulations governing

19 voluntary paternity establishment

20 services offered by hospitals and

21 birth record agencies.

22 ‘‘(bb) SERVICES OFFERED BY

23 OTHER ENTITIES.—The Secretary

24 shall prescribe regulations specify25 ing the types of other entities that
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1 may offer voluntary paternity es2 tablishment services, and govern3 ing the provision of such services,

4 which shall include a requirement

5 that such an entity must use the

6 same notice provisions used by,

7 use the same materials used by,

8 provide the personnel providing

9 such services with the same train10 ing provided by, and evaluate the

11 provision of such services in the

12 same manner as the provision of

13 such services is evaluated by, vol14 untary paternity establishment

15 programs of hospitals and birth

16 record agencies.

17 ‘‘(iv) USE OF PATERNITY ACKNOWL18 EDGMENT AFFIDAVIT.—Such procedures

19 must require the State to develop and use

20 an affidavit for the voluntary acknowledg21 ment of paternity which includes the mini22 mum requirements of the affidavit developed

23 by the Secretary under section 452(a)(7) for

24 the voluntary acknowledgment of paternity,

25 and to give full faith and credit to such an
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1 affidavit signed in any other State accord2 ing to its procedures.

3 ‘‘(D) STATUS OF SIGNED PATERNITY AC4 KNOWLEDGMENT.—

5 ‘‘(i) INCLUSION IN BIRTH RECORDS.—

6 Procedures under which the name of the fa7 ther shall be included on the record of birth

8 of the child only if—

9 ‘‘(I) the father and mother have

10 signed a voluntary acknowledgment of

11 paternity; or

12 ‘‘(II) a court or an administrative

13 agency of competent jurisdiction has

14 issued an adjudication of paternity.

15 Nothing in this clause shall preclude a

16 State agency from obtaining an admission

17 of paternity from the father for submission

18 in a judicial or administrative proceeding,

19 or prohibit the issuance of an order in a ju20 dicial or administrative proceeding which

21 bases a legal finding of paternity on an ad22 mission of paternity by the father and any

23 other additional showing required by State

24 law.
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1 ‘‘(ii) LEGAL FINDING OF PATERNITY.—

2 Procedures under which a signed voluntary

3 acknowledgment of paternity is considered a

4 legal finding of paternity, subject to the

5 right of any signatory to rescind the ac6 knowledgment within the earlier of—

7 ‘‘(I) 60 days; or

8 ‘‘(II) the date of an administra9 tive or judicial proceeding relating to

10 the child (including a proceeding to es11 tablish a support order) in which the

12 signatory is a party.

13 ‘‘(iii) CONTEST.—Procedures under

14 which, after the 60-day period referred to in

15 clause (ii), a signed voluntary acknowledg16 ment of paternity may be challenged in

17 court only on the basis of fraud, duress, or

18 material mistake of fact, with the burden of

19 proof upon the challenger, and under which

20 the legal responsibilities (including child

21 support obligations) of any signatory aris22 ing from the acknowledgment may not be

23 suspended during the challenge, except for

24 good cause shown.
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1 ‘‘(E) BAR ON ACKNOWLEDGMENT RATIFICA2 TION PROCEEDINGS.—Procedures under which

3 judicial or administrative proceedings are not

4 required or permitted to ratify an unchallenged

5 acknowledgment of paternity.

6 ‘‘(F) ADMISSIBILITY OF GENETIC TESTING

7 RESULTS.—Procedures—

8 ‘‘(i) requiring the admission into evi9 dence, for purposes of establishing pater10 nity, of the results of any genetic test that

11 is—

12 ‘‘(I) of a type generally acknowl13 edged as reliable by accreditation bod14 ies designated by the Secretary; and

15 ‘‘(II) performed by a laboratory

16 approved by such an accreditation

17 body;

18 ‘‘(ii) requiring an objection to genetic

19 testing results to be made in writing not

20 later than a specified number of days before

21 any hearing at which the results may be in22 troduced into evidence (or, at State option,

23 not later than a specified number of days

24 after receipt of the results); and
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1 ‘‘(iii) making the test results admissi2 ble as evidence of paternity without the need

3 for foundation testimony or other proof of

4 authenticity or accuracy, unless objection is

5 made.

6 ‘‘(G) PRESUMPTION OF PATERNITY IN CER7 TAIN CASES.—Procedures which create a rebutta8 ble or, at the option of the State, conclusive pre9 sumption of paternity upon genetic testing re10 sults indicating a threshold probability that the

11 alleged father is the father of the child.

12 ‘‘(H) DEFAULT ORDERS.—Procedures re13 quiring a default order to be entered in a pater14 nity case upon a showing of service of process on

15 the defendant and any additional showing re16 quired by State law.

17 ‘‘(I) NO RIGHT TO JURY TRIAL.—Procedures

18 providing that the parties to an action to estab19 lish paternity are not entitled to a trial by jury.

20 ‘‘(J) TEMPORARY SUPPORT ORDER BASED

21 ON PROBABLE PATERNITY IN CONTESTED

22 CASES.—Procedures which require that a tem23 porary order be issued, upon motion by a party,

24 requiring the provision of child support pending

25 an administrative or judicial determination of
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1 parentage, if there is clear and convincing evi2 dence of paternity (on the basis of genetic tests

3 or other evidence).

4 ‘‘(K) PROOF OF CERTAIN SUPPORT AND PA5 TERNITY ESTABLISHMENT COSTS.—Procedures

6 under which bills for pregnancy, childbirth, and

7 genetic testing are admissible as evidence with8 out requiring third-party foundation testimony,

9 and shall constitute prima facie evidence of

10 amounts incurred for such services or for testing

11 on behalf of the child.

12 ‘‘(L) STANDING OF PUTATIVE FATHERS.—

13 Procedures ensuring that the putative father has

14 a reasonable opportunity to initiate a paternity

15 action.

16 ‘‘(M) FILING OF ACKNOWLEDGMENTS AND

17 ADJUDICATIONS IN STATE REGISTRY OF BIRTH

18 RECORDS.—Procedures under which voluntary

19 acknowledgments and adjudications of paternity

20 by judicial or administrative processes are filed

21 with the State registry of birth records for com22 parison with information in the State case reg23 istry.’’.

24 (b) NATIONAL PATERNITY ACKNOWLEDGMENT AFFIDA25 VIT.—Section 452(a)(7) (42 U.S.C. 652(a)(7)) is amended
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1 by inserting ‘‘, and develop an affidavit to be used for the

2 voluntary acknowledgment of paternity which shall include

3 the social security number of each parent and, after con4 sultation with the States, other common elements as deter5 mined by such designee’’ before the semicolon.

6 (c) CONFORMING AMENDMENT.—Section 468 (42

7 U.S.C. 668) is amended by striking ‘‘a simple civil process

8 for voluntarily acknowledging paternity and’’.

9 SEC. 12332. OUTREACH FOR VOLUNTARY PATERNITY ES10 TABLISHMENT.

11 Section 454(23) (42 U.S.C. 654(23)) is amended by

12 inserting ‘‘and will publicize the availability and encourage

13 the use of procedures for voluntary establishment of pater14 nity and child support by means the State deems appro15 priate’’ before the semicolon.

16 SEC. 12333. COOPERATION BY APPLICANTS FOR AND RE17 CIPIENTS OF TEMPORARY FAMILY ASSIST18 ANCE.

19 Section 454 (42 U.S.C. 654), as amended by sections

20 12301(b), 12303(a), 12312(a), and 12313(a) of this Act, is

21 amended—

22 (1) by striking ‘‘and’’ at the end of paragraph

23 (27);

24 (2) by striking the period at the end of para25 graph (28) and inserting ‘‘; and’’; and
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1 (3) by inserting after paragraph (28) the follow2 ing new paragraph:

3 ‘‘(29) provide that the State agency responsible

4 for administering the State plan—

5 ‘‘(A) shall make the determination (and re6 determination at appropriate intervals) as to

7 whether an individual who has applied for or is

8 receiving assistance under the State program

9 funded under part A or the State program under

10 title XXI is cooperating in good faith with the

11 State in establishing the paternity of, or in es12 tablishing, modifying, or enforcing a support

13 order for, any child of the individual by provid14 ing the State agency with the name of, and such

15 other information as the State agency may re16 quire with respect to, the noncustodial parent of

17 the child, subject to such good cause exceptions,

18 taking into account the best interests of the child,

19 as the State may establish through the State

20 agency, or at the option of the State, through the

21 State agencies administering the State programs

22 funded under part A and title XXI;

23 ‘‘(B) shall require the individual to supply

24 additional necessary information and appear at

25 interviews, hearings, and legal proceedings;
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1 ‘‘(C) shall require the individual and the

2 child to submit to genetic tests pursuant to judi3 cial or administrative order;

4 ‘‘(D) may request that the individual sign

5 a voluntary acknowledgment of paternity, after

6 notice of the rights and consequences of such an

7 acknowledgment, but may not require the indi8 vidual to sign an acknowledgment or otherwise

9 relinquish the right to genetic tests as a condi10 tion of cooperation and eligibility for assistance

11 under the State program funded under part A or

12 the State program under title XXI; and

13 ‘‘(E) shall promptly notify the individual

14 and the State agency administering the State

15 program funded under part A and the State

16 agency administering the State program under

17 title XXI of each such determination, and if non18 cooperation is determined, the basis therefore.’’.

19 CHAPTER 5—PROGRAM ADMINISTRATION

20 AND FUNDING

21 SEC. 12341. PERFORMANCE-BASED INCENTIVES AND PEN22 ALTIES.

23 (a) DEVELOPMENT OF NEW SYSTEM.—The Secretary

24 of Health and Human Services, in consultation with State

25 directors of programs under part D of title IV of the Social
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1 Security Act, shall develop a new incentive system to re2 place the system under section 458 of such Act. The new

3 system shall provide additional payments to any State

4 based on such State’s performance under such a program.

5 (b) CONFORMING AMENDMENTS TO PRESENT SYS6 TEM.—Section 458 (42 U.S.C. 658) is amended—

7 (1) in subsection (a), by striking ‘‘aid to families

8 with dependent children under a State plan approved

9 under part A of this title’’ and inserting ‘‘assistance

10 under a program funded under part A’’;

11 (2) in subsection (b)(1)(A), by striking ‘‘section

12 402(a)(26)’’ and inserting ‘‘section 407(a)(4)’’;

13 (3) in subsections (b) and (c)—

14 (A) by striking ‘‘AFDC collections’’ each

15 place it appears and inserting ‘‘title IV–A collec16 tions’’, and

17 (B) by striking ‘‘non-AFDC collections’’

18 each place it appears and inserting ‘‘non-title

19 IV–A collections’’; and

20 (4) in subsection (c), by striking ‘‘combined

21 AFDC/non-AFDC administrative costs’’ both places it

22 appears and inserting ‘‘combined title IV–A/non-title

23 IV–A administrative costs’’.

24 (c) CALCULATION OF IV–D PATERNITY ESTABLISH25 MENT PERCENTAGE.—
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1 (1) Section 452(g)(1) (42 U.S.C. 652(g)(1)) is

2 amended in each of subparagraphs (A) and (B), by

3 striking ‘‘75’’ and inserting ‘‘90’’.

4 (2) Section 452(g)(2)(A) (42 U.S.C.

5 652(g)(2)(A)) is amended in the matter preceding

6 clause (i)—

7 (A) by striking ‘‘paternity establishment

8 percentage’’ and inserting ‘‘IV–D paternity es9 tablishment percentage’’; and

10 (B) by striking ‘‘(or all States, as the case

11 may be)’’.

12 (3) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is

13 amended by adding at the end the following new sen14 tence: ‘‘In meeting the 90 percent paternity establish15 ment requirement, a State may calculate either the

16 paternity establishment rate of cases in the program

17 funded under this part or the paternity establishment

18 rate of all out-of-wedlock births in the State.’’.

19 (4) Section 452(g)(3) (42 U.S.C. 652(g)(3)) is

20 amended—

21 (A) by striking subparagraph (A) and re22 designating subparagraphs (B) and (C) as sub23 paragraphs (A) and (B), respectively;

24 (B) in subparagraph (A) (as so redesig25 nated), by striking ‘‘the percentage of children
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1 born out-of-wedlock in a State’’ and inserting

2 ‘‘the percentage of children in a State who are

3 born out of wedlock or for whom support has not

4 been established’’; and

5 (C) in subparagraph (B) (as so redesig6 nated) by inserting ‘‘and securing support’’ be7 fore the period.

8 (d) EFFECTIVE DATES.—

9 (1) INCENTIVE ADJUSTMENTS.—

10 (A) IN GENERAL.—The system developed under

11 subsection (a) and the amendments made by sub12 section (b) shall become effective on October 1, 1997,

13 except to the extent provided in subparagraph (B).

14 (B) APPLICATION OF SECTION 458.—Section 458

15 of the Social Security Act, as in effect on the day be16 fore the date of the enactment of this section, shall be

17 effective for purposes of incentive payments to States

18 for fiscal years before fiscal year 1999.

19 (2) PENALTY REDUCTIONS.—The amendments

20 made by subsection (c) shall become effective with re21 spect to calendar quarters beginning on or after the

22 date of the enactment of this Act.

23 SEC. 12342. FEDERAL AND STATE REVIEWS AND AUDITS.

24 (a) STATE AGENCY ACTIVITIES.—Section 454 (42

25 U.S.C. 654) is amended—
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1 (1) in paragraph (14), by striking ‘‘(14)’’ and

2 inserting ‘‘(14)(A)’’;

3 (2) by redesignating paragraph (15) as subpara4 graph (B) of paragraph (14); and

5 (3) by inserting after paragraph (14) the follow6 ing new paragraph:

7 ‘‘(15) provide for—

8 ‘‘(A) a process for annual reviews of and re9 ports to the Secretary on the State program op10 erated under the State plan approved under this

11 part, including such information as may be nec12 essary to measure State compliance with Federal

13 requirements for expedited procedures, using

14 such standards and procedures as are required

15 by the Secretary, under which the State agency

16 will determine the extent to which the program

17 is operated in compliance with this part; and

18 ‘‘(B) a process of extracting from the auto19 mated data processing system required by para20 graph (16) and transmitting to the Secretary

21 data and calculations concerning the levels of ac22 complishment (and rates of improvement) with

23 respect to applicable performance indicators (in24 cluding IV–D paternity establishment percent-
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1 ages to the extent necessary for purposes of sec2 tions 452(g) and 458.’’.

3 (b) FEDERAL ACTIVITIES.—Section 452(a)(4) (42

4 U.S.C. 652(a)(4)) is amended to read as follows:

5 ‘‘(4)(A) review data and calculations transmitted

6 by State agencies pursuant to section 454(15)(B) on

7 State program accomplishments with respect to per8 formance indicators for purposes of subsection (g) of

9 this section and section 458;

10 ‘‘(B) review annual reports submitted pursuant

11 to section 454(15)(A) and, as appropriate, provide to

12 the State comments, recommendations for additional

13 or alternative corrective actions, and technical assist14 ance; and

15 ‘‘(C) conduct audits, in accordance with the Gov16 ernment auditing standards of the Comptroller Gen17 eral of the United States—

18 ‘‘(i) at least once every 3 years (or more fre19 quently, in the case of a State which fails to

20 meet the requirements of this part concerning

21 performance standards and reliability of pro22 gram data) to assess the completeness, reliability,

23 and security of the data, and the accuracy of the

24 reporting systems, used in calculating perform-
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1 ance indicators under subsection (g) of this sec2 tion and section 458;

3 ‘‘(ii) of the adequacy of financial manage4 ment of the State program operated under the

5 State plan approved under this part, including

6 assessments of—

7 ‘‘(I) whether Federal and other funds

8 made available to carry out the State pro9 gram are being appropriately expended,

10 and are properly and fully accounted for;

11 and

12 ‘‘(II) whether collections and disburse13 ments of support payments are carried out

14 correctly and are fully accounted for; and

15 ‘‘(iii) for such other purposes as the Sec16 retary may find necessary;’’.

17 (c) EFFECTIVE DATE.—The amendments made by this

18 section shall be effective with respect to calendar quarters

19 beginning 12 months or more after the date of the enactment

20 of this Act.

21 SEC. 12343. REQUIRED REPORTING PROCEDURES.

22 (a) ESTABLISHMENT.—Section 452(a)(5) (42 U.S.C.

23 652(a)(5)) is amended by inserting ‘‘, and establish proce24 dures to be followed by States for collecting and reporting

25 information required to be provided under this part, and
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1 establish uniform definitions (including those necessary to

2 enable the measurement of State compliance with the re3 quirements of this part relating to expedited processes) to

4 be applied in following such procedures’’ before the semi5 colon.

6 (b) STATE PLAN REQUIREMENT.—Section 454 (42

7 U.S.C. 654), as amended by sections 12301(b), 12303(a),

8 12312(a), 12313(a), and 12333 of this Act, is amended—

9 (1) by striking ‘‘and’’ at the end of paragraph

10 (28);

11 (2) by striking the period at the end of para12 graph (29) and inserting ‘‘; and’’; and

13 (3) by adding after paragraph (29) the following

14 new paragraph:

15 ‘‘(30) provide that the State shall use the defini16 tions established under section 452(a)(5) in collecting

17 and reporting information as required under this

18 part.’’.

19 SEC. 12344. AUTOMATED DATA PROCESSING REQUIRE20 MENTS.

21 (a) REVISED REQUIREMENTS.—

22 (1) IN GENERAL.—Section 454(16) (42 U.S.C.

23 654(16)) is amended—

24 (A) by striking ‘‘, at the option of the

25 State,’’;
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1 (B) by inserting ‘‘and operation by the

2 State agency’’ after ‘‘for the establishment’’;

3 (C) by inserting ‘‘meeting the requirements

4 of section 454A’’ after ‘‘information retrieval sys5 tem’’;

6 (D) by striking ‘‘in the State and localities

7 thereof, so as (A)’’ and inserting ‘‘so as’’;

8 (E) by striking ‘‘(i)’’; and

9 (F) by striking ‘‘(including’’ and all that

10 follows and inserting a semicolon.

11 (2) AUTOMATED DATA PROCESSING.—Part D of

12 title IV (42 U.S.C. 651–669) is amended by inserting

13 after section 454 the following new section:

14 ‘‘SEC. 454A. AUTOMATED DATA PROCESSING.

15 ‘‘(a) IN GENERAL.—In order for a State to meet the

16 requirements of this section, the State agency administering

17 the State program under this part shall have in operation

18 a single statewide automated data processing and informa19 tion retrieval system which has the capability to perform

20 the tasks specified in this section with the frequency and

21 in the manner required by or under this part.

22 ‘‘(b) PROGRAM MANAGEMENT.—The automated system

23 required by this section shall perform such functions as the

24 Secretary may specify relating to management of the State

25 program under this part, including—
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1 ‘‘(1) controlling and accounting for use of Fed2 eral, State, and local funds in carrying out the pro3 gram; and

4 ‘‘(2) maintaining the data necessary to meet

5 Federal reporting requirements under this part on a

6 timely basis.

7 ‘‘(c) CALCULATION OF PERFORMANCE INDICATORS.—

8 In order to enable the Secretary to determine the incentive

9 payments and penalty adjustments required by sections

10 452(g) and 458, the State agency shall—

11 ‘‘(1) use the automated system—

12 ‘‘(A) to maintain the requisite data on

13 State performance with respect to paternity es14 tablishment and child support enforcement in the

15 State; and

16 ‘‘(B) to calculate the IV–D paternity estab17 lishment percentage for the State for each fiscal

18 year; and

19 ‘‘(2) have in place systems controls to ensure the

20 completeness and reliability of, and ready access to,

21 the data described in paragraph (1)(A), and the accu22 racy of the calculations described in paragraph

23 (1)(B).

24 ‘‘(d) INFORMATION INTEGRITY AND SECURITY.—The

25 State agency shall have in effect safeguards on the integrity,
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1 accuracy, and completeness of, access to, and use of data

2 in the automated system required by this section, which

3 shall include the following (in addition to such other safe4 guards as the Secretary may specify in regulations):

5 ‘‘(1) POLICIES RESTRICTING ACCESS.—Written

6 policies concerning access to data by State agency

7 personnel, and sharing of data with other persons,

8 which—

9 ‘‘(A) permit access to and use of data only

10 to the extent necessary to carry out the State

11 program under this part; and

12 ‘‘(B) specify the data which may be used for

13 particular program purposes, and the personnel

14 permitted access to such data.

15 ‘‘(2) SYSTEMS CONTROLS.—Systems controls

16 (such as passwords or blocking of fields) to ensure

17 strict adherence to the policies described in paragraph

18 (1).

19 ‘‘(3) MONITORING OF ACCESS.—Routine mon20 itoring of access to and use of the automated system,

21 through methods such as audit trails and feedback

22 mechanisms, to guard against and promptly identify

23 unauthorized access or use.

24 ‘‘(4) TRAINING AND INFORMATION.—Procedures

25 to ensure that all personnel (including State and local
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1 agency staff and contractors) who may have access to

2 or be required to use confidential program data are

3 informed of applicable requirements and penalties

4 (including those in section 6103 of the Internal Reve5 nue Code of 1986), and are adequately trained in se6 curity procedures.

7 ‘‘(5) PENALTIES.—Administrative penalties (up

8 to and including dismissal from employment) for un9 authorized access to, or disclosure or use of, confiden10 tial data.’’.

11 (3) REGULATIONS.—The Secretary of Health and

12 Human Services shall prescribe final regulations for

13 implementation of section 454A of the Social Security

14 Act not later than 2 years after the date of the enact15 ment of this Act.

16 (4) IMPLEMENTATION TIMETABLE.—Section

17 454(24) (42 U.S.C. 654(24)), as amended by section

18 12303(a)(1) of this Act, is amended to read as follows:

19 ‘‘(24) provide that the State will have in effect

20 an automated data processing and information re21 trieval system—

22 ‘‘(A) by October 1, 1997, which meets all re23 quirements of this part which were enacted on or

24 before the date of enactment of the Family Sup25 port Act of 1988, and
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1 ‘‘(B) by October 1, 1999, which meets all re2 quirements of this part enacted on or before the

3 date of the enactment of the Personal Respon4 sibility and Work Opportunity Act of 1995, ex5 cept that such deadline shall be extended by 1

6 day for each day (if any) by which the Secretary

7 fails to meet the deadline imposed by section

8 12344(a)(3) of the Personal Responsibility and

9 Work Opportunity Act of 1995;’’.

10 (b) SPECIAL FEDERAL MATCHING RATE FOR DEVEL11 OPMENT COSTS OF AUTOMATED SYSTEMS.—

12 (1) IN GENERAL.—Section 455(a) (42 U.S.C.

13 655(a)) is amended—

14 (A) in paragraph (1)(B)—

15 (i) by striking ‘‘90 percent’’ and in16 serting ‘‘the percent specified in paragraph

17 (3)’’;

18 (ii) by striking ‘‘so much of’’; and

19 (iii) by striking ‘‘which the Secretary’’

20 and all that follows and inserting ‘‘, and’’;

21 and

22 (B) by adding at the end the following new

23 paragraph:

24 ‘‘(3)(A) The Secretary shall pay to each State, for each

25 quarter in fiscal years 1996 and 1997, 90 percent of so
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1 much of the State expenditures described in paragraph

2 (1)(B) as the Secretary finds are for a system meeting the

3 requirements specified in section 454(16) (as in effect on

4 September 30, 1995) but limited to the amount approved

5 for States in the advance planning documents of such States

6 submitted on or before May 1, 1995.

7 ‘‘(B)(i) The Secretary shall pay to each State, for each

8 quarter in fiscal years 1997 through 2001, the percentage

9 specified in clause (ii) of so much of the State expenditures

10 described in paragraph (1)(B) as the Secretary finds are

11 for a system meeting the requirements of sections 454(16)

12 and 454A.

13 ‘‘(ii) The percentage specified in this clause is 80 per14 cent.’’.

15 (2) TEMPORARY LIMITATION ON PAYMENTS

16 UNDER SPECIAL FEDERAL MATCHING RATE.—

17 (A) IN GENERAL.—The Secretary of Health

18 and Human Services may not pay more than

19 $400,000,000 in the aggregate under section

20 455(a)(3) of the Social Security Act for fiscal

21 years 1996, 1997, 1998, 1999, and 2000.

22 (B) ALLOCATION OF LIMITATION AMONG

23 STATES.—The total amount payable to a State

24 under section 455(a)(3) of such Act for fiscal

25 years 1996, 1997, 1998, 1999, and 2000 shall
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1 not exceed the limitation determined for the

2 State by the Secretary of Health and Human

3 Services in regulations.

4 (C) ALLOCATION FORMULA.—The regula5 tions referred to in subparagraph (B) shall pre6 scribe a formula for allocating the amount speci7 fied in subparagraph (A) among States with

8 plans approved under part D of title IV of the

9 Social Security Act, which shall take into ac10 count—

11 (i) the relative size of State caseloads

12 under such part; and

13 (ii) the level of automation needed to

14 meet the automated data processing require15 ments of such part.

16 (c) CONFORMING AMENDMENT.—Section 123(c) of the

17 Family Support Act of 1988 (102 Stat. 2352; Public Law

18 100–485) is repealed.

19 SEC. 12345. TECHNICAL ASSISTANCE.

20 (a) FOR TRAINING OF FEDERAL AND STATE STAFF,

21 RESEARCH AND DEMONSTRATION PROGRAMS, AND SPECIAL

22 PROJECTS OF REGIONAL OR NATIONAL SIGNIFICANCE.—

23 Section 452 (42 U.S.C. 652) is amended by adding at the

24 end the following new subsection:
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1 ‘‘(j) Out of any money in the Treasury of the United

2 States not otherwise appropriated, there is hereby appro3 priated to the Secretary for each fiscal year an amount

4 equal to 1 percent of the total amount paid to the Federal

5 Government pursuant to section 457(a) during the imme6 diately preceding fiscal year (as determined on the basis

7 of the most recent reliable data available to the Secretary

8 as of the end of the 3rd calendar quarter following the end

9 of such preceding fiscal year), to cover costs incurred by

10 the Secretary for—

11 ‘‘(1) information dissemination and technical as12 sistance to States, training of State and Federal staff,

13 staffing studies, and related activities needed to im14 prove programs under this part (including technical

15 assistance concerning State automated systems re16 quired by this part); and

17 ‘‘(2) research, demonstration, and special

18 projects of regional or national significance relating

19 to the operation of State programs under this part.’’.

20 (b) OPERATION OF FEDERAL PARENT LOCATOR SERV21 ICE.—Section 453 (42 U.S.C. 653), as amended by section

22 12316 of this Act, is amended by adding at the end the

23 following new subsection:

24 ‘‘(o) RECOVERY OF COSTS.—Out of any money in the

25 Treasury of the United States not otherwise appropriated,
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1 there is hereby appropriated to the Secretary for each fiscal

2 year an amount equal to 2 percent of the total amount paid

3 to the Federal Government pursuant to section 457(a) dur4 ing the immediately preceding fiscal year (as determined

5 on the basis of the most recent reliable data available to

6 the Secretary as of the end of the 3rd calendar quarter fol7 lowing the end of such preceding fiscal year), to cover costs

8 incurred by the Secretary for operation of the Federal Par9 ent Locator Service under this section, to the extent such

10 costs are not recovered through user fees.’’.

11 SEC. 12346. REPORTS AND DATA COLLECTION BY THE SEC12 RETARY.

13 (a) ANNUAL REPORT TO CONGRESS.—

14 (1) Section 452(a)(10)(A) (42 U.S.C.

15 652(a)(10)(A)) is amended—

16 (A) by striking ‘‘this part;’’ and inserting

17 ‘‘this part, including—’’; and

18 (B) by adding at the end the following new

19 clauses:

20 ‘‘(i) the total amount of child support

21 payments collected as a result of services

22 furnished during the fiscal year to individ23 uals receiving services under this part;
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1 ‘‘(ii) the cost to the States and to the

2 Federal Government of so furnishing the

3 services; and

4 ‘‘(iii) the number of cases involving

5 families—

6 ‘‘(I) who became ineligible for as7 sistance under State programs funded

8 under part A during a month in the

9 fiscal year; and

10 ‘‘(II) with respect to whom a child

11 support payment was received in the

12 month;’’.

13 (2) Section 452(a)(10)(C) (42 U.S.C.

14 652(a)(10)(C)) is amended—

15 (A) in the matter preceding clause (i)—

16 (i) by striking ‘‘with the data required

17 under each clause being separately stated

18 for cases’’ and inserting ‘‘separately stated

19 for (1) cases’’;

20 (ii) by striking ‘‘cases where the child

21 was formerly receiving’’ and inserting ‘‘or

22 formerly received’’;

23 (iii) by inserting ‘‘or 1912’’ after

24 ‘‘471(a)(17)’’; and
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1 (iv) by inserting ‘‘(2)’’ before ‘‘all

2 other’’;

3 (B) in each of clauses (i) and (ii), by strik4 ing ‘‘, and the total amount of such obligations’’;

5 (C) in clause (iii), by striking ‘‘described

6 in’’ and all that follows and inserting ‘‘in which

7 support was collected during the fiscal year;’’;

8 (D) by striking clause (iv); and

9 (E) by redesignating clause (v) as clause

10 (vii), and inserting after clause (iii) the follow11 ing new clauses:

12 ‘‘(iv) the total amount of support col13 lected during such fiscal year and distrib14 uted as current support;

15 ‘‘(v) the total amount of support col16 lected during such fiscal year and distrib17 uted as arrearages;

18 ‘‘(vi) the total amount of support due

19 and unpaid for all fiscal years; and’’.

20 (3) Section 452(a)(10)(G) (42 U.S.C.

21 652(a)(10)(G)) is amended by striking ‘‘on the use of

22 Federal courts and’’.

23 (4) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is

24 amended—
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1 (A) in subparagraph (H), by striking

2 ‘‘and’’;

3 (B) in subparagraph (I), by striking the pe4 riod and inserting ‘‘; and’’; and

5 (C) by inserting after subparagraph (I) the

6 following new subparagraph:

7 ‘‘(J) compliance, by State, with the stand8 ards established pursuant to subsections (h) and

9 (i).’’.

10 (5) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is

11 amended by striking all that follows subparagraph

12 (J), as added by paragraph (4).

13 (b) EFFECTIVE DATE.—The amendments made by sub14 section (a) shall be effective with respect to fiscal year 1996

15 and succeeding fiscal years.

16 CHAPTER 6—ESTABLISHMENT AND

17 MODIFICATION OF SUPPORT ORDERS

18 SEC. 12351. SIMPLIFIED PROCESS FOR REVIEW AND AD19 JUSTMENT OF CHILD SUPPORT ORDERS.

20 Section 466(a)(10) (42 U.S.C. 666(a)(10)) is amended

21 to read as follows:

22 ‘‘(10) REVIEW AND ADJUSTMENT OF SUPPORT

23 ORDERS UPON REQUEST.—Procedures under which

24 the State shall review and adjust each support order

25 being enforced under this part upon the request of ei-
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1 ther parent or the State if there is an assignment.

2 Such procedures shall provide the following:

3 ‘‘(A) IN GENERAL.—

4 ‘‘(i) 3-YEAR CYCLE.—Except as pro5 vided in subparagraphs (B) and (C), the

6 State shall review and, as appropriate, ad7 just the support order every 3 years, taking

8 into account the best interests of the child

9 involved.

10 ‘‘(ii) METHODS OF ADJUSTMENT.—The

11 State may elect to review and, if appro12 priate, adjust an order pursuant to clause

13 (i) by—

14 ‘‘(I) reviewing and, if appro15 priate, adjusting the order in accord16 ance with the guidelines established

17 pursuant to section 467(a) if the

18 amount of the child support award

19 under the order differs from the

20 amount that would be awarded in ac21 cordance with the guidelines; or

22 ‘‘(II) applying a cost-of-living ad23 justment to the order in accordance

24 with a formula developed by the State

25 and permit either party to contest the
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1 adjustment, within 30 days after the

2 date of the notice of the adjustment, by

3 making a request for review and, if ap4 propriate, adjustment of the order in

5 accordance with the child support

6 guidelines established pursuant to sec7 tion 467(a).

8 ‘‘(iii) NO PROOF OF CHANGE IN CIR9 CUMSTANCES NECESSARY.—Any adjustment

10 under this subparagraph (A) shall be made

11 without a requirement for proof or showing

12 of a change in circumstances.

13 ‘‘(B) AUTOMATED METHOD.—The State

14 may use automated methods (including auto15 mated comparisons with wage or State income

16 tax data) to identify orders eligible for review,

17 conduct the review, identify orders eligible for

18 adjustment, and apply the appropriate adjust19 ment to the orders eligible for adjustment under

20 the threshold established by the State.

21 ‘‘(C) REQUEST UPON SUBSTANTIAL CHANGE

22 IN CIRCUMSTANCES.—The State shall, at the re23 quest of either parent subject to such an order or

24 of any State child support enforcement agency,

25 review and, if appropriate, adjust the order in
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1 accordance with the guidelines established pursu2 ant to section 467(a) based upon a substantial

3 change in the circumstances of either parent.

4 ‘‘(D) NOTICE OF RIGHT TO REVIEW.—The

5 State shall provide notice not less than once

6 every 3 years to the parents subject to such an

7 order informing them of their right to request the

8 State to review and, if appropriate, adjust the

9 order pursuant to this paragraph. The notice

10 may be included in the order.’’.

11 SEC. 12352. FURNISHING CONSUMER REPORTS FOR CER12 TAIN PURPOSES RELATING TO CHILD SUP13 PORT.

14 Section 604 of the Fair Credit Reporting Act (15

15 U.S.C. 1681b) is amended by adding at the end the follow16 ing new paragraphs:

17 ‘‘(4) In response to a request by the head of a

18 State or local child support enforcement agency (or a

19 State or local government official authorized by the

20 head of such an agency), if the person making the re21 quest certifies to the consumer reporting agency

22 that—

23 ‘‘(A) the consumer report is needed for the

24 purpose of establishing an individual’s capacity
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1 to make child support payments or determining

2 the appropriate level of such payments;

3 ‘‘(B) the paternity of the consumer for the

4 child to which the obligation relates has been es5 tablished or acknowledged by the consumer in ac6 cordance with State laws under which the obliga7 tion arises (if required by those laws);

8 ‘‘(C) the person has provided at least 10

9 days’ prior notice to the consumer whose report

10 is requested, by certified or registered mail to the

11 last known address of the consumer, that the re12 port will be requested; and

13 ‘‘(D) the consumer report will be kept con14 fidential, will be used solely for a purpose de15 scribed in subparagraph (A), and will not be

16 used in connection with any other civil, admin17 istrative, or criminal proceeding, or for any

18 other purpose.

19 ‘‘(5) To an agency administering a State plan

20 under section 454 of the Social Security Act (42

21 U.S.C. 654) for use to set an initial or modified child

22 support award.’’.
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1 SEC. 12353. NONLIABILITY FOR FINANCIAL INSTITUTIONS

2 PROVIDING FINANCIAL RECORDS TO STATE

3 CHILD SUPPORT ENFORCEMENT AGENCIES

4 IN CHILD SUPPORT CASES.

5 (a) IN GENERAL.—Notwithstanding any other provi6 sion of Federal or State law, a financial institution shall

7 not be liable under any Federal or State law to any person

8 for disclosing any financial record of an individual to a

9 State child support enforcement agency attempting to estab10 lish, modify, or enforce a child support obligation of such

11 individual.

12 (b) PROHIBITION OF DISCLOSURE OF FINANCIAL

13 RECORD OBTAINED BY STATE CHILD SUPPORT ENFORCE14 MENT AGENCY.—A State child support enforcement agency

15 which obtains a financial record of an individual from a

16 financial institution pursuant to subsection (a) may dis17 close such financial record only for the purpose of, and to

18 the extent necessary in, establishing, modifying, or enforc19 ing a child support obligation of such individual.

20 (c) CIVIL DAMAGES FOR UNAUTHORIZED DISCLO21 SURE.—

22 (1) DISCLOSURE BY STATE OFFICER OR EM23 PLOYEE.—If any person knowingly, or by reason of

24 negligence, discloses a financial record of an individ25 ual in violation of subsection (b), such individual
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1 may bring a civil action for damages against such

2 person in a district court of the United States.

3 (2) NO LIABILITY FOR GOOD FAITH BUT ERRO4 NEOUS INTERPRETATION.—No liability shall arise

5 under this subsection with respect to any disclosure

6 which results from a good faith, but erroneous, inter7 pretation of subsection (b).

8 (3) DAMAGES.—In any action brought under

9 paragraph (1), upon a finding of liability on the part

10 of the defendant, the defendant shall be liable to the

11 plaintiff in an amount equal to the sum of—

12 (A) the greater of—

13 (i) $1,000 for each act of unauthorized

14 disclosure of a financial record with respect

15 to which such defendant is found liable; or

16 (ii) the sum of—

17 (I) the actual damages sustained

18 by the plaintiff as a result of such un19 authorized disclosure; plus

20 (II) in the case of a willful disclo21 sure or a disclosure which is the result

22 of gross negligence, punitive damages;

23 plus

24 (B) the costs (including attorney’s fees) of

25 the action.
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1 (d) DEFINITIONS.—For purposes of this section—

2 (1) FINANCIAL INSTITUTION.—The term ‘‘finan3 cial institution’’ means—

4 (A) a depository institution, as defined in

5 section 3(c) of the Federal Deposit Insurance Act

6 (12 U.S.C. 1813(c));

7 (B) an institution-affiliated party, as de8 fined in section 3(u) of such Act (12 U.S.C.

9 1813(v));

10 (C) any Federal credit union or State credit

11 union, as defined in section 101 of the Federal

12 Credit Union Act (12 U.S.C. 1752), including

13 an institution-affiliated party of such a credit

14 union, as defined in section 206(r) of such Act

15 (12 U.S.C. 1786(r)); and

16 (D) any benefit association, insurance com17 pany, safe deposit company, money-market mu18 tual fund, or similar entity authorized to do

19 business in the State.

20 (2) FINANCIAL RECORD.—The term ‘‘financial

21 record’’ has the meaning given such term in section

22 1101 of the Right to Financial Privacy Act of 1978

23 (12 U.S.C. 3401).

24 (3) STATE CHILD SUPPORT ENFORCEMENT AGEN25 CY.—The term ‘‘State child support enforcement agen-
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1 cy’’ means a State agency which administers a State

2 program for establishing and enforcing child support

3 obligations.

4 CHAPTER 7—ENFORCEMENT OF SUPPORT

5 ORDERS

6 SEC. 12361. INTERNAL REVENUE SERVICE COLLECTION OF

7 ARREARAGES.

8 (a) COLLECTION OF FEES.—Section 6305(a) of the In9 ternal Revenue Code of 1986 (relating to collection of cer10 tain liability) is amended—

11 (1) by striking ‘‘and’’ at the end of paragraph

12 (3);

13 (2) by striking the period at the end of para14 graph (4) and inserting ‘‘, and’’;

15 (3) by adding at the end the following new para16 graph:

17 ‘‘(5) no additional fee may be assessed for adjust18 ments to an amount previously certified pursuant to

19 such section 452(b) with respect to the same obligor.’’;

20 and

21 (4) by striking ‘‘Secretary of Health, Education,

22 and Welfare’’ each place it appears and inserting

23 ‘‘Secretary of Health and Human Services’’.

24 (b) EFFECTIVE DATE.—The amendments made by this

25 section shall become effective October 1, 1997.
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1 SEC. 12362. AUTHORITY TO COLLECT SUPPORT FROM FED2 ERAL EMPLOYEES.

3 (a) CONSOLIDATION AND STREAMLINING OF AUTHORI4 TIES.—Section 459 (42 U.S.C. 659) is amended to read as

5 follows:

6 ‘‘SEC. 459. CONSENT BY THE UNITED STATES TO INCOME

7 WITHHOLDING, GARNISHMENT, AND SIMILAR

8 PROCEEDINGS FOR ENFORCEMENT OF CHILD

9 SUPPORT AND ALIMONY OBLIGATIONS.

10 ‘‘(a) CONSENT TO SUPPORT ENFORCEMENT.—Not11 withstanding any other provision of law (including section

12 207 of this Act and section 5301 of title 38, United States

13 Code), effective January 1, 1975, moneys (the entitlement

14 to which is based upon remuneration for employment) due

15 from, or payable by, the United States or the District of

16 Columbia (including any agency, subdivision, or instru17 mentality thereof) to any individual, including members of

18 the Armed Forces of the United States, shall be subject, in

19 like manner and to the same extent as if the United States

20 or the District of Columbia were a private person, to with21 holding in accordance with State law enacted pursuant to

22 subsections (a)(1) and (b) of section 466 and regulations

23 of the Secretary under such subsections, and to any other

24 legal process brought, by a State agency administering a

25 program under a State plan approved under this part or
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1 by an individual obligee, to enforce the legal obligation of

2 the individual to provide child support or alimony.

3 ‘‘(b) CONSENT TO REQUIREMENTS APPLICABLE TO

4 PRIVATE PERSON.—With respect to notice to withhold in5 come pursuant to subsection (a)(1) or (b) of section 466,

6 or any other order or process to enforce support obligations

7 against an individual (if the order or process contains or

8 is accompanied by sufficient data to permit prompt identi9 fication of the individual and the moneys involved), each

10 governmental entity specified in subsection (a) shall be sub11 ject to the same requirements as would apply if the entity

12 were a private person, except as otherwise provided in this

13 section.

14 ‘‘(c) DESIGNATION OF AGENT; RESPONSE TO NOTICE

15 OR PROCESS—

16 ‘‘(1) DESIGNATION OF AGENT.—The head of each

17 agency subject to this section shall—

18 ‘‘(A) designate an agent or agents to receive

19 orders and accept service of process in matters

20 relating to child support or alimony; and

21 ‘‘(B) annually publish in the Federal Reg22 ister the designation of the agent or agents, iden23 tified by title or position, mailing address, and

24 telephone number.
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1 ‘‘(2) RESPONSE TO NOTICE OR PROCESS.—If an

2 agent designated pursuant to paragraph (1) of this

3 subsection receives notice pursuant to State proce4 dures in effect pursuant to subsection (a)(1) or (b) of

5 section 466, or is effectively served with any order,

6 process, or interrogatory, with respect to an individ7 ual’s child support or alimony payment obligations,

8 the agent shall—

9 ‘‘(A) as soon as possible (but not later than

10 15 days) thereafter, send written notice of the no11 tice or service (together with a copy of the notice

12 or service) to the individual at the duty station

13 or last-known home address of the individual;

14 ‘‘(B) within 30 days (or such longer period

15 as may be prescribed by applicable State law)

16 after receipt of a notice pursuant to such State

17 procedures, comply with all applicable provi18 sions of section 466; and

19 ‘‘(C) within 30 days (or such longer period

20 as may be prescribed by applicable State law)

21 after effective service of any other such order,

22 process, or interrogatory, respond to the order,

23 process, or interrogatory.

24 ‘‘(d) PRIORITY OF CLAIMS.—If a governmental entity

25 specified in subsection (a) receives notice or is served with
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1 process, as provided in this section, concerning amounts

2 owed by an individual to more than 1 person—

3 ‘‘(1) support collection under section 466(b) must

4 be given priority over any other process, as provided

5 in section 466(b)(7);

6 ‘‘(2) allocation of moneys due or payable to an

7 individual among claimants under section 466(b)

8 shall be governed by section 466(b) and the regula9 tions prescribed under such section; and

10 ‘‘(3) such moneys as remain after compliance

11 with paragraphs (1) and (2) shall be available to sat12 isfy any other such processes on a first-come, first13 served basis, with any such process being satisfied out

14 of such moneys as remain after the satisfaction of all

15 such processes which have been previously served.

16 ‘‘(e) NO REQUIREMENT TO VARY PAY CYCLES.—A

17 governmental entity that is affected by legal process served

18 for the enforcement of an individual’s child support or ali19 mony payment obligations shall not be required to vary its

20 normal pay and disbursement cycle in order to comply with

21 the legal process.

22 ‘‘(f) RELIEF FROM LIABILITY.—

23 ‘‘(1) Neither the United States, nor the govern24 ment of the District of Columbia, nor any disbursing

25 officer shall be liable with respect to any payment
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1 made from moneys due or payable from the United

2 States to any individual pursuant to legal process

3 regular on its face, if the payment is made in accord4 ance with this section and the regulations issued to

5 carry out this section.

6 ‘‘(2) No Federal employee whose duties include

7 taking actions necessary to comply with the require8 ments of subsection (a) with regard to any individual

9 shall be subject under any law to any disciplinary ac10 tion or civil or criminal liability or penalty for, or

11 on account of, any disclosure of information made by

12 the employee in connection with the carrying out of

13 such actions.

14 ‘‘(g) REGULATIONS.—Authority to promulgate regula15 tions for the implementation of this section shall, insofar

16 as this section applies to moneys due from (or payable

17 by)—

18 ‘‘(1) the United States (other than the legislative

19 or judicial branches of the Federal Government) or

20 the government of the District of Columbia, be vested

21 in the President (or the designee of the President);

22 ‘‘(2) the legislative branch of the Federal Govern23 ment, be vested jointly in the President pro tempore

24 of the Senate and the Speaker of the House of Rep25 resentatives (or their designees), and
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1 ‘‘(3) the judicial branch of the Federal Govern2 ment, be vested in the Chief Justice of the United

3 States (or the designee of the Chief Justice).

4 ‘‘(h) MONEYS SUBJECT TO PROCESS.—

5 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

6 moneys paid or payable to an individual which are

7 considered to be based upon remuneration for employ8 ment, for purposes of this section—

9 ‘‘(A) consist of—

10 ‘‘(i) compensation paid or payable for

11 personal services of the individual, whether

12 the compensation is denominated as wages,

13 salary, commission, bonus, pay, allowances,

14 or otherwise (including severance pay, sick

15 pay, and incentive pay);

16 ‘‘(ii) periodic benefits (including a

17 periodic benefit as defined in section

18 228(h)(3)) or other payments—

19 ‘‘(I) under the insurance system

20 established by title II;

21 ‘‘(II) under any other system or

22 fund established by the United States

23 which provides for the payment of pen24 sions, retirement or retired pay, annu25 ities, dependents’ or survivors’ benefits,
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1 or similar amounts payable on account

2 of personal services performed by the

3 individual or any other individual;

4 ‘‘(III) as compensation for death

5 under any Federal program;

6 ‘‘(IV) under any Federal program

7 established to provide ‘black lung’ bene8 fits; or

9 ‘‘(V) by the Secretary of Veterans

10 Affairs as pension, or as compensation

11 for a service-connected disability or

12 death; and

13 ‘‘(iii) worker’s compensation benefits

14 paid under Federal or State law but

15 ‘‘(B) do not include any payment—

16 ‘‘(i) by way of reimbursement or other17 wise, to defray expenses incurred by the in18 dividual in carrying out duties associated

19 with the employment of the individual; or

20 ‘‘(ii) as allowances for members of the

21 uniformed services payable pursuant to

22 chapter 7 of title 37, United States Code, as

23 prescribed by the Secretaries concerned (de24 fined by section 101(5) of such title) as nec25 essary for the efficient performance of duty.
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1 ‘‘(2) CERTAIN AMOUNTS EXCLUDED.—In deter2 mining the amount of any moneys due from, or pay3 able by, the United States to any individual, there

4 shall be excluded amounts which—

5 ‘‘(A) are owed by the individual to the

6 United States;

7 ‘‘(B) are required by law to be, and are, de8 ducted from the remuneration or other payment

9 involved, including Federal employment taxes,

10 and fines and forfeitures ordered by court-mar11 tial;

12 ‘‘(C) are properly withheld for Federal,

13 State, or local income tax purposes, if the with14 holding of the amounts is authorized or required

15 by law and if amounts withheld are not greater

16 than would be the case if the individual claimed

17 all dependents to which he was entitled (the

18 withholding of additional amounts pursuant to

19 section 3402(i) of the Internal Revenue Code of

20 1986 may be permitted only when the individual

21 presents evidence of a tax obligation which sup22 ports the additional withholding);

23 ‘‘(D) are deducted as health insurance pre24 miums;
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1 ‘‘(E) are deducted as normal retirement

2 contributions (not including amounts deducted

3 for supplementary coverage); or

4 ‘‘(F) are deducted as normal life insurance

5 premiums from salary or other remuneration for

6 employment (not including amounts deducted for

7 supplementary coverage).

8 ‘‘(i) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) UNITED STATES.—The term ‘United States’

10 includes any department, agency, or instrumentality

11 of the legislative, judicial, or executive branch of the

12 Federal Government, the United States Postal Serv13 ice, the Postal Rate Commission, any Federal cor14 poration created by an Act of Congress that is wholly

15 owned by the Federal Government, and the govern16 ments of the territories and possessions of the United

17 States.

18 ‘‘(2) CHILD SUPPORT.—The term ‘child support’,

19 when used in reference to the legal obligations of an

20 individual to provide such support, means amounts

21 required to be paid under a judgment, decree, or

22 order, whether temporary, final, or subject to modi23 fication, issued by a court or an administrative agen24 cy of competent jurisdiction, for the support and

25 maintenance of a child, including a child who has at-
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1 tained the age of majority under the law of the issu2 ing State, or a child and the parent with whom the

3 child is living, which provides for monetary support,

4 health care, arrearages or reimbursement, and which

5 may include other related costs and fees, interest and

6 penalties, income withholding, attorney’s fees, and

7 other relief.

8 ‘‘(3) ALIMONY.—

9 ‘‘(A) IN GENERAL.—The term ‘alimony’,

10 when used in reference to the legal obligations of

11 an individual to provide the same, means peri12 odic payments of funds for the support and

13 maintenance of the spouse (or former spouse) of

14 the individual, and (subject to and in accordance

15 with State law) includes separate maintenance,

16 alimony pendente lite, maintenance, and spousal

17 support, and includes attorney’s fees, interest,

18 and court costs when and to the extent that the

19 same are expressly made recoverable as such pur20 suant to a decree, order, or judgment issued in

21 accordance with applicable State law by a court

22 of competent jurisdiction.

23 ‘‘(B) EXCEPTIONS.—Such term does not in24 clude—

25 ‘‘(i) any child support; or
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1 ‘‘(ii) any payment or transfer of prop2 erty or its value by an individual to the

3 spouse or a former spouse of the individual

4 in compliance with any community prop5 erty settlement, equitable distribution of

6 property, or other division of property be7 tween spouses or former spouses.

8 ‘‘(4) PRIVATE PERSON.—The term ‘private per9 son’ means a person who does not have sovereign or

10 other special immunity or privilege which causes the

11 person not to be subject to legal process.

12 ‘‘(5) LEGAL PROCESS.—The term ‘legal process’

13 means any writ, order, summons, or other similar

14 process in the nature of garnishment—

15 ‘‘(A) which is issued by—

16 ‘‘(i) a court or an administrative agen17 cy of competent jurisdiction in any State,

18 territory, or possession of the United States;

19 ‘‘(ii) a court or an administrative

20 agency of competent jurisdiction in any for21 eign country with which the United States

22 has entered into an agreement which re23 quires the United States to honor the proc24 ess; or
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1 ‘‘(iii) an authorized official pursuant

2 to an order of such a court or an adminis3 trative agency of competent jurisdiction or

4 pursuant to State or local law; and

5 ‘‘(B) which is directed to, and the purpose

6 of which is to compel, a governmental entity

7 which holds moneys which are otherwise payable

8 to an individual to make a payment from the

9 moneys to another party in order to satisfy a

10 legal obligation of the individual to provide child

11 support or make alimony payments.’’.

12 (b) CONFORMING AMENDMENTS.—

13 (1) TO PART D OF TITLE IV.—Sections 461 and

14 462 (42 U.S.C. 661 and 662) are repealed.

15 (2) TO TITLE 5, UNITED STATES CODE.—Section

16 5520a of title 5, United States Code, is amended, in

17 subsections (h)(2) and (i), by striking ‘‘sections 459,

18 461, and 462 of the Social Security Act (42 U.S.C.

19 659, 661, and 662)’’ and inserting ‘‘section 459 of the

20 Social Security Act (42 U.S.C. 659)’’.

21 (c) MILITARY RETIRED AND RETAINER PAY.—

22 (1) DEFINITION OF COURT.—Section 1408(a)(1)

23 of title 10, United States Code, is amended—

24 (A) by striking ‘‘and’’ at the end of sub25 paragraph (B);
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1 (B) by striking the period at the end of sub2 paragraph (C) and inserting ‘‘; and’’; and

3 (C) by adding after subparagraph (C) the

4 following: new subparagraph

5 ‘‘(D) any administrative or judicial tribu6 nal of a State competent to enter orders for sup7 port or maintenance (including a State agency

8 administering a program under a State plan ap9 proved under part D of title IV of the Social Se10 curity Act), and, for purposes of this subpara11 graph, the term ‘State’ includes the District of

12 Columbia, the Commonwealth of Puerto Rico, the

13 Virgin Islands, Guam, and American Samoa.’’.

14 (2) DEFINITION OF COURT ORDER.—Section

15 1408(a)(2) of such title is amended—

16 (A) by inserting ‘‘or a support order, as de17 fined in section 453(p) of the Social Security Act

18 (42 U.S.C. 653(p)),’’ before ‘‘which—’’;

19 (B) in subparagraph (B)(i), by striking

20 ‘‘(as defined in section 462(b) of the Social Secu21 rity Act (42 U.S.C. 662(b)))’’ and inserting ‘‘(as

22 defined in section 459(i)(2) of the Social Secu23 rity Act (42 U.S.C. 662(i)(2)))’’; and

24 (C) in subparagraph (B)(ii), by striking

25 ‘‘(as defined in section 462(c) of the Social Secu-
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1 rity Act (42 U.S.C. 662(c)))’’ and inserting ‘‘(as

2 defined in section 459(i)(3) of the Social Secu3 rity Act (42 U.S.C. 662(i)(3)))’’.

4 (3) PUBLIC PAYEE.—Section 1408(d) of such

5 title is amended—

6 (A) in the heading, by inserting ‘‘(OR FOR

7 BENEFIT OF)’’ before ‘‘SPOUSE OR’’; and

8 (B) in paragraph (1), in the 1st sentence,

9 by inserting ‘‘(or for the benefit of such spouse

10 or former spouse to a State disbursement unit es11 tablished pursuant to section 454B of the Social

12 Security Act or other public payee designated by

13 a State, in accordance with part D of title IV of

14 the Social Security Act, as directed by court

15 order, or as otherwise directed in accordance

16 with such part D)’’ before ‘‘in an amount suffi17 cient’’.

18 (4) RELATIONSHIP TO PART D OF TITLE IV.—

19 Section 1408 of such title is amended by adding at

20 the end the following new subsection:

21 ‘‘(j) RELATIONSHIP TO OTHER LAWS.—In any case

22 involving an order providing for payment of child support

23 (as defined in section 459(i)(2) of the Social Security Act)

24 by a member who has never been married to the other par25 ent of the child, the provisions of this section shall not
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1 apply, and the case shall be subject to the provisions of sec2 tion 459 of such Act.’’.

3 (d) EFFECTIVE DATE.—The amendments made by this

4 section shall become effective 6 months after the date of the

5 enactment of this Act.

6 SEC. 12363. ENFORCEMENT OF CHILD SUPPORT OBLIGA7 TIONS OF MEMBERS OF THE ARMED FORCES.

8 (a) AVAILABILITY OF LOCATOR INFORMATION.—

9 (1) MAINTENANCE OF ADDRESS INFORMATION.—

10 The Secretary of Defense shall establish a centralized

11 personnel locator service that includes the address of

12 each member of the Armed Forces under the jurisdic13 tion of the Secretary. Upon request of the Secretary

14 of Transportation, addresses for members of the Coast

15 Guard shall be included in the centralized personnel

16 locator service.

17 (2) TYPE OF ADDRESS.—

18 (A) RESIDENTIAL ADDRESS.—Except as

19 provided in subparagraph (B), the address for a

20 member of the Armed Forces shown in the loca21 tor service shall be the residential address of that

22 member.

23 (B) DUTY ADDRESS.—The address for a

24 member of the Armed Forces shown in the loca-
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1 tor service shall be the duty address of that mem2 ber in the case of a member—

3 (i) who is permanently assigned over4 seas, to a vessel, or to a routinely deployable

5 unit; or

6 (ii) with respect to whom the Secretary

7 concerned makes a determination that the

8 member’s residential address should not be

9 disclosed due to national security or safety

10 concerns.

11 (3) UPDATING OF LOCATOR INFORMATION.—

12 Within 30 days after a member listed in the locator

13 service establishes a new residential address (or a new

14 duty address, in the case of a member covered by

15 paragraph (2)(B)), the Secretary concerned shall up16 date the locator service to indicate the new address of

17 the member.

18 (4) AVAILABILITY OF INFORMATION.—The Sec19 retary of Defense shall make information regarding

20 the address of a member of the Armed Forces listed

21 in the locator service available, on request, to the Fed22 eral Parent Locator Service established under section

23 453 of the Social Security Act.

24 (b) FACILITATING GRANTING OF LEAVE FOR ATTEND25 ANCE AT HEARINGS.—
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1 (1) REGULATIONS.—The Secretary of each mili2 tary department, and the Secretary of Transportation

3 with respect to the Coast Guard when it is not operat4 ing as a service in the Navy, shall prescribe regula5 tions to facilitate the granting of leave to a member

6 of the Armed Forces under the jurisdiction of that

7 Secretary in a case in which—

8 (A) the leave is needed for the member to at9 tend a hearing described in paragraph (2);

10 (B) the member is not serving in or with a

11 unit deployed in a contingency operation (as de12 fined in section 101 of title 10, United States

13 Code); and

14 (C) the exigencies of military service (as de15 termined by the Secretary concerned) do not oth16 erwise require that such leave not be granted.

17 (2) COVERED HEARINGS.—Paragraph (1) ap18 plies to a hearing that is conducted by a court or

19 pursuant to an administrative process established

20 under State law, in connection with a civil action—

21 (A) to determine whether a member of the

22 Armed Forces is a natural parent of a child; or

23 (B) to determine an obligation of a member

24 of the Armed Forces to provide child support.
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1 (3) DEFINITIONS.—For purposes of this sub2 section—

3 (A) The term ‘‘court’’ has the meaning

4 given that term in section 1408(a) of title 10,

5 United States Code.

6 (B) The term ‘‘child support’’ has the mean7 ing given such term in section 459(i) of the So8 cial Security Act (42 U.S.C. 659(i)).

9 (c) PAYMENT OF MILITARY RETIRED PAY IN COMPLI10 ANCE WITH CHILD SUPPORT ORDERS.—

11 (1) DATE OF CERTIFICATION OF COURT

12 ORDER.—Section 1408 of title 10, United States Code,

13 as amended by section 362(c)(4) of this Act, is

14 amended—

15 (A) by redesignating subsections (i) and (j)

16 as subsections (j) and (k), respectively; and

17 (B) by inserting after subsection (h) the fol18 lowing new subsection:

19 ‘‘(i) CERTIFICATION DATE.—It is not necessary that

20 the date of a certification of the authenticity or completeness

21 of a copy of a court order for child support received by the

22 Secretary concerned for the purposes of this section be recent

23 in relation to the date of receipt by the Secretary.’’.

24 (2) PAYMENTS CONSISTENT WITH ASSIGNMENTS

25 OF RIGHTS TO STATES.—Section 1408(d)(1) of such
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1 title is amended by inserting after the 1st sentence the

2 following new sentence: ‘‘In the case of a spouse or

3 former spouse who, pursuant to section 407(a)(4) of

4 the Social Security Act (42 U.S.C. 607(a)(4)), assigns

5 to a State the rights of the spouse or former spouse

6 to receive support, the Secretary concerned may make

7 the child support payments referred to in the preced8 ing sentence to that State in amounts consistent with

9 that assignment of rights.’’.

10 (3) ARREARAGES OWED BY MEMBERS OF THE

11 UNIFORMED SERVICES.—Section 1408(d) of such title

12 is amended by adding at the end the following new

13 paragraph:

14 ‘‘(6) In the case of a court order for which effective

15 service is made on the Secretary concerned on or after the

16 date of the enactment of this paragraph and which provides

17 for payments from the disposable retired pay of a member

18 to satisfy the amount of child support set forth in the order,

19 the authority provided in paragraph (1) to make payments

20 from the disposable retired pay of a member to satisfy the

21 amount of child support set forth in a court order shall

22 apply to payment of any amount of child support arrear23 ages set forth in that order as well as to amounts of child

24 support that currently become due.’’.
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1 (4) PAYROLL DEDUCTIONS.—The Secretary of

2 Defense shall begin payroll deductions within 30 days

3 after receiving notice of withholding, or for the 1st

4 pay period that begins after such 30-day period.

5 SEC. 12364. VOIDING OF FRAUDULENT TRANSFERS.

6 Section 466 (42 U.S.C. 666), as amended by section

7 321 of this Act, is amended by adding at the end the follow8 ing new subsection:

9 ‘‘(g) LAWS VOIDING FRAUDULENT TRANSFERS.—In

10 order to satisfy section 454(20)(A), each State must have

11 in effect—

12 ‘‘(1)(A) the Uniform Fraudulent Conveyance Act

13 of 1981;

14 ‘‘(B) the Uniform Fraudulent Transfer Act

15 of 1984; or

16 ‘‘(C) another law, specifying indicia of

17 fraud which create a prima facie case that a

18 debtor transferred income or property to avoid

19 payment to a child support creditor, which the

20 Secretary finds affords comparable rights to

21 child support creditors; and

22 ‘‘(2) procedures under which, in any case in

23 which the State knows of a transfer by a child sup24 port debtor with respect to which such a prima facie

25 case is established, the State must—
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1 ‘‘(A) seek to void such transfer; or

2 ‘‘(B) obtain a settlement in the best inter3 ests of the child support creditor.’’.

4 SEC. 12365. WORK REQUIREMENT FOR PERSONS OWING

5 PAST-DUE CHILD SUPPORT.

6 (a) IN GENERAL.—Section 466(a) of the Social Secu7 rity Act (42 U.S.C. 666(a)), as amended by sections 12315,

8 12317(a), and 12323 of this Act, is amended by adding at

9 the end the following new paragraph:

10 ‘‘(15) PROCEDURES TO ENSURE THAT PERSONS

11 OWING PAST-DUE SUPPORT WORK OR HAVE A PLAN

12 FOR PAYMENT OF SUCH SUPPORT.—

13 ‘‘(A) IN GENERAL.—Procedures under which

14 the State has the authority, in any case in which

15 an individual owes past-due support with re16 spect to a child receiving assistance under a

17 State program funded under part A, to seek a

18 court order that requires the individual to—

19 ‘‘(i) pay such support in accordance

20 with a plan approved by the court, or, at

21 the option of the State, a plan approved by

22 the State agency administering the State

23 program under this part; or

24 ‘‘(ii) if the individual is subject to such

25 a plan and is not incapacitated, participate
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1 in such work activities (as defined in sec2 tion 406(d)) as the court, or, at the option

3 of the State, the State agency administering

4 the State program under this part, deems

5 appropriate.

6 ‘‘(B) PAST-DUE SUPPORT DEFINED.—For

7 purposes of subparagraph (A), the term ‘past-due

8 support’ means the amount of a delinquency, de9 termined under a court order, or an order of an

10 administrative process established under State

11 law, for support and maintenance of a child, or

12 of a child and the parent with whom the child

13 is living.’’.

14 (b) CONFORMING AMENDMENT.—The flush paragraph

15 at the end of section 466(a) (42 U.S.C.666(a)) is amended

16 by striking ‘‘and (7)’’ and inserting ‘‘(7), and (15)’’.

17 SEC. 12366. DEFINITION OF SUPPORT ORDER.

18 Section 453 (42 U.S.C. 653) as amended by sections

19 12316 and 12345(b) of this Act, is amended by adding at

20 the end the following new subsection:

21 ‘‘(p) SUPPORT ORDER DEFINED.—As used in this

22 part, the term ‘support order’ means a judgment, decree,

23 or order, whether temporary, final, or subject to modifica24 tion, issued by a court or an administrative agency of com25 petent jurisdiction, for the support and maintenance of a
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1 child, including a child who has attained the age of major2 ity under the law of the issuing State, or a child and the

3 parent with whom the child is living, which provides for

4 monetary support, health care, arrearages, or reimburse5 ment, and which may include related costs and fees, interest

6 and penalties, income withholding, attorneys’ fees, and

7 other relief.’’.

8 SEC. 12367. REPORTING ARREARAGES TO CREDIT BUREAUS.

9 Section 466(a)(7) (42 U.S.C. 666(a)(7)) is amended

10 to read as follows:

11 ‘‘(7) REPORTING ARREARAGES TO CREDIT BU12 REAUS.—

13 ‘‘(A) IN GENERAL.—Procedures (subject to

14 safeguards pursuant to subparagraph (B)) re15 quiring the State to report periodically to

16 consumer reporting agencies (as defined in sec17 tion 603(f) of the Fair Credit Reporting Act (15

18 U.S.C. 1681a(f)) the name of any noncustodial

19 parent who is delinquent in the payment of sup20 port, and the amount of overdue support owed by

21 such parent.

22 ‘‘(B) SAFEGUARDS.—Procedures ensuring

23 that, in carrying out subparagraph (A), infor24 mation with respect to a noncustodial parent is

25 reported—
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1 ‘‘(i) only after such parent has been af2 forded all due process required under State

3 law, including notice and a reasonable op4 portunity to contest the accuracy of such in5 formation; and

6 ‘‘(ii) only to an entity that has fur7 nished evidence satisfactory to the State

8 that the entity is a consumer reporting

9 agency (as so defined).’’.

10 SEC. 12368. LIENS.

11 Section 466(a)(4) (42 U.S.C. 666(a)(4)) is amended

12 to read as follows:

13 ‘‘(4) LIENS.—Procedures under which—

14 ‘‘(A) liens arise by operation of law against

15 real and personal property for amounts of over16 due support owed by a noncustodial parent who

17 resides or owns property in the State; and

18 ‘‘(B) the State accords full faith and credit

19 to liens described in subparagraph (A) arising in

20 another State, without registration of the under21 lying order.’’.
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1 SEC. 12369. STATE LAW AUTHORIZING SUSPENSION OF LI2 CENSES.

3 Section 466(a) (42 U.S.C. 666(a)), as amended by sec4 tions 12315, 12317(a), 12323, and 12365 of this Act, is

5 amended by adding at the end the following:

6 ‘‘(16) AUTHORITY TO WITHHOLD OR SUSPEND

7 LICENSES.—Procedures under which the State has

8 (and uses in appropriate cases) authority to withhold

9 or suspend, or to restrict the use of driver’s licenses,

10 professional and occupational licenses, and rec11 reational licenses of individuals owing overdue sup12 port or failing, after receiving appropriate notice, to

13 comply with subpoenas or warrants relating to pater14 nity or child support proceedings.’’.

15 SEC. 12370. INTERNATIONAL CHILD SUPPORT ENFORCE16 MENT.

17 (a) AUTHORITY FOR INTERNATIONAL AGREEMENTS.—

18 Part D of title IV, as amended by section 362(a) of this

19 Act, is amended by adding after section 459 the following

20 new section:

21 ‘‘SEC. 459A. INTERNATIONAL CHILD SUPPORT ENFORCE22 MENT.

23 ‘‘(a) AUTHORITY FOR DECLARATIONS.—

24 ‘‘(1) DECLARATION.—The Secretary of State,

25 with the concurrence of the Secretary of Health and

26 Human Services, is authorized to declare any foreign
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1 country (or a political subdivision thereof) to be a

2 foreign reciprocating country if the foreign country

3 has established, or undertakes to establish, procedures

4 for the establishment and enforcement of duties of

5 support owed to obligees who are residents of the

6 United States, and such procedures are substantially

7 in conformity with the standards prescribed under

8 subsection (b).

9 ‘‘(2) REVOCATION.—A declaration with respect

10 to a foreign country made pursuant to paragraph (1)

11 may be revoked if the Secretaries of State and Health

12 and Human Services determine that—

13 ‘‘(A) the procedures established by the for14 eign nation regarding the establishment and en15 forcement of duties of support have been so

16 changed, or the foreign nation’s implementation

17 of such procedures is so unsatisfactory, that such

18 procedures do not meet the criteria for such a

19 declaration; or

20 ‘‘(B) continued operation of the declaration

21 is not consistent with the purposes of this part.

22 ‘‘(3) FORM OF DECLARATION.—A declaration

23 under paragraph (1) may be made in the form of an

24 international agreement, in connection with an inter-
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1 national agreement or corresponding foreign declara2 tion, or on a unilateral basis.

3 ‘‘(b) STANDARDS FOR FOREIGN SUPPORT ENFORCE4 MENT PROCEDURES.—

5 ‘‘(1) MANDATORY ELEMENTS.—Child support en6 forcement procedures of a foreign country which may

7 be the subject of a declaration pursuant to subsection

8 (a)(1) shall include the following elements:

9 ‘‘(A) The foreign country (or political sub10 division thereof) has in effect procedures, avail11 able to residents of the United States—

12 ‘‘(i) for establishment of paternity, and

13 for establishment of orders of support for

14 children and custodial parents; and

15 ‘‘(ii) for enforcement of orders to pro16 vide support to children and custodial par17 ents, including procedures for collection and

18 appropriate distribution of support pay19 ments under such orders.

20 ‘‘(B) The procedures described in subpara21 graph (A), including legal and administrative

22 assistance, are provided to residents of the Unit23 ed States at no cost.
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1 ‘‘(C) An agency of the foreign country is

2 designated as a Central Authority responsible

3 for—

4 ‘‘(i) facilitating child support enforcement in

5 cases involving residents of the foreign nation and

6 residents of the United States; and

7 ‘‘(ii) ensuring compliance with the standards es8 tablished pursuant to this subsection.

9 ‘‘(2) ADDITIONAL ELEMENTS.—The Secretary of

10 Health and Human Services and the Secretary of

11 State, in consultation with the States, may establish

12 such additional standards as may be considered nec13 essary to further the purposes of this section.

14 ‘‘(c) DESIGNATION OF UNITED STATES CENTRAL AU15 THORITY.—It shall be the responsibility of the Secretary of

16 Health and Human Services to facilitate child support en17 forcement in cases involving residents of the United States

18 and residents of foreign nations that are the subject of a

19 declaration under this section, by activities including—

20 ‘‘(1) development of uniform forms and proce21 dures for use in such cases;

22 ‘‘(2) notification of foreign reciprocating coun23 tries of the State of residence of individuals sought for

24 support enforcement purposes, on the basis of infor-
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1 mation provided by the Federal Parent Locator Serv2 ice; and

3 ‘‘(3) such other oversight, assistance, and coordi4 nation activities as the Secretary may find necessary

5 and appropriate.

6 ‘‘(d) EFFECT ON OTHER LAWS.—States may enter

7 into reciprocal arrangements for the establishment and en8 forcement of child support obligations with foreign countries

9 that are not the subject of a declaration pursuant to sub10 section (a), to the extent consistent with Federal law.’’.

11 (b) STATE PLAN REQUIREMENT.—Section 454 (42

12 U.S.C. 654), as amended by sections 12301(b), 12303(a),

13 12312(b), 12313(a), 12333, and 12343(b) of this Act, is

14 amended—

15 (1) by striking ‘‘and’’ at the end of paragraph

16 (29);

17 (2) by striking the period at the end of para18 graph (30) and inserting ‘‘; and’’; and

19 (3) by adding after paragraph (30) the following

20 new paragraph:

21 ‘‘(31)(A) provide that any request for services

22 under this part by a foreign reciprocating country or

23 a foreign country with which the State has an ar24 rangement described in section 459A(d)(2) shall be

25 treated as a request by a State;
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1 ‘‘(B) provide, at State option, notwithstanding

2 paragraph (4) or any other provision of this part, for

3 services under the plan for enforcement of a spousal

4 support order not described in paragraph (4)(B) en5 tered by such a country (or subdivision); and

6 ‘‘(C) provide that no applications will be re7 quired from, and no costs will be assessed for such

8 services against, the foreign reciprocating country or

9 foreign obligee (but costs may at State option be as10 sessed against the obligor).’’.

11 SEC. 12371. FINANCIAL INSTITUTION DATA MATCHES.

12 Section 466(a) (42 U.S.C. 666(a)), as amended by sec13 tions 12315, 12317(a), 12323, 12365, and 12369 of this Act,

14 is amended by adding at the end the following new para15 graph:

16 ‘‘(17) FINANCIAL INSTITUTION DATA MATCHES.—

17 ‘‘(A) IN GENERAL.—Procedures under which

18 the State agency shall enter into agreements with

19 financial institutions doing business in the

20 State—

21 ‘‘(i) to develop and operate, in coordi22 nation with such financial institutions, a

23 data match system, using automated data

24 exchanges to the maximum extent feasible,

25 in which each such financial institution is
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1 required to provide for each calendar quar2 ter the name, record address, social security

3 number or other taxpayer identification

4 number, and other identifying information

5 for each noncustodial parent who maintains

6 an account at such institution and who

7 owes past-due support, as identified by the

8 State by name and social security number

9 or other taxpayer identification number;

10 and

11 ‘‘(ii) in response to a notice of lien or

12 levy, encumber or surrender, as the case

13 may be, assets held by such institution on

14 behalf of any noncustodial parent who is

15 subject to a child support lien pursuant to

16 paragraph (4).

17 ‘‘(B) REASONABLE FEES.—The State agen18 cy may pay a reasonable fee to a financial insti19 tution for conducting the data match provided

20 for in subparagraph (A)(i), not to exceed the ac21 tual costs incurred by such financial institution.

22 ‘‘(C) LIABILITY.—A financial institution

23 shall not be liable under any Federal or State

24 law to any person—
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1 ‘‘(i) for any disclosure of information

2 to the State agency under subparagraph

3 (A)(i);

4 ‘‘(ii) for encumbering or surrendering

5 any assets held by such financial institution

6 in response to a notice of lien or levy issued

7 by the State agency as provided for in sub8 paragraph (A)(ii); or

9 ‘‘(iii) for any other action taken in

10 good faith to comply with the requirements

11 of subparagraph (A).

12 ‘‘(D) DEFINITIONS.—For purposes of this

13 paragraph—

14 ‘‘(i) FINANCIAL INSTITUTION.—The

15 term ‘financial institution’ means any Fed16 eral or State commercial savings bank, in17 cluding savings association or cooperative

18 bank, Federal- or State-chartered credit

19 union, benefit association, insurance com20 pany, safe deposit company, money-market

21 mutual fund, or any similar entity author22 ized to do business in the State; and

23 ‘‘(ii) ACCOUNT.—The term ‘account’

24 means a demand deposit account, checking

25 or negotiable withdrawal order account,
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1 savings account, time deposit account, or

2 money-market mutual fund account.’’.

3 SEC. 12372. ENFORCEMENT OF ORDERS AGAINST PATERNAL

4 OR MATERNAL GRANDPARENTS IN CASES OF

5 MINOR PARENTS.

6 Section 466(a) (42 U.S.C. 666(a)), as amended by sec7 tions 12315, 12317(a), 12323, 12365, 12369, and 12371 of

8 this Act, is amended by adding at the end the following

9 new paragraph:

10 ‘‘(18) ENFORCEMENT OF ORDERS AGAINST PA11 TERNAL OR MATERNAL GRANDPARENTS.—Procedures

12 under which, at the State’s option, any child support

13 order enforced under this part with respect to a child

14 of minor parents, if the custodial parents of such

15 child is receiving assistance under the State program

16 under part A, shall be enforceable, jointly and sever17 ally, against the parents of the noncustodial parents

18 of such child.’’.

19 CHAPTER 8—MEDICAL SUPPORT

20 SEC. 12376. CORRECTION TO ERISA DEFINITION OF MEDI21 CAL CHILD SUPPORT ORDER.

22 (a) IN GENERAL.—Section 609(a)(2)(B) of the Em23 ployee Retirement Income Security Act of 1974 (29 U.S.C.

24 1169(a)(2)(B)) is amended—
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1 (1) by striking ‘‘issued by a court of competent

2 jurisdiction’’;

3 (2) by striking the period at the end of clause

4 (ii) and inserting a comma; and

5 (3) by adding, after and below clause (ii), the

6 following:

7 ‘‘if such judgment, decree, or order (I) is issued

8 by a court of competent jurisdiction or (II) is is9 sued through an administrative process estab10 lished under State law and has the force and ef11 fect of law under applicable State law.’’.

12 (b) EFFECTIVE DATE.—

13 (1) IN GENERAL.—The amendments made by

14 this section shall take effect on the date of the enact15 ment of this Act.

16 (2) PLAN AMENDMENTS NOT REQUIRED UNTIL

17 JANUARY 1, 1996.—Any amendment to a plan required

18 to be made by an amendment made by this section

19 shall not be required to be made before the 1st plan

20 year beginning on or after January 1, 1996, if—

21 (A) during the period after the date before

22 the date of the enactment of this Act and before

23 such 1st plan year, the plan is operated in ac24 cordance with the requirements of the amend25 ments made by this section; and
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1 (B) such plan amendment applies retro2 actively to the period after the date before the

3 date of the enactment of this Act and before such

4 1st plan year.

5 A plan shall not be treated as failing to be operated

6 in accordance with the provisions of the plan merely

7 because it operates in accordance with this para8 graph.

9 SEC. 12377. ENFORCEMENT OF ORDERS FOR HEALTH CARE

10 COVERAGE.

11 Section 466(a) (42 U.S.C. 666(a)), as amended by sec12 tions 12315, 12317(a), 12323, 12365, 12369, 12371, and

13 12372 of this Act, is amended by adding at the end the

14 following new paragraph:

15 ‘‘(19) HEALTH CARE COVERAGE.—Procedures

16 under which all child support orders enforced pursu17 ant to this part shall include a provision for the

18 health care coverage of the child, and in the case in

19 which a noncustodial parent provides such coverage

20 and changes employment, and the new employer pro21 vides health care coverage, the State agency shall

22 transfer notice of the provision to the employer, which

23 notice shall operate to enroll the child in the

24 noncustodial parent’s health plan, unless the

25 noncustodial parent contests the notice.’’.
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1 CHAPTER 9—ENHANCING RESPONSIBIL2 ITY AND OPPORTUNITY FOR NON-RES3 IDENTIAL PARENTS

4 SEC. 12381. GRANTS TO STATES FOR ACCESS AND VISITA5 TION PROGRAMS.

6 Part D of title IV (42 U.S.C. 651–669) is amended

7 by adding at the end the following:

8 ‘‘SEC. 469A. GRANTS TO STATES FOR ACCESS AND VISITA9 TION PROGRAMS.

10 ‘‘(a) IN GENERAL.—The Administration for Children

11 and Families shall make grants under this section to enable

12 States to establish and administer programs to support and

13 facilitate noncustodial parents’ access to and visitation of

14 their children, by means of activities including mediation

15 (both voluntary and mandatory), counseling, education, de16 velopment of parenting plans, visitation enforcement (in17 cluding monitoring, supervision and neutral drop-off and

18 pickup), and development of guidelines for visitation and

19 alternative custody arrangements.

20 ‘‘(b) AMOUNT OF GRANT.—The amount of the grant

21 to be made to a State under this section for a fiscal year

22 shall be an amount equal to the lesser of—

23 ‘‘(1) 90 percent of State expenditures during the

24 fiscal year for activities described in subsection (a); or
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1 ‘‘(2) the allotment of the State under subsection

2 (c) for the fiscal year.

3 ‘‘(c) ALLOTMENTS TO STATES.—

4 ‘‘(1) IN GENERAL.—The allotment of a State for

5 a fiscal year is the amount that bears the same ratio

6 to the amount appropriated for grants under this sec7 tion for the fiscal year as the number of children in

8 the State living with only 1 biological parent bears

9 to the total number of such children in all States.

10 ‘‘(2) MINIMUM ALLOTMENT.—The Administra11 tion for Children and Families shall adjust allotments

12 to States under paragraph (1) as necessary to ensure

13 that no State is allotted less than—

14 ‘‘(A) $50,000 for fiscal year 1996 or 1997;

15 or

16 ‘‘(B) $100,000 for any succeeding fiscal

17 year.

18 ‘‘(d) NO SUPPLANTATION OF STATE EXPENDITURES

19 FOR SIMILAR ACTIVITIES.—A State to which a grant is

20 made under this section may not use the grant to supplant

21 expenditures by the State for activities specified in sub22 section (a), but shall use the grant to supplement such ex23 penditures at a level at least equal to the level of such ex24 penditures for fiscal year 1995.
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1 ‘‘(e) STATE ADMINISTRATION.—Each State to which a

2 grant is made under this section—

3 ‘‘(1) may administer State programs funded

4 with the grant, directly or through grants to or con5 tracts with courts, local public agencies, or non-profit

6 private entities;

7 ‘‘(2) shall not be required to operate such pro8 grams on a statewide basis; and

9 ‘‘(3) shall monitor, evaluate, and report on such

10 programs in accordance with regulations prescribed

11 by the Secretary.’’.

12 CHAPTER 10—EFFECT OF ENACTMENT

13 SEC. 12391. EFFECTIVE DATES.

14 (a) IN GENERAL.—Except as otherwise specifically

15 provided (but subject to subsections (b) and (c))—

16 (1) the provisions of this subtitle requiring the

17 enactment or amendment of State laws under section

18 466 of the Social Security Act, or revision of State

19 plans under section 454 of such Act, shall be effective

20 with respect to periods beginning on and after Octo21 ber 1, 1996; and

22 (2) all other provisions of this subtitle shall be23 come effective upon the date of the enactment of this

24 Act.
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1 (b) GRACE PERIOD FOR STATE LAW CHANGES.—The

2 provisions of this subtitle shall become effective with respect

3 to a State on the later of—

4 (1) the date specified in this subtitle, or

5 (2) the effective date of laws enacted by the legis6 lature of such State implementing such provisions,

7 but in no event later than the 1st day of the 1st calendar

8 quarter beginning after the close of the 1st regular session

9 of the State legislature that begins after the date of the en10 actment of this Act. For purposes of the previous sentence,

11 in the case of a State that has a 2-year legislative session,

12 each year of such session shall be deemed to be a separate

13 regular session of the State legislature.

14 (c) GRACE PERIOD FOR STATE CONSTITUTIONAL

15 AMENDMENT.—A State shall not be found out of compliance

16 with any requirement enacted by this subtitle if the State

17 is unable to so comply without amending the State constitu18 tion until the earlier of—

19 (1) 1 year after the effective date of the necessary

20 State constitutional amendment; or

21 (2) 5 years after the date of the enactment of this

22 Act.
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1 Subtitle D—Restricting Welfare and

2 Public Benefits for Aliens

3 CHAPTER 1—ELIGIBILITY FOR FEDERAL

4 BENEFITS

5 SEC. 12401. ALIENS WHO ARE NOT QUALIFIED ALIENS IN6 ELIGIBLE FOR FEDERAL PUBLIC BENEFITS.

7 (a) IN GENERAL.—Notwithstanding any other provi8 sion of law and except as provided in subsection (b), an

9 alien who is not a qualified alien (as defined section 12431)

10 is not eligible for any Federal public benefit (as defined in

11 subsection (c)).

12 (b) EXCEPTIONS.—Subsection (a) shall not apply with

13 respect to the following Federal public benefits:

14 (1) Emergency medical services under title XIX

15 or XXI of the Social Security Act.

16 (2) Short-term, non-cash, in-kind emergency dis17 aster relief.

18 (3)(A) Public health assistance for immuniza19 tions.

20 (B) Public health assistance for testing and

21 treatment of a serious communicable disease if

22 the Secretary of Health and Human Services de23 termines that it is necessary to prevent the

24 spread of such disease.
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1 (4) Programs, services, or assistance (such as

2 soup kitchens, crisis counseling and intervention, and

3 short-term shelter) specified by the Attorney General,

4 in the Attorney General’s sole and unreviewable dis5 cretion after consultation with appropriate Federal

6 agencies and departments, which (A) deliver in-kind

7 services at the community level, including through

8 public or private nonprofit agencies; (B) do not con9 dition the provision of assistance, the amount of as10 sistance provided, or the cost of assistance provided

11 on the individual recipient’s income or resources; and

12 (C) are necessary for the protection of life or safety.

13 (5) Programs for housing or community develop14 ment assistance or financial assistance administered

15 by the Secretary of Housing and Urban Development,

16 any program under title V of the Housing Act of

17 1949, or any assistance under section 306C of the

18 Consolidated Farm and Rural Development Act, to

19 the extent that the alien is receiving such a benefit on

20 the date of the enactment of this Act.

21 (c) FEDERAL PUBLIC BENEFIT DEFINED.—

22 (1) Except as provided in paragraph (2), for

23 purposes of this subtitle the term ‘‘Federal public ben24 efit’’ means a Federal public benefit providing direct

25 spending for—
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1 (A) any grant, contract, loan, professional

2 license, or commercial license provided by an

3 agency of the United States or by appropriated

4 funds of the United States; and

5 (B) any retirement, welfare, health, disabil6 ity, public or assisted housing, post-secondary

7 education, food assistance, unemployment bene8 fit, or any other similar benefit for which pay9 ments or assistance are provided to an individ10 ual, household, or family eligibility unit by an

11 agency of the United States or by appropriated

12 funds of the United States.

13 (2) Such term shall not apply—

14 (A) to any contract, professional license, or

15 commercial license for a nonimmigrant whose

16 visa for entry is related to such employment in

17 the United States; or

18 (B) with respect to benefits for an alien who

19 as a work authorized nonimmigrant or as an

20 alien lawfully admitted for permanent residence

21 under the Immigration and Nationality Act

22 qualified for such benefits and for whom the

23 United States under reciprocal treaty agreements

24 is required to pay benefits, as determined by the
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1 Attorney General, after consultation with the

2 Secretary of State.

3 SEC. 12402. LIMITED ELIGIBILITY OF CERTAIN QUALIFIED

4 ALIENS FOR CERTAIN FEDERAL PROGRAMS.

5 (a) LIMITED ELIGIBILITY FOR SPECIFIED FEDERAL

6 PROGRAMS.—

7 (1) IN GENERAL.—Notwithstanding any other

8 provision of law and except as provided in paragraph

9 (2), an alien who is a qualified alien (as defined in

10 section 12431) is not eligible for any specified Federal

11 program (as defined in paragraph (3)).

12 (2) EXCEPTIONS.—

13 (A) TIME-LIMITED EXCEPTION FOR REFU14 GEES AND ASYLEES.—Paragraph (1) shall not

15 apply to an alien until 5 years after the date—

16 (i) an alien is admitted to the United

17 States as a refugee under section 207 of the

18 Immigration and Nationality Act;

19 (ii) an alien is granted asylum under

20 section 208 of such Act; or

21 (iii) an alien’s deportation is withheld

22 under section 243(h) of such Act.

23 (B) CERTAIN PERMANENT RESIDENT

24 ALIENS.—Paragraph (1) shall not apply to an

25 alien who—
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1 (i) is lawfully admitted to the United

2 States for permanent residence under the

3 Immigration and Nationality Act; and

4 (ii)(I) has worked 40 qualifying quar5 ters of coverage as defined under title II of

6 the Social Security Act, and (II) did not re7 ceive any Federal means-tested public bene8 fit (as defined in section 12403(c)) during

9 any such quarter.

10 (C) VETERAN AND ACTIVE DUTY EXCEP11 TION.—Paragraph (1) shall not apply to an

12 alien who is lawfully residing in any State and

13 is—

14 (i) a veteran (as defined in section 101

15 of title 38, United States Code) with a dis16 charge characterized as an honorable dis17 charge and not on account of alienage,

18 (ii) on active duty (other than active

19 duty for training) in the Armed Forces of

20 the United States, or

21 (iii) the spouse or unmarried depend22 ent child of an individual described in

23 clause (i) or (ii).

24 (D) TRANSITION FOR ALIENS CURRENTLY

25 RECEIVING BENEFITS.—Paragraph (1) shall
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1 apply to the eligibility of an alien for a program

2 for months beginning on or after January 1,

3 1997, if, on the date of the enactment of this Act,

4 the alien is lawfully residing in any State and

5 is receiving benefits under such program on the

6 date of the enactment of this Act.

7 (3) SPECIFIED FEDERAL PROGRAM DEFINED.—

8 For purposes of this subtitle, the term ‘‘specified Fed9 eral program’’ means any of the following:

10 (A) SSI.—The supplemental security in11 come program under title XVI of the Social Se12 curity Act.

13 (B) FOOD STAMPS.—The food stamp pro14 gram as defined in section 3(h) of the Food

15 Stamp Act of 1977.

16 (b) LIMITED ELIGIBILITY FOR DESIGNATED FEDERAL

17 PROGRAMS.—

18 (1) IN GENERAL.—Notwithstanding any other

19 provision of law and except as provided in section

20 12403 and paragraph (2), a State is authorized to de21 termine the eligibility of an alien who is a qualified

22 alien (as defined in section 12431) for any designated

23 Federal program (as defined in paragraph (3)).
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1 (2) EXCEPTIONS.—Qualified aliens under this

2 paragraph shall be eligible for any designated Federal

3 program.

4 (A) TIME-LIMITED EXCEPTION FOR REFU5 GEES AND ASYLEES.—

6 (i) An alien who is admitted to the

7 United States as a refugee under section

8 207 of the Immigration and Nationality

9 Act until 5 years after the date of an alien’s

10 entry into the United States.

11 (ii) An alien who is granted asylum

12 under section 208 of such Act until 5 years

13 after the date of such grant of asylum.

14 (iii) An alien whose deportation is

15 being withheld under section 243(h) of such

16 Act until 5 years after such withholding.

17 (B) CERTAIN PERMANENT RESIDENT

18 ALIENS.—An alien who—

19 (i) is lawfully admitted to the United

20 States for permanent residence under the

21 Immigration and Nationality Act; and

22 (ii)(I) has worked 40 qualifying quar23 ters of coverage to be a fully insured indi24 vidual for old-age retirement benefits under

25 title II of the Social Security Act, (II) did
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1 not receive any Federal means-tested public

2 benefit (as defined in section 12403(c)) dur3 ing any such quarter, and (III) at the time

4 of application is otherwise eligible for such

5 benefits.

6 (C) VETERAN AND ACTIVE DUTY EXCEP7 TION.—An alien who is lawfully residing in any

8 State and is—

9 (i) a veteran (as defined in section 101

10 of title 38, United States Code) with a dis11 charge characterized as an honorable dis12 charge and not on account of alienage,

13 (ii) on active duty (other than active

14 duty for training) in the Armed Forces of

15 the United States, or

16 (iii) the spouse or unmarried depend17 ent child of an individual described in

18 clause (i) or (ii).

19 (D) TRANSITION FOR THOSE CURRENTLY

20 RECEIVING BENEFITS.—An alien who on the date

21 of the enactment of this Act is lawfully residing

22 in any State and is receiving benefits under such

23 program on the date of the enactment of this Act

24 shall continue to be eligible to receive such bene25 fits until January 1, 1997.
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1 (3) DESIGNATED FEDERAL PROGRAM DE2 FINED.—For purposes of this subtitle, the term ‘‘des3 ignated Federal program’’ means any of the follow4 ing:

5 (A) TEMPORARY ASSISTANCE FOR NEEDY

6 FAMILIES.—The program of block grants to

7 States for temporary assistance for needy fami8 lies under part A of title IV of the Social Secu9 rity Act.

10 (B) SOCIAL SERVICES BLOCK GRANT.—The

11 program of block grants to States for social serv12 ices under title XX of the Social Security Act.

13 (C) MEDICAID AND MEDIGRANT.—The pro14 gram of medical assistance under title XIX and

15 XXI of the Social Security Act.

16 SEC. 12403. FIVE-YEAR LIMITED ELIGIBILITY OF QUALIFIED

17 ALIENS FOR FEDERAL MEANS-TESTED PUB18 LIC BENEFIT.

19 (a) IN GENERAL.—Notwithstanding any other provi20 sion of law and except as provided in subsection (b), an

21 alien who is a qualified alien (as defined in section 12431)

22 and who enters the United States on or after the date of

23 the enactment of this Act is not eligible for any Federal

24 means-tested public benefit (as defined in subsection (c)) for

25 a period of five years beginning on the date of the alien’s
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1 entry into the United States with a status within the mean2 ing of the term ‘‘qualified alien’’.

3 (b) EXCEPTIONS.—The limitation under subsection (a)

4 shall not apply to the following aliens:

5 (1) EXCEPTION FOR REFUGEES AND ASYLEES.—

6 (A) An alien who is admitted to the United

7 States as a refugee under section 207 of the Im8 migration and Nationality Act.

9 (B) An alien who is granted asylum under

10 section 208 of such Act.

11 (C) An alien whose deportation is being

12 withheld under section 243(h) of such Act.

13 (2) VETERAN AND ACTIVE DUTY EXCEPTION.—An

14 alien who is lawfully residing in any State and is—

15 (A) a veteran (as defined in section 101 of

16 title 38, United States Code) with a discharge

17 characterized as an honorable discharge and not

18 on account of alienage,

19 (B) on active duty (other than active duty

20 for training) in the Armed Forces of the United

21 States, or

22 (C) the spouse or unmarried dependent

23 child of an individual described in subparagraph

24 (A) or (B).
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1 (c) FEDERAL MEANS-TESTED PUBLIC BENEFIT DE2 FINED.—

3 (1) Except as provided in paragraph (2), for

4 purposes of this subtitle, the term ‘‘Federal means5 tested public benefit’’ means a Federal public benefit

6 providing direct spending (including cash, medical,

7 housing, and food assistance and social services) by

8 the Federal Government in which the eligibility of an

9 individual, household, or family eligibility unit for

10 benefits, or the amount of such benefits, or both are

11 determined on the basis of income, resources, or fi12 nancial need of the individual, household, or unit.

13 (2) Such term does not include the following:

14 (A) Emergency medical services under title

15 XIX or XXI of the Social Security Act.

16 (B) Short-term, non-cash, in-kind emer17 gency disaster relief.

18 (C) Assistance or benefits under the Na19 tional School Lunch Act.

20 (D) Assistance or benefits under the Child

21 Nutrition Act of 1966.

22 (E)(i) Public health assistance for immuni23 zations.

24 (ii) Public health assistance for testing

25 and treatment of a serious communicable
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1 disease if the Secretary of Health and

2 Human Services determines that it is nec3 essary to prevent the spread of such disease.

4 (F) Payments for foster care and adoption

5 assistance under part B of title IV of the Social

6 Security Act for a child who would, in the ab7 sence of subsection (a), be eligible to have such

8 payments made on the child’s behalf under such

9 part, but only if the foster or adoptive parent or

10 parents of such child are not described under

11 subsection (a).

12 (G) Programs, services, or assistance (such

13 as soup kitchens, crisis counseling and interven14 tion, and short-term shelter) specified by the At15 torney General, in the Attorney General’s sole

16 and unreviewable discretion after consultation

17 with appropriate Federal agencies and depart18 ments, which (i) deliver in-kind services at the

19 community level, including through public or

20 private nonprofit agencies; (ii) do not condition

21 the provision of assistance, the amount of assist22 ance provided, or the cost of assistance provided

23 on the individual recipient’s income or resources;

24 and (iii) are necessary for the protection of life

25 or safety.
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1 (H) Programs of student assistance under

2 titles IV, V, IX, and X of the Higher Education

3 Act of 1965.

4 (I) Means-tested programs under the Ele5 mentary and Secondary Education Act of 1965.

6 CHAPTER 2—ATTRIBUTION OF INCOME

7 AND AFFIDAVITS OF SUPPORT

8 SEC. 12421. ATTRIBUTION OF SPONSOR’S INCOME AND RE9 SOURCES TO ALIEN.

10 (a) IN GENERAL.—Notwithstanding any other provi11 sion of law and except as provided in subsection (c), in

12 determining the eligibility and the amount of benefits of

13 an alien for any means-tested public benefits program (as

14 defined in subsection (e)) the income and resources of the

15 alien shall be deemed to include the following:

16 (1) The income and resources of any person who

17 executed an affidavit of support pursuant to section

18 213A of the Immigration and Nationality Act (as

19 added by section 12422) in behalf of such alien.

20 (2) The income and resources of the spouse (if

21 any) of the person.

22 (b) APPLICATION.—Subsection (a) shall apply with re23 spect to an alien until such time as the alien achieves Unit24 ed States citizenship through naturalization pursuant to
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1 chapter 2 of title III of the Immigration and Nationality

2 Act.

3 (c) EXCEPTIONS.—Subsection (a) shall not apply with

4 respect to the following Federal public benefits:

5 (1) Emergency medical services under title XIX

6 or XXI of the Social Security Act.

7 (2) Short-term, non-cash, in-kind emergency dis8 aster relief.

9 (3) Assistance or benefits under the National

10 School Lunch Act.

11 (4) Assistance or benefits under the Child Nutri12 tion Act of 1966.

13 (5)(A) Public health assistance for immuniza14 tions.

15 (B) Public health assistance for testing and

16 treatment of a serious communicable disease if

17 the Secretary of Health and Human Services de18 termines that it is necessary to prevent the

19 spread of such disease.

20 (6) Payments for foster care and adoption assist21 ance under part B of title IV of the Social Security

22 Act for a child who would, in the absence of sub23 section (a), be eligible to have such payments made on

24 the child’s behalf under such part, but only if the fos-
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1 ter or adoptive parent or parents of such child are not

2 described under subsection (a).

3 (7) Programs, services, or assistance (such as

4 soup kitchens, crisis counseling and intervention, and

5 short-term shelter) specified by the Attorney General,

6 in the Attorney General’s sole and unreviewable dis7 cretion after consultation with appropriate Federal

8 agencies and departments, which (A) deliver in-kind

9 services at the community level, including through

10 public or private nonprofit agencies; (B) do not con11 dition the provision of assistance, the amount of as12 sistance provided, or the cost of assistance provided

13 on the individual recipient’s income or resources; and

14 (C) are necessary for the protection of life or safety.

15 (8) Programs of student assistance under titles

16 IV, V, IX, and X of the Higher Education Act of

17 1965.

18 (d) REVIEW OF INCOME AND RESOURCES OF ALIEN

19 UPON REAPPLICATION.—Whenever an alien is required to

20 reapply for benefits under any means-tested public benefits

21 program, the applicable agency shall review the income and

22 resources attributed to the alien under subsection (a).

23 (e) MEANS-TESTED PUBLIC BENEFITS PROGRAM DE24 FINED.—The term ‘‘means-tested public benefits program’’

25 means a program of Federal public benefits providing di-
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1 rect spending (including cash, medical, housing, and food

2 assistance and social services) by the Federal government

3 in which the eligibility of an individual, household, or fam4 ily eligibility unit for benefits, or the amount of such bene5 fits, or both are determined on the basis of income, re6 sources, or financial need of the individual, household, or

7 unit.

8 (f) APPLICATION.—

9 (1) If on the date of the enactment of this Act,

10 a means-tested public benefits program attributes a

11 sponsor’s income and resources to an alien in deter12 mining the alien’s eligibility and the amount of bene13 fits for an alien, this section shall apply to any such

14 determination beginning on the day after the date of

15 the enactment of this Act.

16 (2) If on the date of the enactment of this Act,

17 a means-tested public benefits program does not at18 tribute a sponsor’s income and resources to an alien

19 in determining the alien’s eligibility and the amount

20 of benefits for an alien, this section shall apply to any

21 such determination beginning 180 days after the date

22 of the enactment of this Act.
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1 SEC. 12422. REQUIREMENTS FOR SPONSOR’S AFFIDAVIT OF

2 SUPPORT.

3 (a) IN GENERAL.—Title II of the Immigration and

4 Nationality Act is amended by inserting after section 213

5 the following new section:

6 ‘‘REQUIREMENTS FOR SPONSOR’S AFFIDAVIT OF SUPPORT

7 ‘‘SEC. 213A. (a) ENFORCEABILITY.—(1) No affidavit

8 of support may be accepted by the Attorney General or by

9 any consular officer to establish that an alien is not exclud10 able as a public charge under section 212(a)(4) unless such

11 affidavit is executed as a contract—

12 ‘‘(A) which is legally enforceable against the

13 sponsor by the sponsored alien, the Federal Govern14 ment, and by any State (or any political subdivision

15 of such State) which provides any means-tested public

16 benefits program, but not later than 10 years after the

17 alien last receives any such benefit;

18 ‘‘(B) in which the sponsor agrees to financially

19 support the alien, so that the alien will not become

20 a public charge; and

21 ‘‘(C) in which the sponsor agrees to submit to the

22 jurisdiction of any Federal or State court for the pur23 pose of actions brought under subsection (e)(2).

24 ‘‘(2) A contract under paragraph (1) shall be enforce25 able with respect to benefits provided to the alien until such
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1 time as the alien achieves United States citizenship through

2 naturalization pursuant to chapter 2 of title III.

3 ‘‘(b) FORMS.—Not later than 90 days after the date

4 of enactment of this section, the Attorney General, in con5 sultation with the Secretary of State and the Secretary of

6 Health and Human Services, shall formulate an affidavit

7 of support consistent with the provisions of this section.

8 ‘‘(c) REMEDIES.—Remedies available to enforce an af9 fidavit of support under this section include any or all of

10 the remedies described in section 3201, 3203, 3204, or 3205

11 of title 28, United States Code, as well as an order for spe12 cific performance and payment of legal fees and other costs

13 of collection, and include corresponding remedies available

14 under State law. A Federal agency may seek to collect

15 amounts owed under this section in accordance with the

16 provisions of subchapter II of chapter 37 of title 31, United

17 States Code.

18 ‘‘(d) NOTIFICATION OF CHANGE OF ADDRESS.—

19 ‘‘(1) IN GENERAL.—The sponsor shall notify the

20 Attorney General and the State in which the spon21 sored alien is currently resident within 30 days of

22 any change of address of the sponsor during the pe23 riod specified in subsection (a)(2).
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1 ‘‘(2) PENALTY.—Any person subject to the re2 quirement of paragraph (1) who fails to satisfy such

3 requirement shall be subject to a civil penalty of—

4 ‘‘(A) not less than $250 or more than

5 $2,000, or

6 ‘‘(B) if such failure occurs with knowledge

7 that the alien has received any means-tested pub8 lic benefit, not less than $2,000 or more than

9 $5,000.

10 ‘‘(e) REIMBURSEMENT OF GOVERNMENT EXPENSES.—

11 (1)(A) Upon notification that a sponsored alien has re12 ceived any benefit under any means-tested public benefits

13 program, the appropriate Federal, State, or local official

14 shall request reimbursement by the sponsor in the amount

15 of such assistance.

16 ‘‘(B) The Attorney General, in consultation with the

17 Secretary of Health and Human Services, shall prescribe

18 such regulations as may be necessary to carry out subpara19 graph (A).

20 ‘‘(2) If within 45 days after requesting reimbursement,

21 the appropriate Federal, State, or local agency has not re22 ceived a response from the sponsor indicating a willingness

23 to commence payments, an action may be brought against

24 the sponsor pursuant to the affidavit of support.
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1 ‘‘(3) If the sponsor fails to abide by the repayment

2 terms established by such agency, the agency may, within

3 60 days of such failure, bring an action against the sponsor

4 pursuant to the affidavit of support.

5 ‘‘(4) No cause of action may be brought under this sub6 section later than 10 years after the alien last received any

7 benefit under any means-tested public benefits program.

8 ‘‘(5) If, pursuant to the terms of this subsection, a Fed9 eral, State, or local agency requests reimbursement from the

10 sponsor in the amount of assistance provided, or brings an

11 action against the sponsor pursuant to the affidavit of sup12 port, the appropriate agency may appoint or hire an indi13 vidual or other person to act on behalf of such agency acting

14 under the authority of law for purposes of collecting any

15 moneys owed. Nothing in this subsection shall preclude any

16 appropriate Federal, State, or local agency from directly

17 requesting reimbursement from a sponsor for the amount

18 of assistance provided, or from bringing an action against

19 a sponsor pursuant to an affidavit of support.

20 ‘‘(f) DEFINITIONS.—For the purposes of this section—

21 ‘‘(1) SPONSOR.—The term ‘sponsor’ means an

22 individual who—

23 ‘‘(A) is a citizen or national of the United

24 States or an alien who is lawfully admitted to

25 the United States for permanent residence;
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1 ‘‘(B) is 18 years of age or over;

2 ‘‘(C) is domiciled in any State; and

3 ‘‘(D) is the person petitioning for the ad4 mission of the alien under section 204.

5 ‘‘(2) MEANS-TESTED PUBLIC BENEFITS PROGRAM

6 DEFINED.—The term ‘means-tested public benefits

7 program’ means a program of Federal public benefits

8 providing direct spending (including cash, medical,

9 housing, and food assistance and social services) by

10 the Federal Government in which the eligibility of an

11 individual, household, or family eligibility unit for

12 benefits, or the amount of such benefits, or both are

13 determined on the basis of income, resources, or fi14 nancial need of the individual, household, or unit.’’.

15 (b) CLERICAL AMENDMENT.—The table of contents of

16 such Act is amended by inserting after the item relating

17 to section 213 the following:

‘‘Sec. 213A. Requirements for sponsor’s affidavit of support.’’.

18 (c) EFFECTIVE DATE.—Subsection (a) of section 213A

19 of the Immigration and Nationality Act, as inserted by sub20 section (a) of this section, shall apply to affidavits of sup21 port executed on or after a date specified by the Attorney

22 General, which date shall be not earlier than 60 days (and

23 not later than 90 days) after the date the Attorney General

24 formulates the form for such affidavits under subsection (b)

25 of such section.
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1 (d) BENEFITS NOT SUBJECT TO REIMBURSEMENT.—

2 Requirements for reimbursement by a sponsor for benefits

3 provided to a sponsored alien pursuant to an affidavit of

4 support under section 213A of the Immigration and Na5 tionality Act shall not apply with respect to the following:

6 (1) Emergency medical services under title XIX

7 or XXI of the Social Security Act.

8 (2) Short-term, non-cash, in-kind emergency dis9 aster relief.

10 (3) Assistance or benefits under the National

11 School Lunch Act.

12 (4) Assistance or benefits under the Child Nutri13 tion Act of 1966.

14 (5)(A) Public health assistance for immuniza15 tions.

16 (B) Public health assistance for testing and

17 treatment of a serious communicable disease if the

18 Secretary of Health and Human Services determines

19 that it is necessary to prevent the spread of such dis20 ease.

21 (6) Payments for foster care and adoption assist22 ance under part B of title IV of the Social Security

23 Act for a child who would, in the absence of sub24 section (a), be eligible to have such payments made on

25 the child’s behalf under such part, but only if the fos-
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1 ter or adoptive parent or parents of such child are not

2 described under subsection (a).

3 (7) Programs, services, or assistance (such as

4 soup kitchens, crisis counseling and intervention, and

5 short-term shelter) specified by the Attorney General,

6 in the Attorney General’s sole and unreviewable dis7 cretion after consultation with appropriate Federal

8 agencies and departments, which (A) deliver in-kind

9 services at the community level, including through

10 public or private nonprofit agencies; (B) do not con11 dition the provision of assistance, the amount of as12 sistance provided, or the cost of assistance provided

13 on the individual recipient’s income or resources; and

14 (C) are necessary for the protection of life or safety.

15 (8) Programs of student assistance under titles

16 IV, V, IX, and X of the Higher Education Act of

17 1965.

18 SEC. 12423. COSIGNATURE OF ALIEN STUDENT LOANS.

19 Section 484(b) of the Higher Education Act of 1965

20 (20 U.S.C. 1091(b)) is amended by adding at the end the

21 following new paragraph:

22 ‘‘(6) Notwithstanding sections 427(a)(2)(C),

23 428B(a), 428C(b)(4)(A), and 464(c)(1)(E), a student

24 who is an alien lawfully admitted for permanent resi25 dence under the Immigration and Nationality Act
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1 shall not be eligible for a loan under this title unless

2 the loan is endorsed and cosigned by the alien’s spon3 sor under section 213A of the Immigration and Na4 tionality Act or by another individual who is a Unit5 ed States citizen.’’.

6 CHAPTER 3—GENERAL PROVISIONS

7 SEC. 12431. DEFINITIONS.

8 (a) IN GENERAL.—Except as otherwise provided in

9 this subtitle, the terms used in this subtitle have the same

10 meaning given such terms in section 101(a) of the Immigra11 tion and Nationality Act.

12 (b) QUALIFIED ALIEN.—For purposes of this subtitle,

13 the term ‘‘qualified alien’’ means an alien who, at the time

14 the alien applies for, receives, or attempts to receive a Fed15 eral public benefit, is—

16 (1) an alien who is lawfully admitted for perma17 nent residence under the Immigration and National18 ity Act,

19 (2) an alien who is granted asylum under sec20 tion 208 of such Act,

21 (3) a refugee who is admitted to the United

22 States under section 207 of such Act,

23 (4) an alien who is paroled into the United

24 States under section 212(d)(5) of such Act for a pe25 riod of at least 1 year,
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1 (5) an alien whose deportation is being withheld

2 under section 243(h) of such Act, or

3 (6) an alien who is granted conditional entry

4 pursuant to section 203(a)(7) of such Act as in effect

5 prior to April 1, 1980.

6 SEC. 12432. REAPPLICATION FOR SSI BENEFITS.

7 (a) APPLICATION AND NOTICE.—Notwithstanding any

8 other provision of law, in the case of an individual who

9 is receiving supplemental security income benefits under

10 title XVI of the Social Security Act as of the date of the

11 enactment of this Act and whose eligibility for such benefits

12 would terminate by reason of the application of section

13 12402(a)(2)(D), the Commissioner of Social Security shall

14 so notify the individual not later than 90 days after the

15 date of the enactment of this Act.

16 (b) REAPPLICATION.—

17 (1) IN GENERAL.—Not later than 120 days after

18 the date of the enactment of this Act, each individual

19 notified pursuant to subsection (a) who desires to re20 apply for benefits under title XVI of the Social Secu21 rity Act shall reapply to the Commissioner of Social

22 Security.

23 (2) DETERMINATION OF ELIGIBILITY.—Not later

24 than 1 year after the date of the enactment of this

25 Act, the Commissioner of Social Security shall deter-
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1 mine the eligibility of each individual who reapplies

2 for benefits under paragraph (1) pursuant to the pro3 cedures of such title XVI.

4 SEC. 12433. STATUTORY CONSTRUCTION.

5 (a) LIMITATION.—

6 (1) Nothing in this subtitle may be construed as

7 an entitlement or a determination of an individual’s

8 eligibility or fulfillment of the requisite requirements

9 for any Federal, State, or local governmental pro10 gram, assistance, or benefits. For purposes of this sub11 title, eligibility relates only to the general issue of eli12 gibility or ineligibility on the basis of alienage.

13 (2) Nothing in this subtitle may be construed as

14 addressing alien eligibility for a basic public edu15 cation as determined by the Supreme Court of the

16 United States under Plyler v. Doe (457 U.S.

17 202)(1982).

18 (b) NOT APPLICABLE TO FOREIGN ASSISTANCE.—This

19 subtitle does not apply to any Federal, State, or local gov20 ernmental program, assistance, or benefits provided to an

21 alien under any program of foreign assistance as deter22 mined by the Secretary of State in consultation with the

23 Attorney General.

24 (c) SEVERABILITY.—If any provision of this subtitle

25 or the application of such provision to any person or cir-
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1 cumstance is held to be unconstitutional, the remainder of

2 this subtitle and the application of the provisions of such

3 to any person or circumstance shall not be affected thereby.

4 Subtitle E—Teaching Hospital and

5 Graduate Medical Education

6 Trust Fund

7 CHAPTER 1—TRUST FUND

8 SEC. 12501. ESTABLISHMENT OF FUND; PAYMENTS TO

9 TEACHING HOSPITALS.

10 The Social Security Act (42 U.S.C. 300 et seq.) is

11 amended by adding after title XXI the following title:

12 ‘‘TITLE XXII—TEACHING HOSPITAL AND

13 GRADUATE MEDICAL EDUCATION TRUST FUND

14 ‘‘TABLE OF CONTENTS OF TITLE

‘‘PART A—ESTABLISHMENT OF FUND

‘‘Sec. 2201. Establishment of Fund.

‘‘PART B—PAYMENTS TO TEACHING HOSPITALS

‘‘Subpart 1—Requirement of Payments

‘‘Sec. 2211. Formula payments to teaching hospitals.

‘‘Sec. 2212. Additional provisions regarding annual payment document.

‘‘Subpart 2—Amount Relating to MedicarePlus Program

‘‘Sec. 2221. Determination of amount relating to MedicarePlus program.

‘‘Subpart 3—Amount Relating to Indirect Costs of Graduate Medical

Education

‘‘Sec. 2231. Determination of amount relating to indirect costs.

‘‘Sec. 2232. Indirect costs; special rules regarding payments from general account.

‘‘Subpart 4—Amount Relating to Direct Costs of Graduate Medical Education

‘‘Sec. 2241. Determination of amount relating to direct costs.
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‘‘Sec. 2242. Direct costs; special rules regarding payments from general account.

‘‘Sec. 2243. Direct costs; authority for payments to consortia of providers.

1 ‘‘PART A—ESTABLISHMENT OF FUND

2 ‘‘SEC. 2201. ESTABLISHMENT OF FUND.

3 ‘‘(a) IN GENERAL.—There is established in the Treas4 ury of the United States a fund to be known as the Teaching

5 Hospital and Graduate Medical Education Trust Fund (in

6 this title referred to as the ‘Fund’), consisting of amounts

7 appropriated to the Fund in subsections (d), (f)(3), and (g),

8 and amounts transferred to the Fund under section 1886(j).

9 Amounts in the Fund are available until expended.

10 ‘‘(b) EXPENDITURES FROM FUND.—Amounts in the

11 Fund are available to the Secretary for making payments

12 under section 2211.

13 ‘‘(c) ACCOUNTS IN FUND.—There are established with14 in the Fund the following accounts:

15 ‘‘(1) The General MedicarePlus Incentive Ac16 count.

17 ‘‘(2) The General Indirect-Costs Medical Edu18 cation Account.

19 ‘‘(3) The General Direct-Costs Medical Edu20 cation Account.

21 ‘‘(4) The Medicare Indirect-Costs Medical Edu22 cation Account.

23 ‘‘(5) The Medicare Direct-Costs Medical Edu24 cation Account.
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1 ‘‘(d) GENERAL TRANSFERS TO FUND.—

2 ‘‘(1) IN GENERAL.—For fiscal year 1997 and

3 each subsequent fiscal year, there are appropriated to

4 the Fund (effective on the date specified in paragraph

5 (2)), out of any money in the Treasury not otherwise

6 appropriated, the following amounts (as applicable to

7 the fiscal year involved):

8 ‘‘(A) For fiscal year 1997, $1,100,000,000.

9 ‘‘(B) For fiscal year 1998, $1,300,000,000.

10 ‘‘(C) For fiscal year 1999, $2,000,000,000.

11 ‘‘(D) For fiscal year 2000, $2,600,000,000.

12 ‘‘(E) For fiscal year 2001, $3,100,000,000.

13 ‘‘(F) For fiscal year 2002, $3,400,000,000.

14 ‘‘(G) For fiscal year 2003 and each subse15 quent fiscal year, the greater of the amount ap16 propriated for the preceding fiscal year or an

17 amount equal to the product of—

18 ‘‘(i) the amount appropriated for the

19 preceding fiscal year; and

20 ‘‘(ii) 1 plus the percentage increase in

21 the nominal gross domestic product for the

22 one-year period ending upon July 1 of such

23 preceding fiscal year.

24 ‘‘(2) EFFECTIVE DATE FOR ANNUAL APPROPRIA25 TION.—For purposes of paragraph (1), the date speci-
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1 fied in this paragraph for a fiscal year is the first

2 day of the fiscal year.

3 ‘‘(3) ALLOCATION FOR GENERAL MEDICAREPLUS

4 INCENTIVE ACCOUNT.—Of the amount appropriated

5 in paragraph (1) for a fiscal year, there shall be allo6 cated to the General MedicarePlus Incentive Account

7 the following percentage (as applicable to the fiscal

8 year involved):

9 ‘‘(A) For fiscal year 1997, 20 percent.

10 ‘‘(B) For fiscal year 1998, 30 percent.

11 ‘‘(C) For fiscal year 1999, 40 percent.

12 ‘‘(D) For fiscal year 2000 and each subse13 quent fiscal year, 50 percent.

14 ‘‘(4) ALLOCATIONS FOR GENERAL MEDICAL EDU15 CATION ACCOUNTS.—

16 ‘‘(A) IN GENERAL.—Of the amount appro17 priated in paragraph (1) for a fiscal year and

18 remaining after the allocation required in para19 graph (3) for the year has been made—

20 ‘‘(i) there shall be allocated to the Gen21 eral Indirect-Costs Medical Education Ac22 count the percentage determined under sub23 paragraph (B)(ii); and

24 ‘‘(ii) there shall be allocated to the

25 General Direct-Costs Medical Education Ac-
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1 count the percentage determined under sub2 paragraph (B)(iii).

3 ‘‘(B) DETERMINATION OF FIXED PERCENT4 AGES.—The Secretary of Health and Human

5 Services, acting through the Administrator of the

6 Health Care Financing Administration, shall de7 termine the following:

8 ‘‘(i) The total amount of payments

9 that were made under subsections (d)(5)(B)

10 and (h) of section 1886 for fiscal year 1994.

11 ‘‘(ii) The percentage of such total that

12 was constituted by payments under sub13 section (d)(5)(B) of such section.

14 ‘‘(iii) The percentage of such total that

15 was constituted by payments under sub16 section (h) of such section.

17 ‘‘(e) TRANSFERS FROM MEDICARE PROGRAM.—

18 Amounts shall, in accordance with section 1886(j), be trans19 ferred to the Fund from the trust funds established under

20 parts A and B of title XVIII.

21 ‘‘(f) INVESTMENT.—

22 ‘‘(1) IN GENERAL.—The Secretary of the Treas23 ury shall invest such amounts of the Fund as such

24 Secretary determines are not required to meet current

25 withdrawals from the Fund. Such investments may be
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1 made only in interest-bearing obligations of the Unit2 ed States. For such purpose, such obligations may be

3 acquired on original issue at the issue price, or by

4 purchase of outstanding obligations at the market

5 price.

6 ‘‘(2) SALE OF OBLIGATIONS.—Any obligation ac7 quired by the Fund may be sold by the Secretary of

8 the Treasury at the market price.

9 ‘‘(3) AVAILABILITY OF INCOME.—Any interest de10 rived from obligations acquired by the Fund, and

11 proceeds from any sale or redemption of such obliga12 tions, are hereby appropriated to the Fund.

13 ‘‘(g) MONETARY GIFTS TO FUND.—There are appro14 priated to the Fund such amounts as may be uncondition15 ally donated to the Federal Government as gifts to the

16 Fund.

17 ‘‘PART B—PAYMENTS TO TEACHING HOSPITALS

18 ‘‘Subpart 1—Requirement of Payments

19 ‘‘SEC. 2211. FORMULA PAYMENTS TO TEACHING HOSPITALS.

20 ‘‘(a) IN GENERAL.—Subject to subsection (d), in the

21 case of each teaching hospital that in accordance with sub22 section (b) submits to the Secretary a payment document

23 for fiscal year 1997 or any subsequent fiscal year, the Sec24 retary shall make payments for the year to the teaching

25 hospital for the direct and indirect costs of operating ap-
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1 proved medical residency training programs. Such pay2 ments shall be made from the Fund, and the total of the

3 payments to the hospital for the fiscal year shall equal the

4 sum of the following:

5 ‘‘(1) An amount determined under section 2221

6 (relating to the MedicarePlus program).

7 ‘‘(2) An amount determined under section 2231

8 (relating to the indirect costs of graduate medical

9 education).

10 ‘‘(3) An amount determined under section 2241

11 (relating to the direct costs of graduate medical edu12 cation).

13 ‘‘(b) PAYMENT DOCUMENT.—For purposes of sub14 section (a), a payment document is a document containing

15 such information as may be necessary for the Secretary to

16 make payments under such subsection to a teaching hospital

17 during a fiscal year. The document is submitted in accord18 ance with this subsection if the document is submitted not

19 later than the date specified by the Secretary, and the docu20 ment is in such form and is made in such manner as the

21 Secretary may require. This subsection is subject to section

22 2212.

23 ‘‘(c) PERIODIC PAYMENTS.—Payments under sub24 section (a) for a teaching hospital for a fiscal year shall

25 be made periodically, at such intervals and in such
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1 amounts as the Secretary determines to be appropriate

2 (subject to applicable Federal law regarding Federal pay3 ments).

4 ‘‘(d) SPECIAL RULES.—

5 ‘‘(1) PAYMENTS TO CONSORTIA OF PROVIDERS.—

6 In the case of payments under subsection (a) that are

7 determined under section 2241:

8 ‘‘(A) The requirement under such subsection

9 to make the payments to teaching hospitals is

10 subject to the authority of the Secretary under

11 section 2243(a) to make payments to qualifying

12 consortia.

13 ‘‘(B) If the Secretary authorizes payments

14 to a consortium under section 2243(a), sub15 sections (a) and (b) of this section (other than

16 subsection (a)(2)) apply to the consortium to the

17 same extent and in the same manner as the sub18 sections apply to teaching hospitals.

19 ‘‘(2) HOSPITALS IN STATES WITH CERTAIN DEM20 ONSTRATION PROJECTS.—Paragraph (2) of subsection

21 (a) is subject to section 2232(d)(1)(B), and paragraph

22 (3) of such subsection is subject to section

23 2242(d)(1)(B).

24 ‘‘(e) ADMINISTRATOR OF PROGRAMS.—This part, and

25 the subsequent parts of this title, shall be carried out by
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1 the Secretary acting through the Administrator of the

2 Health Care Financing Administration.

3 ‘‘(f) APPROVED MEDICAL RESIDENCY TRAINING PRO4 GRAM .—For purposes of this title, the term ‘approved med5 ical residency training program’ has the meaning given

6 such term in section 1886(h)(5)(A).

7 ‘‘SEC. 2212. ADDITIONAL PROVISIONS REGARDING ANNUAL

8 PAYMENT DOCUMENT.

9 ‘‘(a) PERIODIC REPORTS.—In collecting information

10 under section 2211(b), the Secretary may require that infor11 mation be submitted to the Secretary in periodic reports.

12 ‘‘(b) INFORMATION RELATING TO MEDICARE PRO13 GRAM.—Information collected by the Secretary under sec14 tion 2211(b) with respect to a teaching hospital for a fiscal

15 year shall include information on the following:

16 ‘‘(1) The number of inpatient discharges for the

17 fiscal year attributable to individuals enrolled in the

18 MedicarePlus program under part C of title XVIII.

19 ‘‘(2) For each discharge with respect to which

20 payment is received from the Secretary pursuant to

21 part A of title XVIII, the diagnosis-related group

22 within which the discharge is classified (as deter23 mined in accordance with section 1886(d)(4)(A)).

24 ‘‘(3) The medicare patient load of the hospital

25 (as defined in section 1886(h)(3)(C)).
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1 ‘‘Subpart 2—Amount Relating to MedicarePlus Program

2 ‘‘SEC. 2221. DETERMINATION OF AMOUNT RELATING TO

3 MEDICAREPLUS PROGRAM.

4 ‘‘(a) IN GENERAL.—For purposes of section

5 2211(a)(1), the amount determined under this section for

6 a teaching hospital for a fiscal year is the product of—

7 ‘‘(1) the amount in the General MedicarePlus In8 centive Account on the date specified in section

9 2201(d)(2) (once the appropriation under such section

10 is made); and

11 ‘‘(2) the percentage determined for the hospital

12 under subsection (b) for the fiscal year.

13 ‘‘(b) ANNUAL HOSPITAL-SPECIFIC PERCENTAGE.—For

14 purposes of subsection (a)(2), the percentage determined

15 under this subsection for a teaching hospital for a fiscal

16 year is the percentage constituted by the ratio of—

17 ‘‘(1) the number of inpatient discharges for the

18 fiscal year attributable to individuals enrolled in the

19 MedicarePlus program under part C of title XVIII; to

20 ‘‘(2) the sum of the respective numbers deter21 mined under paragraph (1) for the fiscal year for all

22 teaching hospitals.
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1 ‘‘Subpart 3—Amount Relating to Indirect Costs of

2 Graduate Medical Education

3 ‘‘SEC. 2231. DETERMINATION OF AMOUNT RELATING TO IN4 DIRECT COSTS.

5 ‘‘(a) IN GENERAL.—For purposes of section

6 2211(a)(2), the amount determined under this section for

7 a teaching hospital for a fiscal year is the sum of—

8 ‘‘(1) the amount determined under subsection (b)

9 (relating to the General Indirect-Costs Medical Edu10 cation Account); and

11 ‘‘(2) the amount determined under subsection (c)

12 (relating to the Medicare Indirect-Costs Medical Edu13 cation Account), subject to section 2232(d)(1)(B).

14 ‘‘(b) PAYMENT FROM GENERAL ACCOUNT.—

15 ‘‘(1) IN GENERAL.—For purposes of subsection

16 (a)(1), the amount determined under this subsection

17 for a teaching hospital for a fiscal year is the product

18 of—

19 ‘‘(A) the amount in the General Indirect20 Costs Medical Education Account on the date

21 specified in section 2201(d)(2) (once the appro22 priation under such section is made); and

23 ‘‘(B) the percentage determined for the hos24 pital under paragraph (2).

25 ‘‘(2) FIXED HOSPITAL-SPECIFIC PERCENTAGE.—
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1 ‘‘(A) IN GENERAL.—For purposes of para2 graph (1)(B), the percentage determined under

3 this paragraph for a teaching hospital is the

4 mean average of the respective percentages deter5 mined under subparagraph (C) for each fiscal

6 year of the applicable period (as defined in sub7 paragraph (B)), adjusted by the Secretary (up8 ward or downward, as the case may be) on a pro

9 rata basis to the extent necessary to ensure that

10 the sum of the percentages determined under this

11 paragraph for all teaching hospitals is equal to

12 100 percent. The preceding sentence is subject to

13 section 2232.

14 ‘‘(B) APPLICABLE PERIOD REGARDING REL15 EVANT DATA; FISCAL YEARS 1992 THROUGH

16 1994.—For purposes of this part, the term ‘appli17 cable period’ means the period beginning on the

18 first day of fiscal year 1992 and continuing

19 through the end of fiscal year 1994.

20 ‘‘(C) RESPECTIVE DETERMINATIONS FOR

21 FISCAL YEARS OF APPLICABLE PERIOD.—For

22 purposes of subparagraph (A), the percentage de23 termined under this subparagraph for a teaching

24 hospital for a fiscal year of the applicable period

25 is the percentage constituted by the ratio of—
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1 ‘‘(i) the total amount of payments re2 ceived by the hospital under section

3 1886(d)(5)(B) for discharges occurring dur4 ing the fiscal year involved; to

5 ‘‘(ii) the sum of the respective amounts

6 determined under clause (i) for the fiscal

7 year for all teaching hospitals.

8 ‘‘(3) AVAILABILITY OF DATA.—If a teaching hos9 pital received the payments specified in paragraph

10 (2)(C)(i) during the applicable period but a complete

11 set of the relevant data is not available to the Sec12 retary for purposes of determining an amount under

13 such paragraph for the fiscal year involved, the Sec14 retary shall for purposes of such subsection make an

15 estimate on the basis of such data as are available to

16 the Secretary for the applicable period.

17 ‘‘(c) PAYMENT FROM MEDICARE ACCOUNT.—For pur18 poses of subsection (a)(2), the amount determined under this

19 subsection for a teaching hospital for a fiscal year is an

20 amount determined in accordance with the methodology in

21 effect under section 1886(d)(5)(B) for such year. Payments

22 made under section 2211 pursuant to the preceding sentence

23 shall be made from the Medicare Indirect-Costs Medical

24 Education Account.
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1 ‘‘SEC. 2232. INDIRECT COSTS; SPECIAL RULES REGARDING

2 PAYMENTS FROM GENERAL ACCOUNT.

3 ‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS 1995

4 AND 1996.—

5 ‘‘(1) IN GENERAL.—In the case of a teaching hos6 pital whose first payments under section

7 1886(d)(5)(B) were for discharges occurring in fiscal

8 year 1995 or in fiscal year 1996 (referred to in this

9 subsection individually as a ‘first payment year’), the

10 percentage determined under paragraph (2) for the

11 hospital is deemed to be the percentage applicable

12 under section 2231(b)(2) to the hospital, subject to

13 paragraph (3).

14 ‘‘(2) DETERMINATION OF FIXED PERCENTAGE.—

15 For purposes of paragraph (1), the percentage deter16 mined under this paragraph for a teaching hospital

17 is the percentage constituted by the ratio of the

18 amount determined under subparagraph (A) to the

19 amount determined under subparagraph (B), as fol20 lows:

21 ‘‘(A)(i) If the first payment year for the

22 hospital is fiscal year 1995, the amount deter23 mined under this subparagraph is the total

24 amount of payments received by the hospital

25 under section 1886(d)(5)(B) for discharges occur26 ring during fiscal year 1995.
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1 ‘‘(ii) If the first payment year for the hos2 pital is fiscal year 1996, the amount determined

3 under this subparagraph is an amount equal to

4 an estimate by the Secretary of the total amount

5 of payments that would have been paid to the

6 hospital under section 1886(d)(5)(B) for dis7 charges occurring during fiscal year 1995 if such

8 section, as in effect for fiscal year 1996, had ap9 plied to the hospital for discharges occurring

10 during fiscal year 1995.

11 ‘‘(B)(i) If the first payment year for the

12 hospital is fiscal year 1995, the amount deter13 mined under this subparagraph is the aggregate

14 total of the payments received by teaching hos15 pitals under section 1886(d)(5)(B) for discharges

16 occurring during fiscal year 1995.

17 ‘‘(ii) If the first payment year for the hos18 pital is fiscal year 1996—

19 ‘‘(I) the Secretary shall make an esti20 mate in accordance with subparagraph

21 (A)(ii) for all teaching hospitals; and

22 ‘‘(II) the amount determined under

23 this subparagraph is the sum of the esti24 mates made by the Secretary under

25 subclause (I).
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1 ‘‘(3) ADJUSTMENT OF PERCENTAGE.—The per2 centage determined under paragraph (2) shall be ad3 justed by the Secretary in accordance with section

4 2231(b)(2)(A) to the extent determined by the Sec5 retary to be necessary with respect to a sum that

6 equals 100 percent.

7 ‘‘(b) NEW TEACHING HOSPITALS.—

8 ‘‘(1) IN GENERAL.—In the case of a teaching hos9 pital that did not receive payments under section

10 1886(d)(5)(B) for any of the fiscal years 1992 through

11 1996, the percentage determined under paragraph (3)

12 for the hospital is deemed to be the percentage appli13 cable under section 2231(b)(2) to the hospital, subject

14 to paragraphs (4) and (5).

15 ‘‘(2) DESIGNATED FISCAL YEAR REGARDING

16 DATA.—The determination under paragraph (3) of a

17 percentage for a teaching hospital described in para18 graph (1) shall be made for the most recent fiscal year

19 for which the Secretary has sufficient data to make

20 the determination (referred to in this subsection as the

21 ‘designated fiscal year’).

22 ‘‘(3) DETERMINATION OF FIXED PERCENTAGE.—

23 For purposes of paragraph (1), the percentage deter24 mined under this paragraph for the teaching hospital

25 involved is the percentage constituted by the ratio of
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1 the amount determined under subparagraph (A) to

2 the amount determined under subparagraph (B), as

3 follows:

4 ‘‘(A) The amount determined under this

5 subparagraph is an amount equal to an estimate

6 by the Secretary of the total amount of payments

7 that would have been paid to the hospital under

8 section 1886(d)(5)(B) for the designated fiscal

9 year if such section, as in effect for the first fis10 cal year for which payments pursuant to this

11 subsection are to be made to the hospital, had

12 applied to the hospital for the designated fiscal

13 year.

14 ‘‘(B) The Secretary shall make an estimate

15 in accordance with subparagraph (A) for all

16 teaching hospitals. The amount determined

17 under this subparagraph is the sum of the esti18 mates made by the Secretary under the preceding

19 sentence.

20 ‘‘(4) ADJUSTMENT OF PERCENTAGE.—The per21 centage determined under paragraph (3) shall be ad22 justed by the Secretary in accordance with section

23 2231(b)(2)(A) to the extent determined by the Sec24 retary to be necessary with respect to a sum that

25 equals 100 percent.
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1 ‘‘(5) LIMITATION.—This subsection does not

2 apply to a teaching hospital described in paragraph

3 (1) if the hospital is in a State for which a dem4 onstration project under section 1814(b)(3) is in ef5 fect.

6 ‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case of

7 two or more teaching hospitals that have each received pay8 ments pursuant to section 2231 for one or more fiscal years

9 and that undergo a consolidation or merger, the percentage

10 applicable to the resulting teaching hospital for purposes

11 of section 2231(b)(2) is the sum of the respective percentages

12 that would have applied pursuant to such section if the hos13 pitals had not undergone the consolidation or merger.

14 ‘‘(d) STATES WITH CERTAIN DEMONSTRATION

15 PROJECTS.—

16 ‘‘(1) IN GENERAL.—In the case of a teaching hos17 pital in a State for which a demonstration project

18 under section 1814(b)(3) is in effect—

19 ‘‘(A) the percentage determined under para20 graph (2) for the hospital is deemed to be the

21 percentage applicable under section 2231(b)(2) to

22 the hospital; and

23 ‘‘(B) the hospital is not eligible for any

24 payments from the Medicare Indirect-Costs Med25 ical Education Account.
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1 ‘‘(2) DETERMINATION OF FIXED PERCENTAGE.—

2 For purposes of paragraph (1)(A):

3 ‘‘(A) The Secretary shall make an estimate

4 of the total amount of payments that would have

5 been received under section 1886(d)(5)(b) by the

6 hospital involved with respect to each of the fis7 cal years of the applicable period if such section

8 (as in effect for such fiscal years) had applied to

9 the hospital for such years.

10 ‘‘(B) The percentage determined under this

11 paragraph for the hospital for a fiscal year is a

12 mean average percentage determined for the hos13 pital in accordance with the methodology of sec14 tion 2231(b)(2), except that the estimate made by

15 the Secretary under subparagraph (A) of this

16 paragraph for a fiscal year of the applicable pe17 riod is deemed to be the amount that applies for

18 purposes of section 2231(b)(2)(C)(i) for such

19 year.
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1 ‘‘Subpart 4—Amount Relating to Direct Costs of Graduate

2 Medical Education

3 ‘‘SEC. 2241. DETERMINATION OF AMOUNT RELATING TO DI4 RECT COSTS.

5 ‘‘(a) IN GENERAL.—For purposes of section

6 2211(a)(3), the amount determined under this section for

7 a teaching hospital for a fiscal year is the sum of—

8 ‘‘(1) the amount determined under subsection (b)

9 (relating to the General Direct-Costs Medical Edu10 cation Account); and

11 ‘‘(2) the amount determined under subsection (c)

12 (relating to the Medicare Direct-Costs Medical Edu13 cation Account), subject to section 2242(d)(1)(B).

14 ‘‘(b) PAYMENT FROM GENERAL ACCOUNT.—

15 ‘‘(1) IN GENERAL.—For purposes of subsection

16 (a)(1), the amount determined under this subsection

17 for a teaching hospital for a fiscal year is the product

18 of—

19 ‘‘(A) the amount in the General Direct20 Costs Medical Education Account on the applica21 ble date under section 2201(d)(2) (once the ap22 propriation under such section is made); and

23 ‘‘(B) the percentage determined for the hos24 pital under paragraph (2).

25 ‘‘(2) FIXED HOSPITAL-SPECIFIC PERCENTAGE.—
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1 ‘‘(A) IN GENERAL.—For purposes of para2 graph (1)(B), the percentage determined under

3 this paragraph for a teaching hospital is the

4 mean average of the respective percentages deter5 mined under subparagraph (B) for each fiscal

6 year of the applicable period (as defined in sec7 tion 2231(b)(2)(B)), adjusted by the Secretary

8 (upward or downward, as the case may be) on

9 a pro rata basis to the extent necessary to ensure

10 that the sum of the percentages determined under

11 this subparagraph for all teaching hospitals is

12 equal to 100 percent. The preceding sentence is

13 subject to section 2242.

14 ‘‘(B) RESPECTIVE DETERMINATIONS FOR

15 FISCAL YEARS OF APPLICABLE PERIOD.—For

16 purposes of subparagraph (A), the percentage de17 termined under this subparagraph for a teaching

18 hospital for a fiscal year of the applicable period

19 is the percentage constituted by the ratio of—

20 ‘‘(i) the total amount of payments re21 ceived by the hospital under section 1886(h)

22 for cost reporting periods beginning during

23 the fiscal year involved; to
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1 ‘‘(ii) the sum of the respective amounts

2 determined under clause (i) for the fiscal

3 year for all teaching hospitals.

4 ‘‘(3) AVAILABILITY OF DATA.—If a teaching hos5 pital received the payments specified in paragraph

6 (2)(B)(i) during the applicable period but a complete

7 set of the relevant data is not available to the Sec8 retary for purposes of determining an amount under

9 such paragraph for the fiscal year involved, the Sec10 retary shall for purposes of such paragraph make an

11 estimate on the basis of such data as are available to

12 the Secretary for the applicable period.

13 ‘‘(c) PAYMENT FROM MEDICARE ACCOUNT.—For pur14 poses of subsection (a)(2), the amount determined under this

15 subsection for a teaching hospital for a fiscal year is an

16 amount determined in accordance with the methodology in

17 effect under section 1886(h) for such year. Payments made

18 under section 2211 pursuant to the preceding sentence shall

19 be made from the Medicare Direct-Costs Medical Education

20 Account.

21 ‘‘SEC. 2242. DIRECT COSTS; SPECIAL RULES REGARDING

22 PAYMENTS FROM GENERAL ACCOUNT.

23 ‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS 1995

24 AND 1996.—
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1 ‘‘(1) IN GENERAL.—In the case of a teaching hos2 pital whose first payments under section 1886(h) were

3 for the cost reporting period beginning in fiscal year

4 1995 or in fiscal year 1996 (referred to in this sub5 section individually as a ‘first payment year’), the

6 percentage determined under paragraph (2) for the

7 hospital is deemed to be the percentage applicable

8 under section 2241(b)(2) to the hospital, subject to

9 paragraph (3).

10 ‘‘(2) DETERMINATION OF FIXED PERCENTAGE.—

11 For purposes of paragraph (1), the percentage deter12 mined under this paragraph for a teaching hospital

13 is the percentage constituted by the ratio of the

14 amount determined under subparagraph (A) to the

15 amount determined under subparagraph (B), as fol16 lows:

17 ‘‘(A)(i) If the first payment year for the

18 hospital is fiscal year 1995, the amount deter19 mined under this subparagraph is the total

20 amount of payments received by the hospital

21 under section 1886(h) for cost reporting periods

22 beginning in fiscal year 1995.

23 ‘‘(ii) If the first payment year for the hos24 pital is fiscal year 1996, the amount determined

25 under this subparagraph is an amount equal to
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1 an estimate by the Secretary of the total amount

2 of payments that would have been paid to the

3 hospital under section 1886(h) for cost reporting

4 periods beginning in fiscal year 1995 if such sec5 tion, as in effect for fiscal year 1996, had ap6 plied to the hospital for fiscal year 1995.

7 ‘‘(B)(i) If the first payment year for the

8 hospital is fiscal year 1995, the amount deter9 mined under this subparagraph is the aggregate

10 total of the payments received by teaching hos11 pitals under section 1886(h) for cost reporting

12 periods beginning in fiscal year 1995.

13 ‘‘(ii) If the first payment year for the hos14 pital is fiscal year 1996—

15 ‘‘(I) the Secretary shall make an esti16 mate in accordance with subparagraph

17 (A)(ii) for all teaching hospitals; and

18 ‘‘(II) the amount determined under

19 this subparagraph is the sum of the esti20 mates made by the Secretary under

21 subclause (I).

22 ‘‘(3) ADJUSTMENT OF PERCENTAGE.—The per23 centage determined under paragraph (2) shall be ad24 justed by the Secretary in accordance with section

25 2241(b)(2)(A) to the extent determined by the Sec-
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1 retary to be necessary with respect to a sum that

2 equals 100 percent.

3 ‘‘(b) NEW TEACHING HOSPITALS.—

4 ‘‘(1) IN GENERAL.—In the case of a teaching hos5 pital that did not receive payments under section

6 1886(h) for any of the fiscal years 1992 through 1996,

7 the percentage determined under paragraph (3) for

8 the hospital is deemed to be the percentage applicable

9 under section 2241(b)(2) to the hospital, subject to

10 paragraphs (4) and (5).

11 ‘‘(2) DESIGNATED FISCAL YEAR REGARDING

12 DATA.—The determination under paragraph (3) of a

13 percentage for a teaching hospital described in para14 graph (1) shall be made for the most recent fiscal year

15 for which the Secretary has sufficient data to make

16 the determination (referred to in this subsection as the

17 ‘designated fiscal year’).

18 ‘‘(3) DETERMINATION OF FIXED PERCENTAGE.—

19 For purposes of paragraph (1), the percentage deter20 mined under this paragraph for the teaching hospital

21 involved is the percentage constituted by the ratio of

22 the amount determined under subparagraph (A) to

23 the amount determined under subparagraph (B), as

24 follows:
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1 ‘‘(A) The amount determined under this

2 subparagraph is an amount equal to an estimate

3 by the Secretary of the total amount of payments

4 that would have been paid to the hospital under

5 section 1886(h) for the designated fiscal year if

6 such section, as in effect for the first fiscal year

7 for which payments pursuant to this subsection

8 are to be made to the hospital, had applied to the

9 hospital for cost reporting periods beginning in

10 the designated fiscal year.

11 ‘‘(B) The Secretary shall make an estimate

12 in accordance with subparagraph (A) for all

13 teaching hospitals. The amount determined

14 under this subparagraph is the sum of the esti15 mates made by the Secretary under the preceding

16 sentence.

17 ‘‘(4) ADJUSTMENT OF PERCENTAGE.—The per18 centage determined under paragraph (3) shall be ad19 justed by the Secretary in accordance with section

20 2223(b)(2)(A) to the extent determined by the Sec21 retary to be necessary with respect to a sum that

22 equals 100 percent.

23 ‘‘(5) LIMITATION.—This subsection does not

24 apply to a teaching hospital described in paragraph

25 (1) if the hospital is in a State for which a dem-
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1 onstration project under section 1814(b)(3) is in ef2 fect.

3 ‘‘(c) CONSOLIDATIONS AND MERGERS.—In the case of

4 two or more teaching hospitals that have each received pay5 ments pursuant to section 2241 for one or more fiscal years

6 and that undergo a consolidation or merger, the percentage

7 applicable to the resulting teaching hospital for purposes

8 of section 2241(b)(2) is the sum of the respective percentages

9 that would have applied pursuant to such section if the hos10 pitals had not undergone the consolidation or merger.

11 ‘‘(d) STATES WITH CERTAIN DEMONSTRATION

12 PROJECTS.—

13 ‘‘(1) IN GENERAL.—In the case of a teaching hos14 pital in a State for which a demonstration project

15 under section 1814(b)(3) is in effect—

16 ‘‘(A) the percentage determined under para17 graph (2) for the hospital is deemed to be the

18 percentage applicable under section 2241(b)(2) to

19 the hospital; and

20 ‘‘(B) the hospital is not eligible for any

21 payments from the Medicare Direct-Costs Medi22 cal Education Account.

23 ‘‘(2) DETERMINATION OF FIXED PERCENTAGE.—

24 For purposes of paragraph (1)(A):
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1 ‘‘(A) The Secretary shall make an estimate

2 of the total amount of payments that would have

3 been received under section 1886(h) by the hos4 pital involved with respect to each of the fiscal

5 years of the applicable period if such section (as

6 in effect for such fiscal years) had applied to the

7 hospital for such years.

8 ‘‘(B) The percentage determined under this

9 paragraph for the hospital for a fiscal year is a

10 mean average percentage determined for the hos11 pital in accordance with the methodology of sec12 tion 2241(b)(2), except that the estimate made by

13 the Secretary under subparagraph (A) of this

14 paragraph for a fiscal year of the applicable pe15 riod is deemed to be the amount that applies for

16 purposes of section 2241(b)(2)(B)(i) for such

17 year.

18 ‘‘SEC. 2243. DIRECT COSTS; AUTHORITY FOR PAYMENTS TO

19 CONSORTIA OF PROVIDERS.

20 ‘‘(a) IN GENERAL.—In lieu of making payments to

21 teaching hospitals pursuant to sections 2221 and 2241, the

22 Secretary may make payments under this section to consor23 tia that meet the requirements of subsection (b).

24 ‘‘(b) QUALIFYING CONSORTIUM.—For purposes of sub25 section (a), a consortium meets the requirements of this sub-
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1 section if the consortium is in compliance with the follow2 ing:

3 ‘‘(1) The consortium consists of a teaching hos4 pital and one or more of the following entities:

5 ‘‘(A) Schools of allopathic medicine or osteo6 pathic medicine.

7 ‘‘(B) Other teaching hospitals.

8 ‘‘(C) Approved medical residency training

9 programs.

10 ‘‘(D) Federally qualified health centers.

11 ‘‘(E) Medical group practices.

12 ‘‘(F) Managed care entities.

13 ‘‘(G) Entities furnishing outpatient services.

14 ‘‘(H) Such other entities as the Secretary

15 determines to be appropriate.

16 ‘‘(2) The members of the consortium have agreed

17 to collaborate in the programs of graduate medical

18 education that are operated by such members.

19 ‘‘(3) With respect to the receipt by the consor20 tium of payments made pursuant to this section, the

21 members of the consortium have agreed on a method

22 for allocating the payments among the members.

23 ‘‘(4) The consortium meets such additional re24 quirements as the Secretary may establish.
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1 ‘‘(c) PAYMENTS FROM ACCOUNTS.—The total amount

2 of payments to a qualifying consortium for a fiscal year

3 pursuant to subsection (a) shall be the sum of—

4 ‘‘(1) the aggregate amount determined for the

5 teaching hospitals of the consortium pursuant to sec6 tion 2221(a) (relating to the General MedicarePlus

7 Incentive Account);

8 ‘‘(2) the aggregate amount determined for the

9 teaching hospitals of the consortium pursuant to sec10 tion 2241(a)(1) (relating to the General Direct-Costs

11 Account); and

12 ‘‘(3) an amount determined for the consortium

13 in accordance with the methodology in effect under

14 section 1886(j)(2)(C)(i) for the fiscal year (relating to

15 the Medicare Direct-Costs Account).

16 ‘‘(d) DEFINITION.—For purposes of this title, the term

17 ‘qualifying consortium’ means a consortium that meets the

18 requirements of subsection (b).’’.

19 CHAPTER 2—AMENDMENTS TO MEDICARE

20 PROGRAM

21 SEC. 12511. TRANSFER OF FUNDS.

22 Section 1886 (42 U.S.C. 1395ww) is amended—

23 (1) in subsection (d)(5)(B), in the matter preced24 ing clause (i), by striking ‘‘The Secretary shall pro25 vide’’ and inserting the following: ‘‘For discharges oc-
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1 curring on or before September 30, 1996, the Sec2 retary shall provide’’;

3 (2) in subsection (h)—

4 (A) in paragraph (1), in the first sentence,

5 by striking ‘‘the Secretary shall provide’’ and in6 serting ‘‘the Secretary shall, subject to paragraph

7 (6), provide’’; and

8 (B) by adding at the end the following

9 paragraph:

10 ‘‘(6) LIMITATION.—

11 ‘‘(A) IN GENERAL.—The authority to make

12 payments under this subsection applies only

13 with respect to cost reporting periods ending on

14 or before September 30, 1996, except as provided

15 in subparagraph (B).

16 ‘‘(B) RULE REGARDING PORTION OF LAST

17 COST REPORTING PERIOD.—In the case of a cost

18 reporting period that extends beyond September

19 30, 1996, payments under this subsection shall

20 be made with respect to such portion of the pe21 riod as has lapsed as of such date.

22 ‘‘(C) RULE OF CONSTRUCTION.—This para23 graph may not be construed as authorizing any

24 payment under section 1861(v) with respect to

25 graduate medical education.’’; and
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1 (3) by adding at the end the following subsection:

2 ‘‘(j) TRANSFERS TO TEACHING HOSPITAL AND GRAD3 UATE MEDICAL EDUCATION TRUST FUND.—

4 ‘‘(1) INDIRECT COSTS OF MEDICAL EDU5 CATION.—

6 ‘‘(A) IN GENERAL.—From the Federal Hos7 pital Insurance Trust Fund, the Secretary shall,

8 for fiscal year 1997 and each subsequent fiscal

9 year, transfer to the Medicare Indirect-Costs

10 Medical Education Account under section 2201

11 an amount determined by the Secretary in ac12 cordance with subparagraph (B).

13 ‘‘(B) DETERMINATION OF AMOUNTS.—The

14 Secretary shall make an estimate for the fiscal

15 year involved of the nationwide total of the

16 amounts that would have been paid under sub17 section (d)(5)(B) to hospitals during the fiscal

18 year if such payments had not been terminated

19 for discharges occurring after September 30,

20 1996. For purposes of subparagraph (A), the

21 amount determined under this subparagraph for

22 the fiscal year is the estimate made by the Sec23 retary under the preceding sentence.

24 ‘‘(C) SUPPLEMENTAL TRANSFERS.—If the

25 Secretary determines that the amount of a trans-
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1 fer under subparagraph (A) for a fiscal year is

2 insufficient for making payments in the amounts

3 required pursuant to section 2231(a)(2) for the

4 year, the Secretary shall make such additional

5 transfers for the year between the funds and ac6 counts involved as the Secretary determines to be

7 necessary for making the payments.

8 ‘‘(2) DIRECT COSTS OF MEDICAL EDUCATION.—

9 ‘‘(A) IN GENERAL.—From the Federal Hos10 pital Insurance Trust Fund and the Federal

11 Supplementary Medical Insurance Trust Fund,

12 the Secretary shall, for fiscal year 1997 and each

13 subsequent fiscal year, transfer to the Medicare

14 Direct-Costs Medical Education Account (under

15 section 2201) the sum of—

16 ‘‘(i) an amount determined by the Sec17 retary in accordance with subparagraph

18 (B); and

19 ‘‘(ii) as applicable, an amount deter20 mined by the Secretary in accordance with

21 subparagraph (C)(ii).

22 ‘‘(B) DETERMINATION OF AMOUNTS.—For

23 each hospital (other than a hospital that is a

24 member of a qualifying consortium referred to in

25 subparagraph (C)), the Secretary shall make an
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1 estimate for the fiscal year involved of the

2 amount that would have been paid under sub3 section (h) to the hospital during the fiscal year

4 if such payments had not been terminated for

5 cost reporting periods ending on or before Sep6 tember 30, 1996. For purposes of subparagraph

7 (A)(i), the amount determined under this sub8 paragraph for the fiscal year is the sum of all

9 estimates made by the Secretary under the pre10 ceding sentence.

11 ‘‘(C) ESTIMATES REGARDING QUALIFYING

12 CONSORTIA.—If the Secretary authorizes pay13 ments under section 2243(a) to one or more

14 qualifying consortia, the Secretary shall carry

15 out the following:

16 ‘‘(i) The Secretary shall establish a

17 methodology for making payments to quali18 fying consortia with respect to the reason19 able direct costs of such consortia in carry20 ing out programs of graduate medical edu21 cation. The methodology shall be the meth22 odology established in subsection (h), modi23 fied to the extent necessary to take into ac24 count the participation in such programs of

25 entities other than hospitals.
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1 ‘‘(ii) For each qualifying consortium,

2 the Secretary shall make an estimate for the

3 fiscal year involved of the amount that

4 would have been paid to the consortium

5 during the fiscal year if, using the meth6 odology under clause (i), payments had been

7 made to the consortium for the fiscal year

8 as reimbursements with respect to cost re9 porting periods. For purposes of subpara10 graph (A)(ii), the amount determined under

11 this clause for the fiscal year is the sum of

12 all estimates made by the Secretary under

13 the preceding sentence.

14 ‘‘(D) ALLOCATION BETWEEN FUNDS.—In

15 providing for a transfer under subparagraph (A)

16 for a fiscal year, the Secretary shall provide for

17 an allocation of the amounts involved between

18 part A and part B (and the trust funds estab19 lished under the respective parts) as reasonably

20 reflects the proportion of direct graduate medical

21 education costs of hospitals associated with the

22 provision of services under each respective part.

23 ‘‘(E) SUPPLEMENTAL TRANSFERS.—If the

24 Secretary determines that the amount of a trans25 fer under subparagraph (A) for a fiscal year is
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1 insufficient for making payments in the amounts

2 required pursuant to sections 2241(a)(2) and

3 2243(c)(3) for the year, the Secretary shall make

4 such additional transfers for the year between the

5 funds and accounts involved as the Secretary de6 termines to be necessary for making the pay7 ments.

8 ‘‘(3) APPLICABILITY OF CERTAIN AMEND9 MENTS.—Amendments made to subsection (d)(5)(B)

10 and subsection (h) that are effective on or after Octo11 ber 1, 1996, apply only for purposes of estimates

12 under paragraphs (1) and (2) and for purposes of de13 termining the amount of payments under 2211. Such

14 amendments do not require any adjustment to

15 amounts paid under subsection (d)(5)(B) or (h) with

16 respect to fiscal year 1996 or any prior fiscal year.

17 ‘‘(4) RELATIONSHIP TO CERTAIN DEMONSTRA18 TION PROJECTS.—In the case of a State for which a

19 demonstration project under section 1814(b)(3) is in

20 effect, the Secretary, in making determinations of the

21 rates of increase under such section, shall include all

22 amounts transferred under this subsection. Such

23 amounts shall be so included to the same extent and

24 in the same manner as amounts determined under

25 subsections (d)(5)(B) and (h) were included in such
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1 determination under the provisions of this title in ef2 fect on September 30, 1996.’’.

3 Title XII—Other Provisions

4 Subtitle F—National Defense

5 Stockpile

6 SEC. 12601. DISPOSAL OF CERTAIN MATERIALS IN NA7 TIONAL DEFENSE STOCKPILE FOR DEFICIT

8 REDUCTION.

9 (a) DISPOSALS REQUIRED.—(1) During fiscal year

10 1996, the President shall dispose of all cobalt contained in

11 the National Defense Stockpile that, as of the date of the

12 enactment of this Act, is authorized for disposal under any

13 law (other than this Act).

14 (2) In addition to the disposal of cobalt under para15 graph (1), the President shall dispose of additional quan16 tities of cobalt and quantities of other materials contained

17 in the National Defense Stockpile and specified in the table

18 in subsection (b) so as to result in receipts to the United

19 States in amounts equal to—

20 (A) $21,000,000 during the fiscal year ending

21 September 30, 1996;

22 (B) $338,000,000 during the five-fiscal year pe23 riod ending on September 30, 2000; and

24 (C) $649,000,000 during the seven-fiscal year pe25 riod ending on September 30, 2002.
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1 (b) LIMITATION ON DISPOSAL QUANTITY.—The total

2 quantities of materials authorized for disposal by the Presi3 dent under subsection (a)(2) may not exceed the amounts

4 set forth in the following table:

Authorized Stockpile Disposals

Material for disposal Quantity

Aluminum .............................................................................. 62,881 short tons

Cobalt ..................................................................................... 30,000,000 pounds contained

Columbium Ferro .................................................................. 930,911 pounds contained

Germanium Metal ................................................................. 40,000 kilograms

Indium ................................................................................... 35,000 troy ounces

Palladium .............................................................................. 15,000 troy ounces

Platinum ................................................................................ 10,000 troy ounces

Rubber, Natural .................................................................... 125,138 long tons

Tantalum, Carbide Powder .................................................. 6,000 pounds contained

Tantalum, Minerals .............................................................. 750,000 pounds contained

Tantalum, Oxide ................................................................... 40,000 pounds contained

5 (c) DEPOSIT OF RECEIPTS.—Notwithstanding section

6 9 of the Strategic and Critical Materials Stock Piling Act

7 (50 U.S.C. 98h), funds received as a result of the disposal

8 of materials under subsection (a)(2) shall be deposited into

9 the general fund of the Treasury for the purpose of deficit

10 reduction.

11 (d) RELATIONSHIP TO OTHER DISPOSAL AUTHOR12 ITY.—The disposal authority provided in subsection (a)(2)

13 is new disposal authority and is in addition to, and shall

14 not affect, any other disposal authority provided by law re15 garding the materials specified in such subsection.

16 (e) TERMINATION OF DISPOSAL AUTHORITY.—The

17 President may not use the disposal authority provided in

18 subsection (a)(2) after the date on which the total amount

19 of receipts specified in subparagraph (C) of such subsection

20 is achieved.
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1 (f) DEFINITION.—The term ‘‘National Defense Stock2 pile’’ means the National Defense Stockpile provided for in

3 section 4 of the Strategic and Critical Materials Stock Pil4 ing Act (50 U.S.C. 98c).

5 Subtitle G——Child Protection

6 Block Grant Program And Fos7 ter Care and Adoption Assist8 ance

9 SEC. 12701. ESTABLISHMENT OF PROGRAM.

10 Title IV of the Social Security Act (42 U.S.C. 601 et

11 seq.) is amended by striking subpart 2 of part B and insert12 ing the following:

13 ‘‘Subpart 2—Block Grants to States for the Protection

14 of Children and Matching Payments for Foster

15 Care and Adoption Assistance

16 ‘‘SEC. 430. ELIGIBLE STATES.

17 ‘‘(a) IN GENERAL.—As used in this subpart, the term

18 ‘eligible State’ means a State that has submitted to the Sec19 retary, not later than October 1, 1996, and every 3 years

20 thereafter, a plan which has been signed by the chief execu21 tive officer of the State and that includes the following:

22 ‘‘(1) OUTLINE OF CHILD PROTECTION PRO23 GRAM.—A written document that outlines the activi24 ties the State intends to conduct to achieve the child
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1 protection goals of the program funded under this

2 subpart, including the procedures to be used for—

3 ‘‘(A) receiving and assessing reports of child

4 abuse or neglect;

5 ‘‘(B) investigating such reports;

6 ‘‘(C) with respect to families in which abuse

7 or neglect has been confirmed, providing services

8 or referral for services for families and children

9 where the State makes a determination that the

10 child may safely remain with the family;

11 ‘‘(D) protecting children by removing them

12 from dangerous settings and ensuring their

13 placement in a safe environment;

14 ‘‘(E) providing training for individuals

15 mandated to report suspected cases of child abuse

16 or neglect;

17 ‘‘(F) protecting children in foster care;

18 ‘‘(G) promoting timely adoptions;

19 ‘‘(H) protecting the rights of families, using

20 adult relatives as the preferred placement for

21 children separated from their parents where such

22 relatives meet the relevant State child protection

23 standards;

24 ‘‘(I) providing services to individuals, fami25 lies, or communities, either directly or through
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1 referral, that are aimed at preventing the occur2 rence of child abuse and neglect; and

3 ‘‘(J) establishing and responding to citizen

4 review panels under section 434.

5 ‘‘(2) CERTIFICATION OF STATE LAW REQUIRING

6 THE REPORTING OF CHILD ABUSE AND NEGLECT.—A

7 certification that the State has in effect laws that re8 quire public officials and other professionals to report,

9 in good faith, actual or suspected instances of child

10 abuse or neglect.

11 ‘‘(3) CERTIFICATION OF PROCEDURES FOR

12 SCREENING, SAFETY ASSESSMENT, AND PROMPT IN13 VESTIGATION.—A certification that the State has in

14 effect procedures for receiving and responding to re15 ports of child abuse or neglect, including the reports

16 described in paragraph (2), and for the immediate

17 screening, safety assessment, and prompt investiga18 tion of such reports.

19 ‘‘(4) CERTIFICATION OF STATE PROCEDURES FOR

20 REMOVAL AND PLACEMENT OF ABUSED OR NE21 GLECTED CHILDREN.—A certification that the State

22 has in effect procedures for the removal from families

23 and placement of abused or neglected children and of

24 any other child in the same household who may also

25 be in danger of abuse or neglect.
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1 ‘‘(5) CERTIFICATION OF PROVISIONS FOR IMMU2 NITY FROM PROSECUTION.—A certification that the

3 State has in effect laws requiring immunity from

4 prosecution under State and local laws and regula5 tions for individuals making good faith reports of sus6 pected or known instances of child abuse or neglect.

7 ‘‘(6) CERTIFICATION OF PROVISIONS AND PROCE8 DURES FOR EXPUNGEMENT OF CERTAIN RECORDS.—

9 A certification that the State has in effect laws and

10 procedures requiring the facilitation of the prompt

11 expungement of any records that are accessible to the

12 general public or are used for purposes of employment

13 or other background checks in cases determined to be

14 unsubstantiated or false.

15 ‘‘(7) CERTIFICATION OF PROVISIONS AND PROCE16 DURES RELATING TO APPEALS.—A certification that

17 not later then 2 years after the date of the enactment

18 of this subpart, the State shall have laws and proce19 dures in effect affording individuals an opportunity

20 to appeal an official finding of abuse or neglect.

21 ‘‘(8) CERTIFICATION OF STATE PROCEDURES FOR

22 DEVELOPING AND REVIEWING WRITTEN PLANS FOR

23 PERMANENT PLACEMENT OF REMOVED CHILDREN.—A

24 certification that the State has in effect procedures for

25 ensuring that a written plan is prepared for children
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1 who have been removed from their families. Such plan

2 shall specify the goals for achieving a permanent

3 placement for the child in a timely fashion, for ensur4 ing that the written plan is reviewed every 6 months

5 (until such placement is achieved), and for ensuring

6 that information about such children is collected regu7 larly and recorded in case records, and include a de8 scription of such procedures.

9 ‘‘(9) CERTIFICATION OF STATE PROGRAM TO

10 PROVIDE INDEPENDENT LIVING SERVICES.—A certifi11 cation that the State has in effect a program to pro12 vide independent living services, for assistance in

13 making the transition to self-sufficient adulthood, to

14 individuals in the child protection program of the

15 State who are 16, but who are not 20 (or, at the op16 tion of the State, 22), years of age, and who do not

17 have a family to which to be returned.

18 ‘‘(10) CERTIFICATION OF STATE PROCEDURES TO

19 RESPOND TO REPORTING OF MEDICAL NEGLECT OF

20 DISABLED INFANTS.—

21 ‘‘(A) IN GENERAL.—A certification that the

22 State has in place for the purpose of responding

23 to the reporting of medical neglect of infants (in24 cluding instances of withholding of medically in25 dicated treatment from disabled infants with
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1 life-threatening conditions), procedures or pro2 grams, or both (within the State child protective

3 services system), to provide for—

4 ‘‘(i) coordination and consultation

5 with individuals designated by and within

6 appropriate health-care facilities;

7 ‘‘(ii) prompt notification by individ8 uals designated by and within appropriate

9 health-care facilities of cases of suspected

10 medical neglect (including instances of

11 withholding of medically indicated treat12 ment from disabled infants with life-threat13 ening conditions); and

14 ‘‘(iii) authority, under State law, for

15 the State child protective service to pursue

16 any legal remedies, including the authority

17 to initiate legal proceedings in a court of

18 competent jurisdiction, as may be necessary

19 to prevent the withholding of medically in20 dicated treatment from disabled infants

21 with life-threatening conditions.

22 ‘‘(B) WITHHOLDING OF MEDICALLY INDI23 CATED TREATMENT.—As used in subparagraph

24 (A), the term ‘withholding of medically indicated

25 treatment’ means the failure to respond to the
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1 infant’s life-threatening conditions by providing

2 treatment (including appropriate nutrition, hy3 dration, and medication) which, in the treating

4 physician’s or physicians’ reasonable medical

5 judgment, will be most likely to be effective in

6 ameliorating or correcting all such conditions,

7 except that such term does not include the failure

8 to provide treatment (other than appropriate nu9 trition, hydration, or medication) to an infant

10 when, in the treating physician’s or physicians’

11 reasonable medical judgment—

12 ‘‘(i) the infant is chronically and irre13 versibly comatose;

14 ‘‘(ii) the provision of such treatment

15 would—

16 ‘‘(I) merely prolong dying;

17 ‘‘(II) not be effective in ameliorat18 ing or correcting all of the infant’s life19 threatening conditions; or

20 ‘‘(III) otherwise be futile in terms

21 of the survival of the infant; or

22 ‘‘(iii) the provision of such treatment

23 would be virtually futile in terms of the sur24 vival of the infant and the treatment itself
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1 under such circumstances would be inhu2 mane.

3 ‘‘(11) IDENTIFICATION OF CHILD PROTECTION

4 GOALS.—The quantitative goals of the State child

5 protection program.

6 ‘‘(12) CERTIFICATION OF CHILD PROTECTION

7 STANDARDS.—With respect to fiscal years beginning

8 on or after April 1, 1996, a certification that the

9 State—

10 ‘‘(A) has completed an inventory of all chil11 dren who, before the inventory, had been in foster

12 care under the responsibility of the State for 6

13 months or more, which determined—

14 ‘‘(i) the appropriateness of, and neces15 sity for, the foster care placement;

16 ‘‘(ii) whether the child could or should

17 be returned to the parents of the child or

18 should be freed for adoption or other perma19 nent placement; and

20 ‘‘(iii) the services necessary to facili21 tate the return of the child or the placement

22 of the child for adoption or legal guardian23 ship;

24 ‘‘(B) is operating, to the satisfaction of the

25 Secretary—
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1 ‘‘(i) a statewide information system

2 from which can be readily determined the

3 status, demographic characteristics, loca4 tion, and goals for the placement of every

5 child who is (or, within the immediately

6 preceding 12 months, has been) in foster

7 care;

8 ‘‘(ii) a case review system for each

9 child receiving foster care under the super10 vision of the State;

11 ‘‘(iii) a service program designed to

12 help children—

13 ‘‘(I) where appropriate, return to

14 families from which they have been re15 moved; or

16 ‘‘(II) be placed for adoption, with

17 a legal guardian, or if adoption or

18 legal guardianship is determined not

19 to be appropriate for a child, in some

20 other planned, permanent living ar21 rangement; and

22 ‘‘(iv) a preplacement preventive serv23 ices program designed to help children at

24 risk for foster care placement remain with

25 their families; and
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1 ‘‘(C)(i) has reviewed (or not later than Oc2 tober 1, 1997, will review) State policies and ad3 ministrative and judicial procedures in effect for

4 children abandoned at or shortly after birth (in5 cluding policies and procedures providing for

6 legal representation of such children); and

7 ‘‘(ii) is implementing (or not later than Oc8 tober 1, 1997, will implement) such policies and

9 procedures as the State determines, on the basis

10 of the review described in clause (i), to be nec11 essary to enable permanent decisions to be made

12 expeditiously with respect to the placement of

13 such children.

14 ‘‘(13) CERTIFICATION OF REASONABLE EFFORTS

15 BEFORE PLACEMENT OF CHILDREN IN FOSTER

16 CARE.—A certification that the State in each case

17 will—

18 ‘‘(A) make reasonable efforts prior to the

19 placement of a child in foster care, to prevent or

20 eliminate the need for removal of the child from

21 the child’s home, and to make it possible for the

22 child to return home; and

23 ‘‘(B) with respect to families in which abuse

24 or neglect has been confirmed, provide services or

25 referral for services for families and children
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1 where the State makes a determination that the

2 child may safely remain with the family.

3 ‘‘(14) CERTIFICATION OF COOPERATIVE EF4 FORTS.—A certification by the State, where appro5 priate, that all steps will be taken, including coopera6 tive efforts with the State agencies administering the

7 plans approved under parts A and D, to secure an as8 signment to the State of any rights to support on be9 half of each child receiving foster care maintenance

10 payments under this subpart.

11 ‘‘(b) DETERMINATIONS.—The Secretary shall deter12 mine whether a plan submitted pursuant to subsection (a)

13 contains the material required by subsection (a), other than

14 the material described in paragraph (10) of such subsection.

15 The Secretary may not require a State to include in such

16 a plan any material not described in subsection (a).

17 ‘‘SEC. 431. GRANTS TO STATES FOR CHILD PROTECTION

18 AND PAYMENTS FOR FOSTER CARE AND

19 ADOPTION ASSISTANCE..

20 ‘‘(a) FUNDING OF BLOCK GRANTS.—Each eligible

21 State shall be entitled to receive from the Secretary for each

22 fiscal year specified in subsection (c)(1) a grant in an

23 amount equal to the State share of the child protection

24 amount for the fiscal year.

25 ‘‘(b) MAINTENANCE PAYMENTS.—
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1 ‘‘(1) IN GENERAL.—In addition to the grants de2 scribed in subsection (a), each eligible State shall be

3 entitled to receive from the Secretary for each quarter

4 of each fiscal year specified in subsection (c)(1) an

5 amount equal to the sum of—

6 ‘‘(A) an amount equal to the Federal medi7 cal assistance percentage (as defined in section

8 1905(b) of this Act as in effect on the day before

9 the date of enactment of this subpart) of the total

10 amount expended during such quarter as foster

11 care maintenance payments under the child pro12 tection program under this subpart for children

13 in foster family homes or child-care institutions;

14 plus

15 ‘‘(B) an amount equal to the Federal medi16 cal assistance percentage (as defined in section

17 1905(b) of this Act (as so in effect)) of the total

18 amount expended during such quarter as adop19 tion assistance payments under the child protec20 tion program under this subpart pursuant to

21 adoption assistance agreements.

22 ‘‘(2) ESTIMATES BY THE SECRETARY.—

23 ‘‘(A) IN GENERAL.—The Secretary shall,

24 prior to the beginning of each quarter, estimate

25 the amount to which a State will be entitled to
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1 receive under paragraph (1) for such quarter,

2 such estimates to be based on—

3 ‘‘(i) a report filed by the State contain4 ing its estimate of the total sum to be ex5 pended in such quarter in accordance with

6 paragraph (1), and stating the amount ap7 propriated or made available by the State

8 and its political subdivisions for such ex9 penditures in such quarter, and if such

10 amount is less than the State’s propor11 tionate share of the total sum of such esti12 mated expenditures, the source or sources

13 from which the difference is expected to be

14 derived;

15 ‘‘(ii) records showing the number of

16 children in the State receiving assistance

17 under this subpart; and

18 ‘‘(iii) such other information as the

19 Secretary may find necessary.

20 ‘‘(B) PAYMENTS.—The Secretary shall pay

21 to the States the amounts so estimated under

22 subparagraph (A), reduced or increased to the

23 extent of any overpayment or underpayment

24 which the Secretary determines was made under

25 this subsection to such State for any prior quar-
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1 ter and with respect to which adjustment has not

2 already been made under this paragraph.

3 ‘‘(C) PRO RATA SHARE.— The pro rata

4 share to which the United States is equitably en5 titled, as determined by the Secretary, of the net

6 amount recovered during any quarter by the

7 State or any political subdivision thereof with

8 respect to foster care and adoption assistance

9 furnished under this subpart shall be considered

10 an overpayment to be adjusted under this para11 graph.

12 ‘‘(3) ALLOWANCE OR DISALLOWANCE OF

13 CLAIM.—

14 ‘‘(A) IN GENERAL.—Within 60 days after

15 receipt of a State claim for expenditures pursu16 ant to paragraph (2)(A), the Secretary shall

17 allow, disallow, or defer such claim.

18 ‘‘(B) NOTICE.—Within 15 days after a deci19 sion to defer a State claim, the Secretary shall

20 notify the State of the reasons for the deferral

21 and of the additional information necessary to

22 determine the allowability of the claim.

23 ‘‘(C) DECISION.—Within 90 days after re24 ceiving such necessary information (in readily

25 reviewable form), the Secretary shall—
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1 ‘‘(i) disallow the claim, if able to com2 plete the review and determine that the

3 claim is not allowable; or

4 ‘‘(ii) in any other case, allow the

5 claim, subject to disallowance (as nec6 essary)—

7 ‘‘(I) upon completion of the re8 view, if it is determined that the claim

9 is not allowable; or

10 ‘‘(II) on the basis of findings of

11 an audit or financial management re12 view.

13 ‘‘(c) DEFINITIONS.—As used in this section:

14 ‘‘(1) CHILD PROTECTION AMOUNT.—The term

15 ‘child protection amount’ means—

16 ‘‘(A) $1,936,000,000 for fiscal year 1996;

17 ‘‘(B) $1,942,000,000 for fiscal year 1997;

18 ‘‘(C) $2,063,000,000 for fiscal year 1998;

19 ‘‘(D) $2,167,000,000 for fiscal year 1999;

20 ‘‘(E) $2,297,000,000 for fiscal year 2000;

21 ‘‘(F) $2,432,000,000 for fiscal year 2001;

22 and

23 ‘‘(G) $2,593,000,000 for fiscal year 2002;

24 ‘‘(2) STATE SHARE.—
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1 ‘‘(A) IN GENERAL.—The term ‘State share’

2 means the qualified child protection expenses of

3 the State divided by the sum of the qualified

4 child protection expenses of all of the States.

5 ‘‘(B) QUALIFIED CHILD PROTECTION EX6 PENSES.—The term ‘qualified child protection

7 expenses’ means, with respect to a State the

8 greater of—

9 ‘‘(i) the total amount of—

‘‘(I) 1 10 ⁄3 of the total obligations to

11 the State under the provisions of law

12 specified in clauses (i), (ii), and (iii)

13 of subparagraph (C) for fiscal years

14 1992, 1993, and 1994; and

‘‘(II) 1 15 ⁄3 of the total claims sub16 mitted by the State (without regard to

17 disputed claims) under the provision of

18 law specified in subparagraph (C)(iv)

19 for fiscal years 1992, 1993, and 1994;

20 or

21 ‘‘(ii) the total amount of—

22 ‘‘(I) the total obligations to the

23 State under the provisions of law spec24 ified in clauses (i), (ii), and (iii) of
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1 subparagraph (C) for fiscal year 1995;

2 and

3 ‘‘(II) the total claims submitted

4 by the State (without regard to dis5 puted claims) under the provision of

6 law specified in subparagraph (C)(iv)

7 for fiscal year 1995.

8 ‘‘(C) PROVISIONS OF LAW.—The provisions

9 of law specified in this subparagraph are the fol10 lowing (as in effect on the day before the date of

11 enactment of this subpart):

12 ‘‘(i) Section 434 of this Act.

13 ‘‘(ii) Section 474(a)(4) of this Act.

14 ‘‘(iii) Section 474(a)(3) of this Act.

15 ‘‘(d) USE OF GRANT.—

16 ‘‘(1) IN GENERAL.—A State to which a grant is

17 made under this section may use the grant in any

18 manner that the State deems appropriate to accom19 plish the child protection goals of the State program

20 funded under this subpart.

21 ‘‘(2) TIMING OF EXPENDITURES.—A State to

22 which a grant is made under this section for a fiscal

23 year shall expend the total amount of the grant not

24 later than the end of the immediately succeeding fis25 cal year.
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1 ‘‘(3) RULE OF INTERPRETATION.—This subpart

2 shall not be interpreted to prohibit short- and long3 term foster care facilities operated for profit from re4 ceiving funds provided under this subpart.

5 ‘‘(e) TIMING OF PAYMENTS.—The Secretary shall pay

6 each eligible State the amount of the grant payable to the

7 State under this section in quarterly installments.

8 ‘‘(f) PENALTIES.—

9 ‘‘(1) FOR USE OF GRANT IN VIOLATION OF THIS

10 SUBPART.—If an audit conducted pursuant to chap11 ter 75 of title 31, United States Code, finds that an

12 amount paid to a State under this section for a fiscal

13 year has been used in violation of this subpart, then

14 the Secretary shall reduce the amount of the grant

15 that would (in the absence of this paragraph) be pay16 able to the State under this section for the imme17 diately succeeding fiscal year by the amount so used,

18 plus 5 percent of the grant paid under this section to

19 the State for such fiscal year.

20 ‘‘(2) FOR FAILURE TO MAINTAIN EFFORT.—

21 ‘‘(A) IN GENERAL.—If an audit conducted

22 pursuant to chapter 75 of title 31, United States

23 Code, finds that the amount expended by a State

24 (other than from amounts provided by the Fed25 eral Government) during the fiscal years speci-
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1 fied in subparagraph (B), to carry out the State

2 program funded under this subpart is less than

3 the applicable percentage specified in such sub4 paragraph of the total amount expended by the

5 State (other than from amounts provided by the

6 Federal Government) during fiscal year 1995

7 under subpart 2 of part B and part E of this

8 title (as in effect on the day before the date of

9 the enactment of this subpart), then the Sec10 retary shall reduce the amount of the grant that

11 would (in the absence of this paragraph) be pay12 able to the State under this section for the imme13 diately succeeding fiscal year by the amount of

14 the difference, plus 5 percent of the grant paid

15 under this section to the State for such fiscal

16 year.

17 ‘‘(B) SPECIFICATION OF FISCAL YEARS AND

18 APPLICABLE PERCENTAGES.—The fiscal years

19 and applicable percentages specified in this sub20 paragraph are as follows:

21 ‘‘(i) For fiscal years 1996 and 1997,

22 100 percent.

23 ‘‘(ii) For fiscal years 1998 through

24 2002, 75 percent.
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1 ‘‘(3) FOR FAILURE TO SUBMIT REQUIRED RE2 PORT.—

3 ‘‘(A) IN GENERAL.—The Secretary shall re4 duce by 3 percent the amount of the grant that

5 would (in the absence of this paragraph) be pay6 able to a State under this section for a fiscal

7 year if the Secretary determines that the State

8 has not submitted the report required by section

9 436(b) for the immediately preceding fiscal year,

10 within 6 months after the end of the immediately

11 preceding fiscal year.

12 ‘‘(B) RESCISSION OF PENALTY.—The Sec13 retary shall rescind a penalty imposed on a

14 State under subparagraph (A) with respect to a

15 report for a fiscal year if the State submits the

16 report before the end of the immediately succeed17 ing fiscal year.

18 ‘‘(4) FOR FAILURE TO COMPLY WITH SAMPLING

19 METHODS REQUIREMENTS.—The Secretary may re20 duce by not more than 1 percent the amount of the

21 grant that would (in the absence of this paragraph)

22 be payable to a State under this section for a succeed23 ing fiscal year if the Secretary determines that the

24 State has not complied with the Secretary’s sampling
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1 methods requirements under section 436(c)(2) during

2 the prior fiscal year.

3 ‘‘(5) STATE FUNDS TO REPLACE REDUCTIONS IN

4 GRANT.—A State which has a penalty imposed

5 against it under this subsection for a fiscal year shall

6 expend additional State funds in an amount equal to

7 the amount of the penalty for the purpose of carrying

8 out the State program under this subpart during the

9 immediately succeeding fiscal year.

10 ‘‘(6) REASONABLE CAUSE EXCEPTION.—The Sec11 retary may not impose a penalty on a State under

12 this subsection with respect to a requirement if the

13 Secretary determines that the State has reasonable

14 cause for failing to comply with the requirement.

15 ‘‘(7) CORRECTIVE COMPLIANCE PLAN.—

16 ‘‘(A) IN GENERAL.—

17 ‘‘(i) NOTIFICATION OF VIOLATION.—

18 Notwithstanding any other provision of law,

19 the Federal Government shall, before assess20 ing a penalty against a State under this

21 subsection, notify the State of the violation

22 of law for which the penalty would be as23 sessed and allow the State the opportunity

24 to enter into a corrective compliance plan

25 in accordance with this subsection which
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1 outlines how the State will correct any such

2 violations and how the State will insure

3 continuing compliance with the require4 ments of this subpart.

5 ‘‘(ii) 60-DAY PERIOD TO PROPOSE A

6 CORRECTIVE COMPLIANCE PLAN.—Any

7 State notified under clause (i) shall have 60

8 days in which to submit to the Federal Gov9 ernment a corrective compliance plan to

10 correct any violations described in clause

11 (i).

12 ‘‘(iii) ACCEPTANCE OF PLAN.—The

13 Federal Government shall have 60 days to

14 accept or reject the State’s corrective com15 pliance plan and may consult with the

16 State during this period to modify the plan.

17 If the Federal Government does not accept

18 or reject the corrective compliance plan dur19 ing the period, the corrective compliance

20 plan shall be deemed to be accepted.

21 ‘‘(B) FAILURE TO CORRECT.—If a corrective

22 compliance plan is accepted by the Federal Gov23 ernment, no penalty shall be imposed with re24 spect to a violation described in this subsection

25 if the State corrects the violation pursuant to the
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1 plan. If a State has not corrected the violation

2 in a timely manner under the plan, some or all

3 of the penalty shall be assessed.

4 ‘‘(8) LIMITATION ON AMOUNT OF PENALTY.—

5 ‘‘(A) IN GENERAL.—In imposing the pen6 alties described in this subsection, the Secretary

7 shall not reduce any quarterly payment to a

8 State by more than 25 percent.

9 ‘‘(B) CARRYFORWARD OF UNRECOVERED

10 PENALTIES.—To the extent that subparagraph

11 (A) prevents the Secretary from recovering dur12 ing a fiscal year the full amount of all penalties

13 imposed on a State under this subsection for a

14 prior fiscal year, the Secretary shall apply any

15 remaining amount of such penalties to the grant

16 payable to the State under section 431(a) for the

17 immediately succeeding fiscal year.

18 ‘‘(g) TREATMENT OF TERRITORIES.—

19 ‘‘(1) IN GENERAL.—A territory, as defined in

20 section 1108(b)(1), shall carry out a child protection

21 program in accordance with the provisions of this

22 subpart.

23 ‘‘(2) PAYMENTS.—Each territory, as so defined,

24 shall be entitled to receive from the Secretary for any

25 fiscal year an amount, in accordance with section
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1 1108, which shall be used for the purpose of carrying

2 out a child protection program in accordance with the

3 provisions of this subpart.

4 ‘‘(h) LIMITATION ON FEDERAL AUTHORITY.—Except

5 as expressly provided in this Act, the Secretary may not

6 regulate the conduct of States under this subpart or enforce

7 any provision of this subpart.

8 ‘‘SEC. 432. REQUIREMENTS FOR FOSTER CARE MAINTE9 NANCE PAYMENTS.

10 ‘‘(a) IN GENERAL.—Each State operating a program

11 under this subpart shall make foster care maintenance pay12 ments under section 431(b) with respect to a child who

13 would meet the requirements of section 406(a) or of section

14 407 (as in effect on the day before the date of the enactment

15 of this subpart) but for the removal of the child from the

16 home of a relative (specified in section 406(a)(as so in ef17 fect)), if—

18 ‘‘(1) the removal from the home occurred pursu19 ant to a voluntary placement agreement entered into

20 by the child’s parent or legal guardian, or was the re21 sult of a judicial determination to the effect that con22 tinuation therein would be contrary to the welfare of

23 such child and that reasonable efforts of the type de24 scribed in section 430(a)(13) have been made;
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1 ‘‘(2) such child’s placement and care are the re2 sponsibility of—

3 ‘‘(A) the State; or

4 ‘‘(B) any other public agency with whom

5 the State has made an agreement for the admin6 istration of the State program under this sub7 part which is still in effect;

8 ‘‘(3) such child has been placed in a foster fam9 ily home or child-care institution as a result of the

10 voluntary placement agreement or judicial determina11 tion referred to in paragraph (1); and

12 ‘‘(4) such child—

13 ‘‘(A) would have been eligible to receive aid

14 under the eligibility standards under the State

15 plan approved under section 402 (as in effect on

16 the day before the date of the enactment of this

17 subpart and adjusted for inflation, in accordance

18 with regulations issued by the Secretary) in or

19 for the month in which such agreement was en20 tered into or court proceedings leading to the re21 moval of such child from the home were initi22 ated; or

23 ‘‘(B) would have received such aid in or for

24 such month if application had been made there25 fore, or the child had been living with a relative
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1 specified in section 406(a) (as so in effect) with2 in 6 months prior to the month in which such

3 agreement was entered into or such proceedings

4 were initiated, and would have received such aid

5 in or for such month if in such month such child

6 had been living with such a relative and appli7 cation therefore had been made.

8 ‘‘(b) LIMITATION ON FOSTER CARE PAYMENTS.—Fos9 ter care maintenance payments may be made under this

10 subpart only on behalf of a child described in subsection

11 (a) of this section who is—

12 ‘‘(1) in the foster family home of an individual,

13 whether the payments therefore are made to such in14 dividual or to a public or private child-placement or

15 child-care agency; or

16 ‘‘(2) in a child-care institution, whether the pay17 ments therefore are made to such institution or to a

18 public or private child-placement or child-care agen19 cy, which payments shall be limited so as to include

20 in such payments only those items which are included

21 in the term ‘foster care maintenance payments’ (as

22 defined in section 437(6)).

23 ‘‘(c) VOLUNTARY PLACEMENTS.—

24 ‘‘(1) SATISFACTION OF CHILD PROTECTION

25 STANDARDS.—Notwithstanding any other provision of
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1 this section, Federal payments may be made under

2 this subpart with respect to amounts expended by any

3 State as foster care maintenance payments under this

4 subpart, in the case of children removed from their

5 homes pursuant to voluntary placement agreements as

6 described in subsection (a), only if (at the time such

7 amounts were expended) the State has fulfilled all of

8 the requirements of section 435(b) or 430(a)(12).

9 ‘‘(2) REMOVAL IN EXCESS OF 180 DAYS.—No

10 Federal payment may be made under this subpart

11 with respect to amounts expended by any State as

12 foster care maintenance payments, in the case of any

13 child who was removed from such child’s home pursu14 ant to a voluntary placement agreement as described

15 in subsection (a) and has remained in voluntary

16 placement for a period in excess of 180 days, unless

17 there has been a judicial determination by a court of

18 competent jurisdiction (within the first 180 days of

19 such placement) to the effect that such placement is

20 in the best interests of the child.

21 ‘‘(3) DEEMED REVOCATION OF AGREEMENTS.—

22 In any case where—

23 ‘‘(A) the placement of a minor child in fos24 ter care occurred pursuant to a voluntary place25 ment agreement entered into by the parents or
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1 guardians of such child as provided in subsection

2 (a); and

3 ‘‘(B) such parents or guardians request (in

4 such manner and form as the Secretary may

5 prescribe) that the child be returned to their

6 home or to the home of a relative,

7 the voluntary placement agreement shall be deemed to

8 be revoked unless the State opposes such request and

9 obtains a judicial determination, by a court of com10 petent jurisdiction, that the return of the child to such

11 home would be contrary to the child’s best interests.

12 ‘‘SEC. 433. REQUIREMENTS FOR ADOPTION ASSISTANCE

13 PAYMENTS.

14 ‘‘(a) IN GENERAL.—A State operating a program

15 under this subpart shall enter into adoption assistance

16 agreements with the adoptive parents of children with spe17 cial needs.

18 ‘‘(b) PAYMENTS UNDER AGREEMENTS.—Under any

19 adoption assistance agreement entered into by a State with

20 parents who adopt a child with special needs who meets

21 the requirements of subsection (c), the State may make

22 adoption assistance payments to such parents or through

23 another public or nonprofit private agency, in amounts de24 termined under subsection (d).
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1 ‘‘(c) CHILDREN WITH SPECIAL NEEDS.—For purposes

2 of subsection (b), a child meets the requirements of this sub3 section if such child—

4 ‘‘(1)(A) at the time adoption proceedings were

5 initiated, met the requirements of section 406(a) or

6 section 407 (as in effect on the day before the date of

7 the enactment of this subpart) or would have met such

8 requirements except for such child’s removal from the

9 home of a relative (specified in section 406(a) (as so

10 in effect)), either pursuant to a voluntary placement

11 agreement with respect to which Federal payments

12 are provided under section 431(b) (or 403 (as so in

13 effect)) or as a result of a judicial determination to

14 the effect that continuation therein would be contrary

15 to the welfare of such child;

16 ‘‘(B) meets all of the requirements of title XVI

17 with respect to eligibility for supplemental security

18 income benefits; or

19 ‘‘(C) is a child whose costs in a foster family

20 home or child-care institution are covered by the fos21 ter care maintenance payments being made with re22 spect to his or her minor parent;

23 ‘‘(2)(A) would have received aid under the eligi24 bility standards under the State plan approved under

25 section 402 (as in effect on the day before the date of
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1 the enactment of this subpart, adjusted for inflation,

2 in accordance with regulations issued by the Sec3 retary) in or for the month in which such agreement

4 was entered into or court proceedings leading to the

5 removal of such child from the home were initiated;

6 ‘‘(B) would have received such aid in or for such

7 month if application had been made therefore, or had

8 been living with a relative specified in section 406(a)

9 (as so in effect) within 6 months prior to the month

10 in which such agreement was entered into or such

11 proceedings were initiated, and would have received

12 such aid in or for such month if in such month such

13 child had been living with such a relative and appli14 cation therefore had been made; or

15 ‘‘(C) is a child described in subparagraph (A) or

16 (B); and

17 ‘‘(3) has been determined by the State, pursuant

18 to subsection (g) of this section, to be a child with spe19 cial needs.

20 ‘‘(d) DETERMINATION OF PAYMENTS.—The amount of

21 the payments to be made in any case under subsection (b)

22 shall be determined through agreement between the adoptive

23 parents and the State or a public or nonprofit private agen24 cy administering the program under this subpart, which

25 shall take into consideration the circumstances of the adopt-
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1 ing parents and the needs of the child being adopted, and

2 may be readjusted periodically, with the concurrence of the

3 adopting parents (which may be specified in the adoption

4 assistance agreement), depending upon changes in such cir5 cumstances. However, in no case may the amount of the

6 adoption assistance payment exceed the foster care mainte7 nance payment which would have been paid during the pe8 riod if the child with respect to whom the adoption assist9 ance payment is made had been in a foster family home.

10 ‘‘(e) PAYMENT EXCEPTION.—Notwithstanding sub11 section (d), no payment may be made to parents with re12 spect to any child who has attained the age of 18 (or, where

13 the State determines that the child has a mental or physical

14 disability which warrants the continuation of assistance,

15 the age of 21), and no payment may be made to parents

16 with respect to any child if the State determines that the

17 parents are no longer legally responsible for the support of

18 the child or if the State determines that the child is no

19 longer receiving any support from such parents. Parents

20 who have been receiving adoption assistance payments

21 under this subpart shall keep the State or public or non22 profit private agency administering the program under this

23 subpart informed of circumstances which would, pursuant

24 to this section, make them ineligible for such assistance pay-
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1 ments, or eligible for assistance payments in a different

2 amount.

3 ‘‘(f) PRE-ADOPTION PAYMENTS.—For purposes of this

4 subpart, individuals with whom a child who has been deter5 mined by the State, pursuant to subsection (g), to be a child

6 with special needs is placed for adoption in accordance with

7 applicable State and local law shall be eligible for adoption

8 assistance payments during the period of the placement, on

9 the same terms and subject to the same conditions as if such

10 individuals had adopted such child.

11 ‘‘(g) DETERMINATION OF CHILD WITH SPECIAL

12 NEEDS.—For purposes of this section, a child shall not be

13 considered a child with special needs unless—

14 ‘‘(1) the State has determined that the child can15 not or should not be returned to the home of the

16 child’s parents; and

17 ‘‘(2) the State had first determined—

18 ‘‘(A) that there exists with respect to the

19 child a specific factor or condition such as the

20 child’s ethnic background, age, or membership in

21 a minority or sibling group, or the presence of

22 factors such as medical conditions or physical,

23 mental, or emotional handicaps because of which

24 it is reasonable to conclude that such child can25 not be placed with adoptive parents without pro-
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1 viding adoption assistance under this subpart or

2 medical assistance under title XIX or XXI; and

3 ‘‘(B) that, except where it would be against

4 the best interests of the child because of such fac5 tors as the existence of significant emotional ties

6 with prospective adoptive parents while in the

7 care of such parents as a foster child, a reason8 able, but unsuccessful, effort has been made to

9 place the child with appropriate adoptive par10 ents without providing adoption assistance

11 under this section or medical assistance under

12 title XIX or XXI.

13 ‘‘SEC. 434. CITIZEN REVIEW PANELS.

14 ‘‘(a) ESTABLISHMENT.—Each State to which a grant

15 is made under section 431(a) shall establish at least 3 citi16 zen review panels.

17 ‘‘(b) COMPOSITION.—Each panel established under

18 subsection (a) shall be broadly representative of the commu19 nity from which drawn.

20 ‘‘(c) FREQUENCY OF MEETINGS.—Each panel estab21 lished under subsection (a) shall meet not less frequently

22 than quarterly.

23 ‘‘(d) DUTIES.—

24 ‘‘(1) IN GENERAL.—Each panel established under

25 subsection (a) shall, by examining specific cases, de-
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1 termine the extent to which the State and local agen2 cies responsible for carrying out activities under this

3 subpart are doing so in accordance with the State

4 plan, with the child protection standards set forth in

5 section 430(a)(12) and 435, and with any other cri6 teria that the panel considers important to ensure the

7 protection of children.

8 ‘‘(2) CONFIDENTIALITY.—The members and staff

9 of any panel established under subsection (a) shall not

10 disclose to any person or government any information

11 about any specific child protection case with respect

12 to which the panel is provided information.

13 ‘‘(e) STATE ASSISTANCE.—Each State that establishes

14 a panel under subsection (a) shall afford the panel access

15 to any information on any case that the panel desires to

16 review, and shall provide the panel with staff assistance in

17 performing its duties.

18 ‘‘(f) REPORTS.—Each panel established under sub19 section (a) shall make a public report of its activities after

20 each meeting.

21 ‘‘SEC. 435. FOSTER CARE PROTECTION REQUIRED FOR AD22 DITIONAL FEDERAL PAYMENTS.

23 ‘‘(a) REDUCTION OF GRANT.—A State shall not receive

24 a grant under section 431(a) unless such State—
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1 ‘‘(1) has conducted an inventory of all children

2 who have been in foster care under the responsibility

3 of the State for a period of 6 months preceding the

4 inventory, and determined the appropriateness of,

5 and necessity for, the current foster placement, wheth6 er the child can be or should be returned to his par7 ents or should be freed for adoption, and the services

8 necessary to facilitate either the return of the child or

9 the placement of the child for adoption or legal guard10 ianship; and

11 ‘‘(2) has implemented and is operating to the

12 satisfaction of the Secretary—

13 ‘‘(A) a statewide information system from

14 which the status, demographic characteristics, lo15 cation, and goals for the placement of every child

16 in foster care or who has been in such care with17 in the preceding 12 months can readily be deter18 mined;

19 ‘‘(B) a case review system (as defined in

20 section 437(4)) for each child receiving foster

21 care under the supervision of the State; and

22 ‘‘(C) a service program designed to help

23 children, where appropriate, return to families

24 from which they have been removed or be placed

25 for adoption or legal guardianship.
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1 ‘‘(b) ADDITIONAL REQUIREMENTS.—A State shall not

2 receive a grant under section 431(a) unless such State—

3 ‘‘(1) has completed an inventory of the type spec4 ified in subsection (a)(1);

5 ‘‘(2) has implemented and is operating the pro6 gram and systems specified in subsection (a)(2); and

7 ‘‘(3) has implemented a preplacement preventive

8 service program designed to help children remain

9 with their families.

10 ‘‘(c) PRESUMPTION FOR EXPENDITURES.—Any

11 amounts expended by a State for the purpose of complying

12 with the requirements of subsection (a) or (b) shall be con13 clusively presumed to have been expended for child welfare

14 services.

15 ‘‘SEC. 436. DATA COLLECTION AND REPORTING.

16 ‘‘(a) ANNUAL REPORTS ON STATE CHILD WELFARE

17 GOALS.—On the date that is 3 years after the effective date

18 of this subpart and annually thereafter, each State to which

19 a grant is made under section 431(a) shall submit to the

20 Secretary a report that contains quantitative information

21 on the extent to which the State is making progress toward

22 achieving the goals of the State child protection program.

23 ‘‘(b) STATE DATA REPORTS.—

24 ‘‘(1) BIANNUAL REPORTS.—Each State to which

25 a grant is made under section 431(a) shall bian-
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1 nually submit to the Secretary a report that includes

2 the following information with respect to each child

3 within the State receiving publicly-supported child

4 welfare services under the State program funded

5 under this subpart:

6 ‘‘(A) Whether the child received services

7 under the program funded under this subpart.

8 ‘‘(B) The age, gender, and family income of

9 the parents and child.

10 ‘‘(C) The county of residence of the child.

11 ‘‘(D) Whether the child was removed from

12 the family.

13 ‘‘(E) Whether the child entered foster care

14 under the responsibility of the State.

15 ‘‘(F) The type of out-of-home care in which

16 the child was placed (including institutional

17 care, group home care, family foster care, or rel18 ative placement).

19 ‘‘(G) The child’s permanency planning goal,

20 such as family reunification, kinship care, adop21 tion, or independent living.

22 ‘‘(H) Whether the child was released for

23 adoption.

24 ‘‘(I) Whether the child exited from foster

25 care, and, if so, the reason for the exit, such as
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1 return to family, placement with relatives, adop2 tion, independent living, or death.

3 ‘‘(J) Other information as required by the

4 Secretary and agreed to by a majority of the

5 States, including information necessary to en6 sure a that there is a smooth transition of data

7 from the Adoption and Foster Care Analysis and

8 Reporting Systems and the National Center on

9 Abuse and Neglect Data System to the data re10 porting system required under this section.

11 ‘‘(2) ANNUAL REPORTS.—Each State to which a

12 grant is made under section 431(a) shall annually

13 submit to the Secretary a report that includes the fol14 lowing information:

15 ‘‘(A) The number of children reported to the

16 State during the year as alleged victims of abuse

17 or neglect.

18 ‘‘(B) The number of children for whom an

19 investigation of alleged maltreatment resulted in

20 a determination of substantiated abuse or ne21 glect, the number for whom a report of maltreat22 ment was unsubstantiated, and the number for

23 whom a report of maltreatment was determined

24 to be false.
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1 ‘‘(C) The number of families that received

2 preventive services.

3 ‘‘(D) The number of infants abandoned dur4 ing the year, the number of such infants who

5 were adopted, and the length of time between

6 abandonment and adoption.

7 ‘‘(E) The number of deaths of children re8 sulting from child abuse or neglect.

9 ‘‘(F) The number of deaths occurring while

10 children were in the custody of the State.

11 ‘‘(G) The number of children served by the

12 State independent living program.

13 ‘‘(H) Quantitative measurements dem14 onstrating whether the State is making progress

15 toward the child protection goals identified by

16 the State.

17 ‘‘(I) The types of maltreatment suffered by

18 victims of child abuse and neglect.

19 ‘‘(J) The number of abused and neglected

20 children receiving services.

21 ‘‘(K) The average length of stay of children

22 in out-of-home care.

23 ‘‘(L) The response of the State to the find24 ings and recommendations of the citizen review

25 panels established under section 434.
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1 ‘‘(M) Other information as required by the

2 Secretary and agreed to by a majority of the

3 States, including information necessary to en4 sure a that there is a smooth transition of data

5 from the Adoption and Foster Care Analysis and

6 Reporting Systems and the National Center on

7 Abuse and Neglect Data System to the data re8 porting system required under this section.

9 ‘‘(c) AUTHORITY OF STATES TO USE ESTIMATES.—

10 ‘‘(1) IN GENERAL.—A State may comply with a

11 requirement to provide precise numerical information

12 described in subsection (b) by submitting an estimate

13 which is obtained through the use of scientifically ac14 ceptable sampling methods.

15 ‘‘(2) SECRETARIAL REVIEW OF SAMPLING METH16 ODS.—The Secretary shall periodically review the

17 sampling methods used by a State to comply with a

18 requirement to provide information described in sub19 section (b). The Secretary may require a State to re20 vise the sampling methods so used if such methods do

21 not meet scientific standards and shall impose the

22 penalty described in section 431(f)(4) upon a State if

23 a State has not complied with such requirements.

24 ‘‘(d) SCOPE OF STATE PROGRAM FUNDED UNDER

25 THIS SUBPART.—As used in subsection (b), the term ‘State
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1 program funded under this subpart’ includes any equiva2 lent State program.

3 ‘‘SEC. 437. DEFINITIONS.

4 ‘‘For purposes of this subpart, the following definitions

5 shall apply:

6 ‘‘(1) ADMINISTRATIVE REVIEW.—The term ‘ad7 ministrative review’ means a review open to the par8 ticipation of the parents of the child, conducted by a

9 panel of appropriate persons at least one of whom is

10 not responsible for the case management of, or the de11 livery of services to, either the child or the parents

12 who are the subject of the review.

13 ‘‘(2) ADOPTION ASSISTANCE AGREEMENT.—The

14 term ‘adoption assistance agreement’ means a written

15 agreement, binding on the parties to the agreement,

16 between the State, other relevant agencies, and the

17 prospective adoptive parents of a minor child which

18 at a minimum—

19 ‘‘(A) specifies the nature and amount of

20 any payments, services, and assistance to be pro21 vided under such agreement; and

22 ‘‘(B) stipulates that the agreement shall re23 main in effect regardless of the State of which

24 the adoptive parents are residents at any given

25 time.
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1 The agreement shall contain provisions for the protec2 tion (under an interstate compact approved by the

3 Secretary or otherwise) of the interests of the child in

4 cases where the adoptive parents and child move to

5 another State while the agreement is effective.

6 ‘‘(3) CASE PLAN.—The term ‘case plan’ means a

7 written document which includes at least the follow8 ing:

9 ‘‘(A) A description of the type of home or

10 institution in which a child is to be placed, in11 cluding a discussion of the appropriateness of the

12 placement and how the agency which is respon13 sible for the child plans to carry out the vol14 untary placement agreement entered into or ju15 dicial determination made with respect to the

16 child in accordance with section 432(a)(1).

17 ‘‘(B) A plan for assuring that the child re18 ceives proper care and that services are provided

19 to the parents, child, and foster parents in order

20 to improve the conditions in the parents’ home,

21 facilitate return of the child to his or her own

22 home or the permanent placement of the child,

23 and address the needs of the child while in foster

24 care, including a discussion of the appropriate-
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1 ness of the services that have been provided to the

2 child under the plan.

3 ‘‘(C) To the extent available and accessible,

4 the health and education records of the child, in5 cluding—

6 ‘‘(i) the names and addresses of the

7 child’s health and educational providers;

8 ‘‘(ii) the child’s grade level perform9 ance;

10 ‘‘(iii) the child’s school record;

11 ‘‘(iv) assurances that the child’s place12 ment in foster care takes into account prox13 imity to the school in which the child is en14 rolled at the time of placement;

15 ‘‘(v) a record of the child’s immuniza16 tions;

17 ‘‘(vi) the child’s known medical prob18 lems;

19 ‘‘(vii) the child’s medications; and

20 ‘‘(viii) any other relevant health and

21 education information concerning the child

22 determined to be appropriate by the State.

23 Where appropriate, for a child age 16 or over,

24 the case plan must also include a written de25 scription of the programs and services which will
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1 help such child prepare for the transition from

2 foster care to independent living.

3 ‘‘(4) CASE REVIEW SYSTEM.—The term ‘case re4 view system’ means a procedure for assuring that—

5 ‘‘(A) each child has a case plan designed to

6 achieve placement in the least restrictive (most

7 family like) and most appropriate setting avail8 able and in close proximity to the parents’ home,

9 consistent with the best interest and special needs

10 of the child, which—

11 ‘‘(i) if the child has been placed in a

12 foster family home or child-care institution

13 a substantial distance from the home of the

14 parents of the child, or in a State different

15 from the State in which such home is lo16 cated, sets forth the reasons why such place17 ment is in the best interests of the child;

18 and

19 ‘‘(ii) if the child has been placed in fos20 ter care outside the State in which the home

21 of the parents of the child is located, re22 quires that, periodically, but not less fre23 quently than every 12 months, a caseworker

24 on the staff of the State in which the home

25 of the parents of the child is located, or of
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1 the State in which the child has been

2 placed, visit such child in such home or in3 stitution and submit a report on such visit

4 to the State in which the home of the par5 ents of the child is located;

6 ‘‘(B) the status of each child is reviewed pe7 riodically but no less frequently than once every

8 6 months by either a court or by administrative

9 review (as defined in paragraph (1)) in order to

10 determine the continuing necessity for and ap11 propriateness of the placement, the extent of com12 pliance with the case plan, and the extent of

13 progress which has been made toward alleviating

14 or mitigating the causes necessitating placement

15 in foster care, and to project a likely date by

16 which the child may be returned to the home or

17 placed for adoption or legal guardianship;

18 ‘‘(C) with respect to each such child, proce19 dural safeguards will be applied, among other

20 things, to assure each child in foster care under

21 the supervision of the State of a dispositional

22 hearing to be held, in a family or juvenile court

23 or another court (including a tribal court) of

24 competent jurisdiction, or by an administrative

25 body appointed or approved by the court, no
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1 later than 18 months after the original place2 ment (and not less frequently than every 12

3 months thereafter during the continuation of fos4 ter care), which hearing shall determine the fu5 ture status of the child (including whether the

6 child should be returned to the parent, should be

7 continued in foster care for a specified period,

8 should be placed for adoption, or should (because

9 of the child’s special needs or circumstances) be

10 continued in foster care on a permanent or long11 term basis) and, in the case of a child described

12 in subparagraph (A)(ii), whether the out-of-State

13 placement continues to be appropriate and in

14 the best interests of the child, and, in the case of

15 a child who has attained age 16, the services

16 needed to assist the child to make the transition

17 from foster care to independent living; and pro18 cedural safeguards shall also be applied with re19 spect to parental rights pertaining to the re20 moval of the child from the home of his parents,

21 to a change in the child’s placement, and to any

22 determination affecting visitation privileges of

23 parents; and

24 ‘‘(D) a child’s health and education record

25 (as described in paragraph (3)(C)) is reviewed
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1 and updated, and supplied to the foster parent

2 or foster care provider with whom the child is

3 placed, at the time of each placement of the child

4 in foster care.

5 ‘‘(5) CHILD-CARE INSTITUTION.—The term

6 ‘child-care institution’ means a private child-care in7 stitution, or a public child-care institution which ac8 commodates no more than 25 children, which is li9 censed by the State in which it is situated or has been

10 approved, by the agency of such State responsible for

11 licensing or approval of institutions of this type, as

12 meeting the standards established for such licensing,

13 but the term shall not include detention facilities, for14 estry camps, training schools, or any other facility

15 operated primarily for the detention of children who

16 are determined to be delinquent.

17 ‘‘(6) FOSTER CARE MAINTENANCE PAYMENTS.—

18 ‘‘(A) IN GENERAL.—The term ‘foster care

19 maintenance payments’ means payments to

20 cover the cost of (and the cost of providing) food,

21 clothing, shelter, daily supervision, school sup22 plies, a child’s personal incidentals, liability in23 surance with respect to a child, and reasonable

24 travel to the child’s home for visitation. In the

25 case of institutional care, such term shall include
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1 the reasonable costs of administration and oper2 ation of such institution as are necessarily re3 quired to provide the items described in the pre4 ceding sentence.

5 ‘‘(B) SPECIAL RULE.—In cases where—

6 ‘‘(i) a child placed in a foster family

7 home or child-care institution is the parent

8 of a son or daughter who is in the same

9 home or institution; and

10 ‘‘(ii) payments described in subpara11 graph (A) are being made under this sub12 part with respect to such child,

13 the foster care maintenance payments made with

14 respect to such child as otherwise determined

15 under subparagraph (A) shall also include such

16 amounts as may be necessary to cover the cost of

17 the items described in that subparagraph with

18 respect to such son or daughter.

19 ‘‘(7) FOSTER FAMILY HOME.—The term ‘foster

20 family home’ means a foster family home for children

21 which is licensed by the State in which it is situated

22 or has been approved, by the agency of such State

23 having responsibility for licensing homes of this type,

24 as meeting the standards established for such licens25 ing.
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1 ‘‘(8) STATE.—The term ‘State’ means the 50

2 States and the District of Columbia.

3 ‘‘(9) VOLUNTARY PLACEMENT.—The term ‘vol4 untary placement’ means an out-of-home placement of

5 a minor, by or with participation of the State, after

6 the parents or guardians of the minor have requested

7 the assistance of the State and signed a voluntary

8 placement agreement.

9 ‘‘(10) VOLUNTARY PLACEMENT AGREEMENT.—

10 The term ‘voluntary placement agreement’ means a

11 written agreement, binding on the parties to the

12 agreement, between the State, any other agency acting

13 on its behalf, and the parents or guardians of a

14 minor child which specifies, at a minimum, the legal

15 status of the child and the rights and obligations of

16 the parents or guardians, the child, and the agency

17 while the child is in placement.’’.

18 SEC. 12702. CONFORMING AMENDMENTS.

19 (a) REPEAL OF PART E OF TITLE IV OF THE SOCIAL

20 SECURITY ACT.—Part E of title IV of the Social Security

21 Act (42 U.S.C. 671–679) is hereby repealed.

22 (b) REPEAL OF SECTION 13712 OF THE OMNIBUS

23 BUDGET RECONCILIATION ACT OF 1993.—Section 13712 of

24 the Omnibus Budget Reconciliation Act of 1993 (42 U.S.C.

25 670 note) is hereby repealed.
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1 (c) REPEAL OF SECTION 435.—Section 435 of the So2 cial Security Act, as amended by section 12701, is repealed

3 on April 1, 1996.

4 SEC. 12703. EFFECTIVE DATE; TRANSITION RULE.

5 (a) IN GENERAL.—Except as otherwise provided in

6 this subtitle, this subtitle and the amendments made by this

7 subtitle shall take effect as if enacted on October 1, 1995.

8 (b) TRANSITION RULE.—

9 (1) STATE OPTION TO CONTINUE PROGRAMS.—

10 (A) 9-MONTH EXTENSION.—A State may

11 continue the State programs under subpart 2 of

12 part B and part E of title IV of the Social Secu13 rity Act, as in effect on September 30, 1995 (for

14 purposes of this paragraph, the ‘‘State pro15 grams’’) until June 30, 1996.

16 (B) NO INDIVIDUAL OR FAMILY ENTITLE17 MENT UNDER CONTINUED STATE PROGRAMS.—

18 Notwithstanding any other provision of law or

19 any rule of law, no individual or family is enti20 tled to aid under the State programs of any

21 State on or after the date of the enactment of this

22 Act.

23 (C) LIMITATIONS ON FEDERAL OBLIGA24 TIONS.—If a State elects to continue the State

25 programs pursuant to subparagraph (A), the
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1 total obligations of the Federal Government to

2 the State under subpart 2 of part B and part E

3 of title IV of the Social Security Act (as such

4 subpart and part are in effect on September 30,

5 1995) after the date of the enactment of this Act

6 shall not exceed an amount equal to—

7 (I) the grant to the State under

8 section 431(a) (as in effect pursuant to

9 the amendment made by section 12701

10 of this Act)); minus

11 (II) any obligations of the Federal

12 Government to the State under such

13 subpart and part (as in effect on Sep14 tember 30, 1995) with respect to ex15 penditures by the State during the pe16 riod that begins on October 1, 1995,

17 and ends on the day before the date of

18 the enactment of this Act.

19 (D) SUBMISSION OF STATE PLAN FOR FIS20 CAL YEAR 1996 DEEMED ACCEPTANCE OF GRANT

21 LIMITATIONS AND FORMULA.—The submission of

22 a plan by a State under section 430(a) of the So23 cial Security Act (as in effect pursuant to the

24 amendment made by section 12701 of this Act)

25 for fiscal year 1996 is deemed to constitute the
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1 State’s acceptance of the grant reduction under

2 subparagraph (C) of this paragraph (including

3 the formula for computing the amount of the re4 duction).

5 (2) CLAIMS, ACTIONS, AND PROCEEDINGS.—The

6 amendments made by this subtitle shall not apply

7 with respect to—

8 (A) powers, duties, functions, rights, claims,

9 penalties, or obligations applicable to aid, assist10 ance, or services provided before the effective date

11 of this subtitle under the provisions amended;

12 and

13 (B) administrative actions and proceedings

14 commenced before such date, or authorized before

15 such date to be commenced, under such provi16 sions.

17 (3) CLOSING OUT ACCOUNT FOR THOSE PRO18 GRAMS TERMINATED OR SUBSTANTIALLY MODIFIED BY

19 THIS SUBTITLE.—In closing out accounts, Federal

20 and State officials may use scientifically acceptable

21 statistical sampling techniques. Claims made under

22 programs which are repealed or substantially amend23 ed in this subtitle and which involve State expendi24 tures in cases where assistance or services were pro25 vided during a prior fiscal year, shall be treated as
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1 expenditures during fiscal year 1995 for purposes of

2 reimbursement even if payment was made by a State

3 on or after October 1, 1995. States shall complete the

4 filing of all claims no later than September 30, 1997.

5 Federal department heads shall—

6 (A) use the single audit procedure to review

7 and resolve any claims in connection with the

8 close out of programs; and

9 (B) reimburse States for any payments

10 made for assistance or services provided during

11 a prior fiscal year from funds for fiscal year

12 1995, rather than the funds authorized by this

13 subtitle.

14 Subtitle H—Child Care

15 SEC. 12801. SHORT TITLE AND REFERENCES.

16 (a) SHORT TITLE.—This subtitle may be cited as the

17 ‘‘Child Care and Development Block Grant Amendments of

18 1995’’.

19 (b) REFERENCES.—Except as otherwise expressly pro20 vided, whenever in this subtitle an amendment or repeal

21 is expressed in terms of an amendment to, or repeal of, a

22 section or other provision, the reference shall be considered

23 to be made to a section or other provision of the Child Care

24 and Development Block Grant Act of 1990 (42 U.S.C. 9858

25 et seq.).
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1 SEC. 12802. AUTHORIZATION OF APPROPRIATIONS AND EN2 TITLEMENT AUTHORITY.

3 (a) IN GENERAL.—Section 658B (42 U.S.C. 9858) is

4 amended to read as follows:

5 ‘‘SEC. 658B. AUTHORIZATION OF APPROPRIATIONS.

6 ‘‘There is authorized to be appropriated to carry out

7 this subchapter $1,000,000,000 for each of the fiscal years

8 1996 through 2002.’’.

9 (b) SOCIAL SECURITY ACT.—Part A of title IV of the

10 Social Security Act (as amended by section 12101) is

11 amended by adding at the end thereof the following new

12 section:

13 ‘‘SEC. 418. FUNDING FOR CHILD CARE.

14 ‘‘(a) GENERAL CHILD CARE ENTITLEMENT.—

15 ‘‘(1) GENERAL ENTITLEMENT.—Subject to the

16 amount appropriated under paragraph (3), each

17 State shall, for the purpose of providing child care as18 sistance, be entitled to payments under a grant under

19 this subsection for a fiscal year in an amount equal

20 to—

21 ‘‘(A) the sum of the total amounts of Fed22 eral payments for fiscal year 1994 to the State

23 under section—

24 ‘‘(i) 402(g)(3)(A) of this Act (as such

25 section was in effect before October 1, 1995)
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1 for amounts expended for child care pursu2 ant to paragraph (1) of such section;

3 ‘‘(ii) 403(l)(1)(A) of this Act (as so in

4 effect) for amounts expended for child care

5 pursuant to section 402(g)(1)(A) of this Act,

6 in the case of a State with respect to which

7 section 1108 of this Act applies; and

8 ‘‘(iii) 403(n) of this Act (as so in ef9 fect) for child care services pursuant to sec10 tion 402(i) of this Act; or

11 ‘‘(B) the average of the sum of the total

12 amount of Federal payments for each of the fis13 cal years 1992 through 1994 to the State under

14 the sections referred to in subparagraph (A);

15 whichever is greater.

16 ‘‘(2) REMAINDER.—

17 ‘‘(A) GRANTS.—The Secretary shall use any

18 amounts appropriated for a fiscal year under

19 paragraph (3), and remaining after grants are

20 awarded under paragraph (1), to make grants to

21 States under this paragraph.

22 ‘‘(B) AMOUNT.—Subject to subparagraph

23 (C), the amount of a grant awarded to a State

24 for a fiscal year under this paragraph shall be

25 based on the formula used for determining the
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1 amount of Federal payments to the State for fis2 cal year 1994 under section 403(n) (as such sec3 tion was in effect before October 1, 1995) for

4 child care services pursuant to section 402(i) as

5 such amount relates to the total amount of such

6 Federal payments to all States for such fiscal

7 year.

8 ‘‘(C) MATCHING REQUIREMENT.—The Sec9 retary shall pay to each eligible State in a fiscal

10 year an amount, under a grant under subpara11 graph (A), equal to the Federal medical assist12 ance percentage for such State for fiscal year

13 1995 (as defined in section 1905(b)) of so much

14 of the expenditures by the State for child care in

15 such year as exceed the State set-aside for such

16 State under subparagraph (A) for such year and

17 the amount of State expenditures in fiscal year

18 1995 that equal the non-Federal share for the

19 programs described in subparagraphs (A), (B)

20 and (C) of paragraph (1).

21 ‘‘(3) APPROPRIATION.—There is authorized to be

22 appropriated, and there is appropriated, to carry out

23 this section—

24 ‘‘(A) $1,170,000,000 for fiscal year 1996;

25 ‘‘(B) $1,240,000,000 for fiscal year 1997;
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1 ‘‘(C) $1,320,000,000 for fiscal year 1998;

2 ‘‘(D) $1,400,000,000 for fiscal year 1999;

3 ‘‘(E) $1,500,000,000 for fiscal year 2000;

4 ‘‘(F) $1,625,000,000 for fiscal year 2001;

5 and

6 ‘‘(G) $1,745,000,000 for fiscal year 2002.

7 ‘‘(4) REDISTRIBUTION.—With respect to any fis8 cal year, if the Secretary determines that amounts

9 under any grant awarded to a State under this sub10 section for such fiscal year will not be used by such

11 State for carrying out the purpose for which the grant

12 is made, the Secretary shall make such amounts

13 available for carrying out such purpose to 1 or more

14 other States which apply for such funds to the extent

15 the Secretary determines that such other States will

16 be able to use such additional amounts for carrying

17 out such purpose. Such available amounts shall be re18 distributed to a State pursuant to section 402(i) (as

19 such section was in effect before October 1, 1995) by

20 substituting ‘the number of children residing in all

21 States applying for such funds’ for ‘the number of

22 children residing in the United States in the second

23 preceding fiscal year’. Any amount made available to

24 a State from an appropriation for a fiscal year in ac25 cordance with the preceding sentence shall, for pur-
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1 poses of this part, be regarded as part of such State’s

2 payment (as determined under this subsection) for

3 such year.

4 ‘‘(b) USE OF FUNDS.—

5 ‘‘(1) IN GENERAL.—Amounts received by a State

6 under this section shall only be used to provide child

7 care assistance.

8 ‘‘(2) USE FOR CERTAIN POPULATIONS.—A State

9 shall ensure that not less than 70 percent of the total

10 amount of funds received by the State in a fiscal year

11 under this section are used to provide child care as12 sistance to families who are receiving assistance

13 under a State program under this part, families who

14 are attempting through work activities to transition

15 off of such assistance program, and families who are

16 at risk of becoming dependent on such assistance pro17 gram.

18 ‘‘(c) APPLICATION OF CHILD CARE AND DEVELOPMENT

19 BLOCK GRANT ACT.—Notwithstanding any other provision

20 of law, amounts provided to a State under this section shall

21 be transferred to the lead agency under the Child Care and

22 Development Block Grant Act, integrated by the State into

23 the programs established by the State under such Act, and

24 be subject to requirements and limitations of such Act.

25 ‘‘(d) TRANSITION RULE.—
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1 ‘‘(1) IN GENERAL.—Amounts obligated to a State

2 under this section for fiscal year 1996 shall not ex3 ceed—

4 ‘‘(A) the amount for which a State is eligi5 ble under this section for such fiscal year; less

6 ‘‘(B) the amounts obligated to the State for

7 such fiscal year under the provisions of law re8 ferred to in subsection (a)(1)(A) (as such provi9 sions were in effect on the day before the date of

10 enactment of this section).

11 ‘‘(2) ACCEPTANCE OF LIMITATION.—The submis12 sion of a plan by a State under section 401(a) for fis13 cal year 1996 is deemed to constitute the State’s ac14 ceptance of the grant reductions under paragraph (1).

15 If amounts are provided to a State under this section

16 prior to the submission of such a State plan, the ac17 ceptance of such amounts by the State shall constitute

18 the State’s acceptance of such reductions.’’.

19 SEC. 12803. LEAD AGENCY.

20 Section 658D(b) (42 U.S.C. 9858b(b)) is amended—

21 (1) in paragraph (1)—

22 (A) in subparagraph (A), by striking

23 ‘‘State’’ the first place that such appears and in24 serting ‘‘governmental or nongovernmental’’; and
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1 (B) in subparagraph (C), by inserting

2 ‘‘with sufficient time and Statewide distribution

3 of the notice of such hearing,’’ after ‘‘hearing in

4 the State’’; and

5 (2) in paragraph (2), by striking the second sen6 tence.

7 SEC. 12804. APPLICATION AND PLAN.

8 Section 658E (42 U.S.C. 9858c) is amended—

9 (1) in subsection (b)—

10 (A) by striking ‘‘implemented—’’ and all

11 that follows through ‘‘(2)’’ and inserting ‘‘imple12 mented’’; and

13 (B) by striking ‘‘for subsequent State

14 plans’’;

15 (2) in subsection (c)—

16 (A) in paragraph (2)—

17 (i) in subparagraph (A)—

18 (I) in clause (i) by striking ‘‘,

19 other than through assistance provided

20 under paragraph (3)(C),’’; and

21 (II) by striking ‘‘except’’ and all

22 that follows through ‘‘1992’’, and in23 serting ‘‘and provide a detailed de24 scription of the procedures the State
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1 will implement to carry out the re2 quirements of this subparagraph’’;

3 (ii) in subparagraph (B)—

4 (I) by striking ‘‘Provide assur5 ances’’ and inserting ‘‘Certify’’; and

6 (II) by inserting before the period

7 at the end ‘‘and provide a detailed de8 scription of such procedures’’;

9 (iii) in subparagraph (C)—

10 (I) by striking ‘‘Provide assur11 ances’’ and inserting ‘‘Certify’’; and

12 (II) by inserting before the period

13 at the end ‘‘and provide a detailed de14 scription of how such record is main15 tained and is made available’’;

16 (iv) by amending subparagraph (D) to

17 read as follows:

18 ‘‘(D) CONSUMER EDUCATION INFORMA19 TION.—Certify that the State will collect and

20 disseminate to parents of eligible children and

21 the general public, consumer education informa22 tion that will promote informed child care

23 choices.’’;

24 (v) in subparagraph (E), to read as

25 follows:
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1 ‘‘(E) COMPLIANCE WITH STATE LICENSING

2 REQUIREMENTS.—

3 ‘‘(i) IN GENERAL.—Certify that the

4 State has in effect licensing requirements

5 applicable to child care services provided

6 within the State, and provide a detailed de7 scription of such requirements and of how

8 such requirements are effectively enforced.

9 Nothing in the preceding sentence shall be

10 construed to require that licensing require11 ments be applied to specific types of provid12 ers of child care services.

13 ‘‘(ii) UNIFORM APPLICATION OF RE14 QUIREMENTS.—A certification under clause

15 (i) shall include an assurance by the State

16 that the State shall apply all such licensing

17 requirements in a uniform manner to child

18 care providers of the same type regardless of

19 whether a child care provider is receiving

20 assistance under this subchapter. Nothing in

21 this subchapter shall be construed to require

22 that a State apply, or prohibit a State from

23 applying, licensing requirements with re24 spect to a particular type of child care.
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1 ‘‘(iii) INDIAN TRIBES AND TRIBAL OR2 GANIZATIONS.—In lieu of any licensing and

3 regulatory requirements applicable under

4 State and local law, the Secretary, in con5 sultation with Indian tribes and tribal or6 ganizations, shall develop minimum child

7 care standards (that appropriately reflect

8 tribal needs and available resources) that

9 shall be applicable to Indian tribes and

10 tribal organization receiving assistance

11 under this subchapter.’’; and

12 (vi) by striking subparagraphs (F),

13 (G), (H), (I), and (J) and inserting the fol14 lowing:

15 ‘‘(F) MEETING THE NEEDS OF CERTAIN

16 POPULATIONS.—Demonstrate the manner in

17 which the State will meet the specific child care

18 needs of families who are receiving assistance

19 under a State program under part A of title IV

20 of the Social Security Act, families who are at21 tempting through work activities to transition off

22 of such assistance program, and families who are

23 at risk of becoming dependent on such assistance

24 program.’’;

25 (B) in paragraph (3)—
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1 (i) in subparagraph (A), by striking

2 ‘‘(B) and (C)’’ and inserting ‘‘(B) through

3 (D)’’;

4 (ii) in subparagraph (B)—

5 (I) by striking ‘‘.—Subject to the

6 reservation contained in subparagraph

7 (C), the’’ and inserting ‘‘AND RELATED

8 ACTIVITIES.—The’’;

9 (II) in clause (i) by striking ‘‘;

10 and’’ at the end and inserting a pe11 riod;

12 (III) by striking ‘‘for—’’ and all

13 that follows through ‘‘section

14 658E(c)(2)(A)’’ and inserting ‘‘for

15 child care services on sliding fee scale

16 basis, activities that improve the qual17 ity or availability of such services, and

18 any other activity that the State deems

19 appropriate’’; and

20 (IV) by striking clause (ii);

21 (iii) by amending subparagraph (C) to

22 read as follows:

23 ‘‘(C) LIMITATION ON ADMINISTRATIVE

24 COSTS.—Not more than 3 percent of the aggre25 gate amount of funds available to the State to
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1 carry out this subchapter by a State in each fis2 cal year may be expended for administrative

3 costs incurred by such State to carry out all of

4 its functions and duties under this subchapter.

5 As used in the preceding sentence, the term ‘ad6 ministrative costs’ shall not include the costs of

7 providing direct services.’’; and

8 (iv) by adding at the end thereof the

9 following:

10 ‘‘(D) ASSISTANCE FOR CERTAIN FAMI11 LIES.—A State shall ensure that a substantial

12 portion of the amounts available (after the State

13 has complied with the requirement of section

14 419(b)(2) of the Social Security Act) to the State

15 to carry out activities this subchapter in each

16 fiscal year is used to provide assistance to low17 income working families other than families de18 scribed in paragraph (2)(F).’’; and 419(b)(2)

19 (C) in paragraph (4)(A)—

20 (i) by striking ‘‘provide assurances’’

21 and inserting ‘‘certify’’;

22 (ii) in the first sentence by inserting

23 ‘‘and shall provide a summary of the facts

24 relied on by the State to determine that
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1 such rates are sufficient to ensure such ac2 cess’’ before the period; and

3 (iii) by striking the last sentence.

4 SEC. 12805. LIMITATION ON STATE ALLOTMENTS.

5 Section 658F(b) (42 U.S.C. 9858d(b)) is amended—

6 (1) in paragraph (1), by striking ‘‘No’’ and in7 serting ‘‘Except as provided for in section 658O(c)(6),

8 no’’; and

9 (2) in paragraph (2), by striking ‘‘referred to in

10 section 658E(c)(2)(F)’’.

11 SEC. 12806. ACTIVITIES TO IMPROVE THE QUALITY OF

12 CHILD CARE.

13 Section 658G (42 U.S.C. 9858e) is amended to read

14 as follows:

15 ‘‘SEC. 658G. ACTIVITIES TO IMPROVE THE QUALITY OF

16 CHILD CARE.

17 ‘‘A State that receives financial assistance under this

18 subchapter, shall use not less than 3 percent of the total

19 amounts received in each fiscal year for activities that are

20 designed to provide comprehensive consumer education to

21 parents and the public, activities that increase parental

22 choice, and activities designed to improve the quality and

23 availability of child care (such as resource and referral serv24 ices).’’.
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1 SEC. 12807. ADMINISTRATION AND ENFORCEMENT.

2 Section 658I(b) (42 U.S.C. 9858g(b)) is amended—

3 (1) in paragraph (1), by striking ‘‘, and shall

4 have’’ and all that follows through ‘‘(2)’’;

5 (2) by striking paragraph (2); and

6 (3) by redesignating paragraph (3) as para7 graph (2).

8 SEC. 12808. PAYMENTS.

9 Section 658J(c) (42 U.S.C. 9858h(c)) is amended—

10 (1) by striking ‘‘expended’’ and inserting ‘‘obli11 gated’’; and

12 (2) by striking ‘‘3 fiscal years’’ and inserting

13 ‘‘fiscal year’’.

14 SEC. 12809. ANNUAL REPORT AND AUDITS.

15 Section 658K (42 U.S.C. 9858i) is amended—

16 (1) in the section heading by striking ‘‘ANNUAL

17 REPORT’’ and inserting ‘‘REPORTS’’;

18 (2) in subsection (a), to read as follows:

19 ‘‘(a) REPORTS.—

20 ‘‘(1) COLLECTION OF INFORMATION BY

21 STATES.—

22 ‘‘(A) IN GENERAL.—A State that receives

23 funds to carry out this subchapter shall collect

24 the information described in subparagraph (B)

25 on a monthly basis.
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1 ‘‘(B) REQUIRED INFORMATION.—The infor2 mation required under this subparagraph shall

3 include, with respect to a family unit receiving

4 assistance under this subchapter information

5 concerning—

6 ‘‘(i) family income;

7 ‘‘(ii) county of residence;

8 ‘‘(iii) the gender and age of children

9 receiving such assistance;

10 ‘‘(iv) whether the family includes only

11 1 parent;

12 ‘‘(v) the sources of family income, in13 cluding the amount obtained from (and sep14 arately identified)—

15 ‘‘(I) employment, including self16 employment;

17 ‘‘(II) cash or other assistance

18 under part A of title IV of the Social

19 Security Act;

20 ‘‘(III) housing assistance;

21 ‘‘(IV) assistance under the Food

22 Stamp Act of 1977; and

23 ‘‘(V) other assistance programs;

24 ‘‘(vi) the number of months the family

25 has received benefits;
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1 ‘‘(vii) the type of child care in which

2 the child was enrolled (such as family child

3 care, home care, or center-based child care);

4 ‘‘(viii) whether the child care provider

5 involved was a relative;

6 ‘‘(ix) the cost of child care for such

7 families; and

8 ‘‘(x) the average hours per week of such

9 care;

10 during the period for which such information is

11 required to be submitted.

12 ‘‘(C) SUBMISSION TO SECRETARY.—A State

13 described in subparagraph (A) shall, on a quar14 terly basis, submit the information required to be

15 collected under subparagraph (B) to the Sec16 retary.

17 ‘‘(D) SAMPLING.—The Secretary may dis18 approve the information collected by a State

19 under this paragraph if the State uses sampling

20 methods to collect such information.

21 ‘‘(2) BIANNUAL REPORTS.—Not later than De22 cember 31, following the end of the first fiscal year

23 with respect to which the amendments made by the

24 Child Care and Development Block Grants Amend25 ments of 1995 apply, and every 6 months thereafter,
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1 a State described in paragraph (1)(A) shall prepare

2 and submit to the Secretary a report that includes ag3 gregate data concerning—

4 ‘‘(A) the number of child care providers that

5 received funding under this subchapter as sepa6 rately identified based on the types of providers

7 listed in section 658Q(5);

8 ‘‘(B) the monthly cost of child care services,

9 and the portion of such cost that is paid for with

10 assistance provided under this subchapter, listed

11 by the type of child care services provided;

12 ‘‘(C) the number of payments made by the

13 State through vouchers, contracts, cash, and dis14 regards under public benefit programs, listed by

15 the type of child care services provided;

16 ‘‘(D) the manner in which consumer edu17 cation information was provided to parents and

18 the number of parents to whom such information

19 was provided; and

20 ‘‘(E) the total number (without duplication)

21 of children and families served under this sub22 chapter;

23 during the period for which such report is required to

24 be submitted.’’; and

25 (2) in subsection (b)—
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1 (A) in paragraph (1) by striking ‘‘a appli2 cation’’ and inserting ‘‘an application’’;

3 (B) in paragraph (2) by striking ‘‘any

4 agency administering activities that receive’’ and

5 inserting ‘‘the State that receives’’; and

6 (C) in paragraph (4) by striking ‘‘entitles’’

7 and inserting ‘‘entitled’’.

8 SEC. 12810. ALLOTMENTS.

9 Section 658O (42 U.S.C. 9858m) is amended—

10 (1) in subsection (a)—

11 (A) in paragraph (1)

12 (i) by striking ‘‘POSSESSIONS’’ and in13 serting ‘‘POSSESSIONS’’;

14 (ii) by inserting ‘‘and’’ after ‘‘States,’’;

15 and

16 (iii) by striking ‘‘, and the Trust Ter17 ritory of the Pacific Islands’’; and

18 (B) in paragraph (2), by striking ‘‘3 per19 cent of the amount appropriated under section

20 658B’’ and inserting ‘‘1 percent of the aggregate

21 amount of funds available to the State to carry

22 out this subchapter’’;

23 (2) in subsection (c)—

24 (A) in paragraph (5) by striking ‘‘our’’ and

25 inserting ‘‘out’’; and
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1 (B) by adding at the end thereof the follow2 ing new paragraph:

3 ‘‘(6) CONSTRUCTION OR RENOVATION OF FACILI4 TIES.—

5 ‘‘(A) REQUEST FOR USE OF FUNDS.—An

6 Indian tribe or tribal organization may submit

7 to the Secretary a request to use amounts pro8 vided under this subsection for construction or

9 renovation purposes.

10 ‘‘(B) DETERMINATION.—With respect to a

11 request submitted under subparagraph (A), and

12 except as provided in subparagraph (C), upon a

13 determination by the Secretary that adequate fa14 cilities are not otherwise available to an Indian

15 tribe or tribal organization to enable such tribe

16 or organization to carry out child care programs

17 in accordance with this subchapter, and that the

18 lack of such facilities will inhibit the operation

19 of such programs in the future, the Secretary

20 may permit the tribe or organization to use as21 sistance provided under this subsection to make

22 payments for the construction or renovation of

23 facilities that will be used to carry out such pro24 grams.
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1 ‘‘(C) LIMITATION.—The Secretary may not

2 permit an Indian tribe or tribal organization to

3 use amounts provided under this subsection for

4 construction or renovation if such use will result

5 in a decrease in the level of child care services

6 provided by the tribe or organization as com7 pared to the level of such services provided by the

8 tribe or organization in the fiscal year preceding

9 the year for which the determination under sub10 paragraph (A) is being made.

11 ‘‘(D) UNIFORM PROCEDURES.—The Sec12 retary shall develop and implement uniform pro13 cedures for the solicitation and consideration of

14 requests under this paragraph.’’; and

15 (3) in subsection (e), by adding at the end there16 of the following new paragraph:

17 ‘‘(4) INDIAN TRIBES OR TRIBAL ORGANIZA18 TIONS.—Any portion of a grant or contract made to

19 an Indian tribe or tribal organization under sub20 section (c) that the Secretary determines is not being

21 used in a manner consistent with the provision of this

22 subchapter in the period for which the grant or con23 tract is made available, shall be allotted by the Sec24 retary to other tribes or organizations that have sub-
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1 mitted applications under subsection (c) in accord2 ance with their respective needs.’’.

3 SEC. 12811. DEFINITIONS.

4 Section 658P (42 U.S.C. 9858n) is amended—

5 (1) in paragraph (2), in the first sentence by in6 serting ‘‘or as a deposit for child care services if such

7 a deposit is required of other children being cared for

8 by the provider’’ after ‘‘child care services’’; and

9 (2) by striking paragraph (3);

10 (3) in paragraph (4)(B), by striking ‘‘75 per11 cent’’ and inserting ‘‘85 percent’’;

12 (4) in paragraph (5)(B)—

13 (A) by inserting ‘‘great grandchild, sibling

14 (if such provider lives in a separate residence),’’

15 after ‘‘grandchild,’’;

16 (B) by striking ‘‘is registered and’’; and

17 (C) by striking ‘‘State’’ and inserting ‘‘ap18 plicable’’.

19 (5) by striking paragraph (10);

20 (6) in paragraph (3)—

21 (A) by inserting ‘‘or’’ after ‘‘Samoa,’’; and

22 (B) by striking ‘‘, and the Trust Territory

23 of the Pacific Islands’’;

24 (7) in paragraph (14)—
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1 (A) by striking ‘‘The term’’ and inserting

2 the following:

3 ‘‘(A) IN GENERAL.—The term’’; and

4 (B) by adding at the end thereof the follow5 ing new subparagraph:

6 ‘‘(B) OTHER ORGANIZATIONS.—Such term

7 includes a Native Hawaiian Organization, as

8 defined in section 4009(4) of the Augustus F.

9 Hawkins-Robert T. Stafford Elementary and

10 Secondary School Improvement Amendments of

11 1988 (20 U.S.C. 4909(4)) and a private non12 profit organization established for the purpose of

13 serving youth who are Indians or Native Hawai14 ians.’’.

15 Subtitle I—Child Nutrition

16 Programs

17 CHAPTER 1—NATIONAL SCHOOL LUNCH

18 ACT

19 SEC. 12901. TERMINATION OF ADDITIONAL PAYMENT FOR

20 LUNCHES SERVED IN HIGH FREE AND RE21 DUCED PRICE PARTICIPATION SCHOOLS.

22 Section 4(b)(2) of the National School Lunch Act (42

23 U.S.C. 1753(b)(2)) is amended by inserting before the pe24 riod at the end the following: ‘‘for the 1995 school year and

25 1 cent more for each of the 1996 and 1997 school years’’.
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1 SEC. 12902. DIRECT FEDERAL EXPENDITURES.

2 (a) ADMINISTRATIVE EXPENSES.—Section 6(a) of the

3 National School Lunch Act (42 U.S.C. 1755(a)) is amended

4 by striking the second and fourth sentences.

5 (b) AMOUNT OF COMMODITY ASSISTANCE.—Section

6 6(e) of the Act is amended—

7 (1) in paragraph (1), by striking subparagraph

8 (E); and

9 (2) in paragraph (2), by striking the second sen10 tence and inserting the following: ‘‘Each State agency

11 shall offer and equitably distribute commodities

12 among schools participating in the school lunch pro13 gram.’’.

14 (c) BREAKFAST COMMODITY ASSISTANCE.—Section 6

15 of the Act is amended—

16 (1) by striking subsection (f); and

17 (2) by redesignating subsection (g) as subsection

18 (f).

19 (d) COMMODITY ASSISTANCE.—

20 (1) IN GENERAL.—Section 6(f) of the Act (as re21 designated by subsection (c)) is amended by striking

22 ‘‘12 percent’’ and inserting ‘‘8 percent’’.

23 (2) EFFECTIVE DATE.—The amendment made by

24 paragraph (1) shall become effective on July 1, 1996.
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1 SEC. 12903. VALUE OF FOOD ASSISTANCE.

2 (a) IN GENERAL.—Section 6(e)(1) of the National

3 School Lunch Act (42 U.S.C. 1755(e)(1)) is amended—

4 (1) in subparagraph (A)—

5 (A) in the first sentence—

6 (i) by inserting ‘‘for free and reduced

7 price meals’’ after ‘‘thereof,’’;

8 (ii) by striking ‘‘11 cents’’ and insert9 ing ‘‘14.5 cents’’; and

10 (iii) by striking ‘‘1982’’ and inserting

11 ‘‘1998’’; and

12 (B) by inserting after the first sentence the

13 following: ‘‘The national average value of do14 nated foods, or cash payments in lieu thereof, for

15 paid meals, shall be 12 cents, adjusted on July

16 1, 2001, and each July 1 thereafter to reflect

17 changes in the Price Index for Food Used in

18 Schools and Institutions.’’; and

19 (2) by striking subparagraph (B) and inserting

20 the following:

21 ‘‘(B) ADJUSTMENTS.—

22 ‘‘(i) IN GENERAL.—Except as provided

23 in subparagraph (A), the value of food as24 sistance for each meal shall be adjusted each

25 July 1 by the annual percentage change in

26 a 3-month average value of the Price Index
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1 for Foods Used in Schools and Institutions

2 for March, April, and May each year.

3 ‘‘(ii) METHOD OF ADJUSTMENTS.—Ex4 cept as otherwise provided in this subpara5 graph, in the case of each school year, the

6 Secretary shall—

7 ‘‘(I) base the adjustment made

8 under clause (i) on the amount of the

9 unrounded adjustment for the preced10 ing school year;

11 ‘‘(II) adjust the resulting amount

12 in accordance with clause (i); and

13 ‘‘(III) round the result to the

14 nearest lower cent increment.

15 ‘‘(iii) ADJUSTMENT ON JANUARY 1,

16 1996.—On January 1, 1996, the Secretary

17 shall adjust the value of food assistance for

18 all meals for the remainder of the school

19 year by rounding the previously established

20 value of food assistance to the nearest lower

21 cent increment.’’.

22 (b) EFFECTIVE DATE.—The amendment made by sub23 section (a)(1) shall become effective on July 1, 1996.
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1 SEC. 12904. REDUCED PRICE LUNCHES.

2 (a) MAXIMUM PRICE.—Section 9(b)(3) of the National

3 School Lunch Act (42 U.S.C. 1758(b)(3)) is amended—

4 (1) in the last sentence, by striking ‘‘The’’ and

5 inserting ‘‘Except as provided in the succeeding 2

6 sentences, the’’; and

7 (2) by adding at the end the following: ‘‘In the

8 case of the school year beginning July 1, 2000, the

9 price charged for a reduced price lunch shall not ex10 ceed 45 cents. In the case of the school year beginning

11 July 1, 2001, and each school year thereafter, the

12 price charged for a reduced price lunch shall not ex13 ceed 50 cents.’’.

14 (b) REDUCED PRICE MEAL PAYMENT.—Section

15 11(a)(2) of the Act (42 U.S.C. 1759a(a)(2)) is amended—

16 (1) by striking ‘‘cents and the’’ and inserting

17 ‘‘cents. Except as provided in the succeeding 2 sen18 tences, the’’; and

19 (2) by adding at the end the following: ‘‘In the

20 case of the school year beginning July 1, 2000, the

21 special assistance factor for reduced price lunches

22 shall be 45 cents less than the special assistance factor

23 for free lunches. In the case of the school year begin24 ning July 1, 2001, and each school year thereafter,

25 the special assistance factor for reduced price lunches
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1 shall be 50 cents less than the special assistance factor

2 for free lunches.’’.

3 SEC. 12905. LUNCHES, BREAKFASTS, AND SUPPLEMENTS.

4 (a) IN GENERAL.—Section 11(a)(3)(B) of the National

5 School Lunch Act (42 U.S.C. 1759a(a)(3)(B)) is amend6 ed—

7 (1) by designating the second and third sentences

8 as subparagraphs (C) and (D), respectively; and

9 (2) by striking subparagraph (D) (as so des10 ignated) and inserting the following:

11 ‘‘(D) ROUNDING.—Except as otherwise pro12 vided in this paragraph, in the case of each

13 school year, the Secretary shall—

14 ‘‘(i) base the adjustment made under

15 this paragraph on the amount of the

16 unrounded adjustment for the preceding

17 school year;

18 ‘‘(ii) adjust the resulting amount in

19 accordance with subparagraphs (B) and

20 (C); and

21 ‘‘(iii) round the result to the nearest

22 lower cent increment.

23 ‘‘(E) ADJUSTMENT ON JANUARY 1 AND JULY

24 1, 1996.—The Secretary shall adjust the rates for

25 breakfasts and supplements on January 1, 1996,
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1 for the remainder of the school year, and shall

2 adjust the rates for lunches on July 1, 1996, by

3 rounding the previously established rates to the

4 nearest lower cent increment.

5 ‘‘(F) ADJUSTMENT FOR 24-MONTH PERIOD

6 BEGINNING JULY 1, 1996.—In the case of the 24-

7 month period beginning July 1, 1996, the na8 tional average payment rates for paid lunches,

9 paid breakfasts, and paid supplements shall be

10 the same as the national average payment rate

11 for paid lunches, paid breakfasts, and paid sup12 plements, respectively, for the school year begin13 ning July 1, 1995, rounded to the nearest lower

14 cent increment.

15 ‘‘(G) ADJUSTMENT FOR SCHOOL YEAR BE16 GINNING JULY 1, 1998.—In the case of the school

17 year beginning July 1, 1998, the Secretary

18 shall—

19 ‘‘(i) base the adjustments made under

20 this paragraph for—

21 ‘‘(I) paid lunches and paid break22 fasts on the amount of the unrounded

23 adjustment for paid lunches for the

24 school year beginning July 1, 1995;

25 and
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1 ‘‘(II) paid supplements on the

2 amount of the unrounded adjustment

3 for paid supplements for the school

4 year beginning July 1, 1995;

5 ‘‘(ii) adjust each resulting amount in

6 accordance with subparagraph (C); and

7 ‘‘(iii) round each result to the nearest

8 lower cent increment.’’.

9 (b) EFFECTIVE DATE.—The amendments made by sub10 section (a) shall become effective on January 1, 1996.

11 SEC. 12906. SUMMER FOOD SERVICE PROGRAM FOR CHIL12 DREN.

13 (a) ESTABLISHMENT OF PROGRAM.—Section 13(a) of

14 the National School Lunch Act (42 U.S.C. 1761(a)) is

15 amended—

16 (1) in paragraph (1)—

17 (A) in the first sentence, by striking ‘‘initi18 ate, maintain, and expand’’ and insert ‘‘initiate

19 and maintain’’; and

20 (B) in subparagraph (E) of the second sen21 tence, by striking ‘‘the Trust Territory of the Pa22 cific Islands,’’; and

23 (2) in paragraph (7)(A), by striking ‘‘Except as

24 provided in subparagraph (C), private’’ and inserting

25 ‘‘Private’’.
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1 (b) SERVICE INSTITUTIONS.—Section 13(b) of the Act

2 is amended by striking ‘‘(b)(1)’’ and all that follows through

3 the end of paragraph (1) and inserting the following:

4 ‘‘(b) SERVICE INSTITUTIONS.—

5 ‘‘(1) PAYMENTS.—

6 ‘‘(A) IN GENERAL.—Except as otherwise

7 provided in this paragraph, payments to service

8 institutions shall equal the full cost of food serv9 ice operations (which cost shall include the costs

10 of obtaining, preparing, and serving food, but

11 shall not include administrative costs).

12 ‘‘(B) MAXIMUM AMOUNTS.—Subject to sub13 paragraph (C), payments to any institution

14 under subparagraph (A) shall not exceed—

15 ‘‘(i) $1.82 for each lunch and supper

16 served;

17 ‘‘(ii) $1.13 for each breakfast served;

18 and

19 ‘‘(iii) 46 cents for each meal supple20 ment served.

21 ‘‘(C) ADJUSTMENTS.—Amounts specified in

22 subparagraph (B) shall be adjusted each Janu23 ary 1 to the nearest lower cent increment in ac24 cordance with the changes for the 12-month pe25 riod ending the preceding November 30 in the se-
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1 ries for food away from home of the Consumer

2 Price Index for All Urban Consumers published

3 by the Bureau of Labor Statistics of the Depart4 ment of Labor. Each adjustment shall be based

5 on the unrounded adjustment for the prior 12-

6 month period.’’.

7 (c) ADMINISTRATION OF SERVICE INSTITUTIONS.—

8 Section 13(b)(2) of the Act is amended—

9 (1) in the first sentence, by striking ‘‘four meals’’

10 and inserting ‘‘3 meals, or 2 meals and 1 supple11 ment,’’; and

12 (2) by striking the second sentence.

13 (d) REIMBURSEMENTS.—Section 13(c)(2) of the Act is

14 amended—

15 (1) by striking subparagraph (A);

16 (2) in subparagraph (B)—

17 (A) in the first sentence—

18 (i) by striking ‘‘, and such higher edu19 cation institutions,’’; and

20 (ii) by striking ‘‘without application’’

21 and inserting ‘‘upon showing residence in

22 areas in which poor economic conditions

23 exist’’; and

24 (B) by adding at the end the following:

25 ‘‘The higher education institutions referred to in
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1 the preceding sentence shall be eligible to partici2 pate in the program under this paragraph with3 out application.’’;

4 (3) in subparagraph (C)(ii), by striking ‘‘severe

5 need’’; and

6 (4) by redesignating subparagraphs (B) through

7 (E), as so amended, as subparagraphs (A) through

8 (D), respectively.

9 (e) PERMITTING OFFER VERSUS SERVE.—Section

10 13(f) of the Act is amended—

11 (1) by redesignating the first through seventh

12 sentences as paragraphs (1) through (7), respectively;

13 and

14 (2) by adding at the end the following:

15 ‘‘(8) OFFER VERSUS SERVE.—A school food au16 thority participating as a service institution may

17 permit a child attending a site on school premises op18 erated directly by the authority to refuse not more

19 than 1 item of a meal that the child does not intend

20 to consume. A refusal of an offered food item shall not

21 affect the amount of payments made under this sec22 tion to a school for the meal.’’.

23 (f) EFFECTIVE DATE.—The amendments made by sub24 section (b) shall become effective on January 1, 1996.
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1 SEC. 12907. CHILD CARE FOOD PROGRAM.

2 (a) ESTABLISHMENT OF PROGRAM.—Section 17 of the

3 National School Lunch Act (42 U.S.C. 1766) is amended—

4 (1) in the section heading, by striking ‘‘AND

5 ADULT’’; and

6 (2) in the first sentence of subsection (a), by

7 striking ‘‘initiate, maintain, and expand’’ and insert8 ing ‘‘initiate and maintain’’.

9 (b) PAYMENTS TO SPONSOR EMPLOYEES.—Paragraph

10 (2) of the last sentence of section 17(a) of the Act (42 U.S.C.

11 1766(a)) is amended—

12 (1) by striking ‘‘and’’ at the end of subpara13 graph (B);

14 (2) by striking the period at the end of subpara15 graph (C) and inserting ‘‘; and’’; and

16 (3) by adding at the end the following:

17 ‘‘(D) in the case of a family or group day

18 care home sponsoring organization that employs

19 more than 1 employee, the organization does not

20 base payments to an employee of the organiza21 tion on the number of family or group day care

22 homes recruited, managed, or monitored.’’.

23 (c) TECHNICAL ASSISTANCE.—The last sentence of sec24 tion 17(d)(1) of the Act is amended by striking ‘‘, and shall

25 provide technical assistance’’ and all that follows through

26 ‘‘its application’’.
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1 (d) REIMBURSEMENT OF CHILD CARE INSTITU2 TIONS.—Section 17(f)(2)(B) of the Act (42 U.S.C.

3 1766(f)(2)(B)) is amended by striking ‘‘two meals and two

4 supplements or three meals and one supplement’’ and in5 serting ‘‘two meals and one supplement’’.

6 (e) IMPROVED TARGETING OF DAY CARE HOME REIM7 BURSEMENTS.—

8 (1) RESTRUCTURED DAY CARE HOME REIM9 BURSEMENTS.—Section 17(f)(3) of the Act is amend10 ed by striking ‘‘(3)(A) Institutions’’ and all that fol11 lows through the end of subparagraph (A) and insert12 ing the following:

13 ‘‘(3) REIMBURSEMENT OF FAMILY OR GROUP DAY

14 CARE HOME SPONSORING ORGANIZATIONS.—

15 ‘‘(A) REIMBURSEMENT FACTOR.—

16 ‘‘(i) IN GENERAL.—An institution that

17 participates in the program under this sec18 tion as a family or group day care home

19 sponsoring organization shall be provided,

20 for payment to a home sponsored by the or21 ganization, reimbursement factors in ac22 cordance with this subparagraph for the

23 cost of obtaining and preparing food and

24 prescribed labor costs involved in providing

25 meals under this section.
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1 ‘‘(ii) TIER I FAMILY OR GROUP DAY

2 CARE HOMES.—

3 ‘‘(I) DEFINITION.—In this para4 graph, the term ‘tier I family or group

5 day care home’ means—

6 ‘‘(aa) a family or group day

7 care home that is located in a geo8 graphic area, as defined by the

9 Secretary based on census data, in

10 which at least 50 percent of the

11 children residing in the area are

12 members of households whose in13 comes meet the income eligibility

14 guidelines for free or reduced price

15 meals under section 9;

16 ‘‘(bb) a family or group day

17 care home that is located in an

18 area served by a school enrolling

19 elementary students in which at

20 least 50 percent of the total num21 ber of children enrolled are cer22 tified eligible to receive free or re23 duced price school meals under

24 this Act or the Child Nutrition
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1 Act of 1966 (42 U.S.C. 1771 et

2 seq.); or

3 ‘‘(cc) a family or group day

4 care home that is operated by a

5 provider whose household meets

6 the income eligibility guidelines

7 for free or reduced price meals

8 under section 9 and whose income

9 is verified by the sponsoring orga10 nization of the home under regu11 lations established by the Sec12 retary.

13 ‘‘(II) REIMBURSEMENT.—Except

14 as provided in subclause (III), a tier I

15 family or group day care home shall be

16 provided reimbursement factors under

17 this clause without a requirement for

18 documentation of the costs described in

19 clause (i), except that reimbursement

20 shall not be provided under this

21 subclause for meals or supplements

22 served to the children of a person act23 ing as a family or group day care

24 home provider unless the children meet

25 the income eligibility guidelines for
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1 free or reduced price meals under sec2 tion 9.

3 ‘‘(III) FACTORS.—Except as pro4 vided in subclause (IV), the reimburse5 ment factors applied to a home referred

6 to in subclause (II) shall be the factors

7 in effect on the date of enactment of

8 this subclause.

9 ‘‘(IV) ADJUSTMENTS.—The reim10 bursement factors under this subpara11 graph shall be adjusted on August 1,

12 1996, July 1, 1997, and each July 1

13 thereafter, to reflect changes in the

14 Consumer Price Index for food at home

15 for the most recent 12-month period for

16 which the data are available. The re17 imbursement factors under this sub18 paragraph shall be rounded to the

19 nearest lower cent increment and based

20 on the unrounded adjustment in effect

21 on June 30 of the preceding school

22 year.

23 ‘‘(iii) TIER II FAMILY OR GROUP DAY

24 CARE HOMES.—

25 ‘‘(I) IN GENERAL.—
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1 ‘‘(aa) FACTORS.—Except as

2 provided in subclause (II), with

3 respect to meals or supplements

4 served under this clause by a fam5 ily or group day care home that

6 does not meet the criteria set forth

7 in clause (ii)(I), the reimburse8 ment factors shall be 90 cents for

9 lunches and suppers, 25 cents for

10 breakfasts, and 10 cents for sup11 plements.

12 ‘‘(bb) ADJUSTMENTS.—The

13 factors shall be adjusted on July

14 1, 1997, and each July 1 there15 after, to reflect changes in the

16 Consumer Price Index for food at

17 home for the most recent 12-month

18 period for which the data are

19 available. The reimbursement fac20 tors under this item shall be

21 rounded down to the nearest lower

22 cent increment and based on the

23 unrounded adjustment for the pre24 ceding 12-month period.
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1 ‘‘(cc) REIMBURSEMENT.—A

2 family or group day care home

3 shall be provided reimbursement

4 factors under this subclause with5 out a requirement for documenta6 tion of the costs described in

7 clause (i), except that reimburse8 ment shall not be provided under

9 this subclause for meals or supple10 ments served to the children of a

11 person acting as a family or

12 group day care home provider un13 less the children meet the income

14 eligibility guidelines for free or re15 duced price meals under section 9.

16 ‘‘(II) OTHER FACTORS.—A family

17 or group day care home that does not

18 meet the criteria set forth in clause

19 (ii)(I) may elect to be provided reim20 bursement factors determined in ac21 cordance with the following require22 ments:

23 ‘‘(aa) CHILDREN ELIGIBLE

24 FOR FREE OR REDUCED PRICE

25 MEALS.—In the case of meals or
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1 supplements served under this

2 subsection to children who are

3 members of households whose in4 comes meet the income eligibility

5 guidelines for free or reduced price

6 meals under section 9, the family

7 or group day care home shall be

8 provided reimbursement factors

9 set by the Secretary in accordance

10 with clause (ii)(III).

11 ‘‘(bb) INELIGIBLE CHIL12 DREN.—In the case of meals or

13 supplements served under this

14 subsection to children who are

15 members of households whose in16 comes do not meet the income eli17 gibility guidelines, the family or

18 group day care home shall be pro19 vided reimbursement factors in

20 accordance with subclause (I).

21 ‘‘(III) INFORMATION AND DETER22 MINATIONS.—

23 ‘‘(aa) IN GENERAL.—If a

24 family or group day care home

25 elects to claim the factors de-
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1 scribed in subclause (II), the fam2 ily or group day care home spon3 soring organization serving the

4 home shall collect the necessary

5 income information, as deter6 mined by the Secretary, from any

7 parent or other caretaker to make

8 the determinations specified in

9 subclause (II) and shall make the

10 determinations in accordance

11 with rules prescribed by the Sec12 retary.

13 ‘‘(bb) CATEGORICAL ELIGI14 BILITY.—In making a determina15 tion under item (aa), a family or

16 group day care home sponsoring

17 organization may consider a child

18 participating in or subsidized

19 under, or a child with a parent

20 participating in or subsidized

21 under, a federally or State sup22 ported child care or other benefit

23 program with an income eligi24 bility limit that does not exceed

25 the eligibility standard for free or
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1 reduced price meals under section

2 9 to be a child who is a member

3 of a household whose income meets

4 the income eligibility guidelines

5 under section 9.

6 ‘‘(cc) FACTORS FOR CHIL7 DREN ONLY.—A family or group

8 day care home may elect to re9 ceive the reimbursement factors

10 prescribed under clause (ii)(III)

11 solely for the children participat12 ing in a program referred to in

13 item (bb) if the home elects not to

14 have income statements collected

15 from parents or other caretakers.

16 ‘‘(IV) SIMPLIFIED MEAL COUNT17 ING AND REPORTING PROCEDURES.—

18 The Secretary shall prescribe sim19 plified meal counting and reporting

20 procedures for use by a family or

21 group day care home that elects to

22 claim the factors under subclause (II)

23 and by a family or group day care

24 home sponsoring organization that

25 sponsors the home. The procedures the
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1 Secretary prescribes may include 1 or

2 more of the following:

3 ‘‘(aa) Setting an annual per4 centage for each home of the num5 ber of meals served that are to be

6 reimbursed in accordance with the

7 reimbursement factors prescribed

8 under clause (ii)(III) and an an9 nual percentage of the number of

10 meals served that are to be reim11 bursed in accordance with the re12 imbursement factors prescribed

13 under subclause (I), based on the

14 family income of children enrolled

15 in the home in a specified month

16 or other period.

17 ‘‘(bb) Placing a home into 1

18 of 2 or more reimbursement cat19 egories annually based on the per20 centage of children in the home

21 whose households have incomes

22 that meet the income eligibility

23 guidelines under section 9, with

24 each such reimbursement category

25 carrying a set of reimbursement
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1 factors such as the factors pre2 scribed under clause (ii)(III) or

3 subclause (I) or factors established

4 within the range of factors pre5 scribed under clause (ii)(III) and

6 subclause (I).

7 ‘‘(cc) Such other simplified

8 procedures as the Secretary may

9 prescribe.

10 ‘‘(V) MINIMUM VERIFICATION RE11 QUIREMENTS.—The Secretary may es12 tablish any necessary minimum ver13 ification requirements.’’.

14 (2) GRANTS TO STATES TO PROVIDE ASSISTANCE

15 TO FAMILY OR GROUP DAY CARE HOMES.—Section

16 17(f)(3) of the Act is amended by adding at the end

17 the following:

18 ‘‘(D) GRANTS TO STATES TO PROVIDE AS19 SISTANCE TO FAMILY OR GROUP DAY CARE

20 HOMES.—

21 ‘‘(i) IN GENERAL.—

22 ‘‘(I) RESERVATION.—From

23 amounts made available to carry out

24 this section, the Secretary shall reserve
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1 $5,000,000 of the amount made avail2 able for fiscal year 1996.

3 ‘‘(II) PURPOSE.—The Secretary

4 shall use the funds made available

5 under subclause (I) to provide grants

6 to States for the purpose of provid7 ing—

8 ‘‘(aa) assistance, including

9 grants, to family and day care

10 home sponsoring organizations

11 and other appropriate organiza12 tions, in securing and providing

13 training, materials, automated

14 data processing assistance, and

15 other assistance for the staff of the

16 sponsoring organizations; and

17 ‘‘(bb) training and other as18 sistance to family and group day

19 care homes in the implementation

20 of the amendment to subpara21 graph (A) made by section

22 12907(e)(1) of the Balanced Budg23 et Act of 1995.
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1 ‘‘(ii) ALLOCATION.—The Secretary

2 shall allocate from the funds reserved under

3 clause (i)(I)—

4 ‘‘(I) $30,000 in base funding to

5 each State; and

6 ‘‘(II) any remaining amount

7 among the States, based on the number

8 of family day care homes participating

9 in the program in a State during fis10 cal year 1994 as a percentage of the

11 number of all family day care homes

12 participating in the program during

13 fiscal year 1994.

14 ‘‘(iii) RETENTION OF FUNDS.—Of the

15 amount of funds made available to a State

16 for fiscal year 1996 under clause (i), the

17 State may retain not to exceed 30 percent

18 of the amount to carry out this subpara19 graph.

20 ‘‘(iv) ADDITIONAL PAYMENTS.—Any

21 payments received under this subparagraph

22 shall be in addition to payments that a

23 State receives under subparagraph (A).’’.
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1 (3) PROVISION OF DATA.—Section 17(f)(3) of the

2 Act (as amended by paragraph (2)) is further amend3 ed by adding at the end the following:

4 ‘‘(E) PROVISION OF DATA TO FAMILY OR

5 GROUP DAY CARE HOME SPONSORING ORGANIZA6 TIONS.—

7 ‘‘(i) CENSUS DATA.—The Secretary

8 shall provide to each State agency admin9 istering a child care food program under

10 this section data from the most recent de11 cennial census survey or other appropriate

12 census survey for which the data are avail13 able showing which areas in the State meet

14 the requirements of subparagraph

15 (A)(ii)(I)(aa). The State agency shall pro16 vide the data to family or group day care

17 home sponsoring organizations located in

18 the State.

19 ‘‘(ii) SCHOOL DATA.—

20 ‘‘(I) IN GENERAL.—A State agen21 cy administering the school lunch pro22 gram under this Act or the school

23 breakfast program under the Child Nu24 trition Act of 1966 (42 U.S.C. 1771 et

25 seq.) shall provide to approved family
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1 or group day care home sponsoring or2 ganizations a list of schools serving ele3 mentary school children in the State in

which not less than 1 4 ⁄2 of the children

5 enrolled are certified to receive free or

6 reduced price meals. The State agency

7 shall collect the data necessary to cre8 ate the list annually and provide the

9 list on a timely basis to any approved

10 family or group day care home spon11 soring organization that requests the

12 list.

13 ‘‘(II) USE OF DATA FROM PRE14 CEDING SCHOOL YEAR.—In determin15 ing for a fiscal year or other annual

16 period whether a home qualifies as a

17 tier I family or group day care home

18 under subparagraph (A)(ii)(I), the

19 State agency administering the pro20 gram under this section, and a family

21 or group day care home sponsoring or22 ganization, shall use the most current

23 available data at the time of the deter24 mination.
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1 ‘‘(iii) DURATION OF DETERMINA2 TION.—For purposes of this section, a deter3 mination that a family or group day care

4 home is located in an area that qualifies the

5 home as a tier I family or group day care

6 home (as the term is defined in subpara7 graph (A)(ii)(I)), shall be in effect for 3

8 years (unless the determination is made on

9 the basis of census data, in which case the

10 determination shall remain in effect until

11 more recent census data are available) un12 less the State agency determines that the

13 area in which the home is located no longer

14 qualifies the home as a tier I family or

15 group day care home.’’.

16 (4) CONFORMING AMENDMENTS.—Section 17(c)

17 of the Act is amended by inserting ‘‘except as pro18 vided in subsection (f)(3),’’ after ‘‘For purposes of this

19 section,’’ each place it appears in paragraphs (1), (2),

20 and (3).

21 (f) REIMBURSEMENT.—Section 17(f) of the Act is

22 amended—

23 (1) in paragraph (3)—

24 (A) in subparagraph (B), by striking the

25 third and fourth sentences; and
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1 (B) in subparagraph (C)—

2 (i) in clause (i)—

3 (I) by striking ‘‘(i)’’;

4 (II) in the first sentence, by strik5 ing ‘‘and expansion funds’’ and all

6 that follows through ‘‘rural areas’’;

7 (III) by striking the second sen8 tence; and

9 (IV) by striking ‘‘and expansion

10 funds’’ each place it appears; and

11 (ii) by striking clause (ii); and

12 (2) by striking paragraph (4).

13 (g) ELIMINATION OF STATE PAPERWORK AND OUT14 REACH BURDEN.—Section 17 of the Act is amended by

15 striking subsection (k) and inserting the following:

16 ‘‘(k) TRAINING AND TECHNICAL ASSISTANCE.—A

17 State participating in the program established under this

18 section shall provide sufficient training, technical assist19 ance, and monitoring to facilitate effective operation of the

20 program. The Secretary shall assist the State in developing

21 plans to fulfill the requirements of this subsection.’’.

22 (h) MODIFICATION OF ADULT CARE FOOD PRO23 GRAM.—Section 17(o) of the Act is amended—

24 (1) in the first sentence of paragraph (1)—
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1 (A) by striking ‘‘adult day care centers’’

2 and inserting ‘‘day care centers for chronically

3 impaired disabled persons’’ ; and

4 (B) by striking ‘‘to persons 60 years of age

5 or older or’’; and

6 (2) in paragraph (2)—

7 (A) in subparagraph (A)—

8 (i) by striking ‘‘adult day care center’’

9 and inserting ‘‘day care center for chron10 ically impaired disabled persons’’; and

11 (ii) in clause (i)—

12 (I) by striking ‘‘adult’’;

13 (II) by striking ‘‘adults’’ and in14 serting ‘‘persons’’; and

15 (III) by striking ‘‘or persons 60

16 years of age or older’’; and

17 (B) in subparagraph (B), by striking

18 ‘‘adult day care services’’ and inserting ‘‘day

19 care services for chronically impaired disabled

20 persons’’.

21 (i) UNNEEDED PROVISIONS.—Section 17 of the Act is

22 amended—

23 (1) by striking subsections (b) and (q);
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1 (2) by redesignating subsections (c) through (p),

2 as so amended, as subsections (b) through (o), respec3 tively; and

4 (3) in subsection (e), as redesignated by para5 graph (2)—

6 (A) in paragraph (2)(A), by striking ‘‘sub7 section (c)’’ and inserting ‘‘subsection (b)’’; and

8 (B) in paragraph (3)(C), by striking ‘‘sub9 section (d)’’ and inserting ‘‘subsection (c)’’.

10 (j) CONFORMING AMENDMENTS.—

11 (1) Section 11(a)(3)(A)(iv) of the Act (42 U.S.C.

12 1759a(a)(3)(A)(iv)) is amended by striking ‘‘17(c)’’

13 and inserting ‘‘17(b)’’.

14 (2) Section 17A(c) of the Act (42 U.S.C.

15 1766a(c)) is amended by striking ‘‘17(c)(3)’’ and in16 serting ‘‘17(b)(3)’’.

17 (3) Section 17B(f) of the Act (42 U.S.C.

18 1766b(f)) is amended—

19 (A) in the subsection heading, by striking

20 ‘‘AND ADULT’’; and

21 (B) in paragraph (1), by striking ‘‘and

22 adult’’.

23 (4) Section 18(e)(3)(B) of the Act (42 U.S.C.

24 1769(e)(3)(B)) is amended by striking ‘‘and adult’’.
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1 (5) Section 25(b)(1)(C) of the Act (42 U.S.C.

2 1769f(b)(1)(C)) is amended by striking ‘‘and adult’’.

3 (6) Section 3(1) of the Healthy Meals for

4 Healthy Americans Act of 1994 (Public Law 103–

5 448) is amended by striking ‘‘and adult’’.

6 (k) EFFECTIVE DATE.—

7 (1) IN GENERAL.—Except as provided in para8 graph (2), the amendments made by this section shall

9 become effective on the date of enactment of this Act.

10 (2) IMPROVED TARGETING OF DAY CARE HOME

11 REIMBURSEMENTS.—The amendments made by para12 graphs (1), (3), and (4) of subsection (e) shall become

13 effective on August 1, 1996.

14 (3) REGULATIONS.—

15 (A) INTERIM REGULATIONS.—Not later than

16 February 1, 1996, the Secretary shall issue in17 terim regulations to implement—

18 (i) the amendments made by para19 graphs (1), (3), and (4) of subsection (e);

20 and

21 (ii) section 17(f)(3)(C) of the National

22 School Lunch Act (42 U.S.C.

23 1766(f)(3)(C)).

24 (B) FINAL REGULATIONS.—Not later than

25 August 1, 1996, the Secretary shall issue final
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1 regulations to implement the provisions of law

2 referred to in subparagraph (A).

3 (l) STUDY OF IMPACT OF AMENDMENTS ON PROGRAM

4 PARTICIPATION AND FAMILY DAY CARE LICENSING.—

5 (1) IN GENERAL.—The Secretary of Agriculture,

6 in conjunction with the Secretary of Health and

7 Human Services, shall study the impact of the

8 amendments made by this section on—

9 (A) the number of family day care homes

10 participating in the child care food program es11 tablished under section 17 of the National School

12 Lunch Act (42 U.S.C. 1766);

13 (B) the number of day care home sponsor14 ing organizations participating in the program;

15 (C) the number of day care homes that are

16 licensed, certified, registered, or approved by

17 each State in accordance with regulations issued

18 by the Secretary;

19 (D) the rate of growth of the numbers re20 ferred to in subparagraphs (A) through (C);

21 (E) the nutritional adequacy and quality of

22 meals served in family day care homes that—

23 (i) received reimbursement under the

24 program prior to the amendments made by

25 this section but do not receive reimburse-
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1 ment after the amendments made by this

2 section; or

3 (ii) received full reimbursement under

4 the program prior to the amendments made

5 by this section but do not receive full reim6 bursement after the amendments made by

7 this section; and

8 (F) the proportion of low-income children

9 participating in the program prior to the

10 amendments made by this section and the pro11 portion of low-income children participating in

12 the program after the amendments made by this

13 section.

14 (2) REQUIRED DATA.—Each State agency par15 ticipating in the child care food program under sec16 tion 17 of the National School Lunch Act (42 U.S.C.

17 1766) shall submit to the Secretary data on—

18 (A) the number of family day care homes

19 participating in the program on July 31, 1996,

20 and July 31, 1997;

21 (B) the number of family day care homes li22 censed, certified, registered, or approved for serv23 ice on July 31, 1996, and July 31, 1997; and

24 (C) such other data as the Secretary may

25 require to carry out this subsection.
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1 SEC. 12908. PILOT PROJECTS.

2 (a) UNIVERSAL FREE PILOT.—Section 18(d) of the

3 National School Lunch Act (42 U.S.C. 1769(d)) is amend4 ed—

5 (1) by striking paragraph (3); and

6 (2) by redesignating paragraphs (4) and (5) as

7 paragraphs (3) and (4), respectively.

8 (b) DEMO PROJECT OUTSIDE SCHOOL HOURS.—Sec9 tion 18(e) of the Act is amended—

10 (1) in paragraph (1)—

11 (A) in subparagraph (A)—

12 (i) by striking ‘‘(A)’’; and

13 (ii) by striking ‘‘shall’’ and inserting

14 ‘‘may’’; and

15 (B) by striking subparagraph (B); and

16 (2) by striking paragraph (5) and inserting the

17 following:

18 ‘‘(5) AUTHORIZATION OF APPROPRIATIONS.—

19 There are authorized to be appropriated to carry out

20 this subsection such sums as are necessary for each of

21 fiscal years 1997 and 1998.’’.

22 SEC. 12909. INFORMATION CLEARINGHOUSE.

23 Section 26 of the National School Lunch Act (42

24 U.S.C. 1769g) is repealed.
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1 CHAPTER 2—CHILD NUTRITION ACT

2 SEC. 12921. SPECIAL MILK PROGRAM.

3 (a) IN GENERAL.—Section 3(a) of the Child Nutrition

4 Act of 1966 (42 U.S.C. 1772(a)) is amended—

5 (1) in paragraph (3), by striking ‘‘the Trust Ter6 ritory of the Pacific Islands’’ and inserting ‘‘the Com7 monwealth of the Northern Mariana Islands’’; and

8 (2) by striking paragraph (8) and inserting the

9 following:

10 ‘‘(8) ADJUSTMENTS.—

11 ‘‘(A) IN GENERAL.—Except as otherwise

12 provided in this paragraph, in the case of each

13 school year, the Secretary shall—

14 ‘‘(i) base the adjustment made under

15 paragraph (7) on the amount of the

16 unrounded adjustment for the preceding

17 school year;

18 ‘‘(ii) adjust the resulting amount in

19 accordance with paragraph (7); and

20 ‘‘(iii) round the result to the nearest

21 lower cent increment.

22 ‘‘(B) ADJUSTMENT ON JANUARY 1, 1996.—

23 On January 1, 1996, the Secretary shall adjust

24 the minimum rate for the remainder of the

25 school year by rounding the previously estab-
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1 lished minimum rate to the nearest lower cent

2 increment.

3 ‘‘(C) ADJUSTMENT FOR 24-MONTH PERIOD

4 BEGINNING JULY 1, 1996.—In the case of the 24-

5 month period beginning July 1, 1996, the mini6 mum rate shall be the same as the minimum

7 rate in effect on June 30, 1996.

8 ‘‘(D) ADJUSTMENT FOR SCHOOL YEAR BE9 GINNING JULY 1, 1998.—In the case of the school

10 year beginning July 1, 1998, the Secretary

11 shall—

12 ‘‘(i) base the adjustment made under

13 paragraph (7) on the amount of the

14 unrounded adjustment for the minimum

15 rate for the school year beginning July 1,

16 1995;

17 ‘‘(ii) adjust the resulting amount to re18 flect changes in the Producer Price Index

19 for Fresh Processed Milk published by the

20 Bureau of Labor Statistics of the Depart21 ment of Labor for the most recent 12-month

22 period for which the data are available; and

23 ‘‘(iii) round the result to the nearest

24 lower cent increment.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by sub2 section (a) shall become effective on January 1, 1996.

3 SEC. 12922. FREE AND REDUCED PRICE BREAKFASTS.

4 (a) IN GENERAL.—Section 4(b) of the Child Nutrition

5 Act of 1966 (42 U.S.C. 1773(b)) is amended—

6 (1) in the second sentence of paragraph (1)(B),

7 by striking ‘‘, adjusted to the nearest one-fourth cent’’

8 and inserting ‘‘(as adjusted pursuant to section 11(a)

9 of the National School Lunch Act (42 U.S.C.

10 1759a(a))’’; and

11 (2) in paragraph (2)(B)(ii)—

12 (A) by striking ‘‘nearest one-fourth cent’’

13 and inserting ‘‘nearest lower cent increment for

14 the applicable school year’’; and

15 (B) by inserting before the period at the end

16 the following: ‘‘, and the adjustment required by

17 this clause shall be based on the unrounded ad18 justment for the preceding school year’’.

19 (b) EFFECTIVE DATE.—The amendments made by sub20 section (a) shall become effective on July 1, 1996.

21 SEC. 12923. CONFORMING REIMBURSEMENT FOR PAID

22 BREAKFASTS AND LUNCHES.

23 (a) IN GENERAL.—The last sentence of section

24 4(b)(1)(B) of the Child Nutrition Act of 1966 (42 U.S.C.

25 1773(b)(1)(B)) is amended by striking ‘‘8.25 cents’’ and all
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1 that follows through ‘‘Act)’’ and inserting ‘‘the same as the

2 national average lunch payment for paid meals established

3 under section 4(b) of the National School Lunch Act (42

4 U.S.C. 1753(b))’’.

5 (b) EFFECTIVE DATE.—The amendment made by sub6 section (a) shall become effective on January 1, 1996.

7 SEC. 12924. SCHOOL BREAKFAST PROGRAM AUTHORIZA8 TION.

9 Section 4 of the Child Nutrition Act of 1966 (42 U.S.C.

10 1773) is amended by striking subsections (f) and (g).

11 SEC. 12925. MISCELLANEOUS PROVISIONS AND DEFINI12 TIONS.

13 Section 15 of the Child Nutrition Act of 1966 (42

14 U.S.C. 1784) is amended—

15 (1) in paragraph (1), by striking ‘‘the Trust Ter16 ritory of the Pacific Islands’’ and inserting ‘‘the Com17 monwealth of the Northern Mariana Islands’’; and

18 (2) in the first sentence of paragraph (3)—

19 (A) in subparagraph (A), by inserting

20 ‘‘and’’ at the end; and

21 (B) by striking ‘‘, and (C)’’ and all that fol22 lows through ‘‘Governor of Puerto Rico’’.

23 SEC. 12926. NUTRITION EDUCATION AND TRAINING.

24 (a) USE OF FUNDS.—Section 19(f) of the Child Nutri25 tion Act of 1966 (42 U.S.C. 1788(f)) is amended—
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1 (1) in paragraph (1)—

2 (A) by striking subparagraph (B); and

3 (B) in subparagraph (A)—

4 (i) by striking ‘‘(A)’’;

5 (ii) by striking clauses (ix) through

6 (xix);

7 (iii) by redesignating clauses (i)

8 through (viii) and (xx) as subparagraphs

9 (A) through (H) and (I), respectively; and

10 (iv) in subparagraph (H), as so redes11 ignated, by inserting ‘‘and’’ at the end;

12 (2) by striking paragraphs (2) and (4); and

13 (3) by redesignating paragraph (3) as para14 graph (2).

15 (b) AUTHORIZATION OF APPROPRIATIONS.—Section

16 19(i) of the Act is amended—

17 (1) in the first sentence of paragraph (2)(A), by

18 striking ‘‘and each succeeding fiscal year’’;

19 (2) by redesignating paragraphs (3) and (4) as

20 paragraphs (4) and (5), respectively; and

21 (3) by inserting after paragraph (2) the follow22 ing:

23 ‘‘(2) FISCAL YEARS 1997 THROUGH 2002.—

24 ‘‘(A) IN GENERAL.—There are authorized to

25 be appropriated to carry out this section
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1 $10,000,000 for each of fiscal years 1997 through

2 2002.

3 ‘‘(B) GRANTS.—

4 ‘‘(i) IN GENERAL.—Grants to each

5 State from the amounts made available

6 under subparagraph (A) shall be based on a

7 rate of 50 cents for each child enrolled in

8 schools or institutions within the State, ex9 cept that no State shall receive an amount

10 less than $75,000 per fiscal year.

11 ‘‘(ii) INSUFFICIENT FUNDS.—If the

12 amount made available for any fiscal year

13 is insufficient to pay the amount to which

14 each State is entitled under clause (i), the

15 amount of each grant shall be ratably re16 duced.’’.

17 Subtitle J—Food Stamps and

18 Commodity Distribution

19 SEC. 13001. SHORT TITLE.

20 This subtitle may be cited as the ‘‘Food Stamp Reform

21 and Commodity Distribution Act of 1995’’.

22 CHAPTER 1—FOOD STAMP PROGRAM

23 SEC. 13011. DEFINITION OF CERTIFICATION PERIOD.

24 Section 3(c) of the Food Stamp Act of 1977 (7 U.S.C.

25 2012(c)) is amended by striking ‘‘Except as provided’’ and
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1 all that follows and inserting the following: ‘‘The certifi2 cation period shall not exceed 12 months, except that the

3 certification period may be up to 24 months if all adult

4 household members are elderly or disabled. A State agency

5 shall have at least 1 contact with each certified household

6 every 12 months.’’.

7 SEC. 13012. DEFINITION OF COUPON.

8 Section 3(d) of the Food Stamp Act of 1977 (7 U.S.C.

9 2012(d)) is amended by striking ‘‘or type of certificate’’ and

10 inserting ‘‘type of certificate, authorization card, cash or

11 check issued in lieu of a coupon, or an access device, includ12 ing an electronic benefit transfer card or personal identi13 fication number,’’.

14 SEC. 13013. TREATMENT OF CHILDREN LIVING AT HOME.

15 The second sentence of section 3(i) of the Food Stamp

16 Act of 1977 (7 U.S.C. 2012(i)) is amended by striking

17 ‘‘(who are not themselves parents living with their children

18 or married and living with their spouses)’’.

19 SEC. 13014. OPTIONAL ADDITIONAL CRITERIA FOR SEPA20 RATE HOUSEHOLD DETERMINATIONS.

21 Section 3(i) of the Food Stamp Act of 1977 (7 U.S.C.

22 2012(i)) is amended by inserting after the third sentence

23 the following: ‘‘Notwithstanding the preceding sentences, a

24 State may establish criteria that prescribe when individuals

25 who live together, and who would be allowed to participate
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1 as separate households under the preceding sentences, shall

2 be considered a single household, without regard to the com3 mon purchase of food and preparation of meals.’’.

4 SEC. 13015. ADJUSTMENT OF THRIFTY FOOD PLAN.

5 The second sentence of section 3(o) of the Food Stamp

6 Act of 1977 (7 U.S.C. 2012(o)) is amended—

7 (1) by striking ‘‘shall (1) make’’ and inserting

8 the following: ‘‘shall—

9 ‘‘(1) make’’;

10 (2) by striking ‘‘scale, (2) make’’ and inserting

11 ‘‘scale;

12 ‘‘(2) make’’;

13 (3) by striking ‘‘Alaska, (3) make’’ and inserting

14 the following: ‘‘Alaska;

15 ‘‘(3) make’’; and

16 (4) by striking ‘‘Columbia, (4) through’’ and all

17 that follows through the end of the subsection and in18 serting the following: ‘‘Columbia; and

19 ‘‘(4) on October 1, 1996, and each October 1

20 thereafter, adjust the cost of the diet to reflect the cost

21 of the diet, in the preceding June, and round the re22 sult to the nearest lower dollar increment for each

23 household size, except that on October 1, 1996, the

24 Secretary may not reduce the cost of the diet in effect

25 on September 30, 1996.’’.
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1 SEC. 13016. DEFINITION OF HOMELESS INDIVIDUAL.

2 Section 3(s)(2)(C) of the Food Stamp Act of 1977 (7

3 U.S.C. 2012(s)(2)(C)) is amended by inserting ‘‘for not

4 more than 90 days’’ after ‘‘temporary accommodation’’.

5 SEC. 13017. STATE OPTION FOR ELIGIBILITY STANDARDS.

6 Section 5(b) of the Food Stamp Act of 1977 (7 U.S.C.

7 2014(d)) is amended by striking ‘‘(b) The Secretary’’ and

8 inserting the following:

9 ‘‘(b) ELIGIBILITY STANDARDS.—Except as otherwise

10 provided in this Act, the Secretary’’.

11 SEC. 13018. EARNINGS OF STUDENTS.

12 Section 5(d)(7) of the Food Stamp Act of 1977 (7

13 U.S.C. 2014(d)(7)) is amended by striking ‘‘21’’ and insert14 ing ‘‘19’’.

15 SEC. 13019. ENERGY ASSISTANCE.

16 (a) IN GENERAL.—Section 5(d) of the Food Stamp Act

17 of 1977 (7 U.S.C. 2014(d)) is amended by striking para18 graph (11) and inserting the following: ‘‘(11) a 1-time pay19 ment or allowance made under a Federal or State law for

20 the costs of weatherization or emergency repair or replace21 ment of an unsafe or inoperative furnace or other heating

22 or cooling device,’’.

23 (b) CONFORMING AMENDMENTS.—

24 (1) Section 5(k) of the Act (7 U.S.C. 2014(k)) is

25 amended—

26 (A) in paragraph (1)—
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1 (i) in subparagraph (A), by striking

2 ‘‘plan for aid to families with dependent

3 children approved’’ and inserting ‘‘program

4 funded’’; and

5 (ii) in subparagraph (B), by striking

6 ‘‘, not including energy or utility-cost as7 sistance,’’;

8 (B) in paragraph (2), by striking subpara9 graph (C) and inserting the following:

10 ‘‘(C) a payment or allowance described in sub11 section (d)(11);’’; and

12 (C) by adding at the end the following:

13 ‘‘(4) THIRD PARTY ENERGY ASSISTANCE PAY14 MENTS.—

15 ‘‘(A) ENERGY ASSISTANCE PAYMENTS.—For

16 purposes of subsection (d)(1), a payment made

17 under a Federal or State law to provide energy

18 assistance to a household shall be considered

19 money payable directly to the household.

20 ‘‘(B) ENERGY ASSISTANCE EXPENSES.—For

21 purposes of subsection (e)(7), an expense paid on

22 behalf of a household under a Federal or State

23 law to provide energy assistance shall be consid24 ered an out-of-pocket expense incurred and paid

25 by the household.’’.
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1 (2) Section 2605(f) of the Low-Income Home En2 ergy Assistance Act of 1981 (42 U.S.C. 8624(f)) is

3 amended—

4 (A) by striking ‘‘(f)(1) Notwithstanding’’

5 and inserting ‘‘(f) Notwithstanding’’;

6 (B) in paragraph (1), by striking ‘‘food

7 stamps,’’; and

8 (C) by striking paragraph (2).

9 SEC. 13020. DEDUCTIONS FROM INCOME.

10 (a) IN GENERAL.—Section 5 of the Food Stamp Act

11 of 1977 (7 U.S.C. 2014) is amended by striking subsection

12 (e) and inserting the following:

13 ‘‘(e) DEDUCTIONS FROM INCOME.—

14 ‘‘(1) STANDARD DEDUCTION.—The Secretary

15 shall allow a standard deduction for each household

16 in the 48 contiguous States and the District of Co17 lumbia, Alaska, Hawaii, Guam, and the Virgin Is18 lands of the United States of $134, $229, $189, $269,

19 and $118, respectively.

20 ‘‘(2) EARNED INCOME DEDUCTION.—

21 ‘‘(A) DEFINITION OF EARNED INCOME.—In

22 this paragraph, the term ‘earned income’ does

23 not include income excluded by subsection (d) or

24 any portion of income earned under a work

25 supplementation or support program, as defined
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1 under section 16(b), that is attributable to public

2 assistance.

3 ‘‘(B) DEDUCTION.—Except as provided in

4 subparagraph (C), a household with earned in5 come shall be allowed a deduction of 20 percent

6 of all earned income (other than income excluded

7 by subsection (d)) to compensate for taxes, other

8 mandatory deductions from salary, and work ex9 penses.

10 ‘‘(C) EXCEPTION.—The deduction described

11 in subparagraph (B) shall not be allowed with

12 respect to determining an overissuance due to the

13 failure of a household to report earned income in

14 a timely manner.

15 ‘‘(3) DEPENDENT CARE DEDUCTION.—

16 ‘‘(A) IN GENERAL.—A household shall be

17 entitled, with respect to expenses (other than ex18 cluded expenses described in subparagraph (B))

19 for dependent care, to a dependent care deduc20 tion, the maximum allowable level of which shall

21 be $200 per month for each dependent child

22 under 2 years of age and $175 per month for

23 each other dependent, for the actual cost of pay24 ments necessary for the care of a dependent if the

25 care enables a household member to accept or
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1 continue employment, or training or education

2 that is preparatory for employment.

3 ‘‘(B) EXCLUDED EXPENSES.—The excluded

4 expenses referred to in subparagraph (A) are—

5 ‘‘(i) expenses paid on behalf of the

6 household by a third party;

7 ‘‘(ii) amounts made available and ex8 cluded for the expenses referred to in sub9 paragraph (A) under subsection (d)(3); and

10 ‘‘(iii) expenses that are paid under sec11 tion 6(d)(4).

12 ‘‘(4) DEDUCTION FOR CHILD SUPPORT PAY13 MENTS.—

14 ‘‘(A) IN GENERAL.—A household shall be en15 titled to a deduction for child support payments

16 made by a household member to or for an indi17 vidual who is not a member of the household if

18 the household member is legally obligated to

19 make the payments.

20 ‘‘(B) METHODS FOR DETERMINING

21 AMOUNT.—The Secretary may prescribe by regu22 lation the methods, including calculation on a

23 retrospective basis, that a State agency shall use

24 to determine the amount of the deduction for

25 child support payments.
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1 ‘‘(5) HOMELESS SHELTER ALLOWANCE.—A State

2 agency may develop a standard homeless shelter al3 lowance, which shall not exceed $139 per month, for

4 such expenses as may reasonably be expected to be in5 curred by households in which all members are home6 less individuals but are not receiving free shelter

7 throughout the month. A State agency that develops

8 the allowance may use the allowance in determining

9 eligibility and allotments for the households, except

10 that the State agency may prohibit the use of the al11 lowance for households with extremely low shelter

12 costs.

13 ‘‘(6) EXCESS MEDICAL EXPENSE DEDUCTION.—

14 ‘‘(A) IN GENERAL.—A household containing

15 an elderly or disabled member shall be entitled,

16 with respect to expenses other than expenses paid

17 on behalf of the household by a third party, to

18 an excess medical expense deduction for the por19 tion of the actual costs of allowable medical ex20 penses, incurred by the elderly or disabled mem21 ber, exclusive of special diets, that exceeds $35

22 per month.

23 ‘‘(B) METHOD OF CLAIMING DEDUCTION.—

24 ‘‘(i) IN GENERAL.—A State agency

25 shall offer an eligible household under sub-
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1 paragraph (A) a method of claiming a de2 duction for recurring medical expenses that

3 are initially verified under the excess medi4 cal expense deduction in lieu of submitting

5 information or verification on actual ex6 penses on a monthly basis.

7 ‘‘(ii) METHOD.—The method described

8 in clause (i) shall—

9 ‘‘(I) be designed to minimize the

10 burden for the eligible elderly or dis11 abled household member choosing to de12 duct the recurrent medical expenses of

13 the member pursuant to the method;

14 ‘‘(II) rely on reasonable estimates

15 of the expected medical expenses of the

16 member for the certification period (in17 cluding changes that can be reasonably

18 anticipated based on available infor19 mation about the medical condition of

20 the member, public or private medical

21 insurance coverage, and the current

22 verified medical expenses incurred by

23 the member); and

24 ‘‘(III) not require further report25 ing or verification of a change in med-
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1 ical expenses if such a change has been

2 anticipated for the certification period.

3 ‘‘(7) EXCESS SHELTER EXPENSE DEDUCTION.—

4 ‘‘(A) IN GENERAL.—A household shall be

5 entitled, with respect to expenses other than ex6 penses paid on behalf of the household by a third

7 party, to an excess shelter expense deduction to

8 the extent that the monthly amount expended by

9 a household for shelter exceeds an amount equal

10 to 50 percent of monthly household income after

11 all other applicable deductions have been al12 lowed.

13 ‘‘(B) MAXIMUM AMOUNT OF DEDUCTION.—

14 In the case of a household that does not contain

15 an elderly or disabled individual, the excess shel16 ter expense deduction shall not exceed—

17 ‘‘(i) in the 48 contiguous States and

18 the District of Columbia, $247 per month;

19 and

20 ‘‘(ii) in Alaska, Hawaii, Guam, and

21 the Virgin Islands of the United States,

22 $429, $353, $300, and $182 per month, re23 spectively.

24 ‘‘(C) STANDARD UTILITY ALLOWANCE.—
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1 ‘‘(i) IN GENERAL.—In computing the

2 excess shelter expense deduction, a State

3 agency may use a standard utility allow4 ance in accordance with regulations pro5 mulgated by the Secretary, except that a

6 State agency may use an allowance that

7 does not fluctuate within a year to reflect

8 seasonal variations.

9 ‘‘(ii) RESTRICTIONS ON HEATING AND

10 COOLING EXPENSES.—An allowance for a

11 heating or cooling expense may not be used

12 in the case of a household that—

13 ‘‘(I) does not incur a heating or

14 cooling expense, as the case may be;

15 ‘‘(II) does incur a heating or cool16 ing expense but is located in a public

17 housing unit that has central utility

18 meters and charges households, with re19 gard to the expense, only for excess

20 utility costs; or

21 ‘‘(III) shares the expense with,

22 and lives with, another individual not

23 participating in the food stamp pro24 gram, another household participating

25 in the food stamp program, or both,
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1 unless the allowance is prorated be2 tween the household and the other indi3 vidual, household, or both.

4 ‘‘(iii) MANDATORY ALLOWANCE.—

5 ‘‘(I) IN GENERAL.—A State agen6 cy may make the use of a standard

7 utility allowance mandatory for all

8 households with qualifying utility costs

9 if—

10 ‘‘(aa) the State agency has

11 developed 1 or more standards

12 that include the cost of heating

13 and cooling and 1 or more stand14 ards that do not include the cost

15 of heating and cooling; and

16 ‘‘(bb) the Secretary finds that

17 the standards will not result in

18 an increased cost to the Secretary.

19 ‘‘(II) HOUSEHOLD ELECTION.—A

20 State agency that has not made the use

21 of a standard utility allowance man22 datory under subclause (I) shall allow

23 a household to switch, at the end of a

24 certification period, between the stand25 ard utility allowance and a deduction
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1 based on the actual utility costs of the

2 household.

3 ‘‘(iv) AVAILABILITY OF ALLOWANCE TO

4 RECIPIENTS OF ENERGY ASSISTANCE.—

5 ‘‘(I) IN GENERAL.—Subject to

6 subclause (II), if a State agency elects

7 to use a standard utility allowance

8 that reflects heating or cooling costs,

9 the standard utility allowance shall be

10 made available to households receiving

11 a payment, or on behalf of which a

12 payment is made, under the Low-In13 come Home Energy Assistance Act of

14 1981 (42 U.S.C. 8621 et seq.) or other

15 similar energy assistance program, if

16 the household still incurs out-of-pocket

17 heating or cooling expenses in excess of

18 any assistance paid on behalf of the

19 household to an energy provider.

20 ‘‘(II) SEPARATE ALLOWANCE.—A

21 State agency may use a separate

22 standard utility allowance for house23 holds on behalf of which a payment de24 scribed in subclause (I) is made, but

25 may not be required to do so.
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1 ‘‘(III) STATES NOT ELECTING TO

2 USE SEPARATE ALLOWANCE.—A State

3 agency that does not elect to use a sep4 arate allowance but makes a single

5 standard utility allowance available to

6 households incurring heating or cooling

7 expenses (other than a household de8 scribed in subclause (I) or (II) of sub9 paragraph (C)(ii)) may not be re10 quired to reduce the allowance due to

11 the provision (directly or indirectly) of

12 assistance under the Low-Income

13 Home Energy Assistance Act of 1981

14 (42 U.S.C. 8621 et seq.).

15 ‘‘(IV) PRORATION OF ASSIST16 ANCE.—For the purpose of the food

17 stamp program, assistance provided

18 under the Low-Income Home Energy

19 Assistance Act of 1981 (42 U.S.C. 8621

20 et seq.) shall be considered to be pro21 rated over the entire heating or cooling

22 season for which the assistance was

23 provided.’’.

24 (b) CONFORMING AMENDMENT.—Section 11(e)(3) of

25 the Act (7 U.S.C. 2020(e)(3)) is amended by striking ‘‘.
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1 Under rules prescribed’’ and all that follows through ‘‘veri2 fies higher expenses’’.

3 SEC. 13021. VEHICLE ALLOWANCE.

4 Section 5(g) of the Food Stamp Act of 1977 (7 U.S.C.

5 2014(g)) is amended by striking paragraph (2) and insert6 ing the following:

7 ‘‘(2) INCLUDED ASSETS.—

8 ‘‘(A) IN GENERAL.—Subject to the other

9 provisions of this paragraph, the Secretary shall,

10 in prescribing inclusions in, and exclusions

11 from, financial resources, follow the regulations

12 in force as of June 1, 1982 (other than those re13 lating to licensed vehicles and inaccessible re14 sources).

15 ‘‘(B) ADDITIONAL INCLUDED ASSETS.—The

16 Secretary shall include in financial resources—

17 ‘‘(i) any boat, snowmobile, or airplane

18 used for recreational purposes;

19 ‘‘(ii) any vacation home;

20 ‘‘(iii) any mobile home used primarily

21 for vacation purposes;

22 ‘‘(iv) subject to subparagraph (C), any

23 licensed vehicle that is used for household

24 transportation or to obtain or continue em-
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1 ployment to the extent that the fair market

2 value of the vehicle exceeds $4,600; and

3 ‘‘(v) any savings or retirement account

4 (including an individual account), regard5 less of whether there is a penalty for early

6 withdrawal.

7 ‘‘(C) EXCLUDED VEHICLES.—A vehicle (and

8 any other property, real or personal, to the ex9 tent the property is directly related to the main10 tenance or use of the vehicle) shall not be in11 cluded in financial resources under this para12 graph if the vehicle is—

13 ‘‘(i) used to produce earned income;

14 ‘‘(ii) is necessary for the transpor15 tation of a physically disabled household

16 member; or

17 ‘‘(iii) is depended on by a household to

18 carry fuel for heating or water for home use

19 and provides the primary source of fuel or

20 water, respectively, for the household.’’.

21 SEC. 13022. VENDOR PAYMENTS FOR TRANSITIONAL HOUS22 ING COUNTED AS INCOME.

23 Section 5(k)(2) of the Food Stamp Act of 1977 (7

24 U.S.C. 2014(k)(2)) is amended—

25 (1) by striking subparagraph (F); and
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1 (2) by redesignating subparagraphs (G) and (H)

2 as subparagraphs (F) and (G), respectively.

3 SEC. 13023. DOUBLED PENALTIES FOR VIOLATING FOOD

4 STAMP PROGRAM REQUIREMENTS.

5 Section 6(b)(1) of the Food Stamp Act of 1977 (7

6 U.S.C. 2015(b)(1)) is amended—

7 (1) in clause (i), by striking ‘‘six months’’ and

8 inserting ‘‘1 year’’; and

9 (2) in clause (ii), by striking ‘‘1 year’’ and in10 serting ‘‘2 years’’.

11 SEC. 13024. DISQUALIFICATION OF CONVICTED INDIVID12 UALS.

13 Section 6(b)(1)(iii) of the Food Stamp Act of 1977 (7

14 U.S.C. 2015(b)(1)(iii)) is amended—

15 (1) in subclause (II), by striking ‘‘or’’ at the end;

16 (2) in subclause (III), by striking the period at

17 the end and inserting ‘‘; or’’; and

18 (3) by inserting after subclause (III) the follow19 ing:

20 ‘‘(IV) a conviction of an offense under sub21 section (b) or (c) of section 15 involving an item

22 covered by subsection (b) or (c) of section 15 hav23 ing a value of $500 or more.’’.
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1 SEC. 13025. DISQUALIFICATION.

2 (a) IN GENERAL.—Section 6(d) of the Food Stamp Act

3 of 1977 (7 U.S.C. 2015(d)) is amended by striking ‘‘(d)(1)

4 Unless otherwise exempted by the provisions’’ and all that

5 follows through the end of paragraph (1) and inserting the

6 following:

7 ‘‘(d) CONDITIONS OF PARTICIPATION.—

8 ‘‘(1) WORK REQUIREMENTS.—

9 ‘‘(A) IN GENERAL.—No physically and

10 mentally fit individual over the age of 15 and

11 under the age of 60 shall be eligible to partici12 pate in the food stamp program if the individ13 ual—

14 ‘‘(i) refuses, at the time of application

15 and every 12 months thereafter, to register

16 for employment in a manner prescribed by

17 the Secretary;

18 ‘‘(ii) refuses without good cause to par19 ticipate in an employment and training

20 program under paragraph (4), to the extent

21 required by the State agency;

22 ‘‘(iii) refuses without good cause to ac23 cept an offer of employment, at a site or

24 plant not subject to a strike or lockout at

25 the time of the refusal, at a wage not less

26 than the higher of—
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1 ‘‘(I) the applicable Federal or

2 State minimum wage; or

3 ‘‘(II) 80 percent of the wage that

4 would have governed had the minimum

5 hourly rate under section 6(a)(1) of the

6 Fair Labor Standards Act of 1938 (29

7 U.S.C. 206(a)(1)) been applicable to

8 the offer of employment;

9 ‘‘(iv) refuses without good cause to pro10 vide a State agency with sufficient informa11 tion to allow the State agency to determine

12 the employment status or the job availabil13 ity of the individual;

14 ‘‘(v) voluntarily and without good

15 cause—

16 ‘‘(I) quits a job; or

17 ‘‘(II) reduces work effort and,

18 after the reduction, the individual is

19 working less than 30 hours per week;

20 or

21 ‘‘(vi) fails to comply with section 20.

22 ‘‘(B) HOUSEHOLD INELIGIBILITY.—If an

23 individual who is the head of a household be24 comes ineligible to participate in the food stamp

25 program under subparagraph (A), the household
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1 shall, at the option of the State agency, become

2 ineligible to participate in the food stamp pro3 gram for a period, determined by the State agen4 cy, that does not exceed the lesser of—

5 ‘‘(i) the duration of the ineligibility of

6 the individual determined under subpara7 graph (C); or

8 ‘‘(ii) 180 days.

9 ‘‘(C) DURATION OF INELIGIBILITY.—

10 ‘‘(i) FIRST VIOLATION.—The first time

11 that an individual becomes ineligible to

12 participate in the food stamp program

13 under subparagraph (A), the individual

14 shall remain ineligible until the later of—

15 ‘‘(I) the date the individual be16 comes eligible under subparagraph (A);

17 ‘‘(II) the date that is 1 month

18 after the date the individual became

19 ineligible; or

20 ‘‘(III) a date determined by the

21 State agency that is not later than 3

22 months after the date the individual

23 became ineligible.

24 ‘‘(ii) SECOND VIOLATION.—The second

25 time that an individual becomes ineligible
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1 to participate in the food stamp program

2 under subparagraph (A), the individual

3 shall remain ineligible until the later of—

4 ‘‘(I) the date the individual be5 comes eligible under subparagraph (A);

6 ‘‘(II) the date that is 3 months

7 after the date the individual became

8 ineligible; or

9 ‘‘(III) a date determined by the

10 State agency that is not later than 6

11 months after the date the individual

12 became ineligible.

13 ‘‘(iii) THIRD OR SUBSEQUENT VIOLA14 TION.—The third or subsequent time that

15 an individual becomes ineligible to partici16 pate in the food stamp program under sub17 paragraph (A), the individual shall remain

18 ineligible until the later of—

19 ‘‘(I) the date the individual be20 comes eligible under subparagraph (A);

21 ‘‘(II) the date that is 6 months

22 after the date the individual became

23 ineligible;

24 ‘‘(III) a date determined by the

25 State agency; or
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1 ‘‘(IV) at the option of the State

2 agency, permanently.

3 ‘‘(D) ADMINISTRATION.—

4 ‘‘(i) GOOD CAUSE.—The Secretary

5 shall determine the meaning of good cause

6 for the purpose of this paragraph.

7 ‘‘(ii) VOLUNTARY QUIT.—The Secretary

8 shall determine the meaning of voluntarily

9 quitting and reducing work effort for the

10 purpose of this paragraph.

11 ‘‘(iii) DETERMINATION BY STATE

12 AGENCY.—

13 ‘‘(I) IN GENERAL.—Subject to

14 subclause (II) and clauses (i) and (ii),

15 a State agency shall determine—

16 ‘‘(aa) the meaning of any

17 term in subparagraph (A);

18 ‘‘(bb) the procedures for de19 termining whether an individual

20 is in compliance with a require21 ment under subparagraph (A);

22 and

23 ‘‘(cc) whether an individual

24 is in compliance with a require25 ment under subparagraph (A).
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1 ‘‘(II) NOT LESS RESTRICTIVE.—A

2 State agency may not determine a

3 meaning, procedure, or determination

4 under subclause (I) to be less restrictive

5 than a comparable meaning, proce6 dure, or determination under a State

7 program funded under part A of title

8 IV of the Social Security Act (42

9 U.S.C. 601 et seq.).

10 ‘‘(iv) STRIKE AGAINST THE GOVERN11 MENT.—For the purpose of subparagraph

12 (A)(v), an employee of the Federal Govern13 ment, a State, or a political subdivision of

14 a State, who is dismissed for participating

15 in a strike against the Federal Government,

16 the State, or the political subdivision of the

17 State shall be considered to have voluntarily

18 quit without good cause.

19 ‘‘(v) SELECTING A HEAD OF HOUSE20 HOLD.—

21 ‘‘(I) IN GENERAL.—For the pur22 pose of this paragraph, the State agen23 cy shall allow the household to select

24 any adult parent of a child in the

25 household as the head of the household
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1 if all adult household members making

2 application under the food stamp pro3 gram agree to the selection.

4 ‘‘(II) TIME FOR MAKING DESIGNA5 TION.—A household may designate the

6 head of the household under subclause

7 (I) each time the household is certified

8 for participation in the food stamp

9 program, but may not change the des10 ignation during a certification period

11 unless there is a change in the com12 position of the household.

13 ‘‘(vi) CHANGE IN HEAD OF HOUSE14 HOLD.—If the head of a household leaves the

15 household during a period in which the

16 household is ineligible to participate in the

17 food stamp program under subparagraph

18 (B)—

19 ‘‘(I) the household shall, if other20 wise eligible, become eligible to partici21 pate in the food stamp program; and

22 ‘‘(II) if the head of the household

23 becomes the head of another household,

24 the household that becomes headed by

25 the individual shall become ineligible
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1 to participate in the food stamp pro2 gram for the remaining period of ineli3 gibility.’’.

4 (b) CONFORMING AMENDMENT.—

5 (1) The second sentence of section 17(b)(2) of the

6 Act (7 U.S.C. 2026(b)(2)) is amended by striking

7 ‘‘6(d)(1)(i)’’ and inserting ‘‘6(d)(1)(A)(i)’’.

8 (2) Section 20 of the Act (7 U.S.C. 2029) is

9 amended by striking subsection (f) and inserting the

10 following:

11 ‘‘(f) DISQUALIFICATION.—An individual or a house12 hold may become ineligible under section 6(d)(1) to partici13 pate in the food stamp program for failing to comply with

14 this section.’’.

15 SEC. 13026. CARETAKER EXEMPTION.

16 Section 6(d)(2) of the Food Stamp Act of 1977 (7

17 U.S.C. 2015(d)(2)) is amended by striking subparagraph

18 (B) and inserting the following: ‘‘(B) a parent or other

19 member of a household with responsibility for the care of

20 (i) a dependent child under the age of 6 or any lower age

21 designated by the State agency that is not under the age

22 of 1, or (ii) an incapacitated person;’’.

23 SEC. 13027. EMPLOYMENT AND TRAINING.

24 (a) IN GENERAL.—Section 6(d)(4) of the Food Stamp

25 Act of 1977 (7 U.S.C. 2015(d)(4)) is amended—
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1 (1) in subparagraph (A)—

2 (A) by striking ‘‘Not later than April 1,

3 1987, each’’ and inserting ‘‘Each’’;

4 (B) by inserting ‘‘work,’’ after ‘‘skills, train5 ing,’’; and

6 (C) by adding at the end the following:

7 ‘‘Each component of an employment and train8 ing program carried out under this paragraph

9 shall be delivered through a statewide workforce

10 development system, unless the component is not

11 available locally through the statewide workforce

12 development system.’’;

13 (2) in subparagraph (B)—

14 (A) in the matter preceding clause (i), by

15 striking the colon at the end and inserting the

16 following: ‘‘, except that the State agency shall

17 retain the option to apply employment require18 ments prescribed under this subparagraph to a

19 program applicant at the time of application:’’;

20 (B) in clause (i), by striking ‘‘with terms

21 and conditions’’ and all that follows through

22 ‘‘time of application’’; and

23 (C) in clause (iv)—

24 (i) by striking subclauses (I) and (II);

25 and
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1 (ii) by redesignating subclauses (III)

2 and (IV) as subclauses (I) and (II), respec3 tively;

4 (3) in subparagraph (D)—

5 (A) in clause (i), by striking ‘‘to which the

6 application’’ and all that follows through ‘‘30

7 days or less’’;

8 (B) in clause (ii), by striking ‘‘but with re9 spect’’ and all that follows through ‘‘child care’’;

10 and

11 (C) in clause (iii), by striking ‘‘, on the

12 basis of’’ and all that follows through ‘‘clause

13 (ii)’’ and inserting ‘‘the exemption continues to

14 be valid’’;

15 (4) in subparagraph (E), by striking the third

16 sentence;

17 (5) in subparagraph (G)—

18 (A) by striking ‘‘(G)(i) The State’’ and in19 serting ‘‘(G) The State’’; and

20 (B) by striking clause (ii);

21 (6) in subparagraph (H), by striking ‘‘(H)(i)

22 The Secretary’’ and all that follows through ‘‘(ii) Fed23 eral funds’’ and inserting ‘‘(H) Federal funds’’;

24 (7) in subparagraph (I)(i)(II), by striking ‘‘, or

25 was in operation,’’ and all that follows through ‘‘So-
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1 cial Security Act’’ and inserting the following: ‘‘), ex2 cept that no such payment or reimbursement shall ex3 ceed the applicable local market rate’’;

4 (8)(A) by striking subparagraphs (K) and (L)

5 and inserting the following:

6 ‘‘(K) LIMITATION ON FUNDING.—Notwith7 standing any other provision of this paragraph,

8 the amount of funds a State agency uses to carry

9 out this paragraph (including under subpara10 graph (I)) for participants who are receiving

11 benefits under a State program funded under

12 part A of title IV of the Social Security Act (42

13 U.S.C. 601 et seq.) shall not exceed the amount

14 of funds the State agency used in fiscal year

15 1995 to carry out this paragraph for partici16 pants who were receiving benefits in fiscal year

17 1995 under a State program funded under part

18 A of title IV of the Act (42 U.S.C. 601 et seq.).’’;

19 and

20 (B) by redesignating subparagraphs (M)

21 and (N) as subparagraphs (L) and (M), respec22 tively; and

23 (9) in subparagraph (L), as redesignated by

24 paragraph (8)(B)—
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1 (A) by striking ‘‘(L)(i) The Secretary’’ and

2 inserting ‘‘(L) The Secretary’’; and

3 (B) by striking clause (ii).

4 (b) FUNDING.—Section 16(h) of the Act (7 U.S.C.

5 2025(h)) is amended by striking ‘‘(h)(1)(A) The Secretary’’

6 and all that follows through the end of paragraph (1) and

7 inserting the following:

8 ‘‘(h) FUNDING OF EMPLOYMENT AND TRAINING PRO9 GRAMS.—

10 ‘‘(1) IN GENERAL.—

11 ‘‘(A) AMOUNTS.—To carry out employment

12 and training programs, the Secretary shall re13 serve for allocation to State agencies from funds

14 made available for each fiscal year under section

15 18(a)(1) the amount of—

16 ‘‘(i) for fiscal year 1996, $77,000,000;

17 ‘‘(ii) for fiscal year 1997, $80,000,000;

18 ‘‘(iii) for fiscal year 1998, $83,000,000;

19 ‘‘(iv) for fiscal year 1999, $86,000,000;

20 ‘‘(v) for fiscal year 2000, $89,000,000;

21 ‘‘(vi) for fiscal year 2001, $92,000,000;

22 and

23 ‘‘(vii) for fiscal year 2002,

24 $95,000,000.
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1 ‘‘(B) ALLOCATION.—The Secretary shall al2 locate the amounts reserved under subparagraph

3 (A) among the State agencies using a reasonable

4 formula (as determined by the Secretary) that

5 gives consideration to the population in each

6 State affected by section 6(o).

7 ‘‘(C) REALLOCATION.—

8 ‘‘(i) NOTIFICATION.—A State agency

9 shall promptly notify the Secretary if the

10 State agency determines that the State

11 agency will not expend all of the funds allo12 cated to the State agency under subpara13 graph (B).

14 ‘‘(ii) REALLOCATION.—On notification

15 under clause (i), the Secretary shall reallo16 cate the funds that the State agency will not

17 expend as the Secretary considers appro18 priate and equitable.

19 ‘‘(D) MINIMUM ALLOCATION.—Notwith20 standing subparagraphs (A) through (C), the

21 Secretary shall ensure that each State agency op22 erating an employment and training program

23 shall receive not less than $50,000 in each fiscal

24 year.’’.
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1 (c) ADDITIONAL MATCHING FUNDS.—Section 16(h)(2)

2 of the Act (7 U.S.C. 2025(h)(2)) is amended by inserting

3 before the period at the end the following: ‘‘, including the

4 costs for case management and casework to facilitate the

5 transition from economic dependency to self-sufficiency

6 through work’’.

7 (d) REPORTS.—Section 16(h) of the Act (7 U.S.C.

8 2025(h)) is amended—

9 (1) in paragraph (5)—

10 (A) by striking ‘‘(5)(A) The Secretary’’ and

11 inserting ‘‘(5) The Secretary’’; and

12 (B) by striking subparagraph (B); and

13 (2) by striking paragraph (6).

14 SEC. 13028. COMPARABLE TREATMENT FOR DISQUALIFICA15 TION.

16 (a) IN GENERAL.—Section 6 of the Food Stamp Act

17 of 1977 (7 U.S.C. 2015) is amended—

18 (1) by redesignating subsection (i), as added by

19 section 12104, as subsection (p); and

20 (2) by inserting after subsection (h) the follow21 ing:

22 ‘‘(i) COMPARABLE TREATMENT FOR DISQUALIFICA23 TION.—

24 ‘‘(1) IN GENERAL.—If a disqualification is im25 posed on a member of a household for a failure of the
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1 member to perform an action required under a Fed2 eral, State, or local law relating to a means-tested

3 public assistance program, the State agency may im4 pose the same disqualification on the member of the

5 household under the food stamp program.

6 ‘‘(2) RULES AND PROCEDURES.—If a disquali7 fication is imposed under paragraph (1) for a failure

8 of an individual to perform an action required under

9 part A of title IV of the Social Security Act (42

10 U.S.C. 601 et seq.), the State agency may use the

11 rules and procedures that apply under part A of title

12 IV of the Act to impose the same disqualification

13 under the food stamp program.

14 ‘‘(3) APPLICATION AFTER DISQUALIFICATION PE15 RIOD.—A member of a household disqualified under

16 paragraph (1) may, after the disqualification period

17 has expired, apply for benefits under this Act and

18 shall be treated as a new applicant, except that a

19 prior disqualification under subsection (d) shall be

20 considered in determining eligibility.’’.

21 (b) STATE PLAN PROVISIONS.—Section 11(e) of the

22 Act (7 U.S.C. 2020(e)) is amended—

23 (1) in paragraph (24), by striking ‘‘and’’ at the

24 end;
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1 (2) in paragraph (25), by striking the period at

2 the end and inserting a semicolon; and

3 (3) by adding at the end the following:

4 ‘‘(26) the guidelines the State agency uses in car5 rying out section 6(i); and’’.

6 (c) CONFORMING AMENDMENT.—Section 6(d)(2)(A) of

7 the Act (7 U.S.C. 2015(d)(2)(A)) is amended by striking

8 ‘‘that is comparable to a requirement of paragraph (1)’’.

9 SEC. 13029. DISQUALIFICATION FOR RECEIPT OF MULTIPLE

10 FOOD STAMP BENEFITS.

11 Section 6 of the Food Stamp Act of 1977 (7 U.S.C.

12 2015), as amended by section 13028, is further amended

13 by inserting after subsection (i) the following:

14 ‘‘(j) DISQUALIFICATION FOR RECEIPT OF MULTIPLE

15 FOOD STAMP BENEFITS.—An individual shall be ineligible

16 to participate in the food stamp program as a member of

17 any household for a 10-year period if the individual is

18 found by a State agency to have made, or is convicted in

19 a Federal or State court of having made, a fraudulent state20 ment or representation with respect to the identity or place

21 of residence of the individual in order to receive multiple

22 benefits simultaneously under the food stamp program.’’.
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1 SEC. 13030. DISQUALIFICATION OF FLEEING FELONS.

2 Section 6 of the Food Stamp Act of 1977 (7 U.S.C.

3 2015), as amended by section 13029, is further amended

4 by inserting after subsection (j) the following:

5 ‘‘(k) DISQUALIFICATION OF FLEEING FELONS.—No

6 member of a household who is otherwise eligible to partici7 pate in the food stamp program shall be eligible to partici8 pate in the program as a member of that or any other

9 household during any period during which the individual

10 is—

11 ‘‘(1) fleeing to avoid prosecution, or custody or

12 confinement after conviction, under the law of the

13 place from which the individual is fleeing, for a

14 crime, or attempt to commit a crime, that is a felony

15 under the law of the place from which the individual

16 is fleeing or that, in the case of New Jersey, is a high

17 misdemeanor under the law of New Jersey; or

18 ‘‘(2) violating a condition of probation or parole

19 imposed under a Federal or State law.’’.

20 SEC. 13031. COOPERATION WITH CHILD SUPPORT AGEN21 CIES.

22 Section 6 of the Food Stamp Act of 1977 (7 U.S.C.

23 2015), as amended by section 13030, is further amended

24 by inserting after subsection (k) the following:

25 ‘‘(l) CUSTODIAL PARENT’S COOPERATION WITH CHILD

26 SUPPORT AGENCIES.—
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1 ‘‘(1) IN GENERAL.—At the option of a State

2 agency, subject to paragraphs (2) and (3), no natural

3 or adoptive parent or other individual (collectively re4 ferred to in this subsection as ‘the individual’) who is

5 living with and exercising parental control over a

6 child under the age of 18 who has an absent parent

7 shall be eligible to participate in the food stamp pro8 gram unless the individual cooperates with the State

9 agency administering the program established under

10 part D of title IV of the Social Security Act (42

11 U.S.C. 651 et seq.)—

12 ‘‘(A) in establishing the paternity of the

13 child (if the child is born out of wedlock); and

14 ‘‘(B) in obtaining support for—

15 ‘‘(i) the child; or

16 ‘‘(ii) the individual and the child.

17 ‘‘(2) GOOD CAUSE FOR NONCOOPERATION.—

18 Paragraph (1) shall not apply to the individual if

19 good cause is found for refusing to cooperate, as deter20 mined by the State agency in accordance with stand21 ards prescribed by the Secretary in consultation with

22 the Secretary of Health and Human Services. The

23 standards shall take into consideration circumstances

24 under which cooperation may be against the best in25 terests of the child.
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1 ‘‘(3) FEES.—Paragraph (1) shall not require the

2 payment of a fee or other cost for services provided

3 under part D of title IV of the Social Security Act

4 (42 U.S.C. 651 et seq.).

5 ‘‘(m) NON-CUSTODIAL PARENT’S COOPERATION WITH

6 CHILD SUPPORT AGENCIES.—

7 ‘‘(1) IN GENERAL.—At the option of a State

8 agency, subject to paragraphs (2) and (3), a putative

9 or identified non-custodial parent of a child under the

10 age of 18 (referred to in this subsection as ‘the indi11 vidual’) shall not be eligible to participate in the food

12 stamp program if the individual refuses to cooperate

13 with the State agency administering the program es14 tablished under part D of title IV of the Social Secu15 rity Act (42 U.S.C. 651 et seq.)—

16 ‘‘(A) in establishing the paternity of the

17 child (if the child is born out of wedlock); and

18 ‘‘(B) in providing support for the child.

19 ‘‘(2) REFUSAL TO COOPERATE.—

20 ‘‘(A) GUIDELINES.—The Secretary, in con21 sultation with the Secretary of Health and

22 Human Services, shall develop guidelines on

23 what constitutes a refusal to cooperate under

24 paragraph (1).
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1 ‘‘(B) PROCEDURES.—The State agency shall

2 develop procedures, using guidelines developed

3 under subparagraph (A), for determining wheth4 er an individual is refusing to cooperate under

5 paragraph (1).

6 ‘‘(3) FEES.—Paragraph (1) shall not require the

7 payment of a fee or other cost for services provided

8 under part D of title IV of the Social Security Act

9 (42 U.S.C. 651 et seq.).

10 ‘‘(4) PRIVACY.—The State agency shall provide

11 safeguards to restrict the use of information collected

12 by a State agency administering the program estab13 lished under part D of title IV of the Social Security

14 Act (42 U.S.C. 651 et seq.) to purposes for which the

15 information is collected.’’.

16 SEC. 13032. DISQUALIFICATION RELATING TO CHILD SUP17 PORT ARREARS.

18 Section 6 of the Food Stamp Act of 1977 (7 U.S.C.

19 2015), as amended by section 13031, is further amended

20 by inserting after subsection (m) the following:

21 ‘‘(n) DISQUALIFICATION FOR CHILD SUPPORT AR22 REARS.—

23 ‘‘(1) IN GENERAL.—No individual shall be eligi24 ble to participate in the food stamp program as a

25 member of any household during any month that the
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1 individual is delinquent in any payment due under

2 a court order for the support of a child of the individ3 ual.

4 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not

5 apply if—

6 ‘‘(A) a court is allowing the individual to

7 delay payment; or

8 ‘‘(B) the individual is complying with a

9 payment plan approved by a court or the State

10 agency designated under part D of title IV of the

11 Social Security Act (42 U.S.C. 651 et seq.) to

12 provide support for the child of the individual.’’.

13 SEC. 13033. WORK REQUIREMENT.

14 (a) IN GENERAL.—Section 6 of the Food Stamp Act

15 of 1977 (7 U.S.C. 2015), as amended by section 13032, is

16 further amended by inserting after subsection (n) the follow17 ing:

18 ‘‘(o) WORK REQUIREMENT.—

19 ‘‘(1) DEFINITION OF WORK PROGRAM.—In this

20 subsection, the term ‘work program’ means—

21 ‘‘(A) a program under the Job Training

22 Partnership Act (29 U.S.C. 1501 et seq.);

23 ‘‘(B) a program under section 236 of the

24 Trade Act of 1974 (19 U.S.C. 2296); or
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1 ‘‘(C) a program of employment or training

2 operated or supervised by a State or political

3 subdivision of a State that meets standards ap4 proved by the Governor of the State, including a

5 program under section 6(d)(4), other than a job

6 search program or a job search training pro7 gram.

8 ‘‘(2) WORK REQUIREMENT.—Subject to the other

9 provisions of this subsection, no individual shall be el10 igible to participate in the food stamp program as a

11 member of any household if, during the preceding 12-

12 month period, the individual received food stamp ben13 efits for not less than 4 months during which the in14 dividual did not—

15 ‘‘(A) work 20 hours or more per week, aver16 aged monthly; or

17 ‘‘(B) participate in and comply with the re18 quirements of a work program for 20 hours or

19 more per week, as determined by the State agen20 cy; or

21 ‘‘(C) participate in a program under sec22 tion 20 or a comparable program established by

23 a State or political subdivision of a State.

24 ‘‘(3) EXCEPTION.—Paragraph (2) shall not

25 apply to an individual if the individual is—
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1 ‘‘(A) under 18 or over 50 years of age;

2 ‘‘(B) medically certified as physically or

3 mentally unfit for employment;

4 ‘‘(C) a parent or other member of a house5 hold with responsibility for a dependent child;

6 ‘‘(D) otherwise exempt under section

7 6(d)(2); or

8 ‘‘(E) a pregnant woman.

9 ‘‘(4) WAIVER.—

10 ‘‘(A) IN GENERAL.—On the request of a

11 State agency, the Secretary may waive the ap12 plicability of paragraph (2) to any group of in13 dividuals in the State if the Secretary makes a

14 determination that the area in which the indi15 viduals reside—

16 ‘‘(i) has an unemployment rate of over

17 10 percent; or

18 ‘‘(ii) does not have a sufficient number

19 of jobs to provide employment for the indi20 viduals.

21 ‘‘(B) REPORT.—The Secretary shall report

22 the basis for a waiver under subparagraph (A)

23 to the Committee on Agriculture of the House of

24 Representatives and the Committee on Agri25 culture, Nutrition, and Forestry of the Senate.
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1 ‘‘(5) SUBSEQUENT ELIGIBILITY.—

2 ‘‘(A) IN GENERAL.—Paragraph (2) shall

3 cease to apply to an individual if, during a 30-

4 day period, the individual—

5 ‘‘(i) works 80 or more hours;

6 ‘‘(ii) participates in and complies with

7 the requirements of a work program for 80

8 or more hours, as determined by a State

9 agency; or

10 ‘‘(iii) participates in a program under

11 section 20 or a comparable program estab12 lished by a State or political subdivision of

13 a State.

14 ‘‘(B) LIMITATION.—During the subsequent

15 12-month period, the individual shall be eligible

16 to participate in the food stamp program for not

17 more than 4 months during which the individual

18 does not—

19 ‘‘(i) work 20 hours or more per week,

20 averaged monthly;

21 ‘‘(ii) participate in and comply with

22 the requirements of a work program for 20

23 hours or more per week, as determined by

24 the State agency; or
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1 ‘‘(iii) participate in a program under

2 section 20 or a comparable program estab3 lished by a State or political subdivision of

4 a State.’’.

5 (b) TRANSITION PROVISION.—Prior to 1 year after the

6 date of enactment of this Act, the term ‘‘preceding 12-month

7 period’’ in section 6(o) of the Food Stamp Act of 1977, as

8 amended by subsection (a), means the preceding period that

9 begins on the date of enactment of this Act.

10 SEC. 13034. ENCOURAGE ELECTRONIC BENEFIT TRANSFER

11 SYSTEMS.

12 Section 7(i) of the Food Stamp Act of 1977 (7 U.S.C.

13 2016(i)) is amended—

14 (1) by striking paragraph (1) and inserting the

15 following:

16 ‘‘(1) ELECTRONIC BENEFIT TRANSFERS.—

17 ‘‘(A) IMPLEMENTATION.—Each State agen18 cy shall implement an electronic benefit transfer

19 system in which household benefits determined

20 under section 8(a) or 24 are issued from and

21 stored in a central databank before October 1,

22 2002, unless the Secretary provides a waiver for

23 a State agency that faces unusual barriers to im24 plementing an electronic benefit transfer system.
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1 ‘‘(B) TIMELY IMPLEMENTATION.—State

2 agencies are encouraged to implement an elec3 tronic benefit transfer system under subpara4 graph (A) as soon as practicable.

5 ‘‘(C) STATE FLEXIBILITY.—Subject to para6 graph (2), a State agency may procure and im7 plement an electronic benefit transfer system

8 under the terms, conditions, and design that the

9 State agency considers appropriate.

10 ‘‘(D) OPERATION.—An electronic benefit

11 transfer system should take into account gen12 erally accepted standard operating rules based

13 on—

14 ‘‘(i) commercial electronic funds trans15 fer technology;

16 ‘‘(ii) the need to permit interstate op17 eration and law enforcement monitoring;

18 and

19 ‘‘(iii) the need to permit monitoring and

20 investigations by authorized law enforcement

21 agencies.’’;

22 (2) in paragraph (2)—

23 (A) by striking ‘‘effective no later than

24 April 1, 1992,’’;

25 (B) in subparagraph (A)—
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1 (i) by striking ‘‘, in any 1 year,’’; and

2 (ii) by striking ‘‘on-line’’;

3 (C) by striking subparagraph (D) and in4 serting the following:

5 ‘‘(D)(i) measures to maximize the security

6 of a system using the most recent technology

7 available that the State agency considers appro8 priate and cost effective and which may include

9 personal identification numbers, photographic

10 identification on electronic benefit transfer cards,

11 and other measures to protect against fraud and

12 abuse; and

13 ‘‘(ii) effective not later than 2 years after

14 the effective date of this clause, to the extent

15 practicable, measures that permit a system to

16 differentiate items of food that may be acquired

17 with an allotment from items of food that may

18 not be acquired with an allotment.’’;

19 (D) in subparagraph (G), by striking ‘‘and’’

20 at the end;

21 (E) in subparagraph (H), by striking the

22 period at the end and inserting ‘‘; and’’; and

23 (F) by adding at the end the following:

24 ‘‘(I) procurement standards.’’; and

25 (3) by adding at the end the following:
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1 ‘‘(7) REPLACEMENT OF BENEFITS.—Regulations

2 issued by the Secretary regarding the replacement of

3 benefits and liability for replacement of benefits under

4 an electronic benefit transfer system shall be similar

5 to the regulations in effect for a paper food stamp is6 suance system.

7 ‘‘(8) REPLACEMENT CARD FEE.—A State agency

8 may collect a charge for replacement of an electronic

9 benefit transfer card by reducing the monthly allot10 ment of the household receiving the replacement card.

11 ‘‘(9) OPTIONAL PHOTOGRAPHIC IDENTIFICA12 TION.—

13 ‘‘(A) IN GENERAL.—A State agency may re14 quire that an electronic benefit card contain a

15 photograph of 1 or more members of a household.

16 ‘‘(B) OTHER AUTHORIZED USERS.—If a

17 State agency requires a photograph on an elec18 tronic benefit card under subparagraph (A), the

19 State agency shall establish procedures to ensure

20 that any other appropriate member of the house21 hold or any authorized representative of the

22 household may utilize the card.’’.
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1 SEC. 13035. VALUE OF MINIMUM ALLOTMENT.

2 The proviso in section 8(a) of the Food Stamp Act of

3 1977 (7 U.S.C. 2017(a)) is amended by striking ‘‘, and shall

4 be adjusted’’ and all that follows through ‘‘$5’’.

5 SEC. 13036. BENEFITS ON RECERTIFICATION.

6 Section 8(c)(2)(B) of the Food Stamp Act of 1977 (7

7 U.S.C. 2017(c)(2)(B)) is amended by striking ‘‘of more than

8 one month’’.

9 SEC. 13037. OPTIONAL COMBINED ALLOTMENT FOR EXPE10 DITED HOUSEHOLDS.

11 Section 8(c) of the Food Stamp Act of 1977 (7 U.S.C.

12 2017(c)) is amended by striking paragraph (3) and insert13 ing the following:

14 ‘‘(3) OPTIONAL COMBINED ALLOTMENT FOR EX15 PEDITED HOUSEHOLDS.—A State agency may pro16 vide to an eligible household applying after the 15th

17 day of a month, in lieu of the initial allotment of the

18 household and the regular allotment of the household

19 for the following month, an allotment that is equal to

20 the total amount of the initial allotment and the first

21 regular allotment. The allotment shall be provided in

22 accordance with section 11(e)(3) in the case of a

23 household that is not entitled to expedited service and

24 in accordance with paragraphs (3) and (9) of section

25 11(e) in the case of a household that is entitled to ex26 pedited service.’’.
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1 SEC. 13038. FAILURE TO COMPLY WITH OTHER MEANS-TEST2 ED PUBLIC ASSISTANCE PROGRAMS.

3 Section 8 of the Food Stamp Act of 1977 (7 U.S.C.

4 2017) is amended by striking subsection (d) and inserting

5 the following:

6 ‘‘(d) REDUCTION OF PUBLIC ASSISTANCE BENE7 FITS.—

8 ‘‘(1) IN GENERAL.—If the benefits of a household

9 are reduced under a Federal, State, or local law relat10 ing to a means-tested public assistance program for

11 the failure of a member of the household to perform

12 an action required under the law or program, for the

13 duration of the reduction—

14 ‘‘(A) the household may not receive an in15 creased allotment as the result of a decrease in

16 the income of the household to the extent that the

17 decrease is the result of the reduction; and

18 ‘‘(B) the State agency may reduce the allot19 ment of the household by not more than 25 per20 cent.

21 ‘‘(2) RULES AND PROCEDURES.—If the allotment

22 of a household is reduced under this subsection for a

23 failure to perform an action required under part A

24 of title IV of the Social Security Act (42 U.S.C. 601

25 et seq.), the State agency may use the rules and proce26 dures that apply under part A of title IV of the Act
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1 to reduce the allotment under the food stamp pro2 gram.’’.

3 SEC. 13039. ALLOTMENTS FOR HOUSEHOLDS RESIDING IN

4 CENTERS.

5 Section 8 of the Food Stamp Act of 1977 (7 U.S.C.

6 2017) is amended by adding at the end the following:

7 ‘‘(f) ALLOTMENTS FOR HOUSEHOLDS RESIDING IN

8 CENTERS.—

9 ‘‘(1) IN GENERAL.—In the case of an individual

10 who resides in a center for the purpose of a drug or

11 alcoholic treatment program described in the last sen12 tence of section 3(i), a State agency may provide an

13 allotment for the individual to—

14 ‘‘(A) the center as an authorized representa15 tive of the individual for a period that is less

16 than 1 month; and

17 ‘‘(B) the individual, if the individual leaves

18 the center.

19 ‘‘(2) DIRECT PAYMENT.—A State agency may re20 quire an individual referred to in paragraph (1) to

21 designate the center in which the individual resides as

22 the authorized representative of the individual for the

23 purpose of receiving an allotment.’’.
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1 SEC. 13040. CONDITION PRECEDENT FOR APPROVAL OF RE2 TAIL FOOD STORES AND WHOLESALE FOOD

3 CONCERNS.

4 Section 9(a)(1) of the Food Stamp Act of 1977 (7

5 U.S.C. 2018(a)(1)) is amended by adding at the end the

6 following: ‘‘No retail food store or wholesale food concern

7 of a type determined by the Secretary, based on factors that

8 include size, location, and type of items sold, shall be ap9 proved to be authorized or reauthorized for participation

10 in the food stamp program unless an authorized employee

11 of the Department of Agriculture, a designee of the Sec12 retary, or, if practicable, an official of the State or local

13 government designated by the Secretary has visited the store

14 or concern for the purpose of determining whether the store

15 or concern should be approved or reauthorized, as appro16 priate.’’.

17 SEC. 13041. AUTHORITY TO ESTABLISH AUTHORIZATION PE18 RIODS.

19 Section 9(a) of the Food Stamp Act of 1977 (7 U.S.C.

20 2018(a)) is amended by adding at the end the following:

21 ‘‘(3) AUTHORIZATION PERIODS.—The Secretary

22 shall establish specific time periods during which au23 thorization to accept and redeem coupons, or to re24 deem benefits through an electronic benefit transfer

25 system, shall be valid under the food stamp pro26 gram.’’.
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1 SEC. 13042. INFORMATION FOR VERIFYING ELIGIBILITY FOR

2 AUTHORIZATION.

3 Section 9(c) of the Food Stamp Act of 1977 (7 U.S.C.

4 2018(c)) is amended—

5 (1) in the first sentence, by inserting ‘‘, which

6 may include relevant income and sales tax filing doc7 uments,’’ after ‘‘submit information’’; and

8 (2) by inserting after the first sentence the fol9 lowing: ‘‘The regulations may require retail food

10 stores and wholesale food concerns to provide written

11 authorization for the Secretary to verify all relevant

12 tax filings with appropriate agencies and to obtain

13 corroborating documentation from other sources so

14 that the accuracy of information provided by the

15 stores and concerns may be verified.’’.

16 SEC. 13043. WAITING PERIOD FOR STORES THAT FAIL TO

17 MEET AUTHORIZATION CRITERIA.

18 Section 9(d) of the Food Stamp Act of 1977 (7 U.S.C.

19 2018(d)) is amended by adding at the end the following:

20 ‘‘A retail food store or wholesale food concern that is denied

21 approval to accept and redeem coupons because the store

22 or concern does not meet criteria for approval established

23 by the Secretary may not, for at least 6 months, submit

24 a new application to participate in the program. The Sec25 retary may establish a longer time period under the preced-
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1 ing sentence, including permanent disqualification, that re2 flects the severity of the basis of the denial.’’.

3 SEC. 13044. EXPEDITED COUPON SERVICE.

4 Section 11(e)(9) of the Food Stamp Act of 1977 (7

5 U.S.C. 2020(e)(9)) is amended—

6 (1) in subparagraph (A)—

7 (A) by striking ‘‘five days’’ and inserting

8 ‘‘7 days’’; and

9 (B) by inserting ‘‘and’’ at the end;

10 (2) by striking subparagraphs (B) and (C);

11 (3) by redesignating subparagraph (D) as sub12 paragraph (B); and

13 (4) in subparagraph (B), as redesignated by

14 paragraph (3), by striking ‘‘, (B), or (C)’’.

15 SEC. 13045. WITHDRAWING FAIR HEARING REQUESTS.

16 Section 11(e)(10) of the Food Stamp Act of 1977 (7

17 U.S.C. 2020(e)(10)) is amended by inserting before the

18 semicolon at the end a period and the following: ‘‘At the

19 option of a State, at any time prior to a fair hearing deter20 mination under this paragraph, a household may with21 draw, orally or in writing, a request by the household for

22 the fair hearing. If the withdrawal request is an oral re23 quest, the State agency shall provide a written notice to

24 the household confirming the withdrawal request and pro-
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1 viding the household with an opportunity to request a hear2 ing’’.

3 SEC. 13046. DISQUALIFICATION OF RETAILERS WHO INTEN4 TIONALLY SUBMIT FALSIFIED APPLICATIONS.

5 Section 12(b) of the Food Stamp Act of 1977 (7 U.S.C.

6 2021(b)) is amended—

7 (1) in paragraph (2), by striking ‘‘and’’ at the

8 end;

9 (2) in paragraph (3), by striking the period at

10 the end and inserting ‘‘; and’’; and

11 (3) by adding at the end the following:

12 ‘‘(4) for a reasonable period of time to be deter13 mined by the Secretary, including permanent dis14 qualification, on the knowing submission of an appli15 cation for the approval or reauthorization to accept

16 and redeem coupons that contains false information

17 about a substantive matter that was a part of the ap18 plication.’’.

19 SEC. 13047. DISQUALIFICATION OF RETAILERS WHO ARE

20 DISQUALIFIED UNDER THE WIC PROGRAM.

21 Section 12 of the Food Stamp Act of 1977 (7 U.S.C.

22 2021) is amended by adding at the end the following:

23 ‘‘(g) DISQUALIFICATION OF RETAILERS WHO ARE

24 DISQUALIFIED UNDER THE WIC PROGRAM.—
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1 ‘‘(1) IN GENERAL.—The Secretary shall issue

2 regulations providing criteria for the disqualification

3 under this Act of an approved retail food store and

4 a wholesale food concern that is disqualified from ac5 cepting benefits under the special supplemental nutri6 tion program for women, infants, and children estab7 lished under section 17 of the Child Nutrition Act of

8 1966 (7 U.S.C. 1786).

9 ‘‘(2) TERMS.—A disqualification under para10 graph (1)—

11 ‘‘(A) shall be for the same length of time as

12 the disqualification from the program referred to

13 in paragraph (1);

14 ‘‘(B) may begin at a later date than the dis15 qualification from the program referred to in

16 paragraph (1); and

17 ‘‘(C) notwithstanding section 14, shall not

18 be subject to judicial or administrative review.’’.

19 SEC. 13048. COLLECTION OF OVERISSUANCES.

20 (a) COLLECTION OF OVERISSUANCES.—Section 13 of

21 the Food Stamp Act of 1977 (7 U.S.C. 2022) is amended—

22 (1) by striking subsection (b) and inserting the

23 following:

24 ‘‘(b) COLLECTION OF OVERISSUANCES.—
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1 ‘‘(1) IN GENERAL.—Except as otherwise provided

2 in this subsection, a State agency shall collect any

3 overissuance of coupons issued to a household by—

4 ‘‘(A) reducing the allotment of the house5 hold;

6 ‘‘(B) withholding amounts from unemploy7 ment compensation from a member of the house8 hold under subsection (c);

9 ‘‘(C) recovering from Federal pay or a Fed10 eral income tax refund under subsection (d); or

11 ‘‘(D) any other means.

12 ‘‘(2) COST EFFECTIVENESS.—Paragraph (1)

13 shall not apply if the State agency demonstrates to

14 the satisfaction of the Secretary that all of the means

15 referred to in paragraph (1) are not cost effective.

16 ‘‘(3) MAXIMUM REDUCTION ABSENT FRAUD.—If

17 a household received an overissuance of coupons with18 out any member of the household being found eligible

19 to participate in the program under section 6(b)(1)

20 and a State agency elects to reduce the allotment of

21 the household under paragraph (1)(A), the State

22 agency shall not reduce the monthly allotment of the

23 household under paragraph (1)(A) by an amount in

24 excess of the greater of—
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1 ‘‘(A) 10 percent of the monthly allotment of

2 the household; or

3 ‘‘(B) $10.

4 ‘‘(4) PROCEDURES.—A State agency shall collect

5 an overissuance of coupons issued to a household

6 under paragraph (1) in accordance with the require7 ments established by the State agency for providing

8 notice, electing a means of payment, and establishing

9 a time schedule for payment.’’; and

10 (2) in subsection (d)—

11 (A) by striking ‘‘as determined under sub12 section (b) and except for claims arising from an

13 error of the State agency,’’ and inserting ‘‘, as

14 determined under subsection (b)(1),’’; and

15 (B) by inserting before the period at the end

16 the following: ‘‘or a Federal income tax refund as

17 authorized by section 3720A of title 31, United

18 States Code’’.

19 (b) CONFORMING AMENDMENTS.—Section 11(e)(8) of

20 the Act (7 U.S.C. 2020(e)(8)) is amended—

21 (1) by striking ‘‘and excluding claims’’ and all

22 that follows through ‘‘such section’’; and

23 (2) by inserting before the semicolon at the end

24 the following: ‘‘or a Federal income tax refund as au-
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1 thorized by section 3720A of title 31, United States

2 Code’’.

3 (c) RETENTION RATE.—Section 16(a) of the Act (7

4 U.S.C. 2025(a)) is amended by striking ‘‘25 percent during

5 the period beginning October 1, 1990’’ and all that follows

6 through ‘‘error of a State agency’’ and inserting the follow7 ing: ‘‘25 percent of the overissuances collected by the State

8 agency under section 13, except those overissuances arising

9 from an error of the State agency’’.

10 SEC. 13049. AUTHORITY TO SUSPEND STORES VIOLATING

11 PROGRAM REQUIREMENTS PENDING ADMIN12 ISTRATIVE AND JUDICIAL REVIEW.

13 Section 14(a) of the Food Stamp Act of 1977 (7 U.S.C.

14 2023(a)) is amended—

15 (1) by redesignating the first through seventeenth

16 sentences as paragraphs (1) through (17), respectively;

17 and

18 (2) by adding at the end the following:

19 ‘‘(18) SUSPENSION OF STORES PENDING RE20 VIEW.—Notwithstanding any other provision of this

21 subsection, any permanent disqualification of a retail

22 food store or wholesale food concern under paragraph

23 (3) or (4) of section 12(b) shall be effective from the

24 date of receipt of the notice of disqualification. If the

25 disqualification is reversed through administrative or
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1 judicial review, the Secretary shall not be liable for

2 the value of any sales lost during the disqualification

3 period.’’.

4 SEC. 13050. LIMITATION OF FEDERAL MATCH.

5 Section 16(a)(4) of the Food Stamp Act of 1977 (7

6 U.S.C. 2025(a)(4)) is amended by inserting after the

7 comma at the end the following: ‘‘but not including recruit8 ment activities,’’.

9 SEC. 13051. WORK SUPPLEMENTATION OR SUPPORT PRO10 GRAM.

11 Section 16 of the Food Stamp Act of 1977 (7 U.S.C.

12 2025) is amended by adding at the end the following:

13 ‘‘(c) WORK SUPPLEMENTATION OR SUPPORT PRO14 GRAM.—

15 ‘‘(1) DEFINITION OF WORK SUPPLEMENTATION

16 OR SUPPORT PROGRAM.—In this subsection, the term

17 ‘work supplementation or support program’ means a

18 program under which, as determined by the Sec19 retary, public assistance (including any benefits pro20 vided under a program established by the State and

21 the food stamp program) is provided to an employer

22 to be used for hiring and employing a public assist23 ance recipient who was not employed by the employer

24 at the time the public assistance recipient entered the

25 program.
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1 ‘‘(2) PROGRAM.—A State agency may elect to

2 use an amount equal to the allotment that would oth3 erwise be issued to a household under the food stamp

4 program, but for the operation of this subsection, for

5 the purpose of subsidizing or supporting a job under

6 a work supplementation or support program estab7 lished by the State.

8 ‘‘(3) PROCEDURE.—If a State agency makes an

9 election under paragraph (2) and identifies each

10 household that participates in the food stamp pro11 gram that contains an individual who is participat12 ing in the work supplementation or support pro13 gram—

14 ‘‘(A) the Secretary shall pay to the State

15 agency an amount equal to the value of the allot16 ment that the household would be eligible to re17 ceive but for the operation of this subsection;

18 ‘‘(B) the State agency shall expend the

19 amount received under subparagraph (A) in ac20 cordance with the work supplementation or sup21 port program in lieu of providing the allotment

22 that the household would receive but for the oper23 ation of this subsection;

24 ‘‘(C) for purposes of—
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1 ‘‘(i) sections 5 and 8(a), the amount

2 received under this subsection shall be ex3 cluded from household income and resources;

4 and

5 ‘‘(ii) section 8(b), the amount received

6 under this subsection shall be considered to

7 be the value of an allotment provided to the

8 household; and

9 ‘‘(D) the household shall not receive an al10 lotment from the State agency for the period

11 during which the member continues to partici12 pate in the work supplementation or support

13 program.

14 ‘‘(4) OTHER WORK REQUIREMENTS.—No indi15 vidual shall be excused, by reason of the fact that a

16 State has a work supplementation or support pro17 gram, from any work requirement under section 6(d),

18 except during the periods in which the individual is

19 employed under the work supplementation or support

20 program.

21 ‘‘(5) LENGTH OF PARTICIPATION.—A State agen22 cy shall provide a description of how the public as23 sistance recipients in the program shall, within a spe24 cific period of time, be moved from supplemented or
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1 supported employment to employment that is not sup2 plemented or supported.

3 ‘‘(6) DISPLACEMENT.—A work supplementation

4 or support program shall not displace the employ5 ment of individuals who are not supplemented or sup6 ported.’’.

7 SEC. 13052. AUTHORIZATION OF PILOT PROJECTS.

8 The last sentence of section 17(b)(1)(A) of the Food

9 Stamp Act of 1977 (7 U.S.C. 2026(b)(1)(A)) is amended

10 by striking ‘‘1995’’ and inserting ‘‘2002’’.

11 SEC. 13053. EMPLOYMENT INITIATIVES PROGRAM.

12 Section 17 of the Food Stamp Act of 1977 (7 U.S.C.

13 2026) is amended by striking subsection (d) and inserting

14 the following:

15 ‘‘(d) EMPLOYMENT INITIATIVES PROGRAM.—

16 ‘‘(1) ELECTION TO PARTICIPATE.—

17 ‘‘(A) IN GENERAL.—Subject to the other

18 provisions of this subsection, a State may elect

19 to carry out an employment initiatives program

20 under this subsection.

21 ‘‘(B) REQUIREMENT.—A State shall be eli22 gible to carry out an employment initiatives pro23 gram under this subsection only if not less than

24 50 percent of the households that received food

25 stamp benefits during the summer of 1993 also
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1 received benefits under a State program funded

2 under part A of title IV of the Social Security

3 Act (42 U.S.C. 601 et seq.) during the summer

4 of 1993.

5 ‘‘(2) PROCEDURE.—

6 ‘‘(A) IN GENERAL.—A State that has elected

7 to carry out an employment initiatives program

8 under paragraph (1) may use amounts equal to

9 the food stamp allotments that would otherwise

10 be issued to a household under the food stamp

11 program, but for the operation of this subsection,

12 to provide cash benefits in lieu of the food stamp

13 allotments to the household if the household is el14 igible under paragraph (3).

15 ‘‘(B) PAYMENT.—The Secretary shall pay to

16 each State that has elected to carry out an em17 ployment initiatives program under paragraph

18 (1) an amount equal to the value of the allot19 ment that each household would be eligible to re20 ceive under this Act but for the operation of this

21 subsection.

22 ‘‘(C) OTHER PROVISIONS.—For purposes of

23 the food stamp program (other than this sub24 section)—
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1 ‘‘(i) cash assistance under this sub2 section shall be considered to be an allot3 ment; and

4 ‘‘(ii) each household receiving cash ben5 efits under this subsection shall not receive

6 any other food stamp benefit for the period

7 for which the cash assistance is provided.

8 ‘‘(D) ADDITIONAL PAYMENTS.—Each State

9 that has elected to carry out an employment ini10 tiatives program under paragraph (1) shall—

11 ‘‘(i) increase the cash benefits provided

12 to each household under this subsection to

13 compensate for any State or local sales tax

14 that may be collected on purchases of food

15 by any household receiving cash benefits

16 under this subsection, unless the Secretary

17 determines on the basis of information pro18 vided by the State that the increase is un19 necessary on the basis of the limited nature

20 of the items subject to the State or local

21 sales tax; and

22 ‘‘(ii) pay the cost of any increase in

23 cash benefits required by clause (i).
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1 ‘‘(3) ELIGIBILITY.—A household shall be eligible

2 to receive cash benefits under paragraph (2) if an

3 adult member of the household—

4 ‘‘(A) has worked in unsubsidized employ5 ment for not less than the preceding 90 days;

6 ‘‘(B) has earned not less than $350 per

7 month from the employment referred to in sub8 paragraph (A) for not less than the preceding 90

9 days;

10 ‘‘(C)(i) is receiving benefits under a State

11 program funded under part A of title IV of the

12 Social Security Act (42 U.S.C. 601 et seq.); or

13 ‘‘(ii) was receiving benefits under a State

14 program funded under part A of title IV of the

15 Social Security Act (42 U.S.C. 601 et seq.) at the

16 time the member first received cash benefits

17 under this subsection and is no longer eligible for

18 the State program because of earned income;

19 ‘‘(D) is continuing to earn not less than

20 $350 per month from the employment referred to

21 in subparagraph (A); and

22 ‘‘(E) elects to receive cash benefits in lieu of

23 food stamp benefits under this subsection.

24 ‘‘(4) EVALUATION.—A State that operates a pro25 gram under this subsection for 2 years shall provide
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1 to the Secretary a written evaluation of the impact of

2 cash assistance under this subsection. The State agen3 cy, with the concurrence of the Secretary, shall deter4 mine the content of the evaluation.’’.

5 SEC. 13054. REAUTHORIZATION OF PUERTO RICO NUTRI6 TION ASSISTANCE PROGRAM.

7 The first sentence of section 19(a)(1)(A) of the Food

8 Stamp Act of 1977 (7 U.S.C. 2028(a)(1)(A)) is amended

9 by striking ‘‘$974,000,000’’ and all that follows through

10 ‘‘fiscal year 1995’’ and inserting ‘‘$1,143,000,000 for each

11 of fiscal years 1995 and 1996, $1,182,000,000 for fiscal year

12 1997, $1,223,000,000 for fiscal year 1998, $1,266,000,000

13 for fiscal year 1999, $1,310,000,000 for fiscal year 2000,

14 $1,357,000,000 for fiscal year 2001, and $1,404,000,000 for

15 fiscal year 2002’’.

16 SEC. 13055. SIMPLIFIED FOOD STAMP PROGRAM.

17 (a) IN GENERAL.—The Act (7 U.S.C. 2011 et seq.) is

18 amended by adding at the end the following:

19 ‘‘SEC. 24. SIMPLIFIED FOOD STAMP PROGRAM.

20 ‘‘(a) DEFINITION OF FEDERAL COSTS.—In this sec21 tion, the term ‘Federal costs’ does not include any Federal

22 costs incurred under section 17.

23 ‘‘(b) ELECTION.—Subject to subsection (d), a State

24 agency may elect to carry out a Simplified Food Stamp
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1 Program (referred to in this section as a ‘Program’) in ac2 cordance with this section.

3 ‘‘(c) OPERATION OF PROGRAM.—If a State agency

4 elects to carry out a Program, within the State or a politi5 cal subdivision of the State—

6 ‘‘(1) a household in which all members receive

7 assistance under a State program funded under part

8 A of title IV of the Social Security Act (42 U.S.C.

9 601 et seq.) shall automatically be eligible to partici10 pate in the Program; and

11 ‘‘(2) subject to subsection (f), benefits under the

12 Program shall be determined under rules and proce13 dures established by the State under—

14 ‘‘(A) a State program funded under part A

15 of title IV of the Social Security Act (42 U.S.C.

16 601 et seq.);

17 ‘‘(B) the food stamp program (other than

18 section 25); or

19 ‘‘(C) a combination of a State program

20 funded under part A of title IV of the Social Se21 curity Act (42 U.S.C. 601 et seq.) and the food

22 stamp program (other than section 25).

23 ‘‘(d) APPROVAL OF PROGRAM.—

24 ‘‘(1) STATE PLAN.—A State agency may not op25 erate a Program unless the Secretary approves a
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1 State plan for the operation of the Program under

2 paragraph (2).

3 ‘‘(2) APPROVAL OF PLAN.—The Secretary shall

4 approve any State plan to carry out a Program if the

5 Secretary determines that the plan—

6 ‘‘(A) complies with this section; and

7 ‘‘(B) contains sufficient documentation that

8 the plan will not increase Federal costs for any

9 fiscal year.

10 ‘‘(e) INCREASED FEDERAL COSTS.—

11 ‘‘(1) DETERMINATION.—During each fiscal year

12 and not later than 90 days after the end of each fiscal

13 year, the Secretary shall determine whether a Pro14 gram being carried out by a State agency is increas15 ing Federal costs under this Act above the Federal

16 costs incurred under the food stamp program in oper17 ation in the State or political subdivision of the State

18 for the fiscal year prior to the implementation of the

19 Program, adjusted for any changes in—

20 ‘‘(A) participation;

21 ‘‘(B) the income of participants in the food

22 stamp program that is not attributable to public

23 assistance; and

24 ‘‘(C) the thrifty food plan under section

25 3(o).
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1 ‘‘(2) NOTIFICATION.—If the Secretary determines

2 that the Program has increased Federal costs under

3 this Act for any fiscal year or any portion of any fis4 cal year, the Secretary shall notify the State agency

5 not later than 30 days after the Secretary makes the

6 determination under paragraph (1).

7 ‘‘(3) ENFORCEMENT.—

8 ‘‘(A) CORRECTIVE ACTION.—Not later than

9 90 days after the date of a notification under

10 paragraph (2), the State agency shall submit a

11 plan for approval by the Secretary for prompt

12 corrective action that is designed to prevent the

13 Program from increasing Federal costs under

14 this Act.

15 ‘‘(B) TERMINATION.—If the State agency

16 does not submit a plan under subparagraph (A)

17 or carry out a plan approved by the Secretary,

18 the Secretary shall terminate the approval of the

19 State agency to operate a Program and the State

20 agency shall be ineligible to operate a future Pro21 gram.

22 ‘‘(f) RULES AND PROCEDURES.—

23 ‘‘(1) IN GENERAL.—In operating a Program, a

24 State or political subdivision of a State may follow

25 the rules and procedures established by the State or
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1 political subdivision under a State program funded

2 under part A of title IV of the Social Security Act (42

3 U.S.C. 601 et seq.) or under the food stamp program.

4 ‘‘(2) STANDARDIZED DEDUCTIONS.—In operat5 ing a Program, a State may standardize the deduc6 tions provided under section 5(e). In developing the

7 standardized deduction, the State shall consider the

8 work expenses, dependent care costs, and shelter costs

9 of participating households.

10 ‘‘(3) REQUIREMENTS.—In operating a Program,

11 a State or political subdivision shall comply with the

12 requirements of—

13 ‘‘(A) subsections (a) through (g) of section 7;

14 ‘‘(B) section 8(a) (except that the income of

15 a household may be determined under a State

16 program funded under part A of title IV of the

17 Social Security Act (42 U.S.C. 601 et seq.));

18 ‘‘(C) subsection (b) and (d) of section 8;

19 ‘‘(D) subsections (a), (c), (d), and (n) of sec20 tion 11;

21 ‘‘(E) paragraphs (8), (12), (17), (19), (21),

22 (26), and (27) of section 11(e);

23 ‘‘(F) section 11(e)(10) (or a comparable re24 quirement established by the State under a State
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1 program funded under part A of title IV of the

2 Social Security Act (42 U.S.C. 601 et seq.)); and

3 ‘‘(G) section 16.

4 ‘‘(4) LIMITATION ON ELIGIBILITY.—Notwith5 standing any other provision of this section, a house6 hold may not receive benefits under this section as a

7 result of the eligibility of the household under a State

8 program funded under part A of title IV of the Social

9 Security Act (42 U.S.C. 601 et seq.), unless the Sec10 retary determines that any household with income

11 above 130 percent of the poverty guidelines is not eli12 gible for the program.’’.

13 (b) STATE PLAN PROVISIONS.—Section 11(e) of the

14 Act (7 U.S.C. 2020(e)), as amended by sections 13028(b),

15 is further amended by adding at the end the following:

16 ‘‘(27) if a State agency elects to carry out a

17 Simplified Food Stamp Program under section 24,

18 the plans of the State agency for operating the pro19 gram, including—

20 ‘‘(A) the rules and procedures to be followed

21 by the State to determine food stamp benefits;

22 ‘‘(B) how the State will address the needs of

23 households that experience high shelter costs in

24 relation to the incomes of the households; and
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1 ‘‘(C) a description of the method by which

2 the State will carry out a quality control system

3 under section 16(c).’’.

4 (c) CONFORMING AMENDMENTS.—

5 (1) Section 8 of the Act (7 U.S.C. 2017), as

6 amended by section 13039, is further amended—

7 (A) by striking subsection (e); and

8 (B) by redesignating subsection (f) as sub9 section (e).

10 (2) Section 17 of the Act (7 U.S.C. 2026) is

11 amended—

12 (A) by striking subsection (i); and

13 (B) by redesignating subsections (j) through

14 (l) as subsections (i) through (k), respectively.

15 SEC. 13056. STATE FOOD ASSISTANCE BLOCK GRANT.

16 (a) IN GENERAL.—The Food Stamp Act of 1977 (7

17 U.S.C. 2011 et seq.), as amended by section 13055, is fur18 ther amended by adding at the end the following:

19 ‘‘SEC. 25. STATE FOOD ASSISTANCE BLOCK GRANT.

20 ‘‘(a) DEFINITIONS.—In this section:

21 ‘‘(1) FOOD ASSISTANCE.—The term ‘food assist22 ance’ means assistance that may be used only to ob23 tain food, as defined in section 3(g).
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1 ‘‘(2) STATE.—The term ‘State’ means each of the

2 50 States, the District of Columbia, Guam, and the

3 Virgin Islands of the United States.

4 ‘‘(b) ESTABLISHMENT.—The Secretary shall establish

5 a program to make grants to States in accordance with this

6 section to provide—

7 ‘‘(1) food assistance to needy individuals and

8 families residing in the State; and

9 ‘‘(2) funds for administrative costs incurred in

10 providing the assistance.

11 ‘‘(c) ELECTION.—

12 ‘‘(1) IN GENERAL.—A State may annually elect

13 to participate in the program established under sub14 section (b) if the State—

15 ‘‘(A) has fully implemented an electronic

16 benefit transfer system that operates in the entire

17 State;

18 ‘‘(B) has a payment error rate under sec19 tion 16(c) that is not more than 6 percent as an20 nounced most recently by the Secretary; or

21 ‘‘(C) has a payment error rate in excess of

22 6 percent and agrees to contribute non-Federal

23 funds for the fiscal year of the grant, for benefits

24 and administration of the State’s food assistance
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1 program, the amount determined under para2 graph (2).

3 ‘‘(2) STATE MANDATORY CONTRIBUTIONS.—

4 ‘‘(A) IN GENERAL.—In the case of a State

5 that elects to participate in the program under

6 paragraph (1)(C), the State shall agree to con7 tribute, for a fiscal year, an amount equal to—

8 ‘‘(A)(i) the benefits issued in the State; mul9 tiplied by

10 ‘‘(ii) the payment error rate of the State;

11 minus

12 ‘‘(B)(i) the benefits issued in the State; mul13 tiplied by

14 ‘‘(ii) 6 percent.

15 ‘‘(B) DETERMINATION.—Notwithstanding

16 sections 13 and 14, the calculation of the con17 tribution shall be based solely on the determina18 tion of the Secretary of the payment error rate.

19 ‘‘(C) DATA.—For purposes of implementing

20 subparagraph (A) for a fiscal year, the Secretary

21 shall use the data for the most recent fiscal year

22 available.

23 ‘‘(3) ELECTION LIMITATION.—

24 ‘‘(A) RE-ENTERING FOOD STAMP PRO25 GRAM.—A State that elects to participate in the
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1 program under paragraph (1) may in a subse2 quent year decline to elect to participate in the

3 program and instead participate in the food

4 stamp program in accordance with the other sec5 tions of this Act.

6 ‘‘(B) LIMITATION.—Subsequent to re-enter7 ing the food stamp program under subparagraph

8 (A), the State shall only be eligible to participate

9 in the food stamp program in accordance with

10 the other sections of this Act and shall not be eli11 gible to elect to participate in the program estab12 lished under subsection (b).

13 ‘‘(4) PROGRAM EXCLUSIVE.—

14 ‘‘(A) IN GENERAL.—A State that is partici15 pating in the program established under sub16 section (b) shall not be subject to, or receive any

17 benefit under, this Act except as provided in this

18 section.

19 ‘‘(B) CONTRACT WITH FEDERAL GOVERN20 MENT.—Nothing in this section shall prohibit a

21 State from contracting with the Federal Govern22 ment for the provision of services or materials

23 necessary to carry out a program under this sec24 tion.
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1 ‘‘(d) LEAD AGENCY.—A State desiring to receive a

2 grant under this section shall designate, in an application

3 submitted to the Secretary under subsection (e)(1), an ap4 propriate State agency responsible for the administration

5 of the program under this section as the lead agency.

6 ‘‘(e) APPLICATION AND PLAN.—

7 ‘‘(1) APPLICATION.—To be eligible to receive as8 sistance under this section, a State shall prepare and

9 submit to the Secretary an application at such time,

10 in such manner, and containing such information as

11 the Secretary shall by regulation require, including—

12 ‘‘(A) an assurance that the State will com13 ply with the requirements of this section;

14 ‘‘(B) a State plan that meets the require15 ments of paragraph (3); and

16 ‘‘(C) an assurance that the State will com17 ply with the requirements of the State plan

18 under paragraph (3).

19 ‘‘(2) ANNUAL PLAN.—The State plan contained

20 in the application under paragraph (1) shall be sub21 mitted for approval annually.

22 ‘‘(3) REQUIREMENTS OF PLAN.—

23 ‘‘(A) LEAD AGENCY.—The State plan shall

24 identify the lead agency.
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1 ‘‘(B) USE OF BLOCK GRANT FUNDS.—The

2 State plan shall provide that the State shall use

3 the amounts provided to the State for each fiscal

4 year under this section—

5 ‘‘(i) to provide food assistance to needy

6 individuals and families residing in the

7 State, other than residents of institutions

8 who are ineligible for food stamps under

9 section 3(i); and

10 ‘‘(ii) to pay administrative costs in11 curred in providing the assistance.

12 ‘‘(C) GROUPS SERVED.—The State plan

13 shall describe how and to what extent the pro14 gram will serve specific groups of individuals

15 and families and how the treatment will differ

16 from treatment under the food stamp program

17 under the other sections of this Act of the indi18 viduals and families, including—

19 ‘‘(i) elderly individuals and families;

20 ‘‘(ii) migrants or seasonal farm21 workers;

22 ‘‘(iii) homeless individuals and fami23 lies;

24 ‘‘(iv) individuals and families who live

25 in institutions eligible under section 3(i);
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1 ‘‘(v) individuals and families with

2 earnings; and

3 ‘‘(vi) members of Indian tribes or trib4 al organizations.

5 ‘‘(D) ASSISTANCE FOR ENTIRE STATE.—The

6 State plan shall provide that benefits under this

7 section shall be available throughout the entire

8 State.

9 ‘‘(E) NOTICE AND HEARINGS.—The State

10 plan shall provide that an individual or family

11 who applies for, or receives, assistance under this

12 section shall be provided with notice of, and an

13 opportunity for a hearing on, any action under

14 this section that adversely affects the individual

15 or family.

16 ‘‘(F) ASSESSMENT OF NEEDS.—The State

17 plan shall assess the food and nutrition needs of

18 needy persons residing in the State.

19 ‘‘(G) ELIGIBILITY STANDARDS.—The State

20 plan shall describe the income, resource, and

21 other eligibility standards that are established

22 for the receipt of assistance under this section.

23 ‘‘(H) RECEIVING BENEFITS IN MORE THAN

24 1 JURISDICTION.—The State plan shall establish

25 a system for the exchange of information with
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1 other States to verify the identity and receipt of

2 benefits by recipients.

3 ‘‘(I) PRIVACY.—The State plan shall pro4 vide for safeguarding and restricting the use and

5 disclosure of information about any individual

6 or family receiving assistance under this section.

7 ‘‘(J) OTHER INFORMATION.—The State plan

8 shall contain such other information as may be

9 required by the Secretary.

10 ‘‘(4) APPROVAL OF APPLICATION AND PLAN.—

11 The Secretary shall approve an application and State

12 plan that satisfies the requirements of this section.

13 ‘‘(f) NO INDIVIDUAL OR FAMILY ENTITLEMENT TO AS14 SISTANCE.—Nothing in this section—

15 ‘‘(1) entitles any individual or family to assist16 ance under this section; or

17 ‘‘(2) limits the right of a State to impose addi18 tional limitations or conditions on assistance under

19 this section.

20 ‘‘(g) BENEFITS FOR ALIENS.—

21 ‘‘(1) ELIGIBILITY.—No individual who is an

22 alien shall be eligible to receive benefits under a State

23 plan approved under subsection (e)(4) if the individ24 ual is not eligible to participate in the food stamp

25 program due to the alien status of the individual.
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1 ‘‘(2) INCOME.—The State plan shall provide that

2 the income of an alien shall be determined in accord3 ance with section 5(i).

4 ‘‘(h) EMPLOYMENT AND TRAINING.—

5 ‘‘(1) WORK REQUIREMENTS.—No individual or

6 household shall be eligible to receive benefits under a

7 State plan funded under this section if the individual

8 or household is not eligible to participate in the food

9 stamp program under subsection (d) or (o) of section

10 6.

11 ‘‘(2) WORK PROGRAMS.—Each State shall imple12 ment an employment and training program in ac13 cordance with the terms and conditions of section

14 6(d)(4) for individuals under the program and shall

15 be eligible to receive funding under section 16(h).

16 ‘‘(i) ENFORCEMENT.—

17 ‘‘(1) REVIEW OF COMPLIANCE WITH STATE

18 PLAN.—The Secretary shall review and monitor State

19 compliance with this section and the State plan ap20 proved under subsection (e)(4).

21 ‘‘(2) NONCOMPLIANCE.—

22 ‘‘(A) IN GENERAL.—If the Secretary, after

23 reasonable notice to a State and opportunity for

24 a hearing, finds that—
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1 ‘‘(i) there has been a failure by the

2 State to comply substantially with any pro3 vision or requirement set forth in the State

4 plan approved under subsection (e)(4); or

5 ‘‘(ii) in the operation of any program

6 or activity for which assistance is provided

7 under this section, there is a failure by the

8 State to comply substantially with any pro9 vision of this section;

10 the Secretary shall notify the State of the finding

11 and that no further grants will be made to the

12 State under this section (or, in the case of non13 compliance in the operation of a program or ac14 tivity, that no further grants to the State will be

15 made with respect to the program or activity)

16 until the Secretary is satisfied that there is no

17 longer any failure to comply or that the non18 compliance will be promptly corrected.

19 ‘‘(B) OTHER PENALTIES.—In the case of a

20 finding of noncompliance made pursuant to sub21 paragraph (A), the Secretary may, in addition

22 to, or in lieu of, imposing the penalties described

23 in subparagraph (A), impose other appropriate

24 penalties, including recoupment of money im25 properly expended for purposes prohibited or not
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1 authorized by this section and disqualification

2 from the receipt of financial assistance under

3 this section.

4 ‘‘(C) NOTICE.—The notice required under

5 subparagraph (A) shall include a specific identi6 fication of any additional penalty being imposed

7 under subparagraph (B).

8 ‘‘(3) ISSUANCE OF REGULATIONS.—The Sec9 retary shall establish by regulation procedures for—

10 ‘‘(A) receiving, processing, and determining

11 the validity of complaints made to the Secretary

12 concerning any failure of a State to comply with

13 the State plan or any requirement of this sec14 tion; and

15 ‘‘(B) imposing penalties under this section.

16 ‘‘(j) GRANT.—

17 ‘‘(1) IN GENERAL.—For each fiscal year, the Sec18 retary shall pay to a State that has an application

19 approved by the Secretary under subsection (e)(4) an

20 amount that is equal to the grant of the State under

21 subsection (m) for the fiscal year, adjusted for any re22 duction required under subsection (m)(2).

23 ‘‘(2) METHOD OF GRANT.—The Secretary shall

24 make a grant to a State for a fiscal year under this

25 section by issuing 1 or more letters of credit for the
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1 fiscal year, with necessary adjustments on account of

2 overpayments or underpayments, as determined by

3 the Secretary.

4 ‘‘(3) SPENDING OF GRANTS BY STATE.—

5 ‘‘(A) IN GENERAL.—Except as provided in

6 subparagraph (B), a grant to a State determined

7 under subsection (m)(1) for a fiscal year may be

8 expended by the State only in the fiscal year.

9 ‘‘(B) CARRYOVER.—The State may reserve

10 up to 10 percent of a grant determined under

11 subsection (m)(1) for a fiscal year to provide as12 sistance under this section in subsequent fiscal

13 years, except that the reserved funds may not ex14 ceed 30 percent of the total grant received under

15 this section for a fiscal year.

16 ‘‘(4) FOOD ASSISTANCE AND ADMINISTRATIVE

17 EXPENDITURES.—In each fiscal year, not more than

18 6 percent of the Federal and State funds required to

19 be expended by a State under this section shall be

20 used for administrative expenses.

21 ‘‘(5) PROVISION OF FOOD ASSISTANCE.—A State

22 may provide food assistance under this section in any

23 manner determined appropriate by the State, such as

24 electronic benefit transfer limited to food purchases,
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1 coupons limited to food purchases, or direct provision

2 of commodities.

3 ‘‘(k) QUALITY CONTROL.—Each State participating in

4 the program established under this section shall maintain

5 a system in accordance with, and shall be subject to section

6 16(c), including sanctions and eligibility for incentive pay7 ment under section 16(c).

8 ‘‘(l) NONDISCRIMINATION.—

9 ‘‘(1) IN GENERAL.—The Secretary shall not pro10 vide financial assistance for any program, project, or

11 activity under this section if any person with respon12 sibilities for the operation of the program, project, or

13 activity discriminates with respect to the program,

14 project, or activity because of race, religion, color, na15 tional origin, sex, or disability.

16 ‘‘(2) ENFORCEMENT.—The powers, remedies, and

17 procedures set forth in title VI of the Civil Rights Act

18 of 1964 (42 U.S.C. 2000d et seq.) may be used by the

19 Secretary to enforce paragraph (1).

20 ‘‘(m) GRANT CALCULATION.—

21 ‘‘(1) STATE GRANT.—

22 ‘‘(A) IN GENERAL.—Except as provided in

23 subparagraph (B), from the amounts made

24 available under section 18 for each fiscal year,

25 the Secretary shall provide a grant to each State
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1 participating in the program established under

2 this section an amount that is equal to the sum

3 of—

4 ‘‘(i) the greater of, as determined by

5 the Secretary—

6 ‘‘(I) the total dollar value of all

7 benefits issued under the food stamp

8 program established under this Act by

9 the State during fiscal year 1994; or

10 ‘‘(II) the average per fiscal year of

11 the total dollar value of all benefits is12 sued under the food stamp program by

13 the State during each of fiscal years

14 1992 through 1994; and

15 ‘‘(ii) the greater of, as determined by

16 the Secretary—

17 ‘‘(I) the total amount received by

18 the State for administrative costs

19 under section 16 for fiscal year 1994;

20 or

21 ‘‘(II) the average per fiscal year of

22 the total amount received by the State

23 for administrative costs under section

24 16 for each of fiscal years 1992 through

25 1994.
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1 ‘‘(B) INSUFFICIENT FUNDS.—If the Sec2 retary finds that the total amount of grants to

3 which States would otherwise be entitled for a

4 fiscal year under subparagraph (A) will exceed

5 the amount of funds that will be made available

6 to provide the grants for the fiscal year, the Sec7 retary shall reduce the grants made to States

8 under this subsection, on a pro rata basis, to the

9 extent necessary.

10 ‘‘(2) REDUCTION.—The Secretary shall reduce

11 the grant of a State by the amount a State has agreed

12 to contribute under subsection (c)(1)(C).’’.

13 (b) EMPLOYMENT AND TRAINING FUNDING.—Section

14 16(h) of the Act (7 U.S.C. 2025(a)), as amended by section

15 13027(d)(2), is further amended by adding at the end the

16 following:

17 ‘‘(6) BLOCK GRANT STATES.—Each State elect18 ing to operate a program under section 25 shall—

19 ‘‘(A) receive the greater of—

20 ‘‘(i) the total dollar value of the funds

21 received under paragraph (1) by the State

22 during fiscal year 1994; or

23 ‘‘(ii) the average per fiscal year of the

24 total dollar value of all funds received under
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1 paragraph (1) by the State during each of

2 fiscal years 1992 through 1994; and

3 ‘‘(B) be eligible to receive funds under para4 graph (2), within the limitations in section

5 6(d)(4)(K).’’.

6 (c) RESEARCH ON OPTIONAL STATE FOOD ASSIST7 ANCE BLOCK GRANT.—Section 17 of the Act (7 U.S.C.

8 2026), as amended by section 13055(c)(2), is further

9 amended by adding at the end the following:

10 ‘‘(l) RESEARCH ON OPTIONAL STATE FOOD ASSIST11 ANCE BLOCK GRANT.—The Secretary may conduct research

12 on the effects and costs of a State program carried out

13 under section 25.’’.

14 SEC. 13057. AMERICAN SAMOA.

15 The Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.),

16 as amended by section 13056, is further amended by adding

17 at the end the following:

18 ‘‘SEC. 26. TERRITORY OF AMERICAN SAMOA.

19 From amounts made available to carry out this Act,

20 the Secretary may pay to the Territory of American Samoa

21 not more than $5,300,000 for each of fiscal years 1996

22 through 2002 to finance 100 percent of the expenditures for

23 the fiscal year for a nutrition assistance program extended

24 under section 601(c) of Public Law 96–597 (48 U.S.C.

25 1469d(c)).’’.
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1 SEC. 13058. ASSISTANCE FOR COMMUNITY FOOD PROJECTS.

2 The Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.),

3 as amended by section 13057, is further amended by adding

4 at the end the following:

5 ‘‘SEC. 27. ASSISTANCE FOR COMMUNITY FOOD PROJECTS.

6 ‘‘(a) DEFINITION OF COMMUNITY FOOD PROJECTS.—

7 In this section, the term ‘community food project’ means

8 a community-based project that requires a 1-time infusion

9 of Federal assistance to become self-sustaining and that is

10 designed to—

11 ‘‘(1) meet the food needs of low-income people;

12 ‘‘(2) increase the self-reliance of communities in

13 providing for their own food needs; and

14 ‘‘(3) promote comprehensive responses to local

15 food, farm, and nutrition issues.

16 ‘‘(b) AUTHORITY TO PROVIDE ASSISTANCE.—

17 ‘‘(1) IN GENERAL.—From amounts made avail18 able to carry out this Act, the Secretary may make

19 grants to assist eligible private nonprofit entities to

20 establish and carry out community food projects.

21 ‘‘(2) LIMITATION ON GRANTS.—The total amount

22 of funds provided as grants under this section for any

23 fiscal year may not exceed $2,500,000.

24 ‘‘(c) ELIGIBLE ENTITIES.—To be eligible for a grant

25 under subsection (b), a private nonprofit entity must—

26 ‘‘(1) have experience in the area of—
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1 ‘‘(A) community food work, particularly

2 concerning small and medium-sized farms, in3 cluding the provision of food to people in low-in4 come communities and the development of new

5 markets in low-income communities for agricul6 tural producers; or

7 ‘‘(B) job training and business development

8 activities for food-related activities in low-in9 come communities;

10 ‘‘(2) demonstrate competency to implement a

11 project, provide fiscal accountability, collect data, and

12 prepare reports and other necessary documentation;

13 and

14 ‘‘(3) demonstrate a willingness to share informa15 tion with researchers, practitioners, and other inter16 ested parties.

17 ‘‘(d) PREFERENCE FOR CERTAIN PROJECTS.—In se18 lecting community food projects to receive assistance under

19 subsection (b), the Secretary shall give a preference to

20 projects designed to—

21 ‘‘(1) develop linkages between 2 or more sectors

22 of the food system;

23 ‘‘(2) support the development of entrepreneurial

24 projects;
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1 ‘‘(3) develop innovative linkages between the for2 profit and nonprofit food sectors; or

3 ‘‘(4) encourage long-term planning activities and

4 multi-system, interagency approaches.

5 ‘‘(e) MATCHING FUNDS REQUIREMENTS.—

6 ‘‘(1) REQUIREMENTS.—The Federal share of the

7 cost of establishing or carrying out a community food

8 project that receives assistance under subsection (b)

9 may not exceed 50 percent of the cost of the project

10 during the term of the grant.

11 ‘‘(2) CALCULATION.—In providing for the non12 Federal share of the cost of carrying out a community

13 food project, the entity receiving the grant shall pro14 vide for the share through a payment in cash or in

15 kind, fairly evaluated, including facilities, equipment,

16 or services.

17 ‘‘(3) SOURCES.—An entity may provide for the

18 non-Federal share through State government, local

19 government, or private sources.

20 ‘‘(f) TERM OF GRANT.—

21 ‘‘(1) SINGLE GRANT.—A community food project

22 may be supported by only a single grant under sub23 section (b).

24 ‘‘(2) TERM.—The term of a grant under sub25 section (b) may not exceed 3 years.
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1 ‘‘(g) TECHNICAL ASSISTANCE AND RELATED INFORMA2 TION.—

3 ‘‘(1) TECHNICAL ASSISTANCE.—In carrying out

4 this section, the Secretary may provide technical as5 sistance regarding community food projects, processes,

6 and development to an entity seeking the assistance.

7 ‘‘(2) SHARING INFORMATION.—

8 ‘‘(A) IN GENERAL.—The Secretary may

9 provide for the sharing of information concern10 ing community food projects and issues among

11 and between government, private for-profit and

12 nonprofit groups, and the public through publi13 cations, conferences, and other appropriate fo14 rums.

15 ‘‘(B) OTHER INTERESTED PARTIES.—The

16 Secretary may share information concerning

17 community food projects with researchers, practi18 tioners, and other interested parties.

19 ‘‘(h) EVALUATION.—

20 ‘‘(1) IN GENERAL.—The Secretary shall provide

21 for the evaluation of the success of community food

22 projects supported using funds under this section.

23 ‘‘(2) REPORT.—Not later than January 30,

24 2002, the Secretary shall submit a report to Congress

25 regarding the results of the evaluation.’’.
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1 CHAPTER 2—COMMODITY DISTRIBUTION

2 PROGRAMS

3 SEC. 13071. EMERGENCY FOOD ASSISTANCE PROGRAM.

4 (a) DEFINITIONS.—Section 201A of the Emergency

5 Food Assistance Act of 1983 (Public Law 98–8; 7 U.S.C.

6 612c note) is amended to read as follows:

7 ‘‘SEC. 201A. DEFINITIONS.

8 ‘‘In this Act:

9 ‘‘(1) ADDITIONAL COMMODITIES.—The term ‘ad10 ditional commodities’ means commodities made avail11 able under section 214 in addition to the commodities

12 made available under sections 202 and 203D.

13 ‘‘(2) AVERAGE MONTHLY NUMBER OF UNEM14 PLOYED PERSONS.—The term ‘average monthly num15 ber of unemployed persons’ means the average month16 ly number of unemployed persons in each State in the

17 most recent fiscal year for which information concern18 ing the number of unemployed persons is available, as

19 determined by the Bureau of Labor Statistics of the

20 Department of Labor.

21 ‘‘(3) ELIGIBLE RECIPIENT AGENCY.—The term

22 ‘eligible recipient agency’ means a public or nonprofit

23 organization—

24 ‘‘(A) that administers—
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1 ‘‘(i) an emergency feeding organiza2 tion;

3 ‘‘(ii) a charitable institution (includ4 ing a hospital and a retirement home, but

5 excluding a penal institution) to the extent

6 that the institution serves needy persons;

7 ‘‘(iii) a summer camp for children, or

8 a child nutrition program providing food

9 service;

10 ‘‘(iv) a nutrition project operating

11 under the Older Americans Act of 1965 (42

12 U.S.C. 3001 et seq.), including a project

13 that operates a congregate nutrition site

14 and a project that provides home-delivered

15 meals; or

16 ‘‘(v) a disaster relief program;

17 ‘‘(B) that has been designated by the appro18 priate State agency, or by the Secretary; and

19 ‘‘(C) that has been approved by the Sec20 retary for participation in the program estab21 lished under this Act.

22 ‘‘(4) EMERGENCY FEEDING ORGANIZATION.—The

23 term ‘emergency feeding organization’ means a public

24 or nonprofit organization that administers activities

25 and projects (including the activities and projects of
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1 a charitable institution, a food bank, a food pantry,

2 a hunger relief center, a soup kitchen, or a similar

3 public or private nonprofit eligible recipient agency)

4 providing nutrition assistance to relieve situations of

5 emergency and distress through the provision of food

6 to needy persons, including low-income and unem7 ployed persons.

8 ‘‘(5) FOOD BANK.—The term ‘food bank’ means

9 a public or charitable institution that maintains an

10 established operation involving the provision of food

11 or edible commodities, or the products of food or edi12 ble commodities, to food pantries, soup kitchens, hun13 ger relief centers, or other food or feeding centers that,

14 as an integral part of their normal activities, provide

15 meals or food to feed needy persons on a regular

16 basis.

17 ‘‘(6) FOOD PANTRY.—The term ‘food pantry’

18 means a public or private nonprofit organization that

19 distributes food to low-income and unemployed house20 holds, including food from sources other than the De21 partment of Agriculture, to relieve situations of emer22 gency and distress.

23 ‘‘(7) POVERTY LINE.—The term ‘poverty line’

24 has the same meaning given the term in section
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1 673(2) of the Community Services Block Grant Act

2 (42 U.S.C. 9902(2)).

3 ‘‘(8) SOUP KITCHEN.—The term ‘soup kitchen’

4 means a public or charitable institution that, as inte5 gral part of the normal activities of the institution,

6 maintains an established feeding operation to provide

7 food to needy homeless persons on a regular basis.

8 ‘‘(9) TOTAL VALUE OF ADDITIONAL COMMOD9 ITIES.—The term ‘total value of additional commod10 ities’ means the actual cost of all additional commod11 ities made available under section 214 that are paid

12 by the Secretary (including the distribution and proc13 essing costs incurred by the Secretary).

14 ‘‘(10) VALUE OF ADDITIONAL COMMODITIES AL15 LOCATED TO EACH STATE.—The term ‘value of addi16 tional commodities allocated to each State’ means the

17 actual cost of additional commodities made available

18 under section 214 and allocated to each State that are

19 paid by the Secretary (including the distribution and

20 processing costs incurred by the Secretary).’’.

21 (b) STATE PLAN.—Section 202A of the Act (7 U.S.C.

22 612c note) is amended to read as follows:

23 ‘‘SEC. 202A. STATE PLAN.

24 ‘‘(a) IN GENERAL.—To receive commodities under this

25 Act, a State shall submit a plan of operation and adminis-
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1 tration every 4 years to the Secretary for approval. The

2 plan may be amended at any time, with the approval of

3 the Secretary.

4 ‘‘(b) REQUIREMENTS.—Each plan shall—

5 ‘‘(1) designate the State agency responsible for

6 distributing the commodities received under this Act;

7 ‘‘(2) set forth a plan of operation and adminis8 tration to expeditiously distribute commodities under

9 this Act;

10 ‘‘(3) set forth the standards of eligibility for re11 cipient agencies; and

12 ‘‘(4) set forth the standards of eligibility for in13 dividual or household recipients of commodities,

14 which shall require—

15 ‘‘(A) individuals or households to be com16 prised of needy persons; and

17 ‘‘(B) individual or household members to be

18 residing in the geographic location served by the

19 distributing agency at the time of applying for

20 assistance.

21 ‘‘(c) STATE ADVISORY BOARD.—The Secretary shall

22 encourage each State receiving commodities under this Act

23 to establish a State advisory board consisting of representa24 tives of all interested entities, both public and private, in
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1 the distribution of commodities received under this Act in

2 the State.’’.

3 (c) AUTHORIZATION OF APPROPRIATIONS FOR ADMIN4 ISTRATIVE FUNDS.—Section 204(a)(1) of the Act (7 U.S.C.

5 612c note) is amended—

6 (1) in the first sentence—

7 (A) by striking ‘‘1991 through 1995’ and

8 inserting ‘‘1996 through 2002’’; and

9 (B) by striking ‘‘for State and local’’ and

10 all that follows through ‘‘under this title’’ and

11 inserting ‘‘to pay for the direct and indirect ad12 ministrative costs of the State related to the

13 processing, transporting, and distributing to eli14 gible recipient agencies of commodities provided

15 by the Secretary under this Act and commodities

16 secured from other sources’’; and

17 (2) by striking the fourth sentence.

18 (d) DELIVERY OF COMMODITIES.—Section 214 of the

19 Act (7 U.S.C. 612c note) is amended—

20 (1) by striking subsections (a) through (e) and

21 (j);

22 (2) by redesignating subsections (f) through (i)

23 as subsections (a) through (d), respectively;

24 (3) in subsection (b), as redesignated by para25 graph (2)—
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1 (A) in the first sentence, by striking ‘‘sub2 section (f) or subsection (j) if applicable,’’ and

3 inserting ‘‘subsection (a)’’; and

4 (B) in the second sentence, by striking ‘‘sub5 section (f)’’ and inserting ‘‘subsection (a)’’;

6 (4) by striking subsection (c), as redesignated by

7 paragraph (2), and inserting the following:

8 ‘‘(c) ADMINISTRATION.—

9 ‘‘(1) IN GENERAL.—Commodities made available

10 for each fiscal year under this section shall be deliv11 ered at reasonable intervals to States based on the

12 grants calculated under subsection (a), or reallocated

13 under subsection (b), before December 31 of the follow14 ing fiscal year.

15 ‘‘(2) ENTITLEMENT.—Each State shall be enti16 tled to receive the value of additional commodities de17 termined under subsection (a).’’; and

18 (5) in subsection (d), as redesignated by para19 graph (2), by striking ‘‘or reduce’’ and all that follows

20 through ‘‘each fiscal year’’.

21 (e) TECHNICAL AMENDMENTS.—The Act (7 U.S.C.

22 612c note) is amended—

23 (1) in the first sentence of section 203B(a), by

24 striking ‘‘203 and 203A of this Act’’ and inserting

25 ‘‘203A’’;
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1 (2) in section 204(a), by striking ‘‘title’’ each

2 place it appears and inserting ‘‘Act’’;

3 (3) in the first sentence of section 210(e), by

4 striking ‘‘(except as otherwise provided for in section

5 214(j))’’; and

6 (4) by striking section 212.

7 (f) REPORT ON EFAP.—Section 1571 of the Food Se8 curity Act of 1985 (Public Law 99–198; 7 U.S.C. 612c note)

9 is repealed.

10 (g) AVAILABILITY OF COMMODITIES UNDER THE FOOD

11 STAMP PROGRAM.—The Food Stamp Act of 1977 (7 U.S.C.

12 2011 et seq.), as amended by section 13058, is further

13 amended by adding at the end the following:

14 ‘‘SEC. 28. AVAILABILITY OF COMMODITIES FOR THE EMER15 GENCY FOOD ASSISTANCE PROGRAM.

16 ‘‘(a) PURCHASE OF COMMODITIES.—From amounts

17 appropriated under this Act, for each of fiscal years 1997

18 through 2002, the Secretary shall purchase $300,000,000 of

19 a variety of nutritious and useful commodities of the types

20 that the Secretary has the authority to acquire through the

21 Commodity Credit Corporation or under section 32 of the

22 Act entitled ‘An Act to amend the Agricultural Adjustment

23 Act, and for other purposes’, approved August 24, 1935 (7

24 U.S.C. 612c), and distribute the commodities to States for

25 distribution in accordance with section 214 of the Emer-
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1 gency Food Assistance Act of 1983 (Public Law 98–8; 7

2 U.S.C. 612c note).

3 ‘‘(b) BASIS FOR COMMODITY PURCHASES.—In pur4 chasing commodities under subsection (a), the Secretary

5 shall, to the extent practicable and appropriate, make pur6 chases based on—

7 ‘‘(1) agricultural market conditions;

8 ‘‘(2) preferences and needs of States and distrib9 uting agencies; and

10 ‘‘(3) preferences of recipients.’’.

11 (h) EFFECTIVE DATE.—The amendments made by sub12 section (d) shall become effective on October 1, 1996.

13 Subtitle K—Miscellaneous

14 SEC. 13101. FOOD STAMP ELIGIBILITY

15 Section 6(f) of the Food Stamp Act of 1977 (7

16 U.S.C. 2015(f)) is amended by striking the third sentence

17 and inserting the following: The State agency shall, at its

18 option, consider either all income and financial resources

19 of the individual rendered ineligible to participate in the

20 food stamp program under this subsection, or such income,

21 less a pro rata share, and the financial resources of the in22 eligible individual, to determine the eligibility and the

23 value of the allotment of the household of which such indi24 vidual is a member.’
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1 SEC. 13102. REDUCTION IN BLOCK GRANTS FOR SOCIAL

2 SERVICES.

3 Section 2003(c) of the Social Security Act (42

4 U.S.C. 1397b) is amended—

5 (1) by striking ‘and’ at the end of paragraph (4);

6 and

7 (2) by striking paragraph (5) and inserting the

8 following:

9 ‘(5) $2,800,000,000 for each of the fiscal years

10 1990 through 1996; and

11 ‘(6) $2,240,000,000 for each fiscal year after fis12 cal year 1996.’ .

13 Subtitle L—Reform of the Earned Income Credit

14 SEC. 13200. AMENDMENT OF 1986 CODE.

15 Except as otherwise expressly provided, whenever

16 in this subtitle an amendment or repeal is expressed in

17 terms of an amendment to, or repeal of, a section or other

18 provision, the reference shall be considered to be made to

19 a section or other provision of the Internal Revenue Code

20 of 1986.

21 SEC. 13201. EARNED INCOME CREDIT DENIED TO INDIVID22 UALS NOT AUTHORIZED TO BE EMPLOYED IN

23 THE UNITED STATES.

24 (a) IN GENERAL.—Section 32(c)(1) (relating to in25 dividuals eligible to claim the earned income credit) is
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1 amended by adding at the end the following new subpara2 graph:

3 ‘‘(F) IDENTIFICATION NUMBER REQUIRE4 MENT.—The term ‘eligible individual’ does not

5 include any individual who does not include on

6 the return of tax for the taxable year—

7 ‘‘(i) such individual’s taxpayer identi8 fication number, and

9 ‘‘(ii) if the individual is married

10 (within the meaning of section 7703), the

11 taxpayer identification number of such in12 dividual’s spouse.’’.

13 (b) SPECIAL IDENTIFICATION NUMBER.—Section

14 32 is amended by adding at the end the following new sub15 section:

16 ‘‘(l) IDENTIFICATION NUMBERS.—Solely for pur17 poses of subsections (c)(1)(F) and (c)(3)(D), a taxpayer

18 identification number means a social security number is19 sued to an individual by the Social Security Administra20 tion (other than a social security number issued pursuant

21 to clause (II) (or that portion of clause (III) that relates

22 to clause (II)) of section 205(c)(2)(B)(i) of the Social Secu23 rity Act.’’.

24 (c) EXTENSION OF PROCEDURES APPLICABLE TO

25 MATHEMATICAL OR CLERICAL ERRORS.—Section
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1 6213(g)(2) (relating to the definition of mathematical or

2 clerical errors) is amended by striking ‘‘and’’ at the end

3 of subparagraph (D), by striking the period at the end of

4 subparagraph (E) and inserting a comma, and by insert5 ing after subparagraph (E) the following new subpara6 graphs:

7 ‘‘(F) an omission of a correct taxpayer

8 identification number required under section 32

9 (relating to the earned income credit) to be in10 cluded on a return, and

11 ‘‘(G) an entry on a return claiming the

12 credit under section 32 with respect to net earn13 ings from self-employment described in section

14 32(c)(2)(A) to the extent the tax imposed by sec15 tion 1401 (relating to self-employment tax) on

16 such net earnings has not been paid.’’.

17 (d) EFFECTIVE DATE.—The amendments made by

18 this section shall apply to taxable years beginning after

19 December 31, 1995.

20 SEC. 13202. REPEAL OF EARNED INCOME CREDIT FOR INDI21 VIDUALS WITHOUT CHILDREN.

22 (a) IN GENERAL.—Subparagraph (A) of section

23 32(c)(1) (defining eligible individual) is amended to read

24 as follows:
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1 ‘‘(A) IN GENERAL.—The term ‘eligible indi2 vidual’ means any individual who has a qualify3 ing child for the taxable year.’’.

4 (b) CONFORMING AMENDMENTS.—Each of the ta5 bles contained in paragraphs (1) and (2) of section 32(b)

6 are amended by striking the items relating to no qualify7 ing children.

8 (c) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to taxable years beginning after

10 December 31, 1995.

11 SEC. 13203. MODIFICATION OF EARNED INCOME CREDIT

12 AMOUNT AND PHASEOUT.

13 (a) MODIFICATION OF PHASEOUT.—Subparagraph

14 (B) of section 32(a)(2) is amended to read as follows:

15 ‘‘(B) the sum of—

16 ‘‘(i) the initial phaseout percentage of

17 so much of the adjusted gross income (or, if

18 greater, the earned income) of the taxpayer

19 for the taxable year as exceeds the initial

20 phaseout amount but does not exceed the

21 final phaseout amount, plus

22 ‘‘(ii) the final phaseout percentage of

23 so much of the adjusted gross income (or, if

24 greater, the earned income) of the taxpayer
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1 for the taxable year as exceeds the final

2 phaseout amount.’’

3 (b) PERCENTAGES AND AMOUNTS.—

4 (1) IN GENERAL.—Subsection (b) of section 32,

5 as amended by section 13202(b), is amended to read

6 as follows:

7 ‘‘(b) PERCENTAGES AND AMOUNTS.—

8 ‘‘(1) PERCENTAGES.—The credit percentage, the

9 initial phaseout percentage, and the final phaseout

10 percentage shall be determined as follows:

‘‘In the case of an eligible individual with:

The credit

percentage is:

The initial

phaseout

percentage is:

The final

phaseout

percentage is:

1 qualifying child .......................................................................................................... 34 15.98 20

2 or more qualifying children ...................................................................................... 36 21.06 25

11 ‘‘(2) AMOUNTS.—The earned income amount, the

12 initial phaseout amount, and the final phaseout

13 amount shall be determined as follows:

‘‘In the case of an eligible individual with:

The earned

income

amount is:

The initial

phaseout

amount is:

The final

phaseout

amount is:

1 qualifying child ........................................................................................................ $6,340 $11,630 $14,850

2 or more qualifying children .................................................................................... $8,910 $11,630 $17,750’’.

14 (2) INCREASE IN CREDIT FOR LOWER-INCOME

15 FAMILIES HAVING 2 MORE QUALIFYING CHILDREN.—

16 Subsection (d) of section 32 is amended to read as fol17 lows:

18 ‘‘(d) INCREASE IN CREDIT FOR LOWER-INCOME

19 FAMILIES HAVING 2 OR MORE QUALIFYING CHILDREN.—
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1 ‘‘(1) IN GENERAL.—If an eligible individual has

2 2 or more qualifying children, for purposes of apply3 ing paragraphs (1) and (2)(A) of subsection (a)—

4 ‘‘(A) the amount of the taxpayer’s earned

income shall be treated as being equal to 10 5 ⁄9 of

6 such income (determined without regard to this

7 paragraph), and

8 ‘‘(B) the earned income amount shall be

treated as being equal to 10 9 ⁄9 of such amount (de10 termined without regard to this paragraph).

11 ‘‘(2) PHASEOUT OF BENEFIT.—If the applicable

12 income of the taxpayer for the taxable year exceeds

13 $14,000 ($17,000 in the case of a joint return), the

14 amount of each increase under paragraph (1) shall be

15 reduced (but not below zero) by an amount which

16 bears the same ratio to such increase (determined

17 without regard to this subparagraph) as such excess

18 bears to $4,000.

19 ‘‘(3) APPLICABLE INCOME.—For purposes of this

20 subsection, the term ‘applicable income’ means ad21 justed gross income or, if greater, earned income.’’

22 (3) CONFORMING AMENDMENTS.—

23 (A) Subsection (j) of section 32 is amend24 ed—
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1 (i) by striking ‘‘subsection (b)(2)(A)’’

2 and inserting ‘‘subsection (b)(2) or (d)’’,

3 (ii) by striking ‘‘1994’’ and inserting

4 ‘‘1996’’, and

5 (iii) by striking ‘‘1993’’ and inserting

6 ‘‘1995’’.

7 (B) Subsection (e) of section 32 is amended

8 to read as follows:

9 ‘‘(e) OTHER SPECIAL RULES—

10 ‘‘(1) MARRIED INDIVIDUALS.—In the case of an

11 individual who is married (within the meaning of

12 section 7703), this section shall apply only if a joint

13 return is filed for the taxable year.

14 ‘‘(2) TAXABLE YEAR MUST BE FULL TAXABLE

15 YEAR.—Except in the case of a taxable year closed by

16 reason of the death of an individual, no credit shall

17 be allowable under this section in the case of a taxable

18 year covering a period of less than 12 months.’’

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to taxable years beginning after

21 December 31, 1995.
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1 SEC. 13204. RULES RELATING TO DENIAL OF EARNED IN2 COME CREDIT ON BASIS OF DISQUALIFIED IN3 COME.

4 (a) DEFINITION OF DISQUALIFIED INCOME.—Para5 graph (2) of section 32(i) (defining disqualified income) is

6 amended by striking ‘‘and’’ at the end of subparagraph

7 (B), by striking the period at the end of subparagraph (C)

8 and inserting ‘‘, and’’, and by adding at the end the fol9 lowing new subparagraph:

10 ‘‘(D) the excess (if any) of—

11 ‘‘(i) the aggregate income from all pas12 sive activities for the taxable year (deter13 mined without regard to any amount de14 scribed in a preceding subparagraph), over

15 ‘‘(ii) the aggregate losses from all pas16 sive activities for the taxable year (as so de17 termined).

18 For purposes of subparagraph (D), the term

19 ‘passive activity’ has the meaning given such

20 term by section 469.’’.

21 (b) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to taxable years beginning after

23 December 31, 1995.
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1 SEC. 13205. MODIFICATION OF ADJUSTED GROSS INCOME

2 DEFINITION FOR EARNED INCOME CREDIT.

3 (a) IN GENERAL.—Subsections (a)(2), (c)(1)(C),

4 (d), and (f)(2)(B) of section 32, as amended by the preced5 ing sections of this subtitle, are each amended by striking

6 ‘‘adjusted gross income’’ each place it appears and insert7 ing ‘‘modified adjusted gross income’’.

8 (b) MODIFIED ADJUSTED GROSS INCOME DE9 FINED.—Section 32(c) (relating to definitions and special

10 rules) is amended by adding at the end the following new

11 paragraph:

12 ‘‘(5) MODIFIED ADJUSTED GROSS INCOME.—

13 ‘‘(A) IN GENERAL.—The term ‘modified ad14 justed gross income’ means adjusted gross in15 come—

16 ‘‘(i) increased by the sum of the

17 amounts described in subparagraph (B),

18 and

19 ‘‘(ii) determined without regard to—

20 ‘‘(I) the amounts described in sub21 paragraph (C), or

22 ‘‘(II) the deduction allowed under

23 section 172.

24 ‘‘(B) NONTAXABLE INCOME TAKEN INTO AC25 COUNT.—Amounts described in this subpara26 graph are—
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1 ‘‘(i) social security benefits (as defined

2 in section 86(d)) received by the taxpayer

3 during the taxable year to the extent not in4 cluded in gross income,

5 ‘‘(ii) amounts which—

6 ‘‘(I) are received during the tax7 able year by (or on behalf of) a spouse

8 pursuant to a divorce or separation in9 strument (as defined in section

10 71(b)(2)), and

11 ‘‘(II) under the terms of the in12 strument are fixed as payable for the

13 support of the children of the payor

14 spouse (as determined under section

15 71(c)),

16 but only to the extent such amounts exceed

17 $6,000,

18 ‘‘(iii) interest received or accrued dur19 ing the taxable year which is exempt from

20 tax imposed by this chapter, and

21 ‘‘(iv) amounts received as a pension or

22 annuity, and any distributions or payments

23 received from an individual retirement

24 plan, by the taxpayer during the taxable
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1 year to the extent not included in gross in2 come.

3 Clause (iv) shall not include any amount which

4 is not includible in gross income by reason of

5 section 402(c), 403(a)(4), 403(b)(8), 408(d) (3),

6 (4), or (5), or 457(e)(10).

7 ‘‘(C) CERTAIN AMOUNTS DISREGARDED.—

8 an amount is described in this subparagraph if

9 it is—

10 ‘‘(i) the amount of losses form sales or

11 exchanges of capital assets in excess of gains

12 from such sales or exchanges to the extent

13 such amount does not exceed the amount

14 under section 1211(b)(1),

15 ‘‘(ii) the net loss from the carrying on

16 of trades or businesses, computed separately

17 with respect to—

18 ‘‘(I) trades or businesses (other

19 than farming) conducted as sole pro20 prietorships,

21 ‘‘(II) trades or businesses of farm22 ing conducted as sole proprietorships,

23 and

24 ‘‘(III) other trades or business,
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1 ‘‘(iii) the net loss from estates and

2 trusts, and

3 ‘‘(iv) the excess (if any) of

4 amounts described in subsection

5 (i)(2)(C)(ii) over the amounts described

6 in subsection (i)(2)(C)(i) (relating to

7 nonbusiness rents and royalties).

8 For purposes of clause (ii), there shall not be

9 taken into account items which are attributable

10 to a trade or business which consists of the per11 formance of services by the taxpayer as an em12 ployee.’’.

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after

15 December 31, 1995.

16 SEC. 13206. PROVISIONS TO IMPROVE TAX COMPLIANCE.

17 (a) INCREASE IN PENALTIES FOR RETURN PRE18 PARERS.—

19 (1) UNDERSTATEMENT PENALTY.—Section 6694

20 (relating to understatement of income tax liability by

21 income tax return preparer) is amended—

22 (A) by striking ‘‘$250’’ in subsection (a)

23 and inserting ‘‘$500’’, and

24 (B) by striking ‘‘$1,000’’ in subsection (b)

25 and inserting ‘‘$2,000’’.
2422

HR 2491 EAS

1 (2) OTHER ASSESSABLE PENALTIES.—Section

2 6695 (relating to other assessable penalties) is amend3 ed—

4 (A) by striking ‘‘$50’’ and ‘‘$25,000’’ in

5 subsections (a), (b), (c), (d), and (e) and insert6 ing ‘‘$100’’ and ‘‘$50,000’’, respectively, and

7 (B) by striking ‘‘$500’’ in subsection (f)

8 and inserting ‘‘$1,000’’.

9 (b) AIDING AND ABETTING PENALTY.—Section

10 6701(b) (relating to amount of penalty) is amended—

11 (1) by striking ‘‘$1,000’’ in paragraph (1) and

12 inserting ‘‘$2,000’’, and

13 (2) by striking ‘‘10,000’’ in paragraph (2) and

14 inserting ‘‘20,000’’.

15 (c) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to penalties with respect to taxable

17 years beginning after December 31, 1995.

Attest:

Secretary.
104TH CONGRESS

1ST SESSION H. R. 2491

AMENDMENT
HR 2491 EAS——15

HR 2491 EAS——14HR 2491 EAS——13HR 2491 EAS——12HR 2491 EAS——11HR 2491 EAS——10HR 2491 EAS——9HR 2491 EAS——8HR 2491 EAS——7HR 2491 EAS——6HR 2491 EAS——5HR 2491 EAS——4HR 2491 EAS——3HR 2491 EAS——2
HR 2491 EAS——29

HR 2491 EAS——28HR 2491 EAS——27HR 2491 EAS——26HR 2491 EAS——25HR 2491 EAS——24HR 2491 EAS——23HR 2491 EAS——22HR 2491 EAS——21HR 2491 EAS——20HR 2491 EAS——19HR 2491 EAS——18HR 2491 EAS——17HR 2491 EAS——16
HR 2491 EAS——43

HR 2491 EAS——42HR 2491 EAS——41HR 2491 EAS——40HR 2491 EAS——39HR 2491 EAS——38HR 2491 EAS——37HR 2491 EAS——36HR 2491 EAS——35HR 2491 EAS——34HR 2491 EAS——33HR 2491 EAS——32HR 2491 EAS——31HR 2491 EAS——30
HR 2491 EAS——57

HR 2491 EAS——56HR 2491 EAS——55HR 2491 EAS——54HR 2491 EAS——53HR 2491 EAS——52HR 2491 EAS——51HR 2491 EAS——50HR 2491 EAS——49HR 2491 EAS——48HR 2491 EAS——47HR 2491 EAS——46HR 2491 EAS——45HR 2491 EAS——44
HR 2491 EAS——71

HR 2491 EAS——70HR 2491 EAS——69HR 2491 EAS——68HR 2491 EAS——67HR 2491 EAS——66HR 2491 EAS——65HR 2491 EAS——64HR 2491 EAS——63HR 2491 EAS——62HR 2491 EAS——61HR 2491 EAS——60HR 2491 EAS——59HR 2491 EAS——58
HR 2491 EAS——85

HR 2491 EAS——84HR 2491 EAS——83HR 2491 EAS——82HR 2491 EAS——81HR 2491 EAS——80HR 2491 EAS——79HR 2491 EAS——78HR 2491 EAS——77HR 2491 EAS——76HR 2491 EAS——75HR 2491 EAS——74HR 2491 EAS——73HR 2491 EAS——72
HR 2491 EAS——99

HR 2491 EAS——98HR 2491 EAS——97HR 2491 EAS——96HR 2491 EAS——95HR 2491 EAS——94HR 2491 EAS——93HR 2491 EAS——92HR 2491 EAS——91HR 2491 EAS——90HR 2491 EAS——89HR 2491 EAS——88HR 2491 EAS——87HR 2491 EAS——86
HR 2491 EAS——113

HR 2491 EAS——112HR 2491 EAS——111HR 2491 EAS——110HR 2491 EAS——109HR 2491 EAS——108HR 2491 EAS——107HR 2491 EAS——106HR 2491 EAS——105HR 2491 EAS——104HR 2491 EAS——103HR 2491 EAS——102HR 2491 EAS——101HR 2491 EAS——100
HR 2491 EAS——127

HR 2491 EAS——126HR 2491 EAS——125HR 2491 EAS——124HR 2491 EAS——123HR 2491 EAS——122HR 2491 EAS——121HR 2491 EAS——120HR 2491 EAS——119HR 2491 EAS——118HR 2491 EAS——117HR 2491 EAS——116HR 2491 EAS——115HR 2491 EAS——114
HR 2491 EAS——130

HR 2491 EAS——129HR 2491 EAS——128